Exhibit 10.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
Dated As Of
APRIL 1, 2005
Among
TCI SOLUTIONS, INC.,
RETALIX LTD.,
RETALIX HOLDINGS INC.
AND
THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HERETO
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of April 1 2005 among Retalix Ltd., an Israeli
corporation ("Parent"), TCI Solutions, Inc, a Delaware corporation (the
"Company"), the stockholders of TCI Solutions, Inc. listed on the signature
pages hereto ("Sellers"), and Retalix Holdings, Inc., a Delaware corporation
("Buyer"), a wholly-owned subsidiary of Parent.
R E C I T A L S:
WHEREAS, Buyer desires to purchase from Sellers the shares of capital
stock of the Company owned by such Sellers (the "Shares");
WHEREAS, each Seller desires to sell to Buyer all of the Shares owned
by such Seller; and
WHEREAS, for United States federal income tax purposes, this Agreement,
together with the Merger Agreement, is intended to constitute a "plan of
reorganization" within the meaning of Section 1.368-2(g) and 1.368-3(a) of the
Treasury Regulations and the acquisition of Shares and the Mergers (as defined
in the Merger Agreement) taken together are intended to be an integrated
transaction for purposes of Rev. Rul. 2001-26, 2001-1 CB 1297, and Rev. Rul.
2001-46, 2001-2 CB 321, that will qualify as a reorganization within the meaning
of Section 368(a) of the Code;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Adverse" or "Adversely" when used in conjunction with "Affect,"
"Change" or "Effect" shall mean, with respect to the Parent, Buyer or the
Company, as the case may be, any related events, conditions or circumstances
which individually or in the aggregate could reasonably be expected to, in a
material respect or to a material degree (a) adversely affect the enforceability
of this Agreement and the Ancillary Agreements as to such party, (b) adversely
affect such party's assets, liabilities, properties, financial condition or
results of operation, (c) impair or delay such party's ability to fulfill its
obligations under the terms of this Agreement and the Ancillary Agreements or
(d) adversely affect the aggregate rights and remedies of the other parties
under this Agreement and the Ancillary Agreements . "Materiality" as used in
this definition, unless specifically stated to the contrary, shall be determined
without regard to the fact that various provisions of this Agreement and the
Ancillary Agreements set forth specific dollar amounts or the basis for
calculating such amounts.
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"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Ancillary Agreements" means the Escrow Agreement, the Registration
Rights Agreement and the Merger Agreement.
"Average Closing Price" means $24 per share.
"Balance Sheet" means the audited balance sheet of the Company as of
the Balance Sheet Date found in Schedule 3.6.
"Balance Sheet Date" means December 31, 2004.
"Closing Date" means the date of the Closing.
"Closing Date Net Working Capital" means the current assets less the
current liabilities of the Company determined in accordance with U.S. generally
accepted accounting principles and consistent with past practices as of the
close of business on the Closing Date, adjusted to: add back: (i) all accrued
employee termination and severance costs (including pro rated bonus) as of the
Closing Date resulting or triggered by the transactions contemplated by this
Agreement or any of the Ancillary Agreements, (ii) all fees and expenses
incurred as of the Closing Date by the Company in connection with the
transactions contemplated by this Agreement, (iii) all payments contemplated by
Sections 6.3 and 6.4, and (iv) the amount of deferred revenue as of the Closing
Date. An estimate of the Closing Date Net Working Capital, including the
adjustments described above, is set forth on Schedule 1.1 attached hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means TCI Solutions, Inc., a Delaware corporation.
"Company Intellectual Property" means all Intellectual Property that is
owned or held by or on behalf of the Company or that is being, and/or has been,
used, or is currently under development for use, in the business of the Company
as it has been, is currently or is currently planned to be conducted.
"Company's Stock Option Plans" means the 1993 Non-Employee Directors
Stock Option Plan, the 1993 Equity Incentive Plan, the 2001 Non-Employee
Directors Stock Option Plan and the 2001 Equity Incentive Plan.
"Escrow Agent" means the escrow agent that is a signatory to the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement among Sellers, Parent,
Buyer and the Escrow Agent substantially in the form of Exhibit A hereto.
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"Estimated Expenses" means the expenses of the Company on or after the
date hereof in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements, including the fees and expenses of its legal,
financial and accounting advisors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" means all tangible or intangible proprietary
information and materials, including without limitation:
(a) (i) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereon, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, revisions, extensions and
re-examinations thereof, (ii) all trademarks, service marks, trade dress, logos,
trade names, domain names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (iii) all copyrights and all applications, registrations
and renewals in connection therewith, (iv) all mask works and all applications,
registrations and renewals in connection therewith, (v) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, methods, schematics, technology, technical data, designs, drawings,
flowcharts, block diagrams, specifications, customer and supplier lists,
customer data, pricing and cost information and business and marketing plans and
proposals), and (vi) all software (in both source and object code) and firmware
(including data, databases and related documentation);
(b) all documents, records, instructions and files relating to design, end
user documentation, manufacturing, quality control, sales, marketing or customer
support for, and tangible embodiments of, all intellectual property described
herein; and
(c) all licenses, agreements and other rights in any third party product or
any third party intellectual property described in (a) and (b) above other than
any "off the shelf" third party software or related intellectual property.
"To the Company's Knowledge", "Known to the Company" and words of
similar import means the knowledge of each of the senior officers (meaning any
Vice President and more senior officers) having responsibility for the subject
matter of a given representation, the Company's chief financial officer, the
directors of the Company and of each of Sellers (or the officers, directors or
general partners thereof in the case of Sellers who are corporations or
partnerships) ..
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"Merger Agreement" means the Agreement and Plan of Merger dated the
date hereof between the Company, Buyer and Parent in the form attached hereto as
Exhibit B.
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"NIS" means the new Israeli shekel.
"Parent Common Stock" means ordinary shares of Parent, par value of NIS
1.0 per share.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Registration Rights Agreement" means the Registration Rights Agreement
among the Sellers and Parent substantially in the form of Exhibit C hereto.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Series A Non-Redeemable
Convertible Participating Preferred Stock, par value $0.001 per share, of the
Company.
"Series B Preferred Stock" means the Series B Non-Redeemable
Convertible Participating Preferred Stock, par value $0.001 per share, of the
Company.
"Threshold Net Working Capital" means $2,292,759.
"Treasury Regulations" means the regulations, including proposed
regulations and temporary regulations, promulgated by the United States
Department of the Treasury under the Code, as amended.
Each of the following terms is defined in the Section set forth
opposite such term:
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Applicable Jurisdiction 13.8 Parent Option 5.2(b)
Benefit Arrangement 10.1 Parent SEC filings 5.7
Closing 2.2 Parent Stock Plans 5.2(b)
Co-Employer 10.1 Permit 3.15(b)
Company SEC Reports 3.23 Permitted Liens 3.8(a)
Company Securities 3.4 Personal Property 3.8(a)
Damages 11.2 Publicly Available Software 3.13(h)
Employee 10.1 Purchase Price 2.1
Employee Plan 10.1 Real Property 3.9(a)
Environment 3.17(a) Release 3.17(a)
Environmental Law 3.17(a) Required Consent 3.3(b)
Environmental Liabilities 3.17(a) Securities Act 4.3(b)(i)
Environmental Permits 3.17(a) Sellers' Committee 12.1(a)
ERISA 10.1 Separate Counsel 11.4(b)
ERISA Affiliate 10.1 Shares Recitals
Financial Statements 3.6(a)(ii) Stock Value 9.3(d)
Hazardous Substance 3.17(a) Tax 9.1
Interested Person 3.20 Tax Authority 9.1
J.A.M.S. Rules 11.8(a) Tax Returns 9.1
Leased Real Property 3.9(a) Taxes 9.1
Leases 3.9(b) Third Party Claim 11.2(a)(i)(A)
Multiemployer Plan 10.1 Third Party Accounting Firm 2.3
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, each Seller, severally but not jointly, shall sell to Buyer, and
Buyer shall purchase from each such Seller, at the Closing, that number of
Shares at the price as is set forth opposite such Seller's name on Schedule 2.1.
The purchase price for the shares of Series A Preferred Stock and for the shares
of Series B Preferred Stock shall be referred to herein as the "Purchase Price".
2.2 Closing. The closing (the "Closing") of the purchase and sale of
the Shares hereunder shall take place at the offices of ▇▇▇▇▇▇▇▇ & Worcester,
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ at such time or place as
Buyer and Sellers may agree. At the Closing:
(a) Buyer (or Parent on behalf of Buyer) shall pay to Sellers
$12,884,897 in cash by wire transfers in immediately available funds, such
accounts to be designated by written notice to Buyer not later than two business
days prior to the Closing Date.
(b) Buyer (or Parent on behalf of Buyer) shall deliver to the
Escrow Agent $1,717,750 in cash by wire transfer in immediately available funds,
to be held by the Escrow Agent in accordance with the Escrow Agreement.
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(c) Buyer (or Parent on behalf of Buyer) shall deliver to Sellers
certificates for Parent Common Stock, registered in the names of Sellers for the
number of shares shown in Schedule 2.1; provided that if Buyer (or Parent on
behalf of Buyer) is unable to deliver the stock certificates for Parent Common
Stock to Sellers at the Closing, Buyer or Parent shall have 10 days after the
Closing to deliver such certificates to Sellers as provided herein.
(d) Buyer (or Parent on behalf of Buyer) shall deliver to the
Escrow Agent certificates for Parent Common Stock, registered in the names of
Sellers for the number of shares shown in Schedule 2.1; provided that if Buyer
(or Parent on behalf of Buyer) is unable to deliver the stock certificates for
Parent Common Stock to the Escrow Agent at the Closing, Buyer or Parent shall
have 10 days after the Closing to deliver such certificates to the Escrow Agent
as provided herein.
(e) Sellers shall deliver to Buyer certificates for the Shares
duly endorsed or accompanied by stock powers duly endorsed in blank.
(f) Each of the parties to this Agreement shall execute and
deliver to the other parties thereto each of the Ancillary Agreements to be
entered into by it at Closing, in each case substantially in the form attached
as an exhibit to this Agreement.
(g) The parties shall execute and deliver to the appropriate
parties any other instruments, documents and certificates that are required to
be delivered pursuant to this Agreement or as may be reasonably requested by any
party in order to consummate the transactions contemplated by this Agreement.
(h) Sellers shall receive an opinion of Buyer's counsel ▇▇▇▇▇▇▇▇ &
Worcester LLP dated the Closing Date reasonably acceptable to Sellers.
(i) Parent and Buyer shall receive an opinion of Sellers' counsel
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP dated the Closing Date reasonably
acceptable to Parent and Buyer.
(j) Sellers shall deliver a certified copy of the resolutions
adopted by the Board of Directors of the Company approving this Agreement, the
Merger Agreement and the other Ancillary Agreements, declaring the advisability
and recommendation of the Merger, and all such other actions as shall be
required consistent with the approval of a transaction covered by Rule 13e-3 of
the Exchange Act.
(k) Sellers shall deliver to Buyer a certificate of good standing,
tax clearance certificate or similar document(s) which is required by any Tax
Authority to relieve Buyer of (x) any obligation to withhold Taxes in connection
with the transactions contemplated by this Agreement and (y) any Lien or
liability for Taxes (determined without regard to provisions of this Agreement
assigning responsibility therefor) for which relief is available by reason of
the filing of an appropriate certificate or other document.
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(l) Sellers shall deliver to Buyer a properly executed statement
satisfying the requirements of Treasury Regulation Sections 1.897-2(h) and
1.1445-2(c)(3) in a form reasonably acceptable to Buyer.
2.3 Net Working Capital Adjustment.
(a) Within 60 days after the Closing Date, Parent shall prepare
and deliver to the Sellers' Committee its determination of the Closing Date Net
Working Capital. If the Closing Date Net Working Capital is less than the
Threshold Net Working Capital, the Sellers shall owe to the Buyer the amount by
which the Closing Date Net Working Capital is less than the Threshold Net
Working Capital, which amount shall be paid from the funds deposited with the
Escrow Agent pursuant to Section 2.4 below.
