Exhibit 10.18
--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and among
ICONIXX CORPORATION
("Iconixx")
LEAD DOG DESIGN, INC.
(the "Company")
and
THE STOCKHOLDERS OF THE LEAD DOG DESIGN, INC.
(the "Stockholders")
Dated February 23, 2000
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Recitals............................................................................1
ARTICLE I DEFINITIONS...............................................................1
1.1. Definitions..........................................................1
-----------
ARTICLE II STOCK PURCHASE...........................................................6
2.1. Stock Purchase.......................................................6
--------------
2.2 Payment of Purchase Price............................................6
2.3 Funded Indebtedness Adjustment.......................................7
2.4 Intentionally Left Blank.............................................7
2.5 Financial Condition..................................................7
2.6 Closing..............................................................7
2.7 Escrow Arrangements..................................................7
2.8 Closing Audit........................................................8
2.9 Post-Closing Net Working Capital Adjustment..........................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS..................................................9
3.1. Capitalization.......................................................9
--------------
3.2. No Liens on Shares...................................................9
------------------
3.3. Subsidiaries.........................................................9
------------
3.4. Other Rights to Acquire Capital Stock................................9
-------------------------------------
3.5. Due Organization.....................................................9
----------------
3.6. Due Authorization....................................................10
-----------------
3.7. Financial Statements.................................................10
--------------------
3.8. Certain Actions......................................................11
---------------
3.9. Properties...........................................................12
----------
3.10. Licenses and Permits.................................................13
--------------------
3.11. Intellectual Property................................................13
---------------------
3.12. Compliance with Laws.................................................14
--------------------
3.13. Insurance............................................................14
---------
3.14. Employee Benefit Plans...............................................14
----------------------
3.15. Contracts and Agreements.............................................15
------------------------
3.16. Claims and Proceedings...............................................16
----------------------
3.17. Taxes................................................................16
-----
3.18. Personnel............................................................18
---------
3.19. Business Relations...................................................18
------------------
3.20. Accounts Receivable; Accounts Payable; Customer Deposits;
---------------------------------------------------------
Customer Revenues and Deferred Revenues..............................18
---------------------------------------
3.21. Bank Accounts; Investments...........................................19
--------------------------
3.22. Customer Claims......................................................19
---------------
3.23. Brokers..............................................................19
-------
3.24. Affiliated Transactions..............................................19
-----------------------
-i-
3.25. Funded Indebtedness; Letters of Credit; Undisclosed Liabilities......21
---------------------------------------------------------------
3.26. Year 2000............................................................21
---------
3.27. Information Furnished................................................21
---------------------
ARTICLE IV ICONIXX'S REPRESENTATIONS AND WARRANTIES.................................22
4.1. Due Organization of Iconixx..........................................22
---------------------------
4.2. Due Authorization....................................................22
-----------------
4.3. No Brokers...........................................................22
----------
4.4. Investment...........................................................22
----------
4.5. Information Furnished................................................22
---------------------
4.6. Capital Stock and Related Matters....................................22
---------------------------------
4.7. Authorization of the Stock...........................................23
--------------------------
4.8 Financial Statements.................................................23
--------------------
4.9 Compliance with Laws.................................................23
--------------------
4.10 Claims and Proceedings...............................................23
----------------------
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY, ICONIXX
AND THE STOCKHOLDERS..........................................................24
5.1. Consents of Others...................................................24
------------------
5.2. Stockholders' Efforts................................................24
---------------------
5.3. Powers of Attorney...................................................24
------------------
5.4. Conduct of Business by the Company Pending Closing...................24
--------------------------------------------------
5.5. Conduct of Business by Iconixx Pending Closing.......................25
----------------------------------------------
5.6. Access by Iconixx Before Closing.....................................25
--------------------------------
5.7. Access by the Stockholders Before Closing............................25
-----------------------------------------
ARTICLE VI POST-CLOSING COVENANTS...................................................26
6.1. General..............................................................26
-------
6.2. Transition...........................................................26
----------
6.3. Confidentiality......................................................26
---------------
6.4. Covenant Not to Compete..............................................27
-----------------------
6.5. Additional Matters...................................................27
------------------
6.6. Litigation Support...................................................29
------------------
6.7. Audits...............................................................29
------
6.8. Minimum Cash as of the Closing.......................................29
------------------------------
6.9. Iconixx's Stock Options..............................................29
-----------------------
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING..............30
7.1. Conditions to Iconixx's Obligations..................................30
-----------------------------------
7.2. Conditions to the Stockholders' and the Company's Obligations........32
-------------------------------------------------------------
ARTICLE VIII INDEMNIFICATION........................................................33
8.1. Indemnification by the Stockholders..................................33
-----------------------------------
8.2. Defense of Claims....................................................33
-----------------
8.3. Escrow Claim.........................................................34
------------
8.4. Tax Audits, Etc......................................................34
---------------
8.5. Indemnification of Stockholders......................................34
-------------------------------
8.6. Limits on Indemnification............................................35
-------------------------
ARTICLE IX TERMINATION..............................................................36
-ii-
9.1. Termination..........................................................36
-----------
9.2. Effect of Termination................................................36
---------------------
ARTICLE X MISCELLANEOUS.............................................................36
10.1. Modifications........................................................36
-------------
10.2. Notices..............................................................37
-------
10.3. Counterparts; Facsimile Transmission.................................38
------------------------------------
10.4. Expenses.............................................................38
--------
10.5. Binding Effect; Assignment...........................................38
--------------------------
10.6. Entire and Sole Agreement............................................39
-------------------------
10.7. Governing Law........................................................39
-------------
10.8. Survival of Representations, Warranties and Covenants................39
-----------------------------------------------------
10.9. Invalid Provisions...................................................39
------------------
10.10. Public Announcements.................................................39
--------------------
10.11. Remedies Cumulative..................................................40
-------------------
10.12. Third Parties........................................................40
-------------
10.13. No Strict Construction...............................................40
----------------------
10.14. Disclosure Schedules.................................................40
--------------------
-iii-
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Stockholders Accounts and Wire Transfer Instructions((S) 2.4)
Exhibit C-1 Certificate of Incorporation of the Company
Exhibit C-2 Bylaws of the Company
Exhibit C-3 Qualified Jurisdictions
Exhibit D Certificate of Incorporation of Iconixx
Exhibit E-1 Form of Stockholder Employment Agreement
Exhibit E-2 Form of Noncompete/Nonsolicitation Agreement
Exhibit F-1 Opinion of Stockholders' Counsel
Exhibit F-2 Opinion of Iconixx's Counsel
Exhibit G Form of Stockholder Release
DISCLOSURE SCHEDULES
ICONIXX CAPITALIZATION SCHEDULE
OPTIONS SCHEDULE
-iv-
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
February 23, 2000, by and among ICONIXX CORPORATION, a Delaware corporation
("Iconixx"), LEAD DOG DESIGN, INC., a New York corporation (the "Company"); and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇, The ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ Trust, The ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Cipully Trust and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(collectively, the "Stockholders").
Recitals
--------
Pursuant to this Agreement, the Company, which is engaged in the business
of providing information technology consulting, web-site design and graphic and
printing design services in the United States (the "Business"), will be acquired
by Iconixx pursuant to an acquisition of substantially all of the capital stock
of the Company (the "Acquisition"). The Acquisition will occur in the following
steps:
A. THE CURRENT CAPITALIZATION OF THE COMPANY
On the date of this Agreement, the Company's capitalization consists of 200
shares of common stock, no par value per share. The Stockholders are the owners
of 200 shares of the common stock of the Company (the "Company Shares"), which
stock represents all of the issued and outstanding capital stock of the Company.
B. THE STOCK PURCHASE
Iconixx desires to purchase from the Stockholders and the Stockholders
desire to sell to Iconixx all of the Company Shares for an aggregate purchase
price of $68,750 per share (an aggregate purchase price of $13,750,000), subject
to adjustment as provided herein.
Agreement
---------
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have the meanings
-----------
specified or referred to in this Section 1.1 and shall be equally applicable to
-----------
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended,
supplemented and modified from time to time to the extent permitted by the
applicable provisions thereof and by this Agreement.
"Acquisition" has the meaning specified in the beginning of the
recitals of this Agreement.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Audited Closing Financial Statements" has the meaning specified in
Section 2.8.
-----------
"Business" has the meaning specified in the first recital of the
Agreement.
"Cash Purchase Price" shall have the meaning assigned to such term in
Section 2.2(a).
--------------
"Closing" means the closing of the Acquisition.
"Closing Date" has the meaning specified in Section 2.6.
-----------
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.01 per share, of
Iconixx.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Company Shares" has the meaning specified in Recital A of the
---------
Agreement.
"Confidential Information" means (i) the terms and provisions of this
Agreement and the Acquisition and (ii) all confidential information (for
purposes of this Agreement, confidential information shall refer to all
information which is the subject of reasonable efforts by the Company to
maintain its non-public character or to otherwise prevent such information from
becoming widely known) and trade secrets of the Company or its Affiliates
including, without limitation, any of the same comprising the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals. Confidential Information shall
not include any information (a) which is disclosed pursuant to subpoena or other
legal process, (b) which has been publicly disclosed, or (c) which is
subsequently disclosed to any third party not in breach of a confidentiality
agreement.
"Contracts" has the meaning specified in Section 3.15.
------------
"Court Order" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
-2-
"Disclosure Schedules" shall mean the Disclosure Schedules attached to
this Agreement pursuant to which exceptions to the Stockholders' and the
Company's specific representations and warranties set forth in Article III (and
-----------
listed on a Section-by-Section basis) are disclosed to Iconixx pursuant to said
Article III, and pursuant to which exceptions to Iconixx's specific
-----------
representations and warranties set forth in Article IV (and listed on a Section-
----------
by-Section basis) are disclosed to he Stockholders and the Company pursuant to
Article IV
----------
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title or restrictive covenant.
"Environmental and OSHA Obligations" has the meaning specified in
Section 3.12.
------------
"Equitable Exceptions" shall have the meaning specified in Section
-------
3.6.
---
"Equity Agreements" means (i) the Stockholders Agreement dated August
12, 1999 between Iconixx and its stockholders and (ii) the Registration Rights
Agreement dated August 12, 1999 between Iconixx and its stockholders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Union National Bank, N.A.
"Escrow Agreement" means the Escrow Agreement to be executed by and
among the Stockholders, Iconixx and the Escrow Agent in the form of Exhibit A.
---------
"Escrow Period" has the meaning specified in Section 2.7.
-----------
"Escrow Sum" has the meaning specified in Section 2.7.
-----------
"Financial Statements" has the meaning specified in Section 3.7.
-----------
"Force Majeure" shall mean any failure or delay caused by acts of god,
flood, fire, war or terrorism or any failure or delay caused by a governmental
blockage of all currency transactions between a foreign Governmental Body and
the United States of America.
"Funded Indebtedness" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable in the ordinary course of business; (iv) indebtedness of others for
borrowed money guaranteed by the Company or secured by an Encumbrance on the
Company's property; (v) letters of credit or similar obligations; and (vi)
indebtedness of the Company under extended credit terms of more than 90 days
from vendors provided to the Company.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
-3-
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body having jurisdiction over the Company
and/or the Stockholders.
"Governmental Permits" has the meaning specified in Section 3.10.
