EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
DATED AS OF
AUGUST 11, 2004
AMONG
MERGENCE TECHNOLOGIES CORPORATION,
THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HERETO
AND
DATAWATCH CORPORATION
TABLE OF CONTENTS
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Page
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ARTICLE I -- DEFINITIONS.......................................................1
1.01. DEFINITIONS.......................................................1
ARTICLE II -- PURCHASE AND SALE................................................3
2.01. PURCHASE AND SALE.................................................3
2.02. CLOSING...........................................................4
2.03. EARNOUT PAYMENTS..................................................4
2.04. ESCROW............................................................6
ARTICLE III -- REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY..........7
3.01. CORPORATE EXISTENCE AND POWER.....................................7
3.02. CORPORATE AUTHORIZATION...........................................7
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS..............................8
3.04. NON-CONTRAVENTION.................................................8
3.05. CAPITALIZATION....................................................8
3.06. SUBSIDIARIES].....................................................8
3.07. FINANCIAL STATEMENTS..............................................8
3.08. ABSENCE OF CERTAIN CHANGES........................................9
3.09. PERSONAL PROPERTY................................................11
3.10. REAL PROPERTY....................................................11
3.11. NO UNDISCLOSED LIABILITIES.......................................12
3.12. LITIGATION.......................................................12
3.13. MATERIAL CONTRACTS...............................................12
3.14 TECHNOLOGY AND INTELLECTUAL PROPERTY.............................13
3.15. INSURANCE COVERAGE...............................................15
3.16. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS.......................16
3.17. EMPLOYEES AND LABOR MATTERS......................................16
3.18. ENVIRONMENTAL COMPLIANCE.........................................17
3.19. CUSTOMERS AND SUPPLIERS..........................................18
3.20. TRANSACTIONS WITH AFFILIATES.....................................18
3.21. FINDERS' FEES....................................................18
3.22. OTHER INFORMATION................................................18
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS..............19
4.01. TITLE TO AND VALIDITY OF SHARES..................................19
4.02. AUTHORITY........................................................19
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BUYER..........................19
5.01. ORGANIZATION AND EXISTENCE.......................................19
5.02. CORPORATE AUTHORIZATION..........................................19
5.03. GOVERNMENTAL AUTHORIZATION.......................................20
5.04. NON-CONTRAVENTION................................................20
5.05. LITIGATION.......................................................20
5.06. FINDERS' FEES....................................................20
5.07. PURCHASE FOR INVESTMENT..........................................20
ARTICLE VI -- COVENANTS OF THE COMPANY AND SELLERS............................20
6.01. CONDUCT OF THE COMPANY...........................................20
6.02. ACCESS TO INFORMATION............................................21
6.03. NONCOMPETITION...................................................21
6.04. CONFIDENTIALITY..................................................22
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ARTICLE VIA -- COVENANTS OF THE BUYER.........................................24
6.01A. FUTURE BUSINESS STRUCTURE........................................24
6.02A. CESSATION OF COMPETITION IN MARKETS..............................24
ARTICLE VII -- COVENANTS OF ALL PARTIES.......................................24
7.01. BEST EFFORTS.....................................................24
7.02. CERTAIN FILINGS..................................................25
7.03. PUBLIC ANNOUNCEMENTS.............................................25
ARTICLE VIII--TAX MATTERS.....................................................25
8.01. TAX REPRESENTATIONS..............................................25
8.02. TAX COVENANTS....................................................28
ARTICLE IX -- EMPLOYEE BENEFITS...............................................29
9.01. EMPLOYEE BENEFITS DEFINITIONS....................................29
9.02. ERISA REPRESENTATIONS............................................29
9.03. NO THIRD PARTY BENEFICIARIES.....................................31
ARTICLE X -- CONDITIONS TO CLOSING............................................31
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY......................31
10.02. CONDITIONS TO OBLIGATION OF BUYER................................31
10.03. CONDITIONS TO OBLIGATION OF SELLERS..............................32
10.04. FINAL STOCKHOLDERS EQUITY........................................32
ARTICLE XI -- SURVIVAL; INDEMNIFICATION.......................................33
11.01. SURVIVAL.........................................................33
11.02. INDEMNIFICATION..................................................34
11.03. PROCEDURES.......................................................35
11.04. CLAIMS FOR DAMAGES...............................................36
11.05. LIMITATION ON LIABILITY..........................................37
11.06. NO WAIVER........................................................38
11.07. NO SUBROGATION...................................................38
ARTICLE XII -- TERMINATION....................................................38
12.01. GROUNDS FOR TERMINATION..........................................38
12.02. EFFECT OF TERMINATION............................................38
ARTICLE XIV -- MISCELLANEOUS..................................................39
13.01. NOTICES..........................................................39
13.02. AMENDMENTS; NO WAIVERS...........................................39
13.03. EXPENSES.........................................................40
13.04. SUCCESSORS AND ASSIGNS...........................................40
13.05. FURTHER ASSURANCES...............................................40
13.06. GOVERNING LAW....................................................40
13.07. COUNTERPARTS; EFFECTIVENESS......................................40
13.08. ENTIRE AGREEMENT.................................................40
13.09. CAPTIONS.........................................................40
13.10. ARBITRATION......................................................40
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SCHEDULES
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Schedule 2.01 List of Stockholders
Schedule 3.03 Required Consents
Schedule 3.05 Capitalization
Schedule 3.07 Financial Statements
Schedule 3.08 Certain Changes
Schedule 3.10(b) Leases
Schedule 3.11 Liabilities
Schedule 3.13 Material Contracts
Schedule 3.14 Intellectual Property
Schedule 3.15 Insurance
Schedule 3.16 Permits
Schedule 3.17(a) Employees
Schedule 3.17(b) Consultants
Schedule 3.17(c) Employee Matters
Schedule 3.19 Customers and Suppliers
Schedule 3.20 Transactions with Affiliates
Schedule 8.01 Taxes
Schedule 9.02 Employee Benefits
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STOCK PURCHASE AGREEMENT
AGREEMENT dated as of August 11, 2004 among Mergence Technologies
Corporation, a Delaware corporation (the "Company"); the stockholders of the
Company listed on the signature pages hereto ("Sellers"); and Datawatch
Corporation, a Delaware corporation ("Buyer").
R E C I T A L S:
WHEREAS, Buyer desires to purchase all of the outstanding shares of
capital stock of the Company (the "Shares") which term shall include shares to
be issued immediately prior to the Closing pursuant to Section 10.02(e) hereof
(the "Employee Shares"); and
WHEREAS, each Seller desires to sell to Buyer all of the Shares owned
by such Seller; and
WHEREAS, Buyer has entered into separate stock purchase agreements (the
"Additional Seller Purchase Agreements") with all of the other holders of Shares
(the "Additional Sellers"; for purposes of Sections 2.03 and 6.02A hereof,
"Sellers" shall include "Additional Sellers");
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"Balance Sheet" means the balance sheet of the Company as of the
Balance Sheet Date found in Schedule 3.07.
"Balance Sheet Date" means June 30, 2004.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property" means all Intellectual Property that is
owned or held by or on behalf of the Company and any of its Subsidiaries or that
is being, and/or has been, used, or is currently under development for use, in
the business of the Company and any of its Subsidiaries as it has been, is
currently or is currently planned to be conducted.
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"Intellectual Property" means all tangible or intangible proprietary
information and materials, including without limitation:
(a) (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereon, and all
patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, divisions,
revisions, extensions and re-examinations thereof, (ii) all trademarks,
service marks, trade dress, logos, trade names, domain names, and
corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals
in connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all mask works
and all applications, registrations and renewals in connection
therewith, (v) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas,
compositions, manufacturing and production process and techniques,
methods, schematics, technology, technical data, designs, drawings,
flowcharts, block diagrams, specifications, customer and supplier
lists, pricing and cost information and business and marketing plans
and proposals), and (vi) all software and firmware (including data,
databases and related documentation);
(b) all documents, records and files relating to design, end
user documentation, manufacturing, quality control, sales, marketing or
customer support for, and tangible embodiments of, all intellectual
property described herein; and
(c) all licenses, agreements and other rights in any third
party product or any third party intellectual property described in (a)
and (b) above other than any "off the shelf" third party software or
related intellectual property.
"to the Company's Knowledge", "Known to the Company" and words of
similar import means the knowledge of the officers and directors of the Company
and each of its Subsidiaries and the knowledge of each of Sellers.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"Material Adverse Change" means a material adverse change in the
business, assets, financial condition, results of operations or prospects of the
Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition, results of operations or prospects of the
Company and its Subsidiaries taken as whole.
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"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by another company.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section Term Section
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Accounting Referee 2.03 Hazardous Materials 3.18
Balance Sheet 3.07 Indemnified Party 11.03
Benefit Arrangement 9.01 Indemnifying Party 11.03
Business 6.03 Interested Person 3.20
Buyer Third Party Claim 11.02 Leases 3.10
Closing 2.02 Multiemployer Plan 9.01
Closing Balance Sheet 10.04 Objection Notice 2.03
Closing Stockholders' Equity 10.04 Permit 3.16
Co-Employer 9.01 Personal Property 3.09
Company Securities 3.05 Pro Rata Share 11.02
Company Third Party Claim 11.02 Publicly Available Software 3.14
Confidentiality Agreements 6.04 Purchase Price 2.01
Damages 11.02 Required Consent 3.03
Earnout Payment(s) 2.03 SEC 3.03
Employee 9.01 Securities Act 4.03
Employee Plan 9.01 Tax(es) 8.01
Environmental Laws 3.18 Tax Authority 8.01
ERISA 9.01 Tax Return 8.01
ERISA Affiliate 9.01 Third Party Claim 11.02
Final Stockholders' Equity 10.04 Total Researcher Revenues 2.03
Financial Statements 3.07
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions
of this Agreement, each Seller, severally but not jointly, shall sell to Buyer,
and Buyer shall purchase from each such Seller, at the Closing, that number of
Shares as is set forth opposite such Seller's name on Schedule 2.01. The
aggregate purchase price for all of the Shares (including Shares held or to be
held by the Additional Sellers) (the "Purchase Price") is (a) $2,500,000 in cash
and (b) the Earnout Payments. The initial cash portion of the Purchase Price
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payable to each Seller is as set forth on Schedule 2.01. The Purchase Price
shall be paid as provided in Sections 2.02, 2.03 and 2.04.
2.02. CLOSING. The closing (the "Closing") of the purchase and sale of
the Shares hereunder shall take place at the offices of Testa, Hurwitz &
Thibeault, LLP in Boston, Massachusetts on August 11, 2004, or, if the
conditions set forth in Article X are not satisfied or waived, at such other
time or place as Buyer and Sellers may agree, but in no event later than five
business days after satisfaction of the conditions set forth in Article X. At
the Closing:
(a) Buyer shall pay to each Seller the cash purchase price for
such Seller's Shares (other than payment of the Escrow Amount as
provided in Section 2.04 below and Earnout Payments as provided in
Section 2.03 below) by wire transfer in immediately available funds to
the account designated by such Seller by written notice to Buyer not
later than two business days prior to the Closing Date.
