EXHIBIT 2.1
EXECUTION COPY
PURCHASE AGREEMENT
DATED AS OF MARCH 12, 2007
BY AND AMONG
▇▇▇▇▇▇▇, L.L.C.,
▇▇▇▇ ▇▇▇▇▇▇
AND
VIEWPOINT CORPORATION
WITH RESPECT TO ALL THE PARTNERSHIP INTERESTS OF
▇▇▇▇▇ ADVERTISING, L.P.
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
PAGE
ARTICLE I PURCHASE AND SALE.............................................................1
1.01 Purchase and Sale of the Interests..........................................1
1.02 Purchase Price; Adjustment..................................................1
1.03 Accounts Receivable Payment.................................................3
1.05 Closing Deliveries by Sellers...............................................4
1.07 Closing Deliveries by Purchaser.............................................5
1.08 Further Assurances; Post-Closing Cooperation................................5
1.09 Financial Statements........................................................6
1.10 Transfer Taxes..............................................................6
1.11 Legends on Purchased Shares; Restriction on Transfer........................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS....................................7
2.01 Authority...................................................................7
2.02 Organization, Authority and Qualification of the Company....................7
2.03 Subsidiaries................................................................8
2.04 Capitalization..............................................................8
2.05 No Conflicts................................................................9
2.07 Books and Records...........................................................9
2.08 Financial Statements........................................................9
2.09 Absence of Changes.........................................................10
2.10 No Undisclosed Liabilities.................................................12
2.11 Taxes......................................................................12
2.12 Legal Proceedings..........................................................13
2.13 Compliance With Laws and Orders............................................13
2.14 Benefit Plans; ERISA.......................................................13
2.15 Real Property..............................................................15
2.16 Tangible Personal Property; Investment Assets..............................15
2.17 Intellectual Property Rights...............................................16
2.18 Contracts..................................................................16
2.19 Licenses...................................................................16
2.20 Insurance..................................................................18
2.21 Affiliate Transactions.....................................................18
2.22 Employees; Labor Relations.................................................18
2.23 Substantial Customers and Suppliers........................................19
2.24 Bank and Brokerage Accounts; Investment Assets.............................19
2.25 No Power of Attorney.......................................................19
2.26 Nature of Purchase.........................................................19
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2.27 Accredited Investor........................................................20
2.28 Brokers....................................................................20
2.29 Disclosure.................................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER................................20
3.01 Organization; Authority....................................................20
3.02 No Conflicts...............................................................20
3.04 Legal Proceedings..........................................................21
3.05 Capital Stock..............................................................21
3.06 Capitalization.............................................................21
3.07 Availability of Funds......................................................22
3.08 SEC Reports and Financial Statements.......................................22
3.09 Brokers....................................................................22
ARTICLE IV COVENANTS OF SELLER.........................................................23
4.01 Regulatory and Other Approvals.............................................23
4.02 Investigation by Purchaser.................................................23
4.03 No Solicitations...........................................................23
4.04 Conduct of Business........................................................24
4.05 Financial Statements.......................................................24
4.06 Employee Matters...........................................................25
4.07 Certain Restrictions.......................................................25
4.08 Affiliate Transactions.....................................................26
4.09 Books and Records..........................................................27
4.10 Noncompetition.............................................................27
4.11 Notice and Cure............................................................28
4.12 Fulfillment of Conditions..................................................28
ARTICLE V COVENANTS OF PURCHASER.......................................................28
5.01 Regulatory and Other Approvals.............................................28
5.02 Notice and Cure............................................................29
5.03 Fulfillment of Conditions..................................................29
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER......................................29
6.01 Representations and Warranties.............................................29
6.02 Performance................................................................29
6.04 Orders and Laws............................................................30
6.05 Regulatory Consents and Approvals..........................................30
6.06 Third Party Consents.......................................................30
6.07 Releases...................................................................30
6.08 Lines of Credit............................................................30
6.09 Amendment to Company Lease.................................................31
6.10 Non-Compete Agreements.....................................................31
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6.11 Proceedings................................................................31
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLERS.......................................31
7.01 Representations and Warranties.............................................31
7.02 Performance................................................................31
7.03 Purchaser's Certificate....................................................31
7.04 Orders and Laws............................................................31
7.05 Regulatory Consents and Approvals..........................................32
7.06 Third Party Consents.......................................................32
7.07 Amended and Restated Lines of Credit.......................................32
7.08 Proceedings................................................................32
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.........32
8.01 Survival of Representations, Warranties, Covenants and Agreements..........32
ARTICLE IX TAX MATTERS.................................................................33
9.01 Indemnity..................................................................33
9.02 Tax Returns and Payments...................................................33
9.03 Refunds....................................................................34
9.04 Contests...................................................................34
9.05 Time of Payment............................................................35
9.06 Cooperation and Exchange of Information....................................35
9.07 Conveyance Taxes...........................................................36
9.08 Miscellaneous..............................................................36
ARTICLE X INDEMNIFICATION..............................................................36
10.01 Indemnification............................................................36
10.02 Method of Asserting Claims.................................................38
10.03 Tax Matters................................................................40
ARTICLE XI TERMINATION.................................................................40
11.01 Termination................................................................40
11.02 Effect of Termination......................................................41
ARTICLE XII DEFINITIONS................................................................41
12.01 Definitions................................................................41
ARTICLE XIII MISCELLANEOUS.............................................................49
13.01 Notices....................................................................49
13.02 Entire Agreement...........................................................50
13.03 Expenses...................................................................50
13.04 Public Announcements.......................................................50
13.05 Confidentiality............................................................50
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13.06 Waiver..................................................................51
13.07 Amendment...............................................................51
13.08 No Third Party Beneficiary..............................................51
13.09 No Assignment; Binding Effect...........................................51
13.10 Headings................................................................52
13.11 Consent to Jurisdiction and Venue.......................................52
13.12 Invalid Provisions......................................................52
13.13 Governing Law...........................................................52
13.14 Counterparts............................................................52
13.15 Representation..........................................................52
EXHIBITS
EXHIBIT A Sellers' Certificate
EXHIBIT B-1 Form of Non-Compete Agreement
EXHIBIT B-2 Form of Non-Compete Agreement
EXHIBIT C Purchaser's Certificate
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This PURCHASE AGREEMENT dated as of March 12, 2007 (this "AGREEMENT"),
is made and entered into by and among ▇▇▇▇▇▇▇, L.L.C., a Texas limited liability
company (the "GENERAL PARTNER") and the general partner of ▇▇▇▇▇ Advertising,
L.P., a Texas limited partnership (the "COMPANY"), ▇▇▇▇ ▇▇▇▇▇▇, the sole limited
partner of the Company ("▇▇▇▇▇▇" and, together with the General Partner, the
"SELLERS"), and Viewpoint Corporation, a Delaware corporation (the "PURCHASER").
Capitalized terms not otherwise defined herein have the meanings set forth in
SECTION 12.01.
WHEREAS, Sellers own all of the issued and outstanding general and
limited partnership interests (the "INTERESTS") of the Company; and
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, all of the Interests on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 PURCHASE AND SALE OF THE INTERESTS. Upon the terms and subject to
the conditions of this Agreement, at the Closing, Sellers shall sell to
Purchaser, and Purchaser shall purchase from Sellers, the Interests.
1.02 PURCHASE PRICE; ADJUSTMENT.
(a) PURCHASE PRICE. In consideration for the transfer of the Interests
to Purchaser at the Closing, Purchaser will (i) pay to Sellers cash in the
amount of $562,537 (the "INITIAL CASH PAYMENT"), subject to adjustment as
provided in SECTION 1.02(B) and 1.03 (the Initial Cash Payment, as adjusted
pursuant to SECTIONS 1.02(B) and 1.03, the "CASH PAYMENT") based on the
allocation set forth on SECTION 1.02(A) OF THE DISCLOSURE SCHEDULE and (ii)
issue to Sellers a number of whole shares (ignoring fractions) of Purchaser
Common Stock determined by dividing (x) $400,000 by (y) the Per Share Price,
subject to adjustment as provided in SECTION 1.02(B) and 1.03 (the "PURCHASED
SHARES" and, together with the Cash Payment, the "PURCHASE PRICE"), based on the
allocation set forth on SECTION 1.02(A) OF THE DISCLOSURE SCHEDULE.
(b) PURCHASE PRICE ADJUSTMENT TO REFLECT NET BOOK VALUE.
(i) On February 21, 2007, Sellers delivered to Purchaser (A) an
unaudited balance sheet of the Company (the "DECEMBER 31 BALANCE
SHEET") prepared in accordance with the Books and Records of the
Company in a manner consistent with the Company's past practice, and
providing the financial position of the Company as of December 31, 2006
and the results of its operations for the fiscal year then ended, and
such documents fairly present the financial condition and results of
operations of the Company as of the dates thereof or for the periods
covered thereby, and (B) a certificate of Sellers (the "PRE-CLOSING
CERTIFICATE"), setting forth their good faith estimate of the
Net Book Value of the Company as of the Closing Date (the "ESTIMATED
NET BOOK VALUE"), which estimate was derived from and is supported by
the December 31 Balance Sheet.
(ii) On or about the Closing Date, representatives of Purchaser
and/or its independent public accountants ("PURCHASER'S ACCOUNTANTS")
observed by Seller and/or Seller's independent public accountants
("SELLER'S ACCOUNTANTS") shall expeditiously perform such procedures
with respect to the Company as are necessary and appropriate to prepare
and review the Closing Date Financial Statements (as defined below).
Not later than forty-five (45) days following the Closing Date,
Purchaser shall deliver to Sellers (A) a balance sheet of the Company
as of the Closing Date (the "CLOSING DATE BALANCE SHEET"), and the
related statement of operations and cash flow for the period commencing
December 31, 2006 and ending on the Closing Date (together with the
Closing Date Balance Sheet, the "CLOSING DATE FINANCIAL STATEMENTS"),
which Closing Date Financial Statements shall (I) be prepared in
accordance with the Books and Records of the Company and (II) present
fairly the financial position of the Company as of the Closing Date and
the results of its operations for the applicable period in accordance
with those accounting policies and practices used in the preparation of
the Financial Statements and (B) a certificate of Purchaser (the
"CLOSING DATE CERTIFICATE"), which shall set forth the Net Book Value
of the Company as of the Closing Date (the "CLOSING DATE NET BOOK
VALUE") as determined from and supported by the Closing Date Balance
Sheet. To the extent requested by Purchaser, Sellers shall, prior to
the delivery of the Closing Date Balance Sheet, make available to
Purchaser and Purchaser's Accountants such of the Books and Records of
the Company in the possession of Sellers as shall be reasonably
necessary for the preparation of the Closing Date Balance Sheet.
Sellers' Accountants may participate in and observe the preparation of
the Closing Date Balance Sheet. Purchaser and Purchaser's Accountants
shall make all of their work papers and other relevant documents in
connection with the preparation of the Closing Date Balance Sheet
available to Seller and Sellers' Accountants, and shall make the
persons in charge of the preparation of the Closing Date Balance Sheet
available for reasonable inquiry by Seller and Sellers' Accountants.
(iii) Sellers shall notify Purchaser in writing within forty-five
(45) days following receipt of the Closing Date Certificate if it does
not agree with the Closing Date Net Book Value set forth thereon, in
which case Purchaser and Purchaser's Accountants on the one hand, and
Seller and Sellers' Accountants on the other, will use good faith
efforts during the ten (10) day period following the date such written
notice was received by Purchaser to resolve any differences they may
have as to the Closing Date Net Book Value. Such written notice will
identify with specificity the calculations with which Sellers disagree
or other bases for such disagreement. If Purchaser and Sellers cannot
reach agreement during such ten day period, their disagreements shall
be promptly submitted to an independent, nationally-recognized public
accounting firm jointly selected by Purchaser's Accountants and
Sellers' Accountants (the "INDEPENDENT ACCOUNTANT"), which shall
conduct such additional review as is necessary to resolve the specific
disagreements referred to it and, based thereon, shall determine the
Closing Date Net Book Value. The review of the Independent Accountant
will be restricted as to scope to address only those matters as to
which Purchaser and Sellers have not reached agreement pursuant to the
preceding sentence. The final determination as to any matter
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reviewed by the Independent Accountant shall be within the range
supplied by the Purchaser and Sellers. The Independent Accountant's
determination of the Closing Date Net Book Value, which shall be
completed as promptly as practicable but in no event later than thirty
(30) days following its selection, shall be confirmed by the
Independent Accountant in writing to, and shall be final and binding
on, Purchaser and Sellers for purposes of this paragraph (b).
(iv) Any payment to be made by Purchaser to Sellers or Sellers to
Purchaser, as the case may be, with respect to this SECTION 1.02(B)
shall be made within two (2) Business Days following the final
determination of the Excess Amount or the Deficiency amount, as the
case may be, in accordance with this SECTION 1.02(B). To the extent
that the Closing Date Net Book Value determined in accordance with
subparagraph (ii) or (iii), as the case may be (the "FINAL NET BOOK
VALUE"), is greater than the Estimated Net Book Value reflected on the
Pre-Closing Certificate (the amount by which the Final Net Book Value
exceeds the Estimated Net Book Value being herein referred to as the
"EXCESS AMOUNT"), then subject to the proviso contained in SECTION
1.02(A), Purchaser shall be required to pay to Sellers an amount in
cash equal to the Excess Amount by wire transfer of immediately
available funds to Purchaser's account. To the extent that the Final
Net Book Value is less than the Estimated Net Book Value reflected on
the Pre-Closing Certificate (the difference between the Estimated Net
Book Value and the Final Net Book Value being herein referred to as the
"DEFICIENCY AMOUNT"), then, Sellers shall be required to either (i) pay
Purchaser an amount in cash equal to the Deficiency Amount by wire
transfer of immediately available funds to Purchaser's account, (ii)
deliver to Purchaser the Purchased Shares or any whole number of the
Purchased Shares that when multiplied by the Per Share Price is
equivalent to the Deficiency Amount or (iii) deliver to Purchaser a
combination of the Purchased Shares and an amount in cash that is equal
to the Deficiency Amount.
(v) The fees and expenses of the Independent Accountant shall be
prorated between Sellers and Purchaser in proportion to the amounts in
dispute resolved against each of them.
1.03 ACCOUNTS RECEIVABLE PAYMENT.
(a) On the Closing Date, Sellers are providing Purchaser with a
certificate of Sellers setting forth in detail (i) the face value of the
Accounts Receivable of the Company as of the close of business on the day prior
to the Closing Date (the "CLOSING DATE ACCOUNTS RECEIVABLE") and (ii) the amount
of any bad debt reserves (the "BAD DEBT RESERVES") with respect to the Closing
Date Accounts Receivable.
(b) Purchaser shall, on and after the Closing Date, use commercially
reasonable efforts to collect the Closing Date Accounts Receivable. Purchaser
shall, after the Closing Date, also provide Sellers with reports from time to
time as to the Closing Date Accounts Receivable collected.
(c) Not later than the fifth Business Day following the 150th day after
the Closing Date, Purchaser shall provide Sellers with a written notice (the
"RECEIVABLES NOTICE") describing
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in reasonable detail all uncollected Closing Date Accounts Receivable, if any,
and the total face amount thereof. Purchaser will sell, and Sellers agree to
purchase, uncollected Closing Date Accounts Receivable specified by Purchaser,
less the Bad Debt Reserves, for an aggregate purchase price equal to the total
face amount of the uncollected Closing Date Accounts Receivable less the amount
of any Bad Debt Reserves reserved with respect to such Closing Date Accounts
Receivable. After such uncollected Closing Date Accounts Receivable are
purchased by Sellers, Purchaser will continue to make efforts to collect such
Closing Date Accounts Receivable in the normal course of business, and any
payments received thereon by Purchaser will be remitted to Sellers after
deducting any expenses incurred in connection with such collection. Sellers
shall be entitled to cooperate with Purchaser in such collection efforts. To the
extent that prior to the 90th day after the Closing Date, Purchaser has
collected Closing Date Accounts Receivable in excess of an amount equal to (x)
the aggregate face value of the Closing Date Accounts Receivable less (y) the
Bad Debt Reserves, Purchaser shall, within five (5) Business Days following such
90th day, remit to Sellers fifty percent (50%) of such excess amount.