------------
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended and the rules and regulations promulgated thereunder.
"Iconixx" has the meaning specified in the first paragraph of this
Agreement.
"IRS" means the Internal Revenue Service.
"Indemnifiable Costs" has the meaning specified in Section 8.1.
-----------
"Indemnified Parties" has the meaning specified in Section 8.1.
-----------
"Intellectual Property" shall mean all of the following as they are
related primarily to the Business: (i) patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; (v) trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, business and marketing plans, and customer
and supplier lists and related information); and (vi) computer software
(including but not limited to data, data bases and documentation).
"Knowledge of the Company" (whether or not capitalized) shall mean
actual knowledge, after reasonable inquiry within the Company to employees with
responsibility for the subject matter in question, of the Stockholders and the
officers and key employees of the Company. "Knowledge of the Stockholders"
(whether or not capitalized) shall mean actual knowledge of the Stockholders.
"Leases" shall mean the leases set forth on the Schedule 3.9.
------------
"Material" (whether or not capitalized) shall, where appropriate in
context of its use in making the representations and warranties set forth in
Article III, be deemed to mean an amount of money greater than $25,000
-----------
individually or $50,000 in the aggregate.
"Material Adverse Change" or "Material Adverse Effect" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Company's and the Stockholders' representations and warranties
set forth in
-4-
Article III, such terms shall refer to the occurrence of any single event, or
-----------
any series of related events, or set of related circumstances, which results or
likely will result in a loss to the Company, in excess of $25,000 per occurrence
or $50,000 in the aggregate.
"Net Working Capital" shall equal the Company's total current assets
(including cash and cash equivalents but excluding Permitted Distributions)
minus its total current liabilities including, without limitation, any cash to
accrual liability borne by the Company and any change in control payments due to
employees, subcontractors, vendors or customers as a result of the Acquisition
contemplated hereby, but excluding any construction costs associated with the
Company's real property leases or any legal fees incurred in connection with the
transactions contemplated hereby, each as calculated in accordance with GAAP
consistent with past practices to the extent in accordance with GAAP.
"Net Working Capital Adjustment" has the meaning specified in Section
-------
2.9.
---
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. (S)(S)
651 et seq., any amendment thereto, and any regulations promulgated thereunder.
-- ---
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not an Employee Benefit Plan within the meaning
of Section 3(3) of ERISA.
"Permitted Distributions" has the meaning specified in Section 3.8.
-----------
"Permitted Exception" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, (c) purchase money security interest liens solely on the property
acquired pursuant to such credit purchase, or (d) other liens or imperfections
on property which are not material in amount or do not materially detract from
the value or the existing use of the property affected by such lien or
imperfection.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"Preferred Stock" means the Convertible Class A Preferred Stock, par
value $.01 per share of Iconixx.
"Projected Net Working Capital" means $850,000.
"Purchase Price" has the meaning specified in Section 2.1.
-----------
-5-
"Requirements of Laws" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Tax" or "Taxes" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amounts imposed thereon by any Governmental Body.
"Tax Return" means any return, report or similar statement required to be
filed with respect to any Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
ARTICLE II
STOCK PURCHASE
2.1. Stock Purchase. On the Closing Date and subject to the terms and
--------------
conditions set forth in this Agreement, the Stockholders shall sell and deliver
to Iconixx all of the Company Shares, free and clear of all Funded Indebtedness
and all Encumbrances, other than Permitted Exceptions and the restrictions
imposed by federal and state securities laws. The total purchase price for the
Company Shares (the "Purchase Price") shall be equal to $13,750,000, subject to
any adjustment required to be made pursuant to Sections 2.3 and 2.5 below.
------------ ---
2.2. Payment of Purchase Price. On the Closing Date and subject to the
-------------------------
terms and conditions set forth in this Agreement, Iconixx shall pay the Purchase
Price for the Company Shares to the Stockholders. The Purchase Price shall be
payable as follows:
(a) an aggregate of $8,750,000 shall be paid at Closing by wire
transfer of immediately available funds to the Stockholders' accounts as
specified in Exhibit B hereto (the "Cash Purchase Price");
---------
(b) $1,000,000 shall be paid in cash to the Escrow Agent at Closing
pursuant to Section 2.7 below to serve as a portion of the Escrow Sum (as
-----------
defined below); and
(c) $4,000,000 shall be paid at Closing in the form of 1,000,000
shares of Common Stock (valued at $1.00 per share) and 3,000 shares of Preferred
Stock (valued at $1,000 per share), to be allocated among the Stockholders in
the amounts specified in Exhibit B hereto.
---------
-6-
2.3. Funded Indebtedness Adjustment. The Cash Purchase Price will be
------------------------------
adjusted downward by the amount, if any, by which the Company's Funded
Indebtedness exceeds $0 as of the Closing Date.
2.4. Intentionally Left Blank.
------------------------
2.5. Financial Condition. The Company's Net Working Capital at the
-------------------
Closing shall be not less than Projected Net Working Capital (as determined
based on the Company's preliminary closing balance sheet prepared not more than
five days prior to the Closing Date) or the Cash Purchase Price payable at
Closing will be reduced by the amount of such deficit.
2.6. Closing. The Closing of the Acquisition shall take place at
-------
10:00 a.m., Eastern Time, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇.▇. in Washington, D.C. on March 10, 2000, or on a date mutually agreed
to by the parties (which date shall be as soon as practicable following the date
on which all of the conditions to Closing set forth in Sections 7.1 and 7.2 have
------------ ---
been satisfied) (the "Closing Date"), with an Effective Date as of March 1,
2000.
2.7. Escrow Arrangements. Pursuant to the Escrow Agreement to be
-------------------
entered into among Stockholders, Iconixx and the Escrow Agent, $1,000,000 of the
Purchase Price shall be delivered to the Escrow Agent at Closing (such monies
paid, together with all interest accrued thereon, is hereinafter referred to as
the "Escrow Sum"). The Escrow Sum shall be held pursuant to the terms of the
Escrow Agreement for payment from such Escrow Sum of the amounts, if any, owing
by Stockholders to Iconixx or the Company pursuant to the provisions of the Net
Working Capital Adjustment or for indemnification claims pursuant to Article
-------
VIII hereof. To the extent claims against the Escrow Sum are determined in
----
favor of the Stockholders, all amounts reserved against the Escrow Sum in
connection with such claims shall be remitted to the Stockholders as soon as
practicable following any such determination. On the six month anniversary of
the Closing Date, the Escrow Sum shall be reduced to an amount equal to the sum
of $500,000 plus the amount of claims then pending against the Escrow Sum, with
such reduction amount to be remitted to the Stockholders. On December 31, 2000
(such ten-month period being referred to herein as the "Escrow Period"), such
remaining portion of the Escrow Sum not theretofore claimed by or paid to
Iconixx in accordance with the terms of the Escrow Agreement and this Agreement
(together with any interest on such remaining portion of the Escrow Sum) shall
be disbursed to the Stockholders. All disbursements at the expiration of the
Escrow Period shall be paid in cash to the Stockholders at their accounts set
forth in Exhibit B as updated from time to time. The Stockholders and Iconixx
---------
agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party to
receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.8. Closing Audit. Within 180 days following the Closing Date,
-------------
there shall be delivered to Iconixx and to Stockholders an audit of the
Company's balance sheet as of the Closing Date (the "Audited Closing Financial
-7-
Statements"). The Audited Closing Financial Statements shall be audited by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. in accordance with GAAP. The cost of preparing the
Audited Closing Financial Statements shall be paid by Iconixx. The Stockholders
shall be afforded a reasonable opportunity to review the audit results
(including any work papers prepared in connection therewith). In the event that
Stockholders provide written notice within 20 days after receipt of the Audited
Closing Financial Statements that they dispute any item(s) contained in the
Audited Closing Financial Statements, then Stockholders and Iconixx shall
jointly select and retain an independent "Big Five" accounting firm (the
"Independent Accountants") to review the disputed item(s) in the Audited Closing
Financial Statements. In conducting such review, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. shall
provide the Independent Accountants with customary access to the work papers of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. utilized in preparing the Audited Closing Financial
Statements. The final determination of such disputed item(s) by the Independent
Accountants shall be utilized to determine all adjustments described in Section
-------
2.9 below and shall be final and binding on the parties solely for such
---
purposes. The cost of retaining the Independent Accountants shall be borne
equally by the Stockholders and Iconixx.
2.9. Post-Closing Net Working Capital Adjustment. The Purchase
-------------------------------------------
Price will be adjusted upward or downward, on a dollar-for-dollar basis, to
reflect the increase or decrease, if any, in Net Working Capital as reflected on
the Audited Closing Financial Statements from the Projected Net Working Capital
(the "Net Working Capital Adjustment"). The Net Working Capital Adjustment shall
be determined by referring to the Audited Closing Financial Statements. In the
event that the Net Working Capital Adjustment results in an increase in the
Purchase Price, then Iconixx shall pay such amount to the Stockholders in
immediately available funds within 15 days of delivery of the Audited Closing
Financial Statements as finally determined in accordance with Section 2.8 above.
-----------
In the event that the Net Working Capital Adjustment results in a decrease in
the Purchase Price, then the amount of any such decrease shall be payable to
Iconixx (i) first, from the Escrow Sum in immediately available funds within 15
days of the final determination of the Net Working Capital Adjustment up to the
aggregate cash portion of the Escrow Sum and (ii) second, the balance, if any,
by the Stockholders in immediately available funds within 15 days of the final
determination of the Net Working Capital Adjustment; provided, however, that no
Stockholder shall be liable for more than its proportionate share of any Net
Working Capital Adjustment (based on each Stockholder's pro rata share of the
Purchase Price). All payments required to be paid by Stockholders or the Escrow
Agent pursuant to this Section 2.9 shall be deemed to be a downward adjustment
-----------
to the Purchase Price and shall not be controlled or limited by any provision
contained in Article VIII hereof.
------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Except as set forth on the Disclosure Schedules attached hereto (which
Disclosure Schedules identify the exception and reference the applicable
representation so qualified), the Company and the Stockholders jointly and
severally represent and warrant to Iconixx that:
-8-
3.1. Capitalization. The authorized capital stock of the Company
--------------
consists of 200 shares of common stock, 200 of which being the Company Shares
are issued and outstanding and are owned in the amounts set forth on Schedule
--------
3.1. All of the Company Shares are duly authorized, validly issued, fully paid,
---
and nonassessable. All of the Company Shares are owned of record and
beneficially by the Stockholders. None of the Company Shares was issued in
violation of any preemptive, right of first offer or refusal or preferential
rights of any Person.
3.2. No Liens on Shares. The Stockholders own all of the Company
------------------
Shares, free and clear of any Encumbrances other than the rights and obligations
arising under this Agreement, and none of the Company Shares is subject to any
outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Company Shares is subject to any restriction
on transfer thereof except for restrictions imposed by applicable federal and
state securities laws. At Closing pursuant to the Acquisition, the Stockholders
will each have full power and authority to convey good and marketable title to
the Company Shares, free and clear of any Encumbrances other than the
restrictions imposed by federal and state securities laws.