(b) Sellers shall deliver to Buyer certificates for the Shares
duly endorsed or accompanied by stock powers duly endorsed in blank,
with any required transfer stamps affixed thereto.
(c) The parties shall execute and deliver to the appropriate
parties any other instruments, documents and certificates that are
required to be delivered pursuant to this Agreement or as may be
reasonably requested by any party in order to consummate the
transactions contemplated by this Agreement.
2.03. EARNOUT PAYMENTS.
(a) For each quarter during the six year period ending
September 30, 2010 (the "Earnout Period"), Buyer shall pay to the
Sellers, in accordance with this Section 2.03, an amount (each an
"Earnout Payment" and together the "Earnout Payments") calculated by
multiplying the Total Researcher Revenues for such period by 10%. The
portion of each Earnout Payment to be allocated to each Seller is based
on the proportion that the cash purchase price that such Seller was
entitled to receive at Closing bears to the total cash purchase price
that all Sellers were entitled to receive at the Closing (the "Seller
Proportion"). Notwithstanding anything herein to the contrary, Earnout
Payments with respect to the four quarters ending September 30, 2005
("First Year Earnout Payments") shall not be paid until the date on
which the Earnout Payment for the quarter ending September 30, 2005 is
due ("First Year Earnout Due Date") except and to the extent that a
Seller owes Damages to the Buyer, or there are any unresolved claims
for Damages of the Buyer, pursuant to Article XI. After payment of any
such Damages and resolution of any such unresolved claim, any amount of
the First Year Earnout Payments remaining owed to a Seller with respect
to such claim shall be promptly paid to such Seller by the Buyer. Any
portion of the Earnout Payments determined to be owed by a Seller to
the Buyer shall be promptly released to the Buyer by the Buyer.
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(b) "Total Researcher Revenues" shall mean the total net
revenues of the Company and Buyer for the applicable quarter or other
period during the Earnout Period, determined in accordance with
generally accepted accounting principles and as provided herein, from
the sale or license, including subscriptions, of the Researcher
Product.
"Researcher Product" means the software product developed by
the Company known as Researcher, and related Company Intellectual
Property including, without limitation, the applicable patents
("Researcher Intellectual Property"), as currently constituted, and as
the product may be modified, and any derivative or other product
developed which utilizes or relies on the Researcher Intellectual
Property. "Net Revenues" shall be calculated in accordance with
generally accepted accounting principles as gross revenues less returns
and bad debts. To the extent the Researcher Product is sold or licensed
as part of another product or product suite of buyer, the net revenues
for the Research Product will be calculated by comparing the total
price for the products sold or licensed with the sum of the buyers
listed retail price for the products sold or licensed, and applying any
discount to the listed retail price for Research Products sold or
licensed.
(c) The right to receive the Earnout Payments is a contract
right only and no certificate evidencing such right shall be issued.
The right to receive the Earnout Payments shall not be transferred or
assigned, except (a) by will or the laws of descent and distribution,
or (b) to a spouse or child of a Seller, or a trust of which a Seller
or his or her spouse or child is the beneficiary or (c) to a Person
which is not a competitor or an affiliate of a competitor of the Buyer;
provided, however, that the transferring Seller notifies Buyer of such
distribution in writing, provides Buyer with the transferee's name and
address and the exact rights transferred and such transferee agrees in
writing (in form and substance satisfactory to Buyer) to be bound by
the terms and conditions of this Agreement.
(d) Not later than 30 days after the end of each fiscal
quarter in the Earnout Period (other than a fiscal quarter which is the
end of the Buyer's fiscal year), Buyer shall prepare a written
calculation of the Earnout Payment based on Buyer's unaudited
consolidated financial statements for such period and shall deliver to
each of the Sellers copies of such calculation and such unaudited
financials together with payment of the full amount of the Earnout
Payment (less any applicable withholding) for such period (except as
provided in Section 2.03(a)).
(e) Not later than 45 days after the end of each fiscal year
of Buyer in the Earnout Period, Buyer shall prepare a preliminary
written calculation of the Earnout Payment for the preceding fourth
quarter and shall deliver to each of the Sellers a copy of such
preliminary calculation. Within seven days of the release of Buyer's
audited financial statement for each such fiscal year, Buyer shall
prepare a final written calculation of the Earnout Payment for such
fourth quarter based on such financial results (reflecting any changes
from the preliminary calculation and corrections, if any, for prior
quarters resulting from the audit of Buyer's financial statements) and
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shall deliver to each of the Sellers a copy of such calculation with
payment of the full amount of the Earnout Payment (less any applicable
withholding) for such period adjusted for any such corrections.
(f) Sellers will have twenty (20) days from receipt of each of
the calculations in Sections 2.03(d) and 2.03(e) to contest in writing
to Buyer (the "Objection Notice"), which notice must be signed by
Sellers who were the holders of at least 25% of the Shares, a
calculation of an Earnout Payment that they believe in good faith to be
inaccurate. If Sellers issue an Objection Notice, Buyer shall provide
Sellers with reasonable access to the supporting information for such
calculations. Buyer and Sellers shall use their best efforts to reach
agreement on the disputed amount. If Buyer and Sellers are unable to
reach such agreement within twenty (20) days of receipt of the
Objection Notice by Buyer, the parties agree to cause independent
accountants of recognized standing reasonably satisfactory to Sellers
and Buyer (who shall not have a material relationship with Buyer, the
Company or any Seller) (the "Accounting Referee") promptly to review
this Agreement and the disputed amounts. The Accounting Referee shall
deliver to Sellers and Buyer, as promptly as practicable, a reporting
setting forth the calculation of the disputed amount. The report of the
Accounting Referee shall be final and binding upon the parties hereto.
The cost of each such review and report shall be borne by Sellers;
provided however, that Buyer shall bear all the expenses associated
with any such review if the applicable Earnout Payment exceeds Buyer's
original calculation of such amount by more than five percent (5%) of
such original calculation. Each of the Sellers agrees to keep any
information provided pursuant to this Section 2.03 confidential;
provided; however; that nothing in this sentence shall prevent Sellers
from using such information to exercise their right to dispute the
calculation as set forth above or to file any required tax returns.
(g) In the event of any dispute regarding the calculation of
the Earnout Payments or the enforcement of the provisions of this
Section 2.03, the prevailing party shall be entitled to payment of its
reasonable attorneys fees and expenses by the other party. In any such
dispute the Sellers, in the aggregate, shall not be entitled to receive
fees of more than one such counsel.
(h) In addition to any rights now or hereafter granted under
this Agreement, applicable law or otherwise and not by way of
limitation of any such rights, Buyer shall have the right to offset any
and all Earnout Payments payable to any Seller pursuant to this Section
2.03, against any amount owed by such Seller to the Company, including,
without limitation, the amounts payable by such Seller to any
indemnitee pursuant to Section 11.02(a) or 11.02(b).
2.04. ESCROW.
Buyer shall withhold an aggregate of $125,000 (the "Escrow Amount" and
together with the First Year Earnout Payments, the "Reserve Accounts") of the
cash purchase price payable pursuant to Section 2.01(a). The Escrow Amount shall
be withheld from each Seller in proportion to the Seller Proportion and is as
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set forth on Schedule 2.01. The Escrow Amount shall be paid to the Sellers by
Buyer within 10 days of the First Year Earnout Due Date, unless and except to
the extent that a Seller owes any Damages to Buyer, or there are any unresolved
claims for Damages of Buyer, pursuant to Article XI. After payment of any such
Damages and resolution of any such unresolved claim, any portion of the Escrow
Amount remaining owed to a Seller with respect to such claim shall be promptly
paid by the Buyer to the Seller. Buyer shall pay interest to each Seller on the
Escrow Amount paid to such Seller from the Closing through the date of payment
at the rate of 2.25% per annum. Any portion of the Escrow Amount determined to
be owed by a Seller to Buyer shall be promptly released to the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO
THE COMPANY
Except as set forth in the disclosure schedules dated as of the date
hereof and delivered herewith to Buyer (which disclosure schedules identify the
section and subsection to which each disclosure therein relates), the Company
and each of the Sellers hereby represent and warrant, jointly and severally, to
Buyer as of the date hereof and as of the Closing Date that:
3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction, including
Florida, New Jersey and the Philippines, where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect. The
Company has heretofore delivered to Buyer true and complete copies of the
corporate charter and bylaws of the Company as currently in effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by the Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby and thereby, are within the Company's corporate
powers and have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and other applicable
provisions of any laws, statutes, ordinances or regulations of general
application affecting enforcement of creditors' rights or relief of debtors
generally, (ii) the availability of specific performance, injunctive relief, or
other equitable remedies (whether in a court of equity or at law), or (iii)
limitations of publicly policy.
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3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
and performance by the Company and Sellers of this Agreement require no action
by or in respect of, or filing with, any governmental body, agency, official or
authority.
(b) Except as set forth in Schedule 3.03, no consent, approval, waiver
or other action (a "Required Consent") by any Person under any contract,
agreement, indenture, lease, instrument or other document to which the Company
or any Subsidiary is a party or by which any of them is bound is required or
necessary for the execution, delivery and performance by the Company of this
Agreement, or for the consummation of the transactions contemplated hereby.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement, and the consummation of the transactions contemplated
hereby, do not and will not (i) contravene or conflict with the corporate
charter or bylaws of the Company, (ii) contravene or conflict with any provision
of any law, regulation, judgment, injunction, order, Permit or decree binding
upon or applicable to the Company or any Subsidiary; (iii) assuming the receipt
of all Required Consents, constitute a default (with or without notice or lapse
of time, or both) under or give rise to any right of termination, cancellation
or acceleration of any right or obligation of the Company or any Subsidiary or
to a loss of any benefit to which the Company or any Subsidiary is entitled
under any provision of any agreement, contract or other instrument binding upon
the Company or any Subsidiary or by which any of their assets may be bound or
(iv) result in the creation or imposition of any Lien on any asset of the
Company or any Subsidiary.
3.05. CAPITALIZATION. Schedule 3.05 sets forth the designation, number
of authorized shares and number of outstanding shares of each class of capital
stock of the Company and a list of all holders of capital stock of the Company
including, without limitation, the Employee Shares and holders of Employee
Shares. All outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and are owned as
shown on Schedule 3.05. The Employee Shares, when issued, will be duly
authorized and validly issued, fully paid and non-assessable and will be owned
as shown on Schedule 3.05. Except as set forth on Schedule 3.05, there are no
outstanding (i) shares of capital stock, other securities or phantom or other
equity interests of the Company, (ii) securities of the Company convertible into
or exchangeable for shares of capital stock or other securities of the Company
or (iii) options or other rights to acquire from the Company any capital stock,
other securities or phantom or other equity interests of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). Except for the Employee Shares, there are no outstanding
obligations of the Company or any Subsidiary, actual or contingent, to issue or
deliver or to repurchase, redeem or otherwise acquire any Company Securities.
