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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 7, 2000
Netzee, Inc.
------------
(Exact name of registrant as specified in its charter)
Georgia 0-27925 58-2488883
------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
6190 Powers Ferry Road, Suite 400, Atlanta, Georgia 30339
---------------------------------------------------------
(Address of principal executive offices)
(770) 850-4000
---------------------------------------------------
(Registrant's telephone number including area code)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Item 2. Acquisition or Disposition of Assets.
Pursuant to the terms of the Asset Purchase Agreement dated February 28, 2000
by and among Netzee, Inc. ("Netzee"), and Digital Visions, Inc., a Minnesota
corporation ("DVI"), and certain shareholders of DVI, Netzee acquired
substantially all the assets of DVI and assumed certain liabilities of DVI.
This transaction was consummated on March 7, 2000. As consideration for this
acquisition, Netzee issued 838,475 shares of Netzee common stock and options to
purchase 70,419 shares of common stock in exchange for the cancellation of
options to purchase DVI common stock. In addition, Netzee assumed approximately
$3,300,000 in outstanding debt of DVI and $1,200,000 in operating liabilities
and other acquisition costs. A portion of the shares of common stock issued in
this transaction was placed in escrow for indemnification and other purposes.
DVI also has the right to receive up to approximately 628,000 additional shares
of Netzee common stock if certain revenue targets are met in fiscal years 2000
and 2001. The amount of the consideration was determined based upon arm's
length negotiations.
DVI is located in Minneapolis, Minnesota and was engaged principally in the
business of developing, marketing and distributing a suite of Internet-based
products and services to financial institutions. These products and services
include bond portfolio and asset liability management analytic tools and access
to critical information sources such as vehicle valuations, credit reports,
industry economic forecasts, and title and lien search information. Netzee
intends to continue to use the acquired assets to engage in these activities.
Michael Murphy, the founder and former Chief Executive Officer of DVI, has
become a Vice President of Netzee, Inc.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
It is impractical to provide the required financial statements for
DVI at the date of the filing of this Form 8-K. The required
financial statements will be provided by amendment as soon as
practicable, but no later than sixty days after the date on which
this initial report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
It is impractical to provide the required pro forma financial
information at the date of the filing of this Form 8-K. The
required pro forma financial information will be provided by
amendment as soon as practicable, but no later than sixty days
after the date on which this initial report on Form 8-K must be
filed.
(c) Exhibits.
Item No. Exhibit List
2.1 Asset Purchase Agreement dated February 28, 2000 by
and among Netzee, DVI and certain of DVI's
shareholders.*
4.1 Registration Rights Agreement, dated March 7, 2000 by
and between Netzee and DVI.
99.1 Press Release dated March 10, 2000.
*Pursuant to Item 601(b)(2) of Regulation S-K, Netzee agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETZEE, INC.
Date: March 22, 2000 /s/ Richard S. Eiswirth
---------------------------------------------
Executive Vice President, Chief Financial
Officer and Secretary
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
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EXHIBIT LIST
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement dated February 28, 2000 by and among
Netzee, DVI and certain of DVI's shareholders.*
4.1 Registration Rights Agreement, dated March 7, 2000, by and
between Netzee and DVI.
99.1 Press Release dated March 10, 2000.
*Pursuant to Item 601(b)(2) of Regulation S-K, Netzee agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
NETZEE, INC.
DIGITAL VISIONS, INC.
AND THE
MANAGEMENT SHAREHOLDERS
OF DIGITAL VISIONS, INC.
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 THE TRANSACTION................................................................................1
Section 1.1 Sale and Purchase of Assets....................................................................1
Section 1.2 Retained Assets................................................................................1
Section 1.3 Assumed Liabilities............................................................................2
Section 1.4 Retained Liabilities...........................................................................2
Section 1.5 Consideration..................................................................................2
(a) Purchase Price...................................................................2
(b) Earnout Payments.................................................................2
(c) Possible Adjustment..............................................................3
(d) Changes to the Company; Other....................................................4
(e) Calculation of Earnout Payments..................................................4
Section 1.6 Closing........................................................................................5
Section 1.7 Payment of Consideration.......................................................................5
(a) Purchase Price...................................................................5
(b) Earnout Payments.................................................................5
(c) Conformity of Payment............................................................6
Section 1.8 Fractional Shares..............................................................................6
Section 1.9 Certain Consents...............................................................................6
Section 1.10 Restrictions on Securities; Registration Rights................................................6
Section 1.11 Effective Date.................................................................................7
Section 1.12 Tax Free Transaction...........................................................................7
ARTICLE 2 RULES OF CONSTRUCTION..........................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................10
Section 3.1 Organization..................................................................................10
Section 3.2 Capitalization................................................................................10
Section 3.3 Authority; No Violation.......................................................................11
Section 3.4 Financial Statements..........................................................................12
Section 3.5 Broker's and Other Fees.......................................................................13
Section 3.6 Absence of Certain Changes or Events..........................................................13
Section 3.7 Legal Proceedings.............................................................................13
Section 3.8 Taxes and Tax Returns.........................................................................14
Section 3.9 Employee and Fringe Benefit Plans.............................................................15
(a) Schedule of Plans...............................................................15
(b) Qualification...................................................................16
(c) Accruals; Funding...............................................................16
(d) Reporting and Disclosure........................................................16
(e) Prohibited Transactions; Terminations; Other Reportable
Events......................................................................16
</TABLE>
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<TABLE>
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(f) Claims for Benefits............................................................ 17
(g) Other.......................................................................... 17
(h) Creation of Obligations By Reason of Sale of the Purchased Assets...............17
(i) No Multi-Employer Plans.........................................................17
Section 3.10 Compliance with Applicable Laws...............................................................17
Section 3.11 Certain Contracts.............................................................................18
Section 3.12 Properties and Insurance......................................................................19
Section 3.13 Environmental Matters.........................................................................19
Section 3.14 Intellectual Property.........................................................................20
(a) Background......................................................................20
(b) Ownership.......................................................................20
(c) Procedures for Copyright Protection.............................................20
(d) Procedures for Trade Secret Protection..........................................20
(e) Ownership of Software........................................................ 21
(f) Absence of Claims ......................................................... 21
Section 3.15 Adequacy of Technical Documentation...........................................................21
Section 3.16 Third-Party Components in Software............................................................21
Section 3.17 Third-Party Interests or Marketing Rights in Software.........................................22
Section 3.18 Absence of Certain Agreements and Practices...................................................22
Section 3.19 Major Vendors and Customers...................................................................22
Section 3.20 Accounts Receivable...........................................................................22
Section 3.21 Bulk Sales Laws...............................................................................22
Section 3.22 Combinations Involving the Company............................................................22
Section 3.23 Labor Relations...............................................................................22
Section 3.24 Year 2000 Matters.............................................................................23
Section 3.25 Assignment Provisions.........................................................................23
Section 3.26 Necessary Properties..........................................................................23
Section 3.27 Securities Act Compliance.....................................................................24
Section 3.28 Access to Information.........................................................................24
Section 3.29 Experience; Investment........................................................................24
Section 3.30 Tax Advice....................................................................................24
Section 3.31 Disclosure....................................................................................25
ARTICLE 4 REPRESENTATION AND WARRANTIES OF THE
MANAGEMENT SHAREHOLDERS.....................................................................25
Section 4.1 Authority; No Violation.......................................................................25
Section 4.2 Financial Ability.............................................................................25
ARTICLE 5 REPRESENTATION AND WARRANTIES OF
THE PURCHASER...............................................................................26
Section 5.1 Corporate Organization........................................................................26
Section 5.2 Capitalization................................................................................26
Section 5.3 Authority; No Violation.......................................................................26
</TABLE>
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Section 5.4 Broker's and Other Fees.......................................................................27
Section 5.5 Legal Proceedings.............................................................................27
Section 5.6 SEC Reports...................................................................................27
Section 5.7 No Material Adverse Change....................................................................27
Section 5.8 Disclosure....................................................................................27
ARTICLE 6 COVENANTS AND AGREEMENTS OF THE PARTIES.......................................................28
Section 6.1 Conduct of Business...........................................................................28
Section 6.2 Negative Covenants............................................................................28
Section 6.3 No Solicitation...............................................................................29
Section 6.4 Current Information...........................................................................30
Section 6.5 Access to Properties and Records; Confidentiality.............................................30
Section 6.6 Regulatory Matters; Consents; Cooperation, etc................................................31
Section 6.7 Parties' Efforts; Further Assurances; Cooperation.............................................31
Section 6.8 Public Announcements..........................................................................31
Section 6.9 Sales Tax.....................................................................................32
Section 6.10 Disclosure Supplements........................................................................32
Section 6.11 No Transfers..................................................................................32
Section 6.12 Customer Contacts.............................................................................32
Section 6.13 Company Stock Options.........................................................................32
Section 6.14 Additional Financial Statements...............................................................33
Section 6.15 WARN..........................................................................................33
Section 6.16 Broker Fees...................................................................................33
Section 6.17 Meeting of DVI Shareholders...................................................................33
Section 6.18 Dissolution and Liquidation of the Company....................................................33
Section 6.19 Non-Accredited Investors......................................................................34
Section 6.20 Compliance....................................................................................34
ARTICLE 7 CLOSING CONDITIONS............................................................................34
Section 7.1 Conditions to the Obligations of Purchaser under this Agreement...............................34
(a) Authorizations and Regulatory Filings...........................................34
(b) Suits and Proceedings...........................................................34
(c) Representations and Warranties; Covenants and Agreements........................34
(d) Shareholder Approval............................................................35
(e) Opinion of Counsel..............................................................35
(f) Certificates....................................................................35
(g) Noncompetition, Nonsolicitation, Confidentiality and
Employment Agreements.........................................................35
(h) Assignment of Work Product Agreements...........................................35
(i) No Material Adverse Effect on the Company.......................................35
(j) No Interest in Software.........................................................35
(k) Escrow Agreement................................................................35
(l) Cancellation of Debt............................................................35
</TABLE>
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<TABLE>
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(m) Termination of Company Warrants.................................................36
(n) Company Preferred Stock.........................................................36
(o) Bill of Sale; Conveyance Documents...... .......................................36
(p) Assignment and Assumption Agreement...... .....................................36
(q) Due Diligence...................................................................36
(r) Accredited Investors............................................................36
(s) Non-Accredited Investors........................................................36
(t) Other...........................................................................36
Section 7.2 Conditions to the Obligations of the Company under this Agreement.............................36
(a) Authorizations and Regulatory Filings...........................................36
(b) Suits and Proceedings...........................................................37
(c) Representations and Warranties; Covenants and Agreements........................37
(d) Shareholder Approval............................................................37
(e) Certificates....................................................................37
(f) Escrow Agreement................................................................37
(g) Registration Rights Agreement...................................................37
(h) Assignment and Assumption Agreement.......................................... ..37
(i) Purchase Price..................................................................37
(j) Opinion of Counsel..............................................................38
(k) Other...........................................................................38
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.............................................................38
Section 8.1 Termination...................................................................................38
Section 8.2 Effect of Termination; Break-up Fee...........................................................38
Section 8.3 Specific Performance..........................................................................39
Section 8.4 Amendment.....................................................................................39
Section 8.5 Extension; Waiver.............................................................................39
ARTICLE 9 INDEMNIFICATION........................................................................... ...39
Section 9.1 Indemnification by the Company and Shareholders...............................................39
Section 9.2 Indemnification by Purchaser..................................................................40
Section 9.3 Claims for Indemnification....................................................................40
Section 9.4 Defense of Claim by Third Parties.............................................................41
Section 9.5 Third Party Claim Assistance..................................................................41
Section 9.6 Settlement of Indemnification Claims..........................................................41
Section 9.7 Manner of Indemnification by the Company......................................................42
Section 9.8 Certain Limitations...........................................................................42
Section 9.9 Subrogation...................................................................................42
Section 9.10 Escrow........................................................................................42
Section 9.11 Company Representative........................................................................43
</TABLE>
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ARTICLE 10 MISCELLANEOUS.................................................................................43
Section 10.1 Expenses......................................................................................43
Section 10.2 Notices.......................................................................................43
Section 10.3 Parties in Interest...........................................................................45
Section 10.4 Entire Agreement..............................................................................45
Section 10.5 Counterparts..................................................................................45
Section 10.6 Governing Law.................................................................................45
Section 10.7 Invalidity of any Part........................................................................45
Section 10.8 Time of the Essence; Computation of Time......................................................46
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
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<S> <C> <C>
Exhibit A - Form of Opinion of Company's Counsel
Exhibit B-1 - Form of Certificate Required by Purchaser
Exhibit B-2 - Form of Certificate Required by Purchaser
Exhibit C - Form of Noncompetition, Nonsolicitation, Confidentiality Agreement
Exhibit D - Form of Assignment of Work Product Agreement
Exhibit E - Form of Escrow Agreement
Exhibit F - Form of Assignment and Assumption Agreement
Exhibit G-1 - Form of Certificates Required by the Company
Exhibit G-2 - Form of Certificates Required by the Company
Exhibit H - Form of Registration Rights Agreement
Exhibit I - Form of Opinion of Purchaser's Counsel
Exhibit J - Form of Stock Option Agreement
Exhibit K - Form of Letter of Shareholder Acknowledgement
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule 1.1 - Purchased Assets
Schedule 1.3 - Assumed Liabilities/Contracts
Schedule 1.5(a) - Purchase Price
Schedule 3.1(a) - Organization
Schedule 3.1(b) - Articles of Incorporation and Bylaws
Schedule 3.2 - Capitalization
Schedule 3.3(a) - Company Approvals
Schedule 3.4(a) - Annual Financial Statements
Schedule 3.4(d) - Interim Financial Statements
Schedule 3.4(e) - Changes since December 31, 1999
Schedule 3.6(a) - Absence of Certain Changes or Events
Schedule 3.6(b) - Permitted Actions
Schedule 3.7 - Legal Proceedings
Schedule 3.8 - Taxes and Tax Returns
Schedule 3.8(c) - Extensions of Time
Schedule 3.9 - Employee and Fringe Benefits Plan
Schedule 3.10 - Compliance with Applicable Laws
Schedule 3.11(a) - Material Contracts
Schedule 3.11(b) - Non-Binding Material Contracts
Schedule 3.11(c) - Material Contracts in Default
Schedule 3.12(a) - Permitted Encumbrances
Schedule 3.12(b) - Personal Property
Schedule 3.12(c) - Insurance
Schedule 3.14(a) - Software Programs
Schedule 3.14(b) - Ownership
Schedule 3.14(c) - Procedures for Copyright Protection
Schedule 3.14(d) - Procedures for Trade Secret Protection
Schedule 3.14(e) - Ownership of Software
Schedule 3.14(f) - Absence of Claims
Schedule 3.16 - Third Party Components in Software
Schedule 3.17 - Third Party Interests or Marketing Rights in Software
Schedule 3.18 - Absence of Certain Agreements & Practices
Schedule 3.19 - Major Vendors and Customers
Schedule 3.20 - Accounts Receivable
Schedule 3.23 - Labor Relations
Schedule 3.24 - Year 2000 Matters
Schedule 3.25 - Assignment Provisions
</TABLE>
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DEFINED TERMS
<TABLE>
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2000 EARNOUT PAYMENT..............................................................................................2
2001 EARNOUT PAYMENT..............................................................................................3
ACCREDITED INVESTOR..............................................................................................24
ACQUISITION OF THE COMPANY.......................................................................................39
AGREEMENT.........................................................................................................1
ASSIGNMENT AND ASSUMPTION AGREEMENT...............................................................................2
ASSUMED CONTRACTS.................................................................................................2
ASSUMED LIABILITIES...............................................................................................2
AUTHORIZATIONS...................................................................................................11
AVERAGE PRICE.....................................................................................................8
BUSINESS..........................................................................................................1
CLAIMS PERIOD....................................................................................................40
CLOSING...........................................................................................................5
CLOSING DATE......................................................................................................5
CODE..............................................................................................................8
COMPANY...........................................................................................................1
COMPANY AFFILIATES...............................................................................................29
COMPANY APPROVALS................................................................................................11
COMPANY DISCLOSURE SCHEDULES......................................................................................9
COMPANY FINANCIAL STATEMENTS.....................................................................................12
COMPANY REPRESENTATIVE............................................................................................5
COMPANY STOCK OPTION.............................................................................................32
CONFIDENTIALITY AGREEMENT........................................................................................31
DISCLOSED BY PURCHASER............................................................................................9
DISPUTES AUDITOR..................................................................................................5
DIVISION..........................................................................................................2
</TABLE>
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<TABLE>
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DOCUMENTATION....................................................................................................20
EARNOUT PAYMENTS..................................................................................................3
EEOC.............................................................................................................23
EMPLOYEE PLANS...................................................................................................15
ENCUMBRANCE.......................................................................................................9
ENVIRONMENTAL LAWS...............................................................................................19
ERISA AFFILIATE..................................................................................................15
ESCROW...........................................................................................................42
ESCROW AGENT.....................................................................................................42
ESCROW SHARES.....................................................................................................5
EXCHANGE ACT.....................................................................................................27
GAAP.............................................................................................................12
GOVERNMENTAL AUTHORITY............................................................................................9
INCLUDING.........................................................................................................9
INDEMNIFIABLE DAMAGES............................................................................................40
INDEMNIFIED PARTY................................................................................................40
INDEMNIFYING PARTY...............................................................................................40
IRS..............................................................................................................14
KNOWLEDGE.........................................................................................................9
LAWS.............................................................................................................12
LIABILITIES......................................................................................................13
LICENSES.........................................................................................................17
LIQUIDATION......................................................................................................33
MANAGEMENT SHAREHOLDERS...........................................................................................9
MATERIAL ADVERSE EFFECT...........................................................................................9
MATERIAL CONTRACTS...............................................................................................18
MILLENNIUM COMPLAINT.............................................................................................23
MULTI-EMPLOYER PLAN..............................................................................................15
</TABLE>
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<TABLE>
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NLRB.............................................................................................................23
NOTICE OF CLAIM..................................................................................................40
PARTIES...........................................................................................................1
PBGC.............................................................................................................15
PENSION/PROFIT-SHARING PLAN......................................................................................15
PERMITTED ENCUMBRANCES...........................................................................................19
PERSON............................................................................................................9
PROCESSES........................................................................................................23
PURCHASE AGREEMENTS..............................................................................................45
PURCHASE PRICE....................................................................................................2
PURCHASED ASSETS..................................................................................................1
PURCHASER.........................................................................................................1
PURCHASER COMMON STOCK...........................................................................................26
PURCHASER INDEMNIFIED PARTIES....................................................................................40
PURCHASER STOCK OPTION...........................................................................................32
REGULATION D.....................................................................................................24
RETAINED ASSETS...................................................................................................1
RETAINED LIABILITIES..............................................................................................2
RETURNS..........................................................................................................14
SEC..............................................................................................................16
SEC FILINGS......................................................................................................27
SECURITIES ACT....................................................................................................6
SECURITIES LAWS..................................................................................................24
SOFTWARE.........................................................................................................20
SOFTWARE PROGRAMS................................................................................................20
STATE ACTS........................................................................................................6
SUBSIDIARY.......................................................................................................10
TAX..............................................................................................................14
</TABLE>
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<TABLE>
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TAXES............................................................................................................14
THREATENED.......................................................................................................10
WARN.............................................................................................................33
WELFARE PLAN.....................................................................................................15
</TABLE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is dated and effective as
of February 28, 2000, between Netzee, Inc., a Georgia corporation (the
"PURCHASER"), Digital Visions, Inc., a Minnesota corporation (the "COMPANY"),
and the Management Shareholders (as defined below). The Purchaser and the
Company are hereinafter collectively called the "PARTIES."
W I T N E S S E T H :
WHEREAS, the Company owns and operates an application service provider
business which provides information resources and financial management services
to community banks, credit unions and other financial institutions via the
Internet (the "BUSINESS"); and
WHEREAS, Purchaser desires to buy and the Company desires to sell
substantially all of the assets utilized by the Business, all upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto mutually covenant and agree, with the intent to
be legally bound, as follows:
ARTICLE 1
THE TRANSACTION
1.1 SALE AND PURCHASE OF ASSETS. At the Closing, the Company shall sell
and transfer to Purchaser, and Purchaser shall purchase from the Company, all of
the Company's right, title and interest in and to the properties and assets of
the Business, including those assets specified or described on Schedule 1.1,
wherever such assets are located and whether personal, tangible or intangible,
in electronic form or otherwise, and whether or not any such assets have any
value for accounting purposes or are carried or reflected on or specifically
referred to in the Company's books or Company Financial Statements, except those
assets specifically excluded pursuant to Section 1.2, free and clear of all
Encumbrances, other than Permitted Encumbrances. The properties and assets of
the Business to be transferred hereunder are collectively referred to as the
"PURCHASED ASSETS." Purchaser assumes no risk of loss to the Purchased Assets
prior to the Closing.
