EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March 3, 2004 by
and between ITO HOLDINGS, LLC, a California limited liability company ("Seller")
and INFOCROSSING, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns 1,000,000 shares (the "Shares") of common stock of ITO
Acquisition Corporation, a California corporation (the "Company"), such Shares
being all of the outstanding shares of capital stock of the Company;
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Shares pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Shares pursuant to this Agreement, Purchaser
shall own all of the outstanding shares of capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises hereinafter contained, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the parties hereto intending to
be legally bound hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
(a) Defined Terms. When used in this Agreement, the following terms shall
have the respective meanings specified therefor below.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person; provided that, for the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise and provided, further,
that an Affiliate of any Person shall also include (i) any Person that directly
or indirectly owns more than five percent (5%) of any class of capital stock or
other equity interest of such Person, (ii) any officer, director, trustee or
beneficiary of such Person, (iii) any spouse, parent, sibling or descendant of
any Person described in clauses (i) or (ii) above, and (iv) any trust for the
benefit of any Person described in clauses (i) through (iii) above or for any
spouse, issue or lineal descendant of any Person described in clauses (i)
through (iii) above.
"Asset Transactions" shall mean each of the transactions consummated
pursuant to (i) that certain Asset Purchase Agreement, dated as of October 1,
2002, between the Company and Systems Management Specialists, Inc., a Delaware
corporation, as amended, (ii) that certain Asset Purchase Agreement, dated as of
June 27, 2003, between the Company and Acxiom Corporation, a Delaware
corporation and (iii) each other agreement to which the Company is a party
entered into in connection with either of the Asset Purchase Agreements
described in clauses (i) and (ii) above.
"Books and Records" shall mean any and all of the books, records,
contracts, agreements and files of a Person, existing on or after the date of
this Agreement, including computer records and electronic copies of such
information.
"Brea Facility" shall mean the real estate facility located at 3300 Birch
Street, Brea, California 92821 as more particularly described in the Brea
Facility Lease.
"Brea Facility Lease" shall mean that certain Lease Agreement, dated as of
December 19, 2002, with respect to the Brea Facility, between Global Brea LLC,
as successor-in-interest to Birch Windell, LLC, as lessor, and the Company as
lessee, as amended as of January 1, 2004.
"Business Day" shall mean any day, other than a Saturday, Sunday or a day
on which banks located in New York, New York or Los Angeles, California shall be
authorized or required by law to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at Closing Date and
any subsequent provisions of the Code, amendatory thereof, supplemental thereto
or substituted therefor.
"Company Intellectual Property" shall mean any Intellectual Property or
rights thereto used by the Company in connection with its business and owned by
or under license to the Company.
"Company Property" shall mean any real property and improvements owned
(directly, indirectly, or beneficially), leased, used, held for use, operated or
occupied by the Company.
"Environmental Law" shall mean any Law, Order or other requirement of Law,
including any principle of common Law, relating to pollution or the protection
of human health or the environment, or to the identification, manufacture, use,
transport, treatment, storage or Release of Hazardous Substances, including (i)
CERCLA, (ii) the Toxic Substances Control Act, (iii) the Hazardous Materials
Transportation Act, (iv) the Resource Conservation and Recovery Act, (v) the
Clean Water Act, (vi) the Safe Drinking Water Act, (vii) the Clean Air Act,
(viii) the Occupational Safety and Health Act, (ix) the Federal Insecticide,
Fungicide, Rodenticide Act, (x) the Atomic Energy Act, and (xi) the Emergency
Planning and Community Right-to-Know Act.
"Escrow Agent" shall mean the Escrow Agent named in the Escrow Agreement.
'Escrow Agreement" shall mean the duly executed escrow agreement among
Purchaser, Seller and the escrow agent named therein substantially in the form
attached hereto as Exhibit D, subject to any modifications required by the
Escrow Agent and agreed upon by Purchaser and Seller.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Facilities" shall mean each of the Brea Facility and the Woodland Hills
Facility.
"Facility Leases" shall mean each of the Brea Facility Lease and the
Woodland Hills Facility Lease.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental or Regulatory Authority" shall mean any instrumentality,
subdivision, court, administrative agency, commission, official or other
authority of the United States or any other country or any state, province,
prefect, municipality, locality or other government or political subdivision
thereof, or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority.
"Hazardous Substance" shall mean (a) any material, substance or waste
(whether liquid, gaseous or solid) that: (i) requires removal, remediation or
reporting under any Environmental Law, or is listed, classified or regulated as
a "hazardous waste" or "hazardous substance" (or other similar term) pursuant to
any applicable Environmental Law or (ii) is regulated under applicable
Environmental Laws as being, toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and (b) any
petroleum product or by-product, petroleum-derived substances wastes or
breakdown products, asbestos or polychlorinated biphenyls.
"Hosted Materials" shall mean any software applications, databases or other
materials that are (i) owned by a customer of the Company, or licensed by such
customer from a third party, and (ii) provided to the Company by or on behalf
of, and hosted by the Company for, such customer. For the purposes of clarity,
any software applications, databases or other materials that the Company owns or
licenses from a third party and hosts or uses for its customers shall be deemed
to be Company Intellectual Property, and not Hosted Materials.
"Indebtedness" of any Person shall mean and include (i) indebtedness for
borrowed money, whether or not contingent, or indebtedness issued or incurred in
substitution or exchange for indebtedness for borrowed money, (ii) amounts owing
as deferred purchase price for property or services, including all Seller notes
and "earn-out" payments, (iii) indebtedness evidenced by any note, bond,
debenture, mortgage or other debt instrument or debt security, (iv) obligations
or commitments to repay deposits or other amounts advanced by and owing to third
parties, (v) obligations under any interest rate, currency or other hedging
agreement, (vi) any obligation to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property,
which such obligation is required to be treated as a capitalized lease under
GAAP, or (vii) guarantees or other contingent liabilities (including so called
take-or-pay or keep-well agreements) with respect to any indebtedness,
obligation, claim or liability of any other Person of a type described in
clauses (i) through (vi) above. Indebtedness shall not, however, include
accounts payable to trade creditors and accrued expenses arising in the ordinary
course of business consistent with past practice and shall not include the
endorsement of negotiable instruments for collection in the ordinary course of
business.
"Intellectual Property' shall mean all intellectual property or other
proprietary rights of every kind, foreign or domestic, including all: (i)
inventions (whether or not patentable), patents, patent applications, invention
disclosures, and other rights of invention; (ii) trademarks, service marks,
trade names, trade dress, logos, domain names, product names and slogans,
including any common law rights, registrations, and applications for
registration for any of the foregoing, and the goodwill associated with all of
the foregoing; (iii) copyrights and other rights of authorship, and any
applications, registrations and renewals in connection therewith; (iv) trade
secrets, know-how and confidential and proprietary business or technical
information, including, without limitation, customer and supplier lists and
related information, pricing and cost information, business and marketing plans,
any other financial, marketing and business data, technical data, processes,
formulations, specifications and schematics; (v) computer applications,
operating systems, electronic data and databases, web sites (including all
related computer code and content) and any other software (including source code
and object code) or documentation for any of the foregoing; (vi) rights to
exclude others from appropriating any of such intellectual property including
the rights to sue for and remedies against past, present and future
infringements of any or all of the foregoing and rights of priority and
protection of interests therein under the laws of the United States and abroad;
and (vii) any licenses and other proprietary, intellectual property and other
rights relating to any or all of the foregoing.
"IRS" shall mean the United States Internal Revenue Service.
"Key Employees" shall mean the individuals set forth in Schedule 1.1(a).
"Law" shall mean any statute, law, ordinance, rule or regulation of or by
any Governmental or Regulatory Authority.
"Liens" shall mean liens, security interests, options, rights of first
refusal, claims, easements, mortgages, charges, indentures, deeds of trust,
rights of way, restrictions on the use of real property, encroachments, licenses
to third parties, leases to third parties, security agreements, or any other
encumbrances and other restrictions or limitations of any kind, including any
Lien under ERISA or the Code.
"Material Adverse Effect" shall mean, (i) when used with respect to the
Company, any effect, event, occurrence, development, circumstance, change or
condition that, individually or in the aggregate with other effects, events,
occurrences, developments, circumstances, changes or conditions is, or would
reasonably be expected to be, materially adverse to the business, property,
assets, liabilities, results of operation, condition (financial or otherwise) of
the Company, other than changes or effects relating to general economic
conditions, which do not disproportionately affect the Company, or (ii) when
used with respect to Purchaser or Seller, as the case may be, any materially
adverse change in or effect on (including any material delay) the ability of
Purchaser or Seller, as the case may be, to perform their respective obligations
hereunder or under the Transaction Documents.
"Order" shall mean any judgment, order, consent order, injunction, decree,
writ, permit, demand letter or license of any Governmental or Regulatory
Authority or any arbitrator.
"Organizational Documents" means, with respect to any corporation, its
charter, by-laws and any agreements with shareholders; with respect to any
partnership, its certificate of partnership and partnership agreement; with
respect to any limited liability company, its certificate of formation and
limited liability company or operating agreement; with respect to any trust, its
declaration or agreement of trust; and with respect to each other Person, its
comparable constitutional instruments or documents; together, in each case, with
any and all amendments thereto and all material consents and other instruments
delegating authority pursuant to such Organizational Documents.
"Permit" shall mean any permit (including occupancy permit), certificate,
license, consent or authorization of any Governmental or Regulatory Authority.
"Permitted Liens" shall mean (i) Liens consisting of zoning or planning
restrictions or regulations, easements, Permits, restrictive covenants,
encroachments and other restrictions or limitations on the use of real property
or irregularities in, or exceptions to, title thereto which, individually or in
the aggregate, do not materially detract from the value of, or impair the use
of, such property by the Company, (ii) Liens for current Taxes, assessments or
governmental charges or levies not yet due and payable or (iii) those Liens set
forth on Schedule 1.1(b) hereto.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an incorporated organization and a Governmental or
Regulatory Authority.
"Purchaser Common Stock" shall mean the common stock of Purchaser, par
value $0.01 per share.
"Release" shall mean the release, spill, emission, leaking, pumping,
pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge,
dispersal, leaching or migrating of any Hazardous Substance into the indoor or
outdoor environment.
"Representatives" of a Person shall mean the directors, officers,
employees, agents, advisors and other representatives, including financial
advisors, consultants, accountants and counsel of such Person.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" shall mean, with respect to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is owned by such Person directly or indirectly
through one or more Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through one or more Subsidiaries of such Person has more than a 50%
equity interest.
"Taxes" shall mean all federal, state, local, foreign and other income,
franchise, profits, gross receipts, capital gains, capital stock, transfer,
sales, use, value added, occupation, property, excise, severance, windfall
profits, stamp, license, payroll, social security, withholding and other taxes,
assessments, charges, duties, fees, levies or other similar governmental charges
(whether payable directly or by withholding and whether or not requiring the
filing of a Return (as defined below)), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result (i) of transferee liability, (ii) of
being a member of a combined, consolidated, unitary or affiliated group or
(iii) of a contractual obligation to indemnify any Person or other entity.
"Transaction Documents" shall mean the Escrow Agreement and all other
instruments, certificates and documents required to be delivered by the parties
hereto pursuant to this Agreement.
"Woodland Hills Facility" shall mean the real estate facility located at
21051 Warner Center Lane, Suite 200, Woodland Hills, California, 91367, as more
particularly described in the Woodland Hills Facility Lease.
"Woodland Hills Facility Lease" shall mean that certain Lease, dated as of
March 27, 2003, with respect to the Woodland Hills Facility, between CarrAmerica
Realty Corporation and Acxiom Corporation.
(b) Additional Defined Terms. In addition to the terms defined in Section
1.1(a), the following terms shall have the respective meanings assigned thereto
in the sections indicated below.
Defined Term Section
Acquisition Proposal 5.9(a)(i)
Acxiom Business 5.7(l)(ii)
Agreed Claims 8.3(c)
Agreement Preamble
Appraisals 5.7(l)
Balance Sheet 3.7(a)
Balance Sheet Date 3.7(a)
BDO 5.7(l)
Bingham Agreement 2.7
Cash Consideration 2.1
Certificate 8.3(a)
Claims 5.12(a)
Closing 2.3
Closing Cash Consideration 2.2(a)(i)
Closing Date 2.3
Common Stock 3.5
Company First Recital
Confidential Information 5.2(b)
Confidentiality Agreement 5.2(a)
Contract 3.3(a)(iii)
Controlled Group 3.21(i)
Cut-off Time 9.1(d)
Draft Financial Statements 3.7(a)
Employee Benefit Plans 3.21(a)(iv)
ERISA 3.21(a)(i)
Escrow Amount 2.2(a)(i)
Financial Statements Consents 5.7(l)(v)
Financial Statements Deliveries 5.7(l)(v)
Historical Financial Statements 5.7(l)(iii)
Historical Financial Statements Auditor's Report 5.7(l)(iv)
Indemnified Party 8.3(a)
Indemnifying Party 8.3(a)
Insurance Policies 3.16
Losses 8.2(a)
Moore Stephens 5.7(l)
Material Customers 3.19
Material Suppliers 3.19
Multiemployer Plan 3.21(c)(i)
Proposed Debt Financing 4.7
Proposed Equity Financing 4.7
Proposed Financing Transactions 4.7
Purchase Price 2.1
Purchaser Preamble
Purchaser Indemnitee 8.2(a)
Purchaser SEC Reports 4.3
Purchaser's Unlimited Warranty 8.1(b)
Returns 3.15
Seller Preamble
Seller Claims 5.11
Seller Indemnitee 8.2(b)
Seller's Expenses 2.7
Seller's Expenses Certificate 2.7
Seller's Unlimited Warranties 8.1(b)
Shares First Recital
SMS Business 5.7(l)(i)
Stock Consideration 2.1
Unaudited Balance Sheet 3.7(a)
Unaudited Balance Sheet Date 3.7(a)
WARN 3.20(j)
Warranty Claim 3.28
1.2 Construction. In this Agreement, unless the context otherwise
requires:
(a) any reference in this Agreement to "writing" or comparable expressions
includes a reference to facsimile transmission or comparable means of
communication;
(b) words expressed in the singular number shall include the plural and
vice versa, words expressed in the masculine shall include the feminine and
neuter gender and vice versa;
(c) references to Articles, Sections, Exhibits, Schedules and Recitals are
references to articles, sections, exhibits, schedules and recitals of this
Agreement;
(d) reference to "day" or "days' are to calendar days;
(e) this "Agreement" or any other agreement or document shall be construed
as a reference to this Agreement or, as the case may be, such other agreement or
document as the same may have been, or may from time to time be, amended,
varied, novated or supplemented; and
(f) "include," "includes," and "including" are deemed to be followed by
"without limitation" whether or not they are in fact followed by such words or
words of similar import.
1.3 Schedules and Exhibits. The Schedules and Exhibits to this Agreement
are incorporated into and form an integral part of this Agreement. If an Exhibit
is a form of agreement, such agreement, when executed and delivered by the
parties thereto, shall constitute a document independent of this Agreement.
1.4 Knowledge. (a) Where any representation or warranty contained in this
Agreement is expressly qualified by reference to the knowledge of Seller, it
means the actual knowledge of the Key Employees after having made reasonable
inquiry of Seller and the Company as to the matters that are the subject of such
representations and warranties.
(b) Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge of Purchaser, it means the
actual knowledge of Zach Lonstein and Robert Wallach after having made
reasonable inquiry of Purchaser as to the matters that are the subject of such
representations and warranties.
ARTICLE II
SALE OF SHARES
2.1 Sale of Shares. On the terms and subject to the conditions set forth
in this Agreement, Seller agrees to sell, assign, transfer and deliver to
Purchaser at the Closing, and Purchaser agrees to purchase from Seller at the
Closing, the Shares, free and clear of any and all Liens (other than
restrictions or limitations on transfer under the Securities Act and other
applicable securities Laws). The purchase price (the "Purchase Price") for the
Shares is $35,034,265 in cash (the "Cash Consideration"), subject to adjustment
as provided in Section 2.2, and the Stock Consideration.
2.2 Determination and Payment of Closing Payment. (a) In consideration for
the sale of the Shares by Seller to Purchaser, Purchaser shall deliver to Seller
at the Closing (i) an amount in cash (the "Closing Cash Consideration") equal to
the Cash Consideration less $3,650,000 (the "Escrow Amount") and the aggregate
amount of any Seller's Expenses that have been paid by the Company on or prior
to the Closing Date as set forth on the Seller's Expenses Certificate and
(ii) 135,892 shares of Purchaser Common Stock (such shares, the "Stock
Consideration"). Purchaser shall deliver the Closing Cash Consideration by wire
transfer of immediately available funds to the account notified by Seller in
writing to Purchaser at least two (2) Business Days prior to the Closing Date.
(b) Notwithstanding the foregoing, Purchaser shall be entitled to deduct
and withhold from the Closing Cash Consideration such amounts as Purchaser is
required to deduct and withhold under the Code with respect to the payment of
the Purchase Price; provided, however, that Purchaser shall not deduct and
withhold from the Closing Cash Consideration any amount if Purchaser has
received the certificate described in Section 2.4(d) at least two (2) Business
Days prior the Closing Date. To the extent amounts are so withheld by Purchaser,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to Seller. If Purchaser intends to deduct and withhold from the
Closing Cash Consideration any amount as required with respect to the preceding
sentence, Purchaser shall, not less than two (2) Business Days prior to the
Closing Date, notify Seller of such intent and requirement based on the receipt
by Purchaser of a legal opinion from legal counsel.
2.3 Closing. Subject to the terms and conditions of this Agreement, except
as otherwise agreed by the parties, the sale of the Shares referred to in
Section 2.1 (the "Closing") shall take place within three Business Days
following the date on which all of the conditions to the obligations of the
parties set forth in Article VI have been satisfied or waived (other than the
delivery of the certificates, opinions and documents that are to be delivered at
the Closing pursuant hereto); provided, however, that in no event shall the
Closing take place prior to April 1, 2004. The Closing shall take place at such
place as the parties hereto shall agree. Such date is referred to herein as the
"Closing Date".
2.4 Closing Date Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser the following:
(a) the certificates representing the Shares duly endorsed in blank, or
accompanied by either stock powers duly executed in blank by Seller or such
other instruments of transfer as are reasonably acceptable to Purchaser in each
case, with all necessary transfer tax and other revenue stamps, acquired at
Seller's expense, affixed and canceled;
(b) (i) copies of the Company's articles of incorporation as in effect on
the Closing Date, including all amendments thereto, in each case certified by
the Secretary of State or other appropriate official of its jurisdiction of
incorporation, (ii) a certificate from the Secretary of State or other
appropriate official of the jurisdiction of incorporation of the Company to the
effect that the Company is in good standing or subsisting in such jurisdiction
and listing all charter documents of the Company on file, (iii) a certificate
from the Secretary of State or other appropriate official of each state in which
the Company is qualified to do business to the effect that the Company is in
good standing in such state, and (iv) a copy of the by-laws of the Company,
certified by the Secretary of the Company as being true and correct as of the
Closing Date;
(c) resignation letters, effective on the Closing Date, executed by each of
the members of the Board of Directors of the Company, pursuant to which each of
them has resigned as a member of the Board of Directors of the Company;
(d) an affidavit, stating under penalty of perjury, that the indicated
number is Seller's United States taxpayer identification number and that Seller
is not a foreign person, pursuant to Section 1445(b)(2) of the Code;
(e) the Seller's Expenses Certificate and the Bingham Agreement;
(f) a receipt for the Closing Cash Consideration and the Stock
Consideration;
(g) the certificates, opinions and other documents required to be delivered
by Seller pursuant to Section 6.1; and
(h) such other instruments, agreements, certificates and documents as shall
be reasonably requested by Purchaser to make effective the transactions
contemplated hereby.
2.5 Closing Date Deliveries by Purchaser. (a) At the Closing, Purchaser
shall deliver or cause to be delivered to Seller the following:
(i) the Closing Cash Consideration in accordance with Section 2.2;
(ii) a stock certificate duly registered in the name of Seller representing
the Stock Consideration;
(iii) a receipt for the Shares;
(iv) the certificates, opinions and other documents required to be
delivered by Purchaser pursuant to Section 6.2; and
(v) such other instruments, agreements, certificates and documents as shall
be reasonably requested by Seller to make effective the transactions
contemplated hereby.
(b) At the Closing, Purchaser shall wire transfer in immediately available
funds the Escrow Amount to an account designated in writing to Purchaser at
least two (2) Business Days prior to the Closing Date by the Escrow Agent.
2.6 Purchaser Stock. The certificate representing the Stock Consideration
issued to Seller shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR SECURITIES REGULATORS OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE, NOR
MAY ANY INTEREST THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY, SUBJECT TO CERTAIN
EXCEPTIONS, A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, IN
FORM AND SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO INFOCROSSING,
INC."
