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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
By and Between
JAWS TECHNOLOGIES, INC.
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
NUCLEUS CONSULTING, INC.
Dated as of April 20, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE 1 SALE AND PURCHASE OF SHARES......................................1
1.1 Sale of Shares...................................................1
1.2 Purchase Consideration and Payment for Shares....................1
1.2A Adjustments Based on Changes in Capitalization...................2
1.3 Transactions on the Closing Date.................................3
1.4 Payment of Deferred Purchase Price...............................4
1.5 Restricted Securities............................................4
1.6 JAWS Right to Repurchase JAWS Common Stock from Seller;
Forfeiture of Deferred Consideration ............................4
ARTICLE 2 CLOSING AND TERMINATION..........................................5
2.1 Closing..........................................................5
2.2 Termination......................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY.........6
3.1 Authority; Due Execution.........................................6
3.2 Organization.....................................................6
3.3 Certificate of Incorporation; By-laws............................6
3.4 Subsidiaries and Equity Investments..............................7
3.5 Ownership of Shares..............................................7
3.6 Capitalization...................................................7
3.7 No Violation.....................................................7
3.8 Litigation.......................................................8
3.9 Personal Property................................................8
3.10 Real Property....................................................9
3.11 Financial Statements.............................................9
3.12 Books and Records................................................9
3.13 Tax Matters.....................................................10
3.14 Employee Matters................................................12
3.15 Intellectual Property...........................................15
3.16 Accounts Receivable.............................................15
3.17 [Intentionally Omitted].........................................15
3.18 No Material Change..............................................15
3.19 Absence of Change or Event......................................15
3.20 Compliance With Law.............................................17
3.21 Contracts and Commitments.......................................17
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3.22 Insurance.......................................................17
3.23 Affiliate Interests.............................................18
3.24 Customers, Suppliers, Distributors, Etc.........................18
3.25 Environmental Matters...........................................19
3.26 Absence of Questionable Payments................................19
3.27 Investment Intent...............................................20
3.28 Disclosure......................................................20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF JAWS..........................21
4.1 Organization....................................................21
4.2 Corporate Authority.............................................21
4.3 No Violation....................................................22
4.4 Investment Intent...............................................22
4.5 Due Execution...................................................22
4.6 SEC Documents...................................................22
4.7 JAWS Common Stock...............................................22
ARTICLE 5 CERTAIN COVENANTS AND AGREEMENTS OF SELLER AND JAWS.............23
5.1 Conduct of Business Prior to the Closing Date...................23
5.2 Tax Covenants...................................................24
5.3 Expenses and Finder's Fees......................................26
5.4 Access to Information and Confidentiality.......................26
5.5 No Solicitation.................................................26
5.6 Press Releases..................................................27
5.7 Transitional Assistance.........................................27
5.8 Conditions......................................................27
5.9 Rule 144........................................................27
5.10 Name Change.....................................................27
ARTICLE 6 CONDITIONS PRECEDENT OF JAWS....................................27
6.1 Representations and Warranties..................................27
6.2 Due Diligence...................................................27
6.3 Opinion of Counsel..............................................28
6.4 No Actions......................................................28
6.5 Consents........................................................28
6.6 Employment Agreements...........................................28
6.7 Outstanding Shareholder Loans...................................28
6.8 Material Adverse Change.........................................28
6.9 Termination of License Agreement................................28
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ARTICLE 7 CONDITIONS PRECEDENT OF SELLER..................................29
7.1 Representations and Warranties..................................29
7.2 No Actions......................................................29
7.3 Consents........................................................29
7.4 Employment Agreements...........................................29
7.5 Opinion of Counsel..............................................29
7.6 No Material Adverse Change......................................29
ARTICLE 8 INDEMNIFICATION.................................................30
8.1 Indemnification by Seller.......................................30
8.2 Indemnification by JAWS.........................................31
8.3 Limitation on Liability.........................................31
ARTICLE 9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.......... 32
9.1 Representations, Warranties and Covenants.......................32
ARTICLE 10 NON-COMPETITION BY SELLER AND NO SOLICITATION...................32
10.1 Non-Compete.....................................................32
10.2 Remedies........................................................32
ARTICLE 11 MISCELLANEOUS...................................................32
11.1 Cooperation.....................................................32
11.2 Waiver..........................................................32
11.3 Notices.........................................................33
11.4 Governing Law and Consent to Jurisdiction; Dispute Resolution...34
11.5 Counterparts....................................................34
11.6 Headings; Schedules.............................................34
11.7 Entire Agreement................................................34
11.8 Amendment and Modification......................................34
11.9 Binding Effect; Benefits........................................34
11.10 Assignability...................................................35
EXHIBITS
A - 1 Employment Agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
A - 2 Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇
A - 3 Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇
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A - 4 Employment Agreement of ▇▇▇▇▇▇▇ ▇▇▇▇▇
A - 5 Employment Agreement of ▇▇▇ ▇▇▇▇▇
A-6 Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇▇
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STOCK PURCHASE AGREEMENT dated as of April 20, 2000 (herein, together
with the Exhibits attached hereto and the Schedules delivered concurrently
herewith, referred to as the "Agreement") by and between Jaws Technologies,
Inc., a Nevada corporation ("JAWS"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Seller"), and Nucleus
Consulting, Inc., an Illinois corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Seller is the beneficial and record holder of all of the issued
and outstanding shares of capital stock of the Company (the "Shares"); and
WHEREAS, Seller wishes to sell and JAWS wishes to purchase the Shares
upon the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in reliance upon the representations and warranties made
herein and in consideration of the mutual agreements herein contained, the
parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 Sale of Shares. At the Closing provided for in Section 2.1, Seller
shall sell to JAWS (or in JAWS' sole discretion, any subsidiary of JAWS) the
Shares beneficially owned by Seller as set forth on Schedule 1.1, and JAWS shall
purchase such Shares for the aggregate purchase consideration specified in
Section 1.2.
1.2 Purchase Consideration and Payment for Shares. JAWS shall acquire
100% of the issued and outstanding stock of the Company for a total purchase
price of up to $4,000,000, which shall consist of the Initial Purchase Price and
the Deferred Purchase Price, in each case, as defined below. All dollar
references herein shall be to United States dollars.
(a) Initial Purchase Price. The "Initial Purchase Price" will equal
$1,250,000 payable as follows: (i) wire transfer (or certified check) in an
aggregate amount equal to $250,000 (said amount being hereinafter referred to as
the "Initial Cash Consideration"); and (ii) delivery of 142,857 shares of JAWS's
common stock, par value $0.001 per share (the "JAWS Common Stock"), having an
assumed and agreed upon aggregate value equal to $1,000,000 (the "Initial JAWS
Common Stock"), based on an agreed upon value of $7.00 per share.
(b) Deferred Purchase Price. The "Deferred Purchase Price" will be an
amount, subject to the limitations set forth below, equal to up to $2,750,000
(as adjusted for the items set forth in Schedule 1.2(b) and in accordance with
Section 1.6 below). The Deferred Purchase Price shall be payable as follows: (i)
delivery by wire transfer (or certified check) into the attorney trust/escrow
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account of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("DG"), counsel to Seller, at National City Bank
(Jefferson/▇▇▇▇▇▇ Branch), of an amount equal to $750,000 of the Deferred
Purchase Price (the "Deferred Cash Consideration"), to be held in escrow and
released therefrom to Seller or JAWS, as the case may be, as provided in Section
1.2(c) below; and (ii) delivery of a number of shares of JAWS Common Stock (the
"Deferred JAWS Common Stock") as provided in the revenue and EBIT formula set
forth on Schedule 1.2(b), up to a maximum aggregate amount of $2,000,000 of JAWS
Common Stock (i.e., 285,714 shares of JAWS Common Stock, based on the assumed
and agreed upon value of $7.00 per share). The Deferred Purchase Price shall be
payable as provided in Sections 1.2(c) and 1.4 below.
(c) Deferred Cash Consideration Escrow. Seller and JAWS hereby appoint
DG as escrow agent in respect of the Deferred Cash Consideration and DG accepts
such appointment and agrees to serve as escrow agent hereunder and to hold and
dispose of the Deferred Cash Consideration as provided herein. The Deferred Cash
Consideration shall be deposited at Closing into DG's attorney trust/account,
which shall be insured and interest bearing at a rate customary for such
accounts. Subject to the following two sentences, DG shall release the Deferred
Cash Consideration to Seller in three equal payments of $250,000 on each of the
three, six, and nine month anniversary dates of the Closing. In the event there
occurs a Triggering Termination Event (as defined in Section 1.6 below), then DG
shall promptly, upon notice thereof by JAWS, release and pay to JAWS all
remaining Deferred Cash Consideration amounts. In addition, DG shall not release
any portion of the Deferred Cash Consideration that, by notice from JAWS, is
subject to JAWS' right of set-off set forth in Section 8.1 below. In all cases,
interest accrued on any Deferred Cash Consideration shall be paid to Seller.
1.2A Adjustments Based on Changes in Capitalization. (a) In the event
of any change in Jaws Common Stock by reason of any stock dividend, stock split
(forward or reverse), recaptialization, combination, exchange of shares or
similar transaction, the type and number of shares issuable to Seller, and the
agreed value thereof, shall be adjusted appropriately, and proper provision
shall be made in such arrangements and the interpretation of this Agreement, so
that Seller shall receive the upon the grant of such shares of stock (when and
as provided herein), the number and class of shares or other securities or
property that Seller would have received in respect of JAWS Common Stock if the
Deferred JAWS Common Stock had been received immediately prior to such event, or
the record date therefor, as applicable, or before all such changes since the
Closing if more than one such change shall have occurred.
(b) In the event that JAWS shall enter into an agreement (x) to
consolidate with or merge into any person and JAWS shall not be the continuing
or surviving corporation of such consolidation or merger, (y) to permit any
person other than a wholly-owned subsidiary of JAWS to merge into JAWS and JAWS
shall be the continuing or surviving corporation, but, in connection with such
merger, the shares of JAWS Common Stock outstanding immediately prior to the
consummation of such merger shall be changed into or exchanged for stock or
other securities of JAWS or any other person or cash or any other property, or
the shares of JAWS Common Stock outstanding immediately prior to the
consummation of such merger shall after such merger represent
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less than fifty percent (50%)of the issued and outstanding voting securities of
the merged company, or (z) to sell or otherwise transfer all or substantially
all of its assets to any person, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, the rights of Seller to Deferred JAWS Common Stock (to the extent issued
to and owned by Seller, and subject to Section 1.6 below) shall be converted
into, the right to receive the same consideration per share of JAWS Common Stock
as each of the respective holders of JAWS Common Stock received or shall receive
in such transaction, subject to the limitations set forth in Section 1.2(b),
Schedule 1.2(b) and Section 1.6.