(b) Subject to this Section 2.3(b), the calculation of the Closing
Date Net Working Capital delivered by Parent to Sellers' Committee shall be
final, binding and conclusive on the parties hereto. If Sellers' Committee
desires in good faith to dispute any amount reflected on the calculation of the
Closing Date Net Working Capital delivered by Parent, Sellers' Committee shall
notify Parent of its objections in writing within 20 days after its receipt of
the calculation of the Closing Date Net Working Capital, setting forth the basis
for its objection and its proposal for any adjustments to the calculation of the
Closing Date Net Working Capital. Following such notification, Parent and
Seller's Committee shall each negotiate in good faith to reach agreement as to
any such proposed adjustment within 30 days of receipt of Sellers' Committee
notice of objection. If agreement is reached in writing within such 30-day
period as to all proposed further adjustments (or Parent and Seller's Committee
agree that no adjustments are necessary), the parties shall make such
agreed-upon adjustments, if any, and the Closing Date Net Working Capital shall
be based thereon for all purposes of this Agreement. If Parent and Seller are
unable to reach agreement within such 30-day period, Parent and Sellers'
Committee shall select a mutually acceptable accounting firm (the "Third Party
Accounting Firm") to review the proposed Seller's Committee calculation of
Closing Date Net Working Capital and such firm shall make such adjustments, if
any, as are necessary to cause the calculation of the Closing Date Net Working
Capital, if any, to have been properly prepared in accordance with this
Agreement. All such determinations shall relate only to such matters as are in
dispute and shall represent either agreement with the position taken by Parent
or Seller's Committee or a compromise between such positions. The determination
of the Third Party Accounting Firm shall be delivered in writing as soon as
practicable following engagement of the Third Party Accounting Firm, shall state
the amount due by either party as a result and shall be final, conclusive and
binding upon Buyer and Sellers. Not later than 10 days following the
determination by the Third Party Accounting Firm, the amount, if any, required
to be paid as a result of the determination of the Closing Date Net Working
Capital, as determined by the Third Party Accounting Firm, shall be paid from
the funds deposited with the Escrow Agent pursuant to Section 2.4 below. The
fees and expenses of the Third Party Accounting Firm incurred in resolving all
disputed matters shall be equitably apportioned by such accountants based on the
extent to which Parent or Seller's Committee are determined by such accountants
to be the prevailing party; provided, however, that if the Third Party
Accounting Firm cannot determine the prevailing party, the fees shall be paid
one-half by Parent and one-half by Sellers. To the extent any fees are allocated
to the
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Sellers, such fees shall be paid out of the funds deposited with the Escrow
Agent pursuant to Section 2.4 below.
2.4 Escrow Account. The Sellers agree that in accordance with Section
2.2, at the Closing a portion of the Purchase Price shall be delivered by Buyer
to the Escrow Agent for deposit in accordance with the terms of the Escrow
Agreement. All funds and shares of Parent Common Stock deposited with the Escrow
Agent shall be applied by the Escrow Agent in accordance with the terms of the
Escrow Agreement to make any payments due to Parent or Buyer under Section 2.3
and Article 11.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
Except as set forth in the disclosure schedules dated as of the date
hereof and delivered herewith to Buyer (which disclosure schedules identify the
section and subsection to which each disclosure therein relates), the Company
hereby represents and warrants to Parent and Buyer:
3.1 Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have an
Adverse Effect on the Company. The Company has heretofore delivered to Buyer
true and complete copies of the corporate charter and bylaws of the Company as
currently in effect.
3.2 Corporate Authorization. The execution, delivery and performance by
the Company of each Ancillary Agreement to which the Company is a party, and the
consummation by the Company of the transactions contemplated thereby, are within
the Company's corporate powers and, except for any required approval by the
Company's stockholders, have been duly authorized by all necessary corporate
action on the part of the Company. Each Ancillary Agreement to which the Company
is a party has been duly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable in accordance with its
terms.
3.3 Governmental Authorization; Consents. (a) The execution, delivery
and performance by the Company of this Agreement and the Ancillary Agreements,
as the case may be, require no action by or in respect of, or filing with, any
governmental body, agency, official or authority.
(b) Except as set forth in Schedule 3.3, no consent, approval,
waiver or other action (a "Required Consent") by any Person (other than any
governmental body, agency,
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official or authority referred to in (a) above) under any contract, agreement,
indenture, lease, instrument or other document to which the Company is a party
or by which any of them is bound is required or necessary for the execution,
delivery and performance by the Company of this Agreement and each Ancillary
Agreement to which they are a party, as the case may be, or for the consummation
of the transactions contemplated hereby or thereby.
(c) Non-Contravention. The execution, delivery and performance by
the Company of this Agreement and each Ancillary Agreement to which it is a
party, as the case may be, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (i) contravene or conflict with the
corporate charter or bylaws of the Company (and will not constitute a
"Liquidation Event" as defined in such corporate charter), (ii) assuming
compliance with the matters referred to in Section 3.3(a), contravene or
conflict with any provision of any law, regulation, judgment, injunction, order,
Permit or decree binding upon or applicable to the Company; (iii) assuming the
receipt of all Required Consents, constitute a default (with or without notice
or lapse of time, or both) under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the Company or to a
loss of any benefit to which the Company is entitled under any provision of any
agreement, contract or other instrument binding upon the Company or by which any
of their assets may be bound or (iv) result in the creation or imposition of any
Lien on any asset of the Company.
3.4 Capitalization. Schedule 3.4 sets forth (i) the designation, number
of authorized shares and number of outstanding shares of each class of capital
stock of the Company, (ii) the designation of each stock option plan, the number
of shares of stock that may be issued pursuant to such plan, the number of
outstanding options and the number of outstanding options that are currently
exercisable, (iii) all relevant information regarding any outstanding
convertible securities and any other outstanding options, warrants or other
rights to acquire capital stock of, or other equity interests in, the Company
and (iv) a list of all holders of capital stock or rights to acquire capital
stock of the Company. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable
and are owned as shown on Schedule 3.4. Except as set forth on Schedule 3.4,
there are no outstanding (i) shares of capital stock, other securities or
phantom or other equity interests of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or other securities
of the Company or (iii) options or other rights to acquire from the Company any
capital stock, other securities or phantom or other equity interests of the
Company (the items in clauses (i), (ii) and (iii) being referred to collectively
as the "Company Securities"). There are no outstanding obligations of the
Company, actual or contingent, to issue or deliver or to repurchase, redeem or
otherwise acquire any Company Securities.
3.5 Subsidiaries. The Company does not have and has never had any
subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.6 Financial Statements. (a) Attached as Schedule 3.6 are true and
complete copies of:
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(i) a preliminary, unissued draft of the Balance Sheet and the
related audited statements of operations and cash flows for the 12
months ended December 31, 2004 and the audited balance sheet of the
Company as of December 31, 2003 and the related audited statements of
operations and cash flows of the Company for the 12 months then ended;
and
(ii) the unaudited balance sheet of the Company as of February
28, 2005 and the related unaudited statements of income and cash flows
of the Company for the two months ended February 28, 2005 ((i) and
(ii) collectively referred to as the "Financial Statements").
(b) Each of the balance sheets included in the Financial
Statements fairly presents the financial position of the Company as of its date,
and the other statements included in the Financial Statements fairly present the
results of operations and cash flows, as the case may be, of the Company for the
periods therein set forth, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved and, with
respect to the unaudited interim financial statements, for the omission of
footnote disclosure and, to the extent consistent with generally accepted
accounting principles, normally recurring year-end audit adjustments.
(c) All accounts, notes receivable and other receivables reflected
on the February 28, 2005 balance sheet are valid, genuine and fully collectible
in the aggregate amount thereof less any reserves for doubtful accounts recorded
on such balance sheet.
(d) The Company maintains adequate internal controls in accordance
with GAAP. Since January 1, 2002, the Company has not received any written
communications regarding weaknesses in its internal controls. To Company's
Knowledge, there have been no instances of fraud, whether or not material, that
occurred during any period covered by the Financial Statements involving the
management of Company or other employees of Company who have a role in Company's
internal control over financial reporting.
(e) Neither the Company nor any officer, employee, contractor,
subcontractor or agent of Company has discharged, demoted, suspended,
threatened, harassed or in any other manner discriminated against an employee of
Company in the terms and conditions of employment because of any act of such
employee described in 18 U.S.C. Section 1514A(a).
(f) During the periods covered by Financial Statements, to the
Company's Knowledge, the Company's external auditor was independent of Company
and its management. For purposes of this Section 3.6(f), "independent of Company
and its management" shall mean that Company and its external auditor complied at
all times with the auditor independence requirements of Title II of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, the SEC and any regulatory body claiming
jurisdiction over the accounting profession as if Company were an issuer with a
class of securities registered pursuant to the Exchange Act during the periods
covered by the Financial Statement.
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(g) The Company has not, since July 30, 2002, extended or
maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or executive
officer (or equivalent thereof) of the Company.
(h) Schedule 3.6(h) sets forth any and all reports by Company's
external auditors to Company's Board of Directors, or any committee thereof, or
Company's management concerning any of the following and pertaining to any
period covered by the Financial Statements: critical accounting policies,
internal control over financial reporting, significant accounting estimates or
judgments, alternative accounting treatments and any required communications
with Company's Board of Directors, or any committee thereof, or management of
the Company.
(i) The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company is made known on a timely basis to the individuals responsible for the
preparation of the Company's filings with the SEC and other public disclosure
documents. Schedule 3.6(i) lists, and the Company has delivered to Parent copies
of, all written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures.
(j) Attached as Schedule 3.6(j), is a copy of the Company's
expected ranges of financial performance for the quarter ended March 31, 2005.
Each of the Company's revenue, EBITDA and net income for such quarter will not
be materially different than the revenue, EBITDA and net income provided under
the column entitled "Forecast-Low".
3.7 Absence of Certain Changes. Since the Balance Sheet Date, except as
reflected in the unaudited Financial Statements or in Schedule 3.7, the Company
has conducted its businesses in the ordinary course consistent with past
practices and there has not been any:
(a) Adverse Change;
(b) declaration, setting aside or payment of any dividend or other
distribution with respect to any Company Securities or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company;
(c) payment or grant of any right by the Company to any Interested
Person, or any charge by any Interested Person to the Company, or other
transaction between the Company and any Interested Person, except in any such
case for employee compensation payments in the ordinary course of business of
the Company consistent with past practice.
(d) amendment of any outstanding security of the Company;
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(e) incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices;
(f) creation or assumption by the Company of any Lien on any asset
other than Permitted Liens;
(g) making of any loan, advance or capital contributions to or
investment in any Person;
(h) damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company in an
amount greater than $75,000;
(i) transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
of any contract or other right, in either case, material to the Company, other
than transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by this Agreement;
(j) settlement of any claim, action, suit, audit, charge,
investigation or proceeding;
(k) change in any method of financial accounting or accounting
practice by the Company;
(l) (i) grant of any severance or termination pay to any director,
officer or employee of the Company, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company, (iii)
change in benefits payable under existing severance or termination pay policies
of the Company or employment agreements to which the Company is a party or (iv)
change in compensation, bonus or other benefits payable to directors, officers
or employees of the Company, other than in the ordinary course of business
consistent with past practice;
(m) labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representation thereof to
organize any employees of the Company;
(n) employee terminations by the Company (other than for poor
performance or for cause) and/or layoffs, and the Company has preserved intact
and kept available the services of present employees, in each case in accordance
with past practice;
(o) capital expenditure, or commitment for a capital expenditure,
for additions or improvements to property, plant and equipment in an amount
greater than $10,000.
(p) agreement, undertaking or commitment to do any of the
foregoing.
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3.8 Personal Property. (a) The Company has good and marketable title
to, or in the case of leased personal property have valid leasehold interests
in, all personal property described in Schedule 3.8 (including machinery and
equipment, inventory, receivables and furniture) (whether tangible or
intangible), reflected on the Balance Sheet or acquired after the Balance Sheet
Date (the "Personal Property"). None of such Personal Property is subject to any
Liens, other than the following ("Permitted Liens"):
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for Taxes not yet due and payable (and for which
adequate accruals or reserves have been established on the Balance
Sheet); or
(iii) Liens that do not materially detract from the value of the
Personal Property as now used, or materially interfere with any
present or intended use of the Personal Property.
(b) The Personal Property is in good operating condition and
repair (ordinary wear and tear excepted).
(c) The Personal Property owned or leased by the Company, or which
it otherwise has the right to use, constitute all of the Personal Property held
for use or used in connection with the business of the Company.
3.9 Real Property. (a) None of the real property, and leases and
subleases of, and other interests in, real property, used, or occupied by the
Company, in each case, together with all buildup, fixtures and improvements
created thereon ("Real Property") is owned by the Company. All of the Real
Property is leased or subleased by the Company, or the Company has an interest
in such Real Property pursuant to a warehousing, license or occupancy agreement
("Leased Real Property").
(b) Schedule 3.9 completely and accurately describes all leases,
subleases and other agreements pursuant to which the Company derives its rights
in the Leased Real Property (the "Leases").
(c) The Leases are in good standing and are valid, binding and
enforceable in accordance with their respective terms, and there does not exist
under any such Lease any material default by the Company or, to the Sellers'
Knowledge, by any other Person, or any event that, with notice or lapse of time
or both, would constitute a material default by the Company or, to the Sellers'
Knowledge, by any other Person. The Company has delivered to Buyer complete and
accurate copies of all Leases, including all amendments and agreements related
thereto and the Leases constitute the entire agreement between the Company and
each landlord with respect to the Leased Real Property. All rent and other
charges currently due and payable under the Leases have been paid.
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(d) The Company is the holder of the lessee's interest under the
Leases and neither has assigned the Leases nor subleased all or any portion of
the premises leased thereunder. The Company has not made any alterations,
additions or improvements to the premises leased under the Leases that are
required to be removed (or of which lessor could require removal) at the
termination of the respective Lease terms. The Company owns all trade fixtures,
equipment and personal property located in the premises leased under the Leases.
