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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇.▇▇▇, INC.
AND
INTEGRATED MEDIA, INC.
AND
▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
RELATING TO THE PURCHASE OF 100%
OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF
INTEGRATED MEDIA, INC.
-------------------------
NOVEMBER 29, 2000
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF COMPANY CAPITAL STOCK..................................................................1
1.1 Purchase and Sale...................................................................................1
1.2 Consideration.......................................................................................2
1.3 Closing.............................................................................................2
1.4 No Further Ownership Rights in Shares...............................................................2
1.5 Taking of Necessary Action; Further Action..........................................................2
1.6 Accounting Consequences.............................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER..........................................2
2.1 Organization of the Company.........................................................................3
2.2 Subsidiaries........................................................................................3
2.3 Company Capital Structure...........................................................................3
2.4 Authority...........................................................................................4
2.5 No Conflict.........................................................................................4
2.6 Consents............................................................................................4
2.7 Financial Statements................................................................................4
2.8 Accounts Receivable.................................................................................5
2.9 No Undisclosed Liabilities..........................................................................5
2.10 No Changes..........................................................................................5
2.11 Tax Matters.........................................................................................7
2.12 Restrictions on Business Activities.................................................................9
2.13 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment.....................10
2.14 Intellectual Property..............................................................................10
2.15 Agreements, Contracts and Commitments..............................................................12
2.16 Interested Party Transactions......................................................................14
2.17 Compliance with Laws...............................................................................15
2.18 Litigation.........................................................................................15
2.19 Minute Books.......................................................................................15
2.20 Powers of Attorney.................................................................................15
2.21 Insurance..........................................................................................15
2.22 Warranty...........................................................................................16
2.23 Employees..........................................................................................16
2.24 Employee Benefits..................................................................................17
2.25 Environmental Matters..............................................................................18
2.26 Certain Business Relationships With Affiliates.....................................................19
2.27 Absence of Broker or Finder; No Broker or Finder Fees..............................................20
2.28 Customers and Suppliers............................................................................20
2.29 Prepayments, Prebilled Invoices and Deposits.......................................................20
2.30 Banking Facilities.................................................................................20
2.31 No Expropriation...................................................................................21
2.32 Fees and Expenses..................................................................................21
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(Continued)
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2.33 Disclosure.........................................................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER........................................................21
3.1 Ownership of Shares................................................................................21
3.2 Tax Matters........................................................................................22
3.3 Absence of Claims by Shareholder...................................................................22
3.4 Authority..........................................................................................22
3.5 No Conflict........................................................................................22
3.6 Brokers or Finders Fees............................................................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........................................................23
4.1 Organization of Purchaser..........................................................................23
4.2 Authority..........................................................................................23
4.3 SEC Filings........................................................................................23
4.4 No Conflict........................................................................................23
4.5 Litigation.........................................................................................24
4.6 Brokers' and Finders' Fees.........................................................................24
ARTICLE V CLOSING DOCUMENTS..........................................................................................24
5.1 Documents Delivered by the Company and the Shareholder at Closing..................................24
5.2 Documents Delivered by the Purchaser at Closing....................................................25
ARTICLE VI INDEMNIFICATION; SURVIVAL OF REPRESENTATION AND WARRANTIES................................................25
6.1 Indemnification of the Purchaser...................................................................25
6.2 Survival...........................................................................................26
6.3 Indemnification of Shareholder.....................................................................26
6.4 Survival...........................................................................................26
6.5 Method of Asserting Claims Relating to Third Party Actions.........................................27
6.6 Limitations........................................................................................28
ARTICLE VII MISCELLANEOUS............................................................................................29
7.1 Post-Closing Tax Matters...........................................................................29
7.2 Press Releases and Announcements...................................................................29
7.3 No Third Party Beneficiaries.......................................................................29
7.4 Entire Agreement...................................................................................29
7.5 Certain Definition.................................................................................29
7.6 Succession and Assignment..........................................................................30
7.7 Counterparts.......................................................................................30
7.8 Headings...........................................................................................30
7.9 Notices............................................................................................30
7.10 Governing Law......................................................................................31
7.11 Arbitration of Disputes Venue......................................................................31
7.12 Amendments and Waivers.............................................................................31
7.13 Severability.......................................................................................31
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7.14 Expenses...........................................................................................31
7.15 Construction.......................................................................................32
7.16 Incorporation of Exhibits and Schedules............................................................32
EXHIBITS
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Employment Agreement A
Escrow Agreement B
Opinion of Kronish ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the Company and the Shareholder C
Non-Foreign Tax Certificate D
SCHEDULES
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Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of November 29,
2000, by and among ▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "PURCHASER"),
Integrated Media, Inc., a New York corporation (the "COMPANY") and ▇▇▇▇ ▇▇▇▇▇▇▇
(the "SHAREHOLDER")
RECITALS
A. The Purchaser desires to acquire all of the issued and outstanding
capital stock of the Company, all of which capital stock is owned by the
Shareholder, upon the terms and subject to the conditions set forth in this
Agreement (the "ACQUISITION") such that upon consummation of the Acquisition,
the Purchaser will own all of the issued and outstanding capital stock of the
Company.
B. The Shareholder desires to sell and transfer to the Purchaser all his
right, title and interest in and to the capital stock of the Company, all upon
the terms and conditions set forth in this Agreement.
C. As further inducement for the Purchaser and the Company to enter into
this Agreement and to consummate the Acquisition, the parties have agreed to
enter into an Employment Agreement, substantially in the form attached hereto as
Exhibit A (the "EMPLOYMENT AGREEMENT").
D. The Purchaser, the Company and the Shareholder desire to make certain
representations, warranties, covenants and other agreements in connection with
the Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
PURCHASE AND SALE OF COMPANY CAPITAL STOCK
1.1 PURCHASE AND SALE. The Purchaser hereby purchases from the Shareholder,
and Shareholder hereby sells, conveys, transfers, assigns and delivers to the
Purchaser, free and clear of all Liens (as defined in Section 2.11) or claims of
any kind, all of the issued and outstanding shares of capital stock of the
Company and/or any rights to acquire shares of the Company Capital Stock (as
defined in Section 2.3) of the Company, beneficially owned or held of record and
to be beneficially owned or held of record by such Shareholder such that
immediately after the date hereof, the Purchaser shall be the sole record and
beneficial owner of all outstanding shares and rights to acquire shares of the
Company Capital Stock (the "SHARES").
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1.2 CONSIDERATION. Simultaneously with the execution hereof, the Purchaser
is paying $3,000,000 in cash for the Shares as set forth below. Upon making such
payment and receipt thereof by the Shareholder and the Escrow Agent, the
Purchaser will become the owner of the Shares, and the Shareholder shall become
the owner of the cash paid hereunder (other than cash paid into the Escrow
Account) free and clear of all liens, claims and encumbrances. At the Closing,
the Purchaser will pay (i) $2,000,000 in cash by wire transfer to the bank
account designated by the Shareholder and (ii) $1,000,000 by wire transfer into
an escrow account (the "ESCROW ACCOUNT") to be held in accordance with the terms
of that certain Escrow Agreement among the Purchaser, the Shareholder and ▇▇▇▇▇
Fargo Bank West, N.A. (the "ESCROW AGENT") in the form attached hereto as
Exhibit B (the "ESCROW AGREEMENT").
1.3 CLOSING. The closing of the purchase and sale of the Shares hereunder
shall be held at the offices of Kronish ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ at 10:00 a.m. (Eastern Standard Time) on November 29,
2000 (the "CLOSING"), or at such other time and place upon which the Purchaser,
the Company and the Shareholder shall agree (the date of the Closing is
hereinafter referred to as the "CLOSING DATE").
1.4 NO FURTHER OWNERSHIP RIGHTS IN SHARES. All cash paid in respect of the
surrender for exchange of the Shares in accordance with the terms hereof shall
be deemed to be full satisfaction of all of the Shareholder's rights pertaining
to such Shares.