3.06. SUBSIDIARIES. The Company does not have and never has had any
Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.07. FINANCIAL STATEMENTS. (a) Attached as Schedule 3.07 are true and
complete copies of:
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(i) the unaudited statements of operations and cash flows for
each of the 12 month periods ended December 31, 2002 and December 31,
2003 and the unaudited balance sheet of the Company as of the end of
each such period and as of December 31, 2001; and
(ii) the unaudited balance sheet of the Company as of June 30,
2004 (the "Balance Sheet") and the related unaudited statements of
operations and cash flows of the Company for the six month period ended
June 30, 2004 ((i) and (ii) collectively referred to as the "Financial
Statements").
(b) Each of the balance sheets included in the Financial Statements
fairly presents in all material respects the financial position of the Company
as of its date, and the other statements included in the Financial Statements
fairly present in all material respects the results of operations and cash
flows, as the case may be, of the Company for the periods therein set forth, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise set forth
therein and except for the omission of footnote disclosure.
(c) All accounts, notes receivable and other receivables (other than
receivables collected since the Balance Sheet Date) reflected on the Balance
Sheet are, and all accounts and notes receivable of the Company and the
Subsidiaries at the Closing Date will be, valid, genuine and fully collectible
in the aggregate amount thereof, subject to normal and customary trade
discounts, less any reserves for doubtful accounts recorded on the Balance
Sheet. All accounts, notes receivable and other receivables of the Company and
the Subsidiaries at the Balance Sheet Date have been included in the Balance
Sheet. No accounts, notes or other receivables are contingent upon the
performance by the Company of any obligation or contract. No person has any Lien
on any of such receivables and no agreement for deduction or discount has been
made with respect thereto.
3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except
as reflected in the unaudited Financial Statements or in Schedule 3.08, the
Company and the Subsidiaries have conducted their businesses in the ordinary
course consistent with past practices and there has not been any:
(a) Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably
be expected to result in a Material Adverse Change, or any condition,
event or occurrence which, individually or in the aggregate, could
reasonably be expected to prevent or materially delay Sellers' ability
to consummate the transactions contemplated by this Agreement or
perform its obligations hereunder;
(b) declaration, setting aside or payment of any dividend or
other distribution with respect to any Company Securities or any
repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any
Subsidiary;
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(c) amendment of any outstanding security of the Company or
any Subsidiary;
(d) incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money;
(e) creation or assumption by the Company or any Subsidiary of
any Lien on any asset other than Liens for Taxes not yet due and
payable (and for which adequate accruals or reserves have been
established on the Balance Sheet);
(f) making of any loan, advance or capital contributions to or
investment in any Person;
(g) damage, destruction or other casualty loss (whether or not
covered by insurance) that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect;
(h) transaction or commitment made, or any contract or
agreement entered into, by the Company or any Subsidiary relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any Subsidiary of any
contract or other right, in either case, material to the Company and
the Subsidiaries taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(i) change in any method of Tax or financial accounting or
accounting practice or any making of a Tax election or change of an
existing election by the Company or any Subsidiary;
(j) (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any Subsidiary, (iii)
change in benefits payable under existing severance or termination pay
policies of the Company or any Subsidiary or employment agreements to
which the Company or any Subsidiary is a party or (iv) change in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary;
(k) labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representation
thereof to organize any employees of the Company or any Subsidiary;
(l) capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and
equipment in an amount greater than $10,000; or
10
(m) agreement, undertaking or commitment by the Company to do
any of the foregoing.
3.09. PERSONAL PROPERTY. (a) The Company and the Subsidiaries have good
and marketable title to, or in the case of leased personal property have valid
leasehold interests in, all personal property (including machinery and
equipment, inventory, receivables and furniture) (whether tangible or
intangible) reflected on the Balance Sheet or acquired after the Balance Sheet
Date (the "Personal Property"). None of such Personal Property is subject to any
Liens, other than:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for Taxes not yet due and payable (and for which
adequate accruals or reserves have been established on the Balance
Sheet); or
(iii) Liens that do not materially detract from the value of
the Personal Property as now used, or materially interfere with any
present or intended use of the Personal Property.
(b) The Personal Property has no material defects, is in good operating
condition and repair (ordinary wear and tear excepted), and is generally
adequate for the uses to which it is being put.
(c) The Personal Property owned or leased by the Company and its
Subsidiaries, or which it otherwise has the right to use, constitute all of the
Personal Property held for use or used in connection with the business of the
Company and its Subsidiaries and is generally adequate to conduct such business
as currently conducted.
3.10. REAL PROPERTY. (a) The Company does not own any real property.
All real property used or held for use by the Company and its Subsidiaries in
connection with the business of the Company and its Subsidiaries is leased by
the Company and/or its Subsidiaries.
(b) Schedule 3.10(b) completely and accurately describes all leases and
subleases of real property used by or held for use by the Company and its
Subsidiaries in connection with the business of the Company and its Subsidiaries
(the "Leases").
(c) Except as set forth in Schedule 3.10(b), the Leases are in good
standing and are valid, binding and enforceable in accordance with their
respective terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other applicable provisions of any laws,
statutes, ordinances or regulations of general application affecting enforcement
of creditors' rights or relief of debtors generally, (ii) the availability of
specific performance, injunctive relief, or other equitable remedies (whether in
a court of equity or at law), or (iii) limitations of public policy.
11
(d) There does not exist under any such Lease any default by the
Company or its Subsidiaries or, to the Company's Knowledge, by any other Person,
or any event that, with notice or lapse of time or both, would constitute a
default by the Company or its Subsidiaries or, to the Company's Knowledge, by
any other Person. The Company and its Subsidiaries have delivered to Buyer
complete and accurate copies of all Leases, including all amendments and
agreements related thereto. All rent and other charges currently due and payable
under the Leases have been paid.
(e) The Company and/or the Subsidiaries, as applicable, are the holder
of the lessee's (or sublessee's, as the case may be) interest under the Leases
and neither has assigned the Leases nor subleased all or any portion of the
premises leased thereunder to any Person.
3.11. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Financial
Statements or set forth in Schedule 3.11, there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than liabilities incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date,
which in the aggregate are not material to the Company and the Subsidiaries,
taken as a whole.
3.12. LITIGATION. There is no claim, action, suit, investigation or
proceeding pending against or, to the Company's Knowledge, threatened against or
affecting, the Company or any Subsidiary or any of their respective properties
or the transactions contemplated hereby before any court or arbitrator or any
governmental body, agency, official or authority, nor has there been any claim,
action, suit, investigation or proceeding affecting the Company or any
Subsidiary or any of their respective properties that had, or could be
reasonably be expected to have, a Material Adverse Effect.
3.13. MATERIAL CONTRACTS. (a) Except for agreements, contracts, plans,
leases, arrangements or commitments disclosed in Schedule 3.13, as of the date
of this Agreement neither the Company nor any Subsidiary is a party to or
subject to any:
(i) lease;
(ii) contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by
the Company and/or its Subsidiaries of, or pursuant to which in the
last 12 months the Company and/or its Subsidiaries have paid, $10,000
or more;
(iii) sales, distribution or other similar agreement providing
for the sale by the Company and/or its Subsidiaries of, or pursuant to
which in the last 12 months the Company and/or its Subsidiaries sold,
materials, supplies, goods, services, equipment or other assets for an
aggregate purchase price of $10,000 or more;
12
(iv) partnership, joint venture or other similar contract,
arrangement or agreement;
(v) contract relating to indebtedness for borrowed money or
the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset), except contracts relating to
indebtedness incurred in the ordinary course of business in an amount
not exceeding $10,000;
(vi) employment or consulting agreement;
(vii) license, technology transfer, franchise or other
agreement in respect of any Intellectual Property or other property
owned or used by the Company and its Subsidiaries;
(viii) agency, dealer, sales representative or other similar
agreement;
(ix) contract or other document that limits the freedom of the
Company or any Subsidiary to compete in any line of business or with
any Person or in any area or which would so limit the freedom of the
Company or any Subsidiary after the Closing Date;
(x) contract or commitment with or for the benefit of any
Interested Person; or
(xi) other contract or commitment not made in the ordinary
course of business that is material to the Company and the Subsidiaries
taken as a whole.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed in any schedule to this Agreement or required to be disclosed pursuant
to Section 3.13(a) is a valid and binding agreement of the Company or a
Subsidiary (except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other applicable provisions of any laws,
statutes, ordinances or regulations of general application affecting enforcement
of creditors' rights or relief of debtors generally, (ii) the availability of
specific performance, injunctive relief, or other equitable remedies (whether in
a court of equity or at law), or (iii) limitations of public policy), and is in
full force and effect, and neither the Company, any Subsidiary nor, to the
Company's Knowledge, any other party thereto is in default in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment, nor, to the knowledge of the Company, has any event
or circumstance occurred that, with notice or lapse of time or both, would
constitute an event of default thereunder.
3.14 TECHNOLOGY AND INTELLECTUAL PROPERTY. (a) Schedule 3.14 lists: (i)
all patents and all registered trademarks, service marks, copyrights and mask
works, and any applications and renewals for any of the foregoing owned by or on
behalf of the Company and any of its Subsidiaries; (ii) all hardware products
and tools, software and firmware products and tools and services that are
currently sold, published, offered, or under development by the Company and any
of its Subsidiaries; and (iii) all licenses (in and out), sublicenses and other
agreements to which the Company and any of its Subsidiaries is a party and
pursuant to which the Company
13
and any of its Subsidiaries or any other Person is authorized to use any of the
Company Intellectual Property or exercise any rights with respect thereto.
(b) Each item of Company Intellectual Property is either: (i) owned
solely by the Company or one of its Subsidiaries free and clear of any Liens; or
(ii) rightfully used and authorized for use by the Company or one of its
Subsidiaries and their respective successors pursuant to a valid and enforceable
written license (except as limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium, and other applicable provisions of any laws,
statutes, ordinances or regulations of general application affecting enforcement
of creditors' rights or relief of debtors generally, (B) the availability of
specific performance, injunctive relief, or other equitable remedies (whether in
a court of equity or at law), or (C) limitations of public policy). All of the
Company Intellectual Property that is used by the Company or its Subsidiaries
pursuant to a license or other grant of a right by a third party to use its
proprietary information is separately identified as such in Schedule 3.14. The
Company and its Subsidiaries have all rights in the Company Intellectual
Property necessary to carry out the Company's and the Subsidiaries' former,
current and currently planned future activities, including without limitation
(except as noted in Schedule 3.14) rights to make, use, exclude others from
using, reproduce, modify, adapt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent, lease, assign and sell the Company Intellectual Property in all
geographic locations and fields of use, and to sublicense any or all such rights
to third parties, including the right to grant further sublicenses.
