Exhibit 2.1
ASSET PURCHASE AGREEMENT
DATED AS OF
MAY 12, 2000
BY AND AMONG
▇▇▇▇▇▇▇▇.▇▇▇, INC.,
CHILI PEPPER, INC.,
▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS..................................................................4
ARTICLE II BASIC TRANSACTION...........................................................10
Section 2.1 PURCHASE AND SALE OF PURCHASED ASSETS..................................10
Section 2.2 EXCLUDED ASSETS........................................................12
Section 2.3 ASSUMPTION OF LIABILITIES..............................................12
Section 2.4 EXCLUDED LIABILITIES...................................................13
Section 2.5 PURCHASE PRICE.........................................................14
Section 2.6 ESCROW OF A PORTION OF THE TRANSACTION SHARES..........................15
Section 2.7 ALLOCATION OF PURCHASE PRICE...........................................16
Section 2.8 REGISTRATION RIGHTS....................................................16
Section 2.9 DEFEASANCE CONDITION...................................................16
ARTICLE III CLOSING AND CLOSING DATE....................................................17
Section 3.1 CLOSING................................................................17
Section 3.2 CLOSING DATE...........................................................17
Section 3.3 DELIVERIES AT THE CLOSING..............................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS...................18
Section 4.1 ORGANIZATION AND QUALIFICATION.........................................18
Section 4.2 AUTHORITY; ENFORCEABILITY..............................................18
Section 4.3 NONCONTRAVENTION; CONSENTS.............................................18
Section 4.4 CAPITALIZATION; OWNERSHIP OF SHARES....................................19
Section 4.5 FINANCIAL STATEMENTS...................................................19
Section 4.6 [RESERVED.]............................................................20
Section 4.7 WORK IN PROGRESS.......................................................20
Section 4.8 UNDISCLOSED LIABILITIES................................................20
Section 4.9 MATERIAL ADVERSE CHANGE................................................20
Section 4.10 TAX MATTERS............................................................20
Section 4.11 CONTRACTS..............................................................22
Section 4.12 EQUIPMENT LEASES.......................................................23
Section 4.13 REAL PROPERTY..........................................................23
Section 4.14 TITLE AND RELATED MATTERS..............................................24
Section 4.15 INTELLECTUAL PROPERTY..................................................24
Section 4.16 LITIGATION.............................................................26
Section 4.17 EMPLOYEE BENEFITS......................................................26
Section 4.18 EMPLOYEE RELATIONS.....................................................28
Section 4.19 ENVIRONMENTAL MATTERS..................................................28
Section 4.20 LEGAL COMPLIANCE.......................................................28
Section 4.21 PERMITS................................................................28
Section 4.22 [RESERVED.]............................................................28
Section 4.23 AFFILIATE AGREEMENTS...................................................29
Section 4.24 INSURANCE..............................................................29
Section 4.25 BANK ACCOUNTS AND POWERS...............................................29
Section 4.26 [RESERVED.]............................................................29
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Section 4.27 [RESERVED.]............................................................30
Section 4.28 BROKERS' FEES..........................................................30
Section 4.29 INVESTMENT REPRESENTATIONS.............................................30
Section 4.30 FULL DISCLOSURE........................................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................32
Section 5.1 ORGANIZATION...........................................................32
Section 5.2 AUTHORIZATION OF TRANSACTION...........................................32
Section 5.3 NONCONTRAVENTION; CONSENTS.............................................32
Section 5.4 LITIGATION.............................................................32
Section 5.5 CAPITAL STRUCTURE......................................................33
Section 5.6 BROKERS' FEES..........................................................33
Section 5.7 FILINGS................................................................33
Section 5.8 FULL DISCLOSURE........................................................34
Section 5.9 ABSENCE OF CHANGES.....................................................34
Section 5.10 NO UNDISCLOSED LIABILITIES...........................................34
ARTICLE VI POST-CLOSING COVENANTS......................................................34
Section 6.1 GENERAL................................................................34
Section 6.2 POST-CLOSING CONSENTS; NONASSIGNABLE CONTRACTS.........................34
Section 6.3 LITIGATION SUPPORT.....................................................35
Section 6.4 AGREEMENTS REGARDING TAX MATTERS.......................................36
Section 6.5 CONFIDENTIAL INFORMATION...............................................36
Section 6.6 SOLICITATION OF EMPLOYEES.............................................37
Section 6.7 POST-CLOSING RECEIPTS..................................................37
Section 6.8 CORPORATE EXISTENCE OF SELLER..........................................37
ARTICLE VII ADDITIONAL AGREEMENTS.......................................................37
Section 7.1 NOTICE OF TRANSFER; MAIL RECEIVED AFTER CLOSING........................37
Section 7.2 RETENTION OF BOOKS AND RECORDS.........................................38
Section 7.3 BULK TRANSFER LAW......................................................38
Section 7.4 PURCHASER'S INDEMNITY OBLIGATION FOR EQUIPMENT LEASE GUARANTIES........39
ARTICLE VIII EMPLOYMENT AND EMPLOYEE BENEFITS............................................40
Section 8.1 EMPLOYMENT.............................................................40
Section 8.2 BENEFIT TRANSITION.....................................................40
Section 8.3 NO THIRD PARTY RIGHTS..................................................40
Section 8.4 GRANT OF OPTIONS.......................................................41
ARTICLE IX REMEDIES FOR BREACHES OF THIS AGREEMENT.....................................41
Section 9.1 SURVIVAL...............................................................41
Section 9.2 INDEMNIFICATION........................................................42
Section 9.3 METHOD OF ASSERTING CLAIMS.............................................42
ARTICLE X ARBITRATION OF DISPUTES.....................................................44
Section 10.1 ARBITRATION..........................................................44
Section 10.2 PROCEDURE FOR ARBITRATION............................................44
ARTICLE XI MISCELLANEOUS...............................................................45
Section 11.1 PRESS RELEASES AND ANNOUNCEMENTS.....................................45
Section 11.2 EXPENSES; TRANSFER TAXES.............................................45
Section 11.3 [RESERVED.]..........................................................45
Section 11.4 CONSENT TO AMENDMENTS................................................45
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Section 11.5 SUCCESSORS AND ASSIGNS...............................................45
Section 11.6 SEVERABILITY.........................................................46
Section 11.7 COUNTERPARTS.........................................................46
Section 11.8 DESCRIPTIVE HEADINGS.................................................46
Section 11.9 NOTICES..............................................................46
Section 11.10 NO THIRD PARTY BENEFICIARIES.........................................47
Section 11.11 ENTIRE AGREEMENT.....................................................47
Section 11.12 CONSTRUCTION.........................................................47
Section 11.13 INCORPORATION OF EXHIBITS AND SCHEDULES..............................48
Section 11.14 GOVERNING LAW........................................................48
Section 11.15 SUBMISSION TO JURISDICTION...........................................48
LIST OF SCHEDULES
Schedule 2.1(a) - Work in Progress
Schedule 2.1(j) - Seller's Prepayment Items
Schedule 4.3 - Defaults, Violations and Liens
Schedule 4.4 - Capitalization of Seller
Schedule 4.5(a) - Seller's Financial Statements
Schedule 4.5(b) - Liability Reserves
Schedule 4.8 - Seller's Disclosure of Liabilities
Schedule 4.9 - Material Adverse Changes
Schedule 4.11 - Seller's Contracts
Schedule 4.12 - Equipment Leases
Schedule 4.14 - Exceptions to Purchasers Use of Seller's Tangible Personal Property
Schedule 4.15 - Seller's Intellectual Property
Schedule 4.16 - Seller's Litigation
Schedule 4.17 - Seller's Employee Benefit Plans
Schedule 4.19 - Seller's Non-Compliance with Environmental Laws
Schedule 4.20 - Seller's Non-Compliance with Laws
Schedule 4.21 - Seller's Permits
Schedule 4.23 - Seller's Affiliate Agreements
Schedule 4.24 - Seller's Insurance Coverage
Schedule 4.25 - Seller's Bank Accounts and Powers
Schedule 5.5 - Options to Purchase Seller's Capital Stock
Schedule 7.3 - Seller's Creditors
Schedule 8.1 - Seller Employees
LIST OF EXHIBITS
Exhibit A - Form of ▇▇▇▇ of Sale
Exhibit B - Form of Estoppel and Consent Agreement
Exhibit C - Form of Assumption Agreement
Exhibit D - Form of Employment Agreement for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit E - Form of Escrow Agreement
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Assignment and Assumption of Lease Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of May 12, 2000, by and among
▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "PURCHASER"), Chili Pepper,
Inc., a Massachusetts corporation (the "SELLER"), ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"). ▇▇▇▇▇▇ and ▇▇▇▇▇▇ are referred to in this Agreement
collectively as the "STOCKHOLDERS" and each individually as a "STOCKHOLDER".
The Seller provides strategic marketing consulting services and
solutions primarily to companies located in the Northeastern United States. The
Stockholders own all of the issued and outstanding capital stock of the Seller.
This Agreement contemplates a transaction in which the Purchaser will
purchase certain of the assets, and will assume certain specified liabilities,
of the Seller (the "Purchase Transaction").
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
set forth below:
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental Entity investigation or audit.
"AFFILIATE" means (a) with respect to a Person that is not a natural
person, the stockholders, directors and officers of such Person and any entity
that directly or indirectly controls, is controlled by or is under common
control with such Person (where "control" is determined by ownership of a
majority of the voting securities of an entity) and (b) with respect to a Person
that is a natural person, any member of the immediate family of such Person.
"AGREEMENT" means this Asset Purchase Agreement, as the same may be
amended from time to time in accordance with the terms hereof.
"ANCILLARY DOCUMENTS" means, collectively, the Assumption Agreement,
the ▇▇▇▇ of Sale, the Estoppel and Consent Agreement, the Employment Agreement,
the Assignment and Assumption of Lease Agreement, the Escrow Agreement and the
Registration Rights Agreement.
"ACQUISITION INDEMNITEES" has the meaning set forth in Section 9.2(a).
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"ASSET ACQUISITION STATEMENT" has the meaning set forth in Section 2.7.
"ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT" has the meaning set
forth in Section 3.3.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.3.
"ASSUMPTION AGREEMENT" has the meaning set forth in Section 3.3.
"BALANCE ESCROW SHARES" has the meaning set forth in Section 2.6(c).
"▇▇▇▇ OF SALE" has the meaning set forth in Section 3.3.
"BUSINESS" means the business engaged in by the Seller prior to the
Closing Date involving the provision of strategic marketing and consulting and
related services.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in Massachusetts are authorized or obligated to close.
"CASH" means cash and cash equivalents, marketable securities and
short-term investments.
"CLAIM NOTICE" means written notification pursuant to Section 9.2 of a
Third Party Claim as to which indemnity under Section 9.1 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, on the
Indemnified Party and otherwise describing the Indemnified Party's claim against
the Indemnifying Party under Section 9.1.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING BALANCE SHEET" means a balance sheet of the Seller as May 5,
2000.
"CLOSING DATE" has the meaning set forth in Section 3.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any confidential or proprietary
written or other information, in whatever form or medium, excluding any such
information which (a) as of the date of this Agreement is in the public domain,
(b) enters the public domain following the date of this Agreement (other than as
a result of the breach by the Seller or any of its Affiliates of the provisions
of Section 6.5), or (c) becomes available to the Seller and its Affiliates after
the Closing Date on a nonconfidential basis from a Person who is not bound by a
confidentiality agreement with the Purchaser and who is not otherwise legally
prohibited from transmitting such information to the Seller and its Affiliates.
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"CONTRACTS" has the meaning set forth in Section 2.1(b).
"DEFEASANCE PERIOD" has the meaning set forth in Section 2.9.
"DEFEASIBLE SHARES" has the meaning set forth in Section 2.9.
"EMPLOYEE BENEFIT PLAN" means an Employee Pension Benefit Plan or an
Employee Welfare Benefit Plan, where no distinction is required by the context
in which such term is used.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section
3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.
"ENVIRONMENTAL LAW" means any Law with respect to the preservation of
the environment or the promotion of human health and safety, including any Law
relating to Hazardous Materials, drinking water, surface water, groundwater,
wetlands, landfills, open dumps, storage tanks, underground storage tanks, solid
waste, waste water, storm water run-off, noises, odors, air emissions, waste
emissions or ▇▇▇▇▇. Without limiting the generality of the foregoing, the term
will encompass each of the following statutes and the regulations promulgated
thereunder, and any similar applicable state, local or foreign Law, each as
amended (a) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, (b) the Solid Waste Disposal Act, (c) the Hazardous Materials
Transportation Act, (d) the Toxic Substances Control Act, (e) the Clean Water
Act, (f) the Clean Air Act, (g) the Safe Drinking Water Act, (h) the National
Environmental Policy Act of 1969, (i) the Superfund Amendments and
Reauthorization Act of 1986, (j) Title III of the Superfund Amendments and
Reauthorization Act, (k) the Federal Insecticide, Fungicide and Rodenticide Act
and (l) the provisions of the Occupational Safety and Health Act of 1970
relating to the handling of and exposure to Hazardous Materials and similar
substances.