3.3. Subsidiaries. Except as set forth on Schedule 3.3, the
------------ ------------
Company does not own, directly or indirectly, any capital stock or ownership
interests in any Person. The Stockholders do not own any capital stock or
ownership interests in any other Person engaged in the Business other than the
Company Shares (other than ownership of a publicly-held corporation of which the
Stockholders; or any of them own, or has real or contingent rights to own less
than five percent of any class of outstanding securities).
3.4. Other Rights to Acquire Capital Stock. Except as set forth in
-------------------------------------
this Agreement in respect of Iconixx's rights to acquire the Company Shares,
there are no authorized or outstanding warrants, options, or rights of any kind
to acquire from either the Stockholders or the Company any equity or debt
securities of the Company, or securities convertible into or exchangeable for
equity or debt securities of the Company, and there are no shares of capital
stock of the Company reserved for issuance for any purpose nor any contracts,
commitments, understandings or arrangements which requires the Company to issue,
sell or deliver any additional shares of its capital stock.
3.5. Due Organization. The Company is a corporation duly
----------------
organized, validly existing, and in good standing under the laws of the State of
New York and has full corporate power and authority to own and lease its
properties and assets and to carry on the Business as now conducted. Complete
and correct copies of the Articles of Incorporation and Bylaws of the Company,
and all amendments thereto, have been delivered to Iconixx and are attached
hereto as Exhibits C-1 and C-2, respectively. Except as set forth on Schedule
------------ --- --------
3.5, the Company is qualified to do business in each jurisdiction in which the
---
nature of the Business or the ownership of its properties requires such
qualification except where the failure to be so qualified does not and could not
reasonably be expected to have a Material Adverse Effect. The jurisdictions in
which the Company is so qualified are listed on Exhibit C-3 attached hereto.
-----------
-9-
3.6. Due Authorization. The Company and the Stockholders each have
-----------------
full power and authority to execute, deliver and perform this Agreement and to
carry out the Acquisition. The execution, delivery, and performance of this
Agreement and the Acquisition have been duly and validly authorized by all
necessary corporate action of the Company. This Agreement has been duly and
validly executed and delivered by the Company and the Stockholders and
constitutes the valid and binding obligations of the Company and the
Stockholders, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by laws affecting creditors' rights and
debtors' obligations generally, and legal limitations relating to remedies of
specific performance and injunctive and other forms of equitable relief (the
"Equitable Exceptions"). The execution, delivery, and performance of this
Agreement and the Acquisition (as well as all other instruments, agreements,
certificates, or other documents contemplated hereby) by the Company and the
Stockholders, do not (a) violate any Requirements of Laws or any Court Order of
any Governmental Body applicable to the Company or the Stockholders, or their
respective property, (b) violate or conflict with, or permit the cancellation
of, or constitute a default under, any Material agreement to which the Company
or the Stockholders are a party, or by which any of them or any of their
respective property is bound, (c) permit the acceleration of the maturity of any
Material indebtedness of, or indebtedness secured by the property of, the
Company or the Stockholders, (d) violate or conflict with any provision of the
charter or bylaws of the Company, or (e) except for filings or approvals under
the HSR Act and such consents, approvals, or registrations as may be required
under applicable state securities laws, require any material consent, approval
or authorization of, or notice to, or declaration, filing or registration with,
any Governmental Body or other third party.
3.7. Financial Statements. The following financial statements of
--------------------
the Company have been delivered to Iconixx by the Company: unaudited balance
sheets for the years ended December 31, 1997 and December 31, 1999 and audited
balance sheet for the year ended December 31, 1998; unaudited statements of
operation for the years ended December 31, 1997 and December 31, 1999; and
audited balance sheet and statements of operation for the year ended December
31, 1998 (collectively, the "Financial Statements"). Copies of the Financial
Statements are included in Schedule 3.7. Other than the Financial Statements as
------------
of and for the year ended December 31, 1999 (the "Most Recent Financial
Statements"), the Financial Statements have been prepared in accordance with
GAAP and the Most Recent Financial Statements to the Company's Knowledge have
been prepared in accordance with GAAP except as set forth in Schedule 3.7. The
------------
Financial Statements (including the notes thereto) have been prepared on a
consistent basis throughout the periods indicated and fairly present the
financial position, results of operations and changes in financial position of
the Company as of the indicated dates and for the indicated periods and are
consistent with the books and records of the Company (which books and records
are correct and complete in all material respects). Since the date of the last
of such Financial Statements, the Company has incurred no Material liabilities
required by GAAP to be reflected on the Company's balance sheet or notes thereto
nor any other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) Material (in amount or to the conduct of the
Business); and neither the Company nor Stockholders have Knowledge of any basis
for the assertion of any such Material liability or
-10-
obligation. Since December 31, 1999, the Company has not experienced any
Material Adverse Change.
3.8. Certain Actions. Since December 31, 1999, the Company has
---------------
not, except as disclosed on any of the Financial Statements or notes thereto:
(a) paid or declared any dividends or distributions, or purchased, redeemed,
acquired, or retired any stock or indebtedness or any Stockholder (other than
distributions (i) of certain assets mutually agreed upon by the Company and
Iconixx that have been delivered to the Company by its customers in lieu of a
cash payment for services as listed on Section 3.8 of the Disclosure Schedule
----------- -------------------
and (ii) for income taxes for tax periods ending on or prior to closing with
respect to the Company or its Stockholders (excluding tax subject to
reimbursement pursuant to Section 6.5(c)) and expenses incurred in connection
with the transactions contemplated hereby so long as no Net Working Capital
Adjustment will occur as of the Closing Date (collectively the "Permitted
Distributions")); (b) made or agreed to make any loans or advances or guaranteed
or agreed to guarantee any loans or advances to any party whatsoever; (c)
suffered or permitted any Encumbrance to arise or be granted or created against
or upon any of its assets, real or personal, tangible or intangible; (d)
canceled, waived, or released or agreed to cancel, waive, or release any of its
debts, rights, or claims against third parties in excess of $10,000 individually
or $50,000 in the aggregate; (e) sold, assigned, pledged, mortgaged, or
otherwise transferred, or suffered any Material damage, destruction, or loss
(whether or not covered by insurance) to, any assets (except in the ordinary
course of the Business); (f) amended its certificate of incorporation or bylaws;
(g) outside the ordinary course of business, paid or made a commitment to pay
any severance or termination payment to any employee or consultant; (h) made any
Material change in its method of management operation, accounting or reporting
of income or deductions for tax purposes or any change outside the ordinary
course of the Business in the Company's working capital other than Permitted
Distributions; (i) made any Material acquisitions, made any Material capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $50,000; (j) made any investment or commitment therefor in any Person;
(k) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or Stockholders of the Company; (l) made, amended
or entered into any written employment contract with any officers or key
employees of the Company listed on Schedule 3.8 hereto or created or made any
------------
Material change in any bonus, stock option, pension, retirement, profit sharing
or other employee benefit plan or arrangement; (m) made or entered into any
Contract greater than the smallest of the Contracts scheduled in accordance with
Schedule 3.15; (n) made or entered into any agreement granting any Person any
-------------
registration or offer rights in respect of the Company's capital stock; (o)
entered into any non-competition agreement restricting the Company from engaging
in the Business; (p) made or entered into any employment agreement or other
agreement or other arrangement with any officer, director, Stockholder or
Affiliate of the Company; or (q) amended, experienced a termination or received
notice of actual or threatened termination or non-renewal of any Material
contract, agreement,
-11-
lease, franchise or license to which the Company is a party that would or could
reasonably be expected to have a Material Adverse Effect.
3.9. Properties. Schedule 3.9 lists and briefly describes each
---------- ------------
interest in real property (including, without limitation, leasehold interests)
and each item of personal property utilized by the Company in the conduct of the
Business having a book or fair market value in excess of $10,000 as of the date
hereof. Except for Permitted Exceptions and as set forth on Schedule 3.9(a),
---------------
such real and personal properties are free and clear of Encumbrances. The
Stockholders and the Company have delivered to Iconixx copies of all real
property leases and a lien search obtained from the counties where the Company
conducts business and the New York Secretary of State office of all UCC liens of
record against the Company's personal property in the State of New York. All of
the properties and assets necessary for continued operation of the Business as
currently conducted (including, without limitation, all books, records,
computers and computer software and data processing systems) are owned, leased
or licensed by the Company and are reasonably suitable for the purposes for
which they are currently being used. With the exception of used equipment and
inventory valued at no more than $10,000 in the aggregate on the Company's
Financial Statements, the physical properties of the Company, including the real
properties leased by the Company, are in operating condition sufficient for the
conduct of the Company's business as currently conducted or proposed to be
conducted. Except for Permitted Exceptions, the Company has title to all such
properties and assets. The operation of the properties and Business of the
Company in the manner in which they are now and have been operated does not
violate any zoning ordinances, municipal regulations, or other Requirements of
Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except for Permitted Exceptions, no
restrictive covenants, easements, rights-of-way, or regulations of record impair
the uses of the properties of the Company for the purposes for which they are
now operated. All leases of real or personal property by the Company are
legal, valid, binding, enforceable and in full force and effect and will not be
terminated on or after the Closing Date as a result of the failure to obtain any
consents to the Acquisition contemplated hereby, except for the Equitable
Exceptions. All facilities leased by the Company have received all material
approvals from any Governmental Body (including Governmental Permits) required
to be obtained by the Company in connection with the operation of the Business
and have been operated and maintained in accordance with all material
Requirements of Laws applicable to the Company as a lessee thereof. The Company
owns no real property.
3.10. Licenses and Permits. Schedule 3.10 lists all material
-------------------- -------------
licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Company from any
Governmental Body (herein collectively called "Governmental Permits"). The
Company has complied in all material respects with the terms and conditions of
all such Governmental Permits, and the Company has not received notification
from any Governmental Body of violation of any such Governmental Permit or the
Requirements of Laws governing the issuance or continued validity thereof. All
of such Governmental Permits are valid and in full force and effect. No
additional Governmental Permits are required from any
-12-
Governmental Body thereof in connection with the conduct of the Business which
Governmental Permits, if not obtained, would individually or in the aggregate
have a Material Adverse Effect.
3.11. Intellectual Property. Schedule 3.11 lists and briefly
--------------------- -------------
describes all material Intellectual Property owned or utilized by the Company.