1.5 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
date hereof, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to ensure that the Company retains full right,
title and possession to all of its assets, property, rights, privileges, powers
and franchises, the Purchaser, the Shareholder and the officers and directors of
the Company are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
1.6 ACCOUNTING CONSEQUENCES. It is intended by the parties hereto that the
Acquisition shall be treated for accounting purposes as a "purchase."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder hereby jointly and severally represent and
warrant to the Purchaser, subject to such exceptions as are specifically
disclosed in the disclosure schedule (referencing the appropriate section and
paragraph numbers) supplied by the Company and the Shareholder to the Purchaser
(the "DISCLOSURE SCHEDULE") and dated as of the date hereof, that on the date
hereof, as follows:
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2.1 ORGANIZATION OF THE COMPANY. The Company is an S corporation duly
organized, validly existing and is in good standing under the laws of the State
of New York. The Company is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification (which jurisdictions are set forth in Section 2.1 of the
Disclosure Schedule) other than where a failure to be so qualified would have no
Material Adverse Effect (as defined in Section 2.10(d) below) on the Company.
The Company has all requisite corporate power and authority to own, lease and
operate the properties owned and used by it and to carry on its business as now
being conducted and as proposed to be conducted and to perform its obligations
under any contracts to which it is bound. The Company has furnished to the
Purchaser true and complete copies of its certificate of incorporation and
bylaws as in effect on the date hereof. The Company is not in default under or
in violation of any provision of its certificate of incorporation or by-laws.
2.2 SUBSIDIARIES. The Company does not have, and has never had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any shares
in the capital of or any interest in, or control, directly or indirectly, any
corporation, partnership, association, joint venture or other form of business
entity (each, a "BUSINESS ENTITY").
2.3 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of 200 shares
of authorized common stock, no par value per share, of which 10 shares are
issued and outstanding (the "COMPANY CAPITAL STOCK"). All of the Company Capital
Stock is held of record by the Shareholder. None of such shares of Company
Capital Stock is subject to a repurchase right in favor of the Company. All
outstanding shares of Company Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound. All issued
and outstanding shares of Company Capital Stock have been offered, sold and
delivered by the Company in compliance with applicable federal and state
securities laws. Other than Company Capital Stock, the Company has no other
capital stock authorized, issued or outstanding.
(b) The Company has never adopted or maintained any stock option plan
or other plan providing for equity compensation of any person. There are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Company is a party or by which it is bound
obligating the Company to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company. There are no
registration rights agreements, voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company.
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(c) Upon completion of the Acquisition, the Purchaser will own one
hundred percent (100%) of the Company Capital Stock, free and clear of all Liens
(as defined in Section 2.11) or claims of any kind.
2.4 AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, and no further action is required
on the part of the Company to authorize the Agreement and the transactions
contemplated thereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and by general equitable principles.
2.5 NO CONFLICT. Assuming that all consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings have been duly made or
obtained as contemplated by Section 2.6 hereof, the execution and delivery of
this Agreement by the Company does not, and, as of the Closing, the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of time, or
both), give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under or require any consent, waiver or
approval to continue to enjoy the benefits under (any such event, a "CONFLICT")
(a) any provision of the Certificate of Incorporation or Bylaws of the Company
or (b) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") (so as
not to trigger any Conflict), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby by the Company, except for (a) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (b) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Section 2.6 of the Disclosure
Schedule.
2.7 FINANCIAL STATEMENTS. Section 2.7 of the Disclosure Schedule contains
complete and accurate copies of: (a) the Company's unaudited balance sheet as of
December 31, 1999, and December 31, 1998, and related statements of income,
retained earnings, shareholders' equity and cash flows for the Company for the
twelve months ended December 31, 1999, and December 31, 1998; and (b) the
Company's unaudited balance sheet as of September 30, 2000 (the "MOST RECENT
BALANCE SHEET") and related statements of income, retained earnings,
shareholders' equity and cash flows for the Company for the nine (9) months
ended September 30, 2000. The foregoing financial
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statements (the "FINANCIAL STATEMENTS") are correct in all material respects and
have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") applied by the Company on a consistent basis throughout the
periods and fairly present the financial condition, results of operations and
cash flows of the Company, as of the respective dates thereof and for the
periods referred to therein, and are consistent with the books and records of
the Company; provided, however, that the unaudited Financial Statements are
subject to normal recurring adjustments and do not contain footnotes.
2.8 ACCOUNTS RECEIVABLE. Except as set forth in Section 2.8 of the
Disclosure Schedule, all accounts receivable shown on the Most Recent Balance
Sheet (net of reserves indicated on the Most Recent Balance Sheet) or thereafter
acquired until the Closing Date (net of reserves accrued in the normal course of
business and consistent with past practice) arose and are collectible within 90
days from the date recorded, except that the value of any account receivable,
the collection of which is doubtful or which is subject to a defense or set-off,
has been written down to an amount not in excess of net realizable value or
adequate reserves or allowances therefor have been provided. The values at which
accounts receivable are carried reflect the accounts receivable valuation policy
of the Company, which is consistent with its past practice and in accordance
with GAAP applied on a consistent basis. None of the receivables of the Company
is subject to any claim of offset, recoupment, set off, or counterclaim, and, to
the knowledge of the Company, there are no facts or circumstances (whether
asserted or unasserted) that would give rise to any claim. No receivables are
contingent upon the performance by the Company of any obligation or contract. No
person or entity has any lien, charge, pledge, security interest, or other
encumbrance on any such receivables, and no agreement for deduction or discount
has been made with respect to any of such receivables.
2.9 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 2.9 of the
Disclosure Schedule, the Company has no liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, unmatured or other (whether or not
required to be reflected in financial statements in accordance with GAAP), which
individually or in the aggregate (i) has not been reflected in or reserved
against in the Most Recent Balance Sheet, or (ii) has not arisen in the ordinary
course of business consistent with past practices since September 30, 2000, in
either case which amounts do not exceed $10,000 in the aggregate.
2.10 NO CHANGES. Except as set forth in Section 2.10 of the Disclosure
Schedule, since September 30, 2000, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation or the
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $5,000 individually or $10,000 in
the aggregate;
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(d) damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on the Company. ("MATERIAL ADVERSE EFFECT" shall
mean any change, event or effect that is materially adverse to the business,
assets (including intangible assets), condition (financial or otherwise),
results of operations, capitalization or prospects of the Company);
(e) work stoppage, labor strike or other labor trouble, or any action,
suit, claim, labor dispute or grievance relating to any labor, safety or
discrimination matter involving the Company, including, without limitation,
charges of wrongful discharge or other unlawful labor practices or actions;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company other than
required by GAAP;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock or any direct or indirect
redemption, purchase or other acquisition by the Company of its capital stock;
(i) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
or the declaration, payment or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such person;
(j) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
is bound or any termination, extension, amendment or modification the terms of
any agreement, contract, covenant, instrument, lease, license or commitment to
which the Company is a party or by which it or any of its assets is bound;
(k) sale, lease, license or other disposition of any of the material
assets or properties of the Company or any creation of any security interest in
such assets or properties;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business and not exceeding $5,000
individually or $10,000 in the aggregate, consistent with past practices;
(m) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company;
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(n) commencement or notice or threat of any lawsuit or to the
Company's or the Shareholder's knowledge, proceeding, audit or investigation
against the Company or any reasonable basis for a lawsuit;
(o) written notice of any claim or potential claim of ownership by any
person other than the Company of any of the Company Intellectual Property (as
defined in Section 2.14 hereof) owned by or developed or created by the Company
or of infringement by the Company of any other person's Intellectual Property
(as defined in Section 2.14 hereof);
(p) issuance or sale, or contract to issue or sell, by the Company of
any shares of Company Capital Stock or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to purchase
any of the foregoing;
(q) (i) sale by the Company of any Company Intellectual Property or
the entering into of any license agreement, security agreement, assignment or
other conveyance or option for the foregoing, with respect to the Company
Intellectual Property with any person or entity or with respect to the
Intellectual Property of any person or entity, or (ii) the purchase or other
acquisition of any Intellectual Property or the entering into of any license
agreement, security agreement, assignment or other conveyance or option for the
foregoing, with respect to the Intellectual Property of any person or entity, or
(iii) the change in pricing or royalties set or charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(r) any event or condition of any character that has had or is
reasonably likely to have a Material Adverse Effect on the Company;
(s) any creation or other occurrence by the Company of any Lien (as
defined in Section 2.11) on any asset other than in the ordinary course of
business consistent with past practices; or
(t) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with the Purchaser and its representatives
regarding the transactions contemplated by this Agreement).
