Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among
SWITCHBOARD INCORPORATED,
ENVENUE, INC.,
and
THE STOCKHOLDERS OF ENVENUE, INC.
____________________
November 24, 2000
____________________
TABLE OF CONTENTS
Section Page
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1. Purchase and Sale of the Shares........................................................................................... 1
1.01 Purchase of the Shares from the Stockholders........................................................................ 1
1.02 Further Assurances.................................................................................................. 1
1.03 Purchase Price for the Shares....................................................................................... 2
1.04 Additional Consideration............................................................................................ 2
1.05 Stockholders' Representative........................................................................................ 7
2. Representations of the Stockholders Regarding the Shares.................................................................. 8
3. Representations of the Stockholders and the Company Regarding the Company................................................. 9
3.01 Organization........................................................................................................ 10
3.02 Capitalization of the Company....................................................................................... 10
3.03 Subsidiaries........................................................................................................ 10
3.04 Authorization....................................................................................................... 10
3.05 Financial Statements................................................................................................ 11
3.06 Absence of Undisclosed Liabilities.................................................................................. 11
3.07 Litigation.......................................................................................................... 11
3.08 Insurance........................................................................................................... 12
3.09 Personal Property................................................................................................... 12
3.10 Intellectual Property............................................................................................... 12
3.11 Leases.............................................................................................................. 15
3.12 Real Estate......................................................................................................... 15
3.13 Tangible Assets..................................................................................................... 15
3.14 Inventory........................................................................................................... 15
3.15 Accounts Receivable................................................................................................. 15
3.16 Tax Matters......................................................................................................... 15
3.17 Books and Records................................................................................................... 17
3.18 Contracts and Commitments........................................................................................... 17
3.19 Compliance with Agreements and Laws................................................................................. 19
3.20 Employee Relations.................................................................................................. 19
3.21 Employee Plans...................................................................................................... 20
3.22 Absence of Certain Changes or Events................................................................................ 20
3.23 Customers........................................................................................................... 22
3.24 Prepayments and Deposits............................................................................................ 22
3.25 Indebtedness to and from Officers, Directors and Stockholders....................................................... 22
3.26 Banking Facilities.................................................................................................. 22
3.27 Powers of Attorney and Suretyships.................................................................................. 22
3.28 Conflicts of Interest............................................................................................... 22
3.29 Regulatory Approvals................................................................................................ 23
3.30 Disclosure.......................................................................................................... 23
4. Representations of the Buyer.............................................................................................. 23
5. Intentionally Omitted..................................................................................................... 24
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6. Conditions to Obligations of the Buyer.................................................................................... 24
6.01 Continued Truth of Representations and Warranties of the Stockholders and the Company;
Compliance with Covenants and Obligations; Absence of Adverse Change...................................................... 24
6.02 Governmental Approvals.............................................................................................. 24
6.03 Consents and Acknowledgments........................................................................................ 24
6.04 Adverse Proceedings................................................................................................. 25
6.05 Certain Approvals................................................................................................... 25
6.06 Opinion of Counsel.................................................................................................. 25
6.07 Schedule SH......................................................................................................... 25
6.08 Cash Available for Working Capital Purposes......................................................................... 25
6.09 Repayment of Indebtedness........................................................................................... 25
6.10 Trade Payables...................................................................................................... 26
6.11 Closing Deliveries.................................................................................................. 26
7. Conditions to Obligations of the Stockholders............................................................................. 26
7.01 Continued Truth of Representations and Warranties of the Buyer; Compliance with Covenants and Obligations........... 27
7.02 Governmental Approvals.............................................................................................. 27
7.03 Adverse Proceedings................................................................................................. 27
7.04 Closing Deliveries.................................................................................................. 27
8. Indemnification........................................................................................................... 27
8.01 By the Stockholders and the Company................................................................................. 27
8.02 Claims for Indemnification.......................................................................................... 28
8.03 Defense by the Stockholders......................................................................................... 28
8.04 Payment of Indemnification Obligation............................................................................... 29
8.05 Survival of Representations; Claims for Indemnification............................................................. 29
8.06 Limitations......................................................................................................... 29
9. Post-Closing Agreements................................................................................................... 29
10. Intentionally Omitted..................................................................................................... 34
11. Successors and Assigns.................................................................................................... 34
12. Notices................................................................................................................... 34
13. Entire Agreement; Amendments; Attachments................................................................................. 36
14. Severability.............................................................................................................. 36
15. Expenses.................................................................................................................. 36
16. Governing Law............................................................................................................. 37
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17. Section Headings.......................................................................................................... 37
18. Pronouns................................................................................................................. 37
19. Counterparts............................................................................................................. 38
Disclosure Schedule Furnished by the Stockholders and the Company:
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Schedule 3.01 - Organization
Schedule 3.02 - Capitalization of the Company
Schedule 3.03 - Subsidiaries
Schedule 3.04 - Authorization
Schedule 3.05 - Financial Statements
Schedule 3.06 - Absence of Undisclosed Liabilities
Schedule 3.07 - Litigation
Schedule 3.08 - Insurance
Schedule 3.09 - Personal Property
Schedule 3.10 - Intellectual Property
Schedule 3.11 - Leases
Schedule 3.12 - Real Estate
Schedule 3.13 - Tangible Assets
Schedule 3.14 - Inventory
Schedule 3.15 - Accounts Receivable
Schedule 3.16 - Tax Matters
Schedule 3.17 - Books and Records
Schedule 3.18 - Contracts and Commitments
Schedule 3.19 - Compliance with Agreements and Laws
Schedule 3.20 - Employee Relations
Schedule 3.21 - Employee Plans
Schedule 3.22 - Absence of Certain Changes or Events
Schedule 3.23 - Customers
Schedule 3.24 - Prepayments and Deposits
Schedule 3.25 - Indebtedness to and from Officers, Directors and
Stockholders
Schedule 3.26 - Banking Facilities
Schedule 3.27 - Powers of Attorney and Suretyships
Schedule 3.28 - Conflicts of Interest
Schedule 3.29 - Regulatory Approvals
Schedule 3.30 - Disclosure
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Additional Schedule Furnished by the Company and the Stockholders
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Schedule SH - Stockholders
Schedules Furnished by the Buyer
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Schedule 1.04(a)(ii) - Carrier Deal Entities
Schedule 9(a)(i) - Founders
Schedule 9(c) - Recruiters, Etc.
Annexes to this Agreement
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Annex 6.06 - Form of Opinion of Counsel to the Stockholders and
the Company
Annex 9(a)(vi) - Company Budget
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of November 24,
2000 (the "Closing Date") among Switchboard Incorporated, a Delaware corporation
(the "Buyer"), Envenue, Inc., a Delaware corporation (the "Company"), and the
stockholders of the Company set forth on Schedule SH appended to this Agreement
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(each individually, a "Stockholder" and collectively, the "Stockholders"), who
own in the aggregate all of the issued and outstanding capital stock of the
Company. In addition to executing this Agreement as a Stockholder, ▇▇▇▇ ▇.
▇'▇▇▇▇▇ is executing this Agreement for the purpose of acknowledging his
agreement to serve as Stockholders' Representative (as defined in Section
1.05(a) of this Agreement) pursuant to the terms more fully set forth in this
Agreement. The Buyer, the Company and the Stockholders are sometimes referred
to in this Agreement each as a "Party" and collectively as the "Parties."
Preliminary Statement
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A. The Stockholders own of record and beneficially an aggregate of
2,523,289 of the issued and outstanding shares (collectively, the "Shares") of
common stock, $0.01 par value per share (the "Common Stock"), of the Company,
which Shares, at the Closing (as defined in Section 1.01 of this Agreement) will
in the aggregate represent all of the issued and outstanding shares of capital
stock of the Company.
B. The Buyer desires to purchase, and the Stockholders desire to sell,
the Shares for the consideration set forth below, subject to the terms and
conditions of this Agreement.
Agreement
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NOW, THEREFORE, in consideration of the mutual promises set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties hereby further agree as follows:
1. Purchase and Sale of the Shares.
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1.01 Purchase of the Shares from the Stockholders. Subject to and
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upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each Stockholder
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from each Stockholder, all of the Shares
owned by such Stockholder, as set forth on Schedule SH appended to this
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Agreement ("Schedule SH"). At the Closing each Stockholder shall deliver to the
Buyer certificates evidencing the Shares owned by such Stockholder duly endorsed
in blank or with stock powers duly executed by such Stockholder.
1.02 Further Assurances. At any time and from time to time after the
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Closing, at the Buyer's request and without further consideration, each of the
Stockholders shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, more effectively to transfer, convey
and assign to the Buyer, and to confirm the Buyer's title to, all of the Shares
owned by such Stockholder, to put the Buyer in actual possession and operating
control of the assets,
properties and business of the Company, to assist the Buyer in exercising all
rights with respect thereto and to carry out the purpose and intent of this
Agreement.
1.03 Purchase Price for the Shares.
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(a) The aggregate purchase price (the "Purchase Price") to be paid by the
Buyer for the Shares shall be Two Million Dollars ($2,000,000). The Purchase
Price shall be payable in the manner described in Section 1.03(b) of this
Agreement. None of the Purchase Price shall be delivered by the Buyer to the
Stockholders at the Closing.
(b) On or before the date 18 months subsequent to the Closing Date the
Buyer shall deliver to each Stockholder the pro rata portion of the Purchase
Price set forth beside such Stockholder's name on Schedule SH at its address set
forth on Schedule SH. No interest shall be paid by the Buyer on the Purchase
Price for the 18-month period set forth in the first sentence of this Section
1.03(b). Delivery by the Buyer to any Stockholder of such Stockholder's portion
of the Purchase Price pursuant to this Section 1.03.(b) may be made by check or
wire transfer to an account designated by such Stockholder. All amounts paid by
the Buyer to the Stockholders pursuant to this Section 1.03 are subject to
Section 8.04 of this Agreement.
1.04 Additional Consideration. Subsequent to the Closing, the Buyer
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shall pay additional consideration as further described in this Section 1.04
("Additional Consideration"). Notwithstanding anything to the contrary in this
Agreement, in no event may the aggregate amount of any Additional Consideration
paid by the Buyer pursuant to this Section 1.04 exceed Two Million Dollars
($2,000,000).
(a) As used in this Agreement, the following terms shall have the
following definitions:
(i) "Calculation Period" means the period commencing on the Closing
Date and ending on the date 18 months after the Closing Date.
(ii) "Carrier Deal" means an agreement entered into between the
Company and any of the entities set forth on Schedule 1.04(a)(ii) appended to
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this Agreement that promotes the Product Directory through substantially all
Internet-enabled telephones or other devices or means that subscribe to such
entity's wireless Internet services, provided, that, if immediately prior to the
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release by such entity of a new version of browser or operating system, the
above standard was met, but as a result of such release the Product Directory is
no longer promoted on substantially all Internet-enabled telephones or other
devices or means that subscribe to such entity's wireless Internet services,
such standard shall continue to be deemed satisfied so long as the Company is
using its best efforts to make the Product Directory available across the new
browser or operating system. The Product Directory shall be deemed to be
promoted, as contemplated by the preceding sentence, if navigational links to
the Product Directory are embedded in interfaces appearing on the Internet-
enabled telephones or other devices or means that subscribe to the applicable
wireless Internet services, which navigational links are at least on par with
navigational links to other services similar to or competing with the Product
Directory; provided, that, such standard shall be deemed satisfied if the
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navigational links to the Product Directory are on the same card or page on such
Internet-enabled telephones
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or other devices or means, as are navigational links to other services similar
to or competing with the Product Directory.