"EQUIPMENT LEASES" means the leases for equipment listed on SCHEDULE
4.12.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP.
"ESCROW AGREEMENT" means the form of escrow agreement attached hereto
as EXHIBIT E, providing the terms and conditions pursuant to which the Escrow
Agent shall hold the Escrow Shares.
"ESCROW SHARES" has the meaning set forth in Section 2.6(a).
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"ESTOPPEL AND CONSENT AGREEMENT" has the meaning set forth in Section
3.3.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.4.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5(a).
"GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local.
"HAZARDOUS MATERIALS" means each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance that is
defined, determined or identified as hazardous or toxic under any Environmental
Law or the Release of which is prohibited under any Environmental Law. Without
limiting the generality of the foregoing, the term will include (a) "hazardous
substances" as defined in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986 and regulations promulgated thereunder, each as
amended, (b) "hazardous waste" as defined in the Solid Waste Disposal Act and
regulations promulgated thereunder, each as amended, (c) "hazardous materials"
as defined in the Hazardous Materials Transportation Act and the regulations
promulgated thereunder, each as amended, (d) "chemical substance or mixture" as
defined in the Toxic Substances Control Act and regulation promulgated
thereunder, each as amended, (e) petroleum and petroleum products and byproducts
and (f) asbestos.
"INDEBTEDNESS" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable arising in the ordinary
course of business), (iv) all capital lease obligations of such Person, (v) all
obligations of such Person to purchase securities or other property which arise
out of or in connection with the sale of the same or substantially similar
securities or property, (vi) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit,
bankers' acceptance or similar instrument, (vii) all obligations of others
secured by a Lien on any asset of such Person, whether or not such obligation is
assumed by such Person or for which such Person would be liable therefor under
applicable law or any agreement or instrument by virtue of such Person's
ownership interest in or other relationship with such entity, (viii) all
obligations of others guaranteed by such Person, and (ix) with respect to any
swaps, puts calls, collars, caps or other derivative transactions with respect
to or in connection with any of the foregoing.
"INDEMNIFIED PARTY" means any Person claiming indemnification in
accordance with any provision of Article IX.
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"INTELLECTUAL PROPERTY" has the meaning set forth in Section 2.1(d).
"INTERIM BALANCE SHEET" has the meaning set forth in Section 4.5(a).
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in Section
4.5(a).
"IRS" means the Internal Revenue Service of the Department of the
Treasury.
"KNOWLEDGE" as used with respect to the Seller means the actual
knowledge after reasonable investigation of ▇▇▇▇▇▇ and ▇▇▇▇▇▇.
"LAW" means any constitutional provision, statute, law, rule,
regulation, Permit, decree, injunction, judgment, order, ruling, determination,
finding or writ of any Governmental Entity.
"LEASED REAL PROPERTY" has the meaning set forth in Section 2.1(h).
"LIABILITIES" means all Indebtedness, obligations and other liabilities
(or contingencies that have not yet become liabilities) of a Person (whether
absolute, accrued, contingent (or based upon any contingency), known or unknown,
fixed or otherwise, or whether due or to become due), including, without
limitation, any fines, penalties, judgments, awards, settlements respecting any
judicial, administrative or arbitration proceedings, damages, losses, claims or
demands with respect to any Law.
"LIEN" means any mortgage, pledge, security interest, charge, claim or
other encumbrance, other than (a) mechanics', materialmen's and similar liens
with respect to amounts not yet due and payable, (b) liens for Taxes not yet due
and payable, and (c) liens securing rental payments under capital lease
arrangements.
"LOSSES" has the meaning set forth in Section 10.2(a).
"▇▇▇▇▇▇ SHARES" has the meaning set forth in Section 2.9.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of
ERISA.
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
8
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any license, permit, franchise, certificate of authority
or order, or any waiver of the foregoing, issued by any Governmental Entity.
"PER SHARE PRICE" means $7.265625.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Entity.
"PURCHASE PRICE" has the meaning set forth in Section 2.5.
"PURCHASE TRANSACTION" has the meaning provided for in the preamble to
this Agreement.
"PURCHASED ASSETS" has the meaning set forth in Section 2.1.
"PURCHASER" has the meaning set forth in the Preamble to this
Agreement.
"PURCHASER INDEMNIFIED PARTIES" has the meaning set forth in Section
10.2(a).
"REAL PROPERTY LEASES" has the meaning set forth in Section 4.13.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
2.8.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping,
discarding, burying, abandoning or disposing into the environment.
"RELEASE DATE" has the meaning set forth in Section 2.6(c).
"RELEASE DATE DAMAGES" has the meaning set forth in Section 2.6(a).
"RETAINED ACCOUNTS RECEIVABLE" means accounts receivable generated by
Seller for work performed by Seller prior to May 1, 2000.
"SELLER" has the meaning set forth in the Preamble to this Agreement.
"SELLER EMPLOYEES" means, collectively, all of the employees of the
Seller who as of the Closing Date are actively employed by the Seller and are
listed on SCHEDULE 8.1.
"SELLER PLAN" and "SELLER PLANS" have the meaning set forth in Section
4.17(a).
"STOCKHOLDER INDEMNITEES" has the meaning set forth in Section 9.2(b).
9
"STOCKHOLDER REGISTRATION RIGHTS" has the meaning set forth in Section
2.8.
"TAX" means any federal, state or local net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
tax, fee, assessment or charge, including any interest, penalty or addition
thereto and including any liability for the Taxes of any Person under Treasury
Regulation Section 1.1502-6 (or any similar provision of state or local Law),
and any liability in respect of any Tax as a transferee or successor, by Law,
contract or otherwise.
"Taxing Authority" means the IRS and any governmental agency, board,
bureau, body, department or authority of any United States federal, state,
territorial, provincial or local jurisdiction or any foreign jurisdiction,
having or purporting to exercise jurisdiction with respect to any Tax.
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and any amendment thereto or modification thereof.
"TRANSACTION SHARES" has the meaning set forth in Section 2.5.
"WORK IN PROGRESS" has the meaning set forth in Section 2.1(a).
"YEAR-END FINANCIAL STATEMENTS" has the meaning set forth in Section
4.4.
ARTICLE II
BASIC TRANSACTION
SECTION 2.1 PURCHASE AND SALE OF PURCHASED ASSETS. Subject to the
provisions of Sections 2.2 and 6.2, at the Closing the Purchaser will purchase
from the Seller, and the Seller will sell, transfer, assign, convey and deliver
to the Purchaser, all right, title and interest in and to all of the assets,
rights and properties that are owned by the Seller, wherever such assets, rights
or properties are located and whether or not such assets, rights or properties
are reflected on the Interim Balance Sheet (collectively, the "PURCHASED
ASSETS"), listed below in this Section 2.1, in each case as the same exist as of
the Closing Date:
(a) all of Seller's work in progress from and after May 1,
2000, which shall include commitments for forward advertising and, in the
aggregate, total at least $22,000 as listed on SCHEDULE 2.1(A) (collectively,
the "WORK IN PROGRESS");
(b) all contracts, agreements, letter contracts, purchase
orders, delivery orders, task orders, teaming agreements, leases, licenses,
instruments, guaranties, bids, proposals and commitments to which the Seller is
a party, including those listed on SCHEDULE 4.11 and including any
confidentiality agreements between the Seller and any
10
prospective purchaser of all or any portion of the Seller's stock or assets, all
unfilled orders for the purchase of goods or services by the Seller and all
unfilled orders for the sale of goods or services by the Seller (collectively,
the "CONTRACTS");
(c) all machinery, equipment, computers and computer hardware,
spare parts, furniture and fixtures owned by the Seller, and all of the interest
of the Seller in the machinery and equipment used or held for use by the Seller
under the Equipment Leases;
(d) all patents, patent disclosures, trademarks, service
marks, trade dress, logos, trade names, domain names, copyrights and mask works,
and all registrations, applications and associated good will for each of the
foregoing, owned by the Seller, including those listed on SCHEDULE 4.15, and all
computer software (including source and object codes), computer programs,
computer data bases and related documentation and materials, data,
documentation, trade secrets, confidential business information (including
ideas, formulas, compositions, inventions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, designs, plans, proposals and technical data, financial, marketing and
business data, and pricing and cost information), and the name "Chili Pepper",
and other intellectual property rights (in whatever form or medium) owned by the
Seller (collectively, the "INTELLECTUAL PROPERTY"), PROVIDED, HOWEVER, that the
person(s) responsible for creating any of the foregoing works, including ▇▇▇▇▇▇
and/or any Seller Employees, may claim credit for creating such works on their
resume or in their portfolio;
(e) to the extent legally assignable, all Permits held by the
Seller;
(f) all claims, deposits (including, without limitation,
deposits held by the landlord pursuant to the lease for the Leased Real
Property), prepayments, prepaid assets, causes of action, rights of recovery,
rights of set off, rights of recoupment and attorney-client, work product and
other legal privileges (to the extent relating to any of the Purchased Assets or
Assumed Liabilities) of the Seller, including all rights of the Seller under any
property, casualty, workers' compensation or other insurance policy or related
insurance services contract to the extent such rights relate to any Assumed
Liability or any casualty affecting any of the Purchased Assets;
(g) all books, records, ledgers, files, documents,
correspondence, lists, plats, drawings, creative materials, advertising and
promotional materials, studies, reports and other printed or written materials
used or held for use by the Seller;
(h) the real property leased by the Seller pursuant to the
lease agreement set forth on SCHEDULE 4.11 to this Agreement and, to the extent
covered by the lease relating to such leased real property, all fixtures,
machinery, installations, equipment, leasehold improvements and other property
attached thereto or located thereon (collectively, the "LEASED REAL PROPERTY");
11
(i) cash of the Seller (including for this purpose all
collected funds received in bank accounts owned by the Seller through 12:01
A.M., Boston, Massachusetts time, on the Closing Date in an amount not less than
Twenty-Two Thousand Dollars ($22,000.00);
(j) prepayments made by Seller for items set forth on SCHEDULE
2.1(J) to this Agreement; and
(k) the extranet currently under development by Aztec
Consulting.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section
2.1, the Purchased Assets will not include the following assets, rights or
properties (collectively, the "EXCLUDED ASSETS"):
(a) any rights of the Seller or any of its Affiliates with
respect to any Tax refund, carryback or carryforward for periods ending on or
prior to the Closing Date;
(b) the Retained Accounts Receivable;
(c) any rights of the Seller under this Agreement or any
Ancillary Document; or
(d) the articles of organization, bylaws, minute books, stock
record books, income Tax records and other corporate records of the Seller.
SECTION 2.3 ASSUMPTION OF LIABILITIES. Subject to the provisions of
Section 2.4, at the Closing the Purchaser will assume and become responsible
for, and will thereafter pay, perform and discharge when due, the following
liabilities and obligations of the Seller (collectively, the "ASSUMED
LIABILITIES"):
(a) Seller's employee payroll obligation for the period from
May 1, 2000 through the Closing Date;
(b) the liabilities and obligations of the Seller arising with
respect to the performance after the Closing Date of the Contracts that are set
forth on SCHEDULE 4.11, excluding any such liability or obligation arising out
of, relating to or caused by any breach or violation of any Contract by the
Seller occurring on or prior to the Closing Date;
(c) the liabilities and obligations of the Seller relating to
employees and employee benefits solely to the extent expressly provided in
Section 8;
(d) subject to receipt of the Estoppel and Consent Agreement
executed by the landlord of the Leased Real Property, beginning June 1, 2000,
monthly rent and other items due under the lease for the Leased Real Property;
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(e) subject to receipt of the Estoppel and Consent Agreement
executed by the landlord of the Leased Real Property, beginning May 5, 2000,
charges for utility services provided to the Leased Real Property;
(f) beginning May 5, 2000, monthly rental payments due under
the Equipment Leases;
(g) furnishing consulting services with an approximate value
of $100,000 to Aztec Consulting in connection with that entity's development of
a new corporate identity;
(h) Seller's liabilities and obligations under the Equipment
Leases; and
(i) ordinary course of business expenses incurred by Seller
from and after May 1, 2000 that are not reflected in items (a) through (g) of
this Section 2.3.
