Exhibit 2.1
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ACQUISITION AGREEMENT
among
CVSI, INC.,
a Delaware corporation
CVSI ACQUISITION CO., LLC,
a Delaware limited liability company
COMPUTERVISION CORPORATION,
a Delaware corporation
and
4FRONT TECHNOLOGIES, INC.,
a Delaware corporation
Dated as of September 21, 1999
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TABLE OF CONTENTS
I. PURCHASE AND SALE OF SHARES...................................................................................1
1.1 Purchase and Sale of Shares.....................................................................1
1.2 Purchase Price..................................................................................1
II. REPRESENTATIONS AND WARRANTIES................................................................................3
2.1 Representations and Warranties of CVSI and Acquisition Co.......................................3
2.1.1 Corporate Matters......................................................................3
2.1.2 The Shares.............................................................................4
2.1.3 Authorization and Effect of Agreement..................................................5
2.1.4 No Restrictions........................................................................5
2.1.5 Financial Statements; Liabilities; Accounts Payable....................................6
2.1.6 Conduct of the Business Since the Balance Sheet Date...................................6
2.1.7 Compliance with Laws...................................................................8
2.1.8 Permits................................................................................8
2.1.9 Tangible Personal Property; Title to Assets............................................8
2.1.10 Real Property..........................................................................8
2.1.11 Intellectual Property..................................................................9
2.1.12 Litigation; Decrees...................................................................10
2.1.13 Contract Rights.......................................................................10
2.1.14 Employment Matters....................................................................11
2.1.15 Employee Plans........................................................................12
2.1.16 Taxes.................................................................................12
2.1.17 Environmental Matters.................................................................13
2.1.18 Property Necessary to Business........................................................14
2.1.19 Brokers...............................................................................14
2.1.20 Bank Accounts; Receivables............................................................14
2.1.21 Equipment.............................................................................14
2.1.22 Insurance.............................................................................14
2.1.23 Related Party Transactions............................................................15
2.1.24 Suppliers.............................................................................15
2.1.25 Pre-Billing and Revenue Recognition...................................................15
2.1.26 Books and Records.....................................................................15
2.1.27 Australia Agreement...................................................................16
2.2 Representations and Warranties of Computervision...............................................16
2.2.1 Corporate Organization................................................................16
2.2.2 Corporate Organization................................................................16
2.3 Representations and Warranties of Purchaser....................................................16
2.3.1 Corporate Organization................................................................16
2.3.2 Authorization and Effect of Agreement.................................................16
2.3.3 No Restrictions.......................................................................16
2.3.4 Legal Proceedings.....................................................................17
2.3.5 Investment Intent.....................................................................17
2.3.6 Financial Capacity....................................................................17
2.3.7 Brokers...............................................................................17
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2.4 Certain Limitations on Representations, Warranties
and the Rights of the Parties..................................................................17
III. COVENANTS..................................................................................................18
3.1 Approvals; Cooperation.........................................................................18
3.2 Operation of the Business......................................................................18
3.3 Access.........................................................................................20
3.4 Satisfaction of Conditions.....................................................................20
3.5 Press Releases.................................................................................20
3.6 Notification, Updates to Schedules.............................................................21
3.7 No Negotiation.................................................................................21
3.8 Employee Benefit Matters.......................................................................22
3.9 General Post-Closing Matters...................................................................22
3.10 Specified Debt.................................................................................24
3.11 Bonus Payments.................................................................................24
3.12 Australia Agreement............................................................................24
3.13 Option Exercises...............................................................................25
IV. THE CLOSING.................................................................................................25
4.1 Conditions Precedent to Obligations of Purchaser...............................................25
4.2 Conditions Precedent to Obligations of Sellers.................................................26
4.3 The Closing....................................................................................26
4.4 Termination....................................................................................27
V. INDEMNIFICATION..............................................................................................27
5.1 Survival of Representations....................................................................27
5.2 Indemnification................................................................................28
5.3 Limits on Indemnification......................................................................28
5.4 No Contribution................................................................................28
5.5 Defense of Third Party Claims..................................................................29
5.6 Exclusivity of Indemnification Remedies........................................................29
5.7 Exercise of Remedies by Indemnitees Other Than Purchaser.......................................29
VI. MISCELLANEOUS PROVISIONS....................................................................................29
6.1 Notices........................................................................................29
6.2 Expenses.......................................................................................30
6.3 Successors and Assigns.........................................................................31
6.4 Waiver.........................................................................................31
6.5 Entire Agreement...............................................................................31
6.6 Amendments, Supplements, Etc...................................................................31
6.7 Governing Law..................................................................................31
6.8 Severability...................................................................................31
6.9 Titles and Headings............................................................................32
6.10 Certain Interpretive Matters and Definitions...................................................32
6.11 Counterparts...................................................................................32
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iii
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TABLE OF SCHEDULES
Schedule 2.1.1(a) Subsidiaries
Schedule 2.1.2(a) The Shares
Schedule 2.1.2(b) Options, Liens, Etc.
Schedule 2.1.4(a) Restrictions
Schedule 2.1.5(a) Financial Statements
Schedule 2.1.5(b) Liabilities
Schedule 2.1.5(c) Accounts Payable
Schedule 2.1.6 Conduct of Business
Schedule 2.1.7 Government Notice/Failure to Comply
Schedule 2.1.8 Permits
Schedule 2.1.9 Tangible Personal Property; Title to Assets
Schedule 2.1.10 Real Property
Schedule 2.1.11(a) Intellectual Property
Schedule 2.1.11(d) Millennium Compliance
Schedule 2.1.12 Litigation
Schedule 2.1.13(a) Contractors, Severance
Schedule 2.1.13(b) Contract Rights - Various
Schedule 2.1.13(c) Contracts
Schedule 2.1.13(d) Contracts
Schedule 2.1.13(e) Contracts
Schedule 2.1.13(f) Contract Rights
Schedule 2.1.13(g) Contracts
Schedule 2.1.13(h) Contract Rights Schedule 2.1.13(i) Contract Rights
Schedule 2.1.13(j) Contract Rights
Schedule 2.1.14(a) Workers Councils
Schedule 2.1.14(b) Employment Matters - Labor Issues
Schedule 2.1.14(c) Employment Matters - Employees
Schedule 2.1.15(b) Employee Plans
Schedule 2.1.16(b) Change in Control Payments
Schedule 2.1.16(c) Taxes
Schedule 2.1.17 Environmental Matters
Schedule 2.1.18 Necessary Property
Schedule 2.1.20(a) Bank Accounts
Schedule 2.1.20(b) Accounts Receivable
Schedule 2.1.22(a) Insurance
Schedule 2.1.22(c) Pending Insurance Claims
Schedule 2.1.23 Related Party Transactions
Schedule 2.1.24 Suppliers
Schedule 2.1.25 Pre-Billing and Revenue Recognition
Schedule 3.10 Specified Debt
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TABLE OF DEFINED TERMS
1999 Balance Sheet...........................................................6
Accountants .................................................................2
Acquisition Co. .............................................................1
Agreement ...................................................................1
Antitrust Law ..............................................................18
Assets ......................................................................7
Australia Agreement.........................................................16
Balance Sheet Date...........................................................6
Bonus Payments .............................................................24
Business ....................................................................6
Closing ....................................................................26
Closing Date ...............................................................26
Computer Systems ............................................................9
Computervision ............................................................. 1
Confidentiality Agreement...................................................17
Contracts ..................................................................10
Covered Employees ..........................................................22
CVSI ........................................................................1
CVSI Plan ...................................................................1
CVSI Shares .................................................................4
Debt Payments ..............................................................24
EBITDA ......................................................................2
Employee ...................................................................12
Employee Plan ..............................................................12
environment ................................................................14
Environmental Law ..........................................................13
ERISA ......................................................................12
Financial Statements.........................................................6
First Quarter EBITDA.........................................................2
First Quarter Income Statement...............................................2
Former Employee ............................................................12
GAAP ........................................................................6
Governmental Entity..........................................................5
HSR Act .....................................................................6
Indemnified Party ..........................................................28
Initial Purchase Price.......................................................1
Leased Real Property.........................................................8
Legal Proceedings ..........................................................10
Liens .......................................................................5
Loss .......................................................................28
Losses .....................................................................28
Millennium Compliance........................................................9
Orders .....................................................................10
Permit ......................................................................5
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Permitted Liens .............................................................8
Post-Closing Affiliates......................................................2
Post-Closing Periods........................................................23
Pre-Closing ................................................................18
Pre-Closing Periods.........................................................23
Purchase Price ..............................................................1
Purchaser ...................................................................1
Records ....................................................................22
Right .......................................................................1
Rights Payments .............................................................1
Seller ......................................................................1
Sellers .....................................................................1
Shares ......................................................................1
Specified Debt .............................................................24
Specified Rights ............................................................2
Transaction Expenses........................................................31
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ACQUISITION AGREEMENT
This Acquisition Agreement (this "AGREEMENT") is entered into as of
this 21st day of September, 1999, among CVSI, Inc. a Delaware corporation
("CVSI"), CVSI Acquisition Co., LLC, a Delaware limited liability company
("ACQUISITION CO."), Computervision Corporation, a Delaware corporation
("COMPUTERVISION"), and 4Front Technologies, Inc., a Delaware corporation
("PURCHASER"). Certain capitalized terms used in this Agreement are defined in
Exhibit A.
RECITALS
A. Acquisition Co. and Computervision (collectively, the "SELLERS",
and, individually, a "SELLER") are the record and beneficial owners of all of
the issued and outstanding shares (the "SHARES") of common stock, no par value,
of CVSI.
▇. ▇▇▇▇▇▇▇ desire to sell, assign and deliver to Purchaser, and
Purchaser desires to purchase and accept from Sellers, the Shares on the terms
and subject to the conditions set forth in this Agreement.
Now, therefore, the parties agree as follows:
I. PURCHASE AND SALE OF SHARES
I.1 On the terms and subject to the conditions hereof, at the
Closing, Sellers will sell, assign and deliver to Purchaser, and Purchaser
will purchase and accept from Sellers, the Shares.
I.2 PURCHASE PRICE.
I.2.1 At the Closing, Purchaser will pay to Sellers an
aggregate of U.S.$25,500,000, less (a) the Rights Payments, (b) the Bonus
Payments, (c) the Debt Payments, and (d) the Transaction Expenses (the "INITIAL
PURCHASE PRICE"). The Initial Purchase Price shall be decreased
dollar-for-dollar by an amount equal to the amount by which the First Quarter
EBITDA is a loss of more than $750,000. The First Quarter EBITDA shall be
determined pursuant to Section 1.4. As so adjusted, the Initial Purchase Price
is referred to herein as the "PURCHASE PRICE."
I.2.2 Effective immediately prior to the Closing, each holder
of a then-outstanding right to purchase shares of CVSI's common stock under
CVSI's Equity Incentive Plan (the "CVSI PLAN"), whether or not then exercisable
(each, a "RIGHT"), shall, in settlement thereof, receive from CVSI, by delivery
of certified checks at or prior to the Closing, for each share subject to such
Right an amount (subject to any applicable withholding tax) in cash equal to the
difference between $1.55 and the per share exercise price of such Right to the
extent such difference is a positive number. (The aggregate of such payments is
referred to herein as the "RIGHTS PAYMENTS.") The foregoing provisions shall not
apply to Rights required to be redeemed by CVSI pursuant to the terms of (a) the
Employment Agreement dated as of May 18, 1998, between CVSI and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, and (b) the Employment Agreement dated as of July 18, 1997, between CVSI
and ▇▇▇▇▇ ▇. ▇▇▇▇▇, as amended on June 16, 1998 and March 19, 1999, which Rights
(the "SPECIFIED RIGHTS") shall be redeemed effective immediately prior to the
Closing in accordance with the terms of such agreements. Payment for the
Specified Rights pursuant to this Section 1.2.2 shall be made by Purchaser at
the Closing by delivery of certified checks to Acquisition Co., which shall
deliver such checks to the holders of Specified Rights.