(d) Any amounts payable by Purchaser to Sellers or Sellers to
Purchaser, as the case may be, pursuant to SECTION 1.03(C) above shall be
subject to offset against any Excess Amount or Deficiency Amount, as applicable.
Any payments with respect to SECTION 1.03(C) or any Excess Amount or Deficiency
Amount shall be made five (5) days after the date of delivery of the Receivables
Notice; provided, however, that if Purchaser has collected all of the Closing
Dates Accounts Receivable within ninety (90) days after the Closing Date, the
payment of any Excess Amount or Deficiency Amount shall be made within five (5)
days of the final determination of such Excess Amount or Deficiency Amount
pursuant to SECTION 1.02(B).
1.04 CLOSING. Subject to the terms and conditions of this Agreement,
the sale and purchase of the Interests contemplated by this Agreement shall take
place at a closing (the "CLOSING") to be held at the offices of Purchaser, at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 A.M., local time on
the fifth Business Day following the satisfaction or waiver of all conditions to
the obligations of the parties set forth in ARTICLES VI and VII, or at such
other place or at such other time or on such other date as Purchaser and Sellers
mutually agree (the day on which the Closing takes place being the "CLOSING
DATE").
1.05 CLOSING DELIVERIES BY SELLERS. At the Closing, Sellers shall
deliver or cause to be delivered to Purchaser:
(a) transfer documents evidencing the transfer of the Interests as
required pursuant to the limited partnership agreement;
(b) a copy of the certificates of formation and the limited partnership
agreements (or similar organizational documents) of the Company and the general
partner of the Company, in each case as amended, certified by the Secretary of
State of the jurisdiction in which each such entity is incorporated or
organized, as of a date not earlier than ten (10) Business Days prior to the
Closing Date and accompanied by a certificate of the Secretary or Assistant
Secretary of each such entity, dated as of the Closing Date, stating that no
amendments have been made to such certificate of formation or limited
partnership agreement (or similar organizational document) since such date;
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(c) a good standing certificate for the general partner of the Company
from the Secretary of State of the jurisdiction in which such entity is
incorporated or organized and from the Secretary of State in each other
jurisdiction in which the properties owned or leased by the Company, or the
operation of its business in such jurisdiction, requires the Company to qualify
to do business as a foreign corporation, in each case dated as of a date not
earlier than five (5) Business Days prior to the Closing Date;
(d) the release and discharge contemplated by SECTION 6.07; and
(e) the certificates, instruments and other documents required to be
delivered pursuant to ARTICLE VI.
1.07 CLOSING DELIVERIES BY PURCHASER. At the Closing, Purchaser shall
deliver to Sellers:
(a) the Initial Cash Payment, payable in immediately available funds by
wire transfer to the accounts for Sellers designated in a written notice
delivered to Purchaser at least five (5) Business Days prior to the Closing
Date;
(b) the Purchased Shares;
(c) the certificates and other documents required to be delivered
pursuant to ARTICLE VII.
1.08 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) On the Closing Date, Sellers will deliver or make available to
Purchaser at the offices of the Company all of the Books and Records of the
Company, and if at any time after the Closing Sellers discover in their
possession or under their control any other Books and Records of the Company,
Sellers will forthwith deliver such Books and Records to Purchaser.
(b) At any time or from time to time after the Closing, at Purchaser's
request and without further consideration, Sellers shall execute and deliver to
Purchaser such other documents and instruments, provide such materials and
information and take such other actions as Purchaser may reasonably request in
order more effectively to vest title to the Interests in Purchaser and, to the
full extent permitted by Law, to put Purchaser in actual possession and
operating control of the Company and its Assets and Properties and Books and
Records, and otherwise to cause Sellers to fulfill their obligations under this
Agreement.
(c) Following the Closing, each party will afford the other party, its
counsel and its accountants, during normal business hours, reasonable access to
the books, records and other data relating to the Business or Condition of the
Company in its possession and the right to make copies and extracts therefrom,
to the extent that such access may be reasonably required by the requesting
party in connection with (i) the preparation of Tax Returns, (ii) the
determination or enforcement of rights and obligations under this Agreement,
(iii) compliance with the requirements of any Governmental or Regulatory
Authority, (iv) the determination or enforcement of the rights and obligations
of any party to this Agreement or (v) in connection with any actual or
threatened Action or Proceeding. Further, each party agrees for a period
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extending six (6) years after the Closing Date not to destroy or otherwise
dispose of any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party shall not agree in writing to take possession thereof
during the ten (10) day period after such offer is made.
(d) If, in order properly to prepare its Tax Returns, other documents
or reports required to be filed with Governmental or Regulatory Authorities or
its financial statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information, documents or
records relating to the Business or Condition of the Company not referred to in
paragraph (c) above, and such information, documents or records are in the
possession or control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents or records (or
copies thereof) at the recipient's request, cost and expense.
(e) Notwithstanding anything to the contrary contained in this Section,
if the parties are in an adversarial relationship in litigation or arbitration,
the furnishing of information, documents or records in accordance with any
provision of this Section shall be subject to applicable rules relating to
discovery.
1.09 FINANCIAL STATEMENTS. Not later than thirty (30) days following
the Closing Date, Sellers shall deliver to Purchaser, at their sole cost and
expense, the unaudited balance sheet of the Company as of the Closing Date and
the related unaudited statement of operations for the portion of the fiscal year
then ended.
1.10 TRANSFER TAXES. Sellers shall file all Tax Returns and pay all
Taxes shown as due thereon with respect to the Transfer Taxes. Purchaser agrees
to cooperate with Sellers in connection with the filing of such Tax Returns and
obtaining exemptions from Transfer Taxes.
1.11 LEGENDS ON PURCHASED SHARES; RESTRICTION ON TRANSFER.
(a) Upon original issuance thereof, and until such time as the same is
no longer required hereunder or under the applicable requirements of the
Securities Act or applicable state securities or blue sky laws, any certificate
issued representing any of the Purchased Shares, including, without limitation,
all certificates issued upon transfer or in exchange thereof or in substitution
therefor, shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY ARE SO
REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
(b) Purchaser may make a notation on its records or give instructions
to any transfer agents or registrars for the Purchased Shares in order to
implement the restrictions on transfer set forth in this Section.
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(c) In connection with any sale, transfer or other disposition of any
of the Purchased Shares (a "PURCHASED SHARES TRANSFER"), the transferor shall
provide Purchaser with such customary certificates, legal opinions and other
documents as Purchaser may reasonably request to assure that such Purchased
Shares Transfer complies fully with applicable securities and other laws.
(d) Purchaser shall not incur any liability for any delay in
recognizing any Purchased Shares Transfer if Purchaser in good faith reasonably
believes that such Purchased Shares Transfer may have been or would be in
violation in any material respect of the provisions of the Securities Act,
applicable state securities or blue sky laws, or this Agreement.
(e) After such time as the legend described by this SECTION 1.08 is no
longer required on any certificate or certificates representing the Purchased
Shares, upon the request of Sellers, Purchaser will cause such certificate or
certificates to be exchanged for a certificate or certificates that do not bear
such legend.
(f) Notwithstanding anything to the contrary contained herein, Sellers
acknowledge and agree that Sellers shall be prohibited from the sale, transfer,
other disposal or encumbrance of any of the Purchased Shares for a period of one
year from the Closing Date. Subject to the provisions of this Agreement and any
restrictions on the transfer of the Purchased Shares pursuant to law, rule or
regulation, Sellers shall be permitted to transfer up to fifty percent (50%) of
the Purchased Shares one year following the Closing Date and up to one hundred
percent (100%) of the Purchased Shares two years following the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant to Purchaser as follows:
2.01 AUTHORITY. Sellers have full right, power, authority and legal
capacity to execute and deliver this Agreement, to perform their obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Sellers, and (assuming due
authorization, execution and delivery by Purchaser) this Agreement constitutes,
legal, valid and binding obligations of Sellers enforceable against Sellers in
accordance with its respective terms, except as the same may be limited by
bankruptcy, insolvency, moratorium or similar rights whether at a proceeding at
law or in equity.
2.02 ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY.
(a) The Company is a limited partnership duly organized and
validly existing under the Laws of the State of Texas, and has full
power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its Assets and Properties. The
Company is duly qualified, licensed or admitted to do business and is
in good standing in those jurisdictions specified in SECTION 2.02 OF
THE DISCLOSURE SCHEDULE, which are the only jurisdictions in which the
ownership, use or leasing of its Assets and Properties, or the conduct
or nature of its business, makes such qualification, licensing or
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admission necessary, except for those jurisdictions in which the
adverse effects of all such failures by the Company to be qualified,
licensed or admitted and in good standing can in the aggregate be
eliminated without material cost or expense by the Company, as the case
may be, becoming qualified or admitted and in good standing.
(b) All actions taken by the Company in connection with this
Agreement and the transactions contemplated hereby have been duly
authorized, and the Company has not taken any action in connection
herewith that in any respect conflicts with, constitutes a default
under or results in a violation of any provision of its certificate of
formation or limited partnership agreement. True and correct copies of
the certificate of formation and limited partnership agreement of the
Company, each as in effect on the date hereof have been delivered by
Sellers to Purchaser.
2.03 SUBSIDIARIES. There are no subsidiaries, corporations,
partnerships, limited liability companies, joint ventures, associations or other
entities in which the Company owns, of record or beneficially, any direct or
indirect equity or other ownership interest or any right (contingent or
otherwise) to acquire the same. The Company is not a member of (nor is any part
of the business conducted through) any partnership or limited liability company
(or similar entity) is the Company a participant in (nor is any part of the
Business conducted through) any joint venture or similar arrangement, and there
are no contractual obligations of the Company to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person.
2.04 CAPITALIZATION.
(a) The Interests constitute all of the issued and outstanding
equity or ownership interests in the Company and are owned of record
and beneficially by Sellers free and clear of all Encumbrances. None of
the issued and outstanding Interests were issued in violation of any
preemptive rights. Except as set forth in SECTION 2.04(A) OF THE
DISCLOSURE SCHEDULE, there are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of
any character relating to the Interests or obligating any of Sellers or
the Company to issue or sell any Interests, or any other interest in
the Company. There are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any Interests from
any Person. Upon consummation of the transactions contemplated by this
Agreement, Purchaser, assuming it shall have purchased the Interests
for value in good faith and without notice of any adverse claim, will
own all the issued and outstanding Interests free and clear of all
Encumbrances. There are no voting trusts, proxies or other agreements
or understandings in effect with respect to the voting or transfer of
any of the Interests.
(b) SECTION 2.04(B) OF THE DISCLOSURE SCHEDULE hereto accurately
and completely sets forth the number and class of Interests held by
each Person having an equity or ownership interest in the Company as of
the date hereof. Ownership of the Interests is not evidenced by any
certificates or other instruments.
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2.05 NO CONFLICTS. The execution and delivery of this Agreement by
Sellers does not, and the performance by Sellers of their obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of formation or
limited partnership agreement of the Company;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in SECTION 2.05 OF
THE DISCLOSURE SCHEDULE, conflict with or result in a violation or
breach of any term or provision of any Law or Order applicable to
Sellers or the Company or any of their respective Assets and
Properties; or
(c) except as disclosed in SECTION 2.05 OF THE DISCLOSURE
SCHEDULE, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default
under, (iii) require Sellers or the Company to obtain any consent,
approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any
Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person
any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the
creation or imposition of any Lien upon Sellers or the Company or any
of their respective Assets and Properties under, any Contract or
License to which Sellers or the Company is a party or by which any of
their respective Assets and Properties is bound.
2.06 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in SECTION
2.06 OF THE DISCLOSURE SCHEDULE, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Sellers or
the Company is required in connection with the execution, delivery and
performance by Sellers or the Company of this Agreement or the consummation of
the transactions contemplated hereby.
2.07 BOOKS AND RECORDS. Except as set forth in SECTION 2.07 OF THE
DISCLOSURE SCHEDULE, the minute books and other similar records of the Company,
all of which were made available to Purchaser prior to the execution of this
Agreement, contain a true and complete record of all action taken at all
meetings and by all written consents in lieu of meetings of the owners, limited
partners and general partner of the Company. Except as set forth in SECTION 2.07
OF THE DISCLOSURE SCHEDULE, none of the Books and Records of the Company is
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of the Company.
2.08 FINANCIAL STATEMENTS. Prior to the execution of this Agreement,
Sellers have delivered to Purchaser true and complete copies of the following
Company-prepared financial statements: the unaudited balance sheets of the
Company as of December 31, 2004, December 31, 2005, October 31, 2006, and
December 31, 2006 and the related unaudited statements of operations for each of
the fiscal years or portion of the fiscal year then ended. All the Financial
- 9 -
Statements (i) fairly present the consolidated financial condition and results
of operations of the Company as of the respective dates thereof and for the
respective periods covered thereby and (ii) were compiled from the Books and
Records of the Company regularly maintained by management and used to prepare
the financial statements of the Company in accordance with and consistent with
the Company's historical accounting policies and practices. The Company has
maintained its Books and Records in accordance with good business and accounting
practices and in a manner sufficient to permit the preparation of financial
statements, such Books and Records are complete and correct and fairly reflect,
in all material respects, the income, expenses, assets and liabilities of the
Company and such Books and Records provided a fair and accurate basis for the
preparation of the Financial Statements.
2.09 ABSENCE OF CHANGES. Since December 31, 2006, the business of the
Company has been conducted in the ordinary course and consistent with past
practice. Except for the execution and delivery of this Agreement and the
transactions to take place pursuant hereto on or prior to the Closing Date,
since December 31, 2006, there has not been any material adverse change, or any
event or development which, individually or together with other such events,
could reasonably be expected to result in a material adverse change, in the
Business or Condition of the Company. Without limiting the foregoing, except as
disclosed in SECTION 2.09 OF THE DISCLOSURE SCHEDULE, there has not occurred
between December 31, 2006 and the date hereof:
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the Interests, or any direct or
indirect redemption, purchase or other acquisition by the Company of
any partnership interests of or any Option with respect to the Company;
(ii) any authorization, issuance, sale or other disposition by the
Company of any Interests or Option with respect to the Company, or any
modification or amendment of any right of any holder of any partnership
interests of or Option with respect to the Company;
(iii) (x) any increase in the salary, wages or other compensation
of any officer, Employee or consultant of the Company; (y) any
establishment or modification of (A) targets, goals, pools or similar
provisions in respect of any fiscal year under any Benefit Plan,
employment-related Contract or other employee compensation arrangement
or (B) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan, employment-related Contract or other
employee compensation arrangement; or (z) any adoption, entering into
or becoming bound by any Benefit Plan, employment-related Contract or
collective bargaining agreement, or amendment, modification or
termination (partial or complete) of any Benefit Plan,
employment-related Contract or collective bargaining agreement, except
to the extent required by applicable Law and, in the event compliance
with legal requirements presented options, only to the extent the
option which the Company reasonably believed to be the least costly was
chosen;
(iv) (A) incurrences by the Company of Indebtedness, or (B) any
voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or
waiver of any right of the Company under, any Indebtedness of or owing
to the Company;
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(v) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the plant, real
or personal property or equipment of the Company;
(vi) any material change in (x) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or Tax
practice or policy of the Company or (y) any method of calculating any
bad debt, contingency or other reserve of the Company for accounting,
financial reporting or Tax purposes or any change in the fiscal year of
the Company;
(vii) any write-off or write-down of or any determination to write
off or write down any of the Assets and Properties of the Company;
(viii) any acquisition or disposition of, or incurrence of a Lien
on, any Assets and Properties of the Company, other than in the
ordinary course of business consistent with past practice;
(ix) any (x) amendment of the limited partnership agreement (or
other comparable organizational documents) of the Company, (y)
recapitalization, reorganization, liquidation or dissolution of the
Company or (z) merger or other business combination involving the
Company and any other Person;
(x) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed pursuant to SECTION 2.18(A) OF THE DISCLOSURE SCHEDULE or (B)
any material License held by the Company;
(xi) capital expenditures or commitments for additions to
property, plant or equipment of the Company constituting capital
assets;
(xii) any commencement or termination by the Company of any line
of business;
(xiii) any transaction by the Company with Sellers or any
Affiliate of Sellers (A) outside the ordinary course of business
consistent with past practice or (B) other than on an arm's-length
basis, other than pursuant to any Contract in effect on December 31,
2006 and disclosed pursuant to SECTION 2.18(A)(VII) OF THE DISCLOSURE
SCHEDULE;
(xiv) any material adverse change in net sales, costs of goods
sold or collection of Accounts Receivable;
(xv) any entering into of a Contract to do or engage in any of the
foregoing after the date hereof; or
(xvi) any other transaction involving or development affecting the
Company outside the ordinary course of business consistent with past
practice.