SECTION 2.4 EXCLUDED LIABILITIES. The Purchaser will not assume or
become responsible for, and the Assumed Liabilities will not include, any
liability or obligation of the Seller or any of its Affiliates whatsoever other
than as expressly provided in Section 2.3. Such nonassumed liabilities and
obligations are referred to in this Agreement collectively as the "EXCLUDED
LIABILITIES". Without limiting the generality of the foregoing, the parties
acknowledge and agree that each of the following categories of liabilities and
obligations will be deemed to be Excluded Liabilities for purposes of this
Agreement:
(a) any liability or obligation with respect to any mortgage,
indenture, note, installment obligation or other instrument relating to the
borrowing of money, any guarantee of any obligation, any letter of credit, bond
or other indemnity;
(b) any liability or obligation with respect to any check or
draft issued by the Seller prior to, on or after the Closing Date;
(c) any liability or obligation (whether assessed or
unassessed) of the Seller or any of its Affiliates with respect to any Taxes,
including any Taxes arising by reason of the transactions contemplated by this
Agreement or any of the Ancillary Documents, as of or for any period ending
prior to, on or after the Closing Date;
(d) any liability or obligation of any nature of the Seller,
any of its Affiliates or any of their respective predecessors arising under any
Environmental Law in connection with any event, transaction, condition,
practice, Release or occurrence prior to, on or after the Closing Date,
including any liability or obligation relating to the handling of or exposure to
Hazardous Materials or similar substances by current or former employees of the
Seller, any of its Affiliates or any of their respective predecessors, and
including any investigative, regulatory clean-up, remedial or other liability or
obligation resulting from the generation, storage, presence, use, handling,
treatment, transportation, disposal or Release of any Hazardous Materials by the
Seller, any of its Affiliates or any of their respective predecessors;
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(e) except as expressly provided in Section 8 with respect to
those Seller Employees accepting employment with the Purchaser, any liability or
obligation relating to any current or former director, officer, employee,
consultant or agent of the Seller or any of its Affiliates that arises on or
prior to the Closing Date out of any aspect of the terms or conditions of the
employment or other relationship of any such individual, any illness, injury or
other harm of any nature arising out of the employment or other relationship of
any such individual (including any illness, injury or harm resulting in any
claim under any workers' compensation or similar law, whether or not reported as
of the Closing Date), the termination of the employment or other relationship of
any such individual, or the entitlement of any such individual, or any dependant
or beneficiary of any such individual, to compensation or employee welfare or
pension benefits, including severance or termination benefits, indemnification
or advancement of expenses;
(f) any liability or obligation arising prior to, on or after
the Closing Date under or in connection with any Seller Plan;
(g) any liability or obligation arising out of any actual or
alleged interference, infringement, misappropriation or conflict with the
intellectual property rights of any other Person;
(h) any liability or obligation arising in connection with any
retroactive, retrospective or similar adjustment relating to any premium,
administrative expense or other amount paid or payable with respect to any
period on or prior to the Closing Date under any policy of insurance;
(i) any liability or obligation with respect to any pending
claim, action, suit, proceeding or investigation set forth on SCHEDULE 4.16;
(j) except to the extent of any warranty reserve set forth in
the Closing Balance Sheet, any liability or obligation arising in connection
with any claim, action, suit, proceeding or investigation, whether commenced or
asserted prior to, on or after the Closing Date, relating to any service
rendered by the Seller on or prior to the Closing Date;
(k) any liability or obligation arising prior to, on or after
the Closing Date in connection with any Excluded Asset or any other asset, right
or property of the Seller or any of its Affiliates other than the Purchased
Assets; or
(l) any other liability or obligation of the Seller or any of
its Affiliates whatsoever other than as specifically set forth in Section 2.3.
SECTION 2.5 PURCHASE PRICE. The aggregate amount of the purchase price
(the "Purchase Price") for the Purchased Assets shall be $1,755,454.90.
Purchaser shall pay the Purchase Price at Closing through the issuance to Seller
at the Closing of 193,289 shares of the Purchaser's common stock, $.01 par value
per share (such shares of Purchaser's common stock, $.01 par value, are referred
to herein as the "Transaction Shares") on the terms and subject to the
conditions set forth in this Agreement, and the delivery to Seller of a check in
the amount of $351,089.53.
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SECTION 2.6 ESCROW OF A PORTION OF THE TRANSACTION SHARES.
(a) On the Closing Date upon receipt of the Transaction
Shares, the Seller and each of the Stockholders, as collateral security for any
Liability of the Seller and each of the Stockholders to Purchaser under this
Agreement shall deposit with the Escrow Agent 36,242 of the Transaction Shares
(the "Escrow Shares"). The Escrow Shares shall be held by the Escrow Agent until
one (1) year from the Closing Date (the "Release Date").
(b) The Escrow Shares shall be released on the Release Date in
accordance with the Escrow Agreement, provided there are no claims, Actions or
Proceedings initiated against Purchaser, as the case may be, alleging that
Seller or either of the Stockholders (i) is then in breach of the terms,
conditions, representations, warranties or covenants of this Agreement or any of
the Ancillary Documents or (ii) was in breach of this Agreement or any of the
Ancillary Documents prior to the Release Date and such breach remained uncured
in excess of ten (10) days after written notice of such breach was received from
Purchaser. On the Release Date, if and to the extent that there is any Action or
Proceeding alleging that Seller or any of the Stockholders is in breach of this
Agreement or any of the Ancillary Documents or was in breach prior to the
Release Date beyond the cure period provided in this Section 2.6, and damages
alleged in such Action or Proceeding (together with all costs, fees (including
reasonable attorneys' fees) and other expenses expected to be incurred by
Purchaser in its reasonable determination) exceed the amount of Ten Thousand
Dollars ($10,000), the Escrow Agent shall retain and hold the Escrow Shares in
accordance with the terms of the Escrow Agreement as security pending the final
determination of all such Actions or Proceedings, and the Escrow Shares shall be
cancelled (based upon a price per share as determined by application of the Per
Share Price) in satisfaction of any amounts to which Purchaser becomes entitled
in respect of any such Action or Proceeding.
(c) Notwithstanding the provisions set forth in this Section
2.6, on the Release Date, and to the extent that there is any claim, Action or
Proceeding alleging that Seller or any of the Stockholders is in breach of this
Agreement or any of the Ancillary Documents or was in breach prior to the
Release Date beyond the cure period provided in Section 2.6(b) hereof, and
damages alleged in such claim, Action or Proceeding (together with all costs,
fees, including reasonable attorneys fees, and other expenses expected to be
incurred by Purchaser in its reasonable determination) exceed the amount of Ten
Thousand Dollars ($10,000) (the "RELEASE DATE DAMAGES"), the Seller shall have
the right to pay the Escrow Agent the Release Date Damages in immediately
available funds. Upon payment of the Release Date Damages to the Escrow Agent,
the Escrow Agent shall release such number of Escrow Shares based upon a price
per share as determined by application of the Per Share Price equal to the
Release Date Damages. The Escrow Agent shall hold all remaining Escrow Shares
(the "BALANCE ESCROW SHARES") in accordance with the terms of the Escrow
Agreement as security pending the final determination of all such claims,
Actions or Proceedings, and the Balance Escrow Shares shall be cancelled (based
upon a price per share as determined by the Per Share Price) in satisfaction of
any amounts to which Purchaser becomes entitled in respect of any such claim,
Action or Proceeding; PROVIDED, HOWEVER, that the Seller shall be entitled to
pay
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the Escrow Agent such amounts in excess of the Release Date Damages and upon
such payment the Escrow Agent shall release the Balance Escrow Shares to the
Seller.
SECTION 2.7 ALLOCATION OF PURCHASE PRICE. Within 120 days after the
Closing Date, Purchaser will provide Seller copies of IRS Form 8594 and any
required exhibits thereto (the "ASSET ACQUISITION STATEMENT") with the
allocation of the Purchase Price and the Assumed Liabilities as determined by
Purchaser. The costs of preparing the Asset Acquisition Statement and any
supporting materials (including any appraisals) will be borne by the Purchaser.
The Purchase Price and the Assumed Liabilities will be allocated in accordance
with the Asset Acquisition Statement provided by Purchaser to Seller pursuant to
this Section 2.7, and subject to the requirements of any applicable Tax Law or
election, all Tax Returns and reports filed by Purchaser and Seller will be
prepared consistently with such allocation.
SECTION 2.8 REGISTRATION RIGHTS. Thirty percent (30%) of the
Transaction Shares shall be entitled to non-priority piggy-back registration
rights in connection with the next registration of Purchaser common stock after
the Closing Date, excluding, however, the registration of Purchaser common stock
issuable in connection with the conversion of Purchaser's Series B Preferred
Stock and issuable upon the exercise of certain warrants issued in connection
with the sale and issuance of such Series B Preferred Stock, registrations on
Forms ▇-▇, ▇-▇ or any registration form which does not permit secondary sales,
or relating to employee stock option plans, dividend reinvestment plans or Rule
145 transactions, subject to underwriter's cutback; PROVIDED, HOWEVER, that such
piggy-back registration rights shall be subordinated to the registration rights
of the holders of Purchaser Series A Preferred Stock and Series B Preferred
Stock and to the registration rights of Intel Corporation (collectively, the
"STOCKHOLDER REGISTRATION RIGHTS"). The Stockholder Registration Rights shall be
further subject to the Registration Rights Agreement in the form attached hereto
as EXHIBIT F (the "REGISTRATION RIGHTS AGREEMENT").
SECTION 2.9 DEFEASANCE CONDITION. 84,564 of the Transaction Shares
issued to Seller pursuant to this Agreement will be subject to conditional
defeasance as provided in this Section 2.9 for a period of one (1) year
following Closing (the "DEFEASANCE PERIOD"). If, except as provided in the
following sentence, ▇▇▇▇▇▇ separates from employment with Purchaser during the
Defeasance Period, 84564 of the Transaction Shares, which shall be represented
by certificates ______ (the "DEFEASIBLE SHARES"), shall be redeemed by Purchaser
from the holder thereof for a redemption price equal to $.01 per share. The
certificate(s) representing the Defeasible Shares shall be inscribed with a
legend indicating that such shares are subject to conditional defeasance as
provided in this Section 2.9. Purchaser, Seller and each of the Stockholders
agree that the fifty percent (50%) portion of the Transaction Shares issued to
Seller at the Closing and represented by certificates _____ (the "▇▇▇▇▇▇
Shares") shall not be subject to redemption pursuant to this Section 2.9. If
▇▇▇▇▇▇ remains employed by Purchaser for the entire Defeasance Period, if
Purchaser terminates ▇▇▇▇▇▇' employment "without cause" or if ▇▇▇▇▇▇ terminates
his employment with Purchaser for "good reason" (as such terms are defined in
the Employment Agreement) prior to the one (1) year anniversary of the Closing
Date, the defeasance condition shall lapse on the earlier of the date of
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termination of employment or first anniversary of the Closing Date. This Section
2.9 shall survive execution and delivery of this Agreement and the Closing of
the Purchase Transaction.
ARTICLE III
CLOSING AND CLOSING DATE
SECTION 3.1 CLOSING. The consummation of the transactions contemplated
by this Agreement (the "CLOSING") will take place on May 12, 2000.
SECTION 3.2 CLOSING DATE. The date on which the Closing actually takes
place is referred to in this Agreement as the "CLOSING DATE". The Closing will
be deemed for all purposes under this Agreement to have occurred as of 12:01
A.M., Boston, Massachusetts time, on the Closing Date.
SECTION 3.3 DELIVERIES AT THE CLOSING. At the Closing, (a) Seller will
deliver to Purchaser all of the consents of third parties other than the lessors
named in the Equipment Leases required for the assignment and transfer to
Purchaser of the Contracts listed on SCHEDULE 4.11 and all Permits duly assigned
to or reissued in Purchaser's name as are required for Purchaser to use the
Purchased Assets as used by Seller immediately prior to the Closing, (b) Seller
will execute and deliver to the Purchaser a ▇▇▇▇ of Sale in the form attached as
Exhibit A (the "▇▇▇▇ OF SALE"), an estoppel and consent agreement for the lease
agreement relating to the Leased Real Property duly executed by the landlord of
the Leased Real Property in substantially the form attached as EXHIBIT B (the
"ESTOPPEL AND CONSENT AGREEMENT") and the Assignment and Assumption of Lease
Agreement in the form attached as EXHIBIT G (the "Assignment and Assumption of
Lease Agreement"), (c) Seller will deliver to Purchaser executed Lien releases
and termination statements in appropriate form terminating all Liens affecting
any of the Purchased Assets, (d) Purchaser will execute and deliver to Seller an
Assumption Agreement in the form attached as EXHIBIT C (the "ASSUMPTION
AGREEMENT"), (e) Purchaser will execute and deliver to ▇▇▇▇▇▇ and ▇▇▇▇▇▇ will
execute and deliver to Purchaser an Employment Agreement in the form attached as
EXHIBIT D, (f) the Seller and the Stockholders will execute and deliver to
Purchaser an Escrow Agreement in the form attached as EXHIBIT E, (g) Escrow
Agent will execute and deliver to Purchaser an Escrow Agreement in the form
attached as EXHIBIT E, (h) Purchaser will execute and deliver to Seller a
Registration Rights Agreement in the form attached as Exhibit F, and (i)
Purchaser will deliver the Purchase Price to Seller as specified in Section 2.5.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND
STOCKHOLDERS
The Seller and each of the Stockholders jointly and severally represent
and warrant (except with respect to representations and warranties relating or
pertaining specifically to the Stockholders, which are made by each Stockholder
as to himself only) to the Purchaser that the statements contained in this
Article 4 are correct and complete as of the date of this Agreement.
