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EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of November
29, 2000 by Timeline, Inc., a Washington corporation ("Buyer"), and Oralis.com,
Inc., a Delaware corporation ("Seller").
RECITALS
Seller desire to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of WorkWise Software,
Inc., a Delaware corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 1:
"Applicable Contract" -- any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is, or may become bound.
"Best Efforts" -- the commercially reasonable efforts that a prudent
"Person" desirous of achieving a result would use in similar circumstances to
endeavor to ensure that such result is achieved as expeditiously as possible.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Business" -- development and manufacturing of software to deliver
alerting capability for ODBC and OLE DB -- compliant databases and applications.
"Buyer Common Stock" the common stock of Buyer.
"Closing Date" -- the date and time as of which the Closing actually
takes place.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including (a) the sale of the Shares by Seller to Buyer, (b) the
execution, delivery, and performance of the Noncompetition Agreements, and the
Seller Releases (c) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement, and (d) Buyer's acquisition and
ownership of the Shares.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Disclosure Letter" -- the disclosure letter delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
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"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Exchange Act" -- the Securities Exchange Act of 1934, as amended.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" -- any (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature, (b) federal, state,
local, municipal, foreign, or other government, (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal), (d)
multi-national organization or body, or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"IRC" or "Code" -- the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation consistent with such
individual's position with a specified party concerning the existence of such
fact or other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, executive, officer, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty normally
applicable to the Company or the Business.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if (a) such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person, and (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority).
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation, (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person, and (c) any amendment to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
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"Prospectus" -- the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Shares covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.
"Registrable Shares" -- the shares of Buyer Common Stock issued to
Seller pursuant to this Agreement, until in the case of any such share (i) it
has been disposed of pursuant to an effective Registration Statement under the
Securities Act, (ii) it has been transferred pursuant to any available exemption
under the Securities Act (other than pursuant to "Section 4(1-1/2)"), (iii) it
may be transferred by a holder without registration pursuant to Rule 144 under
the Securities Act or any successor rule without regard to the volume
limitations contained in such rule, or (iv) it has ceased to be outstanding.
"Registration Statement" -- any registration statement of Buyer (on any
form which the Buyer shall deem appropriate) that covers any of the Registrable
Shares pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference into such registration statement.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SEC" -- the Securities and Exchange Commission.
"Securities Act" -- the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to the Act or any
successor law.
"Shares" -- 100 shares of the Company, which is 100% of the issued and
outstanding shares of stock of the Company.
"Shelf Registration" -- a registration pursuant to a Registration
Statement which provides for the sale of the Registrable Shares included therein
from time to time on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, but shall not provide for an underwritten registration.
"Tax" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, business and occupation tax, property tax, gift tax,
or estate tax), levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
"Tax Basis" -- the preparation of the Company's financial statements on
an income tax basis of accounting consistently applied.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 Shares. Subject to the terms and conditions of this Agreement, at
the Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller.
2.2 Purchase Price. Subject to Section 6.6, the purchase price (the
"Purchase Price") for the Shares shall be Two Hundred Twenty Five Thousand
(225,000) shares of Buyer Common Stock.
2.3 Closing. The stock exchange (the "Closing") provided for in this
Agreement will take place at the offices of Lasher, Holzapfel, Sperry &
Ebberson, PLLC, 2600 Two Union Square, 601 Union Street, Seattle, Washington
98101-4000, upon satisfaction of the conditions of closing set forth in sections
7 and 8 below, and shall be on (a) a date and at a time agreed to by the
parties, or (b) a date and at a time determined by Buyer on three (3) days
advance notice to Seller. In no event will Closing be later than December 15,
2000, effective as of 11:59 p.m. (pacific time) on the Closing Date.
2.4 Closing Obligations. At the Closing:
(a) Seller will deliver to Buyer:
(i) Certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers),
(ii) Goodwill and Noncompetition Agreement in the form of
Exhibit 2.4(a)(ii) executed by Seller and the Buyer (collectively, the
"Noncompetition Agreement"),
(iii) Release Agreement in substantially the form of Exhibit
2.4(a)(iii) hereto;
(iv) Original minute book for the Company; and
(b) Buyer will deliver to Seller:
(i) A Certificate representing one-half (1/2) of the Purchase
Price. Buyer shall prepare, and shall hold pursuant to Seller's pledge and grant
of security interest in Section 10 below, a second certificate for the other
one-half (1/2) of the Purchase Price, which certificate shall bear a legend that
indicates it is subject to the provisions of Section 10 hereof. In addition,
each certificate shall bear a legend identifying it as "restricted securities"
under the Securities Act.