I.2.3 On the Closing Date, Purchaser will pay by wire transfer
of immediately available funds to such accounts as Sellers have theretofore
designated an amount equal to the Purchase Price, 93.48% of which will be paid
to Acquisition Co. and 6.52% of which will be paid to Computervision.
I.3 INTERCOMPANY OBLIGATIONS. All intercompany liabilities and
obligations owing from Sellers or any of their Affiliates other than a CVSI
Entity (collectively, "POST-CLOSING AFFILIATES") to a CVSI Entity or owing from
a CVSI Entity to Sellers or any Post-Closing Affiliate will be netted against
each other and the net balance thereof will be paid by the applicable party at
the Closing except for on-going fees and charges for continuing business
activities among CVSI and Computervision and Parametric Technology Corporation.
As a result, except for on-going fees and charges for continuing business
activities among CVSI and Computervision and Parametric Technology Corporation,
as of the Closing, there will be no further liability or obligation in respect
of any such matters between Sellers or any Post-Closing Affiliate, on the one
hand, and any CVSI Entity, on the other hand. Any holder of a note or other
evidence of indebtedness settled pursuant to this Section 1.3 will surrender
such note or other evidence of indebtedness to the obligor thereon.
I.4 PRE-CLOSING PURCHASE PRICE ADJUSTMENT. (a) Within 30 calendar days
after the date hereof, CVSI will prepare and deliver or cause to be prepared and
delivered to Purchaser the unaudited, consolidated income statement of CVSI and
the CVSI Entities for the three-month period ended September 30, 1999 (the
"FIRST QUARTER INCOME STATEMENT"). The First Quarter Income Statement will be
prepared in accordance with GAAP (as hereinafter defined) and will reflect the
consolidated EBITDA (as hereinafter defined) of CVSI and the CVSI Entities for
the three-month period ended September 30, ▇▇▇▇ (▇▇▇ "▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇").
For purposes of this Agreement, "EBITDA" shall mean earnings before interest,
taxes, depreciation and amortization, excluding expenses paid or incurred in
connection with the negotiation of this Agreement or the transactions
contemplated hereby.
(b) If, within five calendar days after the date of CVSI's
delivery of the First Quarter Income Statement, the Purchaser determines that
the First Quarter Income Statement has not been prepared and determined in
accordance with this Agreement, the Purchaser will give written notice to CVSI
within such five day period setting forth the Purchaser's proposed changes to
the First Quarter Income Statement and the determination of EBITDA reflected
thereon. The failure by the Purchaser to so express disagreement and provide
such notice within such five day period will constitute the acceptance of CVSI's
preparation of the First Quarter Income Statement and the computation of the
First Quarter EBITDA. If CVSI and the Purchaser are
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unable to resolve any disagreement between them with respect to the preparation
of the First Quarter Income Statement and the determination of the First Quarter
EBITDA within five calendar days after the giving of notice by the Purchaser to
CVSI of such disagreement, the items in dispute will be referred for
determination to Ernst & Young LLP (the "ACCOUNTANTS") as promptly as
practicable, but not later than three calendar days after the expiration of such
five day period. CVSI and the Purchaser will use reasonable efforts to cause the
Accountants to render their decision as soon as practicable thereafter,
including, without limitation, by promptly complying with all reasonable
requests by the Accountants for information, books, records and similar items.
The parties will instruct the Accountants to make a determination as to each of
the items in dispute (but only those items in dispute) (i) in writing, (ii) as
promptly as practicable after the items in dispute have been referred to the
Accountants (but in no event later than 15 calendar days thereafter), and (iii)
in accordance with this Agreement. The Accountants' determination will be
conclusive and binding upon each of the parties hereto. The fees and expenses of
the Accountants will be paid by the parties in proportion to the degree each
party prevails in the arbitration process required by this Section.
(c) During the period that the Purchaser's advisors and
personnel are conducting their review of CVSI's preparation of the First Quarter
Income Statement and determination of the First Quarter EBITDA, the Purchaser
and its representatives will have reasonable access during normal business hours
to the work papers prepared by or on behalf of CVSI and its representatives in
connection with CVSI's preparation of the First Quarter Income Statement and
determination of the First Quarter EBITDA; PROVIDED, HOWEVER, that the Purchaser
will conduct such review in a manner that does not unreasonably interfere with
the conduct of the business of CVSI or result in substantial out-of-pocket costs
to CVSI.
II. REPRESENTATIONS AND WARRANTIES
II.1 REPRESENTATIONS AND WARRANTIES OF CVSI AND ACQUISITION CO.
CVSI and Acquisition Co. jointly and severally represent and warrant, to and for
the benefit of the Indemnitees, as follows:
II.1.1 CORPORATE MATTERS.
(a) CVSI is a corporation duly incorporated, validly
existing and in good standing under the Laws (as hereinafter defined) of the
State of Delaware and has the requisite corporate power and authority to own,
lease or otherwise hold the assets owned, leased or otherwise held by it and to
carry on its business as presently conducted and is duly qualified to conduct
business as a foreign corporation in each jurisdiction in which its ownership,
leasing or holding of property or the nature or conduct of its business makes
such qualification necessary, except for such jurisdictions in which its failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect. SCHEDULE 2.1.1(a) sets forth the subsidiaries of CVSI and any other
entities in which CVSI holds, directly or indirectly, any shares of capital
stock or other ownership interests, including the number of shares held in each
such entity.
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(b) Acquisition Co. is a limited liability company,
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has the requisite power to own and hold its portion of the
Shares.
(c) Computervision is a corporation, duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and has the requisite corporate power to own and hold its portion of the Shares.
(d) Each CVSI Entity is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation, has the requisite corporate power and authority to own, lease or
otherwise hold the assets owned, leased or otherwise held by it and to carry on
its business as presently conducted and is duly qualified to conduct business as
a foreign corporation in each jurisdiction in which its ownership, leasing or
holding of property or the nature or conduct of its business makes such
qualification necessary, except for such jurisdictions in which its failure to
be so qualified could not reasonably be expected to have a Material Adverse
Effect.
(e) CVSI has delivered to the Purchaser accurate and
complete copies of: (1) CVSI's and each CVSI Entity's certificate of
incorporation and bylaws or other constituent documents, including all
amendments thereto; (2) the stock records of CVSI and each CVSI Entity; and (3)
the minutes and other records of the meetings and other proceedings (including
any actions taken by written consent or otherwise without a meeting) of the
stockholders of CVSI and each CVSI Entity and the board of directors of CVSI and
each CVSI Entity. There have been no meetings or other proceedings or actions of
the stockholders of CVSI and each CVSI Entity or the board of directors of CVSI
and each CVSI Entity that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of CVSI's or
any CVSI Entity's certificate of incorporation or bylaws or other constituent
documents or of any resolution adopted by CVSI's or any CVSI Entity's
stockholders or CVSI's or any CVSI Entity's board of directors, and, to the
Knowledge of CVSI, no condition or circumstance exists that is reasonably likely
to (with or without notice or lapse of time) constitute or result directly or
indirectly in such a violation. The books of account, stock records, minute
books and other records of CVSI and each CVSI Entity are accurate, up-to-date
and complete in all material respects and have been maintained in accordance
with sound and prudent business practices and, in all material respects, with
all applicable Legal Requirements
II.1.2 THE SHARES.
(a) SCHEDULE 2.1.2(a) sets forth the number of
outstanding shares of capital stock of CVSI and each CVSI Entity (collectively,
the "CVSI SHARES"), the names of the holders thereof and the number and
percentage of CVSI Shares owned by each such holder. The CVSI Shares held by
Sellers, CVSI and the CVSI Entities represent all of the issued and outstanding
shares of capital stock of CVSI and the CVSI Entities.
(b) The CVSI Shares are duly authorized, validly
issued and outstanding, fully paid and non-assessable and have been issued in
full compliance with applicable securities laws and other applicable Legal
Requirements. Except as set forth on
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SCHEDULE 2.1.2(b), the CVSI Shares have not been issued in violation of, and are
not subject to, any preemptive rights, and, except for the Specified Rights and
as set forth on SCHEDULE 2.1.2(b), there are no outstanding convertible or
exchangeable securities, calls or options relating to the CVSI Shares that may
require any CVSI Entity to issue to any person or entity any shares of any of
its capital stock. Except as set forth on SCHEDULE 2.1.2(b), there are no voting
trusts or other Contracts (as hereinafter defined) restricting the voting,
dividend rights or disposition of the CVSI Shares. Neither CVSI nor any CVSI
Entity has ever repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities. CVSI has delivered accurate and complete
copies of the stock certificates representing the issued and outstanding CVSI
Shares.
(c) Except as set forth on SCHEDULE 2.1.2(b),
Sellers own the Shares free and clear of all mortgages, liens, security
interests and other encumbrances (collectively, "LIENS").
(d) CVSI does not own, directly or indirectly,
beneficially or of record, any stock or other ownership interests in, or
control, any entity other than the CVSI Entities.
II.1.3 AUTHORIZATION AND EFFECT OF AGREEMENT. Each Seller has
good and valid title to the number of Shares set forth on SCHEDULE 2.1.2(a) as
owned by it. Each Seller and CVSI has the requisite power to execute and deliver
this Agreement and to perform the transactions contemplated hereby to be
performed by it. All necessary action required to be taken under the Delaware
Limited Liability Company Act or the Delaware General Corporation Law, as the
case may be, for the due authorization of the execution and delivery of this
Agreement by each Seller and CVSI and the performance by each Seller and CVSI of
the transactions contemplated hereby to be performed by it has been duly taken
by such Seller or CVSI. This Agreement has been duly executed and delivered by
each Seller and CVSI and, assuming the due execution and delivery of this
Agreement by Purchaser, constitutes a valid and binding obligation of each
Seller and CVSI, enforceable against such Seller and CVSI in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy and other
laws of general application relating to creditors' rights or general principles
of equity.
II.1.4 NO RESTRICTIONS.
(a) Except as set forth on SCHEDULE 2.1.4(a), the
execution and delivery of this Agreement by each Seller and CVSI do not, and the
performance by each Seller and CVSI of the transactions contemplated hereby to
be performed by it will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time or both) under (a)
any provision of the Certificate of Formation, the Limited Liability Company
Agreement, the Certificate of Incorporation or the Bylaws or any resolution
adopted by the stockholders, board of directors, members, or managers, as the
case may be, of such Seller or CVSI, (b) any of the provisions of the
certificate of incorporation or bylaws or other constituent documents of any
CVSI Entity or any resolution adopted by the stockholders or board of directors
(or any committee thereof) of any CVSI Entity, (c) any CVSI Contract or
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(d) any permit, license or other written governmental authorization or approval
("PERMIT") issued under any domestic, foreign or other statute, law, ordinance,
rule, regulation, judgment, order, injunction, code, decree, ruling or common
law obligation ("LAW") of any domestic, foreign or other court, government,
governmental agency, authority, entity or instrumentality ("GOVERNMENTAL
ENTITY"). Neither the execution and delivery of this Agreement, nor the
consummation or performance of the transactions contemplated hereby, will,
directly or indirectly, cause CVSI or any CVSI Entity to become subject to, or
to become liable for the payment of, any Tax or give any Person the right to (i)
declare a default or exercise any remedy under any CVSI Contract, (ii)
accelerate the maturity or performance of any CVSI Contract or (iii) cancel,
terminate or modify any CVSI Contract.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental Entity is required
to be obtained or made by or with respect to a Seller or CVSI under any
applicable Law in connection with the execution and delivery of this Agreement
by such Seller and CVSI or the performance by such Seller and CVSI of the
transactions contemplated hereby to be performed by it, except for (i) the
filing of a premerger notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") and (ii) such of the
foregoing as are listed or described on SCHEDULE 2.1.4(a).