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2.10 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in the December 31 Balance Sheet or in the notes thereto or as disclosed
in SECTION 2.10 OF THE DISCLOSURE SCHEDULE, there are no Liabilities against,
relating to or affecting the Company or any of its Assets and Properties, other
than Liabilities (i) incurred since December 31, 2006 in the ordinary course of
business consistent with past practice or (ii) which, individually or in the
aggregate, are not material to the Business or Condition of the Company.
2.11 TAXES. Except as set forth in SECTION 2.11 OF THE DISCLOSURE
SCHEDULE (with paragraph references corresponding to those set forth below):
(a) the Company has filed all Tax Returns and reports (or such Tax
Returns have been filed on behalf of the Company) required to be filed by
applicable law on a timely basis and all such Tax Returns and reports are true,
complete and accurate in all material respects. The Company has paid all Taxes
that are shown to be due, or claimed or asserted by any taxing authority to be
due, from the Company from the periods covered by such Tax Returns. The December
31 Balance Sheet reflects an adequate reserve for all Taxes payable by the
Company for all taxable periods and portions thereof accrued through the date of
such financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed for which the Company could be held liable that are not
adequately reserved for. No claim for any Tax due from or assessed against the
Company is being contested by the Company, none of the Company's Tax Returns or
reports have been audited by the IRS or any state or local Tax authority, and
the Company has not received any notice of deficiency or other adjustment from
the IRS or any state or local Tax authority. There are no pending Tax
examinations of or Tax claims, including, but not limited to, withholding claims
asserted against the Company or any of its assets or properties, there are no
Tax liens on any of the Assets and Properties of the Company, there are no
agreements, waivers, or other arrangements providing an extension of time with
respect to the assessment of any Tax against the Company, nor are there any Tax
proceedings now pending or, to the Knowledge of Sellers, threatened against the
Company. There is no basis for any additional assessment of any Taxes against
the Company. The Company has made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes, including without
limitation the portion of such deposits relating to Taxes imposed upon the
Company. In connection with any audit of the Tax Returns of the Company, no
issue has been raised by any Tax officials which, by the application of similar
principles, reasonably can be expected to result in a deficiency for any other
year not so examined.
(b) The Company is not a party to, bound by or obligated under any
agreement relating to the allocation or sharing of Taxes and does not have any
liability for the Taxes of any person, other than the Company, as a transferee,
or successor or otherwise (including, without limitation, any liability under
Treasury Regulations Section 1.1502-6 or any similar provision of state, local
or foreign law).
(c) The Company has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances,
could obligate it to make payments that under Code Section 280G will not be
deductible.
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(d) Sellers have delivered to Purchaser correct and complete copies of
all federal, state, local and foreign income, franchise and similar Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company since December 31, 2003.
(e) The Company has filed all abandoned/unclaimed property reports
required to be filed by them in a timely manner, and have made copies of all
such reports available to Purchaser.
2.12 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending or,
to the Knowledge of Sellers, threatened against, relating to or affecting
Sellers or the Company or any of their respective Assets and Properties and
there are no Orders outstanding against the Company.
2.13 COMPLIANCE WITH LAWS AND ORDERS.
(a) Except as disclosed in SECTION 2.13 OF THE DISCLOSURE SCHEDULE, the
Company is not, nor has it at any time within the last five (5) years been, nor
has it received any notice that it is or has at any time within the last five
(5) years been, in violation of or in default under, in any material respect,
any Law or Order applicable to the Company or its Assets and Properties.
(b) Except as disclosed in SECTION 2.13 OF THE DISCLOSURE SCHEDULE, the
Company is in compliance with all Laws applicable to it and necessary to conduct
its business as currently conducted.
2.14 BENEFIT PLANS; ERISA.
(a) SECTION 2.14(A) OF THE DISCLOSURE SCHEDULE (i) contains a true and
complete list and description of each of the Benefit Plans, (ii) identifies each
of the Benefit Plans that is a Qualified Plan and (iii) identifies each Benefit
Plan which at any time during the five-year period preceding the date of this
Agreement was a Defined Benefit Plan. The Company has not scheduled or agreed
upon future increases of benefit levels (or creations of new benefits) with
respect to any Benefit Plan, and no such increases or creation of benefits have
been proposed, made the subject of representations to Employees or requested or
demanded by Employees under circumstances which make it reasonable to expect
that such increases will be granted. Except as disclosed in SECTION 2.14(A) OF
THE DISCLOSURE SCHEDULE, no loan is outstanding between the Company and any
Employee.
(b) The Company does not maintain nor is it obligated to provide
benefits under any life, medical or health plan which provides benefits to
retired or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) Except as set forth in SECTION 2.14(C) OF THE DISCLOSURE SCHEDULE,
each Benefit Plan covers only Employees (or former employees or beneficiaries
with respect to service with the Company), so that the transactions contemplated
by this Agreement will require no spin-off of assets and liabilities or other
division or transfer of rights with respect to any such plan.
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(d) Neither the Company nor any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to any "multiemployer plan", as that term is defined in Section 4001
of ERISA.
(e) Each of the Benefit Plans maintained by the Company is, and its
administration is and has been since inception, in all material respects in
compliance with, and the Company has not received any claim or notice that any
such Benefit Plan is not in compliance with, all applicable Laws and Orders and
prohibited transactions exemptions, including the requirements of ERISA, the
Code, the Age Discrimination in Employment Act, the Equal Pay Act and Title VII
of the Civil Rights Act of 1964. Each Benefit Plan maintained by the Company
which is intended to provide for the deferral of income, the reduction of salary
or other compensation or to afford other Tax benefits complies in all material
respects with the requirements of the applicable provisions of the Code or other
Laws required in order to provide such Tax benefits.
(f) The Company is not in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract. All contributions and other payments required to be made by
Sellers or the Company to any Benefit Plan with respect to any period ending
before or at or including the Closing Date have been made or reserves adequate
for such contributions or other payments have been set aside therefor and have
been reflected in Financial Statements in accordance with the policies utilized
by the Company in preparing the Books and Records of the Company. There are no
outstanding liabilities of any Benefit Plan other than liabilities for benefits
to be paid to participants in such Benefit Plan and their beneficiaries in
accordance with the terms of such Benefit Plan.
(g) No benefit under any Benefit Plan, including, without limitation,
any severance or parachute payment plan or agreement, will be established or
become accelerated, vested, funded or payable by reason of any transaction
contemplated under this Agreement.
(h) To the Knowledge of Sellers, there are no pending or threatened
claims by or on behalf of any Benefit Plan, by any Person covered thereby, or
otherwise, which allege violations of Law which could reasonably be expected to
result in liability on the part of Purchaser, the Company, or any fiduciary of
any such Benefit Plan, nor is there any basis for such a claim.
(i) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(j) The fair market value of the assets of each Subject Defined Benefit
Plan, as determined as of the last day of the plan year of such plan which
coincides with or first precedes the date of this Agreement, was not less than
the present value of the projected benefit obligations under such plan at such
date as established on the basis of the actuarial assumptions applicable under
such Subject Defined Benefit Plan at said date and, to the Knowledge of Sellers,
there have been no material changes in such values since said date.
(k) Complete and correct copies of the following documents have been
furnished to Purchaser prior to the execution of this Agreement:
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(i) the Benefit Plans and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary Plan descriptions of each Benefit Plan
subject to ERISA, and any similar descriptions of all other Benefit
Plans;
(iii) the most recent Form 5500 and Schedules thereto for each
Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with respect to the
qualified status of each Qualified Plan; and
(v) all qualified domestic relations orders or other orders
received by the Company governing payments from any Benefit Plan
maintained by the Company.
2.15 REAL PROPERTY.
(a) The Company owns no real property. SECTION 2.15(A) OF THE
DISCLOSURE SCHEDULE contains a true and correct list of each parcel of real
property leased by the Company (as lessor or lessee).
(b) The Company has a valid and subsisting leasehold estate in and the
right to quiet enjoyment of the real properties leased by it for the full term
of the lease thereof. Each lease for real property referred to in paragraph (a)
is a legal, valid and binding agreement, enforceable in accordance with its
terms, of the Company and except as set forth in SECTION 2.15(B) OF THE
DISCLOSURE SCHEDULE, there is no, nor has the Company received any notice of
any, default by the Company (or any condition or event which, after notice or
lapse of time or both, would constitute a default by the Company) thereunder.
The Company does not owe any brokerage commissions with respect to any such
leased space.
(c) Sellers have delivered to Purchaser prior to the execution of this
Agreement, true and complete copies of all leases (including any amendments and
renewal letters) with respect to the real property leased by the Company.
2.16 TANGIBLE PERSONAL PROPERTY; INVESTMENT ASSETS.
(a) The Company is in possession of and has good title to, or has valid
leasehold interests in or valid rights under Contract to use, all tangible
personal property, used in or reasonably necessary for the conduct of its
business, including all tangible personal property reflected on the December 31
Balance Sheet and tangible personal property acquired since such date other than
property disposed of since such date in the ordinary course of business
consistent with past practice. All tangible personal property reflected on the
December 31 Balance Sheet is free and clear of all Liens, other than Liens
disclosed in SECTION 2.16(A) OF THE DISCLOSURE SCHEDULE, and is in good working
order and condition, ordinary wear and tear excepted, and its use complies in
all material respects with all applicable Laws.
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(b) SECTION 2.16(B) OF THE DISCLOSURE SCHEDULE describes each
Investment Asset owned by the Company on the date hereof. Except as disclosed in
SECTION 2.16(B) OF THE DISCLOSURE SCHEDULE, all such Investment Assets are owned
by the Company free and clear of all Liens.
2.17 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in SECTION 2.17
OF THE DISCLOSURE SCHEDULE, the Company either has all right, title and interest
in or a valid and binding right under Contract to use all the Intellectual
Property which is used in the conduct of the business of the Company. Except as
disclosed in SECTION 2.17 OF THE DISCLOSURE SCHEDULE, (i) the Company has the
exclusive right to use all of the patents and trademarks listed in SECTION 2.17
OF THE DISCLOSURE SCHEDULE (the "PATENTS AND TRADEMARKS"), which are all of the
patents and trademarks used by the Company, (ii) all registrations with and
applications to Governmental or Regulatory Authorities in respect of the Patents
and Trademarks are valid and in full force and effect and are not subject to the
payment of any Taxes or maintenance fees or the taking of any other actions by
the Company to maintain their validity or effectiveness, (iii) there are no
restrictions on the direct or indirect transfer of any Contract, or any interest
therein, held by the Company in respect of any of the Patents and Trademarks,
(iv) the Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets, (v) the Company is not, nor has
it received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default) under any Contract to use such
Intellectual Property and (vi) to the Knowledge of Sellers, no such Intellectual
Property is being infringed by any other Person. Neither Sellers nor the Company
has received any notice that the Company is infringing any Intellectual Property
of any other Person, no claim is pending or, to the Knowledge of Sellers, has
been made to such effect that has not been resolved and, to the Knowledge of
Sellers, the Company is not infringing any Intellectual Property of any other
Person.
2.18 CONTRACTS.
(a) SECTION 2.18(A) OF THE DISCLOSURE SCHEDULE (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies of which, or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Purchaser prior to the
execution of this Agreement) currently in effect, to which the Company is a
party or by which any of its Assets and Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or the termination
of employment of any Employee, the name, position and rate of
compensation of each Employee and the expiration date of each such
Contract; and (B) any written representations, commitments, promises or
communications (excluding Benefit Plans and any such Contracts referred
to in clause (A)) involving an obligation of the Company to make
payments in any year, other than with respect to salary or incentive
compensation payments in the ordinary course of business, to any
Employee or former employee;
- 16 -
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company to engage
in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person (including, without limitation, the
partnership agreement of the Company);
(iv) all Contracts relating to Indebtedness of the Company;
(v) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice and (B) any merger or business combination;
(vii) all Contracts between the Company, on the one hand, and
Sellers or any Affiliate of Sellers, on the other hand;
(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the
ability of the Company to declare or pay dividends on, to make any
other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, or incur Indebtedness, to incur or
suffer to exist any Lien, to purchase or sell any Assets and
Properties, to change the lines of business in which it participates or
engages or to engage in any business combination or (B) require the
Company to maintain specified financial ratios or levels of net worth
or other indicia of financial condition; and
(x) all other Contracts (other than Benefit Plans, leases listed
in SECTION 2.15(A) OF THE DISCLOSURE SCHEDULE and insurance policies
listed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE) that (A) involve the
payment or potential payment, pursuant to the terms of any such
Contract, by or to the Company of more than $10,000 annually and (B)
cannot be terminated within thirty (30) days after giving notice of
termination without resulting in any material cost or penalty to the
Company.
(b) Each Contract required to be disclosed in SECTION 2.18(A) OF THE
DISCLOSURE SCHEDULE is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in SECTION 2.18(B) OF THE DISCLOSURE SCHEDULE,
neither the Company nor, to the Knowledge of Sellers, any other party to such
Contract is, or has received notice that it is, in violation or breach of or
default under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Contract) in any material
respect.
2.19 LICENSES. There are no Licenses that are required to be used or
obtained by the Company in connection with its business or operations.
- 17 -
2.20 INSURANCE.
(a) SECTION 2.20 OF THE DISCLOSURE SCHEDULE contains a true and
complete list (including the names and addresses of the insurers, the names of
the Persons to whom such policies have been issued, the expiration dates
thereof, the annual premiums and payment terms thereof, whether it is a "claims
made" or an "occurrence" policy and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business, operations or Employees of the Company or affect or relate to the
ownership, use or operation of any of the Assets and Properties of the Company.
The insurance coverage provided by any of the policies described above will not
terminate or lapse by reason of the transactions contemplated by this Agreement.
Each policy listed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE is valid and
binding and in full force and effect, no premiums due thereunder have not been
paid and neither the Company, nor the Person to whom such policy has been issued
has received any notice of cancellation or termination in respect of any such
policy or is in default thereunder. The insurance policies listed in SECTION
2.20 OF THE DISCLOSURE SCHEDULE are placed with financially sound and reputable
insurers and, in light of the respective business, operations and Assets and
Properties of the Company, are in amounts and have coverages that are reasonable
and customary for Persons engaged in such businesses and operations and having
such Assets and Properties. Neither the Company nor the Person to whom such
policy has been issued has received notice that any insurer under any policy
referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.
(b) The Company has complied with and maintains in full force and
effect all applicable employment insurance required by law.
2.21 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION
2.18(A)(VII) or SECTION 2.21(A) OF THE DISCLOSURE SCHEDULE, (i) there are no
intercompany Liabilities between the Company, on the one hand, and Sellers or
any Affiliate of Sellers, on the other, (ii) neither Sellers nor any such
Affiliate provides or causes to be provided any assets, services or facilities
to the Company, (iii) the Company does not provide or cause to be provided any
assets, services or facilities to Sellers or any such Affiliate and (iv) the
Company does not beneficially own, directly or indirectly, any Investment Assets
issued by Sellers or any such Affiliate. Except as disclosed in SECTION 2.21(B)
OF THE DISCLOSURE SCHEDULE, each of the Liabilities and transactions listed in
SECTION 2.21(A) OF THE DISCLOSURE SCHEDULE was incurred or engaged in, as the
case may be, on a basis no less favorable than had they been engaged in on an
arm's-length basis. Except as disclosed in SECTION 2.21(C) OF THE DISCLOSURE
SCHEDULE, since December 31, 2006, all settlements of intercompany Liabilities
between the Company, on the one hand, and Sellers or any such Affiliate, on the
other, have been made, and all allocations of intercompany expenses have been
applied, in the ordinary course of business consistent with past practice.