(iii) "Carrier Deal Target" means, during the Calculation Period, the
Company shall have entered into five Carrier Deals, all of which remain in full
force and effect as of the date 18 months after the Closing Date.
(iv) "Company Plan" means the achievement of all of the Carrier Deal
Target, the Gross Revenue Target and the Monthly Revenue Per Outlet Target.
(v) "Gross Revenue" means the total revenue achieved by the Company
minus all discounts offered by the Company. Gross Revenue shall include that
portion of the revenue recognized by the Buyer under an agreement entered into
by the Buyer under which the Buyer provides the Product Directory as a service,
which portion of the revenue is attributable solely to the Product Directory
based upon the generally applicable pricing terms for the Product Directory used
by the Company at the time of such agreement (as represented in a price sheet
provided by the Company to the applicable sales personnel of the Buyer).
(vi) "Gross Revenue Target" means, during the Calculation Period,
the Company shall have recognized Gross Revenue of Ten Million Dollars
($10,000,000).
(vii) "Monthly Revenue Per Outlet" means the per month total revenue
achieved by the Company attributable to any Outlet.
(viii) "Monthly Revenue Per Outlet Target" means, as of the date 18
months after the Closing Date, either (A) 50% of all then-existing Outlets shall
have entered into a binding written agreement with the Company for Monthly
Revenue Per Outlet equal to a minimum of Ten Dollars ($10), (B) the
Stockholders' Representative has provided the Buyer with verifiable evidence
reasonably acceptable to the Buyer that Monthly Revenue Per Outlet for 50% of
all then-existing Outlets has been at least Ten Dollars ($10) for a minimum
period of six consecutive months or (C) the Stockholders' Representative has
provided the Buyer with verifiable evidence reasonably acceptable to the Buyer
that the arithmetic mean Monthly Revenue per Outlet of all then-existing Outlets
has been at least Ten Dollars ($10) for a minimum of six consecutive months.
(ix) "Outlet" means any individual retail establishment contributing
data, either alone or collectively with similar retail establishments, to the
Product Directory.
(x) "Product Directory" means the Company's server-side computer
application, or set of applications, that (x) allows the product-level content
information of a retail establishment to be collected from a variety of sources,
(y) associates such product-level content information with the location
information for such retail establishment and (z) is hosted in one or more
consolidated repositories where it can be searched by the users of a range of
Internet-enabled devices.
(xi) "Targets" means the Carrier Deal Target, the Gross Revenue
Target and the Monthly Revenue Per Outlet Target, collectively.
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(b) The payment by the Buyer of Additional Consideration, if any, will be
based upon the achievement by the Company towards the Company Plan which will be
evaluated based upon the following points system.
(i) Notwithstanding anything in this Agreement to the contrary, the
maximum of all points which can be earned is 100. The total points deemed
earned for the Carrier Deal Target, the Gross Revenue Target and the Monthly
Revenue Per Outlet Target shall be determined in accordance with the provisions
of Sections 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this Agreement;
provided, that, the maximum Total Target Projection Overage (as defined in this
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Section 1.04(b)(i)) which can be earned is ten points. The "Total Target
Projection Overage" shall be the sum of (A) to the extent the points deemed
earned pursuant to Section 1.04(b)(ii) of this Agreement exceed 25, the
difference of such points minus 25, (B) to the extent the points deemed earned
pursuant to Section 1.04(b)(iii) of this Agreement exceed 50, the difference of
such points minus 50 plus (C) to the extent the points deemed earned pursuant to
Section 1.04(b)(iv) of this Agreement exceed 25, the difference of such points
minus 25.
(ii) Subject to Section 1.04(b)(i) of this Agreement and subject to
a maximum deemed points earned of 27.5, the number of points deemed earned based
upon the Company's achievement with respect to the Carrier Deal Target will
equal the product of (A) 25 multiplied by (B) the quotient of (I) the number of
Carrier Deals entered into by the Company during the Calculation Period which
remain in full force and effect as of the date 18 months subsequent to the
Closing Date divided by (II) five. Solely for purposes of illustration:
. if the Company enters into 2 Carrier Deals during the Calculation
Period, ten points will be deemed earned: [25 * (2/5) = 10];
. if the Company enters into 5 Carrier Deals during the Calculation
Period, 25 points will be deemed earned: [25 * (5/5) = 25]; and
. if the Company enters into 6 Carrier Deals during the Calculation
Period, 27.5 points will be deemed earned: [25 * (6/5) = 30.
However, the number of points deemed earned may not exceed 27.5.
In addition, these 27.5 points remain subject to the maximum
aggregate 100 point limitation and the ten point maximum Total
Target Projection Overage set forth in Section 1.04(b)(i) of this
Agreement.]
(iii) Subject to Section 1.04(b)(i) of this Agreement and subject to
a maximum deemed points earned of 60, the number of points deemed earned based
upon the Company's achievement with respect to the Gross Revenue Target will
equal the product of (A) 50 multiplied by (B) the quotient of (I) the Gross
Revenue actually achieved by the Company during the Calculation Period divided
by (II) Ten Million Dollars ($10,000,000). Solely for purposes of illustration:
. if the Company achieves Five Million Dollars in Gross Revenue
during the Calculation Period, 25 points will be deemed earned:
[50 * ($5,000,000/$10,000,000) = 25];
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. if the Company achieves Ten Million Dollars in Gross Revenue
during the Calculation Period, 50 points will be deemed earned:
[50 * ($10,000,000/$10,000,000) = 50];
. if the Company achieves Ten Million Five Hundred Thousand Dollars
in Gross Revenue during the Calculation Period, 52.5 points will
be deemed earned: [50 * ($10,500,000/$10,000,000) = 52.5. Note
that these 52.5 points remain subject to the maximum aggregate
100 point limitation and the ten point maximum Total Target
Projection Overage set forth in Section 1.04(b)(i) of this
Agreement.]; and
. if the Company achieves Fourteen Million Dollars in Gross Revenue
during the Calculation Period, 60 points will be deemed earned:
[50 * ($14,000,000/$10,000,000) = 70. However, the number of
points deemed earned may not exceed 60. In addition, these 60
points remain subject to the maximum aggregate 100 point
limitation and the ten point maximum Total Target Projection
Overage set forth in Section 1.04(b)(i) of this Agreement.]
(iv) Subject to Section 1.04(b)(i) of this Agreement and subject to
a maximum deemed points earned of 27.5, the number of points deemed earned based
upon the Company's achievement with respect to the Monthly Revenue Per Outlet
Target will equal the product of (A) 25 multiplied by (B) the quotient of (I)
the higher of the percentage of Outlets who satisfy the criteria set forth in
clause (A) or clause (B) of Section 1.04(a)(viii) of this Agreement (the "Higher
Outlet Percentage") divided by (II) 50%; provided, that, if satisfaction of the
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Monthly Revenue Per Outlet Target is by means of compliance with Section
1.04(a)(viii)(C) of this Agreement, the number of points deemed earned based
upon the Company's achievement with respect to the Monthly Revenue Per Outlet
Target will equal 25. Solely for purposes of illustration:
. if the Higher Outlet Percentage is 40%, 20 points will be deemed
earned: [25 * (40%/50%) = 20];
. if the Higher Outlet Percentage is 50%, 25 points will be deemed
earned: [25 * (50%/50%) = 25];
. if the Higher Outlet Percentage is 52%, 26 points will be deemed
earned: [25 * (52%/50%) = 26. Note that these 26 points remain
subject to the maximum aggregate 100 point limitation and the ten
point maximum Total Target Projection Overage set forth in
Section 1.04(b)(i) of this Agreement.]; and
. if the Higher Outlet Percentage is 80%, 27.5 points will be
deemed earned: [25 * (80%/50%) = 40. However, the number of
points deemed earned may not exceed 27.5. In addition, these 27.5
points remain subject to the maximum aggregate 100 point
limitation and the ten point maximum Total Target Projection
Overage set forth in Section 1.04(b)(i) of this Agreement.]
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(v) If the total points deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this Agreement is
greater than 50 and is less than or equal to 100, the Additional Consideration
to be paid by the Buyer pursuant to this Section 1.04 shall equal the product of
(A) Two Million Dollars multiplied by (B) the quotient of (I) such number of
points divided by (II) 100. Solely for purposes of illustration:
. if 77 total points are deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this
Agreement, the Additional Consideration to be paid by the Buyer
pursuant to this Section 1.04 shall equal One Million Five
Hundred Forty Thousand Dollars: [$2,000,000 * (77/100) =
$1,540,000]; and
. if 100 total points are deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this
Agreement, the Additional Consideration to be paid by the Buyer
pursuant to this Section 1.04 shall equal Two Million Dollars:
[$2,000,000 * (100/100) = $2,000,000.]
(vi) If the total points deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this Agreement is
greater than 25 and is less than or equal to 50, the Additional Consideration to
be paid by the Buyer pursuant to this Section 1.04 shall equal the product of
(A) One Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three
Dollars multiplied by (B) the quotient of (I) such number of points divided by
(II) 100. Solely for purposes of illustration:
. if 40 total points are deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this
Agreement, the Additional Consideration to be paid by the Buyer
pursuant to this Section 1.04 shall equal Five Hundred Thirty-
Three Thousand Three Hundred Thirty-Three Dollars and Twenty
Cents: [$1,333,333 * (40/100) = $533,333.20]; and
. if 50 total points are deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this
Agreement, the Additional Consideration to be paid by the Buyer
pursuant to this Section 1.04 shall equal Six Hundred Sixty-Six
Thousand Six Hundred Sixty-Six Dollars and Fifty Cents:
[$1,333,333 * (50/100) = $666,666.50].
(vii) If the total points deemed earned pursuant to Sections
1.04(b)(i), 1.04(b)(ii), 1.04(b)(iii) and 1.04(b)(iv) of this Agreement is equal
to or less than 25, then no Additional Consideration shall be paid by the Buyer
pursuant to this Section 1.04.
(c) The Additional Consideration to be paid by the Buyer pursuant to this
Section 1.04, if any, shall be delivered by the Buyer on or before the date 45
calendar days subsequent to the date 18 months after the Closing Date. The
Buyer shall deliver to each Stockholder at its address set forth on Schedule SH
such Stockholder's pro rata portion of such Additional Consideration set forth
beside each Stockholder's name on Schedule SH. No interest shall be paid by the
Buyer on any Additional Consideration due to the Stockholders pursuant to this
Section 1.04(c) for the 18-month plus 45-day period set forth in the first
sentence of this Section
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1.04(c). Delivery by the Buyer to any Stockholder of such Stockholder's portion
of any Additional Consideration pursuant to this Section 1.04(c) may be made by
check or wire transfer to an account designated by such Stockholder. All amounts
paid by the Buyer to the Stockholders pursuant to this Section 1.04 are subject
to Section 8.04 of this Agreement.
(d) The calculation of the Targets shall be performed using United States
generally accepted accounting principles ("GAAP") applied consistently with the
Buyer's past practices and shall be derived from the financial statements of the
Buyer and the Company for the relevant periods, as prepared by the Buyer, and
from such other documentation reasonably acceptable to the Buyer; provided,
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that, for purposes of calculating Gross Revenue, revenue shall be deemed to be
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recognized upon the earlier to occur of (i) the time such revenue is recognized
as otherwise set forth in this Section 1.04(d) and (ii) the time at which the
Company has received a non-refundable payment, delivered the service associated
with that payment and such service may not be cancelled pursuant to the terms of
the agreement under which such service is rendered. Non-refundable payments
received by the Company during the 30 days following the date 18 months
subsequent to the Closing Date which are associated with services delivered by
the Company during the 18/th/ month of the Calculation Period, which services
may not be cancelled pursuant to the terms of the agreements under which such
services are rendered, shall be deemed to satisfy the provisions of Section
1.04(d)(ii) of this Agreement.