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SECTION 4.1 ORGANIZATION AND QUALIFICATION. The Seller is a corporation
duly organized, validly existing and in corporate good standing under the laws
of the Commonwealth of Massachusetts and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
presently being conducted. The Seller is duly qualified to conduct business as a
foreign corporation and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to be so
qualified would not have a material adverse effect on the business, financial
condition, operations or results of operations of the Seller.
SECTION 4.2 AUTHORITY; ENFORCEABILITY. Seller and each of the
Stockholders (i) have the full legal capacity to execute and deliver this
Agreement and the Ancillary Documents to which he or it is a party and to
perform his or its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby; (ii) the execution, delivery and
performance of this Agreement and the Ancillary Documents by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly and validly approved by such Seller, and no other action on the part
of either any Stockholder or the Seller is necessary to authorize the execution,
delivery and performance of this Agreement and the Ancillary Documents and the
consummation by Seller and each of the Stockholders of the transactions
contemplated hereby and thereby; (iii) this Agreement has been duly and validly
executed and delivered by Seller and each of the Stockholders and this Agreement
constitutes, and each of the Ancillary Documents to which Seller or either of
such Stockholders is a party (when so executed and delivered) will constitute,
legal, valid and binding obligations of Seller and such Stockholders enforceable
in accordance with their respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
SECTION 4.3 NONCONTRAVENTION; CONSENTS. Neither the execution and
delivery of this Agreement or any of the Ancillary Documents by the Seller, nor
the consummation by the Seller of the transactions contemplated hereby or
thereby, will violate any Law to which the Seller is subject or any provision of
the articles of organization or bylaws of the Seller. Except as set forth on
SCHEDULE 4.3 to this Agreement, neither the execution and delivery of this
Agreement or any the Ancillary Documents by the Seller, nor the consummation by
the Seller of the transactions contemplated hereby or thereby, will constitute a
violation of, be in conflict with, constitute or create a default under or
result in the creation or imposition of any Lien upon any property of the Seller
pursuant to any material agreement or commitment to which the Seller is a party
or by which the Seller or any of its properties is bound or is subject. Except
as set forth on SCHEDULE 4.3, Seller has given all notices and obtained all
material licenses, Permits, consents, approvals, authorizations, qualifications
and orders of Governmental Entities and parties to material contracts as are
required in order to enable the Seller to perform its obligations under this
Agreement and each of the Ancillary Documents, including all material consents
and approvals required to permit it to make the transfers to the Purchaser
contemplated herein and therein and to enable the Purchaser to enjoy after the
Closing Date all rights and benefits presently enjoyed by the Seller in respect
of the Purchased Assets. No Contract has been amended to increase the
18
amount payable thereunder or to provide any other benefit to any other party
thereto in order to obtain any such consent, approval or authorization.
SECTION 4.4 CAPITALIZATION; OWNERSHIP OF SHARES. SCHEDULE 4.4 correctly
sets forth the authorized and outstanding capital stock of the Seller and the
name and number of shares held of record and beneficially owned by each
Stockholder. Each Stockholder holds of record and owns beneficially all of the
outstanding shares of the capital stock of the Seller indicated on SCHEDULE 4.4
as being owned by such Stockholder, free and clear of any restrictions on
transfer (other than restrictions under the Securities Act of 1933, as amended,
and applicable state securities laws), Taxes, Liens, options, warrants, purchase
rights, contracts, commitments, equities, claims or demands. Except as set forth
on SCHEDULE 4.4, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that could require either Stockholder to sell,
transfer or otherwise dispose of any of the shares of the Seller's capital stock
owned such Stockholder or that could require the Seller to issue, sell or
otherwise cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Seller. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Seller. The Seller does not control directly or indirectly or have any
direct or indirect equity participation in any Person.
SECTION 4.5 FINANCIAL STATEMENTS.
(a) Set forth as SCHEDULE 4.5(a) are correct and complete
copies of (i) the compiled balance sheet of the Seller as of December 31, 1998
and December 31, 1999 and the related statements of income, shareholders' equity
and cash flow for the year then ended (the "YEAR-END FINANCIAL STATEMENTS") and
(ii) the unaudited balance sheet of the Seller as of March 31, 2000 (the
"INTERIM BALANCE SHEET") and the related statements of income, shareholders'
equity and cash flow for the three-month period then ended (the "INTERIM
FINANCIAL STATEMENTS"). The Year-End Financial Statements and the Interim
Financial Statements are referred to in this Agreement collectively as the
"FINANCIAL STATEMENTS". The Financial Statements present fairly the financial
condition and results of operations of the Seller as of the dates and for the
periods indicated therein, and are consistent in all material respects with the
books and records of the Seller, which books and records are correct and
complete in all material respects.
(b) Set forth as SCHEDULE 4.5(b) is a correct and complete
list of all liability reserves as of the date of the Interim Balance Sheet.
Except as set forth on SCHEDULE 4.5(b), since the date of the Interim Balance
Sheet none of such reserves has been released, reduced or reclassified.
SECTION 4.6 [RESERVED.]
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SECTION 4.7 WORK IN PROGRESS. The Work in Progress reflected on
SCHEDULE 2.1(a) (i) arose from bona fide work conducted by Seller in the
ordinary course of business consistent with past practice, and (ii) are to
Seller's Knowledge not subject to any valid set-off or counterclaim. Neither
Seller nor the Stockholders know of any reason why the Work in Progress will not
result in accounts and notes receivable that will be billable and collectible in
the ordinary course of business.
SECTION 4.8 UNDISCLOSED LIABILITIES. The Seller has no material
liabilities or obligations (whether known or unknown, assessed or unassessed,
absolute or contingent, liquidated or unliquidated, or due or to become due) of
a type required to be reflected or reserved for on the Interim Balance Sheet,
except for liabilities and obligations (a) reflected or reserved for on the
Interim Balance Sheet, (b) that have arisen since the date of the Interim
Balance Sheet in the ordinary course of the operation of the Seller (none of
which results from, arises out of or was caused by any breach of contract,
breach of warranty, tort, infringement or misappropriation of Intellectual
Property or violation of Law), or (c) as set forth on SCHEDULE 4.8.
SECTION 4.9 MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE
4.9, since December 31, 1999, there has not been any material adverse change in
the business, financial condition, operations, results of operations or future
prospects of the Seller.
SECTION 4.10 TAX MATTERS.
(a) All Tax Returns (including, without limitation, all United
States federal, state, local and other applicable income, goods and services,
and sales Tax Returns) required to have been filed by or with respect to Seller
have been duly and timely filed, and such Tax Returns shall be duly and timely
filed through the period from the date hereof to the Closing Date, unless
extensions have been granted or the Taxes are being contested in good faith.
Each such Tax Return correctly and completely reflects the Tax Liability and all
other information required to be reported thereon. All Taxes due and payable by
Seller have been paid (whether or not shown on any Tax Return), including all
payments of estimated Taxes (taking into account any duly obtained extensions).
(b) The provisions for Taxes due by Seller (including those
for which Tax Returns are not yet required to be filed) in the Financial
Statements for the period ended on the date of the Closing Balance Sheet are
sufficient for all unpaid Taxes of Seller.
(c) Except as set forth on SCHEDULE 4.10, Seller is not a
party to any agreement extending the time within which to file any Tax Return.
No claim has ever been made by any jurisdiction in which Seller does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
(d) Seller has withheld or deducted all Taxes required by Law
to have been withheld or deducted in connection with amounts paid or owing to
any present or former employee, officer, director, shareholder, creditor,
licensor, licensee, distributor,
20
independent contractor or other third party, and Seller has duly paid all
amounts so withheld or deducted to the proper recipients thereof within the
times and in the manner required by such Laws.
(e) SCHEDULE 4.10 indicates those Tax Returns, if any, of
Seller that have been audited by IRS or and any other Taxing Authorities, and
indicates those Tax Returns of Seller that are currently the subject of audit.
No deficiencies, adjustments or changes in assessments for any Taxes have been
proposed, asserted or assessed against Seller, and Seller does not expect any
Taxing Authority to assess additional Taxes against or in respect of it for any
past period. Except as disclosed on SCHEDULE 4.10, (i) there are no
investigations, examinations, reassessments, claims, actions, suits or
proceedings threatened or pending against Seller in respect of any Taxes, nor
are there any matters under discussion with the IRS or any other Taxing
Authorities relating to any Taxes imposed, levied or assessed by any such Taxing
Authority; and (ii) there is no dispute concerning any Tax Liability of Seller
either threatened, claimed or raised by any Taxing Authority or of which Seller
or any Stockholder is or reasonably should be aware. There are no Liens for
Taxes upon the assets, including without limitation the Purchased Assets, or
properties of Seller. The Seller has delivered to Purchaser complete and correct
copies of all federal, state and local income Tax Returns filed by Seller and
all Tax examination reports since Seller's formation. No issue has been raised
since that date by the IRS or any other Taxing Authority in any audit of Seller
which, by application of similar principles, could be expected to result in a
material proposed deficiency for any period not yet audited or for periods under
audit.
(f) Seller has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(g) Seller has not received any written ruling related to
Taxes or entered into any written and legally binding agreement with the IRS or
any other Taxing Authority relating to Taxes.
(h) Seller has no Liability for Taxes of any Person other than
Seller (i) as a transferee or successor, (ii) by reason of Section 1.1502-6 of
the United States Treasury Regulations or any similar provision of any other
Law, (iii) by contract or (iv) otherwise.
(i) Seller has not been a member of a consolidated, combined,
affiliated or unitary and Seller has not filed or consented to the filing of any
federal, state, or local consolidated, combined, affiliated or unitary or
similar return with any entity. Seller is not a party to nor is it bound by any
obligations under any Tax sharing, Tax indemnity or similar agreement or
arrangement. Seller is not a party to any joint venture, partnership or other
arrangement that is treated as a partnership for any federal, state, or local
Tax purposes.
(j) Seller has not made any payments, nor is it obligated to
make any payments, or is a party to any contract, agreement or understanding
that could, contingently or otherwise, obligate it to make any payment that
would, pursuant to
21
Section 280G of the Internal Revenue Code, not be deductible, except as
otherwise provided in this Agreement or as otherwise disclosed on SCHEDULE 4.10.
(k) Seller has not filed a consent under Section 341(f) of the
Code.
(l) Seller is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii).
SECTION 4.11 CONTRACTS.
(a) Except as set forth on SCHEDULE 4.11, the Seller is not a
party to or otherwise bound by any written or oral (i) mortgage, indenture,
note, installment obligation or other instrument relating to the borrowing of
money, (ii) guarantee of any material obligation, (iii) letter of credit or
bond, (iv) agreement for the sale or lease to any Person of any material amount
of its assets, (v) agreement requiring the payment to any Person of more than
$1,000 in any 12-month period for the purchase or lease of any machinery,
equipment or other capital assets, (vi) agreement providing for the lease or
sublease by the Seller (as lessor, sublessor, lessee or sublessee) of any
material parcel of real estate, (vii) distributor, representative or brokerage
contract, (viii) collective bargaining agreement, employment or consulting
agreement or severance or other agreement providing for severance payments or
other additional rights or benefits (whether or not optional) in the event of
the sale of substantially all of the Seller's assets, (ix) joint venture,
partnership, operating or similar agreement, (x) teaming agreement, (xi)
agreement requiring the payment by the Seller of more than $1,000 in any
12-month period for the purchase of goods or services; (xii) license or
sublicense agreement with respect to any material item of Intellectual Property
(whether as licensor, licensee, sublicensor or sublicensee), or (xiii) agreement
imposing non-competition or exclusive dealing obligations.