2.22 EMPLOYEES; LABOR RELATIONS.
(a) SECTION 2.22 OF THE DISCLOSURE SCHEDULE contains a list of the name
of each officer and Employee of the Company at the date hereof, together with
each such person's position or function, annual base salary or wages and any
incentive or bonus arrangement, deferred or contingent compensation, pension,
accrued vacation, "golden parachute" and other like benefits
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paid or payable with respect to such person in effect on such date. Neither the
Company nor Sellers have received any information that would lead them to
believe that any Employees will or may cease to be Employees, or will refuse
offers of employment from Purchaser, because of the consummation of the
transactions contemplated by this Agreement.
(b) Except as disclosed in SECTION 2.22 OF THE DISCLOSURE SCHEDULE, (i)
no Employee is presently a member of a collective bargaining unit and, to the
Knowledge of Sellers, there are no threatened or contemplated attempts to
organize for collective bargaining purposes any of the Employees, and (ii) no
unfair labor practice complaint or sex, age, race or other discrimination claim
has been brought during the last five (5) years against the Company before the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any other Governmental or Regulatory Authority. During the last five (5) years,
there has been no work stoppage, strike or other concerted action by employees
of the Company. During that period, the Company has complied in all material
respects with all applicable Laws relating to the employment of labor,
including, without limitation those relating to wages, hours and collective
bargaining.
2.23 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 2.23(A) OF THE
DISCLOSURE SCHEDULE lists the ten (10) largest customers of the Company, on the
basis of revenues for goods sold or services provided for the most
recently-completed fiscal year. Except as disclosed in SECTION 2.23(B) OF THE
DISCLOSURE SCHEDULE, no such customer has ceased or materially reduced its
purchases from or use of the services of the Company since December 31, 2006, or
to the Knowledge of Sellers, has threatened to cease or materially reduce such
purchases, use, sales or provision of services after the date hereof.
2.24 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS. SECTION 2.24 OF
THE DISCLOSURE SCHEDULE sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, Employees, agents or other similar representatives of the
Company having signatory power with respect thereto; and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
2.25 NO POWER OF ATTORNEY. Except as set forth in SECTION 2.25 OF THE
DISCLOSURE SCHEDULE, the Company does not have any powers of attorney or
comparable delegations of authority outstanding.
2.26 NATURE OF PURCHASE. Sellers' are purchasing the Purchased Shares
for their own account for investment, not as a nominee or agent, and not with a
view to the resale or distribution of the Purchased Shares or any part thereof,
and Sellers have no present intention of selling, granting any participation in,
or otherwise distributing the same. Sellers acknowledge that the offering of the
Purchased Shares pursuant to this Agreement will not be registered under the
Securities Act or any state securities or blue sky law, on the grounds that the
offering and sale of the Purchased Shares contemplated by this Agreement are
exempt from registration
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pursuant to exceptions available under such laws, and that Purchaser's reliance
upon such exemptions is predicated upon Sellers' representations set forth in
this Agreement. Sellers acknowledge and understand that the Purchased Shares
must be held for an indefinite period of time unless they are subsequently
registered under the Securities Act and/or applicable state securities or blue
sky laws or an exemption from such registration is available, and that the
certificates representing such shares will contain a legend to the foregoing
effect.
2.27 ACCREDITED INVESTOR. Sellers are "ACCREDITED INVESTORS" within the
meaning of Regulation D promulgated under the Securities Act.
2.28 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Sellers directly with
Purchaser without the intervention of any Person on behalf of Sellers in such
manner as to give rise to any valid claim by any Person against Purchaser for a
finder's fee, brokerage commission or similar payment.
2.29 DISCLOSURE. All material facts relating to the Business or
Condition of the Company have been disclosed to Purchaser in or in connection
with this Agreement. No representation or warranty of Sellers contained in this
Agreement, and no statement contained in the Disclosure Schedule, the Financial
Statements or the December 31 Balance Sheet, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
3.01 ORGANIZATION; AUTHORITY. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Purchaser has full right, corporate power,
authority and legal capacity to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Purchaser, and (assuming due authorization, execution and delivery by Sellers)
this Agreement constitutes, legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, moratorium or similar rights whether
at a proceeding at law or in equity.
3.02 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement does not, and the performance by Purchaser of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or
by-laws (or other comparable corporate charter document) of Purchaser;
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(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in SECTION 3.03 OF
THE DISCLOSURE SCHEDULE hereto, conflict with or result in a violation
or breach of any term or provision of any Law or Order applicable to
Purchaser or any of its Assets and Properties, except where the failure
to obtain any such consent, approval or action, to make any such filing
or to give any such notice could not be expected to have a material
adverse effect on Purchaser and its subsidiaries taken as a whole; or
(c) except as disclosed in SECTION 3.02 OF THE DISCLOSURE
SCHEDULE, and except as could not be expected to result in a material
adverse effect on Purchaser and its subsidiaries taken as a whole, (i)
conflict with or result in a violation or breach of, (ii) constitute
(with or without notice or lapse of time or both) a default under,
(iii) require Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or
under the terms of, or (iv) result in the creation or imposition of any
Lien upon Purchaser or any of their respective Assets or Properties
under, any Contract or License to which Purchaser is a party or by
which any of its Assets and Properties are bound.
3.03 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in SECTION
3.03 OF THE DISCLOSURE SCHEDULE hereto, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
Purchaser is required in connection with the execution, delivery and performance
by Purchaser of this Agreement or the consummation of the transactions
contemplated hereby, except where the failure to obtain any such consent,
approval or action, to make any such filing or to give any such notice could not
be expected to have a material adverse effect on Purchaser and its subsidiaries
taken as a whole.
3.04 LEGAL PROCEEDINGS. Except as disclosed in SECTION 3.04 OF THE
DISCLOSURE SCHEDULE and except as could not be expected to result in a material
adverse effect on Purchaser and its subsidiaries taken as a whole, there are no
Actions or Proceedings pending or, to the knowledge of Purchaser, threatened
against, relating to or affecting Purchaser or any of its Assets and Properties
which could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
3.05 CAPITAL STOCK. The Purchased Shares issuable in connection with
this Agreement constitute voting stock, have been duly authorized by all
necessary corporate action on the part of Purchaser and have been duly reserved
for issuance pursuant to this Agreement and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable.
contemplated by this Agreement.
3.06 CAPITALIZATION. The authorized capital stock of Purchaser consists
of 150,000,000 shares of Purchaser Common Stock, of which 67,670,000 shares were
issued and outstanding as of March 5, 2007, and 5,000,000 shares of preferred
stock, par value $0.001 per share, none of which are issued and outstanding.
Except as disclosed in SECTION 3.06 OF THE DISCLOSURE SCHEDULE and for issuances
of stock options of Purchaser after December 31, 2006, Purchaser does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares
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of Purchaser Common Stock or any other equity security of Purchaser or any
securities representing the right to purchase or otherwise receive any shares of
Purchaser Common Stock or any other equity security of Purchaser other than as
provided for in this Agreement. There are no bonds, debentures, notes, shares of
preferred stock or other indebtedness of Purchaser having the right to vote (or
convertible into, or exchangeable for securities having the right to vote) on
any matters on which the stockholders of Purchaser may vote. There are no
agreements or understandings with respect to the voting of any shares of
Purchaser Common Stock or which restrict the transfer of such shares to which
Purchaser is a party, other than applicable federal and state securities laws.
3.07 AVAILABILITY OF FUNDS. Purchaser has sufficient cash, or firm
commitments from responsible lending institutions, available lines of credit or
other sources of available funds to enable it to make payment of the Purchase
Price to be paid by it pursuant to this Agreement.
3.08 SEC REPORTS AND FINANCIAL STATEMENTS. Purchaser has made all
filings required to be made by it with the United States Securities and Exchange
Commission ("SEC") since January 1, 2005 (such filings, the "PURCHASER SEC
FILINGS"). As of their respective dates, the Purchaser SEC Filings complied as
to form in all material respects with the requirements of the Securities Act and
the Securities and Exchange Act of 1934, as amended, as the case may be. Prior
to the execution of this Agreement, a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
Purchaser or any of its Subsidiaries with the SEC since January 1, 2005 (as such
documents have since the time of their filing been amended or supplemented, the
("PURCHASER SEC REPORTS") which are all the documents (other than preliminary
material) that Purchaser and its Subsidiaries were required to file with the SEC
since such date, are available to Sellers for inspection on the SEC's ▇▇▇▇▇
system. As of their respective dates, the Purchaser SEC Reports (i) complied as
to form in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Purchaser SEC Reports (the "PURCHASER FINANCIAL STATEMENTS") complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments (which are not expected to be,
individually or in the aggregate, materially adverse to Purchaser and its
Subsidiaries taken as a whole)) the consolidated financial position of Purchaser
and its consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended.
3.09 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with Sellers without the
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intervention of any Person on behalf of Purchaser in such manner as to give rise
to any valid claim by any Person against Sellers for a finder's fee, brokerage
commission or similar payment.
ARTICLE IV
COVENANTS OF SELLER
Sellers covenant and agree with Purchaser that, at all times from and
after the date hereof until the Closing and, with respect to any covenant or
agreement by its terms to be performed in whole or in part after the Closing,
for the period specified therein or, if no period is specified therein,
indefinitely, Sellers will comply with all covenants and provisions of this
ARTICLE IV, except to the extent Purchaser may otherwise consent in writing.
4.01 REGULATORY AND OTHER APPROVALS. Sellers will, and will cause the
Company to, as promptly as practicable (a) take all commercially reasonable
steps necessary or desirable to obtain all consents, approvals or actions of,
make all filings with and give all notices to Governmental or Regulatory
Authorities or any other Person required of Sellers or the Company to consummate
the transactions contemplated hereby, including without limitation those
described in SECTIONS 2.05 AND 2.06 OF THE DISCLOSURE SCHEDULE, (b) provide such
other information and communications to such Governmental or Regulatory
Authorities or other Persons as Purchaser or such Governmental or Regulatory
Authorities or other Persons may reasonably request in connection therewith and
(c) cooperate with Purchaser in connection with the performance of its
obligations under SECTIONS 5.01 AND 5.02. Sellers will provide prompt
notification to Purchaser when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications (and, unless
precluded by Law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement.
4.02 INVESTIGATION BY PURCHASER. Sellers will, and will cause the
Company to, (a) provide Purchaser and its officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives (together "REPRESENTATIVES") with full access, upon reasonable
prior notice and during normal business hours, to all officers, employees,
agents and accountants of the Company and its Assets and Properties and Books
and Records, and (b) furnish Purchaser and such other Persons with all such
information and data (including without limitation copies of Contracts, Benefit
Plans and other Books and Records) concerning the business and operations of the
Company as Purchaser or any of such other Persons reasonably may request in
connection with such investigation.
4.03 NO SOLICITATIONS. Sellers will not take, nor will it permit the
Company or any Affiliate of Sellers (or authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of Sellers, the Company or any such Affiliate) to take,
directly or indirectly, any action to solicit, encourage, receive, negotiate,
assist or otherwise facilitate (including by furnishing confidential information
with respect to the Company or permitting access to the Assets and Properties
and Books and Records of the Company) any offer or inquiry from any Person
concerning an Acquisition Proposal. If Sellers, the Company or any such
Affiliate (or any such Person acting for or on their behalf) receives
- 23 -
from any Person any offer, inquiry or informational request referred to above,
Sellers will promptly advise such Person, by written notice, of the terms of
this SECTION 4.03 and will promptly, orally and in writing, advise Purchaser of
such offer, inquiry or request and deliver a copy of such notice to Purchaser.
4.04 CONDUCT OF BUSINESS. Sellers will cause the Company to conduct
business only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, Sellers will:
(a) cause the Company to use commercially reasonable efforts,
consistent with past practice, to (i) preserve intact the present
business organization and reputation of the Company, (ii) keep
available (subject to dismissals and retirements in the ordinary course
of business consistent with past practice) the services of the present
officers, employees and consultants of the Company, (iii) maintain the
Assets and Properties of the Company in good working order and
condition, ordinary wear and tear excepted, (iv) maintain the good will
of customers, suppliers, lenders and other Persons to whom the Company
sells goods or provides services or with whom the Company otherwise has
significant business relationships and (v) continue all current sales,
marketing and promotional activities relating to the business and
operations of the Company;
(b) except to the extent required by applicable Law, (i) cause the
Books and Records to be maintained in the usual, regular and ordinary
manner, (ii) not permit any material change in (A) any pricing,
investment, accounting, financial reporting, inventory, credit,
allowance or Tax practice or policy of the Company, or (B) any method
of calculating any bad debt, contingency or other reserve of the
Company for accounting, financial reporting or Tax purposes and (iii)
not permit any change in the fiscal year of the Company;
(c) (i) use, and will cause the Company to use, commercially
reasonable efforts to maintain in full force and effect until the
Closing substantially the same levels of coverage as the insurance
afforded under the Contracts listed in SECTION 2.20 OF THE DISCLOSURE
SCHEDULE, (ii) to the extent requested by Purchaser prior to the
Closing Date, use all commercially reasonable efforts to cause such
insurance coverage held by any Person (other than the Company) for the
benefit of the Company to continue to be provided at the expense of the
Company for at least thirty (30) days after the Closing on
substantially the same terms and conditions as provided on the date of
this Agreement and (iii) cause any and all benefits under such
Contracts paid or payable (whether before or after the date of this
Agreement) with respect to the business, operations, employees or
Assets and Properties of the Company to be paid to the Company; and
(d) cause the Company to comply, in all material respects, with
all Laws and Orders applicable to the business and operations of the
Company, and promptly following receipt thereof to give Purchaser
copies of any notice received from any Governmental or Regulatory
Authority or other Person alleging any violation of any such Law or
Order.
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4.05 FINANCIAL STATEMENTS.
(a) As promptly as practicable after the Closing Date, Sellers will
provide assistance with respect to matters requested by Purchaser relating to
the review of the financial statements of the Company as of and for the period
ended as of the Closing Date.
(b) As promptly as practicable, Sellers will deliver to Purchaser true
and complete copies of such other financial statements, reports and analyses as
may be prepared or received by Sellers or the Company relating to the business
or operations of the Company or as Purchaser may otherwise reasonably request.
(c) As promptly as practicable, Sellers will deliver copies of all
License applications and other filings (if any) made by the Company after the
date hereof and before the Closing Date with any Governmental or Regulatory
Authority (other than routine, recurring filings made in the ordinary course of
business consistent with past practice).
4.06 EMPLOYEE MATTERS. Except as set forth on SECTION 4.06 OF THE
DISCLOSURE SCHEDULE, and except as may be required by Law, Sellers will refrain,
and will cause the Company to refrain, from directly or indirectly:
(a) making any representation or promise, oral or written, to any
officer, employee or consultant of the Company concerning any Benefit Plan,
except for statements as to the rights or accrued benefits of any officer,
employee or consultant under the terms of any Benefit Plan;
(b) making any increase in the salary, wages or other compensation of
any officer, employee or consultant of the Company;
(c) adopting, entering into or becoming bound by any Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any Benefit Plan,
employment-related Contract or collective bargaining agreement, except to the
extent required by applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the option which the
Company reasonably believes to be the least costly is chosen; or
(d) establishing or modifying any (i) targets, goals, pools or similar
provisions in respect of any fiscal year under any Benefit Plan,
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan, employment-related Contract or other employee compensation
arrangement.
Sellers will cause the Company to administer each Benefit Plan, or
cause the same to be so administered, in all material respects in accordance
with the applicable provisions of the Code, ERISA and all other applicable Laws.
Sellers will promptly notify Purchaser in writing of each receipt by Sellers or
the Company (and furnish Purchaser with copies) of any notice of investigation
or administrative proceeding by the IRS, Department of Labor, PBGC or other
Person involving any Benefit Plan.