1.05 Stockholders' Representative.
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(a) The Stockholders hereby designate ▇▇▇▇ ▇. ▇'▇▇▇▇▇ as their
representative (the "Stockholders' Representative") in order to administer
efficiently (i) the waiver of any condition to the obligations of the
Stockholders to consummate the transactions contemplated hereby, (ii) the
defense and/or settlement of any claims for which the Stockholders may be
required to indemnify the Buyer or the Company pursuant to Section 8 hereof and
(iii) any amendment to this Agreement.
(b) The Stockholders hereby authorize the Stockholders' Representative (i)
to take all action necessary in connection with the waiver of any condition to
the obligations of the Stockholders to consummate the transactions contemplated
hereby, or the defense and/or settlement of any claims for which the
Stockholders may be required to indemnify the Buyer or the Company pursuant to
Section 8 of this Agreement, (ii) to give and receive all notices required to be
given under this Agreement on behalf of the Stockholders, (iii) to amend this
Agreement on behalf of the Stockholders and (iv) to take any and all other
action as is contemplated to be taken by or on behalf of the Stockholders by the
terms of this Agreement.
(c) In the event that the Stockholders' Representative dies, becomes
unable to perform his responsibilities hereunder or resigns from such position,
Stockholders holding, immediately prior to the Closing, a majority of the Shares
as set forth on Schedule SH shall select another representative to fill such
vacancy and shall immediately provide written notice to the Buyer thereof. Such
substituted representative shall be deemed to be the Stockholders'
Representative for all purposes of this Agreement.
(d) All decisions and actions by the Stockholders' Representative,
including, without limitation, any agreement between the Stockholders'
Representative and the Buyer relating to the
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defense or settlement of any claims for which the Stockholders may be required
to indemnify the Buyer and/or the Company pursuant to Section 8 hereof, shall be
binding upon all of the Stockholders, and no Stockholder shall have the right to
object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree that:
(i) the Buyer shall be able to rely conclusively on the
instructions and decisions of the Stockholders' Representative as to the
settlement of any claims for indemnification by the Buyer or the Company
pursuant to Section 8 of this Agreement or any other actions required or
permitted to be taken by the Stockholders' Representative hereunder, and no
Party hereunder shall have any cause of action against the Buyer for any action
taken by the Buyer in reliance upon the instructions or decisions of the
Stockholders' Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders and
no Stockholder shall have any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by the
Stockholders' Representative under this Agreement, except for fraud or willful
breach of this Agreement by the Stockholders' Representative;
(iii) the provisions of this Section 1.05 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Stockholder may have in
connection with the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions of
this Section 1.05 are inadequate; therefore, the Buyer and the Company shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving damages if either the Buyer or the Company brings an action to enforce
the provisions of this Section 1.05; and
(v) the provisions of this Section 1.05 shall be binding upon the
executors, heirs, legal representatives and successors of each Stockholder, and
any references in this Agreement to a Stockholder or the Stockholders shall mean
and include the successors to the Stockholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
(f) By his execution of this Agreement, ▇▇▇▇ ▇. ▇'▇▇▇▇▇ agrees to serve as
Stockholders' Representative pursuant to the terms more fully set forth in this
Agreement.
(g) All fees and expenses incurred by the Stockholders' Representative
shall be paid by the Stockholders in proportion to their ownership of Shares as
set forth on Schedule SH.
2. Representations of the Stockholders Regarding the Shares.
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Each Stockholder severally represents and warrants to the Buyer as
follows:
(a) such Stockholder has good and marketable title to the Shares which are
to be transferred to the Buyer by such Stockholder pursuant to this Agreement,
free and clear of any
-8-
and all covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever. Schedule
SH sets forth a true and correct description of all Shares owned by such
Stockholder;
(b) such Stockholder has the full right, power and authority to enter into
this Agreement and the other agreements contemplated by this Agreement to which
it is a party and to transfer, convey and sell to the Buyer at the Closing the
Shares to be sold by such Stockholder under this Agreement and, upon
consummation of the purchase contemplated by this Agreement, the Buyer will
acquire from such Stockholder good and valid title to such Shares, free and
clear of all covenants, conditions, restrictions, voting trust arrangements,
liens, charges, encumbrances, options and adverse claims or rights whatsoever;
(c) such Stockholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution or delivery
by such Stockholder of this Agreement or any other agreement contemplated by
this Agreement to which such Stockholder is a party or the transfer, conveyance
and sale of the Shares to be sold by such Stockholder to the Buyer pursuant to
the terms of this Agreement;
(d) no finder, broker, investment banker or the like (an "Intermediary")
has acted for such Stockholder in connection with this Agreement or the
transactions contemplated by this Agreement, and no Intermediary is entitled to
any brokerage or finder's fee or other commissions in respect of such
transactions based upon agreements, arrangements or understandings made by or on
behalf of such Stockholder; and
(e) such Stockholder does not hold shares that are subject to a
substantial risk of forfeiture (within the meaning of Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code")) with respect to which a valid
election under Section 83(b) of the Code has not been made, and no payment to
any Stockholder of any portion of the consideration payable pursuant to this
Agreement will result in compensation or other income by such Stockholder with
respect to which the Buyer or the Company would be required to deduct or
withhold any Tax (as defined in Section 3.16(p) of this Agreement).
3. Representations of the Stockholders and the Company Regarding the
-----------------------------------------------------------------
Company.
-------
Each of the Stockholders and the Company severally represents and
warrants to the Buyer that the statements contained in this Section 3 are true
and correct, except as set forth in the disclosure schedule furnished to the
Buyer by the Stockholders and the Company on the date hereof (the "Disclosure
Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
3, and the disclosures in any paragraph of the Disclosure Schedule shall be
deemed disclosed for and to qualify both (i) the corresponding paragraph of this
Section 3 and (ii) any other paragraph of this Section 3 to the extent a
reasonable person would determine that the disclosure contained in such
paragraph of the Disclosure Schedule could qualify or otherwise apply to other
paragraphs of this Section 3, notwithstanding the absence of a specific cross-
reference. For purposes of this Section 3, the phrase "to the knowledge of" any
person (or entity) or any phrase of similar import shall be deemed to refer to
the actual knowledge of such person (and the actual
-9-
knowledge of the officers of such entity), as well as any other knowledge which
such person (or such officers) would have possessed had he made reasonable
inquiry of appropriate employees and agents of the Company with respect to the
matter in question.
3.01 Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority (corporate and other) to own its properties,
to carry on its business as now being conducted, to execute and deliver this
Agreement and the other agreements contemplated by this Agreement to which it is
a party, and to consummate the transactions contemplated hereby and thereby. The
Company is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification. Certified copies of the certificate of
incorporation and bylaws of the Company, each as amended to date, have been
previously delivered to the Buyer, are complete and correct, and no amendments
have been made thereto or have been authorized since the date thereof.
3.02 Capitalization of the Company.
-----------------------------
The Company's authorized capital stock consists of 5,000,000 shares of
Common Stock, of which 2,523,289 shares are issued and outstanding and held of
record and beneficially by the Stockholders as set forth on Schedule SH. All of
such issued and outstanding shares of Common Stock have been, and on the Closing
Date all of such issued and outstanding shares of Common Stock will be, duly and
validly issued and are, or will be on such date, fully paid and non-assessable.
There are not, and on the Closing Date there will not be, outstanding (i) any
options, warrants or other rights to purchase from the Company any capital stock
of the Company; (ii) any securities convertible into or exchangeable for shares
of such stock or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other securities of
the Company. No issued shares of Common Stock are held in the treasury of the
Company.
3.03 Subsidiaries. The Company has no Subsidiaries. As used in this
------------
Agreement, the term "Subsidiary" means a corporation, partnership, limited
liability company, joint venture or other entity in which the Company has,
directly or indirectly, (i) the right to appoint or name the management, or (ii)
an ownership interest in 50% or more of all equity interests therein.
3.04 Authorization. The execution and delivery by the Company of this
-------------
Agreement and the other agreements to which it is a party and which are
referenced in this Agreement or any schedule annexed to this Agreement, and the
consummation by the Company of all transactions contemplated hereunder and
thereunder, have been duly authorized by all requisite corporate action. This
Agreement and such other agreements have been duly executed by the Company and
the Stockholders party thereto. This Agreement and all such other agreements
constitute the valid and legally binding obligations of the Company and the
Stockholders party thereto, enforceable against them in accordance with their
respective terms. The execution, delivery and performance by the Company and the
Stockholders of this Agreement and such other agreements, and the consummation
by the Company and the Stockholders of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the passage of time
or both, (a) violate the provisions of any law, rule or
-10-
regulation applicable to the Company or any of the Stockholders; (b) violate the
provisions of the certificate of incorporation or bylaws of the Company, each as
amended to date; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Company or any of the Stockholders pursuant
to, any indenture, mortgage, deed of trust or other instrument or agreement to
which the Company or any of the Stockholders is a party or by which the Company,
any of the Stockholders or any of their respective properties is or may be
bound. Schedule 3.04 of the Disclosure Schedule sets forth a true, correct and
-------------
complete list of all consents and approvals of third parties that are required
in connection with the consummation by the Company of the transactions
contemplated by this Agreement.
3.05 Financial Statements.
--------------------
(a) The Stockholders have previously delivered to the Buyer the balance
sheet of the Company as of October 31, 2000 (the "Balance Sheet") and the
related statements of operations, shareholders' equity and cash flows of the
Company for the period commencing at the inception of the Company and ending on
October 31, 2000 (collectively with the Balance Sheet, the "Financial
Statements"). The date of the Balance Sheet is hereinafter referred to as the
"Balance Sheet Date."
(b) The Financial Statements fairly present, as of their respective dates,
the financial condition, retained earnings, assets and liabilities of the
Company and the results of operations of the Company's business for the periods
indicated.
3.06 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
(a) reflected and reserved against in the Balance Sheet or (b) incurred in the
ordinary course of business and consistent with past practice (the "Ordinary
Course of Business") after the Balance Sheet Date and not material in amount,
either individually or in the aggregate, the Company has no liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, which is material to the condition (financial or
otherwise) of the assets, properties, business or prospects of the Company. For
purposes of this Section 3.06, "material" means any amount in excess of $10,000.
3.07 Litigation. There is no action, suit or proceeding to which the
----------
Company is a party (either as a plaintiff or defendant) pending or, to the
knowledge of the Stockholders and the Company, threatened before any court or
governmental agency, authority, body or arbitrator and, to the knowledge of the
Stockholders and the Company, there is no basis for any such action, suit or
proceeding. Neither the Company nor, to the knowledge of the Stockholders and
the Company, any officer, director or employee of the Company, has been
permanently or temporarily enjoined by any order, judgment or decree of any
court or any governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the business, assets or
properties of the Company. There is not in existence any order, judgment or
decree of any court, tribunal or agency enjoining or requiring the Company to
take any action of any kind with respect to its business, assets or properties.
-11-
3.08 Insurance. The Company does not maintain any fire, theft,
---------
casualty, general liability, workers compensation, life, business interruption,
environmental impairment, product liability, automobile or other insurance
policies (collectively, the "Insurance Policies").
