EXHIBIT 10.30
PURCHASE AGREEMENT
BY AND AMONG
NAVIANT, INC.,
SOFTBANK CONTENT SERVICES, INC.
AND
SOFTBANK HOLDINGS INC.
MARCH 7, 2000
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF ASSETS.................................................. 1
Section 1.1 Description of Assets to be Acquired................................. 1
Section 1.2 Excluded Assets...................................................... 3
Section 1.3 Non-Assignment or Subcontracting of Certain Assets................... 3
ARTICLE II LIABILITIES OF THE COMPANY.................................................. 3
Section 2.1 Assumed Liabilities.................................................. 3
Section 2.2 Excluded Liabilities................................................. 4
ARTICLE III SERIES E PREFERRED STOCK................................................... 4
ARTICLE IV CONSIDERATION............................................................... 4
Section 4.1 Consideration........................................................ 4
Section 4.2 Allocation of Acquisition Consideration.............................. 5
ARTICLE V CLOSING 5
Section 5.1 Closing Date......................................................... 5
Section 5.2 Deliveries by the Company............................................ 5
Section 5.3 Deliveries by Acquiror............................................... 6
Section 5.4 Further Assurances................................................... 6
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PARENT................................ 6
Section 6.1 Power and Authority.................................................. 6
Section 6.2 Accredited Investor Status........................................... 7
Section 6.3 Restricted Securities................................................ 7
Section 6.4 Investment Purposes of the Parent.................................... 7
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Section 6.5 Brokers' and Finders' Fees........................................... 7
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT............... 7
Section 7.1 Organization, Standing and Power..................................... 8
Section 7.2 Assets 8
Section 7.3 Authority and Consents............................................... 8
Section 7.4 Financial Statements................................................. 9
Section 7.5 Absence of Certain Changes........................................... 9
Section 7.6 Absence of Undisclosed Liabilities................................... 10
Section 7.7 Litigation........................................................... 10
Section 7.8 Restrictions on Business Activities.................................. 10
Section 7.9 Governmental Authorization........................................... 10
Section 7.10 Title to Property.................................................... 11
Section 7.11 Inventory............................................................ 11
Section 7.12 Proprietary Rights................................................... 11
Section 7.13 Environmental Matters................................................ 12
Section 7.14 Taxes................................................................ 13
Section 7.15 Employee Benefit Plans............................................... 14
Section 7.16 Certain Affected Agreements.......................................... 14
Section 7.17 Employee Matters..................................................... 15
Section 7.18 Interested Party Transactions........................................ 16
Section 7.19 Insurance............................................................ 16
Section 7.20 Compliance With Laws................................................. 16
Section 7.21 Minute Books......................................................... 17
Section 7.22 Accounts Receivable.................................................. 17
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Section 7.23 Customers and Suppliers.......................................................... 17
Section 7.24 Contracts and Commitments........................................................ 17
Section 7.25 Year 2000 Compliance............................................................. 18
Section 7.26 Complete Copies of Materials..................................................... 18
Section 7.27 Brokers' and Finders' Fees....................................................... 18
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR................................................. 18
Section 8.1 Organization, Standing and Power................................................. 19
Section 8.2 Capital Structure................................................................ 19
Section 8.3 Authority........................................................................ 19
Section 8.4 Financial Statements............................................................. 20
Section 8.5 Absence of Certain Changes....................................................... 20
Section 8.6 Absence of Undisclosed Liabilities............................................... 21
Section 8.7 Litigation....................................................................... 21
Section 8.8 Governmental Authorization....................................................... 21
Section 8.9 Title to Property................................................................ 21
Section 8.10 Intellectual Property............................................................ 22
Section 8.11 Insurance........................................................................ 22
Section 8.12 Taxes............................................................................ 22
Section 8.13 Compliance With Laws............................................................. 23
Section 8.14 Year 2000 Compliance............................................................. 24
ARTICLE IX CONDUCT PRIOR TO THE CLOSING DATE................................................................ 24
Section 9.1 General Conduct of Business...................................................... 24
Section 9.2 Conduct of Business of the Company............................................... 24
Section 9.3 No Solicitation.................................................................. 26
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ARTICLE X ADDITIONAL AGREEMENTS............................................................................. 27
Section 10.1 Access to Information............................................................. 27
Section 10.2 Public Disclosure................................................................. 27
Section 10.3 Consents; Cooperation............................................................. 28
Section 10.4 Legal Requirements................................................................ 28
Section 10.5 Non-competition................................................................... 29
Section 10.6 Non-solicitation.................................................................. 29
Section 10.7 COBRA............................................................................. 29
Section 10.8 Further Assurances................................................................ 29
ARTICLE XI CONDITIONS TO THE CLOSING........................................................................ 30
Section 11.1 Conditions to Obligations of Each Party to Effect the Closing..................... 29
Section 11.2 Additional Conditions to Obligations of the Parent and the Company................ 30
Section 11.3 Additional Conditions to the Obligations of the Acquiror.......................... 31
ARTICLE XII TERMINATION, AMENDMENT AND WAIVER............................................................... 33
Section 12.1 Termination....................................................................... 33
Section 12.2 Effect of Termination............................................................. 33
Section 12.3 Expenses.......................................................................... 33
ARTICLE XIII INDEMNIFICATION................................................................................ 34
Section 13.1 Indemnification................................................................... 34
Section 13.2 Procedure for Indemnification with Respect to Third-Party Claims.................. 35
Section 13.3 Procedure For Indemnification with Respect to Non-Third Party Claims.............. 36
Section 13.4 Reductions in Damages............................................................. 36
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Section 13.5 Limitations on Indemnification.................................................... 37
Section 13.6 Term.............................................................................. 37
Section 13.7 Limited Recourse.................................................................. 37
ARTICLE XIV GENERAL PROVISIONS.............................................................................. 37
Section 14.1 Survival.......................................................................... 37
Section 14.2 Notices........................................................................... 37
Section 14.3 Interpretation.................................................................... 39
Section 14.4 Counterparts...................................................................... 39
Section 14.5 Entire Agreement; Nonassignability; Parties in Interest........................... 39
Section 14.6 Severability...................................................................... 40
Section 14.7 Remedies Cumulative............................................................... 40
Section 14.8 Governing Law..................................................................... 40
Section 14.9 Rules of Construction............................................................. 40
Section 14.10 Amendment; Waiver................................................................. 40
Section 14.11 Consent to Jurisdiction; Service of Process....................................... 41
Section 14.12 Definitions of Material Adverse Effect............................................ 41
SCHEDULES
Schedule 1.1(a) Fixed Assets
Schedule 1.1(b) Inventory
Schedule 1.1(c) Contracts
Schedule 1.1(d) Real Property
Schedule 1.1(e) Proprietary Rights
Schedule 1.1(j) Leasehold Interests
Schedule 1.1(k) Insurance Policies
Schedule 1.2 Excluded Assets
Schedule 2.2 Excluded Liabilities
The Parent and Company Disclosure Schedules
Schedule 7.2 Assets
Schedule 7.3 Consents
Schedule 7.6 Undisclosed Liabilities and Creditors
Schedule 7.7 Litigation
Schedule 7.13 Environmental Matters
Schedule 7.14 Taxes
Schedule 7.15 Employee Benefit Plans
Schedule 7.17 Employee Matters
Schedule 7.20(b) Material Governmental Permits
The Acquiror Disclosure Schedule
Schedule 8.2 Capital Structure
Schedule 8.4 Financial Statements
Schedule 8.5 Absence of Changes
Schedule 8.6 Undisclosed Liabilities
Schedule 8.12 Taxes
EXHIBITS
Exhibit 5.2(a) ▇▇▇▇ of Sale
Exhibit 5.2(b) Affidavit of Non-Foreign Status
Exhibit 5.2(e) Employment Agreements
Exhibit 5.3(c) Omnibus Amendment Agreement
Exhibit 7.12(c) Proprietary Information Agreements
Exhibit 11.2 ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP - Legal Opinion
Exhibit 11.3(d) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ - Legal Opinion
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of March 7, 2000, by and among NAVIANT, INC., a Delaware corporation (the
"Acquiror"), SOFTBANK CONTENT SERVICES, INC., a Delaware corporation (the
"Company") doing business as eQuaint, a subsidiary of SOFTBANK HOLDINGS INC., a
Delaware corporation ("Parent"), and Parent.
RECITALS
A Parent owns of record and beneficially 100% of the outstanding
capital stock or other voting securities and equity interests of the Company
(collectively, the "Securities").
B The Company is engaged in, among other things, the business of
providing outsourced product registration of computer equipment, related
peripherals and other technology products (the "Business").
C Acquiror wishes to purchase from the Company and the Company
desires to sell to Acquiror the Assets set forth on the Schedules described
under Section 1.1 below (which assets, properties and rights constitute
substantially all of the assets of the Company), upon the terms and conditions
of this Agreement.
D Parent wishes to purchase from Acquiror and Acquiror desires to
sell to Parent shares of Acquiror's Series E Convertible Preferred Stock
("Series E Preferred Stock") upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the covenants, representations and
other agreements set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
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Section 1.1 Description of Assets to be Acquired. Upon the terms
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and subject to the conditions set forth in this Agreement, at the Closing Date
(as defined in Section 5.1), the Company agrees to convey, sell, transfer,
assign, and deliver to Acquiror, and Acquiror shall purchase from the Company,
all right, title, and interest of the Company at the Closing Date in and to the
assets, properties, and rights of the Business of every kind, nature, and
description, personal, tangible and intangible, known or unknown, wherever
located, including, without limiting the generality of the foregoing (but
excluding the "Excluded Assets," as such term is defined in Section 1.2 below):
(a) All interests in machinery, equipment, instruments, computer
hardware and software, tooling, furniture, fixtures, motor vehicles, supplies,
repair and maintenance parts, demonstration units, and other fixed assets used
in the Business, together with manufacturer or vendor warranties associated
therewith, including, without limitation, those interests listed on Schedule
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1.1(a) hereto;
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(b) All inventories of whatever kind (together with any manufacturer
or vendor warranties associated therewith), works-in-process, finished goods and
supplies relating to the Business, including, without limitation, those listed
on Schedule 1.1(b) hereto (collectively, the "Inventory");
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(c) All claims and rights under those agreements, contracts,
licenses, leases, franchises, instruments, documents, purchase and sale orders
and other executory commitments, and all permits, consents, and certificates of
any regulatory, administrative or other governmental agency or body, listed on
Schedule 1.1(c) hereto (collectively, the "Contracts");
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(d) All interests in the real property listed on Schedule 1.1(d)
---------------
hereto, and all buildings, facilities, and other improvements located thereon
(including construction in progress), together with all related rights,
easements and uses which benefit or burden any such property (collectively, the
"Real Property");
(e) All right, title and interest to trademarks, trademark rights,
service marks, service ▇▇▇▇ rights, copyrights, trade names, trade name rights,
fictitious business names, works of authorship, inventions, industrial models,
industrial designs, utility models and certificates of invention, designs,
emblems and logos, trade secrets, know-how, manufacturing formulae, technical
information, patents, patent applications, mask work registrations, inventions,
franchises, franchise rights, customer and supplier lists together with the
goodwill associated therewith and other proprietary rights used in the Business
(collectively, the "Proprietary Rights"), including without limitation those
listed on Schedule 1.1(e) hereto;
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(f) All original books or duplicates thereof of account, general
ledgers, sales invoices, purchase orders, accounts payable and payroll records,
drawings, files, papers, and all other records relating to the Business (the
"Records");
(g) All rights under express or implied warranties from suppliers of
the Company of supplies used in the Business;
(h) All of the Company's causes of action, judgments, and claims or
demands of whatever kind or description arising out of or relating to the
Business;
(i) All goodwill of the Business (the "Goodwill");
(j) All leasehold interests of the Company listed on Schedule 1.1(j)
---------------
hereto ("Leasehold Interests");
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(k) All insurance policies of the Company, including officers' and
directors' liability insurance policies, together with all proceeds thereof and
rights thereunder, including those policies listed on Schedule 1.1(k) hereto;
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and
(l) The current assets of the Company as of the Closing Date in the
categories that appear on the balance sheet of the Company dated as of February
29, 2000, which balance sheet shall be in form and substance substantially
similar to the audited balance sheet of the Company as of December 31, 1999,
including, without limitation, all lease and rent deposits, prepaid expenses,
prepaid taxes, bank accounts and all other current assets of the Company (the
"Current Assets").