(c) Neither the Company nor any Subsidiary is in violation of any
license, sublicense or other agreement to which the Company or any Subsidiary is
a party or otherwise bound relating to any of the Company Intellectual Property.
Except as noted in Schedule 3.14, neither the Company nor any Subsidiary is
obligated to provide any consideration (whether financial or otherwise) to any
third party, nor is any third party otherwise entitled to any consideration,
with respect to any exercise of rights by the Company or any Subsidiary or
Buyer, as successor to the Company or any Subsidiary, in the Company
Intellectual Property.
(d) The use of the Company Intellectual Property by the Company and its
Subsidiaries and their customers as currently used and as currently proposed to
be used does not infringe any other Person's copyright, trade secret rights,
right of privacy, right in personal data, moral right or other intellectual
property right. The use by the Company and its Subsidiaries and their customers
of the Company Intellectual Property as currently used and as currently proposed
to be used does not infringe any other Person's patent, trademark, service mark,
trade name, firm name, logo, trade dress or mask work. No claims (i) challenging
the validity, enforceability, effectiveness or ownership by the Company or any
Subsidiary of any of the Company Intellectual Property or (ii) to the effect
that the use, reproduction, modification, manufacture, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any Company Intellectual
Property by the Company and its Subsidiaries, infringes or will infringe on any
intellectual property or other proprietary or personal right of any Person have
been asserted against the Company or any Subsidiary or, to the Company's
Knowledge, are threatened by any Person nor does there exist, to the Company's
Knowledge, any valid basis for such a claim. There are no legal or governmental
proceedings, including interference, re-examination, reissue, opposition,
14
nullity, or cancellation proceedings pending that relate to any of the Company
Intellectual Property, other than review of pending patent applications, and
neither the Company, any Subsidiary nor any Seller is aware of any information
indicating that such proceedings are threatened or contemplated by any
governmental entity or any other Person. All granted or issued patents and mask
works, all registered trademarks and service marks, and all copyright
registrations owned by the Company or any Subsidiary are valid, enforceable and
subsisting. To the Company's Knowledge, there is no unauthorized use,
infringement, or misappropriation of any of Company Intellectual Property by any
third party, employee or former employee.
(e) Schedule 3.14 separately lists all parties (other than employees)
who have created any portion of, or otherwise have any rights in or to, the
Company Intellectual Property. The Company and each Subsidiary have secured from
all parties (including employees) who have created any portion of, or otherwise
have any rights in or to, the Company Intellectual Property owned by the Company
valid and enforceable written assignments of any such work, invention,
improvement or other rights to the Company and each Subsidiary and have provided
true and complete copies of such assignments to Buyer.
(f) The transactions contemplated under this Agreement will not alter,
impair or otherwise affect any rights of the Company or any Subsidiary in any
Company Intellectual Property.
(g) The Company and its Subsidiaries have taken commercially reasonable
measures to protect the proprietary nature of the Company Intellectual Property
and to maintain in confidence all trade secrets and confidential information
owned or used by the Company or any of its Subsidiaries.
(h) Company Intellectual Property does not include any Publicly
Available Software and the Company has not used Publicly Available Software in
whole or in part in the development of any part of Company Intellectual Property
in a manner that may subject Company Intellectual Property in whole or in part,
to all or part of the license obligations of any Publicly Available Software.
"Publicly Available Software" means each of (i) any software that contains, or
is derived in any manner (in whole or in part) from, any software that is
distributed as free software, open source software (e.g. Linux), or similar
licensing and distribution models; and (ii) any software that requires as a
condition of use, modification, and/or distribution of such software that such
software or other software incorporated into, derived from, or distributed with
such software (a) be disclosed or distributed in source code form; (b) be
licensed for the purpose of making derivative works; or (c) be redistributable
at no or minimal charge. Publicly Available Software includes, without
limitation, software licensed or distributed under any of the following licenses
or distribution models similar to any of the following: (a) GNU General Public
License (GPL) or Lesser/Library GPL (LGPL), (b) the Artistic License (e.g.
PERL), (c) the Mozilla Public License, (d) the Netscape Public License, (e) the
Sun Community Source License (SCSL), the Sun Industry Source License (SISL), and
the Apache Server License.
3.15. INSURANCE COVERAGE. The Company maintains the insurance policies
of the type and in amounts set forth on Schedule 3.15.
15
3.16. COMPLIANCE WITH LAWS; PERMITS; NO DEFAULTS. (a) Neither the
Company nor any Subsidiary is in violation of, or has violated, any applicable
provisions of any laws, statutes, ordinances or regulations, except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Schedule 3.16 correctly describes each governmental license,
permit, concession or franchise (a "Permit") material to the business of the
Company, together with the name of the governmental agency or entity issuing
such Permit. Such Permits are valid and in full force and effect, and none of
such Permits will be terminated or impaired or become terminable as a result of
the transactions contemplated hereby.
(c) Neither the Company nor any Subsidiary is in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, any judgment, order or injunction of any court, arbitrator or
governmental body, agency, official or authority which defaults or potential
defaults individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect.
3.17. EMPLOYEES AND LABOR MATTERS.
(a) Schedule 3.17(a) sets forth, with respect to each employee of the
Company and its Subsidiaries (including any employee of the Company and its
Subsidiaries who is on a leave of absence or on layoff status subject to recall)
(i) the name of such employee; (ii) such employee's title; and (iii) such
employee's annualized compensation as of the date of this Agreement, including
base salary, vacation and/or paid time off accrual amounts, bonus and/or
commission potential, equity vesting schedule, severance pay potential, and any
other compensation forms. Except as disclosed in Schedule 3.17(a), subject to
applicable provisions of any laws, statutes, ordinances or regulations governing
wrongful termination of employees, the employment of each of the employees of
the Company and its Subsidiaries is terminable by the Company or its Subsidiary
at will.
(b) Schedule 3.17(b) lists all Persons who are currently performing or
have performed since January 1, 2004 services for the Company and its
Subsidiaries who are classified as "consultants" or "independent contractors,"
the compensation of each such Person and whether the Company or a Subsidiary is
party to an agreement with such Person (whether or not in writing). All Persons
engaged by the Company or a Subsidiary as independent contractors, rather than
employees, have been properly classified as such and have been engaged in
accordance with all applicable foreign, federal, state and/or local laws.
(c) Except as disclosed in Schedule 3.17(c), (i) none of the employees
of the Company and its Subsidiaries has notified the Company or its Subsidiary
that he or she intends to terminate his or her employment with the Company or
its Subsidiary, or not to accept employment with Buyer; (ii) to the Company's
Knowledge, no employee of the Company and its Subsidiaries is a party to or is
bound by any employment contract, patent disclosure agreement, noncompetition
agreement or other restrictive covenant or other contract with any third party
16
that would be likely to affect in any way (A) the performance by such employee
of any of his or her duties or responsibilities as an employee, or (B) the
business or operations of the Company and its Subsidiaries; (iii) to the
Knowledge of the Company, no employee of the Company and its Subsidiaries is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company and its
Subsidiaries; and (v) the Company and its Subsidiaries are not and never have
been engaged in any dispute or litigation with an employee or former employee
regarding Intellectual Property matters.
(d) Except as set forth in Schedule 3.05 and Schedule 3.08: (i) the
Company and its Subsidiaries do not have an established severance pay practice
or policy; (ii) no employee of the Company and its Subsidiaries is entitled to
any severance pay, bonus compensation, acceleration of payment or vesting of any
equity interest, or other payment from the Company and its Subsidiaries or, to
the Company's Knowledge, Buyer (other than accrued salary, vacation, or other
paid time off in accordance with the policies of the Company and its
Subsidiaries) as a result of or in connection with the transactions contemplated
by this Agreement or as a result of any termination by the Company and its
Subsidiaries on or after the Closing of any Person employed by the Company and
its Subsidiaries on or prior to the Closing Date.
(e) The Company and its Subsidiaries are in compliance with all
currently applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours. The Company and its
Subsidiaries are not engaged, and to the Company's Knowledge have never engaged,
in any unfair labor practice of any nature. The employees of the Company and its
Subsidiaries have been, and currently are, properly classified under the Fair
Labor Standards Act of 1938, as amended, and under any applicable state law. The
Company and its Subsidiaries have not failed to pay, any of its employees,
consultants or contractors for any wages (including overtime), salaries,
commissions, bonuses, benefits or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such individuals.
(f) To the Company's Knowledge, the Company and its Subsidiaries, and
each employee of the Company and its Subsidiaries, is in compliance with all
applicable immigration law and visa and work permit requirements, and, to the
Company's Knowledge, no visa or work permit held by an employee of the Company
and its Subsidiaries will expire during the six month period following the date
of this Agreement.
3.18. ENVIRONMENTAL COMPLIANCE. (a) The Company has complied in all
material respects with all federal, state and local laws (including, without
limitation, case law, rules, regulations, orders, judgments, decrees, permits,
licenses and governmental approvals) which are intended to protect the
environment and/or human health or safety (collectively, "Environmental Laws")
and (b) Company has not handled, generated, used, stored, transported or
disposed of any material, substance or waste which is regulated by Environmental
Laws ("Hazardous Materials"), except where such handling, generation, use,
storage, transportation or disposal has not had, and could not reasonably be
expected to have, a Material Adverse Effect. The foregoing does not constitute a
17
representation or warranty that no violation of Environmental Laws has occurred
with respect to premises occupied by the Company, although Sellers have no
knowledge of any such violation.
3.19. CUSTOMERS AND SUPPLIERS. Schedule 3.19 sets forth (a) all
customers that have purchased products or services from the Company or its
Subsidiaries in the past 24 months; (b) all customers who are currently under a
maintenance or service agreement with the Company or its Subsidiaries; and (c) a
description of any pending dispute by any of the customers described in either
(a) or (b). Neither the Company nor any Subsidiary has received notice from or
is otherwise aware that (i) any customer (or group of customers under common
ownership or control) that accounted for a material percentage of the aggregate
products and services furnished by the Company and its Subsidiaries during the
past 18 months has stopped or intends to stop purchasing the products or
services of the Company and its Subsidiaries or (ii) any supplier (or group of
suppliers under common ownership or control) that accounted for a material
percentage of the aggregate supplies purchased by the Company and its
Subsidiaries during the past 18 months has stopped or intends to stop supplying
products or services to the Company and its Subsidiaries.
3.20. TRANSACTIONS WITH AFFILIATES. Except as disclosed in Schedule
3.20, there are no agreements, loans, leases, royalty agreements or other
continuing transactions between the Company and its Subsidiaries and (i) any
officer, director or stockholder of the Company or any of their Affiliates or
(ii) any member of any officer, director or stockholder of the Company's family
or any of their Affiliates ("Interested Person"). Except as disclosed in
Schedule 3.20, no Interested Person has any contractual relationship (including
that of creditor or debtor) with the Company and its Subsidiaries other than
such relationships as result solely from being an officer, director or
stockholder of the Company.