2.11 TAX MATTERS.
(a) Definition of Taxes. For the purposes of this Agreement, "TAX" or,
collectively, "TAXES", means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts; (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or
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implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tax Returns and Audits.
(i) The Company as of the Closing will have prepared and timely
filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company or its operations, and such Returns
are true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Closing: (A) will have paid all Taxes
it is required to pay and will have withheld with respect to its employees all
federal and state income taxes, Federal Insurance Contribution Act ("FICA"),
Federal Unemployment Tax Act ("FUTA") and other Taxes required to be withheld,
and (B) will have accrued on the Most Recent Balance Sheet all Taxes
attributable to the periods covered by the Most Recent Balance Sheet and will
not have incurred any liability for Taxes for the period prior to the Closing
other than in the ordinary course of business.
(iii) The Company has not been delinquent in the payment of any
Tax, nor is there any Tax deficiency outstanding, assessed or proposed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified in writing of any
request for such an audit or other examination.
(v) The Company has no liabilities for unpaid federal, state,
local and foreign Taxes which have not been accrued or reserved on the Most
Recent Balance Sheet, whether asserted or unasserted, contingent or otherwise,
and the Company has not incurred any liability for Taxes since the date of the
Most Recent Balance Sheet other than in the ordinary course of business.
(vi) The Company has made available to the Purchaser or its legal
counsel, copies of all foreign, federal, state and local income and all state
and local sales and use Returns for the Company filed for all periods since its
inception.
(vii) There are (and immediately following the Closing there will
be) no liens, pledges, charges, claims, restrictions on transfer, mortgages,
security interests or other encumbrances of any sort (collectively, "LIENS") on
the assets of the Company relating to or attributable to Taxes other than Liens
for Taxes not yet due and payable.
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(viii) Neither the Company nor the Shareholder has knowledge of
any basis for the assertion of any claim relating or attributable to Taxes
which, if adversely determined, would result in any Lien on the assets of the
Company.
(ix) None of the Company's assets is treated as "tax-exempt use
property," within the meaning of Section 168(h) of the Code.
(x) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
(xi) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement.
(xii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income Tax
deductions is accurately reflected on the Company's tax books and records.
(xiii) The Company is not, and has not been at any time, a
"United States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) No adjustment relating to any Return filed by the Company
has been proposed formally or informally by any tax authority to the Company or
any representative thereof.
(xv) The Company files its income Tax Returns on the accrual
basis.
(c) Executive Compensation Tax. There is no contract, agreement, plan
or arrangement to which the Company is a party as of the dates hereof, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Company, which, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code.
(d) Status as an S Corporation The Company is an S corporation within
the meaning of Section 1361 of the Code since January 1, 1996 and the Company
will be an S corporation up to and including the day before the Closing Date.
2.12 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
may reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, 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.
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2.13 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT
(a) The Company does not own any real property and has never owned any
real property. Section 2.13(a) of the Disclosure Schedule sets forth a list of
all real property currently leased by the Company, the name of the lessor, the
date of the lease and each amendment thereto and, with respect to any current
lease, the aggregate annual rental and/or other fees payable under any such
lease. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) by the Company or
to the Company's actual knowledge any existing default (or event which with
notice or lapse of time, or both, would constitute a default) by the landlord.
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Most Recent
Balance Sheet and except for Liens for Taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not detract from the value or
interfere with the present use of the property subject thereto or affected
thereby.
(c) Section 2.13(c) of the Disclosure Schedule lists all items of
equipment with a value of at least $500 (the "EQUIPMENT") owned or leased by the
Company and such Equipment is (i) adequate for the conduct of the business of
the Company as currently conducted, and (ii) in good operating condition,
regularly and properly maintained, subject to normal wear and tear.
(d) The Company has not sold or otherwise released for distribution
any of its customer files relating to the Company's current and former customers
(the "CUSTOMER INFORMATION"). To the Company's and the Shareholder's knowledge,
no person other than the Company possesses any claims or rights with respect to
use of the Customer Information.
2.14 INTELLECTUAL PROPERTY.
(a) The Company owns, is licensed or otherwise possesses, the legally
enforceable right to use, all Intellectual Property (as defined below in this
Section) used in the operation of the business of the Company as presently
conducted or necessary for the operation of the business of the Company as
presently proposed to be conducted. Each item of Intellectual Property owned by
or used in the operation of the Business at any time during the respective
periods covered by the Financial Statements will be owned or available for use
by the Company on identical terms and conditions immediately following the
Closing. The Company has taken reasonable measures to protect the proprietary
nature of each item of Intellectual Property and to maintain in confidence all
trade secrets and confidential information that it owns or uses. To the actual
knowledge of the Company and the Shareholder, no other person or Business Entity
has any rights to any of the Intellectual Property owned by the Company, and no
other person or Business Entity is infringing, violating or misappropriating any
of the Intellectual Property that the Company owns. For purposes
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of this Agreement, "INTELLECTUAL PROPERTY" means all (i) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, trade names and corporate names ("TRADEMARKS") and registrations and
applications for registration thereof, (iii) copyrights and registrations and
applications for registration thereof, (iv) computer software, data and
documentation (excluding computer software, data and documentation purchased or
licensed by the Company from persons who are not Affiliates (as defined below in
this Section) of the Company and who generally offer such computer software,
data and documentation for sale or license to the public), (v) trade secrets,
confidential and proprietary business information, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists, and whether patentable or unpatentable and whether
or not reduced to practice, know how and research and development information,
(vi) other proprietary rights relating to any of the foregoing, and (vii) copies
and tangible embodiments thereof. For purposes of this Agreement, "AFFILIATE"
shall mean (i) in the case of an individual, (A) the individual, (B) the
individual's spouse, (C) the members of the immediate family of the individual
(including parents, siblings and children) and (D) any Business Entity that
directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with any of the foregoing individuals,
or (ii) in the case of a Business Entity, another Business Entity or a person
that directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with the Business Entity.
(b) To the knowledge of the Company and the Shareholder, none of the
activities or businesses conducted by the Company infringes, violates or
constitutes a misappropriation of (or in the past infringed, violated or
constituted a misappropriation of) any Intellectual Property rights of any other
person or Business Entity. The Company has not received any complaint, claim or
written notice alleging any such infringement, violation or misappropriation,
and to the knowledge of the Company and the Shareholder, there is no basis for
any such complaint, claim or notice.
(c) Section 2.14(c) of the Disclosure Schedule identifies each (i)
patent, Trademark and registered copyright that has been issued to the Company,
(ii) pending patent application or application for Trademark or copyright
registration that has been made by the Company, and (iii) license or other
agreement pursuant to which the Company has granted any rights to any third
party with respect to any of its Intellectual Property. The Company has
delivered to the Purchaser correct and complete copies of all such patents,
Trademarks, registered copyrights, patent applications, applications for
Trademarks and copyright registrations, and licenses and agreements (as amended
to date), and has specifically identified and made available to the Purchaser
correct and complete copies of all other written documentation, if any,
evidencing ownership of, and any claims or disputes relating to, each such item.
With respect to each item of Intellectual Property that the Company owns:
(i) subject to such rights as have been granted by the Company
under license agreements entered into in the ordinary course of business, the
Company possesses all right, title and interest in and to such item;
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(ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction; and
(iii) the Company has not agreed to indemnify any person or
Business Entity from or against any infringement, misappropriation or other
conflict with respect to such item.