4.07 CERTAIN RESTRICTIONS. Except as set forth on SECTION 4.07 OF THE
DISCLOSURE SCHEDULE, Sellers will cause the Company to refrain from:
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(a) amending its limited partnership agreement (or other comparable
corporate charter documents) or taking any action with respect to any such
amendment or any recapitalization, reorganization, liquidation or dissolution of
any such limited partnership;
(b) authorizing, issuing, selling or otherwise disposing of any
partnership interests or any Option with respect to the Company, or modifying or
amending any right of any holder of outstanding partnership interests of or
Option with respect to the Company;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the partnership interests of the Company not wholly
owned by the Company, or directly or indirectly redeeming, purchasing or
otherwise acquiring any partnership interests of or any Option with respect to
the Company not wholly owned by the Company;
(d) acquiring or disposing of, or incurring any Lien on, any Assets and
Properties, other than in the ordinary course of business consistent with past
practice;
(e) (i) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to (A)
any Contract that would, if in existence on the date of this Agreement, be
required to be disclosed in the Disclosure Schedule pursuant to SECTION 2.18(A)
or (B) any material License or (ii) granting any irrevocable powers of attorney;
(f) violating, breaching or defaulting under in any material respect,
or taking or failing to take any action that (with or without notice or lapse of
time or both) would constitute a material violation or breach of, or default
under, any term or provision of any License held or used by the Company or any
Contract to which the Company is a party or by which any of its respective
Assets and Properties is bound;
(g) (i) incurring Indebtedness or (ii) voluntarily purchasing,
canceling, prepaying or otherwise providing for a complete or partial discharge
in advance of a scheduled payment date with respect to, or waiving any right of
the Company under, any Indebtedness of or owing to the Company;
(h) engaging with any Person in any merger or other business
combination;
(i) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets;
(j) making any change in the lines of business in which it participates
or is engaged;
(k) writing off or writing down any of their Assets and Properties
outside the ordinary course of business consistent with past practice; or
(l) entering into any Contract to do or engage in any of the foregoing.
4.08 AFFILIATE TRANSACTIONS. Except as set forth in SECTION 4.08 OF THE
DISCLOSURE SCHEDULE or as contemplated by this Agreement, immediately prior to
the Closing, all Indebtedness and other amounts owing under Contracts between
any Sellers, any officer, director or Affiliate (other than the Company) of any
Sellers, on the one hand, and the Company or any of the Subsidiaries, on the
other, will be paid in full, and Sellers will terminate and will cause any such
officer, director
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or Affiliate to terminate each Contract with the Company. Prior to the Closing,
the Company will not enter into any Contract or amend or modify any existing
Contract, and will not engage in any transaction outside the ordinary course of
business consistent with past practice or not on an arm's-length basis (other
than pursuant to Contracts disclosed pursuant to SECTION 2.18(A)(VII) OF THE
DISCLOSURE SCHEDULE), with Sellers or any such officer, director or Affiliate.
4.09 BOOKS AND RECORDS. On the Closing Date, Sellers will deliver or
make available to Purchaser at the offices of the Company all of the Books and
Records, and if at any time after the Closing Sellers discover in their
possession or under its control any other Books and Records, it will forthwith
deliver such Books and Records to Purchaser.
4.10 NONCOMPETITION.
(a) Sellers will, for a period of two (2) years from the Closing Date,
refrain from, either alone or in conjunction with any other Person, or directly
or indirectly through its present or future Affiliates:
(i) employing, engaging or seeking to employ or engage any Person,
who within the prior twelve (12) months, had been an officer, employee
or consultant of the Company;
(ii) causing or attempting to cause (A) any client, customer or
supplier of the Company to terminate or materially reduce its business
with the Company or (B) any officer, employee or consultant of the
Company to resign or sever a relationship with the Company;
(iii) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to
the Company or any of its clients, customers or suppliers; or
(iv) participating or engaging in (other than through the
ownership of five percent (5%) or less of any class of securities
registered under the Securities Exchange Act of 1934, as amended), or
otherwise lending assistance (financial or otherwise) to any Person
participating or engaged in, any of the lines of business in which the
Company is participating or engaged on the Closing Date in any
jurisdiction in which the Company participates or engages in such line
of business on the Closing Date.
(b) The parties hereto recognize that the Laws and public policies of
the various states of the United States may differ as to the validity and
enforceability of covenants similar to those set forth in this Section. It is
the intention of the parties that the provisions of this Section be enforced to
the fullest extent permissible under the Laws and policies of each jurisdiction
in which enforcement may be sought, and that the unenforceability (or the
modification to conform to such Laws or policies) of any provisions of this
Section shall not render unenforceable, or impair, the remainder of the
provisions of this Section. Accordingly, if any provision of this Section shall
be determined to be invalid or unenforceable, such invalidity or
unenforceability
- 27 -
shall be deemed to apply only with respect to the operation of such provision in
the particular jurisdiction in which such determination is made and not with
respect to any other provision or jurisdiction.
(c) The parties hereto acknowledge and agree that any remedy at Law for
any breach of the provisions of this Section would be inadequate, and Sellers
hereby consent to the granting by any court of an injunction or other equitable
relief, without the necessity of actual monetary loss being proved, in order
that the breach or threatened breach of such provisions may be effectively
restrained.
4.11 NOTICE AND CURE. Sellers will notify Purchaser in writing (where
appropriate, through updates to the Disclosure Schedule) of, and
contemporaneously will provide Purchaser with true and complete copies of any
and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes Known to Sellers,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Sellers under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Sellers
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Purchaser's right to
seek indemnity under ARTICLE XII.
4.12 FULFILLMENT OF CONDITIONS. Sellers will execute and deliver at the
Closing each document and other papers that Sellers are required hereby to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not, and will not permit the Company to, take or fail to
take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Sellers that, at all times from and
after the date hereof until the Closing, Purchaser will comply with all
covenants and provisions of this ARTICLE V, except to the extent Sellers may
otherwise consent in writing.
5.01 REGULATORY AND OTHER APPROVALS. Purchaser will as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other Person required
of Purchaser to consummate the transactions contemplated hereby, including
without limitation those described in SCHEDULES 3.03 AND 3.04 hereto, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as Sellers or such Governmental or
Regulatory Authorities or other Persons may reasonably request in connection
therewith and (c) cooperate with Sellers and the Company in connection with the
performance of their obligations under
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SECTIONS 4.01 AND 4.02. Purchaser will provide prompt notification to Sellers
when any such consent, approval, action, filing or notice referred to in clause
(a) above is obtained, taken, made or given, as applicable, and will advise
Sellers of any communications (and, unless precluded by Law, provide copies of
any such communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
5.02 NOTICE AND CURE. Purchaser will notify Sellers in writing of, and
contemporaneously will provide Sellers with true and complete copies of any and
all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes known to Purchaser,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Purchaser under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Purchaser
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Sellers' right to
seek indemnity under ARTICLE X.
5.03 FULFILLMENT OF CONDITIONS. Purchaser will execute and deliver at
the Closing each document and other papers that Purchaser is hereby required to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Sellers contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Interests are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Purchaser
in its sole discretion):
6.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Sellers in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
6.02 PERFORMANCE. Sellers shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Sellers at or before the
Closing.
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6.03 SELLERS' CERTIFICATE. Sellers shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by Sellers, substantially in
the form and to the effect of EXHIBIT A hereto.
6.04 ORDERS AND LAWS. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchaser, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Purchaser, the Company or the transactions contemplated by this
Agreement of any such Law.
6.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby and
thereby (a) shall have been duly obtained, made or given, (b) shall be in form
and substance reasonably satisfactory to Purchaser, (c) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement, shall
have occurred.
6.06 THIRD PARTY CONSENTS. All consents (or in lieu thereof waivers) to
the performance by Purchaser and Sellers of their obligations under this
Agreement or to the consummation of the transactions contemplated hereby and
thereby as are required under any Contract to which Purchaser, Sellers or the
Company is a party or by which any of their respective Assets and Properties are
bound as of the Closing Date (including a written instrument from Frost Bank and
▇▇▇▇▇ Fargo waiving any "change of control" and related event of default under
the Lines of Credit that would otherwise be triggered by the Closing and
providing that the Lines of Credit will continue in full force and effect in
accordance with its terms immediately following the Closing) (a) shall have been
obtained, (b) shall be in form and substance reasonably satisfactory to
Purchaser, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (d) shall be in full force and effect,
except (other than in the case of the consents listed in SECTION 6.06 OF THE
DISCLOSURE SCHEDULE) where the failure to obtain any such consent (or in lieu
thereof waiver) could not reasonably be expected, individually or in the
aggregate with other such failures, to materially adversely affect Purchaser or
the Business or Condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement to
Purchaser.
6.07 RELEASES. Sellers shall release Purchaser and the Company from any
obligations with respect to the Term Note and any other claim by Sellers or
Affiliates of Sellers against the Company.
6.08 LINES OF CREDIT. Frost Bank, ▇▇▇▇▇ Fargo, the Company and
Purchaser shall (i) have entered into an amendment to the Lines of Credit
waiving any "change of control" and
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related event of default under the Lines of Credit that would otherwise be
triggered by the Closing and providing that the Lines of Credit will continue in
full force and effect in accordance with its terms immediately following the
Closing, dated as of the Closing Date, or (ii) at Purchaser's option, Purchaser
shall have paid off such Lines of Credit.
6.09 AMENDMENT TO COMPANY LEASE. To the extent necessary, KFP ▇▇▇▇▇▇
Building, Ltd. and the Company shall have entered into an amendment of that
certain lease agreement between them with respect to space leased by the Company
in the building known as ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
6.10 NON-COMPETE AGREEMENTS. The President/CEO shall have entered into
a Non-Compete Agreement, substantially in the form of EXHIBIT B-1 and the VP of
Client Services and the VP - Creative Directors of the Company shall have
entered into Non-Compete Agreements, substantially in the form of EXHIBIT B-2.
6.11 PROCEEDINGS. All proceedings to be taken on the part of Sellers in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all such
documents and other evidences as Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder to sell the Interests are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Sellers in
their sole discretion):
7.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date.
7.02 PERFORMANCE. Purchaser shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 PURCHASER'S CERTIFICATE. Purchaser shall have delivered to Sellers
a certificate, dated the Closing Date and executed in the name and on behalf of
Purchaser by the President or any Executive Vice President of Purchaser,
substantially in the form and to the effect of EXHIBIT C hereto.
7.04 ORDERS AND LAWS. There shall not be in effect on the Closing Date
any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
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7.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Sellers and Purchaser to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby and
thereby (a) shall have been duly obtained, made or given, (b) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (c) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement, shall have occurred.
7.06 THIRD PARTY CONSENTS. All consents (or in lieu thereof waivers) to
the performance by Sellers of their obligations hereunder and to the
consummation of the transactions contemplated hereby as are required under the
Contracts listed in SECTION 7.06 OF THE DISCLOSURE SCHEDULE (a) shall have been
obtained, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect.
7.07 AMENDED AND RESTATED LINES OF CREDIT. Frost Bank, ▇▇▇▇▇ Fargo, the
Company and Purchaser shall have entered into the Amended Lines of Credit or at
Purchaser's option, Purchaser shall have paid off such Lines of Credit.
7.08 PROCEEDINGS. All proceedings to be taken on the part of Purchaser
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Sellers, and Sellers shall have received copies of all such
documents and other evidences as Sellers may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Purchaser (whether or not exercised) to investigate
the affairs of the Company or any right of any party (whether or not exercised)
to investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Sellers and Purchaser have the right to rely
fully upon the representations, warranties, covenants and agreements of the
other contained in this Agreement. The representations, warranties, covenants
and agreements of Sellers and Purchaser contained in this Agreement will survive
the Closing until eighteen months following the Closing Date; provided, however,
that (a) (i) the representations and warranties contained in SECTIONS 2.01,
2.02, 2.04, 2.11, 3.01, 3.02 and 3.07 and the covenants and agreements contained
in SECTIONS 1.08, 13.03 and 13.05 shall survive indefinitely; (b) with respect
to matters covered by SECTION 2.12 and ARTICLES IX and, insofar as it relates to
ERISA or the Code, SECTION 2.15 such representations, warranties, covenants and
agreements shall survive until sixty (60) days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive); provided that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clause (a) or (b)
above will continue to survive if a Claim Notice, Indemnity Notice, or notice
pursuant to ARTICLE IX (as applicable) shall have been timely given under
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ARTICLE IX or ARTICLE X on or prior to such termination date, until the related
claim for indemnification has been satisfied or otherwise resolved as provided
in ARTICLE IX or ARTICLE X.
ARTICLE IX
TAX MATTERS
9.01 INDEMNITY.
(a) Sellers shall jointly and severally indemnify and hold harmless
Purchaser and the Company against the following Taxes and, except as otherwise
provided in SECTION 9.04, against any loss, damage, Liability or expense,
including reasonable attorneys' and outside consultants' fees incurred in
contesting or otherwise in connection with any such Taxes: (i) Taxes imposed on
the Company with respect to taxable periods of such Person ending on or before
the Closing Date; (ii) with respect to taxable periods beginning before the
Closing Date and ending after the Closing Date, Taxes imposed on the Company
which are allocable, pursuant to SECTION 9.01(B), to the portion of such period
ending on the Closing Date; (iii) Taxes imposed on any member of any affiliated
group with which the Company files or has filed a Tax Return on a consolidated,
combined or unitary basis for a taxable period ending on or before the Closing
Date; and (iv) Taxes imposed on Purchaser or the Company as a result of any
breach of warranty or misrepresentation under SECTION 2.11. Purchaser shall be
responsible for Taxes and associated expenses not allocated to Sellers pursuant
to the first sentence hereof.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending on
the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as
provided under SECTION 9.07), deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to
the Assets or otherwise measured by the level of any item, deemed to be
the amount of such Taxes for the entire period (or, in the case of such
Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period), multiplied by a fraction the numerator
of which is the number of calendar days in the period ending on the
Closing Date and the denominator of which is the number of calendar
days in the entire period.
9.02 TAX RETURNS AND PAYMENTS.
(a) From the date of this Agreement through the Closing Date, Sellers
shall prepare and file or otherwise furnish in proper form to the appropriate
Governmental Authority (or cause to be prepared and filed or so furnished) in a
timely manner all Tax Returns relating to the Company that are due (taking into
account any extensions) on or before the Closing Date. Purchaser shall file, or
cause to be filed, all Tax Returns of the Company not filed by the Closing Date.
With respect to any Tax Return required to be filed by Purchaser or Sellers with
respect to
- 33 -
the Company and as to which an amount of Tax is allocable to the other party
under SECTION 9.01(B), the filing party shall provide the other party and its
authorized representatives with a copy of such completed Tax Return and a
statement certifying the amount of Tax shown on such Tax Return that is
allocable to such other party pursuant to Section 9.01(b), together with
appropriate supporting information and schedules at least twenty (20) Days prior
to the due date (including any extension hereof) for the filing of such Tax
Return, and such other party and its authorized representatives shall have the
right to review and comment on such Tax Return and statement prior to the filing
of such Tax Return.
(b) Sellers shall pay or cause to be paid when due and payable all
Taxes with respect to the Company for any taxable period, or portion thereof,
ending on or before the Closing Date, except for Taxes being contested in good
faith pursuant to the terms of SECTION 9.04 below, and Purchaser shall so pay or
cause to be paid Taxes for any taxable period, or portion thereof, after the
Closing Date (subject to its right of indemnification from Sellers by the date
set forth in SECTION 7.05 for Taxes attributable to the portion of any Tax
period that includes the Closing Date pursuant to SECTIONS 9.01(a) and 9.01(B)).
9.03 REFUNDS. Any Tax refund (including any interest with respect
thereto) relating to the Company for any taxable period prior to the Closing
Date shall be the property of Sellers, and if received by Purchaser or the
Company shall be paid over promptly to Sellers.