The assets, properties, and rights to be conveyed, sold, transferred, assigned,
and delivered to Acquiror pursuant to this Section 1.1 are sometimes hereinafter
collectively referred to as the "Assets."
Section 1.2 Excluded Assets. Notwithstanding the provisions of
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Section 1.1 hereof, the assets to be transferred to Acquiror pursuant to this
Agreement shall not include those assets specifically listed on Schedule 1.2
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(collectively, the "Excluded Assets").
Section 1.3 Non-Assignment or Subcontracting of Certain Assets.
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Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment or subcontracting hereunder of any of the Assets shall require
the consent of any other party (or in the event that any of the same shall be
nonassignable or unable to be subcontracted), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or
subcontract or an agreement to assign or subcontract if such assignment or
subcontract or attempted assignment or subcontract would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, the Company shall use its best efforts to obtain the consent of
such other party to an assignment to Acquiror. If such consent is not obtained
by the Closing Date, the Company shall cooperate with Acquiror in any
arrangement designed for Acquiror to perform the Company's obligations with
respect to such Asset after the Closing Date and for Acquiror to receive the
benefits under any such Asset (net of any taxes imposed upon the Company or any
affiliate in connection with such Asset) after the Closing Date, which
arrangements may include enforcement, for the account and benefit of Acquiror,
of any and all rights of the Company against any other person arising out of the
breach or cancellation by such other person or otherwise, all of such actions of
the Company to be at the direction and expense of the Company. The Company shall
reimburse or pay Acquiror for all costs and expenses, including increased
obligations (net of any tax benefits or savings to the Acquiror or any affiliate
arising from such costs, expenses or obligations), resulting from an inability
of Acquiror to receive the benefits of such assignment or subcontract.
ARTICLE II
LIABILITIES OF THE COMPANY
--------------------------
Section 2.1 Assumed Liabilities. From and after the Closing Date,
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Acquiror agrees to assume and discharge or perform when due, any and all of the
debts,
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liabilities and obligations of the Company, or claims of such debts, liabilities
and obligations, whether matured or unmatured, liquidated or unliquidated, fixed
or contingent, known or unknown, whether arising out of occurrences prior to, at
or after the Closing Date, other than Excluded Liabilities (the "Assumed
Liabilities"), incurred in connection with or related to the Business.
Section 2.2 Excluded Liabilities. Notwithstanding any other
--------------------
provision of this Agreement, the debts, liabilities and obligations of the
Company which are not to be assumed by Acquiror hereunder (the "Excluded
Liabilities") are the following:
(a) all debts, liabilities and obligations arising out of or relating
to exclusively the Excluded Assets;
(b) any debt, liability or obligation, the existence of which
constitutes a breach of a representation or warranty set forth herein to the
extent that Acquiror would be entitled to indemnification under Section 13
hereof if such debt, liability or obligation were assumed by Acquiror;
(c) all debts, liabilities and obligations arising out of the
Business, the Assets or the income derived therefrom for Taxes for any taxable
period, or portion thereof, ending on or before the Closing Date; and
(d) all debts, liabilities and obligations set forth on Schedule 2.2
------------
hereto.
ARTICLE III
SERIES E PREFERRED STOCK
------------------------
The Amended and Restated Certificate of Incorporation of Acquiror (the
"Certificate of Incorporation") shall be amended and restated in the form of the
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Third Amended and Restated Certificate of Incorporation attached as Exhibit III
-----------
hereto (the "New Certificate of Incorporation") setting forth the rights and
--------------------------------
preferences of the Series E Preferred Stock and modifying the rights and
preferences of the Series A Convertible Redeemable Preferred Stock, the Series B
Convertible Redeemable Preferred Stock, the Series C Convertible Redeemable
Preferred Stock and the Series D Non-Voting Convertible Preferred Stock (each
series as described in the New Certificate of Incorporation), which shall be
filed with the Secretary of State of the State of Delaware in accordance with
the Delaware General Corporation Law (the "DGCL")
ARTICLE IV
CONSIDERATION
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Section 4.1 Consideration. Upon the terms and subject to the
-------------
conditions contained in this Agreement, in consideration for the Assets and in
full payment
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therefor, Acquiror will issue, or cause to be issued to the Parent, eleven
million (11,000,000) shares of its Series E Preferred Stock (the "Acquisition
Consideration").
Section 4.2 Allocation of Acquisition Consideration. The value of
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the Acquisition Consideration paid by Acquiror shall be allocated in the manner
provided for in Schedule 4.2, which the parties acknowledge was prepared using
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the allocation methods and principles presented by Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
promulgated thereunder. Any revisions shall be determined in accordance with the
allocation methods and principles prescribed by Code Section 1060 and the
Treasury Regulations promulgated thereunder, in a manner consistent with the
initial allocations set forth on Schedule 4.2.
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ARTICLE V
CLOSING
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Section 5.1 Closing Date. The transactions contemplated by this
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Agreement shall be completed on the fifth business day following the
satisfaction of the conditions set forth in Article XI (the "Closing Date"),
unless otherwise agreed to by Acquiror and the Company. The Closing shall take
place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place or date as
may be agreed to in writing by Acquiror and the Company. The "Closing" shall
mean the deliveries to be made by the parties hereto at the Closing Date in
accordance with this Agreement.
Section 5.2 Deliveries by the Company. At the Closing, the Company
-------------------------
shall deliver to Acquiror, all duly and properly executed, the following:
(a) A good and sufficient ▇▇▇▇ of Sale for the Assets in the form
attached hereto as Exhibit 5.2(a), selling, delivering, transferring, and
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assigning to Acquiror title to all of the Company's right, title, and interest
to the Assets, free and clear of all mortgages, pledges, liens, encumbrances,
security interests, equities, charges, and restrictions of any nature
whatsoever.
(b) An affidavit of the Company, in the form attached hereto as
Exhibit 5.2(b), stating, under penalty of perjury, the Company's United States
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taxpayer identification number and that the Company is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
(c) Valid assignments for all Contracts and Proprietary Rights and
all other third party consents, including the consents of Creditors of the
Company listed in Schedule 7.3, and the consents of any other party which may be
------------
required for the consummation of the transactions contemplated hereby or
governmental consents necessary in order for Acquiror to operate the Business.
(d) Resale certificates for the resale of any items of Inventory.
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(e) Employment agreements, substantially in the form attached hereto
as Exhibit 5.2(e) with ▇▇▇▇ ▇'▇▇▇▇▇, ▇.▇. ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
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Broding.
Section 5.3 Deliveries by Acquiror. At the Closing, Acquiror shall
----------------------
deliver, or cause to be delivered, to the Company, the following:
(a) stock certificates registered in the name of the Company
representing the shares of the Acquisition Consideration;
(b) the New Certificate of Incorporation; and
(c) an executed Omnibus Amendment Agreement No. 2 to Naviant, Inc.
Amended and Restated Registration Rights Agreement and Amended and Restated
Stockholders' Agreement in the form attached hereto as Exhibit 5.3(c) hereto
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(the "Omnibus Amendment Agreement").
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Section 5.4 Further Assurances. At or after the Closing Date, each
------------------
party shall prepare, execute, and deliver, at the preparer's expense, such
further instruments of conveyance, sale, assignment, or transfer, and shall take
or cause to be taken such other or further action, as any party shall reasonably
request of any other party at any time or from time to time in order to perfect,
confirm, or evidence in Acquiror title to all or any part of the Assets and in
the Company title to the Acquisition Consideration, or to consummate, in any
other manner, the terms and provisions of this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE parent
--------------------------------------------
The Parent represents and warrants to, and covenants and agrees with,
the Acquiror as follows:
Section 6.1 Power and Authority. The Parent has all requisite power
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and authority to execute and deliver this Agreement and the other agreements
contemplated hereby (the "Ancillary Agreements") to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements to which the Parent is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Parent. This Agreement and each Ancillary Agreement to which the Parent is a
party has been duly executed and delivered by the Parent and constitutes the
valid and binding obligation of the Parent, enforceable against Parent in
accordance with its terms except as such enforcement may be limited by (i) the
effect of bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally and (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
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Section 6.2 Accredited Investor Status. The Parent is and at the
--------------------------
Closing will be an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated by the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act").
Section 6.3 Restricted Securities. The Parent understands that the
---------------------
shares of Series E Preferred Stock to be issued and sold pursuant to this
Agreement, both to the Parent and the Company, are "restricted securities" under
the federal securities laws and that under such laws and applicable regulations
such securities may not be resold except pursuant to an effective registration
statement under the Securities Act or an available exemption therefrom. In this
connection, the Parent represents that it is familiar with SEC Rule 144 and Rule
145, each as presently in effect, and understands the resale limitations imposed
hereby and by the Securities Act. Acquiror may require a legal opinion of the
Parent's or the Company's counsel with respect to unregistered transfers of
Series E Preferred Stock. Notwithstanding anything in this Agreement to the
contrary, the Parent shall be permitted to sell, transfer, assign or pledge all
or any part of the shares of Series E Preferred Stock of Acquiror it receives to
any affiliates of Parent or SOFTBANK Corp., a Japanese corporation, including,
without limitation, SOFTBANK Capital Partners LP and any other partnership or
other entity of which any direct or indirect subsidiary of SOFTBANK Corp. is a
general partner or has investment discretion, or any employees of any of the
foregoing; provided that any such transfer shall comply with all applicable
state and federal securities laws and the regulations thereunder.
Section 6.4 Investment Purposes of the Parent. Parent understands
---------------------------------
that the Series E Preferred Stock will be acquired for investment for Parent's
own account, not as a nominee or agent, and not with a view to the public resale
or distribution thereof within the meaning of the federal or state securities
laws, and Parent has no present intention of selling, granting any participation
in, or otherwise distributing the same, except as permitted under Section 6.3.
Parent further represents that it does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Series E Preferred Stock.
Section 6.5 Brokers' and Finders' Fees. The Parent has not
--------------------------
incurred, nor will the Parent incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees or
any similar charges in connection with this Agreement or any transaction
contemplated hereby.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
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OF THE COMPANY AND THE PARENT
-----------------------------
Except as disclosed in that section of the document of even date
herewith delivered by the Company to the Acquiror prior to the execution and
delivery of this Agreement (the "Company Disclosure Schedule") corresponding to
the Section of this Agreement to which any of the representations and
warranties specifically relate or as disclosed in another section of
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the Company Disclosure Schedule if it is reasonably apparent on the face of the
disclosure that it is applicable to another section of this Agreement, the
Company and the Parent, jointly and severally, represent and warrant to the
Acquiror as follows:
Section 7.1 Organization, Standing and Power. The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has the requisite power to own its
properties and to carry on its business as now being conducted and as currently
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which it does business. The Company has
delivered to the Acquiror a true and correct copy of its Certificate of
Incorporation and By-laws, each as amended to date. The Company does not,
directly or indirectly, own any equity or other beneficial interest in, or any
interest convertible or exchangeable or exercisable for, any equity or other
beneficial interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity.