The Company has furnished Iconixx with copies of all material license agreements
(including software licensing agreements) to which the Company is a party,
either as licensor or licensee, with respect to any Intellectual Property. The
Company has legal title to or the right to use all the Intellectual Property and
all inventions, processes, designs, formulae, trade secrets and know-how
utilized in the conduct of the Business as presently conducted and, the Company
has sufficient rights in the Intellectual Property to permit diversification of
the Company's customer base as currently planned by the Company (the "Customer
Diversification") without material impediment, without the payment of any
royalty or similar payment, and to the Company's and the Stockholders'
Knowledge, the Company is not infringing on any Intellectual Property right of
others and neither the Company nor the Stockholders have Knowledge of any
infringement by others of any such rights owned by the Company. The Company has
not received notice of any charge, claim, demand, complaint, action, suit,
hearing, proceeding or investigation which challenges the Company's ownership or
licensing of any Intellectual Property, the Company's current uses or the
Company's compliance with the terms and conditions of any contracts, licenses,
agreements or Court Orders involving the Intellectual Property. Schedule 3.11
-------------
contains a complete list of filings made with any Governmental Bodies with
regard to the Intellectual Property. All licenses set forth on Schedule 3.11
-------------
are valid and binding obligations of the Company, and to the Knowledge of the
Company the other parties thereto, enforceable against the Company, and to the
Knowledge of the Company the other parties thereto in accordance with their
respective terms, except for the Equitable Exceptions. The Company owns and
possesses all right, title and interest in and to, or has the right to use
pursuant to a valid license, all Intellectual Property necessary for the
operation of the Business of the Company as presently conducted. The Company's
use of each item of the Intellectual Property owned or licensed by Company (i)
will not be terminated as a result of the Acquisition contemplated hereby; (ii)
does not interfere with the rights of any other Person based on the Company's
current use of such items or the Company's currently proposed use of such items
in order to permit the Customer Diversification without material impediment;
(iii) are in compliance with the material terms and conditions of all license or
other agreements relating to such items; and (iv) does not violate any material
Requirements of Laws or Courts Orders applicable to the Company or, to the
Company's Knowledge, any other party to any material license or other agreement
relating to such Intellectual Property. The Company is not in default (whether
or not after the giving of notice or the lapse of time or both) under any
material license, contract or other agreement relating to any Intellectual
Property.
3.12. Compliance with Laws. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all material statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and is in compliance in all material respects with
all
-13-
federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, the Solid Waste Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA, the
Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "Environmental and OSHA Obligations") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the Knowledge of the Company and the Stockholders, no
such claim is reasonably anticipated) to the effect that the Business fails to
comply, in any respect, with any Requirements of Laws, Governmental Permit or
Environmental and OSHA Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
3.13. Insurance. Schedule 3.13 lists all coverages for fire,
--------- -------------
liability, or other forms of insurance and all fidelity bonds held by or
applicable to the Company. Copies of the binder for all such insurance policies
have been delivered to Iconixx. The insurance maintained by the Company is
customary and reasonably adequate for companies engaged in the Business. No
event relating to the Company has occurred which will result in (i) cancellation
of any such insurance coverages; (ii) a retroactive upward adjustment of
premiums under any such insurance coverages; or (iii) any prospective upward
adjustment in such premiums. All of such insurance coverages will not be
terminated on or after the Closing Date as a result of the failure to obtain any
consents to the Acquisition contemplated hereby. The Company is not in default
under any such insurance policies.
3.14. Employee Benefit Plans.
----------------------
(a) Employee Welfare Benefit Plans and Other Arrangements.
-----------------------------------------------------
Except as disclosed on Schedule 3.14(a), the Company does not maintain or
----------------
contribute to any "employee welfare benefit plan" as such term is defined in
Section 3(1) of ERISA or Other Arrangement (each a "plan"). With respect to each
such plan: (i) the plan is in compliance with, and, except as set forth on
Schedule 3.14(a), the Company does not have any liability under ERISA, the Code
----------------
or any Requirements of Law; (ii) the plan has been administered in accordance
with its governing documents; (iii) neither the plan, nor any fiduciary with
respect to the plan, has engaged in any "prohibited transaction" as defined in
Section 406 of ERISA other than any transaction subject to a statutory or
administrative exemption; (iv) except for the processing of routine claims in
the ordinary course of administration, there is no litigation, arbitration or
disputed claim outstanding; and (v) all premiums due on any insurance contract
through which the plan is funded have been paid. All employee welfare benefit
plans and the related trusts that are subject to Section 4980B(f) of the Code
and Sections 601 through 607 of ERISA comply with and have been administered in
compliance with the health care continuation-coverage requirements for
tax-favored status under Section 4980B(f) of the Code (formerly Section 162(k)
of the Code), Sections 601 through 607 of ERISA. All employee welfare benefit
plans comply with and have been administered in compliance with the requirements
of the (i) Health Insurance Portability and Accountability Act of 1996, to the
extent applicable, and applicable proposed or final regulations, and (ii) Mental
Health Parity Act of 1996, to the extent applicable.
-14-
(b) Employee Pension Benefit Plans. Except as set forth in
------------------------------
Schedule 3.14(b), the Company does not maintain or contribute to any arrangement
----------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
compliance with ERISA and all other applicable Requirements of Laws; (iii) the
plan has been administered in accordance with its governing documents as
modified by applicable law; (iv) the plan has not suffered an "accumulated
funding deficiency" as defined in Section 412(a) of the Code; (v) the plan has
not engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code other than a transaction subject to statutory or administrative
exemption; (vi) the plan has not been subject to a "reportable event" (as
defined in Section 4043(b) of ERISA), the reporting of which has not been waived
by regulation of the Pension Benefit Guaranty Corporation; (vii) no termination
or partial termination of the plan has occurred within the meaning of Section
411(d)(3) of the Code; (viii) all contributions required to be made to the plan
have been made to or on behalf of the plan or accrued in accordance with GAAP;
(ix) there is no litigation, arbitration or disputed claim outstanding; (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis; and (xi) a
favorable determination letter from the IRS has been received by the Company
with respect to such plan stating that such plan is so qualified; and there are
no circumstances which would cause such plan to lose such qualified status.
(c) Employment and Non-Tax Qualified Deferred Compensation
------------------------------------------------------
Arrangements. Except as set forth on Schedule 3.14(c), the Company does not
------------ ----------------
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be and that is not a tax qualified
arrangement under Section 401(a) of the Code.
3.15. Contracts and Agreements. Schedule 3.15 hereto contains a
------------------------ -------------
list of all customer contracts, all employment contracts involving annual
salaries greater than $60,000 and all employment contracts with general managers
or officers of the Company. Schedule 3.15 also contains a list of the 30
-------------
largest contracts (in terms of annual payments made or received with respect
thereto) to which the Company is a party or by which the Company or its
properties are bound, a list of any real estate or office building leases
involving the Company and a list of any contract or agreements, if any,
prohibiting the Company from freely engaging in the Business anywhere in the
world (collectively, the "Contracts"). The Company is not and, to the Knowledge
of the Stockholders and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts. All of the
Contracts to which the Company is a party are legal, valid, binding, enforceable
and in full force and effect and will not be terminated on or after the Closing
Date as a result of the failure to obtain any consents to the Acquisition
-15-
contemplated hereby, except for the Equitable Exceptions. The Company has not
guaranteed any obligations of any other Person. The Company has no present
expectation or intention of not fully performing all of its obligations under
any Contract, the Company has no Knowledge of any breach or anticipated breach
by the other parties to any Contract and the Company has not received notice of
actual or threatened termination or non renewal of any Contract.
3.16. Claims and Proceedings. There are no claims, actions, suits,
----------------------
proceedings, or investigations pending or, to the Knowledge of the Stockholders
or the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, before or by any court, municipality
or other Governmental Body. To the extent any are disclosed on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will individually or in the aggregate result in any
Material Adverse Effect to the Company. The Company has not been and the
Company is not now, subject to any Court Order, stipulation, or consent of or
with any court or Governmental Body. No inquiry, action or proceeding has been
instituted or, to the Knowledge of the Stockholders or the Company, threatened
or asserted against the Stockholders or the Company to restrain or prohibit the
carrying out of the Acquisition or to challenge the validity of the Acquisition
or any part thereof or seeking damages on account thereof. To the Knowledge of
the Company and the Stockholders there is no basis for any such valid claim or
action.
3.17. Taxes.
-----
(a) Except as set forth on Schedule 3.17(a), all Federal,
----------------
foreign, state, county and local and other Taxes due from the Company on or
before the Closing have been paid and all Tax Returns which are required to be
filed by the Company on or before the date hereof have been filed within the
time and in the manner provided by all Requirements of Laws or extensions were
timely filed, and all such Tax Returns are true and correct and accurately
reflect the Tax liabilities of the Company in all respects. No Tax Returns of
the Company are presently subject to an extension of the time to file. All
Taxes, assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Financial Statements. The provisions for Taxes
reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Stockholders or the Company are
aware. For Governmental Bodies with respect to which the Company files Tax
Returns, no such Governmental Body has given the Company written notification
that such corporation is or may be subject to taxation by that Governmental
Body. The Company has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, Stockholder,
creditor, independent contractor or other party. The Company has each properly
reflected for tax purposes in accordance with all Requirements of Laws the
status of all independent contractors, consultants and subcontractors. There are
no Tax liens on any of the property or assets of the Company. The Company (and
any predecessor of the Company) has been a validly electing S
-16-
corporation within the meanings of Sections 1361 and 1362 of the Code at all
times since the date of its incorporation, and the Company will be an S
corporation until and including the Closing Date.
(b) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. 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 any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group. No Stockholder (A) has been a
member of an affiliated group, as defined in Section 1504(a) of the Code, filing
a consolidated federal income Tax Return (other than a group the common parent
of which was any Stockholder) and (B) has any liability for the Taxes of any
Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract or otherwise.
(c) The Company would not be liable for any Tax under Section
1374 of the Code in connection with a deemed sale of such Company's assets
caused by an election under Section 338(h)(10) of Code. The Company has not (i)
acquired assets from another corporation in a transaction in which the Company's
Tax basis for the acquired assets was determined in whole or in part by
reference to the Tax basis of the acquired assets (or any other property) in the
hands of the transferor or (ii) acquired the stock of any other corporation that
is a qualified subchapter S subsidiary.
(d) Except as set forth on Schedule 3.17(d), the Company has
----------------
not had at any time during the Company's existence owned any subsidiaries
(including any "qualified subchapter S subsidiaries" within the meaning of
Section 1361(b)(3)(13) of the Code).
(e) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the sale of the
Company Shares pursuant to this Agreement.
3.18. Personnel. Schedule 3.15 sets forth the names and annual
--------- -------------
rates of compensation of the directors and executive officers of the Company,
and of the employees of the Company whose annual rates of compensation during
the calendar year ended December 31, 1999 (including base salary, bonus and
incentive pay) exceeded (or by December 31, 2000 are expected to exceed) $60,000
and the employment agreements, if any, pertaining to such employees. Schedule
--------
3.18 summarizes the bonus, profit sharing, percentage compensation, company
----
automobile, club membership, and other like benefits, if any, paid or payable to
such directors, officers, and employees during the Company's calendar year ended
December 31, 1999 and to the date hereof. The employee relations of the Company
are generally good, there has
-17-
been no unusual level of employee departures and there is no pending or, to the
Knowledge of Stockholders or the Company, threatened labor dispute or union
organization campaign. None of the employees of the Company is covered by a
collective bargaining agreement. The Company is in compliance in all material
respects with all Requirements of Laws respecting employment and employment
practices, including, without limitation, the Fair Labor Standards Act of 1938,
immigration hiring, terms and conditions of employment, and wages and hours, and
is not engaged in any unfair labor practices. Neither the Company nor the
Stockholders have Knowledge that any Person listed on Schedule 3.15 hereto will
-------------
not agree to remain employed by the Company after the consummation of the
Acquisition. There is no unfair labor practice claim against the Company before
the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the Knowledge of the Company and the Stockholders,
threatened against or involving the Company, and none has previously occurred.
3.19. Business Relations. Neither the Company nor the Stockholders
------------------
have Knowledge that any customer, supplier or licensor engaged in doing business
with the Company will cease to do business with the Company after the
consummation of the Acquisition as previously conducted with the Company except
for any terminations which will not, in the aggregate, result in a Material
Adverse Change. Neither the Stockholders nor the Company has received any
notice of cancellation of any Material business arrangement between any Person
and the Company, and neither the Company nor the Stockholders have Knowledge
that the Business will be subject to cancellation of any such business
arrangement.
