EXHIBIT 10.1
------------
STOCK PURCHASE AGREEMENT
among
american member corp.
and
ACCESSITY CORP.
and
DriverShield ADS Corp.
Dated as of August 1, 2003
COMPANY DISCLOSURE SCHEDULES
Section:
2.4 Consents and Approval
2.6 Undisclosed Liabilities
2.7 Absence of Certain Changes
2.8 Litigation
2.9 Compliance with Law (Permits)
2.10 Employee Benefit Plans
2.11 Labor and Employment Matters
2.12 Taxes
2.13 Contracts
2.14 Real Property
2.15 Intellectual Property
2.17 Environmental Compliance
2.18 Affiliate and Non-Arm's Length Transactions
2.19 Guarantees
2.20 Customers
2.24 Property/Assets/Liabilities
2.29 Bank Accounts
4.1 Conduct of the Business of the Company
4.24 Transferred Assets/Liabilities
5.3(d) List of "Company Employees"
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EXHIBITS
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Exhibit A DriverShield logo
Exhibit B Trademark License Agreement
Exhibit C Security Agreement
Exhibit D Employment Termination Agreement
Exhibit E Web Site Linking Agreement
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STOCK PURCHASE AGREEMENT, dated as of August 1, 2003 (the "Agreement"), by and
among AMERICAN MEMBER CORP., a Florida corporation (the "Buyer"), and Accessity
Corp., a New York corporation (the "Seller"), and DriverShield ADS Corp., a New
York corporation (the "Company").
WHEREAS, the Seller is the record and beneficial owner of all of the
issued and outstanding shares of capital stock of the Company;
WHEREAS, the Company's principal business is to provide consumer
automobile discount club programs through financial institutions and membership
organizations. (the "Business");
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer
desires to purchase from the Seller, all of the issued and outstanding shares of
the capital stock of the Company; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
--------------------------
Section 1.1 Purchase and Sale of Stock. On the Closing Date, upon
the terms and subject to the conditions of this Agreement, the Seller shall sell
to the Buyer, and the Buyer shall purchase from the Seller, the Company Shares.
For the purposes of this Agreement, the term "Company Shares" shall mean all of
the issued and outstanding shares of the common stock, no par value per share,
of the Company. Additionally, the Seller hereby grants to the Company a
perpetual non-exclusive license to use its proprietary auto body shop network
for the operation of the Business (the "Shop License"). Under the Shop License,
the Company shall be provided access to the data base of members of the auto
body shop network and be permitted to make copies of all contracts between the
Seller and each member of the auto body shop network..
Section 1.2 Sale of Web Site. Seller shall sell to the Buyer, and
the Buyer shall purchase from the Seller, all of Seller's right, title and
interest to the web site, having Internet domain names,
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, including the source code for the computer
programs used to operate the websites, and shall also assign to Buyer all
contracts for hosting those websites. Additionally, the Seller shall use all
commercially reasonable attempts to terminate its obligations to provide web
site links to ClaimsNet, Inc. and PHH Vehicle Management Services, LLC, and
following the termination of these obligations, the Seller shall transfer
ownership to the Company of the Internet domain names: ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
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Section 1.3 Transfer of Telephone Numbers. Seller shall transfer the
following telephone numbers to the Company: (▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇,
(▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇.
Section 1.4 Purchase Price. The Buyer and the Company shall pay the
Seller Ten Thousand Dollars ($10,000) and reimburse the Seller for all its
reasonable attorney's fees incurred during the course of negotiating and
consummating this transaction (the "Purchase Price") payable by the Buyer
anytime prior to October 1, 2003.
Section 1.5 Time and Place of Closing. Upon the terms and subject to
the conditions of this Agreement, the closing of the transactions contemplated
by this Agreement (the "Closing") will take place at the offices of Seller at
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ within three (3) business
days after all of the conditions to each party's obligations specified in
Article V hereof have been satisfied or waived by the party entitled to waive
the applicable condition, or at such other date, place or time as the parties
may agree in writing, on or about September 5, 2003. The date on which the
Closing occurs and the transactions contemplated hereby become effective is
referred to herein as the "Closing Date".
Section 1.6 [Intentionally omitted]
Section 1.7 Deliveries by the Seller. Subject to the terms and
conditions hereof, at the Closing, the Seller will deliver the following to the
Buyer:
(a) stock certificates representing the Company Shares, duly endorsed (or
accompanied by duly executed stock powers) for transfer to the Buyer and
registered on the stock books of the Company in the name of the Buyer;
(b) the officer's certificate provided for in Section 5.3(h) of this Agreement;
(c) [Intentionally omitted]
(d) [Intentionally omitted]
(e) a certificate of the Secretary of the Seller reasonably satisfactory in form
and substance to the Buyer setting forth resolutions of the Board of Directors,
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and certifying that such
resolutions/authorization have been duly made and have not been rescinded or
amended as of the Closing Date.
(f) all of the books and records of the Seller relating primarily to the Company
and the Business, including, without limitation, all minute books and stock
ledgers relating to the Company;
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(g) if requested by Buyer, letters of resignation and releases reasonably
satisfactory to the Buyer effective as of the Closing Date from each director
and officer of the Company;
(h) the FIRPTA Certificate provided for in Section 4.6(k) of this Agreement; and
(i) all other documents, instruments and writings required to be delivered by
the Seller at or prior to the Closing Date pursuant to this Agreement.
Section 1.8 Deliveries by the Buyer. Subject to the terms and
conditions hereof, at the Closing, the Buyer will deliver the following to the
Seller:
(a) the officer's certificate provided for in Section 5.2(c) of this Agreement;
(b) a certificate of the Secretary of the Buyer, reasonably satisfactory in form
and substance to the Seller setting forth resolutions of the Board of Directors
of the Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and certifying that such
resolutions have been duly made and have not been rescinded or amended as of the
Closing Date; and
(c) all other documents, instruments and writings required to be delivered by
the Buyer at or prior to the Closing Date pursuant to this Agreement.
Section 1.9 Deliveries by the Buyer and Seller. Subject to the terms
and conditions hereof, at the Closing, the Buyer and Seller will execute and
deliver, one to the other, the following:
(a) the Trademark License Agreement provided for in Section 4.13 of this
Agreement;
(b) the Security Agreement provided for in Section 4.14
(c) the Employment Termination Agreement provided for in Section 4.15.
(d) the Web Site Linking Agreement provided for in Section 4.18.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
------------------------------------------------------------
The Seller and the Company hereby represent and warrant, jointly and
severally, to the Buyer as follows:
Section 2.1 Organization; Etc. The Seller and the Company (i) are
corporations validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, (ii) have all requisite corporate
power and authority to own, lease and operate their respective properties and
assets and to carry on their respective businesses as they are now being
conducted,
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and (iii) are duly qualified and in good standing to do business in each
jurisdiction in which the nature of their respective businesses or the
ownership, operation or leasing of their respective properties makes such
qualification necessary. The Seller has previously delivered or made available
to the Buyer true and complete copies of the organizational documents or
comparable governing instruments (including all amendments to each of the
foregoing) of the Company as in effect on the date hereof.
Section 2.2 Authority Relative to this Agreement. Each of the Seller
and the Company has all necessary corporate power and authority to execute and
deliver this Agreement, the Trademark License Agreement, the Security Agreement,
the Employment Termination Agreement and the Web Site Linking Agreement
(collectively, the "Transaction Documents"), to perform its obligations
hereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Transaction Documents
by the Seller and the Company and the consummation by the Seller and the Company
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Seller or the Company and no filings or recordations required
by the New York Business Corporation Law are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby and thereby.
This Agreement and the other Transaction Documents have been or will be duly
executed and delivered by each of the Seller and the Company and, assuming the
due authorization, execution and delivery by the other parties hereto, each such
agreement constitutes a legal, valid and binding obligations of such party,
enforceable against such party in accordance with its terms, subject to the
effect of any applicable bankruptcy, moratorium, insolvency, reorganization or
other similar law affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may limit the
availability of remedies (whether in a proceeding at law or in equity) (the
"Bankruptcy Exception").
Section 2.3 Capitalization.
(a) The authorized capital stock of the Company consists of 200 shares of common
stock, no par value per share. As of the date hereof there are 100 of such
shares issued and outstanding, not including treasury shares, all of which are
owned by Seller. At the Closing, Seller shall provide a Certificate of Secretary
setting forth the number of shares of common stock of the Company issued and
outstanding as of the Closing Date. The Company Shares have been duly authorized
and validly issued and are fully paid and non-assessable. Except as set forth in
this Section 2.3 and except for the Company Shares, there are no outstanding (i)
shares of capital stock or voting securities of the Company, (ii) securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) options or other rights or agreements,
either directly or indirectly, to acquire from the Company, or other obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company or (iv) additional classes of capital stock or other ownership interests
in the Company. There are no preemptive rights, options, warrants, stock
appreciation rights (or other securities that have their value tied to
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any other securities of the Company), or other rights, agreements, arrangements
or commitments of any character to which the Seller or the Company is a party or
by which the Seller or the Company is bound relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company.
(b) The Seller is the record and beneficial owner of all of the Company Shares,
free and clear of any Liens other than Permitted Liens and any other limitation
or restriction (including any restriction on the right to vote, sell or
otherwise dispose of such shares) and such shares constitute 100% of the issued
and outstanding shares of the Company. The Seller will transfer and deliver to
the Buyer at the Closing valid title to the Company Shares free and clear of any
Liens other than Permitted Liens) and any such limitation or restriction. The
Company does not own, directly or indirectly, any equity or voting interest in,
or otherwise control, any Person, and has no agreement or commitment to acquire
any such equity or voting interest. For the Purposes of this Agreement, "Person"
shall mean a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Entity or other entity or organization.
"Liens" shall mean any lien, security interest, mortgage, pledge,
hypothecation, charge, preemptive right, voting trust, imposition, covenant,
condition, right of first refusal, easement or conditional sale or other title
retention agreement or other restriction; provided, however, that Liens shall
not include any Permitted Lien.
"Permitted Lien" shall mean, (a) Liens imposed by any Governmental
Entity for Taxes, assessments or charges not yet due and payable or which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company in
accordance with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than thirty (30) days or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP; (c) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; or (d) deposits to
secure the performance of any or all of the following: bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business.
Section 2.4 Consents and Approvals; No Violations. Except as set
forth in Section 2.4 of the Company Disclosure Schedule, neither the execution
and delivery of this Agreement and other Transaction Documents by the Seller or
the Company, nor the consummation by the Seller or the Company of the
transactions contemplated hereby or thereby will (a) conflict with or result in
any breach of any provision of the certificate or articles of incorporation, as
the case may be, or by-laws of the Seller or the Company, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right
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of termination, cancellation or acceleration) under, or require any consent
under, any indenture, license, contract, agreement or other instrument or
obligation to which the Seller or the Company is a party or by which either of
them or any of their respective properties or assets are bound, (c) violate any
order, writ, injunction, decree or award rendered by any Governmental Entity (as
hereinafter defined) or any statute, rule or regulation (collectively, "Laws"
and, individually, a "Law") applicable to the Seller or the Company or any of
their respective properties or assets, or (d) require any filing with, or the
obtaining of any permit, authorization, consent or approval of, any domestic or
foreign, federal, state or local governmental or regulatory authority, (a
"Governmental Entity") or (e) result in the creation of a Lien on any property
or asset of the Company pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation. The execution and delivery of this Agreement by the Seller and the
Company do not, and the performance by the Seller and the Company of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, require any consent, approval, authorization or permit of, or
filing by the Seller or the Company with or notification to, any Governmental
Entity, except pursuant to those applicable requirements of the Exchange Act,
the Securities Act, state securities or "blue sky" laws, the rules and
regulations of The Nasdaq SmallCap Market ("Nasdaq"), state takeover laws, and
any filing or recordation required by the New York Business Corporation Law, all
as set forth in Section 2.4 of the Company Disclosure Schedule.
Section 2.5 SEC Reports; Financial Statements.
(a) The Seller has timely filed all forms, reports, statements and documents
required to be filed by it pursuant to the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and other applicable
Securities and Exchange Commission ("SEC") and Nasdaq rules and regulations (A)
with the SEC and Nasdaq since December 31, 2000 (collectively, together with any
such forms, reports, statements and documents the Seller may file subsequent to
the date hereof until the Closing, the "Seller Reports") and (B) with any other
Governmental Entities. Each Seller Report (i) was prepared in all respects in
accordance with the requirements of the Securities Act, the Exchange Act, or the
respective rules and regulations promulgated thereunder, or the rules and
regulations of Nasdaq, as the case may be, and (ii) did not at the time it was
filed (or, in the case of registration statements filed under the Securities
Act, at the time of effectiveness) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each form, report, statement and
document referred to in clause (B) of this paragraph was prepared in all
material respects in accordance with the requirements of applicable Law.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Seller Reports was prepared in accordance with GAAP
(except as may be permitted by Form 10-QSB under the Exchange Act) applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
financial position of the Seller as at the respective dates thereof and its
results of
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operations, shareholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the balance
sheet of the Seller as reported in the Seller Reports, including the notes
thereto, the Seller has no liabilities or obligations of any nature (whether
direct, indirect, known, unknown, accrued, unaccrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, except for immaterial liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2000.