Section 7.2 Assets. The Assets (excluding the Excluded Assets)
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include all intellectual property, inventory and all other property in which the
Company has any right title or interest. The Assets (excluding the Excluded
Assets) include all the assets necessary to operate the Business in the same
manner as the Business was operated by the Company prior to the Closing Date.
The Assets are suitable for the purpose or purposes for which they are being
used, are in good operating condition and in reasonable repair, and free from
any known defects, except such minor defects as do not interfere in any material
respect with the continued use thereof. Each tangible Asset has been serviced
and maintained in accordance with customary industry practices. Subject to
normal wear and tear, such plants, facilities, machinery, and equipment are
capable of and are producing sound and merchantable products. The Assets are
free from all liens, charges, security interests or other encumbrances
(collectively, "Encumbrances") of any nature whatsoever, except (i) any
Encumbrances for Taxes (as defined below), assessments or other governmental
charges which are not delinquent or (ii) any workmen's, repairmen's,
warehousemen's and carriers' liens and Encumbrances arising in the ordinary
course of business (items included in (i) and (ii) are referred to herein as
"Permitted Encumbrances").
Section 7.3 Authority and Consents. The Company has all requisite
----------------------
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement and each Ancillary Agreement to which the Company is a party has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally and (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. The execution and delivery of this Agreement or any Ancillary
Agreement by the Company (including the ability by the Company
8
to transfer the Assets free and clear of all liens and encumbrances of any kind
or nature whatsoever other than liens and encumbrances set forth on the Schedule
of Exceptions and other than permitted encumbrances) do not, and the
consummation of the transactions contemplated hereby or thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of the Certificate of Incorporation, By-laws or other charter or
organizational documents, each as amended, of the Company, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, or any of its
properties or Assets, except for those necessary consents set forth on Schedule
--------
7.3 and except as would not reasonably be expected to have a Material Adverse
---
Effect on the Company. No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
other governmental or quasi-governmental authority or instrumentality of any
jurisdiction ("Governmental Entity") is required by or with respect to the
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal or state securities laws,
(ii) the applicable requirements, if any, of bulk sales laws and the
notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act") and (iii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on the Company and would not reasonably be
expected to prevent, or materially alter or delay, any of the transactions
contemplated by this Agreement.
Section 7.4 Financial Statements. The Company has delivered to the
--------------------
Acquiror the consolidated financial statements (including, without limitation,
consolidated balance sheets (income statements and statements of cash flows) of
the Company for its fiscal years ended on December 31, 1999 and December 31,
1998, respectively (collectively, the "Company Financial Statements"). The
Company Financial Statements have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated. The Company Financial Statements fairly
present the consolidated financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. The Company
maintains an adequate system of internal financial and accounting controls in
accordance with GAAP. There has been no change in the Company's accounting
policies during the foregoing reporting periods except as described in the notes
to the Company Financial Statements. The Company's financial reserves are
adequate to cover claims already incurred.
Section 7.5 Absence of Certain Changes. Since December 31, 1999 (the
--------------------------
"Company Balance Sheet Date"), the Company has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect on the Company; (ii) any acquisition, sale or transfer of any material
asset of the Company; (iii) any material change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of any of its assets;
(iv) any declaration, setting
9
aside, or payment of a dividend or other distribution with respect to the
securities of the Company, or any direct or indirect redemption, purchase or
other acquisition by the Company of any of its securities; (v) any material
contract entered into by the Company, or any material amendment or termination
of, or default by the Company under, any material contract to which the Company
is a party or by which it is bound; (vi) any amendment or change to the
certificate of incorporation or bylaws of the Company; (vii) any increase in or
modification of the compensation or benefits payable or to become payable by the
Company to any of its directors or employees or (viii) any negotiation or
agreement by the Company to do any of the things described in Section 9.2 or in
the preceding clauses (i) through (vii) (other than negotiations with the
Acquiror and its representatives regarding the transactions contemplated by this
Agreement).
Section 7.6 Absence of Undisclosed Liabilities. The Company has no
----------------------------------
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) ("Debt") other than (i) those set forth or adequately provided
for in the consolidated balance sheets of the Company as of the Company Balance
Sheet Date included in the Company Financial Statements (the "Company Balance
Sheets"), (ii) those incurred in the ordinary course of business and not
required to be set forth in the Company Balance Sheets under GAAP, (iii) those
incurred in the ordinary course of business since the Company Balance Sheet Date
and consistent with past practice; and (iv) those incurred in connection with
the execution of this Agreement. Schedule 7.6 sets forth a list of all persons,
------------
corporations, partnerships and other entities holding or with any right to any
Debt ("Creditors") and a description of such Debt.
Section 7.7 Litigation. There is no private, governmental, judicial,
----------
administrative or regulatory action, suit, proceeding, claim, arbitration,
investigation, administrative charge or complaint pending before any agency,
court or tribunal (foreign or domestic) or, to the knowledge of the Parent and
the Company, threatened against the Company or any of its properties or any of
its officers or directors (in their capacities as such), that could reasonably
be expected to prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement or any of the Ancillary Agreements,
or that could reasonably be expected to have a Material Adverse Effect on the
Company. There is no judgment, decree or order against the Company, or, to the
knowledge of the Parent and the Company, any of their respective directors or
officers (in their capacities as such), that could reasonably be expected to
prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements, or that could
reasonably be expected to have a Material Adverse Effect on the Company.
Schedule 7.7 contains a true and complete list of all actions, suits,
------------
proceedings, claims and all litigation involving the Company.
Section 7.8 Restrictions on Business Activities. There is no
-----------------------------------
agreement, judgment, injunction, order or decree binding upon the Company which
has or could reasonably be expected to have the effect of prohibiting or
impairing any current or future business practice related to the Business or the
conduct of the Business as currently conducted or as currently proposed to be
conducted by the Company.
Section 7.9 Governmental Authorization. The Company has obtained each
--------------------------
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) that is required for the operation of the business
10
of the Company or the holding of any such interest ((i) and (ii) herein
collectively called "Company Authorizations"), and all of such Company
Authorizations are in full force and effect, except in each such case where the
failure to obtain or have or maintain in full force and effect any such Company
Authorizations could not reasonably be expected to have a Material Adverse
Effect on the Company.
Section 7.10 Title to Property. The Company has good and marketable
-----------------
title to all of its properties, interests in properties and assets, real and
personal, reflected in the Company Balance Sheets or acquired after the Company
Balance Sheet Date (except properties, interests in properties and assets sold
or otherwise disposed of since the Company Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in such properties and assets, free and clear of all
Encumbrances except Permitted Encumbrances. The plants, property and equipment
of the Company that are used in the operations of the Business are in good
operating condition and repair, subject to normal wear and tear. All properties
used in the operations of the Company are reflected in the Company Balance
Sheets to the extent GAAP require the same to be reflected. Schedule 1.1(d)
---------------
identifies all of the Real Property owned or leased by the Company.
Section 7.11 Inventory. All Inventory of the Company and all items to
---------
be delivered to the Company for Inventory after the Closing Date that are
subject to purchase commitments outstanding at the Closing Date, consist of
items that are or upon delivery will be good and merchantable and of a quality
and quantity presently usable and saleable in the ordinary course of business,
except for defective, obsolete or unmarketable inventory with respect to which
reserves have been provided in the Company Financial Statements in accordance
with GAAP. All such Inventory is and will be valued for financial accounting
purposes using the first-in, first-out (FIFO) method, in accordance with GAAP
consistently applied. In any event, the Inventory is not stated on the Company's
Financial Statements in an amount greater than the estimated net realizable
value thereof.
Section 7.12 Proprietary Rights.
------------------
(a) To the Company's knowledge, there is no pending claim challenging
or questioning the right of the Company to use, sell, license or dispose of any
Proprietary Rights of the Business, nor is there any pending or, to the
Company's knowledge, threatened material litigation or proceeding involving any
Proprietary Rights of the Business. The Company is not in default in any
material respect nor has the Company received written notice or warning or, to
the knowledge of the Parent or the Company, oral notice or warning of alleged
nonperformance, delay in delivery or other noncompliance by the Company with
respect to its obligations under any licenses or agreements listed on Schedule
--------
1.1(e). The consummation of the transactions contemplated hereby will not (i)
-----
constitute a material breach, or give rise to a right of forfeiture or
termination in, of any instrument or agreement governing any right in any
Proprietary Rights or (ii) in any material way impair the right of the Acquiror
to use, sell, license, dispose of or bring infringement action for any
Proprietary Rights. To the Company's knowledge, the use of the Proprietary
Rights by the Business as currently used does not constitute a breach of any
instrument or agreement governing any right in
11
the Proprietary Rights or an infringement of the rights of any other person, in
each case that would reasonably be expected to have a Material Adverse Effect on
the Company.
(b) Except as otherwise set forth in Schedule 1.1(e) and as would not
---------------
have a Material Adverse Effect on the Business, the Company owns, or has the
right to use, sell, license, dispose of or bring infringement action for all
Proprietary Rights of the Business. The Company owns all right, title and
interest in and to, or has a license, sublicense or otherwise has permission
appropriate for the use contemplated to all of the Proprietary Rights, free and
clear of all Encumbrances other than Permitted Encumbrances.
(c) The Company has taken all reasonable actions and made all
applicable applications and filings pursuant to applicable laws to perfect or
protect its interests in, safeguard and maintain the secrecy and confidentiality
of all Proprietary Rights (including, without limitation, entering into
appropriate confidentiality, nondisclosure and noncompetition agreements, copies
of all such agreements have been delivered to Acquiror or its counsel, with all
officers, directors, subcontractors, consultants, employees, licensees and
entities that serve the Company), except where the failure to take such actions
or make such applications or filings would not have a Material Adverse Effect on
the Company or materially interfere with the use or enforcement of such
Proprietary Rights in the ordinary course of its business.
(d) Without limiting the generality of the foregoing, the Company has,
and enforces, a policy requiring each employee, consultant, and independent
contractor to execute proprietary information, confidentiality and invention and
copyright assignment agreements substantially in the form of Exhibit 7.12(c)
---------------
hereto, and each current and former employee, consultant and independent
contractor of the Company has executed such an agreement covering such person's
term of employment with or service to the Company and work responsibilities to
the Company.
(e) All trade secrets of the Company have not been used, divulged or
appropriated for the benefit of any person other than the Company or to the
detriment of the Company.
Section 7.13 Environmental Matters. Except as disclosed on Schedule
---------------------
7.13 or as would not reasonably be expected to have a Material Adverse Effect on
the Company: (a) the Company is in material compliance with applicable Federal,
state, local or foreign law, ordinance, rule, regulation, permit and
authorization pertaining to the protection of human health or the environment
(collectively, the "Environmental Laws"), (b) the Company has not received any
written notices from any Governmental Entity alleging the violation of any
applicable Environmental Laws, (c) the Company is not the subject of any court
order, administrative order or decree arising under any Environmental Law, and
(d) the Company has not generated, stored, used, emitted, discharged or disposed
of any hazardous substances except as permitted under applicable Environmental
Laws.
12
Section 7.14 Taxes.