3.20. Accounts Receivable; Accounts Payable; Customer Deposits;
---------------------------------------------------------
Customer Revenues and Deferred Revenues.
---------------------------------------
(a) Accounts Receivable. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company in the Financial
Statements are bona fide and represent amounts validly due for goods sold or
services rendered and, to the Knowledge of the Company, except for amounts
reserved for as doubtful accounts in the Financial Statements, all such amounts
will be collected in full prior to August 31, 2000. With respect to such
accounts, notes, and loans receivable: (i) all are free and clear of any
Encumbrances; (ii) no claims of offset have been asserted in writing against any
of such accounts, notes, or loans receivable; and (iii) none of the obligors
thereto has given written notice that it will or may refuse to pay the full
amount or any portion thereof. Lists of the Company's accounts receivable as of
December 31, 1999 (including any reconciliation to the accounts receivable entry
on the balance sheet included in the Most Recent Financial Statements) have been
attached to Schedule 3.20(a).
----------------
(b) Accounts Payable. The aggregate amount of accounts payable
-----------------
reflected on the Most Recent Financial Statements are prepared in accordance
with GAAP except as adjusted for in the Net Working Capital Adjustment and,
after giving effect to such adjustment, reflect the accounts payable of the
Company as of December 31, 1999.
(c) Customer Deposits; Customer Revenues and Deferred Revenues.
----------------------------------------------------------
Schedule 3.20(c) sets forth, as of the date specified therein all deferred
----------------
revenues as of
-18-
such date on an aggregate basis. For the year ending December 31, 1999, the
Company's actual deposits and revenues from customer contracts are not less than
the Company's deposits and revenues from customer contracts for the year ending
December 31, 1998.
3.21. Bank Accounts; Investments. Schedule 3.21 lists all banks or
-------------------------- -------------
other financial institutions with which the Company has an account or maintains
a safe deposit box, showing the type and account number of each such account and
safe deposit box and the names of the persons authorized as signatories thereon
or to act or deal in connection therewith. Schedule 3.21 also lists all
-------------
Material investments by the Company in any funds, accounts, securities,
certificates of deposit or instruments of any Person. All of such investments
are customary in form and amount for reasonably prudent treasury investments of
comparable businesses, none of which involve any type of derivative, option,
hedging or other speculative instrument.
3.22. Customer Claims. No written or oral claims for breach of
---------------
contract or otherwise by any customers (a "Customer Claim") has been made
against the Company since January 1, 1999 which could, individually or in the
aggregate, result in any Material Adverse Effect. The level of Customer Claims
for the period since December 31, 1998 through the date hereof is consistent
(plus or minus 5%) with past practices of the Company for the comparable period
in 1998.
3.23. Brokers. Except for Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.,
-------
neither the Company nor the Stockholders have engaged, or caused to be incurred
any liability to any finder, broker, or sales agent in connection with the
origin, negotiation, execution, delivery, or performance of this Agreement or
the Acquisition.
3.24. Affiliated Transactions. No officer, director, Stockholder
-----------------------
or Affiliate of the Company or any individual related by blood or marriage to
any such Person, or any entity in which any such Person owns any beneficial
interest, is a party to any agreement, contract, arrangement or commitment with
the Company or engaged in any transaction with the Company or has any interest
in any property used by the Company, it being understood that ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ are husband and wife. No officer, director or
Stockholder of the Company has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation or mutual fund of which such Person owns, or has real
or contingent rights to own, less than five percent of any class of outstanding
securities) or any property used in the operation of the Business.
-19-
3.25. Funded Indebtedness; Letters of Credit; Undisclosed
---------------------------------------------------
Liabilities.
-----------
(a) Funded Indebtedness. Other than any Funded Indebtedness
-------------------
which is to be repaid and discharged by Stockholders prior to Closing in
accordance with Section 7.1(d), the Company does not have any Funded
--------------
Indebtedness.
(b) Letters of Credit. Other than those listed on Schedule
----------------- --------
3.25, the Company has no letters of credit, performance bonds or similar
----
instruments issued on or for its account for the benefit of any of its vendors
or otherwise.
(c) Undisclosed Liabilities. The Company does not have any
-----------------------
Material liabilities in the aggregate (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected on a corporate balance
sheet or in the notes thereto, except for such liabilities which are accrued or
reserved against in the Financial Statements or disclosed in the notes thereto,
including without limitation any accounts payable or service liabilities of the
Company incurred prior to the Closing Date.
3.26. Year 2000. To the Company's Knowledge, all of the Material
---------
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company in the
conduct of its business will not malfunction, will not cease to function, will
not generate incorrect data, and will not produce incorrect results when
processing, providing, and/or receiving (i) date-related data into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries,
except for any malfunctions or generations of incorrect data or results that
would not individually or in the aggregate have a Material Adverse Effect. The
Company has not been engaged in any year 2000 correction consulting work for
customers pertaining to its work product and has received no claim or notice
from any customer regarding the failure of the Company to install computer
software that is year 2000 compliant.
3.27. Information Furnished. The Company and the Stockholders have
---------------------
made available to Iconixx true and correct copies of all material corporate
records of the Company and all material agreements, documents, and other items
listed on the Disclosure Schedules to this Agreement or referred to in Article
-------
III of this Agreement, and neither this Agreement, the Disclosure Schedules
---
hereto, nor any written information, instrument, or document delivered to
Iconixx pursuant to this Agreement contains any untrue statement of a Material
fact or omits any Material fact necessary to make the statements herein or
therein, as the case may be, not misleading.
-20-
ARTICLE IV
ICONIXX'S REPRESENTATIONS AND WARRANTIES
Except as set forth on the Disclosure Schedules attached hereto (which
Disclosure Schedules identify the exception and references the applicable
representation so qualified), Iconixx represents and warrants to the
Stockholders and the Company as follows:
4.1. Due Organization of Iconixx. Iconixx is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full corporate power and authority to execute, deliver and
perform this Agreement and to carry out the Acquisition.
4.2. Due Authorization. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary corporate action by
Iconixx and the Agreement has been duly and validly executed and delivered by
Iconixx and constitutes the valid and binding obligation of Iconixx, enforceable
in accordance with its terms, except for the Equitable Exceptions. The
execution, delivery, and performance of this Agreement and the Escrow Agreement
(as well as all other instruments, agreements, certificates or other documents
contemplated hereby) by Iconixx shall not (a) violate any Requirements of Laws
or Court Order of any Governmental Body applicable to Iconixx or its property,
(b) violate or conflict with, or permit the cancellation of, or constitute a
default under any agreement to which Iconixx is a party or by which Iconixx or
its property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, Iconixx, (d)
violate or conflict with any provision of the Certificate of Incorporation or
Bylaws of Iconixx, or (e) except for filings or approvals under the HSR Act and
such consents, approvals, or registrations as may be required under applicable
state securities laws, require any consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any Governmental Body or
other third party.
4.3. No Brokers. Iconixx has not engaged, or caused to be incurred
----------
any liability for which the Stockholders may be liable to any finder, broker or
sales agent in connection with the origin, negotiation, execution, delivery, or
performance of this Agreement or the Acquisition.
4.4. Investment. Iconixx will acquire the Company Shares for
----------
investment and for its own account and not with a view to the distribution
thereof.
4.5. Information Furnished. No written information. instrument or
---------------------
document delivered to the Stockholders or the Company pursuant to this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements appearing in the aforementioned items, not
misleading.
4.6. Capital Stock and Related Matters. As of the Closing and
---------------------------------
immediately thereafter, the authorized capital stock of Iconixx shall consist of
100,000,000 shares of stock, of which (i) 150,000 shares shall be designated as
Preferred and (ii) 99,850,000 shares shall be designated as Common Stock. The
ownership of the issued and outstanding Preferred Stock and
-21-
the Common Stock are as set forth on the attached Iconixx Capitalization
Schedule. As of the Closing, all of the outstanding shares of Iconixx's capital
stock shall be validly issued, fully paid and nonassessable.
4.7. Authorization of the Stock. Iconixx has authorized the
--------------------------
issuance and sale to the Stockholders of up to an aggregate of 3,000 shares of
Preferred Stock and an aggregate of 1,000,000 shares of Common Stock, each
having the rights and preferences set forth in the Iconixx's Certificate of
Incorporation attached hereto as Exhibit D.
---------
4.8 Financial Statements. The following financial statements of
--------------------
Iconixx have been delivered to the Stockholders by Iconixx: an unaudited
consolidating balance sheet of Iconixx as of December 31, 1999 and unaudited
consolidating statement of operations of Iconixx for the three months ended
December 31, 1999 (collectively, the "Iconixx Financial Statements"). To the
Knowledge of Iconixx, the Iconixx Financial Statements have been prepared in
accordance with GAAP except for normal year-end adjustments and the absence of
footnotes. The Iconixx Financial Statements fairly present the financial
position and results of operations of Iconixx as of the indicated dates and for
the indicated periods and are consistent with the books and records of Iconixx
(which books and records are correct and complete in all material respects).
Since December 31, 1999, Iconixx has not experienced any material adverse
change.
4.9 Compliance with Laws. Iconixx has (i) complied in all material
--------------------
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to its business and has filed with the proper Governmental Bodies all
material statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which Iconixx or any of its employees
(because of their activities on behalf of Iconixx) are subject and (ii)
conducted its business and is in compliance in all material respects with all
federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Environmental and OSHA Obligations and all other Governmental Body
requirements, except where any such failure to comply or file would not, in the
aggregate, have a material adverse effect on Iconixx. No claim has been made by
any Governmental Body (and, to the knowledge of Iconixx, no such claim is
reasonably anticipated) to the effect that its business fails to comply, in any
material respect, with any Requirements of Laws, Governmental Permit or
Environmental and OSHA Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
4.10 Claims and Proceedings. There are no material claims, actions,
----------------------
suits, proceedings, or investigations pending or, to the knowledge of Iconixx,
threatened against or affecting Iconixx or any of its properties or assets, at
law or in equity, before or by any court, municipality or other Governmental
Body. Iconixx is not currently subject to any Court Order, stipulation, or
consent of or with any court or Governmental Body. No inquiry, action or
proceeding has been instituted or, to the knowledge of Iconixx, threatened or
asserted against Iconixx to restrain or prohibit the carrying out of the
Acquisition or to challenge the validity of the Acquisition or any part thereof
or seeking damages on account thereof. To the knowledge of Iconixx there is no
basis for any such valid claim or action.
-22-
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY, ICONIXX AND THE
STOCKHOLDERS
5.1. Consents of Others. Prior to the Closing, the Company and the
------------------
Stockholders shall use their commercially reasonable best efforts to obtain and
to cause the Company to obtain all material authorizations, consents and permits
required of the Company and the Stockholders to permit them to consummate the
Acquisition. Prior to the Closing, Iconixx shall use its commercially reasonable
best efforts to obtain all material authorizations, consents and permits
required of Iconixx to permit it to consummate the Acquisition. To the extent
required to consummate the Acquisition or to ensure that the Contracts shall not
be terminated as a result of the Closing, Stockholders shall have obtained the
written consent or waiver of any "change of control" type termination rights of
any third party to any Contract. As promptly as practicable after the date
hereof, Iconixx, the Company and the Stockholders shall make, or shall cause to
be made, such filings as may be required pursuant to the HSR Act with respect to
the consummation of the Acquisition.