3.21. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Sellers, the Company or any Subsidiary who is entitled to any fee or
commission from Buyer, the Company or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.22. OTHER INFORMATION. None of the documents or information delivered
to Buyer in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
The financial projections relating to the Company and its Subsidiaries delivered
to Buyer have been prepared in good faith based on assumptions that management
of the Company believe are reasonable, and neither the Company nor any Seller is
aware of any fact or information that would lead it to believe that such
projections are incorrect or misleading in any material respect.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
RELATING TO SELLERS
Each Seller represents and warrants to, and agrees with, Buyer as
follows, but only with respect to himself and expressly not with respect to any
other Seller:
4.01. TITLE TO AND VALIDITY OF SHARES. Such Seller now has, and on the
Closing Date will have, good and marketable title to and unrestricted power to
vote and sell the Shares designated as owned by such Seller opposite such
Seller's name on Schedule 2.01, free and clear of any Lien and, upon purchase
and payment therefor and delivery to Buyer thereof in accordance with the terms
of this Agreement, Buyer will obtain good and marketable title to such Shares
free and clear of any Lien. All Shares owned by such Seller have been duly
authorized and validly issued and are fully paid and non-assessable. All Shares
to be sold by such Seller are registered in the name of such Seller.
4.02. AUTHORITY. Such Seller has the legal power, right and authority
to enter into and perform this Agreement, and to perform each of his obligations
hereunder. This Agreement has been duly executed and delivered by such Seller
and constitutes a valid and binding obligation of such Seller, enforceable in
accordance with its terms, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and other applicable provisions of any
laws, statutes, ordinances or regulations of general application affecting
enforcement of creditors' rights or relief of debtors generally, (ii) the
availability of specific performance, injunctive relief, or other equitable
remedies (whether in a court of equity or at law), or (iii) limitations of
public policy. The execution, delivery and performance of this Agreement by such
Seller (a) require no action by or in respect of, or filing with, or consent of,
any governmental body, agency or official or any other Person and (b) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or any other
instrument binding upon such Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and Sellers that:
5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
5.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
19
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding agreement of Buyer enforceable against Buyer in accordance with its
terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other applicable provisions of any laws,
statutes, ordinances or regulations of general application affecting enforcement
of creditors' rights or relief of debtors generally, (ii) the availability of
specific performance, injunctive relief, or other equitable remedies (whether in
a court of equity or at law), or (iii) limitations of public policy.
5.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement require no action by or in respect of, or
filing with, any governmental body, agency, official or authority.
5.04. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
corporate charter or bylaws of Buyer or (ii) contravene or conflict with any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer.
5.05. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer threatened against or affecting,
Buyer before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
5.06. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Buyer, the Company
or any Affiliate thereof upon consummation of the transactions contemplated by
this Agreement.
5.07. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLERS
The Company and each Seller agree that:
6.01. CONDUCT OF THE COMPANY. (a) From the date hereof until the
Closing Date, the Company and its Subsidiaries shall conduct their businesses in
the ordinary course consistent with past practices and shall use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, the Company and its Subsidiaries will not:
20
(i) adopt or propose any change in their corporate charter or
bylaws;
(ii) merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) sell, lease, license or otherwise dispose of any
material assets or property except (A) pursuant to existing contracts
or commitments and (B) in the ordinary course consistent with past
practices;
(iv) effect any direct or indirect redemption, purchase or
other acquisition of any Company Securities, or declare, set aside or
pay any dividend or make any other distribution of assets of any kind
whatsoever with respect to any Company Securities;
(v) issue any Company Securities;
(vi) incur any indebtedness for money borrowed; or
(vii) agree or commit to do any of the foregoing.
(b) The Company will not, and will not permit any Subsidiary to, (i)
take or agree or commit to take any action that would make any representation
and warranty made by the Company or Sellers under this Agreement on the date of
its execution and delivery inaccurate in any respect at, or as of any time prior
to, the Closing Date or (ii) omit or agree or commit to omit to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any respect at any such time.
6.02. ACCESS TO INFORMATION. From the date hereof until the Closing
Date, the Company shall (a) give, and shall cause each Subsidiary to give,
Buyer, its counsel, financial advisors, financing sources, auditors and other
authorized representatives full access to the offices, properties, books and
records of the Company and its Subsidiaries, (b) furnish, and will cause each
Subsidiary to furnish Buyer, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Company and its Subsidiaries as such Persons may
reasonably request and (c) instruct the employees, counsel and financial
advisors of the Company and its Subsidiaries to cooperate with Buyer in its
investigation of the Company and its Subsidiaries. No investigation by Buyer
pursuant to this Section shall affect any representation or warranty given by
the Company hereunder or any of Buyer's rights under this Agreement, including
without limitation under Articles X, XI and XII. Buyer agrees to coordinate
closely all such activities with the Company and to conduct such inspection with
appropriate discretion and sensitivity to the Company's relationships with its
employees, customers and suppliers.
6.03. NONCOMPETITION. (a) Each Seller agrees that for a period of two
full years from the Closing Date, except as an officer or employee of the Buyer
or a Subsidiary of Buyer, neither he nor any of his Affiliates shall:
21
(i) engage, either directly or indirectly, as a principal or
for his own account or solely or jointly with others, or as stockholder
in any corporation or joint stock association, in the business of
developing, marketing, distributing, licensing or selling products which
compete, directly or indirectly, with products which the Company has
developed or is currently marketing, distributing, licensing or selling
(consisting of iStore, iManager, iMergence, iMagent, and Researcher)
(the "Business") in the United States; provided that nothing herein
shall prohibit the purchase or ownership of up to 1% of the outstanding
stock of a publicly-traded company that competes with the Business; or
(ii) employ or solicit, or receive or accept, the performance
of services by any employee, consultant or contractor employed by
and/or affiliated with the Company or any Subsidiary as of the Closing
Date, or any such person whose employment or affiliation with the
Company or any Subsidiary has terminated within the previous six
months.
(b) If any provision contained in this Section shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Sellers acknowledge that Buyer would be irreparably harmed by any breach of this
Section and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Sellers agree that Buyer shall be entitled
to injunctive relief requiring specific performance by Sellers of this Section,
and Sellers consent to the entry thereof.
6.04. CONFIDENTIALITY. (a) The Company and Sellers will hold in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning Buyer furnished to the Company, or to Sellers, in connection with the
transactions contemplated by this Agreement, and after the Closing Date all
confidential documents and information concerning the Company, except to the
extent that such information can be shown to have been (i) previously known on a
nonconfidential basis by Sellers, (ii) in the public domain through no fault of
Sellers or (iii) later lawfully acquired by Sellers from sources other than the
Company or Buyer; provided that Sellers may disclose such information to their
respective accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement so long as such persons are
informed by Sellers of the confidential nature of such information and are
directed by Sellers to treat such information confidentially in accordance with
this Agreement. The obligation of the Company and Sellers to hold any such
information in confidence shall be satisfied if they exercise the same care with
22
respect to such information as they would take to preserve the confidentiality
of their own similar information. If this Agreement is terminated, the Company
and Sellers will destroy or deliver to Buyer, upon request, all documents and
other materials, and all copies thereof, obtained by the Company, or by Sellers
or their Affiliates, or on their behalf concerning Buyer in connection with this
Agreement that are subject to such confidence.
(b) The Buyer will hold in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company furnished to Buyer
in connection with the transactions contemplated by this Agreement, unless and
until the Closing shall occur, except to the extent that such information can be
shown to have been (i) previously known on a nonconfidential basis by Buyer,
(ii) in the public domain through no fault of Buyer or (iii) later lawfully
acquired by Buyer from sources other than the Company; provided that Buyer may
disclose such information to its accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement so
long as such persons are informed by Buyer of the confidential nature of such
information and are directed by Buyer to treat such information confidentially
in accordance with this Agreement. The obligation of Buyer to hold any such
information in confidence shall be satisfied if Buyer exercises the same care
with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is terminated,
the Buyer will destroy or deliver to the Company, upon request, all documents
and other materials, and all copies thereof, obtained by Buyer or its
Affiliates, or on their behalf concerning the Company in connection with this
Agreement that are subject to such confidence.
(c) This Agreement supersedes the mutual nondisclosure and
confidentiality agreements, dated March 12, 2004, between Buyer and the Company
(the "Confidentiality Agreements"), and the Confidentiality Agreements shall be
of no further force and effect.
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ARTICLE VIA
COVENANTS OF THE BUYER
The Buyer agrees that:
6.01A. FUTURE BUSINESS STRUCTURE. Subject to any unforeseen legal
requirements and following the completion of the actions contemplated by this
Agreement, Buyer intends to continue with the current business operations of the
Company both in the United States and the Philippines without substantial change
to structure or personnel. Upon completion of the transactions contemplated
hereby, the name of the Company will be changed to "Datawatch Technologies
Corporation". Effective on the Closing Date, Rene Tenazas will be President of
the Company, and the directors of the Company will be Robert Hagger, Alan
MacDougall and Rene Tenazas. Notwithstanding the foregoing, Buyer considers full
integration and merger of the two organizations to be important to the success
of the resulting combined operations. The Company and the Sellers acknowledge
that the foregoing is subject to change at Buyer's discretion based on Buyer's
and Company's future business, operations, financial performance or prospects.
6.02A. CESSATION OF COMPETITION IN MARKETS. In the event Buyer ceases
competing, directly or indirectly, in the Business Intelligence, Content or
Document Management markets (collectively, the "BI Markets"), Buyer will be
subject to payment to the Sellers of a minimum Earnout Payment of $1,000,000,
calculated and paid as provided in this Section 6.02A. Effective upon the date
on which Buyer ceases competing in the BI Markets, Buyer will pay as Earnout
Payments and at the times determined in accordance with the payment provisions
of Section 2.03, an aggregate amount equal to $1,000,000 less the aggregate
amounts paid as Earnout Payments with respect to Total Researcher Revenues as
provided in Section 2.03, such amount to be paid ratably over the remaining
fiscal quarters of the Earnout Period.
ARTICLE VII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
7.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement and to perform any obligations imposed on them by
this Agreement. Sellers and Buyer each agree, and Sellers, prior to the Closing,
and Buyer, after the Closing, agree to cause the Company, to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement. This
provisions shall survive the Closing.
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7.02. CERTAIN FILINGS. The Company, Sellers and Buyer shall cooperate
with each other (a) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby prior to the
Closing and, except as may be required by applicable law or stock exchange
regulation, will not issue any such press release or make any such public
statement prior to such consultation. The parties agree that, following the
Closing, Buyer and the Company may issue any press release or make any public
statement with respect to this Agreement or the transactions contemplated hereby
as it deems, in its sole discretion, appropriate.