(c) JAWS shall not enter into any transaction described in Section
1.2A(b) unless the acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all of the obligations of JAWS hereunder
and take all other actions that may be necessary so that the provisions of this
Section 1.2 are given full force and effect. "Acquiring Corporation" means (i)
the continuing or surviving corporation of a consolidation or merger with JAWS
(if other than JAWS), (ii) JAWS in a merger in which JAWS is the continuing or
surviving corporation, and (iii) the transferee of all or substantially all of
JAWS assets.
1.3 Transactions on the Closing Date.
(a) At the Closing, Seller will deliver, or cause to be
delivered, to JAWS the following:
(i) stock certificate(s), in form suitable for transfer,
registered in the name of Seller, evidencing all of the Shares, endorsed
in blank or with an executed blank stock transfer powers attached, and
with any necessary stock transfer tax stamps attached thereto;
(ii) all stock books, stock transfer ledgers, minute
books and the corporate seals of the Company;
(iii) resignations of all of the directors and officers of
the Company, effective as of the Closing;
(iv) as soon as practicable following Closing, duly
executed signature cards for all bank accounts of the Company which are
necessary to establish JAWS' designees, and only JAWS' designees, as the
authorized signatories for such accounts;
(v) each of the certificates and documents contemplated
by Article 6; and
(vi) such other certificates, documents, instruments and
agreements as JAWS shall deem necessary in its reasonable discretion in
order to effectuate the transactions contemplated herein, in form and
substance reasonably satisfactory to JAWS.
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(b) At the Closing, JAWS will deliver to Seller the following:
(i) the Initial Cash Consideration;
(ii) the share certificates representing the Initial JAWS
Common Stock;
(iii) each of the certificates and documents contemplated
by Article 7; and
(iv) such other certificates, documents, instruments and
agreements as Sellers shall deem necessary in its reasonable discretion
in order to effectuate the transactions contemplated herein, in form and
substance reasonably satisfactory to Seller.
1.4 Payment of Deferred Purchase Price. (a) Subject to the terms and
conditions of Section 1.2(b) above, on each of the three, six and nine month
anniversary dates of the Closing, JAWS shall pay to Seller, by wire transfer or
certified check, $250,000 (up to an aggregate maximum amount of $750,000) of the
Deferred Cash Consideration; provided, however, that Seller's right to receive
any unpaid portion of the Deferred Cash Consideration shall subject to the
limitations and rights of JAWS set forth in Section 1.6 below.
(b) Subject to the terms and conditions of Sections 1.2(b)
above and Section 1.6 below, on or before each of the forty-fifth (45) day
following the twelve (12) and twenty-four (24) month anniversary date of the
Closing, JAWS will deliver to Sellers the following:
(i) the shares representing the Deferred JAWS Common
Stock as provided in Section 1.2(b) and Schedule 1.2(b); and
(ii) in the event the payment of Deferred JAWS Common
Stock is less than one hundred percent of that contemplated by Section
1.2(b) and Schedule 1.2(b), a certificate of JAWS setting forth its
calculation of EBIT accompanied by a report thereon by JAWS' independent
public accountants covering their review of such calculation.
1.5 Restricted Securities. The shares representing the Initial JAWS
Common Stock and the Deferred JAWS Common Stock, if any, shall be restricted
securities under Rule 144 of the Securities Act of 1933, as amended (the "Act"),
will not have been registered under the Act and may not be sold or transferred
absent such registration or unless an exception from registration is available
and the certificates evidencing such shares shall bear an appropriate legend
restricting transfers under the Act.
1.6 JAWS Right to Repurchase JAWS Common Stock from Seller; Forfeiture
of Deferred Consideration . In the event there occurs a Triggering Termination
Event (as defined below) with respect to Seller's employment with JAWS or any
subsidiary thereof following the Closing.
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(a) and at any time prior to the twelve (12) month anniversary date of
the Closing, then (i) Seller shall forfeit his right to receive any portion of
the Deferred Cash Consideration payable pursuant to Sections 1.2(b) and 1.4 that
remains unpaid as of the date of such Termination, and JAWS shall have no
further liability or obligation to Seller in respect thereof; (ii) Seller shall
forfeit his right to receive any portion of the Deferred JAWS Common Stock
payable pursuant to Sections 1.2(b) and 1.4 that remains unpaid and unissued as
of the date of such Termination, and JAWS shall have no further liability or
obligation to Seller in respect thereof , and (iii) JAWS shall have the right
(but not the obligation) to redeem or repurchase from Seller, and Seller shall
be obligated to sell and deliver to JAWS upon demand, all shares of JAWS Common
Stock constituting the Initial JAWS Common Stock, and any shares of Deferred
JAWS Common Stock previously paid and issued to Seller, for a redemption or
repurchase price of $0.01 per share in cash;
(b) and at any time following the twelve (12) month anniversary date of
the Closing and prior to the twenty-four (24) month anniversary date of the
Closing, then (i) Seller shall forfeit his right to receive any portion of the
Deferred JAWS Common Stock payable pursuant to Sections 1.2(b) and 1.4 that
remains unpaid and unissued as of the date of such Termination, and JAWS shall
have no further liability or obligation to Seller in respect thereof , and (ii)
JAWS shall have the right (but not the obligation) to redeem or repurchase from
Seller, and Seller shall be obligated to sell and deliver to JAWS upon demand,
all shares of JAWS Common Stock constituting the Deferred JAWS Common Stock
previously paid and issued to Seller, for a redemption or repurchase price of
$0.01 per share in cash.
As used herein, the term "Triggering Termination Event" shall mean the
termination of Seller's employment with JAWS or any subsidiary thereof following
the Closing (x) by JAWS "For Cause" as defined in Seller's Employment Agreement
(as provided in Section 6.6) or (y) by Seller, voluntarily or involuntarily,
including by reason of Seller's death or disability (except that, with respect
to the Initial JAWS Common Stock, the death or disability of Seller shall not
constitute a Triggering Termination Event).
ARTICLE 2
CLOSING AND TERMINATION
2.1 Closing. The closing of the transactions provided for in Section
1.3 above (the "Closing") will take place at the offices of Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10 A.M.
(local time) on or about April 20, 2000 (the "Closing Date"), or at such other
place, time and date as may be agreed upon by JAWS and Seller. The effective
date of the Closing shall be the Closing Date (the "Effective Date").
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2.2 Termination. Anything contained in this Agreement other than in
this Section 2.2 to the contrary notwithstanding, this Agreement may be
terminated in writing at any time on or prior to the Closing:
(a) without liability on the part of any party hereto, by
mutual written consent of JAWS and Seller;
(b) without liability on the part of any party hereto (unless
occasioned by reason of a breach by any party hereto of any of its
representations, warranties or obligations hereunder) by either JAWS or
Seller, if the Closing shall not have occurred on or before May 1, 2000
(or such later date as may be agreed upon in writing by the parties
hereto);
(c) by JAWS, if Seller shall breach in any material respect any
of its representations, warranties or obligations hereunder and such
breach shall not have been cured or waived or Seller shall not have
provided reasonable assurance that such breach can and will be cured on
or before the Closing Date; or
(d) by Seller, if JAWS shall breach in any material respect any
of its representations, warranties or obligations hereunder and such
breach shall not have been cured or waived or JAWS shall not have
provided reasonable assurance that such breach can and will be cured on
or before the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
Seller and the Company jointly and severally represent and warrant
to JAWS that:
3.1 Authority; Due Execution. The Company has full corporate power and
authority to enter into this Agreement and all other agreements contemplated by
this Agreement to which it is a party and to consummate the transactions
contemplated hereby and thereby. Seller has the power to enter into this
Agreement and all other agreements contemplated by this Agreement to which
Seller is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement has been, and the Employment Agreements (as hereinafter
defined) and all other agreements contemplated by this Agreement to which the
Company and/or Seller is a party will be as of the Closing Date, duly executed
and delivered by the Company and Seller, and (assuming due execution and
delivery by JAWS) this Agreement and the Employment Agreements and all other
agreements contemplated by this Agreement to which the Company and Seller is a
party will constitute valid and binding obligations of the Company and Seller,
respectively, enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
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fraudulent conveyance, moratorium, reorganization or similar laws affecting
creditors' rights generally or by general equitable principles.
3.2 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
all requisite corporate power and authority to carry on its business as now
being conducted and to own its properties and is duly licensed or qualified and
in good standing as a foreign corporation in each jurisdiction in which it is
required to be so licensed or so qualified, except where the failure to be so
licensed or so qualified would not have a material adverse effect on the
financial condition, assets, liabilities (contingent or otherwise), results of
operations, business or prospects (a "Material Adverse Effect") of the Company.
3.3 Certificate of Incorporation; By-laws. Seller has heretofore
delivered to JAWS complete and correct copies of the articles of incorporation
and by-laws of the Company as currently in effect.
3.4 Subsidiaries and Equity Investments. The Company has no
subsidiaries and does not own, directly or indirectly, any investments, capital
stock or other equity or ownership interests in any other corporations or
business enterprises and is not a partner in any partnership or a co-venturer in
any joint venture or other business enterprise. The term "subsidiary" means any
corporation or other entity of which the Company, directly or indirectly, owns
or controls capital stock or ownership interests representing either (i) more
than twenty percent (20%) of the general voting power under ordinary
circumstances of such corporation or entity, or (ii) if an entity other than a
corporation, more than twenty percent (20%) of the economic interest therein.
3.5 Ownership of Shares. Seller is the lawful record and beneficial
owner of that number of Shares set forth opposite such Seller's name on Schedule
1.1 which represent all of the issued and outstanding shares of the Company's
capital stock. Seller owns the Shares free and clear of all pledges, liens,
charges, encumbrances, easements, security interests, claims, options and
restrictions of every kind ("Encumbrances"), except for those Encumbrances
identified on Schedule 3.5 (which shall be satisfied and released on or prior to
the Closing). Upon the delivery of the Shares in the manner contemplated under
Section 1.3, at Closing, Seller will transfer to JAWS good and valid record and
beneficial title to such Shares, free and clear of all Encumbrances.