9.04 CONTESTS.
(a) After the Closing, Purchaser shall promptly notify Sellers in
writing of any written notice of a proposed assessment or claim in an audit or
administrative or judicial proceeding of Purchaser or the Company which, if
determined adversely to the taxpayer, would be grounds for indemnification under
this ARTICLE IX; PROVIDED, HOWEVER, that the failure to give such notice will
not affect Purchaser's right to indemnification under this ARTICLE IX except to
the extent, if any, that Purchaser's failure to so notify Sellers precludes
Sellers from contesting the Tax in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, PROVIDED that
Sellers acknowledge in writing their liability under this Agreement to hold
Purchaser and the Company harmless against the full amount of any adjustment
which may be made as a result of such audit or proceeding and, PROVIDED FURTHER,
that such audit or proceeding relates only to Taxes for which Sellers are
liable, Sellers shall have the right at their expense to participate in and
control the conduct of such audit or proceeding; Purchaser also may participate
in any such audit or proceeding and, if Sellers do not assume the defense of any
such audit or proceeding or if Sellers assume such defense but do not diligently
conduct such contest, Purchaser may defend the same in such manner as it may
deem appropriate, including, but not limited to, settling such audit or
proceeding after five (5) Business Days prior written notice to Sellers setting
forth the terms and conditions of settlement. In the event that issues relating
to a potential adjustment for which Sellers have acknowledged their liability
are required to be dealt with in the same proceeding as separate issues relating
to a potential adjustment for which Purchaser would be liable, Purchaser shall
have the right, at its expense, to control the audit proceeding with respect to
the latter issues.
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(c) With respect to issues relating to a potential adjustment for which
both Sellers (as evidenced by their acknowledgement under SECTION 9.04) and
Purchaser or the Company could be liable, (i) each party may participate in the
audit or proceedings, and (ii) the audit or proceedings shall be controlled by
that party which would bear the burden of the greater portion of the sum of the
adjustment and any corresponding adjustments that may reasonably be anticipated
for future Tax periods. The principle set forth in the immediately preceding
sentence shall govern also for purposes of deciding any issue that must be
decided jointly (including choice of judicial forum) in situations in which
separate issues are otherwise controlled under this ARTICLE IX by Purchaser and
Sellers.
(d) Neither Purchaser nor Sellers shall enter into any compromise or
agree to settle any claim pursuant to any Tax audit or proceeding which would
adversely affect the other party for such year or a subsequent year without the
written consent of the other party, which consent may not be unreasonably
withheld or delayed. Purchaser and Sellers shall cooperate, and Purchaser shall
cause the Company to cooperate, in the defense against or compromise of any
claim in any audit or proceeding.
9.05 TIME OF PAYMENT. Payment by Sellers of any amounts due under this
ARTICLE IX in respect of Taxes shall be made (a) at least five (5) Business Days
before the due date of the applicable estimated or final Return required to be
filed by Purchaser on which is required to be reported income for a period
ending after the Closing Date for which Sellers are responsible under SECTIONS
9.01(A) and 9.01(b) without regard to whether the Return shows overall net
income or loss for such period, and (b) within five (5) Business Days following
an agreement between Sellers and Purchaser that an indemnity amount is payable,
an assessment of a Tax by a Taxing authority, or a "determination" as defined in
Section 1313(a) of the Code. If liability under this ARTICLE IX is in respect of
costs or expenses other than Taxes, payment by Sellers of any amounts due under
this ARTICLE IX shall be made within five (5) Business Days after the date when
Sellers have been notified by Purchaser that Sellers have a liability for a
determinable amount under this ARTICLE IX and is provided with calculations or
other materials supporting such liability.
9.06 COOPERATION AND EXCHANGE OF INFORMATION. Sellers and Purchaser
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Return, amended Return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase the Company or any of their Assets or any part
of the Business from Purchaser. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating to rulings or
other determinations by Tax authorities. Sellers shall be available (or shall
cause their appropriate agents or representatives to be available) on a basis
mutually convenient to all parties to provide explanations of any documents or
information provided hereunder. Each of Sellers and Purchaser shall (and shall
cause their appropriate agents and representatives to) retain all Tax Returns,
schedules and work papers, records and other documents in their possession
relating to Tax matters of the Company for each taxable period first ending
after the Closing Date and for all prior taxable periods until the later of (a)
the expiration of the statute of limitations of the taxable periods to which
such Tax Returns and other
- 35 -
documents relate, without regard to extensions except to the extent notified by
the other party in writing of such extensions for the respective Tax periods, or
(b) six (6) years following the due date (without extension) for such Tax
Returns. Any information obtained under this SECTION 9.06 shall be kept
confidential in accordance with SECTION 13.05, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.
9.07 CONVEYANCE TAXES. Sellers shall be liable for and shall hold
Purchaser harmless against any real property transfer or gains, sales, use,
transfer, value added and stamp taxes, any transfer, recording, registration and
other fees, and any similar Taxes which become payable in connection with the
transactions contemplated by this Agreement. Sellers, after the review and
consent by Purchaser, shall file such applications and documents as shall permit
any such Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. Purchaser shall execute
and deliver all instruments and certificates necessary to enable Sellers to
comply with the foregoing.
9.08 MISCELLANEOUS.
(a) Sellers and Purchaser agree to treat all payments made by either of
them to or for the benefit of the other (including any payments to the Company)
under this ARTICLE IX, under other indemnity provisions of this Agreement and
for any misrepresentations or breaches of warranties or covenants as capital
contributions for Tax purposes and that such treatment shall govern for purposes
hereof except to the extent that the Laws of a particular jurisdiction provide
otherwise, in which case such payments shall be made in an amount sufficient to
indemnify the relevant party on an after-Tax basis.
(b) Except with respect to a claim as to which notice is timely given
on or prior to the termination date (which such claim shall continue until the
related claim for indemnification has been satisfied or otherwise resolved), the
obligations of Sellers to indemnify and hold harmless Purchaser and the Company
pursuant to this ARTICLE IX, and the representations and warranties contained in
SECTION 2.11, shall terminate at the close of business on the 60th day following
the expiration of the applicable statute of limitations with respect to the Tax
Liabilities in question (giving effect to any waiver, mitigation or extension
thereof).
(c) From and after the date of this Agreement, Sellers shall not,
without the prior written consent of Purchaser (which may, in its sole and
absolute discretion, withhold such consent), make, or cause or permit to be
made, any Tax election that would affect the Company.
(d) Any party shall be entitled to recover professional fees and
related costs that it may reasonably incur to enforce the provisions of this
ARTICLE IX.
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ARTICLE X
INDEMNIFICATION
10.01 INDEMNIFICATION.
(a) Subject to paragraph (c) of this Section and the other Sections of
this ARTICLE X, Sellers shall severally and not jointly indemnify Purchaser
Indemnified Parties in respect of, and hold each of them harmless from and
against, any and all Losses suffered, incurred or sustained by any of them or to
which any of them becomes subject, resulting from, arising out of or relating to
any breach of representation or warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of Sellers contained in this
Agreement, as qualified in each case by the disclosures set forth in the
Disclosure Schedule or any schedule to this Agreement and determined in all
cases as if the terms "material" or "materially" were not included therein.
Notwithstanding the foregoing, the Purchaser Indemnified Parties will not be
entitled to obtain or seek indemnification for any item to the extent it
constitutes a liability that is reflected in the Closing Balance Sheet or
captured in any subsequent "true-up" adjustments or calculations. No Purchaser
Indemnified Party (other than Purchaser) will be entitled to make or pursue any
claim for indemnification hereunder without the express prior written approval
of Purchaser.
(b) Subject to the other Sections of this ARTICLE X, Purchaser shall
indemnify the Seller Indemnified Parties in respect of, and hold each of them
harmless from and against, any and all Losses suffered, incurred or sustained by
any of them or to which any of them becomes subject, resulting from, arising out
of or relating to any breach of representation or warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement, as qualified in each case by the disclosures set
forth in any schedule or disclosure exhibit of Purchaser to this Agreement and
determined in all cases as if the terms "material" or "materially" were not
included therein.
(c) Notwithstanding the foregoing, Sellers will not be obligated to
indemnify Purchaser or any other Purchaser Indemnified Parties under this
SECTION 10.01(C) or any other applicable Sections of this ARTICLE X unless and
until the amount of all losses incurred by Purchaser or the other Purchaser
Indemnified Parties, taken as a group, exceeds in the aggregate $10,000 (the
"BASKET"), in which event Sellers shall indemnify Purchaser and the other
Purchaser Indemnified Parties for the full amount of such losses.
(d) Notwithstanding the foregoing, Purchaser will not be obligated to
indemnify Sellers or any other Seller Indemnified Parties under this SECTION
10.01(D) or any other applicable Sections of this ARTICLE X unless and until the
amount of all losses incurred by Sellers or the other Seller Indemnified
Parties, taken as a group, exceeds in the aggregate the Basket, in which event
Purchaser shall indemnify Sellers and the other Seller Indemnified Parties for
the full amount of such losses.
(e) Seller's maximum aggregate indemnity obligations under this ARTICLE
X, shall be limited to an amount equal to $400,000; PROVIDED that this
limitation shall not apply to a breach of a representation or warranty contained
in SECTION 2.01, 2.02, 2.04, or 2.11 or to a breach of a covenant contained in
SECTION 1.05, 13.03 or 13.05. Sellers may satisfy in full any claim for
indemnification under this ARTICLE X by tendering to Purchaser either (i) cash
in the amount of the applicable claim (or such lesser amount as is ultimately
determined to be due in respect of such claim) or (ii) the Purchased Shares or
any whole number of the Purchased Shares that when multiplied by the Per Share
Price is equivalent to the applicable claim (or such lesser amount as is
ultimately determined to be due in respect of such claim) or (iii) a combination
of the
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Purchased Shares and an amount in cash that is equal to the applicable claim (or
such lesser amount as is ultimately determined to be due in respect of such
claim).
10.02 METHOD OF ASSERTING CLAIMS. All claims for indemnification by any
Indemnified Party under SECTION 10.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under SECTION 10.01 is asserted against or sought to
be collected from such Indemnified Party by a Person other than Sellers or any
Affiliate of Sellers or of Purchaser (a "THIRD PARTY CLAIM"), the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice
with reasonable promptness after the Indemnified Party receives notice of such
Third Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party under SECTION
10.01 and whether the Indemnifying Party desires, at its sole cost and expense,
to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this SECTION 10.03(A), then the Indemnifying Party will have the right
to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings
will be vigorously and diligently prosecuted by the Indemnifying Party
to a final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party,
which consent will not be unreasonably withheld, in the case of any
settlement that provides for any relief other than the payment of
monetary damages as to which the Indemnified Party will be indemnified
in full). The Indemnifying Party will be deemed to have waived its
right to dispute its liability to the Indemnified Party under SECTION
10.01 with respect to any Third Party Claim as to which it elects to
control the defense. The Indemnifying Party will have full control of
such defense and proceedings, including (except as provided in the
immediately preceding sentence) any settlement thereof; PROVIDED,
HOWEVER, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this clause
(i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and PROVIDED FURTHER, that if
requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party
Claim that the Indemnifying Party elects to contest. The Indemnified
Party may retain separate counsel to represent it in, but not control,
any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and the Indemnified
Party will bear its own costs and expenses with respect to such
separate counsel, except as provided in the preceding sentence and
- 38 -
except that the Indemnifying Party will pay the costs and expenses of
such separate counsel if (x) in the Indemnified Party's good faith
judgment, it is advisable, based on advice of counsel, for the
Indemnified Party to be represented by separate counsel because a
conflict or potential conflict exists between the Indemnifying Party
and the Indemnified Party which makes representation of both parties
inappropriate under applicable standards of professional conduct or (y)
the named parties to such Third Party Claim include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party
determines in good faith, based on advice of counsel, that defenses are
available to it that are unavailable to the Indemnifying Party.
Notwithstanding the foregoing, the Indemnified Party may retain or take
over the control of the defense or settlement of any Third Party Claim
the defense of which the Indemnifying Party has elected to control if
the Indemnified Party irrevocably waives its right to indemnity under
SECTION 10.01 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to SECTION 10.03(A), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, then the Indemnified
Party will have the right to defend, at the sole cost and expense of
the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be prosecuted by the Indemnified
Party in good faith or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including (except as
provided in the immediately preceding sentence) any settlement thereof;
PROVIDED, HOWEVER, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided in clause (iii)
below, the Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this clause
(ii) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse
the Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under SECTION 10.01 or fails to notify
the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party with
respect to such Third Party Claim, the Loss arising from such Third
Party Claim will be conclusively deemed a liability of the Indemnifying
Party under SECTION 10.01 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand following the
final determination thereof. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party will
- 39 -
proceed in good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution Period, such
dispute shall be resolved by litigation in a court of competent
jurisdiction.
(b) In the event any Indemnified Party should have a claim under
SECTION 10.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss arising from the claim specified in such Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under SECTION 10.01
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following the final determination thereof. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
(c) Except with respect to a Claim Notice or Indemnity Notice as to
which notice is timely given on or prior to the termination date (which such
claim shall continue until the related claim for indemnification has been
satisfied or otherwise resolved), the obligations of Sellers to indemnify and
hold harmless Purchaser and the Company pursuant to this ARTICLE X (except for
any breach of a representation or warranty contained in SECTION 2.01, 2.02,
2.04, or 2.11 or to a breach of a covenant contained in SECTION 1.05, 13.03 or
13.05), shall terminate at the close of business on the 60th day following the
date that is eighteen months following the Closing Date.
10.03 TAX MATTERS. Anything in this ARTICLE X to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by ARTICLE IX and
not this ARTICLE X.
ARTICLE XI
TERMINATION
11.01 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
Sellers and Purchaser;
(b) at any time before the Closing, by Sellers or Purchaser, in the
event (i) of a material breach hereof by the non-terminating party if such
non-terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party
- 40 -
or (ii) upon notification of the non-terminating party by the terminating party
that the satisfaction of any condition to the terminating party's obligations
under this Agreement becomes impossible or impracticable with the use of
commercially reasonable efforts if the failure of such condition to be satisfied
is not caused by a breach hereof by the terminating party; or
(c) at any time after April 30, 2007 by Sellers or Purchaser upon
notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to close
is not caused by a breach of this Agreement by the terminating party.
11.02 EFFECT OF TERMINATION. If this Agreement is validly terminated
pursuant to SECTION 11.01(A), (B), (C), or (D), this Agreement will forthwith
become null and void, and there will be no liability or obligation on the part
of the Company, Sellers or Purchaser (or any of their respective stockholders,
officers, directors, employees, agents or other representatives or Affiliates),
except that the provisions with respect to expenses in SECTION 13.03 and
confidentiality in SECTION 13.05 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to SECTION 11.01 (A) or
(C), Sellers will remain liable to Purchaser for any breach of this Agreement by
Sellers existing at the time of such termination, and Purchaser will remain
liable to Sellers for any breach of this Agreement by Purchaser existing at the
time of such termination, and Sellers or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity.
ARTICLE XII
DEFINITIONS
12.01 DEFINITIONS.
(a) DEFINED TERMS. As used in this Agreement, the following defined
terms have the meanings indicated below:
"ACCOUNTS RECEIVABLE" means all trade accounts receivable and
all notes, bonds and other evidences of Indebtedness of and rights to
receive payments arising out of sales occurring in the conduct of the
business of the Company.
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or
audit.
"ACQUISITION PROPOSAL" means any proposal for a merger or
other business combination to which the Company is a party or the
direct or indirect acquisition of any partnership or equity interest
in, or a substantial portion of the assets of, the Company, other than
the transactions contemplated by this Agreement.
"AFFILIATE" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is
under common control with the Person specified. For purposes of this
definition, control of a Person means the power, direct or
- 41 -
indirect, to direct or cause the direction of the management and
policies of such Person whether by Contract or otherwise and, in any
event and without limitation of the previous sentence, any Person
owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"AGREEMENT" means this Purchase Agreement, the Exhibits, the
Disclosure Schedule and the certificates delivered in accordance with
SECTIONS 6.3 and 7.3, as the same shall be amended from time to time.
"ASSETS AND PROPERTIES" of any Person means all assets and
properties of every kind, nature, character and description (whether
real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever
situated), including the goodwill related thereto, operated, owned or
leased by such Person, including without limitation cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"BAD DEBT RESERVES" has the meaning ascribed to it in SECTION
1.03(A).
"BASKET" has the meaning ascribed to it in SECTION 10.01(C).