(b) The Seller has made available to the Purchaser correct and
complete copies of each written Contract set forth on SCHEDULE 4.11, as amended
to date, and a written summary setting forth the terms and conditions of each
oral Contract set forth on SCHEDULE 4.11. Each Contract is a valid, binding and
enforceable obligation of the Seller (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws
affecting creditors' rights and remedies generally and subject as to
enforceability to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing) and is in full force and
effect. Except as set forth on SCHEDULE 4.11, (i) neither the Seller nor, to the
Seller's Knowledge, any other party thereto is in material breach of any term of
any Contract or has repudiated any term of any Contract, (ii) no event,
occurrence or condition exists that, with the lapse of time, the giving of
notice, or both, would become a material default under any Contract by the
Seller or, to the Seller's Knowledge, any other party thereto, and (iii) the
Seller has not waived or released any of its material rights under any Contract.
22
SECTION 4.12 EQUIPMENT LEASES. Included among the Contracts is every
agreement and/or lease for equipment used by the Seller at the Leased Real
Property, all of which are listed on SCHEDULE 4.12.
SECTION 4.13 REAL PROPERTY.
(a) SCHEDULE 4.11 contains a true and correct list of (i) all
the Leased Real Property, together with a copy of the leases thereto (the leases
relating thereto are herein called the "Real Property Leases"), and (ii) all
Liens relating to or affecting all or any of the Real Property Leases. Seller
does not own, nor has it ever owned, any real property.
(b) Subject to the terms of the Real Property Leases, Seller
has a valid and subsisting leasehold estate in and the right to quiet enjoyment
of each of the Leased Real Properties leased by it for the full term of the
lease thereof. Each Real Property Lease is in full force and effect and is a
legal, valid and binding agreement, enforceable in accordance with its terms
against Seller, there is no, nor has Seller or any Stockholder received notice
of any, default (or any condition or event which, after notice or lapse of time
or both, would constitute a default) thereunder. Seller does not owe brokerage,
commissions or finders fees with respect to any such Real Property Lease or
Leased Real Property. Seller has not assigned, sublet, transferred, hypothecated
or otherwise disposed of any interest in any Real Property Lease.
(c) Seller has delivered to Purchaser prior to the execution
of this Agreement true and complete copies of all Real Property Leases
(including any amendments and renewal letters).
(d) There have been no material changes to the Leased Real
Property since Purchaser's last inspection thereof.
(e) Seller's and the Stockholders' current use and operation
of all Leased Real Property is in compliance with all applicable Laws (including
without limitation all Laws relating to zoning and land use) and public and
private covenants, restrictions and easements, and neither Seller nor any
Stockholder has received notice of noncompliance with any applicable Laws.
(f) No Stockholder is a "foreign person," as defined in the
federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax
Reform Act, as amended.
SECTION 4.14 TITLE AND RELATED MATTERS. The Seller has good and
marketable title to all assets and properties, other than the Intellectual
Property, purported to be owned by it, free and clear of all Liens. The Seller
owns the Intellectual Property free and clear of all Liens. There have been no
material changes to any items of tangible personal property owned or leased by
the Seller since Purchaser's last inspection thereof. The Seller owns or has the
right to use pursuant to valid lease, sublease, agreement or permission all
material items of tangible personal property necessary or used for the operation
of the Seller's business as presently conducted. Except as set forth on SCHEDULE
23
4.14, each item of tangible personal property owned or used by the Seller as of
the date of this Agreement will be owned or available for use by the Purchaser
on substantially identical terms and conditions after giving effect to the
Closing.
SECTION 4.15 INTELLECTUAL PROPERTY.
(a) The only Intellectual Property owned or licensed for use
or otherwise used by Seller is disclosed on SCHEDULE 4.15. No other Intellectual
Property is used or necessary in the conduct of the business of Seller. Seller
owns all right, title and interest in each item of such Intellectual Property
disclosed on SCHEDULE 4.15, and none constitute "work-made-for-hire" for
customers or clients, except for those items of software identified on SCHEDULE
4.15 which have been exclusively (other than "shrinkwrap" or similar commercial
end user licenses) and irrevocably licensed to Seller in perpetuity under valid
and binding license agreements, true and correct copies of which have been
provided to Purchaser, which license agreements are in full force and effect
(the "Intellectual Property License Agreements"). The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of the
Intellectual Property License Agreements, and Seller is in compliance with, and
has not breached (or would breach after notice or lapse of time) any term of,
the Intellectual Property License Agreements and, to the Knowledge of Seller,
all of the other parties to such Intellectual Property License Agreements are in
compliance with, and have not breached, any of the terms thereof. There is no
dispute between Seller and any licensor of such Intellectual Property regarding
the scope of the license or performance under any applicable Intellectual
Property License Agreement, including with respect to any payments to be made by
Seller thereunder.
(b) Except as disclosed on SCHEDULE 4.15, all such
Intellectual Property disclosed on SCHEDULE 4.15 is free and clear of any and
all Liens. SCHEDULE 4.15 lists all of Seller's United States or foreign
registrations or applications issued by, filed with or recorded by any
Governmental Entity with respect to the Intellectual Property listed on SCHEDULE
4.15 (including patent, trademark, copyright and other registrations and
applications), and all of such registrations and applications are valid and in
full force and effect and all necessary registration, maintenance and renewal
fees in connection therewith have been made and all necessary documents and
certificates in connection therewith have been filed with the relevant patent,
copyright, trademark or other authority in the United States, or foreign
jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual Property.
Except as described on SCHEDULE 4.15, (i) there are no restrictions on the
direct or indirect transfer of any such Intellectual Property subject to the
terms of any license described on SCHEDULE 4.15, (ii) to the extent requested by
Purchaser and to the extent such documentation exists and is available to
Seller, Seller has made available to Purchaser prior to the execution of this
Agreement documentation with respect to any invention, process, design, computer
software and program or other
24
know-how or trade secret or proprietary information included in such
Intellectual Property, which documentation is accurate in all material respects
and reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other know-how or
trade secret or proprietary information, (iii) Seller reasonably believes that
it has taken reasonable security measures to protect the secrecy,
confidentiality and value of their trade secrets and proprietary information in
light of the Intellectual Property it possesses, and (iv) Seller has not granted
to any Person any license, agreement or other permission to use such
Intellectual Property. Neither Seller nor any Stockholder has any knowledge that
such Intellectual Property is being infringed by any other Person. Seller, to
its Knowledge, is not infringing any Intellectual Property of any other Person,
and no claim is pending or, to the Knowledge of Seller or any Stockholder, has
been threatened to such effect or with respect to the ownership, validity,
license or use of, or any infringement resulting from, Seller's Intellectual
Property, or the sale of any products or services by Seller.
(c) No (i) product, service or publication of Seller, (ii)
material published or distributed by Seller, or (iii) conduct or statement of
Seller, constitutes obscene material, a defamatory statement or material, or
violates any rights, including rights of publicity or privacy, of any Person.
(d) Except as disclosed on SCHEDULE 4.15, the information
systems (including all computer hardware and software) owned, licensed or
otherwise used by Seller, all products and services presently being purchased or
acquired by Seller or which Seller has any Contract to purchase or acquire or
are planning to purchase or acquire, and all products and services which Seller
currently produces, sells or supplies, has previously produced, sold or
supplied, or are planning to produce, sell or supply, are, to Seller's
Knowledge, free of any "Year 2000 Problem" and any "leap year problem" such that
such systems, products and services do not and will not, without requiring any
modifications, experience any malfunctions or other usage problems in connection
with the year 2000 (and later years) as distinct from 1900s years and any leap
year.
SECTION 4.16 LITIGATION. SCHEDULE 4.16 sets forth each instance in
which the Seller is (a) subject to any unsatisfied judgment order, decree,
stipulation, injunction or charge or (b) a party to or, to the Seller's
Knowledge, is threatened to be made a party to any charge, complaint, action,
suit, proceeding, hearing or investigation of or in any court or quasi-judicial
or administrative agency of any federal, state, local or foreign jurisdiction.
SCHEDULE 4.16 sets forth each instance in which the Seller has settled or
otherwise compromised any material charge, complaint, action, suit or proceeding
since January 1, 1998. There are no judicial or administrative actions,
proceedings or investigations pending or, to the Seller's Knowledge, threatened
that question the validity of this Agreement or any of the Ancillary Documents
or any action taken or to be taken by the Seller in connection with this
Agreement or any of the Ancillary Documents or that, if adversely determined,
would have a material adverse effect upon the ability of the Seller to enter
into or perform its obligations under this Agreement or any of the Ancillary
Documents.
SECTION 4.17 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 4.17 is a complete and correct list
of all Employee Benefit Plans maintained or contributed to by Seller, Employee
Benefit Plans
25
pursuant to which Seller may have any Liability, and Employee Benefit Plans
covering employees or former or retired employees of Seller ("Employees") with
respect to their employment with Seller (collectively, the "Seller Plans").
Except as disclosed on SCHEDULE 4.17, each Employee Benefit Plan is in writing
and true and complete copies of such Plans and any trust, custodial or other
funding agreement, including all amendments thereto relating to such Employee
Benefit Plans, have heretofore been delivered to Purchaser.
(b) As to each of the Employee Benefit Plans that is a
retirement, savings or other pension plan as defined in Section 3(2) of ERISA,
Seller has complied, in all material respects, with all applicable laws and
regulations in administering such plans, including specifically the provisions
of ERISA and the qualification provisions of Section 401 of the Internal Revenue
Code. No non-exempt prohibited transaction, as defined in Section 4975 of the
Internal Revenue Code, has occurred with respect to any such Employee Benefit
Plans and no such Employee Benefit Plan has incurred any accumulated funding
deficiency, as defined in Section 412 of the Internal Revenue Code, whether or
not waived. There has not been, with regard to any such Employee Benefit Plan,
any reportable event, as defined in Section 4043(b) of ERISA, that is required
to be reported to the PBGC by law or regulation. The fair market value of the
assets of each such Employee Benefit Plan that is subject to Title IV of ERISA
equals or exceeds the present value of all benefits accrued under such Employee
Benefit Plan, whether or not vested, based on the actuarial assumptions that
would be used by the PGBC if the Employee Benefit Plan were terminated as of the
date of this Agreement and as of the Closing Date. As to each of the Employee
Benefit Plans that is a health, severance, insurance, disability and other
employee welfare Employee Benefit Plan, and all other employee benefit plans and
programs as defined in Section 3(1) of ERISA (including without limitation the
plans listed in Section 3.14(a)), Seller has complied, in all material respects,
with all applicable laws and regulations in the administration thereof
including, without limitation, the provisions of ERISA when applicable. Seller
has not terminated any Employee Benefit Plan or incurred any material liability
to the PBGC under Title IV of ERISA and, to the Knowledge of each of the Seller,
no condition exists that could reasonably be expected to cause Purchaser to
incur any such liability. All premiums payable to the PBGC have been paid when
due.
(c) All required employer contributions, premium payments and
source-deducted Employee contributions under the Employee Benefit Plans have
been made or will be timely made and remitted to the funding agents thereunder.
All such contributions to the Employee Benefit Plans for any period ending
before the Closing Date that are not yet, but will be, required to be made, are
properly accrued and reflected on the Closing Balance Sheet or are disclosed on
SCHEDULE 4.17. No oral or written promise, commitment or representation has been
made by any Stockholder or Seller (i) to amend any of the Employee Benefit Plans
or to provide increased benefits thereunder to any of Seller's present or former
employees, independent contractors, directors, officers or shareholders, except
pursuant to the requirements, if any, of the Employee Benefit Plans or any
collective bargaining agreements, (ii) to establish any new Employee Benefit
Plans, or (iii) to fund or continue any Employee Benefit Plan beyond the Closing
Date. Except as set forth on SCHEDULE 4.17, each Employee Benefit Plan can be
26
terminated on the Closing Date without making any additional contribution to
such Employee Benefit Plan other than normal contributions with respect to the
current plan year.
(d) Except as set forth in on SCHEDULE 4.17, each Employee
Benefit Plan has been maintained, operated and administered in compliance with
its terms and all related documents or agreements and in compliance with all
applicable Laws, and all filings required to be made with any Governmental
Entity with respect to each Employee Benefit Plan have been duly and timely
filed, including without limitation annual reports on Form 5500 Series. Any
non-compliance or failure properly to administer a Employee Benefit Plan or
related trust or fund has not exposed such Employee Benefit Plan or related
trust or fund or Seller, nor could it result in any exposure of Purchaser, to
any Taxes, penalties or Liabilities to any Person, or expose the Employee
Benefit Plan to disqualification or the trust or fund to loss of tax exempt
status.
(e) There is no pending or threatened claim (other than claims
for benefits in the ordinary course), assessment, complaint, proceeding or
investigation of any kind before any Governmental Entity with respect to any
Employee Benefit Plan.