1.2 RETAINED ASSETS. The Company shall retain, and the Purchased Assets
shall not include, the following assets (collectively, the "RETAINED ASSETS"):
(i) the consideration to be delivered to the Company
pursuant to this Agreement, together with the Company's
rights under this Agreement; and
<PAGE> 14
(ii) the Company's minute book, stock book and seal.
1.3 ASSUMED LIABILITIES. At the Closing, pursuant to an Assignment and
Assumption Agreement (the "ASSIGNMENT AND ASSUMPTION AGREEMENT") Purchaser shall
assume and agree to perform and discharge only the following specifically
enumerated obligations and liabilities of the Company (collectively, the
"ASSUMED LIABILITIES"): (i) the liabilities and obligations of the Company
arising on or after the Closing Date under the agreements listed on Schedule 1.3
(the "ASSUMED CONTRACTS"), and (ii) those liabilities of the Company set forth
on Schedule 1.3; provided, however, Purchaser shall not assume any obligation
under any Assumed Liability to the extent that payments were made to or any
other benefit was received by the Company prior to the Closing Date, unless the
Company has remitted the amount of such payment, or otherwise transferred such
benefit under such Assumed Liability to Purchaser, or that results from any
default under or breach of such Assumed Contract occurring prior to the Closing
Date.
1.4 RETAINED LIABILITIES. Except for the Assumed Liabilities, Purchaser
does not hereby assume and shall not assume or in any way undertake to pay,
perform, satisfy or discharge any liability of the Company, whether existing on,
before or after the Closing Date or arising out of any transactions entered
into, or any state of facts existing on, prior to or after the Closing Date (the
"RETAINED LIABILITIES"). Without limiting the foregoing, the Retained
Liabilities shall include any automobile leases of the Company.
1.5 CONSIDERATION.
(a) Purchase Price.
(i) The consideration paid at the Closing for the Purchased
Assets shall consist of the following: (A) 838,475 shares of Purchaser Common
Stock, (B) Purchaser Stock Options for 70,425 shares of Purchaser Common Stock
issued to the former holders of Company Stock Options as described on Schedule
1.5(a) and (C) assumption of the Assumed Liabilities shown on Schedule 1.3. No
cash consideration will be paid for the Purchased Assets. The total
consideration paid at the Closing is collectively referred to as the "PURCHASE
PRICE."
(b) Earnout Payments.
(i) 2000 Earnout Payment. In addition to the Purchase Price
described in Section 1.5(a), the Company will be entitled to additional
Purchaser Common Stock in accordance with the table set forth below if the
division of Purchaser made up of the Purchased Assets (the "DIVISION") reports
total revenue in accordance with the table set forth below, as reported on a
GAAP basis applied consistently by Purchaser, for the calendar year ended
December 31, 2000 (the "2000 EARNOUT PAYMENT"):
2
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<TABLE>
<CAPTION>
Amount of
Total Revenue 2000 Earnout Payment
------------- --------------------
<S> <C>
Equal to or greater than $4 million and less than $4.4 million 78,534 shares
Equal to or greater than $4.4 million and less than $4.7 million 188,482 shares
Equal to or greater than $4.7 million 314,136 shares
</TABLE>
(ii) 2001 Earnout Payment. The Company will also be entitled
to additional Purchaser Common Stock in accordance with the table set forth
below if the Division reports total revenue in accordance with the table set
forth below, as reported on a GAAP basis applied consistently by Purchaser, for
the calendar year ended December 31, 2001 (the "2001 EARNOUT PAYMENT"):
<TABLE>
<CAPTION>
Amount of
Total Revenue 2001 Earnout Payment
------------- --------------------
<S> <C>
Equal to or greater than $13 million and less than $16 million 78,534 shares
Equal to or greater than $16 million and less than $18 million 188,482 shares
Equal to or greater than $18 million 314,136 shares
</TABLE>
The 2000 Earnout Payment and the 2001 Earnout Payment are collectively referred
to as the "EARNOUT PAYMENTS."
(iii) The Earnout Payments shall be paid, if earned, by
Purchaser delivering to the former shareholders of the Company, on a pro rata
basis among such persons, that number of shares of Purchaser Common Stock equal
to the amount of the 2000 Earnout Payment or the 2001 Earnout Payment, as the
case may be, set forth above. If at any time or times prior to the payment of
the 2000 Earnout Payment or the 2001 Earnout Payment, as the case may be,
Purchaser shall (a) declare a dividend or make a distribution with respect to
Purchaser Common Stock in shares of Purchaser Common Stock, (b) subdivide or
reclassify the outstanding Purchaser Common Stock into a greater number of
shares, or (c) combine or reclassify the outstanding Purchaser Common Stock into
a smaller number of shares, then the number of shares set forth in Section
1.5(b)(i) and (ii) shall be proportionately adjusted.
(c) Possible Adjustment. Notwithstanding the provisions of Section
1.5(a)(i), the aggregate amount of any cash payments deemed to be made and the
principal amount of the Assumed Liabilities described in Section 1.5(a)(i) may
not exceed in the aggregate twenty percent (20%) of the Purchase Price paid at
the Closing. In the event the aggregate amount of any deemed cash payments and
principal amount of the Assumed Liabilities described in Section 1.5(a)(i) would
exceed in the aggregate twenty percent (20%) of the Purchase Price, then the
Management Shareholders shall, jointly and severally, assume or provide for the
assumption by Accredited Investors of Assumed Liabilities in exchange for
additional shares of Company Common Stock, in such a manner and amount prior to
the Closing Date to prevent the aggregate amount of the deemed cash payments and
principal amount of the Assumed Liabilities from exceeding in the aggregate
twenty percent (20%) of the Purchase Price.
3
<PAGE> 16
(d) Changes to the Company; Other.
(i) Purchaser shall not be under any obligation to retain the
Purchased Assets, or, in the exercise of reasonable business judgment, continue
to conduct the Business for any particular length of time whatsoever.
(ii) If Purchaser sells substantially all of the Purchased
Assets in a transaction not covered by Section 1.5(d)(iii) to a person that
intends to conduct the Business and such disposition occurs prior to January 1,
2002, Purchaser shall continue to be obligated to pay the Earnout Payments based
upon the revenues of the Business operated by such person.
(iii) If Purchaser is acquired (whether by sale of stock, sale
of assets, merger or otherwise) prior to the payment of the 2001 Earnout
Payment, then Purchaser shall cause the acquiring person to assume the
obligation to pay the Earnout Payments, if, as and when otherwise due, with the
Earnout Payments converted into the right to receive the consideration paid for
each share of Purchaser Common Stock in such acquisition, multiplied by the
appropriate number of shares set forth in Section 1.5(b)(i) and (ii), as
applicable. If such conversion is impracticable in the reasonable judgment of
the acquiring person, the acquiring person will provide a reasonably equivalent
substitute conversion mechanism. If there is a reorganization or
reclassification of Purchaser's securities prior to the payment of the 2001
Earnout Payment, then a similar adjustment in the number and class of shares
subject to the Earnout Payments shall be made by Purchaser to prevent a dilution
or enlargement of rights.
(iv) If Purchaser, in the exercise of its reasonable business
judgment, ceases to conduct the Business or if Purchaser sells substantially all
of the Purchased Assets to a person that does not intend to conduct the
Business, or if Purchaser is dissolved, only those revenues generated prior to
such cessation, sale or dissolution shall be taken into account for purposes of
computing the Earnout Payments. If Purchaser develops or acquires any other
business or businesses, the Earnout Payments will be calculated without taking
into account the revenue from such business or businesses.
(v) Modifications to the terms of the Earnout Payments may be
made if approved by Purchaser and former shareholders of the Company who at the
Closing Date held a majority interest of the stock of the Company.
(e) Calculation of Earnout Payments. As soon as practicable following
(i) December 31, 2000 with respect to the 2000 Earnout Payment and (ii) December
31, 2001 with respect to the 2001 Earnout Payment, and in any event before April
1 of the following year, Purchaser shall deliver to the Company Representative
(defined below) its calculation of the 2000 Earnout Payment, or 2001 Earnout
Payment, as applicable. Purchaser shall make the books and records of Purchaser
available to the Company Representative and its representatives at all
reasonable times with respect to the matters affecting these calculations. If
within thirty days following delivery of the calculations, the Company
Representative has not given Purchaser notice of its objection to any such
calculations (such notice must contain a
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<PAGE> 17
statement of the specific items to which the Company Representative objects and
specific facts as to the reason for the Company Representative's objection, and
identify the amounts in dispute), then Purchaser's calculations will be a final
determination, binding and conclusive on the Parties. If the Company
Representative gives such notice of objection, then Purchaser and the Company
Representative will attempt to resolve any disagreements. If any such
disagreements are not resolved by the Purchaser and the Company Representative
within thirty days following the receipt by Purchaser of the Company
Representative's objections, (i) the issues in dispute will be submitted to
Arthur Andersen LLP (the "DISPUTES AUDITOR") for resolution; (ii) each will
furnish to the Disputes Auditor such work papers and other documents and
information relating to the disputed issues as the Disputes Auditor may request
and are available to it (or its independent public accountants), and Purchaser
and the Company Representative will be afforded the opportunity to present to
the Disputes Auditor any material relating to the determination and to discuss
the determination with the Disputes Auditor; (iii) the determination by the
Disputes Auditor, as set forth in a notice delivered to both parties by the
Disputes Auditor, will be a final determination, binding and conclusive on the
Purchaser and the Company Representative; and (iv) Purchaser will bear a
percentage of the fees of the Disputes Auditor which equals the percentage of
the total amount disputed by the Company Representative which is awarded to the
Company by the Disputes Auditor, and the Company Representative will bear the
balance of such fees. The "COMPANY REPRESENTATIVE" shall be Darryl P. Ekstrom,
or any successor appointed by him, by the Company or by the former shareholders
of the Company who at the Closing Date held a majority of the stock of the
Company.
1.6 CLOSING. The consummation of the purchase and sale of the Purchased
Assets and the consummation of the other transactions contemplated hereby (the
"CLOSING") shall take place three (3) business days after satisfaction of the
latest to occur, or, if permissible, waiver of the conditions set forth in
Article 7, at the offices of Sutherland Asbill & Brennan LLP, 999 Peachtree
Street, N.E., Atlanta, Georgia 30309 or at such other time, date or place as the
Parties agree (the "CLOSING DATE"). The Parties shall use their best efforts to
consummate the Closing on or before March 7, 2000.
1.7 PAYMENT OF CONSIDERATION.
(a) Purchase Price. The Purchase Price shall be paid to the Company by
Purchaser delivering (i) to the Company a certificate for ninety percent (90%)
of the shares of Purchaser Common Stock described in Section 1.5(a)(i)(A), (ii)
assumption of the Assumed Liabilities, and (iii) to the Escrow Agent a
certificate for ten percent (10%) of the shares of Purchaser Common Stock
described in Section 1.5(a)(i)(A) (the "ESCROW SHARES").
(b) Earnout Payments. Any Earnout Payment to be made to a former
shareholder of the Company is personal in nature and may not be encumbered in
any manner or transferred in whole or in part except by will or the laws of
descent and distribution. Subject to Section 9.7, the 2000 Earnout Payment and
the 2001 Earnout Payment, shall be paid within three business days after its
final determination pursuant to Section 1.5(e), together with interest from the
date that is thirty-three days after delivery of Purchaser's calculation under
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<PAGE> 18
Section 1.5(e) to the date of payment at the three-month U.S. Treasury bill
rates in effect on such later date.
(c) Conformity of Payment. Notwithstanding any other provision of this
Agreement and the other Purchase Agreements to the contrary, the Purchase Price
and the Earnout Payments shall be paid only in conformity with the Securities
Laws and other applicable Laws. Without limiting the foregoing and
notwithstanding any other provision of this Agreement, the Company shall
distribute Purchaser Common Stock only to Accredited Investors.
1.8 FRACTIONAL SHARES. No fractional shares of Purchaser Common Stock will
be issued, and fractional shares to which the Company or the former shareholders
of the Company would otherwise be entitled to will be disregarded.
1.9 CERTAIN CONSENTS. Nothing in this Agreement shall be construed as an
attempt to assign any contract, agreement, permit, franchise or claim of the
Company that is by its terms or in law nonassignable without the consent of the
other party or parties thereto, unless such consent shall have been given, or as
to which all the remedies for the enforcement thereof enjoyed by the Company
would not, as a matter of law, pass to Purchaser as an incident of the
assignments provided for by this Agreement. In order to provide Purchaser with
the full realization and value of every contract, agreement, permit, franchise
and claim of the character described in the immediately preceding sentence, the
Company on and after the Closing Date will, at the request and under the
direction of Purchaser, in the name of the Company or otherwise as Purchaser
shall specify, take all reasonable action (i) to assure that the rights of the
Company under such contracts, agreements, permits, franchises and claims shall
be preserved for the benefit of Purchaser and (ii) to facilitate receipt of the
consideration to be received by the Company under every such contract,
agreement, permit, franchise and claim, which consideration shall be held for
the benefit of, and shall be delivered to Purchaser. Nothing in this Section 1.9
shall in any way diminish the obligation of the Company hereunder to obtain all
consents and approvals and to take all such other actions prior to or at Closing
as are necessary to enable the Company to convey or assign valid title to all
the Purchased Assets to Purchaser.
1.10 RESTRICTIONS ON SECURITIES; REGISTRATION RIGHTS.
(a) The shares of Purchaser Common Stock to be delivered in connection
with this Agreement will be issued in a transaction exempt from registration
under the Securities Act of 1933, as amended (the "SECURITIES ACT") by reason of
Section 4(2) thereof, Regulation D promulgated thereunder, or other private
offering exemptions, and similar exemptions under applicable state securities
laws (the "STATE ACTS"), and Purchaser is relying on the representations of the
Company with respect to such exemptions.
(b) The shares of Purchaser Common Stock to be delivered in connection
with this Agreement will be subject to a Registration Rights Agreement.
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(c) The Company understands and agrees that stop transfer instructions
with respect to the shares of Purchaser Common Stock received by the Company and
the former shareholders of the Company pursuant to this Agreement will be given
to Purchaser's transfer agent and that there will be placed on the certificates
for such shares legends stating in substance as follows:
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
may not be offered, sold, transferred or otherwise disposed of unless
registered with the United States Securities and Exchange Commission
and the securities regulatory authorities of applicable states or
unless an exemption from such registration is available.
Certain rights, obligations and restrictions are imposed on the shares
represented by this certificate by a Registration Rights Agreement,
and any amendments to it, copies of which are available at Netzee's
offices. The transfer, encumbrance or other disposition of such shares
in contravention of such Registration Rights Agreement is void. Any
transferee of such shares shall be bound by and entitled to the
benefits of the Registration Rights Agreement.
(d) The foregoing legends will also be placed on any certificate
representing securities issued subsequent to the original issuance of Purchaser
Common Stock pursuant to this Agreement as a result of any transfer of such
shares or any stock dividend, stock split or other recapitalization as long as
Purchaser Common Stock issued to the Company and the former shareholders of the
Company pursuant to this Agreement has not been registered or transferred in
such manner to justify the removal of the legend therefrom.
1.11 EFFECTIVE DATE. For accounting purposes only, the Parties shall treat
the purchase and sale of the Purchased Assets contemplated hereby as effective
as of the close of business on February 28, 2000. For all other purposes, the
Parties shall treat such purchase and sale as effective as of the Closing Date.
1.12 TAX FREE TRANSACTION. The Parties intend that the sale of assets
contemplated by this Agreement shall be treated as a tax free reorganization
under the Code to the extent the consideration is Purchaser Common Stock, shall
report the sale of assets contemplated by this Agreement as such for federal and
state income tax purposes, and shall take no action after the Closing Date to
adversely effect the status of the sale of assets contemplated by this Agreement
as a tax-free reorganization under the Code to the extent the consideration is
Purchaser Common Stock.
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ARTICLE 2
RULES OF CONSTRUCTION
In the interpretation of this Agreement, unless otherwise provided or
the context otherwise requires:
(a) The singular includes the plural and vice versa and, in particular
(but without limiting the generality of the foregoing), any word or expression
defined in the singular has the corresponding meaning used in the plural and
vice versa;
(b) Any reference to either gender includes the other gender;
(c) Any reference to an Article, Section, Exhibit, clause, subclause,
paragraph, subparagraph, Schedule or recital is a reference to an Article,
Section, Exhibit, clause, subclause, paragraph, subparagraph, Schedule or
recital of this Agreement;
(d) Any reference to any agreement, instrument or other document (i)
shall include all appendices, exhibits and schedules thereto and all agreements,
documents or other writings incorporated by reference therein, and (ii) shall be
a reference to such agreement, instrument or other document as amended,
supplemented, modified, suspended, restated or novated from time to time;
(e) Any reference to any statute shall be construed as including all
statutory provisions consolidating, amending or replacing such statute and all
governmental regulations and rules promulgated thereunder;
(f) Any reference to "writing" includes printing, typing, lithography
and other means of reproducing words in a visible form;
(g) Any reference to a time or date or to a local time or date is a
reference to the time and date in Atlanta, Georgia and any reference to a
monetary value is in reference to United States currency (the U.S. Dollar);
(h) The headings and Article, Section and paragraph numbering contained
in this Agreement are used solely for convenience and do not constitute a part
of this Agreement, nor shall such headings and numbering be used in any manner
to aid in the construction of this Agreement;
(i) The term "AVERAGE PRICE" means the average of the per share last
sales price for the Purchaser Common Stock on the Nasdaq National Market or
national stock exchange for the thirty (30) trading days immediately prior to
the relevant date of payment or offset.
(j) The term "CODE" means the Internal Revenue Code of 1986, as
amended, and the applicable rulings and regulations thereunder;
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<PAGE> 21
(k) References herein to the "COMPANY DISCLOSURE SCHEDULES" mean the
disclosure schedules, dated as of the date hereof, which have been delivered by
the Company to Purchaser and all other documents, agreements, and other items
disclosed by the Company in writing to Purchaser and attached to such schedules
in connection with this Agreement, and references to a numbered Company
Disclosure Schedule shall mean that portion of the Company Disclosure Schedules
that refers to the specific section or subsection of Article 3 of this
Agreement;
(l) The term "DISCLOSED BY PURCHASER" means and includes, with respect
to information concerning any event, fact or circumstance, information contained
in this Agreement and the other Purchase Agreements;
(m) The term "ENCUMBRANCE" means any liability, debt, mortgage, deed of
trust, pledge, security interest, encumbrance, option, right-of first refusal,
agreement of sale, adverse claim, easement, lien, assessment, restrictive
covenant, encroachment, burden or charge of any kind or nature whatsoever or any
item similar or related to the foregoing;
(n) The term "INCLUDING" means "including, without limitation";
(o) The term "GOVERNMENTAL AUTHORITY" means any United States federal,
state or local, or foreign, governmental, regulatory or administrative
authority, agency, department, board, investigative body or commission or any
court, tribunal, or judicial or arbitral body;
(p) The term "KNOWLEDGE" as used with respect to the Company (including
any references to the Company being aware of a particular matter) means the
actual knowledge of any of the officers of the Company and information which any
of them reasonably should have known, after inquiry, given the nature of the
disclosure;
(q) The term "MANAGEMENT SHAREHOLDERS" means Collin Dickey, William P.
Langford, Michael R. Marxen and Michael E. Murphy.