(d) The Seller previously has delivered to the Buyer true and complete copies of
the unaudited balance sheets of the Company as of December 31, 2002 and trial
balance sheets as of March 31, 2003 (the "Balance Sheets"), together with an
unaudited statement of income for the twelve (12) months ended March 31, 2003
(collectively the "Financial Statements"). The Financial Statements have been
prepared from, are in accordance with and accurately reflect, the books and
records of the Company, comply in all material respects with applicable
accounting requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved and fairly present, in all material
respects, the financial position and the results of operations of the Company as
of the times and for the periods referred to therein. For the purposes of this
Agreement, "GAAP" shall mean United States generally accepted accounting
principles. The parties acknowledge that the Seller does not allocate certain
corporate expenses to the unaudited statements of its subsidiaries.
Section 2.6 Absence of Undisclosed Liabilities of the Company.
Except as and to the extent set forth or reserved against on the Financial
Statements, including the notes thereto, the Company has no liabilities or
obligations of any nature (whether direct, indirect, known, unknown, accrued,
unaccrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for immaterial liabilities or obligations incurred in the ordinary
course of business consistent with past practice since December 31, 2001.
Section 2.7 [Intentionally omitted]
Section 2.8 Litigation. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, there is no action, suit, proceeding or
governmental investigation (each, a "Legal Proceeding") pending or, to the
knowledge of the Seller or the Company, threatened against either of the Seller
or the Company, including Legal Proceedings which could reasonably be expected
to effect Seller's ability to enter into this Agreement, by or before any court
or Governmental Entity. There is no Legal Proceeding pending or, to the
knowledge of the Seller or the Company, threatened, against either of the Seller
or the Company that questions the validity of this Agreement or any action taken
or to be taken by the Seller or the Company in connection with the consummation
of the transactions contemplated hereby. Except as set forth
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in Section 2.8 of the Company Disclosure Schedule, there is not outstanding or,
to the knowledge of the Seller or the Company, threatened, any orders,
judgments, decrees or injunctions issued by any Governmental Entity against,
affecting or naming the Company (or the Seller, if it could reasonably be
expected to effect Seller's ability to enter into this Agreement).
Section 2.9 Compliance with Law. The Company is in compliance with
all Applicable Laws, and neither the Seller nor the Company has notice or a
reasonable basis to believe that the Company has in any material respect
violated any such Applicable Law. The Company has all permits, licenses, and
other governmental authorizations, consents, and approvals necessary to conduct
its business as currently conducted (collectively, the "Permits"). All of the
Permits are identified in Section 2.9 of the Company Disclosure Schedule. The
Company is not in violation of the terms of any Permit, nor has the Company
engaged in any activity that is reasonably likely to cause revocation or
suspension of any such Permit and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or, to
the Seller's knowledge, threatened. For the purposes of this Agreement, the term
"Applicable Law" shall mean any domestic or foreign federal, state or local
statute, law (including common law), ordinance, rule, administrative
interpretation, regulation, order, judgment, award, injunction, writ or decree
applicable to the parties or the provisions of this Agreement.
Except as set forth in Section 2.9 of the Company Disclosure
Schedule, the Company and, to the knowledge of the Seller, each Person acting as
an agent of the Company has, since January 1, 2000, complied in all material
respects with Applicable Laws, having the purpose or effect of prohibiting
unlawful discrimination against customers or potential customers and, to the
knowledge of the Seller, the Company has not received any complaints from any
Person or Governmental Entity that the Company or any Person acting as an agent
of the Company has engaged in any unlawful discrimination.
Section 2.10 Employee Benefit Plans.
(a) Section 2.10(a) of the Company Disclosure Schedule sets forth a correct and
complete list of all 401(k), equity compensation, incentive compensation, stock
incentive plans, vacation, bonus or other incentive plans, all other employee
programs, arrangements or agreements (including, without limitation, all
employment, termination or severance agreements), all medical, vision, dental or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of the Employee Retirement Income Security Act
("ERISA"), in each case, that is maintained, sponsored or contributed to or
required to be contributed to by Seller or the Company or any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with Seller or
the Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which Seller or the Company or an ERISA Affiliate is a
party, whether written or oral, (collectively, the "Seller Benefit Plans").
Except as set forth in Section 2.10(a) of the Company Disclosure Schedule,
neither Seller nor the Company sponsors or contributes to any other employee
plans (including employee benefit plans) or programs
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including pension, retirement, profit sharing, deferred compensation, employee
stock ownership, or severance plans or programs, and neither the Seller nor the
Company has made any commitment to establish any new plan or program or modify
any existing plan or program. Seller has delivered to Buyer true and complete
copies of (i) the Seller Benefit Plans (including related trust agreements,
custodial agreements, insurance contracts, investment contracts and other
funding arrangements, if any, and adoption agreements, if any), (ii) all
amendments to the Seller Benefit Plans, (iii) written interpretations of the
Seller Benefit Plans, (iv) material employee communications by the plan
administrator of any Seller Benefit Plan (including summary plan descriptions
and summaries of material modifications, as defined under ERISA), (v) the three
(3) most recent annual reports (e.g., the complete Form 5500 series) prepared in
connection with each Seller Benefit Plan (if any such report was required),
including all attachments (including the audited financial statements, if any)
and (vi) the three (3) most recent actuarial valuation reports prepared in
connection with each Seller Benefit Plan (if any such report was required).
There has been no amendment to, interpretation or announcement
(whether or not written) by Seller relating to, or change in employee
participation or coverage under, any Seller Benefit Plan that would increase the
expense of maintaining such plan above the level of expense incurred in respect
of such Seller Benefit Plan for the most recent plan year.
(b) Except as disclosed in Section 2.10(b) of the Company Disclosure Schedule,
all the Seller Benefit Plans and the related trusts comply with and have been
administered in all material respects in compliance with, their terms, ERISA,
the Code, and Applicable Laws. Seller has not received any written notice from
any Governmental Entity questioning or challenging such compliance or
administration.
(c) Except as disclosed in Section 2.10(c) of the Company Disclosure Schedule,
there are no pending, or to the knowledge of Seller, threatened claims or
disputes under the terms of, or in connection with, a Seller Benefit Plan other
than routine claims for benefits which are payable in the ordinary course, and
no material litigation or proceeding has been commenced or is expected to be
commenced with respect to any Seller Benefit Plan. There is no pending or, to
the knowledge of Seller, threatened proceeding by any governmental authority of
or against any Seller Benefit Plan, the assets held thereunder, the trustee of
any such assets, or Seller relating to any of the Seller Benefit Plans.
(d) No Seller Benefit Plan is subject to Title IV of ERISA. No material
liability under Title IV or Section 302 of ERISA has been incurred by the
Seller, the Company or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a risk to the Seller, the Company or any
ERISA Affiliate of incurring any such liability.
(e) Each Seller Benefit Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code and, to the Seller's
knowledge, no condition exists that would reasonably be likely to adversely
affect such qualification. Seller has delivered to Buyer the
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latest determination letters of the Internal Revenue Service relating to each
Seller Benefit Plan intended to be qualified under Code Section 401(a). Such
determination letters have not been revoked. Furthermore, there are no pending
proceedings or, to the knowledge of Seller, threatened proceedings in which the
"qualified" status of any applicable Seller Benefit Plan is at issue and in
which revocation of the determination letter has been threatened. Each
applicable Seller Benefit Plan has not been amended or operated, since the
receipt of the most recent determination letter, in a manner that would
adversely affect the "qualified" status of the Plan. There has been no
termination or partial termination, as defined in Code Section 411(d) and the
regulations thereunder, of any Seller Benefit Plan.
(f) Except as disclosed in Section 2.10(f) of the Company Disclosure Schedule,
no Seller Benefit Plan provides benefits, including any severance or other
post-employment benefit, salary continuation, termination, death, disability,
health or medical benefits (whether or not insured), life insurance or similar
benefit with respect to current or former employees (or their spouses or
dependents) of Seller beyond their retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death, disability or
retirement benefits under any pension plan, (iii) deferred compensation benefits
accrued as liabilities on Seller's financial statements or interim financial
statements or (iv) benefits, the full cost of which is borne by the current or
former employee (or his or her beneficiary).
(g) No Seller Benefit Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for Employees or former employees of
the Company for periods extending beyond their retirement or other termination
of service, other than coverage mandated by Applicable Law.
(h) Except as disclosed in Section 2.10(g) of the Company Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee of the Company to severance pay, unemployment compensation or
any other payment, including without limitation any payment under any employment
contract between any Employee and Seller or the Company, except as expressly
provided in this Agreement, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation or awards due any such Employee or former
employee or (iii) cause any compensation or payment to any Employee to not be
deductible for federal income tax purposes by virtue of Sections 280G or 4999 of
the Code.
(i) Seller has not engaged in any transaction or acted or failed to act in a
manner that violates the fiduciary requirements of ERISA Section 404, or in any
"prohibited transaction" within the meaning of ERISA Section 406(a) or 406(b),
or of Code Section 4975(c), with respect to any Seller Benefit Plans. To the
knowledge of Seller, no other "party in interest," as defined in ERISA Section
3(14), or "disqualified person," as defined in Code Section 4975(e)(2), has
engaged in any such "prohibited transaction".
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(j) No liability has been incurred by Seller or by an ERISA Affiliate for any
tax, penalty or other liability with respect to any Seller Benefit Plan and, to
the knowledge of Seller, such plans do not expect to incur any such liability
prior to the Closing Date.
(k) Seller has made all required contributions under each Seller Benefit Plan on
a timely basis or, if not yet due, adequate accruals therefore have been
provided for in Seller's financial statements and the interim financial
statements.
(l) Seller has complied with, and satisfied, the requirements of COBRA with
respect to each Seller benefit Plan that is subject to the requirements of
COBRA. Each Seller Benefit Plan which is a group health plan, within the meaning
of Code Section 9832(a) has complied with and satisfied the applicable
requirements of Code Sections 9801 and 9802.
(m) Neither Seller nor any ERISA Affiliate has contributed to or been obligated
to contribute to a "multi-employer plan" (within the meaning of Section 3(37) of
ERISA).
Section 2.11 Labor and Employment Matters.
(a) Schedule 2.11(a) contains a correct and complete list of all employees of
the Company ("Company Employees") and, as separately designated on Schedule
2.11(a), employees of Seller, Seller's Affiliates, or independent contractors
who perform essential services for the Company ("Service Employees") as of the
date of this Agreement, specifying for each person his or her job title and rate
of annual base salary or other compensation and target annual bonus opportunity
(Company Employees and Service Employees collectively, "Employees"). Except as
disclosed in Section 2.11(a) of the Company Disclosure Schedule or otherwise
provided pursuant to this Agreement, the employment of all Company Employees is
terminable at will by the Company without any penalty or severance obligation of
the Company. Except as set forth in Section 2.11(a) of the Company Disclosure
Schedule, (i) neither the Company nor the Seller is a party to any union
agreement or collective bargaining agreement or work rules or practices agreed
to with any labor organization or employee association and, to the knowledge of
the Seller and the Company, no attempt to organize any of the Employees or any
employees of Seller has been made or is pending, (ii) since January 1, 1998, the
Company and the Seller have not had any Equal Employment Opportunity Commission
charges or other claims of employment discrimination made or threatened against
it, (iii) since January 1, 1998, no state wage and hour department
investigations have been made of the Company or the Seller, (iv) since January
1, 1998, there has been no labor strike, dispute, slowdown, stoppage or lockout
against or affecting the Company or the Seller, (v) no unfair labor practice
charge or complaint against the Company or the Seller has been threatened or is
pending before the National Labor Relations Board or any similar Governmental
Entity, and (vi) there are no written personnel policies, rules or procedures
applicable to any Employees of the Company, other than those set forth in
Section 2.11(a) of the Company Disclosure Schedule, true and correct copies of
which have heretofore been delivered to the Buyer. Except as set forth in
Section 2.11 (a) of the Company Disclosure Schedule, there are no employment
contracts or severance agreements with any Employees or independent contractors
of the Company.
14
(b) Since the enactment of the Worker Adjustment and Retraining Notification
("WARN") Act, there has not been (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or the Seller; or
(ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Company or the Seller; nor has the Company or the
Seller been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local law. Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule, the Company or the Seller has not suffered an "employment loss" (as
defined in the WARN Act) since 3 months prior to the date of this Agreement.
Section 2.12 Taxes.