2.7 Transaction Costs of the Company. Except as provided in Section 10.1,
Seller shall be responsible for, all fees and expenses of counsel and other
professional advisors incurred by Seller or the Company in connection with the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby ("Seller's Expenses"). No later than two (2) Business Days
prior to the Closing Date, Seller shall deliver to Purchaser a certificate of
Seller (the "Seller's Expenses Certificate"), along with such supporting
documentation as may reasonably be required by Purchaser, signed by a duly
authorized officer of Seller certifying (i) that the only fees and expenses that
constitute Seller's Expenses are the fees and expenses of Bingham McCutchen LLP
and (ii) as to the aggregate amount of any Seller's Expenses that have been paid
or will be paid by the Company at or prior to the Closing Date. Seller will also
deliver to Purchaser a letter agreement among Seller, Bingham McCutchen LLP and
the Company (the "Bingham Agreement"), pursuant to which Bingham McCutchen LLP
(i) agrees that Seller shall be solely responsible for any Seller's Expenses not
paid at or prior to the Closing Date and (ii) waives, and releases the Company
from, any demand, right, claim or other entitlement Bingham McCutchen LLP may
have against the Company for any Seller's Expenses.
ARTICLE III
REPRESENTATIONS OF SELLER
3. Representations of Seller. Seller represents and warrants on the date
hereof and on the Closing Date as follows:
3.1 Ownership of Shares; Existence and Good Standing of Seller. (a) Seller
is the sole lawful owner, beneficially and of record, of all of the Shares, free
and clear of all Liens or other restrictions or limitations on transfer (other
than any restrictions under the Securities Act and other applicable securities
Laws). The delivery to Purchaser of the Shares pursuant to this Agreement will
transfer to Purchaser good and valid title to all of the outstanding capital
stock of the Company, free and clear of all Liens.
(b) Seller is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite limited liability company power and authority to own, lease, operate
and use the assets and properties currently owned, leased, operated and used by
it and to own and operate its business as now conducted.
3.2 Authority and Enforceability. Seller has the limited liability company
power and authority to execute and deliver this Agreement and the other
instruments and agreements to be executed and delivered by Seller as
contemplated hereby. Seller has the limited liability company power and
authority to consummate the transactions contemplated hereby and by the other
instruments and agreements to be executed and delivered by Seller as
contemplated hereby, including the sale, assignment, transfer and conveyance of
the Shares pursuant to this Agreement. The execution, delivery and performance
of this Agreement, and all other instruments and agreements to be executed and
delivered by Seller as contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite limited liability company and member action on the part of Seller and
its members and no other limited liability company proceedings or approvals on
the part of Seller or its members is necessary to authorize the execution,
delivery and performance of this Agreement and such other instruments and
agreements by Seller or the consummation of the transactions contemplated hereby
and thereby. This Agreement and all other instruments and agreements to be
executed and delivered by Seller as contemplated hereby, when delivered in
accordance with the terms hereof, assuming the due execution and delivery of
this Agreement and each such other document by the other parties hereto and
thereto, shall have been duly executed and delivered by Seller and shall be
legal, valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except to the extent that their enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors' rights generally and to
general equitable principles.
3.3 Consents and Approvals; No Violations. (a) Other than as set forth in
Schedule 3.3(a), the execution and delivery of this Agreement by Seller do not,
the execution and delivery by Seller of the other instruments and agreements to
be executed and delivered by Seller as contemplated hereby will not, and the
consummation by Seller of the transactions contemplated hereby and thereby will
not (with or without due notice or lapse of time or both), result in the
creation of any Lien on any of the properties or assets of Seller or the
Company, or result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, payment or acceleration) under: (i) any
provision of the Organizational Documents of Seller or the Company; (ii) subject
to obtaining and making any of the approvals, consents, notices and filings set
forth in Schedule 3.3(b), any Law or Order applicable to Seller or the Company
or by which any of their respective properties or assets may be bound; (iii) any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, license, franchise, permit, agreement, understanding, arrangement,
contract, commitment, lease, franchise agreement or other instrument or
obligation (whether oral or written) (each, including all amendments thereto, a
"Contract") to which Seller or the Company is a party, or by which they or any
of their respective properties or assets is bound; except in the case of clause
(iii) above, for such violations, filings, permits, consents, approvals,
notices, breaches or conflicts which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect with respect to
Seller or the Company.
(b) Except for such filings and approvals as are set forth in Schedule
3.3(b), no consent, approval, Permit, registration, report or action of, filing
with, notice to or authorization of, any Governmental or Regulatory Authority or
any other Person is necessary or required (i) under any of the terms, conditions
or provisions of any Law or Order applicable to Seller or the Company or by
which any of Seller's or the Company's respective properties or assets may be
bound or (ii) under any material Contract to which Seller or the Company is a
party or by which any of them or any of their respective assets or properties
may be bound, in each case, in connection with the execution and delivery of
this Agreement by Seller, the performance by Seller of its obligations hereunder
or the consummation by Seller of the transactions contemplated hereby; except in
the case of clause (ii) above solely with respect to Seller, for such consents,
approvals, Permits, registrations, reports, filings or notices which could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect with respect to Seller.
3.4 Existence and Good Standing of the Company. (a) The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own, lease, operate and use the assets and properties currently
owned, leased, operated and used by it and to own and operate its business as
now conducted.
(b) The Company is duly qualified to do business in, and is in good
standing in, each jurisdiction in which the character or location of the
properties owned, leased or operated by the Company, or the nature of the
business conducted by the Company, makes such qualification necessary, except
for such jurisdictions where the failure to be so qualified or licensed and in
good standing could not reasonably be expected to have a Material Adverse Effect
with respect to the Company. Seller has delivered to Purchaser true and correct
copies of the Organizational Documents of the Company as in effect on the date
hereof.
3.5 Capital Stock. The Company has an authorized capitalization consisting
of 1,000,000 shares of common stock ("Common Stock"), of which no shares are
issued and outstanding other than the Shares and no shares are held in the
Company's treasury. The Shares have been duly authorized and validly issued, are
fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any preemptive rights. Except as described above, no shares of
capital stock of the Company are authorized, issued, outstanding or reserved for
issuance. There are no outstanding or authorized options, warrants, preemptive
or other rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments
contingent or otherwise, relating to the capital stock of, or other equity or
voting interest in, the Company, pursuant to which the Company is or may become
obligated to issue, deliver or sell or cause to be issued, delivered or sold,
shares of Common Stock, any other shares of the capital stock of, or other
equity or voting interest in, the Company or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of the capital stock of, or other equity or voting interest in, the
Company. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the capital stock
of, or other equity or voting interest in, the Company. The Company has no
authorized or outstanding bonds, debentures, notes or other Indebtedness the
holders of which have the right to vote (or that are convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire securities
having the right to vote) with the shareholders of the Company on any matter.
There are no Contracts to which the Company is a party or by which the Company
is bound to (i) repurchase, redeem, retire, defease or otherwise acquire any
shares of capital stock of, or other equity or voting interest in, the Company
or any other Person or (ii) vote or dispose of any shares of capital stock of,
or other equity or voting interest in, the Company. There are no outstanding
proxies and no voting agreements with respect to any shares of capital stock of,
or other equity or voting interest in, the Company.
3.6 Subsidiaries. The Company has no Subsidiaries and has never had any
Subsidiaries. The Company does not own, directly or indirectly, any capital
stock of, or other equity, ownership, proprietary or voting interest in, any
Person.
3.7 Financial Statements; Accounts Receivable. (a) Seller has furnished
Purchaser with (i) a draft of the audited balance sheet of the Company (the
"Balance Sheet") as of December 31, 2003 (the "Balance Sheet Date") and the
related audited statements of operations, shareholders' equity and cash flows
for the year then ended, together with a draft certification by BDO, (ii) a
draft of the audited statements of operations, shareholders' equity and cash
flows for the one (1) month ended December 31, 2002, together with a draft
certification by BDO ((i) and (ii) collectively, the "Draft Financial
Statements"). In addition, Seller has furnished Purchaser with the unaudited
balance sheet of the Company as at January 31, 2004 and the related unaudited
statements of operations, shareholders' equity and cash flows for the one (1)
month then ended. The unaudited balance sheet of the Company as at January 31,
2004 (the "Unaudited Balance Sheet Date") is hereinafter referred to as the
"Unaudited Balance Sheet". The financial statements referred to above, including
the footnotes thereto, (i) except as described therein or, with respect to the
Draft Financial Statement, as set forth in Schedule 3.7(a), have been prepared
in accordance with GAAP consistently applied throughout the periods indicated,
subject, in the case of the Unaudited Balance Sheet and the unaudited statements
of operations, shareholder' equity and cash flows for the one (1) month ended
January 31, 2004, to normal recurring year-end adjustments (the effect of which
will not, individually or in the aggregate, be material) and the absence of
notes (that, if presented, would not differ materially from those included in
the Balance Sheet) and (ii) are consistent with the Books and Records of the
Company.
(b) Except as set forth in Schedule 3.7(a), the Draft Financial Statements
fairly present, in all material respects, the financial condition of the Company
as of the dates thereof and the related statements of operations, shareholders'
equity and cash flows fairly present, in all material respects, the results of
the operations and cash flows of the Company and the changes in its financial
condition for the periods indicated.
(c) The Unaudited Balance Sheet fairly presents, in all material respects,
the financial condition of the Company as of the date thereof and the related
statements of operations, shareholders' equity and cash flows fairly present, in
all material respects, the results of operations and cash flows of the Company
and the changes in its financial condition for the period indicated.
(d) All of the Company's accounts and notes receivable as at the Closing
Date have arisen from bona fide sales transactions in the ordinary course of
business, are carried at values determined in accordance with GAAP consistently
applied, and, to the knowledge of Seller, are legal, valid and binding
obligations of the respective debtors. Except as set forth in Schedule 3.7(d),
to the knowledge of Seller, no Person has any Lien on, valid set-off or
counterclaim against any of the Company's accounts or notes receivable, other
than Permitted Liens. Except as otherwise reflected on the Unaudited Balance
Sheet, there has been no material adverse change since the Balance Sheet Date in
the amount of accounts and notes receivable of the Company or the allowances or
reserves with respect thereto, or accounts payable of the Company, from that
reflected in the Balance Sheet.
3.8 Liabilities; Indebtedness. (a) Except as set forth in Schedule 3.8(a),
the Company has no claims, obligations or liabilities, whether absolute,
accrued, due or to become due, inchoate, contingent or otherwise, except for (i)
claims, obligations or liabilities set forth in the Balance Sheet or
specifically disclosed in the footnotes thereto, (ii) claims, obligations or
liabilities incurred subsequent to the Balance Sheet Date in the ordinary course
of business consistent with past practice and which, individually and in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
with respect to the Company, (iii) obligations or liabilities arising in
connection with the performance (and not the breach by the Company) of Contracts
set forth on Schedule 3.13(a) and Contracts which are not required to be set
forth on Schedule 3.13(a), in each case, in accordance with the terms of such
Contracts (none of which obligations or liabilities results from, arises out of,
relates to, is in the nature of, or was caused by any breach of Contract, breach
of warranty, tort, infringement or violation of applicable Law) and (iv) claims,
obligations or liabilities which do not exceed $15,000 individually or $30,000
in the aggregate.
(b) Except as set forth in Schedule 3.8(b), the Company has no Indebtedness
(within the meaning of clauses (i) and (iii) of the definition thereof) or any
guarantees or other contingent liabilities with respect thereto.
3.9 Books and Records. Except as set forth or disclosed in Schedule 3.9,
the minute book of the Company, as previously made available to Purchaser and
its Representatives, contains accurate records of all meetings of, and corporate
action taken by (including action taken by written consent) the sole shareholder
and Board of Directors of the Company. Except as set forth or disclosed in
Schedule 3.9, none of the Company's Books and Records are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Company.
3.10 Title to Personal Properties. Except as set forth in Schedule 3.10,
the Company has good and valid title to or, in the case of leased assets, a good
and valid leasehold interest in, free and clear of all Liens, except for
Permitted Liens, all of the tangible and intangible personal property and assets
reflected in the Balance Sheet or thereafter acquired, except for properties and
assets disposed of in the ordinary course of business, consistent with past
practice, since the date of the Balance Sheet. The Company owns or has the
exclusive right to use all of the tangible personal properties and assets
necessary for the conduct of its business as currently conducted. All of the
tangible personal property used in the business of the Company (including
furniture, fixtures, furnishing, machinery, equipment, computer hardware,
appliances and vehicles) (a) is in good operating condition and repair, subject
to normal wear and tear and (b) is useable in the ordinary course of business
consistent with past practice.
3.11 Owned Real Property. The Company does not own any real property.
3.12 Leased Real Property. Except as set forth in Schedule 3.12: (i) the
Company has a good and valid leasehold interest in, and enjoys peaceful and
undisturbed possession of, the Facilities pursuant to the respective Facility
Leases; (ii) each of the Facility Leases is a legal, binding and enforceable
obligation against the Company and is in full force and effect, and the Company
has not received any notice from the lessor under any Facility Lease that the
such Facility Lease is not in full force and effect; (iii) no amount payable
under any Facility Lease is past due beyond any applicable cure period; (iv) the
Company is in compliance with all covenants, commitments and obligations on its
part to be performed or observed under each of the Facility Leases and is not in
violation or default thereunder and Seller does not have knowledge of the
failure by any other party to any such lease to comply with all of its
commitments and obligations or to be in violation or default thereunder; (v) the
Company has not received any notice which has not heretofore been cured or
resolved of any breach or demand for performance under any of the Facility
Leases and is not a party to any other agreement with the lessor of any of the
Facilities which gives such lessor, as a remedy for any breach of such other
agreement, any right to terminate or alter the terms of the Facility Lease to
which such lessor is a party; (vi) all material buildings, structures, fixtures
and building systems included in the Facilities are in proper condition and
repair to operate such facilities in the manner in which they are currently
being operated; (vii) the Company has not received notice from any Governmental
or Regulatory Authority that any of such buildings, structures, fixtures and
systems are not presently used and operated in compliance with all material
covenants, easements, agreements, legal requirements, zoning and restrictions
affecting any of the Facilities; and (viii) except for the Facility Leases,
there is no real property lease or sublease to which the Company is a party, and
the Company does not have any other possessory interest in real property.
3.13 Material Contracts. (a) Schedule 3.13(a) sets forth an accurate and
complete list of the following Contracts to which the Company is a party and by
which it is currently bound or pursuant to which the Company's business is
subject or in respect of which assets, rights or properties are held for use by
the Company by any other Person:
(i) all Contracts which contain restrictions with respect to payment of
dividends or any other distribution in respect of the capital stock or other
equity interests of the Company;
(ii) all Contracts relating to capital expenditures or other purchases of
material, supplies, equipment or other tangible assets or properties (other than
purchase orders for inventory or supplies in the ordinary course of business
consistent with past practice) in excess of $20,000 individually;
(iii) all Contracts involving a loan (other than accounts receivable from
trade debtors in the ordinary course of business consistent with past practice)
or advance to (other than travel and entertainment allowances to the employees
of the Company extended in the ordinary course of business consistent with past
practice), or investment in, any Person or any Contract relating to the making
of any such loan, advance or investment;
(iv) all Contracts involving Indebtedness of the Company;
(v) all Contracts (including so called take-or-pay or keep-well agreements)
under which any Person (other than the Company) has directly or indirectly
guaranteed Indebtedness of the Company;
(vi) all Contracts granting or evidencing a Lien on any properties or
assets of the Company, other than a Permitted Lien;
(vii) all management service, consulting, financial advisory or any other
similar type Contract and any Contracts with any investment or commercial bank;
(viii) all Contracts limiting the ability of the Company or any of its
Affiliates to engage in any line of business or to compete with any Person or to
operate its business in any geographic area;
(ix) all Contracts (other than this Agreement and any agreement or
instrument entered into pursuant to this Agreement) between the Company and (A)
Seller, any other Affiliate of the Company or any Affiliate of Seller (other
than the Company) or (B) any current or former officer, director or shareholder
of the Company, Seller or any Affiliate of Seller;
(x) all Contracts (including letters of intent) involving the disposition
or acquisition or the future disposition or acquisition of material assets or
properties, or any merger, consolidation or similar business combination
transaction, whether or not enforceable;
(xi) all Contracts involving any joint venture, partnership, strategic
alliance, shareholders' agreement, co-marketing, co-promotion, co-packaging,
joint development, distribution or similar arrangement;
(xii) all Contracts involving any material resolution or settlement of any
actual or threatened litigation, arbitration, claim or other dispute;
(xiii) all Contracts involving a standstill or similar arrangement;
(xiv) all Contracts involving leases or subleases of personal property,
including capital leases, to which the Company is a party (as lessee or lessor);
(xv) all Contracts which are material to the Company and contain a "change
in control" or similar provision;
(xvi) all Contracts relating to indemnification, whether the Company is the
beneficiary or the obligated party thereunder, including Contracts providing for
indemnification of any Person with respect to Liabilities relating to any
current or former business;
(xvii) all Contracts which include an obligation of the Company to
indemnify any Person in connection with third party claims relating to
infringement or misappropriation of Intellectual Property (unless capped in
liability at or below $25,000);
(xviii) all customer Contracts (including but not limited to Contracts with
respect to hosting services, support services, outsourcing services and other
information technology-related services) that individually account for more than
$5,000 in sales of the Company on a monthly basis (other than the Contracts with
the Company's CMS customers);
(xix) all Contracts (including but not limited to network connection
agreements, data center agreements, equipment leases and disaster recovery
service agreements) pursuant to which the Company is provided equipment or
services that are material to the operation of the Company's business and
individually account for more than $25,000 in annual purchases of the Company;
(xx) all Contracts not made in the ordinary course of business or under
which the consequences of a default or termination could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect with
respect to the Company;
(xxi) all Contracts involving cash (or cash equivalents), property,
services or other consideration valued at $10,000 or more which are not
cancelable by the Company without penalty on thirty (30) days or less notice;
(xxii) all Contracts under which the Company has the right to use any
Intellectual Property that is material to its business;
(xxiii) all Contracts pursuant to which the Company grants any Person the
exclusive right to use any Company Intellectual Property with respect to any
line of business or any geographic area;
(xxiv) all other Contracts not covered by the above that are material to
the business of the Company taken as a whole; and
(xxv) any guaranty with respect to the Company's obligations or performance
under any of the foregoing Contracts.
(b) Except as noted on Schedule 3.13(b), each Contract set forth in
Schedule 3.13(a) (or required to be set forth in Schedule 3.13(a)) is a legal
valid and binding obligation against the Company and, to the knowledge of
Seller, each other party thereto, enforceable in accordance with its terms
against the Company, and, to the knowledge of Seller, each other party thereto,
and is in full force and effect, and each covenant of the Company and, to the
knowledge of Seller, of each other party thereto, required to have been
performed has been fully performed in all material respects, and there exists no
(i) default or event of default by the Company or, to the knowledge of Seller,
any other party to any such Contract with respect to any material term or
provision of any such Contract, or (ii) event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default by the Company or, to the
knowledge of Seller, any other party thereto, with respect to any material term
or provision of any such Contract. Seller has delivered to Purchaser true and
complete copies, including all material amendments, of each Contract set forth
in Schedule 3.13(a).
3.14 Litigation. Except as set forth in Schedule 3.14, there is no action,
suit, proceeding at law or in equity, arbitration or administrative or other
proceeding by (or to the knowledge of Seller any investigation by) any
Governmental or Regulatory Authority or any other Person pending, or, to the
knowledge of Seller, threatened, (i) against, or that has been brought by Seller
or its Affiliates that relates to or affects, the Company or any of its rights
or business or (ii) against Seller that could reasonably be expected to have a
Material Adverse Effect on Seller. Except as set forth in Schedule 3.14, the
Company is not subject to any Order.
3.15 Taxes. (a) Tax Returns. The Company has timely filed or caused to be
timely filed with the appropriate taxing authorities all tax returns,
statements, forms and reports (including, elections, declarations, disclosures,
schedules, estimates and informational tax returns) for Taxes ("Returns") that
are required to be filed by, or with respect to, the Company on or prior to the
Closing Date. The Returns are true, correct and complete in all material
respects. An extension of time within which to file any Return that has not been
filed has not been requested or granted.
(b) Payment of Taxes. All Taxes of the Company that are due and payable
have been timely paid. The unpaid Taxes of the Company as of the Unaudited
Balance Sheet Date do not exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth or included in the Unaudited Balance Sheet.
