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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 28, 2000,
BY AND AMONG
DATA DIMENSIONS, INC., AS SELLER
AND
ACXIOM CORPORATION, AS PURCHASER
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TABLE OF CONTENTS
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ARTICLE I.............................................................................1
1.1 Shares..........................................................................1
1.2 Purchase Price..................................................................1
1.3 Net Working Capital.............................................................1
1.4 Time and Place of Closing.......................................................2
1.5 Manner of Payment of the Purchase Price.........................................2
1.6 Closing Deliveries..............................................................2
ARTICLE II............................................................................3
2.1 General Statement...............................................................3
2.2 Purchaser's Representations and Warranties......................................3
2.3 Seller's Representations and Warranties.........................................4
2.4 Representations and Warranties Concerning DDIS..................................6
ARTICLE III..........................................................................23
3.1 Seller's Obligations...........................................................23
3.2 Purchaser's Obligations........................................................24
3.3 Joint Obligations..............................................................24
ARTICLE IV...........................................................................25
4.1 Conditions to Seller's Obligations.............................................25
4.2 Conditions to Purchaser's Obligations..........................................26
ARTICLE V............................................................................27
5.1 Form of Documents..............................................................27
5.2 Purchaser's Deliveries.........................................................27
5.3 Seller's Deliveries............................................................28
5.4 Joint Deliveries...............................................................29
ARTICLE VI...........................................................................29
6.1 Post-Closing Agreements and Covenants..........................................29
6.2 Inspection of Records..........................................................29
6.3 Certain Assignments............................................................29
6.4 Back-Up........................................................................30
6.5 Transition.....................................................................30
6.6 Non-Solicitation...............................................................30
6.7 Disclosure of Confidential Information.........................................30
6.8 Injunctive Relief..............................................................30
6.9 Further Assurances.............................................................31
6.10 Transfer Taxes.................................................................31
6.11 Tax Covenants..................................................................31
6.12 Data Dimensions Name...........................................................32
ARTICLE VII..........................................................................32
7.1 General........................................................................32
7.2 Indemnification Obligations of Seller..........................................32
7.3. Limitations on Seller's Indemnification Obligations............................34
7.4 Purchaser's Indemnification Covenants..........................................35
7.5 Indemnification Procedure......................................................35
ARTICLE VIII.........................................................................36
8.1 Right to Terminate.............................................................36
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8.2 Remedies.......................................................................36
ARTICLE IX...........................................................................36
9.1 Expenses.......................................................................36
9.2 Publicity......................................................................36
9.3 Notices........................................................................36
9.4 Entire Agreement...............................................................38
9.5 Survival; Non-Waiver...........................................................38
9.6 Applicable Law.................................................................38
9.7 Binding Effect; Benefit........................................................38
9.8 Assignability..................................................................38
9.9 Amendments.....................................................................38
9.10 Headings.......................................................................38
9.11 Counterparts...................................................................38
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of December 28, 2000, between
Data Dimensions, Inc., a Delaware corporation ("Seller"), and Acxiom
Corporation, a Delaware corporation ("Purchaser").
R E C I T A L S
A. Seller is the sole stockholder of Data Dimensions Information
Services, Inc., a California corporation ("DDIS"), which provides data center
hosting services to its customers (such data center hosting services business is
hereinafter referred to as the "Business").
B. Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the issued and outstanding shares of capital stock
of DDIS (the "Shares") for the consideration and on the terms and subject to the
conditions contained in this Agreement.
A G R E E M E N T S
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
Sale and Transfer of Shares; Closing
1.1 Shares. On the terms and subject to the conditions contained in this
Agreement, at the Closing (as defined in Section 1.4 below), Seller will sell
and transfer the Shares to Purchaser, and Purchaser will purchase the Shares
from Seller.
1.2 Purchase Price. Subject to Section 1.3, the "Purchase Price" of the
Shares shall be $5,400,000 (the "Closing Consideration").
1.3 Net Working Capital. The Net Working Capital of DDIS, as calculated
based upon the Financial Statements (as defined in Section 2.4(h)), was
$(90,726) (the "Threshold Amount") as of September 30, 2000. The Closing
Consideration shall be (a) reduced by the amount by which the Threshold Amount
exceeds the Net Working Capital (as defined herein) as of the date of the
Closing Balance Sheet (as defined in Schedule 1.3) (the "Closing Balance Sheet
Date") or (b) increased by the amount by which the Net Working Capital exceeds
the Threshold Amount as of the Closing Balance Sheet Date, all as determined in
accordance with Schedule 1.3 attached hereto and as shown on the Closing Balance
Sheet. As used herein, "Net Working Capital" shall mean the accounts receivable,
net of reserves, of DDIS with respect to the Business as of the Closing Balance
Sheet Date, minus the accounts payable and accrued expenses of DDIS with respect
to the Business as of the Closing Balance Sheet Date, as determined in
accordance with Schedule 1.3.
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1.4 Time and Place of Closing. The transactions contemplated by this
Agreement shall be consummated (the "Closing") at 10:00 a.m. at the offices of
Greenberg Traurig, LLP, 2450 Colorado Avenue, Suite 400 East, Santa Monica, CA
90404 on December 28, 2000 or on such other date, or at such other time or
place, as shall be mutually agreed upon by Seller and Purchaser; provided,
however, that the date of the Closing shall be automatically extended from time
to time for so long as any of the conditions set forth in Article IV shall not
be satisfied or waived, subject, however, to the provisions of Section 8.1. The
date on which the Closing occurs in accordance with the preceding sentence is
referred to in this Agreement as the "Closing Date". The Closing shall be deemed
to be effective as of 12:01 a.m. on the Closing Date.
1.5 Manner of Payment of the Purchase Price. For purposes of the
Closing, the parties have agreed upon a good-faith estimate of the Closing
Consideration (the "Estimated Closing Payment"), based upon the most recent
ascertainable financial information of the Business. At the Closing, Purchaser
shall pay the Estimated Closing Payment to Seller by delivery of:
(a) a promissory note (the "Purchaser Note") in the form of Exhibit
A attached hereto in the aggregate principal amount of
$3,600,000.
(b) cash for the balance ($1,800,000) of the Estimated Closing
Payment (the "Cash Portion") payable by wire transfer to such
account as Seller shall designate by written notice delivered to
Purchaser not later than three (3) days prior to the Closing
Date.
Following the Closing, the parties shall determine the final Closing
Consideration, taking into account the adjustment required pursuant to Section
1.3, if any, and employing the procedures and criteria set forth in Schedule
1.3. If, based on the Closing Consideration as finally determined:
(a) the Closing Consideration exceeds the Estimated Closing
Payment, Purchaser shall forthwith pay the excess to
Seller in cash by wire transfer to such account as
Seller shall designate in writing;
(b) the Estimated Closing Payment exceeds the Closing
Consideration, Seller shall forthwith pay the excess to
Purchaser in cash by wire transfer to such account as
Purchaser shall designate in writing;
provided that if the determination of the final Closing Consideration is not
completed and any payment required under this Section 1.5 is not paid within
thirty (30) days of the Closing, any such payments required under this Section
1.5 shall accrue interest from the Closing Date to the date of payment, at the
rate of 9% per annum.
1.6 Closing Deliveries. At the Closing, (i) Seller will deliver to
Purchaser the various certificates, instruments and documents referred to in
Section 5.3 below, (ii) Purchaser will deliver to Seller the various
certificates, instruments and documents referred to in Section 5.2 below, (iii)
Seller will deliver to Purchaser stock certificates representing all of the
Shares, duly
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endorsed in blank or accompanied by duly executed assignment documents, and (iv)
Purchaser will deliver to Seller the consideration specified in Sections 1.2 and
1.5 above.
ARTICLE II
Representations and Warranties
2.1 General Statement. The parties make the representations and
warranties to each other which are set forth in this Article II. All such
representations and warranties and all representations and warranties which are
set forth elsewhere in this Agreement and in any financial statement, exhibit or
document delivered by a party hereto to the other party pursuant to this
Agreement shall survive the Closing (and none shall merge into any instrument of
conveyance), regardless of any investigation or lack of investigation by any of
the parties to this Agreement. No specific representation or warranty shall
limit the generality or applicability of a more general representation or
warranty. All representations and warranties of Seller are made subject to the
exceptions which are noted in the schedule delivered by Seller to Purchaser
concurrently with the execution of this Agreement and identified by the parties
as the "Disclosure Schedule". All exceptions noted in the Disclosure Schedule
shall be numbered to correspond to the applicable paragraph of Section 2.3 or
2.4, as the case may be, to which such exception refers.
2.2 Purchaser's Representations and Warranties. Purchaser represents and
warrants to Seller that the statements contained in this Section 2.2 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 2.2):
(a) Purchaser is a corporation duly organized, existing and in
good standing, under the laws of the State of Delaware.
(b) Purchaser has full corporate power and authority to enter
into and perform (i) this Agreement, (ii) the Purchaser Note, and
(iii) all other documents and instruments to be executed by
Purchaser pursuant to this Agreement (the agreements and
instruments described in the foregoing clauses (ii) and (iii) are
collectively referred to herein as the "Purchaser's Ancillary
Documents"). This Agreement has been, and Purchaser's Ancillary
Documents will be, duly executed and delivered by duly authorized
officers of Purchaser. This Agreement and Purchaser's Ancillary
Documents constitute valid and legally binding obligations of
Purchaser, enforceable against Purchaser in accordance with their
respective terms (except to the extent that enforcement may be
affected by laws relating to bankruptcy, reorganization,
insolvency and creditors' rights and by the availability of
injunctive relief, specific performance and other equitable
remedies).
(c) No consent, authorization, order or approval of, or filing or
registration with, any governmental authority or other person is
required for the execution and
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delivery by Purchaser of this Agreement and Purchaser's Ancillary
Documents, and the consummation by Purchaser of the transactions
contemplated by this Agreement and Purchaser's Ancillary
Documents.
(d) Neither the execution and delivery of this Agreement and
Purchaser's Ancillary Documents by Purchaser, nor the
consummation by Purchaser of the transactions herein and therein
contemplated, will conflict with or result in a breach of any of
the terms, conditions or provisions of Purchaser's Certificate of
Incorporation or By-laws (each as amended to date), or of any
statute or administrative regulation, or of any order, writ,
injunction, judgment or decree of any court or governmental
authority or of any arbitration award.
(e) Neither Purchaser nor any of its Affiliates has dealt with
any person or entity who is or may be entitled to a broker's
commission, finder's fee, investment banker's fee or similar
payment for arranging the transactions between Purchaser and
Seller contemplated hereby or introducing the parties to each
other. As used herein, an "Affiliate" is any person or entity
which controls a party to this Agreement, which that party
controls, or which is under common control with that party.