(a) Except as set forth in Section 2.12 of the Company Disclosure
Schedule:
(i) The Company (i) has timely filed (or caused to be filed when
due) with the appropriate taxing authorities all material Tax
Returns (as hereinafter defined) required to be filed by it and all
such Tax Returns are true, correct and complete, (ii) has paid all
Taxes (as hereinafter defined) due and payable by it, and (iii) is a
"C" corporation for federal tax purposes, and (iv) established in
the most recent Financial Statements reserves that are adequate for
the payment of any Taxes not yet due and payable;
(ii) The Seller has prior to the date hereof provided to the Buyer
copies of all Tax Returns applicable to the Company;
(iii) There are no outstanding agreements extending or waiving the
statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due for any
taxable period with respect to any Tax for which the Company may be
subject or liable;
(iv) There is not now pending, nor to the knowledge of each the
Seller and the Company is there any threat of an audit, assessment,
collection, suit, action, administrative proceeding, investigation
or other proceeding by any Governmental Entity relating to (i) any
Taxes due from or with respect to the Company, or (ii) any Tax
Return of or with respect to the Company;
(v) There are no Liens for Taxes upon the assets or properties of
the Company, except for statutory Liens for current Taxes not yet
due;
(vi) The Company (i) is not a party to, bound by, or obligated under
any agreement relating to the sharing or allocation of Taxes or
indemnification agreement with respect to Taxes or any similar
contract or arrangement and (ii) has no potential liability or
obligation to any Person as a result of, or pursuant to, any such
agreement, contract or arrangement;
15
(viii)The Company has not agreed, nor is it required to make, any
adjustment under Sections 446(e) or 481(a) of the Code (or any
similar provision of state, local or foreign law) by reason of a
change in accounting method or otherwise for any Tax period for
which the applicable federal statute of limitations has not expired;
(ix)The Company has not received a ruling from any Tax authority,
nor has it entered into any closing agreement pursuant to Section
7121 of the Code (or any similar provision of state, local or
foreign law) or any other agreement with similar Tax purposes;
(x) The Company has complied with all applicable laws relating to
the withholding of Taxes and has timely withheld and paid over to
the relevant Tax authority all amounts required to be so withheld
and paid over for all periods under all applicable laws, including
withholding in connection with payments to employees, independent
contractors, creditors, partners, stockholders or other third
parties;
(xi) The Company has not been a member of any federal, state, local
or foreign consolidated, unitary, combined or similar group other
than the group in which Seller (or its Affiliates) is the common
parent;
(xii) The Company has not filed a consent pursuant to Section 341(f)
of the Code (or any predecessor provision) or agreed to have Section
341(f)(2) of the Code apply to the disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company;
(xiii) No jurisdiction where the Company does not file a Tax Return
has made a Claim that the Company is required to file a Tax Return
for such jurisdiction;
(xiv) and the deduction of any amount payable or benefit provided
pursuant to the terms of any plan, agreement or arrangement, whether
written or oral, of the Company will not be subject to disallowance
under Section 162(a)(1), 162(m) or 280G of the Code;
(xv) No person is entitled to receive any "gross-up" payment from
the Company in the event that the excise tax of Section 4999(a) is
imposed on such Person;
(xvi) Since the date of the Financial Statements, the Company has
not incurred any liability for Taxes other than in the ordinary
course of business; and
(xvii) No power of attorney is currently in force with respect to
any matter relating to Taxes of the Company.
(b) For the purpose of this Agreement, (i) the term "Tax" or "Taxes" shall mean
(x) any taxes, customs, duties, levies, fees or other like assessment or charge
of any kind whatsoever imposed by any Governmental Entity (including, but not
limited to, any taxes on or with respect to net or gross income, gross receipts,
franchise, profits, capital, sales, use, ad valorem, value
16
added, transfer, real property transfer, transfer gains, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, real or personal property, gains,
estimated taxes, rent, excise, occupancy, recordation, bulk transfer,
intangibles, alternative or added minimum, real property, doing business, or any
disability insurance contributions, unemployment insurance contributions or
workers' compensation contributions), together with any interest thereon,
penalties, fines, fees, additions to tax or additional amounts with respect
thereto, imposed by the United States (federal, state or local) or other
applicable jurisdiction; (y) any liability for the payment of any amounts
described in (x) as a result of being a member of an affiliated, consolidated,
combined, unitary or similar group or as a result of transferor or successor
liability and (z) any liability for the payments of any amounts as a result of
being a party to any tax sharing agreement or as a result of any express or
implied obligation to indemnify any other Person with respect to the payment of
any amounts of the type described in clause (x) or (y). (ii) "Tax Return" shall
mean all returns, reports, statements, declarations, estimates and forms or
other documents (including any related or supporting information) required to be
filed by, or on behalf of the Company with respect to Taxes; and (iii) the term
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 2.13 Contracts.
(a) Section 2.13(a) of the Company Disclosure Schedule contains a correct and
complete list of all Contracts pursuant to which the Company is a party to or
bound by; and
(i) have a duration of three months or more and are not terminable
without penalty upon 60 days or less prior written notice by any
party;
(ii) require or could reasonably be expected to require any party
thereto to pay $15,000 or more in any twelve month period, or
$50,000 or more in the aggregate;
(iii) require or could require any severance or retention payments
to Employees after the Closing Date;
(iv) contain any restrictive covenant, confidentiality or
non-competition agreement;
(v) constitute a lease or license of any Intellectual Property from
any third party;
(vi) regard the employment, services, consulting, termination or
severance from employment of any director, officer, Employee,
Company Employee, or other Person;
(vii) constitute a trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money or a leasing
transaction of the type required to be capitalized in accordance
with GAAP;
17
(viii) constitute an agreement of guarantee, support,
indemnification, assumption or endorsement of, or any other similar
commitment with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any
other Person (except for checks endorsed for collection);
(ix) any contract with non-standard payment terms, in each case;
(x) limit the freedom of the Company to engage in any line of
business or to compete with any other corporation, partnership,
limited liability company, trust, individual or other entity, or any
confidentiality, secrecy or non-disclosure Contract or any Contract
that may be terminable as a result of the Buyer's status as a
competitor of any party to such Contract;
(xi) are with an Affiliate or are between the Company and an
Affiliate(s) (including the Seller), on one hand, and a third party,
on the other hand (the "Joint Contracts");
(xii) provide for a joint venture or partnership with any other
Person;
(xiii) are not in writing, true and correct summaries of which have
been provided to Buyer;
(xiv) constitute a contract entered into by the Company other than
in the ordinary course consistent with past practice; or
(xv) has granted or been granted forgiveness or waived or been
granted a waiver of any rights or obligations under such Contract.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure Schedule:
(i) all of the Contracts are valid and binding and are in full force and effect,
the Company is not in default under, and no event has occurred which, with the
passage of time or giving of notice or both, would result in the Company being
in default under or result in the waiver or loss of any right or obligation in
favor of the Company under any of the terms of the Contracts, (ii) none of the
Contracts requires the consent of any other party thereto in connection with the
transactions contemplated by this Agreement, (iii) none of the Contracts
contains a change of control provision that would either prohibit the
transactions contemplated by this Agreement or require the consent of any third
party; (iv) the Company is a party to a written agreement with all suppliers of
goods and services to the Company and (v) there exists no default or event of
default or event, occurrence, condition or act, with respect to the other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or conditions, would become a default or event
of default under any Contract or result in the waiver or loss of any right or
obligation in favor of the Company. True, correct and complete copies of all
Contracts have been delivered to the Buyer.
18
(c) For the purpose of this Agreement the term "Contract" means any written or
oral agreement, arrangement, commitment, contract, indenture, instrument, lease
or obligation of any kind or character to which the Company is a party or that
is binding on the Company or its assets or business.
Section 2.14 Real Property. Section 2.14 of the Company Disclosure
Schedule sets forth a list of all real property leased or subleased by or on
behalf of the Company along with all documentation and amendments related
thereto (the "Real Property Lease") and includes the expiration date of any Real
Property Lease. The Company does not own any real property. The Seller agrees to
permit ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to retain the use of his present office located at ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, secretarial support services
for himself, office space for and the use of all existing office equipment by
the Company's employees on the date hereof, for a period of twelve (12) months
from the Closing Date at a monthly fee of Five Hundred Dollars ($500.00) that
may be terminated by ▇▇. ▇▇▇▇▇▇▇ or the Seller upon sixty (60) days advance
written notice. The Company shall be fully responsible for the cost of all
telephone and facsimile charges incurred by the Company following the Closing
Date.
Section 2.15 Intellectual Property.
(a) As used herein, the term "Intellectual Property" means (i) all trade names,
trademarks, service marks, product designations, trade dress, logos, slogans,
and designs and general intangibles of a like nature together with goodwill, all
registrations and applications related to the foregoing (collectively,
"Trademarks") set forth in Section 2.15(a) of the Company Disclosure Schedule;
(ii) the Internet domain names set forth in Section 2.15(a) of the Company
Disclosure Schedule; (iii) the patents, patent applications, disclosures of
inventions and the patents issued upon patent applications or based upon such
invention disclosures (collectively, "Patents") set forth in Section 2.15(a) of
the Company Disclosure Schedule; (iv) the copyrights, copyright registrations
and copyright applications (collectively, "Copyrights") set forth in Section
2.15(a) of the Company Disclosure Schedule; (v) all copies of computer programs,
including any and all software implementations of algorithms, models and
methodologies whether in source code or object code form, databases and
compilations, including any and all data and collections of data, all
documentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site other
than mass market software licensed to the Company that is available in consumer
retail stores or otherwise commercially available and subject to "shrink-wrap",
"click-through" or other standard form license agreements (collectively,
"Software") and (vi) the confidential information, technology, know-how,
inventions, processes, formulae, algorithms, models and methodologies (such
confidential items collectively, "Trade Secrets"), in the case of each of (i)
through (vi) of this paragraph, held for use or used in or related to the
business of the Company as conducted as of the Closing Date (including all
documentation relating thereto) or as contemplated to be conducted and any
licenses to use any of the foregoing.
19
(b) Section 2.15(b) of the Company Disclosure Schedule sets forth, for all
Intellectual Property owned directly or indirectly, or licensed, leased or
otherwise used, by the Company, a complete and accurate list, of all U.S. and
foreign: (i) patents and patent applications; (ii) trademark and service ▇▇▇▇
registrations (including Internet domain name registrations owned directly or
indirectly by either the Company), trademark and service ▇▇▇▇ applications and
material unregistered trademarks and service marks; and (iii) copyright
registrations, copyright applications and material unregistered copyrights.
(c) Section 2.15(c) of the Company Disclosure Schedule lists all contracts for
material Software which is licensed, leased or otherwise used by the Company,
and all Software which is owned by the Company ("Proprietary Software"), and
identifies which Software is owned, licensed, leased, or otherwise used, as the
case may be.
(d) Section 2.15(d) of the Company Disclosure Schedule sets forth a complete and
accurate list of all material agreements granting or obtaining any right to use
or practice any rights under any Intellectual Property, to which the Company is
a party or otherwise bound, as licensee or licensor thereunder, including,
without limitation, license agreements, settlement agreements and covenants not
to ▇▇▇ (collectively, the "License Agreements").
(e) Except as set forth in Section 2.15(e) of the Company Disclosure Schedule:
(i) The Company owns or has the right to use all Intellectual
Property, free and clear of all Liens other than Permitted Liens;
(ii) Any Intellectual Property owned by the Company, the Seller or
any of their respective Affiliates and used by the Company, has been
duly maintained, is valid and subsisting, in full force and effect
and has not been cancelled, expired or abandoned;
(iii) Any Intellectual Property used by the Company but not owned by
the Company, the Seller or any of their respective Affiliates has
been duly maintained, is valid and subsisting, in full force and
effect and has not been cancelled, expired or abandoned;
(iv) Neither the Seller nor the Company has received written notice
from any third party regarding any actual or potential infringement
by the Company of any intellectual property of such third party, and
the Company has no knowledge of any basis for such a claim against
the Company;
(v) Neither the Seller nor the Company has received written notice
from any third party regarding any assertion or claim challenging
the validity of any Intellectual Property owned or used by the
Company or any subsidiary of the Company and the Company has no
knowledge of any basis for such a claim;
20
(vi) The Company has not licensed or sublicensed its rights in any
Intellectual Property, or received or been granted any such rights,
other than pursuant to the License Agreements;
(vii) No third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned or used by the Company;
(viii) The License Agreements are valid and binding obligations of
the Company, enforceable in accordance with their terms, except that
such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights
generally;
(ix) The Company takes reasonable measures to protect the
confidentiality of Trade Secrets including requiring third parties
having access thereto to execute written nondisclosure agreements.
No Trade Secret of the Company has been disclosed or authorized to
be disclosed to any third party other than pursuant to a written
nondisclosure agreement that the Company and the Seller reasonably
believe adequately protects the Company's proprietary interests in
and to such Trade Secrets;
(x) The consummation of the transactions contemplated hereby will
not result in the loss or impairment of the Company's rights to own
or use any of the Intellectual Property, nor will such consummation
require the consent of any third party in respect of any
Intellectual Property; and
(xi) All Proprietary Software set forth in Section 2.15(c) of the
Company Disclosure Schedule, was either developed (a) by employees
of the Company within the scope of their employment; or (b) by
independent contractors who have assigned all of their rights to the
Company pursuant to written agreement.