(r) The term "MATERIAL ADVERSE EFFECT" with respect to a person means
any circumstance of, change in, or effect on the business and affairs of such
person or any of its Subsidiaries thereof that, individually or in the aggregate
with any other circumstance of change in, or effect on, the business and affairs
of such person and its Subsidiaries: (i) is materially adverse to the business,
operations, assets, liabilities, prospects, results of operations or financial
condition of such person and its Subsidiaries, taken as a whole, or (ii) would
reasonably be expected to materially adversely affect the ability of such person
and its Subsidiaries to operate or conduct its or their business and affairs in
the manner in which it is currently operated or conducted or contemplated by
such person to be operated or conducted;
(s) The term "PERSON" means any individual, partnership, limited
liability company, firm, corporation, association, trust, joint venture,
unincorporated organization or
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<PAGE> 22
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act;
(t) The term "SUBSIDIARY" means any corporation, partnership, joint
venture or other legal entity in which a specified person or entity, directly or
indirectly, owns or controls the voting of at least a 50% share or other equity
interest or for which such person or entity, directly or indirectly, acts as a
general partner or managing member;
(u) The term "THREATENED" means any act that would cause a person
reasonably to believe that the act, omission, fact or circumstance with respect
to which such word is used is likely to occur; and
(v) Each of the Parties acknowledges that it has had the opportunity to
negotiate the terms and provisions of this Agreement, with the assistance and
review of its counsel. This Agreement, therefore, shall be construed without
regard to any presumption or other rule requiring construction against the party
causing the Agreement to be drafted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Purchaser to enter into this Agreement and the other
Purchase Agreements, the Company hereby represents and warrants to Purchaser as
follows:
3.1 ORGANIZATION.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Minnesota. The Company has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and, except as
disclosed on Company Disclosure Schedule 3.1(a), is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where failure to be so licensed, qualified or in good standing
would not have a Material Adverse Effect on the Company.
(b) Company Disclosure Schedule 3.1(b) sets forth true and correct
copies of the Articles of Incorporation and Bylaws of the Company and all
amendments thereto.
(c) The Company has no Subsidiaries, and does not own or control,
directly or indirectly, any equity interest in any corporation, company,
association, partnership, joint venture or other entity.
3.2 CAPITALIZATION. The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, $.01 par value, 2,500,000
undesignated shares, without stated par value, and no other form of capital
stock. As of February 23, 2000, there were 2,318,333 shares of Company Common
Stock issued and outstanding, and 650,852
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shares of Company convertible redeemable preferred stock issued and outstanding.
Company Disclosure Schedule 3.2 sets forth the number of shares of Company
Common Stock owned by each Shareholder and the number of shares of Company
Common Stock which may be acquired by each holder of options to purchase Company
Common Stock. Other than as disclosed on Company Disclosure Schedule 3.2 there
are no options, warrants, or other rights to acquire Company Common Stock. All
issued and outstanding shares of Company Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable, were not issued in
violation of any preemptive rights and were issued pursuant to effective
registration statements or under available exemptions from the registration
requirements of the Securities Laws. Except as set forth on Company Disclosure
Schedule 3.2, (a) neither the Company nor any shareholder of the Company has
granted or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the transfer, purchase,
registration, subscription or issuance of any shares of capital stock of the
Company or any securities representing the right to purchase, subscribe or
otherwise receive any shares of such capital stock or any securities convertible
into any such shares, and (b) there are no agreements or understandings with
respect to voting any such shares. All outstanding shares of Company Common
Stock are owned free and clear of all Encumbrances, liens, claims, options,
proxies, charges, pledges, security interests, and adverse claims.
Notwithstanding the warrants shown on Company Disclosure Schedule 3.2, all
warrants of the Company to purchase Company Common Stock will have been
exercised in full or will have been terminated prior to the Closing Date. There
are no agreements in place by and among any of the shareholders of the Company
and the Company with respect to Company Common Stock or other securities of the
Company (except for the proxy noted on Schedule 3.2).
3.3 AUTHORITY; NO VIOLATION.
(a) Except as disclosed on Company Disclosure Schedule 3.3(a)
(collectively, the "COMPANY APPROVALS"), no consents, approvals, authorizations,
clearances or orders of, filings or registrations with or notices to
(collectively "AUTHORIZATIONS") any third party or any Governmental Authority
are necessary on behalf of the Company in connection with (i) the execution and
delivery by the Company of this Agreement and the other Purchase Agreements,
(ii) the consummation by the Company of the transactions contemplated hereby and
thereby and (iii) the performance of the Company's obligations under this
Agreement and the other Purchase Agreements. The Company has the full corporate
power and authority to execute and deliver this Agreement and the other Purchase
Agreements and to consummate the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Purchase Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors and shareholders of the Company in accordance with the
Articles of Incorporation and Bylaws of the Company and with applicable Laws.
Except for the Company Approvals, no other corporate proceedings on the part of
the Company are necessary for the Company to execute and deliver this Agreement
and the other Purchase Agreements to which it is a party and for the Company and
the shareholders of the Company to be bound by the terms hereof and thereof.
This Agreement and the other Purchase Agreements to which it is a party have
been duly and validly executed and delivered
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by the Company and the Management Shareholders and constitute the valid and
binding obligations of the Company and the Management Shareholders enforceable
against the Company and the Management Shareholders in accordance with its and
their terms, except to the extent that the enforceability thereof may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect that effect the enforcement of creditor's
rights generally or general principles of equity, whether considered in a
proceeding at law or in equity.
(b) Neither the execution and delivery by the Company and each of the
Management Shareholders of this Agreement and the other Purchase Agreements to
which it or he is a party, nor the consummation by the Company and each of the
Management Shareholders of the transactions contemplated hereby and thereby in
accordance with the other terms hereof and thereof, nor compliance by the
Company and each of the Management Shareholders with any of the terms or
provisions hereof or thereof, will: (i) violate any provision of the Company's
Articles of Incorporation or Bylaws; (ii) assuming that the Company Approvals
are duly obtained, violate any United States federal, state or local or foreign
statute, code, ordinance, rule, regulation, judgment, order, writ, ruling,
decree or injunction of any Governmental Authority (collectively, "LAWS")
applicable to the Company or any of its properties or assets; or (iii) assuming
that the Company Approvals are obtained, violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in the
creation of any Encumbrance upon any of the Purchased Assets under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Company is a party, or by which it or any of the Purchased Assets may be bound
or affected, except, as to clause (iii), for defaults which have been waived or
which will be cured or rendered moot by payment or other discharge of the
obligation at the Closing.
3.4 FINANCIAL STATEMENTS.
(a) Company Disclosure Schedule 3.4(a) sets forth copies of: (i) the
audited balance sheets of the Company as of December 31, 1997, December 31,
1998, and December 31, 1999, (ii) the related statements of income and cash
flows for the periods then ended (together with any other financial statements
of the Company delivered pursuant to Section 6.14, the "COMPANY FINANCIAL
STATEMENTS").
(b) The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles and practices ("GAAP") applied
consistently during the periods involved (except as may be indicated therein or
in the notes thereto), and present fairly, in all material respects, the
financial position of the Company as of the respective dates set forth therein,
and the results of the Company's operations and its cash flows for the
respective periods set forth therein, in accordance with GAAP.
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(c) The books and records of the Company have been maintained in
material compliance with applicable legal and accounting requirements, including
GAAP.
(d) Except as and to the extent reflected, disclosed or reserved
against in the Company Financial Statements, or as disclosed in Company
Disclosure Schedule 3.4(d), since December 31, 1999, the Company has not
incurred any liabilities or obligations of any kind, whether absolute, accrued,
contingent or otherwise ("LIABILITIES").
(e) Except as and to the extent reflected, disclosed or reserved
against in the Company Financial Statements, or as disclosed in Company
Disclosure Schedule 3.4(e), since December 31, 1999, there has not been any
change, occurrence or circumstance affecting the business, results of operations
or financial condition of the Company or the Purchased Assets that has had,
individually or in the aggregate, a Material Adverse Effect on the Company or
the Purchased Assets or which is reasonably likely to have a Material Adverse
Effect on the Company or the Purchased Assets.
3.5 BROKER'S AND OTHER FEES. Except for the Landsbury Group, the Company
has not employed any broker or finder or incurred any liability for any broker's
or finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement and the other Purchase Agreements.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Company Disclosure Schedule 3.6(a), or as
reflected in the Company Financial Statements for December 31, 1999, the Company
does not have Knowledge of any facts or conditions which it reasonably believes
would be likely to cause a Material Adverse Effect on the Company or the
Purchased Assets in the next twelve (12) months.
(b) Except as set forth in Company Disclosure Schedule 3.6(b), the
Company has not taken or permitted any of the actions set forth in Section 6.2
since December 31, 1999 and, except for execution of this Agreement, the Company
has conducted its business only in the ordinary course, consistent with past
practice. Prior to December 31, 1999, the Company has not taken or permitted any
of the actions set forth in Section 6.2 that are not reflected in the Company
Financial Statements.
3.7 LEGAL PROCEEDINGS. Except as disclosed in Company Disclosure Schedule
3.7, (a) the Company is not a party to any, and there are no pending or, to the
Company's Knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against the Company or the Purchased Assets, (b) the Company is not a party to
any order, judgment or decree entered in any lawsuit or proceeding, or (c) no
actions, suits, demands, notices, claims, investigations or proceedings are
pending or, to the Company's Knowledge, threatened against or otherwise
involving, directly or indirectly, any officer, director, employee or agent of
the Company (in connection with such officer's, director's, employee's or
agent's activities on behalf of the Company or that otherwise relate, directly
or indirectly to the Company or its properties or securities)
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including without limitation any notices, demand letters or requests from any
Governmental Authority relating to such potential Liabilities.
3.8 TAXES AND TAX RETURNS. Except as disclosed in Company Disclosure
Schedule 3.8:
(a) The Company has duly and timely filed (and until and after the
Closing Date will so file) all returns, declarations, reports, information
returns and statements required to be filed by it in respect of any United
States federal, state, local, or foreign Taxes ("RETURNS") and has duly and
timely paid (and until and after the Closing Date will so pay) all such Taxes
due and payable, other than Taxes which are being contested in good faith (and
disclosed by the Company to Purchaser in writing). As used herein, "TAX" or
"TAXES" means and includes any and all taxes, fees, levies, assessments, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including, without
limitation: foreign, domestic, central, local, state or other jurisdictional
taxes or other charges on or with respect to income, estimated income,
franchises, business, occupation, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees; and customs
duties, tariffs, and similar charges. The Company has established (and until the
Closing Date will establish) on its books and records reserves that are adequate
for the payment of all Taxes not yet due and payable, but are incurred in
respect of the Company through such date and shall pay all Taxes when due.
(b) None of the Returns of the Company have been examined by the
Internal Revenue Service (the "IRS"), or any other United States federal, state
or local or any foreign Governmental Authority since the Company's inception.
There are no audits or other Governmental Authority proceedings presently
pending nor, to the Knowledge of the Company, any other disputes pending with
respect to, or claims asserted for, Taxes upon the Company, nor has the Company
given any currently outstanding waivers or comparable consents regarding the
application of any statute of limitations with respect to any Taxes or Returns.
There are no liens for Taxes upon the assets of the Company, except liens for
Taxes not yet due. The Company has complied (and until and after the Closing
Date will comply) in all respects with all applicable Laws relating to the
payment and withholding of Taxes.
(c) Except as set forth on Company Disclosure Schedule 3.8(c), the
Company (i) has not requested any extension of time within which to file any
Return which Return has not since been filed; (ii) except for a Tax
Indemnification with Michael E. Marxen is not a party to any agreement providing
for the indemnification, allocation or sharing of Taxes; (iii) is not required
to include in income any adjustment by reason of a voluntary change in
accounting method initiated by the Company (nor to the Company's Knowledge has
any Governmental Authority proposed any such adjustment or change of accounting
method); (iv) has not filed a consent with any Governmental Authority pursuant
to which the Company
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has agreed to recognize gain (in any manner) relating to or as a result of this
Agreement or the transactions contemplated hereby; and (v) has not been a member
of an affiliated group of corporations within the meaning of Section 1504 of the
Code.
3.9 EMPLOYEE AND FRINGE BENEFIT PLANS.
(a) Schedule of Plans. Company Disclosure Schedule 3.9 lists each of
the following that the Company or any ERISA Affiliate (as defined below) either
maintains, is required to contribute to or otherwise participates in (or at any
time maintained, contributed to or otherwise participated in) or as to which the
Company or any ERISA Affiliate has any unsatisfied liability or obligations
whether accrued, contingent or otherwise:
(i) any employee pension benefit plan ("PENSION/PROFIT-SHARING PLAN")
(as such term is defined in the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including any pension, profit-sharing, retirement, thrift
or stock bonus plan;
(ii) any "multi-employer plan" ("MULTI-EMPLOYER PLAN") (as such term is
defined in ERISA);
(iii) any employee welfare benefit plan ("WELFARE PLAN") (as such term
is defined in ERISA); or
(iv) any other compensation, stock option, restricted stock, fringe
benefit or retirement plan, program, policy, understanding or arrangement of any
kind whatsoever, whether formal or informal, not included in the foregoing and
providing for benefits for, or the welfare of, any or all of the current or
former employees or agents of the Company or any ERISA Affiliate or their
beneficiaries or dependents, including any group health, life insurance, retiree
medical, bonus, incentive or severance arrangement, and all outstanding stock
options, restricted shares, phantom stock awards, stock appreciation rights,
performance share unit awards or cash or other similar incentive awards
thereunder; (all of the foregoing in items (i), (ii), (iii) and (iv) being
referred to as "EMPLOYEE PLANS""). "ERISA AFFILIATE" means each trade or
business (whether or not incorporated) which together with the Company is
treated as a single employer pursuant to Code Section 414(b), (c), (m) or (o).
The Company has delivered to Purchaser (and Company Disclosure Schedule 3.9
lists each item delivered) copies of the following: (1) each written Employee
Plan, as amended (including either the original plan or the most recent
restatement and all subsequent amendments); (2) the most recent IRS
determination letter issued with respect to each Pension/Profit-Sharing Plan;
(3) the latest actuarial valuation (if any) for each Pension/Profit-Sharing
Plan; (4) all annual reports on the Form 5500 series; (5) each trust agreement,
insurance contract or document setting forth any other funding arrangement, if
any, with respect to each Employee Plan; (6) the most recent ERISA summary plan
description or other summary of plan provisions distributed to participants or
beneficiaries for each Employee Plan; (7) each opinion or ruling from the IRS,
the Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC")
concerning any Employee Plan; and (8) each Registration Statement, amendment
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thereto and prospectus relating thereto filed with the Securities and Exchange
Commission (the "SEC") or furnished to participants in connection with any
Employee Plan.
(b) Qualification. Except as set forth on Company Disclosure Schedule
3.9 each Pension/Profit-Sharing Plan: (i) has received a favorable determination
letter from the IRS to the effect that it is qualified under Code Sections
401(a) and 501, both as to the original plan and all restatements or material
amendments; (ii) has never been subject to any assertion by any Governmental
Authority that it is not so qualified; and (iii) has been operated so that it
has always been so qualified.
(c) Accruals; Funding.
(i) Pension/Profit-Sharing Plans. None of the Employee Plans
is a Pension/Profit-Sharing Plan subject to ERISA Title IV (including those for
retired, terminated or other former employees and agents).
(ii) Other Plans. Company Disclosure Schedule 3.9 fully and
accurately sets forth any funding liability under each Employee Plan not subject
to ERISA Title IV, whether insured or otherwise, specifically setting forth any
liabilities under any retiree medical arrangement and specifically designating
any insured plan which provides for retroactive premium or other adjustments.
The levels of insurance reserves and accrued liabilities with regard to each
such Employee Plan are reasonable and are sufficient to provide for all incurred
but unreported claims and any retroactive premium adjustments.
(iii) Contributions. Except as set forth on Company Disclosure
Schedule 3.9: (A) The Company and each ERISA Affiliate have made full and timely
payment of all amounts required to be contributed under the terms of each
Employee Plan and applicable Law, or required to be paid as expenses under such
Employee Plan, including PBGC premiums and amounts required to be contributed
under Code Section 412; (B) all contributions have been made in accordance with
the actuarial recommendations; and (C) no excise taxes are assessable as a
result of any nondeductible or other contributions made or not made to an
Employee Plan.
(d) Reporting and Disclosure. Summary plan descriptions and all other
returns, reports, registration statements, prospectuses, documents, statements
and communications which are required to have been filed, published or
disseminated under ERISA or other Law and the rules and regulations promulgated
by the Department of Labor under ERISA and the Treasury Department or by the SEC
with respect to the Employee Plans have been so filed, published or
disseminated.
(e) Prohibited Transactions; Terminations; Other Reportable Events
Except as set forth on Company Disclosure Schedule 3.9:
(i) neither the Company, any ERISA Affiliate, any Employee
Plan, any trust or arrangement created under any of them, nor any trustee,
fiduciary, custodian, administrator or any person or entity holding or
controlling assets of any of the Employee
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Plans has engaged in any "prohibited transaction" (as such term is defined in
ERISA or the Code) which could subject any of the foregoing persons or entities,
or any person or entity dealing with them, to any tax, penalty or other cost or
liability of any kind; and
(ii) no termination, whether partial or complete, has occurred
with respect to any Employee Plan.
(f) Claims for Benefits. Other than claims for benefits arising in the
ordinary course of the administration and operation of the Employee Plans, no
claims, investigations or arbitrations are pending or threatened against any
Employee Plan or against the Company, any ERISA Affiliate, any trust or
arrangement created under or as part of any Employee Plan, any trustee,
fiduciary, custodian, administrator or other person or entity holding or
controlling assets of any Employee Plan, and no basis to anticipate any such
claim or claims exists.
(g) Other. The Company and all ERISA Affiliates have fully complied
with all of their obligations under each of the Employee Plans and with all
provisions of ERISA and any and all other Laws applicable to the Employee Plans.
No written notice has been received by the Company of any claim by any
participant in the Employee Plans of any violations of such Laws, and to the
Knowledge of the Company, no such claims are pending or threatened.
(h) Creation of Obligations By Reason of Sale of the Purchased Assets.
Except as set forth on Company Disclosure Schedule 3.9, the execution and
delivery of this Agreement and the other Purchase Agreements and the
consummation of the transactions contemplated by this Agreement and the other
Purchase Agreements will not constitute an event under any Employee Plan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, including
any obligation to make a payment that would be nondeductible under Code Section
280G or any other Code provision.
(i) No Multi-Employer Plans. Except as set forth on Company Disclosure
Schedule 3.9, none of the Employee Plans is a Multi-Employer Plan, and neither
the Company nor any ERISA Affiliate has any liability, joint or otherwise, for
any withdrawal liability (potential, contingent or otherwise) under ERISA Title
IV for a complete or partial withdrawal from any Multi-Employer Plan.
3.10 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in Company
Disclosure Schedule 3.10, the Company holds all licenses, franchises, permits,
consents and authorizations necessary for the lawful conduct of its business
("LICENSES"). No proceeding is pending or to the Knowledge of the Company
threatened seeking the revocation or suspension of any License. Except as set
forth on Company Disclosure Schedule 3.10, the Company is and has been in
compliance in all material respects with all applicable Laws, and the Company
has not received any notices of any allegation of any violation by the Company
of any Law or License.
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3.11 CERTAIN CONTRACTS.
(a) Company Disclosure Schedule 3.11(a) lists the following agreements
(collectively, the "MATERIAL CONTRACTS"), including, without limitation, leases,
purchase contracts and commitments, to which the Company is a party or by which
the Company or any of its material properties or assets is bound:
(i) all agreements involving an annual commitment or payment
by any party thereto of more than $10,000 individually or $25,000 in the
aggregate or which have a fixed term extending more than 12 months from the date
hereof;
(ii) all joint venture, sales agency, sales representative or
distributorship, broker, franchise, license or similar agreements;
(iii) all leases of real and personal property that is
material to the Company's business and operations;
(iv) all notes, bonds, mortgages, security agreements,
guarantees and other agreements and instruments for or relating to any lending
or borrowing by the Company in any amount (exclusive of advances to employees
for expenses in the ordinary course of business);
(v) all powers of attorney, guarantees, suretyships or similar
agreements;
(vi) all employment agreements; and
(vii) all other agreements to which the Company is a party and
either (1) which is material to the Business or the Purchased Assets, or (2) the
breach of or default under which could have a Material Adverse Effect on the
Business or the Purchased Assets.
(b) Except as set forth on Company Disclosure Schedule 3.11(b), each of
the Material Contracts is valid, binding and enforceable on the Company, and to
the Knowledge of the Company, the other parties thereto, in accordance with its
terms, and the Company has provided a true and complete copy of each Material
Contract to Purchaser.
(c) Except as disclosed in Company Disclosure Schedule 3.11(c), (i)
neither the Company, nor to the Knowledge of the Company, any other party
thereto, is in default under any of the Material Contracts or any other
agreement to which the Company is a party or to which its properties are bound;
(ii) to the Company's Knowledge, no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default thereunder entitling any party to terminate a
Material Contract or other such agreement or to otherwise claim or collect
damages the impact of which would have a Material Adverse Effect on the Company;
and (iii) the continuation, validity and effectiveness of all such Material
Contracts and agreements under the current terms thereof and the current rights
and obligations of the Company thereunder will in no way be affected,
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altered or impaired by the consummation of the transactions contemplated by this
Agreement or the other Purchase Agreements.