(c) Other Tax Matters. (i) Except as set forth in Schedule 3.15(c)(i), the
Company has not been the subject of an audit or other examination of Taxes by
the tax authorities of any nation, state or locality (and to Seller's knowledge
no such audit is pending or contemplated) nor has the Company received any
notices from any taxing authority or other Person relating to any issue which
could result in a material Tax liability of the Company. All deficiencies
asserted or assessments made as a result of any such audit or examination have
been fully paid or are fully reflected as a liability in the Unaudited Balance
Sheet or are being contested in good faith and an adequate reserve therefore has
been established in the Unaudited Balance Sheet.
(ii) Except as set forth in Schedule 3.15(c)(ii), neither Seller nor the
Company (A) has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of Taxes of the Company, (B) is presently contesting the
Tax liability of the Company before any court, tribunal or agency, (C) has
granted a power-of-attorney relating to Tax matters to any person or (D) has
applied for and/or received a ruling or determination from a taxing authority
regarding a past or prospective transaction of the Company.
(iii) The Company has not been included in the "consolidated" Return of any
Person, as provided for under the law of the United States and any applicable
non-U.S. jurisdiction or any applicable state or locality. The Company does not
have any liability for any other Person under Treasury Regulations
Section 1.1502-6 (or any comparable Provision of state, local or foreign law or
other law or by contract).
(iv) All Taxes which the Company is (or was) required by Law to withhold or
collect in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party have been duly withheld
or collected, and have been timely paid over to the proper authorities to the
extent due and payable.
(v) No written claim has ever been received from any taxing authority in a
jurisdiction where the Company does not file Returns that the Company is or may
by subject to taxation by that jurisdiction.
(vi) There are no tax sharing, allocation, indemnification or similar
agreements, arrangements or undertakings in effect, written or unwritten, as
between the Company or any Affiliate thereof and any other party (including
Seller and any predecessors or Affiliates thereof) under which Purchaser or the
Company could be liable for any Taxes or other claims of any party.
(vii) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
(viii) No election under Section 341(f) of the Code has been made to treat
the Company as a consenting corporation, as defined in Section 341 of the Code.
(ix) The Company is not a party to any agreement that would require it to
make any payment that would constitute an "excess parachute payment" for
purposes of Sections 280G and 4999 of the Code.
(x) No indebtedness of the Company consists of "corporate acquisition
indebtedness" within the meaning of Section 279 of the Code.
(xi) Seller is not a "foreign person" within the meaning of Section 1445 of
the Code.
(xii) None of the assets of the Company is property required to be treated
as being owned by any other Person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code. None of the assets of the
Company directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of the Company
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(xiii) Within the past three (3) years neither the Company nor any
predecessors by merger or consolidation has been a party to a transaction
intended to qualify under Section 355 of the Code or under so much of Section
356 of the Code as relates to Section 355 of the Code.
(xiv) The Company has not entered into any transaction that is a
"reportable transaction," as defined in Treasury Regulations Section 1.6011-4(b)
or a "potentially abusive tax shelter," as defined in Treasury Regulations
Section 301.6112-1(b).
3.16 Insurance. Set forth in Schedule 3.16(a) is an accurate and complete
list of each insurance policy or binder (including self-insurance) owned by the
Company or Seller which covers the Company or its business, property, assets or
employees (the "Insurance Policies"). The Insurance Policies are in the name of
the Company and are in full force and effect; all premiums thereon have been
paid; and the Company is otherwise in compliance in all material respects with
the terms and provisions of the Insurance Policies. The Company has received no
notice of cancellation or non-renewal of any such policy or arrangement and, to
the knowledge of Seller, the termination of any Insurance Policies has never
been threatened. Since the Company's formation, the Company has not received or
become aware of any notice from an insurer under the Insurance Policies
refusing, denying, disputing or disclaiming coverage or reserving rights with
respect to a particular claim or any Insurance Policy in general. Schedule
3.16(a) also sets forth a list of all pending claims and the claims history for
the Company since its formation. Seller has delivered or made available to
Purchaser true and complete copies of the Insurance Policies. The Company is not
a successor to any Insurance Policy as a result of the Asset Transactions and
none of the Company, its business, properties, assets or employees are covered
by any Insurance Policy under which the Company is not the beneficiary.
3.17 Intellectual Property. (a) The Company owns and possesses all right,
title and interest in and to, or has a valid and enforceable license to use, all
Intellectual Property that is necessary for or otherwise material to the conduct
of the Company's business, free and clear of all Liens other than Permitted
Liens. Schedule 3.17(a) sets forth, a true and complete list of all (i) patents,
patent applications, trademark and service mark applications and registrations,
material common law trademarks and service marks, domain names and copyright
registrations that are owned by the Company (whether solely or jointly with
another Person) and included in the Company Intellectual Property; (ii) licenses
included in the Company Intellectual Property pursuant to which the Company has
licensed any material Intellectual Property from a third party (other than
commercially available, off the shelf desktop software for which the Company has
all required licenses); and (iii) licenses pursuant to which a license of any
Company Intellectual Property is granted to a third party (other than limited,
non-exclusive licenses granted to the Company's customers in connection with the
provision of outsourcing services to such customers).
(b) The Company has not infringed, misappropriated or otherwise conflicted
with, and the operation of the Company's business as currently conducted does
not infringe, misappropriate or otherwise conflict with, any Intellectual
Property owned by any third party except where such infringement,
misappropriation or conflict would not be material to the Company. Except as set
forth on Schedule 3.17(b), the Company has not received any written notice
alleging that the Company or the operation of the Company's business currently
or at any time in the past has infringed, misappropriated or otherwise
conflicted with any Intellectual Property owned by any third party.
(c) To the knowledge of Seller, no material Company Intellectual Property
is being infringed, misappropriated or otherwise is the subject of any material
conflict.
(d) The Company has secured valid written assignments from all of its
consultants, contractors and employees who contributed to the creation,
conception, reduction to practice or development of any Company Intellectual
Property for any rights to such contributions that the Company does not already
own by operation of law, except where the failure to secure any such written
assignment would not be material to the Company.
(e) The Company has taken reasonable steps to protect and preserve the
confidentiality of all the Company's trade secrets, customer data and software
and other proprietary and confidential information (including know-how, source
codes, databases, customer lists, schematics, ideas, algorithms and processes).
The Company has not breached any agreements of non-disclosure or
confidentiality, nor is it currently alleged or claimed to have done so in any
material respect.
(f) To the knowledge of Seller, the Company's use of any Hosted Materials
as required to provide services to its customers has not, and does not,
infringe, misappropriate or otherwise conflict with the Intellectual Property or
other rights of any third party in any material respect.
(g) Neither the execution, delivery or performance of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate any
privacy policy or other terms of use relating to any web sites of the Company,
or violate any applicable Laws relating to the use or dissemination of
information collected in connection with the operation of such web sites or
otherwise. The Company's use and dissemination of any and all data and
information concerning users of such web sites and other persons is in
compliance in all material respects with its privacy policies and terms of use,
and all applicable Laws.
(h) No former or current employee, director, officer or shareholder of the
Company has or will have, directly or indirectly, any interest in any Company
Intellectual Property, nor does or will any such Person have any rights to past
or future royalty payments or license fees deriving from licenses, technology
agreements or other agreements, whether written or oral, between any such Person
and the Company.
3.18 Compliance with Laws. Except as disclosed on Schedule 3.18, the
Company has complied and is in compliance in all material respects with all
applicable Laws and Orders. The Company has received no written notice that any
violation of the foregoing is being or may be alleged.
3.19 Suppliers and Customers. Schedule 3.19(a)(1) sets forth each supplier
accounting for more than $25,000 of annual purchases of the Company (the
"Material Suppliers"). Schedule 3.19(a)(2) sets forth each customer currently
accounting for more than $5,000 of monthly sales (other than CMS customers of
the Company) (the "Material Customers"). Except as set forth in Schedule
3.19(b), the relationships of the Company with each of the Material Suppliers
and each of the Material Customers are good commercial working relationships.
Except as set forth in Schedule 3.19(c), no Material Supplier or Material
Customer has canceled or otherwise terminated or, to the knowledge of Seller,
threatened to cancel or otherwise terminate, its relationship with the Company,
and the Company has not received any written notice or, to the knowledge of
Seller, any other notice that any such Material Supplier or Material Customer
may cancel or otherwise materially and adversely modify its relationship with
the Company or limit its services, supplies or materials to the Company, or its
usage or purchase of the services and products of the Company either as a result
of the transactions contemplated hereby or otherwise.
3.20 Employment Relations. Except as set forth in Schedule 3.20:
(a) The Company has been and is in compliance in all material respects with
all applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours;
(b) The Company has not been and is not engaged in any unfair labor
practice and no unfair labor practice complaint against the Company is pending
before the National Labor Relations Board;
(c) There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of Seller, threatened against or involving the
Company or the Business and since the Company's formation, the Company has not
experienced any labor strike or material concerted labor dispute;
(d) No union is currently certified, and there is no union representation
question and, to the knowledge of Seller, no union or other organizational
activity that would be subject to the National Labor Relations Act (20 U.S.C.
151 et seq.) existing or threatened with respect to the Company;
(e) The Company is not subject to or bound by any collective bargaining or
labor union agreement applicable to any Person employed by the Company, and no
collective bargaining or labor union agreement is currently being negotiated by
the Company;
(f) The Company has not experienced any material labor difficulty or work
stoppage since its formation;
(g) The Company has no Equal Employment Opportunity Commission charges or
other claims of employment discrimination pending or, to the knowledge of
Seller, threatened against the Company;
(h) To the knowledge of Seller, no wage and hour department investigation
has been made of the Company since its formation;
(i) There are no occupational health and safety claims pending or, to the
knowledge of Seller, threatened against the Company or that relate to its
business or property;
(j) Since its formation, the Company has not (i) engaged in layoffs or
employment terminations sufficient in timing and number to constitute (A) a
"mass layoff" (as defined in the Worker Adjustment and Retraining Notification
Act ("WARN")) or (B) an "employment loss" (as defined in WARN) or (ii) effected
a "plant closing" (as defined in WARN) affecting any site of employment or one
or more facilities or operating units within any site of employment or facility
of the Company; the Company has not been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger
application of any similar Law;
(k) Prior to the date hereof, an accurate and complete list showing the
names of all individuals whose compensation from the Company for services
rendered during the fiscal year ended on the Balance Sheet Date exceeded an
annualized rate of $50,000, together with a statement of the full amount paid or
payable to each such person for services rendered during such fiscal year has
been made available to Purchaser; and
(l) The Company is not a governmental contractor for purposes of any
federal, state or local Law.
3.21 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule
3.21(a) is an accurate and complete list of all (i) "employee benefit plans,"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"),
(ii) bonus, savings, profit-sharing, stock option, stock purchase, restricted
stock, phantom stock or other equity based compensation, incentive, fringe
benefit, "voluntary employees' beneficiary associations", under Section
501(c)(9) of the Code, Code section 125 "cafeteria" or "flexible" benefit,
employee loan, educational assistance, pension, or retirement, deferred
compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement, group insurance, change-in-control, retention and unemployment
benefit plans, programs, arrangements, commitments and/or practices (whether or
not insured), (iii) employment, consulting, termination, and severance contracts
or agreements for active, retired or former employees or directors and (iv) any
other similar plans, programs, arrangements, commitments, contracts agreements
or practices, in each case (referred to in (i), (ii), (iii) or (iv) above),
whether or not any such plans, programs, arrangements, commitments, contracts,
agreements and/or practices (referred to in subsections (i), (ii), (iii) or (iv)
above) are in writing or are otherwise exempt from the provisions of ERISA, that
have been established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability (whether direct, indirect, contingent or otherwise) may be
borne by the Company (including, for this purpose and for the purpose of all of
the representations in this Section 3.21, all employers (whether or not
incorporated) that would be treated together with the Company and/or Seller as a
single employer (1) within the meaning of Section 414 of the Code or (2) as a
result of the Company and/or Seller being or having been a general partner of
any such employer), since September 2, 1974("Employee Benefit Plans").
(b) Status of Plans. Each Employee Benefit Plan (including any related
trust) complies in form with the requirements of all applicable Laws, including
ERISA and the Code, and has at all times been maintained and operated in
material compliance with its terms and the requirements of all applicable Laws
and Orders, including ERISA and the Code. No complete or partial termination of
any Employee Benefit Plan has occurred or is expected to occur. The Company has
no commitment, intention or understanding to create, modify or terminate any
Employee Benefit Plan. Except as required to maintain the tax-qualified status
of any Employee Benefit Plan intended to qualify under Section 401(a) of the
Code, no condition or circumstance exists that would prevent the amendment or
termination of any Employee Benefit Plan. Each Employee Benefit Plan which is an
"employee benefit plan" within the meaning of Section 3(2) of ERISA and which is
intended to be qualified under Section 401(a) of the Code is so qualified and
has received a favorable determination letter from the IRS or has applied for
such favorable letter within the applicable remedial amendment period under
Section 401(a) of the Code, and, to the knowledge of Seller, no circumstances
exist that could reasonably be expected to result in the revocation of any such
favorable determination letter or cause any such Employee Benefit Plan or trust
to fail to be so qualified and exempt. To the knowledge of Seller, no event has
occurred and no condition or circumstance has existed that would result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) Liabilities. (i) The Company does not and has never maintained or
contributed to, or had any obligation to contribute to, or otherwise have any
liability (whether contingent or otherwise) with respect to, (A) any "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) subject to
Section 412 of the Code or Section 302 or Title IV of ERISA, (B) any "multiple
employer plan" (within the meaning of the Code or ERISA), or (C) any
"multiemployer plan" (as defined in Sections 3(37) or 4001(a)(3) of ERISA) (a
"Multiemployer Plan"); and none of the Employee Benefit Plans is a Multiemployer
Plan or otherwise subject to Title IV of ERISA.
(ii) The Company does not maintain any Employee Benefit Plan which is a
"group health plan," (as such term is defined in Section 5000(b)(1) of the Code
or Section 607(1) of ERISA) that has not been administered and operated in all
material respects in compliance with the applicable requirements of Part 6 of
Subtitle I of ERISA and Section 4980B of the Code and the Company is not subject
to any liability, including additional contributions, fines, taxes, penalties or
loss of tax deduction, as a result of such administration and operation.
(iii) No Employee Benefit Plan is a "multiple employer welfare
arrangement," within the meaning of Section 3(40) of ERISA.
(iv) Each Employee Benefit Plan that is intended to meet the requirements
of Section 125 of the Code meets such requirements, and each program of benefits
for which employee contributions are provided pursuant to elections under any
Employee Benefit Plan meets the requirements of the Code applicable thereto.
(v) The Company does not maintain any Employee Benefit Plan which is an
"employee welfare benefit plan" (as such term is defined in Section 3(1) of
ERISA) that has provided any "disqualified benefit" (as such term is defined in
Section 4976(b) of the Code) with respect to which an excise tax could be
imposed.
(vi) Except as required by Section 4980B of the Code, the Company does not
maintain any Employee Benefit Plan providing for post-employment or retiree
health, life insurance and/or other welfare benefits, and the Company has no
obligation to provide any such benefits to any retired or former employees or
active employees following such employees' retirement or termination of service.
(vii) The Company has no unfunded liabilities pursuant to any Employee
Benefit Plan that is not intended to be qualified under Section 401(a) of the
Code.
(viii) The Company has incurred no liability for any tax or excise tax
arising under Chapter 43 of the Code, and to the knowledge of Seller, no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
(ix) There are no actions, suits, claims or disputes pending, or, to the
knowledge of Seller, threatened, anticipated or expected to be asserted against
or with respect to any Employee Benefit Plan or the assets of any such plan
(other than routine claims for benefits and appeals of denied routine claims).
No civil or criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or expected to
be asserted against the Company or any fiduciary of any Employee Benefit Plan,
in any case with respect to any Employee Benefit Plan. No Employee Benefit Plan
or any fiduciary thereof has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental agency.
(x) The Company is in material compliance with all Laws relating to the
classification of persons as independent contractors rather than as employees
and with respect to any employees leased from another employer.
(d) Contributions. Full payment has been timely made of all amounts which
the Company is required, under applicable Law or under any Employee Benefit Plan
or any agreement relating to any Employee Benefit Plan to which the Company is a
party, to have paid as contributions or premiums thereto as of the last day of
the most recent fiscal year of such Employee Benefit Plan ended prior to the
date hereof. All such contributions and/or premiums have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any governmental entity, and to the knowledge of Seller no event has occurred
and no condition or circumstance has existed that would give rise to any such
challenge or disallowance. All such contributions and/or premiums have been
reflected on the Company's financial statements provided pursuant to Section 3.7
in accordance with GAAP. The Company has made adequate provision for reserves to
meet contributions and premiums and any other liabilities that have not been
paid or satisfied because they are not yet due under the terms of any Employee
Benefit Plan, applicable Law or related agreements. All such liabilities or
expenses in respect of any Employee Benefit Plan have been properly accrued on
the Company's financial statements provided pursuant to Section 3.7 in
accordance with GAAP. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided.
(e) Transactions. Neither the Company nor any of its directors, officers,
employees or, to the knowledge of Seller, other Persons who participate in the
operation of any Employee Benefit Plan or related trust or funding vehicle, has
engaged in any transaction with respect to any Employee Benefit Plan or breached
any applicable fiduciary responsibilities or obligations under Title I of ERISA
that would subject any of them to a tax, penalty or liability for prohibited
transactions or breach of any obligations under ERISA or the Code or would
result in any claim being made under, by or on behalf of any such Employee
Benefit Plan by any party with standing to make such claim.
(f) Triggering Events. The execution of this Agreement and the consummation
of the transactions contemplated hereby, do not constitute a triggering event
under any Employee Benefit Plan, policy, arrangement, statement, commitment or
agreement, whether or not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
payment (whether of severance pay or otherwise), "parachute payment" (as such
term is defined in Section 280G of the Code), acceleration, vesting or increase
in benefits to any employee or former employee or director of the Company. No
Employee Benefit Plan provides for the payment of severance, termination, change
in control or similar-type payments or benefits.
(g) Documents. Seller has made available to Purchaser true and complete
copies of all material documents in connection with each Employee Benefit Plan,
including (in each case, to the extent applicable): (i) all Employee Benefit
Plans as in effect on the date hereof, together with all amendments thereto,
including, in the case of any Employee Benefit Plan not set forth in writing, a
written description thereof; (ii) all current summary plan descriptions,
summaries of material modifications, and material communications; (iii) all
current trust agreements, declarations of trust and other documents establishing
other funding arrangements (and all amendments thereto and the latest financial
statements thereof); (iv) the most recent IRS determination letter, if any,
obtained with respect to each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code or exempt under Section 501(a) or 501(c)(9) of
the Code; (v) the annual report on IRS Form 5500-series for each of the last
three years for each Employee Benefit Plan required to file such form; (vi) the
most recently prepared financial statements; and (vii) all contracts and
agreements relating to each Employee Benefit Plan, including service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and record
keeping agreements and collective bargaining agreements.
(h) Loans. Except as set forth in Schedule 3.21(h), as of the Closing Date,
the Company will not have any outstanding loans or extensions of credit to any
employees (or their family members or dependents).
(i) No Controlled Group Liabilities. Seller is the only Person that is now
a member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, the Company, as such
terms are defined in Section 414(b), (c), (m) or (o) of the Code (collectively,
a "Controlled Group"). The Company has incurred no liability and has no
obligations with respect to any "employee benefit plan," as defined in Section
3(3) of ERISA, or under any other compensation or employee benefit plan,
agreement, program, policy or other arrangement (including any Incentive Unit
Plan) maintained by Seller or any other member of a Controlled Group of which
the Company has ever been a member.