(f)Except as set forth in Section 2.15(f) of the Company Disclosure Schedule,
neither the Seller nor the Company:
(i) has granted to any third party any exclusive rights of any kind
(including, without limitation, exclusivity with regard to
categories of advertisers on any World Wide Web site, territorial
exclusivity or exclusivity with respect to particular versions,
implementations or translations of any of the Intellectual
Property), nor has the Seller or the Company granted any third party
any right to market any of the Intellectual Property under any
private label or "OEM" arrangements;
(ii) has any outstanding sales or advertising contract, commitment
or proposal (including, without limitation, insertion orders,
slotting agreements or other agreements under which the Seller or
the Company has allowed third parties to advertise on or otherwise
be included in a World Wide Web site) that the Company currently
expects to result in any material loss to the Company upon
completion or performance thereof;
21
(iii) has any oral contracts or arrangements for the sale of
advertising or any other product or service; or
(iv) employs any employee, contractor or consultant who, to the Company's
knowledge, is in violation of any material term of any written employment
contract, patent disclosure agreement or any other written contract or agreement
relating to the relationship of any such employee, consultant or contractor with
the Company or, to the Seller's or the Company's knowledge, any other party
because of the nature of the Business.
Section 2.16 [Intentionally omitted]
Section 2.17 Environmental Compliance. Except as set forth in
Section 2.17 of the Disclosure Schedule: (a) the Company is in compliance with
all applicable Environmental Laws; (b) the Company has all material Permits
required under any applicable Environmental Laws and are in compliance with
their respective requirements; and (c) there are no pending or, to Seller's
knowledge, threatened claims under Environmental Laws against the Company. For
the purposes of this Agreement, the term "Environmental Laws" shall mean each
federal, state, local and foreign law and regulation relating to pollution,
protection or preservation of human health or the environment including ambient
air, surface water, ground water, land surface or subsurface strata, and natural
resources, and including each law and regulation relating to emissions,
discharges, releases or threatened releases of materials of environmental
concern, or otherwise relating to the manufacturing, processing, distribution,
use, treatment, generation, storage, containment (whether above ground or
underground), disposal, transport or handling of materials of environmental
concern, or the preservation of the environment or mitigation of adverse effects
thereon and each law and regulation with regard to record keeping, notification,
disclosure and reporting requirements respecting materials of environmental
concern.
Section 2.18 Affiliate and Non-Arm's Length Transactions. Since
January 1, 2000, the Company has not made any payment or loan to, or borrowed
any moneys from or become otherwise indebted to, any officer, director,
Employee, Company Employee, shareholder, Affiliate of the Company or any other
Person not dealing at arm's length with the Company, except as disclosed in
Section 2.18 of the Company Disclosure Schedule and except for usual employee
reimbursements and compensation paid in the ordinary course. Except as described
in Section 2.18 of the Company Disclosure Schedule and except for Contracts of
employment, the Company is not a party to any Contract with any officer,
director, Employee, shareholder or Affiliate of the Company or any other Person
not dealing at arm's length with the Company. Except as described in Section
2.18 of the Company Disclosure Schedule, neither Seller nor any officer,
director or shareholder of the Company and no entity which is an Affiliate of
one or more of such individuals: (a) owns, directly or indirectly, any interest
in (except for shares representing less than 1% of the outstanding shares of any
class or series of any publicly traded company), or is an officer, director,
employee or consultant of, any Person which is, or is engaged in business as, a
competitor of the Company or a lessor, lessee, supplier, distributor, sales
agent or customer of the Company; (b) owns, directly or indirectly, in whole or
in part, any
22
property used in the operation of the business of the Company; or
(c) has to the knowledge of the Seller or the Company any cause of action or
other claim whatsoever against, or owes any amount to, the Company, except for
any claims in the ordinary course such as for accrued vacation pay and accrued
benefits under any employee plans. Section 2.18 of the Company Disclosure
Schedule contains a complete and correct list as of the date hereof of all
Contracts, transfers of assets or liabilities or commitments or transactions,
whether or not entered into in the ordinary course, to or by which the Company,
on the one hand, and the Seller, an Affiliate of the Seller or any officer,
director, employee or shareholder of the Seller, an Affiliate of the Seller or
the Company, on the other hand, are a party or are otherwise bound or affected
that (i) are currently pending or in effect or (ii) involve continuing
liabilities and obligations. For the purposes of this Agreement, the term
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
Section 2.19 Guarantees. Except as set forth in Section 2.19 of the
Company Disclosure Schedule, neither the Seller nor any other third party
(including any Affiliate) has guaranteed the duties, performance, or obligations
(financial or otherwise) of the Company for the benefit of any Person. Except as
set forth in Section 2.19 of the Company Disclosure Schedule, the Company has
not guaranteed the duties, performance or obligations (financial or otherwise)
of any Person.
Section 2.20 Customers. Section 2.20 of the Seller's Disclosure
Schedule sets forth the twenty (20) largest customers (each a "Material
Customer") of the Company as of the date hereof, based on gross revenues
received from each such customer during such period. Neither Seller nor the
Company has received written notice, or to Seller's knowledge any oral notice,
from any Material Customer that such Material Customer is canceling or otherwise
substantially reducing its usage or purchase of the products and services of the
Company. Except as set forth in Section 2.20 of the Company Disclosure Schedule,
the Company has a written agreement with each Material Customer.
Section 2.21 Brokers; Finders and Fees. The Seller has not employed
any investment banker, broker or finder or incurred any liability for any
investment banking fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
Section 2.22 Accounts Receivable. All information set forth in the
March 31, 2003 balance sheet with respect to accounts receivable of the Company
is true, accurate and complete as of March 31, 2003, and since that date up to
and including the Closing Date there has been no material adverse change with
respect to the amount, validity, or collectibility of accounts receivable of the
Company, except for increases or decreases in the amount of accounts receivable
due to the continued operation of the Company in its ordinary course of
business. Such accounts receivables are, and at the Closing Date, to the extent
not theretofore collected, will be, valid and existing evidence of monies due
for services performed or goods sold.
23
Section 2.23 Insurance. The Company is presently insured, and since
its inception has been insured, against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. The policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of the Company, in the
Company's reasonable estimation, provide adequate coverage against loss. The
Company has furnished to the Buyer a complete and correct list as of the date
hereof of all insurance policies maintained by the Company, and has made
available to the Buyer complete and correct copies of all such policies,
together with all riders and amendments thereto. All such policies are in full
force and effect and all premiums due thereon have been paid to the date hereof.
The Company has complied in all material respects with the terms of such
policies.
Section 2.24 Properties/Assets/Liabilities. The Company has good and
marketable title, free and clear of all Liens to all of its properties and
assets, whether tangible or intangible, real, personal or mixed, reflected in
the Financial Statements as being owned by Company as of the date thereof, other
than (i) any properties or assets that have been sold or otherwise disposed of
in the ordinary course of business since the date of the Financial Statements,
(ii) Liens disclosed in the notes to the Financial Statements, and (iii) Liens
arising in the ordinary course of business after the date of the Financial
Statements. All buildings, and all fixtures, equipment and other property and
assets that are material to its business, held under leases or sub-leases by
Company are held under valid instruments enforceable in accordance with their
respective terms, subject to the Bankruptcy Exception. All of Company's
equipment in regular use which is needed for the operation of Company has been
reasonably maintained and is in serviceable condition, reasonable wear and tear
excepted. The Company has good and marketable title, free and clear of all Liens
to all assets necessary to conduct the Business as such is being conducted on
the date of this Agreement and proposed to be conducted, and such assets are not
owned or held by any other Person. A list of all such assets having a value in
excess of $1,000 is set forth on Section 2.24 of the Company Disclosure
Schedule. A list of all Assets and Liabilities of the Company that are to be
transferred from the Company to the Seller and/or a Seller's subsidiary is set
forth in Section 4.24 of the Company Disclosures Schedule and labeled
"Transferred Assets/Liabilities".
Section 2.25 Certain Business Practices. None of the Company, the
Seller or any of their respective directors, officers, agents or employees (in
their capacities as such) has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 2.26 New York Business Corporation Law. The board of
directors of the Seller has approved this Agreement. To the Knowledge of the
Seller and the Company, no other state takeover statute or similar statute or
regulation applies or purports to apply to this Agreement, or the transactions
contemplated by this Agreement. No other "control share
24
acquisition," "fair price," "moratorium" or other antitakeover laws or
regulations enacted under U.S. state or federal laws apply to this Agreement.
Section 2.27 Business Activity Restriction. There is no
non-competition or other similar agreement, commitment, order of any
Governmental Entity to which the Seller or the Company is a party or subject to
that has or could reasonably be expected to have the effect of prohibiting or
impairing the conduct of the Business by the Company before or after the
Closing. The Company has not entered into any agreement under which the Company
is restricted from selling, licensing or otherwise distributing any of its
technology or products to, or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market or line of business.
Section 2.28 Privacy. The Company is, and has always been, in
compliance with its then-current privacy policy, including those posted on the
Company's Web site(s). The Company has conducted its business and maintained its
data at all times in accordance with all applicable Federal, state and other
laws, including, but not limited to, those relating to the use of information
collected from or about consumers. The Company is, and has always been, in
compliance with its customers' privacy policies, when required to do so by
contract.
Section 2.29 Bank Accounts. Section 2.29 of the Company Disclosure
Schedule sets forth a complete list of all bank accounts, savings deposits,
money-market accounts, certificates of deposit, safety deposit boxes, and
similar investment accounts with banks or other financial institutions
maintained by or on behalf of the Company showing the depository bank or
institution address, appropriate bank contact personnel, account number and
names of signatories.
Section 2.30 Disclosure. No representation or warranty by the Seller
or the Company in this Agreement and no statement contained in any document or
other writing furnished or to be furnished to the Buyer or its representatives
pursuant to the provisions hereof contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary in
order to make the statements made herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
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The Buyer hereby represents and warrants to the Seller as follows:
Section 3.1 Organization; Etc. The Buyer is a Florida Corporation.
Section 3.2 Authority Relative to this Agreement. This Agreement and
the other Transaction Documents have been or will be duly executed and delivered
by the Buyer and, assuming the due authorization, execution and delivery by the
other parties hereto, each such agreement constitutes a legal, valid and binding
obligations of such party, enforceable against such party in accordance with its
terms, subject to the Bankruptcy Exception.
Section 3.3 Consents and Approvals; No Violations. Neither the
execution and delivery of this Agreement by the Buyer nor the consummation by
the Buyer of the transactions contemplated hereby and thereby will (a) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or require any consent under, any indenture, license,
contract, agreement or other instrument or obligation to which the Buyer is a
party or by which it or any of its properties or assets may be bound, (b)
violate any order, writ, injunction, decree or award rendered by any
Governmental Entity or Laws applicable to the Buyer, any of their respective
subsidiaries or any of their respective properties or assets, or (c) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any Governmental Entity.
Section 3.4 Brokers; Finders and Fees. Neither the Buyer nor any of
its Affiliates has employed any investment banker, broker or finder or incurred
any liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
Section 3.5 Investment Representations. The Buyer understands that
as of the Closing Date, the Company Shares will not have been registered under
the Securities Act. The Buyer also understands that the Company Shares are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Buyer's representations contained in the
Agreement. The Buyer hereby represents and warrants that it is an "accredited
investor" within the meaning of the Securities Act of 1933 and the rules and
regulations promulgated thereunder (the "Securities Act").