3.6 Capitalization. The authorized capital of the Company consists of
1,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), of which 8,091 shares are issued and outstanding. Except as set forth
on Schedule 3.6, no other class of capital stock or other ownership interests of
the Company or any subsidiary is authorized, issued, reserved for issuance or
outstanding. All such issued and outstanding shares of Common Stock have been
duly authorized and are validly issued, fully paid and nonassessable. No shares
of Common Stock (including, without limitation, the Shares), and no options,
warrants or other rights, agreements, commitments or arrangements of any kind to
acquire shares of Common Stock, were issued in violation of (x) any
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preemptive or other rights, or (y) any provision of any contract, agreement or
arrangement of any kind. Except as set forth on Schedule 3.6, there are no
outstanding options, warrants, subscriptions, unsatisfied preemptive rights,
calls or other rights, agreements, commitments or arrangements of any kind to
acquire any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the capital stock of the Company or any subsidiary or any
security of any kind convertible into or exchangeable for any such capital
stock. Except as set forth on Schedule 3.6, there are no voting trusts,
shareholder agreements, proxies or other agreements relating to the voting,
purchase or sale of capital stock of the Company (i) between or among the
Company and any Person (as defined below), and (ii) between or among any of the
Company's shareholders. There is no outstanding bond, debenture, note or other
indebtedness of the Company having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any matter on which
shareholders of the Company or any subsidiary may vote.
3.7 No Violation. Neither Seller nor the Company is subject to or
bound by any provision of:
(a) any law, statute, rule, regulation or judicial or
administrative decision,
(b) (in the case of the Company) its articles of incorporation
or by-laws,
(c) any contract, mortgage, deed of trust, lease, note,
shareholders' agreement, proxy, bond, indenture, other instrument or
agreement, license, permit, trust, custodianship or other restriction, or
(d) any consent, judgment, order, writ, award, injunction or
decree of any court, governmental or regulatory body, administrative
agency or arbitrator,
that would conflict with, prevent or be violated by or that would result in the
creation of any Encumbrance as a result of, or under which there would be a
default or right of termination, amendment, acceleration, revocation,
cancellation or suspension as a result of, the execution, delivery and
performance by Seller or the Company of the Agreements to which Seller or the
Company is a party and the consummation of the transactions contemplated
thereby. No consent, order, license, permit, approval or authorization of or
declaration, notice or filing with any individual, corporation, partnership,
limited liability company, trust or unincorporated organization or any
government or any agency or political subdivision thereof (a "Person") is
required for the valid execution, delivery and performance by Seller or the
Company of the Agreements to which it is a party and the consummation of the
transactions contemplated thereby.
3.8 Litigation. Except as set forth in Schedule 3.8, there is (i) no
outstanding consent, order, judgment, injunction, award or decree of any court,
governmental or regulatory body, administrative agency or arbitrator against or
involving the Company (including its subsidiaries), any of its officers or
directors as such or Seller, (ii) no action, suit, dispute or governmental,
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administrative, arbitration or regulatory proceeding pending or, to Seller's
knowledge, threatened against the Company (including its subsidiaries) or
Seller, and (iii) no investigation pending or, to Seller's knowledge, threatened
against or relating to the Company (including its subsidiaries), any of its
officers or directors as such or Seller (collectively, "Proceedings").
3.9 Personal Property. (a) Schedule 3.9(a) sets forth (i) the tangible
physical assets of the Company as of the date of this Agreement that do not
constitute real property (including, but not limited to, machinery, equipment,
furniture, furnishings, leasehold improvements, software, vehicles, buildings
and fixtures) and that have a book value or replacement value in excess of
$15,000 per item or per category of items and the location by address of such
items; (ii) individual refundable deposits in excess of $5,000 or $15,000 in the
aggregate; and (iii) all outstanding loans or advances made by the Company or
any subsidiary to any Person in excess of $15,000.
(b) Except as set forth on Schedule 3.9 (b), each of the
Company and its subsidiaries has good and valid title to all of its material
properties and assets that do not constitute real property, free and clear of
all Encumbrances. Except as set forth on Schedule 3.9(b), each of the Company
and its subsidiaries owns, has valid leasehold interests (pursuant to leases
disclosed in such Schedule) in or valid contractual rights pursuant to contracts
disclosed in such Schedule (or not required to be disclosed therein due to the
dollar threshold set forth in Section 3.21(a)) to use, all of the material
assets, tangible and intangible, currently used by, or necessary for the present
and intended conduct of the business of, the Company.
3.10 Real Property. (a) Schedule 3.10 sets forth each and every parcel
of real property or interest in real estate held under a lease or used by the
Company and its subsidiaries (the "Real Property"). The Company does not own any
real property or interest (other than the leasehold interests referenced on such
Schedule) in real estate. Seller has heretofore delivered to JAWS complete and
correct copies of each and every lease and all documents relating thereto,
including any amendments thereto and any assignment thereof.
(b) Except as set forth in Schedule 3.10, with respect to the
Real Property designated as "leased property" in Schedule 3.10, the Company is
in peaceful and undisturbed possession of the space and/or estate under each
lease under which it is a tenant, and there are no defaults by it as tenant
thereunder; and the Company has good and valid rights of ingress and egress to
and from all the Real Property from and to the public street systems.
3.11 Financial Statements. (a) Seller and the Company have heretofore
furnished JAWS with copies of the following consolidated financial statements of
the Company and its subsidiaries: (i) audited balance sheets as at December 31
for each of 1997, 1998 and 1999, respectively, and as at March 31, 2000; and
(ii) unaudited statements of operations for each of the years ended December 31,
1997, 1998 and 1999 and unaudited for the three month period ended March 31,
2000. Except as noted therein and except for normal year-end adjustments with
respect to the partial year financial statements, all such financial statements
are complete and correct, were prepared in accordance with
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generally accepted accounting principles ("GAAP") consistently applied
throughout the periods indicated and present fairly the financial position of
the Company at such dates and the results of its operations and cash flows for
the periods then ended.
(b) There are no liabilities, debts, obligations or claims
against the Company or any of its subsidiaries of any nature (accrued, absolute
or contingent, unasserted, known or unknown, or otherwise), except (i) as and to
the extent reflected or reserved against on the audited balance sheet described
above as at December 31, 1999 (the "Reference Balance Sheet"); (ii) specifically
described and identified as an exception to this paragraph in any of the
Schedules delivered to JAWS pursuant to this Agreement; (iii) those that are
individually, or in the aggregate, not in excess of $50,000 and were incurred
since December 31, 1999 (the "Reference Balance Sheet Date") in the ordinary
course of business consistent with prior practice; or (iv) open purchase or
sales orders or agreements for delivery of goods and services in the ordinary
course of business consistent with prior practice.
3.12 Books and Records. (a) Seller and the Company have made and will
make available for inspection by JAWS all the books of account relating to
business of the Company. Such books of account of the Company reflect all the
material transactions and other material matters required to be set forth under
GAAP applied on a consistent basis.
(b) The minute book of the Company that has been made available
to JAWS for its inspection contains true and complete records of all meetings
and consents in lieu of meetings of the Board of Directors (and any committees
thereof) of the Company and of its shareholders and accurately reflects all
material transactions referred to in such minutes and consents in lieu of
meetings. The stock books that have been made available to JAWS for its
inspection are true and complete in all material respects.
3.13 Tax Matters. (a) For purposes of this Agreement,
(i) "Tax" or "Taxes" shall mean any federal, state,
local, foreign or other taxes (including, without limitation, income (net
or gross), gross receipts, profits, alternative or add-on minimum,
franchise, license, capital, capital stock, intangible, services,
premium, mining, transfer, sales, use, ad valorem, payroll, wage,
severance, employment, occupation, property (real or personal), windfall
profits, import, excise, custom, stamp, withholding or estimated taxes),
fees, duties, assessments, withholdings or governmental charges of any
kind whatsoever (including interest, penalties, additions to tax or
additional amounts with respect to such items) relating to the income,
operations or properties of the Company and its subsidiaries or the
ownership thereof (by Seller);
(ii) "Pre-Closing Periods" shall mean all Tax periods
ending on or before the Closing Date and, with respect to any Tax period
that includes but does not end on the Closing Date, the portion of such
period that ends on and includes the Closing Date;
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(iii) "Returns" shall mean all returns, declarations,
reports, estimates, information returns and statements of any nature
regarding Taxes for any Pre-Closing Period required to be filed by any
Person and relating to the Company and its subsidiaries;
(iv) "Code" shall mean the Internal Revenue Code of 1986,
as amended; and
(v) the term "Tax Deficiency" shall include a reduction
in any net operating losses.