3.10 No Undisclosed Liabilities. Except as disclosed in the Financial
Statements or set forth in Schedule 3.10, there are no liabilities of the
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than liabilities incurred in the
ordinary course of business consistent with past practice since the Balance
Sheet Date, which in the aggregate will not have an Adverse Effect on the
Company.
3.11 Litigation. Except as disclosed in Schedule 3.11, there is no
claim, action, suit, audit, charge, proceeding (or any basis therefor) pending
against or, to the Company's Knowledge, threatened against, being investigated
or affecting, the Company or any of their respective properties or any Employee
Plan or the transactions contemplated hereby before any court or arbitrator or
any governmental body, agency, official or authority.
3.12 Material Contracts. (a) Except for agreements, contracts, plans,
leases, arrangements or commitments disclosed in Schedule 3.12, as of the date
of this Agreement the Company is not a party to or subject to any:
(i) lease providing for annual rentals by the Company of $75,000
or more;
(ii) contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by
the Company of, or pursuant to which in the last 12 months the Company
has paid, $75,000 or more;
(iii) sales, distribution or other similar agreement providing
for the sale by the Company of, or pursuant to which in the last 12
months the Company sold, materials, supplies, goods, services,
equipment or other assets for an aggregate purchase price of $75,000
or more;
(iv) partnership, joint venture or other similar contract,
arrangement or agreement;
(v) contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset), except contracts relating to
indebtedness incurred in the ordinary course of business in an amount
not exceeding $10,000;
(vi) written employment or consulting agreement;
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(vii) license, technology transfer, franchise or other agreement
in respect of any Intellectual Property or other property owned or
used by the Company;
(viii) agency, dealer, sales representative or other similar
agreement;
(ix) contract or other document that limits the freedom of the
Company to compete in any line of business or with any Person or in
any area or which would so limit the freedom of the Company after the
Closing Date;
(x) contract or commitment with or for the benefit of any
Interested Person; or
(xi) other contract or commitment not made in the ordinary course
of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement and
commitment disclosed in any schedule to this Agreement or required to be
disclosed pursuant to Section 3.12 is a valid and binding agreement of the
Company and is in full force and effect, and to the Company's Knowledge, no
other party thereto is in default in any material respect under the terms of any
such agreement, contract, plan, lease, arrangement or commitment, nor, to the
Knowledge of the Company, has any event or circumstance occurred that, with
notice or lapse of time or both, would constitute an event of default thereunder
by the Company.
3.13 Technology and Intellectual Property. (a) Schedule 3.13(a) lists:
(i) all patents and all registered trademarks, service marks, copyrights and
mask works, and any applications and renewals for any of the foregoing owned by
or on behalf of the Company; (ii) all material software products and tools and
services that are currently sold, published, offered, or under development by
the Company; and (iii) all material licenses (in and out), sublicenses and other
agreements to which the Company is a party and pursuant to which the Company or
any other person is authorized to use any of the Company's Intellectual Property
or exercise any other right with regard thereto. The disclosures described in
clause (iii) of the preceding sentence include the identities of the parties to
the relevant agreements, a brief description of the nature and subject matter
thereof, the term thereof and the applicable payment terms (or summary of any
formula or procedure for determining such payment terms).
(b) Each item of the Company's Intellectual Property is either:
(i) owned solely by the Company free and clear of any Liens other than Permitted
Liens; or (ii) rightfully used and authorized for use by the Company and its
successors pursuant to a valid and enforceable written license. All of the
Company's Intellectual Property that is used by the Company pursuant to a
license or other grant of a right by a third party to use its proprietary
information is separately identified as such under Schedule 3.13(b). The Company
has all rights in the Company's Intellectual Property necessary to carry out the
Company's former and current activities, including to the extent consistent with
the Company's current and past practices (except as noted on Schedule 3.13(b))
rights to make, use, exclude others from using, reproduce, modify, adapt, create
derivative works based on, translate, distribute (directly and indirectly),
transmit, display and perform publicly, license, rent, lease, assign and sell
the Company's
15
Intellectual Property in all geographic locations and fields of use, and to
sublicense any or all such rights to third parties, including the right to
grant further sublicenses.
(c) The Company is not in material violation of any license,
sublicense or other agreement to which the Company is a party or otherwise bound
relating to any of the Company's Intellectual Property. Except as noted in
Schedule 3.13(c), the Company is not obligated to provide any consideration
(whether financial or otherwise) to any third party, nor is any third party
otherwise entitled to any consideration, with respect to any exercise of rights
by the Company or Buyer, as successor to the Company, in Company's Intellectual
Property.
(d) The use of the Company's Intellectual Property by the Company
as currently used and as currently proposed to be used does not infringe any
other Person's copyright, trade secret rights, right of privacy, moral right or
other intellectual property right. The use by the Company of the Company's
Intellectual Property as currently used and as currently proposed to be used
does not infringe any other Person's, patent, trademark, service ▇▇▇▇, trade
name, firm name, logo, trade dress or mask work. No claims (i) challenging the
validity, enforceability, effectiveness or ownership by the Company of any of
the Company's Intellectual Property or (ii) to the effect that the use,
reproduction, modification, manufacture, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any of the Company's Intellectual
Property by the Company, infringes or will infringe on any intellectual property
or other proprietary or personal right of any Person are being or, since April
1, 2001, have been asserted against the Company or, to the Company's Knowledge,
(1) are threatened by any Person nor (2) does there exists any valid basis for
such a claim . There are no legal or governmental proceedings, including
interference, re-examination, reissue, opposition, nullity, or cancellation
proceedings pending that relate to any of the Company's Intellectual Property,
other than review of pending patent applications, and the Company is not aware
of any information indicating that such proceedings are threatened or
contemplated by any governmental entity or any other Person. All granted or
issued patents and mask works, all registered trademarks and service marks, and
all copyright registrations owned by the Company are valid, and subsisting. To
the Company's Knowledge, there is no unauthorized use, infringement, or
misappropriation of any of the Company's Intellectual Property by any third
party, employee or former employee.
(e) Schedule 3.13(e) separately lists all parties (other than
existing or prior employees) who have created any portion of, or otherwise have
any rights in or to, the Company's Intellectual Property. The Company has
secured from all parties (including employees) who have created any portion of,
or otherwise have any rights in or to, the Company's Intellectual Property valid
and enforceable written assignments of any such work, invention, improvement or
other rights to the Company and has provided true and complete copies of such
assignments to Buyer.
(f) The transactions contemplated under this Agreement shall not
alter, impair or otherwise affect any rights of the Company or any Affiliate in
any of the Company's Intellectual Property.
16
(g) The Company has taken commercially reasonable measures to
protect the proprietary nature of the Company's Intellectual Property and to
maintain in confidence all trade secrets and confidential information owned or
used by the Company.
(h) Except as described on Schedule 3.13(h), the Company's
Intellectual Property does not include any Publicly Available Software and the
Company has not used Publicly Available Software in whole or in part in the
development of any part of the Company's Intellectual Property in a manner that
may subject the Company's Intellectual Property in whole or in part, to all or
part of the license obligations of any Publicly Available Software. "Publicly
Available Software" means each of (i) any software that contains, or is derived
in any manner (in whole or in part) from, any software that is distributed as
free software, open source software (e.g. Linux), or similar licensing and
distribution models; and (ii) any software that requires as a condition of use,
modification, and/or distribution of such software that such software or other
software incorporated into, derived from, or distributed with such software (a)
be disclosed or distributed in source code form; (b) be licensed for the purpose
of making derivative works; or (c) be redistributable at no or minimal charge.
Publicly Available Software includes software licensed or distributed under any
of the following licenses or distribution models similar to any of the
following: (a) GNU General Public License (GPL) or Lesser/Library GPL (LGPL),
(b) the Artistic License (e.g. PERL), (c) the Mozilla Public License, (d) the
Netscape Public License, (e) the Sun Community Source License (SCSL), the Sun
Industry Source License (SISL), and the Apache Server License.
3.14 Insurance Coverage. Schedule 3.14 lists all of the insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company.
Sellers' have furnished to Buyer true and complete copies of all insurance
policies and fidelity bonds listed in Schedule 3.14. There is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid and
the Company are otherwise in full compliance with the terms and conditions of
all such policies and bonds. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) have been
in effect since January 1, 2001 and remain in full force and effect. Sellers do
not know of any threatened termination of, or premium increase with respect to,
any of such policies or bonds.
3.15 Compliance with Laws; Permits; No Defaults. (a) The Company is not
in violation of, or has since January 1, 2001 violated, any applicable
provisions of any federal, state, foreign or local laws, statutes, ordinances or
regulations, except for violations that have not had and would not reasonably be
expected to have an Adverse Effect on the Company.
(b) Schedule 3.15 correctly describes each governmental license,
permit, concession or franchise (a "Permit") material to the business of the
Company, together with the name of the governmental agency or entity issuing
such Permit. Such Permits are valid and in full force and effect, and none of
such Permits will be terminated or impaired or become terminable as a result of
the transactions contemplated hereby or by the Merger Agreement.
17
(c) The Company is not in default under, and no condition exists
that with notice or lapse of time or both would constitute a default under, any
judgment, order or injunction of any court, arbitrator or governmental body,
agency, official or authority.
3.16 Employees and Labor Matters. (a) Schedule 3.16(a) sets forth, with
respect to each employee of the Company (including any employee of the Company
who is on a leave of absence or on layoff status subject to recall) as of March
15, 2005 (i) the name of such employee and the date as of which such employee
was originally hired by the Company, and whether the employee is on an active or
inactive status; (ii) such employee's title; (iii) such employee's annualized
compensation as of the date of this Agreement, including base salary, vacation
and/or paid time off accrual amounts, bonus and/or commission potential, equity
vesting schedule, severance pay potential (including the maximum severance
payable to such employee and the circumstances under which such severance
payment is triggered), and any other compensation forms; (iv) each current
benefit plan in which such employee participates or is eligible to participate;
and (v) any governmental authorization that is held by such employee and that is
used in connection with the Company's business. Except as disclosed in Schedule
3.16(a), the employment of each of the employees of the Company is terminable by
the Company at will.
(b) Schedule 3.16(b) lists all Persons who are currently
performing services for the Company who are classified as "consultants" or
"independent contractors," the compensation of each such Person and whether the
Company is party to an agreement with such Person (whether or not in writing).
Any such agreements are listed on Schedule 3.12(a) and have been delivered (or,
in the case of agreements that are not in writing, a summary thereof has been
delivered) to Buyer. All such Persons have executed the Company's form
Proprietary Information and Inventions Agreement . All Persons engaged by the
Company as independent contractors, rather than employees, have been properly
classified as such and have been engaged in accordance with all applicable
foreign, federal, state and/or local laws.
(c) The Company is not and have never been a party to or bound by
any union contract, collective bargaining agreement or similar contract. There
has never been any lockout, strike, slowdown, work stoppage, labor dispute or,
union organizing activity, or any similar activity or dispute, affecting the
Company or any of its employees.
(d) Schedule 3.16(d) lists all current employee manuals and
handbooks, employment policy statements, employment agreements, and other
materials relating to the employment of the current employees of the Company.
Sellers have delivered to Buyer complete copies of all such documents.
(e) Except as disclosed in Schedule 3.16(e), except for clerical,
administrative or hourly employees (i) none of the employees of the Company has
notified or otherwise indicated to the Company that he or she intends to
terminate his or her employment with the Company, or not to accept employment
with Buyer; (ii) the Company does not have a present intention to terminate the
employment of any employee; (iii) to the Company's Knowledge, no employee of the
Company has since January 1, 2005 received an offer of an employment from any
other Person; (iv) all employees of the Company have executed the Company's form
18
Proprietary Information and Inventions Agreement (v) to the Company's Knowledge
no employee of the Company is a party to or is bound by any employment contract,
patent disclosure agreement, noncompetition agreement or other restrictive
covenant or other contract with any third party that would be likely to affect
in any way (A) the performance by such employee of any of his or her duties or
responsibilities as an employee, or (B) the business or operations of the
Company; (vi) to the Knowledge of the Company, no employee of the Company is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company; and
(vii) the Company is not and never has been engaged in any dispute or litigation
with an employee or former employee regarding Intellectual Property matters.
(f) Except as disclosed in Schedule 3.16(f), (i) the Company does
not have an established severance pay practice or policy; (ii) no employee of
the Company is entitled to any severance pay, bonus compensation, acceleration
of payment or vesting of any equity interest, or other payment from the Company
or Buyer (other than accrued salary, vacation, or other paid time off in
accordance with the policies of the Company) as a result of or in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements or as a result of any termination by the Company on or after the
Closing of any Person employed by the Company on or prior to the Closing Date.
Schedule 3.16(f) identifies each employee entitled to any non-discretionary
bonus or severance from the Company or any successor of the Company. .
(g) The Company is and has at all times been in compliance with
all currently applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, except for violations
that have not had and would not reasonably be expected to have an Adverse Effect
on the Company. The Company is not engaged, and to the Company's Knowledge have
never engaged, in any unfair labor practice of any nature. The Company has not
failed to pay any of its employees, consultants or contractors for any wages
(including overtime), salaries, commissions, bonuses, benefits or other direct
compensation for any services performed by them to the date hereof or amounts
required to be reimbursed to such individuals.