5.2. Stockholders' Efforts. Iconixx, the Company and the
---------------------
Stockholders shall use all commercially reasonable best efforts to cause all
conditions for the Closing to be met.
5.3. Powers of Attorney. The Company and the Stockholders shall
------------------
cause the Company to terminate at or prior to Closing all powers of attorney
granted by the Company, other than those relating to service of process,
qualification or pursuant to governmental regulatory or licensing agreements, or
tax matters representation before the IRS or other Governmental Bodies.
5.4. Conduct of Business by the Company Pending Closing. From the
--------------------------------------------------
date of this Agreement to the Closing Date:
(a) Except as otherwise contemplated by this Agreement, or as
Iconixx may otherwise consent to in writing, the Company and the Stockholders
shall conduct the Business only in the ordinary course and shall not engage in
any Material transactions or enter into any Material transaction which would
cause a breach of the representations and warranties contained in Article III.
-----------
(b) The Stockholders and the Company shall use their
commercially reasonable best efforts to cause the Business to preserve
substantially intact its current business organization and present relationships
with its customers, vendors, suppliers and employees and to maintain all of its
insurance currently in effect.
(c) The Stockholders and the Company shall give prompt notice
to Iconixx of any notice of any Material default received by the Company or the
Business subsequent to the date of this Agreement under any Contract or any
Material Adverse Change occurring prior to the Closing Date in the operation of
the Company or the Business.
-23-
(d) Neither the Company nor the Stockholders, nor any of their
representatives, shall solicit, encourage or discuss any Acquisition Proposal
(as hereinafter defined) or supply any non-public information concerning the
Company or the Business or the Company's assets to any party other than Iconixx
or its representatives. As used herein, "Acquisition Proposal" means any
proposal other than the Acquisition, for (i) any merger or other business
combination involving the Company or the Business, (ii) the acquisition of the
Company, a material equity interest in the Company or a material portion of its
assets, or (iii) the dissolution or liquidation of the Company.
5.5. Conduct of Business by Iconixx Pending Closing. From the date
----------------------------------------------
of this Agreement to the Closing Date:
(a) Iconixx shall use its commercially reasonably best efforts
to cause its business to preserve substantially intact its current business
organization and present relationships with its customers, vendors, suppliers
and employees and to maintain all of its insurance currently in effect.
5.6. Access by Iconixx Before Closing. Prior to the Closing Date,
--------------------------------
the Stockholders and the Company agree that it will give, or cause to be given,
to Iconixx and its representatives, during normal business hours and at
Iconixx's expense, reasonable access to the Company's personnel, independent
accountants, officers, agents, employees, assets, properties, titles, contracts,
corporate minute and other books, records, files and documents of the Company
with respect to the Business (including financial, tax basis, budget
projections, accountants' work papers and other information as Iconixx may
reasonably request) upon 24 hours prior notice. The Stockholders and Iconixx
shall mutually agree on the timing and manner of contact with all third parties,
including, but not limited to, customers, vendors or suppliers, which contact
shall not be unreasonably withheld. Iconixx shall not be given access to any
information where the provision of such information would violate a law or
regulation applicable to the Company.
5.7. Access by the Stockholders Before Closing. Prior to the Closing
-----------------------------------------
Date, Iconixx agrees that it will give, or cause to be given, to the
Stockholders and their representatives, during normal business hours and at such
Stockholder's expense, reasonable access to Iconixx's personnel, independent
accountants, officers, agents, employees, assets, properties, titles, contacts,
corporate minutes and other books, records, files and documents of Iconixx with
respect to the business of Iconixx (including financial, tax basis, budget
projections, accountants' work papers and other information as the Stockholders
may reasonably request) upon 24 hour prior notice. The Stockholders and Iconixx
shall mutually agree on the timing and manner of contact with all third parties,
including, but not limited to, customers, vendors or suppliers, which contact
shall not be unreasonably withheld. The Stockholders shall not be given access
to any information where the provisions of such information would violate a law
or regulation applicable to Iconixx.
-24-
ARTICLE VI
POST-CLOSING COVENANTS
6.1. General. In case at any time after the Closing any further
-------
action is legally necessary or reasonably desirable (as determined by Iconixx
and the Stockholders) to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article VIII
------------
below). The Stockholders acknowledge and agree that from and after the Closing,
the Company will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the chief executive office of the Company; provided, however,
that the Stockholders shall be entitled to reasonable access to and to make
copies of such books and records at their sole cost and expense and the Company
will maintain all of the same for a period of at least five (5) years after
Closing. Thereafter, the Company will offer such documentation to the
Stockholders before disposal thereof. The Stockholders further agree to convey
all rights to any Intellectual Property reasonably related to the Business to
the Company. In the event that the Company and the Stockholders have been
unable, despite their reasonable best efforts, to obtain all material
authorizations, consents and permits required of the Company and the
Stockholders to permit them to consummate the Acquisition without default under
any contracts, agreements or permits or Requirements of Laws prior to the
Closing, then the Company and the Stockholders shall obtain all of such material
authorizations, consents or permits, including the consent of the Company's
landlords, if required, within 30 days following the Closing.
6.2. Transition. For a period of four (4) years following Closing,
----------
the Stockholders will not take any action (or cause any such action to be taken
by another Person) that primarily has the effect of discouraging any vendor,
lessor, licensor, customer, contractor, subcontractor, supplier, or other
business associate of the Company from maintaining the same business relations
with the Company after the Closing as it maintained with the Company prior to
the Closing. For a period of four (4) years following Closing, the Stockholders
will refer all customer inquiries relating to the Business to the Company.
6.3. Confidentiality. The Stockholders will treat and hold in
---------------
confidence and not disclose all Confidential Information and refrain from using
any of the Confidential Information except in connection with this Agreement or
otherwise for the benefit of the Company or Iconixx for a period of four (4)
years from the date of this Agreement, and deliver promptly to Iconixx or
destroy, at the written request and option of Iconixx, all tangible embodiments
(and all copies) of the Confidential Information which are in their possession
except as otherwise permitted herein. In the event that any Stockholder is
requested or required (by oral question or written request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar legal proceeding) to disclose any Confidential Information,
such Stockholder will notify the Company and Iconixx promptly of the request or
requirement.
-25-
6.4. Covenant Not to Compete. For and in consideration of the
-----------------------
allocation of $10,000 of the Purchase Price paid to the Stockholders, each
Stockholder covenants and agrees, for a period of four (4) years from and after
the Closing Date, that he or she will not, directly or indirectly without the
prior written consent of the Company, for or on behalf of any entity, engage in
any of the activities prohibited by Section 6 of the Employment Agreement with
such Person in the form of Exhibit E-1 hereto or the Noncompete Agreement with
-----------
such Person in the form of Exhibit E-2 hereto.
-----------
6.5. Additional Matters.
------------------
(a) The Stockholders shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Iconixx and the
Stockholders shall cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to prepare a short period tax
return for the Company covering the period January 1, 2000 through the Closing
Date, subject to the review and approval of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, which approval
shall not be unreasonably withheld. The cost of preparation of such short
period tax return and the 1999 return shall be paid for by Iconixx.
(b) Iconixx and the Stockholders recognize that each of them
will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by Iconixx and/or the Company to
the extent such records and information pertain to events occurring on or prior
to the Closing Date; therefore, Iconixx agrees to cause the Company to (A) use
---------
its commercially reasonable best efforts to properly retain and maintain such
records for a period of six (6) years from the date the Tax Returns for the year
in which the Closing occurs are filed or until the expiration of the statute of
limitations with respect to such year, whichever is later, and (B) allow each
Stockholder and his agents and representatives at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
such other party may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at the requesting
party's expense.
(c) Section 338(h)(10) Election. The Stockholders and Iconixx
---------------------------
shall join in making a timely election (but in no event later than 180 days
following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states (but not in New York City) which permit
corporations to make such elections, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide the others
all necessary information to permit such elections to be made. The Company and
Iconixx shall, as promptly as practicable following the Closing Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
elections; provided, however, that Iconixx shall be the party responsible for
preparing and filing the forms, returns, schedules and other documents necessary
for making an effective and timely election. All Taxes attributable to the
elections made pursuant to this Section 6.5(c) shall be the liability of the
Stockholders; provided, however, that (i) Iconixx shall make payments as an
increase to the Purchase Price after such election to reimburse the
-26-
Stockholders for any additional Taxes and other costs solely as a result of such
election in the State of New York and with the United States; such payments to
be paid to Stockholders in installments in accordance with the Stockholders' tax
payments associated with such election, (ii) said reimbursements shall be
grossed up (based on the Stockholders' highest marginal tax brackets with
respect to the nature of the income giving rise to the Taxes) so that the
Stockholders will be made whole, after taxes, for the additional United States
and New York State Taxes to be paid, and (iii) the amount and the timing of the
one-time reimbursement payment shall be mutually determined as of the date of
the Closing Date by the Stockholders' and Iconixx's accountants. In connection
with such elections, within sixty (60) days following the Closing Date, Iconixx
and the Stockholders shall act together in good faith to determine and agree
upon the "deemed sales price" to be allocated to each asset of the Company in
accordance with Treasury Regulation Section 1.338(h)(10)-1(f) and the other
regulations under Section 338 of the Code. Iconixx and the Stockholders agree
that the "deemed sales price" shall be allocated to the monetary assets of the
Company at their fair market value as of the Closing Date as determined as part
of the determination of the working capital of the Company in accordance with
Section 2.8 hereof, $10,000 shall be allocated to the covenant not to compete
-----------
contained in Section 6.4 hereof, and the balance of the "deemed sales price"
-----------
shall be allocated to the fixed assets, goodwill and other intangible assets of
the Company. Each of the Iconixx and the Stockholders shall report the tax
consequences of the transactions contemplated by this Agreement consistently
with such allocations and shall not take any position inconsistent with such
allocations in any Tax Return or otherwise. In the event that Iconixx and the
Stockholders are unable to agree as to such allocations, Iconixx's reasonable
positions with respect to such allocations shall control if, and only if, there
are no adverse tax consequences to the Stockholders, other than adverse tax
consequences resulting in additional tax subject to reimbursement pursuant to
this Section. The Stockholders shall be liable for, and shall indemnify and hold
Iconixx and the Company harmless against, any Taxes or other costs attributable
solely to (i) a failure on the part of any Stockholder to make the election
contemplated by this Section, execute any forms or prepare any filings necessary
to effect such election, and report the transactions in a manner consistent with
the election (and make allocations of Purchase Price made therewith); or (ii) a
failure on the part of the Company to qualify, at or prior to the Closing, as an
"S corporation" for federal and/or state income Tax purposes. In the event that
a taxing authority pursuant to an audit or otherwise assesses additional Tax
solely as a result of the allocation of Purchase Price among the assets pursuant
to the Section 338(h)(10) election (and in the case of New York City, as a
result of the making of the Section 338(h)(10) election in the State of New York
or with the United States), including without limitation, any local or city Tax,
Iconixx shall indemnify and reimburse the Stockholders (or as the case may be,
hold the Company harmless) for such additional Tax on a grossed up basis in
accordance with the terms of this Section 6.5(c).