3.09 Personal Property. Schedule 3.09 of the Disclosure Schedule sets
----------------- -------------
forth (i) a true, correct and complete list of all items of tangible personal
property owned by the Company having either a net book value per unit or an
estimated fair market value per unit in excess of $1,000; or not owned by the
Company but in the possession of or used or useful in the business of the
Company and having rental payments therefor in excess of $500 per month or
$6,000 per year (collectively, the "Personal Property"); and (ii) a description
of the owner of, and any agreement relating to the use of, each item of Personal
Property not owned by the Company and the circumstances under which such
Property is used. The Company has good and marketable title to each item of
Personal Property that is not rental property, and all Personal Property that is
not rental property is, free and clear of all liens, leases, encumbrances,
claims under bailment and storage agreements, equities, conditional sales
contracts, security interests, charges and restrictions, except for liens, if
any, for personal property taxes not due. No officer, director, stockholder or
employee of the Company, nor any spouse, child or other relative or affiliate
(as such term is defined in the Securities Act and the rules and regulations
promulgated thereunder, an "Affiliate") thereof, owns directly or indirectly, in
whole or in part, any of the Personal Property. Each item of Personal Property
not owned by the Company is in such condition that upon the return of such
property to its owner in its present condition at the end of the relevant lease
term or as otherwise contemplated by the applicable agreement between the
Company and the owner or lessor thereof, the obligations of the Company to such
owner or lessor will be discharged. The Personal Property is in good operating
condition and repair, normal wear and tear excepted, is currently used by the
Company in the ordinary course of its business and normal maintenance has been
consistently performed with respect to the Personal Property. The Company owns
or otherwise has the right to use all of the Personal Property now used or
useful in the operation of its business or the use of which is necessary for or
useful in the performance of any material contract, letter of intent or proposal
to which it is a party.
3.10 Intellectual Property.
---------------------
(a) The Company owns or has the right to use all Intellectual Property (as
defined in this Section 3.10) used in the operation of its business or necessary
for the operation of its business as presently conducted. Each item of
Intellectual Property will be transferred to the Buyer at the Closing, and each
such item of Intellectual Property available for use by the Company will be
available for use by the Buyer on identical terms and conditions immediately
following the Closing. The Company has taken all reasonable measures to protect
the proprietary nature of each item of Intellectual Property, and to maintain in
confidence all trade secrets and confidential information, that it owns or uses.
No other person or entity has any rights to any of the Intellectual Property
owned or used by the Company, and, to the knowledge of the Stockholders and the
Company, no other person or entity is infringing, violating or misappropriating
any of the Intellectual Property.
(b) None of the Intellectual Property infringes, violates or constitutes a
misappropriation of (or in the past infringed, violated or constituted a
misappropriation of) any Intellectual Property rights of any other person or
entity. The Company has not received any
-12-
complaint, claim or notice alleging any such infringement, violation or
misappropriation, and to the knowledge of the Stockholders and the Company,
there is no basis for any such complaint, claim or notice.
(c) Schedule 3.10(c) of the Disclosure Schedule identifies, with respect
----------------
to the business of the Company, each (i) trademark, copyright and patent
registration, (ii) pending trademark, copyright and patent application and (iii)
license or other agreement pursuant to which the Company has granted any rights
to any third party with respect to any of its Intellectual Property. The
Company has delivered to the Buyer correct and complete copies of all such
patent, trademark and copyright registrations and applications (as amended to
date) and such licenses and agreements (as amended to date) and have
specifically identified and made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership of, and any
claims or disputes relating to, each such item. With respect to each item of
Intellectual Property that the Company owns:
(i) the Company possesses all right, title and interest in and to
such item;
(ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction; and
(iii) the Company has not agreed to indemnify any person or entity
for or against any infringement, misappropriation or other conflict with respect
to such item.
(d) Except for commercially available software subject to standard
"shrinkwrap" licenses, Schedule 3.10(d) identifies each item of Intellectual
----------------
Property used in the operation of the business of the Company at any time during
the period covered by the Financial Statements, or that the Company plans to use
in connection with the business of the Company in the future, that is owned by a
party other than the Company. The Company has supplied the Buyer with correct
and complete copies of all licenses, sublicenses or other agreements (as amended
to date) pursuant to which the Company uses such Intellectual Property, all of
which are listed on Schedule 3.18 and Schedule 3.10 of the Disclosure Schedule.
------------- -------------
With respect to each such item of Intellectual Property:
(i) the license, sublicense or other agreement covering such item
is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will continue to be
legal, valid and binding, enforceable and in full force and effect upon and
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing;
(iii) neither the Company nor, to the knowledge of the Stockholders,
any other party to such license, sublicense or other agreement, is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation or injunction;
-13-
(v) the Company has not agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation or other
conflict with respect to such item; and
(vi) no license or other fee is payable upon any transfer or
assignment of such license, sublicense or other agreement.
(e) Schedule 3.10(e) of the Disclosure Schedule accurately identifies and
----------------
describes in summary fashion the functions of all Software (as defined in this
Section 3.10) developed by the Company (the "Company Software") and identifies
the nature of the rights therein of the Company. Schedule 3.10(e) identifies
----------------
all computer programs, libraries, databases or other software not owned by the
Company but embedded in or necessary for the use of the Company Software (the
"Third-Party Software"). The documentation, manuals, flow charts or other
materials to be transferred to the Buyer pursuant to this Agreement document in
reasonable detail all of the functions of the Company Software and Third-Party
Software and are sufficient and adequate to provide for their use by end users
reasonably skilled in the use of computer software. The Company has not
disclosed the source code for any of the Company Software or other confidential
or proprietary information constituting, embodied in or pertaining to the
Company Software to any person and has taken reasonable measures to prevent such
disclosure, other than disclosure of such source code to employees or
independent contractors engaged in the Company's business, in each case pursuant
to valid and binding nondisclosure agreements with such persons or entities
which are in full force and effect. All of the Company Software has been
created by regular employees of the Company within the scope of their employment
by the Company or by independent contractors of the Company who, in either case,
have executed agreements maintaining the confidentiality of the Company Software
and expressly assigning, in the case of such regular employees and such
independent contractors, all such regular employees and such independent
contractors' right, title and interest in the Company Software to the Company.
The Company has not distributed the Company Software or Third-Party Software
except pursuant to and in compliance with the Contracts (as defined in Section
3.18 of this Agreement). No licensees are permitted to distribute the Company
Software except pursuant to a valid written sublicense agreement, a form of
which has been provided to the Buyer. No third party may legally use the
Company Software except pursuant to a written license agreement, a form of which
has been provided to the Buyer or a sublicense agreement, as described above.
(f) "Intellectual Property" means, with respect to the business of the
Company, all (i) patents, patent applications, patent disclosures and all
related continuation, continuation-in-part, divisional, reissue, reexamination,
utility model, certificate of invention and design patents, patent applications,
registrations and applications for registrations; (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names including, without
limitation, "Envenue, Inc.", and registrations and applications for registration
thereof; (iii) copyrights and registrations and applications for registration
thereof (including moral rights); (iv) mask works and registrations and
applications for registration thereof; (v) computer software, data and
documentation; (vi) trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research and development
information, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information; (vii) tools and utilities and any related know-
how
-14-
employed or otherwise utilized by the Company; (viii) other proprietary rights
relating to any of the foregoing and (ix) copies and tangible embodiments
thereof.
(g) "Software" means all copies of and media containing all source code,
object code, flow charts, program descriptions, program listings, libraries,
tools, utilities, databases, data, diagrams, diagnostics, alpha and beta
versions and all related documentation and commentaries, owned, licensed or used
by the Company in the conduct of the Company's business.
3.11 Leases. Schedule 3.11 of the Disclosure Schedule sets forth (a)
------ -------------
a true, correct and complete list as of the date hereof of all leases of real
property, identifying separately each ground lease, to which the Company is a
party (collectively, the "Leases"). True, correct and complete copies of all
Leases and all amendments, modifications and supplemental agreements thereto,
have previously been delivered by the Stockholders or the Company to the Buyer.
The Leases are in full force and effect, are binding and enforceable against
each of the parties thereto in accordance with their respective terms and, have
not been modified or amended since the date of delivery to the Buyer. No party
to any Lease has sent written notice to the other claiming that such party is in
default thereunder and that such default remains uncured. There has not
occurred any event which would constitute a breach of or default in the
performance of any covenant, agreement or condition contained in any Lease, nor
has there occurred any event which with the passage of time or the giving of
notice or both would constitute such a breach or material default. The Company
is not obligated to pay any leasing or brokerage commission relating to any
Lease and will not have any obligation to pay any leasing or brokerage
commission upon the renewal of any Lease. No construction, alteration or other
leasehold improvement work with respect to any of the Leases remains to be paid
for or to be performed by the Company.
3.12 Real Estate. The Company does not own any real property.
-----------
3.13 Tangible Assets. The Company owns or leases all tangible assets
---------------
necessary for the conduct of its business as presently conducted.
3.14 Inventory. The Company has no inventory of raw materials or
---------
goods to be sold or licensed.
3.15 Accounts Receivable. Schedule 3.15 of the Disclosure Schedule
------------------- -------------
sets forth a true, correct and complete list of the accounts and notes
receivable of the Company (the "Accounts Receivable"), including the aging
thereof as of the Closing Date. All Accounts Receivable arose out of the sales
of products or services in the ordinary course of business and are collectible
in the face value thereof within 90 days after the date of invoice, using normal
collection procedures.
3.16 Tax Matters.
-----------
(a) The Company has filed all Tax Returns (as defined below) that it was
required to file, and all such Tax Returns were correct and complete in all
material respects. The Company has paid all Taxes (as defined below) (whether
or not shown on such Tax Returns) that were due and payable. All Taxes that the
Company is or was required by law to withhold or collect have
-15-
been duly withheld or collected and, to the extent required, have been paid to
the proper governmental agency or authority.
(b) The Company has delivered to the Buyer correct and complete copies of
all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since the Company's
inception. To date, the federal income Tax Returns of the Company have not been
audited by the Internal Revenue Service or any other government agency or
authority. No examination or audit of any Tax Return of the Company by any
governmental agency or authority is currently in progress or, to the knowledge
of the Stockholders and the Company, threatened or contemplated. The Company
has not been informed by any jurisdiction that the jurisdiction believes that
the Company was required to file any Tax Return that was not filed.
(c) The Company has not waived any statute of limitations with respect to
Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency.
(d) The Company is not a "consenting corporation" within the meaning of
Section 341(f) of the Code, and none of the assets of the Company are subject to
an election under Section 341(f) of the Code.
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
(f) The Company has no actual or potential liability for any Taxes of any
person (other than the Company) under Treasury Regulation Section 1.1502-6 (or
any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise.
(g) None of the assets of the Company is property that is required to be
treated as being owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Code.
(h) None of the assets of the Company is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(i) None of the assets of the Company directly or indirectly secures any
debt the interest on which is tax exempt under Section 103(a) of the Code.
(j) The Company has not undergone a change in its method of accounting
(and will not undergo a change as a result of the purchase of the Shares by the
Buyer) resulting in an adjustment to its taxable income pursuant to Section
481(a) of the Code.
(k) At all times since its inception, the Company has been taxed for
United States federal income tax purposes under Subchapter C of the Code, and
the Company has not at any time made an election under Section 1361 of the Code.
-16-
(l) The Company is not and has never been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns, other than a group of which only the Company is
or was a member.
(m) The Company has never participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code.
(n) The Company has not used the installment method to defer any material
liability for Taxes to any taxable period ending after the Closing Date. There
is no limitation on the utilization by the Company of its net operating losses,
built-in losses, tax credits or other similar items under Sections 382, 383, or
384 of the Code (other than any such limitation arising as a result of the
consummation of the Share purchase as contemplated by this Agreement).