(ii) The Noncompetition Agreement, executed by Buyer and the
Seller.
(c) Other deliveries:
(i) Neal, Gerber & Eisenberg will execute and deliver to Buyer a
legal opinion in substantially the form of Exhibit 2.4(c)(i), subject to
reasonable assumptions, qualifications and exceptions,
(ii) Lasher Holzapfel Sperry & Ebberson will execute and deliver
to Seller a legal opinion in substantially the form of Exhibit 2.4(c)(iii),
subject to reasonable assumptions, qualifications and exceptions.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
Buyer as follows, each of which representations and warranties shall be accurate
in all material respects as of the date of this Agreement and as of the Closing
Date:
3.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct the Business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use, and to
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perform all its obligations under Applicable Contracts. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification. Seller has delivered to Buyer
copies of the Organizational Documents of the Company, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as enforceability may be limited by bankruptcy or other laws affecting
the enforcement of creditors' rights. Upon the execution and delivery by Seller
of the Seller Releases and the Noncompetition Agreements (collectively, the
"Seller's Closing Documents"), the Seller's Closing Documents will constitute
the legal, valid, and binding obligations of Seller, enforceable against Seller
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy or other laws affecting the enforcement of creditors'
rights. Seller has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the Seller's Closing
Documents and to perform its obligations under this Agreement and the Seller's
Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time) (i) contravene, conflict with, or
result in a violation of (A) any provision of the Organizational Documents of
the Company, or (B) any resolution adopted by the board of directors or the
stockholder of the Company, (ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the reasonable right
to challenge any of the Contemplated Transactions or to reasonably exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company or Seller, or any of the assets owned or used by the Company, may be
subject, (iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the reasonable right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
Business of, or any of the assets owned or used by, the Company, (iv) cause
Buyer or the Company to become subject to, or to become liable for the payment
of any Tax, (v) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the reasonable right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract, or (vi) result in
the imposition or creation of any Encumbrance upon or with respect to any of the
assets owned or used by the Company.
(c) Except as set forth in Part 3.2 of the Disclosure Letter,
neither Seller nor the Company is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions (insofar as the Contemplated Transactions relate to the Seller or
the Company).
3.3 Capitalization. The authorized equity securities of the Company
consist of one thousand (1,000) shares of common stock, of which one hundred
(100) shares are issued and outstanding and constitute the Shares. Seller is and
will be on the Closing Date the record and beneficial owner and holder of the
Shares, free and clear of all Encumbrances. No legend, other than one related to
the Securities Act, or other reference to any purported Encumbrance appears upon
any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act of 1933,
or any other Legal Requirement. The Company does not own, or have any Contract
to acquire, any equity securities or other securities of any Person or any
direct or indirect equity or ownership interest in any other business.
3.4 Financial Statements. Seller has delivered to Buyer: a balance sheet
of the Company as of November 15, 2000 (the "Balance Sheet") and income
statement and statement of changes in stockholder's equity for the period
beginning June 1, 2000 to the date of the Balance Sheet. Except as set forth in
Section 3.4 of the Disclosure Letter, such financial statements (a) have been
prepared in all material respects on a basis in accordance
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with generally accepted accounting principles, and (b) fairly present in all
material respects the financial condition and the results of operations and
changes in stockholder's equity of the Company as at the respective dates of and
for the period referred to in such financial statements; and the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than the Company are required to be included in
the financial statements of the Company.