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 Conduct of Business of the Seller. During the period
from the date of this Agreement to the Closing Date, except (x) as otherwise
contemplated by this Agreement or the transactions contemplated hereby, (y) for
those matters set forth in Section 4.1 of the Company Disclosure Schedule, or
(z) consented to by the Buyer in writing, the Company shall, and Seller shall
cause the Company to, conduct the business of the Company as follows:
(a) The business of the Company shall be conducted in the same manner as
heretofore conducted and only in the ordinary course, and Seller shall cause the
Company to use its commercially reasonable best efforts to preserve the business
organization of the Company intact, keep available the services of the current
officers and employees of the Company and maintain the existing relations with
customers, suppliers, creditors, business partners, landlords, employees and
others having business dealings with the Company. The Company shall not
26
institute any new methods of purchase, sale, lease, management, accounting or
operation or engage in any transaction or activity other than minor changes in
the ordinary course of business and consistent with past practice;
(b) The Company shall not: (i) amend its articles of incorporation or by-laws or
similar organizational documents, (ii) issue, sell, transfer, pledge, dispose of
or encumber any shares of any class or series of its capital stock, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of any class or series
of its capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to any shares of
any class or series of its capital stock; (iv) split, combine or reclassify any
shares of any class or series of its stock; or (v) redeem, purchase or otherwise
acquire directly or indirectly any shares of any class or series of its capital
stock, or any instrument or security which consists of or includes a right to
acquire such shares;
(c) The Company shall not organize any new subsidiary or acquire any capital
stock or other equity securities, or equity or ownership interest in the
business, of any other Person;
(d) The Company shall not modify, amend or terminate any of the Contracts or
waive, release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;
(e) The Company shall not: incur or assume any long-term debt, or except in the
ordinary course of business, incur or assume short-term indebtedness from the
date hereof until the Closing; pay, repay, discharge, purchase, repurchase or
satisfy any indebtedness issued or guaranteed by the Company, except as required
by the terms thereof; modify the terms of any indebtedness or other liability;
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person;
make any loans, advances or capital contributions to, or investments in, any
other Person; enter into any material commitment or transaction (including any
capital expenditure or purchase, sale or lease of assets or real estate); write
down the value of any inventory or write off as uncollectible any notes or
accounts receivable except in the ordinary course of business consistent with
past practice, dispose of or permit to lapse any rights to any Intellectual
Property or change any of the banking or safe deposit arrangements described or
referred to in the Company Disclosure Schedules;
(f) The Company shall not lease, license, mortgage, pledge or encumber any
assets other than in the ordinary course of business and consistent with the
past practice or transfer, sell or dispose of any assets other than in the
ordinary course of business and consistent with past practice or dispose of or
permit to lapse any rights to any Intellectual Property;
(g) The Company shall not make any change in the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring increases in the ordinary course of
business of wages payable to employees who are not officers or directors or
Affiliates of the Company) or to Persons providing management
27
services, or enter into or amend any employment, severance, consulting,
termination or other agreement with, or employee benefit plan for, or make any
loan or advance to, any of its officers, directors, employees, Affiliates,
agents or consultants or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to an employee
benefit plan or otherwise;
(h) The Company shall not (i) pay or make any accrual or arrangement for payment
of any pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any officer, director, employee or
Affiliate or pay or agree to pay or make any accrual or arrangement for payment
to any officer, director, employee or Affiliate of any amount relating to unused
vacation days, except to the extent the Company is unconditionally obligated to
do so on the date hereof, (ii) adopt or pay, grant, issue, accelerate or accrue
salary or other payments or benefits pursuant to any pension, profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director,
officer, employee, agent or consultant, whether past or present, except to the
extent the Company is unconditionally obligated to do so on the date hereof, or
(iii) amend in any material respect any such existing plan, agreement or
arrangement or any Seller Benefit Plan in a manner inconsistent with the
foregoing;
(i) The Company shall not permit any insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated without notice and consent
of Buyer;
(j) The Company shall not enter into any contract or transaction relating to the
purchase of assets other than in the ordinary course of business consistent with
past practices;
(k) The Company shall not pay, repurchase, discharge or satisfy any of its
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the Financial Statements or incurred since the Balance Sheet date in the
ordinary course of business;
(l) The Company shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(m) The Company shall not (i) change any of the accounting methods used by it
unless required by GAAP or (ii) make any election relating to Taxes, change any
election relating to Taxes already made, adopt any accounting method relating to
Taxes, change any accounting method relating to Taxes unless required by GAAP,
enter into any closing agreement relating to Taxes, settle, compromise or agree
to any adjustment of any Tax attribute or any claim or assessment relating to
any Taxes, Tax Return or Tax Claim, surrender any right to claim a refund
28
of Taxes, file any amended Tax Return, or consent to any waiver of the statute
of limitations for any such claim or assessment;
(n) The Company shall not take, or agree to or commit to take, any action that
would or is reasonably likely to result in any of the conditions to the Closing
set forth in Article V not being satisfied, or would make any representation or
warranty of the Seller contained herein inaccurate in any respect at, or as of
any time prior to, the Closing Date, or that would materially impair the ability
of the Company, the Buyer, or the Seller to consummate the Closing in accordance
with the terms hereof or materially delay such consummation;
(o) The Company shall not enter into any agreement, contract, commitment or
arrangement to do any of the foregoing, or authorize, recommend, propose or
announce an intention to do, any of the foregoing; and
(p) The Company shall provide such standard periodic reports (produced by Seller
or the Company in the ordinary course of their business) to Buyer as reasonably
requested by Buyer and permit site visits by Buyer's representatives for
purposes of ongoing due diligence and for verifying compliance with the
provisions of this Section 4.1.
Section 4.2 Access to Information for the Buyer. From the date of
this Agreement to the Closing, the Seller shall (i) give the Buyer and its
authorized representatives reasonable access to all books, records, documents,
personnel, offices and other facilities and properties of the Company, its
attorneys, and its accountants, (ii) permit the Buyer to make such copies and
inspections thereof as the Buyer may reasonably request and (iii) cause the
officers of the Company to furnish the Buyer with such financial and operating
data and other information with respect to the business and properties of the
Company as the Buyer may from time to time reasonably request; provided,
however, that any such access shall be conducted at the Buyer's expense, during
normal business hours, under the supervision of the personnel of the Company and
in such a manner as to maintain the confidentiality of this Agreement and the
transactions contemplated hereby and not to interfere unreasonably with the
normal operation of the business of the Company.
Section 4.3 Consents; Cooperation. Each of the parties shall
cooperate and use its commercially reasonable efforts to make all filings and
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and other third parties
necessary to consummate the transactions contemplated by this Agreement. Section
4.4 Commercially Reasonable Efforts. Each of the parties shall cooperate and use
its commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable under
Applicable Laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
Section 4.5 Public Announcements. Prior to the Closing, except as
otherwise agreed to by the parties, the parties shall not issue any report,
statement or press release or otherwise make
29
any public statements with respect to this Agreement and the transactions
contemplated thereby, except as in the reasonable judgment of a party may be
required by law or in connection with its obligations as a publicly-held,
exchange-listed company, in which case the parties will use their best efforts
to reach mutual agreement as to the language of any such report, statement or
press release. Upon the Closing, the parties will consult with each other with
respect to the issuance of a joint report, statement or press release with
respect to this Agreement and the transactions contemplated hereby.
Section 4.6 Tax Matters.
(a) Tax Returns
(i) The Seller shall prepare and timely file (or cause to be filed
when due) all Tax Returns that are required to be filed by or with
respect to the Company for taxable years or periods ending on or
before the Closing Date and the Seller shall pay (or cause to be
paid) any and all Taxes due and payable in respect to such Tax
Returns. All Tax Returns shall be prepared and filed in a manner
that is consistent with the prior practice of the Company, except as
required by applicable law.
(ii) During the period from the date hereof to the Closing Date, the
Seller shall cause the Company to: (i) timely file all Tax Returns
required to be filed by it ("Post-Signing Tax Returns") and such
Post-Signing Tax Returns shall be prepared in a manner consistent
with past practice, (ii) timely pay all Taxes due and payable and
(iii) promptly notify the Buyer of any federal or state income or
franchise (or other material) Tax Claim, investigation or audit
pending against or with respect to the Company in respect of any Tax
matters (or any significant developments with respect to any ongoing
Tax matters), including material Tax liabilities and material Tax
refund claims. The Buyer shall file or cause to be filed when due
all Tax Returns that are required to be filed by or with respect to
the Company for taxable periods ending after the Closing Date and,
subject to Sections 4.6(b)(iii) and 4.6(c), the Buyer shall pay (or
cause to be paid) any Taxes due in respect of such Tax Returns.
(iii) With respect to any Tax Return required to be filed by the
Buyer for or on behalf of Company for or relating to any taxable
year or period beginning on or before and ending after the Closing
Date (a "Straddle Period"), the Buyer shall provide the Seller with
a copy of such Tax Return and a statement specifying the amount of
Tax shown on such Tax Return that is allocable to the Seller
pursuant to Section 4.6(c) and (d) (the "Straddle Period
Statement"), together with appropriate supporting information, at
least forty-five (45) days prior to the due date (including any
extension thereof) for the filing of such Tax Return. Such Tax
Return shall be prepared in accordance with the past practice of the
Company, if any, to the extent permissible under Applicable Law. The
Seller shall pay the Buyer, in immediately available funds, the
amount of Tax set forth on the Straddle Period Statement for which
Seller is liable pursuant to Section 4.6(c) and (d) no later than 3
days prior to the due date of any such Tax Return.
30
(iv) Seller shall not amend any Tax Return of or relating to the
Company for any taxable year ending on or before the Closing Date or
with respect to any Straddle Period without the consent of the
Buyer, which consent shall not be unreasonably delayed or withheld.
(b) Indemnification
(i) From and after the Closing Date, the Seller shall indemnify,
defend and hold the Buyer, Buyer Indemnitees (as defined herein) and
the Company harmless from and against all Buyer Damages (as defined
herein) asserted against and will reimburse the Buyer, Buyer
Indemnitees and the Company for any and all Buyer Damages incurred
or suffered to the extent such Buyer Damages arise out of or are
attributable or related to (without duplication):
(1) all Taxes imposed on the Company relating or attributable
to taxable periods ending on or prior to the Closing Date
("Pre-Closing Period") and, with respect to any period that
begins on or before and that ends after the Closing Date (in
each case, a "Straddle Period"), the portion of such Straddle
Period deemed to end on and include the Closing Date (in the
manner determined pursuant to Section 4.6(d));
(2) all Taxes imposed on the Company under Section 1.1502-6 of
the Treasury Regulations (and corresponding provisions of
state, local or foreign law) as a result of being a member of
any federal, state, local or foreign consolidated, unitary,
combined or similar group for any tax period ending on or
before, or that includes, the Closing Date;
(3) [Intentionally omitted]
(4) all Transfer Taxes for which Seller is liable pursuant to
Section 4.6(f) of this Agreement;
(5) the inaccuracy of any representation or warranty of the
Seller contained in Section 2.12 of this Agreement;
(6) the breach of any representation or warranty contained in
Section 2.12 of this Agreement; and
(7) the breach by Seller or failure of Seller to perform (or
cause to have performed) any of the covenants made by it
contained in Section 4.1(m) and this Section 4.6.
(ii) From and after the Closing date, the Buyer shall indemnify, defend
and hold the Seller and Seller Indemnitees (as defined herein)
harmless from and against all Seller
31
Damages (as defined herein) asserted against and will reimburse the
Seller and Seller Indemnitees for any and all Seller Damages
incurred or suffered to the extent such Buyer Damages arise out of
or are attributable or related to Taxes imposed on the Company with
respect to taxable periods beginning after the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle
Period beginning after the Closing Date (as determined pursuant to
Section 4.6(d));
(c) Computation of Tax Liabilities. For purposes of Section 4.6(c), in order to
apportion appropriately any Taxes relating to a Straddle Period, the parties
hereto shall, to the extent permitted under applicable law, elect with the
relevant Tax authority to treat for all Tax purposes the Closing Date as the
last day of the taxable year or period of the Company. In any case where
applicable law does not permit the Company to treat the Closing Date as the last
day of the taxable year or period, the portion of any Taxes that are allocable
to the portion of the Straddle Period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (A) based upon or related
to income or receipts, or (B) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible
or intangible), deemed equal to the amount that would be payable if
the taxable year or period ended on the Closing Date; and
(ii) in the case of Taxes not described in Section 4.6(d)(i) that
are imposed on a periodic basis and measured by the amount, value or
level of any item (such as personal property taxes and real estate
taxes), such Taxes shall be deemed to be the amount of such Taxes
for the entire period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Taxes for the immediately
preceding period) multiplied by a fraction, the numerator of which
is the number of calendar days in the Straddle Period ending on (and
including) the Closing Date and the denominator of which is the
number of calendar days in the entire relevant Straddle Period.
(d) Contest Provisions
(i) After the Closing, each of the Buyer and the Company, on the one
hand, and the Seller, on the other hand, (the "Recipient") shall
promptly notify the chief tax officer (or other officer if no such
position exists) of the other party in writing (including by
facsimile) of the receipt by the Recipient of any written notice of
any pending or threatened audits, notice of deficiency, proposed
adjustment, assessment, examination or other administrative or court
proceeding, suit, dispute or other similar claim (a "Tax Claim")
received by Recipient from any Tax authority or any other party with
respect to Taxes which, if determined adversely, could be grounds
for indemnification under this Section 4.6; provided however, that a
failure by the Buyer to give such notice shall not affect the
Buyer's or Company's rights to indemnification under Section 4.6
unless and to the extent the Seller is materially and adversely
prejudiced as a consequence of such failure.
32
(ii) The Seller may elect to control the conduct, through counsel of
the Seller's own choosing and at the Seller's own expense and with
the participation of the Buyer, or any Tax Claim involving any
asserted liability with respect to or relating to any Pre-Closing
Period. If the Seller desires to elect to control any such Tax
Claim, the Seller shall within 10 calendar days of receipt of the
notice of asserted Tax liability notify Buyer in writing of its
intent to do so. If the Seller properly elects to control such Tax
Claim, then the Seller shall have all rights to settle, compromise
and/or concede such asserted liability and the Buyer shall
reasonably cooperate and shall cause the Company to reasonably
cooperate at the expense of the Seller, in each phase of such Tax
Claim; provided however, that the Seller shall not settle,
compromise and/or concede such asserted liability if such
settlement, compromise or concession could increase the Tax
liability of any of the Buyer (or any of its Affiliates) or the
Company for any other taxable period without the consent of the
Buyer. If the Seller does not elect to control a Tax Claim for a
Pre-Closing Period pursuant to this Section 4.6(e) (or, after
assuming control, the Seller fails to reasonably defend against such
Tax Claim), the Buyer or the Company may without affecting its or
any other indemnified party's rights to indemnification under this
Section 4.6, assume and control the defense of such Tax Claim with
participation by the Seller (at Seller's expense); provided,
however, that the Buyer may not settle or compromise such Tax Claim
without the consent of the Seller, which consent shall not be
unreasonably withheld.