(b) In respect of the Pre-Closing Periods only,
(i) all Returns have been or will be timely filed when
due in accordance with all applicable laws;
(ii) all Taxes shown on the Returns have been or will be
timely paid when due;
(iii) the Returns completely, accurately, and correctly in
all material respects reflect the facts regarding the income, properties,
operations and status of any entity required to be shown thereon;
(iv) the charges, accruals, and reserves for Taxes due,
or accrued but not yet due, relating to the income, properties or
operations of the Company for any Pre-Closing Period as reflected on the
books of the Company are adequate in all material respects to cover such
Taxes;
(v) there are no agreements or consents currently in
effect for the extension or waiver of the time (A) to file any Return or
(B) for assessment or collection of any Taxes relating to the Company for
any Pre-Closing Period, and no Person has been requested to enter into
any such agreement or consent;
(vi) all Returns with respect to taxable years ending on
or prior to December 31, 1996 have been examined by the relevant taxing
authorities and closed, or are Returns with respect to which the
applicable statute of limitations, after giving effect to any extensions
and waivers, has expired;
(vii) all Taxes which the Company is required by law to
withhold or collect have been in all material respects duly withheld or
collected, and have been timely paid over to the appropriate governmental
authorities to the extent due and payable;
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(viii) there is no action, suit, proceeding, investigation,
audit or claim currently pending, or to Seller's knowledge, threatened,
regarding any Taxes relating to the Company for any Pre-Closing Period;
(ix) all Tax Deficiencies which have been claimed,
proposed or asserted against Seller or, to Seller's knowledge, any prior
shareholder of the Company relating to ownership of stock in the Company
or against the Company or any group of which the Company is now or was
formerly a member have been fully paid or finally settled;
(x) no Person has executed or entered into a closing
agreement pursuant to Code Section 7121 (or any comparable provision of
state, local or foreign law) that is currently in force and determines
the Tax liabilities of the Company;
(xi) there is no, and will not be any, agreement or
consent made under Code Section 341(f) (or any comparable provision of
state, local or foreign law) affecting the Company;
(xii) there are no liens for any Tax on the assets of the
Company except liens which arise as a matter of law;
(xiii) there are no tax sharing agreements to which the
Company is now or, to Seller's knowledge, ever has been a party;
(xiv) the Company is not a party to any agreement,
contract, arrangement or plan that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Code Section 280G (or any comparable provision of state, local
or foreign law);
(xv) the Company has not received any written notice of
any reassessment and, to Seller's knowledge, there are no proposed
reassessments of any property owned or leased by the Company or any other
proposals that would increase the amount of any Tax for which the Company
could be liable;
(xvi) the Company has not agreed, and is not required, to
make any adjustment under Code Section 481(a) (or any comparable
provision of state, local or foreign law) by reason of a change in
accounting method or otherwise; and
(xvii) no power of attorney is currently in effect, and no
Tax ruling has been requested of any governmental authority, with respect
to any Tax matter relating to the Company.
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3.14 Employee Matters. (a) Schedule 3.14 sets forth as of the date
hereof the name, date of hire, current annual compensation rate (including bonus
and commissions), title, current base salary rate and accrued bonus and vacation
of each present employee of the Company; and a list of any employment,
managerial, advisory, consulting, collective bargaining and severance
agreements; employee confidentiality or other agreements protecting proprietary
processes, formulae or information; any employee handbook(s) and written
employment policies; any reports and/or plans prepared or adopted pursuant to
the Equal Employment Opportunity Act of 1972, as amended; any affirmative action
plans; and each employee benefit or compensation plan, agreement or arrangement
covering present or former employees, consultants or directors of the Company,
including "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), stock purchase, stock
option, fringe benefit, change in control, bonus and deferred compensation
plans, agreements or funding arrangements (collectively, the "Benefit Plans"),
whether sponsored, maintained or contributed to by the Company.
(b) For each Benefit Plan, except as set forth on Schedule
3.14, each of the following is true:
(i) if such Benefit Plan is an employee pension benefit
plan (as such term is defined in ERISA Section 3(2)) intended to qualify
under the Code, is and since its inception has been so qualified and the
Plan has received a favorable determination letter as to its
qualification under the Code (or such a letter has been or will be
applied for prior to expiration of the applicable remedial amendment
period), and nothing has occurred, whether by action or failure to act,
which could cause the loss of such qualification or which would result in
material costs to the Company under the Internal Revenue Service's
Closing Agreement Program, Voluntary Compliance Resolution Program or
Administrative Policy Regarding Sanctions;
(ii) the financial statements of the Company reflect in
all material respects all employee liabilities arising under such Benefit
Plan in a manner satisfying the applicable requirements (if any) of
Statement of Financial Accounting Standards ("SFAS") Nos. 87, 88, 106 and
112;
(iii) there are no actions, suits or claims (other than
routine claims for benefits in the ordinary course) pending, or to
Seller's knowledge, threatened, and to Seller's knowledge, there are no
facts which could give rise to any such material actions, suits or claims
(other than routine claims for benefits in the ordinary course);
(iv) none of Seller, the Company, its subsidiaries, nor
any other party has, with respect to any such Benefit Plan, engaged in a
prohibited transaction, as such term is defined in Code Section 4975 or
ERISA Section 406, which could subject the Company or JAWS to any Taxes,
penalties or other material liabilities resulting from prohibited
transactions under Code Section 4975 or under ERISA Sections 409 or
502(i);
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(v) all Benefits Plans are in compliance with ERISA and
the Code;
(vi) all contributions and insurance premiums required as
of the Closing Date have been paid;
(vii) the execution and delivery of this Agreement by
Seller and the consummation of the transactions contemplated hereunder,
will not (pursuant to any "change-of-control provision" or otherwise)
result in any additional (or otherwise modify or accelerate any existing
or contingent) obligation or liability (with respect to accrued benefits
or otherwise) to any such Benefit Plan, to any employee or former
employee of the Company and its subsidiaries;
(viii) the transactions contemplated by this Agreement will
not result in the payment or series of payments to any employee of the
Company or its subsidiaries which is a "parachute payment" within the
meaning of Section 280G of the Code; and
(ix) Seller has delivered to JAWS current, accurate and
complete copies of such Benefit Plan (including the plan document, trust
agreement and other funding or insurance instruments relating thereto)
and, to the extent applicable, copies of the most recent: (A)
determination letter and any outstanding request for a determination
letter; (B) Form 5500 with respect to the plan years ending in calendar
years 1995, 1996 and 1997; (C) collective bargaining agreements or other
such contracts; and (D) the general notification to employees of their
"COBRA" rights under Code Section 4980B and ERISA Sections 601-609 and
the form of letter(s) distributed upon the occurrence of a COBRA
qualifying event for each Benefit Plan that is a "group health plan" as
defined in Code Section 5000(b)(1) and ERISA Section 607(1).
(c) Neither the Company nor any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate") sponsors or maintains (and has not sponsored or
maintained in the calendar years ending 1995, 1996 and 1997) an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) that is
subject to Title IV of ERISA or to the minimum funding requirements of Section
412 of the Code or Part 3 of Title I of ERISA.
(d) Neither the Company nor any ERISA Affiliate contributes or
is obligated to contribute (or in the past six years has been obligated to
contribute) to a "multiemployer plan" (within the meaning of Section 4001(a)(3)
of ERISA).
(e) The Company and its subsidiaries have no employee welfare
benefit plans (within the meaning of ERISA Section 3(1)) which provide benefits
beyond termination of employment except as required by applicable law.
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(f) With respect to the Company and its subsidiaries, except as
set forth on Schedule 3.14, each of the following is true in all material
respects:
(i) the Company is in compliance with all applicable
laws and agreements respecting employment and employment practices, terms
and conditions of employment and wages and hours and occupational safety
and health and is not engaged in any unfair labor practice within the
meaning of Section 8 of the National Labor Relations Act, and there is no
action, suit or legal, administrative, arbitration, grievance or other
proceeding pending or, to Seller's knowledge, threatened, or is any
investigation pending or, to Seller's knowledge, threatened against the
Company or any subsidiary relating to any employment matter, and, to
Seller's knowledge, no basis exists for any such action, suit or legal,
administrative, arbitration, grievance or other proceeding or
governmental investigation;
(ii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to Seller's knowledge, threatened against
the Company;
(iii) none of the employees of the Company is a member of
or represented by any labor union and, there are no attempts of whatever
kind and nature being made to organize any of such employees;
(iv) without limiting the generality of paragraph (iii)
above, no certification or decertification is pending or was filed within
the past twelve months respecting the employees of the Company and no
certification or decertification petition is being or was circulated
among the employees of the Company within the past twelve months;
(v) no agreement (including any collective bargaining
agreement), arbitration or court decision, decree or order or
governmental order which is binding on the Company in any material way
limits or restricts the Company or any subsidiary from relocating or
closing any of its operations;
(vi) the Company has not experienced any organized work
stoppage in the last five years; and
(vii) there are no administrative proceedings, lawsuits or
complaints of discrimination (including but not limited to discrimination
based upon sex, age, marital status, race, national origin, sexual
orientation, disability or veteran status) pending or, to Seller's
knowledge, threatened, or to Seller's knowledge, is any investigation
pending or threatened before the Equal Employment Opportunity Commission
or any federal, state or local agency or court, or is any complaint or
internal investigation pending with regard to sexual or other harassment.
There have been no audits of the equal employment opportunity
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practices or affirmative action practices of the Company and, to Seller's
knowledge, no reasonable basis for any claim regarding such practices
exists.
3.15 Intellectual Property. Schedule 3.15 sets forth a list of all
registered trademarks, trademark registrations and applications therefor, trade
names, brand names, all service marks, service ▇▇▇▇ registrations and
applications therefor, all registered trade dress rights, registrations and
applications therefor, patents and patent applications, material registered
copyrights, and applications therefor (including information as to expiration
dates of all the foregoing where applicable) presently owned or used, in whole
or in part, by the Company or any subsidiary or for which the Company is
licensed. Neither Seller nor the Company are licensors in respect of any
patents, trade secrets, inventions, shop rights, copyrights or applications
therefor which are used in the business of the Company.
3.16 Accounts Receivable. The accounts receivable appearing on the
Reference Balance Sheet and all accounts receivable created since that date
through the Closing Date represent in all material respects and will in all
material respects represent valid obligations owing to the Company, have arisen
from bona fide transactions in the ordinary course of business and are fully
collectible by the Company in the ordinary course of business, subject to the
reserve for doubtful accounts appearing on the Reference Balance Sheet.
3.17 [Intentionally Omitted]
3.18 No Material Change. Since the Reference Balance Sheet Date, there
has been no material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), results of operations, business or
prospects of the Company.