-----
(a) The Company has withheld and paid all material Taxes required by
law to be withheld and paid by the Company with respect to any amounts paid to
any employee, independent contractor, creditor, stockholder, or other third
party. There is no audit currently pending regarding any material Taxes. Neither
the Company nor the Parent expects any federal, state, local or foreign
governmental entity responsible for the imposition of any tax (a "Taxing
Authority") to assess any additional material Taxes for any period for which Tax
returns have been filed. There is no material outstanding or unresolved dispute
or claim concerning any Tax liability of the Company either (i) claimed or
raised by a Taxing Authority in writing or (ii) as to which the Company or
Parent has knowledge. No claim has ever been made by a Taxing Authority in a
jurisdiction where the Company does not file Tax returns that it is or may be
subject to taxation by that jurisdiction.
(b) The Company is a treated as a "C" corporation for federal income
tax purposes and is not a person other than a United States person within the
meaning of Section 7701(a)(30) of the Internal Revenue Code. There is no
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or independent contractor or
former employee or independent contractor of the Company that, individually or
collectively, could give rise to the payment by the Company of any amount that
would not be deductible pursuant to Section 280G or Section 162(m) of the Code.
None of the assets (including the Assets) of the Company (i) is property that is
required to be treated as owned by any other person pursuant to the so-called
"safe harbor lease" provisions of former Section 168(f)(8) of the Code, (ii)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code or (iii) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(c) There are no material liens for Taxes upon the Assets except liens
for current Taxes not yet due. The Company is not party to a tax allocation or
sharing agreement.
(d) Schedule 7.14 lists all federal, state, local, and foreign income
Tax returns that have been audited, and indicates those Tax returns that are
currently the subject of an audit.
(e) For purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means (i) any net income, alternative or add-on
minimum tax, gross income, gross or net receipts, sales, use, ad valorem,
transfer, franchise, capital, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period and (iii) any liability for the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
13
Section 7.15 Employee Benefit Plans.
----------------------
(a) All employee benefit plans, programs, policies, or arrangements
(including, without limitation, each employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that are sponsored, maintained or contributed to or required to be
contributed to by the Company (the "Company Plans") are set forth in Schedule
--------
7.15.
----
(b) Each Company Plan has been maintained and administered in all
material respects in accordance with its terms and all applicable laws,
including ERISA and the Code. All contributions required to be made to each of
the Company Plans under the terms of such Company Plans, ERISA, the Code or any
other applicable laws have been timely made.
(c) Each Company Plan intended to be qualified under Section 401(a) of
the Code has either obtained a favorable determination letter as to its
qualified status from the Internal Revenue Service ("IRS") or still has a
remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination.
(d) No Company Plan is a multiemployer pension plan (as defined in
Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA or
Section 412 of the Code.
(e) To the knowledge of the Parent and the Company, there has been no
prohibited transaction (within the meaning of Section 406 or ERISA or Section
4975 of the Code) with respect to any Company Plan that could result in
liability to the Company. No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of the Parent and the Company
is threatened, against or with respect to any such Company Plan (other than
routine benefits claims).
(f) Company and any entity that, together with the Company, would be
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
are in material compliance with the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations (including
proposed regulations) thereunder.
Section 7.16 Certain Affected Agreements. Neither the execution and
---------------------------
delivery of this Agreement or any Ancillary Agreements nor the consummation of
the transaction contemplated hereby or thereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation,
contractual or statutory redundancy pay, golden parachute, liquidated damages,
damages for breach of contract or wrongful dismissal, compensation in respect of
unfair dismissal, bonus or otherwise) becoming due to any present or former
director, employee or consultant of the Company, (ii) materially increase any
benefits otherwise payable by the Company or (iii) result in the acceleration of
the time of payment or vesting of any such benefits.
14
Section 7.17 Employee Matters.
----------------
(a) The Company is in compliance in all material respects with all
currently applicable laws and regulations and other requirements having the
force of law (including, without limitation, codes of practice, orders and
awards) respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice, except as
would not reasonably be expected to have a Material Adverse Effect on the
Company.
(b) The Company has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments to
directors, employees and consultants; and are not liable for any arrears of
wages, salaries, fees, commission, bonus, overtime pay, holiday pay, sick pay,
employer pension contribution (and employee pension contribution where relevant)
or any other benefits and emoluments, for any taxes or national insurance
contributions, or for any penalty for failure to comply with any of the
foregoing, except as would not reasonably be expected to have a Material Adverse
Effect on the Company.
(c) The Company is not liable for any payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice).
(d) There are no pending claims against the Company under any workers
compensation plan or policy or for long term disability. The Company has no
severance or termination obligations under law or statute with respect to any
former employees or qualifying beneficiaries thereunder, except for obligations
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
(e) There are no controversies pending or, to the knowledge of the
Parent or the Company, threatened, between the Company and any of its present or
former directors, employees, consultants, trade unions or other employees'
representatives, which controversies have or could reasonably be expected to
result in an action, suit, proceeding, claim, arbitration or investigation
before any agency, court or tribunal, foreign or domestic.
(f) The Company is not a party to any collective bargaining agreement
or other labor union contract or any form of agreement or arrangement (whether
oral or in writing or existing by reason of custom or practice and whether or
not legally binding) with any labor union or other employees' representatives or
organization concerning or affecting the employees of the Company; nor does the
Parent or the Company know of any activities or proceedings of any labor union
to organize any such employees. Further, the Company, so far as the Company and
the Parent are aware, has not done any act which might be construed as
recognition and there has been no request for recognition from any labor union
and no such request is pending.
15
(g) To the knowledge of the Company and the Parent, no employees of
the Company are in violation of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, confidentiality agreement or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by it or to the use of trade
secrets or proprietary information of others.
(h) The Company has no employment contract with any of its officers or
other employees. No key employee of the Company, other than any employee whose
duties are primarily secretarial or clerical, has given notice to the Company.
Section 7.18 Interested Party Transactions. The Company is not
-----------------------------
indebted to any director, officer, employee or agent of the Company (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to the Company.
Section 7.19 Insurance. The Company has policies of insurance and
---------
bonds of the type and in amounts customarily carried by persons conducting
businesses or owning assets similar to those of the Company. Schedule 1.1(k)
---------------
contains a complete list of the policies and contracts of insurance maintained
by the Company. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company are otherwise in
compliance in all material respects with the terms of such policies and bonds.
Neither the Company nor the Parent has knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
Section 7.20 Compliance With Laws.
--------------------
(a) The Company has complied with, is not in violation of, and has not
received any notices of violation with respect to, any statute, law, regulation,
ordinance, rule, judgment, order and decree of any applicable Governmental
Entity with respect to the conduct of the Business, or the ownership or
operation of the Business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on the
Company.
(b) The Company has, to the extent applicable to the Company,
complied, is in compliance with, all licensing requirements, rules and
regulations of the Governmental Entities with regulatory authority over the
Business, and has complied, and is in compliance with, all authorizations,
consents, licenses, permits (temporary or otherwise), orders, approvals,
restriction agreements, waivers, franchises and other rights ("Governmental
Permits") of Governmental Entities required to operate its business and maintain
its assets, except in each such case as would not reasonably be expected to have
a Material Adverse Effect on the Company. The Company has obtained all
Governmental Permits of any and all Governmental Entities required for the
carrying on of its business and the maintenance of its assets, except in each
such case as would not reasonably be expected to have a Material Adverse Effect
on the Company and such
16
Governmental Permits are in full force and effect, and the Company has not
received any written notice from any regulatory authorities with regulatory
authority over the Company that any of such Governmental Permits may be revoked
or not renewed or withdrawn or (except to an immaterial or beneficial extent)
amended, in whole or in part. Schedule 7.20(b) sets forth a true and complete
----------------
list of all material Governmental Permits held by the Company. There is no order
issued, investigation or proceeding pending or (to the knowledge of the Company
and the Parent) threatened, or notice served, with respect to any violation of
any law, statute, ordinance, order, writ, decree, rule, interpretation or
regulation issued by any Governmental Entity applicable to the Company or, to
the knowledge of the Parent or the Company, any of their respective directors,
officers, employees or agents.
(c) The Company is not a party or subject to, any agreement, consent
decree or order, or other understanding or arrangement with, or any directive of
any Governmental Entity which imposes any material restrictions on or otherwise
affects in any material respect, the conduct of the Business.
Section 7.21 Minute Books. The minute books of the Company made
------------
available to the Acquiror contain a complete and accurate summary in all
material respects of all meetings of directors or actions by written consent
since the time of organization of the Company, and reflect all transactions
referred to in such minutes accurately in all material respects.
Section 7.22 Accounts Receivable. Subject to any reserves set forth in
-------------------
the Company Financial Statements, the accounts receivable shown on the Company
Financial Statements represent and will represent bona fide claims against
debtors for sales and other charges, and are not subject to discount except for
normal cash and immaterial trade discounts.
Section 7.23 Customers and Suppliers. No customer which individually
-----------------------
accounted for more than five percent (5%) of the Company' consolidated gross
revenues during the fiscal year ended December 31, 1999, and no supplier of the
Company, has canceled or otherwise terminated, or made any written threat to the
Company to cancel or otherwise terminate its relationship with the Company, or
has decreased materially its services or supplies to the Company in the case of
any such supplier, or its usage of the services or products of the Company in
the case of such customer, and neither the Company nor the Parent has received
written notice from any such supplier or customer that it intends to cancel or
otherwise terminate its relationship with the Company or to decrease materially
its services or supplies to the Company or its usage of the services or products
of the Company, as the case may be. The Company has not knowingly breached, so
as to provide a benefit to the Company that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of the Company.
Section 7.24 Contracts and Commitments.
-------------------------
(a) The Contracts set forth on Schedule 1.1(c) constitute all
agreements to which the Company is a party or by which the Assets are bound
which are material to the Assets or the Business or are likely to materially
affect Acquiror's ability
17
to operate the Business or use the Assets after the Closing Date, in the same
manner in which such Business is currently operated or the Assets are used by
the Company.
(b) The Company has performed all of its obligations under the terms
of each Contract to which it is a party, and is not in default thereunder,
except as would not reasonably be expected to have a Material Adverse Effect on
the Company. No event or omission has occurred which, but for the giving of
notice or lapse of time, or both, would constitute a default by such party
thereto under any such agreement. Each such agreement is in full force and
effect and is valid and binding on all parties thereto. True, correct and
complete copies of all Contracts have been delivered to the Acquiror. Each
Contract which requires a consent, waiver or approval for the assignment thereof
or for the consummation of the transactions contemplated hereby is listed on
Schedule 7.3 hereto. The Company has received no notice of default,
------------
cancellation, or termination in connection with any such Contract.
Section 7.25 Year 2000 Compliance. The Company has reviewed its
--------------------
operations to evaluate the extent to which the business or operations of the
Company will be affected by the Year 2000 Problem. As a result of such review,
the Company has no reason to believe, and does not believe, that the Year 2000
Problem has had or will have a Material Adverse Effect on the Company. The "Year
2000 Problem" as used herein means any significant risk that computer hardware
or software used in the receipt, transmission, processing, manipulation,
storage, retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind is not functioning or
will not function, in the case of dates or time periods occurring after December
31, 1999, at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000.
Section 7.26 Complete Copies of Materials. The Company has delivered
----------------------------
or made available to the Acquiror true and complete copies of each material
document which has been requested in writing by the Acquiror or its counsel in
connection with their legal and accounting review of the Company.