(d) Section 2.14(d) of the Disclosure Schedule identifies each patent,
Trademark, registered copyright, software and documentation (other than
off-the-shelf commercially available software and documentation with a purchase
price or license fee of less than $10,000) owned by a party other than the
Company used in the operation of its business at any time during the period
covered by the Financial Statements, or that the Company has currently licensed
or arranged to be used in the future. The Company has supplied the Purchaser
with correct and complete copies of all licenses, sublicenses or other
agreements (as amended to date) related to such items listed on Section 2.14(d)
of the Disclosure Schedule. With respect to each such item:
(i) to the Shareholder's and the Company's actual knowledge, the
license, sublicense or other agreement covering such item is legal, valid and
binding, and enforceable by the Company and in full force and effect;
(ii) to the Shareholder's and the Company's actual knowledge,
such license, sublicense or other agreement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) the Company and, to the Shareholder's and the Company's
actual knowledge, any other party to such license, sublicense or other agreement
are not in breach or default, and to the Shareholder's and the Company's
knowledge no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) to the Shareholder's and the Company's actual knowledge, the
underlying item is not subject to any outstanding judgment, order, decree,
stipulation or injunction;
(v) the Company has not agreed to indemnify any person or
Business Entity from or against any interference, infringement, misappropriation
or other conflict with respect to such item; and
(vi) no license or other fee is payable upon any transfer or
assignment of such license, sublicense or other agreement.
2.15 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on Section
2.15(a) of the Disclosure Schedule, the Company does not have, is not a party to
and is not bound by:
(a) any collective bargaining agreements;
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(b) any employment, consulting or non-competition agreement, contract
or commitment with any officer, director, employee or member of the Company's
Board of Directors;
(c) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements;
(d) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company;
(e) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, or under which payments are required to be made by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(f) any fidelity or surety bond or completion bond;
(g) any lease (whether of real or personal property) having a value
individually in excess of $10,000;
(h) any agreement of indemnification or guaranty, except for
indemnification or guarantees provided in the ordinary course of business in
connection with the provision of the Company's services or sale of the Company's
products;
(i) any agreement, contract or commitment containing any covenant
limiting in any respect the right of the Company to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(j) any agreement relating to capital expenditures and involving
future payments in excess of $10,000;
(k) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by the Company after the date of this
Agreement of a material amount of assets not in the ordinary course of business
or pursuant to which the Company has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(l) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (h) hereof;
(m) any purchase order or contract involving the expenditure by the
Company of $10,000 or more for the Company's products or $10,000 or more or
otherwise;
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(n) any construction contracts;
(o) any dealer, distribution, joint marketing (including any pilot
program), development, content provider, destination site or merchant agreement;
(p) any agreement pursuant to which the Company has granted or may be
obligated to grant in the future, to any party a source code license or option
or other right to use or acquire source code, including any agreements which
provide for source code escrow arrangements;
(q) any sales representative, original equipment manufacturer, value
added, remarketer or other agreement for distribution of the Company's products
or services or the products or services of any other person or entity;
(r) any agreement pursuant to which the Company has advanced or loaned
any amount to any shareholder of the Company or any director, officer, employee
or consultant other than business travel advances in the ordinary course of
business consistent with past practice;
(s) any settlement agreement entered into since the Company's initial
incorporation; or
(t) any other agreement that involves $10,000 or more or is not
cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time, giving
of notice, or both, as are all noted in Section 2.15(b) of the Disclosure
Schedule, the Company has not breached, violated or defaulted under, or received
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment required to be set forth on
Section 2.15(a) of the Disclosure Schedule (any such agreement, contract or
commitment, a "CONTRACT"). Each Contract is a valid and binding agreement of the
Company and is in full force and effect and, except as otherwise disclosed in
Section 2.15(b) of the Disclosure Schedule, is not subject to any default
thereunder of which the Company has actual knowledge by any party obligated to
the Company pursuant thereto. True and complete copies of each such Contract
have been delivered to the Purchaser.
2.16 INTERESTED PARTY TRANSACTIONS. Except as set forth on Section 2.16 of
the Disclosure Schedule, to the Company's knowledge, no officer, director or
affiliate (as defined under Regulation C under the Securities Act of 1933, as
amended (the "SECURITIES ACT")) of the Company (nor any member of the immediate
family of any of such persons, or any trust, partnership or corporation in which
any of such persons has or has had an economic interest), has or has had,
directly or indirectly, (a) an economic interest in any entity which furnished
or sold, or furnishes or sells, the same or similar services or products as
those which the Company furnishes or sells, or proposes to furnish or sell, or
(b) an economic interest in any entity that purchases from or sells or furnishes
to, the Company, any goods or services or (c) a beneficial interest in any
contract or agreement set forth in Section 2.15(a) of the Disclosure Schedule;
provided, that ownership of less
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than five percent of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.16. There are no receivables of the Company owing by
any director, officer, employee or consultant to the Company (or any member of
the immediate family of any such persons, or any trust, partnership, or
corporation in which any of such persons has an economic interest), other than
advances in the ordinary and usual course of business for reimbursable business
expenses (as determined in accordance with the Company's established employee
reimbursement policies and consistent with past practice). The Shareholder has
not agreed to, or assumed, any obligation or duty to guaranty or otherwise
assume or incur any obligation or liability of the Company except as
contemplated by this Agreement.
2.17 COMPLIANCE WITH LAWS. The Company is not in conflict with, or in
default or violation of any law, rule, regulation, order, judgment or decree
applicable to the Company or by which its properties are bound or affected. No
investigation or review by any governmental or regulatory body or authority is
pending or, to the knowledge of the Company, threatened against the Company or
any of its officers, directors or employees, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company, any acquisition of
material property by the Company or the conduct of business by the Company.
2.18 LITIGATION. There is no action, suit or proceeding of any nature
pending or, to the Company's knowledge, threatened against the Company, its
properties or any of its officers, directors or employees, nor, to the knowledge
of the Company, is there any reasonable basis therefor. Section 2.18 of the
Disclosure Schedule sets forth, with respect to any pending or threatened
action, suit, proceeding or investigation, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedy
requested. The Company has not received any written notice of and has no reason
to believe that any Governmental Entity has at any time challenged or questioned
the legal right of the Company to conduct its operations as presently or
previously conducted.
2.19 MINUTE BOOKS. The minute books of the Company made available to the
Purchaser are the only minute books of the Company and contain an accurate
summary of all meetings of directors (or committees thereof) and shareholders or
actions by written consent since the time of incorporation of the Company.
2.20 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company or the Shareholder, except those executed by
the Shareholder for estate planning purposes that do not affect the transactions
contemplated hereby.
2.21 INSURANCE. Section 2.21 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past three (3) years. To the actual knowledge of
the Shareholder and the Company, except as set forth in Section 2.21 of the
Disclosure Schedule, each
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such in force insurance policy is enforceable and in full force and effect and
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing. The Company is not in breach or default (including with respect to
the payment of premiums or the giving of notices) under any such policy, and no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default or permit termination, modification or acceleration,
under such policy. The Company has not received any written notice from the
insurer disclaiming coverage or reserving rights with respect to a particular
claim or such in force policy in general. Section 2.21 of the Disclosure
Schedule also identifies all claims asserted by the Company since its inception
pursuant to any insurance policy and describes the nature and status of each
such claim. The Company has not incurred any loss, damage, expense or liability
covered by any such insurance policy for which it has not properly asserted a
claim under such policy. To the knowledge of the Shareholder and the Company,
the Company is covered by insurance in scope and amount that is reasonable given
the nature of the Business. The Company has no knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.
2.22 WARRANTY. No product or service manufactured, sold, leased, licensed,
delivered or otherwise provided by the Company is subject to any
Company-provided guaranty, warranty, right of return or other indemnity other
than as set forth in the Contracts.