(e) Transfer Taxes. The Seller will pay or cause to be paid any sales, use, real
property transfer, real property gains, transfer, stamp, registration,
documentary, recording or similar Taxes together with any interest thereon,
penalties, fines, fees, additions to tax or additional amounts with respect
thereto (collectively, "Transfer Taxes") incurred in connection with the
transactions contemplated by this Agreement. The Seller will be responsible for
preparing and timely filing (and the Buyer will cooperate with the Seller at the
Seller's expense in preparing and filing) any Tax Returns required with respect
to any such Transfer Taxes. The Seller will provide to the Buyer a true copy of
each such Tax Return as filed and evidence of timely filing thereof.
(f) Termination of Tax Sharing Agreements. As of the Closing, all Tax sharing
agreements or similar agreements, written or unwritten, with respect to or
involving the Company shall be terminated and, after the Closing Date, the
Company shall not have any further rights or obligations under any such
agreement.
(h) Accounting and Tax Records. The Buyer acknowledges that the Seller, from
time to time after the Closing Date, require access to certain accounting and
Tax records and information held by the Company to the extent such records and
information pertain to events occurring on or prior to the Closing Date;
therefore, from and after the Closing Date, the Buyer and the Company shall (I)
use its reasonable best efforts to properly retain and maintain such records for
seven (7) years after the Closing Date and subject to sub-Sections (2) and (3)
of 4.6(h) may thereafter destroy, abandon or dispose of all or a portion of such
records in its sole discretion, (ii) upon
33
written notice by the Seller to the Buyer (within 90 days prior to the end of
the 7 year period following the Closing Date) that Seller requests all or a
portion of such records, Buyer shall transfer such records (or copies of such
records) to the Seller at Seller's expense and (iii) allow the Seller and their
respective agents and representatives, at times and dates reasonably and
mutually acceptable to the parties, from time to time, to inspect, review and
make copies of such records as the Seller may deem necessary or appropriate;
provided, however, that in all cases, such activities are to be conducted by the
Seller during normal business hours and at the Seller's expense. The Seller
shall reimburse the Buyer for its reasonable out-of-pocket costs and expenses
incurred in conjunction with such efforts. The Buyer shall not be required by
this Section 4.6(h) to take any action that would unreasonably interfere with
the conduct of its business or unreasonably disrupt its normal operations.
(i) Tax Assistance and Cooperation.
(i) The Seller and Buyer agree to furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance
relating to the Company as reasonably requested for the filing of
any Tax Returns, for the preparation of any audit and for the
prosecution or defense of any Tax Claim, suit or proceeding related
to any proposed adjustment. Any information obtained under this
Section 4.6(i) shall be kept confidential except (1) as may be
otherwise necessary in connection with the filing of Tax Returns or
Tax Claims for refund or in conducting an audit or other proceeding
or (2) with the consent of the Seller or the Buyer, as the case may
be.
(ii) Subject to 4.6(e), the Buyer shall not permit the Company (1)
to take any action (other than actions in the ordinary course of
business or with respect to any election) on the Closing Date that
will increase the Seller's liability for Taxes, without consent of
the Seller or (2) make or change any Tax election or amend any Tax
Return (other than with respect to the carryback of the Tax
attribute form a period ending after the Closing Date), with respect
to or relating to Pre-Closing Periods of the Company, as the case
may be without the consent of the Seller or (3) waive or extend any
statute of limitations with respect or relating to Pre-Closing
Periods of the Company without the consent of the Seller, not to be
unreasonably withheld.
(iii) Notwithstanding anything to the contrary contained in this
Agreement, the Seller shall not, and the Buyer shall not be required
by the Seller to, amend any Tax Return of or relating to the
Company.
(j) Tax Audits
(i) After the Closing, each of the Buyer, on the one hand, and the
Seller, on the other hand ("Recipient"), will promptly notify the
other party in writing upon receipt by the Recipient or any of its
Affiliates (including in the case of the Buyer, the Company) of any
written notice of any pending or threatened audit or assessment,
suit, proposed
34
adjustment, deficiency, dispute, administrative or judicial
proceeding or other similar claim ("Tax Claim") received by the
Recipient form any Tax authority or any other party with respect to
Taxes for which the Seller is liable pursuant to Section 4.6(c),
provided, however, that a failure by the Buyer to give such notice
will not affect the Buyer's or the Company's rights to
indemnification under Section 4.6(c) unless and to the extent such
failure materially and adversely affects the Seller's rights to
participate in and defend such Tax Claim. Such notice shall contain
factual information (to the extent known) describing the asserted
Tax liability in reasonable detail and shall include copies of any
notice or other document received from any Tax authority in respect
of any such asserted Tax liability.
(ii) The Seller may elect to control the conduct, through counsel of
the Seller's own choosing and at the Seller's own expense and with
the participation of the Buyer, of any Tax claim involving any
asserted liability with respect to or relating to any Pre-Closing
Period only. If the Seller elects to control any such Tax Claim, the
Seller shall within 30 calendar days of receipt of the notice of
asserted Tax liability notify the Buyer in writing of its intent to
do so. If the Seller properly elects to control such a Tax Claim,
then the Seller shall have all rights to settle, compromise and/or
concede such asserted liability and the Buyer shall cooperate and
shall cause the Company or any of their successors to reasonably
cooperate, at the expense of the Seller, in each phase of such Tax
Claim; provided, however, that the Seller shall not settle,
compromise and/or concede such asserted liability if such
settlement, compromise or concession could increase the Tax
liability of the Company for any other taxable period without the
consent of the Buyer. If the Seller does not elect to control a Tax
Claim for a Pre-Closing Period, the Buyer or the Company may,
without affecting its or any other indemnified party's rights to
indemnification under Section 4.6, assume and control the defense of
such Tax Claim with participation by the Seller (at its own
expense); provided, however, that the Buyer may not settle or
compromise such Tax Claim without the consent of the Seller, which
consent shall not be unreasonably withheld.
(iii) With respect to any Tax Claim that involves any Straddle
Period, the Buyer shall control the conduct of any such Tax Claim,
through counsel of the Buyer's own choosing.
(k) FIRPTA Certificate. The Seller shall furnish to the Buyer on or before the
Closing Date a duly executed certificate of the Seller's non-foreign status in
the form and manner that complies with Section 1445 of the Code and the Treasury
Regulations thereunder (the "FIRPTA Certificate"). Notwithstanding anything to
the contrary contained herein, if the Seller fails to deliver the FIRPTA
Certificate and the Buyer elects to proceed with the Closing, the Buyer shall be
entitled to withhold the amount required to be withheld pursuant to Section 1445
of the Code from the Purchase Price payable to the Seller.
35
(l) Payments. Except as otherwise provided in this Section 4.6, any amounts owed
by any party to any other party under this Section 4.6 shall be paid within ten
days of notice from such other party. Any amounts that are not paid within such
ten-day period (or as otherwise set forth herein) shall accrue interest at the
rate of eight percent per year, compounded daily.
(m) Tax Refunds. The Buyer shall pay to the Seller all refunds or credits of
Taxes received by the Buyer or the Company after the Closing Date and
attributable to Taxes paid by the Company (or any predecessor of the Company)
with respect to a Pre-Closing Period, net of any Taxes imposed on such refund
amount, provided, however, that the Buyer shall not be entitled to any refund or
credit of the Company relating to a carryback of a Tax attribute relating to any
period ending after the Closing Date.
(n) Conflicts; Survival. Notwithstanding any other provision of this Agreement
to the contrary: the obligations of the parties hereto set forth in this Section
4.6 shall: (i) be unconditional and absolute, and (ii) remain in full force and
effect indefinitely, provided, however, that the representations and warranties
contained in Section 2.12 shall survive the Closing until 180 days following the
expiration of the applicable statute of limitations (taking into account all
extensions); provided; further; in the event notice for indemnification shall
have been given within the applicable survival period, the representation or
warranty that is the subject of such indemnification claim shall survive until
such time as such claim is finally resolved. In the event of a conflict between
Section 4.6 and any other provision of this Agreement, this Section 4.6 shall
govern and control.
(o) Tax Treatment of Indemnification Payment. The parties hereto agree to treat
any Indemnity Payment made pursuant to this Section 4.6 as an adjustment to the
Purchase Price for all Tax purposes.
Section 4.7 Employees; Employee Benefits; Stock Options.
(a) [Intentionally omitted]
(b) Commencing at the time of the Closing, each Company Employee shall be
eligible to participate in the employee benefit plans, programs, policies and
arrangements of the Buyer (or Buyer's parent as the case may be) generally
provided to similarly situated employees of the Buyer (such plans, "Buyer
Benefit Plans") in accordance with the terms governing such plans. For purposes
of the Buyer Benefit Plans, the Buyer shall treat the prior service of such
employees with the Company as service rendered to the Buyer for purposes of all
eligibility periods and vesting.
(c) On the Closing Date, the Buyer and the Seller shall jointly give notice to
the Company Employees that the active participation of employees in the Seller
Benefit Plans shall terminate as of such date and that such employees shall be
immediately eligible to participate in the Buyer Benefit Plans in accordance
with the terms thereof. Except as otherwise stated in this Agreement, in no
event shall any Company Employee be entitled to accrue any benefits under, or
36
continue participation in, the Seller Benefit Plans after the Closing Date, and
the Company shall terminate its participation in all Seller Benefit Plans as of
that date. However, notwithstanding any provision in this Agreement to the
contrary, Seller will continue to provide health insurance benefits for all
Company employees for a period of sixty (60) days after the Closing Date, or
until such time as Buyer obtains health insurance benefits for the Company's
employees, whichever occurs first, at the sole cost of the Company. Seller shall
invoice the Company for the actual cost of the health insurance benefits and the
Company shall pay such invoice within ten (10) days of receipt of each invoice.
The Company shall assume all risk of any claim asserted by the insurer or any
employee of the Company regarding non-insurability of the Company's employees
subsequent to the Closing Date.
(d) [Intentionally omitted]
(e) The Seller shall retain responsibility for all life insurance and long term
disability expenses and benefits in respect of claims covered by the applicable
Seller Benefit Plan that are incurred in respect of an Employee prior to the
Closing Date.
(f) It is expressly agreed that the provisions of this Section 4.7 are not
intended to be for the benefit of or otherwise be enforceable by any third
party, including, without limitation, any Employee, Company Employee or employee
organization.
(g) [Intentionally omitted]
(g) From and after the Closing Date, the Seller shall indemnify and hold
harmless the Buyer Indemnitees (as defined in Section 7.2(a)) from and against
all Buyer Damages (as defined in Section 7.2(a)) resulting from any claim
asserted against or incurred by any Buyer Indemnitee arising out of any Seller
Benefit Plan.
Section 4.8 Maintenance of Books and Records. Each of the parties
hereto shall preserve, until at least the fifth anniversary of the Closing Date,
all pre-Closing Date records possessed or to be possessed by such party relating
to the Company except to the extent with respect to Tax records of or relating
to the Company (which shall be governed by Section 4.6(h) of this Agreement.
After the Closing Date and up until at least the third anniversary of the
Closing Date, upon any reasonable request from a party hereto or its
representatives, the party holding such records shall, subject to the
confidentiality provisions of Section 4.11, (x) provide to the requesting party
or its representatives reasonable access to such records during normal business
hours and (y) permit the requesting party or its representatives to make copies
of such records, in each case at no cost to the requesting party or its
representatives (other than for reasonable out-of-pocket expenses). Such records
may be sought under this Section 4.8 for any reasonable purpose, including,
without limitation, to the extent reasonably required in connection with the
audit, accounting, tax, litigation, federal securities disclosure or other
similar needs of the party seeking such records. Notwithstanding anything to the
contrary contained herein, the
37
maintenance of all books and records with respect to Tax matters pertinent to
the Company relating to any taxable period beginning on or before, or including,
the Closing Date, shall be governed by Section 4.6(h).
Section 4.9 Covenants of the Buyer and the Company. The Buyer and
the Company agree to honor and enforce all of the terms of any and all
agreements that are assigned to the Buyer and/or the Company pursuant to the
terms of this Agreement.
Section 4.10 Non-Competition; Non-Solicitation.
(a) None of the Seller, its Affiliates (including without limitation
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ CRM Corp. ("CRM") and Sentaur Corp.), shall, at any time
following the Closing Date, directly or indirectly, own, operate or become an
Affiliate of any Person engaged in the Business of the Company ; provided that
the foregoing shall not prohibit the Seller or its Affiliates from owning, in
the aggregate, as a passive investment less than 5% of the equity of any
publicly-traded entity.
(b) The Seller, for itself and its Affiliates, agree that neither will directly
or indirectly, for a period of three years after the Closing Date, (i) seek to
employ, or solicit for employment, any Employee or employee of Buyer (a "Buyer
Employee") or (ii) employ any Buyer Employee or Company Employee whose name is
set forth in Section 5.3(d) of the Company Disclosure Schedule unless such
Company Employee or Buyer Employee has been separated from employment by the
Company or Buyer as the case may be for a period of not less than six (6) months
immediately prior to the date of such solicitation (in the case of paragraph
(b)(i)) or employment in the case of paragraph (b)(ii).