Section 7.27 Brokers' and Finders' Fees. Neither the Company nor any
--------------------------
of its affiliates has incurred, nor will they incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
----------------------------------------------
Except as disclosed in that section of the document of even date
herewith delivered by the Acquiror to the Company prior to the execution and
delivery of this Agreement (the "Acquiror Disclosure Schedule") corresponding to
the Section of this Agreement to which any of the representations and warranties
specifically relate or as disclosed in another section of the Acquiror
Disclosure Schedule if it is reasonably apparent on the face of the disclosure
that it
18
is applicable to another Section of this Agreement, the Acquiror represents and
warrants to the Parent as follows:
Section 8.1 Organization, Standing and Power. The Acquiror is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Acquiror has the requisite power to own its
properties and to carry on its business as now being conducted and as currently
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which it does business. The Acquiror has
delivered to the Company a true and correct copy of its certificate of
incorporation and bylaws, each as amended to date.
Section 8.2 Capital Structure. Except as set forth on Schedule 8.2,
----------------- ------------
there are no other outstanding shares of capital stock, voting securities or
equity interests and no outstanding commitments to issue any shares of capital
stock, voting securities or equity interests of the Acquiror (collectively, the
"Acquiror Securities"). All outstanding Acquiror Securities are duly authorized,
validly issued, fully paid and non-assessable, are free and clear of any liens
or encumbrances, and are not subject to preemptive rights or rights of first
refusal. Except for the rights created pursuant to this Agreement, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which the Acquiror is a party or by which it is bound obligating
the Acquiror to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any voting securities or
equity interests of the Acquiror or obligating the Acquiror to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. All outstanding
Acquiror Securities were issued in compliance with all applicable securities
laws. The shares of the Series E Preferred Stock to be issued pursuant to this
Agreement will be duly authorized, validly issued, fully paid, and non-
assessable upon consummation of the transactions contemplated hereby.
Section 8.3 Authority. The Acquiror has all requisite corporate power
---------
and authority to execute and deliver this Agreement and the Ancillary Agreements
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which the Acquiror is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Acquiror. This Agreement and each
Ancillary Agreement to which the Acquiror is a party has been duly executed and
delivered by the Acquiror, as applicable, and constitutes the valid and binding
obligations of the Acquiror, enforceable against the Acquiror in accordance with
its terms except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally and (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless or whether considered in a proceeding in equity
or at law. The execution and delivery of this Agreement or any Ancillary
Agreement do not, and the consummation of the transactions contemplated hereby
or thereby will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a benefit under (i) any provision of the Certificate of Incorporation or By-
laws, each as amended, of the Acquiror or (ii) any material mortgage, indenture,
lease, contract
19
or other agreement or instrument, permit, concession, franchise, license,
judgment, order or decree applicable to the Acquiror, or any of its properties
or assets, except as would not reasonably be expected to have a Material Adverse
Effect on the Acquiror. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to the Acquiror in connection with the execution and delivery
of this Agreement by the Acquiror or the consummation by the Acquiror of the
transactions contemplated hereby, except for (i) such filings as may be required
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR
Act") and (ii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on the Acquiror and would not reasonably be expected to prevent,
materially alter or delay any of the transactions contemplated by this
Agreement.
Section 8.4 Financial Statements. The Acquiror has delivered to the
--------------------
Parent the audited consolidated financial statements (including, without
limitation, consolidated balance sheets, income statements and statements of
cash flows) of the Acquiror and its subsidiaries as of July 30, 1999 and July
31, 1998, and the unaudited financial statements (including, without limitation,
consolidated balance sheets, income statements and statements of cash flows) of
the Acquiror and its subsidiaries for the twelve-month period ended December 31,
1999 (collectively, the "Acquiror Financial Statements"). The Acquiror Financial
Statements have been prepared in accordance with GAAP (except that the unaudited
financial statements do not have notes thereto) applied on a consistent basis
throughout the periods indicated. The Acquiror Financial Statements fairly
present the consolidated financial condition and operating results of the
Acquiror and its subsidiaries as of the dates, and for the periods, indicated
therein, subject, in the case of unaudited financial statements, to normal year-
end audit adjustments (none of which are material). The Acquiror maintains and
will continue to maintain an adequate system of internal financial and
accounting controls in accordance with GAAP. There has been no change in the
Acquiror's accounting policies during the foregoing reporting periods except as
described in the notes to the Acquiror Financial Statements.
Section 8.5 Absence of Certain Changes. Since December 31, 1999 (the
--------------------------
"Acquiror Balance Sheet Date"), the Acquiror has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect on the Acquiror; (ii) an acquisition, sale or transfer of any material
asset of the Acquiror; (iii) any material change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by the Acquiror or any revaluation by the Acquiror of any of its assets;
(iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the securities of the Acquiror, or any direct or
indirect redemption, purchase or other acquisition by the Acquiror of any of its
securities; (v) any material contract entered into by the Acquiror, or any
material amendment or termination of, or default by the Acquiror under, any
material contract to which the Acquiror is a party or by which it is bound; (vi)
any amendment or change to the certificate of incorporation or bylaws of the
Acquiror; (vii) any increase in or modification of the compensation or benefits
payable or to become payable by the Acquiror to any of its directors or
employees or (viii) any negotiation or agreement by the Acquiror to do any of
the things described in the preceding clauses (i) through (vii) (other than
negotiations with the Parent and the Company and their representatives regarding
the transactions contemplated by this Agreement).
20
Section 8.6 Absence of Undisclosed Liabilities. Neither the Acquiror,
----------------------------------
nor any of its subsidiaries has any material obligations or liabilities of any
nature (matured or unmatured, fixed or contingent) other than (i) those set
forth or adequately provided for in the consolidated balance sheets of the
Acquiror and its subsidiaries as of the Acquiror Balance Sheet Date included in
the Acquiror Financial Statements (the "Acquiror Balance Sheets"), (ii) those
incurred in the ordinary course of business and not required to be set forth in
the Acquiror Balance Sheets under GAAP, (iii) those incurred in the ordinary
course of business since the Acquiror Balance Sheet Date and consistent with
past practice; and (iv) those incurred in connection with the execution of this
Agreement.
Section 8.7 Litigation. There is no private, governmental, judicial,
----------
administrative or regulatory action, suit, proceeding, claim, arbitration,
investigation, administrative charge or complaint pending before any agency,
court or tribunal (foreign or domestic) or, to the knowledge of the Acquiror,
threatened against the Acquiror or any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such), that could reasonably be expected to prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this Agreement
or any of the Ancillary Agreements, or that could reasonably be expected to have
a Material Adverse Effect on the Acquiror. There is no judgment, decree or order
against the Acquiror or any of its subsidiaries, or, to the knowledge of the
Acquiror, any of its directors or officers (in their capacities as such), that
could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements, or that could
reasonably be expected to have a Material Adverse Effect on the Acquiror.
Section 8.8 Governmental Authorization. The Acquiror and its
--------------------------
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which the Acquiror and its subsidiaries
currently operate or hold any interest in any of its or their properties or (ii)
that is required for the operation of the business of the Acquiror or any of its
subsidiaries or the holding of any such interest ((i) and (ii) herein
collectively called "Acquiror Authorizations"), and all of such Acquiror
Authorizations are in full force and effect, except in such case where the
failure to obtain or have or maintain in full force and effect any such Acquiror
Authorizations could not reasonably be expected to have a Material Adverse
Effect on the Acquiror.
Section 8.9 Title to Property. The Acquiror and its subsidiaries have
-----------------
good and marketable title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Acquiror Balance
Sheets or acquired after the Acquiror Balance Sheet Date (except properties,
interests in properties and assets sold or otherwise disposed of since the
Acquiror Balance Sheet Date in the ordinary course of business), or with respect
to leased properties and assets, valid leasehold interests in such properties
and assets, free and clear of all Encumbrances except Permitted Encumbrances.
The plants, property and equipment of the Acquiror and its subsidiaries that are
used in the operations of their businesses are in good operating condition and
repair, subject to normal wear and tear. All properties used in the operations
of the Acquiror and its subsidiaries are reflected in the Acquiror Balance
Sheets to the extent GAAP require the same to be reflected.
21
Section 8.10 Intellectual Property.
---------------------
(a) To the Acquiror's knowledge, there is no pending claim
challenging or questioning the right of the Company to use, sell, license or
dispose of any Acquiror Proprietary Rights (as defined below), nor is there any
pending, or, to the Acquiror's knowledge, threatened material litigation or
proceeding involving any Acquiror Proprietary Rights. The consummation of the
transactions contemplated hereby will not constitute a material breach of any
instrument or agreement governing any right in any material Acquiror Proprietary
Rights. To the Acquiror's knowledge, the use of the Acquiror Proprietary Rights
by the Acquiror as currently used does not constitute a breach of any instrument
or agreement governing any right in the Acquiror Proprietary Rights or an
infringement of the rights of any other person, in each case that would
reasonably be expected to have a Material Adverse Effect on the Acquiror.
"Acquiror Proprietary Rights" shall mean all right, title and interest to
trademarks, trademark rights, service marks, service ▇▇▇▇ rights, copyrights,
trade names, trade name rights, fictitious business names, works of authorship,
inventions, industrial models, industrial design, utility models and
certificates of invention, designs, emblems and logos, trade secrets, know-how,
manufacturing formulae, technical information, patents, patent applications,
masks work registrations, inventions, franchises, franchise rights, customer and
supplier lists together with the goodwill associated therewith of the Acquiror
and its subsidiaries.
(b) Except as set forth in Schedule 8.10 and as would not have a
-------------
Material Adverse Effect on the Acquiror, the Acquiror owns, or has the right to
use, sell or license all Acquiror Proprietary Rights. The Acquiror owns all
right, title and interest in and to, or has a license, sublicense or otherwise
has permission appropriate for the use contemplated, to use, all of the Acquiror
Proprietary Rights, free and clear of all Encumbrances other than Permitted
Encumbrances.
(c) The Acquiror has taken reasonable steps to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, all Acquiror
Proprietary Rights.
Section 8.11 Insurance. The Acquiror and its subsidiaries have
---------
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Acquiror and its subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Acquiror and
its subsidiaries are otherwise in compliance in all material respects with the
terms of such policies and bonds. The Acquiror has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
Section 8.12 Taxes.
-----
(a) All material Taxes due or payable by the Acquiror and each member
of the affiliated group of corporations of which the Acquiror is a member (the
"Acquiror Affiliated Group"), and all interest and penalties thereon, whether
disputed or
22
not, other than Taxes which are not yet due and payable, have been paid in full.
All material Tax returns, statements, reports, forms and other documents
required to be filed in connection therewith have been duly and timely filed
(and no waiver or extension of any filing date applicable thereto has been
requested or granted) and were correct and complete in all material respects.
The Acquiror has withheld and paid all material Taxes required by law to be
withheld and paid by the Acquiror with respect to any amounts paid to any
employee, independent contractor, creditor, stockholder, or other third party.
There is no audit currently pending regarding any Taxes and the Acquiror has not
extended the period in which any Tax could be assessed or collected. The
Acquiror does not expect any Taxing Authority to assess any additional material
Taxes for any period for which Tax returns have been filed. There is no material
outstanding or unresolved dispute or claim concerning any material Tax liability
of the Acquiror or any other member of the Affiliated Group either (i) claimed
or raised by a Taxing Authority in writing or (ii) as to which the Acquiror has
knowledge. No claim has ever been made by a Taxing Authority in a jurisdiction
where the Company does not file Tax returns that it is or may be subject to
taxation by that jurisdiction.