(o) The Company has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that could obligate it to make any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Code.
(p) For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies or other similar assessments or liabilities, including, without
limitation, income, gross receipts, ad valorem, premium, value-added, excise,
real property, personal property, sales, use, transfer, withholding, employment,
payroll and franchise taxes imposed by the United States of America or any
state, local or foreign government, or any agency thereof, or other political
subdivision of the United States of America or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
3.17 Books and Records. The general ledgers and books of account of
-----------------
the Company, all federal, state and local income, franchise, property and other
tax returns filed by the Company are in all material respects complete and
correct and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations.
3.18 Contracts and Commitments.
-------------------------
(a) Schedule 3.18(a) of the Disclosure Schedule contains a true, complete
----------------
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all loan agreements, indentures, mortgages and guaranties to
which the Company is a party or by which the Company or any of its property is
bound;
(ii) all pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases and lease
purchase agreements to which the Company is a party or by which the Company or
any of its property is bound;
-17-
(iii) all contracts, agreements, commitments, purchase orders or
other understandings or arrangements to which the Company is a party or by which
the Company or any of its property is bound which (A) involve payments or
receipts by the Company of more than $10,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under which full performance
(including payment) has not been rendered by all parties thereto or (B) which
may materially adversely affect the condition (financial or otherwise) or the
properties, assets, business or prospects of the Company;
(iv) all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, pension plans, retirement plans, employee stock option or stock
purchase plans and group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments to which the Company is a
party or by which the Company or any of its property is bound;
(v) all agency, distributor, sales representative, franchise or
similar agreements to which the Company is a party or by which the Company or
any of its property is bound;
(vi) all contracts, agreements or other understandings or
arrangements between the Company (including, but not limited to, any Tax sharing
arrangements) or between the Company and its Affiliates;
(vii) all leases, whether operating, capital or otherwise, under
which the Company is lessor or lessee;
(viii) all contracts, agreements and other documents or information
relating to past disposal of waste (whether or not hazardous) with respect to
the business of the Company;
(ix) all contracts, agreements or other arrangements imposing a non-
competition or non-solicitation obligation on the Company;
(x) all contracts, agreements, licenses, commitments, purchase
orders or other understandings relating to the business of the Company to which
the Company is a party obligated to or pursuant to which the Company (A) is
otherwise obligated to perform maintenance services for (I) a period in excess
of one year subsequent to the Closing Date or (II) nominal or no consideration
or (B) has licensed its products for nominal or no consideration; and
(xi) any other material agreements or contracts entered into by the
Company.
(b) Each Contract is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and none of the
Stockholders or the Company has any knowledge that any Contract is not a valid
and binding agreement of the other parties thereto. The Company has fulfilled
all material obligations required pursuant to the Contracts to have been
performed by the Company on its part prior to the date of this Agreement, and
none of the Stockholders or the Company has reason to believe that the Company
will not be able to fulfill, when due, all of its obligations under the
Contracts which remain to be performed after the date of this Agreement. The
Company is not in breach of or default under any Contract, and
-18-
no event has occurred which with the passage of time or giving of notice or both
would constitute such a default, result in a loss of rights or result in the
creation of any lien, charge or encumbrance, thereunder or pursuant thereto. To
the knowledge of the Stockholders and the Company, there is no existing breach
or default by any other party to any Contract, and no event has occurred which
with the passage of time or giving of notice or both would constitute a default
by such other party, result in a loss of rights or result in the creation of any
lien, charge or encumbrance thereunder or pursuant thereto. There are not and,
since the Company's inception, have not been, any claims of a non-routine nature
relating to the Company by customers of the Company under any warranties,
whether express or implied. The Company is not restricted by any Contract from
carrying on its business anywhere in the world. The Company has no written or
oral contracts to sell products or perform services which are expected to be
performed at, or to result in, a loss.
(c) True, correct and complete copies of all Contracts have previously
been delivered by the Company or the Stockholders to the Buyer.
3.19 Compliance with Agreements and Laws.
-----------------------------------
(a) The Company has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state and
local authorities necessary to conduct its business and own and operate its
assets (collectively, the "Permits"). Schedule 3.19 of the Disclosure Schedule
-------------
sets forth a true, correct and complete list of all such Permits, copies of
which have previously been delivered by the Company or the Stockholders to the
Buyer. The Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties. The business of the Company as
conducted since January 1, 1992 has not violated, and on the date hereof does
not violate any federal, state, local or foreign laws, regulations or orders
(including, but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste,
conservation, or corrupt practices), the enforcement of which would have a
material adverse effect on the results of operations, condition (financial or
otherwise), assets, properties business or prospects of the Company. The
Company has not had notice or communication from any federal, state or local
governmental or regulatory authority or otherwise since January 1, 1992 of any
such violation or noncompliance.
(b) The Company is not in violation of any federal, state, county or
municipal authority law, ruling, order, decree, regulation, permit, or other
environmental or hazardous waste requirement applicable to the Company relating
to health, safety, pollution, hazardous waste, environmental or other similar
matters.
(c) For purposes of this Section 3.19, "hazardous waste" means "hazardous
waste" as defined in the Resource Conservation and Recovery Act, as amended, 42
U.S.C. (S)6921 et. seq., and the regulations adopted pursuant thereto.
3.20 Employee Relations.
------------------
-19-
(a) The Company is in compliance with all federal, state and municipal
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practice, and there are no arrears in the payment of wages, unemployment Taxes
or social security Taxes.
(b) None of the employees of the Company is represented by any labor
union. There is no unfair labor practice complaint against the Company pending
before the National Labor Relations Board or any state or local agency. There is
no pending labor strike or other material labor trouble affecting the Company
(including, without limitation, any organizational drive). There is no material
labor grievance pending against the Company. There is no pending representation
question respecting the employees of the Company. There are no pending
arbitration proceedings arising out of or under any collective bargaining
agreement to which the Company is a party, or to the knowledge of the
Stockholders and the Company any basis for which a claim may be made under any
collective bargaining agreement to which the Company is a party. The Company has
no continuing obligation for health, life, medical insurance or other similar
fringe benefits to any former employee of the Company.
(c) Schedule 3.20(c) sets forth a true, correct and complete list of the
----------------
current payroll of the Company, including the job descriptions and salary or
wage rates of each of their employees, showing separately the maximum amounts
paid or payable as salary and bonus payments for the period commencing at the
Company's inception and ending on the date of this Agreement and the projected
maximum amounts paid and payable as salary and bonus payments for the fiscal
year ending December 31, 2000.
(d) For purposes of this Section 3.20, the term "employee" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the business of the Company.
3.21 Employee Plans. All of the pension, benefit, profit sharing,
--------------
stock, retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance or separation pay, change in control or other similar
plans, programs and agreements, whether reduced to writing or not, relating to
the employees engaged in the business and operations of the Company, or
maintained at any time by the Company with respect to such employees (the
"Employee Plans"), are in compliance, in all material respects, and the Company
has taken all actions with respect to such Employee Plans required to comply,
and not taken any actions which are not in compliance, with the requirements
prescribed by any and all statutes, orders or governmental rules or regulations
currently in effect, including, without limitation, the Employee Retirement
Income Security Act of 1974, as amended, and the Code, applicable to the
Employee Plans.
3.22 Absence of Certain Changes or Events.
------------------------------------
(a) Since the Balance Sheet Date, the Company has not entered into any
transaction which is not in the Ordinary Course of Business, and, without
limiting the generality of the foregoing, the Company has not:
(i) incurred any material obligation or liability for borrowed
money;
-20-
(ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than current liabilities reflected in the Balance
Sheet;
(iii) mortgaged, pledged or subjected to lien, charge or other
encumbrance any of its properties or assets;
(iv) sold or purchased, assigned or transferred any of its tangible
assets or canceled any debts or claims, except for inventory sold and raw
materials purchased in the ordinary course of business;
(v) made any material amendment to or termination of any Contract
or done any act or omitted to do any act which would cause the breach of any
Contract;
(vi) suffered any losses of personal or real property, whether
insured or uninsured, and whether or not in the control of the Company, as the
case may be, in excess of $10,000 in the aggregate, or waived any rights of any
value;
(vii) authorized any declaration or payment of dividends by the
Company which is not wholly owned by the Company, or paid any such dividends, or
authorized any transfer of assets of any kind whatsoever by the Company to any
of its stockholders with respect to any shares of their capital stock;
(viii) authorized or issued recall notices for any of its products or
initiated any safety investigations;
(ix) received notice of any litigation, warranty claim or products
liability claims;
(x) made any material change in the terms, status or funding
condition of any Employee Plan;
(xi) engaged any new employee for a salary in excess of $25,000 per
annum;
(xii) made, or committed to make, any changes in the compensation
payable to any officer, director, employee or agent of the Company, or any bonus
payment or similar arrangements made to or with any of such officers, directors,
employees or agents;
(xiii) incurred any capital expenditure in excess of $5,000 in any
instance or $10,000 in the aggregate;
(xiv) made any material alteration in the manner of keeping the
books, accounts or records of the Company, or in the accounting practices
therein reflected; or
(xv) suffered any material adverse change in the results of
operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Company.
-21-
(b) None of the Stockholders and the Company have knowledge of any
existing or threatened occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on the business,
properties, assets, condition (financial or otherwise) or prospects of the
Company.
3.23 Customers. Schedule 3.23 of the Disclosure Schedule sets forth a
--------- -------------
true, correct and complete list of the names and addresses of each customer of
the Company which accounted for more than 1% of the revenues of the Company for
the period commencing at the Company's inception and ending on the Balance Sheet
Date. The Company has good customer relations and none of the customers of the
Company has notified the Company that it intends to discontinue its relationship
with the Company.
3.24 Prepayments and Deposits. Schedule 3.24 of the Disclosure
------------------------ -------------
Schedule sets forth all prepayments and deposits, which have been received by
the Company as of the date hereof, from customers for products to be shipped, or
services to be performed, after the Closing Date.
3.25 Indebtedness to and from Officers, Directors and Stockholders.
-------------------------------------------------------------
The Company is not indebted, directly or indirectly, to any person who is an
officer, director or stockholder of the Company or any Affiliate of any such
person in any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, all of which have been reflected on the
Financial Statements, and no such officer, director, stockholder or Affiliate is
indebted to the Company except for advances made to employees of the Company in
the Ordinary Course of Business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
3.26 Banking Facilities. Schedule 3.26 of the Disclosure Schedule
------------------ -------------
sets forth a true, correct and complete list of:
(a) each bank, savings and loan or similar financial institution in which
the Company has an account or safety deposit box and the numbers of the accounts
or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such account or to
have access to any such safety deposit box facility, together with a description
of the authority (and conditions thereof, if any) of each such person with
respect thereto.
3.27 Powers of Attorney and Suretyships. The Company has no general
----------------------------------
or special powers of attorney outstanding (whether as grantor or grantee
thereof) or has any obligation or liability (whether actual, accrued, accruing,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any person, corporation,
partnership, limited liability company, joint venture, association, organization
or other entity, except as endorser or maker of checks or letters of credit,
respectively, endorsed or made in the ordinary course of business.