2.23 EMPLOYEES.
(a) Section 2.23 of the Disclosure Schedule contains a list of all
employees of the Company, along with the position, date of hire, the annual rate
of compensation (or with respect to employees compensated on an hourly or per
diem basis, the hourly or per diem rate of compensation), number of accrued
vacation days as of the Closing Date, and estimated or target annual incentive
compensation of each such person. The Company's standard form of all employment
agreements, non-competition agreements and contracts listed in Section 2.15 of
the Disclosure Schedule pursuant to Section 2.15(b) and a list of all parties
thereto have been delivered to the Purchaser by the Company. To the
Shareholder's and the Company's actual knowledge, no key employee or group of
employees (other than billable consultants whose project term may conclude in
accordance with the Company's Consulting Employee Agreement (previously provided
to the Purchaser) or Independent Contractor Agreement (previously provided to
the Purchaser) with such consultants) has any plans to terminate their
employment with the Company immediately upon or shortly after the Closing. The
Shareholder is reasonably certain that substantially all billable consultants
will agree to remain employees or subcontractors of the Company after the
Closing on the same terms and conditions that currently apply.
(b) The Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. No
organizational effort has been made or threatened, either currently or within
the past two years, by or on behalf of any labor union with respect to employees
of the Company.
(c) Neither the Company nor any director, officer or, to the Company's
and the Shareholder's actual knowledge, other key employee of the Company, the
Shareholder or any
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Affiliate of any of them, owns, directly or indirectly, individually or
collectively, any interest in any Business Entity which is in a business similar
or competitive to the Business or which has any existing contractual
relationship with the Company not otherwise disclosed in this Agreement.
(d) For purposes of this Agreement, the term "EMPLOYEE" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the business of the Company (each of whom
shall be so identified in Section 2.23 of the Disclosure Schedule).
2.24 EMPLOYEE BENEFITS.
(a) Section 2.24(a) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans (as defined below) maintained, or
contributed to, by the Company. For purposes of this Agreement, "EMPLOYEE
BENEFIT PLAN" means any written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation, pension benefits,
insurance coverage, severance benefits, vision care, drug benefits, sick leave,
vacation benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation. Complete and accurate
copies of (i) all Employee Benefit Plans which have been reduced to writing,
(ii) written summaries of all unwritten Employee Benefit Plans, (iii) all
related trust agreements, insurance contracts and summary plan descriptions,
(iv) any annual reports filed with Governmental Entities for the last five (5)
plan years for each Employee Benefit Plan, and (v) any actuarial reports have
been delivered to the Purchaser. Each Employee Benefit Plan has been
administered in accordance with its terms, and the Company has met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto required to be made at or prior to the Closing Date. The
Company and all Employee Benefit Plans are in compliance in all material
respects with the currently applicable provisions of laws and the regulations
thereunder, except with respect to any plan amendments which may be required
under currently applicable law but which may be hereinafter lawfully adopted
with retroactive effect.
(b) To the Shareholder's knowledge, there are no pending
investigations by any Governmental Entity, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Employee Benefit Plans and proceedings with respect to qualified domestic
relations orders), suits or proceedings against or involving any Employee
Benefit Plan or asserting any rights or claims to benefits under any Employee
Benefit Plan that could give rise to any liability (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders).
(c) All the Employee Benefit Plans that are intended to be qualified
are qualified and the plans and the trusts related thereto are exempt from
federal income taxes and no such Employee Benefit Plan has been amended, and no
act or omission has occurred, that would materially adversely affect its
qualification or increase its cost.
(d) Except for the Employee Benefit Plans set forth in Section 2.24 of
the Disclosure Schedule, the Company has never maintained an Employee Benefit
Plan subject to Section 412 of
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the Code or Title IV of the United States Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(e) At no time has the Company been obligated to contribute to any
multiemployer plan.
(f) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under applicable law and insurance
conversion privileges under applicable law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company that would
subject the Company to any material fine, penalty, tax or liability of any kind.
(h) No Employee Benefit Plan is funded by, associated with, or related
to a voluntary employees beneficiary association.
(i) No Employee Benefit Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(j) Section 2.24(j) of the Disclosure Schedule discloses each: (i)
agreement with any director, executive officer or other key employee of the
Company (A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving the Company of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such director,
executive officer or key employee; and (ii) agreement or plan binding the
Company, including without limitation, any stock option plan, stock appreciation
right plan, restricted stock plan, stock purchase plan, severance benefit plan,
or any Employee Benefit Plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The accrual for vacation expense is accounted
for on the Most Recent Balance Sheet and is adequate and properly reflect the
expense associated therewith in accordance with GAAP applied by the Company on a
consistent basis with past-practice.
2.25 ENVIRONMENTAL MATTERS.
(a) Other than customary office waste, the Company does not now and
has never engaged in the treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous substances or solid or
hazardous waste, and the Company does not now and has never arranged for the
disposal, at any third party owned sites, any industrial, toxic or hazardous
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substances or solid or hazardous waste. The Company has obtained, and is in
material compliance with, all permits required under any Environmental Law
applicable to its operations, which permits are set forth in Section 2.25(a) of
the Disclosure Schedule. For purposes of this Agreement, "ENVIRONMENTAL LAW"
means any federal, state, province or local law, statute, rule or regulation or
the common law relating to the environment or occupational health and safety,
including without limitation any statute, regulation or order pertaining to (i)
treatment, storage, disposal, generation and transportation of industrial, toxic
or hazardous substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers; (vii) underground and other storage tanks or
vessels, abandoned, disposed or discarded barrels, containers and other closed
receptacles; (viii) health and safety of employees and other persons; and (ix)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or solid or hazardous
waste.
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) by the Company into the environment at any parcel of
real property or any facility formerly or currently owned, leased, operated or
controlled by the Company while such parcel or facility was owned, leased,
operated or controlled by the Company, or, to the Shareholder's or the Company's
actual knowledge, while such parcel or facility was owned, leased, operated or
controlled by a third party. The Shareholder and the Company are not aware of
any releases of Materials of Environmental Concern at parcels of real property
or facilities other than those owned, operated or controlled by the Company that
could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Company and could reasonably
result in any liability to the Company. For purposes of this Agreement,
"MATERIALS OF ENVIRONMENTAL CONCERN" means any chemicals, pollutants or
contaminants, hazardous substances, solid wastes and hazardous wastes, toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
(c) Set forth in Section 2.25(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits relating to premises
currently or previously owned or operated by the Company (whether conducted by
or on behalf of the Company or a third party, and whether done at the initiative
of the Company or directed by a Governmental Entity or other third party) which
the Company has in its possession. Complete and accurate copies of each such
report, or the results of each such investigation or audit, have been provided
to the Purchaser.
2.26 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. Neither the
Shareholder nor an Affiliate of the Company or the Shareholder (a) owns any
property or right, tangible or intangible, which is used in the business of the
Company, (b) has any claim or cause of action against the Company or (c) owes
any money to or is owed money by the Company.
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2.27 ABSENCE OF BROKER OR FINDER; NO BROKER OR FINDER FEES. Except as set
forth in Section 2.27 of the Disclosure Schedule, no person or Business Entity
is acting or has acted for the Company or the Shareholder as broker or finder in
connection with the transactions contemplated by this Agreement. In addition,
except as set forth in Section 2.27 of the Disclosure Schedule, the Company has
not engaged any brokers, finders or agents, and the Purchaser has not, and will
not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement. In the event that the
preceding two sentences are in any way inaccurate, the Company hereby agrees to
indemnify and hold harmless the Purchaser from any liability for any such
commission or compensation in the nature of a brokerage or finder's fee or
agent's commission (and the costs and expenses of defending against such
liability or asserted liability) for which such Purchaser or any of its
officers, partners, employees or representatives is responsible.