3.12 PROPERTIES AND INSURANCE.
(a) Except as disclosed in Company Disclosure Schedule 3.12(a), the
Company has good and marketable title to all of the Purchased Assets, whether
tangible or intangible, subject to no Encumbrances except statutory liens for
amounts not yet due or which are being contested in good faith (and which have
been disclosed on Company Disclosure Schedule 3.12(a) (the "PERMITTED
ENCUMBRANCES").
(b) Company Disclosure Schedule 3.12(b) contains a list of all of the
items of personal property included among the Purchased Assets together with
their respective replacement values. No item of real property is included among
the Purchased Assets. Complete and correct copies of each lease listed on
Company Disclosure Schedule 3.12(b) and any amendments, extensions, and renewals
thereof have been furnished to Purchaser. Each of the leases described on
Company Disclosure Schedule 3.12(b) is in full force and effect and there is no
existing defaults or events of default, real or claimed, or events which with
notice or lapse of time or both would constitute defaults. Except as described
on Company Disclosure Schedule 3.12(b), all such leases are fully assignable
without the consent of any third party. No rights of the Company under such
leases have been assigned or otherwise transferred as security for any
obligation of the Company.
(c) The Purchased Assets and the Business are currently insured under
various policies of general liability and other forms of insurance, which are
set forth on Company Disclosure Schedule 3.12(c), and which policies are in
amounts adequate in the reasonable judgment of the Company to protect the
Business from significant loss. All such policies are in force and effect with
premiums thereon timely paid and no act or failure to act has accrued which
caused or may cause any such policy to be canceled or terminated. For the past
five (5) years, all insurance policies covering liability maintained by or for
the benefit of the Company has been "occurrence" policies and not "claims made"
policies. The Company has not been refused any insurance with respect to the
Purchased Assets or the Business by any insurance carrier to which it has
applied for insurance.
(d) No person other than the Company is currently entitled to
possession of any of the Purchased Assets, whether owned or leased by the
Company.
3.13 ENVIRONMENTAL MATTERS.
(a) The operations of the Company comply, and have complied, in all
material respects with all applicable Laws relating to pollution or protection
of the environment ("ENVIRONMENTAL LAWS").
(b) The Company has obtained all environmental, health and safety
licenses and other authorizations necessary for the operation of the Business,
all of which are valid and
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in good standing and are not subject to any modification or revocation
proceeding, and the Company is in compliance in all material respects with all
terms and conditions thereof.
(c) The Company has not received any written notice of any pending or
threatened investigation, proceeding or claim to the effect that the Company is
or may be liable to any person or responsible or potentially responsible for the
costs of any remedial or removal action or other cleanup costs, as a result of
noncompliance with any Environmental Laws or arising out of the presence,
generation, storage or disposal of hazardous waste, including liability under
the United States Comprehensive Environmental Response, Compensation and
Liability Act, as amended, any state superfund law or any Environmental Law, and
to the Company's Knowledge there is no past or present action, condition or
circumstance that could be expected to give rise to any such liability on the
part of the Company to any person or entity or for any such cleanup costs.
3.14 INTELLECTUAL PROPERTY.
(a) Background. The Company develops, markets and licenses certain
proprietary application software products and systems to its customers (the
"SOFTWARE PROGRAMS"), and in connection therewith the Company has developed
certain related technical documentation and user reference manuals (the
"DOCUMENTATION"). The Software Programs and the Documentation are collectively
referred to as the "SOFTWARE." The Software Programs are listed on Company
Disclosure Schedule 3.14(a).
(b) Ownership. Except as set forth in Company Disclosure Schedule
3.14(b), the Company owns all patents, trademarks, service marks, trade names
and copyrights (including registrations, licenses and applications pertaining
thereto) and all other proprietary information used by the Company in the
conduct of the Business. Company Disclosure Schedule 3.14(b) sets forth all
domestic and foreign patents, trademarks, service marks, trade names and
copyrights owned or used by the Company and all applications therefor and
registrations thereof.
(c) Procedures for Copyright Protection. Company Disclosure Schedule
3.14(c) sets forth the form and placement of the proprietary legends and
copyright notices displayed in or on the Software including screen displays. In
no instance has the eligibility of the Software for protection under copyright
law been forfeited to the public domain.
(d) Procedures for Trade Secret Protection. The Company has never
disclosed source code for any of the Software to a third party other than the
persons identified in Company Disclosure Schedule 3.14(d), each of which has
executed an appropriate nondisclosure agreement in favor of the Company. The
Company discloses its source code to employees only on a need-to-know basis in
connection with the performance of their duties to the Company. Except as
described in Company Disclosure Schedule 3.14(d), each current employee of the
Company and each former employee of the Company has executed and delivered to
the Company an employment or other agreement containing provisions for the
protection of trade secrets and confidential information of the Company and the
absolute
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ownership by the Company of all work resulting from the performance of services
by such employee. The source code and system documentation comprising the
Software have at all times been maintained by the Company in confidence and the
Company has not taken (nor has it failed to take) any action which would be
reasonably likely to result in such source code and system documentation not
being protectable as a trade secret under applicable Laws.
(e) Ownership of Software. Except as disclosed on Company Disclosure
Schedule 3.14(e), all persons who have contributed to or participated in the
conception and development of the Software on behalf of the Company have been
full-time employees of the Company hired to prepare such works within the scope
of employment. As a consequence, the Company has all ownership interests in the
Software.
(f) Absence of Claims. Except as set forth in Company Disclosure
Schedule 3.14(f), no claims have been asserted by any person to rights in the
Software, and to the Knowledge of the Company, no valid basis for any such claim
exists. The use of the Software by the Company and its licensees does not
infringe on the rights of any person (whether arising under copyright, trade
secret, patent, unfair competition or other Laws that protect intellectual
property rights). The use by the Company of the patents, trademarks, service
marks, trade names and copyrights identified in Company Disclosure Schedule
3.14(a) does not infringe the rights of any person, and the Company has not
received a claim asserting that the use by the Company of any of the foregoing
infringes the rights of any person. The Company has not received notice of any
claim asserted by any person to the effect that any current or former employee
of the Company has violated the provisions of any noncompete or nondisclosure
agreement with such person or has disclosed any proprietary information of such
person to the Company or any third party.
3.15 ADEQUACY OF TECHNICAL DOCUMENTATION. The Software includes the source
code, system documentation and schematics for all Software Programs, as well as
any programmer comments for documentation and pertinent commentary or
explanation that may be reasonably necessary to render such materials
understandable and usable by a trained computer programmer. The Software also
includes the programs (including compilers), workbenches, tools and higher level
language, if any, used for the development, maintenance and implementation of
the Software Programs.
3.16 THIRD-PARTY COMPONENTS IN SOFTWARE. The Company has validly obtained
the right and license to use, copy, modify and distribute any third-party
programming and materials contained in the Software pursuant to the contracts
identified in Company Disclosure Schedule 3.16, subject to no further license
fee, royalty or other payment obligations not identified in Company Disclosure
Schedule 3.16, other than software maintenance payments customarily associated
therewith. The Software contains no other programming or materials in which any
third party may claim superior, joint or common ownership, including any right
or license. The Software does not contain derivative works of any programming or
materials not owned in their entirety by the Company.
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3.17 THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE. The Company has
not granted, transferred or assigned any right or interest in the Software to
any person except pursuant to the contracts identified on Company Disclosure
Schedule 3.17. There are no contracts, agreements, licenses, commitments or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the Software by any independent salesperson, distributor,
sublicensor or other remarketer or sales organization except as set forth on
Company Disclosure Schedule 3.17.
3.18 ABSENCE OF CERTAIN AGREEMENTS AND PRACTICES. Neither the Company, its
directors or officers, or employees, or to the Company's Knowledge, its agents,
affiliates, nor any other person acting on behalf of the Company has (a) given
or agreed to give any gift or similar benefit having a value of $1,000 or more
to any customer, supplier or governmental employee or official or any other
person, for the purpose of directly or indirectly furthering the Business, (b)
used any corporate funds for contributions, payments, gifts or entertainment, or
made any expenditures relating to political activities to government officials
or others in violation of any applicable Laws in connection with the Business or
(c) received any unlawful contributions, payments, gifts or expenditures in
connection with the Business.
3.19 MAJOR VENDORS AND CUSTOMERS. Company Disclosure Schedule 3.19 sets
forth a list of each licensor, developer, remarketer, distributor and supplier
of property or services to, and each licensee, end-user or customer of, the
Company, to whom the Company paid or billed in the aggregate in excess of
$25,000 during calendar year 1999.
3.20 ACCOUNTS RECEIVABLE. Company Disclosure Schedule 3.20 sets forth the
accounts receivable of the Company as of December 31, 1999, as reflected in the
Company Financial Statements as of that date, and the accounts receivable of the
Company as of February 20, 2000, together with an aging of these accounts. These
accounts receivable, and all accounts receivable of the Company created after
February 20, 2000 represent receivables due for goods sold and services rendered
in the ordinary course of business and are collectible at the recorded amounts
thereof, except to the extent reserves therefor have been made on the Company
Financial Statements in accordance with GAAP.
3.21 BULK SALES LAWS. No bulk sales law is applicable to the transactions
contemplated by this Agreement.
3.22 COMBINATIONS INVOLVING THE COMPANY. All mergers, consolidations or
other business combinations involving the Company and all liquidations,
purchases of stock or assets or other transactions by which the Company acquired
or disposed of any of its business, property or securities were conducted in
compliance with applicable charter documents, Bylaws, any other applicable
agreements, instruments and documents and applicable Laws.
3.23 LABOR RELATIONS. Except as disclosed on Company Disclosure Schedule
3.23, the Company is in material compliance with all federal and state Laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice. There is no unlawful
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employment practice or discrimination charge against the Company pending before
the United States Equal Employment Opportunity Commission ("EEOC") or any EEOC
recognized state "referral agency." There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
("NLRB"). There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Company's Knowledge, threatened against or involving or
affecting the Company, and no NLRB representation question exists respecting any
of its employees. No grievance or arbitration proceeding is pending and no
written claim therefor exists. There is no collective bargaining agreement that
is binding on the Company. Except for any Material Contract disclosed pursuant
to Section 3.11, the Company is not a party to or bound by any agreement,
arrangement or understanding with any employee or consultant that cannot be
terminated on notice of ninety (90) or fewer days without liability to the
Company or that entitles such employee or consultant to receive any salary
continuation or severance payment or retain any specified position with the
Company.
3.24 YEAR 2000 MATTERS. Except as provided on Company Disclosure Schedule
3.24, the Software and the Company's internal systems and software and the
network connections it maintains are each "MILLENNIUM Complaint." For purposes
of this Agreement, "Millennium Compliant" means: (a) the functions,
calculations, and other computing processes of the Software (collectively,
"PROCESSES") perform as designed regardless of the date in time on which the
Processes are actually performed and regardless of the date input to the
Software, whether or not the dates include leap years; (b) the Software can
accept, store, sort, extract, sequence, and otherwise manipulate date inputs and
date values, and return and display date values, as designed and in a materially
accurate manner, regardless of the dates used or format of the date input; (c)
the Software will function without interruptions caused by the date in time on
which the Processes are actually performed or by the date input to the Software;
(d) the Software accepts and responds to four digit year date input in a manner
that resolves any material ambiguities as to the century in an accurate manner;
and (e) the Software displays, prints and provides electronic output of date
information in ways that are unambiguous as to the determination of the century.
3.25 ASSIGNMENT PROVISIONS. Company Disclosure Schedule 3.25 contains a
true and complete copy of all agreements in effect to which the Company is a
party and which contain any provisions which become effective or are accelerated
or contingent upon a sale of assets by the Company or otherwise require any
payment or performance by the Company or any officer, director or shareholder
thereof, now or in the future, in connection with or as a result of any of the
transactions contemplated by this Agreement or any of the other Purchase
Agreements.
3.26 NECESSARY PROPERTIES. All properties and assets occupied by, used in
or necessary to the conduct of the Business, other than the Retained Assets, are
included in the Purchased Assets and are being sold, transferred, assigned and
conveyed by the Company to Purchaser pursuant to this Agreement. The Purchaser's
ability to use the Purchased Assets in the conduct of the Business will not be
prohibited or otherwise impaired by the consummation of the transactions
contemplated in this Agreement or the other Purchase Agreements.
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3.27 SECURITIES ACT COMPLIANCE. The Company acknowledges that none of the
shares of Purchaser Common Stock to be delivered to the Company pursuant to this
Agreement will, at the time of delivery, be registered under the Securities Act
or any State Acts (collectively the "SECURITIES LAWS"). Except as provided in
Section 6.11, the Company represents and warrants that it is acquiring the
Purchaser Common Stock for investment, and not with a view toward, or for resale
in connection with, a distribution of Purchaser Common Stock. The Company
acknowledges that Purchaser Common Stock may be sold, pledged, hypothecated,
disposed of, or otherwise transferred or distributed only (i) pursuant to an
effective registration statement covering Purchaser Common Stock under the
Securities Laws, or (ii) pursuant to an exemption from the registration
requirements of the Securities Laws.
3.28 ACCESS TO INFORMATION. The Company has had access to Purchaser's SEC
Filings and has otherwise had access to sufficient information about Purchaser
upon which to analyze the transactions contemplated by this Agreement. The
Company has been given the opportunity to ask questions and receive answers from
the officers of Purchaser concerning the terms and conditions of the
transactions contemplated by this Agreement and the business and financial
condition of Purchaser. The Company has had the opportunity to obtain any
additional information it deems necessary to verify the accuracy and
completeness of information provided by Purchaser in connection with this
Agreement and the transactions contemplated hereby.
3.29 EXPERIENCE; INVESTMENT. The Company has such knowledge and experience
in financial and business matters as to enable the Company (a) to utilize the
information made available to the Company in connection with the transactions
contemplated by this Agreement and the other Purchase Agreements, (b) to
evaluate the merits and risks associated with the acquisition of Purchaser
Common Stock pursuant hereto, and (c) to make an informed decision with respect
thereto. The Company has such business and financial experience such that
Purchaser could reasonably assume the Company has the capacity to protect its
own interests in connection with the offer, sale and issuance of Purchaser
Common Stock. The Company is financially capable of bearing the risk of loss of
any and all consideration surrendered in exchange for the Purchaser Common
Stock, and acknowledges that an investment in Purchaser Common Stock involves a
high degree of risk, including a possible total loss of investment, and that the
market price of Purchaser Common Stock on the Closing Date may not be indicative
of its future value. The Company represents that it and each of its shareholders
is an "ACCREDITED INVESTOR" within the meaning of Regulation D ("REGULATION D")
promulgated by the Commission under the Securities Act. The Company understands
that the officers, directors, attorneys and other advisors of Purchaser will
rely upon the representations and warranties made by the Company in this
Agreement in order to establish any necessary exemption from the registration
provisions of the Securities Laws.
3.30 TAX ADVICE. The Company has reviewed with its tax advisors the United
States federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement and the other Purchase Agreements. The Company is
relying solely on such advisors and not on any statements or representations of
Purchaser or any of its agents, and understands that it (and not Purchaser or
any other person or entity) shall be responsible for its
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own tax liability that may arise as a result of the transactions contemplated by
this Agreement and the other Purchase Agreements.
3.31 DISCLOSURE. No representation, warranty or statement made by the
Company in this Agreement, the other Purchase Agreements or in any document or
certificate furnished or to be furnished to the Purchaser pursuant to this
Agreement or the other Purchase Agreements contains or will contain any untrue
or incomplete statement or omits or will omit to state any material fact
necessary to make the statements contained herein or therein not misleading. The
Company has completely and accurately responded in all material respects to all
diligence inquiries made by Purchaser and its officers, directors, attorneys,
accountants and other representatives in connection with this Agreement and the
other Purchase Agreements and has disclosed all material facts (and have not
omitted any material facts) known or reasonably available that are reasonably
necessary in order to make the Company's responses to such inquiries, in light
of the circumstances in which such responses were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT SHAREHOLDERS
To induce the Purchaser to enter into this Agreement and the other
Purchase Agreements, the Management Shareholders severally represent and warrant
to Purchaser as follows:
4.1 AUTHORITY; NO VIOLATION. No Authorizations of any third party or any
Governmental Authority are necessary on behalf of the Management Shareholders in
connection with (i) the execution and delivery by the Management Shareholders of
this Agreement and the other Purchase Agreements, (ii) the consummation by the
Management Shareholders of the transactions contemplated hereby and thereby and
(iii) the performance of the Management Shareholders' obligations under this
Agreement and the other Purchase Agreements. Each Management Shareholder has the
full power, capacity and authority to execute, deliver and perform this
Agreement and the other Purchase Agreements and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof.
This Agreement and the other Purchase Agreements to which the Management
Shareholders are a party have been duly and validly executed and delivered by
the Management Shareholders, are entered into voluntarily without promise or
benefit other than as set forth herein, and constitute the valid and binding
obligations of the Management Shareholders, enforceable against the Management
Shareholders in accordance with their terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect that
effect the enforcement of creditor's rights generally or general principles of
equity, whether considered in a proceeding at law or in equity.
4.2 FINANCIAL ABILITY. The Management Shareholders each has the financial
capacity to meet its obligations under this Agreement and the other Purchase
Agreements.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
To induce the Company to enter into this Agreement and the other
Purchase Agreements, the Purchaser hereby represents and warrants to the Company
as follows:
5.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Georgia.
Purchaser has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted.
5.2 CAPITALIZATION. The authorized capital stock of the Purchaser consists
of 70,000,000 shares of common stock, without par value (the "PURCHASER COMMON
STOCK"), 20,395,855 shares of which were issued and outstanding as of February
26, 2000 and 5,000,000 shares of preferred stock, 500,000 of which were issued
and outstanding as of February 26, 2000. The Purchaser Common Stock to be issued
to the Company pursuant to this Agreement will be duly authorized, validly
issued, fully paid and non-assessable.
5.3 AUTHORITY; NO VIOLATION.
(a) Except for filings of Form D and other notices related to the
issuance of securities by Purchaser, and the Nasdaq notification of listing of
additional shares of Purchaser Common Stock, no Authorizations are necessary on
behalf of Purchaser in connection with (i) the execution and delivery by
Purchaser of this Agreement and the other Purchase Agreements, (ii) the
consummation by Purchaser of the transactions contemplated hereby and thereby
and (iii) the performance of Purchaser's obligations under this Agreement and
the other Purchase Agreements. Purchaser has the full corporate power and
authority to execute and deliver this Agreement and the other Purchase
Agreements to which it is a party and the consummation by Purchaser of the other
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and the other Purchase
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
Purchaser in accordance with the Articles of Incorporation and Bylaws of the
Purchaser and applicable Laws. No other corporate proceedings on the part of
Purchaser are necessary to consummate the transactions so contemplated. This
Agreement and the other Purchase Agreements have been duly and validly executed
and delivered by Purchaser and constitute the valid and binding obligation of
the Purchaser enforceable against Purchaser in accordance with its terms, except
to the extent that the availability of the remedy of specific performance may be
limited by equitable principles.
(b) Neither the execution and delivery of this Agreement and the other
Purchase Agreements to which it is a party by Purchaser, nor the consummation by
Purchaser of the transactions contemplated hereby and thereby in accordance with
the terms hereof and thereof, nor compliance by Purchaser with any of the terms
or provisions hereof and thereof,
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will (i) violate any provision of Purchaser's Articles of Incorporation or
Bylaws, or (ii) violate any Laws applicable to Purchaser or any of its
properties or assets.
5.4 BROKER'S AND OTHER FEES. Except for The Robinson-Humphrey Company, LLC,
Purchaser has not employed any broker or finder or incurred any liability for
any broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
5.5 LEGAL PROCEEDINGS. No litigation is pending or, to the Knowledge of
Purchaser, threatened against or affecting Purchaser in connection with any of
the transactions contemplated by this Agreement or the other Purchase Agreements
to which Purchaser is a party which may affect Purchaser's ability to perform
its obligations hereunder or thereunder. There is presently no outstanding
judgment, decree or order of any Governmental Authority against or affecting
Purchaser in connection with the transactions contemplated by this Agreement or
the other Purchase Agreements to which Purchaser is a party.