3.22 Environmental Laws and Regulations. Except as set forth in Schedule
3.22, (i) the Company is, and since its formation has been, in compliance with
all applicable Environmental Laws, and has obtained, and is in compliance with,
all Permits required of it under applicable Environmental Laws and each such
Permit (A) remains in full force and effect and is not subject to appeal and all
applicable time periods for filing such an appeal have expired and (B) will not
be required, as a result of the transactions contemplated by this Agreement, to
be transferred or amended or require any submissions to a Governmental or
Regulatory Authority in connection therewith; (ii) there are no pending claims,
proceedings, investigations or actions by any Governmental or Regulatory
Authority or other Person or entity pending or, to the knowledge of Seller,
threatened against the Company or its business or property under any
Environmental Law; (iii) to the knowledge of the Company, there are no facts,
circumstances or conditions relating to the past or present business or
operations of the Company or any of its business or property (including the
disposal of any wastes, hazardous substances or other materials), or to any past
or present Company Property, that could reasonably be expected to give rise to
any claim, proceeding or action, or to any liability, under any Environmental
Law; (iv) the Company has not received from any Governmental or Regulatory
Authority or any other Person any notice or allegation of violation of,
non-compliance with, liability or potential liability pursuant to, any
Environmental Law (including a Clean Air Act Section 114 notice, a CERCLA
Section 104(e) request, or a potentially responsible party or "PRP" notice) and
neither the Company nor the Business is subject to any outstanding
administrative or judicial Order, "consent order" or other agreement with regard
to any violation, noncompliance or liability under any Environmental Law; (v) no
Hazardous Substance has been Released at, on, to or from any of the Company's
current or former Company Property or into the air as a result of the Business
or other activities of the Company or into, onto or upon the soil or groundwater
at any location (A) for which the Company could be obligated to remediate
Releases of such Hazardous Substances (or reimburse any other Person for the
cost of remediation) pursuant to any Environmental Law or (B) which could
reasonably be expected to trigger an investigation of the Company or the
Business or result in claims against the Company or with respect to the Business
for liability under any Environmental Law; (vi) the Company is not a party to
any contract, lease or other agreement with any Person pursuant to which the
Company has any continuing obligations with respect to the remediation of any
condition resulting from the Release of Hazardous Substances; and (vii) all
material environmental site assessment reports (including any Phase I and Phase
II reports), remediation studies, audits, assessments or similar documents (if
any) that are within the custody or control of Seller or the Company that relate
to the investigation or remediation of environmental conditions at any current
or former Company Property, or which otherwise relate to the Company's
compliance with or liability under Environmental Laws, have been made available
to Purchaser. To the knowledge of Seller, there are no such studies, audits,
assessments or similar documents that are not within the custody or control of
Seller or the Company.
3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions. Except
as set forth in Schedule 3.23, (a) there are no Contracts, liabilities or
obligations between the Company, on the one hand, and either Seller or any or
Affiliate of Seller (other than the Company) on the other hand, and (b) neither
Seller, any Affiliate of Seller nor any shareholder, officer or director of the
Company possesses, directly or indirectly, any material financial interest in,
or is a director, officer or employee of, any Person which is a client,
supplier, customer, lessor, lessee, or competitor or potential competitor of the
Company. Ownership of securities of a company whose securities are registered
under the Exchange Act of 5% or less of any class of such securities shall not
be deemed to be a material financial interest for purposes of this Section 3.23.
3.24 Bank Accounts and Powers of Attorney. Set forth in Schedule 3.24 is an
accurate and complete list showing (a) the name and address of each bank in
which the Company has an account or safe deposit box, the number of any such
account or any such safe deposit box and the names of all Persons authorized to
draw thereon or to have access thereto and (b) the names of all Persons, if any,
holding powers of attorney from the Company and a summary statement of the terms
thereof. Copies of all agreements or other writings evidencing such powers of
attorney have been made available to Purchaser.
3.25 Permits. Seller has delivered or made available to Purchaser for
inspection a true and correct copy of each material Permit obtained or possessed
by the Company. The Company has obtained and possesses all Permits necessary for
the lawful conduct of its business as presently conducted, or otherwise
necessary for the lawful ownership of its properties and assets or the operation
of its business as presently operated, other than those the failure of which to
obtain, possess or make could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect with respect to the Company. All
such Permits are in full force and effect. The Company is in compliance with all
such Permits except for such non-compliance that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Company. Any applications for the renewal of any such Permit
which are due prior to the Closing Date have been timely made or filed by the
Company prior to the Closing Date. No proceeding to renew, suspend, modify,
suspend, revoke, withdraw, terminate or otherwise limit any such Permit is
pending or, to the knowledge of Seller, threatened.
3.26 No Changes Since Balance Sheet Date. Except as set forth in Schedule
3.26, since the Balance Sheet Date, the Company has conducted its business in
the ordinary course consistent with past practice and, since such date, there
has not been (i) any development, action, event, occurrence or transaction that
would have been prohibited by Section 5.1 if this Agreement had been in effect
at the time thereof or any agreement, arrangement, understanding, Contract or
commitment in respect of any development, action, event, occurrence or
transaction that would have been prohibited by Section 5.1 if this Agreement had
been in effect at the time thereof, (ii) any Material Adverse Effect with
respect to the Company or an event or development that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Company or Seller, or (iii) any damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
assets, property or business of the Company.
3.27 Government Contracts. Except as set forth in Schedule 3.27, the
Company:
(a) has no contracts with any Governmental Authority involving any
information, technology or data which is classified under Executive Order 12356
of April 2, 1982;
(b) has no products or services (including research and development) with
respect to which it is a supplier, direct or, to the knowledge of Seller,
indirect, to any of the military services of the United States or the Department
of Defense;
(c) does not export (a) products or technical data under validated licenses
or technical data under General License GTDR pursuant to the U.S. Export
Administration Regulations (15 CFR Parts 768 through 799) or (b) defense
articles and defense services under the International Traffic in Arms
Regulations (22 CFR Subchapter M); or
(d) does not have a facility security clearance under the Department of
Defense Industrial Security Program.
3.28 Warranty Claims. There are no pending or, to the knowledge of Seller,
threatened Warranty Claims against the Company or that relate to its business in
connection with the sales of products or the provision of services, except
Warranty Claims that do not exceed $5,000 individually or $10,000 in the
aggregate. Except as set forth in Schedule 3.28, the Company does not make any
representation or warranty to its customers with respect to products sold or
services delivered by it. Schedule 3.28 contains a complete list of the pending,
and, to the knowledge of Seller, threatened Warranty Claims against the Company
or that relate to its business. As used herein, the phrase "Warranty Claim"
means any claim presented to the Company by any Person alleging one or more
defects in a product sold or a service provided by the Company in violation of
the terms of the product's warranty.
3.29 Brokers' or Finders' Fees. No agent, broker, finder, investment
banker, or other Person acting on behalf of Seller, the Company or any of their
respective Affiliates is, or will be, entitled to any commission or brokers' or
finders' fees or expenses from the Company or Purchaser, or from any of their
respective Affiliates, in connection with any of the transactions contemplated
by this Agreement.
3.30 Investment Intent. Seller understands that the shares of Purchaser
Common Stock representing the Stock Consideration are "restricted securities"
(as defined under Rule 144 under the Securities Act) and have not been
registered under the Securities Act or any applicable state securities Law.
Seller is acquiring the shares of Purchaser Common Stock representing the Stock
Consideration for its own account and not with a view to or for sale (as defined
in the Securities Act) in connection with any distribution thereof within the
meaning of the Securities Act, except pursuant to an exemption therefrom or
pursuant to an effective registration statement (it being understood that the
Stock Consideration shall be distributed by Seller to certain of its members
following the Closing in accordance with Section 5.12).
ARTICLE IV
REPRESENTATIONS OF PURCHASER
4. Representations of Purchaser. Purchaser represents and warrants on the
date hereof and on the Closing Date as follows:
4.1 Existence and Good Standing of Purchaser; Power and Authority.
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware. Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement and the other
instruments and agreements to be executed and delivered by Purchaser as
contemplated hereby. Purchaser has all requisite corporate power and authority
to consummate the transactions contemplated hereby and thereby, including the
issuance of the Stock Consideration. The execution, delivery and performance of
this Agreement, and all other instruments and agreements to be executed and
delivered by Purchaser as contemplated hereby, the issuance of the Stock
Consideration and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate and stockholder
action on the part of Purchaser and no other corporate proceedings or approvals
on the part of Purchaser or its stockholders is necessary to authorize the
execution, delivery and performance of this Agreement and such other instruments
and agreements by Purchaser, the issuance of the Stock Consideration or the
consummation of the transactions contemplated hereby and thereby. This Agreement
and all other instruments and agreements to be executed and delivered by
Purchaser as contemplated hereby, when delivered in accordance with the terms
hereof, assuming the due execution and delivery of this Agreement and each such
other document by the other parties hereto and thereto, shall have been duly
executed and delivered by Purchaser and shall be legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
terms, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting the enforcement of creditors' rights generally and to general
equitable principles. The Stock Consideration, when issued as contemplated
hereby, will constitute duly and validly issued shares of Purchaser Common Stock
and will be fully paid and non-assessable.
4.2 Consents and Approvals; No Violations. (a) Other than as set forth in
Schedule 4.2(a), the execution and delivery of this Agreement by Purchaser do
not, the execution and delivery by Purchaser of the other instruments and
agreements to be executed and delivered by Purchaser as contemplated hereby and
the issuance of the Stock Consideration will not and the consummation by
Purchaser of the transactions contemplated hereby and thereby will not (with or
without due notice or lapse of time or both) result in the creation of any Lien
upon any of the properties or assets of Purchaser, or result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under: (i) any provision of the Organizational
Documents of Purchaser; (ii) subject to obtaining and making any of the
approvals, consents, notices and filings set forth in Schedule 4.2(b), any Law
or Order applicable to Purchaser or by which any of its properties or assets may
be bound; or (iii) any Contract to which Purchaser is a party, or by which any
of its properties or assets is bound except in the case of clauses (ii) and
(iii) above, for such violations, filings, permits, consents, approvals,
notices, breaches or conflicts which could not reasonably be expected to have a
Material Adverse Effect with respect to Purchaser.
(b) Except for such filings and approvals as may be set forth in Schedule
4.2(b), no consent, approval, Permit, registration, report or action of, filing
with, notice to or authorization of any Governmental or Regulatory Authority or
any other Person is necessary or required (i) under any of the terms, conditions
or provisions of any Law or Order or any Contract to which Purchaser is a party
or by which any of its properties or assets is bound or (ii) for the execution
and delivery of this Agreement by Purchaser, the performance by Purchaser of its
obligations hereunder, the issuance of the Stock Consideration or the
consummation by Purchaser of the transactions contemplated hereby other than
those, the failure of which to obtain, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect with respect to
Purchaser.
4.3 Purchaser SEC Reports. Since January 1, 2002, Purchaser has properly
filed all forms, schedules, reports, prospectuses, proxy statements and other
documents required to be filed by Purchaser with the Securities and Exchange
Commission (the "Purchaser SEC Reports"). The Purchaser SEC Reports (i) at the
time they were filed, complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by the filing prior to the
date of this Agreement or the Closing Date, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Purchaser makes no representation or
warranty whatsoever concerning the Purchaser SEC Reports as of any time other
than the time they were filed.
4.4 Purchase for Investment. Purchaser understands that the Shares are
"restricted securities" (as defined in Rule 144 under the Securities Act) and
have not been registered under the Securities Act or any applicable state
securities Law. Purchaser is acquiring the Shares for its own account and not
with a view to or for sale (as defined in the Securities Act) in connection with
any distribution thereof within the meaning of the Securities Act, except
pursuant to an exemption therefrom or pursuant to an effective registration
statement.
4.5 No Action or Proceedings. No action or proceedings have been instituted
or, to Purchaser's knowledge, threatened before a court or other Governmental or
Regulatory Authority to restrain or prohibit any of the transactions
contemplated hereby.
4.6 Brokers' or Finders' Fees. Except for Roth Capital Partners, LLC, whose
commission, fees and expenses are obligations solely of Purchaser, no agent,
broker, finder, investment banker, or other Person acting on behalf of Purchaser
or any of its Affiliates is, or will be, entitled to any commission or brokers'
or finders' fees or expenses in connection with any of the transactions
contemplated by this Agreement and no such agent, broker, finder, investment
banker or other Person is, or will be, entitled to any commission or brokers' or
finders' fees or expenses from Seller, or from any of its Affiliates, in
connection with any of the transactions contemplated by this Agreement.
4.7 Financing. Purchaser intends to obtain the funds required to satisfy
its obligations to pay the Cash Consideration pursuant to this Agreement through
a proposed debt financing (the "Proposed Debt Financing") and a proposed equity
financing (the "Proposed Equity Financing" and, together with the Proposed Debt
Financing, the "Proposed Financing Transactions") as described in Schedule
4.7(a). Other than as set forth in Schedule 4.7(b), the Proposed Financing
Transactions will not result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, payment or acceleration)
under: (i) any provision of the Organizational Documents of Purchaser; (ii)
subject to obtaining and making any of the approvals, consents, notices and
filings set forth in Schedule 4.7(b), any Law or Order applicable to Purchaser
or by which any of its properties or assets may be bound; or (iii) any Contract
to which Purchaser is a party, or by which any of its properties or assets is
bound, except with respect to clause (iii) as could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect with
respect to Purchaser. Except for such filings and approvals as may be set forth
in Schedule 4.7(b), it is not anticipated that any consent, approval, Permit,
registration, report or action of, filing with, notice to or authorization of
any Governmental or Regulatory Authority or any other Person will be necessary
or required under any of the terms, conditions or provisions of any Law or
Order, any Contract to which Purchaser is a party or by which any of its
properties or assets is bound, for the completion of the Proposed Financing
Transactions.
ARTICLE V
COVENANTS OF SELLER AND PURCHASER
5.1 Conduct of Business. (a) Prior to the Closing Date, except as set forth
in Schedule 5.1, Seller shall, and shall cause the Company to:
(i) maintain its limited liability company or corporate existence, as
applicable;
(ii) use commercially reasonable efforts to keep available the services of
the current employees of the Company;
(iii) conduct its operations in the ordinary course of business consistent
with past practice and use commercially reasonable efforts to preserve the
Company's business intact and retain the Company's Permits and preserve the
existing Contracts and goodwill of its customers, distributors, suppliers,
lenders, licensors, licensees and others having business relations with the
Company;
(iv) have in effect and maintain at all times all insurance of the kinds,
in the amounts and with the insurers as is in presently in effect for the
benefit of the Company and its business;
(v) keep in working condition and good order and repair all of the
Company's assets and other properties;
(vi) maintain the Company's Books and Records and accounts in its usual,
regular and ordinary manner and post all entries therein promptly in compliance
with accepted practice and all applicable Laws;
(vii) pay and discharge when due all Taxes, imposed upon it or any of its
properties, or upon the income or profit therefrom; and
(viii) meet in all material respects the Company's obligations under all
material Contracts, instruments and arrangements.
(b) Without limiting the generality of the foregoing, except as set forth
in Schedule 5.1 or otherwise consented to by Purchaser (which consent shall not
be unreasonably withheld), prior to the Closing Date, Seller shall cause the
Company not to (and with respect to subsections (ii), (xxi), (xxii) and (xxiii)
below, Seller shall not):
(i) amend, modify, supplement, rescind, restate or otherwise change its
Organizational Documents;
(ii) authorize for issuance, issue, sell, deliver, transfer, pledge or
otherwise encumber, grant, create or incur a Lien on, or agree or commit to do
any of the foregoing with respect to, (A) any capital stock of, or other equity
or voting interest in, the Company or (B) any securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire either (1)
any shares of capital stock of, or other equity or voting interest in, the
Company, or (2) any securities convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire, any shares of the capital stock of, or
other equity or voting interest in, the Company;
(iii) declare, pay or set aside any dividend or make any distribution
(whether in property, assets or cash and in any form) with respect to, or split,
combine, redeem, reclassify, purchase or otherwise acquire, in each case,
directly or indirectly, any shares of capital stock of, or other equity or
voting interest in, the Company, or make any other change in the capital
structure of the Company;
(iv) increase the compensation payable (in whatever form, including, but
not limited to, wages, salaries, bonuses or any other remuneration) or to become
payable to any officer, director, employee or agent or other Person (including
any leased employee or contract employee) providing services to the Company,
except for (A) such increases that were required in accordance with the terms of
any Employee Benefit Plan set forth in Schedule 3.21(a) and (B) salary increases
made in the ordinary course of business consistent with past practice not
exceeding three percent (3%) of the annual base salary for any Person and
disclosed to Purchaser;
(v) enter into, establish, adopt or amend or otherwise become obligated
under any Employment Benefit Plan (other than as set forth in Schedule 3.21(a))
or any other employment retention, change in control, collective bargaining,
deferred compensation, severance, retirement, bonus, profit-sharing, stock
option or other equity-based pension or welfare plan, or any other plan,
agreement, trust, fund, policy or arrangement for the benefit of maintained for
the benefit of any officer, director, employee, agent or other Person (including
any leased employee or contract employee) providing services to the Company or
make, grant or pay any severance, termination, compensation, benefits, bonus,
profit sharing, pension, retirement or insurance payment, distribution or
arrangement to or with any officer, director, employee, agent or other Person
(including any leased employee or contract employee) providing services to the
Company, except to the extent required by the terms of any Employee Benefit Plan
set forth in Schedule 3.21(a);
(vi) except as contemplated by Section 5.11, cancel, terminate, modify,
assign or amend in any material respect any Contract (A) set forth in Schedule
3.13(a), (B) which, if in effect on the date hereof, would be required to be set
forth in Schedule 3.13(a) or (C) outside the ordinary course of business;
(vii) incur, assume, guarantee or modify any Indebtedness, except for (A)
Indebtedness incurred, assumed, guaranteed or modified pursuant to the terms of
any Contract set forth in Schedule 3.13(a) pursuant to Section 3.13(a)(iv) or
(B) negative cash balances and unpaid checks or drafts incurred in the ordinary
course of business consistent with past practice;
(viii) permit, grant, create or incur any Lien on any of its properties or
assets (other than Permitted Liens);
(ix) sell, transfer, lease, license, assign or otherwise dispose of any
assets or properties having a value in excess of $5,000 in any individual case
or $10,000 in the aggregate;
(x) merge or consolidate with or into, or acquire all or substantially all
or a substantial portion of the business or assets of, any other Person, in a
single transaction or a series of transactions or by any other manner, or form
or cause to be formed any Subsidiary of the Company;
(xi) make any capital expenditure or execute any lease involving payments
in excess of $5,000 individually or $10,000 in the aggregate or otherwise
acquire any assets or properties that are material to the Company, individually
or taken as a whole;
(xii) enter into, materially amend or become subject to any joint venture,
partnership, strategic alliance, shareholders' agreement, co-marketing,
co-promotion, co-packaging, joint development or similar arrangement;
(xiii) write-off as uncollectible any notes or accounts receivable, except
write-offs in the ordinary course of business consistent with past practice and
GAAP charged to, and not in excess of, applicable reserves;
(xiv) cancel, waive or release any claims or rights of material value or
settle or compromise any action, claim, suit or other proceeding at law or in
equity;
(xv) except as required by GAAP, make any change in its accounting
principles or any method of accounting or auditing practice by which such
principles are applied for financial accounting purposes;
(xvi) make any new, or changed any existing, tax election or settle and/or
compromise any tax liability, prepare any Returns in a manner which is
inconsistent with the past practices of the Company with respect to the
treatment of items on such Returns, incur any material liability for Taxes other
than in the ordinary course of business or file an amended Return or a claim for
refund of Taxes with respect to the income, operations or property of the
Company;
(xvii) pay, discharge, settle or satisfy any material claims, other than in
the ordinary course of business consistent with past practice;
(xviii) plan, announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company;
(xix) conduct its cash management customs and practices (including
collection policies and payment terms applicable to any suppliers, distributors
and customers) other than in the ordinary course of business consistent with
past practice;
(xx) take any action with respect to or in contemplation of, or adopt
resolutions providing for, any complete or partial liquidation, dissolution,
recapitalization, reorganization or other winding up of its business or
operations;
(xxi) enter into any Contract of the type described in Section 3.13(a)(ix),
other than as set forth in Schedule 3.13(a), or any other transaction with any
Affiliate, director, officer or shareholder of the Company or Seller;
(xxii) sell, transfer, lease, license, assign or otherwise disposed of any
material Company Intellectual Property, except for nonexclusive licenses granted
to customers in the ordinary course of business consistent with past practice or
permit to lapse any registrations or applications or other rights with respect
to any material Company Intellectual Property, or otherwise abandon or fail to
maintain or enforce the Company's rights to any material Company Intellectual
Property;
(xxiii) take any action that if taken on or prior to the date of this
Agreement would cause any of the representations and warranties of Seller set
forth in Article III to be false or incorrect in any material respect; or
(xxiv) take any action in contemplation of or enter into any contract or
letter of intent with respect to, or otherwise commit or agree to do, in each
case, whether or not binding or enforceable and whether or not in writing, any
of the foregoing.
5.2 Confidential Information. (a) Effective upon the Closing, Purchaser'
obligations under that certain confidentiality and nondisclosure Agreement
entered into on the 19th day of September 2003 between the Company and Purchaser
(the "Confidentiality Agreement") shall terminate with respect to information
relating to the Company. The terms of the Confidentiality Agreement shall
otherwise be incorporated herein by reference.