II.1.5 FINANCIAL STATEMENTS; LIABILITIES; ACCOUNTS PAYABLE.
(a) Attached as SCHEDULE 2.1.5(a) are (i) the audited
consolidated balance sheet of CVSI and the CVSI Entities as of June 30, 1998,
and the related audited consolidated statements of operations and cash flows of
CVSI and the CVSI Entities for the fiscal year then ended and the notes thereto,
and (ii) the unaudited consolidated balance sheet of CVSI and the CVSI Entities
as of June 30, 1999 (the "1999 BALANCE Sheet"), and the related unaudited
consolidated statements of operations and cash flows of CVSI and the CVSI
Entities for the fiscal year then ended (collectively, (i) and (ii) are referred
to as the "FINANCIAL Statements"). The Financial Statements present fairly, in
all material respects, the consolidated financial position of CVSI and the CVSI
Entities as of the dates thereof and the consolidated results of operations and
cash flows of CVSI and the CVSI Entities for the periods specified therein in
conformity with United States generally accepted accounting principles,
consistently applied ("GAAP"), except (i) as set forth in the notes to the
Financial Statements, and (ii) in the case of unaudited statements, for the
absence of notes and year-end adjustments, which adjustments will not be
material either individually or in the aggregate. For purposes of this
Agreement, the "BALANCE SHEET DATE" means June 30, 1999.
(b) Except as set forth in SCHEDULE 2.1.5(b), CVSI
has no Liabilities, except for (i) Liabilities identified as such in the
"liabilities" column of the 1999 Balance Sheet; (ii) accounts payable (of the
type required to be reflected as current liabilities in the "liabilities"
section of the balance sheet prepared in accordance with GAAP); (iii)
Liabilities incurred in the Ordinary Course of Business since the Balance Sheet
Date that are not required to be reflected in a balance sheet or the notes
thereto prepared in accordance with GAAP; or (iv) Liabilities that are not Known
to CVSI.
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(c) SCHEDULE 2.1.5(c) provides an accurate and
complete breakdown and aging of CVSI's accounts payable as of the Balance Sheet
Date.
(d) When prepared and delivered to the Purchaser, the
First Quarter Income Statement will present fairly, in all material respects,
the consolidated results of operations of CVSI and the CVSI Entities for the
period specified therein in conformity with GAAP, except for the absence of
notes.
II.1.6 CONDUCT OF THE BUSINESS SINCE THE BALANCE SHEET DATE.
Except as described on SCHEDULE 2.1.6, and except as a result of matters
permitted or required by this Agreement, since the Balance Sheet Date, CVSI and
each of the CVSI Entities have conducted their respective businesses (the
"BUSINESS") in the Ordinary Course of Business. Except as described on SCHEDULE
2.1.6, since the Balance Sheet Date:
(a) there has not been any material adverse change in
the financial condition, assets, or operations of CVSI and the CVSI Entities,
considered as a whole, and no event has occurred that could reasonably be
expected to have a Material Adverse Effect;
(b) neither CVSI nor any of the CVSI Entities has
made any capital expenditure which is not reflected on the 1999 Balance Sheet
and which exceeds $300,000 in the aggregate;
(c) neither CVSI nor any of the CVSI Entities has
(i) entered into or permitted any of the assets owned or used by such entity to
become bound by any Contract or (ii) to the Knowledge of CVSI, other than in the
Ordinary Course of Business, amended or prematurely terminated or waived any
material right or remedy under any Contract to which it is or was a party or
under which it has or had any rights or obligations;
(d) neither CVSI nor any CVSI Entity has written off
as uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness or altered its revenue recognition
policy;
(e) neither CVSI nor any of the CVSI Entities has
entered into any material transaction or taken any other material action outside
the Ordinary Course of Business;
(f) neither CVSI nor any of the CVSI Entities has
failed to continue existing practices relating to maintenance of the assets
owned, leased or otherwise held by CVSI or any of the CVSI Entities for use in
the Business ("ASSETS");
(g) neither CVSI nor any of the CVSI Entities has
purchased, sold, leased or disposed of, or entered into any Contract for the
purchase, sale, lease or disposition of, or subjected to a Lien (other than
Permitted Liens), any of the Assets other than in the Ordinary Course of
Business;
7
(h) neither CVSI nor any of the CVSI Entities has
made any material amendment to any Employee Plan or materially increased the
general rates of compensation of Employees, except (i) in connection with
amendments as required by Law, (ii) in the Ordinary Course of Business, or (iii)
pursuant to any Contract;
(i) neither CVSI nor any of the CVSI Entities has
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, and has not repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;
(j) neither CVSI nor any of the CVSI Entities has
sold or otherwise issued any shares of capital stock or any other securities;
(k) neither CVSI nor any of the CVSI Entities has
formed any subsidiary or acquired any equity interest or other interest in any
other Entity;
(l) neither CVSI nor any of the CVSI Entities has
(i) loaned money to any Person or (ii) to the Knowledge of CVSI, incurred,
assumed or otherwise become subject to any Liability, except for current
Liabilities incurred in the Ordinary Course of Business;
(m) CVSI has not changed any of its methods of
accounting or accounting practices in any respect;
(n) CVSI has not made any material Tax election; and
(o) neither CVSI nor any of the CVSI Entities has
commenced or settled any Legal Proceeding, except in the Ordinary Course of
Business.
II.1.7 COMPLIANCE WITH LAWS. Neither CVSI nor any of the CVSI
Entities has conducted the Business in violation of any applicable Law, other
than any violation which could not reasonably be expected to have a Material
Adverse Effect. Except as set forth in SCHEDULE 2.1.7, neither CVSI nor any of
the CVSI Entities has received at any time since their respective inceptions,
any written notice or other written communication from any Governmental Entity
regarding any actual or alleged material violation of, or material failure to
comply with, any Legal Requirement.
II.1.8 PERMITS. SCHEDULE 2.1.8 lists all material Permits
issued to CVSI and the CVSI Entities applicable to the Business. There are no
Permits necessary for the conduct of the Business that have not been obtained or
are not in full force and effect and neither CVSI nor the CVSI Entities is
currently conducting the Business in violation of any Permit, other than any
violation which could not reasonably be expected to have a Material Adverse
Effect. The consummation of the transactions contemplated hereby will not void
any such Permit other than those Permits the loss of which could not be
reasonably expected to have a Material Adverse Effect.
8
II.1.9 TANGIBLE PERSONAL PROPERTY; TITLE TO ASSETS. Except (a)
with respect to the Leased Real Property (which is the subject of Section
2.1.10), (b) as listed or described on SCHEDULE 2.1.9 and (c) for assets sold in
the Ordinary Course of Business since the Balance Sheet Date, CVSI and the CVSI
Entities own all material tangible assets reflected on the 1999 Balance Sheet as
owned by CVSI and the CVSI Entities or thereafter purchased or acquired by CVSI
or the CVSI Entities, free and clear of all Liens except for (i) Liens that are
listed or described on SCHEDULE 2.1.9, (ii) mechanics', carriers', workers',
repairmen's or other Liens arising or incurred in the Ordinary Course of
Business, (iii) Liens for taxes, assessments and other similar governmental
charges which are not due and payable or which may thereafter be paid without
penalty or which are listed or described on SCHEDULE 2.1.9, (iv) Liens that
arise under zoning, land use and other similar Laws and other imperfections of
title or encumbrances, if any, which do not materially affect the marketability
of the property subject thereto and do not materially impair the use of the
property subject thereto in the Business as presently conducted and (v) other
Liens arising as a matter of Law. (The items referred to in clauses (i) through
(v) of the immediately preceding sentence being "PERMITTED LIENS.")
II.1.10 REAL PROPERTY. SCHEDULE 2.1.10 lists all real property
leased by CVSI or any CVSI Entity (the "LEASED REAL PROPERTY"). Neither CVSI nor
any of the CVSI Entities owns any real property. CVSI or a CVSI Entity has title
to the leasehold interests in the Leased Real Property (subject to the terms of
the applicable leases, subleases and related instruments governing its interests
therein, as listed on SCHEDULE 2.1.10), free and clear of all Liens other than
(a) Liens listed or described on SCHEDULE 2.1.10, (b) Permitted Liens and (c)
easements, covenants, rights-of-way and other encumbrances or restrictions,
whether recorded or referred to in an applicable lease or unrecorded, which do
not materially impair the continued use of the property subject thereto in the
Business as presently conducted. The leases and subleases related to the Leased
Real Property are valid and subsisting leases or subleases which are in full
force and effect.
II.1.11 INTELLECTUAL PROPERTY.
(a) Each of the CVSI Entities owns and possesses all
right, title and interest in and to, or has a valid license to use, all of the
Proprietary Rights (as defined below) necessary for the operation of its
business as presently conducted. SCHEDULE 2.1.11(a) sets forth a list and
briefly describes the Proprietary Rights, indicating which are owned and which
are licensed, and, where appropriate, indicating the date, serial or
registration number, and place of any registration thereof.
(b) No claim by any third party contesting the
validity, enforceability, use or ownership of any Proprietary Rights has been
made, is currently outstanding or, to the Knowledge of CVSI, is threatened.
(c) None of CVSI or the CVSI Entities nor any
registered agent of any of them has received any written notice of, nor does
CVSI have Knowledge of any allegation of, any infringement or misappropriation
by, or conflict with, any third party
9
(including current and former employees of CVSI) with respect to the Proprietary
Rights, nor has any CVSI or any CVSI Entity or any registered agent of any of
them received any written claim of infringement or misappropriation of or other
conflict with any proprietary rights of any third party (including current and
former employees of CVSI). To the Knowledge of CVSI, none of the CVSI or CVSI
Entities has infringed, misappropriated or otherwise violated any proprietary
rights of any third parties.
(d) To the Knowledge of CVSI, none of the computer
software, computer firmware, computer hardware (whether general or special
purposes) or other similar or related items of automated, computerized or
software systems that are used or relied on by CVSI in its Business (the
"COMPUTER SYSTEMS") will malfunction, will cease to function, will generate
incorrect data or will produce incorrect results when processing, providing or
receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries ("MILLENNIUM COMPLIANCE"), in
each instance in such a manner as to have a Material Adverse Effect. SCHEDULE
2.1.11(d) describes the measures that have been implemented to determine the
extent to which the Computer Systems are not in Millennium Compliance and the
material details of any program undertaken with a view towards causing the
Computer Systems to achieve Millennium Compliance. To the Knowledge of CVSI,
except as set forth on SCHEDULE 2.1.11(d), CVSI will not be required to incur
any further material expense in order to achieve Millennium Compliance. CVSI
(together with the CVSI Entities) has developed reasonable contingency plans to
deal with the possibility that some of its customers and suppliers may not have
achieved Millennium Compliance.
(e) As used herein, the term "Proprietary Rights"
means all of the following, to the extent used by CVSI or a CVSI Entity in the
conduct of the Business: patents, patent applications, patent disclosures,
trademarks, service marks, trade dress, trade names, corporate names, domain
names, copyrights, designs, logos and computer documentation and software, and
any licenses to use any of the foregoing that are owned by third parties,
excluding in all cases generally available "off-the-shelf" software and licenses
to use such software.