5.6 SEC REPORTS. Purchaser is a "reporting issuer" and has a class of
securities registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). Purchaser has made all filings with the
SEC that it has been required to make under the Securities Act and the Exchange
Act (the "SEC FILINGS"). None of the reports contained in such SEC Filings, as
of their respective dates (or if amended or superseded by subsequent filing, on
the dates of such filings), contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading. The financial statements of Purchaser contained in such
SEC Filings and reports were prepared in accordance with GAAP consistently
applied through the periods covered thereby (except as may be indicated in the
notes to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q promulgated by the SEC) and present fairly, in all
material respects, the financial condition of Purchaser as of the indicated
dates and the results of operations of Purchaser for the indicated periods.
5.7 NO MATERIAL ADVERSE CHANGE. Since the date of Purchaser's most recent
SEC Filings, other than as disclosed by Purchaser in such SEC Filings, in press
releases of Purchaser disseminated to major new wire services or the Nasdaq, or
in this Agreement, there has been no material adverse change in the business,
financial condition or results of operations of Purchaser.
5.8 DISCLOSURE. No representation, warranty or statement made by Purchaser
in this Agreement, the other Purchase Agreements or in any document or
certificate furnished to the Company pursuant to this Agreement or the other
Purchase Agreements contains or will contain any untrue or incomplete statement
or omits or will omit to state any material fact necessary to make the
statements herein or therein not misleading.
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ARTICLE 6
COVENANTS AND AGREEMENTS OF THE PARTIES
6.1 CONDUCT OF BUSINESS. From the date hereof to the Closing Date, the
Company shall conduct the Business only in the ordinary course and consistent
with past practice, except for transactions permitted hereunder or with the
prior written consent of Purchaser. Without limiting the generality of the
foregoing, the Company shall use all commercially reasonable efforts to:
(a) maintain its existence and status in good standing in all
jurisdictions in which it is required to be qualified or registered to conduct
its business;
(b) maintain all of the tangible Purchased Assets in good operating
condition, ordinary wear and tear excepted, and maintain the protection of all
intellectual property in substantially the same standing as exists on the date
hereof;
(c) continue performance in the ordinary course of its obligations
under its contracts and agreements;
(d) preserve its business organization intact, use all commercially
reasonable efforts to keep available its present officers and employees and
preserve its present relationships with suppliers, customers and others having
business relationships with it; and
(e) maintain its existing insurance, subject to variations in amount
required by the ordinary operations of its business.
6.2 NEGATIVE COVENANTS. From the date hereof to the Closing Date, except as
otherwise approved by Purchaser in writing, or as permitted or required by this
Agreement, the Company will not:
(i) change any provision of its Articles of Incorporation or
Bylaws;
(ii) grant any severance or termination pay to, or enter into
or amend any employment or severance agreement with, any of its directors,
officers or employees; adopt any new employee benefit plan or arrangement of any
type; or award any increase in compensation or benefits to its directors,
officers or employees except for (A) employee increases in the ordinary course
of business and consistent with past practices and policies, (B) bonuses in
amounts that do not result in a material variance from the amounts reserved for
such payments through the date of the most recent balance sheet included in the
Company Financial Statements, and (C) acceleration of the right to exercise
and/or cashless exercise of options under the Company's 1995 Stock Incentive
Plan;
(iii) sell or dispose of any Purchased Assets other than in
the ordinary course of business consistent with past practices;
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(iv) make any capital expenditures outside the ordinary course
of business;
(v) acquire in any manner whatsoever any business or entity;
(vi) make any change in its accounting methods or practices;
(vii) incur, create, assume or guarantee any Liabilities
except in the ordinary course of business and as would not have a Material
Adverse Effect on the Company;
(viii) pay, discharge or satisfy any Liabilities, other than
by payment, discharge or satisfaction in the ordinary course of business;
(ix) permit or allow any of the Purchased Assets (real,
personal or mixed, tangible or intangible) to be subjected to any Encumbrance,
except for Permitted Encumbrances;
(x) declare, file or permit to be filed any voluntary
bankruptcy, receivership, insolvency or other similar proceeding or petition
with any Governmental Authority with respect to the Company;
(xi) fail to perform its obligations under any Material
Contract (except those being contested in good faith) or enter into, assume or
amend any agreement that would be a Material Contract other than agreements to
provide services entered into in the ordinary course of business;
(xii) take any action that results in (A) a Material Adverse
Effect on the Company or (B) any of its representations and warranties contained
in Article 3 not being true and correct in any material respect at the Closing
Date, or that would cause any of the conditions to the Closing not to be
satisfied; or
(xiii) directly or indirectly agree to do any of the
foregoing.
6.3 NO SOLICITATION. From the date hereof to the Closing Date or the
earlier termination of this Agreement in accordance with its terms:
(a) neither the Company nor any of its present or future Subsidiaries
or other affiliates, nor any of its or their directors, officers, shareholders,
employees, representatives or other agents (collectively, the "COMPANY
AFFILIATES") shall, directly or indirectly, (i) enter into any agreement (or
agree to do so), or solicit, initiate or knowingly encourage the invitation of
inquiries or proposals or offers from any person (other than Purchaser or its
directors, officers, employees, representatives and agents) concerning: (A) any
sale of assets or transfer of liabilities of the Company or any of its present
or future Subsidiaries, divisions or other affiliates (other than any such sale
or transfer in the ordinary course of business); (B) any issuance, purchase or
sale of capital stock or debt or other securities of the Company or any of its
present or future Subsidiaries, divisions or other
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affiliates; or (C) any merger, consolidation, restructuring, recapitalization or
other significant transaction involving the Company or any of its present or
future Subsidiaries, divisions or other affiliates; or (ii) provide any
confidential information to, participate in discussions or negotiations relating
to any such transaction with, or otherwise cooperate with or assist or
participate in any effort to take such action by any person or entity (other
than Purchaser or its directors, officers, shareholders, employees,
representatives and agents). The Company shall immediately advise Purchaser if
any such inquiry, offer or proposal is made or received by the Company or any of
the Company Affiliates;
(b) will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and the Company will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 6.3; and
(c) will notify Purchaser immediately of the identity of any potential
acquiror and the terms of any proposal or offer (including, without limitation,
any proposal or offer to any of the shareholders of the Company) with respect to
a proposed or potential merger, acquisition, consolidation, business
combination, transfer or similar transaction involving, or any purchase of all
or any significant portion of the assets, equity securities of or rights with
respect to any assets or securities of, the Company whether or not permitted by
this Section 6.3.
6.4 CURRENT INFORMATION. During the period from the date of this Agreement
to the Closing Date or the earlier termination of this Agreement in accordance
with its terms:
(a) Upon the reasonable request of Purchaser the Company will cause one
or more of the Company's representatives to confer with representatives of
Purchaser regarding its business, operations, properties, assets and financial
condition; each of the Parties will cause one or more of its representatives to
confer with representatives of the other Party regarding matters relating to the
completion of the transactions contemplated herein; and
(b) Each of the Parties will notify the other Party as soon as
practicable after any determination or discovery by it of any fact or
circumstance relating to the other Party which it has discovered through the
course of investigation and which represents, or is reasonably likely to
represent, a material breach of any representation, warranty, covenant or
agreement of the other Party or which has or is reasonably likely to have a
Material Adverse Effect on either Purchaser, the Business or the Purchased
Assets.
6.5 ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
(a) The Company shall permit Purchaser and its representatives
reasonable access to its properties and shall disclose and make available to
Purchaser and its representatives all books, papers and records and information
relating to it, its assets, stock ownership, properties, operations, obligations
and liabilities, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, agreements, filings with any Governmental
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Authority, accountants' work papers, litigation files, plans affecting
employees, and any other records and information in which Purchaser and its
representatives may have a reasonable interest; provided that such investigation
shall be reasonably related to the transactions contemplated by this Agreement
and shall not interfere unnecessarily with the normal business operations of the
Company.
(b) The terms of that certain Confidentiality Agreement between the
Parties (the "CONFIDENTIALITY AGREEMENT"), shall continue to be applicable to
the Parties from the date hereof to the Closing Date. If the Closing shall
occur, the terms of the Confidentiality Agreement shall remain in effect until
three (3) years following the Closing Date. If the Closing does not occur, the
Confidentiality Agreement shall continue in effect pursuant to the terms
thereof.
6.6 REGULATORY MATTERS; CONSENTS; COOPERATION, ETC.
(a) Each of the Parties will promptly furnish each other with copies of
written communications received by them or any of their respective Subsidiaries
from, or delivered by any of the foregoing to, any Governmental Authorities in
respect of the transactions contemplated hereby.
(b) As soon as practicable following the date hereof, each of the
Parties will use its commercially reasonable efforts to obtain all consents,
waivers and other Authorizations under any of its or its Subsidiaries'
agreements, contracts, licenses or leases required to be obtained by such Party
in connection with the consummation of the transactions contemplated hereby.
6.7 PARTIES' EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the other
provisions in this Agreement, the Parties shall in good faith perform their
obligations under this Agreement and the other Purchase Agreements before, at
and after the Closing Date, and shall each use all commercially reasonable
efforts to do, or cause to be done, all things necessary, proper or advisable to
obtain all Authorizations and satisfy all conditions to the obligations of the
Parties under this Agreement and the other Purchase Agreements and to cause the
transactions contemplated by this Agreement and the other Purchase Agreement to
be carried out promptly in accordance with the terms hereof and thereof shall
cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as part of their respective obligations under
this Agreement and the other Purchase Agreements. Upon the execution of this
Agreement and thereafter, each Party shall take such actions and execute and
deliver such documents as may be reasonably requested by the other Party in
order to consummate the transactions contemplated by this Agreement and the
other Purchase Agreements.
6.8 PUBLIC ANNOUNCEMENTS. The Company shall not make any public
announcement regarding any aspect of this Agreement without Purchaser's prior
written consent. Nothing in this Section 6.8 shall be deemed to prohibit any
Party from making any
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disclosure which its counsel deems necessary in order to satisfy such Party's
disclosure obligations imposed by Law or Governmental Authority.
6.9 SALES TAX. The Company shall be responsible for paying any sales, use,
transfer or other Tax assessable against the Company and arising out of the
transactions contemplated by this Agreement.
6.10 DISCLOSURE SUPPLEMENTS. From time to time prior to the Closing Date,
the Company will promptly notify Purchaser of any inaccuracy in the Company
Disclosure Schedules delivered pursuant hereto including, without limitation,
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Schedule or which
is necessary to correct any information in such Schedule that has been rendered
inaccurate. Notwithstanding the foregoing, no such notification shall be deemed
to amend the Company Disclosure Schedules or shall be deemed to be part hereof
unless agreed to by the Purchaser.
6.11 NO TRANSFERS. Except pursuant to the Registration Rights Agreement and
with the prior written consent of Purchaser or transfers by the Company to the
shareholders of the Company who are Accredited Investors within the meaning of
Regulation D upon the Liquidation (if the transfer to such shareholders is
effected in conformity with the Securities Laws and applicable Laws, including
the Code), neither the Company nor any of such shareholders shall transfer,
assign, convey or otherwise dispose of any of the Purchaser Common Stock or any
rights with respect to such stock received pursuant to this Agreement for a
period of twelve months commencing upon the date of receipt of such Purchaser
Common Stock.
6.12 CUSTOMER CONTACTS. The Company shall permit Purchaser to conduct a
survey or otherwise inquire of certain or all of the Company's key customers, as
selected by Purchaser, regarding the relationship between such customer and the
Company and the impact of a change in control on such relationship. The Company
shall assist Purchaser in making such survey or inquiries and shall have the
right to have a representative of its choice participate therein.
6.13 COMPANY STOCK OPTIONS. As of the Closing, Purchaser will issue options
(each a "PURCHASER STOCK OPTION") to acquire Purchaser Common Stock to holders
of outstanding options to acquire Company Common Stock under the 1995 Stock
Incentive Plan (each a "COMPANY STOCK OPTION") who have agreed prior to the
Closing Date to surrender their Company Stock Options in exchange for Purchaser
Stock Options by executing an agreement substantially in the form of Exhibit J.
The Purchaser Stock Options shall upon exercise entitle the holder to .196
shares of Purchaser Common Stock for each share of Company Common Stock subject
to such exchanged option to acquire Company Common Stock, at an exercise price
for each full share of Purchaser Common Stock equal to the quotient obtained by
dividing (a) the exercise price per share of Company Common Stock provided for
in the option to acquire Company Common Stock by (b) .196. The exercise price
and the number of shares subject to the Purchaser Stock Option shall be subject
to any
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adjustment as provided for in the Purchaser Stock Option agreement relating to
such option. Only whole shares of Purchaser Common Stock shall be issued upon
exercise of a Purchaser Stock Option. The exchange of Company Stock Options for
Purchaser Stock Options shall not give the holders of such Purchaser Stock
Options any additional benefits which they did not have pursuant to the Company
stock option (except that Purchaser acknowledges that the Company has
accelerated the right to exercise of all such options which would not be
exercisable in full at the Closing Date).
6.14 ADDITIONAL FINANCIAL STATEMENTS. As soon as practicable after the end
of every month (but in no event later than the twentieth day of the following
month) beginning with the month in which this Agreement is signed, the Company
will deliver to Purchaser an unaudited balance sheet of the Company as of the
end of such month, and related statements of income, stockholders' equity and
cash flows for such month, each certified by an officer of the Company as
meeting the standards for financial statements set forth in Section 3.4. Before
and after the Closing Date, the Company will cooperate with Purchaser in the
timely preparation of financial statements of the Company which meet the
requirements of the SEC for filing under Form 8-K.
6.15 WARN. The Company shall be responsible for giving any notice that may
be required by the Worker Adjustment and Retraining Notification Act ("WARN") as
a result of the transactions contemplated by this Agreement, both as to layoffs
or facility closings ordered prior to or after the Closing Date.
6.16 BROKER FEES. Each Party shall be responsible for the payment of any
fees, commissions, or other expenses incurred by or owed to any broker or
representative hired or retained by such Party.
6.17 MEETING OF DVI SHAREHOLDERS. The Company covenants and agrees that its
Board of Directors shall (a) cause copies of this Agreement and whatever
supplemental information Purchaser reasonably requests to be distributed to the
shareholders of the Company by overnight delivery as soon as practicable; (b)
cause a shareholders meeting to be duly called and held in accordance with the
Company's Articles of Incorporation, its Bylaws and applicable Law as soon as
reasonably practicable and no later than March 7, 2000, to consider and vote
upon this Agreement and the liquidation of the Company (the "LIQUIDATION"); and
(c) use its best efforts to cause such meeting to take place and to obtain the
approval by the shareholders of the Company of this Agreement, the other
transactions contemplated by this Agreement and the Liquidation in accordance
with its Articles of Incorporation, Bylaws and applicable Law.
6.18 DISSOLUTION AND LIQUIDATION OF THE COMPANY. Upon receipt of approval
from the Board of Directors and shareholders of the Company for the Liquidation,
the Company shall liquidate and distribute the Purchase Price and Retained
Assets no later than 30 days after the Closing Date.
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6.19 NON-ACCREDITED INVESTORS. Prior to the Closing Date, the Company or
the Management Shareholders will purchase or will cause to be purchased by other
Accredited Investors, the Company Common Stock owned by any Non-Accredited
Investors after providing such Non-Accredited Investors with appropriate
information reasonably satisfactory in form and substance to Purchaser.
6.20 COMPLIANCE. The Company covenants and agrees that all transactions
with respect to the Company's securities have been and shall be, through the
date of Liquidation, conducted in all respects in accordance with the Securities
Laws and applicable Law.
ARTICLE 7
CLOSING CONDITIONS
7.1 CONDITIONS TO THE OBLIGATIONS OF PURCHASER UNDER THIS AGREEMENT. The
obligations of the Purchaser under this Agreement shall be further subject to
the satisfaction or waiver, at or prior to the Closing Date, of the following
conditions:
(a) Authorizations and Regulatory Filings. All necessary Authorizations
of Governmental Authorities and third parties required to be obtained by the
Company to consummate the transactions contemplated by this Agreement and the
other Purchase Agreements shall have been obtained. All conditions required to
be satisfied by the Company prior to the Closing Date by the terms of such
Authorizations shall have been satisfied and all statutory waiting periods in
respect thereof shall have expired.
(b) Suits and Proceedings. The consummation of the transactions
contemplated by this Agreement and other Purchase Agreements will not violate
the provisions of any injunction, order, judgment, decree or Law applicable or
effective with respect to the Company or its officers and directors. No suit or
proceeding shall have been instituted by any person, or, to the Knowledge of
Purchaser, shall have been threatened by any Governmental Authority, and not
subsequently withdrawn, dismissed or otherwise eliminated, which seeks (i) to
prohibit, restrict or delay consummation of the transactions contemplated hereby
or to limit in any material respect the right of Purchaser to acquire any of the
Purchased Assets, or (ii) to subject the Company or its directors or officers to
material liability on the ground that it or they have breached any Law or
otherwise acted improperly in relation to the transactions contemplated by this
Agreement.
(c) Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Company and the Management Shareholders
contained in this Agreement shall be true and correct as of the date hereof and
shall also be true and correct in all material respects on the Closing Date as
though made on and as of the Closing Date, except that those representations and
warranties which are confined to a particular date shall speak only as of such
date, and the Company and the Management Shareholders shall have performed the
agreements, covenants and obligations to be performed by it at or prior to the
Closing Date.
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(d) Shareholder Approval The shareholders of the Company shall have
approved the transactions contemplated by this Agreement in accordance with
applicable Law. No more than 2% of the outstanding shares of Company Common
Stock immediately prior to the Closing shall be owned by shareholders of the
Company who have exercised dissenter's rights pursuant to applicable Law.
(e) Opinion of Counsel. Purchaser shall have received an opinion of
counsel to the Company, dated the Closing Date, in form and substance reasonably
satisfactory to Purchaser, covering the matters set forth on Exhibit A.
(f) Certificates. The Company shall have furnished Purchaser with such
certificates of the Company and its authorized officers or others and such other
documents to evidence fulfillment of the conditions set forth in this Article 7
and otherwise to consummate the transactions contemplated pursuant to this
Agreement and the other Purchase Agreements as Purchaser may reasonably request,
including certificates in substantially the form attached hereto as Exhibit B-1
and Exhibit B-2.
(g) Noncompetition, Nonsolicitation, Confidentiality and Employment
Agreements. The Company and the Management Shareholders shall each have executed
and delivered to Purchaser a Noncompetition, Nonsolicitation and Confidentiality
Agreement substantially in the form attached hereto as Exhibit C, and Michael
Murphy shall have entered into an employment agreement with Purchaser in form
and substance satisfactory to Purchaser and Michael Murphy.
(h) Assignment of Work Product Agreements. The Company shall have
delivered to Purchaser an Assignment of Work Product Agreement in substantially
the form attached hereto as Exhibit D or standard form previously used by the
Company and reasonably acceptable to Purchaser, signed by all persons who have
developed, modified or otherwise had access to the source code for the Software.
(i) No Material Adverse Effect on the Company. No event shall have
occurred and no fact or circumstance shall have arisen which has had a Material
Adverse Effect on the Business or the Purchased Assets.
(j) No Interest in Software. The Company shall have eliminated or
provided for the elimination of any and all claims to ownership, access, copies,
source code and license and royalty interests in all Software and systems
associated with the Company's Software, each of which shall be satisfactory to
Purchaser and its counsel in all respects.
(k) Escrow Agreement. The Company shall have executed and delivered to
Purchaser the Escrow Agreement in substantially the form attached hereto as
Exhibit E and with such modifications reasonably requested by the Escrow Agent.
(l) Cancellation of Debt. Except for the debt obligations of the
Company assumed by Purchaser pursuant to Schedule 1.3, the Company shall have
eliminated the remaining debt of the Company to the reasonable satisfaction of
Purchaser.
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(m) Termination of Company Warrants. All warrants of the Company which
have not been converted into Company Common Stock shall have been terminated by
the Company prior to the Closing Date.
(n) Company Preferred Stock. All issued and outstanding shares of the
preferred stock of the Company shall have been converted into shares of Company
Common Stock.
(o) Bill of Sale; Conveyance Documents. The Company shall have executed
and delivered to Purchaser bills of sale and such other instruments of sale,
conveyance, transfer, assignment, endorsement, direction or authorization as
will, in the opinion of Purchaser, vest in Purchaser all right, title and
interest (which title and interest shall be good and marketable) in and to the
Purchased Assets free and clear of all Encumbrances other than Permitted
Encumbrances.