(b) Seller acknowledges that it is in possession of Confidential
Information (as defined in the Confidentiality Agreement) concerning Purchaser
and/or the Company and its business and operations. Seller agrees that it will,
and will cause its Affiliates (other than the Company following the Closing) and
its and their respective Representatives who have had access to Confidential
Information to, treat confidentially and not disclose all or any portion of such
Confidential Information; provided that the Company may use any such
Confidential Information for the purpose of operating its business in the
ordinary course. Seller acknowledges and agrees that such Confidential
Information is proprietary and confidential in nature. If Seller or any of its
Representatives are legally required to disclose (after Seller has used its
commercially reasonable efforts to avoid such disclosure and after promptly
advising and consulting with Purchaser about its intention to make, and the
proposed contents of such, disclosure) any of such Confidential Information
(whether by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process), Seller agrees that Seller shall, or
shall cause such Representative, to provide Purchaser with prompt written notice
of such request so that Purchaser may seek an appropriate protective order or
other appropriate remedy. If such protective order or remedy is not obtained,
Seller or such Representative, may disclose only that portion of such
Confidential Information which such Person is legally required to disclose, and
Seller shall exercise its commercially reasonable efforts to obtain assurance
that confidential treatment will be accorded to such Confidential Information so
disclosed. Seller further agrees that from and after the Closing Date, Seller
and its Representatives, upon the request of Purchaser or the Company, promptly
will deliver to Purchaser or the Company or destroy all such Confidential
Information without retaining any copy thereof; provided, however, that any such
Person may retain a sealed archival copy of any records in order to comply with
applicable Law or to the extent maintenance of such records is otherwise
required by the internal policies and procedures of such Person.
5.3 Public Announcements. Neither Seller nor Purchaser shall, nor shall any
of their respective Affiliates, without the approval of the other party, issue
any press releases or otherwise make any public statements with respect to the
transactions contemplated by this Agreement, except as may be required by
applicable Law or regulation or by obligations pursuant to any listing agreement
with any national securities exchange or interdealer quotation system; provided
that, prior to any such press release or making any such public statement, such
party has used commercially reasonable efforts to obtain the approval of the
other party prior to issuing such press release or making such public
disclosure. The foregoing notwithstanding, after the Closing, Seller and its
members shall have the right to issue press releases, make public statements and
publish and disseminate "tombstone" and similar announcements concerning the
consummation of the sale of Shares provided that such press releases, statements
and announcements do not contain any information concerning the Company or the
terms of the transactions contemplated hereby not previously made public by
Purchaser.
5.4 Non-Solicitation of Employees and Customers. (a) In consideration of
the purchase of the Shares by Purchaser, Seller shall not, and shall cause its
Affiliates not to, for the period from the Closing Date until the second (2nd)
anniversary of the Closing Date:
(i) solicit the employment, or the engagement as a consultant or
contractor, for itself or any third Person, of, or any Key Employee. Nothing
herein is intended to preclude (i) Seller's or its Affiliates' general
solicitations in public media regarding employment opportunities or (ii)
Seller's or its Affiliates' solicitation of any Key Employee (as an employee,
consultant or otherwise) (A) whose employment by the Company (or any of its
Affiliates) shall have been terminated at the instigation of the Company (or
such Affiliate, as the case may be), or (B) if such Key Employee has resigned
from the Company more than one hundred and eighty (180) days prior to such
solicitation; and
(ii) solicit for the benefit of or fulfillment by Seller or any Person
other than the Company the business of the type and character engaged in or
competitive with that conducted by the Company on the Closing Date, of any
Person which is a customer or client of the Company, or was its customer or
client, at any time within the two (2) years prior to the Closing Date, or
attempt to hurt, hinder, diminish or interfere with the relationship between the
Company and any such customer or client (including making any negative or
disparaging statements or communications about Purchaser or the Company);
provided, however, that this clause (ii) shall not limit in any way the lawful
competitive business activities of any Person in which any Affiliate of Seller
is at any time an investor or to which any Affiliate of Seller is at any time a
lender so long as such activities are conducted in the ordinary course of
business and do not use confidential information concerning the Company or its
business provided to such Person by such Affiliate.
(b) It is the desire and intent of the parties to this Agreement that the
provisions of this Section 5.4 shall be enforced to the fullest extent
permissible under the Laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provision or portion of this
Section 5.4 shall be adjudicated to be invalid or unenforceable, this Section
5.4 shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such provision or portion in the particular
jurisdiction in which such adjudication is made.
(c) The parties recognize that the performance of the obligations under
this Section 5.4 by Seller is special, unique and extraordinary in character,
and that in the event of the breach by Seller of the terms and conditions of
this Section 5.4 to be performed by Seller, Purchaser and the Company shall be
entitled, if it so elects, to obtain damages for any breach of this Section 5.4,
or to enforce the specific performance thereof by Seller.
5.5 Access and Information. (a) Prior to the Closing, Seller shall permit
and shall cause the Company to permit, Purchaser, its Affiliates and their
respective Representatives to (i) have reasonable access, during regular
business hours, to the assets, Representatives, properties, Books and Records,
businesses and operations relating to the Company as Purchaser, its Affiliates
and their respective Representatives may reasonably request, (ii) to inspect
each Contract set forth in Schedule 3.13(a) (or required to be set forth in
Schedule 3.13(a)), Books and Records and all other documents and information,
from time to time, reasonably requested by Purchaser and its Representatives,
including financial, tax and operating documents and information and (iii)
without limiting the foregoing, to meet with designated employees and
Representatives of the Company. Seller shall cause the Company to furnish to
Purchaser promptly upon request such additional documents and information with
respect to the affairs of the Company, as Purchaser, its Affiliates or their
respective Representatives may from time to time reasonably request. No
information or knowledge obtained by Purchaser pursuant to this Section 5.5(a)
shall affect or be deemed to modify any representation made by Seller under this
Agreement or any other Transaction Document.
(b) All information provided or obtained under Section 5.5(a) shall be held
by Purchaser in accordance with and subject to the terms of the Confidentiality
Agreement, and Purchaser hereby agrees that the provisions of the
Confidentiality Agreement will apply to any properties, Books and Records, data,
documents and other information that is provided to Purchaser or its Affiliates
or any of their respective Representatives pursuant to this Agreement.
5.6 Supplemental Disclosure and Notices. (a) Between the date hereof and
the Closing Date, Seller shall promptly notify Purchaser in writing if Seller
has knowledge of: (i) the occurrence or non-occurrence of any fact or event that
could reasonably be likely to cause (A) any representation of Seller in this
Agreement or any other Transaction Document to be untrue or inaccurate in any
material respect or (B) any covenant or condition of Seller contained in this
Agreement or any other Transaction Document not to be complied with or satisfied
in any material respect; (ii) any failure of Seller to comply with or satisfy
any covenant or condition to be complied with or satisfied by Seller under this
Agreement or any other Transaction Document in any material respect; (iii) any
notice or other communication from any Person alleging that the consent or
approval of such Person is or may be required in connection with the
transactions contemplated by this Agreement or any other Transaction Document or
that such transactions otherwise may violate the rights of or confer remedies
upon such Person; (iv) any notice or other communication from any Governmental
or Regulatory Authority in connection with the transactions contemplated by this
Agreement or any other Transaction Document; and (v) any judicial,
administrative, arbitration, action, suit, proceeding (public or private),
condemnation, audit, claim, inquiry, investigation, whether domestic or foreign,
in law or in equity, or before any arbitrator or Governmental or Regulatory
Authority, that, if pending on the date of this Agreement, would have been
required to have been disclosed by Seller to Purchaser pursuant to this
Agreement. Notwithstanding the foregoing, such notices shall not be deemed to
cure, or to relieve Seller from, any liability or obligation with respect to,
any breach of or failure to satisfy any representation, warranty, covenant,
condition or agreement under this Agreement or any other Transaction Document,
it being understood that the updating of Schedule 3.13(a) solely to reflect the
execution, termination or expiration after the date hereof of Contracts in the
ordinary course of business of the Company consistent with past practice, to the
extent such execution, termination or expiration is otherwise permitted by this
Agreement, shall not constitute a breach of the representations and warranties
of Seller set forth in Section 3.13(a).
(b) Between the date hereof and the Closing Date, Purchaser shall promptly
notify Seller in writing if Purchase has knowledge of: (i) the occurrence or
non-occurrence of any fact or event that could reasonably be likely to cause
(A) any representation or warranty of Purchaser contained in this Agreement or
any other Transaction Document to be untrue or inaccurate in any material
respect or (B) any covenant or condition of Purchaser contained in this
Agreement or any Transaction Document not to be complied with or satisfied in
any material respect; (ii) any failure of Purchaser to comply with or satisfy
any covenant or condition to be complied with or satisfied by Purchaser under
this Agreement or any other Transaction Document in any material respect;
(iii) any notice or other communication from any Person alleging that the
consent or approval of such Person is or may be required in connection with the
transactions contemplated by this Agreement or any other Transaction Document or
that such transactions otherwise may violate the rights of or confer remedies
upon such Person; and (iv) any notice or other communication from any
Governmental or Regulatory Authority in connection with the transactions
contemplated by this Agreement or any other Transaction Document.
Notwithstanding the foregoing, such notices shall not be deemed to cure, or to
relieve Purchaser from any liability or obligation with respect to, any breach
of or failure to satisfy any representation, warranty, covenant, condition or
agreement under this Agreement or any other Transaction Document.
5.7 Efforts to Consummate Transaction. (a) Each of Purchaser and Seller
shall use commercially reasonable efforts in good faith to take or cause to be
taken all actions, and to do, or cause to be done as promptly as practicable,
all actions necessary, proper or advisable under applicable Law to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and any other Transaction Document, including the execution of
documents, instruments or conveyances of any kind that may be reasonably
necessary or advisable to carry out any of the transactions contemplated by this
Agreement and any other Transaction Document.
(b) Each of Purchaser and Seller shall file or supply, or cause to be filed
or supplied as soon as practicable following the execution of this Agreement,
all material applications, notifications and information required to be filed or
supplied by them pursuant to applicable Law in connection with the transactions
contemplated by this Agreement and any other Transaction Document, including
such applications, notifications and information required to be filed pursuant
to Section 5.7(c).
(c) In furtherance of Section 5.7(b) but subject to Section 5.7(h), each
party hereto covenants to contest and resist any action, claim or suit, whether
judicial or administrative and whether brought derivatively or on behalf of
third parties, seeking to have imposed any Order (whether temporary,
preliminary, or permanent) that would prevent or materially delay the
consummation of the transactions contemplated by this Agreement or any other
Transaction Document.
(d) Purchaser shall use commercially reasonable efforts to obtain all
consents, Permits, exemptions and waivers from Governmental or Regulatory
Authorities and third Persons required to be obtained by Purchaser and necessary
or advisable to authorize, approve or permit the performance by Purchaser of its
obligations hereunder and under any other Transaction Document, including all
such consents, Permits, exemptions and waivers set forth in Schedule 4.2(b).
(e) Seller shall use commercially reasonable efforts to obtain all
consents, Permits, exemptions and waivers from Governmental or Regulatory
Authorities and third Persons required to be obtained by Seller and the Company
and necessary or advisable to authorize, approve or permit the performance by
Seller of its obligations hereunder and under any other Transaction Document,
including all such consents, Permits, exemptions and waivers set forth in
Schedule 3.3(b); provided, however, that Seller shall have no obligation to, and
may provide for the Company to, as may be permitted under this Agreement, make
any payments or bear any other economic consequences of obtaining any such
consent, Permits, exemptions and waivers.
(f) Each party shall cooperate in good faith with the other party in
obtaining all consents, Permits, exemptions and waivers from Governmental or
Regulatory Authorities and third Persons required to be obtained and necessary
or advisable to authorize, approve or permit the performance by the parties of
their obligations hereunder and under any other Transaction Document.
(g) Without the prior written consent of Purchaser, which consent shall not
be unreasonably withheld, no amendment or modification shall be made to any
Contract set forth in Schedule 3.13(a) (or required to be set forth in Schedule
3.13(a)) to obtain any required consent, Permit, exemption or waiver, and no
consideration, whether such consideration shall consist of the payment of money
or shall take any other form, for any such consent, Permit, exemption or waiver
required, necessary or advisable for the consummation of the transactions
contemplated hereby or by any other Transaction Document shall be given or
promised by Seller or the Company and no expenses shall be incurred with respect
to such consents, Permits, exemptions or waivers without the prior written
approval of Purchaser, unless such consideration or expenses shall be paid or
given solely by Seller without any obligations of Purchaser or the Company to
reimburse Seller therefor.
(h) Notwithstanding the foregoing, nothing contained herein shall require
Purchaser or its Affiliates to (i) defend any lawsuit should it determine, in
its sole discretion, that it is not in its business interest to do so, (ii)
sell, transfer, divest or otherwise dispose of any of its business assets or
properties or any of the business or assets of the Company in connection with
this Agreement or any other Transaction Document or any of the transactions
contemplated hereby or thereby or (iii) give or promise any consideration,
whether such consideration shall consist of the payment of money or shall take
any other form, or incur any expenses for any consent, Permit, exemption or
waiver required, necessary or advisable for the consummation of the transactions
contemplated hereby or by any other Transaction Document.
(i) Each party shall provide to the other party copies of all filings made
by such party with any Governmental or Regulatory Authority and, upon reasonable
request, any other information supplied by such party to any Governmental or
Regulatory Authority in connection with this Agreement or any other Transaction
Document.
(j) As promptly as practicable following the date of this Agreement,
Purchaser shall use its commercially reasonable efforts to (i) complete the
Proposed Financing Transactions and (ii) have the funds provided by the Proposed
Equity Financing held in escrow pursuant to a customary escrow arrangement with
the longest term as is then commercially and reasonable available up to thirty
(30) days. Purchaser shall provide Seller with a copy of any final and executed
commitment letter it receives or credit agreement it enters into in connection
with the Proposed Debt Financing and shall promptly inform Seller if at any time
Purchaser becomes aware of any fact or circumstance that indicates that
Purchaser will not be able to complete the Proposed Financing Transactions
within forty five (45) days from the date of this Agreement. At such time as
Purchaser has obtained the funds sufficient to pay the Cash Consideration (or
has the right to obtain such funds through customary commitments of the type
used in financings similar to the Proposed Financing Transactions or otherwise,
subject to the satisfaction of the other conditions precedent to the
consummation of the transactions contemplated hereby), Purchaser shall deliver a
written notice to Seller to such effect.
(k) Seller shall, and shall cause the Company and the Representatives of
each of Seller and the Company to, cooperate with Purchaser upon its reasonable
request in connection with the Proposed Financing Transactions; provided,
however, that under no circumstances shall Seller, the Company (prior to the
Closing) or any Representative of Seller or the Company (other than the Key
Employees and such Representatives and other employees of the Company as may be
approved by the Key Employees, excluding non-Key Employee directors of the
Company and members of Seller and their respective Representatives) be required
to make any oral or written representation to any potential purchaser of equity
securities in the Proposed Equity Financing or to any potential lender in the
Proposed Debt Financing.
(l) Seller shall use its commercially reasonable efforts, and shall cause
the Company to use its commercially reasonable efforts, to cause Moore Stephens
Wurth Frazer and Torbet, LLP ("Moore Stephens"), with respect to (i) and (ii)
below, and BDO Seidman LLP ("BDO"), with respect to (iii) below, to deliver to
Purchaser, as promptly as practicable following the date of this Agreement, (i)
the audited statements of assets, liabilities and division capital, statements
of operations and statements of cash flows of the business purchased by the
Company from Systems Management Specialists, Inc. pursuant to the Asset
Transactions (the "SMS Business") for the eleven-month period ended November 30,
2002 and the year ended December 31, 2001 and the audited balance sheets of the
SMS Business as of November 30, 2002 and December 31, 2001, (ii) the audited
statements of assets, liabilities and division capital, statements of operations
and statements of cash flows of the business purchased by the Company from
Acxiom Corporation pursuant to the Asset Transactions (the "Acxiom Business")
for the six-month period ended June 30, 2003, and the years ended December 31,
2002 and December 31, 2001 and the audited balance sheets of the Acxiom Business
as of June 30, 2003, December 31, 2002 and December 31, 2001, (iii) (A) the
audited balance sheet of the Company as of December 31, 2003 and the related
audited statements of operations, shareholders' equity and cash flows for the
year then ended certified by BDO and (B) the audited balance sheet of the
Company as of December 31, 2002 and the related audited statements of
operations, shareholders' equity and cash flows for the one (1) month ended
December 31, 2002 certified by BDO ((i), (ii) and (iii) collectively, the
"Historical Financial Statements"), (iv) the auditor,s reports of Moore Stephens
relating to the Historical Financial Statements described in (i) and (ii) above
and BDO relating to the Historical Financial Statements described in (iii) above
(collectively, the "Historical Financial Statements Auditor's Reports") and (v)
the consent of each of Moore Stephens and BDO, as applicable, with respect to
the inclusion of the Historical Financial Statements, in each case, in customary
form and meeting the filing requirements of the Securities and Exchange
Commission, in any filings to be made by Purchaser under the Securities Act or
the Exchange Act (the "Financial Statements Consents" and together with the
Historical Financial Statements and the Historical Financial Statements
Auditor's Reports, the "Financial Statements Deliveries"). Notwithstanding the
foregoing, BDO will not have an obligation to deliver the Historical Financial
Statements described in clause (iii) of the immediately preceding sentence until
such time as it receives the appraisals (the "Appraisals") from an independent
appraiser (to be provided at the cost and expense of Purchaser) of the tangible
and intangible assets purchased by the Company in the Asset Transactions
necessary to complete the final allocation of the purchase prices paid by the
Company in connection with the Asset Transactions.
5.8 Further Assurances. Seller and Purchaser each agree that from time to
time before and after the Closing Date, they will execute and deliver or cause
their respective Affiliates (including the Company) to execute and deliver such
further instruments, and take (or cause their respective Affiliates, including
the Company, to take) such other action, as may be reasonably necessary to carry
out the purposes and intents of this Agreement and the other Transaction
Documents.
5.9 Non-Solicitation. (a) Seller shall not, and shall not cause or permit
the Company or any of their respective Affiliates to, nor any Representative of
Seller, the Company or any of their respective Affiliates (including any
investment banker, attorney or accountant retained by Seller, the Company or any
of their respective Affiliates) to:
(i) initiate, facilitate, conduct, continue, solicit or encourage, directly
or indirectly, any inquiries or the making of any proposal or offer (including
any proposal or offer to Seller) with respect to a merger, consolidation,
acquisition, business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company or its business or any purchase of any
capital stock or other equity securities of the Company, or of any business of
the Company, or all or any portion of the assets of the Company, (any such
proposal or offer (other than as specifically permitted by this Agreement), an
"Acquisition Proposal");
(ii) engage in or encourage or respond (except as specifically permitted
below) to any negotiations concerning, or provide any information or data to, or
have any discussions with, or otherwise cooperate in any other way with any
Person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; or
(iii) release any Person or other third party from, or amend or waive any
provision of, any confidentiality or standstill agreement to which they (or any
of them) are a party.
(b) Seller shall, and shall cause each of the respective Affiliates and
Representatives of Seller and the Company (including any investment banker,
attorney or accountant retained by Seller, the Company or any of their
respective Affiliates) to, immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Person conducted prior
to the date of this Agreement with respect to any Acquisition Proposal.
(c) Before responding to any Acquisition Proposal or responding to any
request for information or to commence discussions that may be reasonably
believed to be directed at making an Acquisition Proposal, which response shall
consist solely of informing such Person of the restrictions contained in this
Section 5.9, Seller shall, and shall cause its Affiliates, the Company and their
respective Representatives to (as applicable), promptly notify Purchaser (in
writing) that it has received such Acquisition Proposal or request.
5.10 Intercompany Balances. At or prior to the Closing, Seller shall cause,
and shall cause the Company to cause, all intercompany Indebtedness, and amounts
owed, and all intercompany balances outstanding, between Seller or any Affiliate
of Seller (other than the Company), on the one hand, and the Company, on the
other hand, to have been satisfied in full in a manner that does not create any
Tax or other liability for or obligation of Purchaser, the Company or any of
their respective Affiliates (including any increase in the Purchase Price).
5.11 Termination of Existing Registration Rights Agreement. Prior to the
Closing, Seller shall cause, and shall cause the Company and each other party
thereto to cause, the termination (including the termination of any rights or
obligations with respect to the Common Stock of the Company) of that certain
Amended and Restated Registration Rights Agreement, dated as of June 27, 2003,
by and among Seller, the Company, and the other parties named therein, and the
Company shall have been released from all obligations thereunder.
5.12 Release. (a) For and in consideration of the amounts payable to Seller
under this Agreement, effective as of the Closing Date, Seller, acting solely in
its capacity as the sole shareholder of the Company, hereby releases, acquits
and forever discharges the Company of and from any and all manner of action or
actions, cause or causes of action, demands, rights, damages, debts, dues, sums
of money, accounts, reckonings, costs, expenses, responsibilities, covenants,
contracts, controversies, agreements and claims whatsoever, whether known or
unknown, of every name and nature, both in law and in equity (collectively,
"Claims"), other than Claims arising under this Agreement, which Seller ever
had, now has, or hereafter may have against the Company arising out of Seller's
status as a shareholder of the Company (it being understood and agreed that
nothing in this clause (a) shall in any way limit or otherwise restrict any
claims Seller may have against Purchaser arising out of, relating to or in
connection with this Agreement and the transactions contemplated hereby).