(f) The consummation of the transactions contemplated
by this Agreement will not, in and of itself, result in the loss of CVSI's and
the CVSI Entities' right, title and interest in and to, or license to use, the
Proprietary Rights. To the extent that registration of any Proprietary Right is
required by Law, such Proprietary Right has been duly and validly registered,
and any fees that are necessary to maintain in force any Proprietary Rights or
registrations thereof have been paid.
II.1.12 LITIGATION; DECREES. Except (a) as listed or described
on SCHEDULE 2.1.12, (b) for routine claims for employee benefits, and (c) for
claims for money damages alone of less than $100,000 in respect of any single
claim or series of related claims arising out of a single event or condition,
there are no actions, lawsuits, arbitration, litigation, hearing, audit or
investigation or administrative or other legal proceedings before any
Governmental Entity ("LEGAL PROCEEDINGS") pending or, to the Knowledge of CVSI,
threatened against CVSI or the CVSI Entities. Neither CVSI nor the CVSI Entities
in default under the terms of any judgment, order or decree of any
10
Governmental Entity specifically applicable to CVSI or a CVSI Entity
(collectively, "ORDERS"), except for such defaults which could not reasonably be
expected to have a Material Adverse Effect.
II.1.13 CONTRACT RIGHTS. Except as listed or described on
SCHEDULES 2.1.13(A) through (J), as of the date hereof, neither CVSI nor any
CVSI Entity is a party to or bound by any legally binding contract, lease or
license (collectively, "CONTRACTS") that is of a type described below:
(a) any employment, severance or consulting Contract
with an Employee (as hereinafter defined) or Former Employee (as hereinafter
defined) that is not terminable at will by CVSI or a CVSI Entity (other than any
Contract for the employment of any such Employee or Former Employee implied in
Law) and which will require, (i) in the case of independent contractors, the
payment of amounts by CVSI after the date hereof in excess of $100,000 per
annum, or (ii) in the case of employees, payment of severance in excess of six
weeks compensation or, with respect to employees outside the United States, in
excess of that required by or implied in Law;
(b) any collective bargaining Contract with any labor
union;
(c) any Contract for capital expenditures or the
acquisition or construction of fixed assets which requires aggregate future
payments in excess of $300,000;
(d) any Contract requiring aggregate future payments
or expenditures in excess of $50,000 and relating to cleanup, abatement,
remediation or similar actions in connection with environmental liabilities;
(e) any Contract granting to any Person or Entity a
first-refusal, first-offer or other right to purchase or acquire any of the
Shares or any other capital stock or other securities of any CVSI Entity, other
than the Contracts evidencing the Specified Rights;
(f) any license, royalty Contract or other Contract
with respect to Intellectual Property which pursuant to the terms thereof
requires future payments by CVSI or any CVSI Entity;
(g) any indenture, mortgage, loan or credit Contract
under which CVSI or a CVSI Entity has borrowed any money or issued any note,
bond, indenture or other evidence of indebtedness for borrowed money, or
guaranteed indebtedness for money borrowed by others, which is not reflected in
the 1999 Balance Sheet;
(h) any Contract with any manufacturer's
representative or other sales agent having a remaining term in excess of one (1)
year and which is not terminable without penalty on 90 calendar days' or less
notice;
(i) any Contract under which CVSI or a CVSI Entity is
(i) a lessee of real property, (ii) a lessee of, or holds or uses, any
machinery, equipment, vehicle or other
11
tangible personal property owned by a third person or entity, (iii) a lessor of
real property or (iv) a lessor of any tangible personal property owned by CVSI
or a CVSI Entity, in any case referred to in clauses (ii) or (iv) which requires
annual payments in excess of $100,000; or
(j) Any Contract which involves aggregate future
payments by or to CVSI in excess of $100,000 other than a purchase or sales
order or other Contract entered into in the Ordinary Course of Business.
Except as set forth on SCHEDULES 2.1.13(a) through (j), each Contract listed or
described on SCHEDULES 2.1.13(a) through (j) is a valid and binding obligation
of CVSI or a CVSI Entity and is enforceable by CVSI or a CVSI Entity, as
applicable, in accordance with its terms. Except as set forth on SCHEDULES
2.1.13(a) through (j), CVSI or the applicable CVSI Entity has performed in all
material respects the obligations required to be performed by it through the
date hereof under each of such Contracts and neither CVSI nor such CVSI Entity
is (with or without the lapse of time or the giving of notice, or both) in
Breach or default in any respect thereunder, except in any such case for any
Breach or default which could not reasonably be expected to have a Material
Adverse Effect.
II.1.14 EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULES 2.1.14(a),
neither CVSI nor any of the CVSI Entities is a party to or bound by a collective
bargaining agreement or any agreement with a workers' council.
(b) Except as described on SCHEDULE 2.1.14(b) and
except as could not reasonably be expected to have a Material Adverse Effect,
(i) there is no unfair labor practice complaint against CVSI or any CVSI Entity
before the National Labor Relations Board or any comparable agency or court in
any jurisdiction, (ii) there is no labor strike, slowdown or stoppage existing
or threatened with respect to the Business, and (iii) CVSI has conducted the
Business in accordance with the provisions of the WARN Act, the Fair Labor
Standards Act and the applicable rules and regulations of the Equal Employment
Opportunity Commission. CVSI will comply with the provisions of the WARN Act in
connection with the transactions contemplated hereby.
(c) SCHEDULE 2.1.14(c) sets forth, with respect to
each Employee, the name of such Employee and the date as of which such Employee
was originally hired by CVSI, such Employee's title and the current compensation
arrangement with each such Employee. SCHEDULE 2.1.14(c) identifies each Former
Employee who is receiving (or whose spouse or other dependent is receiving) any
benefits relating to such Former Employee's employment with CVSI.
II.1.15 EMPLOYEE PLANS.
(a) For purposes of this Agreement, the term
"EMPLOYEE PLAN" means each employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
each other material plan, program,
12
agreement or arrangement (other than a plan, program, agreement or arrangement
mandated or implied by Law), whether or not subject to ERISA, that provides
benefits for Employees and Former Employees and that is maintained by a Seller,
CVSI or a CVSI Entity or to which a Seller, CVSI or a CVSI Entity contributes or
is obligated to contribute, or under which a Seller, CVSI or a CVSI Entity is
liable in respect of Employees or Former Employees. As used in this Agreement,
(i) the term "EMPLOYEE" means each person who is presently employed by CVSI
primarily in the conduct of the Business (including any person presently
employed by CVSI who is on sick leave, disability, worker's compensation or
other absence from work and including any person covered under the terms of
CVSI's Separation Notification Policy or a CVSI Management Retention Agreement),
and (ii) the term "FORMER EMPLOYEE" means any person formerly so employed by
CVSI. The terms "EMPLOYEE" and "FORMER EMPLOYEE" will include, where an Employee
Plan provides benefits for beneficiaries or dependents, the beneficiaries and
dependents of an Employee or Former Employee.
(b) SCHEDULE 2.1.15(b) lists or describes all
material Employee Plans other than Employee Plans listed or described on
SCHEDULES 2.1.13(a) through (j). None of the Employee Plans is a multi-employer
plan within the meaning of Section 3(37) of ERISA. With respect to each Employee
Plan, Acquisition Co. has made available to Purchaser, to the extent applicable,
a copy of the plan document as currently in effect or a summary plan
description. Each Employee Plan has been operated and administered in all
material respects in accordance with applicable Laws, including without
limitation ERISA.
II.1.16 TAXES.
(a) CVSI and each CVSI Entity has filed or caused to
be filed with the appropriate United States, state, local and foreign
Governmental Entities all Tax Returns (as hereinafter defined) required to be
filed by it with respect to the Business on or prior to the Closing Date (taking
into account all extensions of due dates), and all such Tax Returns were correct
and complete in all material respects. CVSI and each CVSI Entity has fully and
timely paid all Taxes (as hereinafter defined) due and payable on or prior to
the Closing Date and has provided adequate reserves or accruals on its books and
records for all Taxes not yet due and owing through the Closing Date. The
Financial Statements accrue all actual and contingent Liabilities for Taxes with
respect to all period through the dates thereof in accordance with GAAP. CVSI
will establish, in the Ordinary Course of Business, reserves for the payment of
all Taxes for the period from the Balance Sheet Date through the Closing Date in
accordance with GAAP. No Governmental Entity has proposed in writing any
adjustment relating to the Business to any such Tax Return that has not been
adequately provided for or satisfied. None of CVSI or any CVSI Entity is a party
to a tax sharing agreement.
(b) Except as set forth on SCHEDULE 2.1.16(b) there
is no agreement, plan, arrangement or other Contract covering any Employee or
independent contractor or Former Employee or independent contractor of CVSI
that, individually or collectively, could give rise, directly or indirectly, to
the payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code.
13
(c) Except as set forth in SCHEDULE 2.1.16(c), there
have been no examination or audits of any Tax Return filed by CVSI or any of the
CVSI Entities and no such examination or audit has been proposed or scheduled.
Except as set forth in SCHEDULE 2.1.16(c), no claim or Legal Proceeding is
pending or, to the Knowledge of CVSI, has been threatened against CVSI or any
CVSI Entity in respect of any Tax.
(d) Neither CVSI, any CVSI Entity, nor any other
person (including Sellers) on behalf of CVSI or any CVSI Entity has (A) filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by CVSI or any CVSI
Entity, or (B) agreed to or is required to make any adjustments pursuant to
Section 481(a) of the Code or any similar provision of state, local, or foreign
law by reason of a change in accounting method initiated by CVSI or any CVSI
Entity or has any Knowledge that the Internal Revenue Service has proposed any
such adjustment or change in accounting method, or has any application pending
with any taxing authority requesting permission for any changes in accounting
methods that relate to the business or operations of CVSI or any CVSI Entity.
(e) Neither CVSI or any CVSI Entity has any liability
for taxes (A) by reason of United States Treasury Regulation Section 1.1502-6(a)
or any analogous or similar state, local or foreign law or regulation, or (B) by
reason of being a successor in interest or transferee of another entity.
II.1.17 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
2.1.17, (a) CVSI is not in violation of any Environmental Law (as hereinafter
defined) applicable to the operation of the Business as presently conducted and
(b) CVSI holds all Permits required under Environmental Laws applicable to the
operation of the Business as presently conducted, other than any such violation
or failure to hold such Permits which could not reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, (A) "ENVIRONMENTAL LAW"
means any and all federal, state and local laws, statutes, ordinances, rules and
regulations and any judicial or governmental orders, decrees, rulings, actions,
agreements and policies which are related to the contamination, remediation or
protection of the environment (including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601,
et seq.) and Resource Conservation and Recovery Act (42 U.S.C. Sections 6901, et
seq.)) and any rule or doctrine of any common law related to the contamination,
remediation or protection of the environment (including without limitation
contribution, strict liability, negligence, trespass and nuisance) and (B)
"ENVIRONMENT" means (1) any surface or ground water, (2) surface or subsurface
soil and land strata, (3) buildings or facilities in which there has been a
release, (4) air and (5) natural resources, including wildlife, fish and plant
life.
II.1.18 PROPERTY NECESSARY TO BUSINESS. Except as set forth on
SCHEDULE 2.1.18, CVSI and the CVSI Entities own or lease all property, real,
personal and mixed, necessary to permit it to carry on the Business as presently
conducted.