2.28 CUSTOMERS AND SUPPLIERS. Except as set forth in Section 2.28 of the
Disclosure Schedule, to the Company's and the Shareholder's knowledge, the
Company has satisfactory relations with its customers, and none of such
customers has notified the Company that it intends to discontinue or limit its
relationship with the Company. Section 2.28 of the Disclosure Schedule lists
each customer of the Company during the last full fiscal year and the interim
period through the date of the Most Recent Balance Sheet and the amount of
revenues accounted for by such customer during each such periods.
2.29 PREPAYMENTS, PREBILLED INVOICES AND DEPOSITS.
(a) Section 2.29(a) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been received by the
Company as of the date of this Agreement from customers for products to be
shipped, or services to be performed after the Closing Date, and (ii) with
respect to each such prepayment, prebilled invoice or deposit, (A) the party and
contract credited, (B) the date received or invoiced, (C) the products and/or
services to be delivered, and (D) the conditions for the return of such
prepayment, prebilled invoice or deposit. All such prepayments, prebilled
invoices and deposits are properly accrued for on the Most Recent Balance Sheet
in accordance with GAAP applied on a consistent basis with past practice.
(b) Section 2.29(b) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been made or paid by the
Company as of the date of this Agreement for products to be purchased, services
to be performed or other benefits to be received after the Closing Date, and
(ii) with respect to each such prepayment, prebilled invoice or deposit, (A) the
party to whom such prepayment, prebilled invoice or deposit was made or paid,
(B) the date made or paid, (C) the products and/or services to be delivered, and
(D) the conditions for the return of such prepayment, prebilled invoice or
deposit. All such prepayments, prebilled invoices and deposits are properly
accrued for on the Most Recent Balance Sheet in accordance with GAAP applied on
a consistent basis with past practices.
2.30 BANKING FACILITIES. Section 2.30 of the Disclosure Schedule
identifies:
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(a) each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such account
or to have access to any such safety deposit box facility, together with a
description of the authority (and conditions thereof, if any) or each such
person with respect thereto.
2.31 NO EXPROPRIATION. No property or assets of the Company have been taken
or expropriated by any federal, state, municipal or other authority nor, has any
notice or proceeding in respect thereof been given or commenced, nor is the
Company or Shareholder aware of any intent or proposal to give any such notice
or commence any such proceedings.
2.32 FEES AND EXPENSES. The Company has not paid, will not pay and is not
obligated to pay any costs or expenses of attorneys, accountants, brokers and
financial advisors representing it or the Shareholder in connection with the
transactions contemplated hereby.
2.33 DISCLOSURE. To the Shareholder's and the Company's knowledge, the
Shareholder has disclosed to the Purchaser all material information relating to
the Company's business, and has not intentionally concealed or omitted any such
material information. None of the documents or information delivered to the
Purchaser in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
The cash flow projections through April 13, 2001 provided by the Company to the
Purchaser were prepared in good faith in the ordinary course of business
consistent with the Shareholder's past practice and are based upon reasonable
assumptions, and neither the Company nor the Shareholder is aware of any fact or
set of circumstances that would lead it to believe that such projections are
incorrect or misleading in any material respect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to the Purchaser, subject to such
exceptions as are specifically disclosed in the Disclosure Schedule, as follows:
3.1 OWNERSHIP OF SHARES. The Shareholder is the sole record and beneficial
owner of all of the Shares and all of the Shares are to be sold pursuant to this
Agreement. The Shares are not subject to any Liens or to any rights of first
refusal of any kind, and the Shareholder has not granted any rights to purchase
the Shares to any other person or entity. The Shareholder has the sole right to
transfer the Shares to the Purchaser. The Shares constitute all of Company
Capital Stock owned, beneficially or of record, by the Shareholder, and the
Shareholder has no options, warrants or other rights to acquire Company Capital
Stock. Upon the consummation of the transactions contemplated hereby, the
Purchaser will receive good title to such Shares, subject to no Liens retained,
granted or
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permitted by the Shareholder or the Company. The Shareholder has not engaged in
any sale or other transfer of any Company Capital Stock in contemplation of the
Acquisition.
3.2 TAX MATTERS. The Shareholder has had an opportunity to review with its
own tax advisors the tax consequences to the Shareholder of the Acquisition and
the other transactions contemplated by this Agreement. The Shareholder
understands that it must rely solely on its advisors and not on any statements
or representations by the Purchaser, the Company or any of their agents. The
Shareholder understands that he (and not the Purchaser or the Company) shall be
responsible for his or her own tax liability that may arise as a result of the
Acquisition or the other transactions contemplated by this Agreement.
3.3 ABSENCE OF CLAIMS BY SHAREHOLDER. Except as set forth in Section 3.3 of
the Disclosure Schedule, the Shareholder does not have any claim against the
Company, contingent or unconditional, fixed or variable under any contract or on
any other basis whatsoever, whether in equity or at law (other than for accrued
compensation and other employee benefits that have been disclosed to the
Purchaser in Section 3.3 in the Disclosure Schedule and other than with respect
to any rights to indemnification that the Shareholder may now or hereafter be
entitled to under the Company's Certificate of Incorporation or Bylaws).
3.4 AUTHORITY. The Shareholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Shareholder,
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes a valid and binding obligation of the Shareholder,
enforceable in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and by general equitable principles.
3.5 NO CONFLICT. The execution and delivery by the Shareholder of this
Agreement does not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with (i) any mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which the Shareholder or any of his properties or assets is subject, or (ii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Shareholder or his properties or assets.
3.6 BROKERS OR FINDERS FEES. Except as set forth in Section 2.27 of the
Disclosure Schedule, the Shareholder has not engaged any brokers, finders or
agents, and the Purchaser has not, and will not occur, directly or indirectly,
as a result of any action taken by the Company, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement. In the event that the preceding sentence is in any way
inaccurate, the Shareholder hereby agrees to indemnify and hold harmless the
Purchaser from any liability for any such commission or compensation in the
nature of a brokerage or finder's fee or agent's commission (and the costs and
expenses of defending against such liability or asserted liability) for which
such Purchaser or any of its officers, partners, employees or representatives is
responsible.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company and to the Shareholder
as follows:
4.1 ORGANIZATION OF PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has the corporate power to own its properties and to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified would have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated hereby.
4.2 AUTHORITY. The Purchaser has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Purchaser. This Agreement
has been duly executed and delivered by the Purchaser and constitutes the valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and by general equitable principles.
4.3 SEC FILINGS. The Purchaser has filed all forms, reports and documents
required to be filed by the Purchaser with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act and the Securities and
Exchange Act of 1934, as amended (the "EXCHANGE ACT") and has made available to
the Company such forms, reports and documents in the form filed with the SEC.
All such required forms, reports and documents (including those that the
Purchaser may file subsequent to the date hereof until the Closing) are referred
to herein as the "PURCHASER SEC REPORTS;" provided, that, any Purchaser SEC
Report shall be deemed to include all amendments to such report through the
Closing Date. As of their respective filing dates (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), the Purchaser SEC Reports (i) complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Purchaser
SEC Reports and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
4.4 NO CONFLICT. Assuming that all consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings have been duly made or
obtained as contemplated by Section 4.3 hereof, the execution and delivery of
this Agreement by the Purchaser does not, and, as of the Closing, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under or
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require any consent, waiver or approval to continue to enjoy the benefits under
(any such event, a "CONFLICT") (a) any provision of the Certificate of
Incorporation or Bylaws of the Purchaser or (b) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Purchaser or its properties or assets.
4.5 LITIGATION. There is no action, suit or proceeding of any nature
pending or, to the Purchaser's knowledge, threatened against the Purchaser, its
properties or any of its officers, directors or employees, nor, to the knowledge
of the Purchaser, is there any reasonable basis therefor. The Purchaser has not
received any written notice of and has no reason to believe that any
Governmental Entity has at any time challenged or questioned the legal right of
the Purchaser to conduct its operations as presently or previously conducted.
4.6 BROKERS' AND FINDERS' FEES. The Purchaser has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby. In the event that the preceding sentence is
in any way inaccurate, the Purchaser hereby agrees to indemnify and hold
harmless the Shareholder from any liability for any such commission or
compensation in the nature of a brokerage or finder's fee or agent's commission
(and the costs and expenses of defending against such liability or asserted
liability) for which such Shareholder is responsible.