(b) For and in consideration of the Shares to be transferred to Purchaser
pursuant to this Agreement, effective as of the Closing Date, Purchaser on
behalf of the Company, hereby releases, acquits and forever discharges Seller,
solely in its capacity as a shareholder of the Company, of and from any and all
Claims, other than Claims arising under this Agreement, which the Company ever
had, now has, or hereafter may have against Seller, arising out of Seller's
status as the sole shareholder of the Company (it being understood and agreed
that nothing in this clause (b) shall in any way limit or otherwise restrict any
claims Purchaser may have against Seller arising out of, relating to or in
connection with this Agreement and the transactions contemplated hereby).
5.13 Distributions of Stock Consideration. Seller shall take all action
required to ensure that the Stock Consideration is distributed to its members as
a distribution with respect to their membership interests. Purchaser shall upon
request of Seller promptly re-register the shares of Purchaser Common Stock
issued as the Stock Consideration in the names of the members who have received
such shares (allocated among the members in such amounts as Seller may instruct)
without any requirement for the delivery of any legal opinion in connection
therewith.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions to the Obligation of Purchaser. The obligation of Purchaser
to consummate the purchase of the Shares and the other transactions contemplated
hereby shall be subject to the satisfaction by Seller or waiver (to the extent
permitted by Law) by Purchaser on or prior to the Closing Date of each of the
following conditions:
(a) Representations, Warranties and Covenants. (i) The representations and
warranties of Seller contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 shall
be true and correct in all respects and the representations and warranties
contained in Section 3.7 (to the extent not qualified by "materiality," "in all
material respects," or similar terms and phrases) shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Closing Date with the same effect as though made on and as of the date of
this Agreement and on the Closing Date (except to the extent that any such
representation or warranty relates to a specified date, in which case such
representation or warranty shall be true and correct as of such date) and (ii)
all other representations and warranties of Seller contained in Article III
hereof, disregarding and without giving effect to all qualifications and
exceptions contained in such representations and warranties relating to
knowledge, materiality or Material Adverse Effect (and, accordingly, all
references in such representations and warranties to "material," "Material
Adverse Effect," "in all material respects" and similar terms and phrases shall
be deemed to be deleted therefrom), shall be true and correct as of the date of
this Agreement and as of the Closing Date with the same effect as though made on
and as of the date of this Agreement and the Closing Date (except to the extent
that any such representation or warranty relates to a specified date, in which
case such representation or warranty shall be true and correct as of such date),
except where the untruth or incorrectness of such representations and warranties
has not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to the Company; each of the
covenants and agreements of Seller to be performed on or prior to the Closing
Date shall have been duly performed in all material respects in accordance with
this Agreement; and Purchaser shall have received at the Closing certificates
certifying as to the fulfillment of the foregoing dated as of the Closing Date
and duly executed on behalf of Seller.
(b) Material Adverse Effect. No event, change, development, condition or
circumstance shall have occurred since the Balance Sheet Date that has had or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company or Seller.
(c) No Action or Order. On the Closing Date, no action, suit or proceeding
by, or before, any Governmental or Regulatory Authority of competent
jurisdiction shall be pending or threatened seeking to (i) enjoin, prohibit or
restrain the consummation of the sale of the Shares or the other transactions
contemplated by this Agreement or recover damages from Purchaser, any Affiliate
of Purchaser or the Company with respect thereto or (ii) require Purchaser to
dispose of or hold separately any Shares or assets of the Company or Purchaser.
No preliminary or permanent injunction, temporary restraining Order or other
decree of any Governmental or Regulatory Authority and no applicable Law shall
exist that enjoins, prohibits or restrains the consummation of the transactions
contemplated by this Agreement.
(d) Opinion of Counsel. Purchaser shall have received the opinion of
Bingham McCutchen LLP containing substantially the matters set forth in Exhibit
A.
(e) Governmental Consents. All consents, approvals, licenses, permits,
orders and authorizations of, or registrations, declarations or filings with, or
expirations of waiting periods imposed by, any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have been obtained, made or filed or shall have occurred,
including the approvals set forth in Schedule 6.1(e), without the imposition of
conditions, the requirement of divestiture of assets or property or the
requirement of expenditure of money by Purchaser or the Company (other than as
permitted hereunder) to a third party (other than filing and similar fees
required to be paid to a Governmental Authority) in exchange for any such
consent, approval, license, permit, order, authorization, registration,
declaration, filing or expiration of waiting periods, except for such consents,
approvals, licenses, permits, orders and authorizations registrations,
declarations, filings or expirations of waiting periods the failure of which to
obtain (i) could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to the Company, Seller or
Purchaser or (ii) could not reasonably be expected to result in a violation of
applicable Law.
(f) Third Party Consents. The Company shall have obtained all consents from
third parties set forth in Schedule 6.1(f).
(g) Estoppels. Purchaser shall have received estoppels, in form and
substance reasonably satisfactory to Purchaser, from each ground lessor under a
Facility Lease whose consent is required pursuant to Section 6.1(f); provided
that such ground lessor is required to deliver an estoppel by the terms of the
relevant Facility Lease (it being understood that Seller shall not permit the
Company to pay any consideration or offer or grant any financial accommodation
to such ground lessor without the prior consent of Purchaser).
(h) Financial Statements Deliveries. Purchaser shall have received the
Financial Statements Deliveries, and the Historical Financial Statements
described in clause (iii) of Section 5.7(l) shall not differ in any material
respect from the Draft Financial Statements, except to the extent any such
differences are reflected solely as a result of the information contained in the
Appraisals and the final allocation of the purchase prices paid by the Company
in connection with the Asset Transactions as determined pursuant to the
Appraisals.
(i) Financing. Purchaser shall have obtained funds pursuant to the Proposed
Financing Transactions sufficient to enable it to pay the Cash Consideration.
(j) Escrow Agreement. Each of the escrow agent named in the Escrow
Agreement and Seller shall have executed and delivered to Purchaser the Escrow
Agreement.
(k) Employment Agreements. The Key Employees shall have entered into
employment agreements with Purchaser on the terms set forth in Schedule 6.1(k).
(l) Other Documents. Purchaser shall have received all other documents and
certificates required to be delivered to Purchaser pursuant to Section 2.4 of
this Agreement.
6.2 Conditions to the Obligation of Seller. The obligation of Seller to
consummate the sale of the Shares and the other transactions contemplated by
this Agreement shall be subject to the satisfaction by Purchaser or waiver (to
the extent permitted by Law) by Seller on or prior to the Closing Date of each
of the following conditions:
(a) Representations, Warranties and Covenants. (i) The representations and
warranties of Purchaser contained in Sections 4.1 and 4.2 shall be true and
correct in all respects as of the date of this Agreement and as of the Closing
Date with the same effect as though made on and as of the date of this Agreement
and the Closing Date (except to the extent that any such representation or
warranty relates to a specified date, in which case such representation or
warranty shall be true and correct as of such date) and (ii) all other
representations and warranties of Purchaser contained in Article IV hereof
disregarding and without giving effect to all qualifications and exceptions
contained in such representations and warranties relating to knowledge,
materiality or Material Adverse Effect (and, accordingly, all references in such
representations and warranties to "material," "Material Adverse Effect," "in all
material respects" and similar terms and phrases shall be deemed to be deleted
therefrom), shall be true and correct as of the date of this Agreement and as of
the Closing Date with the same effect as though made on and as of the date of
this Agreement and on the Closing Date (except to the extent that any such
representation or warranty relates to a specified date, in which case such
representation or warranty shall be true and correct as of such date), except
where the untruth or incorrectness of such representations and warranties has
not had and could not reasonably be expected to have a Material Adverse Effect;
each of the covenants and agreements of Purchaser to be performed on or prior to
the Closing Date shall have been duly performed in all material respects in
accordance with this Agreement; and the Company shall have received at the
Closing certificates certifying as to the fulfillment of the foregoing dated as
of the Closing Date and duly executed on behalf of each of Purchaser.
(b) No Action or Order. On the Closing Date, no action, suit or proceeding
by, or before, any Governmental or Regulatory Authority of competent
jurisdiction shall be pending or threatened seeking to enjoin, prohibit or
restrain the consummation of the transactions contemplated by this Agreement or
recover damages from Seller or any Affiliate of Seller with respect thereto. No
preliminary or permanent injunction, temporary restraining Order or other decree
of any Governmental or Regulatory Authority and no applicable Law shall exist
that enjoins, prohibits or restrains the consummation of the transactions
contemplated by this Agreement.
(c) Opinion of Counsel. Seller shall have received the opinion of Latham &
Watkins LLP containing substantially the matters set forth in Exhibit B.
(d) Governmental Consents. All consents, approvals, licenses, permits,
orders and authorizations of, or registrations, declarations or filings with, or
expirations of waiting periods imposed by, any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement shall have been obtained, made or filed or shall have occurred,
including such approvals as are set forth in Schedule 6.1(e), without the
imposition of conditions, the requirement of divestiture of assets or property
or the requirement of expenditure of money by Purchaser or the Company to a
third party (other than filing and similar fees required to be paid to a
Governmental Authority) in exchange for any such consent, approval, license,
permit, order, authorization, registration, declaration, filing or expiration of
waiting periods, other than those consents, approvals, licenses, permits, orders
and authorizations registrations, declarations, filings or expirations of
waiting periods, the failure of which to obtain, (i) could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Seller or (ii) could not reasonably be expected to result in a
violation of applicable Law.
(e) Escrow Agreement. Each of the escrow agent named in the Escrow
Agreement and Purchaser shall have executed and delivered to Seller the Escrow
Agreement.
(f) Other Documents. Seller shall have received all other documents and
certificates required to be delivered to Seller pursuant to Section 2.5 of this
Agreement.
ARTICLE VII
TAX MATTERS
7.1 Tax Returns. (a) Seller shall prepare and execute on behalf of the
Company and timely file, or cause to be prepared and timely filed, all Returns
of the Company that are due on or prior to the Closing Date. Such Returns shall
be prepared by treating items on such Returns in a manner consistent with the
past practices of the Company with respect to such items. Seller shall provide a
copy of such Returns due after the date of this Agreement to Purchaser for its
review or comment at least fifteen (15) days before such Returns are due. Such
Returns shall not be filed without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld or delayed.
(b) Purchaser shall have the exclusive authority and obligation to prepare
and timely file, or cause to be prepared and timely filed, all Returns of the
Company that are due after the Closing Date. Such authority shall include, but
not be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and
operations of the Company shall be reported or disclosed on such Returns.
(c) After the Closing Date, Purchaser shall have the sole right to control
any audit or examination by any taxing authority, initiate any claim for refund
or amend any Return, and contest, resolve and defend against any assessment for
additional Taxes, notice of Tax deficiency or other adjustment of Taxes of, or
relating to, the income, assets or operations of the Company for all taxable
periods.
7.2 Transfer Taxes. Purchaser and Seller shall share equally in the payment
of all transfer, sales and use, registration, stamp and similar Taxes imposed in
connection with the sale of the Shares or any other transaction that occurs
pursuant to this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 Survival of Representations. (a) Except as set forth in paragraph (b)
below, the respective representations and warranties of Seller and Purchaser
contained in this Agreement or in any Schedule, Exhibit or certificate delivered
pursuant to this Agreement shall survive the purchase and sale of the Shares
pursuant to this Agreement for a period of twelve (12) months after the Closing
Date.
(b) The representations and warranties contained in Sections 3.1(a)
(Ownership of Shares), 3.4(a) (Existence and Good Standing) and 3.5 (Capital
Stock) shall survive indefinitely. The representations and warranties contained
in Sections 3.29 and 4.6 (Brokers' or Finders' Fees) shall survive until sixty
(60) days after the expiration of the applicable statute of limitations period
with respect to the matters covered thereby (after giving effect to any waivers
and extensions thereof). All of the representations and warranties of Seller
referred to in this Section 8.1(b) are collectively referred to herein as
"Seller's Unlimited Warranties" and the representation and warranty of Purchaser
referred to in this Section 8.1(b) is referred to herein as "Purchaser's
Unlimited Warranty".
8.2 Indemnification. (a) Subject to Section 8.2(e), Seller agrees to
indemnify, defend (as provided in Section 8.4) and hold Purchaser and its
Affiliates (including the Company) and their respective stockholders, officers,
directors, employees, agents and other Representatives, successors and assigns
(each a "Purchaser Indemnitee"), harmless from and against any damages, losses,
liabilities, penalties, obligations, claims of any kind, interest or expenses
(including reasonable attorneys' fees and expenses) (collectively, "Losses"),
suffered, incurred or paid, directly or indirectly, through application of the
Company's or Purchaser's assets or otherwise, as a result of, in connection with
or arising out of (i) the failure of any representation or warranty made by
Seller in this Agreement (whether or not contained in Article III) or in the
certificate delivered pursuant to Section 6.1(a) to be true and correct in all
respects, (ii) any breach by Seller of any of its covenants contained herein,
(iii) Seller's Expenses to the extent the actual amount thereof paid by the
Company exceeds the aggregate amount of Seller's Expenses set forth on the
Seller's Expenses Certificate delivered in accordance with Section 2.7, (iv) any
liability arising out of the Company's failure to comply with the provisions of
any foreign, federal, state or local "bulk sales," "bulk transfer" or similar
Laws with respect to the Asset Transactions, (v) any Claims asserted by any
Person against the Company, Purchaser or any of their respective Affiliates
relating to (A) any equity incentive plan of Seller or the Company in effect
prior to the Closing or (B) the distribution of the Purchase Price by Seller to
its members.
(b) Subject to Section 8.2(f), Purchaser agrees to indemnify, defend (as
provided in Section 8.4) and hold Seller and its Affiliates and their respective
shareholders, officers, directors, employees, agents and other Representatives,
successors and assigns (other than the Company and its Subsidiaries) (each a
"Seller Indemnitee") harmless from and against any Losses suffered, incurred or
paid, directly or indirectly, as a result of, in connection with or arising out
of (i) the failure of any representation or warranty made by Purchaser in this
Agreement (whether or not contained in Article IV) or in any certificate
delivered pursuant to Section 6.2(a) to be true and correct in all respects,
(ii) any breach by Purchaser of any of its covenants contained herein, (iii) any
liability under WARN or any similar Law resulting from actions taken by
Purchaser following the Closing and (iv) any liability under any securities Law
resulting from claims brought by a third party against Seller in connection with
the Proposed Equity Financing.
(c) The obligations to indemnify, defend and hold harmless pursuant to
Sections 8.2(a)(i) and 8.2(b)(i) shall survive the consummation of the
transactions contemplated by this Agreement for the time periods set forth in
Section 8.1, except for claims for indemnification asserted prior to the end of
such periods, which claims shall survive until final resolution thereof. The
obligations to indemnify, defend and hold harmless pursuant to the other
provisions of Sections 8.2(a) and 8.2(b) shall survive the consummation of the
transactions contemplated by this Agreement until the expiration of all
applicable statutes of limitation, except for claims for indemnification
asserted prior to the end of such periods, which claims shall survive until
final resolution thereof.
(d) Except for claims grounded in fraud, deceit or willful misconduct, the
rights of Purchaser Indemnitees, on the one hand, and the Seller Indemnitees, on
the other hand, under this Article VIII comprise the sole rights and remedies of
Purchaser Indemnitees and the Seller Indemnitees, respectively, at Law or in
equity or otherwise for any misrepresentation, breach of warranty, or the
failure to fulfill any agreement or covenant hereunder on the part of Seller or
Purchaser, respectively, including the right of rescission or restitution but
excluding the right to seek specific performance or equitable enforcement of any
agreement or covenant of Seller or Purchaser, respectively, hereunder.
(e) Seller shall have no liability with respect to the matters described in
Sections 8.2(a)(i) (other than with respect to breaches or inaccuracies of any
of Seller's Unlimited Warranties and any of the representations and warranties
in Sections 3.8(b) (Indebtedness), 3.15 (Taxes) and 3.17 (Intellectual
Property)) until the total of all Losses with respect thereto exceeds two
hundred thousand dollars ($200,000), and then only for the amount by which such
Losses exceed two hundred thousand dollars ($200,000). In no event shall the
aggregate liability of Seller under Section 8.2(a)(i) exceed an amount equal to
the Escrow Amount plus interest accrued thereon pursuant to the Escrow Agreement
(and any such liability shall be satisfied solely out of the Escrow Amount and
such interest accrued thereon as provided in the Escrow Agreement), except with
respect to indemnification for breaches or inaccuracies of Seller's Unlimited
Warranties.
(f) Purchaser shall have no liability with respect to the matters described
in Section 8.2(b)(i) (other than with respect to breaches or inaccuracies of
Purchaser's Unlimited Warranty) until the total of all Losses with respect
thereto exceeds two hundred thousand dollars ($200,000), and then only for the
amount by which such Losses exceed two hundred thousand dollars ($200,000). In
no event shall the aggregate liability of Purchaser under Section 8.2(b)(i)
exceed an amount equal to the Escrow Amount plus interest accrued thereon
pursuant to the Escrow Agreement, except with respect to indemnification for
breaches or inaccuracies of Purchaser's Unlimited Warranty.
(g) The right to indemnification based upon breaches or inaccuracies of
representations, warranties and covenants will not be affected by any
investigation conducted with respect to, or knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and delivery
of this Agreement or the Closing Date, whether as a result of disclosure by a
party pursuant to this Agreement or otherwise, with respect to the accuracy or
inaccuracy of or compliance with any such representation, warranty or covenant.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant, will not
affect a party's right to indemnification, payment of Losses or other remedies
based on such representations, warranties and covenants.
(h) Subject to Section 8.4, upon payment in full by Seller of any claim for
indemnification, or the payment by Seller of any judgment or settlement with
respect to a claim by a third party, Seller shall be subrogated to the extent of
such payment to the rights of Purchaser Indemnitee (at no cost or expense to any
Purchaser Indemnitee) against any person or entity (other than any Purchaser
Indemnitee, including, without limitation, the Company) with respect to the
subject matter of such claim for indemnification or claim by such third party,
provided, however, that: (i) Purchaser shall have the right to assume the
conduct and control, through counsel reasonably acceptable to Seller, of the
prosecution of any action, lawsuit, proceeding or other claim made or brought
against such Person or entity if Purchaser or the Company has any remaining
unsatisfied claim for Losses against such entity or party connected with, or
arising from, the subject matter of such claim for indemnification or claim by
such third party; (ii) any amount recovered as a result of any such action,
lawsuit, proceeding or other claim shall be paid to Purchaser and set-off
against the amount of Purchaser's unsatisfied claim for Losses and any balance
remaining (up to the amount of the payment made by Seller for such claim for
indemnification or judgment or settlement with respect to such claim by a third
party) shall be paid to Seller; and (iii) no action shall be taken by Seller
pursuant to this Section 8.2(h) unless and until any such remaining unsatisfied
claim of Purchaser or the Company for Losses has been satisfied in full.
(i) Purchaser and Seller acknowledge and agree that, after the Closing, the
Company shall not have any liability to Seller or any of its Affiliates or
Seller Indemnitees on the account of any claim made by Purchaser or any other
party under this Agreement or any other Transaction Document, and none of Seller
or any of its Affiliates or Seller Indemnitees shall have any right of
contribution against the Company with respect to any such claim made by
Purchaser or any other party.
8.3 Indemnification Procedure. (a) Within a reasonable period of time after
the incurrence of any Losses by any Person entitled to indemnification pursuant
to Section 8.2 hereof (an "Indemnified Party"), including, any claim by a third
party described in Section 8.4, which might give rise to indemnification
hereunder, the Indemnified Party shall deliver to the party from which
indemnification is sought (the "Indemnifying Party") a certificate in the form
of Exhibit C (the "Certificate"), which Certificate shall:
(i) state that the Indemnified Party has paid or properly accrued Losses or
anticipates that it will incur liability for Losses for which such Indemnified
Party is entitled to indemnification pursuant to this Agreement; and
(ii) specify in reasonable detail each individual item of Loss included in
the amount so stated, the date such item was paid or properly accrued, the basis
for any anticipated liability and the nature of the misrepresentation, breach of
warranty, breach of covenant or claim to which each such item is related and the
computation of the amount to which such Indemnified Party claims to be entitled
hereunder.