II.1.19 BROKERS. No broker, finder or investment banker (other
than ▇▇▇▇▇ ▇▇▇▇ & Co., LLC, whose fees will be included as a current liability
14
of CVSI as of the Balance Sheet Date) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of either Seller or CVSI.
II.1.20 BANK ACCOUNTS; RECEIVABLES.
(a) SCHEDULE 2.1.20(a) provides accurate and complete
information with respect to each account maintained by or for the benefit of
CVSI and the CVSI Entities at any bank or other financial institution, including
(i) the name and location of the institution at which such accounts, is
maintained, (ii) the name in which such account is maintained and the account
number of such account, and (iii) the names of all individuals authorized to
draw on or make withdrawals from such account and any limitations on such
individuals' authorization. There are no safe deposit boxes or similar
arrangements maintained by or for the benefit of CVSI or any of the CVSI
Entities.
(b) SCHEDULE 2.1.20(b) provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of CVSI as of the Balance Sheet Date. Except as set forth in
SCHEDULE 2.1.20(b), all existing accounts receivable of CVSI (including those
accounts receivable reflected on the 1999 Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since the Balance Sheet
Date and have not yet been collected) represent valid obligations of customers
of CVSI arising from bona fide transactions entered into in the Ordinary Course
of Business.
II.1.21 EQUIPMENT. The assets owned by CVSI and the CVSI
Entities that are material to the conduct of the Business, as currently
conducted, are adequate for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the Business as currently conducted.
II.1.22 INSURANCE. (a) SCHEDULE 2.1.22(a) accurately sets
forth, with respect to each material insurance policy maintained by or at the
expense of, or for the direct or indirect benefit of, CVSI: (i) the name of the
insurance carrier that issued such policy and the policy number of such policy;
(ii) whether such policy is a "claims made" or an "occurrences" policy; (iii) a
description of the coverage provided by such policy and the material terms and
provisions of such policy (including all applicable coverage limits, deductible
amounts and co-insurance arrangements and any non-customary exclusions from
coverage); (iv) the annual premium payable with respect to such policy, and the
cash value (if any) of such policy; and (v) a description of any claims pending,
and any material claims that have been asserted in the past, with respect to
such policy.
(b) To the Knowledge of CVSI, each of the policies identified
in SCHEDULE 2.1.22(a) is valid, enforceable and in full force and effect, and
has been issued by an insurance carrier that, to the Knowledge of CVSI, is
solvent, financially sound and reputable. To the Knowledge of CVSI, all of the
information contained in the applications submitted in connection with said
policies was (at the times said applications were submitted) accurate and
15
complete. All premiums and other amounts owing with respect to said policies
have been paid in full on a timely basis.
(c) Except as set forth in SCHEDULE 2.1.22(c), there is no
pending claim involving $25,000 or more under or based upon any of the policies
identified in SCHEDULE 2.1.22(A).
II.1.23 RELATED PARTY TRANSACTIONS. Except as set forth in
SCHEDULE 2.1.23, to the Knowledge of CVSI: (a) no Related Party has any interest
of any nature in any asset used in or otherwise relating to the Business of CVSI
or any CVSI Entity; (b) no Related Party is indebted to CVSI or any CVSI Entity;
(c) no Related Party is a party to, or has any direct or indirect financial
interest in, any material Contract, transaction or business dealing of any
nature involving CVSI or any CVSI Entity; (d) no current officer, director or
Employee of CVSI or any CVSI Entity is competing, directly or indirectly, with
CVSI or any of the CVSI Entities in any market served by CVSI or any of the CVSI
Entities; and (e) no Related Party has any claim or right against CVSI or any
CVSI Entity.
II.1.24 SUPPLIERS. SCHEDULE 2.1.24 sets forth a true, complete
and correct list of the Business's 15 largest suppliers by sales for the year
ended December 31, 1998 and for the 1999 year-to-date period ended on the
Balance Sheet Date. To the Knowledge of CVSI, neither CVSI nor any CVSI Entity
has received any written indication from any material supplier of the Business
(including those listed on SCHEDULE 2.1.24) to the effect that such supplier
will stop, or decrease the rate of, supplying materials, products or services to
the Business.
II.1.25 PRE-BILLING AND REVENUE RECOGNITION. Except as set
forth on SCHEDULE 2.1.25, none of CVSI or the CVSI Entities has recognized any
revenue in respect of any ▇▇▇▇▇▇▇▇ to customers or payments received from
customers other than such as are attributable to work actually performed by CVSI
or a CVSI Entity or such as are permitted as progress payments or the like under
Contracts.
II.1.26 BOOKS AND RECORDS. All the books, records and accounts
of CVSI and the CVSI Entities are in all material respects accurate and
complete, accurately reflect all matters normally entered into the books,
records or accounts maintained by similar businesses, are in all material
respects in accordance with all laws, regulations and rules applicable to CVSI
and the CVSI Entities and accurately present and reflect in all material
respects all of the transactions described therein. CVSI and the CVSI Entities
have accounting controls sufficient to ensure that its transactions are (i) in
all material respects executed in accordance with its management's general or
specific authorization and (ii) recorded in conformity with generally accepted
accounting principles.
II.1.27 AUSTRALIA AGREEMENT. As of the date of this Agreement,
none of CVSI or any CVSI Entity has received any written claims for
16
indemnification pursuant to the terms of the CVSI Share Sale Agreement dated
June 30, 1999 among CVSI Holdings BV, Solution 6 Holdings Ltd. and CVSI (the
"AUSTRALIA AGREEMENT").
II.2 REPRESENTATIONS AND WARRANTIES OF COMPUTERVISION. Computervision
represents and warrants to Purchaser as follows:
II.2.1 CORPORATE ORGANIZATION. Computervision is a
corporation, duly organized, validly existing and in good standing under the
Laws of the State of Delaware and has the requisite corporate power to own and
hold its portion of the Shares.
II.2.2 CORPORATE ORGANIZATION. Except as set forth on SCHEDULE
2.1.2(b), Computervision owns the Shares attributed to it on SCHEDULE 2.1.2(a)
free and clear of all ▇▇▇▇▇.
II.3 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to each Seller as follows:
II.3.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of Delaware, and
has the requisite corporate power to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted.
II.3.2 AUTHORIZATION AND EFFECT OF AGREEMENT. Purchaser has
the requisite corporate power to execute and deliver this Agreement and to
perform the transactions contemplated hereby to be performed by it. All
necessary corporate action required to be taken for the due authorization of the
execution and delivery of this Agreement by Purchaser and the performance of the
transactions contemplated hereby to be performed by it has been duly taken. This
Agreement has been duly executed and delivered by Purchaser and, assuming the
due execution and delivery of this Agreement by Sellers and CVSI, constitutes a
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy and other laws of general application relating to creditors' rights
or general principles of equity.
II.3.3 NO RESTRICTIONS. The execution and delivery of this
Agreement by Purchaser do not, and the performance by Purchaser of the
transactions contemplated hereby to be performed by it will not, conflict in any
material respect with, or result in any material violation of, or constitute a
material default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, any provision of the charter
or bylaws or comparable governing documents of Purchaser, or any Contract or
Permit applicable to Purchaser. No material consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to Purchaser under
any applicable Law in
17
connection with the execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of the transactions contemplated hereby to be performed
by it, except for the filing of a premerger notification report under the HSR
Act.
II.3.4 LEGAL PROCEEDINGS. There is no Legal Proceeding pending
or threatened against Purchaser affecting, or which may affect, Purchaser's
ability to perform its obligations under this Agreement.
II.3.5 INVESTMENT INTENT. Purchaser is acquiring the Shares
for investment solely for the account of Purchaser and not with a view to or for
resale in connection with the distribution or other disposition thereof in
violation of any applicable Law. Purchaser acknowledges that, in reliance on the
foregoing representation, the Shares being sold to Purchaser hereunder have not
been registered under the Securities Act of 1933, as amended, or the blue sky
Laws of any state or any other applicable Law, nor will the Shares be sold
pursuant to an effective registration statement. Purchaser will not sell or
otherwise dispose of the Shares except in compliance with the registration
requirements or exemption provisions under applicable Laws.
II.3.6 FINANCIAL CAPACITY. Purchaser has cash on hand or
available to it sufficient to satisfy all of its obligations under this
Agreement.
II.3.7 BROKERS. No broker, finder or investment banker has
been engaged by Purchaser with respect to the transactions contemplated by this
Agreement.
II.4 CERTAIN LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND THE RIGHTS
OF THE PARTIES. Each of the parties hereby acknowledges and agrees that:
(a) Each of the parties is a sophisticated legal entity that
was advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Accordingly, each of the parties
hereby acknowledges that (i) except for this Agreement (including the Schedules
hereto), as executed and delivered at the Closing, no party has relied or will
rely upon any document or written or oral information previously furnished to or
discovered by it or its representatives, including, without limitation, the
Confidential Information Memorandum dated January, 1999, prepared by ▇▇▇▇▇, ▇▇▇▇
& Company, LLC, any information provided to Purchaser pursuant to a presentation
by management of CVSI in connection with the transactions contemplated hereby or
the confidentiality agreement between CVSI and Purchaser (the "CONFIDENTIALITY
AGREEMENT") or any financial projection or forecast delivered to Purchaser with
respect to the revenues or profitability which may arise from the operation of
the Business after the Closing Date, (ii) there are no representations or
warranties by or on behalf of any party hereto or any of its respective
Affiliates or representatives other than those expressly set forth in this
Agreement, (iii) the parties' respective rights, obligations and remedies with
respect to this Agreement, the Shares, the transactions contemplated hereby and
the events giving rise thereto (excluding claims based on fraud) will be solely
as set forth in this Agreement, and (iv) any instrument or document which is
delivered in connection with the transactions contemplated hereby will be
subject to the terms of this Section 2.3. With respect to
18
any projection or forecast delivered by or on behalf of a Seller to Purchaser,
Purchaser acknowledges that (A) there are uncertainties inherent in attempting
to make such projections and forecasts, (B) it is familiar with such
uncertainties, and (C) Purchaser is purchasing the Business as a going concern,
and has prepared its own plan of operations and financial forecasts for the
Business.
(b) Except as expressly stated herein, neither Seller nor CVSI
nor any of their Affiliates or representatives makes any, and each Seller, CVSI
and each of their Affiliates disclaims, all representations and warranties,
express or implied, with respect to the Business, the Shares, the transactions
contemplated hereby and the events giving rise thereto.
III. COVENANTS
III.1 APPROVALS; COOPERATION.
(a Each of the parties will use reasonable best
efforts, in good faith, to take, or cause to be taken, or do, or cause to be
done, all things necessary, proper or advisable to satisfy all conditions to the
obligations of the parties under this Agreement over which it has control or
influence and to cause the transactions contemplated hereby to be consummated as
soon as practicable in accordance with the terms hereof, including without
limitation by using commercially reasonable efforts to: (i) obtain any required
consents, approvals or authorizations of any Governmental Entity, (ii) contest
and resist all Legal Proceedings challenging this Agreement or the consummation
of the transactions contemplated hereby, (iii) vacate, lift, reverse or overturn
any injunction or restraining order or other Order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby in
accordance with the terms hereof and (iv) effect all necessary registrations and
filings and submissions of information required or requested by any Governmental
Entity with respect to the transactions contemplated hereby. Each of the parties
will cooperate fully with each other party and their respective officers,
directors, employees, agents, counsel and other designees in connection with
using such efforts, satisfying such conditions and causing the Closing to occur
in accordance with the terms hereof.