(b) The Acquiror has not been a member of an affiliated group of
corporations filing a consolidated federal income tax return other than the
Acquiror Affiliated Group.
Section 8.13 Compliance With Laws.
--------------------
(a) The Acquiror and its subsidiaries have complied with, are not in
violation of, and have not received any notices of violation with respect to,
any statute, law, regulation, ordinance, rule, judgment, order and decree of any
applicable Governmental Entity with respect to the conduct of its business, or
the ownership or operation of its business, except for such violations or
failures to comply as could not be reasonably expected to have a Material
Adverse Effect on the Acquiror.
The Acquiror and its subsidiaries have, to the extent applicable to
the Acquiror, complied, and are in compliance with, all licensing requirements,
rules and regulations of any applicable Governmental Entity, and have complied,
and are in compliance with, all Governmental Permits of Governmental Entities
required to operate its business and maintain its assets, except as would not
reasonably be expected to have a Material Adverse Effect on the Acquiror. The
Acquiror and its subsidiaries have obtained all Governmental Permits of any and
all Governmental Entities required for the carrying on of its business and the
maintenance of its assets, except as would not reasonably be expected to have a
Material Adverse Effect on the Acquiror, and such Governmental Permits are in
full force and effect, and the Acquiror and its subsidiaries have not received
any written notice from any regulatory authorities with regulatory authority
over the Acquiror and its subsidiaries that any of such Governmental Permits may
be revoked or not renewed or withdrawn or (except to an immaterial or beneficial
extent) amended, in whole or in part. There is no order issued, investigation or
proceeding pending or, to the knowledge of the Acquiror, threatened, or notice
served, with respect to any violation of any law, statute, ordinance, order,
writ, decree, rule, interpretation or regulation issued by any Governmental
Entity applicable to the Acquiror, any of its subsidiaries, or, to the knowledge
of the Acquiror or its subsidiaries, any of their respective directors,
officers, employees or agents.
23
Neither the Acquiror nor any of its subsidiaries is a party or subject to, any
agreement, consent decree or order, or other understanding or arrangement with,
or any directive of any Governmental Entity which imposes any material
restrictions on or otherwise affects in any material respect, the conduct of the
business of the Acquiror or any of its subsidiaries.
Section 8.14 Year 2000 Compliance. The Acquiror and its subsidiaries
--------------------
have reviewed their operations to evaluate the extent to which the business or
operations of the Acquiror and its subsidiaries will be affected by the Year
2000 Problem. As a result of such review, the Acquiror and its subsidiaries have
no reason to believe, and do not believe, that the Year 2000 Problem has had or
will have a Material Adverse Effect on the Acquiror or its subsidiaries.
ARTICLE IX
CONDUCT PRIOR TO THE CLOSING DATE
---------------------------------
Section 9.1 General Conduct of Business. During the period from the
---------------------------
date hereof and continuing until the earlier of the termination of this
Agreement or the Closing, except to the extent expressly contemplated by this
Agreement or as consented to in writing by the Acquiror, the Company shall, and
the Parent shall cause the Company to, conduct its businesses in the ordinary
course in substantially the same manner as heretofore conducted, pay debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other obligations when due, and use all reasonable efforts consistent
with past practice and policies to preserve intact their present business
organizations, keep available the services of their present officers and key
employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
them, to the end that their goodwill and ongoing businesses shall be unimpaired
at the Closing Date. The Company shall promptly notify the Acquiror prior to
taking any action in contravention of Section 9.2 hereof or of any event which
could reasonably be expected to make inaccurate the Company's representations in
Section 7.5 hereof.
Section 9.2 Conduct of Business of the Company. During the period from
----------------------------------
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Closing, except as set forth in the Company Disclosure
Schedule or as expressly contemplated by this Agreement, the Company shall not
cause or permit, and the Parent shall not permit the Company to cause or permit,
any of the following, without the prior written consent of the Acquiror:
(a) Dividends; Subsidiaries. Declare or pay any dividends on or make
-----------------------
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock or other securities, or form any subsidiaries;
(b) Material Contracts. Enter into any material contract or
------------------
commitment, or amend or otherwise modify or waive any of the terms of any of its
material contracts, other than in the ordinary course of business consistent
with past practice;
24
(c) Intellectual Property. Transfer to any person or entity any
---------------------
rights to its Intellectual Property other than pursuant to non-exclusive license
arrangements in the ordinary course of business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements pursuant
----------------
to which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products, services or
technology;
(e) Dispositions. Sell, lease, license or otherwise dispose of or
------------
encumber any of its properties or assets which are material, individually or in
the aggregate, to its business, except for sales of products in the ordinary
course;
(f) Indebtedness. Incur any indebtedness for borrowed money or
------------
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(g) Leases. Enter into any operating lease involving payments in
------
excess of $100,000 per annum;
(h) Payment of Obligations. Pay, discharge or satisfy in an amount in
----------------------
excess of $50,000 in any one case or $100,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financial Statements;
(i) Capital Expenditures. Make any capital expenditures, capital
--------------------
additions or capital improvements, or make any commitments for any of the
foregoing, except in the ordinary course of business consistent with past
practice, and in any event not to exceed $50,000 for any such transaction or
$100,000 in the aggregate of all such transactions;
(j) Insurance. Materially reduce the amount of any insurance coverage
---------
provided by existing insurance policies;
(k) Termination or Waiver. Expressly terminate or waive any right of
---------------------
substantial value;
(l) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend
----------------------
any employee benefit or stock purchase or option plan, or hire any new director
level or officer level employee, pay any special bonus or special remuneration
to any employee or director or, other than in the ordinary course consistent
with past practice in connection with scheduled performance reviews, increase
the salaries or wage rates of its employees;
(m) Severance Arrangements. Grant any severance or termination pay to
----------------------
any director, officer or other employee, except payments made pursuant to
written agreements outstanding on the date of this Agreement;
25
(n) Lawsuits. Commence a lawsuit other than (i) for the routine
--------
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with the Acquiror prior to the
filing of such a suit, or (iii) against the Acquiror or its agents;
(o) Acquisitions. Acquire or agree to acquire by merging,
------------
consolidating or amalgamating with, or by purchasing a material portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its business, other than inventory in the ordinary course of
business;
(p) Taxes. Other than in the ordinary course of business, make or
-----
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any material claim
or assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(q) Notices. Fail to give all notices and other information required
-------
to be given to the employees of the Company, any collective bargaining unit
representing any group of employees of the Company, and any applicable
government authority under applicable law (domestic or foreign) in connection
with the transactions provided for in this Agreement;
(r) Revaluation. Revalue any of its assets for financial accounting
-----------
purposes, including without limitation writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business; or
(s) Other. Take or agree in writing or otherwise to take, any of
-----
the actions described in Section 9.2 (a) through (R) above, or any other action
that would materially delay or materially impair the ability of the Company or
the Parent to consummate the Closing.
Section 9.3 No Solicitation. The Company, the Parent and the
---------------
officers, directors, employees or other agents of the Company will not, directly
or indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal or (ii) engage in negotiations with, or disclose any
nonpublic information relating to either of the Company to, or afford access to
the properties, books or records of either of the Company to, any person that
has advised either of the Company that it may be considering making, or that has
made, an Acquisition Proposal. The Company and the Parent shall not, and shall
not permit any of the Company' officers, directors, employees or other
representatives to agree to or endorse any Acquisition Proposal. The Company
will promptly notify the Acquiror after receipt of any Acquisition Proposal or
any notice that any person is considering making a Acquisition Proposal or any
request for nonpublic information relating to either of the Company or for
access to the properties, books or records of either of the Company by any
person that has advised either of
26
the Company that it may be considering making, or that has made, a Acquisition
Proposal and will keep the Acquiror fully informed of the status and details of
any such Acquisition Proposal notice, request or any correspondence or
communications related thereto and shall provide the Acquiror with a true and
complete copy of such Acquisition Proposal notice or request or correspondence
or communications related thereto, if it is in writing, or a written summary
thereof, if it is not in writing. For purposes of this Agreement, "Acquisition
Proposal" means any offer or proposal for, or any indication of interest in, a
business combination involving either of the Company or the direct or indirect
acquisition of ten percent (10%) or more of the outstanding capital stock or
other equity interests of the Company, or a significant portion of the assets
of, either of the Company, other than the transactions contemplated by this
Agreement.
ARTICLE X
ADDITIONAL AGREEMENTS
---------------------
Section 10.1 Access to Information.
---------------------
(a) The Company shall, and the Parent shall cause the Company to,
afford the Acquiror and its accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Closing Date to all of the Company' properties, books, contracts, commitments
and records concerning the business, properties and personnel of the Company as
the Acquiror may reasonably request; provided, however, that neither the
Acquiror nor any of its accountants, counsel or representatives shall be given
access to any Tax Returns filed on a combined, integrated or consolidated basis
with the Parent or any of its affiliates (other than the Company). The Company
agree to provide to the Acquiror and its accountants, counsel and other
representatives copies of internal financial statements, budgets, operating
plans and, to the extent they are available, projections, promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof
until the Closing Date, each of the Acquiror and the Company shall confer with
one or more representatives of the other party to report operational matters of
materiality and the general status of ongoing operations.
No information or knowledge obtained in any investigation pursuant to
this Section 10.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the transactions contemplated hereby.
Section 10.2 Public Disclosure. Unless otherwise permitted by this
-----------------
Agreement, the Acquiror and the Company shall consult with each other before
issuing any press release or otherwise making any public statement or making any
other public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement or the Ancillary Agreements and
the transactions contemplated hereby and thereby, and neither shall issue any
such press release or make any such statement or disclosure without the prior
approval of the other (which approval shall not be unreasonably withheld),
except as
27
may be required by law or by obligations pursuant to any listing agreement with
any securities exchange or with the NASD.
Section 10.3 Consents; Cooperation.
---------------------
(a) Each of the Acquiror and the Company shall promptly apply for or
otherwise seek, and use its commercially reasonable efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
transactions contemplated hereby, including those required under the HSR Act,
any foreign antitrust laws and any securities regulatory laws. The Company shall
use commercially reasonable efforts to obtain all necessary consents, waivers
and approvals under any of its material contracts for the assignment thereof or
otherwise for the consummation of the transactions contemplated hereby. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act, any other antitrust or fair trade law or any
securities regulatory law.
(b) Each of the Acquiror and the Company shall use commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under federal, state or foreign statutes, rules, regulations, orders
or decrees. In connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement, each of the Acquiror and the Company
shall cooperate and use commercially reasonable efforts vigorously to contest
and resist any such action or proceeding and to have vacated, lifted, reversed,
or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the transactions
contemplated hereby, unless either the Acquiror or the Company decides that
litigation is not in its best interests. Each of the Acquiror and the Company
shall use commercially reasonable efforts to take such action as may be required
to cause the expiration of the notice periods under the HSR Act or other
antitrust laws with respect to such transactions as promptly as possible after
the execution of this Agreement.
(c) Notwithstanding anything to the contrary in this Agreement, (i)
the Acquiror shall not be required to divest any of its businesses, product
lines or assets, or to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have a Material Adverse Effect
on the Acquiror or on the Company after the Closing Date and (ii) the Company
shall not be required to divest any of their businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation
that could reasonably be expected to have a Material Adverse Effect on the
Company.
Section 10.4 Legal Requirements. Each of the Acquiror and the
------------------
Company will take all reasonable actions necessary to comply in all material
respects promptly
28
with all legal requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made by them in
connection with the taking of any action contemplated by this Agreement.