"BENEFIT PLAN" means any Plan established by the Company, or
any predecessor or Affiliate of the Company, existing at the Closing
Date or prior thereto, to which the Company contributes or has
contributed, or under which any Employee, former employee or director
of the Company or any beneficiary thereof is covered, is eligible for
coverage or has benefit rights as a result of employment by the Company
or service as a director of the Company.
"BOOKS AND RECORDS" of any Person means all files, documents,
instruments, papers, books and records relating to the business,
operations, condition of (financial or otherwise), results of
operations and Assets and Properties of such Person, including without
limitation financial statements, Tax Returns and related work papers
and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer lists,
computer files and programs, retrieval programs, operating data and
plans and environmental studies and plans.
"BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or
obligated to close.
"BUSINESS OR CONDITION OF THE COMPANY" means the business,
condition (financial or otherwise), results of operations, prospects
and Assets and Properties of the Company.
"CASH PAYMENT" has the meaning ascribed to it in SECTION 1.02
(A).
"CLAIM NOTICE" means written notification pursuant to SECTION
10.02(A) of a Third Party Claim as to which indemnity under SECTION
10.01 is sought by an Indemnified Party, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for
- 42 -
such Third Party Claim and for the Indemnified Party's claim against
the Indemnifying Party under SECTION 10.01, together with the amount
or, if not then reasonably determinable, the estimated amount,
determined in good faith, of the Loss arising from such Third Party
Claim.
"CLOSING" has the meaning ascribed to it in SECTION 1.04.
"CLOSING DATE" has the meaning ascribed to it in SECTION 1.04.
"CLOSING DATE ACCOUNTS RECEIVABLE" has the meaning ascribed to
it in SECTION 1.03(A).
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to it in
SECTION 1.02(B)(II).
"CLOSING DATE CERTIFICATE" has the meaning ascribed to it in
SECTION 1.02(B)(II).
"CLOSING DATE FINANCIAL STATEMENTS" has the meaning ascribed
to it in SECTION 1.02(B)(II).
"CLOSING DATE NET BOOK VALUE" has the meaning ascribed to it
in SECTION 1.02(B)(II).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COMPANY" has the meaning ascribed to it in the forepart of
this Agreement.
"CONTRACT" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract
(whether written or oral).
"DECEMBER 31 BALANCE SHEET" has the meaning ascribed to it in
SECTION 1.02(B)(I).
"DEFICIENCY AMOUNT" has the meaning ascribed to it in SECTION
1.02(B)(IV).
"DEFINED BENEFIT PLAN" means each Benefit Plan which is
subject to Part 3 of Title I of ERISA, Section 412 of the Code or Title
IV of ERISA.
"DISCLOSURE SCHEDULE" means the record delivered to Purchaser
by Sellers, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein
pursuant to this Agreement.
"DISPUTE PERIOD" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim Notice or
an Indemnity Notice.
"EMPLOYEES" means those Persons employed by the Company
immediately prior to the Closing Date.
- 43 -
"ENCUMBRANCE" means any security interest, pledge,
hypothecation, mortgage, lien (including environmental and Tax liens),
lease, license, encumbrance, servient easement, reversion, reverter,
restrictive covenant, condition or restriction of any kind, including
any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person treated as a single
employer with the Company pursuant to Sections 414(b), (c), (m) or (o)
of the Code or Title IV of ERISA.
"ESTIMATED NET BOOK VALUE" has the meaning ascribed to it in
SECTION 1.02(B)(I).
"EXCESS AMOUNT" has the meaning ascribed to it in SECTION
1.02(B)(IV).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"FINAL NET BOOK VALUE" has the meaning ascribed to it in
SECTION 1.02(B)(IV).
"FINANCIAL STATEMENTS" means the financial statements of the
Company delivered to Purchaser pursuant to SECTION 2.08 and to be
delivered to Purchaser following the Closing Date pursuant to SECTION
1.09.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"GENERAL PARTNER" has the meaning ascribed to it in the
forepart of this Agreement.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision.
"INDEBTEDNESS" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred purchase
price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (iv) under capital leases
and (v) in the nature of guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification
under any provision of ARTICLE X.
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of ARTICLE X.
- 44 -
"INDEMNITY NOTICE" means written notification pursuant to
SECTION 10.02 of a claim for indemnity under ARTICLE X by an
Indemnified Party, specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably determinable, the
estimated amount, determined in good faith, of the Loss arising from
such claim.
"INDEPENDENT ACCOUNTANT" has the meaning ascribed to it in
SECTION 1.02(B)(III).
"INITIAL CASH PAYMENT" has the meaning ascribed to it in
SECTION 1.02 (A).
"INTELLECTUAL PROPERTY" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights,
service marks and service ▇▇▇▇ rights, service names and service name
rights, brand names, inventions, trade secrets, processes, formulae,
copyrights and copyright rights, trade dress, business and product
names, logos, slogans, trade secrets, industrial models, processes,
designs, methodologies, computer programs (including all source codes)
and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service
marks and copyrights.
"INTERESTS" has the meaning ascribed to it in the forepart of
this Agreement.
"INVESTMENT ASSETS" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to
purchase and securities convertible into or exchangeable for other
securities), interests in joint ventures and general and limited
partnerships, mortgage loans and other investment or portfolio assets
owned of record or beneficially by the Company (other than trade
receivables generated in the ordinary course of business of the
Company).
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE OF SELLERS", "KNOWN TO SELLERS" or "SELLERS'
KNOWLEDGE" means the actual knowledge of Sellers, the VP - Client
Services, the VP - Creative Directors or the Treasurer of the Company.
"LAWS" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or of any Governmental or
Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed
or otherwise, or whether due or to become due).
"LICENSES" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and
similar consents granted or issued by any Governmental or Regulatory
Authority.
- 45 -
"LIENS" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract
or other Contract to give any of the foregoing.
"LOSS" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation
interest, court costs, fees of attorneys, accountants and other experts
or other expenses of litigation or other proceedings or of any claim,
default or assessment).
"NET BOOK VALUE OF THE COMPANY" means the total assets of the
Company (net of allowances for doubtful accounts and accumulated
depreciation) minus the total liabilities of the Company as shown on
the applicable balance sheet of the Company, calculated in accordance
with the Company's historical practice with respect to the preparation
of its financial statements, including the December 31 Balance Sheet.
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract
that gives the right to (i) purchase or otherwise receive or be issued
any shares of capital stock of such Person or any security of any kind
convertible into or exchangeable or exercisable for any shares of
capital stock of such Person or (ii) receive or exercise any benefits
or rights similar to any rights enjoyed by or accruing to the holder of
shares of capital stock of such Person, including any rights to
participate in the equity or income of such Person or to participate in
or direct the election of any directors or officers of such Person or
the manner in which any shares of capital stock of such Person are
voted.
"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such
case whether preliminary or final).
"PATENTS AND TRADEMARKS" has the meaning ascribed to it in
SECTION 2.17.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"PENSION BENEFIT PLAN" means each Benefit Plan which is a
pension benefit plan within the meaning of Section 3(2) of ERISA.
"PER SHARE PRICE" means the volume weighted average price of
Purchaser Common Stock on the NASDAQ Stock Market for the five (5)
Trading Days immediately preceding the Closing Date; provided that the
Per Share Price shall not be less than $0.60, nor greater than $1.50.
"PERSON" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent
- 46 -
care, legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy or arrangement of any
kind, whether written or oral, including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"PRE-CLOSING CERTIFICATE" has the meaning ascribed to it in
SECTION 1.02(B)(I).
"PURCHASE PRICE" has the meaning ascribed to it in SECTION
1.02.
"PURCHASED SHARES" has the meaning ascribed to it in SECTION
1.02(A).
"PURCHASED SHARES TRANSFER" has the meaning ascribed to it in
SECTION 1.11(C).
"PURCHASER" has the meaning ascribed to it in the forepart of
this Agreement.
"PURCHASER COMMON STOCK" means the common stock, par value
$0.01 per share, of Purchaser.
"PURCHASER'S ACCOUNTANTS" has the meaning ascribed to it in
SECTION 1.02(B)(II).
"PURCHASER FINANCIAL STATEMENTS" has the meaning ascribed to
it in SECTION 3.08.
"PURCHASER INDEMNIFIED PARTIES" means Purchaser and its
officers, directors, employees, agents and Affiliates (including,
following the Closing Date, the Company).
"PURCHASER SEC FILINGS" has the meaning ascribed to it in
SECTION 3.08.
"PURCHASER SEC REPORTS" has the meaning ascribed to it in
SECTION 3.08.
"QUALIFIED PLAN" means any Benefit Plan which is intended to
qualify under Section 401(a) of the Code.
"RECEIVABLES NOTICE" has the meaning ascribed to it in SECTION
1.03(C).
"REPRESENTATIVES" has the meaning ascribed to it in SECTION
4.02.
"RESOLUTION PERIOD" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a
claim set forth in a Claim Notice or an Indemnity Notice.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"SELLERS" has the meaning ascribed to it in the forepart of
this Agreement.
"SELLERS' ACCOUNTANTS" has the meaning ascribed to it in
SECTION 1.02(B)(II).
- 47 -
"SELLER INDEMNIFIED PARTIES" means Sellers and their agents
and Affiliates.
"SUBJECT DEFINED BENEFIT PLAN" means each Defined Benefit Plan
listed and described in SECTION 2.13(A) OF THE DISCLOSURE SCHEDULE.
"TAX" or TAXES" means any Federal, state, county, local or
foreign income, profits, gross receipts, franchise, sales, use,
occupancy, excise gains, value added, withholding, employment, payroll,
social security, general property, personal property, intangible
property and all other taxes of any nature, fees, levies, duties,
assessments, deficiencies or charges imposed by any Governmental or
Regulatory Authority, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes and any expenses incurred
in connection with the determination, settlement or litigation of any
Tax Liability.
"TAX RETURNS" means a report, return or other information
(including any amendments) required to be supplied to a Governmental or
Regulatory Authority with respect to Taxes.
"TERM NOTE" means the Term Note entered into between the
Company and ▇▇▇▇▇▇, dated as of January 10, 2003, as amended pursuant
to the Addendum Agreement between the Company and ▇▇▇▇▇▇, dated as of
September 1, 2006.
"THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION
10.02(A).
"TRADING DAY" means any day on which securities are traded on
The NASDAQ Stock Market.
"TRANSFER TAXES" means all sales, use, transfer, real property
transfer, reporting, recording, gains, stock transfer and other similar
taxes and fees arising out of or in connection with the transactions
effected pursuant to this Agreement.
"▇▇▇▇▇▇" has the meaning ascribed to it in the forepart of
this Agreement.
(b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of the Company. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
- 48 -
ARTICLE XIII
MISCELLANEOUS
13.01 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Viewpoint Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
with a copy to:
Viewpoint Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
If to Sellers, to:
▇▇▇▇ ▇▇▇▇▇▇
c/o MAKOS Advertising, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇, L.L.C.
c/o MAKOS Advertising, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 49 -
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
13.02 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement entered into between the Company and Purchaser, dated as of November
21, 2006, supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
13.03 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby.
13.04 PUBLIC ANNOUNCEMENTS. Other than in connection with the initial
press release approved by the Company and Purchaser and the related statements
to the public to be made by Purchaser at the conference call referenced in such
press release, at all other times at or before the Closing, Sellers and
Purchaser will not issue or make any reports, statements or releases to the
public with respect to this Agreement or the transactions contemplated hereby
without the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
party with a copy thereof. Sellers and Purchaser will also obtain the other
party's prior approval of any press release to be issued immediately following
the Closing announcing the consummation of the transactions contemplated by this
Agreement.
13.05 CONFIDENTIALITY. Each party hereto will hold, and will use its
best efforts to cause its Affiliates, and their respective Representatives to
hold, in strict confidence from any Person (other than any such Affiliate or
Representative), unless (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or
- 50 -
information can be shown to have been (a) previously known by the party
receiving such documents or information, (b) in the public domain (either prior
to or after the furnishing of such documents or information hereunder) through
no fault of such receiving party or (c) later acquired by the receiving party
from another source if the receiving party is not aware that such source is
under an obligation to another party hereto to keep such documents and
information confidential; provided that following the Closing the foregoing
restrictions will not apply to Purchaser's use of documents and information
concerning the Company furnished by Sellers hereunder. In the event the
transactions contemplated hereby are not consummated, upon the request of the
other party, each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly (and in no event later than five (5)
Business Days after such request) redeliver or cause to be redelivered all
copies of documents and information furnished by the other party in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party furnished
such documents and information or its Representatives.
13.06 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
13.07 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
13.08 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under ARTICLES IX OR X.
13.09 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation, the rights to purchase the
general partner interest or the limited partner interest of the Company) to (i)
one or more wholly-owned subsidiaries of Purchaser (PROVIDED that any such
subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein), (ii) any post-Closing purchaser of all of the
issued and outstanding stock of the Company or a substantial part of its assets
or (iii) any financial institution providing purchase money or other financing
to Purchaser or the Company from time to time as collateral security for such
financing, but no such assignment referred to in clause (i) or (ii) shall
relieve Purchaser of its obligations hereunder. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
- 51 -
13.10 HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
13.11 CONSENT TO JURISDICTION AND VENUE. Each party hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York or any court of the State of New York located
in the Borough of Manhattan in the City of New York in any action, suit or
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated hereby, and agrees that any such action, suit or
proceeding shall be brought only in such court. Each party hereby irrevocably
waives, to the fullest extent permitted by Law, any objection that it may now or
hereafter have to the laying of the venue of any such action, suit or proceeding
brought in such a court and any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum.
13.12 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
13.13 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the Laws of the State of New York applicable to a Contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
13.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, including facsimile counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument.
13.15 REPRESENTATION. Each party to this Agreement hereby acknowledges
that it or he has had an opportunity to ask for and has obtained information
relevant to the negotiation and preparation of this Agreement and the
transactions provided for herein and to consult with counsel of its or his
choosing with respect to such matters, and has either engaged counsel of its or
his choosing to represent it or him in connection with the negotiation and
preparation of this Agreement and the transactions provided for herein, or has
elected not to be represented by counsel.
- 52 -
IN WITNESS WHEREOF, each party hereto has signed this Agreement, or
caused this Agreement to be signed by its officer thereunto duly authorized, as
of the date first above written.
VIEWPOINT CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: CEO
▇▇▇▇▇▇▇, L.L.C.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President/Manager
▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
SELLERS' CERTIFICATE
▇▇▇▇ ▇▇▇▇▇▇, the sole limited partner of ▇▇▇▇▇ Advertising, L.P., a
Texas limited partnership (the "Company") and ▇▇▇▇▇▇▇, L.L.C., the general
partner of the Company (collectively, "SELLERS"), pursuant to SECTION 6.03 of
the Purchase Agreement dated as of March __, 2007 (the "PURCHASE AGREEMENT";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Purchase Agreement) between Viewpoint Corporation, a Delaware corporation,
and Sellers, HEREBY CERTIFIES that:
(1) Each of the representations and warranties made by Sellers in the
Purchase Agreement (other than those made as of a specified date earlier than
the date hereof) is true and correct in all material respects on and as of the
date hereof as though made on and as of the date hereof, and each of the
representations and warranties made by Sellers as of a specified date earlier
than the date hereof was true and correct in all material respects as of such
earlier date.
(2) Each of the agreements, covenants and obligations required by the
Purchase Agreement to be performed or complied with by Sellers at or before the
Closing has been duly performed or complied with in all material respects.
IN WITNESS WHEREOF, Sellers have caused this Certificate to be executed
on their behalf by the undersigned on and as of the ____ day of ____________,
____.
▇▇▇▇▇▇▇, L.L.C.
By:___________________________
Name:
Title:
▇▇▇▇ ▇▇▇▇▇▇
By:___________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT B-1
NON-COMPETE AGREEMENT
This Non-Compete Agreement between Viewpoint Corporation ("Purchaser")
and ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") is entered into as of March __, 2007 (the
"Non-Compete Agreement"). Capitalized terms used herein, but not defined herein
shall have the meaning as set forth in the Purchase Agreement dated as of March
12, 2007 (the "Purchase Agreement"), by and among ▇▇▇▇▇▇▇, L.L.C., ▇▇▇▇▇▇, and
Purchaser.