(b In furtherance and not in limitation of paragraph
(a) above, as soon as reasonably practicable following the date of this
Agreement, Purchaser and Sellers, as required by applicable Law, will make such
filings as may be required by the HSR Act and any other applicable Antitrust Law
(as hereinafter defined) with respect to the transactions contemplated by this
Agreement. Each of Sellers and Purchaser will promptly inform the other party of
any material communication received by such party from any Governmental Entity
in respect of any such filing or submission. Purchaser agrees and acknowledges
that it will be responsible for obtaining any required clearance under any
Antitrust Law (including without limitation the HSR Act) and will pay and be
solely responsible for all filing fees payable in connection therewith.
(c For purposes of this Agreement, "ANTITRUST LAW"
means any Law designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
regulating competition.
19
III.2 OPERATION OF THE BUSINESS. CVSI and Acquisition Co. shall ensure
that, during the period commencing as of the date of this Agreement through the
Closing Date (the "PRE-CLOSING PERIOD"), except as contemplated herein or as
otherwise consented to by Purchaser in writing:
(a CVSI and the CVSI Entities conduct their respective
operations in the Ordinary Course of Business;
(b CVSI and the CVSI Entities continue existing practices
relating to maintenance of the Assets;
(c CVSI and the CVSI Entities do not purchase, sell, lease
or dispose of, or enter into any Contract for the purchase, sale, lease or
disposition of, or subject to a Lien (other than Permitted Liens), any of the
Assets other than in the Ordinary Course of Business;
(d neither CVSI nor any of the CVSI Entities make any
material amendment to any Employee Plan or materially increase the general
rates of compensation of Employees, except (i) in connection with amendments
as required by Law, (ii) in the ordinary course of business of the Business,
or (iii) pursuant to any Contract;
(e CVSI use commercially reasonable efforts to keep in
full force all insurance policies identified in SCHEDULE 2.1.22(a);
(f subject to any applicable confidentiality obligations
existing on the date hereof, CVSI immediately notifies the Purchaser of any
inquiry, proposal or offer from any Person relating to any Acquisition
Transaction;
(g CVSI does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and does not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(h CVSI does not sell or otherwise issue any shares of
capital stock or any other securities;
(i neither CVSI nor any of the CVSI Entities amend CVSI's
certificate of incorporation or bylaws or the organizational documents of any
of the CVSI Entities, and do not effect, or permit CVSI or any material CVSI
Entity to become a party to, any Acquisition Transaction, recapitalization,
reclassification, reclassification of shares, stock split, reverse stock
split or similar transaction;
(j neither CVSI nor any of the CVSI Entities forms any
subsidiary or acquires any equity interest or other interest in any other
Entity;
(k CVSI and the CVSI Entities do not make any capital
expenditure which is not reflected on the 1999 Balance Sheet and which
exceeds $300,000 in the aggregate;
20
(l neither CVSI nor any of the CVSI Entities makes any
capital expenditure, except for capital expenditures made in the Ordinary
Course of Business that do not exceed $300,000 in the aggregate;
(m neither CVSI nor any CVSI Entity nor the Sellers enter
into any transaction or take any other action that is reasonably likely to
cause or constitute a Breach of any representation or warranty made by CVSI
and Acquisition Co.;
(n neither CVSI nor any of the CVSI Entities (i) lend
money to any Person or (ii) incur, assume or otherwise become subject to any
Liability Known to CVSI, except for current Liabilities incurred in the
Ordinary Course of Business and borrowings under the Specified Debt;
(o CVSI does not change any of its methods of accounting
or accounting practices in any respect;
(p CVSI does not make any material Tax election;
(q neither CVSI nor any of the CVSI Entities commences or
settles any Legal Proceeding, except in the Ordinary Course of Business;
(r CVSI and of the CVSI Entities (i) do not enter into or
permit any of the assets owned or used by such entity to become bound by any
Contract or (ii) to the extent CVSI can reasonably prevent it, amend or
prematurely terminate or waive any material right or remedy under any
Contract to which it is or was a party or under which it has any rights or
obligations;
(s CVSI and the CVSI Entities do not prepay any
indebtedness or write off as uncollectible, or establish any extraordinary
reserve with respect to, any account receivable or other indebtedness;
(t neither CVSI nor any of the CVSI Entities enter into
any material transaction or take any other material action outside the
Ordinary Course of Business; and
(u neither CVSI nor any of the CVSI Entities, as
applicable, agree or commit to take any of the actions described in clauses
"(c)", "(d)" and "(g)" through "(t)" of this Section 3.2.
III.3 ACCESS. CVSI and Acquisition Co. shall ensure that, at all times
during the Pre-Closing Period, CVSI and its Representatives provide the
Purchaser and its Representatives with access, during normal business hours upon
reasonable notice, to CVSI's Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to CVSI and the CVSI Entities.
III.4 SATISFACTION OF CONDITIONS. Without limiting the generality or
effect of any provision of Article IV, during the Pre-Closing
21
Period, each of the parties hereto will use its respective reasonable best
efforts with due diligence and in good faith to satisfy promptly all conditions
required hereby to be satisfied by such party in order to expedite the
consummation of the transactions contemplated hereby.
III.5 PRESS RELEASES. During the Pre-Closing Period, no party will
issue or cause the publication of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior consent of Purchaser (in the case of Sellers) or Acquisition Co. (in
the case of Purchaser), which consent will not be unreasonably withheld;
provided, however, that nothing herein will prohibit any party from issuing or
causing publication of any such press release or public announcement to the
extent that such party determines such action to be required by Law (including
reporting obligations under the securities laws) or the rules of any national
stock exchange applicable to it or its Affiliates, in which event the party
making such determination will, if practicable in the circumstances, use
reasonable best efforts to allow the other parties reasonable time to comment on
such release or announcement in advance of its issuance.
III.6 NOTIFICATION, UPDATES TO SCHEDULES.
(a During the Pre-Closing Period, CVSI and/or Acquisition
Co. shall promptly notify Purchaser in writing if CVSI gains Knowledge of:
(i the discovery by CVSI or the Sellers of any
event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes a Breach of any
representation or warranty made by CVSI or Acquisition Co. in this Agreement;
(ii any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement that would
have caused or constituted a Breach of any representation or warranty made by
CVSI or Acquisition Co. in this Agreement if (A) such representation or
warranty had been made as of the time of the occurrence, existence or
discovery of such event, condition, fact or circumstance or (B) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior
to the date of this Agreement;
(iii any Breach of any covenant or obligation of
CVSI or Sellers; and
(iv any event, condition, fact or circumstance
that would make the timely satisfaction of any of the conditions set forth in
Section 4.1 or Section 4.2 impossible or unlikely.
(b If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 3.6(a) requires any change in
the Schedules, or if any such event, condition, fact or circumstance would
require such a change assuming the Schedules were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then CVSI and Acquisition Co. shall promptly deliver to
Purchaser an update to the Schedules specifying such change. No such update
shall be deemed to supplement or amend the Schedules for the purpose of
determining the accuracy of any of the representations
22
and warranties made by CVSI or the Sellers for purposes of Section 4.1(a) or
Section 4.4(a)(iv), but shall be deemed to supplement or amend the Disclosure
Schedule for purposes of Section V.
III.7 NO NEGOTIATION. During the Pre-Closing Period, neither CVSI
nor the Sellers shall, directly or indirectly:
(a solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Purchaser) relating to a
possible Acquisition Transaction; or
(b participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than Purchaser) relating to or in connection with a possible
Acquisition Transaction.
(c subject to any applicable confidentiality obligations
existing on the date hereof, CVSI and/or Acquisition Co. shall promptly
notify Purchaser in writing of any inquiry, proposal or offer relating to a
possible Acquisition Transaction that is received by CVSI or any of the CVSI
Entities or Sellers during the Pre-Closing Period.
III.8 EMPLOYEE BENEFIT MATTERS.
(a From and after the Closing, Purchaser shall, and shall
cause its subsidiaries (including CVSI) to, honor and provide for payment of
all accrued obligations (financial or otherwise) and benefits under all
Employee Plans set forth in SCHEDULE 2.1.15 and all employment or severance
agreements between CVSI and any Employee or Former Employee ("COVERED
EMPLOYEES") set forth in SCHEDULE 2.1.14(c), all in accordance with their
respective terms and CVSI's past practices.
(b For at least one year after the Closing Date, Purchaser
shall provide (or cause to be provided) to all Covered Employees who remain
in the employ of the Business employee benefits and compensation no less
favorable in the aggregate than those provided to such employees immediately
prior to the Closing Date. To the extent that Covered Employees are included
in any benefit plan of Purchaser or its subsidiaries, Purchaser agrees that
the Covered Employees shall receive credit under such plan for service prior
to the Closing Date with CVSI to the same extent such service was counted
under similar Employee Plans for purposes of eligibility, vesting,
eligibility for retirement (but not for benefit accrual), and with respect to
vacation, disability and severance, benefit accrual. To the extent that
Covered Employees are included in any medical, dental or health plan other
than the plan or plans they participated in on the Closing Date, no such
plans shall include pre-existing condition exclusions, except to the extent
such exclusions were applicable under the similar Employee Plan on the
Closing Date, and all such plans shall provide credit for any deductibles and
co-payments applied or made with respect to each Covered Employee in the
calendar year of the change.
III.9 GENERAL POST-CLOSING MATTERS.
23
(a ACCESS. On the Closing Date, or as soon thereafter as
practicable, and in no event later than 30 calendar days after the Closing
Date, Acquisition Co. will deliver or cause to be delivered to Purchaser all
books and records, including without limitation all files, invoices, forms,
accounts, correspondence, production records, technical, accounting,
manufacturing and procedural manuals and employment records, relating to the
Business and CVSI and the CVSI Entities (collectively, "RECORDS") in the
possession of the Sellers or any Post-Closing Affiliate to the extent not in
the possession of the CVSI or Purchaser, subject to the following exceptions:
(i Purchaser recognizes that certain Records may
contain only incidental information relating to CVSI or may primarily relate
to the Sellers or any Post-Closing Affiliate, or the businesses of the
Sellers or any Post-Closing Affiliate other than the Business, and Sellers
and its Post-Closing Affiliates may retain such Records and Acquisition Co.
may deliver appropriately excised copies of such Records; and
(ii Sellers and each Post-Closing Affiliate may
retain any Tax Returns.
After the Closing, Purchaser will, and will cause CVSI to, retain all Records
(except those Records referred to in Section 3.9.1(a)(i) and (ii)) required to
be retained pursuant to obligations imposed by any applicable Law. Except as
provided in the immediately preceding sentence, Purchaser will, and will cause
CVSI to, retain all Records for a period of seven (7) years after the Closing
Date.
(b After the Closing, upon reasonable notice, each party
hereto will give, or cause to be given, to the Representatives, employees,
counsel and accountants of the other parties hereto access, during normal
business hours, to Records relating to periods prior to or including the
Closing, and will permit such persons to examine and copy such Records to the
extent reasonably requested by the other party in connection with tax and
financial reporting matters (including without limitation any Tax Return
relating to state or local real property transfer or gains taxes), audits,
Legal Proceedings, governmental investigations and other business purposes;
provided, however, that nothing herein will obligate any party to take
actions that would unreasonably disrupt the normal course of its business,
violate the terms of any Contract to which it is a party or to which it or
any of its assets is subject or grant access to any of its proprietary,
confidential or classified information. Purchaser will, and will cause CVSI
to, provide or make available to Sellers and each Post-Closing Affiliate
access to, and assistance from, employees of Purchaser and CVSI for the
purposes of, and with the limitations described in, the preceding sentence.
(c CERTAIN TAX MATTERS.