Section 10.5 Non-competition. During the four (4) year period
---------------
commencing on the Closing Date, the Parent agrees that the Parent, and any
Subsidiary of the Parent (collectively, the "Parent Group") shall not directly
engage in any activity that competes or will compete with the Business. A
"Subsidiary" of any entity shall be any other entity in which such entity, or
one or more Subsidiaries of such entity, or such entity and one or more
Subsidiaries thereof, owns at least 80% of the voting power of all outstanding
shares of the capital stock of such entity.
Section 10.6 Non-solicitation. During the two (2) year period
----------------
commencing on the Closing Date, the Parent agrees that the Parent Group shall
not, directly or indirectly, either as a partner, owner shareholder or in any
other capacity whatsoever, on behalf of any person, firm, corporation,
partnership or entity, recruit, solicit, hire, or assist any other person or
party in recruiting, soliciting, or hiring any employee of the Business.
Section 10.7 COBRA. Parent shall be responsible for providing the
-----
continued health coverage required under Section 4980B of the Code ("COBRA
Coverage") with respect to any employees of the Company or eligible dependents
who incur a qualifying event under Section 4980B of the Code on or before the
Closing Date. Acquiror shall be responsible for providing COBRA Coverage for any
employees of the Company employed by the Acquiror or eligible dependents who,
with respect to their coverage under Acquiror's health plan, incur a qualifying
event under Section 4980B of the Code at any time after the Closing Date.
Section 10.8 Further Assurances. Each of the parties to this
------------------
Agreement shall use its reasonable best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
the Closing under this Agreement. Each party hereto, at the reasonable request
of another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting the Closing and the other transactions contemplated hereby.
ARTICLE XI
CONDITIONS TO THE CLOSING
-------------------------
Section 11.1 Conditions to Obligations of Each Party to Effect the
-----------------------------------------------------
Closing. The respective obligations of each party to this Agreement to
-------
consummate the
29
Closing shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing, by
agreement of the Acquiror, the Company and the Parent:
(a) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the Closing shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other Governmental Entity
or instrumentality, domestic or foreign, seeking any of the foregoing be
pending; nor shall there be any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Closing which makes the Closing
illegal. In the event an injunction or other order shall have been issued, each
party agrees to use its reasonable efforts to have such injunction or other
order lifted.
Section 11.2 Additional Conditions to Obligations of the Parent and
------------------------------------------------------
the Company. The obligations of the Parent and the Company to consummate the
-----------
Closing shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing, by the
Parent:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Acquiror in this Agreement shall be true and correct in
all material respects (except that any such representations and warranties that
are qualified by their terms by a reference to Material Adverse Effect or
materiality as so qualified shall be true in all respects) on and as of the
Closing Date as though such representations and warranties were made on and as
of such time (except that any such representations and warranties that are made
as of a particular date other than the date of this Agreement shall have been so
true and correct as of such particular date), and the Acquiror shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it at or prior to the Closing.
(b) Regulatory Consents and Approvals. All consents, approvals,
---------------------------------
waivers and actions of, filings with and notices to any Governmental Entity or
other regulatory authority necessary for consummation of or in connection with
the transactions contemplated hereby and required to be obtained by the Acquiror
(a) shall have been timely and duly obtained, made or given by the Acquiror, (b)
shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (c) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental
Entity or other regulatory authority necessary for the Closing or in connection
with the transactions contemplated hereby, including under the HSR Act and
securities regulatory laws, shall have occurred.
(c) Certificate of the Acquiror. The Parent and the Company shall
---------------------------
have been provided with a certificate executed on behalf of the Acquiror by an
officer of the Acquiror certifying that the conditions set forth in Section
11.2(a) have been fulfilled.
30
(d) Legal Opinion. The Parent and the Company shall have received a
-------------
legal opinion from the Acquiror's legal counsel, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, in substantially the form of Exhibit 11.2.
------------
(e) Closing Certificates. The Parent and the Company shall have been
--------------------
provided with such certificates and closing documents as are customary for
transactions of the type contemplated hereby and as may be reasonably requested
by the Parent, the Company or their counsel.
(f) Omnibus Amendment Agreement. The Omnibus Amendment Agreement
----------------------------
shall have been duly executed and delivered by the Acquiror and the other
parties thereto.
(g) No Material Adverse Changes. There shall not have occurred any
---------------------------
material adverse change in the condition, (financial or otherwise) properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of the Acquiror and its subsidiaries, taken as a whole.
Section 11.3 Additional Conditions to the Obligations of the
-----------------------------------------------
Acquiror. The obligations of the Acquiror with respect to the Closing shall be
--------
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, by the Acquiror:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Parent and the Company in this Agreement shall be true and
correct in all material respects (except that any such representations and
warranties that are qualified by their terms by a reference to Material Adverse
Effect or materiality as so qualified shall be true and correct in all respects)
on and as of the Closing Date as though such representations and warranties were
made on and as of such time (except that any such representations and warranties
that are made as of a particular date other than the date of this Agreement
shall have been so true and correct as of such particular date), and the Parent
and the Company shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them at or prior to the Closing.
(b) Regulatory Consents and Approvals. All consents, approvals,
---------------------------------
waivers and actions of, filings with and notices to any Governmental Entity or
other regulatory authority necessary for consummation of or in connection with
the transactions contemplated hereby and required to be obtained by the Parent
or the Company (a) shall have been timely and duly obtained, made or given by
the Company and the Parent, (b) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (c) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental Entity or other regulatory authority necessary for the Closing
or in connection with the transactions contemplated hereby, including under the
HSR Act and securities regulatory laws, shall have occurred.
31
(c) Certificate of the Company. The Acquiror shall have been provided
--------------------------
with a certificate executed on behalf of each of the Parent and the Company by
an authorized officer thereof certifying that the conditions set forth in
Section 11.3(a) have been fulfilled.
(d) Legal Opinion. The Acquiror shall have received a legal opinion
-------------
from the Parent's and the Company's legal counsel, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, in
substantially the form of Exhibit 11.3(d).
---------------
(e) Closing Certificates. The Acquiror shall have been provided with
--------------------
such certificates and closing documents as are customary for transactions of the
type contemplated hereby and as may be reasonably requested by the Acquiror or
its counsel.
(f) Third Party Consents. The Acquiror shall have been furnished with
--------------------
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the transactions
contemplated hereby under the Contracts listed on Schedule 7.24 hereto.
(g) Transitional Services Agreement. The Acquiror shall have received
-------------------------------
a fully executed copy of the Transitional Services Agreement, in substantially
the form of Exhibit 11.3(g).
---------------
(h) Omnibus Amendment Agreement. The Omnibus Amendment Agreement
---------------------------
shall have been duly executed and delivered by the Parent, the Company and the
other parties thereto.
(i) Key Employees. Each of ▇▇▇▇ ▇'▇▇▇▇▇, ▇.▇. ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
-------------
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ shall have accepted employment with the Acquiror on
terms acceptable to each party.
(j) No Material Adverse Changes. There shall not have occurred
---------------------------
any material adverse change in the condition, (financial or otherwise)
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of the Company.
(k) Affidavit of Non-Foreign Status. An affidavit of Seller, in the
-------------------------------
form attached hereto as Exhibit 5.2(b), stating, under penalty of perjury,
--------------
Seller's United States taxpayer identification number and that Seller is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
32
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 12.1 Termination. At any time prior to the Closing Date,
-----------
this Agreement may be terminated:
(a) by mutual written consent duly authorized by the Acquiror, the
Parent and the Company;
(b) by the Acquiror, the Parent or the Company, if the Closing shall
not have occurred on or before June 15, 2000 (provided, a later date may be
agreed upon in writing by the parties hereto, and provided further that the
right to terminate this Agreement under this Section 12.1(b) shall not be
available to any party whose action or failure to act has been the cause or
resulted in the failure of the Closing to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement);
(c) by the Acquiror, if any of the Company or the Parent shall
materially breach any representation, warranty, obligation or agreement
hereunder and such breach shall not have been cured within ten (10) business
days of receipt by the Company of written notice of such breach, provided that
the right to terminate this Agreement by the Acquiror under this Section 12.1(c)
shall not be available to the Acquiror where the Acquiror is at that time in
material breach of this Agreement;
(d) by the Parent, if the Acquiror shall materially breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10) days of receipt by the Acquiror of
written notice of such breach, provided that the right to terminate this
Agreement by the Parent under this Section 12.1(d) shall not be available to the
Parent where the Parent or the Company is at that time in material breach of
this Agreement; or
(e) by the Acquiror or by the Parent, if any permanent injunction or
other order of a court or other competent authority preventing the Closing shall
have become final and nonappealable.
Section 12.2 Effect of Termination. In the event of termination of
----------------------
this Agreement as provided in Section 12.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
Acquiror or the Company or their respective officers, directors, securityholders
or affiliates, except to the extent that such termination results from the
willful breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided that the provisions of Section
12.3 (Expenses) and this Section 12.2 and of Article XIII (but only with respect
to such a willful breach) shall remain in full force and effect and survive any
termination of this Agreement.
Section 12.3 Expenses.
--------
(a) Subject to the other terms hereof , whether or not the Closing
occurs, all costs and expenses incurred in connection with this Agreement and
the
33
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisers, accountants and legal counsel) shall be paid, in the
case of the expenses and costs of (i) the Company and the Parent, by the Parent
and (ii) the Acquiror, by the Acquiror. The filing fee with respect to HSR Act
filing shall be borne equally by the Company and Acquiror such that the Company
pays an amount equal to one-half of such fee, and Acquiror pays an amount equal
to one-half of such fee.
(b) In the event that the Acquiror shall terminate this Agreement
pursuant to Section 12.1(c) then the Parent shall, or shall cause the Company
to, promptly reimburse the Acquiror for all of the out-of-pocket costs and
expenses incurred by the Acquiror in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisors, accountants and legal counsel).
(c) In the event that the Parent shall terminate this Agreement
pursuant to Section 12.1(d), the Acquiror shall promptly reimburse the Company
for all of the out-of-pocket costs and expenses incurred by the Company in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel).
ARTICLE XIII
INDEMNIFICATION
---------------
Section 13.1 Indemnification.
---------------
(a) Subject to the limitations set forth in this Article XIII, the
Parent and, prior to the Closing, the Company shall jointly and severally
indemnify and hold harmless the Acquiror and its officers, directors, agents and
employees, and each person, if any, who controls or may control the Acquiror
within the meaning of the Securities Act (any person entitled to indemnification
under this Section 13.1(a) (a "Company Indemnified Person") or Section 13.1(b)
(a "Buyer Indemnified Person") is hereinafter referred to as an "Indemnified
Person", and any person required to indemnify such Indemnified Person is
hereinafter referred to as an "Indemnifying Person") from and against any and
all losses, costs, damages, liabilities and expenses arising from claims,
demands, actions, causes of action, including, without limitation, reasonable
legal fees (collectively, "Damages") arising out of any or breach of or default
in connection with any of the representations, warranties, covenants and
agreements given or made by any of the Company or the Parent in this Agreement,
the Ancillary Agreements, the Company Disclosure Schedule or any exhibit or
schedule to this Agreement.
(b) The Acquiror shall indemnify and hold harmless the Parent and its
officers, directors, agents and employees, and each person, if any, who
controls or may control the Parent within the meaning of the Securities Act
from and against any and all Damages arising out of any or breach of or default
in connection with any of the representations, warranties, covenants and
agreements given or made by the Acquiror in
34
this Agreement, the Ancillary Agreements, the Acquiror Disclosure Schedule or
any exhibit or schedule to this Agreement.