(h) The Company, and each employee of the Company, is in
compliance in all material respects with all applicable visa and work permit
requirements, and no visa or work permit held by an employee of the Company will
expire during the six month period following the date of this Agreement.
3.17 Environmental Compliance.
(a) Environmental Definitions. The following terms, as used
herein, have the following meanings:
19
"Environment" means any and all environmental media, including without
limitation ambient air, surface water, ground water, drinking water supply, land
surface or subsurface, soil or strata, and also means any indoor location.
"Environmental Law" means any and all federal, state, local and foreign
statutes, laws (including common or case law), regulations, ordinances, rules,
judgments, judicial decisions, orders, decrees, codes, plans, injunctions,
Environmental Permits or governmental restrictions relating to the Environment
or to emissions, discharges or Releases of any Hazardous Substance into the
Environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Substance or the containment, removal or remediation thereof.
"Environmental Liabilities" means any and all liabilities arising in
connection with or in any way relating to the past or present business of the
Company, whether contingent or fixed, actual or potential, known or unknown,
which (i) arise under or relate to matters governed by Environmental Law or
arise in connection with or relate to any matter disclosed or required to be
disclosed in Schedule 3.17 and (ii) arise from or relate in any way to actions
occurring or conditions existing before the Closing Date.
"Environmental Permits" means any and all governmental permits,
licenses, concessions, grants, franchises, agreements, authorizations,
registrations or other governmental approvals or filings issued or required
under any Environmental Law.
"Hazardous Substance" means any and all pollutants and contaminants,
and any and all toxic, caustic, radioactive or otherwise hazardous materials,
substances or wastes that are regulated under any Environmental Law, and
includes, without limitation, petroleum and its derivatives and by-products, and
any other hydrocarbons.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the Environment (including, without limitation, the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Substance).
(b) Environmental Representations and Warranties. Except as
disclosed in Schedule 3.17(b):
(i) The Company has complied in all material respects with all
Environmental Laws and Environmental Permits. The Company has no
material Environmental Liabilities.
(ii) The Company has applied for and received all Environmental
Permits required in connection with its business. Schedule 3.17(b)
sets forth a list of all such Environmental Permits, each of which is
in full force and effect. No suspension or cancellation is threatened
and there is no basis for believing that any such Environmental Permit
will not be renewable upon expiration. Except as set forth in Schedule
3.17(b),
20
each such Environmental Permit will continue to be in full
force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing and
the consummation of the transactions contemplated herein and in the
Merger Agreement will not conflict with, result in a violation or
breach of or constitute a default under any such Environmental Permit.
The consummation of the transactions contemplated herein and in the
Merger Agreement will not require any filing, notice or compliance
under any environmental property transfer laws and no transfer of any
Environmental Permits will be required.
(iii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or, to the Sellers' Knowledge, threatened, by any governmental
or other entity with respect to any (A) alleged violation by the
Company of any Environmental Law or any liability thereunder, (B)
alleged failure by the Company to have any Environmental Permit, or
(C) use, generation, treatment, storage, handling, recycling,
transportation or disposal of any Hazardous Substance by the Company.
(iv) The Company has not stored, handled, transported (or
arranged for transport, directly or indirectly) or Released any
Hazardous Substance on, at or from any property now or previously
owned, leased or operated by the Company. No Hazardous Substance is
present, in a reportable or threshold planning quantity, where such a
quantity has been established by any Environmental Law or
Environmental Permit, at, on or under any property now or previously
owned, leased or operated by the Company.
(v) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for the
Company, or of which the Sellers' Knowledge, relating to any property
or facility now or previously owned or leased by the Company that have
not been delivered to Buyer.
(vi) The Leased Real Property does not contain any (a)
underground storage tanks or (b) asbestos.
3.18 Customers and Suppliers. Company has not received notice from and
is not otherwise aware that (a) any customer (or group of customers under common
ownership or control) that accounted for more that 10% of Company's revenue
during the past 18 months has stopped or intends to stop purchasing the products
or services (including maintenance and support services in connection with the
products sold) of the Company or (b) any supplier (or group of suppliers under
common ownership or control) that accounted for more that 10% of the Company's
revenue during the past 18 months has stopped or intends to stop supplying
products or services to the Company.
3.19 Products.
21
(a) Each of the products produced or sold by Company is, and at
all relevant times have, conformed in all material respects to any affirmation
of fact made in documentation for such products or in connection with its sale.
(b) Except as set forth in Schedule 3.19, there are no forms of
warranties, guaranties or assurances of Company's software products and services
that are in effect other than as set forth in Company's standard terms and
conditions, copies of which are attached to Schedule 3.19. There is no pending
or, to the Company's Knowledge , threatened action under any warranty or
guaranty against the Company. The Company has adequate insurance or has reserved
adequate amounts for any liability, damage, loss, cost or expense as a result of
any defect or other deficiency (whether of design, materials, workmanship,
labeling instructions or otherwise) with respect to any product sold or services
rendered by or on behalf of the Company (including any licensee thereof) prior
to the Closing.
3.20 Transactions with Affiliates; Intercompany Arrangements. Except as
set forth on Schedule 3.20, there are no agreements, loans, leases, royalty
agreements or other continuing transactions between the Company and (i) any
officer, director or stockholder of the Company or any of their Affiliates or
(ii) any member of any officer, director or stockholder of the Company's family
or any of their Affiliates ("Interested Person"). To the Knowledge of the
Sellers, no Interested Person (x) has any material direct or indirect interest
in any entity that does business with the Company or (y) has any direct or
indirect interest in any property, asset or right that is used by the Company in
the conduct of their business. No Interested Person has any contractual
relationship (including that of creditor or debtor) with the Company other than
such relationships as result solely from being an officer, director or
stockholder of the Company.
3.21 Finders' Fees. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Sellers or the Company who might be entitled to any fee or commission from
Buyer, the Company or any of their respective Affiliates upon consummation of
the transactions contemplated by this Agreement and the Merger Agreement.
3.22 Other Information. None of this Agreement, the Ancillary
Agreements and the schedules and exhibits, when read together as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
The Company makes no representation with respect to any financial projections it
may have provided to Buyer or Parent.
3.23 SEC Reports. The Company has filed all forms, reports and
documents required to be filed by the Company with the SEC since January 1, 2002
under Section 13(a) or Section 15(d) of the Exchange Act. All such required
forms, reports and documents (including those that the Company may file
subsequent to the date hereof) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in all material respects in accordance with the requirements of the
Exchange Act, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this
22
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Company
SEC Report.
3.24 Consideration Received. Schedule 3.24 lists the amount of
consideration to be received by each stockholder of the Company pursuant to this
Agreement and the Merger Agreement. With respect to each stockholder, such
amounts are equal to the amount such stockholder is entitled to receive under
the Company's certificate of incorporation, as amended to date.
3.25 Trading in Parent Common Stock. To the actual knowledge of the CEO
of the Company, (i) no executive officer or director of the Company has
purchased, sold or otherwise traded shares of Parent Common Stock or in any
derivative securities that base their value on the trading price of Parent
Common Stock during the 30 days preceding the date of this Agreement and (ii)
the Company has not purchased, or induced others to purchase, its shares of
Common Stock or any derivative securities that base their value of the trading
price of Parent Common Stock during the 30 days preceding the date of this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS
Each Seller as to itself only, severally but not jointly, represents
and warrants to, and agrees with, Buyer and Parent as follows:
4.1 Title to and Validity of Shares. Seller now has, and on the Closing
Date will have, good and marketable title to and unrestricted power to vote and
sell the Shares designated as owned by such Seller opposite such Seller's name
on Schedule 2.1, free and clear of any Lien and, upon purchase and payment
therefor and delivery to Buyer thereof in accordance with the terms of this
Agreement, Buyer will obtain good and marketable title to such Shares free and
clear of any Lien. All Shares owned by such Seller have been duly authorized and
validly issued and are fully paid and non-assessable. All Shares to be sold by
such Seller are registered in the name of such Seller.
4.2 Authority. Such Seller has the legal power, right and authority to
enter into and perform this Agreement and each Ancillary Agreement to which it
is a party, and to perform each of his obligations hereunder. This Agreement has
been duly executed and delivered by such Seller and constitutes a valid and
binding obligation of such Seller, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement and such Ancillary
Agreements by such Seller (a) require no action by or in respect of, or filing
with, or consent of, any governmental body, agency or official or any other
Person and (b) do not
23
contravene, or constitute a default under, any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or any other
instrument binding upon such Seller.
4.3 Investment Representation. (a) Such Seller represents and warrants
that:
(i) it is acquiring Parent Common Stock solely for its account
and not with a view to or for resale in connection with a distribution
thereof;
(ii) it has had the opportunity to ask questions of and receive
complete answers from representatives of Buyer concerning the
business, management and financial condition of Buyer and the terms
and conditions of Parent Common Stock;
(iii) it is able to bear the economic risk of its investment in
Parent Common Stock for an indefinite period of time;
(iv) it can afford a complete loss of its investment in Parent
Common Stock; and
(v) such Seller has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of the investment in Parent Common Stock; and
(vi) such Seller is an "accredited investor" within the meaning
of Rule 501 under the Securities Act.
(b) Such Seller acknowledges and agrees that:
(i) the shares of Parent Common Stock to be issued to such Seller
hereunder have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or under the securities laws of any
state or other jurisdiction, and are being issued in reliance upon
certain exemptions under such statutes;
(ii) the shares of Parent Common Stock to be issued to such
Seller hereunder may not be resold, transferred, pledged or otherwise
disposed of except pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or
pursuant to a valid exemption from such registration requirements;
(iii) except as contemplated by the Registration Rights
Agreement, Buyer shall have no obligation to register Parent Common
Stock pursuant to the Securities Act or the securities laws of any
state or to supply the information which may be necessary to sell such
securities; and
(iv) each certificate representing Parent Common Stock will bear
an the following restrictive legend:
24
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be
sold, transferred or otherwise disposed of except in
accordance with the terms thereof and unless registered with
the Securities and Exchange Commission of the United States
and the securities regulatory authorities of certain states or
unless an exception from such registration is available."
Buyer shall have no obligation to remove such legend unless
(i) the shares of Parent Common Stock have been registered pursuant to
the Securities Act, or (ii) in the opinion of counsel satisfactory to
Buyer no such legend is required.
4.4 Trading in Parent Common Stock. Since January 1, 2005, such Seller
has not purchased, sold or otherwise traded shares of Parent Common Stock or in
any derivative securities that base their value on the trading price of Parent
Common Stock.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer hereby jointly and severally represent and warrant to
each Seller that:
5.1 Organization, Standing and Corporate Power. Each of Parent and
Buyer is a corporation or other legal entity duly organized, validly existing
and in good standing, or local law equivalent, under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power, as the case may be, and authority to carry on its business as now being
conducted. Each of Parent and Buyer is duly qualified or licensed to do business
and is in good standing, or local law equivalent, in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties or
operations makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed or to be in good
standing, or local law equivalent, would not reasonably be expected to have an
Adverse Effect on Parent or Buyer, as the case may be. Parent has delivered or
made available to Seller, prior to the execution of this Agreement, complete and
correct copies of its Articles of Association and Memorandum of Association, in
each case as amended through the date hereof. Buyer has delivered or made
available to Seller, prior to the execution of this Agreement, complete and
correct copies of its certificate of incorporation and by-laws, in each case as
amended through the date hereof.
25
5.2 Capital Structure.
(a) The authorized capital stock of Parent consists of 25,000,000
ordinary shares, par value NIS 1.00 per share. As of February 28, 2005, (i)
17,655,584 shares of Parent Common Stock are issued and outstanding, and (ii) no
shares of treasury stock are outstanding.
(b) As of the date of this Agreement and regarding options to
purchase shares of Parent Common Stock (each a "Parent Option") under Parent's
First 1998 Share Option Plan ("First Parent 1998 Plan"), Parent's Second 1998
Share Option Plan, as amended ("Second Parent 1998 Plan"), and the Parent 2004
Share Option Plan ("2004 Share Option Plan") and, collectively with the First
Parent 1998 Plan, and Second Parent 1998 Plan, the "Parent Stock Plans"):
(i) Parent has reserved 300,000 shares of Parent Common Stock
for issuance pursuant to outstanding options granted under
the First Parent 1998 Plan (which has been terminated with
respect to any future issuance), all of which have been
exercised, and no other shares remain available for issuance
thereunder;
(ii) Parent has reserved 5,000,000 shares of Parent Common Stock
for issuance to employees, consultants and directors
pursuant to the Second Parent 1998 Plan, of which 609,600
were available for future grants as of February 28, 2005;
and
(iii) Parent has reserved 2,000,000 shares of Parent Common Stock
for issuance to employees, directors and consultants
pursuant to 2004 Share Option Plan, of which, 1,400,000 were
available for future grants as of February 28, 2005.