(p) Assignment and Assumption Agreement. The Company shall have
executed and delivered to Purchaser assignment and assumption agreements in
substantially form attached hereto as Exhibit F whereby Purchaser shall assume
certain liabilities and obligations related to the Business.
(q) Due Diligence. Purchaser shall have completed its due diligence
review of the Company to its sole and absolute discretion and satisfaction.
(r) Accredited Investors. Immediately prior to the Closing Date, all
the outstanding shares of Company Common Stock and preferred stock shall be
owned by Accredited Investors. Each of the shareholders of the Company shall
have executed and delivered an agreement in the form attached hereto as Exhibit
K.
(s) Non-Accredited Investors. Any non-Accredited Investor who has sold
his Company Common Stock prior to the Closing shall have consented to such sale
based upon full written disclosure made to the non-Accredited Investor, said
written disclosure being satisfactory to Purchaser in its sole discretion.
(t) Other. The Company shall have executed and delivered to Purchaser
or obtained and delivered to Purchaser such other documents as may be reasonably
requested by Purchaser to effect the transactions contemplated by this
Agreement.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY UNDER THIS AGREEMENT. The
obligations of the Company under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Closing Date, of the following
conditions:
(a) Authorizations and Regulatory Filings. All necessary Authorizations
of Governmental Authorities required to be obtained by Purchaser to consummate
the transactions contemplated by this Agreement and the other Purchase
Agreements shall have been obtained. All conditions required to be satisfied by
Purchaser prior to the Closing Date by the terms of
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such Authorizations shall have been satisfied; and all statutory waiting periods
in respect thereof shall have expired.
(b) Suits and Proceedings. The consummation of the transactions
contemplated by this Agreement and other Purchase Agreements will not violate
the provisions of any injunction, order, judgment, decree or Law applicable or
effective with respect to Purchaser or its officers and directors. No suit or
proceeding shall have been instituted by any person, or, to the Knowledge of the
Company, shall have been threatened by any Governmental Authority, and not
subsequently withdrawn, dismissed or otherwise eliminated, which seeks (i) to
prohibit, restrict or delay consummation of the transactions contemplated hereby
or to limit in any material respect the right of the Company to sell the
Purchased Assets, or (ii) to subject the Company or its directors or officers to
material liability on the ground that it or they have breached any Law or
otherwise acted improperly in relation to the transactions contemplated by this
Agreement.
(c) Representations and Warranties; Covenants and Agreements. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct as of the date hereof and shall also be true and correct in all
material respects on the Closing Date as though made on and as of the Closing
Date, except that those representations and warranties which are confined to a
particular date shall speak only as of such date, and Purchaser shall have
performed the agreements, covenants and obligations to be performed by it at or
prior to the Closing Date.
(d) Shareholder Approval. The shareholders of the Company shall have
approved the transactions contemplated by this Agreement in accordance with
applicable Law.
(e) Certificates. Purchaser shall have furnished the Company with such
certificates of Purchaser and its authorized officers or others and such other
documents to evidence fulfillment of the conditions set forth in this Article 7
and otherwise to consummate the transactions contemplated pursuant to this
Agreement as the Company may reasonably request including certificates in
substantially the form attached hereto as Exhibit G-1 and Exhibit G-2.
(f) Escrow Agreement. Purchaser shall have executed and delivered the
Escrow Agreement in substantially the form attached hereto as Exhibit E and with
such modifications reasonably requested by the Escrow Agent.
(g) Registration Rights Agreement. Purchaser shall have executed and
delivered to the Company a Registration Rights Agreement in the form attached
hereto as Exhibit H.
(h) Assignment and Assumption Agreement. Purchaser shall have executed
and delivered to the Company the Assignment and Assumption Agreement.
(i) Purchase Price. Purchaser shall have delivered to the Company that
portion of the Purchase Price payable at the Closing.
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<PAGE> 50
(j) Opinion of Counsel. The Company shall have received an opinion of
counsel to Purchaser, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, covering the matters set for on Exhibit I.
(k) Other. Purchaser shall have executed and delivered to the Company
or obtained and delivered to the Company such other documents as may be
reasonably requested by the Company to effect the transactions contemplated by
this Agreement.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated prior to the Closing
Date, whether before or after approval of this Agreement by the Purchaser and
the Company as follows:
(a) by mutual written consent of Purchaser and the Company;
(b) by Purchaser or the Company if the Closing Date shall not have
occurred on or prior to April 15, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
Party whose action or failure to act has been a principal cause of or resulted
in the failure of the transactions contemplated by this Agreement to occur on or
before such date and such action or failure to act constitutes a willful and
material breach of this Agreement;
(c) by Purchaser, if there has been a material breach of any
representation, warranty, covenant, agreement or obligation of the Company
hereunder in each case which either is not capable of being remedied, or, if
capable of being remedied, shall not have been remedied within 10 days after
receipt by the Company of notice in writing from Purchaser specifying the nature
of such breach and requesting that it be remedied;
(d) by the Company, if there has been a material breach in any
representation, warranty, covenant, agreement or obligation of Purchaser
hereunder in each case which either is not capable of being remedied, or, if
capable of being remedied, shall not have been remedied within 10 days after
receipt by Purchaser, of notice in writing from the Company specifying the
nature of such breach and requesting that it be remedied;
(e) by Purchaser if any of the conditions set forth in Section 7.1 is
not satisfied and is no longer capable of being satisfied; or
(f) by the Company if any of the conditions set forth in Section 7.2 is
not satisfied and is no longer capable of being satisfied.
8.2 EFFECT OF TERMINATION; BREAK-UP FEE. If any Party terminates and
abandons this Agreement pursuant to Section 8.1, this Agreement, other than
Section 6.5(b), this Section 8.2, Section 8.3, Article 9 and Section 10.1 (each
of which shall survive termination), shall forthwith become void and have no
effect, without any liability on the part of any Party or its
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<PAGE> 51
officers, directors or shareholders; provided, however, that nothing contained
in this Section 8.2 shall relieve any Party from any liability for any breach of
this Agreement or the Confidentiality Agreement. If this Agreement is terminated
by Purchaser under Section 8.1(b) (except where the Company could also terminate
under Section 8.1(b)), 8.1(c) (except where the Company could also terminate
under Section 8.1(d)), or 8.1(e) (except where the Company could also terminate
under Section 8.1(f)) and within twelve months from the date of such
termination, the Company executes a definitive agreement with respect to the
Acquisition of the Company, then immediately upon the execution of such
agreement, the Company shall pay to Purchaser $1,000,000 in cash. As used
herein, "ACQUISITION OF THE COMPANY" means the acquisition of all or a
substantial part of the Company, whether by sale of stock, sale of assets,
merger or otherwise by any person other than Purchaser.
8.3 SPECIFIC PERFORMANCE. The Parties acknowledge that the rights of each
Party to consummate the transactions contemplated hereby are special, unique,
and of extraordinary character, and that, in the event any Party either violates
or fails or refuses to perform any covenant made by it herein, the other Party
will be without adequate remedy at law. Each Party agrees, therefore, that in
the event that it violates, fails or refuses to perform any covenant or
agreement made by it herein, the other Party, so long as it is not in breach
hereof, may, in addition to the remedies at law, institute and prosecute an
action in a court of competent jurisdiction to enforce specific performance of
such covenant or agreement or seek any other equitable relief.
8.4 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of the Parties hereto; provided, however, that no
approval of the Management Shareholders is necessary except for an amendment
which directly affects their obligations under this Agreement as Management
Shareholders and that after the Liquidation, the Company Representative named in
Section 1.5 shall be substituted for the Company as a Party. The terms of the
Earnout Payments may be amended after the Closing Date as set forth in Section
1.5(d)(v).
8.5 EXTENSION; WAIVER. The Parties may, at any time prior to the Closing
Date, (a) extend the time for the performance of any of the obligations or other
requirements herein; (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant thereto; or
(c) waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of any Party to any extension or waiver shall be valid
only if it is set forth in an instrument in writing signed on behalf of the
Party against whom the waiver is sought to be enforced and shall apply only to
the specific condition, representation or warranty identified by the writing as
being waived, extended or modified.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE COMPANY AND SHAREHOLDERS. Subject to the terms
of this Article 9, the Company shall indemnify, defend, save and hold harmless
Purchaser, and its
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<PAGE> 52
respective Subsidiaries, predecessors, successors, directors, officers,
employees, agents, representatives and assigns (collectively, the "PURCHASER
INDEMNIFIED PARTIES"), from and against any claims, losses, damages,
liabilities, demands, assessments, judgments, costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses),
together with interest and penalties, if any, awarded by court order or
otherwise agreed to (collectively, "INDEMNIFIABLE DAMAGES"), suffered by
Purchaser Indemnified Parties that arise out of or result from any of the
following (whether or not a third party initiates the proceeding or claim giving
rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Purchase
Agreements; or
(b) any breach of any representation, warranty, covenant or agreement
in a document or certificate delivered by the Company at the Closing.
9.2 INDEMNIFICATION BY PURCHASER. Subject to the terms of this Article 9,
Purchaser shall indemnify, defend, save and hold harmless the Company from and
against any Indemnifiable Damages suffered by the Company that arise out of or
result from any of the following (whether or not a third party initiates the
proceeding or claim giving rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties, covenants or
agreements made by Purchaser in this Agreement or in the other Purchase
Agreements; or
(b) any breach of any representation, warranty, covenant or agreement
in a document or certificate delivered by Purchaser at the Closing.
9.3 CLAIMS FOR INDEMNIFICATION. The representations, warranties, covenants
and agreements of the Parties in this Agreement shall survive the Closing, and
the representations and warranties of the Parties shall remain in full force and
effect until thirty days after the completion of an audit and the issuance of an
audit opinion by Purchaser's independent public accountants with respect to
Purchaser for the fiscal year ended December 31, 2000 (the "CLAIMS PERIOD");
provided, however, that the representations and warranties set forth in Sections
3.8, 3.12(a) and 3.13 shall survive until expiration of any applicable statute
of limitations (including any extensions thereof) which would preclude assertion
of claims for matters existing on or prior to the date of this Agreement. The
Party seeking indemnification (the "INDEMNIFIED PARTY") shall give the Party
from whom indemnification is sought (the "INDEMNIFYING PARTY") a written notice
("NOTICE OF CLAIM") within sixty (60) days of the discovery of any Indemnifiable
Damage in respect of which the right to indemnification contained in this
Article 9 may be claimed; provided, however, that the failure to give such
notice within such sixty (60) day period shall not result in the waiver or loss
of any right to bring such claim hereunder after such period unless, and only to
the extent that, the Indemnifying Party is actually prejudiced by such failure.
Any Notice of Claim delivered to the Company shall also be delivered to the
Escrow Agent. Any Notice of Claim shall set forth the representations,
warranties, covenants and agreements with respect to which the claim is made,
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<PAGE> 53
the facts giving rise to an alleged basis for the claim and the amount of
liability asserted or anticipated to be asserted by reason of the claim.
9.4 DEFENSE OF CLAIM BY THIRD PARTIES. If any claim is made by a third
party against a Party to this Agreement that, if sustained, would give rise to a
liability of the other Party under this Agreement, the Party against whom the
claim is made shall promptly cause notice of the claim to be delivered to the
other Party and shall afford the other Party and its counsel, at the other
Party's sole expense, the opportunity (which must be accepted within twenty (20)
days of notice) to join in the defense and settlement of the claim. The failure
to provide such notice will not relieve the Indemnifying Party of liability
under this Agreement unless, and only to the extent that, the Indemnifying Party
is actually prejudiced by such failure.
9.5 THIRD PARTY CLAIM ASSISTANCE. From time to time after the Closing,
Purchaser and the Company shall provide or cause their appropriate employees or
representatives to provide each other with information or data in connection
with the handling and defense of any third party claim or litigation (including
counterclaims filed by the parties) in respect to which a Party may be required
to indemnify another Party under this Agreement. The Party receiving such
information or data shall reimburse the other Party for all of its reasonable
costs and expenses in providing these services, including, without limitation,
(i) all out of pocket, travel and similar expenses incurred by their personnel
in rendering these services; and (ii) all fees and expenses for services
performed by third parties engaged by or at the request of such other Party.
9.6 SETTLEMENT OF INDEMNIFICATION CLAIMS. If a recipient of a Notice of
Claim desires to dispute such claim, it shall, within thirty (30) days after
receipt of the Notice of Claim, give counter-notice, setting forth the basis for
disputing such claim, to Purchaser or the Company, as the case may be. In the
case of the Company giving counter-notice, such notice must also be given to the
Escrow Agent. If such counter-notice is not given to all parties to which such
counter-notice is required to be given within such thirty (30) day period, or if
Purchaser or the Company, as the case may be, acknowledges liability for
indemnification, then the amount claimed shall be promptly satisfied as provided
in Section 9.7. If, within thirty (30) days after the receipt of counter-notice
by Purchaser or the Company, as the case may be, the Company and Purchaser shall
not have reached agreement as to the claim in question, then the Party disputing
the claim shall satisfy any undisputed amount as specified in Section 9.7 and
the disputed amount of the claim of indemnification shall be submitted to and
settled by arbitration in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall be held in the Atlanta, Georgia area before a panel of three (3)
arbitrators, one selected by each of the Parties and the third selected by
mutual agreement of the first two, and all of whom shall be independent and
impartial under the rules of the American Arbitration Association. The decision
of the arbitrators shall be final and binding as to any matter submitted under
this Agreement. To the extent the decision of the arbitrators is that a Party
shall be indemnified hereunder, the amount shall be satisfied as provided in
Section 9.7. Judgment upon any award rendered by the arbitrators may be entered
in any court of competent jurisdiction.
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<PAGE> 54
9.7 MANNER OF INDEMNIFICATION BY THE COMPANY. Where the Company is
obligated to indemnify Purchaser Indemnified Parties under Section 9.1 after the
Closing Date, such indemnity obligation shall be satisfied first out of the
Escrow (the Purchaser Common Stock valued for this purpose at the Average
Price). Thereafter such indemnity obligation shall be satisfied by an offset
against the Earnout Payments (the Purchaser Common Stock valued for this purpose
at the Average Price). Where the Company is obligated to indemnify the Purchaser
Indemnified Parties prior to the Closing Date or Purchaser is obligated to
indemnify the Company after the Closing Date such indemnity obligation shall be
satisfied by payment of cash.
9.8 CERTAIN LIMITATIONS. Notwithstanding the foregoing in this Article 9,
the indemnification obligations of the parties shall not be affected by any
investigation made by the Parties hereto prior to the date hereof or the Closing
Date and shall be subject to the following limitations.
(a) No indemnification shall be made for breaches of representations
and warranties pursuant to this Article 9 until the total Indemnifiable Damages
for which the Company, on the one hand, and Purchaser, on the other hand, would
be liable exceeds $25,000, in which event the Indemnifying Party shall be
obligated to indemnify to the extent the amount such Indemnifiable Damages
exceed $25,000.
(b) No indemnification shall be made for breaches of representation and
warranties pursuant to this Article 9 to the extent Indemnifiable Damages to be
paid by the Company, on the one hand, or Purchaser, on the other hand, exceed
the aggregate of the Purchase Price and, with respect to indemnification by the
Company, to the extent received, the 2000 Earnout Payment and the 2001 Earnout
Payment.
(c) The limitations set forth in Sections 9.7, 9.8(a) and (b) shall not
apply to Indemnifiable Damages arising out of (a) fraud, or (b) intentional
breaches, and the limitations set forth in Section 9.8(a) shall not apply to
breaches of the representations and warranties in Sections 3.3, 3.8, 3.12, 3.14,
3.15, 3.16 and 3.17.
9.9 SUBROGATION. Upon payment in full of any Indemnifiable Damages, whether
such payment is effected by set-off or otherwise, or the payment of any judgment
or settlement with respect to a third party claim, the Indemnifying Party shall
be subrogated to the extent of such payment to the rights of the Indemnified
Party against any person or entity with respect to the subject matter of such
Indemnifiable Damages or third party claim.
9.10 ESCROW. The Escrow Shares shall be delivered by Purchaser to U.S. Bank
Trust, National Association or such other financial institution as may be agreed
upon by the Company and Purchaser (the "ESCROW AGENT"). Company and Purchaser
shall each pay one-half of the fees payable to the Escrow Agent for maintaining
the escrow (the "ESCROW") established under the Escrow Agreement. The Escrow
Shares (or other property into which the Escrow Shares are converted) shall be
maintained by the Escrow Agent for a period beginning on the Closing Date and
ending at the termination of the Claims Period or such
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<PAGE> 55
longer period as provided in the Escrow Agreement. The Escrow shall be available
to satisfy the indemnification rights of Purchaser Indemnified Parties set forth
in Section 9.1 as well as any other obligations of the Company under this
Agreement.
9.11 COMPANY REPRESENTATIVE. After the Liquidation, all actions required to
be taken by or with respect to the Company in this Article 9 shall be taken by
or with respect to the Company Representative.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES.
(a) Except as otherwise expressly stated herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including legal and accounting fees and expenses) shall be borne by the
Party incurring such costs and expenses and shall be paid by such Party prior to
or on the Closing Date.
(b) Notwithstanding any provision in this Agreement to the contrary, if
any of the Parties shall willfully default in its obligations hereunder, the
non-defaulting Party may pursue any remedy available at law or in equity to
enforce its rights and shall be paid by the willfully defaulting Party for all
damages, costs and expenses, including without limitation reasonable legal and
accounting expenses incurred or suffered by the non-defaulting Party in
connection herewith or in the enforcement of its rights hereunder.
10.2 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or by reputable overnight or express courier, sent by registered or certified
mail, postage prepaid, or by telefax (with subsequent delivery via one of the
two previous methods) as follows:
(a) If to Purchaser, to:
Netzee, Inc.
6190 Powers Ferry Road,
Suite 400
Atlanta, Georgia 30339
Attn: President and Chief Financial Officer
Telefax: (770) 200-7150
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<PAGE> 56
Copy (which shall not constitute notice) to:
Sutherland Asbill & Brennan LLP
999 Peachtree Street, N.E.
Suite 2300
Atlanta, Georgia 30309
Attn: Mark D. Kaufman
Telefax: (404) 853-8806
(b) If to the Company or the Management Shareholders, to:
Digital Visions, Inc.
4500 Park Glen Road
Minneapolis, Minnesota 55416
Attn: Michael E. Murphy
Telefax: (612) 928-0774
Copy (which shall not constitute notice) to:
Moss & Barnett, P.A.
4800 Norwest Center
90 South 7th Street
Minneapolis, Minnesota 55402
Attn: Janna R. Severance
Telefax: (612) 339-6686
(c) If to the Company Representative, to:
Darryl P. Ekstrom
6024 Medicine Lake Road
Minneapolis, MN 55422
Telefax: (612) 544-6469
Copy (which shall not constitute notice) to:
Moss & Barnett, P.A.
4800 Norwest Center
90 South 7th Street
Minneapolis, Minnesota 55402
Attn: Janna R. Severance
Telefax: (612) 339-6686
or such other addresses and telefax numbers as shall be furnished in writing by
any Party, and any such notice or communications shall be deemed to have been
given as of the next
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<PAGE> 57
succeeding business day after the date actually sent via overnight or express
courier, five days after mailed and upon telefax confirmation of receipt to
addressee by the sender.
10.3 PARTIES IN INTEREST. This Agreement shall be binding on and shall
inure to the benefit of the Parties hereto, the former shareholders of the
Company following Liquidation, and their respective successors, representatives
and assigns. This Agreement (and the rights and interests herein) may not be
assigned by either Party without the written consent of the other Party, which
consent shall not be unreasonably withheld; provided, however, Purchaser may
assign its interests herein to (a) an entity controlling, controlled by or under
common control with Purchaser or (b) a purchaser or transferee of all or
substantially all of the business or assets of Purchaser, whether by sale of
stock or assets, merger or otherwise. Any attempted assignment in contravention
of the foregoing shall be null and void. Nothing in this Agreement is intended
to confer, expressly or by implication, upon any other person or entity any
rights or remedies under or by reason of this Agreement.
10.4 ENTIRE AGREEMENT. This Agreement, which includes the disclosure
schedules, exhibits and the other documents, agreements, certificates and
instruments executed and delivered pursuant to or in connection with this
Agreement (collectively, the "PURCHASE AGREEMENTS"), contains the entire
agreement among the Parties with respect to the transactions contemplated by
this Agreement and supersedes all prior negotiations, arrangements or
understandings, written or oral, with respect thereto.