(c) The Acquiror and the Parent each acknowledge that such Damages,
if any, would relate to unresolved contingencies existing at the Closing Date,
which if resolved at the Closing Date would have led to a change in the total
consideration the Acquiror would have agreed to issue and convey hereunder or
the Parent and the Company would have agreed to accept hereunder. If the Closing
does not occur. Notwithstanding any provision to the contrary, if the Closing is
consummated, the Parent shall bear, and the Company shall be released from, all
of the liabilities, obligations and duties pursuant to this Article XIII, it
being understood that the Parent shall remain solely liable thereon.
Section 13.2 Procedure for Indemnification with Respect to Third-Party
-------------------------------------------
Claims
------
(a) If an Indemnified Person determines to seek indemnification under
this Article XIII with respect to the existence of a claim giving rise to
Damages ("Claim") resulting from the assertion of liability by third parties or
an Indemnified Person shall give notice to the Indemnifying Person promptly
after such Indemnified Person becomes aware of any claim or of facts upon which
any such claim will be based; the notice shall set forth such material
information with respect thereto as is then reasonably available to such
Indemnified Person. In case any such liability is asserted against such
Indemnified Person, and such Indemnified Person notifies such Indemnifying
Person thereof, such Indemnifying Person will be entitled, if it so elects, by
written notice delivered to such Indemnified Person within twenty (20) days
after receiving such notice, to assume the defense thereof with counsel
reasonably satisfactory to such Indemnified Person. Notwithstanding the
foregoing, (i) such Indemnified Person shall also have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless it shall reasonably determine
that there is a conflict of interest between such Indemnified Person and
Indemnifying Person with respect to such claim or there are or may be legal
defenses available to such Indemnified Person which are different from or
additional to those available to such Indemnifying Person or a difference of
position or potential difference of position exists between or among such
Indemnifying Person and Indemnified Person that would make such separate
representation advisable in the reasonable opinion of counsel to such
Indemnified Person, in which case the fees and expenses of one such counsel will
be borne by such Indemnifying Person, (ii) such Indemnified Person shall not
have any obligation to give any notice of any assertion of liability by a third
party unless such assertion is in writing, and (iii) the rights of such
Indemnified Person to be indemnified hereunder in respect of such claims
resulting from the assertion of liability by third parties shall not be
adversely affected by its failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, such Indemnifying Person is
prejudiced thereby. With respect to any assertion of liability by a third party
that results in such claim, the parties hereto shall make available to each
other all relevant information in their possession material to any such
assertion.
35
(b) In the event that such Indemnifying Person, within twenty (20)
days after receipt of the aforesaid notice of a claim, fails to assume the
defense of such Indemnified Person against such claim, such Indemnified Person
shall have the right to undertake the defense, compromise, or settlement of such
action on behalf of and for the account, expense, and risk of such Indemnifying
Person; provided, however, that such Indemnified Person shall not, without such
Indemnifying Person's prior written consent, settle or compromise any such claim
or consent to entry of any judgment in respect thereof, and such Indemnifying
Person shall have no liability with respect to any such compromise or settlement
thereof effected without its prior written consent.
(c) Notwithstanding anything in this Article XIII to the contrary,
such Indemnified Person shall have the right to participate in such defense,
compromise, or settlement and such Indemnifying Person shall not, without such
Indemnified Person's written consent (which consent shall not be unreasonably
withheld), settle or compromise any such claim or consent to entry of any
judgment in respect thereof unless such settlement, compromise, or consent
includes as an unconditional term thereof the giving by the claimant or the
plaintiff to such Indemnified Person a release from all liability in respect of
such claim.
Section 13.3 Procedure For Indemnification with Respect to Non-
--------------------------------------------------
Third Party Claims. In the event that an Indemnified Person asserts the
------------------
existence of a claim giving rise to Damages (but excluding claims resulting from
the assertion of liability by third parties), it shall give written notice to
the Indemnifying Person. Such written notice shall state that it is being given
pursuant to this Section 13.3, specify the nature and amount of the claim
asserted and indicate the date on which such assertion shall be deemed accepted
and the amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence). Such Indemnifying Person, within sixty (60)
days after the mailing of notice by such Indemnified Person, shall give written
notice to such Indemnified Person announcing its intent to contest such
assertion. In the event that such Indemnifying Person contests the assertion of
a claim by giving such written notice to such Indemnified Person within said
period, then the parties shall act in good faith to reach agreement regarding
such claim. In the event that litigation shall arise with respect to any such
claim, the prevailing party shall be entitled to reimbursement of costs and
expenses incurred in connection with such litigation including reasonable
attorneys' fees.
Section 13.4 Reductions in Damages.
---------------------
(a) Any amount payable by an Indemnifying Person pursuant to this
Section 13 (after giving effect to Section 13.5) shall be reduced by any net tax
benefit to the Indemnified Person that results from the Damages that are being
indemnified and the receipt of the indemnification payment. For purposes of the
preceding sentence, the "net tax benefit" shall equal all actual U.S. federal,
state, local and foreign income tax deduction arising from the Damages minus any
income or gain recognized as a result of receiving the indemnity payment
multiplied by the maximum marginal effective federal, state or local income tax
rates, whichever are applicable, to such income or gain.
36
(b) An Indemnifying Person shall not be required to indemnify an
Indemnified Person with respect to any Damages to the extent that indemnity
therefor is available pursuant to any policies of insurance.
Section 13.5 Limitations on Indemnification
------------------------------
(a) The indemnification obligations of the Parent and the Company,
under Section 13.1, on the one hand, and the indemnification obligations of
Acquiror under Section 13.2, on the other hand, shall be effective only when the
aggregate amount of all Claims by the Buyer Indemnified Persons or the Company
Indemnified Persons, as the case may be, subject to indemnification hereunder
exceeds $250,000 (the "Deductible"), in which case the Indemnifying Persons
shall be liable only for Damages in excess of such amount. In no event shall the
aggregate amount of indemnity payments by the Buyer Indemnified Persons, on the
one hand, or the Company Indemnified Persons, on the other hand, exceed
$15,000,000. In no event shall an indemnity be recoverable from the Indemnifying
Persons with respect to any individual Claim unless the amount thereof equals at
least $10,000, and no Claim in an amount less than $10,000 shall count toward
the deductible.
Section 13.6 Term. The indemnification obligations under
----
Section 13.1 and Section 13.2 shall cease and be of no force and effect after
the first anniversary of the Closing Date, except with respect to any Claim for
indemnification hereunder made prior to such business date in writing and
stating with specificity the basis for such Claim; provided that any Claim for
Damages arising out of any breach or default in connection with the
representations and warranties (i) contained in Sections 7.2, 7.13 and
Section 8.2 shall survive indefinitely and (ii) contained in Section 7.14 and
8.12 shall survive until the applicable statutes of limitation in respect
thereof has expired.
Section 13.7 Limited Recourse. Notwithstanding anything to the
-----------------
contrary contained herein, it is agreed that no claim of any nature hereunder
shall or may be asserted, and no recourse hereunder shall or may be had, against
any officer, director, employee, shareholder, general partner, limited partner
or affiliate of any Indemnifying Person. To the extent permitted by applicable
law, Parent, Company and Acquiror and each other Indemnified Person hereby
expressly waive, relinquish, release and remise any right that Parent, Company
or Acquiror or such other Indemnified Person might otherwise have to assert or
enforce any claim hereunder against any person or entity, or the assets of any
person or entity, except in a manner consistent with this Section 13.
ARTICLE XIV
GENERAL PROVISIONS
------------------
Section 14.1 Survival. The representations, warranties and covenants
--------
of the parties contained herein shall survive until the first anniversary of the
Closing Date (or, if later, the final resolution of any indemnity claims
hereunder), except that the representations, warranties and covenants (i)
contained in Sections 7.2, 7.13 and 8.2 shall survive indefinitely (ii)
37
contained in Section 7.14 and 8.12 shall survive until the applicable statutes
of limitation in respect thereof shall have expired and the provisions of
Sections 12.2 and 12.3 and of Article XIII shall survive in accordance with
their terms.
Section 14.2 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to the Acquiror, to:
Naviant, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇
General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
SOFTBANK Content Services, Inc.
c/o SOFTBANK Holdings Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
38
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Parent, to:
SOFTBANK Holdings Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Section 14.3 Interpretation. When a reference is made in this
--------------
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the first paragraph of this Agreement. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 14.4 Counterparts. This Agreement may be executed in two or
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more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 14.5 Entire Agreement; Nonassignability; Parties in
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Interest. This Agreement and the documents and instruments and other agreements
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specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Company Disclosure Schedule and the
Acquiror Disclosure Schedule (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
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agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms, (b) are not
intended to confer upon any other person any rights or remedies hereunder, (c)
shall not be assigned by operation of law or otherwise except as otherwise
specifically provided, and (d) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Section 14.6 Severability. In the event that any provision of this
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Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 14.7 Remedies Cumulative. Except as otherwise provided
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herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
Section 14.8 Governing Law. (a) This Agreement shall be governed by
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and construed in accordance with the laws of the State of New York without
reference to such state's principles of conflicts of law.
Section 14.9 Rules of Construction. The parties hereto agree that
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they have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
Section 14.10 Amendment; Waiver. This Agreement may not be changed,
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amended, terminated, augmented, rescinded, or discharged (other than by
performance), in whole or in part, except by a writing executed by the Acquiror,
the Company and the Parent, and no waiver of any of the provisions or conditions
of this Agreement or any of the rights of a party hereto shall be effective or
binding unless such waiver shall be in writing and signed by the party claimed
to have given or consented thereto. At any time prior to the Closing Date any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Except to the extent that a party hereto
may have otherwise agreed in writing, no waiver by that party of any condition
of this Agreement or breach by the other party of any of its obligations or
representations hereunder or
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thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 14.11 Consent to Jurisdiction; Service of Process. Any action,
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suit or proceeding arising out of or relating to this Agreement may be
instituted in any United States Federal court or any state court located in New
York, New York and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim it may
now or hereafter have that it is not subject personally to the jurisdiction of
such court, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such court in any
such action, suit or proceeding, and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with this Agreement from which no appeal
has been taken or is available. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given personally or by registered or certified mail, postage prepaid
and return receipt requested, or by personal service on such party. Nothing
contained herein shall be deemed to affect the right of any party to serve
process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction.
Section 14.12 Definitions of Material Adverse Effect. For purposes of
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this Agreement, "Material Adverse Effect" means, with respect to any entity or
entities (and in the case of the Company, the Business), any event, change,
condition or effect that is, or could be reasonably expected to be, materially
adverse to the condition (financial or otherwise), properties, assets
(including, without limitation, intangible assets), liabilities, business,
operations or results of operations of such entity or entities (and in the case
of the Company, the Business).
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IN WITNESS WHEREOF, the Acquiror, the Parent and the Company
have caused this Agreement to be executed and delivered by their respective
officers thereunto duly authorized as of the date first written above.
NAVIANT, INC.
By: ___________________________________
Name:
Title:
SOFTBANK CONTENT SERVICES, INC.
By: ___________________________________
Name:
Title:
SOFTBANK HOLDINGS INC.
By: ___________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
EXHIBIT 5.2(a)
EXHIBIT 5.2(b)
EXHIBIT 5.2(e)
EXHIBIT 5.3(c)
EXHIBIT 7.12(c)
EXHIBIT 11.2
EXHIBIT 11.3(d)