3.28 Conflicts of Interest. No officer, director or stockholder of
---------------------
the Company nor, to the knowledge of the Stockholders and the Company, any
Affiliate of any such person, now has or within the last three years had, either
directly or indirectly:
-22-
(a) an equity or debt interest in any corporation, partnership, limited
liability company, joint venture, association, organization or other person or
entity which furnishes or sells or during such period furnished or sold services
or products to the Company, or purchases or during such period purchased from
the Company any goods or services, or otherwise does nor during such period did
business with the Company; or
(b) a beneficial interest in any contract, commitment or agreement to
which the Company is or was a party or under which any of them is or was
obligated or bound or to which any of their respective properties may be or may
have been subject, other than stock options and other contracts, commitments or
agreements between the Company and such persons in their capacities as
employees, officers or directors of the Company.
3.29 Regulatory Approvals. All consents, approvals, authorizations or
--------------------
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company and which are necessary for the execution
and delivery by the Stockholders and the Company of this Agreement or any other
documents to be executed and delivered by the Stockholders or the Company in
connection herewith are set forth on Schedule 3.29 of the Disclosure Schedule
-------------
and have been, or prior to the Closing Date will be, obtained and satisfied.
3.30 Disclosure. The information concerning the Stockholders and the
----------
Company set forth in this Agreement, the Schedules and Annexes appended to this
Agreement, the Disclosure Schedule and any document, statement or certificate
furnished or to be furnished to the Buyer pursuant to this Agreement, does not
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein or necessary to make the
statements and facts contained herein or therein, in light of the circumstances
in which they are made, not false and misleading. The Stockholders and the
Company have disclosed to the Buyer all material facts pertaining to the
transactions contemplated by this Agreement, the Annexes appended hereto and the
Disclosure Schedule. Copies of all documents heretofore or hereafter delivered
or made available to the Buyer pursuant to this Agreement were or will be
complete and accurate copies of such documents.
4. Representations of the Buyer
----------------------------
The Buyer represents and warrants to each Stockholder as follows:
(a) the Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
power and authority (corporate and other) to own its properties and to carry on
its business as now being conducted;
(b) the Buyer has full power to execute and deliver this Agreement and the
other agreements contemplated herein to which it is a party, and to consummate
the transactions contemplated hereby and thereby;
(c) the execution and delivery by the Buyer of this Agreement and the
other agreements to which it is a party and which are referenced in this
Agreement or any schedule annexed to this Agreement, and the consummation by the
Buyer of all transactions contemplated hereunder and thereunder, have been duly
authorized by all requisite corporate action;
-23-
(d) this Agreement and the other agreements to which the Buyer is a party
and which are referenced in this Agreement or any schedule annexed to this
Agreement have been duly executed by the Buyer;
(e) this Agreement and the other agreements to which the Buyer is a party
and which are referenced in this Agreement or any schedule annexed to this
Agreement constitute the valid and legally binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms; and
(f) No Intermediary has acted for the Buyer in connection with this
Agreement or the transactions contemplated by this Agreement, and no
Intermediary is entitled to any brokerage or finder's fee or other commissions
in respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of the Buyer.
5. Intentionally Omitted
---------------------
6. Conditions to Obligations of the Buyer
--------------------------------------
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
6.01 Continued Truth of Representations and Warranties of the
--------------------------------------------------------
Stockholders and the Company; Compliance with Covenants and Obligations; Absence
--------------------------------------------------------------------------------
of Adverse Change. The representations and warranties of the Stockholders and
-----------------
the Company in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date
(even though they purport to have been given on a date prior to the Closing
Date), except for any changes permitted by the terms hereof or consented to in
writing by the Buyer. The Stockholders and the Company shall have performed and
complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by each
of them prior to or at the Closing Date. Since the Balance Sheet Date, there
shall have been no material adverse change in the business, properties,
operations, condition (financial or otherwise), prospects, assets or liabilities
of the Company or the Company's business.
6.02 Governmental Approvals. All governmental agencies, department,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Stockholders or the Company of the transactions
contemplated by this Agreement and the operation of the business of the Company
by the Buyer shall have consented to, authorized, permitted or approved such
transactions.
6.03 Consents and Acknowledgments. The Stockholders and the Company
----------------------------
shall have received to the Buyer's satisfaction all requisite consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Stockholders and the Company to consummate
the transactions contemplated by this Agreement, including, without limitation,
those set forth on Schedule 3.04 of the Disclosure Schedule.
-------------
-24-
6.04 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own the Shares or to own or operate the business of
the Company after the Closing.
6.05 Certain Approvals.
-----------------
(a) The Board of Directors of the Company and the Stockholders shall have:
(i) approved this Agreement and the transactions contemplated
hereby;
(ii) ratified and approved as of their respective dates of issuance
and/or grant, as the case may be, the issuances and grants by the Company of all
of the Company's outstanding securities, consisting solely of (A) the Shares and
(B) any options to purchase Common Stock described in Schedule 3.02 of the
-------------
Disclosure Schedule ("Company Options"); and
(iii) approved an amendment to Section 8 of the Company's 2000
Incentive and Non-Statutory Stock Option Plan clarifying that stock acquisitions
of greater than 50% of the outstanding shares of Common Stock of the type
contemplated by this Agreement constitute a "reorganization" for purposes of
said Section (the "Plan Amendment").
(b) All holders of Company Options prior to the approval and adoption of
the Plan Amendment shall have consented to the Plan Amendment.
(c) The Board of Directors of the Company shall have (i) cancelled all
Company Options, effective as of the Closing, to the extent not then exercised
and (ii) provided written notice to each holder of Company Options of such
cancellation and the right to exercise such Company Options to the extent that
the same are then exercisable.
6.06 Opinion of Counsel. The Buyer shall have received an opinion of
------------------
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the Founders and the Company dated as of the
Closing Date, in the form appended hereto as Annex 6.06, and as to such other
----------
matters as may be reasonably requested by the Buyer or its counsel.
6.07 Schedule SH. As of the Closing, Schedule SH, as appended to this
-----------
Agreement on the date hereof, shall accurately describe all of the issued and
outstanding securities of the Company, all rights to acquire any such securities
and all commitments of any kind for the issuance of securities of the Company.
6.08 Cash Available for Working Capital Purposes. On the Closing
-------------------------------------------
Date, the Company will have available cash for working capital purposes of not
less than $4,000.
6.09 Repayment of Indebtedness. On the Closing Date, the Company
-------------------------
shall have no long-term indebtedness, and the aggregate amount of short-term
indebtedness of the Company shall not exceed $50,000.
-25-
6.10 Trade Payables. On the Closing Date, the Company will not have
--------------
obligations, in excess of $50,000 in the aggregate, to suppliers and vendors of
goods and services and other trade creditors which have been outstanding for
more than 30 days.
6.11 Closing Deliveries. The Buyer shall have received at or prior to
------------------
the Closing such documents, instruments or certificates from the Stockholders
and/or the Company as the Buyer may reasonably request including, without
limitation:
(a) the stock certificates representing the Shares duly endorsed in
accordance with Section 1.01 of this Agreement;
(b) a balance sheet of the Company as of the Closing Date prepared in
accordance with the Company's past practice and certified by either the
Company's President or Chief Financial Officer which fairly presents, as of the
Closing Date, the financial condition, retained earnings, assets and liabilities
of the Company;
(c) such certificates of the Company's officers and of the Stockholders
and such other documents evidencing satisfaction of the conditions specified in
this Section 6 as the Buyer shall reasonably request;
(d) a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including Tax) of the Company in
Delaware;
(e) a certificate of the Secretary of the Company attesting to the
incumbency of the Company's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Section 3.01 of this Agreement;
(f) certificates of appropriate governmental officials in each state in
which the Company is required to qualify to do business as a foreign corporation
as to the due qualification and good standing (including Tax) of the Company in
each such jurisdiction;
(g) written resignations of all members of the Company's Board of
Directors;
(h) the original corporate minute books of the Company and all corporate
seals; and
(i) if requested by the Buyer, (i) the Company will deliver to the Buyer
and to the Internal Revenue Service notices that the Shares are not a "U.S. real
property interest" in accordance with the Treasury Regulations under Sections
897 and 1445 of the Code, or (ii) the Stockholders will deliver to the Buyer
certifications that they are not foreign persons in accordance with the Treasury
Regulations under Section 1445 of the Code.
7. Conditions to Obligations of the Stockholders.
---------------------------------------------
The obligations of the Stockholders under this Agreement are subject
to the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholders or the Stockholders' Representative:
-26-
7.01 Continued Truth of Representations and Warranties of the Buyer;
---------------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
-----------------------------------------
of the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date
(even though they purport to have been given on a date prior to the Closing
Date), except for any changes permitted by the terms hereof or consented to in
writing by either the Stockholders or the Stockholders' Representative. The
Buyer shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
7.02 Governmental Approvals. All governmental agencies, departments,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
7.03 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Stockholders to transfer the Shares.
7.04 Closing Deliveries. The Stockholders' Representative shall have
------------------
received at or prior to the Closing such documents, instruments or certificates
as the Stockholders' Representative may reasonably request including, without
limitation:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 7 as the
Stockholders' Representative shall reasonably request;
(b) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the Buyer's certificate of incorporation
and bylaws; and
(c) a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including Tax) of the Buyer in the State
of Delaware.
8. Indemnification.
---------------
8.01 By the Stockholders and the Company. The Stockholders,
-----------------------------------
severally, hereby indemnify and hold harmless the Buyer and the Company from and
against all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or other expenses
for investigating or defending any actions or threatened actions) (collectively,
the "Losses") in connection with each and all of the following:
(a) any misrepresentation or breach of any representation or warranty made
by any Stockholder, the Stockholders or the Company in this Agreement;
-27-
(b) any breach of any covenant, agreement or obligation of any
Stockholder, the Stockholders or the Company contained in this Agreement or any
other agreement, certificate, instrument or document contemplated by this
Agreement or any Schedule annexed to this Agreement; and
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by any Stockholder, the Stockholders or the Company pursuant
to this Agreement or in connection with the transactions contemplated by this
Agreement.
8.02 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under this Section 8, the Buyer or the Company, as the case may
be, seeking indemnification (the "Indemnified Party"), shall promptly notify the
Stockholders' Representative of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Stockholders' Representative.
8.03 Defense by the Stockholders. In connection with any claim which
---------------------------
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person other than the Indemnified Party, the
Stockholders' Representative, at the sole cost and expense of the Stockholders,
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if the Stockholders' Representative acknowledges
to the Indemnified Party in writing the obligation of the Stockholders to
indemnify the Indemnified Party with respect to all elements of such claim. If
the Stockholders' Representative assumes the defense of any such claim or legal
proceeding, the Stockholders' Representative shall select counsel reasonably
acceptable to the Indemnified Party to conduct the defense of such claims or
legal proceedings and at the sole cost and expense of the Stockholders shall
take all steps necessary in the defense or settlement thereof. The
Stockholders' Representative shall not consent to a settlement of, or the entry
of any judgment arising from, any such claim or legal proceeding, without the
prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. If the Stockholders' Representative does not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate and
(b) the Stockholders' Representative shall be entitled to participate in (but
not control) the defense of such action, with their counsel and at their own
expense. If the Stockholders or the Stockholders' Representative thereafter
seek to question the manner in which the Indemnified Party defended such third-
party claim or the amount or nature of any such settlement, the Stockholders or
the Stockholders' Representative shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third-party claim in a reasonably prudent manner.
-28-
8.04 Payment of Indemnification Obligation. Subject to the provisions
-------------------------------------
of Section 8.06 of this Agreement, each of the Stockholders and the Buyer hereby
agree that any claim for indemnification by the Buyer or the Company (a) shall
be offset against any and all amounts payable by the Buyer (or an Affiliate
thereof) or the Company (or an Affiliate thereof), as the case may be, to any
Stockholder, including, without limitation, the Purchase Price and any
Additional Consideration and (b) other than with respect to claims for
indemnification which are based upon fraud, the offset set forth in the
preceding clause (a) of this Section 8.05 shall be the Buyer's sole and
exclusive remedy with respect to indemnification payments under this Section 8.