"Control" means the power, direct or indirect, to direct or cause
the direction of the management and policies of a person or
entity through voting securities, contract or otherwise.
(f) Purchaser (A) understands that the Shares have not been, and
will not be, registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any state securities
laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public
offering, (B) is acquiring the Shares solely for its own account
for investment purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received
certain information concerning DDIS and has had an opportunity to
obtain additional information as desired in order to evaluate the
merits and risks inherent in holding the Shares, (E) is able to
bear the economic risk and lack of liquidity inherent in holding
the Shares, and (F) is an accredited investor as defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
(g) There is no litigation or proceeding, in law or in equity,
and there are no proceedings or governmental investigations
before any commission or other administrative authority, pending,
or, to the best of Purchaser's knowledge, threatened, against
Purchaser, or against any of its Affiliates with respect to the
consummation of the transactions contemplated hereby; and, to the
best of Purchaser's knowledge, there is no reasonable basis for
any of the foregoing.
2.3 Seller's Representations and Warranties. Seller represents and
warrants to Purchaser that the statements contained in this Section 2.3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
2.3), except as set forth in the Disclosure Schedule:
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(a) Seller is a corporation duly organized, existing and in good
standing, under the laws of the State of Delaware.
(b) Seller has full corporate power and authority to enter into
and perform (i) this Agreement and (ii) all other documents and
instruments to be executed by Seller pursuant to this Agreement
(the agreements and instruments described in the foregoing clause
(ii) are collectively referred to herein as the "Seller's
Ancillary Documents"). This Agreement has been, and Seller's
Ancillary Documents will be, duly executed and delivered by duly
authorized officers of Seller. This Agreement constitutes a valid
and legally binding obligation of Seller, enforceable against
Seller in accordance with its terms (except to the extent that
enforcement may be affected by laws relating to bankruptcy,
reorganization, insolvency and creditors' rights and by the
availability of injunctive relief, specific performance and other
equitable remedies).
(c) No consent, authorization, order or approval of, or filing or
registration with, any governmental authority or other person or
entity is required for the execution and delivery of this
Agreement and Seller's Ancillary Documents and the consummation
by Seller of the transactions contemplated by this Agreement and
Seller's Ancillary Documents.
(d) Neither the execution and delivery of this Agreement and
Seller's Ancillary Documents by Seller, nor the consummation by
Seller of the transactions herein contemplated, will, with or
without the giving of notice or passage of time, result in any
material breach of, or constitute a material default under, or
result in the imposition of any material lien or encumbrance upon
any asset or property of Seller pursuant to, any material
agreement, contract, permit, license, indenture or other
instrument to which Seller is a party or by which it or any of
its properties, assets or rights is bound or affected, or any
provision of federal or state law or any judgment, order, writ,
decree, statute, rule or regulation applicable to Seller, and
will not violate Seller's Certificate of Incorporation or Bylaws.
(e) Seller does not have any direct or indirect equity interest
in, or operate, manage or otherwise control, any business related
to the Business other than the Business.
(f) Neither Seller nor any of its Affiliates has dealt with any
person or entity who is or may be entitled to a broker's
commission, finder's fee, investment banker's fee or similar
payment for arranging the transactions contemplated hereby or
introducing the parties to each other.
(g) Seller (A) understands that the Purchaser Note has not been,
and will not be, registered under the Securities Act, or under
any state securities laws, and is being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the Purchaser
Note solely for its own account for investment purposes, and not
with a view to the
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distribution thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial matters, (D)
has received certain information concerning Purchaser and has had
an opportunity to obtain additional information as desired in
order to evaluate the merits and risks inherent in holding the
Purchaser Note, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Purchaser Note, and (F) is an
accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
(h) Seller is the sole legal, beneficial and record owner of the
Shares, which consist of 100 shares of Common Stock, no par
value, of DDIS, constituting all of the outstanding capital stock
of DDIS, free and clear of any restrictions on transfer (other
than any restrictions under the Securities Act and state
securities laws), Taxes (as defined in Section 2.4(m)), security
interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. Seller is not a party
to any option, warrant, purchase right or other contract or
commitment that could require Seller to sell, transfer or
otherwise dispose of any capital stock of DDIS (other than this
Agreement). Seller is not a party to any voting trust, proxy or
other agreement or understanding with respect to the voting of
any capital stock of DDIS.
2.4 Representations and Warranties Concerning DDIS. Seller represents
and warrants to Purchaser that the statements contained in this Section 2.4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
2.4), except as set forth in the Disclosure Schedule:
CORPORATE
(a) DDIS is a corporation duly organized, existing and in good
standing, under the laws of the State of California. DDIS has
all necessary corporate power and authority and all licenses,
permits and authorizations to conduct the Business as the
Business is now being conducted and as presently proposed to be
conducted and to own and use the properties owned and used by
it. Section 2.4(a) of the Disclosure Schedule lists the
directors and officers of DDIS. Seller has delivered to
Purchaser correct and complete copies of the Articles of
Incorporation and By-laws (each as amended to date) of DDIS. The
minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock
record books of DDIS are correct and complete. DDIS is not in
default under or in violation of any provision of its Articles
of Incorporation and By-laws (each as amended to date).
(b) DDIS is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in all
jurisdictions in which the nature or location of its activities
and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which
failure to do so would not, either individually or in the
aggregate, have a material adverse effect
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on the business, operations, prospects, assets or condition
(financial or otherwise) of DDIS. All jurisdictions in which
DDIS is qualified as a foreign corporation are set forth in
Section 2.4(b) of the Disclosure Schedule.
(c) The entire authorized capital stock of DDIS consists of
1,000,000 shares of Common Stock, no par value, of which 100
shares are issued and outstanding and comprise the Shares. There
are no treasury shares of capital stock of DDIS. Other than as
required by applicable federal and state securities laws, no
legend or other reference to any purported encumbrance appears
on any certificate representing the Shares. All of the issued
and outstanding Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, are held of record by
Seller, and were issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant
state securities laws or pursuant to valid exemptions therefrom.
None of the Shares is subject to any preemptive rights, whether
created by statute, DDIS's Articles of Incorporation or By-laws
(each as amended to date), agreement or otherwise. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or
other contracts or commitments to which DDIS is a party or by
which DDIS may be bound that do or may obligate DDIS to issue,
sell or otherwise cause to become outstanding any of its capital
stock. There are no outstanding agreements, contracts,
obligations, promises, commitments, indentures, plans,
instruments, arrangements, undertakings or understandings
(whether oral, written, express or implied) to which DDIS is a
party or is bound or which affects or relates to the voting,
issuance, purchase, redemption, repurchase or transfer of any
capital stock of DDIS. There are no voting trusts, proxies or
other agreements or understandings with respect to the voting of
the capital stock of DDIS. None of the Shares were issued in
violation of any law, rule or regulation, including, without
limitation, state and federal securities laws.
(d) No consent, authorization, order or approval of, or filing
or registration with, any governmental authority or other person
or entity is required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
(e) Neither the execution and delivery of this Agreement and
Seller's Ancillary Documents by Seller, nor the consummation by
Seller of the transactions herein contemplated, will, with or
without the giving of notice or passage of time, result in any
material breach of, or constitute a material default under, or
result in the imposition of any material lien or encumbrance
upon any asset or property of DDIS pursuant to, any material
agreement, contract, permit, license, indenture or other
instrument to which DDIS is a party or by which it or any of its
properties, assets or rights is bound or affected, or any
provision of federal or state law or any judgment, order, writ,
decree, statute, rule or regulation applicable to DDIS, and will
not violate DDIS's Articles of Incorporation or Bylaws.
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(f) DDIS has no subsidiaries and does not own or control,
directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture,
limited liability company or other business enterprise.
FINANCIAL
(g) DDIS's books, accounts and records with respect to the
Business are, and have been, maintained in DDIS's usual, regular
and ordinary manner, in accordance with generally accepted
accounting practices, and all Material transactions to which
DDIS is or has been a party with respect to the Business are
properly reflected therein. As used in this Agreement, a
transaction, agreement, instrument or document, or a series of
related transactions, agreements, instruments or documents, is
"Material" if it involves (i) one or more payments to or from
DDIS of at least $50,000, or (ii) payments to or from DDIS of at
least $100,000 in the aggregate.
(h) Complete and accurate copies of (i) the audited consolidated
balance sheets, statements of income and retained earnings,
statements of cash flows, and notes to financial statements
(together with any supplementary information thereto) of Seller,
all as of and for the years ended December 31, 1999 and December
31, 1998, respectively, as audited by PricewaterhouseCoopers
LLP, and December 31, 1997, as audited by BDO Seidman, LLP (the
"Seller Financial Statements"), and (ii) the unaudited balance
sheet and statements of income and retained earnings and cash
flows of DDIS, as of and for the period ended September 30,
2000, are contained in the Disclosure Schedule (the "Financial
Statements"). The Seller Financial Statements present accurately
and completely the financial position of Seller and its
subsidiaries (including DDIS) as of the respective dates
thereof, and the results of operations and cash flows of Seller
and its subsidiaries (including DDIS) for the respective periods
covered by said statements, in accordance with GAAP,
consistently applied. The Financial Statements present
accurately and completely the financial position of DDIS as of
the date thereof, and the results of operations and cash flows
of DDIS for the period covered by said statements, in accordance
with GAAP, consistently applied.
(i) None of the trade receivables which are reflected on the
Financial Statements or which arose subsequent to the date of
the Financial Statements, including, without limitation, the
accounts receivable, is or was subject to any counterclaim, set
off, discount, or allowance, except as set forth on the
Financial Statements. Allowances for doubtful accounts and
warranty returns are adequate and have been prepared in
accordance with GAAP consistently applied and in accordance with
the past practices of DDIS. All of such trade receivables arose
out of bona fide, arms length transactions for the sale of goods
or performance of services. None of the trade receivables which
are reflected on the Financial Statements relate to products
sold or services performed subsequent to the date of such
Financial Statements. DDIS has no liabilities or obligations
relating to the
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Business whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to DDIS, whether due or to
become due, arising out of transactions entered into at or prior
to the Closing, or any action or inaction at or prior to the
Closing, including, without limitation, Taxes with respect to or
based upon transactions or events occurring on or before the
Closing, except liabilities and obligations (i) disclosed on the
Disclosure Schedule, (ii) disclosed on the Financial Statements,
or (iii) which have arisen after the date of the Financial
Statements in the ordinary course of business consistent with
past business practices.