3.19 Absence of Change or Event. Except as set forth on Schedule 3.19,
since the Reference Balance Sheet Date, the Company has conducted its business
only in the ordinary course consistent with past practice and has not:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, in excess of
$15,000 in the aggregate, except liabilities or obligations incurred in
the ordinary course of business and consistent with prior practice which
do not exceed $50,000 in the aggregate;
(b) mortgaged, pledged or subjected to lien, restriction or any
other Encumbrance any of the property, businesses or assets, tangible or
intangible, of the Company, except for purchase money liens;
(c) sold, transferred, leased to others or otherwise disposed
of any of its assets (or committed to do any of the foregoing), including
the payment of any loans owed, or the making of any loans, to any
officer, director, shareholder or other affiliate of the Company,
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except for inventory sold to customers or returned to vendors and
payments to any non-affiliates on account of accounts payable or
scheduled payments in respect of indebtedness for money borrowed
disclosed on the Reference Balance Sheet or in the Schedules, or
canceled, waived, released or otherwise compromised any debt or claim
other than in the ordinary course of business, or any material right;
(d) suffered any damage, destruction or loss (whether or not
covered by insurance) in an amount greater than $15,000;
(e) made or committed to make any capital expenditures or
capital additions or betterments in excess of an aggregate of $15,000;
(f) instituted or threatened any litigation, action or
proceeding before any court, governmental or regulatory body,
administrative agency or arbitrator relating to it or its property;
(g) issued, authorized for issuance or sold any capital stock,
notes, bonds or other securities, or any option, warrant or other right
to acquire the same, of the Company, or declared or paid any dividend or
made any other payment or distribution in respect of its capital stock,
or directly or indirectly redeemed, purchased or otherwise acquired any
of its capital stock or any option, warrant or other right to acquire
such capital stock;
(h) increased the compensation of any officer, director,
employee or agent of the Company, directly or indirectly, including by
means of any bonus, pension plan, profit sharing, deferred compensation,
savings, insurance, retirement, or any other employee benefit plan,
except in the case of any employee whose annual base compensation is less
than $30,000;
(i) materially changed any of its business or accounting
accrual practices, including, without limitation, the amount of
promotional or advertising expenditures, investments, marketing, pricing,
purchasing, production, personnel, sales, returns or budgets, accounts
receivable or inventory reserves, or otherwise changed its policies with
respect thereto;
(j) made or changed any election concerning Taxes or Tax
Returns, changed an annual accounting period, adopted or changed any
accounting method, filed any amended Return, entered into any closing
agreement with respect to Taxes, settled any Tax claim or assessment or
surrendered any right to claim a refund of Taxes or obtained or entered
into any Tax ruling, agreement, contract, understanding, arrangement or
plan;
(k) allowed any Permit (as hereinafter defined) relating to the
business of the Company to lapse or terminate;
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(l) materially amended or terminated or received any threat
(not subsequently withdrawn) to terminate, any Contract (as hereinafter
defined);
(m) amended its articles of incorporation or bylaws or merged
with or into or consolidated with any Person, subdivided, combined or in
any way reclassified any shares of its capital stock, or changed or
agreed to change the rights of its capital stock or the character
thereof; or
(n) engaged in any other material transaction other than in the
ordinary course of business.
3.20 Compliance With Law. The operations and activities of the Company
have complied and are in compliance in all respects with all applicable federal,
state, local and foreign laws, statutes, rules, regulations, judicial and
administrative decisions and consents, judgments, orders, awards, writs and
decrees of any court, governmental or regulatory body, administrative agency or
arbitrator, including, without limitation, health and safety statutes and
regulations and all environmental laws, including, without limitation, all
restrictions, conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the environmental laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder, the
failure of which could have a Material Adverse Effect on the Company.
3.21 Contracts and Commitments. (a) Schedule 3.21 sets forth each
written contract or agreements (i) involving a liability or obligation of the
Company equal to or in excess of $15,000 and outstanding as of the date hereof
to which the Company is a party or (ii) which is not terminable by the Company
on sixty day's or less prior notice, without penalty, other than ordinary course
of business purchase orders.
(b) Except as set forth on Schedule 3.21, each of the
agreements set forth on such Schedule (the "Contracts") was entered into in a
bona fide transaction in the ordinary course of business, is valid and binding
on the Company (assuming due authorization, execution and delivery thereof by
the other parties thereto) and is in full force and effect and, upon
consummation of the transactions contemplated hereby, will continue in full
force and effect without penalty. Seller has heretofore delivered to JAWS
complete and correct copies of the Contracts. There is not under any Contract:
(A) any existing material default by the Company or, to Seller's knowledge, by
any other party thereto, or (B) any event which, after notice or lapse of time
or both, would constitute a material default by the Company or, to Seller's
knowledge, by any other party, or result in a right to accelerate, suspend or
terminate or result in a loss of rights of the Company.
3.22 Insurance. (a) Schedule 3.22 sets forth (i) the policies of
insurance presently in force and, without restricting the generality of the
foregoing, those covering the Company's public and product liability and its
personnel, properties, buildings, machinery, equipment, furniture, fixtures
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and operations, specifying with respect to each such policy the name of the
insurer, type of coverage, term of policy, limits of liability and annual
premium; (ii) the Company's premiums, deductibles and losses in excess of
$15,000, by year, by type of coverage, for the calendar years 1995, 1996 and
1997 based on information received from the Company's insurance carrier(s);
(iii) all outstanding insurance claims in excess of $10,000 by the Company for
damage to or loss of property or income which have been referred to insurers or
which Seller believe to be covered by commercial insurance; (iv) general
comprehensive liability policies carried by the Company for the calendar years
1997, 1998 and 1999, including excess liability policies; and (v) any
agreements, arrangements or commitments by or relating to the Company under
which the Company indemnifies any other Person or is required to carry insurance
for the benefit of any other Person. Seller have heretofore delivered to JAWS
complete and correct copies of the policies and agreements set forth on Schedule
3.22.
(b) The insurance policies set forth on Schedule 3.22 are in
full force and effect, all premiums which are due with respect thereto covering
all periods up to and including the date of the Closing have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for compliance with all requirements of law
and all agreements to which the Company is a party; are valid, outstanding and
enforceable policies; will remain in full force and effect through the
respective dates set forth on Schedule 3.22; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Company has not been refused any insurance with respect to the
respective assets or operations of the Company, nor has any such coverage been
limited, by any insurance carrier to which the Company has applied for any such
insurance or with which the Company has carried insurance during the calendar
years 1997, 1998 and 1999.
3.23 Affiliate Interests. (a) The Company has not made any payments in
1999, or during any of the three (3) preceding calendar years, to any officer,
director, or shareholder other than compensation for bona fide services
rendered, for shareholders distributions for federal income tax liabilities, and
for reimbursement for reasonable business related expenses.
(b) Except as set forth on Schedule 3.23(b), no shareholder,
officer or director of the Company or any affiliate of Seller (in each case, or
any family member thereof) (i) has any interest, directly or indirectly, in any
property, real or personal, tangible or intangible, including without
limitation, inventions, patents, trademarks or trade names, used in or
pertaining to the business of the Company, (ii) owns, directly or indirectly,
any interest in (excepting less than 5% stock holdings for investment purposes
in securities of companies which are publicly held and traded), or is an
officer, director, employee or consultant of, any Person which is, or is engaged
in business as, a competitor, lessor, lessee, supplier, distributor, sales agent
or customer of the Company, or (iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company, except for claims
arising in the ordinary course of business arising from such Person's employment
with the Company and indebtedness described in Section 6.7 hereof.
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3.24 Customers, Suppliers, Distributors, Etc. Except for the loss of
such other customers that will not have a Material Adverse Effect on the
Company, no supplier, customer, distributor or sales representative of the
Company has canceled or otherwise terminated, or made any written threat to the
Company or to any of their affiliates to cancel or otherwise terminate, for any
reason, including the consummation of the transactions contemplated hereby, its
relationship with the Company. Except for the loss of such relationship that
will not have a Material Adverse Effect on the Company, to Seller's knowledge no
such supplier, customer, distributor or sales representative intends to cancel
or otherwise terminate its relationship with the Company.
3.25 Environmental Matters. (a) For the purposes of this Section the
following terms shall have the following meanings: (i) the term "Hazardous
Material" shall mean any material or substance that, whether by its nature or
use, is now or hereafter defined, determined or identified as a hazardous
material, hazardous waste, hazardous substance, toxic substance, pollutant or
contaminant under any Environmental Law, or which is toxic, explosive,
corrosive, ignitable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous or is harmful to human health or the environment, or which
is or contains petroleum, gasoline, diesel fuel or another petroleum hydrocarbon
product; (ii) "Environmental Laws" shall collectively mean all present and
future federal, state and local laws, statutes, ordinances, rules, regulations,
orders, codes, licenses, permits, decrees, judgments, directives, guidelines,
standards or the equivalent of or by any governmental authority and relating to
or addressing the protection of the environment or human health (including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section
9601 et seq.), and the regulations adopted and publications promulgated pursuant
thereto); and (iii) the term "governmental authority" shall mean the Federal
government, or any state or other political subdivision thereof, or any agency,
court or body of the Federal government, any state or other political
subdivision thereof, exercising executive, legislative, judicial, regulatory or
administrative functions.
(b) Except as set forth in Schedule 3.25, Seller represents and
warrants that: (i) neither the Company nor, to the best of Seller's knowledge,
any prior owner or any user or tenant or operator of the Real Property, has
generated, stored, treated, disposed of, used, caused to be used, or permitted
the use of Hazardous Materials in, on or about the Real Property in violation of
Environmental Laws; (ii) the Company is in compliance with all applicable
Environmental Laws; (iii) the Company has secured all permits, licenses,
authorizations, registrations and approvals necessary for the storage, use or
handling of Hazardous Materials and is in compliance therewith; (iv) there are
no pending claims by any governmental authority or any other person in respect
of Environmental Laws affecting the Company or the Real Property and neither
Seller nor the Company has received any notice of any violations of any
Environmental Laws or has received any warning notices, administrative
complaints, judicial complaints or other formal or informal notices from any
person alleging that the Company or conditions on the Real Property are, or may
be, in violation of any Environmental Laws; (v) there is not now, nor, to the
best of Seller's knowledge,
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has there ever been, any disposal, discharge or other type of release on
property adjacent to or near the Real Property or to the surface or ground water
flowing to the Real Property which may constitute a risk of contamination to the
Real Property; and (vi) no releasing, emitting, discharging, leaching, dumping
or disposing of any Hazardous Material by the Company or from the Real Property
has occurred at, into, onto or under any other property which may give rise to
liability under any Environmental Law.
3.26 Absence of Questionable Payments. Except as set forth on Schedule
3.26, neither the Company nor, to Seller's knowledge, any director, officer,
agent, employee or other Person acting on behalf of the Company has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 30A of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Neither the Company nor, to Seller's
knowledge, any current director, officer, agent, employee or other Person acting
on behalf of the Company has accepted or received any unlawful contributions,
payments, gifts or expenditures.