10.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, and each of which shall
constitute one and the same agreement. Any Party may deliver an executed copy of
this Agreement and any documents contemplated hereby by facsimile transmission
to another Party, and such delivery shall have the same force and effect as any
other delivery of a manually signed copy of this Agreement or of such other
documents.
10.6 GOVERNING LAW.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the United States of America and the State of Georgia,
excluding choice of law principles.
(b) Purchaser, the Company and the Management Shareholders consent to
the exclusive jurisdiction and venue of the courts of any county in the State of
Georgia and the United States Federal District Courts of Georgia, in any
judicial proceeding brought to enforce this Agreement and agree that any forum
other than the State of Georgia is an inconvenient forum and that a lawsuit (or
non-compulsory counterclaim) brought in a court of any jurisdiction other than
the State of Georgia should be forthwith dismissed or transferred to a court
located in the State of Georgia.
10.7 INVALIDITY OF ANY PART. If any provision or part of this Agreement
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 Agreement and shall be construed
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as if such invalid, illegal or unenforceable provision or part thereof had never
been contained herein, but only to the extent of its invalidity, illegality, or
unenforceability. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
10.8 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence of
each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a federal, public or legal holiday, the Party
having such right or duty shall have until 5:00 p.m. on the next succeeding
regular business day to exercise such right or to discharge such duty.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, Purchaser, the Company and the Management
Shareholders have caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
PURCHASER:
NETZEE, INC.
By: /s/ R. S. EISWIRTH, JR.
--------------------------------------------
Name: R. S. EISWIRTH, JR.
------------------------------------------
Title: SEVP and CEO
-----------------------------------------
THE COMPANY
DIGITAL VISIONS, INC.
By: /s/ Michael E. Murphy
--------------------------------------------
Name: Michael E. Murphy
Title: Chairman and Chief Executive Officer
MANAGEMENT SHAREHOLDERS
By: /s/ Collin Dickey
--------------------------------------------
Collin Dickey
By: /s/ William P. Langford
--------------------------------------------
William P. Langford
By: /s/ Michael E. Murphy
--------------------------------------------
Michael E. Murphy
By: /s/ Michael E. Marxen
--------------------------------------------
Michael E. Marxen
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated and
executed effective as of March 7, 2000, by and among Netzee, Inc., a Georgia
corporation (the "Company"), and Digital Visions, Inc., a Minnesota corporation
("DVI" or the "Shareholder"). The Company and the Shareholder are hereinafter
collectively called the "Parties."
WHEREAS, the Company and the Shareholder have entered into an Asset
Purchase Agreement dated as of February 28, 2000 (the "Acquisition Agreement"),
pursuant to which, among other things, the Company has agreed to issue to
Shareholder shares of the Company's common stock, without par value (the
"Common Stock"); and
WHEREAS, Shareholder will initially acquire 838,475 shares of Common
Stock, and may receive additional shares of Common Stock in respect of Earnout
Payments; and
WHEREAS, the Company and the Shareholder desire to provide for the
rights of the Shareholder with respect to the registration of the shares of
Common Stock to be received by the Shareholder pursuant to the Acquisition
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "1933 Act" means the United States Securities Act of
1933, as amended, or any similar U.S. federal statute enacted hereafter, and
the rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time;
(b) "1934 Act" means the United States Securities
Exchange Act of 1934, as amended, or any similar U.S. federal statute enacted
hereafter, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect from time to time;
(c) "Commission" means the United States Securities and
Exchange Commission or any other U.S. federal agency at the time administering
the 1933 Act and 1934 Act;
(d) "Holder" means the Shareholder, if the Shareholder
holds Registrable Securities, as well as any Person who becomes a Holder after
the date of this Agreement pursuant to Section 20;
(e) "Initiating Group" means the Shareholder or
shareholders of DVI who receive Shares upon the liquidation and dissolution of
DVI and who, in the aggregate, hold more than fifty percent (50%) of the
Registerable Shares or the Remaining Registerable Shares, as applicable;
(f) "Member of Management" means a Holder who was an
officer or director of DVI at the time of DVI's liquidation and dissolution;
<PAGE> 2
(g) "NASD" means the National Association of Securities
Dealers, Inc.;
(h) "Permitted Transferee" shall mean any of the
following (each, a "Permitted Transferee"): (1) an immediate family member of
the Holder, (2) a trust established solely for the benefit of the Holder and/or
the Holder's immediate family members or (3) a corporation, partnership or
other entity the voting stock, partnership interests or other ownership rights
of which are beneficially owned solely by the Holder and/or the Holder's
immediate family members.
(i) "Person" means an individual, partnership,
corporation, limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof, or any other entity
of any kind;
(j) "Register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the 1933 Act and the declaration or ordering of effectiveness
of such registration statement by the Commission;
(k) "Registrable Securities" means the Shares;
(l) "Registerable Shares" means 50% of the Shares;
(m) "Registration Expenses" means all expenses (excluding
Selling Expenses and expenses of special counsel for any Selling Holders in
excess of $25,000) incident to the Company's performance of or compliance with
Sections 2, 3 and 4 hereof, including all registration and filing fees, fees
with respect to filings required to be made with any stock exchange or the
NASD, fees and expenses of compliance with state securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), messenger, telephone and
delivery expenses, costs of printing prospectuses, fees and expenses of all
independent certified public accountants of the Company (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance) and the fees and expenses of counsel for the Company and counsel
for the underwriters and fees and expenses of the legal counsel of the Selling
Holders up to $25,000, in the aggregate, per registration;
(n) "Registration Statement" means any registration
statement of the Company which includes any of the Registrable Securities
pursuant to this Agreement, including the prospectus included or deemed
included in the Registration Statement and all amendments and supplements to
the Registration Statement or the prospectus, including post-effective
amendments, and all exhibits to, and all materials incorporated by reference
in, such registration statement;
(o) "Remaining Registerable Shares" means that number of
Shares which equals the total number of Registerable Shares less the number of
Registerable Shares, if any, that have been previously registered pursuant to
Sections 2, 3 or 4 of this Agreement.
(p) "Rule 144" means Rule 144 promulgated under the 1933
Act or any successor provision;
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<PAGE> 3
(q) "Selling Expenses" means legal counsel expenses of
the Selling Holders in excess of $25,000 in the aggregate and all underwriting
discounts, selling commissions and stock transfer taxes attributable to the
sale of Registrable Securities;
(r) "Selling Holders" means a Holder who chooses to sell
Shares in a registered offering pursuant to the terms of this Agreement;
(s) "Shares" means (i) the shares of Common Stock that
were initially received by DVI at the Closing pursuant to the terms of the
Acquisition Agreement (including all shares deposited in escrow under the
Escrow Agreement, except that any of the Shares that remain deposited in such
escrow from time to time shall continue to be subject to all of the terms and
conditions of the Escrow Agreement and cannot be sold notwithstanding the fact
that such Shares may be included in a Registration Statement) and (ii) the
shares of Common Stock issued or issuable as dividends on, or other
distributions with respect to such Shares.
All other capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Acquisition Agreement.
2. Next Public Offering Registration.
(a) Next Public Offering Registration. After the date of
this Agreement and prior to the date that is six months after the Closing Date
under the Acquisition Agreement, the first time, if at all during such period,
that the Company proposes to register, on its own initiative, any of its
capital stock under the 1933 Act in connection with the public offering of such
securities solely for cash (except for public offerings filed on Form S-4, S-8
or any similar registration statements, or for registrations of foreign
issuances or distributions) on a form and in a manner that would permit
registration of the Registrable Securities for sale to the public under the
1933 Act (the "Next Public Offering"), then:
(i) the Company shall notify in writing each
Holder of its intention to effect such a registration at least 10 days prior to
the proposed filing of a Registration Statement in connection therewith; and
(ii) the Company shall offer each Holder the
opportunity to include in such registration all or a portion the Shares held by
such Holder, subject to the provisions hereof. Any Holder wishing to
participate must submit within 5 days after receipt of the notice described
under Section 2(a)(i) a written request for registration setting forth the
number of Shares that such Holder wishes to have registered. No Member of
Management of DVI may request registration of greater than 50% of the Shares
held by such Member of Management. If the aggregate number of Shares for which
all Holders request registration is less than or equal to the number of
Registerable Shares, then the Company shall cause all of the Shares specified
in such Holders' requests to be included in the Registration Statement, subject
to the provisions hereof. If such Holders collectively request to register more
than the number of Registerable Shares, then the Company shall provide notice
of such fact in writing to all such Holders. Such Holders shall have two (2)
business days after the date such notice is given by the Company to deliver to
the Company a written alternative allocation of Shares to be registered
pursuant to this Section 2 (the "Alternative Allocation"), which shall be
executed by all such Holders and shall be limited so as to include, in the
aggregate, a number of Shares less than or equal to the number of Registerable
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Shares. Any delivery of an Alternative Allocation that does not conform to the
requirements of the previous sentence may be deemed invalid and disregarded by
the Company, in its sole discretion. Each Holder delivering a request shall be
entitled to have included in the Registration Statement (and the Company will
cause to be included in the Registration Statement, subject to the provisions
hereof) that number of Shares equal to either (A) if a valid Alternative
Allocation has been provided, the number of Registerable Shares specified for
such Holder in such Alternative Allocation, or (B) if no such valid Alternative
Allocation has been provided, (x) the number of Registrable Shares, multiplied
by (y) a fraction, the numerator of which is the number of Shares for which the
Holder has requested registration and the denominator of which is the aggregate
number of Shares requested to be registered by all Selling Holders.
(b) Limitations On Company's Obligations to Effect Next
Public Offering Registration. Notwithstanding the provisions of Section 2(a):
(i) if and to the extent that the managing
underwriter(s) advise the Company in writing that, in its good faith
determination, inclusion of the number of Shares that would be registerable
under Section 2(a)(ii) would materially interfere with the underwriter's
ability to effectuate the registration and sale of securities proposed to be
offered and sold pursuant to the Registration Statement, the managing
underwriter(s) shall select the permissible quantity of Shares to be sold by
the Selling Holders (which may be none) by reducing the total number of
securities to be sold by each Selling Holder on a pro rata basis among all
Selling Holders; and
(ii) if, at any time after giving such written
notice of its intention to register any of its securities and prior to the
effective date of the applicable Registration Statement filed in connection
with such registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give written notice
of such determination to each Selling Holder to be sold in such registration
and thereupon shall be relieved of its obligation to register any securities in
connection with such registration.
(c) Underwritten Offer. If the registration of which the
Company gives written notice under Section 2(a)(i) involves an underwriting,
the Company shall so advise in such written notice. In such event the right of
any Holder to registration pursuant to Section 2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Shares in such underwriting. All Holders proposing to distribute their Shares
through such underwriting shall (together with the Company and the other
Holders distributing their Shares through such underwriting) participate in the
underwriting by entering into or completing, at the request of the underwriter
or underwriters selected for such underwriting by the Company, an underwriting
agreement, questionnaires, powers of attorney and indemnities in their
customary form.
3. Demand Registration.
(a) Demand for Registration. In the event that there are
any Remaining Registerable Shares, at any time after the date that is six
months after the Closing Date under the Acquisition Agreement, members of the
Initiating Group may make one request (subject to Section 3(d)), by written
notice that the Company effect the registration under the 1933 Act of the
Remaining Registerable Shares (the "Demand Registration"). The notice given
pursuant to
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the immediately preceding sentence shall set forth (i) the aggregate number of
Shares to be included, (ii) the names of the Selling Holders and the number of
Shares to be sold by each such Selling Holder, and (iii) the proposed manner of
sale. No Member of Management of DVI may request registration of greater than
that number of Shares which, when combined with any other Shares previously
registered under this Agreement for such Member of Management, would total in
excess of 50% of the Shares held by such Member of Management. If the aggregate
number of Shares for which all Holders request registration is less than or
equal to the number of Remaining Registerable Shares, then the Company, shall
cause all of the Shares specified in such Holders' requests to be included in
the Registration Statement, subject to the provisions hereof. If the aggregate
number of Shares for which all Holders request registration is greater than the
number of Remaining Registerable Shares, then the Company shall provide notice
of such fact in writing to all such Holders. Such Holders shall have two (2)
business days after the date such notice is given by the Company to deliver to
the Company an Alternative Allocation, which shall be executed by all such
Holders and shall be limited so as to include, in the aggregate, a number of
Shares less than or equal to the number of Remaining Registerable Shares. Any
delivery of an Alternative Allocation that does not conform to the requirements
in the previous sentence may be deemed invalid and disregarded by the Company,
in its sole discretion. Subject to Section 3(d), each Holder delivering a
request shall be entitled to have included in the Registration Statement (and
the Company will cause to be included in the Registration Statement, subject to
the provisions hereof) that number of Shares equal to either (A) if a valid
Alternative Allocation has been provided, the number of Remaining Registerable
Shares specified for such Holder in such Alternative Allocation, or (B) if no
such valid Alternative Allocation has been provided, the number of Remaining
Registerable Shares, multiplied by a fraction, the numerator of which is the
number of Shares for which the Holder has requested registration and the
denominator of which is the aggregate number of Shares requested for
registration by all Selling Holders. Upon receipt of such request, the Company
shall use its commercially reasonable efforts to cause such registration to be
effective not later than seventy five (75) days from the date of such request.
(b) Limitations on Company's Obligation.
(i) Except as set forth below or in Section
3(d), the Company is obligated to effect only one registration pursuant to this
Section 3, and thereafter the Company shall have no obligation to include any
Shares in any registration pursuant to this Section 3. A request for
registration shall be deemed not to have been made for the purposes of this
Section 3 in the event that, prior to the sale of the Shares (A) a registration
requested pursuant to this Section 3 fails to become effective, (B) a stop
order shall have been issued, or (C) the registration shall have been
terminated.
(ii) Only shares which are to be included in the
underwriting pursuant to this Agreement or other agreements with the Company,
or shares offered by the Company may be included in the registration.
(c) Underwritten Offering. A registration under Section
3(a) shall be conditioned upon the Selling Holders' participation in an
underwritten offering and the inclusion of the Registerable Shares held by such
Selling Holders in such underwriting. The Company shall have the right to
select the underwriter(s) for such offering, which such underwriter(s) shall be
reasonably satisfactory to the Initiating Group in its good-faith
determination. All Selling Holders proposing to distribute their Registerable
Shares through such underwriting shall
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<PAGE> 6
(together with the Company and the other selling shareholders who may
distribute securities through such underwriting) participate in the
underwriting by entering into or completing, at the request of the underwriter
or underwriters selected for such underwriting by the Company, an underwriting
agreement, questionnaires, powers of attorney, indemnities, custody agreements,
and other documents, all in their customary form.
(d) Priorities. If in the opinion of the managing
underwriter, the number of securities requested to be included in such
registration exceeds the number which can be sold at the desired price in such
offering, the managing underwriter(s) shall select the permissible quantity of
Shares to be sold by the Selling Holders (which may be none) by reducing the
total number of securities to be sold by each Selling Holder on a pro rata
basis among all Selling Holders; provided, however, that if, solely with
respect to the initial Demand Registration, the managing underwriter so reduces
the number of any Shares that may be sold by any Selling Holder, then,
beginning on a date not less than six (6) months after the effective date of
such Demand Registration, members of the Initiating Group may request in
writing that the Company effect a second Demand Registration pursuant to all of
the terms and conditions of this Section 3, except that, with respect to such
additional request and thereafter until this Agreement is terminated, this
proviso of this Section 3(d) shall be null and void so as to limit the maximum
number of possible Demand Registrations requested by or on behalf of the
Holders to two (2).
(e) Obligations of the Company. Whenever the Company is
required to effect the registration of any Registrable Securities under this
Section 3, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Commission a
registration statement covering such Registrable Securities and use all
commercially reasonable efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and to keep
such registration effective with respect to the Registrable Securities until
the earlier of (1) the date when all Registrable Securities covered by the
registration statement have been sold or (2) 90 days from the effective date of
the registration statement; provided, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
will furnish to counsel for the Selling Holders of Registrable Securities
covered by such registration statement and the underwriters, if any, copies of
all such documents proposed to be filed (excluding exhibits, unless any such
Person shall specifically request exhibits), which documents will be subject to
the review of such counsel and underwriters. The Company agrees that it will
not file such registration statement or any amendment thereto or any prospectus
or any supplement thereto (including any documents incorporated by reference
therein) with the Commission if the information in such registration statement
or prospectus concerning the Selling Holder has changed and the Selling Holder
or the underwriters, if any, shall reasonably object; provided, that the
Company may file and amend the registration statement under this Section
3(e)(i) if it removes any incorrect or outdated information from the
registration statement before such filing or amendment.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration statement as may
be necessary to keep such registration statement effective during the period
referred to in Section 3(e)(i) and to comply with the provisions of the 1933
Act with respect to the disposition of all securities during such period that
are covered by such registration statement, and cause the prospectus to be
supplemented by
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<PAGE> 7
any required prospectus supplement, and as so supplemented to be filed with the
Commission pursuant to Rule 424 under the 1933 Act.
(iii) Furnish to the Selling Holders such number
of copies of such registration statement, each amendment thereto, the
prospectus included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as the Selling
Holders may reasonably request in order to facilitate the disposition of
Registrable Securities owned by the Selling Holders.
(iv) Use all commercially reasonable efforts to
register and qualify the Registrable Securities under such other securities
laws of such jurisdictions as shall be reasonably requested by the Selling
Holder and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Selling Holder to consummate the
disposition of the Registrable Securities owned by the Selling Holder in such
jurisdictions; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to transact business, to subject
itself to taxation in any such jurisdiction or to file a general consent to
service of process in any such counties, states or jurisdictions (other than as
to matters and transactions relating to the registration statement).
(v) Notify the Selling Holders at any time when
a prospectus relating thereto is required to be delivered under the 1933 Act of
the happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and, with the
assistance of such Holders, the Company will prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(vi) Provide a transfer agent and registrar for
all such Registrable Securities not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements
(including underwriting agreements in customary form for a secondary offering)
and take all such other actions as the Holders of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities.
(viii) Make available for inspection by the Selling
Holders, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such Selling Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
officers, directors, employees and independent accountants of the Company to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
(ix) Promptly notify the Selling Holders and the
underwriters, if any, of the following events and (if requested by any such
Person) confirm such notification in writing: (1) the filing of the prospectus
or any prospectus supplement and the registration statement and
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<PAGE> 8
any amendment or post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment thereto, the declaration
of the effectiveness of such documents, (2) any requests by the Commission for
amendments or supplements to the registration statement or the prospectus or
for additional information, (3) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose and (4) the
receipt by the Company of any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any jurisdiction or
the initiation or threat of initiation of any proceeding for such purpose.
(x) Cooperate with the Selling Holders and the
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and, except with
respect to certificates held or to be held by Persons who are affiliates of the
Company, as that term is defined in Rule 405 promulgated under the 1933 Act,
not bearing any restrictive legends, and enable such Registrable Securities to
be in such lots and registered in such names as the underwriters may request at
least two business days prior to any delivery of Registrable Securities to the
underwriters.
(xi) Provide a CUSIP number for all Registrable
Securities not later than the effective date of the registration statement.
(xii) Prior to the effectiveness of the
registration statement and any post-effective amendment thereto and at each
closing of an underwritten offering, (1) obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the Selling Holders and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with similar underwritten
offerings; and (2) deliver such documents and certificates as may be reasonably
requested by the Selling Holders being sold and by the underwriters, if any, to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company and the Selling
Holders.
(xiii) Cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD.
(xiv) Otherwise comply with all applicable rules
and regulations of the Commission, and make generally available to its security
holders, as soon as practicable, a consolidated earnings statement meeting the
requirements of the 1933 Act and Rule 158 thereunder (which need not be
audited) for the twelve-month period (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm or
best efforts underwritten offering or (ii) if not sold to underwriters in such
an offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the registration statement.