(c) All outstanding shares of Parent's capital stock were duly
authorized, validly issued, and are fully paid and nonassessable and not subject
to or issued in violation of any purchase option, call option, right of first
refusal, pre-emptive right, subscription right or any similar right under any
provision of Israeli Companies Law - 1999, Parent's Articles of Association,
Memorandum of Association or any Contract to which Parent is a party or
otherwise bound. None of the outstanding shares of Parent's capital stock has
been issued in violation of any federal, state or Israeli securities laws.
5.3 Authority; Noncontravention.
(a) Parent and Buyer have the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Parent and Buyer and the consummation by Parent and Buyer of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Parent and Buyer and no other
corporate authorizations or corporate approvals on the part of Parent or Buyer
are
26
necessary to approve this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Parent and Buyer and constitutes a legal, valid and binding
obligation of Parent and Buyer, enforceable against Parent and Buyer in
accordance with its terms.
(b) The execution and delivery of this Agreement by Parent and
Buyer and the consummation of the transactions contemplated hereby and
compliance by Parent and Buyer with the provisions hereof, do not and will not
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of, or
result in, termination, cancellation or acceleration of any obligation, or
result in the creation of any Lien in or upon any of the properties or assets of
Parent or any of its subsidiaries under, any provision of (i) the Articles of
Association or Memorandum of Association of Parent or Certificate of
Incorporation or Bylaws of Buyer, (ii) constitute a default (with or without
notice or lapse of time, or both) under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Parent
or Buyer, or to a loss of any benefit under any provision of any material
agreement, contract, license or other instrument binding upon Parent or Buyer,
or (iii) subject to the governmental filings, approvals and other matters
referred to in the following paragraph, any statute, law, ordinance, rule,
regulation, judgment, order or decree, in each case, applicable to Parent or any
of its subsidiaries or their respective properties or assets; other than, in the
case of clauses (ii) and (iii), any such conflicts, terminations, cancellations,
violations, breaches, defaults, rights, results, losses, Liens or entitlements
that would not reasonably be expected to have an Adverse Effect on Parent.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any governmental body,
agency, official or authority is required to be made or obtained by Parent or
Buyer in connection with the execution and delivery of this Agreement by Parent
and Buyer or the consummation by Parent and Buyer of the transactions
contemplated hereby or compliance with the provisions hereof, provided that the
representations made by Seller under this Agreement are true and correct, except
(i) for the filing with the SEC of such filings, notices or reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) for any filings or notifications required
under the rules and regulations of the Nasdaq Stock Market, Inc. of the
transactions contemplated hereby, (iii) for any filings or notifications
required under the Israeli Currency Oversight Law -1998 and the rules and
regulations promulgated thereunder, (iv) for any filings or notifications to the
Israeli Securities Authority, (v) as may be required under the Israeli law for
Encouragement of Research and Development in the Industry - 1984 and the rules
and regulations promulgated thereunder, (vi) as may be required under the
Israeli law for Encouragement of Capital Investments - 1959 and the rules and
regulations promulgated thereunder and (vii) as required under the rules and
regulations of the Tel Aviv Stock Exchange.
5.4 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Parent or Buyer threatened against or
affecting, Parent or Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby.
27
5.5 Finders' Fees. Except for Citigroup Global Markets, Inc., whose
fees will be paid by Buyer, there is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
5.6 Sufficient Funds and Stock. Buyer has, or shall have, at the
Closing Date sufficient cash funds to consummate the transactions contemplated
by this Agreement, and Parent has, or shall have, at the Closing Date,
sufficient capital stock to consummate the transactions contemplated by this
Agreement.
5.7 SEC Filings. Parent has filed all required reports, forms and other
documents with the SEC (the "Parent SEC Documents"). As of their respective
dates (giving effect to any amendment contained in a subsequently-filed Parent
SEC Document intended to supplement or replace information given at any such
date), (i) the Parent SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Parent included in
the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except as otherwise permitted in the case of
unaudited statements) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the financial position of SEC and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
5.8 Adverse Change. Parent has conducted its business in the ordinary
course consistent with past practices since the date of the financial statements
of Parent included in the most recently filed SEC Documents. Without limiting
the generality of the foregoing, since such date, there has not been any
Material Adverse Change to Buyer or Parent not disclosed in the Parent SEC
Documents.
ARTICLE 6
COVENANTS OF SELLERS AND COMPANY
6.1 Confidentiality. Each Seller for itself and on behalf of its
Affiliates, will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning Buyer furnished to the Company, or to such
Sellers or its
28
Affiliates, in connection with the transactions contemplated by this Agreement,
and after the Closing Date all confidential documents and information concerning
the Company, except to the extent that such information can be shown to have
been (i) previously known on a nonconfidential basis by such Sellers from a
source other than the Company or its Affiliates, (ii) in the public domain
through no fault of such Sellers or (iii) later lawfully acquired by such Seller
from sources other than the Company, Parent or Buyer; provided that such Seller
may disclose such information to their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement so long as such persons are
informed by Sellers of the confidential nature of such information and are
directed by such Seller to treat such information confidentially in accordance
with this Agreement. The obligation of such Seller and such Seller's Affiliates,
to hold any such information in confidence shall be satisfied if they exercise
the same care with respect to such information as they would take to preserve
the confidentiality of their own similar information. If this Agreement is
terminated, each Seller and its Affiliates, will, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to Buyer, upon
request, all documents and other materials, and all copies thereof, obtained by
the Company, or by such Seller or its Affiliates, or on their behalf concerning
Buyer in connection with this Agreement that are subject to such confidence.
6.2 Directors and Officers. Each Seller shall use its or his reasonable
efforts to (a) ensure that those members of the Board of Directors of the
Company who are appointed by such Seller as Seller's designated representatives
on the Board of Directors, remain members of the Board of Directors through the
earlier of (1) the earliest possible date in which Parent's nominees may take
control of the Board under Rule 14f-1 of the Securities Exchange Act of 1934 or
(2) the termination of the Merger Agreement, and (b) cause such directors not to
remove any officers of the Company up to the Effective Time all current officers
of the Company. Each Seller shall cause those members of the Board of Directors
of the Company who are appointed by such Seller as Seller's designated
representatives on the Board of Directors to resign from the Board when and if
requested by Buyer.
6.3 Payment of Outstanding Options and Related Bonuses. No later than
immediately prior to the Closing , the Company shall have paid to each holder of
outstanding options for Company Common Stock issued under the Company's Stock
Option Plans to the extent such options are vested (or become vested) and
unexercised at the Closing: (a) a cash amount equal to what such holder would
have received had the holder exercised such options and received shares of
Company Common Stock prior to the Closing, reduced by the sum of (i) the
aggregate exercise price payable to the Company by such holder pursuant to such
options (each such reduction to be deemed to constitute full and complete
satisfaction and payment of each such exercise price), and (ii) the amount of
federal, state or other taxes the Company is required to withhold due to the
deemed exercise of the options and simultaneous disposition of the Company
Common Stock obtained upon such deemed exercise; plus (b) an additional cash
bonus equal to $0.0425 for each vested option (subject to required
withholdings). Details regarding the payments referred to in the previous
sentence, including the identity of each holder, the options
29
held by such holder, the exercise price of such holder's option and the net cash
amount paid to each such holder, are set forth in Schedule 6.3 hereto. The
Company shall take all steps and actions necessary to terminate, effective as of
the Effective Time, all unvested options. No payments shall be made to any
holder of outstanding options until and unless such person agrees to terminate
his unvested options.
6.4 Payment of Certain Bonuses Related to Option Exchange Offer. No
later than immediately prior to the Closing, the Company shall have paid a cash
amount to each person who formerly held options for the Company Common Stock
which were tendered for exchange under the Company's Offer to Exchange dated
October 27, 2004. The identity of each person to receive the bonus described in
the previous sentence and the amounts to be paid are set forth on Schedule 6.4
hereto.
6.5 Payment of Severance and Pro-Rated Performance Bonuses. The Company
shall pay the employees listed on Schedule 6.5 their contractual severance
amounts and a pro-rated performance bonus in one lump sum (less all required
withholdings) under the circumstances described on such Schedule. The identity
of each person to receive the payments described in the previous sentence and
the amounts of contractual severance to be paid are set forth on Schedule 6.5
hereto.
6.6 Payments Received by Sellers. Each Seller acknowledges and agrees
that the amounts set forth on Schedule 6.6 opposite to its name, constitute the
only payments to be received by such Seller under this Agreement and such
payments constitute the only payments that such Seller is entitled to receive
from the Company or any other Person under the Company's certificate of
incorporation, as amended to date, or otherwise.
6.7 Termination of Stockholders Agreement. Each Seller and the Company
agrees that the Amended and Restated Stockholders Agreement dated as of December
21, 2001, as amended, among the Sellers and the Company is terminated effective
as of the Closing Date with no further obligations or liabilities owed by any
party thereto. To the extent such termination is not effective due to additional
consents being required, each Seller and the Company shall use reasonable
efforts to cause the termination of such Amended and Restated Stockholders
Agreement promptly after the date hereof.
ARTICLE 7
COVENANTS OF PARENT AND BUYER
Parent and Buyer agree that:
7.1 Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, Parent, Buyer and its Affiliates will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Company
30
furnished to Parent, Buyer or their Affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by Parent or Buyer, (ii) in the public domain through no fault of Parent
or Buyer or (iii) later lawfully acquired by Parent or Buyer from sources other
than the Company or Sellers; provided that Parent or Buyer may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement and to its financing sources in connection with
obtaining the financing for the transactions contemplated by this Agreement so
long as such Persons are informed by Buyer of the confidential nature of such
information and are directed by Parent or Buyer to treat such information
confidentially in accordance with this Agreement. The obligation of Parent or
Buyer and their Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information. If this Agreement is terminated, Parent, Buyer and their Affiliates
will, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
destroy or deliver to Seller, upon request, all documents and other materials,
and all copies thereof, obtained by Parent, Buyer or its Affiliates or on their
behalf concerning Sellers and the Company in connection with this Agreement that
are subject to such confidence.
7.2 Access. The Company, on and after the Closing Date, will afford
Sellers and their agents reasonable access to their properties, books, records,
employees and auditors to the extent necessary to permit Sellers to determine
any matter relating to their rights and obligations hereunder or with respect to
any period ending on or before the Closing Date.
7.3 Indemnification of Directors and Officers. The Buyer and Parent
shall ensure that the organizational documents of the Company and any
successor-in-interest to the Company contain provisions which eliminate to the
fullest extent permitted by law the liability of the Company's officers and
directors and which provide for the indemnification by the Company of directors
and officers of the Company to the fullest extent permitted by law. The Company
has purchased a "tail" policy with respect to its director and officer insurance
policy prior to the date hereof, with the costs of such "tail" policy being paid
by the Company.
ARTICLE 8
COVENANTS OF ALL PARTIES
The parties hereto agree that:
8.1 Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Sellers and Buyer
each agree, and Sellers, prior to the Closing, and Buyer, after the Closing,
agree to cause the Company, to execute and deliver such other documents,
certificates, agreements and other
31
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
8.2 Certain Filings. Sellers, Parent and Buyer shall cooperate with
each other (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and (b)
in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers.
8.3 Public Announcements. The parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except as may be
required by applicable law or stock exchange regulation, will not issue any such
press release or make any such public statement prior to such consultation.
8.4 Expenses. Except as otherwise specifically provided in this
Agreement or the Ancillary Agreements, all costs and expenses incurred in
connection with this Agreement and the Ancillary Agreements and with the
consummation of the transactions contemplated herein and therein shall be paid
by the party incurring such costs and expenses.
ARTICLE 9
TAX MATTERS
9.1 Definitions.
"Tax" and "Taxes" means all taxes, assessments or impositions imposed
of any nature including: (i) federal, state, local or foreign net income tax,
alternative or add-on minimum tax, profits or excess profits tax, franchise tax,
gross income, adjusted gross income or gross receipts tax, employment related
tax (including employee withholding or employer payroll tax, FICA or FUTA), real
or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp
tax or duty, any withholding or back up withholding tax, estimated taxes,
environmental tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax; and (ii)
any liability with respect to the foregoing as a result of being or formerly
having been a member of any affiliated, consolidated, combined, unitary, or
similar group, as a result of any transferee liability in respect of the
foregoing, whether arising as a result of any agreement or otherwise by
operation of law.
32
"Tax Returns" means all returns, declarations, reports, claims for
refund, information statements and other documents relating to Taxes, including
all schedules and attachments thereto, and including all amendments thereof.
"Tax Authority" means any governmental authority responsible for the
imposition or collection of any Tax.
9.2 Tax Representations. Sellers hereby represent and warrant to Parent
and Buyer as of the date hereof and as of the Closing Date that:
(a) The Company has timely filed all Tax Returns required to be
filed on or before the date hereof (determined without regard to extensions).