3.27 Investment Intent. Seller
(i) represents and warrants that (a) the Initial JAWS
Common Stock, and (b) to the extent issued to Seller as contemplated by
this Agreement, the Deferred JAWS Common Stock (the securities describes
in clauses (a) and (b) being herein referred to collectively as, the
"Securities") are being acquired as an investment and not with a view to
the distribution thereof;
(ii) understands that none of the Securities have been
registered under the Act, in reliance on an exemption therefrom, and that
none of the Securities have been approved or disapproved by the United
States Securities and Exchange Commission or by any other Federal or
state agency;
(iii) understands that none of the Securities can be sold,
transferred or assigned unless registered by JAWS (which no Seller has
the right to compel) pursuant to the Act and any applicable state
securities laws, or unless an exemption therefrom is available, and,
accordingly, it may not be possible for Seller to liquidate its
investment in the Securities, and agrees not to sell, assign or otherwise
transfer or dispose of the Securities unless such Securities have been so
registered or an exemption from registration is available;
(iv) acknowledges that all documents, records and books
pertaining to JAWS and its business (including, but not limited to, the
following documents which have been provided to, and reviewed by, Seller:
(a) JAWS' Annual Reports on Form 10-K for the fiscal years ended December
31, 1999 (the "1999 Form 10-K"), and (b) JAWS' Registration Statement on
Form S-1 (Reg. No. 333-3046), as declared effective by the Securities and
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Exchange Commission (the "Registration Statement"), respectively, have
been made available to Seller and Seller's attorney and/or accountant
and/or representative. Seller has had an opportunity to ask questions and
receive answers from JAWS concerning the business and assets of JAWS and
all such questions have been answered to the full satisfaction of Seller;
and
(v) is an accredited investor, as that term is defined
in Regulation D under the Act.
3.28 Disclosure. (a) No representations or warranties by Seller and the
Company in this Agreement, including the Exhibits and the Schedules, and no
statement contained in any document (including, without limitation, the
financial statements, certificates and other writings furnished or to be
furnished by Seller or the Company to JAWS or any of its representatives
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby), contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. There is no fact known to Seller which has a Material
Adverse Effect on the Company which has not been set forth in this Agreement,
including any Exhibit or Schedule, the financial statements referred to in
Section 3.11 (including the footnotes thereto), any schedule, exhibit, or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Seller or the
Company in connection with the transactions contemplated by this Agreement.
(b) Seller has furnished or caused to be furnished, or made
available, to JAWS complete and correct copies of all agreements, instruments
and documents set forth in the Schedules. Each of the Schedules is true,
complete and correct.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF JAWS
JAWS represents and warrants to Seller that:
4.1 Organization. JAWS is a corporation duly organized and validly
existing and in good standing under the laws of the State of Nevada. JAWS has
all requisite corporate power and authority to carry on its business as now
being conducted and to own its properties and is duly licensed or qualified and
in good standing as a foreign corporation in each jurisdiction in which it is
required to be so licensed or so qualified, except where the failure to be so
licensed or so qualified would not have a Material Adverse Effect on JAWS.
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4.2 Corporate Authority. JAWS has full corporate power and authority
to enter into this Agreement and all other agreements contemplated by this
Agreement to which it is party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by JAWS of this
Agreement and all other agreements contemplated by this Agreement to which it is
party have been duly authorized by all requisite corporate action. This
Agreement has been, and each of the other agreements contemplated by this
Agreement to which it is party will be as of the Closing Date, duly executed and
delivered by JAWS, and (assuming due execution and delivery by Seller and the
Company) this Agreement constitutes, and each of such other agreements when
executed and delivered will constitute, a valid and binding obligation of JAWS,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
4.3 No Violation. JAWS is not subject to or bound by any provision of:
(a) any law, statute, rule, regulation or judicial or
administrative decision,
(b) any certificate of incorporation or by-laws,
(c) any mortgage, deed of trust, lease, note, shareholders'
agreement, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship or other restriction, or
(d) any judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or arbitrator,
that would prevent or be violated by, or under which there would be a default as
a result of, the execution, delivery and performance by JAWS of this Agreement
and the consummation of the transactions contemplated hereby. No consent,
approval or authorization of or declaration or filing with any Person is
required for the valid execution, delivery and performance by JAWS of this
Agreement and the consummation of the transactions contemplated hereby.
4.4 Investment Intent. JAWS is acquiring the Shares for its own
account for investment and not with a view to any distribution thereof.
4.5 Due Execution. This Agreement has been duly executed and delivered
by JAWS and (assuming due execution and delivery by Seller and the Company) the
Agreement constitutes, and (assuming due execution and delivery by each party
thereto other than JAWS) the Employment Agreements and all other agreements to
be executed and delivered by JAWS pursuant to this Agreement will constitute,
valid and binding obligations of JAWS, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent
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conveyance, moratorium, reorganization or similar laws affecting creditors'
rights generally or by general equitable principles.
4.6 SEC Documents. JAWS has furnished Seller with copies of the
following reports (the "SEC Documents") filed by JAWS with the United States
Securities and Exchange Commission (the "SEC"):
(a) the 1999 Form 10-K; and
(b) the Registration Statement.
4.7 JAWS Common Stock. All shares of JAWS Common Stock delivered to
Seller pursuant to this Agreement (which shall include all shares of Initial
JAWS Common Stock, and Deferred JAWS Common Stock, if any, when issued as
contemplated hereby, will be duly authorized, fully paid and non-assessable.
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS OF SELLER AND JAWS
5.1 Conduct of Business Prior to the Closing Date. Seller and the
Company agree that, between the date hereof and the Closing Date:
(a) Except as contemplated by this Agreement or permitted by
written consent of JAWS, Seller shall cause the Company to operate its
business only in the ordinary course consistent with prior practice and
not to:
(i) declare or pay any dividends, make any distributions
to shareholders or undertake any similar transactions affecting
the capital of the Company;
(ii) sell or dispose of any assets of the Company other
than the sale of inventory in the ordinary course of business and
dispositions of immaterial assets;
(iii) take any action of the nature referred to in Section
3.19, except as permitted therein;
(iv) change the Company's banking or safe deposit
arrangements;
(v) cause or permit indebtedness (which for purposes of
this clause (v) shall be deemed to exclude trade payables
consisting of accounts payable, deferred taxes and accrued
expenses) of the Company to exceed $10,000 in the aggregate; or
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(vi) except as my be required by law, take any action to
amend or terminate any Employee Benefit Plan or adopt any other
plan, program, arrangement or practice providing new benefits or
compensation to its employees.
(b) Seller shall use his best efforts to conduct the business
of the Company in a manner consistent with past business practices; to
preserve the business organization of the Company intact; to keep
available to JAWS the services of the present officers and employees of
the Company; to preserve for JAWS the good will of the Company's
suppliers, customers, distributors, sales representatives and others
having business relations with the Company; and to inform JAWS of, and
consult with JAWS on, any key decisions involving any capital expenditure
in excess of $15,000.
(c) Seller shall cause the Company to maintain in force the
insurance policies referred to on Schedule 3.22 or insurance policies
providing the same or substantially similar coverage; provided, however,
that Seller will notify JAWS prior to the expiration of any of such
insurance policies.
(d) Except as contemplated by this Agreement or permitted by
written consent of JAWS, no Benefit Plan disclosed or required to be
disclosed has been or will be:
(i) terminated by the Company other than for expiration
of its terms;
(ii) except as required by law, amended in any manner
which would directly or indirectly increase the benefits accrued
in a material amount, by any participant thereunder; or
(iii) except as required by law, amended in any manner
which would materially increase the cost to JAWS of maintaining
such plan, fund or arrangement.
(e) Seller and the Company shall give JAWS prompt notice of any
event, condition or circumstance occurring from the date hereof through
the Closing Date that would constitute a violation or breach of any
representation or warranty of Seller of which Seller have knowledge,
whether made as of the date hereof or as of the Closing Date, or that
would constitute a violation or breach of any covenant of Seller
contained in this Agreement.
5.2 Tax Covenants. (a) Seller shall cooperate with JAWS in the
preparation and filing by JAWS of all Returns relating to Pre-Closing Periods.
Such Returns shall be prepared or completed in a manner consistent with prior
practice of Seller and the Company with respect to Returns concerning the
income, properties or operations of the Company (including elections and
accounting methods and conventions), except as otherwise required by law or
regulation or
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otherwise agreed to by JAWS prior to the filing thereof, subject to the proviso
of the preceding sentence.
(b) JAWS and Seller shall cooperate with each other in
responding to any audit or proceeding relating to any Returns (including any
proceeding relating to the Company for Pre-Closing Periods). Notwithstanding
anything to the contrary contained or implied in this Agreement, (i) without the
prior written approval of JAWS (which shall not be unreasonably withheld or
delayed), neither Seller nor any affiliate thereof shall agree or consent to
compromise or settle, either administratively or after the commencement of
litigation, any issue or claim arising in any such audit or proceeding, or
otherwise agree or consent to any Tax liability, to the extent that any such
compromise, settlement, consent or agreement shall materially affect the Tax
liability of JAWS, any of its affiliates or the Company (including, but not
limited to, the imposition of Tax deficiencies, the material reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of material amortization or depreciation deductions, or the
material reduction of loss or credit carry-forwards).
(c) JAWS shall promptly notify Seller upon receipt by JAWS, any
affiliate of JAWS or the Company of notice of any pending or threatened Tax
audits or assessments relating to the income, properties or operations of the
Company, in each case for Pre-Closing Periods only, so long as Pre-Closing
Periods remain open; provided, however, that failure by JAWS to comply with this
Section 5.2(c) shall not affect JAWS's right to indemnification relating to
Taxes if such failure does not prejudice the rights of Seller. Seller shall
promptly notify JAWS upon receipt by Seller or any affiliate thereof of notice
of any pending or threatened Tax audits or assessments relating to the income,
properties or operations of the Company, in each case for Pre-Closing Periods
only.
(d) Neither Seller nor any affiliate of Seller shall, without
the prior written consent of JAWS, file, or cause to be filed, any amended Tax
return or claim for Tax refund, with respect to the Company, to the extent that
any such filing shall materially affect the Tax liability of JAWS, any of its
affiliates or the Company (including, but not limited to, the imposition of Tax
deficiencies, the material reduction of asset basis or cost adjustments, the
lengthening of any amortization or depreciation periods, the denial of material
amortization or depreciation deductions, or the material reduction of loss or
credit carry-forwards).