To the extent that any claim for indemnification by the Buyer or the Company is
offset pursuant to the first sentence of this Section 8.04, such offset shall be
applied pro rata across all Stockholders as set forth on Schedule SH.
8.05 Survival of Representations; Claims for Indemnification. All
-------------------------------------------------------
representations and warranties made by any Stockholder, the Stockholders and the
Company in this Agreement, or in any instrument or document furnished in
connection with this Agreement or the transactions contemplated hereby, shall
survive the Closing and any investigation at any time made by or on behalf of
the Indemnified Party for a period of 18 months subsequent to the Closing Date.
All such representations and warranties shall expire on the date 18 months
subsequent to the Closing Date, except for claims, if any, (a) asserted in
writing prior to such date 18 months subsequent to the Closing Date identified
as a claim for indemnification pursuant to this Section 8 or (b) which are based
upon fraud or breach of any representations or warranties contained in Sections
2 and 3.02 hereof, which shall survive the Closing and the consummation of the
transactions contemplated hereby and continue indefinitely until finally
resolved and satisfied in full.
8.06 Limitations. Notwithstanding anything to the contrary herein,
-----------
the Stockholders shall have no obligation under this Section 8 to make any
indemnity payment to the Buyer unless and until the aggregate Losses to the
Buyer exceed $25,000 (at which point the Stockholders shall become liable for
the aggregate Losses, and not just amounts in excess of $25,000). If the
Closing occurs, the aggregate liability of the Stockholders for all indemnity
payments to the Buyer under this Section 8 shall not exceed the amount of any
and all Additional Consideration paid by the Buyer pursuant to Section 1.04 of
this Agreement; provided, that, such aggregate liability limit shall be
-------- ----
increased (up to a maximum of an additional Two Million Dollars ($2,000,000)) by
the amount of all Losses experienced by the Buyer and by the Company in
connection with matters which were known to any Stockholder or the Company and
not adequately disclosed, in accordance with Section 3 of this Agreement, in the
Disclosure Schedule, or which any Stockholder or the Company was reckless or
grossly negligent in not knowing or which any Stockholder or the Company
intentionally or fraudulently did not adequately disclose to the Buyer, in
accordance with Section 3 of this Agreement, in the Disclosure Schedule or
attempt to mitigate, ameliorate or otherwise remedy. Except in cases of fraud,
the provisions of this Section 8 shall constitute the sole and exclusive remedy
of the Buyer and the Company with respect to any claims for money damages
arising under this Agreement.
9. Post-Closing Agreements.
------------------------
(a) Operational Matters.
-29-
(i) During the period (the "Operational Period") commencing on the
Closing Date and ending on the earlier to occur of (y) the date 18 months
subsequent to the Closing Date and (z) the cessation of employment by the
Company of any of the persons set forth on Schedule 9(a)(i) appended to this
----------------
Agreement (the "Founders") for Cause (as defined in this Section 9(a)(i)) or
voluntarily on the part of such Founder, the Buyer shall:
(A) Permit the Founders generally to operate the Company,
allowing the Founders control over revenues and expenses, and permit the Company
to operate under a separate budget from the Buyer, all subject to reasonable
oversight and approval by the Buyer; and
(B) Provide up to Five Million Five Hundred Thousand Dollars
($5,500,000) (the "Buyer Funding") over the course of the Operational Period to
fund the Company's operations, including, without limitation, business expenses,
employee benefits, equipment costs and lease and facilities costs, which Buyer
Funding shall include:
(I) cash; and
(II) all costs and expenses associated with third party
services provided to the Company through the Company's relationship with the
Buyer, including, without limitation, costs and expenses associated with general
and administrative services, insurance and telecommunications and other
technology services, but specifically excluding co-location services provided by
Exodus Communications to the extent that the Company secures dependable and
reasonably appropriate co-location services from another party at a cost savings
to the Company equal to at least 20% from the cost of the similar services
otherwise to be provided to the Company by Exodus Communications under this
Section 9(a)(I)(B(II) (provided, that, securing such substitute co-location
-------- ----
services does not conflict with the Buyer's agreement with Exodus Communications
or otherwise significantly compromise the Buyer's relationship with Exodus
Communications).
(C) Utilize up to 18% (the "Promotion Percentage") of the
advertising and promotion which the Buyer uses pursuant to Section 2 of that
certain Advertising and Promotion Agreement dated as of June 30, 1999 by and
among CBS Corporation, Banyan Systems Incorporated and the Buyer (the
"Advertising Agreement") towards the integrated promotion of the Product
Directory under the Buyer's branded advertising. Product Directory promotion
integrated into such advertising will be on par with other features and
functionality promoted in such advertising. Creation and placement of such
advertising will be (I) solely at the Buyer's discretion, (II) to the extent
deemed appropriate by the Buyer and (III) as is otherwise consistent with the
provisions of the Advertising Agreement (consistent with past practice between
the Buyer and CBS Corporation). The Promotion Percentage shall be calculated
based upon the cash value of the advertising and promotion, as determined in
accordance with terms and provisions of the Advertising Agreement, which the
Buyer actually uses pursuant to Section 2 of the Advertising Agreement; and
(D) Use its best efforts, to the extent commercially reasonable,
to integrate the Product Directory into all of the Buyer's existing products and
sales operations.
-30-
For purposes of this Section 9(a), "Cause" shall mean, with respect to any
Founder: (1) conviction or pleading guilty (including a plea of nolo contendere)
with respect to the commission of a felony, (2) acts of dishonesty or moral
turpitude which are materially detrimental to the Buyer and/or its affiliates,
(3) failure of such Founder to obey the reasonable and lawful orders of the
Buyer's Board of Directors or any executive officer of the Buyer after written
demand that such Founder do so, (4) gross negligence by such Founder in the
performance of, or willful disregard by such Founder of, such Founder's
significant obligations to the Buyer or (5) the breach by such Founder of any of
such Founder's obligations of confidentiality, nonsolicitation or noncompetition
with respect to the Buyer or any of the Buyer's Affiliates.
(ii) As soon after the Closing as is practicable, the Company will
move its principal place of business from its present location to a new location
within 25 miles of the Buyer's offices in Westboro, Massachusetts, which new
location, the facilities thereat and the terms of the Company's lease thereof
shall be consented to by the Buyer (which consent shall not be unreasonably
withheld). Solely for the purpose of clarification, as with all other
operational costs and expenses experienced by the Company during the Operational
Period, all costs and expenses associated with such relocation along with all
rent, build-out, furnishing, equipment and other costs and expenses related to
such new facilities shall be funded by and out of the Buyer Funding.
(iii) Notwithstanding anything in this Agreement to the contrary, if
as of the date six months subsequent to the Closing Date the Company has not
achieved all of the interim targets set forth in this Section 9(a)(iii)
(collectively, the "Six Month Interim Targets"), the Buyer may at any time
within 45 days of such date, at its option and in its sole discretion, provide
written notice to the Stockholders' Representative that all of the Buyer's
obligations pursuant to Section 9(a)(i) of this Agreement, including, without
limitation, the Buyer's obligation to provide the Buyer Funding, shall be
terminated effective as of the date six months subsequent to the Closing Date.
Upon the delivery of such notice, all of the Buyer's obligations pursuant to
Section 9(a)(i) of this Agreement, including, without limitation, the Buyer's
obligation to provide the Buyer Funding, shall terminate, effective as of the
date six months subsequent to the Closing Date. The Six Month Interim Targets
are as follows:
(A) Intentionally omitted.
(B) During the period commencing on the Closing Date and ending
on the date six months subsequent to the Closing Date, the Company shall have
achieved Gross Revenue of at least Two Million Seven Hundred Thousand Dollars
($2,700,000); and
(C) As of the date six months subsequent to the Closing Date,
either (I) at least 10.8% of all then-existing Outlets shall have entered into a
binding written agreement with the Company for Monthly Revenue Per Outlet equal
to a minimum of Ten Dollars ($10), (II) the Stockholders' Representative has
provided the Buyer with verifiable evidence reasonably acceptable to the Buyer
that Monthly Revenue Per Outlet for at least 10.8% of all then-existing Outlets
has been at least Ten Dollars ($10) for a minimum of six consecutive months or
(III) the Stockholders' Representative has provided the Buyer with verifiable
evidence reasonably acceptable to the Buyer that the arithmetic mean Monthly
Revenue Per Outlet of at least 21.6%
-31-
of all then-existing Outlets has been at least Ten Dollars ($10) for a minimum
of six consecutive months.
(iv) Notwithstanding anything in this Agreement to the contrary, if as
of the date 12 months subsequent to the Closing Date the Company has not
achieved all of the interim targets set forth in this Section 9(a)(iv)
(collectively, the "12 Month Interim Targets"), the Buyer may at any time within
45 days of such date, at its option and in its sole discretion, provide written
notice to the Stockholders' Representative that all of the Buyer's obligations
pursuant to Section 9(a)(i) of this Agreement, including, without limitation,
the Buyer's obligation to provide the Buyer Funding, shall be terminated
effective as of the date 12 months subsequent to the Closing Date. Upon the
delivery of such notice, all of the Buyer's obligations pursuant to Section
9(a)(i) of this Agreement, including, without limitation, the Buyer's obligation
to provide the Buyer Funding, shall terminate, effective as of the date 12
months subsequent to the Closing Date. The 12 Month Interim Targets are as
follows:
(A) The Company shall have entered into at least two Carrier
Deals, all of which remain in full force and effect as of the date 12 months
after the Closing Date and all of which will remain, pursuant to their
respective terms, in full force and effect as of the date 12 months after the
Closing Date;
(B) During the period commencing on the Closing Date and ending
on the date 12 months subsequent to the Closing Date, the Company shall have
achieved Gross Revenue of at least Six Million Six Hundred Sixty-Six Thousand
Six Hundred Sixty-Seven Dollars ($6,666,667); and
(C) As of the date 12 months subsequent to the Closing Date,
either (I) at least 26.6% of all then-existing Outlets shall have entered into a
binding written agreement with the Company for Monthly Revenue Per Outlet equal
to a minimum of Ten Dollars ($10), (II) the Stockholders' Representative has
provided the Buyer with verifiable evidence reasonably acceptable to the Buyer
that Monthly Revenue Per Outlet for at least 26.6% of all then-existing Outlets
has been at least Ten Dollars ($10) for a minimum of six consecutive months or
(III) the Stockholders' Representative has provided the Buyer with verifiable
evidence reasonably acceptable to the Buyer that the arithmetic mean Monthly
Revenue Per Outlet of at least 53.4% of all then-existing Outlets has been at
least Ten Dollars ($10) for a minimum of six consecutive months.
(v) The Parties acknowledge and agree that the covenants contained in
this Section 9(a) are designed to enable the Stockholders to have a fair
opportunity to meet the goals set forth in Section 1.04 of this Agreement and
earn the Additional Consideration. The Parties also acknowledge and agree that
this Section 9(a) shall not be construed as giving any Stockholder (including
any Founder) the right to continued employment or any other relationship with
the Buyer or its Affiliates, or affecting the ability of any Stockholder
(including any Founder), the Buyer or its Affiliates to terminate the employment
or other relationship. The Buyer, on behalf of itself and its Affiliates,
expressly reserves the right at any time to dismiss or otherwise terminate its
employment or other relationship with any Stockholder (including any Founder)
free from any liability or claim under this Section 9(a).