The Company has paid all Taxes owed (whether or not shown, or required to be
shown, on Tax Returns) on or before the date hereof. The Company has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party. All Tax Returns filed by the Company were
complete and correct in all respects, and such Tax Returns correctly reflected
the facts regarding the income, business, assets, operations, activities, status
and other matters of the Company and any other information required to be shown
thereon. The Company has not participated in or otherwise engaged in any
transaction described in Treasury Regulation Section 301.6111-2(b)(2) or any
"Reportable Transaction" within the meaning of Treasury Regulation Section
1.6011-4(b). The Company has disclosed on its Tax Returns all positions taken
therein that could give rise to a substantial understatement of Tax within the
meaning of Section 6662 of the Code (or any similar provision of state, local or
foreign Tax law). There are no Liens for Taxes upon any of the Company's assets,
other than Liens for ad valorem Taxes not yet due and payable.
(b) None of the Tax Returns filed by the Company or Taxes payable
by the Company have been the subject of an audit, action, suit, proceeding,
claim, examination, deficiency or assessment by any governmental authority, and
no such audit, action, suit, proceeding, claim, examination, deficiency or
assessment is currently pending or expected by the Company or any director or
officer (or employee responsible for Tax matters) of the Company.
(c) The Company is not currently the beneficiary of any extension
of time within which to file any Tax Return, and the Company has not waived any
statute of limitation with respect to any Tax or agreed to any extension of time
with respect to the assessment or collection of any deficiency. All material
elections with respect to Taxes affecting the Company, as of the date hereof,
are set forth in the Financial Statements or in Schedule 9.2.
(d) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of (i) any "excess parachute payments" within the
meaning of Section 280G of the Code (without regard to the exceptions set forth
in Sections 280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which
a deduction would be disallowed or deferred under Section 162 or Section 404 of
the Code. . None of the shares of outstanding capital stock of the Company or
any Subsidiary is subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code. Except
33
as set forth in Schedule 9.2, no portion of the Purchase Price is subject to the
Tax withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
(e) The Company is not a party to or member of any joint venture,
partnership, limited liability company or other arrangement or contract which
could be treated as a partnership for federal income tax purposes. The Company
is not, nor has it ever been, a "United States real property holding
corporation" (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. The Company does not
own an interest in real property or personal property in any jurisdiction in
which a Tax is imposed, or the value of such interest reassessed, on the
transfer of an interest in real property or personal property or which treats
the transfer of an interest in an entity that owns an interest in real property
or personal property as a transfer of such interest in real property or personal
property. The Company has never been either a "controlled corporation" or a
"distributing corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) with respect to a transaction that was described in, or intended to
qualify as a tax-free transaction pursuant to, Section 355 of the Code. Except
as set forth in Schedule 9.2, the Company does not have net operating losses.
The Company has not made or agreed to make any adjustment under Section 481(a)
of the Code (or any corresponding provision of state, local or foreign Tax law)
by reason of a change in accounting method or otherwise or entered into a
"closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law),
nor will the Company be required to make such an adjustment as a result of the
transactions contemplated by this Agreement. The Company has not participated in
an international boycott as defined in Section 999 of the Code. Except as set
forth in Section 9.2, the Company has never (i) made an election under Section
1362 of the Code to be treated as an S corporation or made an election under
Section 1361 of the Code to be treated as a "qualified subchapter S subsidiary"
for federal income tax purposes or (ii) made any similar election under any
comparable provision of any state, local or foreign Tax law. The Company does
not own, directly or indirectly, any interests in an entity that is or has been
treated as a "passive foreign investment company" within the meaning of Section
1297 of the Code, a "foreign personal holding company" within the meaning of
former Section 552 of the Code or a "controlled foreign corporation" within the
meaning of Section 957 of the Code. None of the assets of the Company directly
or indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code. None of the assets of the Company is "tax-exempt use
property" within the meaning of Section 168(h) of the Code. None of the assets
of the Company is property which is required to be treated as being owned by any
other Person pursuant to the so-called "safe harbor lease" provisions of Section
168(f)(8) of the Internal Revenue Code of 1954. The Company has complied with
all withholding obligations under Section 1445 of the Code and under any
comparable applicable provisions of state or local law.
(f) The Company is not a party to any Tax sharing agreement or
similar arrangement (including, but not limited to, an indemnification agreement
or arrangement). The Company has never been a member of a group filing a
consolidated federal income Tax Return or a combined, consolidated, unitary or
other affiliated group Tax Return for state, local or
34
foreign Tax purposes (other than a group the common parent of which is the
Company), and the Company does not have any liability for the Taxes of any
Person (other than the Company) under Treasury Regulation Section 1.1502-6 (or
any corresponding provision of state, local or foreign Tax law), or as a
transferee or successor, or by contract, or otherwise.
(g) The unpaid Taxes of the Company did not, as of the Balance
Sheet Date exceed the reserve for actual Taxes (as opposed to any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) as shown on the Balance Sheet, and will not exceed such reserve as
adjusted for the passage of time through the Closing Date in accordance with the
reasonable past custom and practice of the Company and its Subsidiaries in
filing Tax Returns. The Company will not incur any liability for Taxes from the
Balance Sheet Date through the Closing Date other than in the ordinary course of
business and consistent with reasonable past practice.
(h) Schedule 9.2 hereto contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax is properly payable by the
Company. No claim has ever been made by a Tax Authority in a jurisdiction where
the Company does not file Tax Returns that the Company is or may be subject to
Tax in that jurisdiction. The Company does not have, and has never had, a
permanent establishment or other taxable presence in any foreign country, as
determined pursuant to applicable foreign law and any applicable Tax treaty or
convention between the United States and such foreign country.
(i) Schedule 9.2 hereto lists all Tax Returns filed with respect
to the Company for taxable periods ended on or after December 31, 1999 and lists
the Company's IRS employment identification number. The Company has delivered to
Buyer correct and complete copies of all income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company since December 31, 1999. Schedule 9.2 sets forth as of the most recent
practicable date which is set forth on Schedule 9.2 the basis of the Company in
its assets.
(j) There has not been any change in any method of Tax accounting
or any making of a Tax election or change of an existing election by the
Company.
(k) At all times during the Company's existence, each record or
beneficial holder of an equity interest in the Company has been a "United States
person" (as defined in Section 7701(a)(30) of the Code) for purposes of the
provisions of Sections 897 and 1445 of the Code.
(l) For purposes of this Section 9.2, any reference to the Company
shall be deemed to include any Person which merged with or was liquidated into
the Company.
9.3 Tax Covenants. The following provisions shall govern the allocation
of responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
35
(a) Cooperation on Tax Matters.
(i) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by any other party, in connection with the filing
of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer agrees (A) to
retain all books and records with respect to Tax matters pertinent to
the Company relating to any Tax period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller's Committee, any extensions
thereof) of the respective Tax periods, and to abide by all record
retention agreements entered into with any Tax Authority, and (B) to,
in the case of Buyer give Seller's Committee reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if another such party so requests.
(ii) Buyer and Sellers further agree, upon request, to provide
any other party with all information that such party may be required
to report pursuant to Sections 6043 and 6043A of the Code and all
Treasury Regulations promulgated thereunder.
(b) Certain Taxes. Any transfer, documentary, sales, use, stamp or
other similar Taxes and recording and filing fees incurred in connection with
the transactions contemplated by this Agreement or any Ancillary Agreement with
respect to shares owned by each Seller shall be borne and paid by each Seller,
respectively, and such Seller shall promptly reimburse Buyer for any such
amounts paid by Buyer.
(c) Tax Free Reorganization. Each of the parties shall use its
reasonable best efforts through the effective time of the Subsequent Merger (as
defined in the Merger Agreement) to cause the acquisition of Shares and the
Mergers (as defined in the Merger Agreement) taken together to be treated as a
reorganization within the meaning of Section 368(a) of the Code. No party will
take any position on any federal, state or local income or franchise Tax Return,
or take any other tax reporting position, that is inconsistent with the
treatment of the acquisition of Shares and the Mergers (as defined in the Merger
Agreement) taken together as a reorganization within the meaning of Section
368(a) of the Code, unless otherwise required by applicable tax law (and then
only to the extent required by such applicable tax law)..
ARTICLE 10
EMPLOYEE BENEFITS
10.1 Employee Benefits Definitions. The following terms, as used
herein, have the following meanings:
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"Benefit Arrangement" means an employment, severance or similar
contract, arrangement or policy (written or oral) and each plan or arrangement
providing for severance, insurance coverage (including any self-insured
arrangements), workers' compensation, vacation benefits, disability benefits, or
salary continuation for other leaves of absence, supplemental unemployment
benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, phantom stock, stock options, stock appreciation rights
or other forms of incentive or equity compensation, educational assistance
arrangements or policies, any plan governed by Section 125 of the Code, any
fringe benefit (including company cars), any change of control arrangements or
policies or post-retirement insurance, compensation or benefits or any
Co-employment agreement that (i) is not an Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by the Company or any of its
ERISA Affiliates or any Co-Employer and (iii) covers any Employee or former
Employee of the Company.
"Co-Employer" means any entity that is or was considered to be a
co-employer with the Company.
"Employee" for purposes of this Article 10 means any employee of the
Company or an ERISA Affiliate of the Company, including any employee co-employed
by the Company and Co-Employer.
"Employee Plan" means each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates or any Co-Employer, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, all as from time to time in
effect, and any successor laws thereto.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code or Section 4001 of ERISA.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA.
10.2 ERISA Representations. The Company hereby represents and warrants
to Parent and Buyer as of the date hereof that:
(a) Schedule 10.2 lists each Employee Plan and Benefit Arrangement
that covers any Employee. The Company has made available to Buyer correct and
complete copies of all Employee Plans and Benefit Arrangements and, where
applicable, each of the following documents with respect to such Employee Plans
or Benefit Arrangements: (i) any amendments; (ii) any related trust documents;
(iii) any documents governing the investment and management of the Employee Plan
or the Benefit Arrangement, or the assets thereof, including any documents
relating to fees incurred by the sponsor or participants and beneficiaries; (iv)
the most recent
37
summary plan descriptions and summaries of material modifications; (v) written
communications to employees to the extent the substance of the Employee Plans
and Benefit Arrangements described therein differ materially from the other
documentation furnished under this clause and (vi) copies of the Federal Form
5500 series and accountant's opinion, if applicable, for each Employee, for the
three plan years preceding the Closing Date.
(b) None of the Employee Plans or Benefit Arrangements listed on
Schedule 10.2(a) is subject to the laws of any jurisdiction outside the United
States.
(c) No non-exempt "prohibited transaction," as defined in Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to any
Employee Plan.
(d) Neither the Company nor any ERISA Affiliate maintains or has
ever maintained or contributed to or expects to incur liability with respect to
any Multiemployer Plan or Employee Plan subject to Title IV of ERISA or Section
412 of the Code. Neither the Company nor any ERISA Affiliate has incurred any
liability with respect to any transaction described in Section 4069 of ERISA.
(e) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to the Closing Date, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. No event has
occurred that will or could reasonably be expected to give rise to
disqualification of any such Employee Plan or to a tax under Section 511 of the
Code. The Company has furnished to Buyer copies of the most recent Internal
Revenue Service determination or opinion letter with respect to each such
Employee Plan. Each Employee Plan and Benefit Arrangement has been maintained in
compliance with its terms and with the applicable requirements prescribed by any
and all statutes, orders, rules and regulations and neither the Company nor any
ERISA Affiliate has received any outstanding written notice from any
governmental or quasi-governmental authority questioning or challenging such
compliance.
(f) With respect to the Employees and former Employees, there are
no employee post-retirement health or welfare plans in effect, except as
required by Section 4980B of the Code or applicable state law. No tax under
Section 4980B or 4980D of the Code has been incurred in respect of any Employee
Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code.
(g) All contributions and payments accrued under each Employee
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals for the period
ending on the Closing Date, will be discharged and paid on or prior to the
Closing Date except to the extent reflected on the Financial Statements and on
Schedule 10.2(g). There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of their respective
ERISA Affiliates relating to, or change in employee participation or coverage
under, any Employee Plan or Benefit Arrangement that would increase materially
the expense of
38
maintaining such Employee Plan or Benefit Arrangement above the
level of the expense incurred in respect thereof for the fiscal year ended prior
to the date hereof.
(h) Except as set forth in Schedules 6.3, 6.4 and 6.5, no Employee
will become entitled to any material bonus, retirement, severance or similar
benefit or enhanced benefit solely as a result of the transactions contemplated
hereby.
(i) Neither the Company nor any ERISA Affiliate nor any of their
respective directors, officers, employees or any other fiduciary has committed
any breach of fiduciary responsibility imposed by ERISA that would subject the
Company or any ERISA Affiliate or any of their respective directors, officers or
employees to liability under ERISA.
(j) There have been no acts or omissions by the Company or any
ERISA Affiliate that have given rise to or could reasonably be expected to give
rise to material fines, penalties, taxes or related charges under Sections
502(c) or 502(i) of ERISA or Chapter 43 of the Code for which the Company or any
ERISA Affiliate may be liable.
(k) The provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or any equivalent state statute, and the
Health Insurance Portability and Accountability Act of 1996, or any equivalent
state statute, have been complied with in all material respects.
(l) Except as disclosed in Schedule 10.2(k), neither the Company
nor any ERISA Affiliate maintains a "nonqualified deferred compensation plan"
within the meaning of Section 409A of the Code.