ARTICLE VIII
TAX MATTERS
8.01. TAX REPRESENTATIONS.
(a) Definitions.
"Tax" and "Taxes" means all federal, state, local and foreign
net income, alternative or add-on minimum, estimated, gross income,
gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit taxes, customs duties and
other taxes, governmental fees and other like assessments and charges
of any kind whatsoever (including Tax liabilities incurred or borne as
a transferee or successor, or by contract or otherwise), together with
all interest, penalties, additions to tax and additional amounts with
respect thereto.
"Tax Returns" means all returns, declarations, reports, claims
for refund, information statements and other documents relating to
Taxes, including all schedules and attachments thereto, and including
all amendments thereof.
"Tax Authority" means any governmental authority responsible
for the imposition of any Tax.
(b) Except as set forth on Schedule 8.01, the Company and each
Subsidiary have timely filed all Tax Returns required to be filed (determined
without regard to extensions) on or before the date hereof. The Company and each
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Subsidiary have paid, or made provision (and made adequate accruals or reserves
on the Balance Sheet) for the payment of, all Taxes owed (whether or not shown,
or required to be shown, on Tax Returns) on or before the date hereof. Each of
the Company and its Subsidiaries has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
All Tax Returns filed by the Company and the Subsidiaries were complete and
correct in all respects, and such Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities, status and other
matters of the Company and the Subsidiaries and any other information required
to be shown thereon.
(c) Except as set forth in Schedule 8.01, none of the Tax Returns filed
by the Company or any Subsidiary or Taxes payable by the Company or any
Subsidiary have been the subject of an audit, action, suit, proceeding, claim,
examination, deficiency or assessment by any governmental authority, and no such
audit, action, suit, proceeding, claim, examination, deficiency or assessment is
currently pending or, to the Company's Knowledge, threatened.
(d) Neither the Company nor any Subsidiary is currently the beneficiary
of any extension of time within which to file any Tax Return, and neither the
Company nor any Subsidiary has waived any statute of limitation with respect to
any Tax or agreed to any extension of time with respect to a Tax assessment or
deficiency. All material elections with respect to Taxes affecting the Company
or any Subsidiary, as of the date hereof, are set forth in the Financial
Statements or in Schedule 8.01.
(e) Neither the Company nor any Subsidiary is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of (i) any "excess parachute payments" within
the meaning of Section 280G of the Code (without regard to the exceptions set
forth in Sections 280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for
which a deduction would be disallowed or deferred under Section 162 or Section
404 of the Code. Except as set forth in Schedule 8.01, none of the shares of
outstanding capital stock of the Company or any Subsidiary is subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code.
No portion of the Purchase Price is subject to the Tax withholding provisions of
Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any
other provision of law.
(f) Neither the Company nor any Subsidiary is a party to or member of
any joint venture, partnership, limited liability company or other arrangement
or contract which could be treated as a partnership for federal income tax
purposes. Neither the Company nor any Subsidiary has ever filed a consent
pursuant to Section 341(f) of the Code, relating to collapsible corporations and
Section 341(f)(2) does not apply to any of the Company's or any Subsidiary's
assets. Neither the Company nor any Subsidiary is, or has been, a U.S. real
property holding company (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither
the Company nor any Subsidiary owns an interest in real property in any
jurisdiction in which a Tax is imposed, or the value of the interest reassessed,
on the transfer of an interest in real property and which treats the transfer of
an interest in an entity that owns an interest in real property as a transfer of
the interest in real property. Neither the Company nor any Subsidiary has ever
been either a "controlled corporation" or a "distributing corporation" (within
26
the meaning of Section 355(a)(1)(A) of the Code) with respect to a transaction
that was described in, or intended to qualify as a tax-free transaction pursuant
to Section 355 of the Code. Neither the Company nor any Subsidiary has net
operating losses or other tax attributes presently subject to limitation under
Sections 382, 383 or 384 of the Code, or the federal consolidated return
regulations (other than limitations imposed as a result of the transactions
contemplated by this Agreement). Neither the Company nor any Subsidiary has made
or agreed to make any adjustment under Section 481(a) of the Code (or any
corresponding provision of state, local or foreign Tax law) by reason of a
change in accounting method or otherwise, and will not be required to make such
an adjustment as a result of the transactions contemplated by this Agreement.
Except as set forth in Schedule 8.01, neither the Company nor any Subsidiary has
ever (i) made an election under Section 1362 of the Code to be treated as an S
corporation for federal income tax purposes or (ii) made a similar election
under any comparable provision of any state, local or foreign Tax law.
(g) Neither the Company nor any Subsidiary is a party to any Tax
sharing agreement or similar arrangement (including, but not limited to, an
indemnification agreement or arrangement). Neither the Company nor any
Subsidiary has ever been a member of a group filing a consolidated federal
income Tax Return or a combined, consolidated, unitary or other affiliated group
Tax Return for state, local or foreign Tax purposes (other than a group the
common parent of which is the Company), and neither the Company nor any
Subsidiary has any liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any corresponding
provision of state, local or foreign Tax law), or as a transferee or successor,
or by contract, or otherwise.
(h) The unpaid Taxes of the Company and its Subsidiaries did not, as of
the Balance Sheet Date exceed the reserve for actual Taxes (as opposed to any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) as shown on the Balance Sheet, and will not exceed such
reserve as adjusted for the passage of time through the Closing Date in
accordance with the reasonable past custom and practice of the Company and its
Subsidiaries in filing Tax Returns. Neither the Company nor any Subsidiary will
incur any liability for Taxes from the Balance Sheet Date through the Closing
Date other than in the ordinary course of business and consistent with
reasonable past practice.
(i) Schedule 8.01 hereto contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax is properly payable by the Company or any
Subsidiary. No claim has ever been made by a Tax Authority in a jurisdiction
where the Company or any Subsidiary does not file Tax Returns that the Company
or any Subsidiary is or may be subject to Tax in that jurisdiction. Neither the
Company nor any Subsidiary has, or has ever had, a permanent establishment or
other taxable presence in any foreign country, as determined pursuant to
applicable foreign law and any applicable Tax treaty or convention between the
United States and such foreign country.
(j) The Company has delivered to Buyer correct and complete copies of
all income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its Subsidiaries since
its incorporation. Schedule 8.01 sets forth the following information with
respect to each of the Company and its Subsidiaries as of the most recent
practicable date: (A) the basis of the Company or Subsidiary in its assets; (B)
27
the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (C) the amount of any deferred gain or loss
allocable to the Company or Subsidiary arising out of any deferred intercompany
transaction.
8.02 TAX COVENANTS. The parties hereto agree that:
(a) Cooperation on Tax Matters.
(i) Buyer, the Company and its Subsidiaries and Sellers shall
cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Company and its Subsidiaries and Sellers agree (A) to retain all books
and records with respect to Tax matters pertinent to the Company and
its Subsidiaries relating to any Tax period beginning before the
Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of
the respective Tax periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so
requests, the Company and its Subsidiaries or Sellers, as the case may
be, shall allow the other party to take possession of such books and
records.
(ii) Buyer and Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) Buyer and Sellers further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
(b) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Sellers
when due, and Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
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ARTICLE IX
EMPLOYEE BENEFITS
9.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used
herein, having the following meanings:
"Benefit Arrangement" means an employment, severance or similar
contract, arrangement or policy (written or oral) and each plan or arrangement
providing for severance, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, pension or retirement benefits or for
deferred compensation, profit-sharing, bonuses, phantom stock, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits or any co-employment
agreement that (i) is not an Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by the Company or any of its ERISA
Affiliates or any Co-Employer and (iii) covers any Employee or former Employee
of the Company.
"Co-Employer" means each Subsidiary and any entity that is or was
considered to be a co-employer with the Company.
"Employee" for purposes of this Article IX means any employee of the
Company, including any employee Co-employed by the Company and Co-Employer.
"Employee Plan" means each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates or any Co-Employer, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code or Section 4001 of ERISA.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 4001(a)(3) of ERISA.
9.02. ERISA REPRESENTATIONS. The Company and each Seller, jointly and
severally, hereby represent and warrant to Buyer as of the date hereof and as of
the Closing Date that:
(a) Schedule 9.02 lists each Employee Plan that covers any Employee,
copies of all of which, and a summary plan description of each, have previously
been furnished to Buyer. With respect to each Employee Plan, all annual reports
(Form 5500) required to be filed with the Internal Revenue Service or Department
of Labor have been properly filed on a timely basis and the Company has provided
the most recently filed Form 5500.
29
(b) Schedule 9.02 also includes a list of each Benefit Arrangement of
the Company and each Subsidiary, copies or descriptions of which have been made
available or furnished previously to Buyer.
(c) None of the Employee Plans or Benefit Arrangements listed on
Schedule 9.02 is subject to the laws of any jurisdiction outside the United
States.
(d) No non-exempt "prohibited transaction," as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate
maintains or has ever maintained or contributed to or expects to incur liability
with respect to any Multiemployer Plan or Employee Plan subject to Title IV of
ERISA. Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred
nor does it reasonably expect to incur any liability with respect to any
transaction described in Section 4069 of ERISA.
(f) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to Buyer
copies of the most recent Internal Revenue Service determination or opinion
letter with respect to each such Employee Plan. Each Employee Plan and Benefit
Arrangement has been maintained in compliance with its terms and with the
applicable requirements prescribed by any and all statutes, orders, rules and
regulations.
(g) With respect to the Employees and former Employees, there are no
employee post-retirement health or welfare plans in effect, except as required
by Section 4980B of the Code or applicable state law. No tax under Section 4980B
or 4980D of the Code has been incurred in respect of any Employee Plan that is a
group health plan, as defined in Section 5000(b)(1) of the Code.
(h) All contributions and payments accrued under each Employee Plan and
Benefit Arrangement, determined in accordance with prior funding and accrual
practices, as adjusted to include proportional accruals for the period ending on
the Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent reflected on the Closing Balance Sheet. There has been no
amendment to, written interpretation of or announcement (whether or not written)
by the Company, any Subsidiary or any of their respective ERISA Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended prior to the date
hereof.
(i) No Employee will become entitled to any material bonus, retirement,
severance or similar benefit or enhanced benefit solely as a result of the
transactions contemplated hereby.
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9.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article IX or
any other provision in this Agreement shall create any third party beneficiary
or other rights in any employee or former employee (including any beneficiary or
dependent thereof) of the Company or any Subsidiary in respect of continued
employment (or resumed employment) with the Company or any Subsidiary and no
provision of this Article IX shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under any
Employee Plan or Benefit Arrangement or any plan or arrangement that may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after the
Closing Date any Employee Plan or Benefit Arrangement.
ARTICLE X
CONDITIONS TO CLOSING
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer, the Company and Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(b) Buyer shall enter into mutually agreeable employment arrangements
with each of Rene Tenazas and Scott Rade. Buyer shall offer employment to each
of the other current employees of the Company, including three months severance
or notice for a termination without cause.