(i Purchaser will pay all sales, use, transfer,
recordation, stamp, conveyance, value added or other similar Taxes (as
hereinafter defined), duties, excise or governmental charges (excluding any
income or similar Tax) imposed by any taxing jurisdiction, domestic or
foreign, and all recording or filing fees, notarial fees and other
24
similar costs of Closing with respect to the transfer of the Shares or otherwise
on account of this Agreement or the transactions contemplated hereby.
(ii Acquisition Co. shall be responsible for the
preparation of the Tax Returns of each of CVSI and the CVSI Entities for all
taxable periods ending on or prior to the Closing Date ("PRE-CLOSING
PERIODS"). Such Tax Returns, together with all work papers and schedules
related thereto, shall be delivered to Purchaser for its review and
acceptance and shall be prepared in a manner consistent with prior practice
unless otherwise required by applicable Laws. Acquisition Co. shall reimburse
CVSI for Taxes of CVSI or any CVSI Entity with respect to a Pre-Closing
Period within fifteen (15) days after payment by CVSI (or its Affiliates) of
such Taxes to the extent such Taxes are not reflected in cash reserves for
Tax liabilities (rather than any reserve for deferred taxes) on the books and
records of CVSI or the applicable CVSI Entity.
(iii Purchaser shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of CVSI and each CVSI
Entity for all periods which begin on or prior to the Closing Date and end
after the Closing Date ("POST-CLOSING PERIODS"). Acquisition Co. shall
reimburse CVSI for Taxes of CVSI or any CVSI Entity with respect to a
Post-Closing Period within fifteen (15) days after the date on which such
Taxes are paid with respect to such period an amount equal to the portion of
such Taxes allocable to the pre-Closing portion of such Post-Closing Period
pursuant to Section 9.1(iv) to the extent such Taxes are not reflected in
cash reserves for Tax liabilities (rather than any reserve for deferred
taxes) on the books and records of CVSI or the applicable CVSI Entity.
(iv For purposes of this Agreement, the
allocation of Taxes for a period that straddles the Closing Date shall be
made on the basis of an interim closing of the books as of the end of the
Closing Date.
(v For purposes of this Agreement, (A) "TAX" or
"TAXES" includes all federal, state, local, foreign and other taxes,
assessments, or governmental charges of any kind whatsoever including,
without limitation, income, franchise, capital stock, excise, property,
sales, use, service, service use, license, leasing, leasing use, gross
receipts, value added, single business, premium, registration, alternative or
add-on minimum, occupation, ad valorem, real and personal property, stamp,
workers' compensation, severance, environmental, windfall profits, transfer,
payroll, withholding, disability, employment, unemployment and social
security taxes, or other taxes of the same or similar nature, together with
any interest, penalties or additions thereon and estimated payments thereof,
whether disputed or not, (B) "TAX RETURN" or "TAX RETURNS" includes all
returns, reports, information returns, forms, declarations, claims for
refund, statements and other documents (including any amendments thereto and
including any schedule or attachment thereto) in connection with Taxes that
are required to be filed with a Government Entity or other tax authority, or
sent or provided to another party under applicable Law and (C) "INCOME TAX"
or "INCOME TAXES" means all Taxes imposed on, measured by, or that require
reference to, net or taxable income (including any income, franchise,
estimated, alternative minimum, add-on minimum or other tax imposed on,
measured by, or which requires reference to, net or taxable income), together
with interest and penalties thereon and estimated payments thereof.
25
III.10 SPECIFIED DEBT. Immediately after the Closing, Purchaser shall
cause CVSI to repay all amounts due under the obligations listed on SCHEDULE
3.10 (the "SPECIFIED DEBT"). To facilitate the foregoing, prior to the Closing
Date, Acquisition Co. shall provide Purchaser with pay-off letters and wire
instructions to be used by CVSI to repay the Specified Debt directly to the
lenders thereof. The aggregate of such payments, as specified in such pay-off
letters, is referred to herein as the "DEBT PAYMENTS."
III.11 BONUS PAYMENTS. At the Closing, Purchaser shall cause CVSI to
pay the bonuses described in the letter dated the date hereof from CVSI to
Purchaser. The aggregate of such bonus payments, not to exceed $100,000, is
referred to herein as the "BONUS PAYMENTS."
III.12 AUSTRALIA AGREEMENT. After the Closing, the parties shall
cooperate to ensure compliance by CVSI with the terms and conditions of the
Australia Agreement. Such cooperation shall include, but not be limited to,
advising each other promptly upon learning of any material developments or
claims under or with respect to the Australia Agreement. Subject to the
indemnification provided under Section 5.2 hereof, Purchaser shall take
commercially reasonable efforts to, and shall cause CVSI to take commercially
reasonable efforts to, fulfill CVSI's obligations under the Australia Agreement.
III.13 OPTION EXERCISES. Notwithstanding anything to the contrary
contained herein, CVSI shall be permitted, prior to the Closing, to accept and
honor exercises of Rights, provided that the Shares received upon such exercise
are redeemed by CVSI or purchased by one of the Sellers prior to the Closing. In
the event CVSI redeems such Shares, the cost of such redemption shall be added
to the amount of the Rights Payments.
IV. THE CLOSING
IV.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation
of Purchaser to consummate the transactions contemplated hereby will be subject
to the satisfaction or waiver (by Purchaser), at or prior to the Closing, of the
following conditions:
(a ACCURACY OF REPRESENTATIONS. Each of the
representations and warranties made by CVSI and Acquisition Co. in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of CVSI and Acquisition Co. in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (without giving effect to
any update to the Schedules).
(b PERFORMANCE OF COVENANTS. Each covenant or obligation
that CVSI or the Sellers is required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all material
respects, including the delivery by the Sellers of the certificates
representing the Shares as set forth in Section 1.1, which certificates shall
have
26
been duly endorsed for transfer or accompanied by duly executed stock powers.
(c CONSENTS. All material consents required to be obtained
by CVSI or the Sellers in connection with the transactions contemplated by
this Agreement (including the consents identified on SCHEDULE 2.1.4) shall
have been obtained and shall be in full force and effect.
(d AGREEMENTS AND DOCUMENTS. Purchaser shall have
received the following agreements and documents, each of which shall be in
full force and effect:
(i written resignations of all officers and
directors of CVSI, effective as of the Closing Date (provided that any such
resignation will not be considered a "voluntary resignation" under any
benefit plan, severance plan, employee plan or employment agreement and such
resignation will not diminish or otherwise affect the rights of or benefits
received or to be received by such officers and directors under such plan or
agreement); and
(ii a certificate executed by Acquisition Co.
containing the representation and warranty of Acquisition Co. that the
conditions set forth in this Section 4.1 have been satisfied.
(e NO MATERIAL ADVERSE CHANGE. Except for adverse changes
that result from general economic conditions, there shall have been no
material adverse change in the financial condition, assets or operations of
CVSI and the CVSI Entities, considered as a whole, since the date of this
Agreement.
(f NO RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have been issued
by any court of competent jurisdiction and remain in effect, and there shall
not be any Legal Requirement enacted or deemed by a Governmental Entity to be
applicable to the transactions contemplated hereby that makes consummation of
the transactions contemplated hereby illegal.
(g HSR APPROVAL. Any waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated hereby
shall have expired or shall have been terminated.
(h FIRST QUARTER EBITDA. The First Quarter Income
Statement shall have been finally determined pursuant to Section 1.4 and the
First Quarter EBITDA reflected thereon shall not be a loss of more than $2.0
million.
IV.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligation of
the Sellers to consummate the transactions contemplated hereby will be subject
to the satisfaction or waiver (by the Sellers), at or prior to the Closing, of
the following conditions:
(a ACCURACY OF REPRESENTATIONS. Each of the
representations and warranties
27
made by Purchaser in this Agreement that are qualified as to materiality shall
be true and correct, and the representations and warranties of Purchaser in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
(b PERFORMANCE OF COVENANTS. Each covenant or obligation
that Purchaser is required to comply with or to perform at or prior to the
Closing shall have been complied with and performed in all material respects.
(c NO RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have been issued
by any court of competent jurisdiction and remain in effect, and there shall
not be any Legal Requirement enacted or deemed applicable to the transactions
contemplated hereby that makes consummation of the transactions contemplated
hereby illegal.
(d HSR APPROVAL. Any waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated hereby
shall have expired or shall have been terminated.
(e FIRST QUARTER EBITDA. The First Quarter Income
Statement shall have been finally determined pursuant to Section 1.4 and the
First Quarter EBITDA reflected thereon shall not be a loss of more than $2.0
million.
IV.3 THE CLOSING. Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1 and 4.2, the consummation of the
purchase and sale of the Shares contemplated hereby (the "CLOSING") will take
place on the earlier of (i) the third business day after the conditions set
forth in Sections 4.1 and 4.2 have been satisfied and (ii) such other date as
Purchaser and Sellers may mutually agree (the "CLOSING Date"). The Closing will
take place at 10:00 a.m., local time, at the offices of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
IV.4 TERMINATION.
(a Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated at any time prior to the
Closing:
(i by the mutual written consent of Purchaser and
Sellers;
(ii by either Purchaser or Sellers if the Closing
shall not have occurred on or before the 90th calendar day after the date
hereof;
(iii by either Purchaser or Sellers if there
shall have been entered a final, nonappealable order or injunction of any
Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby or any material part thereof or if the
finally determined First Quarter EBITDA is a loss of more than $2.0 million;
28
(iv by Purchaser if there is a material Breach of
any representation, warranty, covenant or obligation of CVSI or Sellers; and
(v by Sellers if there is material Breach of any
representation, warranty, covenant or obligation of Purchaser.
(b TERMINATION PROCEDURES. If Purchaser wishes to
terminate this Agreement pursuant to Sections 4.4(a)(i), (ii), (iii) or (iv),
Purchaser shall deliver to Acquisition Co. a written notice stating that
Purchaser is terminating this Agreement and setting forth a brief description
of the basis on which the Purchaser is terminating this Agreement. If the
Sellers wish to terminate this Agreement pursuant to Sections 4.4(a)(i),
(ii), (iii) or (v), Acquisition Co. shall deliver to Purchaser a written
notice stating that the Sellers are terminating this Agreement and setting
forth a brief description of the basis on which the Sellers are terminating
this Agreement.
(c EFFECT OF TERMINATION. In the event of the termination
of this Agreement under Section 4.4(a), each party hereto will pay all of its
own fees and expenses. There will be no further Liability hereunder on the
part of any party hereto if this Agreement is so terminated, except by reason
of a material Breach of any covenant contained in this Agreement, including
without limitation the covenants contained in Sections 3.1 and 3.4.
V. INDEMNIFICATION
V.1 SURVIVAL OF REPRESENTATIONS. The representations and warranties of
Acquisition Co. pursuant to this Agreement shall survive the Closing and shall
expire at midnight, New York time, on September 30, 2000; provided, however,
that if, at any time prior to such expiration time, any Indemnitee seeking
indemnification under this Section V (acting in good faith) delivers to
Acquisition Co. a written notice alleging the existence of a Breach of any of
the representations and warranties made by Acquisition Co. contained herein (and
setting forth in reasonable detail the basis for such Indemnitee's belief that
such a Breach may exist) and asserting a claim for recovery under Section 5.2
based on such alleged Breach, then the claim asserted in such notice shall
survive such expiration time until such time as such claim is fully and finally
resolved.