10.3 Employee Benefits Covenants. Provided that it complies in all
material respects with applicable law and the terms of any employment
arrangements identified in Section 3.16, Buyer may, in its sole discretion,
substitute employee compensation, benefit and severance programs for those of
the Company as are comparable with the programs provided from time to time to
Buyer's employees and the employees of Buyer's Affiliates. Subject to the
preceding sentence, the Buyer shall have no obligation to continue the existence
of any Employee Plan or Benefit Arrangement maintained by the Company or any
ERISA Affiliate.
10.4 No Third Party Beneficiaries. No provision of this Article 10 or
any other provision in this Agreement shall create any third party beneficiary
or other rights in any employee or former employee (including any beneficiary or
dependent thereof) of the Company in respect of continued employment (or resumed
employment) with the Company and no provision of this Article 10 shall create
any such rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any Employee Plan or Benefit Arrangement
or any plan or arrangement that may be established by Buyer or any of its
Affiliates. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any Employee Plan or
Benefit Arrangement.
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ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or the Ancillary
Agreements or in any certificate or other writing delivered pursuant hereto or
in connection herewith shall survive the Closing until the first anniversary of
the Closing Date, except in the case of Article 4 and 6.1, which shall survive
indefinitely.
Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
Section 11.2 shall survive the time at which it would otherwise terminate
pursuant to the preceding paragraph, if written notice of the inaccuracy or
breach thereof giving rise to such right to indemnity shall have been given to
the party against whom such indemnity may be sought prior to such time.
11.2 Indemnification. (a) Each Seller severally and not jointly hereby
indemnifies Parent, Buyer and, effective at the Closing, without duplication,
the Company, against and agrees to hold them harmless from any and all damage,
loss, liability and expense (including without limitation reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Parent, Buyer or
the Company arising out of:
(i) (A) any misrepresentation or breach of warranty (determined
without regard to any materiality qualification contained in any
representation or warranty giving rise to claim for indemnity
hereunder) made by the Company pursuant to this Agreement or pursuant
to the Merger Agreement (if such breach occurs prior to the Board
resignation contemplated pursuant to Section 6.2 hereof) and any
certificate or other agreement delivered pursuant hereto or thereto
and (B) any claim, action, suit or proceeding by any Person (a "Third
Party Claim") alleging facts that if proven true would constitute a
breach of such representations and warranties;
(ii) (A) any misrepresentation or breach of warranty (determined
without regard to any materiality qualification contained in any
representation or warranty giving rise to claim for indemnity
hereunder) made by such Seller (but not other Sellers) pursuant to the
provisions of Article 4 or any Ancillary Agreement and (B) a Third
Party Claim alleging facts that if proven true would constitute a
misrepresentation or breach of such representations and warranties;
(iii) any breach of any covenant or agreement made or to be
performed by such Seller (but not other Sellers) pursuant to this
Agreement or the Ancillary Agreements;
(iv) the amount by which Closing Date Net Working Capital,
calculated in compliance with Section 2.3, is less than Threshold Net
Working Capital;
40
(v) the amount by which the total consideration ultimately paid
by Parent or Buyer to any holder or former holder of Company
Securities (other than Sellers) under the Merger Agreement, as amended
from time to time, or otherwise in connection with the acquisition by
Parent or Buyer of the Company, exceeds $2,574,966; .
(vi) The amount by which (1) any transaction related expenses
(including any Estimated Expenses) plus (2) the costs of the director
and officer tail insurance policy, exceed $295,000.
(vii) The amount by which severance payments, contractual
bonuses, retention bonuses and benefits paid by the Company exceed the
amounts set forth in Schedule 11.2(a)(vii).
(viii) Any Adverse change in the audited financial statements of
the Company with respect to the fiscal year ended December 31, 2004 as
compared to the draft audited financial statements delivered under
Section 3.6.
(b) Buyer hereby indemnifies each Seller against and agrees to
hold it harmless from any and all Damages incurred or suffered by such Seller
arising out of:
(i) (A) any misrepresentation or breach of warranty made by Buyer
pursuant this Agreement, the Ancillary Agreements and any certificate
or other writing delivered pursuant hereto or thereto and (B) a Third
Party Claim alleging facts that if proven true would constitute a
misrepresentation or breach of such representations and warranties;
and
(ii) any breach of any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement or the Ancillary
Agreements.
(c) All indemnification payments made under this Agreement shall be
treated as adjustments to the Purchase Price.
11.3 Limitation of Indemnification. (a) Notwithstanding the provisions
of Section 11.2, (i) Sellers shall not be liable for Damages under Section
11.2(a)(i), (iii) and (viii) unless the aggregate amount of Damages with respect
to all such misrepresentations or breaches of warranty (determined without
regard to any materiality qualification contained in any representations or
warranty giving rise to claim for indemnity hereunder) exceeds $250,000 and then
only to the extent of such excess and (ii) each Seller's maximum liability, as
the case may be, under (1) Section 11.2(a)(i), (iii), (iv), (v), (vi), (vii) and
(viii) shall not exceed the amount deposited in escrow with the Escrow Agent on
behalf of such Seller; and (2) Section 11.2(a)(v) shall not exceed 50% of such
Damages, in any event the total Damages to be borne Sellers under this
subsection (2) not to exceed $900,000. Notwithstanding anything to the contrary
herein, for purposes of Section 11.2(a)(i), a claim shall not be deemed to
constitute indemnifiable Damages for purposes of such section unless the amount
of Damages with respect to such claim is equal to or greater than $15,000.
41
(b) Notwithstanding the provisions of Section 11.2, (i) Parent's
and Buyer's maximum liability under Section 11.2(b) shall not exceed
$17,177,500.
(c) In the event that Parent, Buyer or the Company are indemnified
under this Agreement and thereafter receive insurance proceeds for such Damage,
then Parent, Buyer or the Company, as the case may be, shall remit such funds to
Sellers' Committee for distribution to the Sellers. The Company agrees to use
its commercially reasonable efforts to recover any such available insurance
proceeds.
(d) Notwithstanding anything in this Agreement to the contrary,
except for breaches of Section 6.1, there shall not be included in the
definition of Damages, and Buyer and Parent shall not be entitled to recover
under any action for breach of contract or tort hereunder, any indirect,
punitive, special, exemplary or consequential damages (other than indirect,
punitive, special, exemplary or consequential damages which are paid to third
parties), damages for lost profits of the Company, damages for diminution in
value of the Company or damages computed on a multiple of earnings or similar
basis.
11.4 Procedures. (a) If any indemnified party receives notice of the
assertion of any Third-Party Claim with respect to which an indemnifying party
is obligated under this Agreement to provide indemnification, such indemnified
party shall give such indemnifying party written notice thereof (together with a
copy of such Third-Party Claim, process or other legal pleading) promptly after
becoming aware of such Third-Party Claim; provided, however, that the failure of
any indemnified party to give notice as provided in this Section 11.4 shall not
relieve any indemnifying party of its obligations under this Section 11.4,
except to the extent that such indemnifying party is actually prejudiced by such
failure to give notice or except as provided in Section 11.1 hereof. Such notice
shall describe such Third-Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own
expense and through counsel chosen by such indemnifying party (which counsel
shall be reasonably acceptable to the indemnified party), may elect to defend,
compromise and settle any Third-Party Claim on reasonable terms. If an
indemnifying party elects to defend a Third-Party Claim, then, within ten (10)
business days after receiving notice of such Third-Party Claim (or sooner, if
the nature of such Third-Party claim so requires), such indemnifying party shall
notify the indemnified party of its intent to do so, and such indemnified party
shall cooperate in the defense of such Third-Party Claim (and pending such
notice and assumption of defense, an indemnified party may take such steps to
defend against such Third-Party Claim as, in such indemnified party's good-faith
judgment, are appropriate to protect its interests). Such indemnifying party
shall pay such indemnified party's reasonable out-of-pocket expenses incurred in
connection with such cooperation. Such indemnifying party shall keep the
indemnified party reasonably informed as to the status of the defense of such
Third-Party Claim. After notice from an indemnifying party to an indemnified
party of its election to assume the defense of a Third-Party Claim, such
indemnifying party shall not be liable to such indemnified party under this
Section 11.4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided, however,
that such indemnified party shall have
42
the right to employ one law firm as counsel("Separate Counsel"), to represent
such indemnified party in any action or group of related actions (which firm or
firms shall be reasonably acceptable to the indemnifying party) if, in such
indemnified party's reasonable judgment at any time, either a conflict of
interest between such indemnified party and such indemnifying party exists in
respect of such claim that precludes the indemnifying party's counsel from
adequately representing the indemnified party, or there may be defenses
available to such indemnified party which are different from or in addition to
those available to such indemnifying party and the representation of both
parties by the same counsel would be inappropriate, and in that event (i) the
reasonable fees and expenses of such Separate Counsel shall be paid by such
indemnifying party (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one Separate Counsel with
respect to any Third-Party Claim (even if against multiple indemnified
parties)), and (ii) each of such indemnifying party and such indemnified party
shall have the right to conduct its own defense in respect of such claim. If an
indemnified party is conducting its own defense of a Third-Party Claim, whether
because of a conflict of interest (as contemplated by the previous sentence) or
because an indemnifying party elects not to defend against a Third-Party Claim,
or fails to notify an indemnified party of its election as provided in this
Section 11.4 within the period of ten (10) business days described above, or
having elected to defend the claim, then fails to defend the claim, the
indemnified party may defend, compromise, and settle such Third-Party Claim on
reasonable terms and shall be entitled to indemnification hereunder (to the
extent permitted hereunder). Notwithstanding the foregoing, the indemnifying
party shall not, without the prior written consent of the indemnified party, (i)
settle or compromise any Third-Party Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery by
the claimant or plaintiff to the indemnified party of a written release in a
form reasonably satisfactory to the indemnified party from all liability in
respect of such Third-Party Claim, or (ii) settle or compromise any Third-Party
Claim in any manner that would include injunctive relief or reasonably be
expected to have a material adverse effect on the indemnified party.
11.5 No Subrogation. Following the Closing, Sellers shall have no right
of indemnification, contribution or subrogation against the Company with respect
to any indemnification payments made by any Seller or Sellers under Section 11.2
if the transactions contemplated by this Agreement are consummated.
11.6 Escrow. Parent's and Buyer's claims for indemnification pursuant
to Section 11.2(a)(i), (iii), (iv), (v), (vi), (vii) and (viii) shall be
satisfied solely from funds withheld or deposited and held in escrow pursuant to
Section 2.2. Parent's and Buyer's claims for indemnification pursuant Section
11.2(a)(ii) shall be satisfied, at the sole and exclusive option of Parent and
Buyer, either (1) from the amounts then held in escrow or (2) directly from the
Seller causing such Damage (even if amounts remain withheld or deposited under
the terms of the Escrow Agreement). The procedure for payments from the escrow
as well as releases from escrow shall be governed by the Escrow Agreement.
11.7 Exclusive Remedy. Section 11.2 shall provide the exclusive remedy
for any misrepresentation or breach of warranty, covenant or other agreement or
other claim arising out of this Agreement, the Ancillary Agreements or the
transactions contemplated hereby and
43
thereby (whether such claim is for breach of contract, tort or otherwise),
except with respect to claims for injunctive relief and/or against a party who
commits fraud.
11.8 Dispute Resolution. (a) Subject to the other subsections of this
Section 11.8, any dispute arising out of or relating to indemnification pursuant
to this Article 11 shall be finally settled by binding arbitration conducted
expeditiously by a single arbitrator in accordance with the J.A.M.S./Endispute
Comprehensive Arbitration Rules and Procedures then in effect (the "J.A.M.S.
Rules"). The arbitration shall occur under the auspices of the United States
Arbitration Act, 9 U.S.C. ▇▇.▇▇. 1-6, and judgment upon the award rendered by
the arbitrators may be entered by any court having jurisdiction thereunder. The
place of arbitration shall be Orange County, California until the Company's
records have been moved from the Company's facility in Orange County, and
thereafter shall be Dallas, Texas.
(b) The arbitration proceedings shall be administered by the
arbitrators in accordance with the J.A.M.S. Rules as the arbitrators deem
appropriate. The discovery period related to the arbitration proceedings shall
terminate ninety (90) days after the arbitrators have been finally appointed,
and Parent and Buyer, on the one hand, and the Seller, on the other hand, shall
each be permitted to depose up to six (6) witnesses. The parties and the
arbitrators shall use their best efforts to see that the arbitration proceedings
taking place pursuant to this Section 11.8 shall conclude within one hundred
fifty (150) days after the arbitrators have been finally appointed. The
arbitrators shall render a reasoned opinion in writing in support of their
decision, and shall award reimbursement of attorneys' and other experts' fees
and disbursements and other costs of arbitration to the prevailing party, in
such manner as the arbitrator shall deem appropriate.
(c) All expenses and fees of the arbitrators and expenses for
hearing facilities and other expenses of the arbitration shall be borne equally
by Buyer, on one hand, and the Seller, on the other hand, unless they agree
otherwise or unless the arbitrators in the award assess such expenses against
one of the parties or allocates such expenses other than equally between the
parties. Each party shall bear its own counsel fees and the expenses of its
witnesses except to the extent otherwise provided in this Agreement or by law or
by the arbitrator's award. While there are escrow funds deposited (and not
subject to claims) with the Escrow Agent, the Sellers' portion of any such fees
and expenses shall be paid from the escrow funds.