10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) the Company and each Seller shall have performed in all material
respects all of their obligations hereunder required to be performed by them on
or prior to the Closing Date, (ii) the representations and warranties of the
Company and each Seller contained in this Agreement at the time of its
execution and delivery and in any certificate or other writing delivered by the
Company or a Seller pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse
Effect, shall be true and correct at and as of the Closing Date as if made at
and as of such date and (iii) Buyer shall have received a certificate signed by
the President of the Company and by each Seller to the foregoing effect.
(b) No court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or regulation,
restraining the effective operation by Buyer of the business of the Company and
the Subsidiaries after the Closing Date and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit,
alter, prevent or materially delay the Closing shall have been instituted by
any Person before any court, arbitrator or governmental body, agency or
official and be pending.
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(c) The Company shall have received all of the Required Consents.
(d) Sellers shall have delivered to Buyer certificates for the Shares
duly endorsed or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
(e) The Company shall have issued the Employee Shares immediately prior
to the Closing to the employees as set forth in Schedule 3.05 and shall have
made appropriate arrangements with respect to any withholding obligation with
respect to such shares.
(f) Buyer shall have entered into effective Additional Seller Purchase
Agreements with each of the Additional Sellers and shall have received the
stock certificates duly endorsed in blank, for the Shares owned by the
Additional Sellers.
(g) Final Stockholders' Equity, determined in accordance with Section
10.04, shall be at least $300,000
10.03. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of Sellers
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a)(i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Buyer contained in this
Agreement at the time of its execution and delivery and in any certificate or
other writing delivered by Buyer pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct at and as of the Closing
Date as if made at and as of such date and (iii) Sellers shall have received a
certificate signed by the President of Buyer to the foregoing effect.
(b) Buyer shall have paid to each Seller the cash purchase price (less
such Seller's portion of the Escrow Amount) for such Seller's Shares by wire
transfer of immediately available funds to the account designated by such
Seller in accordance with 2.02(a).
(c) Buyer shall have paid to each Additional Seller the cash purchase
price (less any applicable withholding) for such Additional Sellers' Shares.
10.04. FINAL STOCKHOLDERS EQUITY.
(a) Definitions. The following terms, as used herein, have the
following meanings:
"Closing Balance Sheet" means a consolidated balance sheet of the
Company and its Subsidiaries as of the close of business on the day immediately
preceding the Closing Date that (x) fairly presents the financial position of
the Company and its Subsidiaries as at the close of business on the day
immediately preceding the Closing Date on a basis consistent with the
presentation in the Balance Sheet, (y) includes line items substantially
consistent with those used in the preparation of the Balance Sheet and (z) is
prepared in accordance with generally accepted accounting principles
consistently.
32
"Closing Stockholders' Equity" means the consolidated stockholders'
equity of the Company and its Subsidiaries as of the close of business on the
day immediately preceding the Closing Date as shown on the Closing Balance
Sheet.
"Final Stockholders' Equity" means Closing Stockholders' Equity (i) as
shown in the Company's calculation delivered pursuant to Section 10.03(b) if no
notice of disagreement with respect thereto is duly delivered by Buyer pursuant
to Section 10.03(c) or (ii) if such a notice of disagreement is duly delivered
by Buyer, as agreed by the parties after good faith negotiation pursuant to
Section 10.03(c).
(b) Preparation of Closing Balance Sheet. The Company will cause the
Closing Balance Sheet to be prepared and will prepare a certificate based on
such Closing Balance Sheet setting forth its calculation of Closing
Stockholders' Equity, each of which shall be delivered to prior to the Closing
Date.
(c) Disagreement by Buyer. If Buyer disagrees with the Company's
calculation of Closing Stockholders' Equity, Buyer may deliver a notice to the
Company on the Closing Date disagreeing with such calculation and setting forth
Buyer's calculation of the Closing Balance Sheet and Closing Stockholders'
Equity. Buyer and the Company agree to negotiate in good faith to resolve any
disagreements with respect to the Closing Stockholders' Equity. Notwithstanding
anything to the contrary in the agreement, if Buyer and the Company cannot agree
on the Closing Stockholders' Equity, then Buyer shall have no obligation to
consummate the Closing.
(d) Cooperation. The parties hereto agree that they will cooperate and
assist in the preparation of the Closing Balance Sheet and the calculation of
Closing Stockholders' Equity, including without limitation the making available
to the extent necessary of books, records, work papers and personnel.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the second anniversary of the Closing Date or:
(i) in the case of Section 3.18 (Environmental Compliance),
until the fifth anniversary of the Closing Date;
33
(ii) in the case of the covenants, agreements, representations
and warranties contained in Article VIII (Tax) and Article IX (Employee
Benefits), until the expiration of the statutory period of limitations
applicable to third party claims pertaining to such matters, if later
(giving effect to any waiver, mitigation or extension thereof); and
(iii) in the case of Article IV and Sections 6.04
(Confidentiality), indefinitely; and
(iv) in the case of Section 6.03 (Noncompetition), for the
period set forth therein.
Notwithstanding the preceding sentence, any covenant, agreement, representation
or warranty in respect of which indemnity may be sought under Section 11.02
shall survive the time at which it would otherwise terminate pursuant to the
preceding sentence, if notice of the inaccuracy or breach thereof giving rise to
such right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
11.02. INDEMNIFICATION. (a) Subject to the provisions of Section 11.04,
each of the Sellers, severally and not jointly, hereby indemnifies Buyer (which
term, effective at the Closing, shall include without duplication, the Company
and its Subsidiaries for purposes of this Section 11.02) against and agrees to
hold them harmless from such Seller's Pro Rata Share of any and all damage,
loss, liability and expense (including without limitation reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer arising
out of:
(i) (A) any misrepresentation in this Agreement or any breach
of a representation or warranty (determined without regard to any
materiality qualification contained in any representation or warranty
giving rise to claim for indemnity hereunder) made by the Company and
by the Sellers pursuant to the provisions of this Agreement other than
Article IV (Representations and Warranties Relating to Sellers) and any
certificate or other writing delivered pursuant hereto; and (B) any
claim, action, suit or proceeding by any third party alleging facts
that if proven true would constitute a misrepresentation or breach of
warranty by the Company (a "Company Third Party Claim");
(ii) the payment by the Company of consulting fees to MMT
Consulting and New Strategies Corp., and immigration matters relating
to the Company's Filipino employees with respect to occurrences prior
to the Closing; and
(iii) any breach of any covenant or agreement made by the
Company or the Sellers pursuant to this Agreement.
"Pro Rata Share" means a fraction the numerator of which is the number of Shares
owned by the applicable Seller and the denominator of which is the total number
of Shares owned by all Sellers.
(b) Subject to Section 11.04, each Seller, severally and not jointly,
hereby indemnifies Buyer and, effective at the Closing, without duplication, the
Company and agrees to hold them harmless from and against all Damages incurred
34
or suffered by Buyer or the Company arising out of any misrepresentation in this
Agreement or any breach of any representation or warranty by such Seller
pursuant to Article IV (Representations and Warranties Relating to Sellers).
(c) Buyer hereby indemnifies each Seller against and agrees to hold it
harmless from any and all Damages incurred or suffered by such Seller arising
out of:
(i)(A) any misrepresentation in this Agreement or any breach
of warranty (determined without regard to any materiality qualification
contained in any representation or warranty giving rise to claim for
indemnity hereunder) made or to be performed by Buyer pursuant to the
provisions of this Agreement and (B) any claim, action, suit or
proceeding by any third party alleging facts that if proven true would
constitute a misrepresentation or breach of warranty by Buyer (a "Buyer
Third Party Claim" and, together with a Company Third Party Claim, a
"Third Party Claim"); and
(ii) any breach of any covenant or agreement made by Buyer
pursuant to this Agreement.
11.03. PROCEDURES. Any party seeking indemnification under Section
11.02 (the "Indemnified Party") shall give prompt notice to the party against
whom indemnity is sought (the "Indemnifying Party"), specifying to the extent
known the amount and nature of the Third Party Claim, and of any matter which in
the Indemnified Party's opinion is likely to give rise to a Third Party Claim;
provided that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party of any liability or
obligation hereunder except to the extent that the Indemnifying Party has been
prejudiced thereby. The Indemnifying Party may, and at the request of the
Indemnified Party shall, participate in and control the defense of any Third
Party Claim at its own expense. If the Indemnifying Party assumes control of the
defense of a Third Party Claim, the Indemnifying Party shall not be liable under
Section 11.02 for any settlement effected by the Indemnified Party without its
consent of any Third Party Claim. If the Indemnifying Party assumes control of
the defense, the Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, enter into any settlement that does not contain an
unconditional release of the Indemnified Party or that imposes a monetary or
other continuing obligation on the Indemnified Party. Notwithstanding the
foregoing, if the Indemnifying Party assumes control of the defense of a Third
Party Claim and if the Indemnified Party later determines in good faith that a
Third Party Claim is likely to materially adversely affect it or its business in
a manner that may not be adequately compensated by money damages, then the
Indemnified Party may, by written notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim. If the Indemnified
Party shall so assume the exclusive right to defend, compromise, or settle such
claim, all attorneys' fees and other expenses incurred by the Indemnified Party
in the defense, compromise or settlement of such claim shall be at the
Indemnified Party's expense and shall not be eligible for indemnification from
the Indemnifying Party, but the Indemnified Party shall be entitled to be
indemnified by the Indemnifying Party for the full amount of any other Damages
suffered by the Indemnified Party as a result of or arising out of the Third
Party Claim. The party controlling the defense of any third party suit, action
or proceeding shall keep the other party advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto.
35
11.04. CLAIMS FOR DAMAGES. (a) If Buyer has incurred or suffered
Damages for which it is entitled to indemnification by one or more Sellers under
Article XI, if Buyer becomes aware of such Damages on or before September 30,
2005, the Buyer may notify the applicable Seller or Sellers in writing on or
before September 30, 2005 of such claim (a "Claim Notice"). Each Claim Notice
shall state the amount of claimed Damages (the "Claimed Amount") and the basis
for such claim.
(b) Within 20 days after delivery of a Claim Notice, the Sellers so
notified shall deliver to the Buyer a written response (the "Response Notice")
in which such Sellers shall: (i) agree that all of the Claimed Amount may be
released from the Reserve Accounts to the Buyer, (ii) agree that part, but not
all, of the Claimed Amount (the "Agreed Amount") may be released from the
Reserve Accounts to the Buyer or (iii) contest that any of the Claimed Amount
may be released from the Reserve Accounts to the Buyer. Any of the Sellers may
contest the release from escrow of all or a portion of the Claimed Amount only
based upon a good faith belief that all or such portion of the Claimed Amount
does not constitute Damages for which the Buyer is entitled to indemnification
under Article XII. If no Response Notice is delivered by such Sellers and
received by the Buyer within such 20-day period, such Sellers shall be deemed to
have agreed that all of the Claimed Amount may be released to the Buyer from the
Reserve Accounts.
