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Exhibit 10.23
ACQUISITION AND STOCK EXCHANGE AGREEMENT
among
UBICS, INC.,
COBALT CREATIVE, INC.
and
THE SHAREHOLDERS OF COBALT CREATIVE, INC.
July 5, 2000
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TABLE OF CONTENTS
ARTICLE I-- EXCHANGE............................................................................................. 1
1.01. Exchange of Shares..............................................................................1
1.02. Transfer Restrictions...........................................................................2
1.03. Waiver of Rights................................................................................3
1.04. Payment of Fees and Expenses....................................................................3
ARTICLE II-- REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND COBALT........................................3
2.01. Organization and Qualification..................................................................3
2.02. Authority and Authorization.....................................................................4
2.03. Execution and Binding Effect....................................................................4
2.04. No Breach, Default, Violation or Consent........................................................4
2.05. Ownership and Control...........................................................................5
2.06. Subsidiaries....................................................................................5
2.07. Financial Statements; Liabilities...............................................................5
2.08. Tax Matters.....................................................................................6
2.09. Litigation......................................................................................7
2.10. Absence of Certain Changes and Events...........................................................7
2.11. Constituent Documents and Governmental Rules....................................................8
2.12. Governmental Orders.............................................................................8
2.13. Permits.........................................................................................8
2.14. Environmental Matters...........................................................................8
2.15. Real Property...................................................................................9
2.16. Personal Property..............................................................................10
2.17. Intellectual Property..........................................................................10
2.18. Title to Assets................................................................................12
2.19. Pension Plans..................................................................................13
2.20. Welfare Plans and Other Benefit Plans..........................................................13
2.21. Personnel Matters..............................................................................14
2.22. Insurance......................................................................................14
2.23. Indebtedness...................................................................................15
2.24. Other Material Business Agreements.............................................................15
2.25. Status of Cobalt Business Agreements...........................................................15
2.26. Transactions with Affiliates...................................................................16
2.27. Customers and Suppliers........................................................................16
2.28. Brokers........................................................................................16
2.29. Bank Accounts..................................................................................16
2.30. Delivery of Documents; Accurate Disclosure.....................................................16
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ARTICLE III-- REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................................................17
3.01. Investor Status................................................................................17
3.02. Title to Capital Stock.........................................................................17
3.03. Authorization of Transaction...................................................................17
3.04. No Violation...................................................................................17
3.05. Investment Intent..............................................................................18
3.06. No Breach, Default, Violation or Consent.......................................................18
ARTICLE IV-- REPRESENTATIONS AND WARRANTIES OF UBICS.............................................................18
4.01. Organization and Qualification.................................................................18
4.02. Authority and Authorization....................................................................18
4.03. Execution and Binding Effect...................................................................19
4.04. No Breach, Default, Violation or Consent.......................................................19
4.05. Capitalization.................................................................................19
4.06 Securities Matters and Financial Statements....................................................20
4.07. Absence of Certain Changes and Events..........................................................20
4.08. Litigation.....................................................................................21
4.09. Investor Status................................................................................21
4.10. Delivery of Documents; Accurate Disclosure.....................................................21
4.11. Solvency.......................................................................................21
4.12. Price Stabilization............................................................................21
4.13. NASD Compliance................................................................................21
ARTICLE V-- POST CLOSING COVENANTS...............................................................................21
5.01. Publicity......................................................................................21
5.02. Best Efforts; Notification.....................................................................22
5.03. Tax-Free Reorganization........................................................................22
5.04. Confidentiality................................................................................22
5.05. Nasdaq Listing.................................................................................23
5.06. Release of Guarantees..........................................................................24
5.07. Securities Law Compliance......................................................................24
5.08. Cobalt Board of Directors......................................................................24
5.09. Registration Rights............................................................................24
ARTICLE VI--CLOSING AND CLOSING CONDITIONS.......................................................................25
6.01. Closing........................................................................................25
6.02. Conditions Precedent to Obligations of UBICS...................................................25
6.03. Conditions Precedent to Obligations of Cobalt and the Shareholders.............................26
ARTICLE VII-- INDEMNIFICATION....................................................................................27
7.01. Survival of Representations and Warranties.....................................................27
7.02. Indemnification................................................................................28
7.03. Claims.........................................................................................28
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7.04. Notice of Third Party Claims; Assumption of Defense............................................29
7.05. Settlement or Compromise.......................................................................30
7.06. Failure of Indemnifying Person to Act..........................................................30
7.07. Escrow.........................................................................................30
7.08. Duration of Indemnification Obligations........................................................30
7.09. Indemnification Threshold, Cap and Payment.....................................................30
ARTICLE VIII-- MISCELLANEOUS PROVISIONS..........................................................................31
8.01. Amendments.....................................................................................31
8.02. Assignment.....................................................................................31
8.03. Counterparts; Telefacsimile Execution..........................................................31
8.04. Entire Agreement...............................................................................31
8.05. Expenses.......................................................................................31
8.06. Further Assurances.............................................................................31
8.07. Governing Law..................................................................................32
8.08. Notices........................................................................................32
8.09. Severability...................................................................................33
8.10. Successors and Assigns.........................................................................33
8.11. Waivers........................................................................................33
8.12. Arbitration....................................................................................33
8.13. Knowledge......................................................................................34
INDEX OF EXHIBITS AND ANNEXES
Exhibit A - Cobalt Shareholders
Exhibit B - Escrow Agreement
Exhibit C-1 - ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. Employment Agreement
Exhibit C-2 - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Employment Agreement
Exhibit D - Form of Non-Competition Agreement
Exhibit E - Fees and Expenses
Exhibit F - Form of Opinion of Counsel to Cobalt
Exhibit G - Form of Opinion of Counsel to UBICS
Annex 5.11 - Guaranteed Obligations of Cobalt
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ACQUISITION AND STOCK EXCHANGE AGREEMENT
This Agreement is made as of July 5, 2000 among UBICS, INC., a
Delaware corporation ("UBICS"), COBALT CREATIVE, INC., an Arizona corporation
("COBALT") and the shareholders of Cobalt listed on the signature page hereof
(the "SHAREHOLDERS"). Concurrently with the execution and delivery of this
Agreement, Cobalt and the Shareholders are delivering a Disclosure Schedule
containing certain disclosures. References in this Agreement to any "SCHEDULE"
are to the various schedules contained in the Disclosure Schedule.
PREAMBLE
The parties hereto desire for UBICS and Cobalt to engage in, and the
Boards of Directors of UBICS and Cobalt have approved, the exchange of all of
Cobalt's issued and outstanding shares of capital stock for shares of common
stock of UBICS (the "EXCHANGE") upon the terms and subject to the conditions set
forth herein.
The parties desire to structure the Exchange as a tax-free
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (together with the rules and regulations
promulgated thereunder, the "CODE"), and desire that the Exchange be accounted
for as a pooling of interests pursuant to generally accepted accounting
principles ("GAAP").
UBICS would not be willing to enter into this Agreement unless the
Shareholders agreed to refrain from competing with UBICS and Cobalt
(collectively, the "COMBINED COMPANIES") for a reasonable period of time, and
accordingly each of the Shareholders has agreed to execute and deliver to UBICS
a noncompetition agreement or an employment agreement containing noncompetition
covenants.
Therefore, in consideration of the premises and the mutual covenants,
agreements, representations, and warranties herein contained, the parties
hereto, intending to be legally bound, agree as follows.
ARTICLE I
EXCHANGE
1.01. Exchange of Shares. Subject to the terms and conditions set forth
in this Agreement, at and as of the Closing Date:
(a) Each Shareholder will sell, assign, transfer and deliver
to UBICS the number of shares (if any) of common stock, no par value, of Cobalt
(the "COMMON STOCK") and the number of shares (if any) of Preferred Stock Series
A, par value $3.04346 per share, of Cobalt (the "PREFERRED STOCK") owned by such
Shareholder, as set forth opposite such
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Shareholder's name on Exhibit A hereto (all such shares of Common Stock and
Preferred Stock being referred to collectively as the "COBALT STOCK"), free and
clear of all liens, pledges, security interests, claims or other encumbrances
(collectively, "LIENS"), which shall constitute all of the shares of capital
stock of Cobalt issued and outstanding immediately prior to the Closing Date. In
exchange for the Cobalt Stock, UBICS shall issue and deliver to each Shareholder
the number of shares (the "EXCHANGE SHARES") of UBICS' common stock, par value
$.01 per share (the "UBICS COMMON STOCK"), set forth opposite such Shareholder's
name on Exhibit A hereto.
(b) Upon the surrender by the Shareholders of certificates (or
evidence of lost certificates reasonably acceptable to UBICS) representing all
of the outstanding shares of Cobalt Stock to UBICS, UBICS shall (i) cause its
transfer agent to deliver to the Shareholders certificates representing an
aggregate of 334,384 of the Exchange Shares and (ii) cause its transfer agent to
deposit into the Escrow (as defined below), certificates representing an
aggregate of 100,000 of the Exchange Shares to secure the obligations of the
Shareholders under Article VII below (the "ESCROW SHARES"). The Escrow Shares
shall be held in and released from Escrow as and to the extent provided in the
Escrow Agreement among UBICS, the Shareholders and Chase Manhattan Trust
Company, National Association, as escrow agent (the "ESCROW AGENT"), in
substantially the form attached hereto as Exhibit B (the "ESCROW AGREEMENT").
(c) Any and all outstanding options, warrants and other rights
to purchase or acquire any shares of capital stock of Cobalt shall be cancelled
and of no further force and effect.
(d) All of the shares of UBICS Common Stock previously issued
and outstanding shall remain issued and outstanding and shall not be affected by
the Exchange.
1.02 Transfer Restrictions
(a) The Exchange Shares to be issued to the Cobalt
Shareholders will not at the time of issuance be registered under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), on the ground that the issuance
thereof in the Exchange is exempt from registration pursuant to Section 4(2)
thereof and/or Regulation D thereunder. The parties understand that the
availability of such exemption is based in part upon the imposition of
restrictions on the transfer of the Exchange Shares, upon certain information
supplied to UBICS by Cobalt and the Shareholders and upon the representations of
Cobalt and the Shareholders set forth in this Agreement. The Exchange Shares may
not be transferred except pursuant to an effective registration statement under
the Securities Act or an exemption from such registration requirements and
compliance with applicable state securities law. The following legend will be
placed on the certificates representing the Exchange Shares:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS, AND SUCH SHARES MAY NOT BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
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EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
(b) Each Shareholder agrees that such Shareholder will not,
directly or indirectly, without the prior written consent of UBICS, offer, sell,
grant any option to purchase or otherwise dispose (or announce any offer, sale,
grant of an option to purchase or other disposition) of any Exchange Shares
received by such Shareholder until after the first anniversary of the Closing
Date. UBICS agrees that it will promptly consent to a requested sale or transfer
by a Shareholder of up to 20% of the Exchange Shares received by such
Shareholder, provided such sale or transfer complies with the requirements of
Section 1.02(a).
(c) UBICS may instruct its transfer agent to place stop
transfer orders against any transfer of the Exchange Shares in violation of this
Section 1.02.
1.03 Waiver of Rights. Cobalt and the Shareholders each waives any and
all preemptive rights, rights of first refusal and other similar rights which
they may have to acquire the Cobalt Stock pursuant to the terms of the
Shareholders Agreement dated as of March 10, 2000 by and among the Shareholders
and Cobalt, as amended (the "SHAREHOLDERS AGREEMENT"), or any other agreement to
which any of them are of party, provided however that upon the termination of
this Agreement for any reason, such waiver shall be deemed null and void and of
no force or effect.
1.04 Payment of Fees and Expenses. At the Closing, UBICS shall pay
those fees and expenses listed on Exhibit E hereto
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND COBALT
Each of the Shareholders and Cobalt hereby jointly and
severally represent and warrant to UBICS as follows:
2.01. Organization and Qualification. Cobalt is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona. Cobalt is duly qualified to do business as a foreign corporation and is
in good standing in all jurisdictions in which the ownership of its assets or
the nature of its business makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified has not resulted in, and is
not likely to result in, a material adverse change in, or material adverse
effect on, the assets, business, operations, financial condition or prospects of
Cobalt (a "MATERIAL ADVERSE EFFECT"). Attached on Schedule 2.01 is a complete
and correct copy of the Articles of Incorporation and By-Laws of Cobalt, as
currently in effect.
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2.02. Authority and Authorization. Cobalt has the corporate power and
authority to own, lease and operate its properties and assets, to conduct its
business as presently conducted and to execute, deliver and perform this
Agreement and the other Transaction Documents (as defined below) to which it is
a party.
2.03. Execution and Binding Effect. The Exchange, this Agreement, the
other Transaction Documents and the transactions contemplated hereby and thereby
have been, and on the Closing Date will be, duly authorized and approved by the
Board of Directors and shareholders of Cobalt, and, except as set forth on
Schedule 2.25, no other approvals or consents are required before Cobalt may
duly execute, deliver and perform its obligations under this Agreement and the
other Transaction Documents to which it is a party. This Agreement has been, and
on the Closing Date the other Transaction Documents will be, duly and validly
executed and delivered by and constitutes (or upon such execution and delivery
will constitute) the legal, valid and binding obligation of Cobalt enforceable
against Cobalt in accordance with their respective terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (b) applicable equitable principles, whether considered in a
proceeding at law or in equity and (c) reason of generally applicable public
policy principles, considerations or limitations imposed or resulting from the
exercise by any court of its discretion.
2.04. No Breach, Default, Violation or Consent. Except as set forth on
Schedules 2.04 and 2.25, the execution, delivery and performance by Cobalt and
the Shareholders of this Agreement and the other Transaction Documents do not
and will not:
(a) violate the articles of incorporation or by-laws of
Cobalt;
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any Cobalt
Agreement (as defined below) or Permit (as defined below) or of any contract,
agreement, instrument or document to which any Shareholder is a party or by
which any Shareholder or his assets are bound;
(c) breach or otherwise violate any order, writ, judgment,
injunction or decree issued by any governmental entity (each a "GOVERNMENTAL
ORDER") which names Cobalt or any Shareholder, or is directed to Cobalt or any
Shareholder any of their respective assets;
(d) result in the creation of a Lien held by any third party
on Cobalt's assets;
(e) violate any law, rule, regulation, ordinance or code of
any governmental entity (each a "GOVERNMENTAL RULE") applicable to Cobalt or its
business or assets; or
(f) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any person
or entity (each a "PERSON").
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2.05. Ownership and Control.
(a) The authorized capitalization of Cobalt consists of
1,000,000 shares of Common Stock and 200,000 shares of Preferred Stock. Exhibit
A sets forth a correct and complete list of (i) the number of shares of Common
Stock and of Preferred Stock issued and outstanding and (ii) the names of the
record and beneficial owners of each share of Common Stock and Preferred Stock
and the number of shares of Common Stock and Preferred Stock owned by such
persons.
(b) All of the issued and outstanding shares of Cobalt's
capital stock have been duly authorized and validly issued in compliance with
applicable Governmental Rules relating to the issuance of securities and are
fully paid and non-assessable. Except as otherwise disclosed on Schedule 2.05,
there are no outstanding (i) options, warrants, agreements or other rights for
the acquisition of shares of any of the unissued shares of Cobalt's capital
stock, (ii) securities or other obligations of Cobalt which are convertible into
or exchangeable for such shares or (iii) options, sale agreements, shareholder
agreements, pledges, proxies, voting trusts, powers of attorney, restrictions on
transfer or other agreements or instruments which are binding on any of the
Shareholders of Cobalt and which relate to the ownership, voting or transfer of
any of such shares.
2.06. Subsidiaries. Cobalt has no subsidiaries. As used in this
Agreement, a "SUBSIDIARY" of a party hereto means any corporation, partnership,
limited liability company, joint venture or other business entity with respect
to which such party or any Subsidiary of such party is entitled, by reason of a
direct or indirect ownership interest therein, to (a) elect a majority of the
directors thereof or otherwise direct or cause the direction of the management
and policies thereof or (b) receive a majority of the dividends and other
distributions made thereby, in each case regardless of any contingency which
does or may suspend or dilute such rights.
2.07. Financial Statements; Liabilities.
(a) Cobalt. Attached on Schedule 2.07 are correct and complete
copies of Cobalt's unaudited balance sheets and statements of income, retained
earnings and cash flows as of and for its fiscal years ended December 31, 1999
and 1998, and the five month period ended May 31, 2000, (the "COBALT FINANCIAL
STATEMENTS"). Except as disclosed on Schedule 2.07, the Cobalt Financial
Statements present fairly the financial condition of Cobalt as at the end of the
periods covered thereby and the results of its operations and the changes in its
cash flows for the periods covered thereby, and were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby.
Except as and to the extent otherwise disclosed in the Cobalt Financial
Statements or on Schedule 2.07, Cobalt has no liabilities of any kind, whether
direct or indirect, fixed or contingent or otherwise, other than (y) liabilities
which are not required to be set forth on the Cobalt Financial Statements in
accordance with GAAP, and (z) liabilities incurred in the ordinary course of
business since May 31, 2000 (the "COBALT FINANCIAL STATEMENT DATE").
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2.08. Tax Matters. Except as otherwise disclosed on Schedule 2.08:
(a) all tax returns and reports required to be filed by Cobalt
have been properly prepared and timely filed and were complete and correct when
filed;
(b) Cobalt has paid, or has made adequate reserves on its
books for the payment of, all Taxes (as defined below), interest, penalties,
assessments and deficiencies shown to be due on such tax returns and reports or
which Cobalt is required to withhold on behalf of any other Person;
(c) the reserves and provisions for Taxes on the books of
Cobalt are adequate in all material respects for all open years and for its
current fiscal period and properly classify such Tax obligations as either
current or deferred;
(d) to the knowledge of Cobalt and the Shareholders there are
no assessments of any additional Taxes on Cobalt by any governmental entity
(whether or not reserved against);
(e) Cobalt is not currently being audited by any governmental
entity, and no such audit is pending or, to the knowledge of Cobalt and the
Shareholders, threatened;
(f) Cobalt has not made any tax elections which (i) were in
effect in any past year for which the time for audit has not expired, (ii) are
currently in effect or (iii) will be in effect at any future time;
(g) Cobalt has not given any waiver or extension of any period
of limitation governing the time of assessment or collection of any Tax;
(h) except as disclosed on Schedule 2.08, Cobalt is not a
party to any agreement providing for the allocation or sharing of Taxes; and
(i) prior to March 10, 2000, Cobalt was at all times an "S
Corporation" within the meaning of Section 1361(a) of the Code (an "S
CORPORATION"), and a valid election under Section 1362 of the Code has been in
effect with respect to Cobalt at all times for such period. A valid S
corporation or similar election has been in effect with respect to Cobalt during
such period in all relevant state and local jurisdictions in which Cobalt is
subject to Tax. For such periods, the shareholders of Cobalt have filed in a
timely fashion with all relevant Tax Authorities a consent to such S corporation
or similar elections with respect to Cobalt. Cobalt has not been, and will not
be, subject to tax under Section 1374 or Section 1375 of the Code for any
taxable year ending on or prior to the Closing Date. Effective as of March 10,
2000, Cobalt's election to be an S Corporation pursuant to Section 1361(d) of
the Code was revoked by its issuance of Preferred Stock to Bitter End
Investments, L.L.C., and no other action needs to be taken to effect or maintain
such revocation.
"TAXES" means any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales,
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withholding, social security, occupation, ▇▇▇, service, value added, license,
net worth, payroll, franchise, transfer and recording taxes, fees and charges
imposed by a Tax Authority, whether computed on a separate consolidated,
unitary, combined or any other basis; and such term shall include any interest,
penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such taxes, charges, fees, levies or other assessments. "TAX
AUTHORITY" means the Internal Revenue Service (the "IRS") and any other federal,
state or local domestic or foreign governmental authority responsible for the
administration or collection of any Taxes;
2.09. Litigation. There is no pending or, to the knowledge of Cobalt
and the Shareholders, threatened investigation, action or proceeding ("ACTION")
against Cobalt or any of its assets by or before any court, governmental entity
or arbitrator.
2.10. Absence of Certain Changes and Events. Except as otherwise
disclosed on Schedule 2.10 or in the Cobalt Financial Statements, since the
Cobalt Financial Statement Date:
(a) Cobalt has not incurred any material obligation or
liability except for obligations incurred in the ordinary course of business;
(b) no casualty, loss or damage has occurred with respect to
Cobalt's assets, whether or not the same is covered by insurance, except for
those casualties, losses or damages which would not, individually or in the
aggregate, be reasonably expected to exceed $50,000;
(c) Cobalt has not sold, transferred, pledged, encumbered or
otherwise disposed of any of its assets or any interest therein, or agreed to do
any of the foregoing, except for sales of assets for aggregate proceeds not in
excess of $10,000;
(d) Cobalt has not written off as uncollectible any of its
accounts receivable, or written down the value of any of its assets, except in
each case in the ordinary course of business consistent with past practice;
(e) Cobalt has not waived or released any of its material
rights with respect to its business or assets or permitted any of such rights to
lapse except to the extent that such actions are in the ordinary course of
business or, in the exercise of Cobalt's reasonable business judgment, are
otherwise in its best interests;
(f) no executive officer or other key employee of Cobalt has
left his or her employment with Cobalt;
(g) Cobalt has not granted, and is not committed to grant, any
salary or wage increases to any of its employees, except for individual salary
or wage increases which will not exceed $15,000 in the twelve month period
commencing on the date hereof;
(h) Cobalt has not made, or committed to make, any capital
expenditures in excess of $20,000 in the aggregate;
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(i) there has been no payment, discharge or other satisfaction
of Cobalt's liabilities, whether direct or indirect, fixed or contingent or
otherwise, other than the satisfaction, in the ordinary course of business, of
liabilities reflected on the Cobalt Financial Statements or incurred in the
ordinary course of business since the Cobalt Financial Statement Date;
(j) Cobalt has not introduced any material change with respect
to its business, including without limitation with respect to the products or
services it sells, the areas in which such products or services are sold, its
marketing techniques or its accounting methods; and
(k) no Material Adverse Effect, and no event which is likely
to result in a Material Adverse Effect, has occurred.
2.11. Constituent Documents and Governmental Rules. Cobalt is in
compliance, in all material respects, with (a) its charter and by-laws and (b)
all Governmental Rules applicable to it, or its business or assets.
2.12. Governmental Orders. Schedule 2.12 sets forth a correct and
complete list of all Governmental Orders which name Cobalt or are directed to or
apply to Cobalt or any of its respective assets. Cobalt is in compliance with
all such Governmental Orders.
2.13. Permits. Cobalt has all permits, licenses, franchises,
certificates, authorizations, consents and approvals of governmental entities
which are necessary for the ownership or operation of its business or the
ownership, operation or use of any of its assets, except for those that the
failure to hold, either individually or in the aggregate, would not result in a
Material Adverse Effect (collectively, "PERMITS"). Such Permits are in full
force and effect and represent all governmental permits, licenses, franchises,
certificates, authorizations, consents and approvals necessary under applicable
Governmental Rules for Cobalt to carry on its business as now being conducted
and to own, occupy or use their respective assets, except for those that the
failure to hold, either individually or in the aggregate, would not result in a
Material Adverse Effect. Cobalt has not received any notice from any
governmental entity that it intends to cancel, revoke, terminate, suspend or not
renew any such Permit. Cobalt is in compliance in all material respects, with
all Permits.
2.14. Environmental Matters. Except as otherwise disclosed on Schedule
2.14:
(a) Cobalt is in compliance in all material respects with all
applicable Environmental Rules (as defined below) which compliance includes,
without limitation, the possession by Cobalt of permits and other governmental
authorizations required under applicable Environmental Rules, and compliance
with the terms and conditions thereof except where the failure to comply, either
individually or in the aggregate, would not result in a Material Adverse Effect;
(b) Cobalt has not received written notice of, or is the
subject of, any actions, causes of action, claims, investigations, demands, or
notices by any person or entity alleging liability under or noncompliance with
any Environmental Rule ("ENVIRONMENTAL CLAIMS");
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(c) no Hazardous Substances (defined below) are being or have
been generated, used, processed, treated, stored, released, transported or
disposed of by Cobalt except in compliance with applicable Environmental Rules;
(d) to the knowledge of Cobalt and the Shareholders, no
Hazardous Substances are present on or under any real property (including
without limitation in any body of water located thereon or adjacent thereto or
any groundwater located thereunder) now or previously owned, leased, occupied or
used by Cobalt, or in any improvement located thereon, in quantities or at
levels which require reporting or remediation under any applicable Environmental
Rule; and
(e) to the knowledge of Cobalt and the Shareholders, no event
has occurred and no condition exists with respect to Cobalt or its business or
assets which has resulted in, or is likely to result in, any material liability,
cost or expense to Cobalt under any applicable Environmental Rule, and Cobalt
has not received any notice from any governmental entity or other Person of its
intention to impose any such liability, cost or expense upon Cobalt.
As used in this Agreement the following terms have the following
meanings:
"ENVIRONMENTAL RULE" shall mean any Governmental Rule which
relates to Hazardous Substances, pollution or protection of the environment,
natural resources or public health or safety, including without limitation any
Governmental Rule relating to the generation, use, processing, treatment,
storage, release, transport or disposal of Hazardous Substances, together with
all rules, regulations and orders issued thereunder, as any of the same may be
amended.
"HAZARDOUS SUBSTANCE" shall mean any substance which
constitutes, in whole or in part, a pollutant, contaminant or toxic or hazardous
substance or waste under, or the generation, use, processing, treatment,
storage, release, transport or disposal of which is regulated by, any
Governmental Rule, and shall specifically include, without limitation, any
substance which (i) constitutes a "hazardous substance" under the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., or a "hazardous waste" under the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., (ii) exhibits any of the hazardous
characteristics enumerated in 40 C.F.R. Sections 261.20-261.24, inclusive, (iii)
constitutes any of those extremely hazardous substances referred to in Section
302 of the Superfund Amendments and Reauthorization Act of 1986, Public Law
99-499, 100 Stat. 1613, at 42 U.S.C. Section 11002, (iv) constitutes a hazardous
material which, when transported, is subject to regulation by the United States
Department of Transportation at 49 C.F.R. Parts 171-199 or (v) constitutes
asbestos, urea formaldehyde, chlorinated biphenyls (polychlorinated or
monochlorinated) or petroleum products.
2.15. Real Property. Cobalt has sufficient title, leaseholds or rights
to real property to conduct its business as currently conducted. Cobalt does not
own or have the right to acquire any real property. Schedule 2.15 sets forth a
correct and complete list of all leases, subleases and
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other agreements or rights pursuant to which Cobalt has the right to occupy or
use any real property owned by others.
2.16. Personal Property.
(a) Schedule 2.16 sets forth a correct and complete list of
all leases and other agreements pursuant to which Cobalt leases any equipment,
machinery, trade fixtures, tools, vehicles, computer hardware, computer software
or furniture (collectively, "EQUIPMENT").
(b) Except as otherwise disclosed on Schedule 2.16, all
Equipment owned or leased by Cobalt, is in good repair and operating condition,
reasonable wear and tear excepted, and is generally suitable for the purposes
for which it is used.
(c) Except as otherwise disclosed on Schedule 2.16, as of May
31, 2000 all accounts receivable of Cobalt (i) represent amounts receivable for
goods actually delivered or services actually provided (or, in the case of
non-trade receivables, represent amounts receivable in respect of other bona
fide business transactions); (ii) to the knowledge of Cobalt and the
Shareholders, are not subject to any material defenses, counterclaims or rights
of setoff, (iii) have been billed and are generally due and payable within 60
days after billing, and (iv) are expected to be fully collectible in the
ordinary course of business except, in the case of receivables arising prior to
May 31, 2000, to the extent of the reserves set forth in the Cobalt Financial
Statements.
2.17. Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service ▇▇▇▇ registrations and
applications therefor throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world, and (viii) any similar or equivalent rights to any of the foregoing
anywhere in the world.
"COBALT INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Cobalt.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or
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applications related to trademarks; (iii) registered copyrights and applications
for copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"COBALT REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, Cobalt.
(a) No material Cobalt Intellectual Property or product or
service of Cobalt is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Cobalt, or which may affect the validity, use or
enforceability of such Cobalt Intellectual Property.
(b) Schedule 2.17 is a complete and accurate list of all
Cobalt Registered Intellectual Property and specifies, where applicable, the
jurisdictions in which each such item of Cobalt Registered Intellectual Property
has been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers. Each material item of Cobalt Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees currently due in connection with such Registered Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Registered Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property.
(c) Cobalt owns and has good and exclusive title to, or has
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to, each material item of Cobalt Intellectual
Property or other Intellectual Property used by Cobalt free and clear of any
lien or encumbrance (excluding licenses and related restrictions); and Cobalt is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of Cobalt, including the sale of any
products or the provision of any services by Cobalt.
(d) Cobalt owns exclusively, and has good title to, all
copyrighted works that are Cobalt products or which Cobalt otherwise expressly
purports to own.
(e) To the extent that any material Intellectual Property has
been developed or created by a third party (i.e., independent contractors) for
Cobalt, Cobalt has a written agreement with such third party with respect
thereto and Cobalt thereby either (i) has obtained ownership of, and is the
exclusive owner of, or (ii) has obtained a license (sufficient for the conduct
of its business as currently conducted and as proposed to be conducted) to all
such third party's Intellectual Property in such work, material or invention by
operation of law or by valid assignment, to the fullest extent it is legally
possible to do so.
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(f) Cobalt has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was
material to Cobalt Intellectual Property, to any third party, except to those
customers of Cobalt described on Schedule 7.02.
(g) The Disclosure Schedule lists all material contracts,
licenses and agreements to which Cobalt is a party (i) with respect to Cobalt
Intellectual Property licensed or transferred to any third party (other than
end-user licenses in the ordinary course); or (ii) pursuant to which a third
party has licensed or transferred any material Intellectual Property to Cobalt.
(h) All material contracts, licenses and agreements relating
to the Cobalt Intellectual Property are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of such contracts, licenses and agreements. Cobalt is in material
compliance with, and has not materially breached any term any of such contracts,
licenses and agreements and, to the knowledge of Cobalt, all other parties to
such contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
(i) The operation of the business of Cobalt as such business
currently is conducted, including Cobalt's design, development, manufacture,
marketing and sale of the products or services of Cobalt (including with respect
to products currently under development) has not, does not and will not, to the
knowledge of Cobalt and the Shareholders, infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(j) Cobalt has not received notice from any third party that
the operation of the business of Cobalt or any act, product or service of
Cobalt, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(k) To the knowledge of Cobalt and the Shareholders, no person
has or is infringing or misappropriating any Cobalt Intellectual Property.
(l) Cobalt has taken reasonable steps to protect Cobalt's
rights in Cobalt's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Cobalt, and, without limiting the foregoing, Cobalt has and enforces
a policy requiring each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Parent and all current and former employees and contractors of Cobalt have
executed such an agreement, except where the failure to do so is not reasonably
expected to be material to Cobalt.
2.18. Title to Assets. Except as otherwise disclosed on Schedule 2.18,
Cobalt has (a) good and marketable title to all assets purported to be owned by
it and (b) good leasehold title or license to all assets purported to be leased
or licensed by it, in each case free and clear of all liens, pledges, security
interests, claims or other encumbrances (collectively, "LIENS"), except
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inchoate Liens for taxes not yet due and payable, Liens granted to landlords
under applicable law, and Liens on assets in connection with indebtedness
reflected on the Cobalt Financial Statements and except for any defects in title
or Liens which, individually or in the aggregate, would not result in a Material
Adverse Effect.
2.19. Pension Plans. Cobalt does not maintain, nor has it previously
maintained, any Pension Plan.
As used in this Agreement, the following terms have the
following meanings:
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and all rules, regulations and orders issued thereunder, as any of the
same may be amended.
"ERISA AFFILIATE" shall mean any trade or business which,
together with Cobalt, is treated as a single employer under Section 4001(b)(1)
of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
"PENSION PLAN" shall mean any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (i) which is maintained for past or present
employees of Cobalt or any of its ERISA Affiliates or (ii) to which Cobalt or
any of its ERISA Affiliates made, or was required to make, contributions within
the preceding five years, as any of the same may be amended.
2.20. Welfare Plans and Other Benefit Plans.
(a) Except as set forth on Schedule 2.20(a), Cobalt does not
maintain any Welfare Plans (defined below). As used in this Section, "WELFARE
PLAN" means any "employee welfare benefit plan" as defined in Section 3(1) of
ERISA (i) which is maintained for past or present employees of Cobalt or any of
its ERISA Affiliates or (ii) to which Cobalt or its ERISA Affiliates made, or
was required to make, contributions within the preceding five years, as any of
the same may be amended.
(b) Schedule 2.20(b) sets forth, and Cobalt has delivered or
made available to UBICS copies or summaries of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, and arrangements, and all other employee benefit plans or
fringe benefit plans, currently adopted, maintained by, sponsored in whole or in
part by, or contributed to by Cobalt for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
(collectively, the "BENEFIT PLANS"). Except as disclosed in Schedule 2.20(b) or
Exhibit E, all Benefit Plans are in compliance in all material respects with
applicable Governmental Rules and neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, or otherwise) becoming due to any director or
any employee under any Benefit Plan, (ii) increase any benefits otherwise
payable under any Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
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2.21. Personnel Matters.
(a) Schedule 2.21 sets forth a correct and complete list of
(i) all directors and executive officers of Cobalt, (ii) all other employees of
or consultants to Cobalt, (iii) the current job title or relationship to Cobalt
of each such Person described in clauses (i) and (ii) above, (iv) the amount of
compensation (including bonuses and commissions) paid to each such Person during
the year ended December 31, 1999 and which each of them is expected by Cobalt to
receive in the year ending December 31, 2000 and (v) any employee benefits or
perquisites available to any such Person that are not generally available to
employees of Cobalt.
(b) Except as otherwise disclosed on Schedule 2.21, Cobalt is
not a party to any written employment, consulting, noncompete or similar
agreement with any Person.
(c) Except as otherwise disclosed on Schedule 2.21, (i) no
employees of Cobalt are represented by any labor union or similar organization,
(ii) Cobalt is not party to any collective bargaining or similar agreement
covering any of its employees and (iii) no labor union or similar organization
or group of employees has made a demand for recognition filed a petition seeking
a representation proceeding, or given any Cobalt Company notice of any intention
to hold an election of a collective bargaining representative at any time during
the past three years.
(d) Except as otherwise disclosed on Schedule 2.21, (i) no
strike, work stoppage, contract dispute or other labor disturbance involving any
employees of Cobalt currently exists or, to the best of Cobalt's and the
Shareholder's knowledge, is threatened and (ii) no investigation, action or
proceeding by or before any governmental entity which relates to allegedly
unfair or discriminatory employment or labor practices or the violation of any
Governmental Rule relating to employment or labor practices is pending against
Cobalt or, to the best of Cobalt's and the Shareholders' knowledge, threatened
against Cobalt.
(e) Except as set forth on Schedule 2.21, Cobalt has complied
in all material respects with all Governmental Rules pertaining to the
employment and terminating of employees, the hiring and terminating of
contractors and sub-contractors, and the immigration and employment of foreign
nationals, including, without limitation all such Governmental Rules relating to
labor relations, equal employment practices, fair employment practices,
entitlements, prohibited discrimination, terms and conditions of employment,
wages and hours, independent contractor classification, withholding
requirements, worker's compensation or other similar employment or hiring
practices or acts, and Cobalt is not engaged in any unfair labor practices or is
a party to any Action involving a violation or alleged violation of any of the
foregoing Governmental Rules.
2.22. Insurance. Schedule 2.22 sets forth a correct and complete list
of all insurance policies of which Cobalt is the owner, insured or beneficiary
(the "INSURANCE POLICIES") and indicates for each such policy any pending claims
thereunder. Cobalt has provided UBICS access to complete and correct copies of
all Insurance Policies and all other general liability and product liability
insurance policies covering Cobalt since January 1, 1998. There is no default
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with respect to any material provision contained in any of the Insurance
Policies, nor has there been any failure to give any notice or present any
material claim under any such policy in a timely fashion or as otherwise
required by any such policy. Except as otherwise disclosed on Schedule 2.22: (i)
all premiums under the Insurance Policies which were due and payable on or prior
to the date hereof have been paid in full; and (ii) Cobalt has not received
notice of any material increase in the premium under, cancellation or
non-renewal of or disallowance of any claim under any such policy.
2.23. Indebtedness.
(a) Schedule 2.23 sets forth a complete list of all
agreements, documents, instruments and securities which are currently in effect
and which create, evidence or secure any indebtedness of Cobalt (exclusive of
trade payables) or pursuant to which Cobalt has guaranteed any indebtedness or
other obligations of any other Person or has any other contingent liability.
(b) Schedule 2.23 sets forth a correct and complete list of
all outstanding trade payables of Cobalt owed to any single vendor which,
individually or in the aggregate, exceed $30,000 and payment of which is more
than 60 days overdue and, with respect to any trade payables which have not been
paid due to a dispute with a vendor, identifies the nature of such dispute.
2.24. Other Material Agreements. All written agreements and contracts
to which Cobalt is a party or by which Cobalt or any of its assets are bound are
set forth on Schedule 2.24 other than (a) agreements listed on any of Schedule
2.04 through Schedule 2.23, (b) agreements involving the payment by or to
Cobalt, or creating any liability of Cobalt (whether direct or indirect, fixed
or contingent), of less than $10,000 over the term thereof, and (c) agreements
which are cancelable by Cobalt on 30 days' notice or less without any material
liability to Cobalt. The agreements and contracts to which Cobalt is a party
listed on Schedules 2.04 through 2.24 are referred to herein as the "COBALT
AGREEMENTS".
2.25. Status of Cobalt Agreements. Each Cobalt Agreement is in full
force and effect and is enforceable against Cobalt and, to the knowledge of
Cobalt and the Shareholders, the other parties thereto, in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (b) applicable equitable principles,
whether considered in a proceeding at law or in equity and (c) reason of
generally acceptable public policy principles, consideration or limitations
imposed by or resulting from the exercise by any court of its discretion. Cobalt
is in compliance with each Cobalt Agreement to which it is a party, except, in
each case, for such non-compliance as does not (x) constitute a breach or
default (or an event which, with the giving of notice or the passage of time, or
both, would constitute a default) thereunder, (y) give to others any rights of
termination, acceleration, suspension, revocation, cancellation or amendment
thereof or (z) cause, either individually or in the aggregate, a Material
Adverse Effect. To the knowledge of Cobalt and the Shareholders, all other
parties to such Cobalt Agreements are in material compliance with the terms
thereof. Except as otherwise
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disclosed on Schedule 2.04 or 2.25, no consent of any other Person party to such
Cobalt Agreements is required in connection with the Exchange.
2.26. Transactions with Affiliates. Except as otherwise disclosed on
Schedule 2.26: (a) none of the customers, suppliers, or contractors of Cobalt
are Affiliates (defined below) of Cobalt or any of their respective officers,
directors or shareholders; (b) none of Cobalt's assets are owned or used by or
leased to any Affiliates of Cobalt or any of their respective officers,
directors or shareholders; (c) no Affiliate of Cobalt or any of its officers,
directors or shareholders is a party to any Cobalt Agreement; and (d) no
Affiliate of Cobalt or any of their respective officers, directors or
shareholders provides any legal, accounting or other services to Cobalt. As used
in this Agreement the term "AFFILIATE" means, with respect to any Person, (i)
any director, officer, partner or principal of such Person, (ii) any other
Person of which such Person is a director, officer, partner or principal, (iii)
any Person who directly or indirectly controls or is controlled by, or is under
common control with, such Person and (iv) with respect to any Person described
above who is a natural person, any spouse, parent, grandparent, child or
grandchild of such Person, and the term "control" shall mean, with respect to
any Person, the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
2.27. Customers and Suppliers. Schedule 2.27 sets forth a correct and
complete list of each of the customers and suppliers of Cobalt whose purchases
from or sales to Cobalt constituted five percent or more of Cobalt's net sales
or net purchases, respectively, during the fiscal year ended December 31, 1999
or during the five months ended May 31, 2000, (collectively "MATERIAL CUSTOMERS
AND SUPPLIERS") and indicates with respect to each the name of the party and the
respective dollar volume. Cobalt is not required to provide any material bonding
or other financial security arrangements in connection with any transactions
with any of the Material Customers and Suppliers.
2.28. Brokers. Except as described in Section 1.03, neither Cobalt nor
any of the Shareholders has employed or retained, or have any liability to, any
broker, agent or finder on account of this Agreement or any of the other
Transaction Documents or the transactions contemplated hereby or thereby.
2.29. Bank Accounts. Schedule 2.29 sets forth a correct and complete
list of the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which Cobalt maintains accounts
of any nature, the type and number of all such accounts and the names of all
persons authorized to draw thereon or make withdrawals therefrom.
2.30. Delivery of Documents; Accurate Disclosure. Cobalt has previously
made available to UBICS correct and complete copies or forms of each Cobalt
Agreement. None of the information furnished or to be furnished by Cobalt and
the Shareholders to UBICS or any of its representatives in connection with this
Agreement and the other Transaction Documents, and none of the representations
and warranties of Cobalt and the Shareholders set forth herein, in any
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other Transaction Document or in any certificate delivered in connection
herewith or therewith, (a) is or will be false or misleading in any material
respect, (b) contains or will contain any untrue statement of a material fact or
(c) omits or will omit any statement of material fact necessary to make the same
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, hereby represents and
warrants to UBICS as follows:
3.01. Investor Status. The Shareholder, if a resident of the United
States, either (a) is an "accredited investor" as such term is defined in Rule
501 promulgated under the Securities Act or (b) has such knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of acquiring the UBICS Common Stock pursuant to this
Agreement. The Shareholder resides at the address shown on Exhibit A.
3.02. Title to Capital Stock. The Shareholder has good and marketable
title to the shares of Cobalt Stock shown on Exhibit A as owned by the
Shareholder, free and clear of any and all Liens. The Shareholder is not a party
to or bound by any option, sale agreement, shareholder agreement, pledge, proxy,
voting trust, power of attorney, restriction on transfer or other agreement or
instrument which relates to the ownership, voting or transfer of any shares of
Cobalt Stock owned by the Shareholder except for those certain agreements
described on Schedule 2.26. The Shareholder has the sole and absolute right,
power and authority to sell, assign and transfer such Cobalt Stock as provided
in this Agreement. UBICS will acquire good and unencumbered title to such Cobalt
Stock, free and clear of all Liens, and not subject to any adverse claim when
acquired by UBICS pursuant to this Agreement.
3.03. Authorization of Transaction. The Shareholder has the full right,
power and authority (i) to execute and deliver this Agreement and each of the
other Transaction Documents to which he is a party, and (ii) to perform the
Shareholder's obligations hereunder and thereunder. This Agreement and the other
Transaction Documents to which the Shareholder is a party constitute the valid
and legally binding obligations of the Shareholder, enforceable against him in
accordance with their respective terms, except as the same may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditors' rights generally, now or
hereafter in effect, (b) applicable equitable principles, whether considered in
a proceeding at law or in equity, and (c) reason of generally applicable public
policy principles, considerations or limitations imposed by or resulting from
the exercise by any court of its discretion.
3.04. No Violation. The Shareholder is not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other Governmental Agency which would prevent the
execution, delivery or performance of this Agreement or any other Transaction
Document by him.
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3.05. Investment Intent. The Shareholder (i) is acquiring the UBICS
Common Stock pursuant to the Exchange solely for his own account for investment
purposes and not with a view to the distribution thereof within the meaning of
the Securities Act; and (ii) has had access to all UBICS SEC Documents (as
defined below), and has had the opportunity to obtain such additional
information as he deemed necessary in order to evaluate the merits and risks
inherent in acquiring and holding the UBICS Common Stock.
3.06. No Breach, Default, Violation or Consent. The execution, delivery
and performance by the Shareholder of this Agreement, and the other Transaction
Documents to which he is a party do not and will not:
(a) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any contract,
agreement, instrument or document to which the Shareholder is a party or by
which the Shareholder or his assets are bound;
(b) breach or otherwise violate any Governmental Order which
names the Shareholder, or is directed to the Shareholder or any of his assets;
(c) result in the creation of a Lien held by any third party
on any of his shares of Cobalt Stock;
(d) violate any Governmental Rule applicable to the
Shareholder; or
(e) except as set forth on Schedule 2.04 and 2.25, require any
consent, authorization, approval, exemption or other action by, or any filing,
registration or qualification with, any Person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UBICS
UBICS hereby represents and warrants to Cobalt and the
Shareholders as follows:
4.01. Organization and Qualification. UBICS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. UBICS is duly qualified to do business as a foreign corporation and is
in good standing in all jurisdictions in which the ownership of its assets or
the nature of its business makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified has not resulted in, and is
not likely to result in, a material adverse change in, or material adverse
effect on, the assets, business, operations, financial condition or prospects of
UBICS taken as a whole.
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4.02. Authority and Authorization. UBICS has the corporate power and
authority to own, lease and operate its properties and assets, to conduct its
business as presently conducted and to execute, deliver and perform this
Agreement and the other Transaction Documents.
4.03. Execution and Binding Effect. The Exchange, this Agreement, the
other Transaction Documents and the transactions contemplated hereby and
thereby, have been, and on the Closing Date will be, duly authorized and
approved by UBICS' Board of Directors, and no other approvals are required
before UBICS may duly execute, deliver and perform its obligations under this
Agreement and each of the other Transaction Documents. This Agreement has been
and on the Closing Date the other Transaction Documents will be, duly and
validly executed and delivered by UBICS and constitutes (or upon such execution
and delivery will constitute) legal, valid and binding obligations of UBICS
enforceable against UBICS in accordance with their respective terms, except as
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (b) applicable equitable principles, whether considered in a
proceeding at law or in equity, and (c) reason of generally applicable public
policy principles, considerations or limitations imposed by or resulting from
the exercise by any court of its discretion.
4.04. No Breach, Default, Violation or Consent. The execution, delivery
and performance by UBICS of this Agreement and the other Transaction Documents
do not and will not:
(a) violate the Certificate of Incorporation or by-laws of
UBICS;
(b) breach or result in a default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any consent under or give to others any rights of termination,
acceleration, suspension, revocation, cancellation or amendment of any material
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which UBICS is a party or by which it or any of its
properties or assets may be bound;
(c) breach or otherwise violate any Governmental Order which
names UBICS or is directed to UBICS or any of its assets;
(d) result in the creation of a Lien held by any third party
on any of UBICS' assets;
(e) violate any Governmental Rule applicable to any of UBICS
or respective its business or assets; or
(f) require any consent, authorization, approval, exemption or
other action by, or any filing, registration or qualification with, any Person.
4.05. Capitalization. The authorized capitalization of UBICS consists
of (i) 20,000,000 shares of UBICS Common Stock, of which 6,579,800 shares are
issued and outstanding and
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(ii) 2,000,000 shares of preferred stock, par value $.01 per share, none of
which are issued and outstanding. All of the issued and outstanding shares of
UBICS Common Stock have been duly authorized and validly issued in compliance
with applicable Governmental Rules relating to the issuance of securities and
are fully paid and non-assessable. The shares of UBICS Common Stock to be issued
in the Exchange, when issued in accordance with the terms of this Agreement,
will be duly authorized and validly issued in compliance with applicable United
States federal and state Governmental Rules relating to the issuance of
securities, fully paid and nonassessable, and the issuance of all such shares is
not subject to any preemptive rights.
4.06. Securities Matters and Financial Statements.
(a) UBICS has filed with the SEC, and has heretofore made
available to Cobalt and the Shareholders true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
and its Subsidiaries since September 1, 1997 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "UBICS SEC DOCUMENTS"), which are all the documents
(other than preliminary material) that UBICS, or any present or former
Subsidiary of UBICS, was required to file with the SEC since such date. As of
their respective filing dates, the UBICS SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
the UBICS SEC Documents. As of their respective dates or, if amended, as of the
date of the last such amendment, the UBICS SEC Documents, including, without
limitation, any financial statements or schedules included therein did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The financial statements (including the related notes) of
UBICS included in the UBICS SEC Documents (the "UBICS FINANCIAL STATEMENTS")
comply as to form in all material respects with all applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, present fairly the financial condition of UBICS and its
consolidated Subsidiaries as at the end of the periods covered thereby and the
results of its consolidated operations and the changes in its consolidated cash
flows for the periods covered thereby, and were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby subject, in
the case of the unaudited interim statements, to year-end audit adjustments
(which are not expected to be material except as otherwise disclosed on Schedule
4.06) and the lack of footnotes and other presentation items. Except as and to
the extent otherwise disclosed in the UBICS SEC Documents, the UBICS Financial
Statements or on Schedule 4.06, UBICS and its consolidated Subsidiaries have no
liabilities of any kind, whether direct or indirect, fixed or contingent or
otherwise, other than (y) liabilities which are not required to be set forth on
the UBICS Financial Statements in accordance with GAAP, and (z) liabilities
incurred in the ordinary course of business since March 31, 2000.
4.07. Absence of Certain Changes and Events. Except as otherwise
disclosed on Schedule 4.07, in the UBICS SEC Documents or in the UBICS Financial
Statements, since
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March 31, 2000, there has not been (i) any material adverse change in the
financial condition or results of operations of UBICS and its subsidiaries taken
as a whole, (ii) any split, combination or reclassification of any of UBICS'
capital stock, (iii) any material change by UBICS in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, (iv)
any deduction or payment of any dividend or other distribution or (v) any action
taken or entered into by UBICS outside of the ordinary course of business.
4.08. Litigation. There is no pending or, to UBICS' knowledge,
threatened Action against UBICS or any of its assets by or before any court,
governmental entity or arbitrator which, if decided adversely to UBICS, would
have a material adverse effect on the assets, business, results of operations,
financial condition or prospects of UBICS (a "UBICS MATERIAL ADVERSE EFFECT").
4.09. Investor Status. UBICS is an "accredited investor" as such term
is defined in Rule 501 promulgated under the Securities Act.
4.10. Delivery of Documents; Accurate Disclosure. None of the
information furnished or to be furnished by UBICS or any of its representatives
in connection with this Agreement and the other Transaction Documents, and none
of the representations and warranties of UBICS set forth herein, in any other
Transaction Document or in any certificate delivered in connection herewith or
therewith, when considered as a whole together with the UBICS SEC Documents, (a)
is or will be false or misleading in any material respect, (b) contains or will
contain any untrue statement of a material fact or (c) omits or will omit any
statement of material fact necessary to make the same not misleading.
4.11. Solvency. UBICS is and through the Closing Date will be solvent.
"SOLVENT" shall mean, for purposes of application of this provision, that (i)
the fair salable value of UBICS's property is in excess of the total amount of
its debts; and (ii) UBICS is generally able to pay its debts as they mature.
4.12. Price Stabilization. Neither UBICS nor to its knowledge any of
its officers, directors or Affiliates has taken, directly or indirectly, any
action designed to cause or result in, or which constituted, the stabilization
or manipulation of the price of the outstanding common stock or any other
outstanding securities of UBICS.
4.13. NASD Compliance. UBICS has complied with the reporting and other
requirements of the National Association of Securities Dealers to have its
common stock listed on Nasdaq.
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ARTICLE V
POST CLOSING COVENANTS
5.01. Publicity. The initial press releases with respect to the
execution of this Agreement shall be acceptable to UBICS and Cobalt. Thereafter,
neither UBICS, Cobalt nor any of their respective Affiliates shall issue or
cause the publication of any press release or other public announcement with
respect to the Exchange, this Agreement or the other transactions contemplated
hereby (including, without limitation, the failure to execute this Agreement or
the failure to consummate the transactions contemplated hereby) without the
prior agreement of the other party (which shall not be unreasonably withheld or
delayed), except as may be required by law or by the NASDAQ National Market
("NASDAQ"), in which case each party will use reasonable efforts to consult with
the other party prior to any such issuance.
5.02. Best Efforts; Notification.
(a) The parties agree to use their reasonable best efforts to
take or cause to be taken and to do or cause to be done all such actions and
things as shall be necessary or advisable, or as shall be reasonably requested
by the other party, in order to consummate the transactions contemplated hereby
and by the other Transaction Documents. Without limiting the generality of the
foregoing, the parties agree to take all reasonable actions necessary in order
to (i) obtain any consent or approval of any third party, including without
limitation any governmental entity, which is required in connection with this
Agreement or the other Transaction Documents or any of the transactions
contemplated hereby or thereby and (ii) comply with the requirements of federal
and state securities and Blue Sky laws with respect to the securities to be
issued pursuant to this Agreement.
(b) Cobalt shall give prompt notice to UBICS of (i) the
occurrence of any Material Adverse Effect, and (ii) the occurrence or failure to
occur of an event that would, or with the lapse of time would, reasonably be
expected to cause any condition to the consummation of the Exchange not to be
satisfied.
(c) UBICS shall give prompt notice to Cobalt and the
Shareholders of (i) the occurrence of any UBICS Material Adverse Effect, and
(ii) the occurrence or failure to occur of an event that would, or with the
lapse of time would, reasonably be expected to cause any condition to the
consummation of the Exchange not to be satisfied.
5.03. Tax-Free Reorganization. Each of the parties to this Agreement
shall use its best reasonable efforts to cause the Exchange to be treated as a
tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Code.
5.04. Confidentiality.
(a) As used in this Section, the "CONFIDENTIAL INFORMATION" of
a party shall mean all information concerning or related to the business,
operations, financial condition or prospects of such party or any of its
Affiliates, regardless of the form in which such information appears and whether
or not such information has been reduced to a tangible form, and shall
specifically include (i) all information regarding the officers, directors,
employees, equity holders, customers, suppliers, distributors, sales
representatives and licensees of such party and
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its Affiliates, in each case whether present or prospective, (ii) all
inventions, discoveries, trade secrets, processes, techniques, methods,
formulae, ideas and know-how of such party and its Affiliates and (iii) all
financial statements, audit reports, budgets and business plans or forecasts of
such party and its Affiliates; provided, that the Confidential Information of a
party shall not include (A) information which is or becomes generally known to
the public through no act or omission of the other party and (B) information
which has been or hereafter is lawfully obtained by the other party from a
source other than the party to whom such Confidential Information belongs (or
any of its Affiliates or their respective officers, directors, employees, equity
holders or agents) so long as, in the case of information obtained from a third
party, such third party was or is not, directly or indirectly, subject to an
obligation of confidentiality owed to the party to whom such Confidential
Information belongs or any of its Affiliates at the time such Confidential
Information was or is disclosed to the other party.
(b) Except as otherwise permitted by subsection (c) below,
each party agrees that it will not, without the prior written consent of the
other party, disclose or use for its own benefit any Confidential Information of
the other party.
(c) Notwithstanding subsection (b) above, each of the parties
shall be permitted to:
(i) disclose Confidential Information of the other
party to its officers, directors, employees, equity holders, lenders, agents,
accountants, attorneys and Affiliates, but only to the extent reasonably
necessary in order for such party to perform its obligations and exercise its
rights and remedies under this Agreement, and such party shall take all such
action as shall be necessary or desirable in order to ensure that each of such
Persons maintains the confidentiality of any Confidential Information that is so
disclosed;
(ii) make additional disclosures of or use for its
own benefit Confidential Information of the other party, but only if and to the
extent that such disclosures or use are specifically contemplated by this
Agreement;
(iii) disclose Confidential Information of the other
party to the extent, but only to the extent, required by Governmental Rules;
provided, that prior to making any disclosure pursuant to this subparagraph, the
party required to make such disclosure (the "DISCLOSING PARTY") shall notify the
other party (the "AFFECTED PARTY") of the same, and the Affected Party shall
have the right to participate with the Disclosing Party in determining the
amount and type of Confidential Information of the Affected Party, if any, which
must be disclosed in order to comply with Governmental Rules; and
(iv) in the case of ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇,
utilize and disclose Confidential Information of UBICS after the Closing as
necessary to perform their duties as employees of Cobalt.
5.05. Nasdaq Listing. UBICS shall prepare and file with the National
Association of Securities Dealers the required documents and make payment of the
required fees for the listing
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on Nasdaq of the shares of UBICS Common Stock to be issued to the Shareholders
pursuant to the Exchange.
5.06. Release of Guarantees. At or within 30 days following the
Closing, UBICS shall issue its guaranty of those obligations of Cobalt listed on
Annex 5.11 (the "GUARANTEED OBLIGATIONS") and shall use its reasonable
commercial efforts to cause the obligees of such Guaranteed Obligations to
release the guarantees of such Guaranteed Obligations issued by the
Shareholders. In the event that UBICS has not caused the full release of the
guarantors of any Guaranteed Obligations within thirty (30) days following the
Closing Date, then within forty-five (45) days following the Closing Date, UBICS
shall, or shall cause Cobalt to, fully repay the outstanding balance of such
Guaranteed Obligations regardless whether such balance is then due and payable.
5.07. Securities Law Compliance. From and after the Closing Date, the
Company shall:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(c) furnish to any Shareholder promptly upon its written
request therefor (i) a written statement by the Company that it has complied
with the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act and (ii) and such reports and documents as may have been filed by
the Company with the SEC, as may be reasonably requested by any Shareholder in
availing such Shareholder of any rule or regulation of the SEC permitting the
selling of any such securities without registration.
5.08. Cobalt Board of Directors. Following the Closing, UBICS shall
take such action as shall be necessary to elect to, and maintain on, the Board
of Directors of Cobalt, two representatives of the Shareholders. Such
representatives may be any two of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇, as chosen by the Shareholders. The obligation of UBICS to elect and
maintain one of such representatives of the Shareholders on the Board of
Directors of Cobalt shall terminate when either of the following events to
occur: (a) the Shareholders collective ownership of UBICS Common Stock
represents less than 4% of the total issued and outstanding shares of UBICS
Common Stock or (b) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. cease to be employed
by Cobalt, UBICS or any of their respective affiliates. Thereafter, the
obligation of UBICS to maintain the other of such representatives of the
Shareholders on the Board of Directors of Cobalt shall terminate upon the
occurrence of the later of (a) and (b) described above.
5.09. Registration Rights. In the event that, in connection with a
future acquisition in which UBICS issues shares of its common stock, UBICS
grants registration rights (whether demand, piggy-back or otherwise) with
respect to some or all of such shares, UBICS shall also
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grant to the Shareholders comparable and pro rata piggy-back registration rights
with respect to the UBICS Common Stock issued pursuant to this Agreement.
ARTICLE VI
CLOSING AND CLOSING CONDITIONS
6.01. Closing. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at 2:00 p.m., local time, on July 5,
2000 (the "CLOSING DATE"), at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, One Mellon
Bank Center, 50th Floor, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
unless another time, date or place is agreed to in writing by the parties
hereto.
6.02. Conditions Precedent to Obligations of UBICS. The obligations of
UBICS hereunder to proceed with the Closing shall be subject to the satisfaction
on or prior to the Closing Date of each of the following conditions precedent
(unless otherwise waived by UBICS):
(a) Accuracy of Representations and Warranties. The
representations and warranties of Cobalt and the Shareholders set forth herein
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of such date, except as
otherwise contemplated or permitted by the terms of this Agreement.
(b) Performance and Compliance. Cobalt and the Shareholders
shall have performed or complied in all material respects with each covenant and
agreement to be performed or complied with by them hereunder on or prior to the
Closing Date.
(c) Consents and Approvals. All authorizations, approvals or
consents required to permit the consummation of the Exchange and the other
transactions contemplated hereby shall have been obtained and be in full force
and effect.
(d) Litigation. There shall be no pending or threatened action
by or before any governmental entity or arbitrator seeking to restrain, prohibit
or invalidate any of the transactions contemplated hereby or by any of the other
Transaction Documents or seeking monetary relief against UBICS by reason of the
consummation of such transactions, and there shall not be in effect any
Governmental Order which has such effect.
(e) Material Adverse Effect. No event shall have occurred and
no condition shall exist which constitutes or, with the giving of notice or the
passage of time, or both, is likely to constitute, a Material Adverse Effect.
(f) Officer's Certificate. Cobalt shall have delivered to
UBICS a certificate of its President dated the Closing Date and certifying that
each of the conditions specified in subsections (a), (b), (c), (d) and (e) above
have been met.
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(g) Secretary's Certificate. Cobalt shall have delivered to
UBICS a certificate of its Secretary dated the Closing Date and certifying (i)
that correct and complete copies of its charter and by-laws are attached
thereto, (ii) that correct and complete copies of each resolution of its board
of directors and shareholders approving this Agreement and the other Transaction
Documents to which it is a party and authorizing the execution hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
are attached thereto and (iii) the incumbency and signatures of the officers of
Cobalt authorized to execute and deliver this Agreement and the other
Transaction Documents to which Cobalt is a party on behalf of Cobalt.
(h) Good Standing Certificate. Cobalt shall have delivered to
UBICS a certificate of the Secretary of State of the State of Arizona dated as
of a recent date, as to the legal existence and good standing of Cobalt.
(i) Opinion of Counsel. Cobalt shall have delivered to UBICS
an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ dated the Closing Date and in substantially the
form attached hereto as Exhibit F.
(j) Other Transaction Documents. Cobalt and any other parties
thereto (other than UBICS) shall have executed and delivered to UBICS the Escrow
Agreement (together with this Agreement, and the agreements referred to in
Sections 6.02(l) and (m), the "TRANSACTION DOCUMENTS").
(k) No Registration of Securities. The issuance of the
Exchange Shares shall be exempt from the registration requirements of the
Securities Act and applicable state securities laws.
(l) Employment Agreements. Employment agreements between
Cobalt and each of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ each dated as of the
Closing Date and in substantially the forms of Exhibits C-1 and C-2, shall have
been executed and delivered by the parties thereto (the "EMPLOYMENT
AGREEMENTS").
(m) Non-Competition Agreement. Bitter End Investments, L.L.C.
shall have entered into a non-competition agreement with UBICS and Cobalt in the
form of Exhibit D.
6.03. Conditions Precedent to Obligations of Cobalt and the
Shareholders. The obligations of Cobalt and the Shareholders hereunder to
proceed with the Closing shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions precedent (unless otherwise
waived by Cobalt and the Shareholders):
(a) Accuracy of Representations and Warranties. The
representations and warranties of UBICS set forth herein shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of such date.
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(b) Performance and Compliance. UBICS shall have performed or
complied in all material respects with each covenant and agreement to be
performed or complied with by it hereunder on or prior to the Closing Date.
(c) Consents and Approvals. All authorizations, approvals or
consents required to permit the consummation of the Exchange and the other
transactions contemplated hereby shall have been obtained and be in full force
and effect.
(d) Litigation. There shall be no pending or threatened action
by or before any governmental entity or arbitrator seeking to restrain, prohibit
or invalidate any of the transactions contemplated hereby or by any of the other
Transaction Documents or seeking monetary relief against Cobalt by reason of the
consummation of such transactions, and there shall not be in effect any
Governmental Order which has such effect.
(e) Officer's Certificate. UBICS shall have delivered to
Cobalt a certificate of its President dated the Closing Date and certifying that
each of the conditions specified in subsections (a), (b), (c) and (d) above have
been met.
(f) Secretary's Certificate. UBICS shall have delivered to
Cobalt a certificate of its Secretary dated the Closing Date and certifying (i)
that correct and complete copies of its certificate of incorporation and by-laws
are attached thereto, (ii) that correct and complete copies of each resolution
of its board of directors approving this Agreement and the other Transaction
Documents to which it is a party and authorizing the execution hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
are attached thereto and (iii) the incumbency and signatures of the officers of
UBICS authorized to execute and deliver this Agreement and the other Transaction
Documents to which UBICS is a party on behalf of UBICS.
(g) Good Standing Certificate. UBICS shall have delivered to
Cobalt a certificate of the Secretary of State of the State of Delaware dated as
of a recent date, as to the legal existence and good standing of UBICS.
(h) Other Transaction Documents. UBICS and any other parties
thereto (other than Cobalt and the Shareholders) shall have executed and
delivered to Cobalt the Escrow Agreement and the other Transaction Documents to
which they are parties.
(i) Employment Agreements. UBICS shall have executed and
delivered the Employment Agreements.
(j) Opinion of Counsel. UBICS shall have delivered to Cobalt
an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP dated the Closing Date and in substantially
the form attached hereto as Exhibit G.
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ARTICLE VII
INDEMNIFICATION
7.01. Survival of Representations and Warranties. The representations
and warranties of Cobalt, the Shareholders and UBICS contained in Articles II,
III and IV shall survive the Closing until the Escrow Termination Date (as
defined below).
7.02. Indemnification.
(a) The Shareholders, jointly and severally, shall indemnify
UBICS and its Affiliates and their respective officers, directors, employees,
agents, and representatives (the "UBICS INDEMNIFIED PARTIES") against, and agree
to hold the UBICS Indemnified Parties harmless from, any and all liabilities,
losses, costs, claims, damages (including consequential damages), penalties and
expenses (including attorneys' fees and expenses and costs of investigation and
litigation) ("LOSSES") incurred or suffered by them relating to or arising out
of or in connection with any of the following:
(i) any breach of or any inaccuracy in any
representation or warranty made by Cobalt or any Cobalt Shareholder in this
Agreement, the other Transaction Documents or any other document delivered at
the Closing;
(ii) any breach of or failure by Cobalt or any Cobalt
Shareholder to perform any covenant or obligation of such parties set out or
contemplated in this Agreement, the other Transaction Documents or any other
document delivered at the Closing (unless such breach or failure was waived by
UBICS); or
(iii) any claim of rights to Intellectual Property by
any of the parties identified on Schedule 7.02 or their successors or assigns
arising from or relating to agreements between such parties and Cobalt made
prior to the Closing.
(b) UBICS shall indemnify the Shareholders and each of their
respective officers, managers, employees, representatives, agents, heirs,
representatives, administrators, successors and assigns (the "COBALT INDEMNIFIED
PARTIES") against, and agrees to hold each of them harmless from, any and all
Losses incurred or suffered by them relating to or arising out of or in
connection with any of the following:
(i) any breach of or any inaccuracy in any
representation or warranty made by UBICS in this Agreement, the other
Transaction Documents or any other document delivered at the Closing; or
(ii) any breach of or failure by UBICS to perform any
covenant or obligation of UBICS set forth or contemplated in this Agreement, the
other Transaction Documents or any other document delivered at the Closing.
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7.03 Claims. The provisions of this Section shall be subject to Section
7.04. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement, the party claiming indemnification (the
"INDEMNIFIED PERSON") shall promptly give notice to the Party or Parties from
whom indemnification is requested (the "INDEMNIFYING PERSONS") (and, if a UBICS
Indemnified Party is the Indemnified Person, the Escrow Agent) of such claim and
the amount the Indemnified Person reasonably believes such Indemnified Person
will be entitled to receive hereunder from the Indemnifying Persons; provided,
however that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Persons of their obligations under this Article VII,
except to the extent (if any) that the Indemnifying Persons shall have been
prejudiced thereby. If the Indemnifying Persons do not object in writing to such
indemnification claim within 30 calendar days of receiving notice thereof, the
Indemnified Person shall be entitled to recover from the Indemnifying Person
(and, if a UBICS Indemnified Party is the Indemnified Person, the Escrow Agent)
within five Business Days after such 30 day period, the amount of such claim
(but such recovery shall not limit the amount of any additional indemnification
to which the Indemnified Person may be entitled pursuant to Section 7.02 or
7.03). If the Indemnifying Persons agree that they have an indemnification
obligation, but object in writing that they are obligated to pay only a lesser
amount, the Indemnified Person shall nevertheless be entitled to recover from
the Indemnifying Persons (and, if a UBICS Indemnified Party is the Indemnified
Person, the Escrow Agent) within five Business Days of the receipt of such
objection, the lesser amount, without prejudice to the Indemnified Person's
claim for the difference.
7.04. Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Persons and the Escrow Agent of the assertion of any claim, or
the commencement of any suit, action or proceeding, by any person not a party
hereto in respect of which indemnity may be sought under this Agreement;
provided, however that the failure of the Indemnified Person to give notice
shall not relieve the Indemnifying Persons of their obligations under this
Article VII, except to the extent (if any) that the Indemnifying Persons shall
have been prejudiced thereby. The Indemnifying Persons may, at their own expense
participate in the defense of any claim, suit, action or proceeding, provided,
however that (i) the Indemnifying Persons' counsel is reasonably satisfactory to
the Indemnified Person, and (ii) the Indemnifying Persons shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for such consultation from time to time with respect to such claim,
suit, action or proceeding. If the Indemnifying Persons assume such defense, the
Indemnified Person shall have the right (but not the obligation) to participate
as counsel of record in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Persons. If,
however, the Indemnified Persons reasonably determine in their judgment that
representation by the Indemnifying Persons' counsel of both the Indemnifying
Persons and the Indemnified Person would present such counsel with a conflict of
interest, then such Indemnified Person may employ separate counsel to represent
or defend it in any such claim, action, suit or proceeding, and the Indemnifying
Persons shall pay the fees and disbursements of such separate counsel. Whether
or not the Indemnifying Persons choose to defend or prosecute any such claim,
suit, action or proceeding, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
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7.05. Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Persons, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 7.04 shall also be binding upon the Indemnifying Persons or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, however that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result of
such settlement without its prior written consent. The party defending the claim
shall give the other party at least 30 calendar days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time the other party may reject such proposed settlement
or compromise; provided, however that from and after such rejection, the other
party shall be obligated to assume the defense of and full and complete
liability and responsibility for such claim, suit, action or proceeding and
shall be responsible for any and all Losses in connection therewith in excess of
the amount of the proposed settlement amount.
7.06. Failure of Indemnifying Person to Act. In the event that the
Indemnifying Persons do not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Persons of their
obligations hereunder.
7.07. Escrow. If during the duration of the Escrow Agreement, a UBICS
Indemnified Party is entitled to receive an indemnification amount from the
Shareholders pursuant to this Agreement, such amount shall be satisfied to the
extent possible by a transfer to the Indemnified Party by the Escrow Agent of a
portion of the Holdback Escrow Shares, pursuant to the Escrow Agreement. The
number of shares of UBICS Common Stock to be transferred by the Escrow Agent to
the UBICS Indemnified Party shall be based on a value per share equal to the
closing sales price of the shares of UBICS Common Stock as reported on Nasdaq on
the Closing Date (the "CLOSING PRICE"). Pursuant to the Escrow Agreement, the
remaining balance of the Holdback Escrow Shares shall be released to the
Shareholders on the first anniversary of the Closing Date (the "ESCROW
TERMINATION DATE"), except if and to the extent claims have been asserted by
UBICS against the Shareholders, in which case an appropriate portion of the
Holdback Escrow Shares shall remain in Escrow until such claims are finally
resolved.
7.08. Duration of Indemnification Obligations. Claims for
indemnification under this Article may only be asserted until the Escrow
Termination Date.
7.09. Indemnification Threshold, Cap and Payment.
(a) Notwithstanding any other provision hereof, but subject to
the last sentence of this Section 7.09(a), neither party shall have any
indemnification obligations under this Article unless and until the claims
asserted against such party exceed $50,000 in the aggregate (the "THRESHOLD
AMOUNT"); thereafter, such party shall be liable for all indemnification claims
properly asserted against it, in excess of the Threshold Amount. The
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Threshold Amount shall not be applied (and shall in no way limit the full
liability of UBICS with respect) to any claim asserted by Cobalt or the
Shareholders against UBICS relating to any failure of UBICS to perform any
covenant or obligation set forth or contemplated herein or in any Transaction
Document, including without limitation failure of UBICS to perform as set forth
in Article 5.
(b) The maximum aggregate indemnification obligations of
either party under Section 7.02 shall not exceed (i) the product of (A) the
total number of Exchange Shares times (B) the Closing Price, plus (ii) the
aggregate amount of fees, expenses and other payments set forth on Exhibit E.
(c) Subject to Section 7.07, the indemnification obligations
of the Shareholders under Section 7.02 may be satisfied, at the option of the
Shareholders, by the transfer to UBICS of Exchange Shares valued at the Closing
Price, by the payment to UBICS of cash, or by a combination of the two.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Amendments. This Agreement may be amended only by a writing
signed by each of the parties, and any such amendment shall be effective only to
the extent specifically set forth in such writing.
8.02. Assignment. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned, pledged or otherwise transferred by any
party, whether by operation of law or otherwise, without the prior consent of
the other party or parties.
8.03. Counterparts; Telefacsimile Execution. This Agreement and all
agreements, certificates and documents to be delivered in connection herewith
(each an "INSTRUMENT") may be executed in any number of counterparts, and by
each of the parties on separate counterparts, each of which, when so executed,
shall be deemed an original, but all of which shall constitute but one and the
same instrument. Delivery of an executed counterpart of an Instrument by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of an Instrument. Any party delivering an executed counterpart of an
Instrument by telefacsimile also shall deliver a manually executed counterpart
of such Instrument, but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability or binding effect of such
Instrument.
8.04. Entire Agreement. This Agreement, together with the other
agreements referred to herein and the schedules and exhibits attached hereto,
contains the entire agreement of the parties with respect to the transactions
contemplated hereby and supersedes all prior written and oral agreements, and
all contemporaneous oral agreements, relating to such transactions.
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8.05. Expenses. Except as otherwise specifically provided herein or in
any other Transaction Document, each party shall be responsible for such
expenses as it may incur in connection with the negotiation, preparation,
execution, delivery, performance and enforcement of this Agreement and the other
Transaction Documents.
8.06. Further Assurances. The parties shall from time to time do and
perform such additional acts and execute and deliver such additional documents
and instruments as may be required by applicable Governmental Rules or
reasonably requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this Agreement and the
other Transaction Documents. Without limiting the generality of the foregoing,
each party agrees to endorse (if necessary) and deliver to the other, promptly
after its receipt thereof, any payment or document which it receives after the
Closing Date and which is the property of the other.
8.07. Governing Law. This Agreement shall be a contract under the laws
of the State of Delaware and for all purposes shall be governed by and construed
and enforced in accordance with the laws of said State without giving effect to
the principles of conflicts of law thereof or of any other jurisdiction.
8.08. Notices. Unless otherwise specifically provided herein, all
notices, consents, requests, demands and other communications required or
permitted hereunder:
(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S.
mail, a reliable express delivery service or telecopier (with a copy sent by one
of the foregoing means), charges prepaid as applicable, to the appropriate
address(es) or number(s) set forth below; and
(c) shall be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a business day, on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the Person delivering such communication or a notice to the effect that such
addressee refused to claim or accept such communication, if sent by messenger,
U.S. mail or express delivery service, or (ii) a receipt generated by the
sender's telecopier showing that such communication was sent to the appropriate
number on a specified date, if sent by telecopier.
All such communications shall be sent to the following
addresses or numbers, or to such other addresses or numbers as any party may
inform the others by giving five business days' prior notice:
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If to Cobalt: with a copy to:
Cobalt Creative, Inc. ▇▇▇▇▇▇▇ & Burnham PLC
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: 480.367.8656 Telecopier No.: 602.256.4475
If to the Shareholders: With a copy to:
To each of the addresses set forth ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
on Exhibit A ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: 602.263.3665
If to UBICS: With a copy to:
UBICS, Inc. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ #▇▇▇ One Mellon ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Attn: President ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇.▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇.▇▇▇▇
8.09. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
8.10. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties and their respective legal
representatives, heirs, successors and permitted assigns.
8.11. Waivers. The due performance or observance by the parties of
their respective obligations hereunder and under the other Transaction Documents
shall not be waived, and the rights and remedies of the parties hereunder and
under the other Transaction Documents shall not be affected, by any course of
dealing or performance or by any delay or failure of any party in exercising any
such right or remedy. The due performance or observance by a party of any of its
obligations hereunder or under any other Transaction Document may be waived only
by a writing signed by the party against whom enforcement of such waiver is
sought, and any such waiver shall be effective only to the extent specifically
set forth in such writing. Notwithstanding the foregoing, a party which elects
to close despite the failure of a condition to its obligation to close being
satisfied, shall be deemed to have waived such condition.
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8.12 Arbitration. Any claim, controversy or dispute arising between the
parties with respect to this Agreement (a "DISPUTE"), to the maximum extent
allowed by applicable law, shall be submitted to and finally resolved by binding
arbitration. Either party may file a written Demand for Arbitration with the
American Arbitration Association's Pittsburgh Pennsylvania or Phoenix, Arizona
Regional Office, and shall send a copy of the Demand for Arbitration to the
other party. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and the Commercial Arbitration Rules of the American
Arbitration Association, except that discovery may be had in accordance with the
Federal Rules of Civil Procedure. The venue for the arbitration shall be the
office of the American Arbitration Association where the Demand for Arbitration
is filed. The arbitration shall be conducted before a panel of three arbitrators
selected as follows:. Within 15 business days after a Demand for Arbitration is
filed, each party shall select an arbitrator and, within 10 business days after
the end of such 15-day period, such two arbitrators shall select a third
arbitrator. Each arbitrator must either have professional experience relating to
the business or legal aspects of the subject of the arbitration or be a retired
judge. No arbitrator shall (i) have any material interest in the result of the
arbitration or (ii) be, or shall ever have been, an Affiliate, equity holder or
creditor of, or an attorney, accountant, agent or consultant for, any party to
such arbitration proceeding. The arbitrators shall meet promptly, fix the time,
date and place of the hearing and notify the parties. The parties shall
stipulate that the arbitration hearing shall last no longer than five business
days. A majority of the panel shall render a decision within 10 days of the
completion of the hearing, which decision may include an award of legal fees,
costs of arbitration and interest. The panel of arbitrators shall promptly
transmit an executed copy of its decision to the parties. The decision of the
arbitrators shall be final, binding and conclusive upon the parties. Each party
shall have the right to have the decision enforced by any court of competent
jurisdiction. Notwithstanding any other provision of this Section, any Dispute
in which a party seeks equitable relief may be brought in any court having
jurisdiction. The obligations of the parties under this Section shall be
specifically enforceable and shall survive any termination of this Agreement.
8.13. Knowledge. To the knowledge of a party with respect to the
subject matter of its representations and warranties contained herein shall only
include matters about which such party had actual knowledge with respect to the
subject matters of said representations and warranties which arose prior to the
date such representations and warranties are made hereunder.
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE PAGE TO ACQUISITION AND STOCK EXCHANGE AGREEMENT
COBALT CREATIVE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
UBICS, INC.
By: /s/ Babu Srinivas
---------------------------------------
Babu Srinivas, Vice President, Finance
and Accounting
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
BITTER END INVESTMENTS L.L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Title:
------------------------------------
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Exhibit A
COBALT SHAREHOLDERS
Shares of UBICS Shares of UBICS
Shares of Cobalt Shares of Cobalt Common Stock Shares of UBICS Common Stock
Common Stock Preferred Stock to be Received Common Stock Deposited in
Name and Address Owned Owned in the Exchange Delivered at Closing Escrow
---------------- ----- ----- --------------- -------------------- ------
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 50,000 0 144,806 111,314 33,492
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 50,000 0 144,806 111,314 33,492
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Bitter End Investments, L.L.C 0 49,286 142,739 109,723 33,016
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ------- ------- ------- ------- -------
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Totals 100,000 49,286 432,351 332,351 100,000
1