4. Piggyback Registration.
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(a) Piggyback Registration. In the event that there are
any Remaining Registerable Shares, at any time after the date that is six
months after the Closing Date under the Acquisition Agreement, if the Company
proposes to register, either on its own initiative, or otherwise (other than
pursuant to Sections 2 or 3), any of its capital stock under the 1933 Act in
connection with the public offering of such securities solely for cash (except
for public offerings filed on Form S-4, S-8 or any similar registration
statements, or for registrations of foreign issuances or distributions) on a
form and in a manner that would permit registration of Registrable Securities
for sale to the public under the 1933 Act (each, a "Piggyback Registration"),
then:
(i) the Company shall notify in writing each
Holder of its intention to effect such a registration at least 15 days prior to
the proposed filing of a Registration Statement in connection therewith; and
(ii) the Company shall offer each Holder the
opportunity to include in such registration all or a portion the Shares held by
such Holder, subject to the provisions hereof. Any Holder wishing to
participate must submit within 10 days after receipt of the notice described
under Section 4(a) (i) written request for registration setting forth the
number of Shares that such Holder wishes to have registered. No Member of
Management of DVI may request registration of greater than that number of
Shares which, when combined with any other Shares previously registered or to
be registered under this Agreement for such Member of Management, would total
in excess of 50% of the Shares held by such Member of Management. If the
aggregate number of Shares for which all Holders request registration is less
than or equal to the Remaining Registerable Shares, then the Company, subject
to the provisions hereof, shall cause all of the Shares specified in such
Holders' requests to be included in the Registration Statement, subject to the
provisions hereof. If the aggregate number of Shares for which all Holders
request registration is greater than the number of Remaining Registerable
Shares, then the Company shall provide notice of such fact in writing to all
such Holders. Such Holders shall have two (2) business days after the date such
notice is given by the Company to deliver to the Company an Alternative
Allocation, which shall be executed by all such Holders and shall be limited so
as to include, in the aggregate, a number of Shares less than or equal to the
number of Remaining Registerable Shares. Any delivery of an Alternative
Allocation that does not conform to the requirements in the previous sentence
may be deemed invalid and disregarded by the Company, in its sole discretion.
Subject to the remainder of this Section 4, each Holder delivering a request
shall be entitled to have included in the Registration Statement (and the
Company will cause to be included in the Registration Statement, subject to the
provisions hereof) that number of Shares equal to either (A) if a valid
Alternative Allocation has been provided, the number of Remaining Registerable
Shares for such Holder specified in such Alternative Allocation, or (B) if no
such valid Alternative Allocation has been provided, (x) the number of
Remaining Registerable Shares, multiplied by (y) a fraction, the numerator of
which is the number of Shares for which the Holder has requested registration
and the denominator of which is the aggregate number of Shares requested for
registration by all Selling Holders. Upon receipt of such request, the Company
shall use its commercially reasonable efforts to cause such registration to be
effective not later than seventy five (75) days from the date of such request.
(b) Limitations On Company's Obligations to Effect
Piggyback Registration. Notwithstanding the provisions of Section 4(a):
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<PAGE> 10
(i) if and to the extent that the managing
underwriter(s) advise the Company in writing that, in its good faith
determination, inclusion of the number of Shares held by Holders requesting
inclusion in the Registration Statement would materially interfere with the
underwriter's ability to effectuate the registration and sale of securities
proposed to be offered and sold pursuant to the Registration Statement, the
managing underwriter(s) shall select the permissible quantity of Shares to be
sold by the Holders (which may be none) by reducing the total number of
securities to be sold by each Selling Holder on a pro rata basis among all
Selling Holders; and
(ii) if, at any time after giving such written
notice of its intention to register any of its securities and prior to the
effective date of the applicable Registration Statement filed in connection
with such registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give written notice
of such determination to each Holder of Shares to be sold in such registration
and thereupon shall be relieved of its obligation to register any securities in
connection with such registration.
(c) Underwritten Offer. If the registration of which the
Company gives written notice under Section 4(a)(i) involves an underwriting,
the Company shall so advise in such written notice. In such event the right of
any Holder to registration pursuant to Section 4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Shares in such underwriting. All Holders proposing to distribute their Shares
through such underwriting shall (together with the Company and the other
Holders distributing their Shares through such underwriting) participate in the
underwriting by entering into or completing, at the request of the underwriter
or underwriters selected for such underwriting by the Company, an underwriting
agreement, questionnaires, powers of attorney and indemnities in their
customary form.
5. Suspension or Delay. Notwithstanding anything to the contrary
on this Agreement, the Company may delay filing a registration statement and
may withhold efforts to cause the registration statement to become effective,
if the Company determines in good faith that such registration might (a)
interfere with or affect the negotiation or completion of any transaction that
is being contemplated by the Company (whether or not a final decision has been
made to undertake such transaction) at the time the right to delay is
exercised, or (b) involve initial or continuing disclosure obligations that
might not be in the best interest of the Company's shareholders. If, after a
registration statement becomes effective, the Company advises the holders of
registered shares that the Company considers it appropriate for the
registration statement to be amended, the holders of such registered shares
shall suspend any further sales of their registered shares until the Company
advises them that the registration statement has been amended. Notwithstanding
the foregoing, the Company shall not so delay, withhold or cause such
suspension for more than an aggregate of 120 days without the consent of the
Holders holding more than 50% of the Remaining Registrable Shares.
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Selling Holders shall furnish to the Company such information regarding the
Selling Holders, the Registrable Securities held by the Selling Holders, and
the intended method of disposition of such Registrable Securities as the
Company shall request and as shall be required or, in the opinion of the
Company's legal counsel, necessary, in connection with the action to be taken
by the Company.
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7. Suspension of Disposition of Registrable Securities. The
Selling Holders of Registrable Securities agree by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(v), such Holder
will forthwith discontinue disposition of Registrable Securities until such
Holder's receipt of copies of a supplemented or amended prospectus contemplated
by Section 3(e)(v), or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference
in the prospectus, and, if so directed by the Company, such Holder will deliver
to the Company (at the expense of the Company) all copies, other than permanent
file copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time periods mentioned in
Section 3(e)(i) shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 3(e)(i)
to and including the date when the selling Holder of Registrable Securities
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 3(e)(i) or the Advice.
8. Expenses of Registration. The Company will pay all
Registration Expenses in connection with registrations of Shares effected
pursuant to Sections 2 and 3. All Selling Expenses in connection with any
registration effected pursuant to this Agreement shall be borne by the Company,
the Holders of securities included in such registration other than Shares and
the Holders of the Shares so registered, pro rata on the basis of the relative
proceeds received from the securities included in the registration for the
account of the Company and each such Holder.
9. Termination of the Company's Obligations.
(a) The Company shall not be obligated to register or
include in any registration Registrable Securities that any Holder has
requested to be registered if all Registrable Securities that such Holder holds
may be publicly offered, sold and distributed without registration under the
1933 Act pursuant to Rule 144 within a three (3) month period.
(b) With a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act and any other rule or
regulation of the Commission that may at any time permit the Holders to sell
securities of the Company to the public without registration, the Company
agrees to use all commercially reasonable efforts to:
(i) file with the Commission in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the 1934 Act while it is subject to such registration requirements; and
(ii) furnish to each of the Holders so long as
such Holders owns any of the Registrable Securities forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements the 1934 Act (at any time for which it remains subject to such
reporting requirements), a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
may be reasonably requested by the Holder in availing the Holder of any rule or
regulation of the Commission permitting the selling of any such securities
without registration.
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10. Lockup Agreements.
(a) As a condition precedent to the Company's obligation
to cause any registration under this Agreement, each Holder of Shares to be
registered shall agree that, as of the closing date specified in the
Acquisition Agreement and for a period of twelve (12) months thereafter, each
such Holder shall not sell, make any short sale of, loan, pledge, hypothecate,
transfer, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities, except (i) with the prior written consent of the
Company, (ii) the prior written consent of any underwriter with respect to a
public offering of the Company's securities (other than on Forms S-4, S-8 or
any other successor forms) or (iii) a transfer pursuant to Section 10(c) of
this Agreement.
(b) As a condition precedent to the Company's obligation
to cause any registration under this Agreement, and upon request of the
underwriters managing an underwritten public offering (other than on Forms S-4,
S-8 or any other successor forms), each Selling Holder agrees to enter into an
agreement providing that, except with the prior written consent of such
underwriters, for a period of time not to exceed one hundred eighty (180) days
after the effective date of a registration statement covering any such public
offering, such Selling Holder shall not sell, make any short sale of, loan,
pledge, hypothecate, transfer, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities; provided, however, that such
restrictions shall not be more burdensome than those placed on members of the
Company's management or any other persons who have agreed to sell securities
under such registration statement.
(c) Unless prohibited by the applicable securities laws
or an agreement executed pursuant to Section 10(b) hereunder, a Holder shall be
permitted to effect a bona fide transfer not for value of Registrable
Securities to a Permitted Transferee. Any such purported transfer above shall
be void and of no force and effect unless the Holder shall provide written
notice of the proposed transfer to the Company no less than five (5) days prior
to the completion thereof and shall provide the Company with all certificates,
affidavits, representations or other documents reasonably necessary to
effectuate such proposed transfer under federal, state or other applicable
securities laws. For purposes of this section, a "transfer not for value" shall
not be deemed to include a transfer to an entity whereby the Holder receives
consideration solely in the form of voting stock or other ownership interests
in that entity.
11. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the full extent permitted by law, the Company
hereby agrees to indemnify and hold harmless the Holder requesting or joining
in a registration and each agent, officer, director and employee, and each
Person, if any, who controls such Holder within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act and applicable state securities laws
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue or alleged untrue statement of
any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make
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the statements therein, in light of the circumstances under which they were
made, not misleading or arise out of any violation by the Company of any rule
or regulation promulgated under the 1933 Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; and will reimburse each such Person for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 11(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
or on behalf of such Holder or controlling Person or (ii) such Holder's failure
to deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto to any offeree after the Company has furnished such
Holder with a sufficient number of copies of the same.
(b) To the full extent permitted by law, each Holder
requesting or joining in a registration under this Agreement hereby agrees to
indemnify and hold harmless the Company, each of its directors and officers,
each Person, if any, who controls the Company within the meaning of the 1933
Act, and any underwriter for the Company (within the meaning of the 1933 Act),
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director, officer, controlling Person or underwriter
may become subject, under the 1933 Act and applicable state securities laws,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling Person or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 11(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder (which
consent shall not be unreasonably withheld).
(c) In no event shall the liability of the selling Holder
of Registrable Securities or the Company hereunder be greater than the dollar
amount of the proceeds received by such Holder or of the Company upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
13
<PAGE> 14
(d) Promptly after receipt by an indemnified party under
this Section 11 of notice of the commencement of any action or knowledge of a
claim that would, if asserted, give rise to a claim for indemnity hereunder,
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 11, notify the indemnifying
party in writing of the commencement thereof or knowledge thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action or of the knowledge of any such
claim, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
11, but the omission so to notify the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 11.
12. Remedies. In addition to being entitled to exercise all rights
provided in this Agreement and the Acquisition Agreement as well as all rights
granted by law, including recovery of damages, the Company and the Holder of
Registrable Securities will be entitled to specific performance of its rights
under this Agreement.
13. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless such amendment, modification or supplement is approved
in writing by (a) if all of the Shares are held by DVI, the Company and the
Holder or (b) if the Shares have been distributed to the former shareholders of
DVI as a result of the liquidation or dissolution of DVI, by the Company and
the former shareholders of DVI who hold more than fifty percent (50%) of the
Registerable Shares or the Remaining Registerable Shares, as applicable.
14. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by personal delivery, by
internationally recognized overnight courier (with charges prepaid) or by
telecopy (with telephone confirmation) as follows:
(a) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in accordance with the
provisions of this Section 14, which address initially is the address used by
DVI to send notices to such Holder in connection with the Acquisition Agreement
and/or the transactions contemplated thereby;
(b) if to DVI, initially at its address set forth in the
Acquisition Agreement and thereafter at such other address, notice of which is
given by DVI in accordance with the provisions of this Section 14, with a copy
(which shall not constitute notice) to DVI's counsel as identified in the
Acquisition Agreement;
(c) if to the Company, initially at its address set forth
in the Acquisition Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 14, with a
copy (which shall not constitute notice) to the Company's counsel as identified
in the Acquisition Agreement.
14
<PAGE> 15
All such notices and communications shall be deemed to have been duly given or
made when personally delivered, the day of guaranteed delivery by such
overnight courier service or when transmitted to the specified telecopy number
and confirmed by telephone, in each case addressed to the respective parties as
set forth above.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, and each of which shall
constitute one and the same agreement. Any Party may deliver an executed copy
of this Agreement and any documents contemplated hereby by facsimile
transmission to another Party, and such delivery shall have the same force and
effect as any other delivery of a manually signed copy of this Agreement or of
such other documents.
16. Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
17. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the United States of America and the
State of Georgia, excluding choice of law principles. The Company, DVI and each
person who becomes a Holder pursuant to Section 20 hereunder consent to the
exclusive jurisdiction and venue of the courts the United States Federal
District Court of Georgia, in any judicial proceeding brought to enforce this
Agreement. Without limiting the foregoing, each party hereby irrevocably and
unconditionally waives, and agrees not to use as a defense, to the fullest
extent permitted by applicable law (a) any objection which it may now or
hereafter have to the laying of jurisdiction or venue in such courts (including
any defense that it is not personally subject to the jurisdiction or venue of
such courts) and (b) any claim that any such forum is an inconvenient forum.
18. Invalidity of any Part. If any provision or part of this
Agreement 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 Agreement and shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
19. Entire Agreement. This Agreement, along with the Acquisition
Agreement, contain the entire agreement among the Parties with respect to the
transactions contemplated by this Agreement and supersedes all prior
negotiations, arrangements or understandings, written or oral, with respect
thereto.
20. No Assignment; Parties Benefited.
(a) Except as provided below, no Party may assign its rights,
duties or obligations under this Agreement without the express written consent
of the other Party. Any attempted assignment without such written consent shall
be null and void. Notwithstanding the foregoing, (i) DVI may transfer its
Registrable Securities to its shareholders who are "accredited
15
<PAGE> 16
investors" as defined in Regulation D promulgated under the 1933 Act in
connection with the liquidation and dissolution of the Company and such
shareholders shall become Holders for purposes of this Agreement and (ii) a
Holder hereunder may transfer Registrable Securities to a Permitted Transferee
in accordance with the provisions of Section 10(c) hereunder; provided, that,
in each case, the Permitted Transferees shall execute a written agreement
provided by the Company to adopt and agree to be bound by this Agreement. If
such Permitted Transferee does not agree to sign such written agreement, such
Permitted Transferee shall be deemed to have waived any registration rights
hereunder and all Registrable Securities owned by such Permitted Transferee
shall no longer be deemed to be Registrable Securities.
(b) The Company may transfer its rights and obligations
under this Agreement to any Person who acquires all or a substantial part of
the Company's business, whether by sale of stock, sale of assets, merger or
otherwise.
(c) Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations or
liabilities.
The Parties have executed this Registration Rights Agreement as of the
date first above written.
[Signatures appear on the following page]
16
<PAGE> 17
NETZEE, INC.
By: /s/ Richard Eiswirth
-----------------------------------------
Name: Richard Eiswirth
Title: Chief Financial Officer and Secretary
SHAREHOLDER
DIGITAL VISIONS, INC.
By: /s/ Michael E. Murphy
----------------------------------------
Name: Michael E. Murphy
Title: Chairman and Chief Executive Officer
17
<PAGE> 1
Exhibit 99.1
[NETZEE LOGO]
FOR IMMEDIATE RELEASE
Contact: Richard S. Eiswirth
Chief Financial Officer
770-200-3450
NETZEE, INC. ACQUIRES DIGITAL VISIONS, INC.
--------------------
Acquisition Expands Product Line and Increases Penetration
in the Community Banking and Credit Union Markets
ATLANTA (March 10, 2000) -- Netzee, Inc. (Nasdaq/NM:NETZ), a leading provider
of integrated Internet-based banking products, services and e-commerce
solutions, today announced it has completed its acquisition of Digital Visions,
Inc., a provider of Internet-based financial information tools for community
banks and credit unions. Under the terms of the transaction, Digital Visions
received approximately 850,000 shares of Netzee common stock, 10% of which will
be held in escrow for indemnification purposes, and options to purchase
approximately 70,000 additional shares. Digital Visions also has the right to
receive up to approximately 628,000 additional shares of Netzee common stock if
certain revenue targets are met in fiscal years 2000 and 2001. Netzee assumed
approximately $3.3 million in Digital Visions' debt, and also assumed certain
operating liabilities of Digital Visions.
Digital Visions provides a suite of Internet products and services
including state of the art bond accounting, portfolio analytics and asset
liability management. It has contracted to provide these products and services
to more than 950 community banks and credit unions. Digital Visions' products
will expand Netzee's product portfolio to community financial institutions and
fits particularly well with Netzee's recent acquisition of DPSC Software.
Additionally, Digital Visions' customer base and its access to over 3,000 banks
and 750 credit unions through strategic alliances represent a valuable
distribution channel for Netzee's online banking, bill payment and e-commerce
services.
Digital Visions, based in Minneapolis, Minnesota, was founded in 1995.
The company's product line includes: PortPro Bond Accounting, a comprehensive
Internet based bond accounting system for regulatory and management reporting;
PortPro Analytics, an Internet based analytical tool for bond portfolio
management; and PALMS, the PortPro Asset Liability Management System. Digital
Visions' Internet desktop product suites, The BANC Mall for community banks and
The PortPro Mall for credit unions, provide access to the company's PortPro
family of products as well as access to services from partners such as Dun &
Bradstreet, DRI/McGraw Hill, NADA, and Paragon Document Research.
Glenn W. Sturm, chief executive officer of Netzee, Inc., said,
"Netzee's mission is to become an invaluable partner to our financial
institution customers by offering products and services that will make them
more competitive, backed by a premier customer service organization. We believe
that our acquisition of Digital Visions will help us fulfill our mission by
providing online services that were once beyond the reach of community
financial institutions without significant systems investment. Furthermore,
Digital Visions' business model is complementary to our company's recurring
revenue model. We are excited about the synergies that will be created from our
combined companies.
-MORE-
<PAGE> 2
Netzee Acquires Digital Visions
Page 2
March 10, 2000
Michael E. Murphy, founder, chairman and chief executive officer of
Digital Visions, said, "Our business has been built on the fundamental
principle of making the finest, Internet-based state of the art financial
management tools affordable for small and medium-sized financial institutions.
Netzee's mission and customer-focused business philosophy is very similar to
ours. I believe that together we have an unparalleled opportunity to help
community financial institutions compete more effectively."
ABOUT NETZEE, INC.
Netzee, Inc. was founded in 1999 as a subsidiary of The InterCept
Group, Inc. In 1999 Netzee strengthened its offerings through the acquisition
of companies including SBS Corporation, an Internet and telephone banking
provider; the Internet banking divisions of The Bankers Bank and The
Independent BankersBank; Call Me Bill, LLC, a bill payment service; and Dyad
Corporation, a developer of proprietary loan application, approval and
fulfillment software. Netzee became a public company in November 1999, raising
approximately $61.6 million in gross proceeds from its initial public offering.
With the acquisition of DPSC Software in December 1999, Netzee
provides over 7,000 institutional customers with one or more of its products.
The Company's products and services include full-service Internet banking,
e-commerce services, custom web site design and hosting, implementation and
marketing services, telephone banking, bill payment, Internet access service,
and mission critical software. All of Netzee's products and services are
supported by a help desk and 24x7 emergency support services. Netzee can be
found on the Internet at www.netzee.com.
This release contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E the Securities Exchange Act of 1934, as amended. These
statements include all statements that are not statements of historical fact
regarding the intent, belief or expectations of Netzee and its management with
respect to, among other things: (1) whether we can successfully combine the
operations we have acquired, and operations we may acquire, to create or
continue improvements in our financial condition; (2) the anticipated impact of
certain events and circumstances; (3) trends affecting Netzee's operations,
financial condition and business; (4) Netzee's growth and operating strategies
and (5) the continued and future acceptance of and demand for our existing and
future products and services by our customers. The words "may," "will,"
"anticipate," "believe," "intend," "plan," "allow," "strategy" and similar
expressions are intended to identify forward-looking statements. Such
forward-looking statements are not guarantees of future performance and actual
results may differ materially from those projected in the forward-looking
statements as a result of risks related to the integration of acquired assets
and businesses; the Company's ability to achieve, manage or maintain growth and
execute its business strategy successfully; its dependence on developing,
testing, marketing and selling enhanced and new products and services; Netzee's
ability to sell its products and services to financial institution customers
and their customers; Netzee's ability to respond to competition; the volatility
associated with Internet-related companies; and various other factors discussed
in detail in the Company's filings with the Securities and Exchange Commission,
including the "Risk Factors" section in Netzee's Registration Statement on Form
S-1 (Registration No. 333-87089), as declared effective by the Securities and
Exchange Commission on November 8, 1999, and other periodic reports filed by
Netzee under the Securities Exchange Act of 1934, as amended. Netzee undertakes
no obligations to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes to
future operating results.
-END-