(c) If the Sellers in the Response Notice unanimously agree (or are
deemed to have agreed) that all or a portion of the Claimed Amount may be
released from the Reserve Accounts to the Buyer, the Buyer shall promptly
release to the Buyer from the Reserve Accounts an amount equal to the Claimed
Amount (or such lesser amount as is then held in the Reserve Accounts, or has
been agreed to by the Sellers) and retain the balance, if any, in the Reserve
Accounts.
(d) If the Buyer is to disburse all or a portion of the Claimed Amount,
such distribution (the "Distributable Amount") shall with respect to each
Seller, be made from that amount in the Reserve Accounts with respect to such
Seller equal to the portion of the Distributable Amount attributable to such
Seller.
(e) If any of the Sellers in the Response Notice contest the release of
all or part of the Claimed Amount (the "Contested Amount"), the matter shall be
settled by binding arbitration in Wilmington, Delaware. All claims shall be
settled by three arbitrators in accordance with the Commercial Arbitration Rules
then in effect of the American Arbitration Association (the "AAA Rules"). Such
Sellers and the Buyer shall each designate one arbitrator within 15 days of the
delivery of the Sellers' Response Notice contesting the Claimed Amount. The
Sellers and the Buyer shall cause such designated arbitrators mutually to agree
upon and to designate a third arbitrator; provided, however, that (i) failing
such agreement within 45 days of delivery of the Sellers' Response Notice, the
third arbitrator shall be appointed in accordance with the AAA Rules and (ii) if
either the Sellers or the Buyer fail to timely designate an arbitrator, the
dispute shall be resolved by the one arbitrator timely designated. Such Sellers
36
and the Buyer shall pay the fees and expenses of their respectively designated
arbitrators and shall bear equally the fees and expenses of the third
arbitrator. The Sellers and the Buyer shall cause the arbitrators to decide the
matter to be arbitrated pursuant hereto within 60 days after the appointment of
the last arbitrator. The arbitrators' decision shall relate solely to whether
the Buyer is entitled to receive the Contested Amount (or a portion thereof)
pursuant to the applicable terms of this Agreement. The final decision of the
majority of the arbitrators shall be furnished to the Sellers and the Buyer in
writing and shall constitute a conclusive determination of the issue in
question, binding upon such Sellers and the Buyer and shall not be contested by
any of them. Such decision may be used in a court of law only for the purpose of
seeking enforcement of the arbitrators' award. After delivery of a Response
Notice that the Claimed Amount is contested by such Sellers, the Buyer shall
continue to hold in the Reserve Accounts an amount sufficient to cover the
Contested Amount (up to the amount then available in the Reserve Accounts),
until (i) delivery of a copy of a settlement agreement executed by the Buyer and
such Sellers setting forth instructions to the Buyer as to the disbursements, if
any, that shall be made with respect to the Contested Amount or (ii) delivery of
a copy of the final award of the majority of the arbitrators setting forth
instructions to the Buyer as to the disbursements, if any, that shall be made
with respect to the Contested Amount. The Buyer shall thereupon release amounts
from the Reserve Accounts (to the extent such amounts are then held in the
Reserve Accounts) (as a whole) to the Buyer in accordance with such agreement or
instructions.
(f) A Seller shall remain liable to the Buyer for any Damages owed by
such Seller which are not satisfied by the Reserve Accounts, subject to Section
11.05.
(g) Claims for Damages against a Seller received after September 30,
2005 and for Damages against Buyer shall be resolved under the procedure
specified in 11.04(e) above.
11.05. LIMITATION ON LIABILITY. Buyer, the Company and Sellers agree
that this Article XI shall be the sole and exclusive remedy for any
misrepresentation in this Agreement or any breach of any representation or
warrant made by Buyer, Company or Seller pursuant to this Agreement. In no event
shall indemnification be available with respect to any such claim pursuant to
Sections 11.02(a)(i), 11.02(b) or 11.02(c)(i) unless the cumulative Damages
sustained, suffered or incurred by the party bringing the claim exceed
twenty-five thousand dollars ($25,000) (in the case of claims by the Sellers,
the Damages suffered by all Sellers shall be aggregated for purposes of
determining whether such threshold has been met, and, in the case of claims by
Buyer, the Damages suffered by Buyer from all Sellers shall be aggregated for
purposes of determining whether such threshold has been met). Anything in this
agreement to the contrary notwithstanding, the maximum aggregate liability of
the Sellers under the provisions of Section 11.02(a)(i) shall be $1,871,966.38
plus the aggregate amount of any Earnout Payments, the maximum aggregate
liability of any Seller under the provisions of Section 11.02(b) shall be the
amount of the Purchase Price paid to such Seller and the maximum aggregate
liability of Buyer under the provisions of Section 11.02(c)(i) shall be
$2,500,000.
37
11.06. NO WAIVER. No waiver of a closing condition by Buyer or any
Seller shall limit its or their rights under Section 11.02.
11.07. NO SUBROGATION. Following the Closing, Sellers shall have no
right of indemnification, contribution or subrogation against the Company with
respect to any indemnification payments by any Seller or Sellers under Section
11.02 if the transactions contemplated by this Agreement are consummated.
Sellers shall have a right of contribution against each other with respect to
amounts actually paid pursuant to Section 11.02, but such right of contribution
shall in no way limit or affect Buyer's and the Company's rights contained in
this Article XI.
ARTICLE XII
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by written agreement of Sellers and Buyer;
(b) by Buyer if there is a Material Adverse Change;
(c) by either Sellers or Buyer if the Closing shall not have
been consummated on or before August 31, 2004; and
(d) by either Sellers or Buyer if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses (b),
(c) or (d) shall give notice of such termination to the other parties.
12.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 12.01, such termination shall be without liability of
either party (or any shareholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of another party or to
perform a covenant of this Agreement or from a willful breach of any
representation or warranty by any party to this Agreement, such party shall be
fully liable for any and all Damages incurred or suffered by the other parties
as a result of such failure or breach. The provisions of Sections 6.04
(Confidentiality), 13.03 (Expenses), and 13.10 (Arbitration) shall survive any
termination hereof pursuant to Section 12.01.
38
ARTICLE XIII
MISCELLANEOUS
13.01. NOTICES. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery, if personally delivered by hand, (ii) upon the third day after such
notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the date
scheduled for delivery after such notice is sent by a nationally recognized
overnight express courier or (iv) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
if to Buyer, to: with a copy to:
President William B. Simmons, Jr.
Datawatch Corporation Testa, Hurwitz & Thibeault, LLP
175 Cabot Street 125 High Street
Lowell, MA 01854 Boston, MA 02110
Telecopy: (978) 453-4443 Telecopy: (617) 248-7100
if to the Company, to: with a copy to:
President F. Steven Herb
Mergence Technologies Corporation Nelson Hesse, LLP
208 Route 17 North 2070 Ringling Boulevard
Rutherford, NJ 07070 Sarasota, FL 34237
Telecopy:-(201)935-0908 Telecopy: (941) 955-3708
if to a Seller:
at his address shown in
Schedule 2.01
Such information may be changed, from time to time, by means of a
notice given in the manner provided in this Section 13.01.
13.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may
be amended prior to the Closing Date if, and only if, such amendment is in
writing and signed by Buyer, the Company and the Sellers. Any provision of this
Agreement may be waived if the waiver is in writing and signed by the party to
be bound by the waiver.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
39
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.03. EXPENSES. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense;
provided, however, that in the event the closing occurs, Buyer agrees to pay the
transaction costs and expenses of the Company, including, without limitation,
costs and expenses of the Company's counsel, Nelson Hesse, LLP incurred by the
Company in connection with this Agreement; provided that the costs and expenses
incurred by the Company in excess of $50,000 shall be paid or reimbursed by
Sellers.
13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
13.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, Sellers will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares.
13.06. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of Delaware, without regard to the
conflicts of law rules of such state.
13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
13.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter hereof other
than the Mergence No-Shop and Break-up Agreement dated as of July 9, 2004. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. None of
the provisions of this Agreement is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
13.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
13.10. ARBITRATION. Any dispute, controversy or claim arising out of,
in connection with, or in relation to this Agreement or any breach thereof shall
be finally settled by arbitration, pursuant to the rules then obtaining of the
American Arbitration Association in accordance with the procedures set forth in
Section 11.04(e). The arbitration shall be held in Wilmington, Delaware. Any
40
award shall be final, binding and conclusive upon the parties and a judgment
upon the award rendered thereon may be entered in any court having jurisdiction
thereof. In any such arbitration action, the party which is determined in the
arbitration proceeding to be the breaching party under the Agreement shall pay
for and bear the cost of all parties' experts, evidence and counsel; provided,
however, that if both parties are determined in the arbitration proceeding to be
breaching parties, the arbitrator shall assign the responsibility for the
payment of such costs based upon the relative nature and extent of the breach by
each such party. Notwithstanding anything herein to the contrary, the provisions
of this Section 13.10 shall not apply with respect to claims of violations of
the non-competition or non-solicitation provisions of Section 6.3 or the
confidentiality provisions of Section 6.4 for which Buyer or the Company, as the
case may be, may seek injunctive, legal or equitable relief for such
infringement or violation.
41
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
DATAWATCH CORPORATION
By: /s/ Robert W. Hagger
----------------------------
Title: President and CEO
MERGENCE TECHNOLOGIES CORPORATION
By: /s/ Rene Tenazas
----------------------------
Title: President
SELLERS:
/s/ John Rade
----------------------------
John Rade
/s/ Barbara Rade
----------------------------
Barbara Rade
/s/ Rene Tenazas
----------------------------
Rene Tenazas
/s/ Marilou Tenazas
----------------------------
Marilou Tenazas
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
42
SCHEDULE 2.01
-------------
PURCHASED SHARES AND CASH PURCHASE PRICE
----------------------------------------
--------------------------------------
CASH PURCHASE PRICE
- --------------------------- ----------- ------------ --------- -------------
# OF CASH BEFORE ESCROW PAYABLE
NAME AND ADDRESS OF SELLER SHARES SOLD ESCROW AMOUNT AT CLOSING
- --------------------------- ----------- ------------ --------- -------------
John Rade and Barbara Rade, 85,500 1,265,242.10 84,485 1,180,757.10
Joint Tenants WROS
- --------------------------- ----------- ------------ --------- -------------
Rene Tenazas and 41,000 606,724.28 40,515 566,209.28
Marilou Tenazas,
Joint Tenants WROS
- --------------------------- ----------- ------------ --------- -------------
TOTAL 126,500 $1,871,966.38 $ 125,000 $1,746,966.38
- --------------------------- ----------- ------------ --------- -------------
43