(f) All insurance premiums required with respect to any
Employee Benefit Plan up to the Closing Date have been or shall be paid on or
prior to the Closing Date, and, with respect to any such insurance policy, there
shall be no Liability of Seller or Purchaser in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent Liability
arising wholly or partially out of events occurring prior to the Closing Date.
(g) All benefits, expenses and other amounts due and payable
to or under any Employee Benefit Plan, and all contributions, transfers or
payments required to be made to any Employee Benefit Plan, have been paid when
due.
(h) No Employee Benefit Plan provides benefits, including,
without limitation, death or medical benefits, beyond termination of service or
retirement other then (i) coverage mandated by Law, (ii) death or retirement
benefits under any Employee Benefit Plan that is a pension plan as defined in
Section 3(2) of ERISA, or (iii) deferred compensation benefits reflected on the
books of Seller and described on SCHEDULE 4.17.
(i) Neither Seller nor any Employee Benefit Plan has agreed to
guarantee or indemnify the performance of any Person with respect to any
Employee Benefit Plan.
(j) As a result of the consummation of the Purchase
Transaction, neither Seller nor Purchaser shall be obligated to make a payment
to any individual with respect to severance or compensation for personal
services (other than salary and benefits at current rates for services
performed), nor shall any benefit under any Employee Benefit Plan be accelerated
or become vested, including without limitation any Options or similar rights to
stock.
27
SECTION 4.18 EMPLOYEE RELATIONS. There is no labor organization that
has been recognized as the collective bargaining representative of any employees
of the Seller, there are no controversies pending or, to the Seller's Knowledge,
threatened between the Seller and any current or former employee of the Seller
or any labor or other collective bargaining unit representing any current or
former employee of the Seller that could reasonably be expected to result in a
labor strike, dispute, slow-down or work stoppage or otherwise have a material
adverse effect on the financial condition of the Seller. The Seller is not aware
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of the Seller. To the Seller's
Knowledge, no executive, key employee or group of employees of the Seller has
any plan to terminate employment with the Seller.
SECTION 4.19 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
4.19, (a) the Seller has complied in all material respects with all
Environmental Laws in connection with the ownership, use, maintenance and
operation of the Leased Real Property and otherwise in connection with its
operation of its business, (b) the Seller has no material liabilities, whether
contingent or otherwise, under any Environmental Law with respect to the
operations or properties of the Seller, (c) no notices of any alleged violation
of, alleged non-compliance with or any liability under any Environmental Law
relating to the operations or properties of the Seller have been received by the
Seller since January 1, 1998, (d) there are no administrative, civil or criminal
writs, injunctions, decrees, orders or judgments outstanding or any
administrative, civil or criminal actions, suits, claims, proceedings or
investigations pending or, to the Seller's Knowledge, threatened, relating to
compliance with or liability under any Environmental Law affecting the Seller,
(e) no material changes or alterations in the practices or operations of the
Seller as presently conducted are anticipated to be required under any
Environmental Law or Permit issued to pursuant to any Environmental Law, and (f)
no audits or other reviews of the properties or operations of the Seller
pertaining to compliance with or liabilities under any Environmental Laws have
been performed.
SECTION 4.20 LEGAL COMPLIANCE. Except as set forth on SCHEDULE 4.20,
the Seller has complied in all material respects with all applicable Laws in
connection with the operation of its business and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been
filed or commenced against or, to the Seller's Knowledge, has been threatened
against the Seller alleging any failure to so comply.
SECTION 4.21 PERMITS. The Seller holds all material Permits that are
required by any Governmental Entity to permit it to conduct its business as
presently conducted and to operate the Purchased Assets as they are presently
operated. Each such material Permit is listed on SCHEDULE 4.21. No suspension,
cancellation or termination of any of such material Permit is pending or, to the
Seller's Knowledge, threatened.
SECTION 4.22 [RESERVED.]
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SECTION 4.23 AFFILIATE AGREEMENTS. SCHEDULE 4.23 sets forth a list of
all written contracts and agreements outstanding as of the date of this
Agreement, and a brief description in reasonable detail of all oral agreements
or arrangements, that relate to (a) the provision of products or services to the
Seller by any Affiliate of the Seller or (b) the provision of products or
services by the Seller to any Affiliate of the Seller. The Seller has delivered
to the Purchaser correct and complete copies of each such written agreement, as
amended to date.
SECTION 4.24 INSURANCE. SCHEDULE 4.24 contains a correct and complete
list of all material policies of insurance under which the Seller is insured.
All such policies are in full force and effect, are sufficient for compliance
with all applicable requirements of Law and all agreements to which the Seller
is a party or subject, and provide insurance coverage of the assets, operations
and employees of the Seller.
SECTION 4.25 BANK ACCOUNTS AND POWERS. SCHEDULE 4.25 lists each bank,
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which the Seller has an account or safe deposit box
and the names and identification of all Persons authorized to draw thereon or to
have access thereto. SCHEDULE 4.25 lists the names of each Person holding powers
of attorney or agency authority from the Seller and a summary of the terms
thereof.
SECTION 4.26 [RESERVED.]
SECTION 4.27 [RESERVED.]
SECTION 4.28 BROKERS' FEES. The Seller and its Affiliates have no
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Purchaser or any of its Affiliates could become liable or obligated.
SECTION 4.29 INVESTMENT REPRESENTATIONS. The Seller and each
Stockholder represents, warrants and agrees with Purchaser that:
(a) He, she or it has been advised by Purchaser that the
Transaction Shares to be acquired pursuant to this Agreement will not be
registered under the Securities Act except as provided herein and the issuance
to the Seller of such stock is being made on the basis of an exemption afforded
under the Securities Act and Purchaser's reliance on such statutory exemption is
based in part on the representations made herein by the Seller and the
Stockholders.
(b) He, she and it is either an "Accredited Investor", as
defined in Rule 501 of Regulation D promulgated under the Securities Act ("Reg.
D") or has been advised by a "Purchaser Representative" (as defined in Reg. D)
in connection with the issuance of the Transaction Shares pursuant to this
Agreement. Seller and each such
29
Stockholder, or if he, she or it is not an Accredited Investor, as advised by
his, her or its Purchaser Representative, has such knowledge and experience in
financial and business matters that he, she or it is capable of evaluating the
merits and risk of Transaction Shares, and is able to bear the economic risk of
such investment.
(c) He, she and it is familiar with the condition, financial
or otherwise of Purchaser and its affairs as he, she or it has deemed necessary
to evaluate the merits and risk of Seller becoming a stockholder of Purchaser
and acknowledges that Purchaser has offered to make available and has, when
requested, made available, such additional information that would be provided in
a registration statement under the Securities Act and granted access to such
reasonable additional information necessary to verify the accuracy of all
information furnished.
(d) He, she and it, as advised by legal counsel, (i) is
familiar with the nature of the limitations imposed by the Securities Act, and
the rules and regulations promulgated thereunder, on the transfer of the
Transaction Shares, (ii) understands that the Transaction Shares must be held by
the Seller indefinitely unless a disposition thereof is registered under the
Securities Act, or in the opinion of counsel to the Seller (reasonably
acceptable to Purchaser) in form and substance satisfactory to Purchaser's
counsel (a signed copy of which opinion shall have been delivered to Purchaser
prior to the disposition of any shares of Transaction Shares), is exempt from
registration under the Securities Act, including a disposition in accordance
with all the requirements and limitations of Rule 144 promulgated under the
Securities Act, and complies with other applicable federal and state securities
Laws.
(e) The Seller will acquire the Transaction Shares for its own
account, for investment and not with a view to the distribution or resale
thereof within the meaning of the Securities Act, nor with any present intention
of selling or distributing the same.
(f) The Seller will not transfer any shares of Purchaser
Common Stock except in compliance with the terms and provisions of this Section
4.29.
(g) The Seller agrees that each certificate to be received by
it representing Transaction Shares will bear the following legend:
'THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND ANY OTHER APPLICABLE SECURITIES LAWS."
30
In addition to marking the certificates with the above legend, the
Seller and each of the Stockholders agrees that Purchaser is authorized to
notify its transfer agent of the status of the Transaction Shares and to take
such action, including stop transfer instructions, as Purchaser in its sole
discretion may deem necessary or proper to prevent the violation of the
Securities Act or other securities Laws and to assure compliance with the terms
of this Agreement.
SECTION 4.30 FULL DISCLOSURE. No representation or warranty of the
Seller and/or the Stockholders contained in this Agreement or any of the
Ancillary Documents contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading. There is no fact that the Seller has not disclosed to
the Purchaser in writing that the Seller and/or the Stockholders presently
believes has or will have a material adverse effect on the business, financial
condition, operations, results of operations or future prospects of the Seller
or a material adverse effect on the ability of the Seller to perform this
Agreement and the Ancillary Agreements to which it is a party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller that the statements
contained in this Section 5 are correct and complete as of the date of this
Agreement.
SECTION 5.1 ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
SECTION 5.2 AUTHORIZATION OF TRANSACTION. The Purchaser has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and each of the Ancillary Documents and to perform its
obligations hereunder and thereunder. This Agreement constitutes, and each of
the Ancillary Documents when executed and delivered by the Purchaser will
constitute, the valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms and conditions.
SECTION 5.3 NONCONTRAVENTION; CONSENTS. Neither the execution and the
delivery of this Agreement or any of the Ancillary Documents by the Purchaser,
nor the consummation by the Purchaser of the transactions contemplated hereby or
thereby, will violate any Law to which the Purchaser is subject or any provision
of the charter or bylaws of the Purchaser. Neither the execution and delivery of
this Agreement or any of the Ancillary Documents by the Purchaser, nor the
consummation by the Purchaser of the transactions contemplated hereby or
thereby, will constitute a violation of, be in conflict with or constitute or
create a default under, any agreement or commitment to which the Purchaser is a
party or by which the Purchaser or any of its properties is bound or is subject.
The Purchaser has given all required notice and obtained all licenses, Permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Entities as are required in order to enable the Purchaser to perform its
obligations under this Agreement and each of the Ancillary Documents.
31
SECTION 5.4 LITIGATION. There are no judicial or administrative
actions, proceedings or investigations pending or, to the Purchaser's knowledge,
threatened that question the validity of this Agreement or any of the Ancillary
Documents or any action taken or to be taken by the Purchaser in connection with
this Agreement or any of the Ancillary Documents or that, if adversely
determined, would have a material adverse effect upon the Purchaser's ability to
enter into or perform its obligations under this Agreement or any of the
Ancillary Documents.
SECTION 5.5 CAPITAL STRUCTURE. As of the date hereof, the authorized
capital stock of Purchaser consists of 50,000,000 shares of Purchaser Common
Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, of
which 12,862,841 and 98,347 shares, respectively, were issued and outstanding as
of April 26, 2000. Such outstanding shares of Purchaser Common Stock are, and
the Transaction Shares to be issued pursuant to this Agreement will be, upon
consummation of the Purchase Transaction in accordance with this Agreement,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. As of the date hereof, except as set forth on SCHEDULE 5.5, there are no
Options to which Purchaser is a party or by which it is bound obligating
Purchaser to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Purchaser
SECTION 5.6 BROKERS' FEES. The Purchaser and its Affiliates have no
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Seller or any of its Affiliates could become liable or obligated. Purchaser
SECTION 5.7 FILINGS. To the Purchaser's knowledge, it has filed all
required reports, schedules, forms, statements and other documents with the
Securities and Exchange Commission (the "Commission") (any of the foregoing are
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the Commission promulgated thereunder applicable to such SEC Documents, and
to the Purchaser's knowledge, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent that information contained in any SEC Document has been revised or
superseded by a later-filed SEC Document, to the Purchaser's knowledge, none of
the SEC Documents currently contains any untrue statement of a material fact at
the time that it was made or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein as of the
date thereof, in light of the circumstances under which they were made, not
misleading.
SECTION 5.8 FULL DISCLOSURE. No representation or warranty of the
Purchaser contained in this Agreement or any of the Ancillary Documents contains
an untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading.
There is no fact that the Purchaser
32
has not disclosed to the Seller in writing that the Purchaser presently believes
has or will have a material adverse effect on the business, financial condition,
operations, results of operations or future prospects of the Purchaser or a
material adverse effect on the ability of the Purchaser to perform this
Agreement and the Ancillary Documents to which it is a party.
SECTION 5.9 ABSENCE OF CHANGES. Since April 14, 2000 (the date on which
the Purchaser filed its Form 10-KSB/A), the Purchaser has conducted its
operations in the ordinary course of business consistent with past practice and
there has not been any material adverse change, or any event or development
which, individually or together with other such events or developments, could
reasonably be expected to resolve in a material adverse change in the business,
operations, assets, Liabilities or results of operations of the Purchaser.