(b) In the event that the Indemnifying Party shall object to the
indemnification of an Indemnified Party in respect of any claim or claims
specified in any Certificate, the Indemnifying Party shall, within ten (10)
Business Days after receipt by the Indemnifying Party of such Certificate,
deliver to the Indemnified Party a notice to such effect and the Indemnifying
Party and the Indemnified Party shall, within the thirty (30) day period
beginning on the date of receipt by the Indemnified Party of such objection,
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such claims to which the Indemnifying Party shall have so
objected. If the Indemnified Party and the Indemnifying Party shall succeed in
reaching agreement on their respective rights with respect to any of such
claims, the Indemnified Party and the Indemnifying Party shall promptly prepare
and sign a memorandum setting forth such agreement. Should the Indemnified Party
and the Indemnifying Party be unable to agree as to any particular item or items
or amount or amounts, then the Indemnified Party and the Indemnifying Party
shall submit such dispute to a court of competent jurisdiction. The party which
receives a final judgment in such dispute shall be indemnified and held harmless
for all reasonable attorney and consultant's fees or expenses by the other
party.
(c) Claims for Losses specified in any Certificate to which an Indemnifying
Party shall not object in writing within ten (10) Business Days of receipt of
such Certificate, claims for Losses covered by a memorandum of agreement of the
nature described in Section 8.3(b), claims for Losses the validity and amount of
which have been the subject of judicial determination as described in Section
8.3(b) and claims for Losses the validity and amount of which shall have been
the subject of a final judicial determination, or shall have been settled with
the consent of the Indemnifying Party, as described in Section 8.4, are
hereinafter referred to, collectively, as "Agreed Claims". Within ten (10)
Business Days of the determination of the amount of any Agreed Claims, subject
to the limitation set forth in Section 8.2, the Indemnifying Party shall pay to
the Indemnified Party an amount equal to the Agreed Claim by wire transfer in
immediately available funds to the bank account designated by the Indemnified
Party in a notice to the Indemnifying Party not less than two (2) Business Days
prior to such payment. 8.4 Third Party Claims. If a claim by a third party is
made against any Indemnified Party and if such party intends to seek indemnity
with respect thereto under this Article VIII, such Indemnified Party shall
promptly notify the Indemnifying Party of such claims; provided that the failure
to so notify shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent that the Indemnifying Party is actually and
materially prejudiced thereby. The Indemnifying Party shall have thirty (30)
days after receipt of such notice to assume the conduct and control, through
counsel reasonably acceptable to the Indemnified Party at the expense of the
Indemnifying Party, of the settlement or defense thereof and the Indemnified
Party shall cooperate with it in connection therewith; provided that it is
reasonably anticipated by the Indemnified Party that the Indemnifying Party
shall permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by such Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by such Indemnified Party; provided,
further, that the Indemnifying Party shall not be entitled to assume control of
such defense and shall pay the fees and expenses of counsel retained by the
Indemnified Party if (i) the claim for indemnification relates to or arises in
connection with any criminal proceeding, action, indictment, allegation or
investigation; (ii) the Indemnified Party has been advised in writing by counsel
that a reasonable likelihood exists of a conflict of interest between the
Indemnifying Party and the Indemnified Party; or (iii) upon petition by the
Indemnified Party, the appropriate court rules that the Indemnifying Party
failed or is failing to vigorously prosecute or defend such claim. Any
Indemnified Party shall have the right to employ separate counsel in any such
action or claim and to participate in (but not control) the defense thereof, but
the fees and expenses of such counsel shall not be at the expense of the
Indemnifying Party unless (i) the Indemnifying Party shall have failed, within a
reasonable time after having been notified by the Indemnified Party of the
existence of such claim as provided in the preceding sentence, to assume the
defense of such claim, (ii) the employment of such counsel has been specifically
authorized in writing by the Indemnifying Party, which authorization shall not
be unreasonably withheld, or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party and such Indemnified Party shall have been advised in writing
by such counsel that there may be one or more legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party. So long as
the Indemnifying Party is reasonably contesting any such claim in good faith,
the Indemnified Party shall not pay or settle any such claim. Notwithstanding
the foregoing, the Indemnified Party shall have the right to pay or settle any
such claim, provided that in such event it shall waive any right to indemnity
therefor by the Indemnifying Party for such claim unless the Indemnifying Party
shall have consented to such payment or settlement. If the Indemnifying Party
does not notify the Indemnified Party within thirty (30) days after the receipt
of the Indemnified Party's notice of a claim of indemnity hereunder that it
elects to undertake the defense thereof, the Indemnified Party shall have the
right to contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement. The Indemnifying Party
shall not, except with the written consent of the Indemnified Party, enter into
any settlement that (i) is not entirely indemnifiable by the Indemnifying Party
pursuant to this Article VIII and does not include as an unconditional term
thereof the giving by the Person or Persons asserting such claim to all
Indemnified Parties of an unconditional release from all liability with respect
to such claim or consent to entry of any judgment, (ii) provides for injunctive
relief or other nonmonetary relief affecting the Indemnified Party or (iii) in
the reasonable opinion of the Indemnified Party, could materially adversely
affect the Indemnified Party. The Indemnifying Party and the Indemnified Party
shall cooperate with each other in all reasonable respects in connection with
the defense of any claim, including making available records relating to such
claim and furnishing, without expense to the Indemnifying Party and/or its
counsel, such employees of the Indemnified Party as may be reasonably necessary
for the preparation of the defense of any such claim or for testimony as
witnesses in any proceeding relating to such claim. The obligations of an
Indemnifying Party pursuant to this Section 8.4 are subject to the limitation
set forth in Section 8.2.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) By the mutual written agreement of Purchaser and Seller;
(b) By Purchaser, on the one hand, or Seller, on the other hand, by written
notice to the other party after 5:00 p.m. New York City time on the date that is
sixty (60) days after the date of this Agreement, if the transactions
contemplated by this Agreement have not been consummated, unless such date is
extended by the mutual written consent of Purchaser and Seller; provided that
the right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill in any material respect any
obligations under this Agreement has caused or resulted in the failure of the
Closing to occur on or before such date;
(c) By either Purchaser, on the one hand, or Seller, on the other hand, by
written notice to the other party if:
(i) the other party has (and the terminating party shall not have) failed
to perform and comply with, in any material respect, any material agreement,
covenant or condition hereby required to have been performed or complied with by
such party prior to the time of such termination, and such failure shall not
have been cured within 30 days following notice of such failure; or
(ii) any event occurs or any condition exists after the date of this
Agreement that makes it impossible to satisfy a condition precedent to the
terminating party's obligations to consummate the transactions contemplated by
this Agreement, unless the occurrence of such event is due to the failure of the
terminating party to perform or comply with any of the agreements, covenants or
conditions of this Agreement to be performed or complied with by such party
prior to the Closing;
(d) By Seller by written notice to Purchaser after 5:00 p.m. New York City
time on the date that is forty five (45) days from the date of this Agreement
(the "Cut-off Time"), if (i) Purchaser has not delivered to Seller the written
notice referred to in the last sentence of Section 5.7(j) on or prior to the
Cut-off Time or (ii) Purchaser has delivered such notice prior to the Cut-off
Time but as of the Cut-off Time does not have funds sufficient to pay the Cash
Consideration and does not have the right to obtain such funds through customary
commitments of the type used in financings similar to the Proposed Financing
Transactions or otherwise (subject to the satisfaction of the other conditions
precedent to the transactions contemplated hereby); provided, however, that
Seller may not terminate this Agreement pursuant to this Section 9.1(d) if, as
of the Cut-off Time, any event has occurred or any condition exists at the
Cut-off Time that would make it impossible for Seller to satisfy the conditions
precedent set forth in Sections 6.1(a), 6.1(b) and 6.1(c) and it is reasonable
to conclude that Seller will not be able to satisfy such conditions precedent
within fifteen (15) days following the Cut-off Time.
9.2 Effect of Termination(a) . (a) In the event of the termination of this
Agreement in accordance with Section 9.1, written notice thereof shall promptly
be given by the terminating party to the other party and this Agreement shall
become void and have no effect, without any liability to any person in respect
of this Agreement or of the transactions contemplated by this Agreement on the
part of any party, or any of its Representatives, shareholders or Affiliates,
except as provided in Sections 5.2, 5.3, Article X and this Section 9.2, and
except that nothing in this Agreement shall relieve any party of liability for
fraud or deceit or willful misconduct, or for any breach of or failure to
perform any of its agreements and covenants contained in this Agreement;
provided, however, that, notwithstanding anything to the contrary contained
herein, Seller's right (whether or not exercised) pursuant to Section 9.1(d) to
terminate this Agreement and receive a termination fee pursuant to Section
9.2(b) shall be Seller's sole and exclusive remedy for any breach of Purchaser's
representations, warranties or covenants relating the Proposed Financing
Transactions or any obligation, covenant or agreement of Purchaser to obtain
funds to pay the Cash Consideration.
(b) In the event this Agreement shall be terminated by Seller pursuant to
Section 9.1(d), Purchaser shall, within two Business Days thereof, pay to Seller
by wire transfer of immediately available funds a termination fee in the amount
of three hundred seventy five thousand dollars ($375,000).
(c) In the event this Agreement shall be terminated and at such time any
party is in material breach of or in default under any term or provision hereof,
such termination shall be without prejudice to, and shall not effect, any and
all rights to damages that any other party may have hereunder or otherwise under
applicable Law; provided, however, that, notwithstanding anything to the
contrary contained herein, Seller's right (whether or not exercised) pursuant to
Section 9.1(d) to terminate this Agreement and receive a termination fee
pursuant to Section 9.2(b) shall be Seller's sole and exclusive remedy for any
breach of Purchaser's representations, warranties or covenants relating the
Proposed Financing Transactions or any obligation, covenant or agreement of
Purchaser to obtain funds to pay the Cash Consideration. The damages recoverable
by the non-defaulting party shall include all attorneys' fees reasonably
incurred by such party in connection with recovering any such damages.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as provided in this Agreement, the parties hereto
shall pay all of their own expenses relating to the transactions contemplated by
this Agreement, including the fees and expenses of their respective legal
counsel and financial advisers. Without limiting the generality of the
foregoing, Seller shall be responsible for Seller's Expenses as provided in
Section 2.7. The foregoing notwithstanding, all out-of-pocket expenses incurred
by the Company relating to the preparation of the Historical Financial
Statements as described in clauses (i) and (ii) of Section 5.7(l) shall be borne
by Purchaser, whether or not the transactions contemplated by this Agreement are
consummated. Except as provided in the immediately preceding sentence, the
Company shall pay and shall be entitled to pay without any adjustment to the
Purchase Price or reimbursement obligation on the part of Seller, the fees and
expenses of the Company's accountants incurred in connection with the
preparation of the Historical Financial Statements as described in clause (iii)
of Section 5.7(l), the related drafts thereof and the unaudited financial
statements of the Company, including the preparation of the related financial
statements of Seller, or in providing other services to the Company in the
ordinary course of business consistent with past practice or in connection with
the transactions contemplated by this Agreement.
10.2 Governing Law. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
New York applicable to agreements executed and to be performed solely within
such State.
10.3 Jurisdiction. Each of the parties hereby irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of the courts of (i) the State of New York or the United States
District Court for the Southern District of New York or (ii) the State of
California or the United States District Court for the Central District of
California, in connection with any suit, action or judicial proceeding brought
against any of the parties to this Agreement or any dispute arising out of this
Agreement or any Transaction Document or any matter related hereto or thereto
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement or any Transaction Document. Each of
the parties hereby irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of this Agreement or any Transaction Document or any matter related hereto
or thereto in any New York State or Federal Court sitting in New York or in any
California State or Federal Court sitting in California and each of the parties
hereto irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action, suit or proceeding
in any such court. The foregoing consents to non-exclusive jurisdiction shall
not be deemed to confer rights on any Person other than the respective parties
to this Agreement. The prevailing party or parties in any such litigation shall
be entitled to receive from the losing party or parties all costs and expenses,
including reasonable counsel fees, incurred by the prevailing party or parties.
Each of the parties to this Agreement agrees that service of any process,
summons, notice or document by any method approved pursuant to Section 10.4
below, to such party's address set forth below shall be effective service of
process for any action, suit or proceeding with respect to any matters for which
it has submitted to jurisdiction pursuant to this Section 10.3.
10.4 Notices. Any notice or other communication required or permitted under
this Agreement shall be deemed to have been duly given (a) when sent, if sent by
facsimile transmission, if receipt thereof is confirmed by telephone, (b) when
delivered, if delivered personally to the intended recipient and (c) two
Business Days following deposit with a nationally recognized overnight courier
service, in each case addressed as follows (or to such other address or number
as shall be furnished in writing by any such party):
if to Seller, to
ITO Holdings, LLC
c/o Global Innovation Partners, LLC
2730 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 233-3609
Facsimile: (650) 233-3601
Attn: Eric Harrison
and to
ITO Holdings, LLC
c/o RLH Investors, L.P.
300 South Grand Avenue, 29th Floor
Los Angeles, CA 90071
Telephone: (213) 229-8500
Facsimile: (213) 229-8597
Attn: Patrick C. Haden
with a copy to
Bingham McCutchen LLP
600 Anton Boulevard, 18th Floor
Costa Mesa, CA 92626
Telephone: 714-830-0626
Facsimile: 714-830-0726
Attn: James W. Loss, Esq.
Thomas F. Morrison, Esq.
and if to Purchaser, to
Infocrossing, Inc.
Two Christie Heights Street
Leonia, NJ 07605
Telephone: 201-840-4700
Facsimile: 201-840-7126
Attn: Chief Executive Officer
with a copy to
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022--4802
Telephone: 212-906-1215
Facsimile: 212-751-4864
Attn: David M. Schwartzbaum, Esq.
David S. Allinson, Esq.
10.5 Assignment; Parties in Interest. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto without the
express written consent of the other party hereto, other than by operation of
Law; provided that Purchaser may assign its rights, interests and obligations
(other than its obligation to issue the Stock Consideration) hereunder without
the express written consent of the other party hereto (a) to any direct or
indirect wholly owned Subsidiary of Purchaser, (b) in connection with the
transfer by Purchaser of all or substantially all of the capital stock and/or
assets of the Company or (c) to one or more lenders as a collateral assignment;
provided, further, that if Purchaser makes any assignment referred to in (a)
above, Purchaser shall remain liable under this Agreement as if such assignment
had not occurred. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. Any purported assignment in
violation of the above shall be void and of no effect to transfer any right
hereunder.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.7 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof and the Confidentiality Agreement,
contain the entire understanding of the parties hereto and thereto with respect
to the subject matter contained herein and therein. This Agreement, including
the other documents referred to herein which form a part hereof and the
Confidentiality Agreement supersede all prior agreements and understandings
between the parties with respect to such subject matter.
10.8 Amendments. This Agreement may not be changed, and any of the terms,
covenants, representations, warranties and conditions cannot be waived, except
pursuant to an instrument in writing signed by Purchaser and Seller or, in the
case of a waiver, by the party waiving compliance.
10.9 Severability. If any term, provision, agreement, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, agreements, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party hereto. Upon such a determination, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a reasonably acceptable manner in order that
the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
10.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and the Purchaser Indemnitees
and Seller Indemnitees, all of whom are express third party beneficiaries of
this Agreement.
10.11 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by all parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provision of this Agreement.
10.12 Schedules and Exhibits(a) . (a) Items disclosed on one particular
Schedule relating to one section of this Agreement shall be deemed to be
constructively disclosed or set forth in other Schedules relating to other
sections of this Agreement regardless of whether a cross-reference is made to
such other Schedules so long as the matter and extent of such disclosure is
sufficient to identify the facts and circumstances required to be disclosed in
such other Schedule. The fact that any item of information is contained in a
Schedule shall not be construed as an admission of liability under any
applicable Law, or to mean that such information is required to be disclosed in
or by this Agreement, or to mean that such information is material. Such
information shall not be used as a basis for interpreting the term "material",
"materially", "materiality" or "Material Adverse Effect", or any similar
qualification in this Agreement.
(b) Each Exhibit and Schedule to this Agreement is a part of this
Agreement, but, in the event of any conflict or inconsistency between the main
body of this Agreement and any Exhibit or Schedule, the provisions of the main
body of this Agreement shall prevail.
10.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN ANY OF THE PARTIES
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO.
EACH OF THE PARTIES TO THIS AGREEMENT (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY OR PARTIES
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.13.
[The remainder of this page has been intentionally left blank.
Signature page follows.]
IN WITNESS WHEREOF, each of Seller and Purchaser has caused its company
name to be hereunto subscribed by its officer thereunto duly authorized all as
of the day and year first above written.
ITO HOLDINGS, LLC
By: /s/ Patrick A. Dolan
------------------------------
Name: Patrick A. Dolan
Title: Manager
INFOCROSSING, INC.
By: /s/ Zach Lonstein
-----------------------------
Name: Zach Lonstein
Title: Chairman & Chief Executive Officer
EXHIBIT A
Topics to be Covered by Seller's Counsel Legal Opinion
Opinions covering the following topics will be addressed in one or more opinions
to be delivered by counsel to Seller subject to standard exceptions and
qualifications1:
1. Seller is a limited liability company of the State of California, with
limited liability company power and authority to enter into the Purchase
Agreement and the other Transaction Documents to which it is a party and
perform its obligations thereunder. Based on certificates from public
officials, we confirm that Seller is validly existing and in good standing
under the laws of the State of California.
2. The Company is a corporation of the State of California. Based on
certificates from public officials, we confirm that the Company is validly
existing and in good standing under the laws of the State of California.
3. The execution, delivery and performance of the Purchase Agreement and the
other Transaction Documents to which it is a party have been duly
authorized by all necessary limited liability company action of Seller, and
the Agreement and the other Transaction Documents to which it is a party
have been duly executed and delivered by Seller.
4. Each of the Purchase Agreement and the Escrow Agreement constitutes a
legally valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms.
5. The execution and delivery of the Purchase Agreement and the Escrow
Agreement, and the sale, assignment, transfer and delivery by Seller to
Purchaser of the Shares pursuant to the Purchase Agreement and the Escrow
Agreement, on the date hereof do not: (i) violate the provisions of the
Organizational Documents of Seller or the Company, (ii) violate any federal
or California statute, rule or regulation applicable to Seller or the
Company, or (iii) require any consents, approvals, or authorizations to be
obtained by Seller or the Company, or any registrations, declarations of
filings to be made by Seller or the Company, under any federal or
California statute, rule or regulation applicable to Seller or the Company
that have not been obtained or made.
6. The authorized capitalization of the Company consists of 1,000,000 shares
of common stock, of which no shares are issued and outstanding other than
the Shares and no shares are held in the Company's treasury. The Shares are
owned of record by Seller. Except as described above, no shares of capital
stock of the Company are authorized, issued, outstanding or reserved for
issuance.
7. The Shares have been duly authorized by all necessary corporate action of
the Company and are validly issued, fully paid and non-assessable and free
of preemptive rights arising from the Organizational Documents of the
Company or Seller.
Seller's counsel shall permit the lenders of Purchaser to rely on the foregoing
opinions delivered at the Closing as may be reasonably requested by such lenders
in connection with the Proposed Debt Financing.
EXHIBIT B
Topics to be Covered by Purchaser's Counsel Legal Opinion
Opinions covering the following topics will be addressed in one or more opinions
to be delivered by counsel to Purchaser subject to standard exceptions and
qualifications1:
1. Purchaser is a corporation of the State of Delaware, with corporate power
and authority to enter into the Purchase Agreement and the other
Transaction Documents to which it is a party and perform its obligations
thereunder. Based on certificates from public officials, we confirm that
Purchaser is validly existing and in good standing under the laws of the
State of Delaware.
2. The execution, delivery and performance of the Purchase Agreement and the
other Transaction Documents to which it is a party have been duly
authorized by all necessary corporate action of Purchaser, and the
Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by Purchaser.
3. Each of the Purchase Agreement and the Escrow Agreement constitutes a
legally valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms.
4. The execution and delivery of the Purchase Agreement and the Escrow
Agreement, and the purchase by Purchaser of the Shares from Seller pursuant
to the Purchase Agreement and the Escrow Agreement, on the date hereof do
not: (i) violate the provisions of the Organizational Documents of
Purchaser, (ii) violate any federal or New York statute, rule or regulation
applicable to Purchaser, or (iii) require any consents, approvals, or
authorizations to be obtained by Purchaser, or any registrations,
declarations of filings to be made by Purchaser, under any federal or New
York statute, rule or regulation applicable to Purchaser that have not been
obtained or made.
5. The Stock Consideration to be issued to Seller pursuant to the Purchase
Agreement has been duly authorized by all necessary corporate action of
Purchaser and, when issued to Seller in accordance with the terms of the
Purchase Agreement, will be validly issued, fully paid and non-assessable
and free of preemptive rights arising from the Organizational Documents of
Purchaser.