(d) Notwithstanding the other provisions of this Section 11.8,
either party may seek from any court having jurisdiction hereof any interim,
provisional or injunctive relief that may be necessary to protect the rights or
property of any party or to maintain the status quo before, during or after the
pendency of the arbitration proceeding. The institution and maintenance of any
judicial action or proceeding for any such interim, provisional or injunctive
relief shall not constitute a waiver of the right or obligation of either party
to submit the dispute to arbitration, including any claims or disputes arising
from the exercise of any such interim, provisional or injunctive relief. Nothing
herein, however, shall be construed to mean that any decision of the arbitrators
is subject to judicial review or appeal, and the parties hereto hereby waive any
and all rights of judicial appeal or review, on any ground whatsoever.
44
11.9 Seller's Mutual Reimbursement Obligation. In the event that a
Seller causes a claim to be paid against the Escrow Account due to such Seller's
breach of Section11.2(a)(ii) and (iii) hereof, such Seller shall reimburse the
other Sellers for any losses sustained due to such Seller's breach.
11.10 Exception. The parties acknowledge that, without obligation to do
so, they may mutually agree to additional accruals with respect to the Company's
financial statements for the period ending March 31, 2005 (the "Agreed
Accruals") and that the Agreed Accruals shall not (i) give raise to a claim of a
breach of the representations and warranties set forth in Article III hereof or
(ii) cause an adjustment to the calculation of Closing Date Net Working Capital.
ARTICLE 12
SELLERS' COMMITTEE
12.1 Appointment of Sellers' Committee.
(a) Each Seller hereby irrevocably constitutes and appoints,
Innocal II, L.P., Argentum Capital Partners, L.P. and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the
"Sellers' Committee"), or a majority of them acting separately, as such Seller's
attorneys-in-fact and agents in connection with the transactions contemplated by
this Agreement and the Ancillary Agreements. This power is irrevocable and
coupled with an interest, and shall not be affected by the death, incapacity,
illness or other inability to act of any Seller.
(b) Each Seller hereby irrevocably grants Sellers' Committee, or a
majority of the members thereof acting separately, full power and authority on
behalf of such Seller:
(i) to deliver certificates representing the Shares to be sold by
such Seller at the Closing.
(ii) to (A) dispute or refrain from disputing any claim made by
Buyer under this Agreement; (B) negotiate and compromise any dispute
that may arise under, and to exercise or refrain from exercising any
remedies available under, this Agreement and the Escrow Agreement, and
(C) execute any settlement agreement, release or other document with
respect to such dispute or remedy;
(iii) to give or agree to any and all consents, waivers,
amendments or modifications deemed by Sellers' Committee, in its sole
discretion, to be necessary or appropriate under this Agreement or the
Escrow Agreement, and, in each case, to execute and deliver any
documents that may be necessary or appropriate in connection
therewith;
(iv) to enforce any claim against Buyer arising under this
Agreement or the Escrow Agreement.
45
(v) to engage attorneys, accountants and agents at the expense of
Sellers and to cause the release from the Escrow Account of amounts
necessary to pay such expenses; and
(vi) to give such instructions and to take such action or refrain
from taking such action as Sellers' Committee deems, in its sole
discretion, necessary or appropriate to carry out the provisions of,
and to consummate the transactions contemplated by, this Agreement or
the Escrow Agreement.
(c) Each Seller hereby agrees that:
(i) the Company, Parent and Buyer shall be entitled to rely on
any and all action taken by Sellers' Committee, or a majority of the
members thereof acting separately, under this Agreement and the
Ancillary Agreements notwithstanding any dispute or disagreement among
Sellers or among the members of Sellers' Committee without any
liability to, or obligation to inquire of, any Seller or the other
members of Sellers' Committee, notwithstanding any knowledge on the
part of the Company, Parent or Buyer of any such dispute or
disagreement;
(ii) notice to Sellers' Committee, delivered in the manner
provided herein, shall be deemed to be notice to such Seller for the
purposes of this Agreement and the Escrow Agreement;
(iii) the authority of Sellers' Committee, as described in this
Agreement, shall be effective until the rights and obligations of
Sellers' Committee under this Agreement and the Escrow Agreement shall
terminate by virtue of the termination of any and all rights and
obligations of such Seller to Buyer under this Agreement and the
Escrow Agreement;
(iv) if any member of Sellers' Committee resigns or is removed or
otherwise ceases to function in his capacity as such for any reason
whatsoever, and no successor acceptable to Buyer is appointed by a
majority-in-interest of Sellers within thirty 30 days, Sellers'
Committee shall consist solely of the remaining members of Sellers'
Committee and, under such circumstances, Parent, Buyer and the Company
shall be entitled to rely on any and all actions taken by the
remaining members or member of Sellers' Committee. If, as a result of
such resignation or removal, there are no remaining members of
Sellers' Committee and no successor is appointed by a
majority-in-interest of Sellers within 30 days, then Parent or Buyer
shall have the right to appoint a member of Sellers' Committee to
serve as described in this Agreement (who shall be a Seller) and,
under such circumstances, Buyer and the Company shall be entitled to
rely on any and all actions taken by such member of Sellers'
Committee;
(v) there shall at no time be more than three members of Sellers'
Committee; and
46
(vi) no member of the Seller's Committee shall be liable to any
Seller for Damages with respect to any action taken or any omission by
Sellers' Committee pursuant to this Article 12, except to the extent
such Damages are caused by such member's willful misconduct.
(d) Each Seller agrees that, notwithstanding the foregoing, at the
request of Parent or Buyer, he shall take all actions necessary or appropriate
to consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including, without limitation, delivery of his Shares and acceptance
of the purchase price therefor) individually on his own behalf.
12.2 Limitation on Actions. Any claim, action, suit or other
proceeding, whether at law or in equity, to enforce any right, benefit or remedy
granted to Sellers under this Agreement shall be asserted, brought, prosecuted,
or maintained only by Sellers' Committee on behalf of Sellers. Any claim,
action, suit or other proceeding, whether at law or in equity, to enforce any
right, benefit or remedy granted under this Agreement, including without
limitation any right of indemnification provided in this Agreement, may be
asserted, brought, prosecuted or maintained by Buyer against Sellers by service
of process on each member of Sellers' Committee and without the necessity of
serving process on, or otherwise joining or naming any other Seller as a
defendant in such claim, action, suit or other proceeding. With respect to any
matter contemplated by this Section, a Seller shall be bound by any
determination in favor of or against Sellers' Committee or the terms of any
settlement or release to which Sellers' Committee shall become a party.
12.3 Indemnification. Each Seller shall indemnify each member of
Sellers' Committee against any Damages (except such as result from such member's
willful misconduct) that such member may suffer or incur in connection with any
action taken or any omission by such member as a member of Sellers' Committee
except to the extent such Damages were caused by such member's willful
misconduct.
ARTICLE 13
MISCELLANEOUS
13.1 Notices. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery, if personally delivered by hand, (ii) upon the third day after such
notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the date
scheduled for delivery after such notice is sent by a nationally recognized
overnight express courier or (iv) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
47
if to Buyer, to: with a copy to:
▇▇▇▇▇ Moshaioff ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Retalix, Ltd. ▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ House One Post Office Square
43000, Ra'anana, Israel ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇▇-▇-▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to: with a copy to:
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
TCI Solutions, Inc. Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to a Seller:
at his address shown in
Schedule 2.1, or to the
Sellers' Committee
Such information may be changed, from time to time, by means of a
notice given in the manner provided in this Section 13.1.
13.2 Amendments; No Waivers. (a) Any provision of this Agreement may be
amended prior to the Closing Date if, and only if, such amendment is in writing
and signed by Buyer, the Company and the Sellers. Any provision of this
Agreement may be waived if the waiver is in writing and signed by the party to
be bound, which in the case of the Seller may be taken by Sellers' Committee.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and shall not be exclusive of any
equitable rights or remedies.
13.3 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
13.4 Further Assurances. From time to time after the Closing, at the
request of Buyer and without further consideration, Sellers will execute and
deliver to Buyer such other documents, and take such other action, as Parent or
Buyer may reasonably request in order to
48
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the Shares.
13.5 Governing Law. This Agreement and the Ancillary Agreements shall
be construed in accordance with and governed by the law of the State of New
York, without regard to the conflicts of law rules of such state.
13.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
13.7 Entire Agreement. This Agreement and the Ancillary Agreements and
specify other agreements constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter hereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. None of the provisions of this Agreement and
the Ancillary Agreements is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
13.8 Jurisdiction. Subject to the provisions of Section 11.8, any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties in the
state or federal courts located in Applicable Jurisdiction, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served on any party anywhere in the world, whether within or without the
Applicable Jurisdiction. "Applicable Jurisdiction" means Orange County,
California until the Company's records have been moved from the Company's
facility in Orange County, and thereafter shall be Dallas, Texas.
13.9 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
13.10 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (ii) the terms "hereof"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph and Schedule references are to the Articles,
Sections, paragraphs and Schedules to this Agreement unless otherwise specified,
(iii) the word "including" and words of similar import when used in this
Agreement means "including, without limitation," unless the context otherwise
requires or unless otherwise specified, (iv) the word "or" shall not be
exclusive, (v) provisions
49
shall apply, when appropriate, to successive events
and transactions, and (vi) all references to any period of days shall be deemed
to be to the relevant number of calendar days.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted
13.11 Conflict Waiver. The Company and Sellers acknowledge that (i) the
law firm of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP ("▇▇▇▇, ▇▇▇▇▇▇▇▇") represented
the interests of both the Company and Sellers with respect to this Agreement and
all related matters, and (ii) such representations give rise to a potential
conflict of interest. The Company and Sellers hereby consent to ▇▇▇▇, Hastings'
representations under the circumstances and waive any actual or potential
conflict of interest which may arise as a result of ▇▇▇▇, ▇▇▇▇▇▇▇▇'
representations of such persons and entities. The Company and Sellers represent
that they have had the opportunity to consult with independent counsel
concerning the giving of this waiver.
[Signature page follows].
50
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
RETALIX, LTD.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
RETALIX HOLDINGS INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
TCI SOLUTIONS, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
TCI SOLUTIONS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
51
ENVIRONMENTAL & INFORMATION
TECHNOLOGY PRIVATE EQUITY FUND
III, a civil partnership with
limitation of liability
established under the laws of
the Federal Republic of Germany
By: Infrastructure and Environmental Private Equity
Management, L.L.C., Its General Partner
By: First Analysis IEPEF Management Company, III,
L.L.C., A Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Member
Address: The Sears Tower
Suite 9500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
-------------------
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
52
INFRASTRUCTURE AND ENVIRONMENTAL PRIVATE EQUITY FUND
III, L.P.
By: Infrastructure and Environmental Private Equity
Management, L.L.C., Its General Partner
By: First Analysis IEPEF Management Company, III,
L.L.C., A Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Member
Address: The Sears Tower
Suite 9500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
53
ARGENTUM CAPITAL PARTNERS, L.P.
By: B.R. Associates, Inc,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
ARGENTUM CAPITAL PARTNERS II, L.P.
By: Argentum Partners II, L.L.C.,
its General Partner
By: Argentum Investments, L.L.C.,
its Managing Member
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
54
TCI ACPII LIMITED PARTNERS, L.P.
By: Argentum Investments, L.L.C.,
its Managing Member
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
GUARANTEE & TRUST CO., TTEE ▇▇▇▇▇▇ ▇▇▇▇▇▇ GTC ▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Title:
---------------
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
55
/s/ ▇▇▇▇ Kouogeorge
-------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Address:
-------------------
-------------------
-------------------
Facsimile No.: ( )
---- ---------
56
INNOCAL II, L.P.
By: InnoCal Management II, L.P.
Its: General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
Its: Managing Director
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
57
PRODUCTIVITY FUND IV, L.P.
By: First Analysis Management Company IV L.L.C.,
its General Partner
By: First Analysis Venture Operations and Research,
L.L.C., Managing Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Member
Address: The Sears Tower
Suite 9500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
PRODUCTIVITY FUND IV ADVISORS FUND, L.P.
By: First Analysis Management Company IV, L.L.C.
Its: General Partner
By: First Analysis Venture Operations &
Research, L.L.C.
Its: Management Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Its: Member
Address: The Sears Tower
Suite 9500
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
58
BLUE CHIP CAPITAL FUND IV LIMITED PARTNERSHIP
By: Blue Chip Venture Company, Ltd.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
Address: c/o Blue Chip Venture Company, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
59
SELLERS' COMMITTEE
(in their capacity as such)
INNOCAL II, L.P.
By: InnoCal Management II, L.P.
Its: General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
Its: Managing Director
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ Kouogeorge
-------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Address:
-------------------
-------------------
-------------------
Facsimile No.: ( )
---- ---------
ARGENTUM CAPITAL PARTNERS, L.P.
By: B.R. Associates, Inc,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
60