ARTICLE V
CLOSING DOCUMENTS
5.1 DOCUMENTS DELIVERED BY THE COMPANY AND THE SHAREHOLDER AT CLOSING. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the condition that the Company and Shareholder
deliver or cause to be delivered at the Closing the following documents to the
Purchaser:
(a) certificates for the Shares, duly endorsed to the Purchaser for
transfer, or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto;
(b) the Escrow Agreement, duly executed by the Shareholder and the
Escrow Agent;
(c) a resignation letter, effective as of the date hereof, executed by
each director and officer of the Company;
(d) a good standing certificate regarding the good standing of the
Company in the State of New York dated within 5 days of the Closing, and
equivalent certificates (dated within 10 days of the date hereof) from each
jurisdiction in which the Company is qualified to do business;
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(e) the Employment Agreement, substantially in the form attached
hereto as Exhibit A, duly executed by the Shareholder;
(f) a legal opinion from Kronish ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to
the Company and the Shareholder, substantially in form attached hereto as
Exhibit C; and
(g) all other documents, certificates, instruments or writings
reasonably required by Purchaser to be delivered by the Company or the
Shareholder concurrently herewith in order to consummate the transactions
contemplated by this Agreement.
5.2 DOCUMENTS DELIVERED BY THE
PURCHASER AT CLOSING. The obligation of the Shareholder to consummate the
transactions contemplated by this Agreement shall be subject to the condition
that the Purchaser deliver at the Closing the following documents to the
Shareholder:
(a) a good standing certificate of the Purchaser dated within 10 days
of the date hereof regarding the good standing of the Purchaser in the State of
Delaware;
(b) the Escrow Agreement, duly executed by the Purchaser;
(c) a certificate of the corporate secretary of the Purchaser
certifying the resolutions adopted by the Purchaser's Board of Directors with
respect to this Agreement and the incumbency of the officers of the Purchaser;
(d) the Employment Agreement, duly executed by the Purchaser; and
(e) all other documents, certificates or writings required to be
delivered by the Purchaser concurrently herewith in order to consummate the
transactions contemplated by this Agreement.
ARTICLE VI
INDEMNIFICATION; SURVIVAL OF REPRESENTATION AND WARRANTIES
6.1 INDEMNIFICATION OF THE PURCHASER.
(a) After the Closing, and subject to the provisions of this Section
6.1 and Sections 6.2 and 6.6 below, the Shareholder will indemnify and hold the
Purchaser and its Affiliates, officers, directors and employees harmless from
and against any and all claims, liabilities, damages, losses, deficiencies (to
the extent that such deficiency results in an actual cash payment) and expenses
(including, without limitation, reasonable attorneys' fees and expenses and
costs of suit) (individually a "LOSS" and collectively "LOSSES") arising out of:
(i) any breach or default of any of the representations and warranties made by
or on behalf of the Shareholder in this Agreement; (ii) any breach or default by
the Shareholder of any covenant or agreement contained in this Agreement; and
(iii) recovery against the Company for any workers compensation claims currently
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pending against the Company in excess of the Company's workers' compensation
insurance. As partial security for the indemnity provided in this Section
6.1(a), the Purchaser shall have the right to make claims against the Escrow
Account in accordance with the provisions of the Escrow Agreement. In addition,
the Purchaser may seek indemnification for Losses directly from the Shareholder
in the manner and to the extent provided in Sections 6.5 and 6.6; provided,
however, that so long as the Escrow Account has not been depleted or released to
the Shareholder, the Purchaser shall first make any claim for Losses against the
Escrow Account.
(b) All claims for Losses specified in this Section 6.1(a) must be
made within the survival periods specified in Section 6.2, below, and must
specify in reasonable detail the factual basis of the claim.
6.2 SURVIVAL. The Purchaser's right to assert claims for Losses under this
Section 6.1(a) will survive the Closing and the consummation of the transactions
contemplated hereby, until the first anniversary of the date of this Agreement,
except for claims for Losses relating to the following:
(a) Fraud or intentional misrepresentation by the Shareholder, and any
breach of the representations and warranties contained in Section 2.3 (regarding
capitalization), Section 2.28 (regarding brokers or finders), Section 2.33
(regarding fees and expenses), or Section 3.1 (regarding the Shares), any of
which may be brought forever; and
(b) A breach of the representations and warranties contained in
Section 2.11 (regarding tax matters) or Section 2.13 (regarding title to
properties) which may be brought until 90 days after the expiration of the
applicable statute of limitations.
With regard to the claims described in this Section 6.2, the survival
periods set forth in this Section 6.2 shall govern, and the parties agree that
statutes of limitations otherwise applicable to such claims shall not apply to
such claims.
6.3 INDEMNIFICATION OF SHAREHOLDER.
(a) After the Closing, and subject to the provisions of this Section
6.3 and Sections 6.4 and 6.6 below, the Purchaser will indemnify and hold the
Shareholder harmless from and against any and all Losses arising out of: (i) any
breach or default of any of the representations and warranties made by or on
behalf of the Purchaser in this Agreement; and (ii) any breach or default by the
Purchaser of any covenant or agreement contained in this Agreement.
(b) All claims for Losses specified in Section 6.3(a) must be made
within the survival periods specified in Section 6.4, below, and must specify in
reasonable detail the factual basis of the claim.
6.4 SURVIVAL(a) . The Shareholder's right to assert claims for Losses
under Section 6.3(a) will survive the Closing and the consummation of the
transactions contemplated hereby, until the first anniversary of the date of
this Agreement, except for claims for Losses relating to fraud or
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intentional misrepresentation by the Purchaser, which may be brought forever.
With regard to the claims described in this Section 6.4, the survival periods
set forth in this Section 6.4 shall govern, and the parties agree that statutes
of limitations otherwise applicable to such claims shall not apply to such
claims.
6.5 METHOD OF ASSERTING CLAIMS RELATING TO THIRD PARTY ACTIONS.
(a) The person entitled to indemnification pursuant to Section 6.1 or
Section 6.3 (an "INDEMNIFIED PERSON") shall give prompt written notification to
the Shareholder or the Purchaser, as applicable (the "INDEMNIFYING PERSON") of
the commencement of any action, suit or proceeding relating to a third party
claim for which indemnification may be sought pursuant to Section 6.1 or Section
6.3, as the case may be; provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person of any liability or obligation hereunder except to the
extent of any damage, liability or actual prejudice caused by or arising out of
such delay.
(b) Within 15 days after delivery of such notification, the
Indemnifying Person may, upon written notice thereof to the Indemnified Person,
assume control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Person, provided (i) the Indemnifying
Person acknowledges in writing to the Indemnified Person that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Person in connection with such action, suit or proceeding constitute Losses for
which the Indemnified Person shall be entitled to indemnification pursuant to
Section 6.1 or Section 6.3, as the case may be, (ii) the third party seeks
monetary damages only, and (iii) an adverse resolution of the third party's
claim would not have a material adverse effect on the goodwill or the reputation
of the Indemnified Person and its subsidiaries, if applicable, taken as a whole,
or the business, operations or future conduct of the Indemnified Person and its
subsidiaries, if applicable, taken as a whole.
(c) If the Indemnifying Person does not so assume or is not entitled
to assume control of such defense, the Indemnified Person shall control such
defense, and the Indemnifying Person may in good faith dispute whether the
Indemnifying Person is obliged to indemnify for any Losses pursuant to Section
6.1 or Section 6.3, as the case may be. The party not controlling such defense
may participate therein at its own expense; provided that if the Indemnifying
Person assumes control of such defense but in the reasonable opinion of counsel
the Indemnifying Person and the Indemnified Person have conflicting interests or
different defenses available with respect to such action, suit or proceeding,
such that separate representation is advisable, the reasonable fees and expenses
of counsel to the Indemnified Person shall be considered "Losses" for purposes
of this Agreement.