(j) DDIS has good and marketable title to, or a valid leasehold
interest in, the properties and assets purported to be owned,
leased or licensed by it or used in the operation of its
business, free and clear of any liens, claims, encumbrances and
security interests, except for the following liens ("Permitted
Liens"): (i) statutory liens for Taxes not yet due, (ii) liens
of carriers, warehousemen, mechanics and materialmen incurred in
the ordinary course of business for sums not yet due; and (iii)
liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security.
(k) The Disclosure Schedule contains a true and correct list and
description (including coverages, deductibles and expiration
dates) of all insurance policies which are owned by DDIS
relating to the conduct of the Business or which name DDIS as an
insured and which pertain to the Business, or DDIS's employees
who are employed in the conduct of the Business, and true and
correct copies of such policies have been delivered to
Purchaser. All such insurance policies are in full force and
effect. DDIS has not received any written notice in the three
(3) year period ending on the date hereof from, or on behalf of,
any insurance carrier issuing such policies, to the effect that
insurance rates will hereafter be substantially increased
(except to the extent that insurance rates may be increased for
all similarly situated risks), that there will hereafter be no
renewal of an existing policy, or that material alteration of
any equipment, leased personalty, or Leased Premises (as defined
in Section 2.4(hh)), purchase of additional equipment, or
material modification of any of DDIS's methods of conducting the
Business, will be required or is suggested. No insurance carrier
has refused any application for insurance by DDIS or any other
person on behalf of DDIS on any of its properties or assets.
(l) The Disclosure Schedule describes each: (i) business
relationship relating to or in connection with the conduct of
the Business (excluding employee compensation and other ordinary
incidents of employment) existing on the date of this Agreement
between (1) DDIS, and (2) any present or former officer,
director, stockholder or Affiliate of DDIS, any present or
former known spouse, ancestor or descendant of any of the
aforementioned persons or any trust or other similar entity for
the benefit of any of the foregoing persons (all such persons
and trusts encompassed by this clause (2) being sometimes
collectively referred to herein as
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the "Related Parties" and individually as a "Related Party");
(ii) transaction relating to or in connection with the conduct
of the Business occurring between January 1, 1998 and the date
of this Agreement between DDIS and any Related Party; and (iii)
amount owing by or to any of the Related Parties, respectively,
to or from DDIS relating to or in connection with the conduct of
the Business as of the date of this Agreement. No property or
interest in any property (including, without limitation, designs
and drawings concerning machinery) which relates to and is or
will be necessary or useful in the present or currently
contemplated future operation of the Business, is presently
owned by or leased by or to any Related Party. Prior to the
Closing Date, all amounts due and owing to or from DDIS by or to
any of the Related Parties (excluding employee compensation and
other incidents of employment) relating to or in connection with
the conduct of the Business shall be paid in full. Neither DDIS
nor any Related Party has an interest, directly or indirectly,
in any business, corporate or otherwise, which is in competition
with the Business.
(m)(i) For purposes of this Agreement, the term "Taxes" means
all Federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem,
registration, alternative or add-on minimum, transfer,
capital stock, franchise, profits, license, lease,
service, service use, withholding, payroll, employment,
excise, severance, social security (or similar),
unemployment, disability, stamp, occupation, premium,
real property, personal property, windfall profits,
environmental (including taxes under Section 59A of the
Code), customs, duties or other taxes, fees, assessments
or charges of any kind whatever, together with any
interest and any penalties, additions to tax or
additional amounts with respect thereto, whether or not
disputed, and the term "Tax" means any one of the
foregoing Taxes; the term "Returns" means all returns
(including estimated tax returns), declarations,
reports, statements, claims for refund, information
returns, and other documents required to be filed in
respect of Taxes, including any schedule or attachment
thereto and including any amendment thereof, and the
term "Return" means any one of the foregoing Returns;
the term "Code" means the Internal Revenue Code of 1986,
as amended (all citations to the Code, or to the
Treasury Regulations promulgated thereunder, shall
include any amendments or any substitute or successor
provisions thereto); the term "Affiliated Group" means
any affiliated group within the meaning of Section
1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law; the
term "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization
or a governmental entity (or any department, agency or
political subdivision thereof).
(ii) There have been properly completed and filed on a
timely basis and in correct form all Returns required to
be filed by DDIS on or prior to the date hereof
pertaining to the Taxes. As of the time of filing, the
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foregoing Returns correctly reflected the facts
regarding the income, business, assets, operations,
activities, status or other matters of DDIS with respect
to the Business or any other information required to be
shown thereon, and no extension of time within which to
file any such Return has been requested or granted. Any
Returns required to be filed with any tax authority with
respect to any taxable period ending between the date
hereof and the Closing Date, by or on behalf of DDIS,
shall be filed when due (including any extension of such
due date), and all amounts shown due during such period
or periods shall be paid on or before such date. No
claim has ever been made by a taxing authority in a
jurisdiction where DDIS does not file Returns that it is
or may be subject to taxation by that jurisdiction.
There are no liens on any of the assets of DDIS that
arose in connection with any failure (or alleged
failure) to pay any Tax, except for liens for Taxes not
yet due. The Disclosure Schedule lists all Federal,
state, local and foreign income Returns filed with
respect to DDIS for taxable periods ended on or after
January 1, 1998, indicates those Returns that have been
audited, and indicates those Returns that currently are
the subject of audit or in respect of which any written
or unwritten notice of any audit or examination has been
received by DDIS. Seller has delivered to Purchaser
correct and complete copies of all Federal income
Returns, examination reports and statements of
deficiencies assessed against or agreed to by DDIS since
January 1, 1998.
(iii) With respect to all amounts in respect of Taxes
imposed upon DDIS, or for which DDIS is or could be
liable, whether to taxing authorities (as, for example,
under law) or to other persons or entities (as, for
example, under tax allocation agreements), with respect
to all taxable periods or portions of periods ending on
or before the Closing Date, all applicable tax laws and
agreements have been fully complied with, and all such
amounts required to be paid by DDIS, to taxing
authorities or others, on or before the date hereof have
been paid. No director of officer (or employee
responsible for Tax matters) of DDIS or Seller expects
any taxing authority to assess DDIS additional Taxes for
any period for which Returns have been filed. There is
no material claim, audit, action, suit, proceeding,
dispute or investigation now pending, or, to the best of
Seller's knowledge, threatened against or with respect
to DDIS in respect of any Tax or assessment. No notice
or deficiency or similar document of any tax authority
has been received by DDIS, and there are no liabilities
for Taxes (including liabilities for interest,
additional taxes and penalties thereon and related
expenses) with respect to the issues that have been
raised (and are currently pending) by any tax authority
that could, if determined adversely to DDIS, materially
and adversely affect the liability of DDIS for any
Taxes. No issue relating to Taxes has been raised by a
taxing authority during any pending audit or
examination, and no issue relating to Taxes was raised
by a taxing authority in any completed audit or
examination, that reasonably can be expected to recur in
a later taxable
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period. Except as may be required as a result of the
transactions contemplated by this Agreement, DDIS has
not been or shall not be required to include any
material adjustment in taxable income for any tax period
(or portion thereof) ending on or after the Closing
pursuant to Section 481 or 263A of the Code or any
comparable provisions under state or foreign taxes as a
result of transactions, events or accounting methods
employed prior to the Closing.
(iv) DDIS is not a person other than a United States
person within the meaning of the Code and the
transactions contemplated herein are not subject to the
withholding provisions of section 3406 or subchapter a
of Chapter 3 of the Code. All material elections with
respect to the Taxes affecting DDIS as of the date
hereof are set forth on Section 2.4(m) of the Disclosure
Schedule. After the date hereof, no written election
shall be made by DDIS without Purchaser's express
written consent.
(v) To the best of Seller's knowledge, all monies
required to be held by DDIS from employees, independent
contractors, creditors, stockholders or other third
parties for income taxes, social security, unemployment
insurance taxes and all other Taxes, have been collected
or withheld or either paid to the respective
governmental agencies or set aside in cash for such
purpose, or paid to or for a DDIS employee benefit plan
or trust.
(vi) Except as disclosed on the Disclosure Schedule,
DDIS has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(vii) DDIS has not filed a consent under Section 341(f)
of the Code concerning collapsible corporations. DDIS
has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under
certain circumstances could obligate it to make any
payments that will not be deductible under section 280G
of the Code. DDIS has not been a United States real
property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the
Code. DDIS has disclosed on its Federal income Returns
all positions taken therein that could give rise to a
substantial understatement of Federal income Tax within
the meaning of Section 6662 of the Code. DDIS is not a
party to any Tax allocation or sharing agreement. Except
for the Affiliated Group of which the Seller is the
common parent, DDIS (i) has not been a member of an
Affiliated Group filing a consolidated Federal income
Return and (ii) has no liability for the Taxes of any
Person under Treasury Regulation section 1.1502-6 (or
any similar provision of state, local or foreign law),
as a transferee or successor, by contract or otherwise.
(viii) The unpaid Taxes of DDIS (i) did not, as of the
most recent fiscal month end, exceed the reserve for Tax
liability (excluding any reserve for
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deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of
the most recent balance sheet (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted
for the passage of time through the Closing Date in
accordance with the past custom and practice of DDIS in
filing its Returns.
(ix) DDIS shall not be required to include in a taxable
period ending after the Closing Date taxable income
attributable to income that accrued in a prior taxable
period but was not recognized in any prior taxable
period as a result of the installment method of
accounting, the completed contract method of accounting,
the long-term contract method of accounting, the cash
method of accounting or Section 481 of the Code or any
comparable provision of state, local or foreign tax law.
(x) Except as set forth on the Disclosure Schedule, (1)
DDIS is not a party to any joint venture, partnership or
other arrangement or contract that could be treated as a
partnership for Federal income tax purposes, and (2)
DDIS has not entered into any sale leaseback or
leveraged lease transaction that fails to satisfy the
requirements of Revenue Procedure 75-21 (or similar
provisions of foreign law) or any safe harbor lease
transaction.
(xi) All private letter rulings issued by the Internal
Revenue Service to DDIS (and any corresponding ruling or
determination of any state, local or foreign taxing
authority) have been disclosed on the Disclosure
Schedule, and there are no pending requests for any such
rulings (or corresponding determinations).
(xii) DDIS and Seller shall grant to Purchaser or its
designees access at all reasonable times to all of
DDIS's books and records (including tax workpapers and
returns and correspondence with tax authorities),
including the right to take extracts therefrom and make
copies thereof, to the extent such books and records
relate to taxable periods ending on or prior to or that
include the Closing Date. Purchaser shall (i) grant to
the Seller access at all reasonable times to all of
DDIS's books and records (including tax workpapers and
returns and correspondence with tax authorities),
including the right to take extracts therefrom and make
copies thereof, to the extent that such books and
records relate to the operations of DDIS during taxable
periods ending on or prior to or that include the
Closing Date, and (ii) otherwise cooperate with the
Seller in connection with any audit of Taxes that relate
to the business of DDIS prior to Closing.