(e) Any and all powers of attorney relating to Tax matters
concerning the Company shall be terminated as to the Company on or prior to the
Closing Date and shall have no further force or effect.
(f) After the Closing Date, JAWS and Seller shall provide each
other, and JAWS shall cause the Company to provide Seller, with such cooperation
and information relating to the Company as either party reasonably may request
in (A) filing any Tax return, amended return or claim for refund, (B)
determining any Tax liability or a right to refund of Taxes, (C) conducting or
defending any audit or other proceeding in respect of Taxes or (D) effectuating
the terms of this
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Agreement. The parties shall retain, and JAWS shall cause the Company to retain,
all returns, schedules and work papers, and all material records and other
documents relating thereto, until the expiration of the statute of limitation
(and, to the extent notified by any party, any extensions thereof) of the
taxable years to which such returns and other documents relate and, unless such
returns and other documents are offered and delivered to Seller or JAWS, as
applicable, until the final determination of any Tax in respect of such years.
Any information obtained under this Section 5.2 shall be kept confidential,
except as may be otherwise necessary in connection with filing any Tax return,
amended return, or claim for refund, determining any Tax liability or right to
refund of Taxes, or in conducting or defending any audit or other proceeding in
respect of Taxes, or as otherwise may be required by law. Notwithstanding the
foregoing, neither Seller nor JAWS, nor any of their affiliates, shall be
required unreasonably to prepare any document, or determine any information not
then in its possession, in response to a request under this Section 5.2(f).
(g) JAWS shall have received from Seller, on or before the
Closing Date, an affidavit to the effect that Seller is not a "foreign person"
within the meaning of Code Section 1445. If, on or before the Closing Date, JAWS
shall not have received such affidavit from any Seller, JAWS may withhold from
the Initial Cash Consideration payable at the Closing to such Seller pursuant
hereto such sums as are required to be withheld therefrom under Section 1445 of
the Code.
(h) Seller shall be liable for, and shall pay when due, (i) any
transfer, gains, documentary, sales, use, registration, stamp, value added or
other similar Taxes payable by reason of the transactions contemplated by this
Agreement or attributable to the sale, transfer or delivery of the Shares
hereunder, and (ii) other Taxes imposed on Seller or any former shareholder of
the Company for which JAWS or the Company is held liable. Other than in the case
of Returns and other documentation that are required to be filed by the Company,
which relate to Tax periods commencing on or after the Closing Date, Seller
shall, at his own expense, file all necessary Tax returns and other
documentation with respect to all such Taxes.
5.3 Expenses and Finder's Fees. JAWS and Seller will bear their own
expenses in connection with this Agreement and its performance. Seller, on the
one hand, and JAWS, on the other hand, each represent and warrant to the other
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on in such a manner as not to give rise to
any valid claims against the other party or the Company for a brokerage
commission, finder's fee or other like payment.
5.4 Access to Information and Confidentiality. Seller and the Company
agree that until the Closing, JAWS may conduct such reasonable investigation
with respect to the business, business prospects, assets, liabilities
(contingent or otherwise), results of operations, employees and financial
condition of the Company as will permit JAWS to evaluate the transactions
contemplated by this Agreement. Until the Closing, Seller shall afford JAWS
reasonable access to the premises, books, records and business affairs of the
Company (and, to the extent directly relating thereto, of Seller) for purposes
of conducting such investigation. Unless and until the transactions contemplated
herein
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have been consummated, each of JAWS and Seller shall maintain all confidential
information received from the other in connection with its evaluation of the
transactions contemplated by this Agreement (the "Confidential Information") in
strict confidence, and shall take all precautions necessary to prevent
disclosure, access to, or transmission of the Confidential Information, or any
part thereof, to any third party. Each of JAWS and Seller may make limited
disclosure of Confidential Information to its representatives and to such other
persons as need to know for the purpose of preparing for and negotiating this
Agreement and in connection with the consummation of the purchase and sale
contemplated hereby, including arranging JAWS's financing in connection with the
purchase, provided such persons are informed of and bound by JAWS's
confidentiality obligations hereunder. In the event the Closing does not occur
for any reason, each of JAWS and Seller shall, promptly upon the other's
request, return all copies and recordings of the Confidential Information in its
possession or under its control and delete all records thereof in any data
storage system maintained by it. For the purposes of this Section 5.4,
Confidential Information shall not include information which (a) the holder can
reasonably demonstrate was already in the holder's possession, provided that
such information is not known by the holder to be subject to another
confidentiality agreement with, or other obligation of secrecy to another party,
(b) becomes generally available to the public other than as a result of a
disclosure by the holder or the holder's directors, officers, employees, agents
or advisors, or (c) becomes available to the holder on a non-confidential basis
from a source other than Seller or its advisors, provided that such source is
not known by the holder to be bound by a confidentiality agreement with, or
other obligation of secrecy to another party. Nothing contained in this Section
5.4 or otherwise shall prohibit the holder from making disclosure of
Confidential Information to the extent required by law, rule or regulation,
provided that the holder shall give the other prior notice as to the nature of
the required disclosure so as to provide the other the opportunity to challenge
the need for such disclosure.
5.5 No Solicitation. Seller and the Company shall not, and each shall
direct their respective affiliates, representatives and agents and the Company's
officers and employees, not to, directly or indirectly, encourage, solicit,
initiate or engage in discussions or negotiations with, or provide any
non-public information to, any Person concerning any merger, sales of
substantial assets, sales of shares of capital stock or similar transactions
involving the Company or enter into any agreement with respect thereto. Seller
will promptly communicate to JAWS the terms of any proposal which it may receive
in respect of all such transactions prohibited by the foregoing.
5.6 Press Releases. Except as required by law or stock exchange
regulation, any public announcements by the Company or Seller regarding the
transactions contemplated hereby shall be made only with the consent of JAWS.
5.7 Transitional Assistance. Seller shall reasonably cooperate with
and assist JAWS in the orderly transfer of the business of the Company after the
Closing Date. Such cooperation and assistance shall include, but not be limited
to, the physical transfer of any books, records and computer software of the
Company.
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5.8 Conditions. Seller shall use their best efforts to fulfill or
cause the fulfillment of the conditions set forth in Article 6. JAWS shall use
its best efforts to fulfill or cause the fulfillment of the conditions set forth
in Article 7.
5.9 Rule 144. Following the Closing Date, JAWS agrees to use
commercially reasonable efforts to cooperate with Seller with respect to
permitted sales of JAWS Common Stock by Seller under Rule 144 of the Exchange
Act.
5.10 Name Change. Effective immediately following the Closing, Seller,
the Company and JAWS shall take such action and effect such filings as are
necessary to change the name of the Company to a corporate name to be designated
by JAWS.
ARTICLE 6
CONDITIONS PRECEDENT OF JAWS
JAWS need not consummate the transactions contemplated by this Agreement
unless the following conditions shall be fulfilled or waived:
6.1 Representations and Warranties. Except as otherwise contemplated
or permitted by this Agreement, (a) the representations and warranties of Seller
and the Company contained in this Agreement and in any certificate or document
delivered to JAWS pursuant hereto shall be deemed to have been made again at and
as of the Closing Date and shall then be true in all material respects, except
to the extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true in all
material respects as of such date, and (b) Seller shall have performed and
complied with all material agreements and conditions required by this Agreement
to be performed or complied with by Seller prior to or on the Closing Date, and
JAWS shall have been furnished with a certificate of Seller, dated the Closing
Date, certifying to the effect of clauses (a) and (b) of this Section 6.1.
6.2 Due Diligence. JAWS shall have completed, to its sole
satisfaction, its due diligence investigation of the Company.
6.3 Opinion of Counsel. JAWS shall have been furnished with an opinion
dated the Closing Date of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC , counsel for Seller and the
Company, in form and substance reasonably acceptable to JAWS.
6.4 No Actions. No action, suit, or proceeding before any court or
governmental or regulatory authority shall be pending, no investigation by any
governmental or regulatory authority shall have been commenced, and no action,
suit or proceeding by any governmental or regulatory authority shall have been
threatened, against JAWS, Seller, the Company or any of the principals,
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officers or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions.
6.5 Consents. All consents of third parties, including, without
limitation, governmental authorities and non-governmental self-regulatory
agencies, and all filings with and notifications of governmental authorities,
regulatory agencies (including non-governmental self-regulatory agencies) or
other entities which regulate the business of JAWS, Seller or the Company
necessary on the part of JAWS, Seller or the Company, to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and to permit the continued operation of the respective businesses of
JAWS and the Company in substantially the same manner immediately after the
Closing Date as theretofore conducted, other than routine post-closing
notifications or filings, shall have been obtained or effected.
6.6 Employment Agreements. Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed and
delivered an Employment Agreement substantially in the forms attached hereto as
Exhibits A-1 and A-6, respectively (together, as applicable, with the
"Restrictive Letter" and any other exhibits attached thereto, the "Employment
Agreements").
6.7 Outstanding Shareholder Loans. Any outstanding loans from or
guarantees by the Company to or for the benefit of any Seller shall have been
satisfied and discharged or otherwise have terminated or been canceled, and
Seller and the Company shall have delivered to JAWS satisfactory evidence
thereof.
6.8 Material Adverse Change. There shall have been no material adverse
change in the financial conditions, assets, liabilities (contingent or
otherwise), results of operations or business of the Company.
6.9 Termination of License Agreement. Effective on or prior to the
Closing, Seller shall obtain and deliver to JAWS, a written termination of the
License Agreement, dated December 2, 1994, by and between the Company and
Nucleus Design Limited, and such written termination shall contain a release of
the Company with respect to any liability penalty, or obligation thereunder,
historically and prospectively.
ARTICLE 7
CONDITIONS PRECEDENT OF SELLER
Seller need not consummate the transactions contemplated hereby unless
the following conditions shall be fulfilled on or prior to the Closing:
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7.1 Representations and Warranties. Except as otherwise contemplated
or permitted by this Agreement, (a) the representations and warranties of JAWS
contained in this Agreement or in any certificate or document delivered to
Seller pursuant hereto shall be deemed to have been made again at and as of the
Closing Date and shall then be true in all material respects, and (b) JAWS shall
have performed and complied with all material agreements and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date, and Seller shall have been furnished a certificate of an
appropriate officer of JAWS, dated the Closing Date, certifying to the effect of
clauses (a) and (b) of this Section 7.1.