SECTION 5.10 NO UNDISCLOSED LIABILITIES. Since April 14, 2000 (the date
on which the Purchaser filed its Form 10-KSB/A), there are no Liabilities of,
relating to or effecting the Purchaser or assets used in the business of the
Purchaser other than Liabilities incurred in the ordinary course of business
consistent with past practice since April 14, 2000, which in the aggregate have
not had a material adverse effect on the Purchaser's business.
ARTICLE VI
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing Date.
SECTION 6.1 GENERAL. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Section 10).
SECTION 6.2 POST-CLOSING CONSENTS; NONASSIGNABLE CONTRACTS.
(a) The Seller will continue to use its commercial reasonable
efforts after the Closing Date to obtain at the Seller's expense all third party
consents that are not obtained prior to the Closing Date and that are required
in connection with the transactions contemplated by this Agreement.
(b) To the extent that any Contract is not capable of being
transferred by the Seller to the Purchaser pursuant to this Agreement without
the consent of a third party (including a Governmental Entity) and such consent
is not obtained prior to Closing, or if such transfer or attempted transfer
would constitute a breach or a violation of any Law, nothing in this Agreement
will constitute a transfer or an attempted transfer thereof.
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(c) In the event that any required consent is not obtained on
or prior to the Closing Date, the Seller will use its commercially reasonable
efforts to (i) provide to the Purchaser the benefits of the applicable Contract,
(ii) cooperate in any reasonable and lawful arrangement designed to provide such
benefits to the Purchaser and (iii) enforce at the request of the Purchaser and
for the account of the Purchaser any rights of the Seller arising from any such
Contract (including the right to elect to terminate such Contract in accordance
with the terms thereof upon the request of the Purchaser).
(d) The Purchaser will perform the obligations arising under
all Contracts referred to in Section 6.2(b) for the benefit of the Seller and
the other party or parties thereto, except for any obligation under such
Contract that constitutes an Excluded Liability.
SECTION 6.3 LITIGATION SUPPORT.
(a) In the event and for so long as any party is actively
contesting or defending against any charge, complaint, action, audit, suit,
proceeding, hearing, investigation, claim or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date,
the other party will cooperate with the contesting or defending party and its
counsel in the contest or defense, make available its personnel and provide such
testimony and access to its books and records as may be necessary in connection
with the contest or defense, at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Section 10).
(b) The Purchaser will maintain all original books, records,
files, documents, papers and agreements pertaining to the operations of the
Seller as conducted prior to the Closing Date that are included in the Purchased
Assets for at least five (5) years following the Closing Date or such longer
period as may be required by Law. The Seller will maintain all original books,
records, files, documents, papers and agreements pertaining to the operations of
the Seller as conducted prior to the Closing Date that are not included in the
Purchased Assets for at least five (5) years following the Closing Date or such
longer period as may be required by Law. Each of the Seller and the Purchaser
agrees that before destroying or discarding any materials required to be
retained pursuant to this Section 6.3(b), it will notify the other party in
writing (which notice will include a description of the materials to be
destroyed or discarded) and such other party may, at its expense, remove or make
copies of such materials within 90 days following the date of such written
notice. In the event the other party has not removed such materials within such
90-day period, the party desiring to destroy or discard such materials may
proceed with such action without any liability to the other party.
(c) The Seller acknowledges and agrees that all
attorney-client, work product and other legal privileges that may exist with
respect to any of the Purchased Assets or Assumed Liabilities are included in
the Purchased Assets being acquired by the Purchaser pursuant to this Agreement
and, from and after the Closing Date, will be the
34
sole and exclusive right and privilege of the Purchaser. The Seller accordingly
acknowledges and agrees that it and its Affiliates will have no right or power
after the Closing Date to assert or waive any such privilege. The Seller agrees
that it will, and will cause its Affiliates to, take any actions reasonably
requested by the Purchaser, at the sole cost and expense of the Purchaser unless
the Purchaser is entitled to indemnification therefor under the provisions of
Section 10, in order to permit the Purchaser to preserve and assert any such
privileges.
SECTION 6.4 AGREEMENTS REGARDING TAX MATTERS.
(a) The Seller and the Purchaser will each provide the other
party with such assistance as may reasonably be requested in connection with the
preparation of any Tax Return, audit or other examination by any taxing
authority or judicial or administrative proceeding relating to liability for
Taxes, will each retain and provide to the other party all records and other
information that may be relevant to any such Tax Return, audit or examination,
proceeding or determination and will each provide the other party with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other party for
any period. Without limiting the generality of the foregoing, each of the
Purchaser and the Seller will retain, until the expiration of the applicable
statutes of limitation (including any extensions thereof) copies of all Tax
Returns, supporting work schedules and other records relating to Tax periods or
portions thereof ending on or prior to the Closing Date.
(b) The parties agree that the Purchaser will employ
individuals who immediately before the Closing Date were employed by the Seller.
The parties agree that the responsibility for the reporting of payroll Taxes
with respect to each individual employed by the Purchaser who had been employed
by the Seller will be assigned under the Alternative Procedure described in
Section 5 of Revenue Procedure 96-68.
SECTION 6.5 CONFIDENTIAL INFORMATION. For a period of five (5) years
after the Closing Date, the Seller and each Stockholder will treat and hold as
such, and will not use for the benefit of themselves or others, any Confidential
Information. In the event the Seller or either Stockholder is requested or
required (by oral request or written request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, then the Seller or such
Stockholder will notify the Purchaser promptly in writing of the request or
requirement so that the Purchaser may seek an appropriate protective order or
waive compliance with this Section 6.5. If, in the absence of a protective order
or receipt of a waiver hereunder, the Seller or such Stockholder is, on the
advice of outside counsel, compelled to disclose any Confidential Information to
any third party, including without limitation, any Governmental Entity or else
stand liable for contempt, then the Seller or such Stockholder may disclose such
Confidential Information to such third party, provided that the Seller or such
Stockholder will use its reasonable commercial efforts to obtain at the request
of the Purchaser an order or other assurance that confidential treatment will be
accorded to such Confidential Information.
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SECTION 6.6 SOLICITATION OF EMPLOYEES. Without the Purchaser's prior
written consent, for a period of two (2) years after the Closing Date, the
Seller and the Stockholders will not, directly or indirectly through any other
Person, solicit the employment of or hire (as an employee, consultant, employee
of a third party employee leasing company or otherwise) any employee of the
Seller employed by the Purchaser.
SECTION 6.7 POST-CLOSING RECEIPTS. In the event that any party after
the Closing Date receives any funds properly belonging to any other party in
accordance with the terms of this Agreement, the receiving party will promptly
so advise such other party, will segregate and hold such funds in trust for the
benefit of such other party and will promptly deliver such funds, together with
any interest earned thereon, to an account or accounts designated in writing by
such other party. Purchaser.
SECTION 6.8 CORPORATE EXISTENCE OF SELLER. During that period of time
beginning on the Closing Date and continuing through and including the Release
Date, the Stockholders shall maintain the Seller as a Massachusetts corporation
in good standing and, in connection therewith, shall make all necessary filings
and pay all necessary taxes, fees and expenses required by a Massachusetts
corporation to maintain good standing. In exchange for the covenants set forth
in the previous sentence, Purchaser has agreed to compensate Seller in the
amount of Three Thousand Dollars ($3,000.00), for expenses incurred to maintain
Seller's existence as a Massachusetts corporation. The compensation referred to
in the previous sentence involved a reduction from Twenty-Five Thousand Dollars
($25,000.00) to Twenty-Two Thousand Dollars ($22,000.00) in the amount of
working capital acquired by Purchaser from Seller in the Purchase Transaction.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 NOTICE OF TRANSFER; MAIL RECEIVED AFTER CLOSING. Following
the Closing, Purchaser and Seller shall cooperate to provide notice to the
customers, suppliers, vendors and other Persons having business relations with
the business conducted by Seller prior to May 1, 2000, that the Purchased Assets
have been transferred. All mail received by Purchaser addressed to Seller shall
be promptly forwarded to Seller. Seller shall promptly open the mail and, in the
event the mail relates to the Purchased Assets or the business conducted by
Seller or Purchaser subsequent to May 1, 2000, Seller shall promptly return such
mail to Purchaser (after making any copies reasonably required for Seller's
records) and Purchaser may thereafter deal with the contents thereof in its
discretion to the extent that such mail and the contents thereof relate to the
Purchased Assets or such business. Seller shall deliver to Purchaser, promptly
after receipt by Seller, copies of all mail received by Seller addressed to
Purchaser, whether or not such mail relates to the Purchased Assets or the
business conducted by Seller or Purchaser subsequent May 1, 2000.
SECTION 7.2 RETENTION OF BOOKS AND RECORDS. To the extent documents and
records pertaining to the periods before the Closing are included in the
Purchased Assets, Purchaser will retain and maintain, in an organized and
retrievable manner, all documents
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and records pertaining to the periods before the Closing in accordance with
standards of commercial reasonableness. Purchaser will retain and maintain all
machine-sensible records, such as computer tapes, disks, diskettes, etc., which
are considered books and records within the meaning of Internal Revenue Code
Section 6001, in accordance with Internal Revenue Procedure 91-59 or such
amending or superseding guidance as issued by the Internal Revenue Service.
Purchaser will make available such documents and records, machine sensible
records, computer time, and assistance from Purchaser's personnel as may be
requested by Seller in order to expeditiously comply with all pertinent requests
from the Internal Revenue Service and state taxing authorities which relate to
periods prior to the Closing Date and to permit Seller to contest or defend
against any charge, complaint, action, audit, suit, proceeding, hearing,
investigation, claim or demand.
SECTION 7.3 BULK TRANSFER LAW. Seller and Purchaser hereby waive
compliance with the Massachusetts bulk transfer law in connection with the
transactions contemplated by this Agreement. Seller shall indemnify and hold
Purchaser harmless from any and all claims made by creditors of Seller relating
to provisions of the Massachusetts bulk transfer law and from all costs
(including reasonable attorneys fees) incurred in the defense of any claims made
under such law. In the event Seller's creditors assert claims arising out of the
Massachusetts bulk transfer law against Purchaser or the Purchased Assets,
Purchaser shall have the right to set off against the Escrow Shares for all
expenses incurred in connection with such claims; PROVIDED, HOWEVER, that as a
condition to Purchasers' right to set off, Purchaser shall provide Seller with
written notice of such creditor's claim and Seller shall have a period not to
exceed thirty (30) days from the date of the notice in which to satisfy such
claim. In addition, on the Closing Date, Seller shall provide Purchaser with a
list of Seller's creditors holding claims or rights for monies due in connection
with the Business conducted prior to May 1, 2000 or any of the Purchased Assets,
and actual or estimated amounts owed to each such creditor, accurate and
complete as of the Closing Date, which shall be attached hereto and incorporated
herein as SCHEDULE 7.3. At or immediately following the Closing, Seller
covenants and agrees to pay those of Seller's creditors identified on SCHEDULE
7.3 as pay-off recipients.
SECTION 7.4 PURCHASER'S INDEMNITY OBLIGATION FOR EQUIPMENT LEASE
GUARANTIES. The Stockholders have entered into certain guaranty agreements
guaranteeing performance by Seller under the Equipment Leases. Purchaser has
assumed Seller's rights, liabilities and obligations under the Equipment Leases
and in connection with such assumption will indemnify each of the Stockholders
from any loss suffered by such Stockholder under his Equipment Lease guaranties
arising out of Purchaser's failure to satisfy after the Closing all of the
liabilities and obligations assumed by Purchaser with respect to the Equipment
Leases. This Section 7.4 shall survive Closing until such time as the
liabilities and obligations assumed by Purchaser under the Equipment Leases have
been satisfied.
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ARTICLE VIII
EMPLOYMENT AND EMPLOYEE BENEFITS
SECTION 8.1 EMPLOYMENT.
(a) As of the Closing Date, the Purchaser will offer continued
employment, without termination, to the Seller Employees listed on SCHEDULE 8.1
(the "Seller Employees"). The Purchaser agrees that, for a period of one year
following the Closing Date, the Seller Employees will be provided annual cash
compensation and employee benefit levels which, in the aggregate, are
substantially equivalent to annual cash compensation and employee benefit levels
which were provided by the Seller immediately prior to the date of this
Agreement.
(b) The Seller hereby authorizes the Purchaser to enter into
discussions with and to advise the Seller Employees concerning the terms of any
future employment of such individuals by the Purchaser and agrees to permit the
Purchaser reasonable access to the Seller Employees for this purpose. Upon
request of the Purchaser, the Seller will provide the Purchaser with reasonable
access to data (including computer data) regarding the ages, dates of birth,
compensation and job description of the Seller Employees.