Section 4.11 Post-Closing Confidentiality. For a period of five
years after the Closing, the Seller agrees to, and to cause each of their
Affiliates to, maintain the confidentiality of all confidential or proprietary
information of and with respect to the Company existing as of the Closing Date
including, without limitation, Trade Secrets (collectively, "Confidential
Information") and shall not disclose any Confidential Information except (i)
where specifically required by Law or legal process pursuant to the reasonable
advice of legal counsel to the Seller (and in such case only after providing the
Buyer, where practicable, with sufficient notice to enable them to move for a
protective order), (ii) to the extent such information becomes generally
available to the public other than as a result of a disclosure by the Seller, or
any of their Affiliates in violation of this Section 4.11, (iii) to the extent
such information becomes available to the Seller, or their Affiliates on a
non-confidential basis from a source other than the Buyer, provided that, to the
knowledge of Seller, such source is not prohibited from disclosing such
information by a contractual, legal or fiduciary obligation (whether or not in
writing) or (iv) to the extent independently developed by the Seller, or any of
its Affiliates, without use of or inclusion of any Confidential Information.
Notwithstanding the foregoing, the provisions of this Section 4.11 shall not
apply to any Confidential Information that was utilized jointly by both the
Seller and the Company prior to the Closing Date provided that both parties
treat such Confidential Information in accordance with applicable law and any
confidentiality agreements that they are bound by with respect to such
Confidential Information.
38
Section 4.12 Non-contravention. The Buyer shall not take, nor agree
to commit to take, any action that would or is reasonably likely to result in
any of the conditions to the Closing set forth in Article V not being satisfied,
or would make any representation or warranty of the Buyer contained herein
inaccurate in any respect at, or as of any time prior to, the Closing Date, or
that would materially impair the ability of the Company, the Buyer, or the
Seller to consummate the Closing in accordance with the terms hereof or
materially delay such consummation.
Section 4.13 Trademark License Agreement. It is understood and
agreed that Buyer shall not acquire direct or indirect ownership of the
"DriverShield" ▇▇▇▇, or the logo and design (as depicted in Exhibit A) currently
in use by Seller and the Company (the "Retained Intellectual Property"). At the
Closing, Seller on the one hand, and Buyer and the Company, on the other hand,
shall enter into a license agreement substantially in the form of Exhibit B
hereto (the "Trademark License Agreement") with respect to the Retained
Intellectual Property. Among other things, the Seller shall grant the Buyer and
the Company a non-exclusive, worldwide, royalty free, transferable (to any
Affiliate), perpetual license to the Retained Intellectual Property in the
Trademark License Agreement.
Section 4.14 Security Agreement. . In order for the Seller to secure
the Purchase Price owed by the Buyer, the Buyer and the Company agree to provide
the Seller a perfected security interest in: (i) all of the assets of the
Company and (ii) all of the issued and outstanding common stock shares of the
Company held by the Buyer and agree to enter into a Security Agreement in the
form of Exhibit C hereto (the "Security Agreement").
Section 4.15 Employment Termination Agreement. Following the
purchase by the Buyer of the capital stock of the Company, the Buyer's
employment with the Seller shall be terminated. Therefore, the Seller and the
Buyer agree to enter into the Employment Termination Agreement in the form of
Exhibit D hereto (the "Employment Termination Agreement").
Section 4.16 Post-Closing Cooperation. In case at any time after the
Closing Date any further action is necessary, proper or advisable to carry out
the purposes of this Agreement, as soon as reasonably practicable, each party
hereto shall take, or cause its proper officers or directors to take, all such
necessary, proper or advisable actions.
Section 4.17 Subsequent Actions. If at any time during the 12 months
immediately following the Closing, the Buyer will consider or be advised that
any deeds, bills of sale, instruments of conveyance, assignments, assurances or
any other actions or things are necessary or desirable (i) to vest, perfect or
confirm ownership (of record or otherwise) in the Buyer, its right, title or
interest in, to or under any or all of the Company Shares and other assets
conveyed hereunder, (ii) to vest, perfect or confirm ownership (of record or
otherwise) in the Company of any of its rights, properties or assets or any
assets of the Seller or any of its Affiliates primarily
39
related to the Company, (iii) to run the business of the Company as presently
conducted, or (iv) otherwise to carry out this Agreement, the Seller shall
execute and deliver all deeds, bills of sale, instruments of conveyance, powers
of attorney, assignments and assurances and take and do all such other actions
and things as may be requested by the Buyer in order to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Buyer or the Company or otherwise to carry out this Agreement.
Section 4.18 Web Site Linking Agreement. At the Closing, Seller, on
one hand, and Buyer and the Company, on the other hand, shall enter into a Web
Site Linking Agreement substantially in the form of Exhibit E hereto (the "Web
Site Linking Agreement").
Section 4.19 [Intentionally omitted]
Section 4.20 [Intentionally omitted]
Section 4.21 [Intentionally omitted]
Section 4.22 Toll Free Telephone Number. It is understood between
Buyer and Seller that on and after the Closing Date the Company will continue to
use, and have exclusive rights to, the toll free telephone number or numbers
used by the Company's customers, prospects and suppliers as of the date of this
Agreement.
Section 4.23 [Intentionally omitted]
Section 4.24 Transferred Assets/Liabilities. Notwithstanding
anything herein to the contrary the parties acknowledge that prior to Closing,
the Company shall transfer those assets and liabilities of the Company listed on
Section 4.24 of the Company Disclosure Schedule that is labeled "Transferred
Assets/Liabilities", to the Seller and/or a Seller's subsidiary.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
------------------------------------------------
Section 5.1 Conditions to Each Party's Obligations to Consummate the
Stock Purchase. The respective obligations of each party to consummate the
transactions contemplated hereby is subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) No statute, rule, regulation, executive order, decree, or injunction shall
have been enacted, entered, promulgated or enforced by any court or Governmental
Entity that remains in force and prohibits the consummation of the transactions
described herein.
(b) No action or proceeding before a court or any other Governmental Entity or
body shall have been instituted or threatened to restrain or prohibit the
transactions contemplated by this Agreement and no Governmental Entity or body
shall have taken any other action or made any request of the Buyer as a result
of which the management of the Buyer deems it inadvisable to proceed with the
transactions hereunder.
Section 5.2 Further Conditions to the Seller's Obligations. The
obligations of the Seller to consummate the transactions contemplated hereby are
further subject to satisfaction or waiver by the Seller of the following
conditions:
(a) The representations and warranties of the Buyer contained in this Agreement
shall be true and correct in all material respects (other than representations
and warranties subject to "materiality" qualifiers, which shall be true,
complete and correct as stated) at and as of the Closing Date as though such
representations and warranties were made at and as of such date (except to the
extent expressly made as of an earlier date, in which case, as of such date);
(b) The Buyer shall have performed and complied in all material respects with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) The Buyer shall have delivered to the Seller an officer's certificate
reasonably satisfactory in form and substance to the Seller to the effect that
each of the conditions specified above in Sections 5.2(a) and (b) is satisfied
in all respects; and
(d) The Seller shall have received the deliveries set forth in Section 1.7.
Section 5.3 Further Conditions to the Buyer's Obligations. The
obligations of the Buyer to consummate the transactions contemplated hereby are
further subject to the satisfaction or waiver by the Buyer at or prior to the
Closing Date of the following conditions:
(a) The representations and warranties of the Seller and the Company contained
in this Agreement shall be true and correct in all material respects (other than
representations and warranties subject to "materiality" qualifiers, which shall
be true, complete and correct as stated) at and as of the Closing Date as though
such representations and warranties were made at and as of such date (except to
the extent expressly made as of an earlier date, in which case, as of such
date);
(b) The Seller shall have performed and complied in all material respects with
all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) The Buyer shall have received the deliveries set forth in Section 1.7;
41
(d) Effective as of the Closing, the Seller and the Company will have taken such
actions as are necessary to ensure that as of the Closing, only those persons
listed on Section 5.3(d) of the Company Disclosure Schedule are Employees of the
Company (the "Company Employees"). Seller acknowledges that all other Employees
shall have their employment transferred to the Seller, as appropriate, effective
as of the time of Closing;
(e) The Seller shall have obtained approval of this Agreement and the
transactions contemplated herein as may be necessary under New York corporation
law, the Exchange Act, the Securities Act, and the rules and regulations of
Nasdaq;
(f) [Intentionally omitted]
(g) The Company shall have repaid all of its outstanding indebtedness for
borrowed money and there shall be no indebtedness as between the Company, on the
one hand, and the Seller and its Affiliates, on the other hand; and
(h) The Seller shall have delivered to the Buyer an officer's certificate
reasonably satisfactory in form and substance to the Buyer to the effect that
each of the conditions specified above in Sections 5.3(a), (b), (d), (e), and
(g) is satisfied in all respects.
ARTICLE VI
TERMINATION AND ABANDONMENT
---------------------------
Section 6.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing
Date:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Seller or the Buyer at any time after September 1, 2003, if the
Closing shall not have occurred by such date; provided, however, that the right
to terminate this Agreement under this Section 6.1(b) shall not be available to
(i) the Seller, if the Seller has breached any of its representations,
warranties or covenants hereunder in any material respect and such breach has
been the cause of or resulted in the failure of the Closing to occur on or
before such date, (ii) the Buyer, if the Buyer has breached any of its
representations, warranties or covenants hereunder in any material respect and
such breach has been the cause of or resulted in the failure of the Closing to
occur on or before such date,
(c) by the Seller, on the one hand, or the Buyer, on the other hand, if one of
the others shall have breached or failed to perform in any material respect any
of its respective representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (i) would give
rise to the failure of a condition set forth in Section 5.2(a) or (b) or 5.3(a)
(b), (d) (e), (f), or (g), as applicable, and (ii) cannot be or has not been
cured within 30 days after the giving of written notice to the Seller or the
Buyer, as applicable;
42
(d) [Intentionally omitted]
(e) by the Buyer during or upon completion of due diligence of the Buyer's
reasonable determination that it is not satisfied with its findings regarding
any material element of the contemplated transaction, limited to only those
material assets and liabilities being transferred as a consequence of this
transaction, which assets are owned or used by, and which liabilities were
incurred by, the Company in the ordinary conduct of the Business as of the
Closing Date.
Section 6.2 Procedure for and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties hereto pursuant to Section 6.1 hereof, written notice
thereof shall be given by a party so terminating to the other party and this
Agreement shall forthwith terminate and shall become null and void (except as
provided in Section 6.2(c) below) and of no further effect, and the transactions
contemplated hereby shall be abandoned without further action by the Seller or
the Buyer. If this Agreement is terminated pursuant to Section 6.1 hereof:
(a) Each party shall redeliver all documents, work papers and other materials of
the other parties relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same,
and all confidential information received by any party hereto with respect to
the other party shall be treated in accordance with Section 4.11 hereof (in the
case of the Buyer as if made by the Buyer);
(b) All filings, applications and other submissions made pursuant hereto, if
any, shall, to the extent practicable, be withdrawn from the agency or other
person to which made; and
(c) There shall be no liability or obligation hereunder on the part of the
Seller or the Company, on one hand, or the Buyer, on the other hand, or any of
their respective directors, officers, employees, Affiliates, controlling
persons, agents or representatives, except that the Seller or the Company, on
one hand, or the Buyer, on the other hand, may have liability to the other
party/parties if the basis of termination is a material breach by the Seller,
the Company or the Buyer, as the case may be, of one or more of the provisions
of this Agreement, and except that the obligations provided for in Sections 4.11
and 8.8 hereof shall survive any such termination.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 7.1 Survival Periods. The representations and warranties
made by the parties in this Agreement shall survive the Closing and shall
continue in full force and effect without limitation after the Closing except
that, subject to the provisions of the next sentence, neither the Buyer, on the
one hand, nor the Seller or the Company, on the other, shall have any liability
with respect to any matter if notice of a claim has not been provided on or
prior to the third anniversary of the Closing Date. Notwithstanding the
foregoing, (a) any indemnification
43
obligations of any sort relating to (i) Section 2.12 (Taxes), or (ii) Section
2.10 (ERISA) shall continue in full force and effect without limitation, unless
the Buyer shall not have given notice of a claim on or prior to the expiration
of the statute of limitations applicable to such matters, in which case such
indemnification obligations shall terminate, (b) the representations and
warranties contained in Sections 2.1 through and including 2.4 and Sections 3.1
through and including 3.3 and any indemnification obligations in connection
therewith shall continue in full force and effect without any limitation, (c)
any claims, actions or suits the Buyer may have which arise from any fraud on
the part of any the Seller or the Company, or any representative of either,
shall continue in full force and effect without limitation and (d) all of the
provisions and obligations of Section 1.2, 8.4 and 8.7 shall continue in full
force and effect without limitation until the payment by the Buyer to the Seller
of the Purchase Price.
Section 7.2 The Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Seller shall indemnify and hold harmless the Buyer, its Affiliates
(including the Company after the Closing), and their respective directors,
officers, employees, controlling persons, agents and representatives and their
successors and assigns (collectively, the "Buyer Indemnitees") from and against
all liability, demands, claims, actions or causes of action, assessments,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, the "Buyer Damages") either (i)
arising out of any act or omission (including without limitation negligence or
breach of contract) of Seller or the Company on or before the Closing, (ii)
asserted against or incurred by any Buyer Indemnitee as a result of or arising
out of (w) a breach of any representation or warranty of the Seller contained in
this Agreement, (x) a breach of any covenant or agreement on the part of the
Seller under this Agreement (y) the enforcement or defense of any Intellectual
Property or Retained Intellectual Property, or (z) any obligations of Seller or
any Affiliate (including without limitation the Company) with respect to any
obligations arising before the Closing under the Joint Contracts (as defined in
Section 2.13(a)).