7.2 No Actions. No action, suit, or proceeding before any court,
governmental or regulatory authority, administrative agency or arbitrator shall
be pending, no investigation by any governmental or regulatory authority shall
have been commenced, and no action, suit or proceeding by any Person shall have
been threatened, against Seller seeking to restrain, prevent, or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions.
7.3 Consents. All consents of third parties including, without
limitation, governmental authorities, and non-governmental self-regulatory
agencies, and all filings with and notifications of governmental authorities,
regulatory agencies (including non-governmental self-regulatory agencies) or
other entities which regulate the business of Seller, necessary on the part of
Seller, to the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, other than routine post-closing
notifications or filings, shall have been obtained or effected.
7.4 Employment Agreements. JAWS shall have caused the Employment
Agreements to be duly executed and delivered by the Company.
7.5 Opinion of Counsel. Seller shall have been furnished with an
opinion, dated the Closing Date, of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to JAWS (and any local counsel, as applicable), in form and substance
reasonably satisfactory to Seller.
7.6 No Material Adverse Change. There shall have been no material
adverse change in the financial condition, assets, liabilities (contingent or
otherwise), results of operations or business of JAWS and its subsidiaries,
taken as a whole.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Seller. Effective only from and upon the
occurrence of the Closing, and subject to Section 8.3 below, Seller hereby
agrees to defend, indemnify and hold harmless JAWS and, following the Closing,
the Company, and their respective successors, assigns
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and affiliates (collectively, the "JAWS Indemnitees") from and against any and
all losses, deficiencies, liabilities, damages, assessments, judgments, costs
and expenses, including reasonable attorneys' fees (both those incurred in
connection with the defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this provision, subject to the
qualification that attorneys' fees shall not be recoverable in any action in
which no JAWS Losses (as defined below) are awarded), including, without
limitation, Environmental Liabilities and Costs (collectively, "JAWS Losses"),
caused by, resulting from or arising out of:
(a) (i) breaches of representation or warranty under this
Agreement on the part of Seller; and (ii) failures by Seller to perform
or otherwise fulfill any undertaking or other agreement or obligation
under this Agreement;
(b) (i) any and all Taxes imposed on the Company (including,
without limitation, Taxes relating to the Tax liability of Seller to the
extent any governmental authority seeks to impose such Taxes on the
Company) for, or relating to, all Pre-Closing Periods to the extent the
charges, accruals and reserves therefor as reflected on the books of the
Company as of the date of the Closing are inadequate to cover such Taxes;
and
(c) any and all actions, suits, proceedings, claims, demands,
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a JAWS Indemnitee
proposes to demand indemnification ("JAWS Indemnified Claims"), JAWS or such
other JAWS Indemnitee shall promptly notify Seller thereof, provided further,
however, that the failure to so notify Seller shall not reduce or affect
Seller's obligations with respect thereto except to the extent that Seller is
materially prejudiced thereby. Subject to rights of or duties to any insurer or
other third Person having liability therefor, Seller shall have the right
promptly upon receipt of such notice (after acknowledging responsibility for
such JAWS Indemnified Claim) to assume the control of the defense, compromise or
settlement of any such JAWS Indemnified Claims (provided that any compromise or
settlement must be reasonably approved by JAWS), including, at its own expense,
employment of counsel reasonably satisfactory to JAWS; provided, however, that
if Seller shall have exercised his right to assume such control, JAWS may, in
its sole discretion and at its expense, employ counsel to represent it (in
addition to counsel employed by Seller) in any such matter. So long as Seller is
contesting any such JAWS Indemnified Claim in good faith, JAWS and each other
JAWS Indemnitee shall not pay or settle any such JAWS Indemnified Claim. JAWS
shall have the right to offset any JAWS Indemnified Claims and/or JAWS Losses
against the Deferred Purchase Price.
8.2 Indemnification by JAWS. JAWS hereby agrees to defend, indemnify
and hold harmless Seller and his respective successors, assigns and affiliates
(collectively, "Seller Indemnitees") from and against any and all losses,
deficiencies, liabilities, damages, assessments, judgments, costs and expenses,
including reasonable attorneys' fees (both those incurred in
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connection with the defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this provision subject to the
qualification that attorneys' fees shall not be recoverable in any action in
which no Seller Losses (as defined below) are awarded), but in no event
consequential, punitive or incidental damages or losses (collectively, "Seller
Losses"), resulting from or arising out of:
(a) breaches of representation and warranty hereunder on the
part of JAWS and failures by JAWS to perform or otherwise fulfill any
undertaking or agreement or obligation hereunder; and
(b) any and all actions, suits, proceedings, claims and demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Seller Indemnitee
proposes to demand indemnification ("Seller Indemnified Claims"), Seller or such
other Seller Indemnitee shall notify JAWS thereof, provided further, however,
that the failure to so notify JAWS shall not reduce or affect JAWS's obligations
with respect thereto except to the extent that JAWS is materially prejudiced
thereby. Subject to rights of or duties to any insurer or other third Person
having liability therefor, JAWS shall have the right promptly upon receipt of
such notice to assume the control of the defense, compromise or settlement of
any such Seller Indemnified Claims (provided that any compromise or settlement
must be reasonably approved by Seller) including, at its own expense, employment
of counsel reasonably satisfactory to Seller; provided, however, that if JAWS
shall have exercised its right to assume such control, Seller may, in its sole
discretion and at its expense, employ counsel to represent it (in addition to
counsel employed by JAWS) in any such matter. So long as JAWS is contesting any
such Seller Indemnified Claim in good faith, Seller or such other Seller
Indemnitees shall not pay or settle any such Seller Indemnified Claim.
8.3 Limitation on Liability. The aggregate liability of Seller under
this Article 8 shall not exceed the aggregate amount of the Initial Purchase
Price and Deferred Purchase Price (based on an agreed upon value of $7.00 per
share in the case of Deferred JAWS Common Stock); provided, however, that for
purposes of determining Seller's aggregate liability hereunder, the Deferred
Purchase Price shall be reduced by any shares of Deferred JAWS Common Stock that
are forfeited pursuant to Section 1.6 by virtue of Seller's death or disability.
The aggregate liability of JAWS under this Article 8 shall not exceed the value
of the Initial JAWS Common Stock and the Deferred JAWS Common Stock, if any, in
each case, that has been paid to Seller and is no longer subject to JAWS' rights
under Section 1.6, which value shall be based on the assumed and agreed upon
value of $7.00 per share.
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ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Representations, Warranties and Covenants. The covenants contained
in this Agreement shall survive the Closing Date without limitation. The
representations and warranties contained herein shall survive the Closing Date
for a period of two (2) years, except that, any representation or warranty of
Seller contained in Sections 3.1, 3.5, 3.6, 3.11(b) and 3.25 shall survive until
the tenth anniversary of the Closing Date, and any representation or warranty of
Seller contained in Sections 3.13 (Tax Matters) shall survive until the
expiration of one year after the expiration of the applicable statute of
limitations (provided, that if Seller or the Company and the United States
Internal Revenue Service or other taxing authority have agreed to extend the
applicable statute of limitations beyond any such period, then in such case such
representations and warranties shall survive to the date on which such agreement
to extend expires).
ARTICLE 10
NON-COMPETITION BY SELLER AND NO SOLICITATION
10.1 Non-Compete. In consideration of the purchase by JAWS of the
Shares under this Agreement, Seller will at the Closing execute and deliver
non-compete agreement in the form attached to Seller's Employment Agreement.
10.2 Remedies. Seller recognizes that a breach or threatened breach by
him of his obligations under this Article 10 and his Employment Agreement would
cause irreparable injury to the Company, and the Company shall be entitled to
seek preliminary and permanent injunctions enjoining him from violating the
non-compete agreements contemplated by this Article 10, in addition to any other
remedies which may be available.
ARTICLE 11
MISCELLANEOUS
11.1 Cooperation. Each of the parties hereto shall use its reasonable
efforts to take or cause to be taken all actions, to cooperate with the other
party hereto with respect to all actions, and to do or cause to be done all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
11.2 Waiver. Any failure of Seller to comply with any of their
respective obligations or agreements herein contained may be waived only in
writing by JAWS. Any failure of JAWS to
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comply with any of its obligations or agreements herein contained may be waived
only in writing by Seller.
11.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given upon receipt of: hand
delivery; certified or registered mail, return receipt requested; or telecopy
transmission with confirmation of receipt:
(i) If to Seller or (prior to Closing) the Company, to:
Nucleus Consulting, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(with a copy to)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
(ii) If to JAWS, to
Jaws Technologies, Inc.
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
(with a copy to)
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Esq.
Such names and addresses may be changed by written notice to each person listed
above.
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11.4 Governing Law and Consent to Jurisdiction; Dispute Resolution. (a)
This Agreement shall be governed by and construed in accordance with the
internal substantive laws, and not the choice of law rules, of the State of New
York.
(b) Any dispute, claim or controversy arising out of or
relating to this Agreement, or the interpretation or breach thereof, shall be
referred to arbitration under the rules of the American Arbitration Association,
to the extent such rules are not inconsistent with this Section 11.4. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made within a reasonable time after the claim, dispute or other matter in
question has arisen, and in any event shall not be made after the date when
institution of legal or equitable proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations.
(c) The arbitration panel shall consist of three arbitrators,
one of whom shall be appointed by each party hereto. The two arbitrators thus
appointed shall choose the third arbitrator; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator,
either arbitrator may petition the American Arbitration Association to make the
appointment.
(d) The place of arbitration shall be New York City.
11.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.6 Headings; Schedules. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All references to "Schedules" shall
mean the disclosure schedules heretofore delivered by Seller to JAWS.
11.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and the documents referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.8 Amendment and Modification. This Agreement may be amended or
modified only by written agreement of the parties hereto.
11.9 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto and their
respective successors and assigns (and, to the extent provided in Sections 8.1
and 8.2, the other JAWS Indemnitees and Seller Indemnitees) any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
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11.10 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties provided that JAWS
may assign its rights under the Agreement to any affiliate of JAWS.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
JAWS TECHNOLOGIES, INC.
By
---------------------------------
Name:
Title:
NUCLEUS CONSULTING, INC.
By
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individually as Seller
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