--------------
6.6. Litigation Support. In the event and for so long as any party
------------------
is actively contesting or defending against any claim, suit, action or charge,
complaint, or demand in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, circumstance, status, condition, activity,
practice, occurrence, event, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other parties will
-27-
cooperate and make reasonably available themselves or their personnel, as
applicable, and provide such reasonable testimony and access to their books and
records as shall be necessary in connection with the contest or defense.
6.7. Audits. Following the Closing, the Stockholders shall use
------
their best efforts to cause the Company, at the Company's expense, to deliver,
or cause to be delivered, to Iconixx an unqualified and unmodified audit report
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. or other reputable independent accounting firm on the
balance sheet of the Company as of the Closing Date in connection with the
preparation of the Audited Closing Financial Statements and audited statements
of operations and cash flows of the Company with respect to the periods January
1, 2000 through the Closing Date and for any prior fiscal years in 1999, 1998
and 1997, which reports shall be without limitation as to the scope of the
audit. The Stockholders, in their capacities as officers and directors of the
Company during such periods, shall provide all management letters, reports or
representations reasonably requested by such auditors in connection with such
audits.
6.8. Minimum Cash as of the Closing. At the Closing, the Company
------------------------------
shall maintain a level of cash and cash equivalents (net of outstanding checks)
equal to at least $0.
6.9. Iconixx's Stock Options. At or within 30 days following the
-----------------------
Closing, Iconixx will grant stock options for the purchase of Common Stock under
its stock option plan in the aggregate amount of 275,000 shares to certain
employees of the Company mutually agreed upon by Iconixx and the Stockholders
and as provided on the Options Schedule hereto; provided, however, that 50,000
----------------
of such 275,000 shares of Common Stock shall be reserved for future issuance to
key employees of the Company hired following the Closing Date. The Iconixx
stock options shall be exercisable at the fair market value per share of the
Common Stock on the date of grant as determined by Iconixx. The terms of such
stock options shall generally be for ten years from the date of grant, subject
to customary four year annual vesting requirements (i.e., 25% vesting per
annum), and shall otherwise be on the same terms and conditions applicable to
all stock options granted to key executives and employees of Iconixx and its
subsidiaries.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1. Conditions to Iconixx's Obligations. The obligation of Iconixx
-----------------------------------
under this Agreement to consummate the Closing is subject to the conditions
that:
(a) Covenants, Representations and Warranties. The Company and
-----------------------------------------
the Stockholders shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
contained in this Agreement to be performed and complied with by each of them
prior to or at the Closing Date. The representations and warranties of the
Company and the Stockholders set forth in this Agreement shall be accurate in
all material respects at and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
-28-
(b) Consents. All statutory requirements for the valid
--------
consummation by the Company and the Stockholders of the Acquisition shall have
been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under the HSR Act and
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation of the Acquisition shall have been obtained in form and substance
reasonably satisfactory to Iconixx unless such failure could not reasonably be
expected to have a Material Adverse Effect. All approvals of the Boards of
Directors and the Stockholders of the Company necessary for the consummation of
this Agreement and the Acquisition shall have been obtained.
(c) Leases. Each of the Leases shall provide that the Company is
------
the lessee and if required under the terms of a given lease, any consent
required in connection with the Acquisition contemplated by this Agreement shall
have been obtained, and copies of such Leases (and any assignments pursuant to
which any of such Leases have been assigned to the Company prior to the Closing
Date) shall have been provided to Iconixx.
(d) Discharge of Indebtedness and Liens; Stockholder Loans. The
------------------------------------------------------
Stockholders and the Company shall have provided for the payment in full by the
Stockholders of all Funded Indebtedness of the Company at the Closing or the
Purchase Price will be reduced proportionately by the amount that such Funded
Indebtedness exceeds $0 as of the Closing Date. Such Funded Indebtedness, if
any, as of December 31, 1999, is listed on Schedule 7.1(d) hereto. Stockholders
---------------
shall have also provided for the termination of all Encumbrances of record on
the properties of the Company, except for Permitted Exceptions. All liens or UCC
filings against the Company or Affiliates of the Company which are engaged in
the Business, shall have been terminated as of the Closing. All outstanding
loans or other amounts owed by any Stockholder to the Company shall have been
repaid in full on or prior to the Closing.
(e) Transfer Taxes. The Stockholders shall be responsible for
--------------
all stock transfer or gains taxes imposed on the Stockholders incurred in
connection with this Agreement.
(f) Documents to be Delivered by the Stockholders and the
-----------------------------------------------------
Company. The following documents shall be delivered at the Closing by the
-------
Stockholders and the Company:
(i) Escrow Agreement. The Stockholders shall have delivered
----------------
to Iconixx at the Closing the duly executed Escrow Agreement in
substantially the form attached hereto as Exhibit B.
---------
(ii) Opinion of the Stockholders' Counsel. Iconixx shall
------------------------------------
have received an opinion of counsel to the Company and the
Stockholders, dated the Closing Date, in substantially the same form
as the form of opinion that is Exhibit F-1 hereto.
-----------
-29-
(iii) Certificates. Iconixx shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in a form
mutually agreed upon by Iconixx and the Stockholders.
(iv) Release. The Stockholders shall have furnished the
-------
Company with a general release of liabilities, excluding compensation
and employee benefits as well as obligations pursuant to this
Agreement, in the form attached as Exhibit G hereto and ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------
shall have provided the Company with a general release of all rights
to the Company's equity in a form reasonably satisfactory to Iconixx.
(v) Employment Agreements. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
---------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have duly
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit E-1 hereto, pursuant to which each of
-----------
the Stockholders will be employed by the Company following the
Closing.
(vi) Delivery of the Company Shares. At the Closing, the
------------------------------
Stockholders shall deliver to Iconixx the Company Shares duly endorsed
for transfer to Iconixx and free and clear of all Encumbrances, other
than the restrictions imposed by federal and state securities laws.
(vii) Resignation of Directors. The Company shall deliver
------------------------
the written resignations of all directors of the Company effective as
of the Closing.
(g) Company Equity Arrangements. Joinders to the Equity
---------------------------
Agreements shall have been executed and delivered by the Stockholders.
(h) Financing. Iconixx shall have obtained the approval of its
---------
senior lenders to the Acquisition.
7.2. Conditions to the Stockholders' and the Company's Obligations.
-------------------------------------------------------------
The obligation of the Stockholders and the Company under this Agreement to
consummate the Closing is subject to the conditions that:
(a) Covenants, Representations and Warranties. Iconixx shall
-----------------------------------------
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by Iconixx prior to or at the Closing and the
representations and warranties of Iconixx set forth in Article IV hereof shall
be accurate in all material respects, at and as of the Closing Date, with the
same force and effect as though made on and as of the Closing Date.
(b) Consents. All statutory requirements for the valid
--------
consummation by Iconixx of the Acquisition shall have been fulfilled and all
authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and
-30-
those of all federal, state, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by Iconixx of the Acquisition shall have been obtained unless such
failure shall not have a Material Adverse Effect on the Business.
(c) Documents to be Delivered by Iconixx. The following
------------------------------------
documents shall be delivered at the Closing by Iconixx:
(i) Escrow Agreement. Iconixx shall have delivered to
----------------
the Stockholders at the Closing the duly executed Escrow Agreement.
(ii) Employment Agreements. Iconixx shall have caused the
---------------------
Company to duly execute and deliver an Employment Agreement with each
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ in the same form attached as Exhibit E-1 hereto, pursuant to
-----------
which each of such Persons will be employed by the Company following
the Closing.
(iii) Opinion of Iconixx's Counsel. The Stockholders shall
----------------------------
have received an opinion of counsel to Iconixx, dated the Closing
Date, in substantially the form as the form of opinion that is Exhibit
-------
F-2 hereto.
---
(iv) Delivery of Iconixx's Shares. At the Closing,
----------------------------
Iconixx shall deliver to each of the Stockholders their proportionate
interest in the 1,000,000 shares of Common Stock and 3,000 shares of
Preferred Stock upon the Stockholders execution of the Equity
Agreements, duly endorsed for issuance to the Stockholders and free
and clear of all Encumbrances, other than the restrictions imposed by
Federal and state securities laws and the Equity Agreements.
(v) Certificates. Iconixx shall have delivered an
------------
officer's certificate and a secretary's certificate of Iconixx
executed by officers of Iconixx, dated the Closing Date, in a form
mutually agreed upon by Iconixx and the Stockholders.
(d) Company Equity Arrangements. The Equity Agreements shall
---------------------------
have been executed and delivered by the respective parties thereto.
(e) Payments to Stockholders. Each Stockholder shall have
------------------------
received its allocable portion of the Purchase Price payable to the Stockholders
at Closing for the Company Shares.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by the Stockholders. Except as provided in
-----------------------------------
Section 8.6, the Stockholders agree to jointly and severally indemnify and hold
-----------
harmless Iconixx and the
-31-
Company and each officer, director, and Affiliate of Iconixx and the Company,
including without limitation any successor of the Company or Iconixx or any of
Iconixx's lenders as provided in Section 10.5 hereof (collectively, the
------------
"Indemnified Parties") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively, the
"Indemnifiable Costs"), which any of the Indemnified Parties may sustain, or to
which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by the Stockholders or the Company of or
under any of the representations, covenants, agreements or other provisions of
this Agreement or any agreement or document executed in connection herewith;
provided, however, that Indemnifiable Costs for covenants with respect to the
Company shall be with respect to pre-Closing periods only; (B) any downward Net
Working Capital Adjustment not paid to the Company pursuant to a reduction of
the Escrow Sum; (C) cost of any brokerage or other transaction fees liability,
if any, borne by the Company and not by the Stockholders except as provided in
Section 10.4 hereof; and (D) any customer claims involving pre- Closing services
------------
or products of the Company for breach of warranty, product liability or customer
service remediation, including claims for consequential damages, to the extent
not reserved for in the Company's Financial Statements, but only to the extent
such customer claims are a result of the Company's gross negligence, willful
misconduct or fraud. The liability of any individual Stockholder pursuant to
this Section 8.1 shall be limited, for each claim or claims, to the amount of
-----------
such claim multiplied by a fraction the numerator of which shall be the
consideration received by such Stockholder as set forth on Exhibit B attached
---------
hereto and the denominator shall be $13,750,000.