(c) The Seller Employees offered employment by the Purchaser
will be deemed employees at will and nothing expressed or implied herein will
obligate the Purchaser to provide continued employment to any such Seller
Employee for a specified period of time following the Closing Date. The
Purchaser will be the sole judge of the number, identity and qualifications of
employees necessary for the conduct of its business operations and, except as
expressly provided in this Section 8, the Purchaser's employment of the Seller
Employees will be on such terms and conditions as the Purchaser, in its sole
discretion, may from time to time determine.
SECTION 8.2 BENEFIT TRANSITION. The Purchaser will include all Seller
Employees employed by the Purchaser in employee benefit plans offered by
Purchaser to its employees. Each of the Seller Employees shall retain his or her
vacation days accrued as an employee of the Seller and shall be entitled to use
such vacation days following the Closing Date pursuant to a schedule approved by
the Purchaser.
SECTION 8.3 NO THIRD PARTY RIGHTS.
(a) Nothing expressed or implied in this Section 8 will confer
upon any employee of the Seller, the Purchaser or any of their respective
Affiliates, or upon any legal representative of such employee, any rights or
remedies, including any right to employment or continued employment for any
specified period, of any nature or kind whatsoever under or by reason of this
Agreement.
(b) Nothing in this Agreement will be deemed to confer upon
any individual, or any dependent or beneficiary thereof, any rights under or
with respect to
38
any plan, program or arrangement described in or contemplated by this Section 8,
and each individual, and each dependent and beneficiary thereof, will be
entitled to look only to the express terms of any such plan, program or
arrangement for his or her rights thereunder.
(c) Nothing in this Agreement will cause the Purchaser or its
Affiliates or the Seller or its Affiliates to have any obligation to provide
employment or any employee benefits to any individual who is not a Seller
Employee or to continue to employ any Seller Employee for any period of time
following the Closing Date.
(d) Nothing in this Agreement will cause duplicate benefits to
be paid or provided to or with respect to any Seller Employee under any employee
benefit policies, plans, arrangements, programs, practices or agreements.
References herein to a benefit with respect to a Seller Employee will include,
where applicable, benefits with respect to any eligible dependents and
beneficiaries of such Seller Employee under the same employee benefit policy,
plan, arrangement, program, practice or agreement.
(e) Except for as otherwise expressly provided in this Section
8, nothing in this Agreement will limit or restrict in any way the right of the
Seller or the Purchaser to modify, amend, terminate or establish employee
benefit plans or arrangements in whole or in part at any time after the Closing
Date.
SECTION 8.4 GRANT OF OPTIONS. Each of the Seller Employees shall
receive at Closing, or as soon thereafter as the Compensation Committee of the
Purchaser is able to act, an option to purchase, pursuant to the Purchaser's
1998 Stock Plan, the number of shares of Purchaser common stock listed beside
his or her name on SCHEDULE 8.1.
ARTICLE IX
REMEDIES FOR BREACHES OF THIS AGREEMENT
SECTION 9.1 SURVIVAL. Notwithstanding any right of Purchaser (whether
or not exercised) to investigate the affairs of Seller or each Stockholder or
any right of any party (whether or not exercised) to investigate the accuracy of
the representations and warranties of the other party contained in this
Agreement or the waiver of any provision hereof, Seller, on the one hand, and
Purchaser, on the other, have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements of Seller, the
Stockholders, and Purchaser contained in this Agreement shall survive the
Closing (a) for a period equal to the applicable statute of limitations with
respect to the representations and warranties contained in Sections 4.3,
4.10,4.20, 4.17 and 4.21 ; and (b) for a period of three (3) years after the
Closing Date with respect to all other representations and warranties; provided,
however, that any representation, warranty, covenant or agreement that would
otherwise terminate will continue to survive if a Claim Notice or Indemnity
Notice (as applicable) shall have been timely given under Article X on or prior
to such termination date, until the related claim for indemnification has been
satisfied or otherwise resolved as provided in this Article IX, but only with
respect to matters described in the Claim Notice or Indemnity Notice.
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SECTION 9.2 INDEMNIFICATION.
(a) The Seller and each of the Stockholders, jointly and
severally, shall indemnify Purchaser and its stockholders and the officers,
directors, employees, agents and Affiliates of Purchaser (in each case, other
than the Stockholders) (collectively, the "Acquisition Indemnitees"), in respect
of, and hold each of them harmless from and against, and shall pay any and all
Losses suffered, incurred or sustained by any of them or to which any of them
becomes subject, resulting from, arising out of or relating to any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of Seller or any of the
Stockholders contained in this Agreement or any of the Ancillary Documents
(including, without limitation, any certificate delivered in connection herewith
or therewith) during any applicable survival period pursuant to Section 9.1
above, to the extent such Losses arise from the act or omission of Seller or the
Stockholders after the Closing Date, in an amount up to and including the value
of the Escrow Shares, to be satisfied by cancellation of the Escrow Shares to
the extent necessary to satisfy the Stockholders indemnity obligations
hereunder.
Purchaser agrees to indemnify the Seller and its stockholders and the officers,
directors, employees, agents and Affiliates of Seller (the "Stockholder
Indemnitees"') in respect of, and hold each of them harmless from and against,
and shall pay any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Purchaser contained
in this Agreement or the Ancillary Documents (including, without limitation, any
certificate delivered in connection herewith or therewith) during any applicable
survival period pursuant to Section 9.1 above, to the extent such Losses arise
from the act or omission of Purchaser after the Closing Date in an amount up to
and including, but not exceeding the value of the Escrow Shares.
SECTION 9.3 METHOD OF ASSERTING CLAIMS. All claims for indemnification
by any Indemnified Party under this Article IX will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Article IX in respect of, arising out of
or involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a claim notice to the Indemnifying Party within ten (10) Business
Days after receipt by such Indemnified Party of written notice of the Third
Party Claim ("Claim Notice"); provided, however, that failure to give such Claim
Notice shall not affect the indemnification provided hereunder except to the
extent the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party, provided that all
40
Indemnifying Parties with respect to such Third Party Claim jointly acknowledge
to the Indemnified Party its right to indemnity pursuant hereto in respect of
the entirety of such claim (as such claim may be modified through written
agreement of the parties or arbitration hereunder) and provide assurances
reasonably satisfactory to the Indemnified Party that the Indemnifying Parties
will be financially able to satisfy such claim to the extent of the indemnity
provided in Section 9.2 hereof if it is decided adversely. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof (except as hereinafter provided), but shall continue to pay for
any expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense (except as
hereinafter provided), separate from the counsel employed by the Indemnifying
Party. Notwithstanding the foregoing, if (i) the Indemnifying Party shall not
assume the defense of a Third Party Claim with counsel reasonably satisfactory
to the Indemnified Party within five (5) Business Days of any Claim Notice, or
(ii) legal counsel for the Indemnified Party notifies the Indemnifying Party
that there are or may be legal defenses available to the Indemnified Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party. Whether the Indemnifying Party or the
Indemnified Party control the defense of any Third Party Claim, the parties
hereto shall cooperate in the defense thereof. Such cooperation shall include
the retention and provision to the counsel of the controlling party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Indemnifying
Party shall have the right to settle, compromise or discharge a Third Party
Claim (other than any such Third Party Claim in which criminal conduct is
alleged) without the Indemnified Party's consent if such settlement, compromise
or discharge (i) constitutes a complete and unconditional discharge and release
of all Indemnified Parties, and (ii) provides for no relief other than the
payment of monetary damages and such monetary damages are paid in full by the
Indemnifying Party, and in all other cases may not so settle without the prior
written consent of the Indemnified Party.
(c) In the event any Indemnified Party should have a claim
under Section 9.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been actually prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period as to
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a Liability of the Indemnifying Party under Section 9.1 and
the Indemnifying Party shall
41
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its Liability with respect to such claim,
the Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by arbitration as
provided in Article X.
(d) The rights accorded to Indemnified Parties hereunder shall
be in addition to any rights that any Indemnified Party may have at law or in
equity, under federal or state securities Laws, but shall be limited to those
rights set forth in the Ancillary Documents, or by separate agreement.
(e) Any payment under this Article IX shall be treated for tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations or, alternatively, by Purchaser as an offset to a Tax benefit
item, if such characterization is permissible under such Tax Authorities.
ARTICLE X
ARBITRATION OF DISPUTES
SECTION 10.1 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by an arbitration panel consisting of three (3) persons,
one selected by Purchaser, one selected by the Seller and the third selected by
mutual agreement of the first two arbitrators selected, and judgement upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
SECTION 10.2 PROCEDURE FOR ARBITRATION.
(a) The arbitration shall be held Boston, Massachusetts.
(b) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by a party that prevails on any issue in
any arbitration commenced hereunder or in any judicial proceeding seeking to
enforce this Agreement to arbitrate disputes or seeking to enforce any order or
award of any arbitration hereunder shall be assessed against the party or
parties that do not prevail on such issue or issues.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 PRESS RELEASES AND ANNOUNCEMENTS. Neither Seller nor
either of the Stockholders will issue any press release or announcement relating
to the subject matter of this Agreement prior to the Closing Date without the
prior approval of the Purchaser. Purchaser may make any public disclosure,
including without limitation, a press release or the filing of a Form 8-K with
the Securities and Exchange Commission, it believes in good faith is required by
Law.
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SECTION 11.2 EXPENSES; TRANSFER TAXES. Each of the parties hereto will
bear all legal, accounting, investment banking and other expenses incurred by it
or on its behalf in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. The Seller will pay
and hold the Purchaser harmless from payment of all sales, use, transfer and
documentary Taxes applicable to the transfer of the Purchased Assets to the
Purchaser. The parties will cooperate in a timely manner in making and
completing all filings, returns, reports and forms as may be required pursuant
to the provisions of such Tax laws. The parties will also cooperate in providing
each other with appropriate resale exemption certificates and similar Tax and
fee documentation.
SECTION 11.3 [RESERVED.].
SECTION 11.4 CONSENT TO AMENDMENTS. The provisions of this Agreement
may be amended or waived only by a written agreement executed and delivered by
each of the parties. No other course of dealing between the parties to this
Agreement or any delay in exercising any rights hereunder will operate as a
waiver of any rights of such parties.
SECTION 11.5 SUCCESSORS AND ASSIGNS. No party hereto may assign or
delegate any of such party's rights or obligations under or in connection with
this Agreement or any Ancillary Document without the written consent of the
other party hereto; provided that the Purchaser may without the consent of the
Seller or either Stockholder assign its rights under this Agreement or any of
the Ancillary Document to one or more of its wholly-owned subsidiaries. No
assignment by the Purchaser pursuant to the proviso of the preceding sentence
will release the Purchaser from any of its obligations under this Agreement or
any Ancillary Agreement or waive or release any right or remedy the Seller may
have against the Purchaser hereunder or thereunder. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement or in any Ancillary Document by or on behalf of any of the parties
hereto or thereto will be binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by and will inure
to the benefit of the respective successors and permitted assigns of such party.
SECTION 11.6 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
SECTION 11.7 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement. This Agreement may be delivered by
facsimile.
SECTION 11.8 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
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SECTION 11.9 NOTICES All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally to
the recipient, one business day after the date when sent to the recipient by
reputable express courier service (charges prepaid) or ten business days after
the date when mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to the Purchaser, the Seller and the Stockholders at
the addresses indicated below:
If to the Purchaser:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
Five Clock ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
With copies (which will not constitute notice) to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
McGuire, Woods, Battle & ▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to the Seller:
Chili Pepper, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, President
and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
With a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
SECTION 11.10 NO THIRD PARTY BENEFICIARIES. This Agreement will not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.
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SECTION 11.11 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, that may have related in any way to the subject
matter hereof. Notwithstanding the foregoing, the Confidentiality Agreement will
not be deemed to have been superseded by this Agreement unless and until the
Closing occurs, in which event the Confidentiality Agreement will be deemed to
have terminated in its entirety and will have no further force or effect.
SECTION 11.12 CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction will be applied against any party. The use of
the word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
SECTION 11.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
SECTION 11.14 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES
HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF
THE STATE OF DELAWARE.
SECTION 11.15 SUBMISSION TO JURISDICTION. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Massachusetts in any action or proceeding arising out of or relating to this
Agreement, agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court, and agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties to this Agreement waives any defense of inconvenient forum in
connection with the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
party with respect thereto. Each party agrees that a final judgment in any
action or proceeding so brought will be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE.]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ [SEAL]
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
CHILI PEPPER, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ [SEAL]
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ [SEAL]
---------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇ [SEAL]
---------------------------
▇▇▇▇ ▇▇▇▇▇▇
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