Purchaser's counsel shall permit the lenders of Purchaser to rely on the
foregoing opinions delivered at the Closing as may be reasonably requested by
such lenders in connection with the Proposed Debt Financing. 1.
EXHIBIT C
Form of Certificate: Indemnification Procedure
[Letterhead of Indemnified Party]
CERTIFICATE OF ENTITLEMENT TO INDEMNITY
[______________]1
[Notice address of Indemnifying Party]
I, _____________________, [a duly authorized officer of [Indemnified Party]
(the "Company"), a [________]2,]3 pursuant to Section 8.3 of the Stock Purchase
Agreement (the "SPA"), dated as of February __, 2004, by and between ITO
Holdings, LLC and Infocrossing, Inc., hereby certify[ on behalf of [Name of
Party], and not in my personal capacity,]4 that:
(1) [Name of Party][I] [[has][have] paid or properly accrued
Losses][anticipate[s] that [it][I] will incur liability for Losses] for
which [the [Name of Party] is entitled][I am entitled] to indemnification
pursuant to Section 8.2 of the SPA, in an aggregate amount of
$[__________].
(2) Schedule I attached hereto specifies in reasonable detail each
individual item of Loss included in the amount stated above, the date such
item was paid or properly accrued, the basis for any anticipated liability
and the nature of the misrepresentation, breach of warranty, breach of
covenant or claim to which each item is related and the computation of the
amount to which [the [Name of Party] claims][I claim] to be entitled under
Section 8.2 of the SPA.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in the SPA, unless the context requires otherwise.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
written above.
[Indemnified Party]
By:
Name:
Title:
Schedule I
Item Amount Date Paid or Accrued Description and Computation
EXHIBIT D
Form of Escrow Agreement
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement"), dated as of ______ __, 2004, is made
and entered into by and among ITO HOLDINGS, LLC, a California limited liability
company ("Seller"), INFOCROSSING, INC., a Delaware corporation ("Purchaser"),
and _______________ (the "Escrow Agent").
W I T N E S S E T H :
WHEREAS, Seller and Purchaser have entered into a Stock Purchase Agreement,
dated as of March 3, 2004 (the "Purchase Agreement"), providing for the purchase
by Purchaser from Seller of all of the issued and outstanding shares of common
stock (the "Shares") of ITO Acquisition Corporation, a California corporation
(the "Company");
WHEREAS, the Purchase Agreement provides that certain portions of the cash
consideration to be paid by Purchaser to Seller for the Shares shall be held in
escrow pursuant to this Agreement; and
WHEREAS, Seller and Purchaser desire that the Escrow Agent hold and dispose of
such escrowed monies, and the Escrow Agent is willing to do so, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows (capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Purchase
Agreement):
1. Appointment of Escrow Agent. The Escrow Agent is hereby constituted and
appointed the escrow agent hereunder.
2. Escrow Funds. Simultaneously with the execution of this Agreement, Purchaser
shall deliver to and deposit with the Escrow Agent in accordance with the
Purchase Agreement, in immediately available funds, an amount equal to three
million six hundred and fifty thousand dollars ($3,650,000) to be held by the
Escrow Agent in accordance with the terms of this Agreement (the funds so held
by the Escrow Agent, from time to time, with the benefit of any earnings
thereon, being hereinafter referred to as the "Escrow Funds"). The Escrow Agent
hereby agrees to act with respect to the Escrow Funds as hereinafter set forth.
The Escrow Funds will be retained by the Escrow Agent for safekeeping in an
account (the "Escrow Account") pursuant to the terms hereof as security for the
indemnity obligations of Seller set forth in Article VIII of the Purchase
Agreement.
3. Investment of Escrow Funds.
(a) The Escrow Agent shall invest and reinvest the Escrow Funds in any of
the following investments: (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof; (ii) money market investments consisting solely of
the investments identified in subsection (i) above; or (iii) certificates
of deposit with maturities of six months or less from the date of
acquisition thereof and overnight bank deposits with any domestic
commercial bank having capital and surplus in excess of $5 billion
(including the Escrow Agent, if applicable). Any earnings received from the
investment of the Escrow Funds shall be credited to, and shall become a
part of, the Escrow Funds (and any losses on such investments shall be
deducted from the Escrow Funds) and shall be invested as provided in this
Section 3 and remain on deposit with the Escrow Agent in the Escrow Account
until disbursed in accordance with the terms hereof. The Escrow Agent shall
have the right to sell any investments held hereunder in order to comply
with the terms of this Agreement and shall not be liable for any loss due
to fluctuation of interest rates or the market value of the investment
being sold.
(b) The Escrow Agent shall not be responsible or liable for any loss
suffered in connection with any investment of the Escrow Funds made by it
in accordance with this Section 3 or realized as a result of the sale of
any such investment. All earnings on investments of Escrow Funds shall be
net of income taxes, if any, payable by the Escrow Agent.
4. Claims Relating to the Escrow Account.
(a) If at any time (and from time to time) Purchaser determines that it is
entitled to indemnification for Losses from Seller pursuant to Article VIII
of the Purchase Agreement, Purchaser shall deliver to each of the Escrow
Agent and Seller a copy of the relevant Certificate delivered to Seller
pursuant to Section 8.3(a) of the Purchase Agreement, together with wire
instructions for disbursement to Purchaser of the amount specified in the
Certificate for which indemnification is sought (the "Certificate Amount").
The Escrow Agent will have no responsibility to verify the existence of any
circumstances set forth in such Certificate.
(b) Seller may, within ten (10) Business Days after the delivery the
Certificate described in Section 4(a) (the "Notice Period"), send a notice
of objection with respect to the Certificate Amount to the Escrow Agent and
Purchaser in accordance with Section 8.3(b) of the Purchase Agreement and
Section 10 hereof (any such notice, a "Dispute Notice").
(c) If the Escrow Agent does not receive a Dispute Notice with respect to a
Certificate Amount within the Notice Period, Seller shall be deemed to have
accepted such Certificate Amount in full and Seller shall have no further
right to contest such amount. In the event of an acceptance or deemed
acceptance of a Certificate Amount in its entirety, the Escrow Agent shall
pay such amount to Purchaser within three (3) Business Days of such
acceptance or deemed acceptance, to the extent Escrow Funds are available.
If the Escrow Agent receives a Dispute Notice that relates to a Certificate
within the Notice Period, the Escrow Agent (i) will pay to Purchaser the
portion, if any, of the Certificate Amount that is not objected to in such
Dispute Notice within three (3) Business Days after receipt of such Dispute
Notice and (ii) will not disburse such portion of the Certificate Amount
which is objected to in such Dispute Notice unless it has received either
(x) a notice of release signed by Seller directing the Escrow Agent to
deliver all or a portion of such funds and setting forth instructions as to
payment, or (y) a final order by a court of competent jurisdiction, which
order is not subject to ongoing appeal, directing the Escrow Agent to
disburse an amount set forth in such order (provided that the Escrow Agent
shall be entitled to receive from the claiming party, with a copy to the
non-claiming party, a letter, on which the Escrow Agent may conclusively
rely, to the effect that the order of the court is final and binding).
(d) Notwithstanding the receipt of one or more Dispute Notices, the Escrow
Agent shall disburse the amount specified in one or more Certificates for
which no Dispute Notices have been timely received by it regardless of
whether such disbursement would reduce the Escrow Account to an amount less
than the amount subject to Dispute Notices which have been timely received
by the Escrow Agent; provided, however, that at such time as the amount of
the Escrow Funds have been reduced to zero, all then unresolved Dispute
Notices shall be deemed resolved and of no further force or effect, solely
for purposes of this Agreement and not with respect to any unresolved
claims under the Purchase Agreement, and this Agreement shall terminate in
accordance with Section 22 hereof.
5. Release of Escrow Account. Within three (3) Business Days after [Date which
is one year from the closing of the Purchase Agreement to be inserted] [_______]
(the "Distribution Date"), the Escrow Agent shall pay out of the Escrow Account
to Seller an amount equal to the remaining amount, if any, of the Escrow Funds
(subject to the succeeding proviso); provided, however, that (i) if any
Certificate that has been delivered to Seller and the Escrow Agent on or prior
to the Distribution Date remains outstanding and unresolved, an amount equal to
the aggregate Certificate Amounts set forth in such outstanding and unresolved
Certificates shall not be distributed to Seller on the Distribution Date, but
instead will remain on deposit in the Escrow Account, and will be paid out only
in accordance with the terms of Section 4(d) of this Agreement, to the extent
funds are available, and (ii) the only amount that shall be distributed to
Seller upon resolution in favor of Seller of any such Certificate shall be an
amount, if available, equal to the difference between (x) the amount of Escrow
Funds deducted from the distribution to Seller on the Distribution Date, minus
(y) the aggregate Certificate Amounts subject to any remaining outstanding and
unresolved Dispute Notices.
6. Tax Matters.
(a) The parties to this Agreement agree that, for federal and applicable
state income tax purposes, all interest or other income earned from the
investment of the Escrow Funds or any portion thereof shall be treated as
assets and income of Seller. The Escrow Agent shall timely report to Seller
and Purchaser the aggregate amount of such interest or other income and
shall allocate such amounts in accordance with the preceding sentence.
(b) Seller agrees to provide the Escrow Agent with a certified tax
identification number by signing and returning a form W-9 to the Escrow
Agent prior to the date on which any income earned on the investment of the
Escrow Funds is credited to such Escrow Funds. The parties hereto
understand that, in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from
time to time, may require withholding of a portion of any interest or other
income earned on the investment of the Escrow Funds.
7. Payments by the Escrow Agent. All payments by the Escrow Agent will be by
wire transfer or intrabank transfer of immediately available funds to the
account of Purchaser or to the account of Seller, as the case may be, specified
in written notice from the applicable party to the Escrow Agent.
8. No Creditor Rights. The Escrow Funds shall be held as a trust fund, subject
to the sole dominion and control of the Escrow Agent, who shall have sole legal
title thereto, and shall not be subject to lien or attachment of any creditor of
any party hereto and shall be used solely for the purposes and subject to the
conditions set forth herein. No creditor of Purchaser or Seller shall have any
rights in or to the Escrow Funds so long as they remain subject to the terms of
this Agreement. In addition, in order to effectuate the parties' intentions
under this Agreement, Purchaser hereby grants to Seller and Seller hereby grants
to Purchaser, a security interest in all of the grantor's rights, title and
interest in and to the Escrow Funds and any proceeds thereof (as such term is
defined in Section 9-306 of the Uniform Commercial Code) so long as the Escrow
Funds and/or any such proceeds remain subject to the terms of this Agreement. In
addition, Purchaser and Seller hereby appoint the Escrow Agent as Purchaser's
and Seller's agent for possession of the Escrow Funds in order to perfect
Purchaser's and Seller's respective security interests therein. The Escrow Agent
agrees to this appointment and acknowledges that, in connection with the
security interest granted in this Section 9, it is acting as bailee with respect
to such Escrow Funds and/or such proceeds on behalf of Purchaser and Seller.
Purchaser and Seller further agree to take any and all necessary additional
steps to perfect and continue perfection of the security interests granted
hereunder. The Escrow Agent hereby waives any and all rights to offset that it
may have against the Escrow Funds, including, without limitation, claims arising
as a result of any claims, amounts, liabilities, costs, expenses, indemnified
costs or other losses (collectively "Escrow Agent Claims") that the Escrow Agent
may be otherwise be entitled to collect from any party to this Agreement, other
than Escrow Agent Claims arising under this Agreement.
9. Matters Relating to the Escrow Agent 10.14 .
(a) The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein.
(b) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written instructions or notices furnished
to it hereunder and believed by it to be genuine and to have been signed
and presented by the proper party or parties.
(c) The Escrow Agent will not be liable for any action taken by it in good
faith and believed by it to be authorized or within the rights and powers
conferred upon it by this Agreement (other than its negligence, gross
negligence or willful misconduct), and may consult with counsel of its own
choice and will be fully protected for any action taken by it hereunder in
good faith and in accordance with the written opinion of such counsel.
(d) In the event that the Escrow Agent shall be uncertain as to its duties
or rights or shall receive instructions with respect to any property held
by it in escrow pursuant to this Agreement which, in the opinion of the
Escrow Agent, are in conflict with any of the provisions of this Agreement,
the Escrow Agent shall be entitled to refrain from taking any action until
it shall be directed otherwise in writing by Purchaser and Seller or by a
final order of a court of competent jurisdiction, which order is not
subject to ongoing appeal. In the event that any of the terms and
provisions of any other agreement (excluding any amendment to this
Agreement and, with respect to Seller and Purchaser, the Purchase
Agreement) between any of the parties hereto conflict or are inconsistent
with any of the terms and provisions of this Agreement, the terms and
provisions of this Agreement shall govern and control in all respects.
(e) The Escrow Agent may resign by giving written notice of such
resignation to Purchaser and Seller specifying a date (not less than thirty
(30) days after the giving of such notice) when such resignation shall take
effect; provided, however, that such resignation shall not become effective
until a successor escrow agent shall have been appointed and shall have
accepted such appointment in writing and all Escrow Funds have been
transferred to such successor escrow agent. Promptly after such notice,
Purchaser and Seller will, by mutual agreement and notice to the Escrow
Agent, appoint a successor escrow agent or otherwise provide for the
disposition of Escrow Funds, and the Escrow Agent shall pay over the Escrow
Funds, less its unpaid fees and expenses, as provided in such notice. If,
within thirty (30) days after written notice of resignation by the Escrow
Agent is received by Purchaser and Seller, a successor escrow agent is not
appointed and no notice is delivered with regard to the disposition of
Escrow Funds, the Escrow Agent shall have the right to petition any court
of competent jurisdiction for the appointment of a successor escrow agent.
(f) Seller and Purchaser may by mutual agreement at any time substitute a
new escrow agent by giving fifteen (15) days' joint written notice thereof
to the Escrow Agent then acting. The Escrow Agent shall continue to serve
until its successor accepts the escrow and receives delivery of the Escrow
Funds.
(g) For the Escrow Agent's services hereunder, Purchaser, on the one hand,
and Seller, on the other hand, severally and not jointly, each agree to (i)
pay to the Escrow Agent one-half of the fees in accordance with the
schedule of fees set forth in Exhibit A attached hereto (payable for the
first year promptly following execution and delivery of this Agreement) and
(ii) reimburse the Escrow Agent upon request for one-half of all reasonable
expenses, disbursements and advances, including reasonable attorneys' fees,
incurred or made by it in connection with carrying out its duties
hereunder.
(h) Seller, on the one hand, and Purchaser, on the other hand, jointly and
not severally agree to indemnify the Escrow Agent for, and to hold it
harmless against, any loss, liability or expense incurred by it arising out
of or in connection with its carrying out its duties hereunder, other than
as incurred by reason of its negligence, gross negligence or willful
misconduct. As between Seller, on the one hand, and Purchaser, on the other
hand, Seller, on the one hand, and Purchaser, on the other hand, agree that
each shall be responsible for one-half of all indemnified amounts pursuant
to this Section 10(g), other than as incurred solely by reason of either
Seller's, on the one hand, or Purchaser's, on the other hand, negligence,
gross negligence or willful misconduct, in which case the non-offending
party shall not be liable to the offending party for the payment of any
indemnified amounts.
(i) The Escrow Agent shall not be responsible for delays or failures in
performance resulting from acts beyond its control. Such acts shall include
but not be limited to acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes,
terrorist attacks or other disasters.
10. Notices. All notices, requests, demands, waivers and other communications
hereunder shall be in writing and shall be deemed to have been duly given to
Seller and/or Purchaser in accordance with Section 10.4 of the Purchase
Agreement and to Escrow Agent in the same manner at [____________] (or at such
other address for a party as shall be specified by like notice).
11. Consent to Jurisdiction. Each of the parties hereby irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of (i) the State of New York or the United States District Court
for the Southern District of New York or (ii) the State of California or the
United States District Court for the Central District of California, in
connection with any suit, action or judicial proceeding brought against any of
the parties to this Agreement or any dispute arising out of this Agreement or
any matter related hereto and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement. Each of the
parties hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
this Agreement or any matter related hereto in any New York State or Federal
Court sitting in New York or in any California State or Federal Court sitting in
California. Each of the parties hereto irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action, suit or proceeding in any such court. The foregoing consents to
non-exclusive jurisdiction shall not be deemed to confer rights on any Person
other than the respective parties to this Agreement. The prevailing party or
parties in any such litigation shall be entitled to receive from the losing
party or parties all costs and expenses, including reasonable counsel fees,
incurred by the prevailing party or parties. Each of the parties to this
Agreement agrees that service of any process, summons, notice or document by any
method approved pursuant to Section 11 above, to such party's address set forth
in Section 10.4 of the Purchase Agreement shall be effective service of process
for any action, suit or proceeding with respect to any matters for which it has
submitted to jurisdiction pursuant to this Section 12.
12. Entire Agreement. This Agreement, the Purchase Agreement and the other
Transaction Documents constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to their subject matters.
14. Governing Law. The interpretation and construction of this Agreement, and
all matters relating hereto, shall be governed by the laws of the State of New
York applicable to agreements executed and to be performed solely within such
State.
16. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN ANY OF THE PARTIES
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO.
EACH OF THE PARTIES TO THIS AGREEMENT (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY OR PARTIES
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
17. Amendments. No amendment, modification or discharge of this Agreement, and
no waiver under this Agreement, shall be valid or binding unless set forth in
writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. The waiver by any of the parties of a
breach of or a default under any of the provisions of this Agreement or to
exercise any right or privilege under this Agreement, shall not be construed as
a waiver of any other breach or default of a similar nature, or as a waiver of
any of such provisions, rights or privileges under this Agreement.
18. Assignments. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties; provided, however, that Purchaser and may,
upon written notice to Seller assign any of its rights and obligations hereunder
in accordance with the Purchase Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by and against the successors and permitted assigns of the parties, whether or
not so expressed. Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon any person other than the parties hereto
and the successors and assigns permitted by this Section 17, any right, remedy
or claim under or by reason of this Agreement, and no person, other than the
parties, their successors and permitted assigns, is entitled to rely on any
representation, warranty, covenant or agreement contained herein.
20. Enforcement. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not to be performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other right and remedy to which they are entitled under this
Agreement or, subject to this Agreement, at law or in equity.
21. Warranties. Each party executing this Agreement hereby represents and
warrants as of the date hereof that it has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
23. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
25. Interpretation. In this Agreement, unless otherwise specified, the following
rules of interpretation apply:
(a) references to Sections, Schedules, Exhibits and parties are references
to sections or subsections, schedules, and exhibits of, and parties to,
this Agreement;
(b) the section and other headings contained in this Agreement are for
reference purposes only and do not affect the meaning or interpretation of
this Agreement;
(c) references to any law, regulation or statutory provision include
references to such law or regulation or provision as modified, codified,
re-enacted or replaced;
(d) references to any party include references to such party's successors
and permitted assigns;
(e) words importing the singular include the plural and vice versa;
(f) words importing one gender include the other gender;
(g) references to the word "including" do not imply any limitation;
(h) references to months are to calendar months;
(i) the words "hereof", "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and
not to any particular provision of this Agreement;
(j) references to "$" or "dollars" refer to U.S. dollars; and
(k) a defined term has its defined meaning throughout this Agreement and in
each Exhibit and Schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined.
27. Severability. If any provision, including any phrase, sentence, clause,
section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering such provisions in question invalid, inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision in this
Agreement contained invalid, inoperative, or unenforceable to any extent
whatsoever, and such other provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to a party. Upon such determination that any provision is invalid,
inoperative or unenforceable, the parties shall negotiate in good faith to
modify this Agreement so as to give effect to the original intent of the parties
as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
29. Termination. This Agreement and all rights and obligations of the parties
hereunder shall terminate upon payment, in accordance with the provisions
hereof, of all samounts held by the Escrow Agent in the Escrow Account, except
that nothing in this Agreement shall relieve any party of liability for fraud or
deceit or intentional misrepresentations or for any breach of or failure to
perform any of its agreements and covenants contained in this Agreement. The
obligations of Seller and Purchaser to pay accrued fees to the Escrow Agent
pursuant to Section 10(f) hereof and to indemnify the Escrow Agent pursuant to
Section 10(g) hereof shall survive any termination of this Agreement or
replacement of the Escrow Agent hereunder.
31. Public Announcements. Neither the Escrow Agent nor Seller shall issue any
press release or other public statement with respect to the transactions
contemplated by this Agreement, except as may be required by applicable law or
court process. Seller shall not issue any press release or other public
statement with respect to the transactions contemplated by this Agreement,
except in accordance with the Purchase Agreement.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
ITO HOLDINGS, LLC
By:
Name:
Title:
INFOCROSSING, INC.
By:
Name:
Title:
[ESCROW AGENT]
By:
Name:
Title:
Exhibit A
Fee Schedule