(b) The Seller shall be obligated to indemnify the Buyer Indemnitees pursuant to
clause (i) of Section 7.2(a) only for those claims giving rise to Buyer Damages
as to which the Buyer Indemnitees have given the Seller notice thereof no later
than forty-five (45) days after the end of any applicable survival period (as
provided for in Section 7.1). Any written notice delivered by a Buyer Indemnitee
to the Seller with respect to Buyer Damages shall set forth with as much
specificity as reasonably practicable the basis of the claim for Buyer Damages
and, to the extent reasonably practicable, a reasonable estimate of the amount
thereof.
(c) Notwithstanding anything to the contrary, the Seller shall not be obligated
to indemnify the Buyer if the Buyer's Damages were incurred due to the
intentional and/or negligent acts of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
Section 7.3 The Buyer's Agreement to Indemnify.
44
(a) Subject to the terms and conditions set forth herein, from and after the
Closing, the Buyer (the "Buyer Indemnitors") shall indemnify and hold harmless
the Seller, its Affiliates, and their respective directors, officers, employees,
controlling persons, agents and representatives and their successors and assigns
(collectively, the "Seller Indemnitees") from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively, "Seller Damages") asserted against or incurred by
any Seller Indemnitee as a result of or arising out of (i) a breach of any
representation or warranty of the Buyer contained in this Agreement, (ii) a
breach of any covenant or agreement on the part of the Buyer under this
Agreement, or (iii) any obligation of the Company or any Affiliate with respect
to the Joint Contracts incurred after the Closing.
(b) The Buyer Indemnitors shall be obligated to indemnify the Seller Indemnitees
pursuant to clause (i) of Section 7.3(a) only for those claims giving rise to
Seller Damages as to which the Seller Indemnitees have given the Buyer
Indemnitors written notice thereof no later than forty-five (45) days of the end
of any applicable survival period (as provided for in Section 7.1). Any written
notice delivered by a Seller Indemnitee to the Buyer Indemnitors with respect to
Seller Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Seller Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
Section 7.4 Third-Party Indemnification. The obligations of the
Seller to indemnify the Buyer Indemnitees under Section 7.2 hereof with respect
to Buyer Damages and the obligations of the Buyer Indemnitors to indemnify the
Seller Indemnitees under Section 7.3 with respect to Seller Damages, in either
case resulting from the assertion of liability by third parties (each, as the
case may be, a "Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the indemnifying
party written notice of any such Claim promptly after learning of such Claim,
and the indemnifying party may at its option undertake the defense thereof by
representatives of its own choosing. Failure to give prompt notice of a Claim
hereunder shall not affect the indemnifying party's obligations under this
Article VII, except to the extent the indemnifying party is materially
prejudiced by such failure to give prompt notice. If the indemnifying party,
within 30 days after notice of any such Claim, or such shorter period as is
reasonably required, fails to assume the defense of such Claim, the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, against whom such Claim
has been made will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement (subject to the terms
of Section 7.4(c)) of such claim on behalf of and for the account and risk, and
at the expense, of the indemnifying party, subject to the right of the
indemnifying party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
(b) So long as the indemnifying party has assumed the defense of any Claim in
the manner set forth above, the indemnifying party shall have the exclusive
right to contest, defend and
45
litigate such Claim and, except as expressly provided in Section 7.4(c), shall
have the exclusive right, in its sole discretion, to settle any such claim,
either before or after the initiation of litigation at such time and on such
terms as the indemnifying party deems appropriate. If the indemnifying party
elects not to assume the defense of any such Claim (which shall be without
prejudice to its right at any time to assume subsequently such defense), the
indemnifying party will nonetheless be entitled, at its own expense, to
participate in such defense. The indemnified party shall have the right to
participate, with separate counsel (which counsel shall act in an advisory
capacity only), in any such contest, defense, litigation or settlement conducted
by the indemnifying party. After notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the defense of
such Claim, the indemnifying party will not be liable to such indemnified party
for any expenses of the indemnified party's counsel that are subsequently
incurred in connection with the defense thereof; provided, however, that the
expense of such indemnified party's counsel shall be paid by the indemnifying
party if (i) the indemnifying party requested such separate counsel to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a significant conflict of interest exists between the indemnifying party,
on the one hand, and the indemnified party, on the other hand, that would make
such separate representation clearly advisable.
(c) Without the prior written consent of the indemnified party (which consent
shall not be unreasonably withheld or delayed), the indemnifying party shall not
admit any liability with respect to, or settle, compromise or discharge, any
Claim or consent to the entry of any judgment with respect thereto, except in
the case of any settlement that includes as an unconditional term thereof the
delivery by the claimant or plaintiff to the indemnified party of a written
release from all liability in respect of such Claim. In addition, whether or not
the indemnifying party shall have assumed the defense of the Claim, the
indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, any Claim or consent to the entry of any judgment with
respect thereto, without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld or delayed), and the
indemnifying party will not be subject to any liability for any such admission,
settlement, compromise, discharge or consent to judgment made by an indemnified
party without such prior written consent of the indemnifying party.
(d) The indemnifying party and the indemnified party shall cooperate fully in
all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to this Article VII, including, but not limited to, by
providing the other party with reasonable access to employees and officers
(including as witnesses) and other information.
Section 7.5 No Duplication; Sole Remedy.
(a) Any liability for indemnification hereunder shall be determined without
duplication of recovery by reason of the state of facts giving rise to such
liability constituting a breach of more than one representation, warranty,
covenant or agreement.
(b) The Buyer's on the one hand, and the Seller's, on the other hand, respective
rights to indemnification as provided for in Sections 7.2 and 7.3, as
applicable, shall be the exclusive remedy for any Buyer Damages or Seller
Damages, respectively, for which indemnification is provided hereunder;
provided, however, that nothing contained herein shall prevent an indemnified
party from pursuing remedies as may be available to such party under applicable
law in the event of (i) fraud or willful misconduct, (ii) only equitable relief
would be suitable to address the injury or possible injury, or (iii) an
indemnifying party's failure to comply with its indemnification obligations
hereunder.
Section 7.6 Indemnification Matters Governed by this Article VII.
Notwithstanding anything contained herein to the contrary, except as provided in
Section 4.6(m), Article VII shall have no application with respect to any matter
that is governed by Section 4.6.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
Section 8.1 Entire Agreement. This Agreement (including the Company
Disclosure Schedule and any other schedules or exhibits to this Agreement)
constitutes the entire agreement of the parties relating to the subject matter
hereof and supersede other prior and contemporaneous agreements and
understandings between the parties both oral and written regarding such subject
matter.
Section 8.2 Severability. It is the desire and intent of the parties
to this Agreement that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of this Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid or unenforceable, this Agreement shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
such Agreement in the particular jurisdiction in which such adjudication is
made.
Section 8.3 Notices. Any notice required or permitted by this
Agreement must be in writing and must be sent by facsimile, by nationally
recognized commercial overnight courier, or mailed by United States registered
or certified mail, addressed to the other party at the address below or to such
other address for notice (or facsimile number, in the case of a notice by
facsimile) as a party gives the other party written notice of in accordance with
this Section 8.3. Any such notice will be effective as of the date of receipt:
(a) if to the Buyer, to
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o American Member Corp.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇.▇▇▇▇▇, Esquire and
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Seller, to
Accessity Corp.
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Meritz & ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.4 Arbitration.
Any dispute, controversy or claim arising under, out of, in connection with or
in relation to this Agreement, or the breach, termination, validity or
enforceability of any provision hereof (a "Dispute"), if not resolved informally
through negotiation between the parties, it will be resolved by final and
binding arbitration conducted in accordance with and subject to the Commercial
Arbitration Rules of the AAA then applicable. One arbitrator will be selected by
the parties' mutual agreement or, failing that, by the AAA, and the arbitrator
will allow such discovery as is appropriate, consistent with the purposes of
arbitration in accomplishing fair, speedy and cost effective resolution of
disputes. The arbitrator will reference the rules of evidence of the Federal
Rules of Civil Procedure then in effect in setting the scope of discovery,
except that no requests for admissions will be permitted and interrogatories
will be limited to identifying (a) persons with knowledge of relevant facts and
(b) expert witnesses and their opinions and the bases therefor. Judgment upon
the award rendered in any such arbitration may be entered in any court having
jurisdiction thereof. Any negotiation, mediation or arbitration conducted
pursuant to this paragraph will take place in Broward County, FL. Other than
those matters involving injunctive relief or any action necessary to enforce the
award of the arbitrator, the parties agree that the
48
provisions of this paragraph are a complete defense to any suit, action or other
proceeding instituted in any court or before any administrative tribunal with
respect to any Dispute or the performance by either party of its obligations
herein. The parties also agree that the AAA Optional Rules for Emergency
Measures of Protection shall apply to the proceedings.
Section 8.5 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and shall in no way be construed
to define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of, or scope or intent
of, this Agreement nor in any way affect this Agreement.
Section 8.6 Counterparts. This Agreement may be signed in
counterparts and such counterparts of this Agreement when executed by all
signatories, will together constitute one original of this Agreement. This
Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by all the other parties hereto. A facsimile or
photocopy of a signature on a counterpart will constitute an original for all
purposes.
Section 8.7 Assignment. The Buyer may assign this Agreement to
another business entity (the "Assignee Company") in which ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("Spiegel") is and remains in management control and holds a majority of the
equity ownership. Should Spiegel wish to relinquish management control and/or
majority ownership in the Buyer or Assignee Company, then the Purchase Price
must first be made to the Seller.
Section 8.8 Fees and Expenses. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein, all costs and expenses (including legal fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses (except that Seller shall pay all of the Company's costs and expenses).
Each of the Seller, on the one hand, and the Buyer, on the other hand, shall
indemnify and hold harmless the other parties from and against any and all
claims or liabilities for financial advisory and finders' fees incurred by
reason of any action taken by such party or otherwise arising out of the
transactions contemplated by this Agreement by any person claiming to have been
engaged by such party.
Section 8.9 Interpretation. Throughout this Agreement, nouns,
pronouns and verbs shall be construed as masculine, feminine, neuter, singular
or plural, whichever shall be applicable. Unless otherwise specified, all
references herein to "Section" shall refer to corresponding provisions of this
Agreement or the Company Disclosure Schedule, as the case may be, whenever the
words "include," "includes" or "including" are used in this Agreement, they are
deemed to be followed by the words "without limitation. "The phrase" to the
knowledge of the Seller" or any similar phrase shall mean such facts and other
information that as of the date hereof are actually known or should have been
known, after due inquiry, to any director, officer, employee, advisor or legal
representative of the Seller or the Company. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
49
Section 8.10 No Third-Party Beneficiaries. This Agreement shall not
benefit or create any right or cause of action in or on behalf of any person
other than the parties hereto; provided, however, that this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and permitted assigns.
Section 8.11 No Waivers; Modification. Any waiver of any right or
default hereunder will be effective only in the instance given and will not
operate as or imply a waiver of any other or similar right or default on any
subsequent occasion. No waiver, modification or amendment of this Agreement or
of any provision hereof will be effective unless in writing and signed by the
party against whom such waiver, modification or amendment is sought to be
enforced.
Section 8.12 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof and immediate injunctive relief, without the necessity of proving
the inadequacy of money damages as a remedy, in addition to any other remedy at
law or equity.
Section 8.13 Non-Competition. None of the Buyer, the Company, or its
Affiliates shall, at any time during the period commencing on the Closing Date
and terminating on February 5, 2007, directly or indirectly, own, operate or
become an Affiliate of any Person engaged in the business of providing vehicle
repair or accident management services for corporate or government fleets, or
itself engage in any such activity; provided that the foregoing shall not
prohibit the Buyer, the Company, or its Affiliates from engaging in the business
of being a provider of collision repair management services directly to the
insurance industry only, as conducted by DriverShield CRM Corp. as of February
6, 2002. Notwithstanding the above, nothing herein shall preclude the Buyer, the
Company or its Affiliates from marketing its programs as long as such programs
do not involve providing vehicle repair or accident management services to
corporate or government fleets.
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IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly signed as of the date first above written.
American Member Corp.
By: ___________________________
Name: _________________________
Title: ________________________
Accessity Corp.
By: ___________________________
Name: _________________________
Title: ________________________
DriverShield ADS Corp.
By: ___________________________
Name: _________________________
Title: ________________________
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Exhibit A
[GRAPHIC OMITTED]
DRIVER'S SHIELD LOGO
Disclosure Schedule 4.24 Transferred Assets/Liabilities
All current assets and liabilities of the Company through July 31, 2003,
including but not limited to: cash, accounts receivable, pre-paid expenses
and/or accounts payable, whether or not earned, paid, credited, billed,
invoiced, or accrued. Subsequent to the Closing, the parties will reconcile
these items and transfer the appropriate accounts to the Seller pursuant to
Section 4.24 of this Agreement.
53