-32-
(vi) As set forth in Section 9(a)(i)(A) of this Agreement, the
Parties agree that during the Operational Period the Company shall operate under
a separate budget from the Buyer, subject to reasonable oversight and approval
by the Buyer. The Parties acknowledge that the amount of the Buyer Funding was
determined in part by reference to the budget provided by the Company to the
Buyer and appended to this Agreement as Annex 9(a)(vi) (the "Company Budget").
--------------
Subject to Sections 9(a)(iii) and 9(a)(iv) of this Agreement, and without
committing either the Buyer or the Company to a predetermined funding schedule
for the Buyer Funding, the Parties (A) agree that the Buyer and the Company
shall work together to develop a budget or budgets for the Company and (B)
acknowledge that the Company Budget may represent a reasonable and fair model
from which such budget(s) may be derived. Notwithstanding anything in this
Section 9(a)(vi) to the contrary, in no event shall the Buyer Funding exceed
$5,500,000.
(b) Proprietary Information.
-----------------------
(i) Each of the Stockholders and each of their Affiliates shall hold
in confidence and shall use their best efforts to have all officers, directors
and personnel who continue after the Closing to be employed by any such
Stockholder or any Affiliate thereof to hold in confidence all knowledge and
information of a private, secret or confidential nature with respect to the
business, business relationships or financial affairs of the Company and not to
disclose, publish or make use of the same without the consent of the Buyer,
except to the extent that such information shall have become public knowledge
other than by breach of this Agreement by the Stockholders.
(ii) If (A) the employment of an officer, director or other employee
of a Stockholder or any Affiliate thereof, to whom secret or confidential
knowledge or information concerning the business of the Company has been
disclosed, is terminated and (B) such individual is subject to an obligation to
maintain such knowledge or information in confidence after such termination, the
Stockholders shall, upon request by the Buyer, take all reasonable steps at
their expense to enforce such confidentiality obligation in the event of an
actual or threatened breach thereof. Any legal counsel retained by any such
Stockholder in connection with any such enforcement or attempted enforcement
shall be selected by such Stockholder, but shall be subject to the approval of
the Buyer, which approval shall not be unreasonably withheld.
(iii) Each Stockholder agrees that the remedy at law for any breach of
this Section 9(b) would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 9(b).
(c) No Solicitation or Hiring of Former Employees. Except as provided by
---------------------------------------------
law, for a period of two years after the Closing Date (the "Non-Solicitation
Period"), no Stockholder nor any Affiliate thereof shall directly or indirectly
recruit, solicit or hire, as an employee, officer, director, consultant,
advisor, contractor or otherwise, any person who was an employee of either the
Buyer or the Company at any time between the Company's inception and the
conclusion of the Non-Solicitation Period, or induce or attempt to induce any
employee, officer, director, consultant, adviser or contractor of the Buyer or
the Company at any time between the Company's inception and the conclusion of
the Non-Solicitation Period to terminate his employment with or otherwise cease
his relationship with, the Company or the Buyer; provided, that, notwithstanding
-------- ----
the foregoing, after the date 18 months subsequent to the Closing Date, the
-33-
following individuals may recruit, solicit and hire each other: each of the
Founders and each of the persons set forth on Schedule 9(c) appended to this
-------------
Agreement; provided, further, that notwithstanding the foregoing, each of the
-------- -------
Founders may hire each other (but may not directly or indirectly recruit or
solicit each other as an employee, officer, director, consultant, advisor,
contractor or otherwise or induce or attempt to induce each other to terminate
his employment or otherwise cease his relationship with the Company or the
Buyer).
(d) Noncompetition Agreement.
------------------------
(i) For a period of two years after the Closing Date, no Stockholder
nor any Affiliate thereof shall (whether as owner, partner, officer, director,
employee, consultant, investor, lender or otherwise, except as the holder of not
more than 1% of the outstanding stock of a publicly held company): (A) develop,
design, produce, market, sell or render (or assist any other person in
developing, designing, producing, marketing, selling or rendering) products or
services competitive with those developed, designed, produced, marketed, sold or
rendered by the Company on or prior to the Closing Date, or (B) engage in any
business competitive with the business of the Company as conducted on the date
hereof or on the Closing Date, in the United States or any other country in
which the Company conducted its business prior to the Closing Date.
(ii) The Buyer and the Stockholders agree that the duration and
geographic scope of the noncompetition provision set forth in this Section 9(d)
are reasonable. In the event that any court of competent jurisdiction determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the Buyer and the Stockholders
agree that the provision shall remain in full force and effect for the greatest
time period and in the greatest area that would not render it unenforceable. The
Parties agree that damages are an inadequate remedy for any breach of this
provision and that the Buyer shall, whether or not it is pursuing any potential
remedies at laws, be entitled to equitable relief in the form of preliminary and
permanent injunctions without bond or other security upon any actual or
threatened breach of this Section 9(d).
10. Intentionally Omitted
---------------------
11. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs and assigns, except that the
Buyer, on the one hand, and the Stockholders and the Company on the other hand,
may not assign their respective rights and obligations hereunder without the
prior written consent of the other Party; provided that, the Buyer may assign
-------- ----
this Agreement, and its rights and obligations hereunder, to a subsidiary or
Affiliate of the Buyer. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer (or, as appropriate, a
subsidiary or Affiliate of the Buyer), the Stockholders or the Company from any
obligation or liability under this Agreement.
12. Notices
-------
Any notice, request, demand, claim, or other communication hereunder
shall be in writing. Any notice, request, demand, payment, claim, or other
communication hereunder shall
-34-
be deemed duly delivered four business days after it is sent by United States
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable overnight courier service, in each case to the
intended recipient as set forth below:
To the Buyer: With a copy to:
Switchboard Incorporated Switchboard Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer Attention: Associate General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company (Prior to the Closing): With a copy to:
Envenue, Inc. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ One Post Office Square
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company (Subsequent to the Closing): With a copy to:
Envenue, Inc. Envenue, Inc.
c/o Switchboard Incorporated c/o Switchboard Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer Attention: Associate General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Stockholders' Representative: With a copy to:
▇▇▇▇ ▇. ▇'▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
c/o Envenue, Inc. ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To a Stockholder: With a copy to:
At the respective address At the respective address, if any,
for each Stockholder set forth on Schedule SH
set forth on Schedule SH
-35-
Any Party may give any notice, request, demand, payments, claim or other
communication hereunder by personal delivery or telecopy, but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the Party or individual for
whom it is intended. Any notice sent by telecopy shall be followed by a
confirmation copy sent by reputable overnight business courier service. Any
Party may change the address to which notices, requests, demands, payments,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
13. Entire Agreement; Amendments; Attachments.
-----------------------------------------
(a) This Agreement, the Disclosure Schedule and all Annexes appended
hereto, and all agreements and instruments to be delivered by the Parties
pursuant hereto represent the entire understanding and agreement between the
Parties hereto with respect to the subject matter hereof and supersede all prior
oral and written and all contemporaneous oral negotiations, commitments and
understandings between such Parties. The Buyer, by the consent of its Board of
Directors or officers authorized by such Board, and the Stockholders'
Representative (who shall have the authority to bind all of the Stockholders)
may amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and the Stockholders' Representative.
(b) If the provisions of the Disclosure Schedule or any Annex appended
to this Agreement are inconsistent with the provisions of this Agreement, the
provisions of this Agreement shall prevail. The Disclosure Schedule and any
other Schedule and the Annexes appended hereto or to be appended hereafter are
hereby incorporated as integral parts of this Agreement.
14. Severability.
------------
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
15. Expenses.
--------
(a) The Stockholders will be responsible for all costs, fees and
expenses of the Company and the Stockholders, including, without limitation, all
fees, commissions, expenses and other payments to counsel, to any Intermediary
or to any other provider of professional services, arising on account of the
Company and/or the Stockholders and incurred in connection with this Agreement
and the transactions contemplated hereby; provided, that, the Stockholders will
-------- ----
not be responsible for the Company Counsel Fees (as defined in this Section
15(a)). For purposes of this Agreement, "Company Counsel Fees" shall mean (i)
the reasonable fees of ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP for legal services rendered to
the Company and to the Founders solely in connection with this Agreement and the
transactions contemplated hereby, based upon the hourly rates generally
applicable to other legal services rendered by ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP to
-36-
the Company and without any premium and (ii) the reasonable disbursements of
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP solely in connection with the rendering of such legal
services in connection with this Agreement and the transactions contemplated
hereby. Other than Company Counsel Fees (to the extent provided for in Section
15(b) of this Agreement), in no event will any of the costs, fees or expenses
incurred in connection with this transaction by the Company and/or the
Stockholders, including, without limitation, the fees and expenses of counsel to
the Company and the Stockholders, be billed to or paid by the Buyer or the
Company. Each Stockholder shall be responsible for payment of all sales, use and
transfer Taxes, including, without limitation, any value added, stock transfer,
gross receipts, stamp duty, and real, personal or intangible property transfer
Taxes, arising out of the conveyance of the Shares owned by such Stockholder. In
addition, the Founders will be responsible for 50% of the PwC Fees (as defined
in this Section 15(a)). As used in this Agreement, "PwC Fees" means all
reasonable fees (based upon the hourly rates generally applicable to other
similar services rendered by PricewaterhouseCoopers LLP ("PwC") to the Buyer and
without any premium) and expenses of PwC attributable to the accounting,
auditing and other professional services rendered by PwC solely in connection
with its preparation, review and audit of the financial statements of the
Company required to be filed by the Buyer with the United States Securities and
Exchange Commission pursuant to Item 7(a) of the Current Report or Form 8-K as a
result of the transactions contemplated by this Agreement (the "8-K Financial
Statements") and all other financial information with respect to the Company
required by the Buyer to satisfy the Buyer's filing requirements under Item 7 of
the Current Report on Form 8-K, including, without limitation, a report of PwC
on the 8-K Financial Statements.
(b) Except as otherwise expressly provided herein, the Buyer will be
responsible for (i) the costs, fees and expenses of the Buyer, including,
without limitation, all fees, commissions, expenses and other payments to
counsel, to any Intermediary or to any other provider of professional services,
arising on account of the Buyer and incurred in connection with this Agreement
and the transactions contemplated hereby, (ii) the Company Counsel Fees and
(iii) 50% of the PWC Fees.
16. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the internal laws of The Commonwealth of Massachusetts, without giving effect to
any choice or conflict of law provision or rule (whether of The Commonwealth of
Massachusetts or any other jurisdiction) that would cause the application of
laws of any other jurisdiction.
17. Section Headings.
----------------
The section headings are for the convenience of the Parties hereto and
in no way alter, modify, amend, limit, or restrict the contractual obligations
of the Parties.
18. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
-37-
19. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which shall constitute one
and the same document. This Agreement may be executed by facsimile signatures.
* * * * * *
-38-
IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as
of and on the date first above written.
BUYER:
SWITCHBOARD INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President and CFO
COMPANY:
ENVENUE, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President/CEO
STOCKHOLDERS' REPRESENTATIVE:
▇▇▇▇ ▇. ▇'▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇'▇▇▇▇▇
---------------------------------------
Individually
STOCKHOLDERS:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Individually
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Individually
-39-
STOCKHOLDERS CONTINUED:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Individually
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Individually
▇▇▇▇ ▇. ▇'▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇'▇▇▇▇▇
---------------------------------------
Individually
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Individually
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Individually
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Individually
-40-
STOCKHOLDERS CONTINUED:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Individually
IMPACHELVAN VITHIANANTHAN
/s/ Impachelvan Vithiananthan
---------------------------------------
Individually
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Individually
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