WHEREAS, Purchaser desires to retain the services of ▇▇▇▇▇▇, as an
at-will employee of Purchaser following the purchase of ▇▇▇▇▇ Advertising, L.P.
(the "Company") by Purchaser and ▇▇▇▇▇▇ desires to be retained by Purchaser to
serve as an at-will employee of Purchaser.
NOW THEREFORE, for good and valuable consideration, including the grant
of a stock option to ▇▇▇▇▇▇, the sufficiency of which is hereby acknowledged by
the parties, the parties hereto hereby agree as follows:
1. NO SOLICITATION; OBLIGATION TO KEEP PURCHASER INFORMED. ▇▇▇▇▇▇ agrees that
for a period of one year immediately following ▇▇▇▇▇▇'▇ termination (voluntary
or otherwise) with Purchaser (the "Restricted Period"), ▇▇▇▇▇▇ shall not, as a
director, officer, employee, manager, consultant, independent contractor,
advisor or otherwise, directly or indirectly interfere with the business of
Purchaser in any manner, including, without limitation, by (a) employing,
soliciting for employment or advising or recommending to any other party that
they employ or solicit for employment any person or associate of Purchaser, or
otherwise inducing an employee or associate to leave Purchaser, (b) inducing a
consultant or other independent contractor to sever that person's relationship
with Purchaser, (c) doing any act that is disloyal to Purchaser or is
inconsistent with the interests of Purchaser, or (d) soliciting existing or
potential customers or clients or otherwise disrupting Purchaser's relationships
with customers, agents, representatives, or vendors or otherwise.
2. NON-COMPETE. ▇▇▇▇▇▇ agrees that for the Restricted Period, ▇▇▇▇▇▇ will not
directly or indirectly, as a director, officer, employee, manager, consultant,
independent contractor, advisor or otherwise:
(a) employing, engaging or seeking to employ or engage any
Person, who within the prior twelve (12) months, had been an officer,
employee or consultant of Purchaser;
(b) causing or attempting to cause (A) any client, customer or
supplier of Purchaser to terminate or materially reduce its business
with Purchaser or (B) any officer, employee or consultant of Purchaser
to resign or sever a relationship with Purchaser;
(c) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to
Purchaser or any of its clients, customers or suppliers; or
- 2 -
(d) participating or engaging in (other than through the
ownership of five percent (5%) or less of any class of securities
registered under the Securities Exchange Act of 1934, as amended), or
otherwise lending assistance (financial or otherwise) to any Person
participating or engaged in, any of the lines of business in which
Purchaser is participating or engaged on the Closing Date or at any
time during the Restricted Period in any jurisdiction in which
Purchaser participates or engages in such line of business on the
Closing Date or at any time during the Restricted Period.
3. SURVIVAL. To the extent reasonably possible, this Non-Compete Agreement, and
all provisions hereof, is binding on ▇▇▇▇▇▇'▇ heirs, executors, administrators
or other legal representatives or assigns, and inures to the benefit of
successors and assigns of Purchaser. The Non-Compete Agreement, and all
provisions hereof, shall survive ▇▇▇▇▇▇'▇ employment by Purchaser.
4. NOTIFICATION OF NEW EMPLOYER. In the event that ▇▇▇▇▇▇ leaves the employ of
Purchaser, ▇▇▇▇▇▇ hereby consents to the notification of ▇▇▇▇▇▇'▇ new employer
of ▇▇▇▇▇▇'▇ rights and obligations under this Non-Compete Agreement.
5. MISCELLANEOUS:
(a) WAIVER. The waiver by Purchaser of a breach of any provision of
this Non-Compete Agreement by ▇▇▇▇▇▇ shall not operate or be construed as a
waiver of any other or subsequent breach by ▇▇▇▇▇▇. Purchaser shall not be
required to give notice to enforce strict adherence to all terms of this
Agreement.
(b) SEVERABILITY. ▇▇▇▇▇▇ agrees that in the event that any court of
competent jurisdiction shall finally hold that any provision of this Non-Compete
Agreement is void or constitutes an unreasonable restriction against ▇▇▇▇▇▇,
such provision shall not be rendered void but shall apply to such extent as such
court may judicially determine constitutes a reasonable restriction under the
circumstances. If any part of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Non-Compete Agreement for the purpose
only of the particular legal proceedings in question, and all other covenants
and provisions of this Non-Compete Agreement shall in every other respect
continue in full force and effect and no covenant or provision shall be deemed
dependent upon any other covenant or provision.
(c) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Non-Compete
Agreement shall be construed to be in accordance with, and governed by, the laws
of the State of New York, without reference to such state's statutes or case law
regarding conflicts of laws. ▇▇▇▇▇▇ hereby expressly consents to the exclusive
personal jurisdiction of the state and federal courts located in New York for
any lawsuit filed there against ▇▇▇▇▇▇ by Purchaser arising from or related to
this Non-Compete Agreement.
- 3 -
(d) AMBIGUITY; AMENDMENT. ▇▇▇▇▇▇ acknowledges that any ambiguity
between this Non-Compete Agreement and the Purchase Agreement shall be construed
against ▇▇▇▇▇▇, and construed in favor of Purchaser. This Non-Compete Agreement
may be amended or modified only with the written consent of both ▇▇▇▇▇▇ and
Purchaser. No oral waiver, amendment or modification shall be effective under
any circumstances whatsoever. Any subsequent change or changes in ▇▇▇▇▇▇'▇
duties, salary or compensation will not affect the validity or scope of this
Non-Compete Agreement.
(e) NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
(a) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
6. REASONABLENESS OF RESTRICTIONS. ▇▇▇▇▇▇ represents that ▇▇▇▇▇▇'▇ experience,
capabilities and circumstances are such that the provisions of this Non-Compete
Agreement will not prevent ▇▇▇▇▇▇ from earning a livelihood. ▇▇▇▇▇▇ further
agrees that the limitations set forth in this Non-Compete Agreement are
reasonable in duration, geographic area and scope and are properly required for
the adequate protection of the businesses of Purchaser. It is understood and
agreed that the covenants made by ▇▇▇▇▇▇ in this Agreement shall survive the
termination of ▇▇▇▇▇▇'▇ employment with Purchaser.
7. ACKNOWLEDGEMENT. ▇▇▇▇▇▇ represents and acknowledge the following:
(a) ▇▇▇▇▇▇ has carefully read this Non-Compete Agreement in its
entirety;
(b) ▇▇▇▇▇▇ understands the terms and conditions contained herein;
(c) ▇▇▇▇▇▇ has had the opportunity to review this Non-Compete Agreement
with legal counsel of ▇▇▇▇▇▇'▇ own choosing and have not relied on any
statements made by Purchaser or its legal counsel as to the meaning of any term
or condition contained herein or in deciding whether to enter into this
Non-Compete Agreement; and
(d) ▇▇▇▇▇▇ is entering into this Non-Compete Agreement knowingly and
voluntarily.
This Non-Compete Agreement shall be effective as of the first day of
▇▇▇▇▇▇'▇ employment with Purchaser.
I CERTIFY AND ACKNOWLEDGE I HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS, AND
WILL FULLY AND FAITHFULLY COMPLY WITH ALL PROVISIONS.
- 4 -
▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------------------
Date:
----------------------------------------------
ACCEPTED AND AGREED TO:
VIEWPOINT CORPORATION
By:
------------------------------------------------
Print Name:
----------------------------------------
Title:
---------------------------------------------
Date:
----------------------------------------------
EXHIBIT B-2
NON-COMPETE AGREEMENT
This Non-Compete Agreement between Viewpoint Corporation ("Purchaser")
and __________ ("Employee") is entered into as of March __, 2007 (the
"Non-Compete Agreement"). Capitalized terms used herein, but not defined herein
shall have the meaning as set forth in the Purchase Agreement dated as of March
__, 2007 (the "Purchase Agreement"), by and among ▇▇▇▇▇▇▇, L.L.C., ▇▇▇▇ ▇▇▇▇▇▇,
and Viewpoint Corporation, a Delaware corporation (the "Purchaser").
WHEREAS, Purchaser desires to retain the services of Employee, as an
at-will employee of Purchaser following the purchase of ▇▇▇▇▇ Advertising, L.P.
(the "Company") by Purchaser and Employee desires to be retained by Purchaser to
serve as an at-will employee of Purchaser.
NOW THEREFORE, for good and valuable consideration, including the grant
of a stock option to Employee, the sufficiency of which is hereby acknowledged
by the parties, the parties hereto hereby agree as follows:
1. NO SOLICITATION; OBLIGATION TO KEEP PURCHASER INFORMED. Employee agrees that
for a period of one year immediately following the Closing (the "Restricted
Period"), Employee shall not, as a director, officer, employee, manager,
consultant, independent contractor, advisor or otherwise, directly or indirectly
interfere with the business of Purchaser in any manner, including, without
limitation, by (a) employing, soliciting for employment or advising or
recommending to any other party that they employ or solicit for employment any
person or associate of Purchaser, or otherwise inducing an employee or associate
to leave Purchaser, (b) inducing a consultant or other independent contractor to
sever that person's relationship with Purchaser, (c) doing any act that is
disloyal to Purchaser or is inconsistent with the interests of Purchaser, or (d)
soliciting existing or potential customers or clients or otherwise disrupting
Purchaser's relationships with customers, agents, representatives, or vendors or
otherwise.
2. NON-COMPETE. Employee agrees that for the Restricted Period, Employee will
not directly or indirectly, as a director, officer, employee, manager,
consultant, independent contractor, advisor or otherwise:
(a) employing, engaging or seeking to employ or engage any
Person, who within the prior twelve (12) months, had been an officer,
employee or consultant of Purchaser;
(b) causing or attempting to cause (A) any client, customer or
supplier of Purchaser to terminate or materially reduce its business
with Purchaser or (B) any officer, employee or consultant of Purchaser
to resign or sever a relationship with Purchaser;
(c) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to
Purchaser or any of its clients, customers or suppliers; or
- 2 -
(d) participating or engaging in (other than through the
ownership of five percent (5%) or less of any class of securities
registered under the Securities Exchange Act of 1934, as amended), or
otherwise lending assistance (financial or otherwise) to any Person
participating or engaged in, any of the lines of business in which
Purchaser is participating or engaged on the Closing Date or at any
time during the Restricted Period in any jurisdiction in which
Purchaser participates or engages in such line of business on the
Closing Date or at any time during the Restricted Period.
The foregoing restrictions provided in Section 2 shall not apply to the extent
Employee is terminated by Purchaser during the Restricted Period without Cause.
"Cause" means the occurrence of any of the following:
(i) the willful and continuing refusal of Employee to follow the lawful
directives of the immediate supervisor, Chief Executive Officer of Purchaser or
the Board of Directors of Purchaser, provided that such directives are
consistent with Employee's title and position,
(ii) conduct that is intentional and known by Employee to be materially
harmful or potentially materially harmful to Purchaser's best interest,
(iii) gross negligence in the performance of, or willful disregard of,
Employee's job responsibilities,
(iv) Employee's conviction of any felony, or
(v) Employee's commission of any act of dishonesty or moral turpitude
which, in the good faith opinion of the Board of Directors of Purchaser, is
materially detrimental to Purchaser.
3. SURVIVAL. To the extent reasonably possible, this Non-Compete Agreement, and
all provisions hereof, is binding on Employee's heirs, executors, administrators
or other legal representatives or assigns, and inures to the benefit of
successors and assigns of Purchaser. The Non-Compete Agreement, and all
provisions hereof, shall survive Employee's employment by Purchaser.
4. NOTIFICATION OF NEW EMPLOYER. In the event that Employee leaves the employ of
Purchaser, Employee hereby consents to the notification of Employee's new
employer of Employee's rights and obligations under this Non-Compete Agreement.
5. MISCELLANEOUS:
(a) WAIVER. The waiver by Purchaser of a breach of any provision of
this Non-Compete Agreement by Employee shall not operate or be construed as a
waiver of any other or subsequent breach by Employee. Purchaser shall not be
required to give notice to enforce strict adherence to all terms of this
Agreement.
- 3 -
(b) SEVERABILITY. Employee agrees that in the event that any court of
competent jurisdiction shall finally hold that any provision of this Non-Compete
Agreement is void or constitutes an unreasonable restriction against Employee,
such provision shall not be rendered void but shall apply to such extent as such
court may judicially determine constitutes a reasonable restriction under the
circumstances. If any part of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Non-Compete Agreement for the purpose
only of the particular legal proceedings in question, and all other covenants
and provisions of this Non-Compete Agreement shall in every other respect
continue in full force and effect and no covenant or provision shall be deemed
dependent upon any other covenant or provision.
(c) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Non-Compete
Agreement shall be construed to be in accordance with, and governed by, the laws
of the State of New York, without reference to such state's statutes or case law
regarding conflicts of laws. Employee hereby expressly consents to the exclusive
personal jurisdiction of the state and federal courts located in New York for
any lawsuit filed there against Employee by Purchaser arising from or related to
this Non-Compete Agreement.
(d) AMBIGUITY; AMENDMENT. Employee acknowledges that any ambiguity
between this Non-Compete Agreement and the Purchase Agreement shall be construed
against the Employee, and construed in favor of Purchaser. This Non-Compete
Agreement may be amended or modified only with the written consent of both
Employee and Purchaser. No oral waiver, amendment or modification shall be
effective under any circumstances whatsoever. Any subsequent change or changes
in Employee's duties, salary or compensation will not affect the validity or
scope of this Non-Compete Agreement.
(e) NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
(a) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
- 4 -
6. REASONABLENESS OF RESTRICTIONS. Employee represents that Employee's
experience, capabilities and circumstances are such that the provisions of this
Non-Compete Agreement will not prevent Employee from earning a livelihood.
Employee further agrees that the limitations set forth in this Non-Compete
Agreement are reasonable in duration, geographic area and scope and are properly
required for the adequate protection of the businesses of Purchaser. It is
understood and agreed that the covenants made by Employee in this Agreement
shall survive the termination of Employee's employment with Purchaser.
7. ACKNOWLEDGEMENT. Employee represents and acknowledge the following:
a) Employee has carefully read this Non-Compete Agreement in
its entirety;
b) Employee understands the terms and conditions contained
herein;
c) Employee has had the opportunity to review this
Non-Compete Agreement with legal counsel of Employee's own
choosing and have not relied on any statements made by
Purchaser or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether
to enter into this Non-Compete Agreement; and
d) Employee is entering into this Non-Compete Agreement
knowingly and voluntarily.
This Non-Compete Agreement shall be effective as of the first day of
Employee's employment with Purchaser.
I CERTIFY AND ACKNOWLEDGE I HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS, AND
WILL FULLY AND FAITHFULLY COMPLY WITH ALL PROVISIONS.
[EMPLOYEE]
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Date:
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- 5 -
ACCEPTED AND AGREED TO:
VIEWPOINT CORPORATION
By:
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Print Name:
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Title:
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Date:
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EXHIBIT C
OFFICER'S CERTIFICATE
Viewpoint Corporation, a Delaware corporation ("PURCHASER"), pursuant
to SECTION 7.03 of the Purchase Agreement dated as of March __, 2007 (the
"PURCHASE AGREEMENT"; capitalized terms not defined herein shall have the
meanings ascribed to them in the Purchase Agreement) between Purchaser and ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, L.L.C., HEREBY CERTIFIES that:
(1) Each of the representations and warranties made by Purchaser in the
Purchase Agreement (other than those made as of a specified date earlier than
the date hereof) is true and correct in all material respects on and as of the
date hereof as though made on and as of the date hereof, and each of the
representations and warranties made by Purchaser as of a specified date earlier
than the date hereof was true and correct in all material respects as of such
earlier date.
(2) Each of the agreements, covenants and obligations required by the
Purchase Agreement to be performed or complied with by Purchaser at or before
the Closing has been duly performed or complied with in all material respects.
IN WITNESS WHEREOF, Purchaser has caused this Certificate to be
executed on its behalf by the undersigned on and as of the ____ day of
_____________, ____.
VIEWPOINT CORPORATION
By:___________________________
Name:
Title: