EXHIBIT 10.4
SHARE PURCHASE AGREEMENT
RELATING TO THE ACQUISITION OF ALL OF THE
OUTSTANDING CAPITAL STOCK OF
BOULDER INTERACTIVE
TECHNOLOGY SERVICES CO.,
(A COLORADO CORPORATION)
BY
VERTICALNET, INC.
(A PENNSYLVANIA CORPORATION)
TABLE OF CONTENTS
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Section Page
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1. Definitions.................................................. 1
2. Purchase and Sale............................................ 7
3. Representations and Warranties of Shareholders............... 7
4. Representations and Warranties of Buyer......................18
5. Covenants of Shareholders....................................19
6. Covenants of Buyer...........................................22
7. Mutual Covenants.............................................22
8. Conditions Precedent to Obligations of Shareholders..........23
9. Conditions Precedent to Obligations of Buyer.................24
10. Indemnification..............................................25
11. Termination..................................................28
12. General Matters..............................................29
13. Remedies.....................................................31
14. Notices......................................................31
15. Governing Law................................................32
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Schedules
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3.3 Shareholder Required Consents
3.4 Stock Ownership
3.5 Financial Statements
3.6 Encumbrances
3.7 Real Property
3.8 Tangible Personal Property
3.9 Non-Real Estate Leases
3.11 Inventory and Equipment
3.12 Liabilities
3.13 Taxes
3.15 Litigation
3.16 Contracts
3.17 Insurance
3.18(a) Intellectual Property
3.18(b) Intellectual Property Contracts
3.18(c) Know-How
3.19 Directors and Officers of the Company
3.20 ERISA
3.22(c) Compensation
3.22(h) Payments to Affiliates of the Company
3.23 Customers
3.28 Additional Information
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT is made as of September 1, 1998 by and among
VERTICALNET, INC., a Pennsylvania corporation ("Buyer"), Boulder Interactive
Technology Services Co. (dba Microwave Online Services Co., RF Globalnet and
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇), a Colorado corporation (the "Company") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the "Shareholders"). Certain
other terms are used herein as defined below in Section 1 or elsewhere in this
Agreement.
Background
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Shareholders are the owners of all the issued and outstanding shares (the
"Shares") of capital stock of the Company. Buyer desires to purchase from
Shareholders, and Shareholders desire to sell to Buyer, all the Shares in
accordance with the provisions of this Agreement.
Witnesseth
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NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions
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For convenience, certain terms used in more than one part of this Agreement
are listed in alphabetical order and defined or referred to below (such terms as
well as any other terms defined elsewhere in this Agreement shall be equally
applicable to both the singular and plural forms of the terms defined).
"Acquisition Proposal" is defined in Section 5.3.
"Action" is defined in Section 10.6.
"Affiliates" means, with respect to a particular party, persons or entities
controlling, controlled by or under common control with that party, as well as
any officers, directors and majority-owned entities of that party and of its
other Affiliates. For the purposes of the foregoing, ownership, directly or
indirectly, of 20% or more of the voting stock or other equity interest shall be
deemed to constitute control.
"Agreement" means this Agreement and the Exhibits and Disclosure Schedules
hereto, as each may be amended, restated, supplemented or modified from time to
time.
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"Assets" means all of the assets, properties, goodwill and rights of every
kind and description, real and personal, tangible and intangible, wherever
situated and whether or not reflected in the most recent Financial Statements,
that are owned or possessed by the Company.
"Balance Sheet" is defined in Section 3.5.
"Balance Sheet Date" is defined in Section 3.5.
"Benefit Plan" means: (i) as to employees employed in the United States,
any (y) "employee benefit plan" as defined in Section 3(3) of ERISA, and (z)
supplemental retirement, bonus, deferred compensation, severance, incentive
plan, program or arrangement or other employee fringe benefit plan, program or
arrangement; and (ii) as to employees employed outside the United States of
America, all employee benefit, health, welfare, supplemental unemployment
benefit, bonus, pension, profit sharing, deferred compensation, stock
compensation, stock purchase, retirement, hospitalization insurance, medical,
dental, legal, disability and similar plans or arrangements or practices.
"Business" means the Company's entire business, operations and facilities.
"Buyer Indemnified Party" is defined in Section 10.1.
"Buyer Required Consents" is defined in Section 4.3.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Claim Notice" is defined in Section 10.4.
"Claim Response" is defined in Section 10.4(a).
"Closing" is defined in Section 2.1.
"Closing Certificates" means the certificates to be delivered by
Shareholders under Section 9.3 and any other provisions hereof.
"Closing Date" is defined in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Contracts" is defined in Section 3.16(b).
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"Confidential Information" means any confidential information or trade
secrets of the Company, including personnel information, know-how and other
technical information, customer lists, customer information and supplier
information.
"Contract" means any written or oral contract, agreement, lease,
instrument, or other commitment that is binding on any person or its property
under applicable law.
"Copyrights" means all copyrights in both published works and unpublished
works.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable law.
"Damages" is defined in Section 10.1.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"Disclosure Schedule" means the any of the Schedules containing information
relating to the Company or any Shareholder pursuant to Section 3 and other
provisions hereof that has been provided to Buyer on the date hereof.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 3.15(b).
"Environmental Law" means all Laws and Court Orders relating to pollution
or protection of public safety, safety or the environment as well as any
principles of common law under which a Party may be held liable for the release
or discharge of any materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" is defined in Section 10.5.
"Financial Statements" is defined in Section 3.5.
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"GAAP" means generally accepted accounting principles.
"Governmental Permits" means all governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hazardous Substances" means any toxic or hazardous gaseous, liquid or
solid material or waste that may or could pose a hazard to the environment or
human health or safety including (i) any "hazardous substances" as defined by
the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S)(S) 9601 et seq., (ii) any "extremely hazardous substance,"
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"hazardous chemical," or "toxic chemical" as those terms are defined by the
federal Emergency Planning and Community ▇▇▇▇▇-▇▇-▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. (▇)(▇)
▇▇▇▇▇ et seq., (iii) any "hazardous waste," as defined under the federal Solid
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Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., (iv) any "pollutant," as defined under the federal
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Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et seq., as any of such laws
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in clauses (i) through (iv) as amended, and (v) any regulated substance or waste
under any Laws or Court Orders that have been enacted, promulgated or issued by
any federal, state or local governmental authorities concerning protection of
the environment.
"Immaterial Lease" is defined in Section 3.9.
"Indemnified Party" is defined in Section 10.4.
"Indemnitor" is defined in Section 10.4.
"Intellectual Property" means any Copyrights, Patents, Trademarks, service
marks, trade names, information, proprietary rights, processes, technology
rights and licenses, trade secrets, franchises, know-how, inventions and other
intellectual property.
"Knowledge" means actual knowledge.
"Inventory" means all inventory, including raw materials, supplies, work in
process and finished goods.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental agency or body or of any
other type of regulatory body, including those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, claim, loss, damage, deficiency, guaranty or endorsement of or by
the Company, absolute or contingent, accrued or unaccrued, due or to become due,
liquidated or unliquidated.
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"Liquidated Claim Notice" is defined in Section 10.4(a).
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business,
including the Assets, financial condition, results of operations, liquidity,
products, competitive position, customers and customer relations thereof.
"Minor Contract" means any Contract that is terminable by a party on not
more than 30 days' notice without any Liability and any Contract under which the
obligation of a party (fulfilled and to be fulfilled) involves an amount of less
than $5,000.
"Non-Real Estate Leases" is defined in Section 3.9.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Patents" means all patents, patent applications, and inventions and
discoveries that may be patentable.
"Person" means any natural person, corporation, partnership, limited
liability company, proprietorship, association, trust or other legal entity.
"Prime Rate" means the prime lending rate as announced from time to time in
The Wall Street Journal.
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"Purchase Price" is defined in Section 2.1.
"Real Estate Leases" is defined in Section 3.7.
"Real Property" is defined in Section 3.7.
"Response Period" is defined in Section 10.4(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Representatives" means any investment advisors, accountants,
counsel, agents or other Persons who may act on behalf of Shareholders.
"Shareholder Required Consents" is defined in Section 3.3.
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"Taxes" means all taxes, duties, charges, fees, levies or other assessments
imposed by any taxing authority including, without limitation, income, gross
receipts, value-added, excise, withholding, personal property, real estate,
sale, use, ad valorem, license, lease, service, severance, stamp, transfer,
payroll, employment, customs, duties, alternative, add-on minimum, estimated and
franchise taxes (including any interest, penalties or additions attributable to
or imposed on or with respect to any such assessment).
"Tax Return" means any return (including any information return), report,
statement, schedule, notice, form, estimate or declaration of estimated tax
relating to or required to be filed with any governmental authority in
connection with the determination, assessment, collection or payment of any Tax.
"Termination Date" is defined in Section 2.2.
"Trade Secrets" means all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints, owned, used or licensed (as
licensor or licensee) by the Company, except for any such item that is (i)
generally available to the public, (ii) becomes available to a Person on a non-
confidential basis from a source other than the Company or its representatives,
which has represented to the Person (and which the Person has no reason to
disbelieve after due inquiry) that it is entitled to disclose it or (iii) was in
the possession of or was known to the Person on a non-confidential basis prior
to the disclosure thereof to the Person by the Company or its representatives.
"Transaction Documents" means this Agreement and the documents contemplated
hereby.
"Transactions" means the sale of the Shares and the other transactions
contemplated by the Transaction Documents.
"Unliquidated Claim" is defined in Section 10.4(a).
"Welfare Plan" is defined in Section 3.20(g).
2. Purchase and Sale
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2.1 Purchase and Sale. Subject to the terms and conditions contained in
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this Agreement, on the Closing Date, Shareholders shall sell, assign, transfer
and deliver to Buyer, and Buyer shall purchase from Shareholders, all of the
Shares in exchange for a purchase price of $1,800,000 (the "Purchase Price"),
which shall be paid in cash by wire transfer of immediately available funds to
each Shareholder in an amount based on such Shareholder's pro rata ownership of
the Shares on the Closing Date, and to such accounts at such banks as
Shareholders shall direct.
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2.2 Closing. The closing (the "Closing") of the sale and purchase of the
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Shares shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇
▇▇▇▇▇ Square, Philadelphia, Pennsylvania, commencing at 10:00 A.M., local time,
on the first business day after the conditions set forth in Sections 8 and 9
have been satisfied, or at such other date, time or place as may be agreed upon
in writing by the parties hereto, but not later than September 1, 1998 (the
"Termination Date"). The date of the Closing is sometimes herein referred to as
the "Closing Date."
2.3 Items to be Delivered Immediately Prior to or at Closing. At the
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Closing:
(i) In exchange for the payment by Buyer to Shareholders of the
Purchase Price, Shareholders shall deliver to Buyer a certificate or
certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank,
(ii) Shareholders shall also deliver to Buyer, and Buyer shall
deliver to Shareholders, the certificates referred to in Sections 8 and 9,
and
(iii) Buyer shall deliver to each of the Shareholders the Purchase
Price.
3. Representations and Warranties of Shareholders.
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Each Shareholder hereby represents and warrants to Buyer the
representations and warranties set forth in Sections 3.2 and 3.3 and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, jointly and severally, hereby represent and warrant
to Buyer the representations and warranties in this Section 3.
3.1 Corporate Status. The Company is a corporation duly organized,
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validly existing and in good standing under the Laws of the State of Colorado
and is qualified to do business as a foreign corporation in any jurisdiction
where it is required to be so qualified. The Charter Documents and bylaws of
the Company that have been delivered to Buyer as of the date hereof are
effective under applicable Laws and are current, correct and complete.
3.2 Authorization. Each Shareholder has the requisite power and authority
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to execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions performed or to be performed by it. Each Transaction
Document executed and delivered by Shareholders has been duly executed and
delivered by each Shareholder and constitutes a valid and binding obligation of
Shareholders, enforceable against such Shareholder in accordance with its terms.
3.3 Consents and Approvals. Except for any consents specified in SCHEDULE
----------------------
3.3 (collectively the "Shareholder Required Consents"), neither the execution
and delivery by any Shareholder of the Transaction Documents to which it is a
party, nor the performance of the
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Transactions performed or to be performed by any Shareholder, require any
filing, consent or approval, constitute a Default or cause any payment
obligation to arise under (a) any Law or Court Order to which any Shareholder is
subject, (b) the Charter Documents or bylaws of the Company or (c) any Contract,
Governmental Permit or other document to which the Company is a party or by
which the properties or other assets of the Company may be subject.
3.4 Stock Ownership. The Shareholders are the sole record and beneficial
---------------
owners of all of the issued and outstanding shares of common stock (and options
to purchase common stock) of the Company, and the respective shares owned by the
Shareholders are specified on SCHEDULE 3.4. Except as set forth on SCHEDULE
3.4, there are no existing options, warrants, calls, commitments or other rights
of any character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued common stock or other securities of the
Company.
3.5 Financial Statements. Attached hereto as SCHEDULE 3.5 are the
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following financial statements of the Company (collectively, the "Financial
Statements"): (i) the balance sheet as of December 31, 1997 and the related
statements of operations, shareholders' equity and cash flows for the fiscal
year ended December 31, 1997, and (ii) the balance sheet as of June 30, 1998
and the related statements of operations, shareholders' equity and cash flows
for the fiscal quarter ended June 30, 1998. The Financial Statements have been
prepared in accordance with GAAP and (with the exception of Note 6 (Income
Taxes)) present fairly, in all material respects, the financial position of the
Company, and the results of its operations and its cash flows for the period
then ended. The balance sheet of the Company as of June 30, 1998 that is
included in the Financial Statements is referred to herein as the "Balance
Sheet," and the date thereof is referred to as the "Balance Sheet Date."
3.6 Title to Assets and Related Matters. The Company has good and
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marketable title to, valid leasehold interests in or valid licenses to use, all
of its Assets, free from any Encumbrances except those specified in SCHEDULE
3.6. The use of the Assets are not subject to any Encumbrances (other than those
specified in the preceding sentence), and such use does not, to the Knowledge of
the Shareholders, encroach on the property or rights of anyone else. Except as
set forth on SCHEDULE 3.11, all tangible personal property (other than
Inventory) included in the Assets are suitable for the purposes for which they
are used, in good working condition, reasonable wear and tear excepted, and are
free from any known defects.
3.7 Real Property. SCHEDULE 3.7 describes all real estate used in the
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operation of the Business as well as any other real estate that is owned, in the
possession of or leased by the Company and the improvements (including and other
structures) located on such real estate (collectively, the "Real Property"), and
lists any lease buildings under which any such Real Property is possessed (the
"Real Estate Leases"). SCHEDULE 3.7 also describes any other real estate
previously owned, leased, occupied or otherwise operated by the Company and the
time periods of any such ownership, lease, occupation or operation. All of the
Real Property (a) is usable in the ordinary course of business and (b) to
Shareholders' Knowledge, conforms with any applicable Laws relating to its
construction, use and operation and with applicable zoning
8
Laws. The Company or the landlord of any Real Property leased by the Company has
obtained all licenses and rights-of-way from governmental entities or private
parties that are necessary to ensure vehicular and pedestrian ingress and egress
to and from the Real Property.
3.8 Certain Personal Property. SCHEDULE 3.8 describes all items of
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tangible personal property that were included in the Balance Sheet at a net book
value of at least $10,000. Except as specified in SCHEDULE 3.8, since the
Balance Sheet Date, the Company has not acquired any items of tangible personal
property that have a carrying value in excess of $10,000. All of such personal
property included in SCHEDULE 3.8 is, and any such personal property acquired
after the date hereof in accordance with Section 5.1 will be, usable in the
ordinary course of business, and all such personal property included in SCHEDULE
3.8 conforms, and all of such personal property acquired after the date hereof
will conform, with any applicable Laws relating to its construction, use and
operation. Except for those items subject to the Non-Real Estate Leases and
certain computer hardware and software owned by the Company's employees or
consultants with an aggregate value of less than $5,000, no Person other than
the Company owns any vehicles, material equipment or other material tangible
assets located on the Real Property that have been used in the Business or that
are necessary for the operation of the Business.
3.9 Non-Real Estate Leases. SCHEDULE 3.9 lists all assets and property
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(other than Real Property) that are possessed by the Company under an existing
lease, including all trucks, automobiles, forklifts, machinery, equipment,
furniture and computers, except for any lease under which the aggregate annual
payments are less than $10,000 (each, an "Immaterial Lease"). SCHEDULE 3.9 also
lists the leases under which such assets and property listed in SCHEDULE 3.8 are
possessed. All of such leases (excluding Immaterial Leases) are referred to
herein as the "Non-Real Estate Leases."
3.10 Accounts Receivable. All accounts receivable of the Company (a) are
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valid and genuine, (b) arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions, (c) are not subject to
valid defenses, set-offs or counterclaims other than normal returns and
allowances and (d) were generated only in the ordinary course of business.
3.11 Inventory and Equipment. All inventory and equipment of the Company
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reflected on the Balance Sheet, and all inventory and equipment owned by the
Company was acquired and has been maintained in accordance with the regular
business practices of the Company, consists of items of a quality and quantity
useable in the ordinary course of the Company's business consistent with past
practice, and is valued in conformity with generally accepted accounting
principles applied on a consistent basis; except as set forth on SCHEDULE 3.11,
no significant amount of such inventory or equipment is obsolete.
3.12 Liabilities. The Company does not have any material Liabilities,
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other than (a) Liabilities specified in SCHEDULE 3.12, (b) Liabilities specified
in the Balance Sheet (except as heretofore paid or discharged), (c) Liabilities
incurred in the ordinary course since the Balance Sheet Date that, individually
or in the aggregate, are not material to the Business, or (d)
9
Liabilities under any Contracts that were not required under GAAP to have been
specifically disclosed or reserved for on the Balance Sheet.
3.13 Taxes. Except as set forth on SCHEDULE 3.13,
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(a) The Company has timely filed all Tax Returns required to be
filed on or before the Closing Date and all such Tax Returns are true, correct
and complete in all respects. The Company has paid in full on a timely basis all
Taxes owed by it, whether or not shown on any Tax Return, except where the
failure to file such return or pay such taxes would not have a Material Adverse
Effect. No claim has ever been made by any authority in any jurisdiction where
the Company does not file Tax Returns that the Company may be subject to
taxation in that jurisdiction.
(b) The amount of the Company's liability for unpaid Taxes as of the
Balance Sheet Date did not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) shown on the Balance Sheet.
(c) There are no ongoing examinations or claims against the Company
for Taxes, and no notice of any audit, examination or claim for Taxes, whether
pending or threatened, has been received. The Company has not waived or extended
the statute of limitations with respect to the collection or assessment of any
Tax.
(d) The Company has a taxable year ended on December 31, in each
year commencing from the incorporation of the Company. The Company currently
utilizes the cash method of accounting for income Tax purposes and such method
of accounting has not changed in the past 10 years.
(e) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(f) Copies of (A) any Tax examinations, (B) extensions of statutory
limitations for the collection or assessment of Taxes and (C) the Tax Returns of
the Company and each Subsidiary for the last two fiscal years have been made
available to Buyer
(g) There are (and as of immediately following the Closing there
will be) no Liens on the assets of the Company relating to or attributable to
Taxes, except for liens for Taxes not yet due. To the Shareholders' Knowledge,
there is no basis for the assertion of any claim relating to or attributable to
Taxes which, if adversely determined, would result in any Lien on the assets of
the Company or otherwise have an adverse effect on the Company or its business.
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(h) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
would reasonably be expected to give rise to any payment (or portion thereof)
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
The Company has not filed a consent under Section 341(f) of the Code. The
Company is not and has not been a United States real property holding company
within the meaning of Section 897(c) during the period specified in Section
897(c)(1)(A)(ii).
(i) The Company has not been at any time, a party to a tax sharing,
tax indemnity or tax allocation agreement, and the Company has not assumed the
tax liability of any other person under contract.
3.14 Subsidiaries. The Company does not own, directly or indirectly, any
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interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, trust, joint venture or other legal entity.
3.15 Legal Proceedings and Compliance with Law.
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(a) Except as set forth in SCHEDULE 3.15, there is no Litigation that
is pending or, to Shareholders' Knowledge, threatened against the Company. To
the Shareholders Knowledge, there has been no Default under any Laws applicable
to the Company, including Laws relating to pollution or protection of the
environment, and the Company has not received any notices from any governmental
entity regarding any alleged Defaults under any Laws. There has been no Default
with respect to any Court Order applicable to the Company.
(b) Without limiting the generality of Section 3.15(a), to the
Shareholders' Knowledge, and except as described in SCHEDULE 3.15, there is not
and never has been any Environmental Condition (i) at the premises at which the
Business has been conducted by the Company or any predecessor of the Company,
(ii) (A) at any property owned, leased, occupied or operated at any time by the
Company or (B) at any property owned, leased, occupied or operated at any time
by any Person controlled by the Company or any predecessor of any of them in
connection with the Business, or (iii) at any property at which wastes have been
deposited or disposed by, from or at the behest or direction of any of the
foregoing, nor has the Company received written notice of any such Environmental
Condition. "Environmental Condition" means any condition or circumstance,
including the presence of Hazardous Substances, whether created by the Company
or any third party, at or relating to any such property or premises specified in
any of clauses (i) through (iii) above that did, does or may reasonably be
expected to (A) require abatement or correction under an Environmental Law, (B)
give rise to any civil or criminal liability on the part of the Company under an
Environmental Law, or (C) create a public or private nuisance.
(c) The Company has delivered to Buyer complete copies of any written
reports, studies or assessments in the possession or control of the Company or
any Shareholder
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that relate to any Environmental Condition and to the Business or any Assets and
has identified on SCHEDULE 3.15 all other reports, studies and assessments of
which the Company or any Shareholder has Knowledge.
(d) Except as set forth in Schedule 3.15, the Company has obtained
and is in full compliance with all material Governmental Permits, along with
their respective expiration dates, that are required for the complete operation
of the Business as currently operated or that relates to the Real Property, (ii)
all of such Governmental Permits are currently valid and in full force and (iii)
the Company has filed such timely and complete renewal applications as may be
required with respect to its Governmental Permits. To Shareholders' Knowledge,
no revocation, cancellation or withdrawal thereof has been threatened.
3.16 Contracts.
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(a) SCHEDULE 3.16 lists all Contracts of the following types to which
the Company is a party or by which it is bound, except for Minor Contracts:
(i) Contracts with any present or former shareholder, director,
officer, employee, partner or consultant of the Company or any
Affiliate thereof.
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any real or personal
property from or the performance of services by a third party;
(iii) Contracts to sell or supply products or to perform services
that involve an amount in excess of $5,000 in any individual case;
(iv) Contracts to lease to or to operate for any other party any
real or personal property that involve an amount in excess of $5,000
in any individual case;
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from officers,
directors, partners, shareholders or Affiliates of the Company or any
members of their immediate families), agreements or arrangements for
a line of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
12
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the ordinary
course of business.
(b) The Contracts listed in SCHEDULE 3.16 and the Minor Contracts
excluded from SCHEDULE 3.16 based on the term or amount thereof are referred to
herein as the "Company Contracts." The Company is not in material Default under
any Company Contract (including any Real Estate Leases and Non-Real Estate
Leases). The Company has not received any communication from, or given any
communication to, any other party indicating that the Company or such other
party, as the case may be, is in Default under any Company Contract. To the
Knowledge of the Shareholders, (i) none of the other parties in any such Company
Contract is in Default thereunder, and (ii) each such Company Contract is
enforceable against any other parties thereto in accordance with terms thereof.
3.17 Insurance. SCHEDULE 3.17 lists all policies or binders of insurance
---------
held by or on behalf of the Company, specifying with respect to each policy the
insurer, the amount of the coverage, the type of insurance, the risks insured,
the expiration date, the policy number and any pending claims thereunder. To
the Shareholders' Knowledge, there is no Default with respect to any such policy
or binder, nor has there been any failure to give any notice or present any
claim under any such policy or binder in a timely fashion or in the manner or
detail required by the policy or binder. There is no notice of nonrenewal or
cancellation with respect to, or disallowance of any claim under, any such
policy or binder that has been received by the Company.
3.18 Intellectual Property
---------------------
(a) Intellectual Property. The Company has good and valid title to
---------------------
and ownership of all Intellectual Property necessary for its Business and
operations (as now conducted and as proposed to be conducted). A list of all
Intellectual Property owned by the Company is set forth on SCHEDULE 3.18(A).
There are no outstanding options, licenses or agreements of any kind to which
the Company is a party or by which it is bound relating to any Intellectual
Property, whether owned by the Company or another person, except as disclosed on
SCHEDULE 3.18(A). To the Knowledge of the Shareholders, the business of the
Company as formerly and presently conducted did not and does not conflict with
or infringe upon any Intellectual Property right, owned or claimed by another.
(b) Contracts. SCHEDULE 3.18(B) contains a complete and accurate
---------
list and summary description, including any royalties paid or received by the
Company, of all Contracts relating to the Intellectual Property to which the
Company is a party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $5,000 under which the
Company is the licensee. There are no outstanding and, to Shareholders'
Knowledge, no threatened disputes or disagreements with respect to any such
agreement.
13
(c) Know-How Necessary for the Business. The Intellectual Property
-----------------------------------
included in the Assets constitutes all of the Intellectual Property that is, to
the Shareholders Knowledge, necessary for the operation of the Business as it is
currently conducted. Except as described on SCHEDULE 3.18(C), the Company is the
owner of all right, title and interest in and to each item of Intellectual
Property, free and clear of any Encumbrances, and to the Knowledge of the
Shareholders has the right to use without payment to a third party all of the
Intellectual Property.
3.19 Employees. The Company is not (a) a party to, involved in or, to
---------
Shareholders' Knowledge, threatened by, any labor dispute or unfair labor
practice charge, or (b) currently negotiating any collective bargaining
agreement. The Company has not experienced during the last three years any work
stoppage. Shareholders have delivered to Buyer a complete and correct list of
the names and salaries, bonus and other cash compensation of all employees
(including officers) of the Company. SCHEDULE 3.19 lists the directors and
officers of the Company.
3.20 ERISA.
-----
(a) SCHEDULE 3.20 contains a complete list of all Benefit Plans
sponsored or maintained by the Company or under which the Company is obligated.
Shareholders have delivered to Buyer (i) accurate and complete copies of all
such Benefit Plan documents and all other material documents relating thereto,
including (if applicable) all summary plan descriptions, summary annual reports
and insurance contracts, (ii) accurate and complete detailed summaries of all
unwritten Benefit Plans, (iii) accurate and complete copies of the most recent
financial statements and actuarial reports with respect to all such Benefit
Plans for which financial statements or actuarial reports are required or have
been prepared and (iv) accurate and complete copies of all annual reports for
all such Benefit Plans (for which annual reports are required) prepared within
the last three years. Each such Benefit Plan providing benefits that are funded
through a policy of insurance is indicated by the word "insured" placed by the
listing of the Benefit Plan in the SCHEDULE 3.20.
(b) To the Knowledge of any of the Shareholders, all such Benefit
Plans conform (and at all times have conformed) in all material respects to, and
are being administered and operated (and have at all time been administered and
operated) in material compliance with, the requirements of ERISA, the Code and
all other applicable Laws. All returns, reports and disclosure statements
required to be made under ERISA and the Code with respect to all such Benefit
Plans have been timely filed or delivered. To the Knowledge of any of the
Shareholders, there have not been any "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA involving any of the
Benefit Plans, that could subject any Shareholder or the Company to any material
penalty or tax imposed under the Code or ERISA.
(c) Except as is set forth in SCHEDULE 3.20, any such Benefit Plan
that is intended to be qualified under Section 401(a) of the Code and exempt
from tax under Section 501(a) of the Code has been determined by the Internal
Revenue Service to be so qualified or an
14
application for such determination is pending. Any such determination that has
been obtained remains in effect and has not been revoked, and with respect to
any application that is pending, the Company does not have any reason to suspect
that such application for determination will be denied. Nothing has occurred
since the date of any such determination that is reasonably likely to affect
adversely such qualification or exemption, or result in the imposition of excise
taxes or income taxes on unrelated business income under the Code or ERISA with
respect to any such Benefit Plan.
(d) The Company does not sponsor a defined benefit plan subject to
Title IV of ERISA, nor does it have a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA). The
Company does not have any liability with respect to any employee benefit plan
(as defined in Section 3(3) of ERISA) other than with respect to such Benefit
Plans.
(e) There are no pending or, to Shareholders' Knowledge, any
threatened claims by or on behalf of any such Benefit Plans, or by or on behalf
of any individual participants or beneficiaries of any such Benefit Plans,
alleging any breach of fiduciary duty on the part of the Company or any of its
officers, directors or employees under ERISA or any other applicable
regulations, or claiming benefit payments (other than those made in the ordinary
operation of such plans), nor is there, to Shareholders's Knowledge, any basis
for such claim. The Benefit Plans are not the subject of any pending (or to
Shareholders's Knowledge, any threatened) investigation or audit by the Internal
Revenue Service or the Department of Labor.
(f) The Company has timely made all required contributions under
such Benefit Plans.
(g) With respect to any such Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare
Plan") and except as specified in SCHEDULE 3.20, (i) each Welfare Plan for which
contributions are claimed by the Company as deductions under any provision of
the Code complies with all applicable requirements pertaining to such deduction,
(ii) with respect to any welfare benefit fund (within the meaning of Section 419
of the Code) related to a Welfare Plan, there is no disqualified benefit (within
the meaning of Section 4976(b) of the Code) that would result in the imposition
of a tax under Section 4976(a) of the Code, (iii) any Benefit Plan that is a
group health plan (within the meaning of Section 4980B(g)(2) of the Code)
complies, and in each and every case has complied, with all of the applicable
requirements of Section 4980B of the Code, ERISA, Title XXII of the Public
Health Service Act and the Social Security Act, and (iv) all Welfare Plans may
be amended or terminated at any time on or after the Closing Date. Except as
specified in SCHEDULE 3.20, no Benefit Plan provides any health, life or other
welfare coverage to employees of the Company beyond termination of their
employment with the Company by reason of retirement or otherwise, other than
coverage as may be required under Section 4980B of the Code or Part 6 of ERISA,
or under the continuation of coverage provisions of the laws of any state or
locality.
15
3.21 Corporate Records. The minute books of the Company contain complete,
-----------------
correct and current copies of its Charter Documents and bylaws and of all
minutes of meetings, resolutions and other proceedings of its Board of Directors
and shareholders. The stock record books of the Company are complete, correct
and current.
3.22 Absence of Certain Changes. Except as contemplated by this Agreement,
--------------------------
the Company has conducted the Business in the ordinary course since June 30,
1998, and there has not been with respect to the Business any of the items
specified below since the Balance Sheet Date:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any distribution or payment declared or made in respect of its
common stock by way of dividends, purchase or redemption of shares or
otherwise;
(c) Except as set forth on SCHEDULE 3.22(C), any increase in the
compensation payable or to become payable to any director, officer,
employee or agent, except for increases for non-officer employees made in
the ordinary course of business, nor any other change in any employment or
consulting arrangement except in the ordinary course of business;
(d) any sale, assignment or transfer of Assets, or any additions to
or transactions involving any Assets, other than those made in the ordinary
course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held;
(f) materially decrease its working capital;
(g) other than in the ordinary course of business, any incurrence of
indebtedness for borrowed money or issuance of any debt securities; or
(h) any payments to any Affiliate of the Company, except as
specified in SCHEDULE 3.22(H).
3.23 Customers. The Company has used reasonable business efforts to
---------
maintain, and currently maintains, good working relationships with all of its
customers. SCHEDULE 3.23 contains a list of the names of each of the 10
customers that, in the aggregate, for the period from January 1, 1998 through
June 30, 1998 were the largest dollar volume customers of products or services,
or both, sold by the Company. Except as specified in SCHEDULE 3.23, none of such
16
customers has given the Company written notice terminating, canceling or
threatening to terminate or cancel any Contract or relationship with the
Company.
3.24 Previous Sales; Warranties. The Company has not breached any express
--------------------------
or implied warranties in connection with the sale or distribution of goods or
the performance of services, except for breaches that, individually and in the
aggregate, are not material and are consistent with the past practices of the
Business.
3.25 Finder's Fees. No Person retained by the Company or any Shareholder
-------------
is or will be entitled to any commission or finder's or similar fee in
connection with the Transactions.
3.26 Accuracy of Information. To the Shareholders' Knowledge, no
-----------------------
representation or warranty by the Company or any Shareholder in any Transaction
Document, and no information contained therein contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.
3.27 Intentionally Omitted.
---------------------
3.28 Additional Information. SCHEDULE 3.28 accurately lists the
----------------------
following:
(a) the names and addresses of every bank or other financial
institution in which the Company maintains an account (whether checking,
saving or otherwise), lock box or safe deposit box, and the account numbers
and names of Persons having signing authority or other access thereto; and
(b) all names under which the Company has conducted the Business or
which it has otherwise used at any time during the past five years.
40 Representations and Warranties of Buyer.
---------------------------------------
Buyer hereby represents and warrants to Shareholders as follows:
4.1 Organizational Status. Buyer is a corporation duly organized, validly
---------------------
existing and in good standing under the Laws of the Commonwealth of Pennsylvania
and is qualified to do business in any jurisdiction where it is required to be
so qualified. The Charter Documents of Buyer that have been delivered to
Shareholders as of the date hereof are effective under applicable Laws and are
current, correct and complete.
4.2 Authorization. Buyer has the requisite power and authority to own its
-------------
assets and to carry on its business. Buyer has the requisite power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions performed or to be performed by it. Such
execution, delivery and performance by Buyer have been duly authorized
17
by all necessary corporate action. Each Transaction Document executed and
delivered by Buyer has been duly executed and delivered by Buyer and constitutes
a valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
4.3 Consents and Approvals. Neither the execution and delivery by Buyer
----------------------
of the Transaction Documents to which it is a party, nor the performance of the
Transactions performed or to be performed by Buyer, require any filing, consent
or approval, constitute a Default or cause any payment obligation to arise under
(a) any Law or Court Order to which Buyer is subject, (b) the Charter Documents
or bylaws of Buyer or (c) any Contract, Governmental Permit or other document to
which Buyer is a party or by which the properties or other assets of Buyer may
be subject.
4.4 Finder's Fees. No Person retained by Buyer is or will be entitled to
-------------
any commission or finder's or similar fee in connection with the Transactions.
4.5 Accuracy of Information. To Buyer's actual knowledge, no
-----------------------
representation or warranty by Buyer in any Transaction Document, and no
information contained therein or otherwise delivered by or on behalf of Buyer to
any other Party in connection with the Transactions contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which such statements were made.
5. Covenants of Shareholders.
-------------------------
5.1 Conduct of the Business. Except as contemplated or otherwise
-----------------------
consented to by Buyer in writing, after the date of this Agreement the Company
shall carry on the Business in the ordinary course. In furtherance of and in
addition to such restriction, (a) the Company shall not: amend its Charter
Documents or bylaws; merge or consolidate with, or purchase substantially all of
the assets of, or otherwise acquire any business of, any corporation,
partnership or other business organization or business division thereof; split,
combine or reclassify its outstanding capital stock; enter into any Contract or
otherwise incur any Liability outside the ordinary course of business; discharge
or satisfy any Encumbrance or pay or satisfy any material Liability except
pursuant to the terms thereof; compromise, settle or otherwise adjust any
material claim or litigation; make any capital expenditure involving in any
individual case more than $5,000; incur any indebtedness for borrowed money or
issue any debt securities; declare or pay any dividend or other distribution on
its capital stock; materially decrease its working capital; increase the
salaries or other compensation payable to any employee, or take any action, or
fail to take any reasonable action within its control, as a result of which any
of the changes or events listed in Section 3.22 would be likely to occur, and
(b) the Company shall maintain and service the Assets consistent with past
practice and preserve intact the current business organization of the Company.
18
5.2 Access to Information. From the date of this Agreement to the Closing
---------------------
Date, the Shareholders shall cause the Company to give to Buyer and its
officers, employees, counsel, accountants and other representatives access to
and the right to inspect, during normal business hours, all of the assets,
records, contracts and other documents relating to the Company as the other
party may reasonably request. Buyer shall not use such information for purposes
other than in connection with the transactions contemplated by this Agreement
and shall otherwise hold such information in confidence until such time as such
information otherwise becomes publicly available and will sign such standard and
customary non-disclosure agreements as are reasonably requested by the Company.
5.3 No Solicitation. From and after the date hereof until the earlier of
---------------
the Termination Date or the date of termination of this Agreement pursuant to
Section 11, without the prior written consent of Buyer, each Shareholder and the
Company will not, and will not authorize or permit any Shareholder
Representative to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate knowingly any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to an Acquisition Proposal
from any Person, or engage in any discussion or negotiations relating thereto or
accept any Acquisition Proposal. The Company or any Shareholder that receives
any such inquiries, offers or proposals shall (a) notify Buyer orally and in
writing of any such inquiries, offers or proposals (including the terms and
conditions of any such proposal and the identity of the person making it),
within 48 hours of the receipt thereof, (b) keep Buyer informed of the status
and details of any such inquiry, offer or proposal, and (c) give Buyer five
days' advance notice of any agreement to be entered into with, or any
information to be supplied to, any Person making such inquiry, offer or
proposal. As used herein, "Acquisition Proposal" means a proposal or offer
(other than pursuant to this Agreement) for a tender or exchange offer, merger,
consolidation or other business combination involving any or any proposal to
acquire in any manner a substantial equity interest in, or all or substantially
all of the Assets. Notwithstanding the foregoing, the Shareholders will remain
free to participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner, any effort or attempt by any Person to do or seek any of the
foregoing to the extent their fiduciary duties may require.
5.4 Existing Employment Agreements and Other Liabilities. Each
----------------------------------------------------
Shareholder, effective as of the Closing, hereby consents to the cancellation of
any Contract that the Shareholders have with the Company, including any
employment agreement, and also releases and discharges Shareholder and any of
its Affiliates from any and all Liabilities other than those arising out of this
Agreement or any other Transaction Documents and those related to wages due to
the Shareholders in the ordinary course.
5.5 Expenses. The Shareholders shall pay all of the legal and accounting
--------
expenses in excess of $30,000 incurred by Shareholders and the Company in
connection with the Transactions.
19
5.6 Confidentiality.
---------------
(a) Each Shareholder recognizes and acknowledges that by reason of
its or his involvement with or employment in the Business, it or he has or may
have had access to Trade Secrets relating to the Business. Each Shareholder
acknowledges that such Trade Secrets are a valuable and unique asset and
covenants that it or he will not disclose any such Trade Secrets to any Person
for any reason whatsoever, unless such information (a) is in the public domain
through no wrongful act of such Shareholder, (b) has been rightfully received
from a third party without restriction and without breach of this Agreement or
(c) except as may be required by law.
(b) The terms of this Section 5.6 shall apply to each Shareholder
and to any other Person controlled by any Shareholder and any of their
respective Affiliates that it or he controls to the same extent as if they were
parties hereto, and each such party shall take whatever actions may be necessary
to cause any such party or Affiliate to adhere to the terms of this Section 5.6.
(c) In the event of any breach or threatened breach by any party of
any provision of Section 5.6, Buyer shall be entitled to injunctive or other
equitable relief, restraining such party from using or disclosing any Trade
Secrets in whole or in part, or from engaging in conduct that would constitute a
breach of the obligations of a party under Section 5.6. Such relief shall be in
addition to and not in lieu of any other remedies that may be available,
including an action for the recovery of Damages, all of which may be sought only
in accordance with the arbitration provisions of this Agreement.
5.7 Transfer of Assets and Business. Shareholders shall, and shall cause
-------------------------------
the Company to, take such reasonable steps as may be necessary or appropriate,
in the judgment of Buyer, so that Buyer shall be placed in actual possession and
control of all of the Assets and the Business.
5.8 Accounts Receivable.
-------------------
(a) After the Closing, Buyer shall cause the Company to use
reasonable and diligent efforts to collect the accounts receivables of the
Company outstanding as of the Balance Sheet Date (the "Closing Accounts
Receivables"), without any obligation to compromise the gross amount of any such
account receivable, commence legal proceedings or retain collection agencies.
(b) In the event that, notwithstanding the efforts by the Company,
the Closing Accounts Receivables have not been collected in full within 120 days
after the Closing, (i) Buyer shall be responsible for the first $25,000 of the
amount of any uncollected Closing Accounts Receivables (without application of
any reserves for uncollectible accounts receivable on any financial statement of
the Company), and (ii) Shareholders, jointly and severally, shall upon written
notice from Buyer, promptly pay the Company an amount equal to 50% of the unpaid
20
portion of such uncollected Closing Accounts Receivables in excess of $25,000
(without application of any reserves for uncollectible accounts receivable on
any financial statement of the Company).
6. Covenants of Buyer.
------------------
6.1 Fulfillment of Closing Conditions. At and prior to the Closing, Buyer
---------------------------------
shall use commercially reasonable efforts to fulfill the conditions specified in
Sections 8 and 9 to the extent that the fulfillment of such conditions is within
its control. In connection with the foregoing, each such party will (a) refrain
from any actions that would cause any of its representations and warranties to
be inaccurate in any material respect as of the Closing, (b) execute and deliver
the applicable agreements and other documents referred to in Sections 8 and 9,
(c) comply in all material respects with all applicable Laws in connection with
its execution, delivery and performance of this Agreement and the Transactions,
(d) use commercially reasonable efforts to obtain in a timely manner all
necessary waivers, consents and approvals required under any Laws, Contracts or
otherwise, including any Buyer Required Consents, and (e) use commercially
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things reasonably necessary, proper or advisable
to consummate and make effective as promptly as practicable the Transactions.
6.2 Expenses. Buyer shall pay all of the legal, accounting and other
--------
expenses incurred by Buyer in connection with the Transactions.
7. Mutual Covenants.
----------------
7.1 Fulfillment of Closing Conditions. At and prior to the Closing, each
---------------------------------
party shall use commercially reasonable efforts to fulfill, and to cause each
other to fulfill, as soon as practicable after the conditions specified in
Sections 8 and 9 to the extent that the fulfillment of such conditions is within
its or his control. In connection with the foregoing, each party will (a)
refrain from any actions that would cause any of its representations and
warranties to be inaccurate as of the Closing, and take any reasonable actions
within its control that would be necessary to prevent its representations and
warranties from being inaccurate as of the Closing, (b) execute and deliver the
applicable agreements and other documents referred to in Sections 8 and 9, (c)
comply in all material respects with all applicable Laws in connection with its
execution, delivery and performance of this Agreement and the Transactions, (d)
use commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals required under any Laws, Contracts or otherwise,
including any Shareholder Required Consents in the case of Shareholders and any
Buyer Required Consents in the case of Buyer, (e) use commercially reasonable
efforts to take, or cause to be taken, all other actions and to do, or cause to
be done, all other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the Transactions.
21
7.2 Disclosure of Certain Matters. Each Shareholder on the one hand, and
-----------------------------
Buyer, on the other hand, shall give Buyer and Shareholders, respectively,
prompt notice of any event or development that occurs that (a) had it existed or
been known on the date hereof would have been required to be disclosed by such
party under this Agreement, (b) would cause any of the representations and
warranties of such party contained herein to be inaccurate or otherwise
misleading, except as contemplated by the terms hereof, or (c) gives any such
party any reason to believe that any of the conditions set forth in Sections 8
and 9 will not be satisfied prior to the Termination Date (defined below).
7.3 Intentionally omitted.
7.4 Public Announcements. Shareholders and Buyer shall consult with each
--------------------
other before issuing any press release or making any public statement with
respect to this Agreement and the Transactions and, except as may be required by
applicable law, none of such Parties nor any other Parties shall issue any such
press release or make any such public statement without the consent of the other
parties hereto.
7.5 Confidentiality. If the Transactions are not consummated, each party
---------------
shall treat all information obtained in its investigation of another party or
any Affiliate thereof, and not otherwise known to them or already in the public
domain, as confidential and shall not use or otherwise disclose such information
to any third party and shall return to such other party or Affiliate all copies
made by it or its representatives of Confidential Information provided by such
other party or Affiliate.
8. Conditions Precedent to Obligations of Shareholders.
---------------------------------------------------
All obligations of Shareholders to consummate the Transactions are subject
to the satisfaction prior thereto of each of the following conditions:
8.1 Representations and Warranties. The representations and warranties of
------------------------------
Buyer contained in this Agreement shall be true and correct on the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) shall also be true and correct on and as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
8.2 Agreements, Conditions and Covenants. Buyer shall have performed or
------------------------------------
complied with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by it on or before the Closing Date.
8.3 Certificates. Shareholders shall have received a certificate of an
------------
executive officer of Buyer to the effect set forth in Sections 8.1 and 8.2 with
respect to Buyer.
22
8.4 Legality. No Law or Court Order shall have been enacted, entered,
--------
promulgated or enforced by any court or governmental authority that is in effect
and has the effect of making the purchase and sale of the Assets illegal or
otherwise prohibiting the consummation of such purchase and sale.
8.5 Buyer Required Consents. Buyer shall have obtained Buyer Required
-----------------------
Consents without any modification that Shareholders reasonably deem
unacceptable.
8.6 Employment Agreement. Contemporaneously with the Closing, Buyer shall
--------------------
execute and deliver an employment agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, which
agreement shall become effective on the Closing Date.
8.7 Legal Fees. The legal fees and expenses of ▇▇▇▇▇▇▇, Phleger &
----------
▇▇▇▇▇▇▇▇ LLP set forth in Schedule 3.12 shall have been paid.
9. Conditions Precedent to Obligations of Buyer.
--------------------------------------------
All obligations of Buyer to consummate the Transactions are subject to the
satisfaction (or waiver) prior thereto of each of the following conditions:
9.1 Representations and Warranties. The representations and warranties of
------------------------------
Shareholders contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct on and as of the Closing Date,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Closing Date.
9.2 Agreements, Conditions and Covenants. Shareholders shall have
------------------------------------
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Closing Date.
9.3 Certificates. Buyer shall have received a certificate of an executive
------------
officer of the Company and each Shareholder to the effect set forth in Sections
9.1 and 9.2.
9.4 Legality. No Law or Court Order shall have been enacted, entered,
--------
promulgated or enforced by any court or governmental authority that is in effect
and (a) has the effect of making the purchase and sale of the Assets illegal or
otherwise prohibiting the consummation of such purchase and sale or (b) has a
reasonable likelihood of causing a Material Adverse Effect.
10. Indemnification.
---------------
10.1 By Shareholders. From and after the Closing Date, the Shareholders,
---------------
jointly and severally, shall indemnify and hold harmless Buyer and its
successors and assigns, and their respective officers, directors, employees,
shareholders, agents, Affiliates and any Person who
23
controls any of such Persons within the meaning of the Securities Act or the
Exchange Act (each, a "Buyer Indemnified Party") from and against any
liabilities, claims, demands, judgments, losses, costs, damages or expenses
whatsoever (including reasonable attorneys', consultants' and other professional
fees and disbursements of every kind, nature and description incurred by such
Buyer Indemnified Party in connection therewith including consequential damages)
(collectively, "Damages") that such Buyer Indemnified Party may sustain, suffer
or incur and that result from, arise out of or relate to (a) any breach of any
of the respective representations, warranties, covenants or agreements of any
Shareholder contained in this Agreement or in the Closing Certificates, (b) any
Environmental Condition existing on or before the Closing, and (c) any Liability
of any Shareholder involving Taxes due and payable by, or imposed on the Company
with respect to any Shareholder for any and all taxable periods ending on or
prior to the Closing Date (whether or not such Taxes have been due and payable).
Shareholder Indemnified Parties' obligations under this Section 10 are joint and
several; provided that a Shareholder shall not be liable under this Agreement
for an aggregate amount in excess of the portion of the Purchase Price received
by such Shareholder minus any Taxes paid by such Shareholder on account of the
Purchase Price; provided, further, that the Shareholders shall not have any
obligation to indemnify Buyer from and against any Damages caused by the breach
of any representation or warranty of the Shareholders contained in Section 3
until Buyer has suffered by reason of all such breaches Damages in excess of
$50,000 in the aggregate (the "Deductible Amount"); at such time as to the total
amount of such Damages exceeds the Deductible Amount in the aggregate, Buyer
shall be entitled to indemnification against all Damages in excess of the
Deductible Amount.
10.2 By Buyer. From and after the Closing Date, Buyer shall indemnify and
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hold harmless Shareholders and their respective successors and assigns, and (if
any) their respective officers, directors, employees, shareholders, agents,
Affiliates and any Person who controls any of such Persons within the meaning of
the Securities Act or the Exchange Act (each, a "Shareholder Indemnified Party")
from and against any Damages that such Shareholder Indemnified Party may
sustain, suffer or incur and that result from, arise out of or relate to any
breach of any of the respective representations, warranties, covenants or
agreements of Buyer contained in this Agreement. Buyer shall not be liable
under this Agreement for an aggregate amount in excess of the Purchase Price;
provided, however, that Buyer shall not have any obligation to indemnify
Shareholders from and against any Damages caused by the breach of any
representation or warranty of Buyer contained in Section 4 until Buyer has
suffered by reason of all such breaches Damages in excess of $50,000 in the
aggregate (the "Deductible Amount"); at such time as to the total amount of such
Damages exceeds the Deductible Amount in the aggregate, Shareholders shall be
entitled to indemnification against all Damages in excess of the Deductible
Amount.
10.3 Holders' Representative.
-----------------------
(a) ▇▇▇▇▇ ▇▇ shall act as the Shareholders' representative (the
"Holders' Representative") for the purpose of settling on behalf of the
Shareholders any indemnification
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claims made by Buyer Indemnified Party hereunder, and taking any other action
that is specifically delegated to the Holders' Representative hereunder. Buyer
shall give notice under Section 10.4 of any claim for indemnification against
the Shareholders to Shareholders and the Holders' Representative, and only the
Holders' Representative shall be empowered following such notice to respond to
or take any other action on behalf of the Shareholders with respect to the
claim. Shareholders shall be bound by any and all actions taken by the Holders'
Representative on their behalf in accordance with this Agreement.
(b) Buyer shall be entitled to rely exclusively upon any
communications or writings given or executed by the Holders' Representative and
shall not be liable in any manner whatsoever for any action taken or not taken
in reliance upon the actions taken or not taken or communications or writings
given or executed by the Holders' Representative. Buyer shall be entitled to
disregard any notices or communications given or made by the Shareholders unless
given or made through the Holders' Representative.
(c) In the event of the death of the Holders' Representative or his
inability to perform his functions hereunder, the Shareholders who immediately
prior to the Closing owned a majority of Shares shall choose another Holders'
Representative.
(d) The Holders' Representative shall not be liable to any Shareholder
or any other party for any action taken or omitted to be taken by him as
Holders' Representative except, in the case of willful misconduct or gross
negligence. Shareholders jointly indemnify the Holders' Representative and hold
him harmless from and against any loss, liability or expense of any nature
incurred by the Holders' Representative arising out of or in connection with the
administration of his duties as Holders' Representative, including reasonable
legal fees and other costs and expenses of defending or preparing to defend
against any claim or liability in the premises, unless such loss, liability or
expense shall be caused by the Holders' Representative's willful misconduct or
gross negligence.
10.4 Procedure for Claims.
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(a) Any Person that desires to seek indemnification under any part of
this Section 10 (each, an "Indemnified Party") shall give notice (a "Claim
Notice") to each party responsible or alleged to be responsible for
indemnification hereunder (an "Indemnitor") prior to any applicable Expiration
Date specified below. Such notice shall explain with specificity the nature of
the claim, the specific section of this Agreement to which the claim relates and
the parties known to be invoked, and shall specify the amount thereof. If the
matter to which a claim relates shall not have been resolved as of the date of
the Claim Notice, the Indemnified Party shall estimate the amount of the claim
in the Claim Notice, but also specify therein that the claim has not yet been
liquidated (an "Unliquidated Claim"). If an Indemnified Party gives a Claim
Notice for an Unliquidated Claim, the Indemnified Party shall also give a second
Claim Notice (the "Liquidated Claim Notice") within 60 days after the matter
giving rise to the claim becomes finally resolved, and the Second Claim Notice
shall specify the amount of the claim. Each
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Indemnitor to which a Claim Notice is given shall respond to any Indemnified
Party that has given a Claim Notice (a "Claim Response") within 60 days (the
"Response Period") after the later of (i) the date that the Claim Notice is
given or (ii) if a Claim Notice is first given with respect to an Unliquidated
Claim, the date on which the Liquidated Claim Notice is given. Any Claim Notice
or Claim Response shall be given in accordance with the notice requirements
hereunder, and any Claim Response shall specify whether or not the Indemnitor
giving the Claim Response disputes the claim described in the Claim Notice. If
any Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice. If any Indemnitor elects not to dispute a claim described in a
Claim Notice, whether by failing to give a timely Claim Response or otherwise,
then the amount of such claim shall be conclusively deemed to be an obligation
of such Indemnitor. For the purposes of the immediately preceding sentence, an
Indemnitor's failure to give a timely Claim Response shall not be deemed an
election not to dispute a Claim Notice unless the Indemnified Party shall have
given a second Claim Notice after expiration of the Response Period and another
20 days after the date on which the Indemnified Party shall have given such
second Claim Notice shall have expired without the Indemnitor's having given a
Response Notice within such period.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party hereunder, such Indemnitor shall pay to such Indemnified Party within 30
days after the last day of the Claim Response Period the amount to which such
Indemnified Party shall be entitled. If there shall be a dispute as to the
amount or manner of indemnification under this Section 10, the Indemnified Party
may pursue whatever legal remedies may be available for recovery of the Damages
claimed from any Indemnitor in accordance with the arbitration provisions of
this Agreement. If any Indemnitor fails to pay all or part of any
indemnification obligation when due, then such Indemnitor Party shall also be
obligated to pay to the applicable Indemnified Party interest on the unpaid
amount for each day during which the obligation remains unpaid at an annual rate
equal to the Prime Rate, and the Prime Rate in effect on the first business day
of each calendar quarter shall apply to the amount of the unpaid obligation
during such calendar quarter.
10.5 Claims Period. Any claim for indemnification under this Section 10
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shall be made by giving a Claim Notice under Section 10.4 on or before the first
anniversary of the Closing Date (the "Expiration Date"). So long as an
Indemnified Party gives a Claim Notice for an Unliquidated Claim on or before
the Expiration Date, such Indemnified Party shall be entitled to pursue its
rights to indemnification regardless of the date on which such Indemnified Party
gives the related Liquidated Claim Notice.
10.6 Third Party Claims.
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(a) If any third party shall notify any Indemnified Party with
respect to any actions, suits or other administrative or judicial proceedings
(each, an "Action") which may give rise to a claim for indemnification against
any Indemnifying Party under this Section 10, then the
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Indemnified Party shall promptly (and in any event within five Business Days'
after receiving notice of the Action) notify each Indemnifying Party thereof in
writing.
(b) Any Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Action with counsel of his or its choice
reasonably satisfactory to the Indemnified Party; provided, however, that the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Action without the prior written consent of
the Indemnified Party (which consent shall not be unreasonably withheld) unless
the judgment or proposed settlement involves only the payment of money damages
and does no impose an injunction or other equitable relief upon the Indemnified
Party.
(c) Unless and until an Indemnifying Party assumes the defense of the
Action, the Indemnified Party may defend against the Action in any manner he or
it reasonably may deem appropriate.
(d) In no event will the Indemnified Party consent to the entry of any
judgment or enter into any settlement with respect to any Action without the
prior written consent of each of the Indemnifying Parties (which consent shall
not be unreasonably withheld).
11. Termination.
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11.1 Grounds for Termination. This Agreement may be terminated at any time
-----------------------
before the Closing Date:
(a) By mutual written consent of Shareholders and Buyer;
(b) By Shareholders or Buyer if the Closing shall not have been
consummated on or before the Termination Date; provided, however, that the right
to terminate this Agreement under this Section 10.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
the Termination Date;
(c) By Shareholders or Buyer if a court of competent jurisdiction or
govern mental, regulatory or administrative agency or commission shall have
issued a Court Order (which Court Order the parties shall use commercially
reasonable efforts to lift) that permanently restrains, enjoins or otherwise
prohibits the Transactions, and such Court Order shall have become final and
nonappealable;
(d) By Buyer, if any Shareholder shall have breached, or failed to
comply with, any of its or his obligations under this Agreement or any
representation or warranty made by any Shareholder shall have been incorrect
when made, and such breach, failure or misrepresentation is not cured within 20
days after notice thereof; and
27
(e) By any Shareholder, if Buyer shall have breached, or failed to
comply with any of its obligations under this Agreement or any representation or
warranty made by it shall have been incorrect when made, and such breach,
failure or misrepresentation is not cured within 20 days after notice thereof,
and in either case, any such breaches, failures or misrepresentations,
individually or in the aggregate, results or would reasonably be expected to
affect materially and adversely the benefits to be received by the Shareholders
hereunder.
11.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 11.1, the agreements contained in Section 7.5 shall survive the
termination hereof and any party may pursue any legal or equitable remedies that
may be available if such termination is based on a breach of another party.
12. General Matters.
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12.1 Arbitration.
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(a) All disputes concerning this Agreement shall be decided by
arbitration in accordance with the commercial rules and regulations of the
American Arbitration Association (except to the extent such rules and
regulations are inconsistent with the provisions of this Section).
(b) If the parties agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. If the parties do not so agree, the parties shall
each select one independent, qualified arbitrator. For this purpose, all
parties whose interest in the matter being arbitrated are substantially
identical shall be treated as a single party entitled to select on arbitrator.
If an even number of arbitrators is selected, such arbitrators shall select an
additional arbitrator.
(c) Each party reserves the right to object to any individual
arbitrator who is employed by or affiliated with an organization that competes
with such party.
(d) The parties shall have the right to conduct discovery as
specified for up to three months. Such discovery shall include the right to take
depositions and subpoena witnesses.
(e) At the request of any party, arbitration proceedings shall be
conducted in the utmost secrecy. In such case, all documents, testimony, and
records shall be received, heard and maintained by the arbitrators in secrecy
under seal, available for the inspection only of the parties and their
respective attorneys and experts who have agreed in advance in writing to
receive and maintain all such information in confidence until such information
becomes generally known.
(f) The arbitrators shall act by majority vote. The arbitrators shall
issue a written opinion of their findings of fact and their conclusions of law
at the request and at the expense of either party.
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(g) The arbitrators shall be able to decree any and all relief of an
equitable nature, including without limitation such relief as a temporary
restraining order and a preliminary or permanent injunction, and shall also be
able to award damages, with or without an accounting, and costs, except that the
prevailing party shall be entitled to its reasonable attorneys fees. The decree
or judgment of an award rendered by the arbitrators shall be binding upon the
parties and may be entered in any court having jurisdiction thereof.
(h) Reasonable notice of the time and place of arbitration shall be
given to all persons as required by law. Such persons and their authorized
representatives shall have the right to attend or participate in all the
arbitration hearings in such manner as the law requires.
12.2 Contents of Agreement. This Agreement, together with the other
---------------------
Transaction Documents, sets forth the entire understanding of the parties with
respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
12.3 Amendment, Parties in Interest, Assignment, Etc. This Agreement may
-----------------------------------------------
be amended, modified or supplemented only by a written instrument duly executed
by each of the parties hereto. If any provision of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the parties.
Nothing in this Agreement shall confer any rights upon any Person other than
Shareholders and Buyer and their respective heirs, legal representatives,
successors and permitted assigns. No party hereto shall assign this Agreement
or any right, benefit or obligation hereunder. Any term or provision of this
Agreement may be waived at any time by the party entitled to the benefit thereof
by a written instrument duly executed by such party.
12.4 Further Assurances. At and after the Closing, Shareholders and Buyer
------------------
shall execute and deliver any and all documents and take any and all other
actions that may be deemed reasonably necessary by their respective counsel to
complete the Transactions.
12.5 Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (a) references to the plural include the singular, the singular the
plural, the part the whole, (b) references to any gender include all genders,
(c) "or" has the inclusive meaning frequently identified with the phrase
"and/or," (d) "including" has the inclusive meaning frequently identified with
the phrase "but not limited to" and (e) references to "hereunder" or "herein"
relate to this Agreement. The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, Schedule and Exhibit references are to this Agreement
unless otherwise specified. Each accounting term used herein that is not
specifically defined herein shall have the meaning given to it under GAAP. Any
reference to a
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party's being satisfied with any particular item or to a party's determination
of a particular item presumes that such standard will not be achieved unless
such party shall be satisfied or shall have made such determination in its sole
or complete discretion.
12.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original.
12.7 Schedules. Any items listed or described on SCHEDULES shall be listed
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or described under a caption that identifies the Sections of this Agreement to
which the item relates.
13. Remedies.
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The indemnification rights under Section 10 are independent of and in
addition to such rights and remedies as the parties may have at law or in equity
or otherwise (subject to Section 12 hereof) for any misrepresentation, breach of
warranty or failure to fulfill any agreement or covenant hereunder on the part
of any party hereto, including the right to seek specific performance,
rescission or restitution, none of which rights or remedies shall be affected or
diminished by Section 10. Buyer acknowledges that Section 10 shall be the
exclusive remedy of the Buyer for any breach of the representations and
warranties in Section 3 above with respect to such individuals, except for any
willful misrepresentation, willful breach of warranty or willful failure to
fulfill any agreement or covenant.
14. Notices.
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All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by mail, facsimile
message or Federal Express or other delivery service. Any notices shall be
deemed given upon the earlier of the date when received at, or the third day
after the date when sent by registered or certified mail or the day after the
date when sent by Federal Express to, the address or fax number set forth below,
unless such address or fax number is changed by notice to the other Party
hereto:
If to Shareholders:
Boulder Interactive Technology Services Co.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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with a required copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, III, Esquire
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer:
VerticalNet, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
15. Governing Law.
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This Agreement shall be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania without regard to its provisions
concerning conflict of laws.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been executed by the
parties hereto as of the day and year first written above.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ VERTICALNET, INC.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Chief Financial Officer
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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