(xiii) Seller and DDIS filed a consolidated Federal
income Return for the tax year immediately preceding the
current tax year and the Seller is eligible to make an
election under section 338 (h)(10) of the Code and any
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comparable provision under state, local or foreign Tax
laws with respect to DDIS with respect to Purchaser's
purchase of the Shares.
CONDUCT OF BUSINESS
(n) Since September 30, 2000, DDIS has not with respect to
the Business:
(i) sold or in any way transferred or otherwise disposed
of any of its assets or property, except for cash
applied in payment of DDIS's liabilities in the usual
and ordinary course of business;
(ii) suffered any casualty, damage, destruction or loss,
or any material interruption in use, of any material
assets or property (whether or not covered by
insurance), on account of fire, flood, riot, strike or
other hazard or Act of God;
(iii) made or suffered any material change in the
conduct or nature of any aspect of the Business whether
made in the ordinary course of business or not or
whether or not the change had a material adverse effect
on the business activities or financial condition of the
Business (the foregoing representation and warranty
shall not be deemed to be breached by virtue of the
entry of DDIS into this Agreement or its consummation of
the transactions contemplated hereby);
(iv) other than intercompany transactions with Seller
which are set forth in the Disclosure Schedule, paid (or
been paid by) any Related Party, or charged (or been
charged by) any Related Party, for (A) goods sold to or
services rendered by or to the Business, or (B)
corporate overhead expenses, management fees, legal or
accounting fees, capital charges, or similar charges or
expenses, on a basis which is either more or less
favorable to the Business than the basis which would be
employed by a party who is not a Related Party;
(v) waived any right or cancelled or compromised any
debt or claim, other than in the ordinary course of
business;
(vi) made (or committed to make) capital expenditures in
an amount which exceeds $50,000 for any item or $250,000
in the aggregate, unless otherwise approved by Purchaser
in writing;
(vii) increased the compensation payable to any
employee;
(viii) hired or terminated any employee who has an
annual salary in excess of $40,000 or employees with
aggregate annual salaries or wages in excess of $80,000;
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(ix) borrowed any money or issued any bonds, debentures,
notes or other corporate securities evidencing money
borrowed; altered any material term of any outstanding
debt or capital stock of DDIS; or guaranteed any debt
for borrowed money;
(x) paid, declared or set aside any dividend or other
distribution on its securities of any class or
purchased, exchanged or redeemed any of its securities
of any class;
(xi) amended or modified its Articles of Incorporation
or By-laws;
(xii) changed DDIS's accounting methods; or
(xiii) without limitation by the enumeration of any of
the foregoing, except for the execution of this
Agreement, entered into any transaction other than in
the usual and ordinary course of business.
(o) DDIS has not suffered or been threatened with any material
adverse change in the business, operations, assets, liabilities,
financial condition or prospects of the Business, including,
without limiting the generality of the foregoing, the existence
or threat of any labor dispute, or any material adverse change
in, or loss of, any relationship between DDIS and any of its
customers, suppliers or key employees of the business.
CONTRACTS
(p) The Disclosure Schedule correctly and completely lists and
describes all Material contracts, leases, and agreements,
written or verbal, to which DDIS is a party and which relate to
the conduct of the Business, including, without limitation:
outsourcing or other services agreements; employment, consulting
and employment-related agreements, including bonus and benefit
plans and severance agreements; confidentiality,
non-solicitation or proprietary information agreements,
agreements restricting the right of the Business to compete or
restricting other companies from competing with the Business and
other covenants not to compete; loan agreements and guaranties;
notes; security and pledge agreements; sales representative,
distribution, franchise, advertising and similar agreements;
leases and subleases of leased personalty or Leased Premises;
license agreements; purchase orders and purchase contracts and
sales orders and sales contracts; contracts between the DDIS and
its Affiliates or Related Parties; and any other contracts,
agreements or instruments related to the Business and assigned
to Purchaser hereunder (collectively, the "Material Contracts").
Seller has provided to Purchaser correct and complete copies of
all Material Contracts, including all amendments and supplements
thereto. All Material Contracts referred to in this Section
2.4(p), and all other contracts or instruments to which DDIS is
a party and which related to the Business, are in full force and
binding upon the parties thereto. No default by DDIS has
occurred thereunder and, to the best of Seller's knowledge, no
default by the other contracting parties has
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occurred thereunder. No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or
the happening of any further event or condition, would become a
default by DDIS thereunder. DDIS has not released its rights
under any contract or agreement relating to the Business. Except
as set forth in the Material Contracts identified in the
Disclosure Schedule, DDIS has not made any verbal or written
warranties with respect to the quality or the absence of defects
of any products or services which it has sold or performed in
the conduct of the Business which are in force as of the date
hereof.
(q) DDIS is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written or verbal contract,
agreement, indenture, mortgage, debenture, note or other
instrument under the terms of which performance by DDIS
according to the terms of this Agreement will be a default or an
event of acceleration, or whereby timely performance by DDIS
according to the terms of this Agreement may be prohibited,
prevented or delayed.
(c) The Disclosure Schedule contains a true and correct copy of
every license, permit, registration and governmental approval,
agreement and consent applied for, pending by, issued or given
to DDIS with respect to the Business, and every agreement with
governmental authorities (Federal, state, local or foreign)
entered into by DDIS with respect to the Business, which is in
effect or has been applied for or is pending, exclusive of
Environmental Permits (as herein defined) (the "Permits"). Such
Permits constitute all licenses, permits, registrations,
approvals and agreements and consents (other than Environmental
Permits) which are required in order for the DDIS to conduct the
Business as presently conducted. DDIS is not in default under
any of such franchises, permits, licenses or other similar
authority which has had or could reasonably be deemed to have a
material adverse effect on the business, operations, assets,
liabilities, financial condition or prospects of the Business.
(s) No "Significant Customer" (as herein defined) has notified
Seller that it will terminate or reduce its business
relationship with the Business in any material respect. As used
herein, "Significant Customer" means any of the 15 largest
customers of the Business, measured in terms of sales volume in
dollars for the eleven-month period ended November 30, 2000. No
"Significant Supplier" (as herein defined) has notified Seller
that it will terminate or reduce its business relationship with
the Business in any material respect. As used herein,
"Significant Supplier" means any supplier of the Business from
whom DDIS has purchased $10,000 or more of goods or services
during the eleven-month period ended November 30, 2000 for use
in the Business.
EMPLOYEES
(t) The Disclosure Schedule provides a description of each of the
following, if any, which is sponsored, maintained or contributed to by
DDIS or Seller for the benefit of the employees or agents of DDIS, or
has been so sponsored, maintained or contributed to at any time during
DDIS's existence:
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(i) each "Employee Benefit Plan", as such term is defined
in Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA") (including, but not limited to, employee benefit
plans, such as foreign plans, which are not subject to the
provisions of ERISA) ("Plan"), and
(ii) each personnel policy, employee manual or other
written statements of rules or policies concerning employment,
stock option plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation and
sick leave policy, severance pay policy or agreement, deferred
compensation agreement or arrangement, consulting agreement,
employment contract and each other employee benefit plan,
agreement, arrangement, program, practice or understanding which
is not described in Section 2.4(t)(i) ("Benefit Program or
Agreement").
(u) True, correct and complete copies of each of the Plans (if
any), and related trusts, if applicable, including all amendments
thereto, have been furnished to Purchaser. There has also been furnished
to Purchaser, with respect to each Plan required to file such report and
description, the three most recent reports on Form 5500 and the summary
plan description. True, correct and complete copies or descriptions of
all Benefit Programs or Agreements have also been furnished to
Purchaser.
(v) Except as otherwise set forth in the Disclosure Schedule,
(i) DDIS does not contribute to or have an obligation to
contribute to, and DDIS has not at any time contributed to or had
an obligation to contribute to, a multiemployer plan within the
meaning of Section 3(37) of ERISA ("Multiemployer Plan") or a
multiple employer plan within the meaning of Section 413(b) and
(c) of the Code;
(ii) DDIS has substantially performed all obligations,
whether arising by operation of law or by contract, required to
be performed by it in connection with the Plans and the Benefit
Programs and Agreements, and to the knowledge of Seller, there
have been no defaults or violations by any other party to the
Plans or Benefit Programs or Agreements;
(iii) All reports and disclosures relating to the Plans
required to be filed with or furnished to governmental agencies,
Plan participants or Plan beneficiaries have been filed or
furnished in accordance with applicable law in a timely manner,
and each Plan and each Benefit Program or Agreement has been
administered in substantial compliance with its governing
documents;
(iv) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of Seller,
threatened against, or with respect to, any of the Plans or
Benefit Programs or Agreements or their assets; and
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(v) All contributions required to be made to the Plans
pursuant to their terms and provisions and applicable law have
been made timely.
(w) Except as set forth in the Disclosure Schedule, DDIS does not
have any obligation to provide health benefits to former employees,
except as specifically required by law.
(x) Except as set forth in the Disclosure Schedule, DDIS is not a
party to any agreement, and has not established any policy or practice,
requiring DDIS to make a payment or provide any other form or
compensation or benefit to any person performing services for DDIS upon
termination of such services which would not be payable or provided in
the absence of the consummation of the transactions contemplated by this
Agreement.
(y) The Disclosure Schedule sets forth by number and employment
classification the approximate numbers of employees employed by DDIS in
the Business as of the date of this Agreement. None of said employees
are subject to union or collective bargaining agreements with DDIS.
LITIGATION
(z) There is no litigation or proceeding, in law or in equity,
and there are no proceedings or governmental investigations
before any commission or other administrative authority,
pending, or, to the best of Seller's knowledge, threatened,
against DDIS, or against any of its Affiliates with respect to
or affecting the business, operations, assets, liabilities,
financial condition or prospects of the Business, or with
respect to the consummation of the transactions contemplated
hereby; and, to the best of Seller's knowledge, there is no
reasonable basis for any of the foregoing.
(aa) There are no facts which, if known by a potential claimant
or governmental authority, would give rise to a claim or
proceeding which, if asserted or conducted with results
unfavorable to DDIS, would have a material adverse effect on the
business, operations, assets, liabilities, financial condition
or prospects of DDIS, or the consummation of the transactions
contemplated hereby.
(bb) DDIS is not a party to, or bound by, any decree, order or
arbitration award (or agreement entered into in any
administrative, judicial or arbitration proceeding with any
governmental authority) with respect to its properties, assets,
personnel or business activities of DDIS.
(cc) DDIS is not in violation of, or delinquent in respect to,
any decree, order or arbitration award or law, statute, or
regulation of or agreement with, or Permit from, any Federal,
state or local governmental authority (or to which its
properties, assets, personnel, business activities of the
Business or the Leased Premises are subject or to which it,
itself, is subject), including, without limitation, laws,
statutes and regulations relating to equal employment
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opportunities, fair employment practices, unfair labor
practices, terms of employment, occupational health and safety,
wages and hours and discrimination, and zoning ordinances and
building codes, which violation or delinquency, individually or
in the aggregate, could reasonably be expected to have a
material adverse effect on the business, operations, prospects,
assets or condition (financial or otherwise) of DDIS. Copies of
all notices of violation of any of the foregoing which DDIS has
received within the past three years are attached to the
Disclosure Schedule.
ENVIRONMENTAL MATTERS
(dd) Neither DDIS nor the Business is in violation of any
Environmental Law (as herein defined) or Environmental Permit
(as herein defined), which violation, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect on the business, operations, prospects, assets or
condition (financial or otherwise) of DDIS. A copy of any
notice, citation, inquiry or complaint which DDIS has received
in the past three years of any alleged violation of any
Environmental Law or Environmental Permit is contained in the
Disclosure Schedule, and all violations alleged in said notices
have been corrected. DDIS possesses all required Environmental
Permits, and is in compliance with the provisions of all such
Environmental Permits. Copies of all Environmental Permits
issued to DDIS are contained in the Disclosure Schedule.
(ee) There has been no storage, treatment, generation,
transportation or Release (as herein defined) of any Hazardous
Materials (as herein defined) by DDIS or its predecessors in
interest, or by any other person or entity for which DDIS is or
may be held responsible, at any Facility (as herein defined) or
any Offsite Facility (as herein defined) in violation of, or
which could give rise to any obligation under, Environmental
Laws.
(ff) The Disclosure Schedule sets forth a complete list of all
Containers (as herein defined) that are now present at, or have
heretofore been removed from, the Leased Premises. All
Containers which have been heretofore removed from the Leased
Premises have been removed in accordance with all applicable
Environmental Laws.
(gg) For the purposes of this Agreement:
(1) "Containers" means above-ground and under- ground
storage tanks, vessels and related equipment and
containers;
(2) "Environmental Laws" means all federal, state and
local statutes, regulations, ordinances, rules,
regulations and policies, all court orders and decrees
and arbitration awards, and the common law, which
pertain to environmental matters or contamination of any
type whatsoever. Environmental Laws include, without
limitation, those relating to: manufacture, processing,
use, distribution, treatment, storage, disposal,
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generation or transportation of Hazardous Materials;
air, surface or ground water or noise pollution;
Releases; protection of wildlife, endangered species,
wetlands or natural resources; Containers; health and
safety of employees and other persons; and notification
requirements relating to the foregoing;
(3) "Environmental Permits" means licenses, permits,
registrations, governmental approvals, agreements and
consents which are required under or are issued pursuant
to Environmental Laws;
(4) "Facility" means any facility as defined in CERCLA;
(5) "Hazardous Materials" means:
(A) pollutants, contaminants, pesticides,
radioactive substances, solid wastes or
hazardous or extremely hazardous, special,
dangerous or toxic wastes, substances, chemicals
or materials within the meaning of any
Environmental Law, including without limitation
any (i) "hazardous substance" as defined in the
Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601,
et. Seq., as amended and reauthorized
("CERCLA"), and (ii) any "hazardous waste" as
defined in the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C., Sec. 6902 et.
Seq., and all amendments thereto and
reauthorizations thereof; and
(B) even if not prohibited, limited or regulated
by Environmental Laws, all pollutants,
contaminants, hazardous, dangerous or toxic
chemical materials, wastes or any other
substances, including without limitation, any
industrial process or pollution control waste
(whether or not hazardous within the meaning of
RCRA) which could pose a hazard to the
environment or the health and safety of any
person, or impair the use or value of any
portion of the Leased Premises;
(6) "Offsite Facility" means any Facility which is not
presently, and has not heretofore been, owned, leased or
occupied by DDIS with respect to the Business;
(7) "Release" means any spill, discharge, leak,
emission, escape, injection, dumping, or other release
or threatened release of any Hazardous Materials into
the environment, whether or not notification or
reporting to any governmental agency was or is,
required, including without limitation any Release which
is subject to CERCLA.
REAL ESTATE
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(hh) DDIS owns no real property. The Disclosure Schedule lists
and describes briefly all real property leased or subleased by
DDIS (the "Leased Premises"), and true and correct copies of
such leases have been delivered by Seller to Purchaser. None of
the improvements comprising the Leased Premises, or the
businesses conducted by DDIS thereon, including the Business,
are in violation of any building line or use or occupancy
restriction, limitation, condition or covenant of record or any
zoning or building law, code or ordinance or public utility or
other easements. DDIS is not in default under any agreement
relating to the Leased Premises nor, to the best of Seller's
knowledge, is any other party thereto in default thereunder. All
options in favor of DDIS to purchase any of the Leased Premises,
if any, are in full force and effect. To Seller's knowledge, no
capital expenditures in excess of $50,000 in the aggregate are
required within 90 days of the Closing Date for the maintenance
and/or repair of the Leased Premises in order to conduct the
Business as presently conducted.
(ii) There are no challenges or appeals pending regarding the
amount of the taxes on, or the assessed valuation of, the Leased
Premises, and no special arrangements or agreements exist with
any governmental authority with respect thereto (the
representations and warranties contained in this subparagraph
(ii) shall not be deemed to be breached by any prospective
general increase in real estate tax rates).
(jj) There are no condemnation proceedings pending or, to the
best of Seller's knowledge, threatened with respect to any
portion of the Leased Premises.
(kk) There is no tax assessment (in addition to the normal,
annual general real estate tax assessment) pending or, to the
best of Seller's knowledge, threatened with respect to any
portion of the Leased Premises to the extent DDIS is liable for
payment therefor.
INTELLECTUAL PROPERTY
(ll) The Disclosure Schedule identifies all of the following in
which DDIS claims any ownership rights: (i) trademarks, service
marks, slogans, trade names, trade dress and the like
(collectively with the associated goodwill of each,
"Trademarks"), together with information regarding all
registrations and pending applications to register any such
rights; (ii) common law Trademarks; (iii) know-how and trade
secrets which are material to the Business; (iv) patents on and
pending applications to patent any technology or design; (v)
registrations of and applications to register copyrights; and
(vi) licenses of rights in computer software, Trademarks,
patents, copyrights, and other know-how, whether to or by DDIS.
The scheduled rights are referred to herein collectively as the
"Intellectual Property."
(mm) (i) DDIS is the owner of or duly licensed to use each
Trademark and its associated goodwill; (ii) each Trademark
registration exists and has been maintained in good standing;
(iii) each patent and application included in the
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Intellectual Property exists, is owned by or licensed to DDIS,
and has been maintained in good standing; (iv) each copyright
registration exists and is owned by DDIS; (v) to the best of
Seller's knowledge, no other firm, corporation, association or
person claims the right to use in connection with similar or
closely related goods and in the same geographic area, any mark
which is identical or confusingly similar to any of the
Trademarks; (vi) Seller has no knowledge of any claim, and has
no reason to believe that any third party asserts ownership
rights in any of the Intellectual Property; (vii) Seller has no
knowledge of any claim and has no reason to believe that DDIS's
use of any Intellectual Property infringes upon any right of any
third party; and (viii) Seller has no knowledge or any reason to
believe that any third party is infringing upon any of DDIS's
rights in any of the Intellectual Property.
GENERAL
(nn) The machinery and equipment and other tangible personal
property (and intangible personal property, to the extent not
otherwise comprising Intellectual Property), owned, leased or
used by DDIS as of the Closing are, taken as a whole, (i)
suitable for the uses to which it is currently employed and (ii)
in good operating condition and repair, subject only to ordinary
wear and tear in light of their respective ages and the
respective uses for which they are currently used. The uses of
such tangible properties and assets conform and comply in all
material respects with all rules, regulations and standards
applicable to DDIS or its assets or properties, imposed by
applicable federal, state or local laws or regulations. The
equipment, leased personalty and the buildings and other
facilities located on the Leased Premises are free of any latent
structural or engineering defects known to Seller or any patent
structural or engineering defects.
(oo) No representation or warranty made by Seller in this
Agreement, nor any financial statement, certificate, schedule or
exhibit prepared and furnished or to be prepared and furnished
by Seller or its representatives pursuant hereto contains or
shall contain any untrue statement of a material fact, or omits
or shall omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading
in light of the circumstances under which they were furnished.
There is no event or fact known by DDIS or Seller which DDIS or
Seller has not disclosed to Purchaser in writing which
materially affects or which shall materially affect adversely
DDIS's business, sales, income, properties, assets, liabilities,
activities, customers, or the ability of DDIS to perform under
this Agreement.
(pp) The copies of all documents furnished by Seller to
Purchaser pursuant to the terms of this Agreement are complete
and accurate. The information contained in the Disclosure
Schedule is complete and accurate.
(qq) Neither DDIS, nor any of its Affiliates, has dealt with any
person or entity who is or may be entitled to a broker's
commission, finder's fee, investment
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banker's fee or similar payment from Purchaser for arranging the
transactions contemplated hereby or introducing the parties to
each other.
(rr) Other than intercompany obligations with Seller which are
set forth in the Disclosure Schedule, DDIS is not obligated as a
borrower, guarantor or accommodation party with respect to any
indebtedness for borrowed money.
ARTICLE III
Conduct Prior to the Closing
3.1 Seller's Obligations. Between the date hereof and the Closing Date:
(a) Seller shall give to Purchaser's officers, employees,
attorneys, consultants, accountants and lenders reasonable
access during normal business hours to all of the properties,
books, contracts, documents, records relating to and personnel
of DDIS, and of Seller to the extent they are employed in the
conduct of the Business, and shall furnish to Purchaser such
information as Purchaser may at any time and from time to time
reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 3.1(a) shall affect or be
deemed to modify any representation or warranty given by Seller
to Purchaser hereunder or the conditions to the obligations of
Seller to consummate the transactions contemplated by this
Agreement.
(b) Seller will cause DDIS to give any notices to third parties,
and will cause DDIS to use its best efforts to obtain all
consents (collectively, the "Consents") specified by Purchaser
to the assignment of, or alternative arrangements satisfactory
to Purchaser with respect to, any contract, insurance policy,
agreement, purchase order, sales order, or other instrument,
Permit or Environmental Permit, which is to be assigned to
Purchaser hereunder and which may be required for such
assignment to be effective.
(c) Seller shall carry on the Business, or cause DDIS to carry
on the Business, in the usual and ordinary course of business,
consistent with past practices and shall use its best efforts to
preserve, or cause DDIS to preserve, the Business and the
goodwill of its customers, suppliers and others having business
relations with the Business and to retain its business
organization intact, including keeping available the services of
its present employees, representatives and agents, and shall
maintain, or cause DDIS to maintain, all of the properties used
in connection with the Business in good operating condition and
repair, ordinary wear and tear excepted.
(d) Without the prior written consent of Purchaser, and without
limiting the generality of any other provision of this
Agreement, Seller shall not, and shall not cause DDIS to, with
respect to the conduct of the Business: incur or commit to incur
any capital expenditures in connection with the Business not set
forth in the
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Disclosure Schedule in excess of $50,000 in the aggregate;
incur, assume or guarantee any long-term or short-term
indebtedness of the Business; enter into any lease, contract or
other agreement other than in the ordinary course of business in
accordance with past practices; increase the compensation
payable to any employee of the Business; pay, declare or set
aside any dividend or other distribution on its securities of
any class; issue, sell, purchase or redeem any of its securities
of any class; hire any new employee to be employed in the
Business who shall have, or terminate the employment of any
employee employed in the Business, who has, an annual salary in
excess of $40,000; or sell, transfer or otherwise dispose of any
material asset or property of the Business except for cash
applied in payment of liabilities of the Business in the usual
and ordinary course of business.
(e) Seller shall assist and cooperate with Purchaser in the
transfer of all Permits and Environmental Permits necessary for
the operation of the Business by Purchaser.
(f) Seller will not, and will not cause or permit DDIS to, (i)
solicit, initiate or encourage the submission of any proposal or
offer from any person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of
the assets, of DDIS (including any acquisition structured as a
merger, consolidation or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. Seller will notify
Purchaser immediately if any person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing.
(g) Seller shall, or shall cause DDIS to, pay all accrued and
outstanding sales commissions payable or otherwise owed by DDIS,
and as of the Closing Date, there will not be outstanding any
accrued and unpaid sales commissions payable or otherwise owed
by DDIS to any person or entity.
3.2 Purchaser's Obligations. Between the date hereof and the Closing
Date, Purchaser shall not disclose to any third party (other than to its
directors, officers, and employees having a need to know such information in
connection with the transactions contemplated hereby, or to its attorneys,
accountants, investors and lenders), or use for any purpose other than
evaluating and carrying out the transactions contemplated hereby, any
Confidential Information (as defined herein) regarding the Business. Intending
that the term shall be broadly construed to include anything protectible under
the California Trade Secrets Act or other applicable law, "Confidential
Information" means all information, and all documents and other tangible items
which record information, which at the time or times concerned is protectible as
a trade secret under applicable law.
3.3 Joint Obligations. Between the date hereof and the Closing Date:
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(a) Without implication that such laws apply to the transactions
contemplated hereby, Seller and Purchaser shall not comply with
the provisions of the laws of any states relating to bulk sales,
unless such compliance is required by any lender to Purchaser.
(b) No party shall intentionally perform any act which, if
performed, or omit to perform any act which, if omitted to be
performed, would prevent or excuse the performance of this
Agreement by any party hereto or which would result in any
representation or warranty herein contained of said party being
untrue in any material respect as if originally made on and as
of the Closing Date.
(c) Each party shall promptly give the other party written
notice of (i) the existence or occurrence of any condition which
would make any representation or warranty herein contained of
either party untrue or which might reasonably be expected to
prevent the consummation of the transactions contemplated
hereby, (ii) any notice or other communication from any person
alleging that the consent of such person is or may be required
in connection with the transactions contemplated by this
Agreement or (iii) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement. Seller
shall promptly give Purchaser written notice of any actions,
suits, claims, investigations or proceedings commenced, or the
best of Seller's knowledge, threatened against, relating to or
involving or otherwise affecting Seller or DDIS which relate to
the consummation of the transactions contemplated by this
Agreement. Purchaser shall promptly give Seller written notice
of any actions, suits, claims, investigations or proceedings
commenced, or the best of Purchaser's knowledge, threatened
against, relating to or involving or otherwise affecting
Purchaser which relate to the consummation of the transactions
contemplated by this Agreement.
ARTICLE IV
Conditions to Closing
4.1 Conditions to Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated hereby is subject to the fulfillment of
all of the following conditions on or prior to the Closing Date, upon the
non-fulfillment of any of which this Agreement may, at Seller's option, be
terminated pursuant to and with the effect set forth in Article VIII:
(a) Each and every representation and warranty made by Purchaser
shall have been true and correct when made and shall be true and
correct as if originally made on and as of the Closing Date.
(b) All obligations of Purchaser to be performed hereunder
through, and including on, the Closing Date (including, without
limitation, all obligations which Purchaser would be required to
perform at the Closing if the transactions contemplated hereby
were consummated) shall have been performed.
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(c) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private
person on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the
transactions contemplated hereby.
(d) Purchaser shall have delivered to Seller the written opinion
of Greenberg Traurig, LLP addressed to Seller, dated as of the
Closing Date, in substantially the form of Exhibit C attached
hereto.
(e) Purchaser shall have delivered at the Closing all of the
documents, instruments and other items set forth in Section 5.2.
4.2 Conditions to Purchaser's Obligations. The obligation of Purchaser
to consummate the transactions contemplated hereby is subject to the fulfillment
of all of the following conditions on or prior to the Closing Date, upon the
non-fulfillment of any of which this Agreement may, at Purchaser's option, be
terminated pursuant to and with the effect set forth in Article VIII:
(a) Each and every representation and warranty made by Seller
shall have been true and correct when made and shall be true and
correct as if originally made on and as of the Closing Date.
(b) All obligations of Seller to be performed hereunder through,
and including on, the Closing Date (including, without
limitation, all obligations which Seller would be required to
perform at the Closing if the transactions contemplated hereby
were consummated) shall have been performed.
(c) All of the Consents shall have been obtained or, to the
extent Permits or Environmental Permits held by Seller are not
assignable, Purchaser shall have either obtained licenses and
permits on substantially the same terms as the Permits and
Environmental Permits have been issued to Seller, or shall have
obtained binding commitments from the applicable governmental
authorities to issue such licenses and permits to Purchaser
following the Closing.
(d) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private
person on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the
transactions contemplated hereby.
(e) Seller shall have delivered to Purchaser the written opinion
of Garvey, Schubert & Barer, counsel to Seller, addressed to
Purchaser, dated as of the Closing Date, in substantially the
form of Exhibit D attached hereto.
(f) Seller shall have delivered at the Closing all of the
documents, instruments and other items set forth in Section 5.3.
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(g) Eugene Stabile shall have executed and delivered a
Consulting Agreement in the form attached hereto as Exhibit E.
(h) Purchaser shall have received a consent and estoppel
certificate from, or other evidence of consent to assignment in
a form acceptable to Purchaser of, the landlord of the Leased
Premises, or, in the alternative, Purchaser and the landlord of
the Leased Premises shall have executed and delivered an
amendment to the Office Lease dated September 15, 1993, as
amended, or otherwise executed a new lease for the Leased
Premises and/or such other space located in the same building as
the Leased Premises as Purchaser and landlord may mutually
agree, in form and substance satisfactory to Purchaser (such
amendment or new lease, the "New Lease").
(i) Seller and DDIS shall each have executed a mutual release
and waiver as to all intercompany obligations, commitments, and
payables owed by DDIS to Seller or by Seller to DDIS in form and
substance satisfactory to Purchaser.
ARTICLE V
Closing
5.1 Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this Article V.
All documents which Seller shall deliver shall be in form and substance
reasonably satisfactory to Purchaser and Purchaser's counsel. All documents
which Purchaser shall deliver shall be in form and substance reasonably
satisfactory to Seller and Seller's counsel.
5.2 Purchaser's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.2, Purchaser shall execute and/or deliver to
Seller all of the following:
(a) the Estimated Closing Payment, in the manner provided in
Section 1.5;
(b) a certified copy of Purchaser's Certificate of Incorporation
and By-laws;
(c) a certificate of good standing of Purchaser, issued not
earlier than ten (10) days prior to the Closing Date by the
Secretary of State of Delaware;
(d) an incumbency and specimen signature certificate with
respect to the officers of Purchaser executing this Agreement
and Purchaser's Ancillary Documents on behalf of Purchaser;
(e) a certified copy of the resolutions of the Executive
Committee of Purchaser authorizing the execution, delivery and
performance of this Agreement and Purchaser's Ancillary
Documents;
(f) a closing certificate executed by the President of Purchaser
(or any other officer of Purchaser specifically authorized to do
so), on behalf of Purchaser,
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pursuant to which Purchaser represents and warrants to Seller
that Purchaser's representations and warranties to Seller are
true and correct as of the Closing Date as if then originally
made (or, if any such representation or warranty is untrue in
any respect, specifying the respect in which the same is
untrue), that all covenants required by the terms hereof to be
performed by Purchaser on or before the Closing Date, to the
extent not waived by Seller in writing, have been so performed
(or, if any such covenant has not been performed, indicating
that such covenant has not been performed), and that all
documents to be executed and delivered by Purchaser at the
Closing have been executed by duly authorized officers of
Purchaser;
(g) the Purchaser Note and Stock Pledge Agreement in
substantially the form of Exhibit B attached hereto, duly
executed by Purchaser; and
(h) without limitation by the specific enumeration of the
foregoing, all other documents required from Purchaser to
consummate the transactions contemplated hereby.
5.3 Seller's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 4.1, Seller shall deliver or cause to be
executed and/or delivered to Purchaser all of the following:
(a) certified copies of DDIS's Articles of Incorporation and
By-laws;
(b) certified copies of Seller's Certificate of Incorporation
and By-laws;
(c) certificates of good standing of Seller, issued not earlier
than ten (10) days prior to the Closing Date by the Secretary of
State of Delaware and California;
(d) certificate of good standing of DDIS, issued not earlier
than ten (10) days prior to the Closing Date by the Secretary of
State of California;
(e) an incumbency and specimen signature certificate with
respect to the officers of Seller executing this Agreement and
Seller's Ancillary Documents on behalf of Seller;
(f) a certified copy of resolutions of Seller's board of
directors and stockholders, authorizing the execution, delivery
and performance of this Agreement and Seller's Ancillary
Documents;
(g) stock certificates representing all of the Shares as the
Closing Date, which stock certificates shall be accompanied by
original stock powers duly endorsed in blank or accompanied by
duly executed assignment documents in form and substance
satisfactory to Purchaser;
(h) a closing certificate duly executed by the President of
Seller (or any other officer of Seller specifically authorized
to do so), on behalf of Seller, pursuant to which Seller
represents and warrants to Purchaser that Seller's
representations and
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warranties to Purchaser are true and correct as of the Closing
Date as if then originally made (or, if any such representation
or warranty is untrue in any respect, specifying the respect in
which the same is untrue), that all covenants required by the
terms hereof to be performed by Seller on or before the Closing
Date, to the extent not waived by Purchaser in writing, have
been so performed (or, if any such covenant has not been so
performed, indicating that such covenant has not been
performed), and that all documents to be executed and delivered
by Seller at the Closing have been executed by duly authorized
officers of Seller;
(i) to the extent obtained, all necessary Consents, all as
reasonably acceptable to Purchaser;
(j) the Stock Pledge Agreement in substantially the form of
Exhibit B attached hereto, duly executed by Seller; and
(k) without limitation by specific enumeration of the foregoing,
all other documents reasonably required from Seller to
consummate the transactions contemplated hereby.
5.4 Joint Deliveries. At the Closing, the parties shall execute and
deliver, or cause to be executed and delivered, to each other, all legally
required transfer tax declarations concerning the Shares.
ARTICLE VI
Post-Closing Agreements and Covenants
6.1 Post-Closing Agreements and Covenants. From and after the Closing,
the parties shall have the respective rights and obligations which are set forth
in the remainder of this Article VI.
6.2 Inspection of Records. Seller and Purchaser shall each retain and
make their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party, or
by its duly accredited representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a seven (7) year period after
the Closing Date, with respect to all transactions contemplated by this
Agreement occurring prior to and those relating to the Closing, the historical
financial condition, assets, liabilities, results of operations and cash flows
of DDIS . As used in this Section 6.2, the right of inspection includes the
right to make extracts or copies. The representatives of a party inspecting the
records of the other party shall be reasonably satisfactory to the other party.
6.3 Certain Assignments. Any other provision of this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
transfer or assign, or a transfer or assignment of, any claim, contract, lease,
Permit, Environmental Permit, commitment, sales order or purchase order, or any
benefit arising thereunder or resulting therefrom, if an attempt at transfer or
assignment thereof without the consent required or necessary for such
assignment, would constitute a breach thereof or in any way adversely affect the
rights of
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Purchaser or Seller thereunder. If such a consent or agreement to transfer or
assign is not obtained for any reason, Purchaser and Seller shall cooperate in
any arrangement Purchaser may reasonably request to provide for Purchaser the
benefits under such claim, contract, lease, Permit, Environmental Permit,
commitment or order.
6.4 Back-Up. Seller shall, at Purchaser's request, furnish such detailed
back-up material with respect to the past financial statements of DDIS as are in
Seller's possession or are reasonably available to Seller.
6.5 Transition. Seller shall not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of DDIS from maintaining the same business
relationships with Purchaser after the Closing. Seller will refer all customer
inquiries relating to the Business of DDIS to Purchaser from and after the
Closing.
6.6 Non-Solicitation. As an inducement for Purchaser to enter into this
Agreement, Seller agrees that from and after the Closing and continuing for the
lesser of two (2) years from the Closing Date or the longest time permitted by
applicable law, neither Seller nor any of its Affiliates shall, directly or
indirectly, (a) solicit or attempt to solicit the business of or seek to enter
into a business relationship with any Customer or Prospective Customer of DDIS
for services substantially similar to those provided by Purchaser and/or DDIS as
of the Closing Date; (b) interfere with the contractual relationship or
Prospective business relations between DDIS and any Customer or Prospective
Customer of DDIS; or (c) hire or attempt to hire for any purpose whatsoever
(whether as an employee, officer, director, partner, member, consultant,
adviser, independent contractor, agent, or otherwise) any person who is, as of
the Closing Date, an employee, independent contractor, or other professional or
business relation of DDIS without the prior written consent of DDIS and
Purchaser. In the event of any breach of this Section 6.6, the time period of
the breached covenant shall be extended for the period of such breach. As used
herein, the term "Customer" shall include any person or entity to whom products
or services have been sold by DDIS during the twelve (12) month period prior to
the Closing Date, and any person or entity with whom DDIS has established
strategic marketing, services or other alliances prior to the Closing Date. The
term "Prospective Customer" shall include any person or entity toward whom DDIS
has directed efforts to establish a customer relationship or strategic alliance
prior to the Closing Date and with whom DDIS has a reasonable expectation of
establishing such a relationship or alliance.
6.7 Disclosure of Confidential Information. As a further inducement for
Purchaser to enter into this Agreement, Seller agrees that for the longest
period permitted by law after the Closing Date, Seller shall, and shall cause
its Affiliates to, hold in strictest confidence, and not, without the prior
written approval of Purchaser, use for their own benefit or the benefit of any
party other than Purchaser or disclose to any person, firm or corporation other
than Purchaser (other than as required by law) any information of any kind
relating to the Business, except such information as was publicly available
prior to the Closing Date.
6.8 Injunctive Relief. Seller specifically recognizes that any breach of
Sections 6.5, 6.6 or 6.7 will cause irreparable injury to Purchaser and that
actual damages may be difficult to ascertain, and in any event, may be
inadequate. Accordingly (and without limiting the
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availability of legal or equitable, including injunctive, remedies under any
other provisions of this Agreement), Seller agrees that in the event of any such
breach, Purchaser shall be entitled to injunctive relief in addition to such
other legal and equitable remedies that may be available. Seller and Purchaser
recognize that the absence of a time limitation in Section 6.7 is reasonable and
properly required for the protection of Purchaser and in the event that the
absence of such limitation is deemed to be unreasonable by a court of competent
jurisdiction, Seller agrees and submits to the imposition of such a limitation
as said court shall deem reasonable.
6.9 Further Assurances. The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Shares to Purchaser, on the terms herein contained, and to otherwise
comply with the terms of this Agreement and consummate the transactions
contemplated hereby.
6.10 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the transfer of the Shares, but excluding
Taxes (whether Federal, state or local) payable by Seller or DDIS as a result of
gain realized on the sale of the Shares, shall be paid by Purchaser when due,
and Purchaser will, at its own expense, file all necessary Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees, and, if required by applicable law,
Purchaser will, and will cause its Affiliates to, join in the execution of any
such Returns and other documentation.
6.11 Tax Covenants.
(a) Seller shall join with Purchaser in making an election under
Section 338(h)(10) of the Code (and any corresponding elections
under state, local, or foreign tax law) (collectively and
separately, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Shares under this Agreement. Seller and
Purchaser shall jointly prepare Internal Revenue Service Form
8023, together with such other forms and schedules as are
necessary to make the Section 338(h)(10) Election, and Seller
and Purchaser shall take all such other acts as are necessary to
make or perfect a timely Section 338(h)(10) Election. Exhibit F
attached hereto and made a part hereof reflects Seller's and
Purchaser's agreement with respect to the principles that will
govern the allocation of the "ADSP" (as defined in Treasury
Regulation Section 1.338-4T) among the assets of DDIS pursuant
to the applicable Treasury Regulations under Section 338 of the
Code (the "ADSP Allocation") and the parties will use the ADSP
Allocation in reporting the deemed purchase and sale of DDIS's
assets for federal and state income tax purposes.
(b) Seller and DDIS will join in filing a consolidated federal
income tax return for the taxable year that includes the Closing
Date. Seller will cause the income of DDIS for all periods
through the Closing Date (including any income recognized as a
result of the Section 338(h)(10) Election, any deferred income
triggered by Treasury Regulation. Sections 1.1502-13 and
1.1502-14 and any excess loss accounts taken into income under
Treasury Regulation Section 1.1592-19) to be included on
Seller's consolidated federal income tax
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return and will cause Seller to pay any federal income Taxes
attributable to such income, except that Purchaser agrees to
indemnify Seller for any additional tax owed by Seller and DDIS
(including any tax owed by DDIS or Seller due to this
indemnification payment) resulting from any transaction outside
the ordinary course of business that occurs on the Closing Date
and after the Closing. Upon request, Purchaser will cause DDIS
to furnish Tax information to Seller within a reasonable time
for inclusion in Seller's consolidated federal income tax return
for the period which includes the Closing Date. For federal
income tax purposes, the income of DDIS will be apportioned to
the period up to and including the Closing Date and the period
after the Closing Date by closing the books of DDIS as of the
end of the Closing Date, except that any transactions not in the
ordinary course of DDIS's business (other than the sale of the
Shares contemplated hereby and the Section 338(h)(10) Election)
that occur on the Closing Date and after the Closing shall be
treated as occurring on the day after the Closing Date to the
extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(B). Principles similar to those described in
this Section shall apply with respect to any foreign, state, or
local income Tax return of Seller's consolidated group which is
filed on a consolidated, unitary or combined basis and which
includes the pre-Closing operations of DDIS.
6.12 Data Dimensions Name. Within ten (10) days following the Closing,
Purchaser will file Articles of Amendment with the California Secretary of State
changing the name of DDIS so as not to include the words "Data Dimensions".
ARTICLE VII
Indemnification
7.1 General. From and after the Closing, the parties shall indemnify
each other as provided in this Article VII. For the purposes of this Article
VII, each party shall be deemed to have remade all of its representations and
warranties contained in this Agreement at the Closing with the same effect as if
originally made at the Closing. As used in this Agreement, the term "Damages"
shall mean all liabilities, demands, claims, actions or causes of action,
regulatory, legislative or judicial proceedings or investigations, assessments,
levies, losses, fines, penalties, damages, costs and expenses, including,
without limitation: (i) reasonable attorneys', accountants', investigators', and
experts' fees and expenses, sustained or incurred in connection with the defense
or investigation of any such Claim (as defined in Section 7.5) and (ii) costs
and expenses reasonably incurred to bring the Business and properties and assets
of DDIS into compliance with Environmental Laws.
7.2 Indemnification Obligations of Seller. Seller shall defend,
indemnify, save and keep harmless Purchaser and its officers, directors,
employees, agents, stockholders, successors and permitted assigns against and
from all Damages sustained or incurred by any of them resulting from or arising
out of or by virtue of:
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(a) any inaccuracy in or breach of any representation and
warranty made by Seller in this Agreement, the Seller's
Ancillary Documents or in any closing document delivered to
Purchaser in connection with this Agreement;
(b) any breach by Seller of, or failure by Seller to comply
with, any of its covenants or obligations under this Agreement
(including, without limitation, its obligations under this
Article VII);
(c) the failure to discharge when due any liability set forth
under Section 3.1(g) or any claim against Purchaser with respect
to any such liability or obligation or alleged liability or
obligation;
(d) any claims by parties other than Purchaser to the extent
caused by acts or omissions of Seller or DDIS on or prior to the
Closing Date, including, without limitation, claims for Damages
which arise or arose out of Seller's or DDIS's operation of the
Business, by virtue of Seller's ownership of the Shares on or
prior to the Closing Date, or by virtue of any pending or
overtly threatened litigation against DDIS or its Affiliates,
even if disclosed on the Disclosure Schedule;
(e) any employee pension benefit plan (as defined by Section
3(2) of ERISA) or any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) which Seller, DDIS or an ERISA
Affiliate has at any time maintained or administered or to which
Seller, DDIS or any ERISA Affiliate has at any time contributed
(including, without limitation, any liability for health
continuation requirements under Code Section 4980B or Part 6 of
Subtitle B of Title I of ERISA and any liability arising
pursuant to Title IV of ERISA for plan termination, withdrawal
or partial withdrawal from any multiemployer plan, or any lien
to enforce any Title IV liability), to the extent that such
Damages result from or arise out of or by virtue of acts or
omissions prior to the Closing Date;
(f) any benefits accrued pursuant to any Welfare Plan or
Employee Benefit Plan at or prior to the Closing Date other than
benefits payable under insurance policies in full force and
effect on the Closing Date;
(g) any action or failure to act, in whole or in part, at or
prior to the Closing Date with respect to any Plan, Welfare Plan
or Employee Benefit Plan;
(h) any claims by employees of Seller or DDIS employed in the
conduct of the Business relating to (x) the termination by DDIS
or Seller of such employees on or prior to the Closing Date or
(y) the termination by Seller of Seller employees after the
Closing Date;
(i) (1) all liability for the Taxes of DDIS and its subsidiaries
for any period ending on or before the Closing Date and the
portion of any Straddle Period (as herein defined) commencing
before the Closing Date and not ending on the Closing Date, (2)
all liabilities of DDIS as a result of the applicability of
Treas.
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Reg. Section 1.1502-6 or otherwise for Taxes of the Seller, DDIS
or any other corporation affiliated with the Seller on or prior
to the Closing Date, and (3) all liability for Taxes resulting
from the Section 338(h)(10) Election (or any comparable election
under state, local or foreign Tax law) contemplated by Section
6.11 of this Agreement. Any payment due under this Section
7.2(i) shall be that amount necessary to hold the Purchaser
harmless after taking into account all Taxes payable by the
Purchaser as a result of receiving such payment. Real, personal
and intangible personal property Taxes of DDIS for a Straddle
Period allocable to Seller shall be equal to the amount of such
Taxes for the entire taxable period multiplied by a fraction,
the numerator of which is a number of days in a Straddle Period
prior to and including the Closing Date and the denominator of
which is the number of days in the Straddle Period. All other
Taxes for the portion of the Straddle Period ending on the
Closing Date shall be computed as if such taxable period ended
as of the close of business on the Closing Date. As used herein,
"Straddle Period" means a period that commences before the
Closing Date and ends after the Closing Date; or
(j) any claims by parties other than Purchaser relating to the
classification of employees and/or independent contractors of
DDIS or Seller employed in the conduct of the Business on or
prior to the Closing Date, including without limitation, claims
for Damages.
7.3. Limitations on Seller's Indemnification Obligations. With the
exception of the representations and warranties contained in Section 2.4(c),
which shall survive indefinitely, and the representations and warranties
contained in Sections 2.4(m), (t), (u), (v), (w), (x), (y), (dd), (ee), (ff),
and (gg), which shall survive until the expiration of the applicable statute of
limitations (giving effect to any extension thereof and provided that the
indemnification obligation under Section 7.2 shall not terminate with respect to
any item as to which Purchaser shall have, before expiration of the applicable
period, previously made a claim by delivery and notice of such claim stating in
reasonable detail the basis of such claim to Seller), Purchaser and its
successors and permitted assigns shall not be entitled to indemnification under
Section 7.2 hereof unless such claim has been asserted by written notice,
specifying the details of such breach, delivered to Seller within twenty (20)
months following the Closing Date. Seller's indemnification obligations under
Section 7.2 shall be subject to the following additional limitations:
(a) Purchaser shall not be entitled to recover Damages under
Section 7.2 unless and until such Damages equal or exceed
$100,000, and then only to the extent Purchaser's Damages exceed
such amount; and
(b) Seller's aggregate liability for all Damages claimed under
Section 7.2 shall be limited to the Purchase Price.
(c) Notwithstanding the foregoing, the limitations set forth in
Section 7.3(a) shall not apply to any inaccuracy in or breach of
any representation and warranty made by Seller in Sections
2.4(t), (u), (v), or (w) of this Agreement.
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7.4 Purchaser's Indemnification Covenants. Purchaser shall defend,
indemnify, save and keep harmless Seller and its successors and permitted
assigns against and from all Damages sustained or incurred by any of them
resulting from or arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation and
warranty made by Purchaser in this Agreement or in any closing
document delivered to Seller in connection with this Agreement;
(b) any breach by Purchaser of, or failure by Purchaser to
comply with, any of its covenants or obligations under this
Agreement (including, without limitation, its obligations under
this Article VII); or
(c) any claims by parties other than Seller to the extent caused
by the acts or omissions of Purchaser after the Closing Date and
not constituting a liability set forth in Section 3.1(g),
including, without limitation, claims for Damages which arise
out of Purchaser's operation of the Business after the Closing
Date.
7.5 Indemnification Procedure. In the event that either party to this
Agreement is made a defendant in or party to any action or proceeding, judicial
or administrative, instituted by any third party, the liabilities for which, or
the costs or expenses of which, are Damages (a "Claim"), such party (the
"Indemnified Party") shall give the other party (the "Indemnifying Party")
prompt notice thereof. The Indemnifying Party shall be entitled to assume the
defense of any such Claim, provided that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may assume or participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall pay such expense,
including the expenses of separate counsel, if representation of the Indemnified
Party by counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
VII unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party (not to be unreasonably withheld), consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a full release from all liability in respect to such claim
or litigation. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior written consent (not to be unreasonably withheld).
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ARTICLE VIII
Effect of Termination/Proceeding
8.1 Right to Terminate. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing by prompt notice given
in accordance with Section 9.3:
(a) by the mutual written consent of Purchaser and Seller;
(b) by either of such parties if the Closing shall not have
occurred at or before 11:59 p.m. on January 31, 2001; provided,
however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure
to fulfill any material obligation under this Agreement has been
the cause of or resulted in the failure of the Closing to occur
on or prior to the aforesaid date; or
(c) by either of such parties in the event of a material
misrepresentation, breach of warranty or covenant, or other
material breach or default of an obligation set forth in this
Agreement on the part of the other party if such
misrepresentation, breach or default, if capable of cure, is not
cured within 10 days after receipt of written notice thereof to
such other party.
8.2 Remedies. In the event of a breach of this Agreement, the
non-breaching party shall not be limited to the remedy of termination of this
Agreement, but shall be entitled to pursue all available legal and equitable
rights and remedies, and shall be entitled to recover all of its reasonable
costs and expenses incurred in pursuing them (including, without limitation,
reasonable attorneys' fees).
ARTICLE IX
Miscellaneous
9.1 Expenses. Except as set forth in Article VII, each party hereto
shall bear all fees and expenses incurred by such party in connection with,
relating to or arising out of the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, attorneys', accountants' and other professional
fees and expenses.
9.2 Publicity. Except as otherwise required by law, press releases
concerning this transaction shall be made only with the prior agreement of the
Seller and Purchaser, and no such press releases or other publicity shall state
the amount of the Purchase Price. Notwithstanding the foregoing, the parties
acknowledge that Seller has disclosure obligations pursuant to federal
securities laws which may require Seller to make certain disclosures regarding
the transactions contemplated by this Agreement. Seller shall provide Purchaser
a copy of any such disclosure prior to issuance, and Purchaser shall fully
cooperate with Seller to permit Seller to meet such disclosure obligations.
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9.3 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized overnight courier, or by United States mail. All such notices and
other communications shall be deemed to have been given and received (i) in the
case of personal delivery, on the date of such delivery, if before 5:00 p.m.
local time of the recipient and on a business day, if not then on the next
business day, (ii) in the case of delivery by telecopy, on the date of
confirmation, if before 5:00 p.m. local time of the recipient and on a business
day, if not then on the next business day, (iii) in the case of delivery by
nationally recognized overnight courier, on the next business day following the
date when sent and (iv) in the case of mailing, on the fifth business day
following such mailing. All notices shall be addressed as follows:
If to Seller, to:
Data Dimensions, Inc.
Sterling Plaza, 3rd Floor
3535 Factoria Boulevard SE
Bellevue, WA 98006
Attention: Jim McLendon
Telecopier: (425) 688-1099
with a copy to:
Garvey, Schubert & Barer
1191 Second Avenue, 18th Floor
Seattle, WA 98101
Attention: Bruce A. Robertson, Esq.
Telecopier: (206) 464-0125
If to Purchaser, to:
Acxiom Corporation
1501 Opus Place
Downers Grove, IL 60515
Attention: Outsourcing Division Leader
Telecopier: (630) 719-0441
with a copy to:
Acxiom Corporation
1501 Opus Place
Downers Grove, IL 60515
Attention: Outsourcing Division Legal Leader
Telecopier: (630) 725-3303
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 9.3.
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9.4 Entire Agreement. This Agreement and the instruments to be delivered
by the parties pursuant to the provisions hereof constitute the entire agreement
between the parties. Each exhibit, and the Disclosure Schedule, shall be
considered incorporated into this Agreement. Any amendments, or alternative or
supplementary provisions to this Agreement, must be made in writing and duly
executed by an authorized representative or agent of each of the parties hereto.
9.5 Survival; Non-Waiver. All representations and warranties shall
survive the Closing regardless of any investigation or lack of investigation by
any of the parties hereto. The failure in any one or more instances of a party
to insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, right or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
9.6 Applicable Law. This Agreement shall be governed and controlled as
to validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of California applicable to contracts
made in that State.
9.7 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer on
any person other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
9.8 Assignability. This Agreement shall not be assignable by either
party without the prior written consent of the other party, except that at or
prior to the Closing Purchaser may assign its rights and delegate its duties
under this Agreement to a subsidiary corporation and may assign its rights under
this Agreement to its lenders for collateral security purposes, and after the
Closing Purchaser or Seller may assign its respective rights and delegate its
respective duties under this Agreement to any third party. No such assignment
shall relieve Purchaser or Seller of any of its respective liabilities or
obligations under this Agreement.
9.9 Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
9.10 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
9.11 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SELLER:
DATA DIMENSIONS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PURCHASER:
ACXIOM CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
39