V.2 INDEMNIFICATION. Subject to the provisions of this Section V, from
and after the Closing, Acquisition Co. shall indemnify, defend and save
Purchaser and its Affiliates, and each of their respective officers, directors,
employees, agents, employee benefit plans and fiduciaries, plan administrators
or other parties dealing with any such plans (each, an "INDEMNIFIED PARTY"),
harmless from and against, and shall promptly pay to an Indemnified Party or
reimburse an Indemnified Party for, any and all liabilities (whether contingent,
fixed or unfixed, liquidated or unliquidated, or otherwise), obligations,
deficiencies, demands, claims, suits, actions, or causes of action, assessments,
losses, costs, expenses, interest, fines, penalties, actual or punitive damages
or costs or expenses of any and all investigations, proceedings, judgments,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of attorneys, accountants and other
29
experts incurred by any Indemnified Party in any action or proceeding between
such Indemnified Party and the indemnitor or between any Indemnified Party and
any third party or otherwise) (individually a "LOSS" and collectively, the
"LOSSES") sustained or incurred by any Indemnified Party resulting from or
arising out of (i) any breach of a representation or warranty made herein by
CVSI and Acquisition Co. (including breaches that manifest themselves through
allegations by third parties that are not Indemnified Parties and which are
finally determined to be true), (ii) any breach by CVSI (pre-Closing) or
Acquisition Co. of any of their respective covenants or agreements contained in
this Agreement, or (iii) the Australia Agreement, subject to Purchaser's
compliance with Section 3.12. Computervision shall have no liability for
indemnification under this Article V.
V.3 LIMITS ON INDEMNIFICATION.
(a Subject to Section 5.3(b), Acquisition Co. shall not be
required to make any payments pursuant to Section 5.2 until such time as the
total amount of all Damages (including the Damages arising from such Breach
and all other Damages arising from any other Breaches of any representations
or warranties) for which the Indemnitees are entitled to be indemnified
exceeds $500,000 in the aggregate. At such time as the total amount of such
Damages exceeds $500,000, the Indemnitees shall be entitled to be indemnified
against the total amount of such Damages exceeding $250,000 (subject to
Section 5.3(b)).
(b Claims for Damages made by the Indemnified Parties
pursuant to the provisions of Section 5.2 shall be limited to $5,000,000 in
the aggregate.
(c No Indemnified Party shall be entitled to
indemnification with respect to any Losses to the extent such Losses are
reflected in or compensated for by the adjustment to the Initial Purchase
Price provided in Sections 1.2.1 and 1.4.
V.4 NO CONTRIBUTION. Each Seller waives and acknowledges and agrees
that, after the Closing, such Seller shall not have and shall not exercise or
assert (or attempt to exercise or assert), any right of contribution, right of
indemnity or other similar right or remedy against CVSI in connection with any
indemnification obligation or any other Liability to which such Seller may
become subject under this Agreement or any of the agreements contemplated hereby
or otherwise in connection with any of the transactions contemplated hereby.
V.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person (other than Purchaser or its Affiliates) of any claim
or Legal Proceeding (whether against CVSI, any other Indemnified Party or any
other Person) with respect to which Acquisition Co. may become obligated to
indemnify, hold harmless, compensate or reimburse any Indemnified Party pursuant
to this Section V, Acquisition Co. shall have the right, at its election, to
proceed with the defense of such claim or Legal Proceeding on its own, provided
that, subject to Purchaser's compliance with Section 3.12, if such claim relates
to the Australia Agreement, Acquisition Co. shall be obligated to proceed with
the defense thereof. If Acquisition Co. so proceeds with the defense of any such
claim or Legal Proceeding:
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(a all expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by Acquisition Co.;
(b Purchaser shall make available to Acquisition Co. any
documents and materials in the possession or control of Purchaser that may be
necessary to the defense of such claim or Legal Proceeding;
(c Acquisition Co. shall keep Purchaser informed of all
material developments and events relating to such claim or Legal Proceeding;
and
(d Acquisition Co. shall have the right to settle, adjust
or compromise such claim or Legal Proceeding only with the consent of
Purchaser; provided, however, that (i) such consent shall not be unreasonably
withheld, and (ii) in the event Purchaser fails to consent to a proposed
settlement or compromise that involves only monetary damages, Acquisition
Co.'s liability to all Indemnified Parties with respect to the Legal
Proceeding proposed to be settled shall be limited to the amount of the
proposed settlement to which Purchaser failed to consent.
V.6 EXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Section V shall be the exclusive
remedy of the parties hereto with respect to any claims or causes of action
whatsoever related to or arising out of this Agreement and the transactions
contemplated hereby, excluding in all cases fraud.
V.7 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PURCHASER. No
Indemnified Party (other than the Purchaser or any successor thereto or assign
thereof) shall be permitted to assert any indemnification claim or exercise any
other remedy under this Agreement unless the Purchaser (or any successor thereto
or assign thereof) shall have consented to the assertion of such indemnification
claim or the exercise of such other remedy.
VI. MISCELLANEOUS PROVISIONS
VI.1 NOTICES. All notices and other communications required or
permitted under this Agreement will be in writing and, unless otherwise provided
in this Agreement, will be deemed to have been duly given upon receipt when
delivered in person or when dispatched by electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) or dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
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(a) If to Purchaser, to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
with a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(a If to a Seller, to:
CVSI Acquisition Co., LLC
c/o Resurgence Asset Management LLC
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇ ▇▇▇▇▇)
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and
Computervision Corporation
c/o Parametric Technology Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
32
VI.2 EXPENSES. Subject to Section V and except as provided in Section
2.1.19, (a) Sellers will pay or cause to be paid all expenses incurred by
Sellers incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein and (b) Purchaser will pay any
expenses incurred by it incident to this Agreement and in preparing to
consummate and consummating the transactions provided for herein. Acquisition
Co. may provide Purchaser with written notice prior to the Closing of the amount
and recipients (including wire instructions) of any transaction fees to be paid
by Purchaser on behalf of Sellers at the Closing. The aggregate of such payments
is referred to herein as the "TRANSACTION EXPENSES."
VI.3 SUCCESSORS AND ASSIGNS. No party may assign, in whole or in part,
its rights or obligations hereunder without the prior written consent of the
other parties hereto. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
VI.4 WAIVER. Either Purchaser or Sellers by written notice to the other
may (a) extend the time for performance of any of the obligations or other
actions of the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement, (c)
waive compliance with any of the conditions or covenants of the other contained
in this Agreement, or (d) waive or modify performance of any of the obligations
of the other under this Agreement; provided, however, that neither Purchaser nor
Sellers may, without the prior written consent of the other, make or grant such
extension of time, waiver of inaccuracies or compliance or waiver or
modification of performance with respect to its (or any of its Affiliates')
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
VI.5 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto)
supersedes any other agreement, whether written or oral, that may have been made
or entered into by any party or any of their respective Affiliates (or by any
director, officer or representative thereof) prior to the date hereof relating
to the matters contemplated hereby, other than the Confidentiality Agreement,
which will survive the execution, delivery or termination of this Agreement.
This Agreement (together with the Confidentiality Agreement and Schedules
hereto) constitutes the entire agreement by and among the parties hereto and
there are no agreements or commitments by or among such parties or their
Affiliates except as expressly set forth herein.
VI.6 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by Purchaser and Sellers to be necessary, desirable or expedient to
further the purposes of this Agreement or to clarify the intention of the
parties hereto.
33
VI.7 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the Laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
VI.8 SEVERABILITY. If any provision of this Agreement or the
application of any such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable Law,
the parties waive any provision of law that renders any provision of this
Agreement invalid, illegal or unenforceable in any respect. In the event that
any provision of this Agreement shall be finally determined by a court of
competent jurisdiction to be unenforceable such court shall have jurisdiction to
reform this Agreement so that it is enforceable to the maximum extent permitted
by applicable Law and the parties shall abide by such court's determination. If
such provision cannot be reformed, such provision shall be deemed to be severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
VI.9 TITLES AND HEADINGS. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
VI.10 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS.
(a) Unless the context otherwise requires, (i) all references
to Sections or Schedules are to Sections or Schedules of or to this Agreement,
(ii) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, (iii) "or" is disjunctive but
not necessarily exclusive, (iv) words in the singular include the plural and
VICE VERSA, (v) the terms "SUBSIDIARY" and "AFFILIATE" have the meanings given
to those terms in Rule 12b-2 of Regulation 12B under the Securities Exchange Act
of 1934, as amended, and (vi) all references to "$" or dollar amounts will be to
lawful currency of the United States of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
VI.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
CVSI, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
CVSI ACQUISITION CO., LLC
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
COMPUTERVISION CORPORATION
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
4FRONT TECHNOLOGIES, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
35
EXHIBIT A
CERTAIN DEFINITIONS
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of CVSI's and the CVSI Entities' Business or assets;
(b) the issuance, disposition or acquisition of (i) any
capital stock or other equity security of CVSI or of any material CVSI Entity,
(ii) any option, call, warrant or right (whether or not immediately exercisable)
to acquire, or otherwise relating to, any capital stock or other equity security
of CVSI or of any material CVSI Entity, or (iii) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of CVSI; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving CVSI or any material
CVSI Entity.
AFFILIATE. "Affiliate" shall mean any person which directly or
indirectly controls, is controlled by, or is under common control with such
person. A person shall be deemed to control another person if such person owns
10% or more of any class of stock of the "controlled" person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the controlled person, whether through ownership of
stock or partnership interests, by contract, or otherwise.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been any
inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach or failure.
CVSI CONTRACT. "CVSI Contract" shall mean any Contract: (a) to which
CVSI is a party; (b) by which CVSI or any of its assets is or may become bound
or under which CVSI has, or may become subject to, any obligation; or (c) under
which CVSI has or may acquire any right or interest.
CVSI ENTITIES. "CVSI Entities" shall mean the entities on
SCHEDULE 2.1.1(a).
DAMAGES. "Damages" shall mean any loss, damage, injury, reduced value,
Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee
(including any reasonable legal fee, expert fee, accounting fee or advisory
fee), charge, cost (including any reasonable cost of investigation enforcement)
or expense of any nature, net of insurance recoveries.
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate,
36
trust, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) the
Purchaser; (b) the Purchaser's current and future affiliates (including CVSI but
excluding the Sellers); (c) the respective Representatives of the Persons
referred to in clauses "(a)" and "(b)" above; and (d) the respective successors
and assigns of the Persons referred to in clauses "(a)", "(b)" and "(c)" above.
KNOWLEDGE. CVSI shall be deemed to have "Knowledge" or to have "Known"
of a particular fact or other matter if any of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ Love is actually aware of such fact or other matter.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmeasured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with GAAP and regardless of whether such
debt, obligation, duty or liability is immediately due and payable.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" if such violation or other matter has a
material adverse effect on the financial condition, assets or operations of CVSI
and the CVSI Entities, considered as a whole.
ORDINARY COURSE OF BUSINESS. An action taken by or on behalf of an
Entity shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is consistent with an Entity's past practices
and is taken in the ordinary course of such Entity's normal day-to-day
operations; and
(b) such action is not required to be authorized by an
Entity's stockholders, board of directors or similar body, or committee of such
Entity's board of directors or similar body and does not require any other
separate or special authorization of any nature.
RELATED PARTY. Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is, or who has at any time been, an
officer or director of CVSI or any of the CVSI Entities;
37
(b) each member of the immediate family of each of the
individuals referred to in clause "(a)" above; and
(c) any Entity (other than CVSI or any of the CVSI Entities)
in which any one of the individuals referred to in clauses "(a)" and "(b)" above
holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting or equity interest.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
PERSON. "Person" shall mean any individual, Entity or Governmental
Entity
SCHEDULES. "Schedules" shall mean the schedule (dated as of the date
of this Agreement) delivered to the Purchaser on behalf of CVSI and Acquisition
Co., a copy of which is attached to this Agreement
38