8.2. Defense of Claims. If any legal proceeding shall be
-----------------
instituted, or any claim or demand made by a third Person, against any
Indemnified Party in respect of which the Stockholders or may be liable
hereunder, such Indemnified Party shall give prompt written notice thereof to
the Stockholders and, except as otherwise provided in Section 8.4 below, the
-----------
Stockholders shall have the right to defend any litigation, action, suit,
demand, or claim for which an Indemnified Party may seek indemnifications, and
such Indemnified Party shall extend reasonable cooperation in connection with
such defense, which shall be at the Stockholders' expense. In the event the
Stockholders fail or refuse to defend the same within a reasonable length of
time, the Indemnified Parties shall be entitled to assume the defense thereof,
and the Stockholders shall be jointly and severally liable to repay the
Indemnified Parties for all reasonably incurred Indemnifiable Costs. If the
Stockholders shall not have the right to assume the defense of any litigation,
action, suit, demand, or claim in accordance with the preceding sentence, the
Indemnified Parties shall, at the Stockholders' expense, have the absolute right
to control the defense of such litigation, action, suit, demand, or claim, but
the Stockholders shall be entitled, at their own expense, to participate in such
litigation, action, suit, demand, or claim. The party controlling any defense
pursuant to this Section 8.2 shall deliver, or cause to be delivered to the
-----------
other party, copies of all correspondence, pleadings, motions, briefs, appeals
or other written statements relating to or submitted in connection with the
defense of any such litigation, action, suit, demand or claim, and timely notice
of any hearing or other court proceeding relating to such litigation, action,
suit, demand or claim. Notwithstanding the
-32-
forgoing, in no event will the party controlling any defense pursuant to this
Section 8.2 settle any litigation, action, suit, demand or claim without the
-----------
prior written consent of the non- controlling party, unless such settlement
provides for the unqualified, absolute and complete release of all claims
against the non-controlling party and results in no monetary or equitable
liability to the non-controlling party.
8.3. Escrow Claim. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
------------
Escrow Period, such Indemnified Party shall first apply to the Escrow Agent
provided in Section 2.7 of this Agreement for reimbursement of such claim in
-----------
accordance with the provisions of the Escrow Agreement (which Escrow Agreement
shall provide for any dispute resolutions involving such claims); provided,
however, the Escrow Sum is not intended to be an exclusive remedy in the event
Iconixx or the Company has indemnification claims hereunder which exceed such
amount.
8.4. Tax Audits, Etc. In the event of an audit of a Tax Return of
---------------
the Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, the Stockholders and the Company
------------
shall jointly control any and all such audits which may result in the assessment
of additional Taxes against the Company and any and all subsequent proceedings
in connection therewith, including appeals. The Stockholders and Iconixx shall
cooperate fully in all matters relating to any such audit or other Tax
proceeding (including according access to all records pertaining thereto), and
will execute and file any and all consents, powers of attorney, and other
documents as shall be reasonably necessary in connection therewith. If
additional Taxes are payable by the Company as a result of any such audit or
other proceeding, the Stockholders shall be severally responsible for and shall
promptly pay all Taxes, interest, and penalties for which any of the Indemnified
Parties shall be entitled to indemnification.
8.5. Indemnification of Stockholders. Iconixx agrees to indemnify
-------------------------------
and hold harmless the Stockholders and the Company and each officer, director,
Stockholder or Affiliate of the Company, from and against any Indemnifiable
Costs arising out of any misrepresentation, breach or default by Iconixx of or
under any of the representations, covenants, agreements or other provisions of
this Agreement or any agreement or document executed in connection herewith;
provided, however, that claims for breaches of representations and warranties of
Iconixx with respect to the operations, financial performance or otherwise of
its Subsidiaries shall be expressly limited to periods arising after the
acquisition of such Subsidiaries by Iconixx.
8.6. Limits on Indemnification. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations, warranties and covenants of the Stockholders
under Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.17 or Article VI hereof (the
------------ --- --- --- --- ---- ----------
indemnification for which shall expire on the expiration of the applicable
statute of limitations or, in the case of covenants in Article VI which have a
----------
specific expiration date, as of such date, and if so made, such claims, and all
Indemnifiable Costs incurred thereafter, shall continue after such date until
finally resolved), the right to make claims for indemnification provided under
this Article VIII
------------
-33-
shall expire on August 31, 2001 (except for any claims for Indemnifiable Costs
made prior to such date which claims shall continue after such date until
finally resolved). The Stockholders shall not be obligated to pay any amounts
for indemnification under this Article VIII until the aggregate indemnification
------------
obligation sought by Iconixx hereunder exceeds $50,000, whereupon the
Stockholders shall be liable for all amounts for which indemnification may be
sought. Notwithstanding the foregoing, in no event shall the aggregate liability
of the Stockholders to Iconixx under Article VIII exceed $2,500,000; provided,
------------
however, that such limitation shall not include and shall not limit any claims
for the breaching of the representations and warranties of the Stockholders
under Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.12 (to the extent such claims
------------ --- --- --- --- --- ----
relate to Environmental and OSHA Obligations) and 3.17 or any breach of Sections
---- --------
8.1(B) or (C), all of which claims together shall not exceed the Purchase Price.
------ ---
Iconixx shall not be obligated to pay any amounts for indemnification under this
Article VIII until the aggregate indemnification obligation sought by
------------
Stockholders hereunder exceeds $50,000, whereupon Iconixx shall be liable for
all amounts for which indemnification may be sought. Notwithstanding the
foregoing, in no event shall the aggregate liability of Iconixx to Stockholders
for claims for indemnification under this Article VIII exceed $2,500,000.
------------
However nothing in this Article VIII shall limit Iconixx or the Stockholders in
------------
exercising or securing any remedies provided by applicable statutory or common
law with respect to the fraudulent conduct of the Stockholders or Iconixx in
connection with this Agreement or in the amount of damages that it can recover
from the other in the event that Iconixx or the Stockholders successfully prove
intentional fraud or intentional fraudulent conduct in connection with this
Agreement. Other than as set forth in the preceding sentence, the
indemnification provided for in this Section VIII is intended to be the
------------
exclusive monetary remedy of Iconixx or the Stockholders with regard to the
Acquisition contemplated by this Agreement.
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing:
(a) by the mutual written consent of all parties hereto;
(b) in writing by Iconixx, if the Company or any of the
Stockholders has breached in any material respect any representation, warranty
or covenant contained in this Agreement, and in each case such breach has not
been remedied within ten (10) business days after receipt of written notice
specifying such breach and demanding such breach to be remedied; or
(c) in writing by the Stockholders, if Iconixx has breached in
any material respect any representation, warranty or covenant contained in this
Agreement, and in each case such breach has not been remedied within ten (10)
business days after receipt of written notice specifying such breach and
demanding such breach to be remedied; or
-34-
(d) in writing by the Stockholders, on the one hand, or Iconixx,
on the other hand, in the event the Closing has not occurred on or before
February 29, 2000, unless the failure of such consummation or the failure to
satisfy such condition, as applicable, shall be due to a breach of any
representation or warranty made by the party or parties seeking to terminate
this Agreement or the failure of such party or parties to comply in all material
respects with the agreements and covenants contained herein to be performed by
such party or parties.
9.2. Effect of Termination. If the Acquisition is terminated
---------------------
pursuant to Section 9.1 by notice in writing to the non-terminating party or
-----------
parties, this Agreement shall become void and of no further force and effect,
except that (a) such termination shall not relieve (i) any party from its
covenants in respect of confidentiality contained in Section 6.3 and (ii) any
-----------
party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach and (b)
Sections 10.4 and 10.7 shall survive termination of this Agreement.
------------- ----
ARTICLE X
MISCELLANEOUS
10.1. Modifications. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
10.2. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Iconixx:
-------
Iconixx Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
-35-
With a copy to:
--------------
▇▇▇▇▇▇ Equity Investors IV, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
------
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
The Company or the Stockholders:
-------------------------------
c/o Lead Dog Design, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ &
Wolosky LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
10.3. Counterparts; Facsimile Transmission. This Agreement may be
------------------------------------
executed in several counterparts, each of which shall be deemed an original but
all of which counterparts collectively shall constitute one instrument, and in
making proof of this Agreement,
-36-
it shall never be necessary to produce or account for more than one such
counterpart. Signatures of a party to this Agreement or other documents executed
in connection herewith which are sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms hereof or
thereof by such signatory party, with originals to be circulated to the other
parties in due course.
10.4. Expenses. Each of the parties hereto will bear all costs,
--------
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the Acquisition, provided, however, that the
Stockholders shall bear all costs and expenses of (i) any broker involved in
this transaction on behalf of the Stockholders or the Company and (ii) all legal
and other expenses of the Stockholders or the Company with respect to this
Agreement and the Acquisition; provided, however, that the Company may bear a
portion or all of such expenses so long as no Net Working Capital Adjustment
would occur. In addition, Iconixx shall pay up to $250,000 of the Company's
costs and expenses owed to Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. in connection
with the transactions contemplated by this Agreement.
10.5. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and inure to the benefit of the Company, Iconixx and the Stockholders,
their heirs, representatives, successors, and permitted assigns, in accordance
with the terms hereof. This Agreement shall not be assignable by the Company or
the Stockholders without the prior written consent of Iconixx. This Agreement
shall be assignable by Iconixx and/or the Company to either (a) any lender
providing financing to Iconixx or the Company (but only with respect to
Iconixx's rights under Article II and Article VIII hereof) or (b) any
---------- ------------
Subsidiary of Iconixx, provided Iconixx remain liable, in each case without the
prior written consent of the Stockholders. In addition, following the Closing,
Iconixx or the Company may assign any or all of its rights hereunder, without
the consent of the Stockholders, in connection with any sale of all or
substantially all of the assets, capital stock, partnership interests or
business of the Company or Iconixx (whether effected by sale, exchange, merger,
consolidation or other transaction) and provided the acquiring party shall
assume all of Iconixx's or the Company's obligations hereunder.
10.6. Entire and Sole Agreement. This Agreement and the other
-------------------------
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
10.7. Governing Law. This Agreement and its validity,
-------------
construction, enforcement, and interpretation shall be governed by the
substantive laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
10.8. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
Acquisition shall survive the Closing for a period ending on August 31, 2001
provided (a) the
-37-
representations and warranties contained in Section 3.17 of this Agreement, and
------------
the related indemnities, shall survive the Closing until the expiration of the
applicable statutes of limitations for determining or contesting Tax liabilities
including any extension of such periods plus sixty (60) days, (b) the
representations, warranties and covenants contained in Sections 3.1, 3.2, 3.3,
------------ --- ---
3.4, 3.5, 3.6 and 6.5(c) of this Agreement, and the related indemnities, shall
--- --- --- ------
survive the Closing indefinitely and not expire, (c) all covenants in this
Agreement which have an expiration date contained therein shall expire as of
such date and (d) all other covenants in this Agreement which do not have an
expiration date shall expire upon the expiration of the applicable statutes of
limitation
10.9. Invalid Provisions. If any provision of this Agreement is
------------------
deemed or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
all parties hereto.
10.10. Public Announcements. Neither the Stockholders nor the
--------------------
Company (pre-Closing) shall make any public announcement of the Acquisition
without the prior written consent of Iconixx, which consent shall not be
unreasonably withheld.
10.11. Remedies Cumulative. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
10.12. Third Parties. Except as specifically set forth or referred
-------------
to herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
10.13. No Strict Construction. The parties hereto have
----------------------
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
10.14. Disclosure Schedules. An item disclosed in any part of the
--------------------
Disclosure Schedules attached hereto shall be deemed disclosed in response to
other applicable Disclosure Schedules sections to the extent cross-referenced
therein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-38-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
THE COMPANY:
-----------
LEAD DOG DESIGN, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
STOCKHOLDERS:
------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as Attorney in Fact
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Attorney in Fact
-39-
The ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Cipully Trust
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Attorney in Fact
ICONIXX:
-------
ICONIXX CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President and Secretary
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. The Registrant will provide these
Exhibits and Schedules upon the request of the Securities and Exchange
Commission.
-40-