(d) The party conducting the defense of such action, suit or
proceeding shall keep the other party advised of the status of such action, suit
or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. The Indemnified
Person shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Person, which shall not be
unreasonably withheld or delayed.
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(e) The Indemnifying Person shall not agree to any settlement of or
the entry of a judgment in any action, suit or proceeding with respect to which
they have assumed the defense thereof without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld (it being
understood that it is reasonable to withhold such consent if, among other
things, the settlement or the entry of a judgment (A) lacks a complete release
of the Indemnified Person for all liability with respect thereto or (B) imposes
any liability or obligation on the Indemnified Person).
6.6 LIMITATIONS
(a) In the case of Losses covered by Section 6.1:
(i) Except for Losses arising out of fraud or intentional
misrepresentation by the Shareholder, or any breach of the representations and
warranties contained in Section 2.3 (regarding capitalization), Section 2.28
(regarding brokers or finders), Section 2.33 (regarding fees and expenses) or
Section 3.1 (regarding the Shares), the Indemnified Person shall not be entitled
to indemnification under Section 6.1 except to the extent that the aggregate
Losses exceed $50,000 (the "BASKET").
(ii) Except for Losses arising out of fraud or intentional
misrepresentation by the Shareholder, or any breach of the representations and
warranties contained in Section 2.3 (regarding capitalization), Section 2.11
(regarding tax matters), Section 2.28 (regarding brokers or finders), Section
2.33 (regarding fees and expenses) or Section 3.1 (regarding the Shares), the
Purchaser shall not be entitled to indemnification under Section 6.1 for
aggregate Losses in excess of the Indemnity Cap. For the purpose of this Section
6.6, "INDEMNITY CAP" shall mean (i) $3,000,000, (ii) in the event that
Shareholder has already received the First Escrow Amount (as defined in the
Escrow Agreement), $2,500,000 or (iii) in the event that Shareholder has
forfeited the entire Escrow Amount pursuant to the Escrow Agreement entirely as
a result of either the termination of Shareholder's employment with Purchaser
for Cause (as defined in the Employment Agreement) or Shareholder's voluntary
termination of his employment with Purchaser without Good Reason (as defined in
the Employment Agreement), $2,000,000.
(iii) With respect to Losses arising out of fraud or intentional
misrepresentation by the Shareholder, or any breach of the representations and
warranties contained in Section 2.3 (regarding capitalization), Section 2.28
(regarding brokers or finders), Section 2.33 (regarding fees and expenses) or
Section 3.1 (regarding the Shares), the Indemnified Person shall be entitled to
indemnification under Section 6.1 for any amount of Losses and without regard to
the Indemnity Cap or the Basket. With respect to Losses arising out of any
breach of the representations and warranties contained in Section 2.11
(regarding tax matters), Section 2.13 (regarding title to properties) or Section
2.14 (regarding intellectual property), the Indemnified Person shall be entitled
to indemnification under Section 6.1 for an amount of Losses subject to the
Basket, but not subject to the Indemnity Cap.
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(b) In the case of Losses covered by Section 6.3:
(i) Except for Losses arising out of fraud or intentional
misrepresentation by the Purchaser, the Shareholder shall not be entitled to
indemnification under Section 6.3 for aggregate Losses (x) except to the extent
that aggregate Losses exceed the Basket, and (y) in excess of the Indemnity Cap.
(ii) With respect to Losses arising out of fraud or intentional
misrepresentation by the Purchaser, the Shareholder shall be entitled to
indemnification under Section 6.3 for any amount of Losses and without regard to
the Indemnity Cap or the Basket.
(c) The parties agree that any indemnification provided under this
Article VI is not to be deemed insurance (whether primary or excess or
otherwise) for purposes of seeking reimbursement from the applicable insurance
coverage. In addition, there will be no multiple recoveries for any Loss. There
shall be deducted from the amount of any indemnifiable Loss, any actual Tax
benefit realized by the Indemnified Person.
ARTICLE VII
MISCELLANEOUS
7.1 POST-CLOSING TAX MATTERS. Each of the Purchaser and the Shareholder
shall cooperate in the preparation of all Tax Returns for any tax periods for
which the other party could reasonably require its assistance in obtaining any
necessary information. All reasonable expenses of the Shareholder in discharging
these obligations shall be borne by the Company.
7.2 PRESS RELEASES AND ANNOUNCEMENTS. On or shortly after the Closing Date,
the Purchaser may issue a press release relating to the subject matter of this
Agreement. Thereafter, all public disclosure regarding the subject matter of
this Agreement shall be made by the Purchaser, and no such public disclosure
shall be made by the Company or the Shareholder without the Purchaser's prior
written consent.
7.3 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
heirs, successors and permitted assigns.
7.4 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
attached hereto, constitute the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
7.5 CERTAIN DEFINITION. With respect to the transactions contemplated by
this Agreement, no act shall be considered a "fraud" or "fraudulent" unless
actual intent to deceive is established along with the other elements required
under Delaware law.
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7.6 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective heirs,
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other party.
7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. 7.8 HEADINGS. The section
headings contained in this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this Agreement.
7.9 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered (i) three
(3) business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) when received if it is sent by
facsimile communication during normal business hours on a business day or one
(1) business day after it is sent by facsimile and received if sent other than
during business hours on a business day, (iii) one (1) business day after it is
sent via a reputable overnight courier service, or (iv) when received if it is
delivered by hand, in each case to the intended recipient as set forth below:
If to the Shareholder: Copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇, Weiner & ▇▇▇▇▇▇▇ LLP
▇▇▇. ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ of the Americas
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Tel (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: Copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇.▇▇▇, Inc. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Professional Corporation
Suite 1400 ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices, requests, demands,
claims or other communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section.
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7.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
7.11 ARBITRATION OF DISPUTES VENUE. All disputes arising out of or related
to this Agreement or the transactions contemplated hereby shall be adjudicated
exclusively through final and binding arbitration before a panel of three
arbitrators pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Arbitration shall take place in New York County, New
York. At the request of any party, the arbitrators, attorneys, parties to the
arbitration, witnesses, experts, court reporters, and other persons present at
the arbitration shall agree in writing to maintain the strict confidentiality of
the arbitration proceedings and awards. The award of the arbitrators shall be
enforceable under any applicable law. The arbitrators may award damages and/or
injunctive relief, but in no event shall the arbitrators have the authority to
award punitive or exemplary damages. Notwithstanding the above, a party may
apply to a court of competent jurisdiction for relief in the form of a temporary
restraining order or preliminary injunction pending final determination of a
claim through arbitration in accordance with this paragraph. If proper notice
has been given, the arbitrators will have full power to proceed to take evidence
or to perform any other acts necessary to arbitrate the matter in the absence of
any party who fails to appear.
7.12 AMENDMENTS AND WAIVERS. The parties may mutually amend any provision
of this Agreement at any time. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the parties. No
waiver by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
7.13 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.14 EXPENSES. The Purchaser will pay in connection with the transactions
contemplated herein, the fees and out-of-pocket expenses incurred by the
Shareholder, such fees and expenses not to exceed $30,000 in the aggregate.
Except as set forth in the preceding sentence, the Shareholder, and not the
Company, shall bear all costs and expenses of its and the Company's attorneys,
accountants, brokers and financial advisors representing the Shareholder or the
Company in
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connection with the transactions contemplated hereby. The Purchaser shall bear
the cost and expense of its own attorneys, accountants and financial advisors
representing the Purchaser in connection with the transactions contemplated
hereby.
7.15 CONSTRUCTION. The language used in this Agreement shall be deemed to
be the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
7.16 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this STOCK PURCHASE
AGREEMENT as of the date first above written.
PURCHASER
▇▇▇▇▇.▇▇▇, INC.
By:
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Name:
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Title:
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Company:
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COMPANY
INTEGRATED MEDIA, INC.
By:
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Name:
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Title:
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SHAREHOLDER
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