3.5 Books and Records. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices. The minute book of the Company contains accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Company, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. Notwithstanding the foregoing, such books and
records may not contain any or all of the results or records of any or all of
the casual meetings held during which routine daily decisions are made. At the
Closing, all of those books and records will be in the possession of the
Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the Disclosure Letter
contains a complete and accurate list of all real property, leaseholds, or other
interests therein owned by the Company. The Company owns all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that they purport to own, including all of the properties and assets reflected
in the Balance Sheet (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Disclosure Letter and
personal property sold since the date of the Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Company since the date of the Balance
Sheet (except for personal property acquired and sold since the date of the
Balance Sheet in the Ordinary Course of Business and consistent with past
practice). All material properties and assets reflected in the Balance Sheet are
free and clear of all Encumbrances.
3.7 Condition and Sufficiency of Assets. The equipment and other assets
of the Company are sufficient for the continued conduct of the Company's
Business after the Closing in substantially the same manner as conducted prior
to the Closing.
3.8 Accounts Receivable. All accounts receivable of the Company that are
reflected on the Balance Sheet or on the accounting records of the Company as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. There is no contest,
claim, or right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Balance Sheet, which list will be updated as of
the Closing Date, and which list will set forth the aging of such Accounts
Receivable.
3.9 Inventory. [INTENTIONALLY OMITTED]
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of the
Disclosure Letter, the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 Taxes. Except as set forth on Schedule 3.11, no Tax Returns are or
were required to be filed by or with respect to the Company during the period of
its business operations, pursuant to applicable Legal Requirements. There is no
tax sharing agreement that will require any payment by the Company after the
date of this Agreement.
3.12 S-Corporation. The Company has not elected to be treated as an "S"
Corporation at any time during its existence. There are no facts or
circumstances that would cause the election of such "S" Corporation status.
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3.13 Employee Benefits. The Company has no employees or employee benefit
plans. There is no sharing agreement for employee or employee benefit plan
expenses that will require any payment by the Company after the date of this
Agreement.
3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Disclosure Letter (i)
the Company is, and at all times has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its Business or the ownership or use of any of its assets, (ii) no event has
occurred or circumstance exists that (with or without notice or lapse of time)
(A) may constitute or result in a violation by the Company of, or a failure on
the part of the Company to comply with, any Legal Requirement, or (B) could
reasonably give rise to any obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature,
and (iii) the Company has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the Business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Disclosure Letter (i) the Company is,
and at all times has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter, (ii) no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter, (iii) the
Company has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization,
and (iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
(c) The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its Business in
the manner it currently conducts and operates such Business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there
is no pending Proceeding (i) that has been commenced by or against the Company
or that otherwise relates to or may affect the Business of, or any of the assets
owned or used by, the Company, or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions (insofar as the Contemplated Transactions
relate to the Seller or the Company). To the Knowledge of Seller and the
Company, (1) no such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that may reasonably give rise to or serve as a
basis for the commencement of any such Proceeding. Seller has delivered to Buyer
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings listed
in Part 3.15 of the Disclosure Letter will not have a material adverse effect on
the Business, operations, assets, or condition of the Company.
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(b) Except as set forth in Part 3.15 of the Disclosure Letter (i)
there is no Order to which the Company, or any of the assets owned or used by
the Company, is subject, (ii) there is no Order that relates to the Business of,
or any of the assets owned or used by, the Company, and (iii) to the Knowledge
of Seller no employee of the Business is subject to any Order that prohibits
such employee from engaging in or continuing any conduct, activity, or practice
relating to the Business.
3.16 Absence of Certain Changes and Events. Except as set forth in Part
3.16 of the Disclosure Letter, since the date of the Balance Sheet, the Company
has conducted its Business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; or grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock,
(b) amendment to the Organizational Documents of the Company,
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee,
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other Plans for or with any employees of the Company,
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company, taken as a whole,
(f) entry into, termination of, or receipt of notice of termination
of any Contract or transaction involving a total remaining commitment by or to
the Company of at least Five Thousand Dollars ($5,000.00) other than in the
Ordinary Course of Business,
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the intellectual property assets of the Company,
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of Five Thousand Dollars ($5,000.00),
(i) material change in the accounting methods used by the Company,
or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves performance of services or
delivery of goods or materials by or to the Company of an amount or value in
excess of Five Thousand Dollars ($5,000.00),
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(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of the
Company in excess of Five Thousand Dollars ($5,000.00),
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than Five Thousand Dollars ($5,000.00) and with
terms of less than one year),
(iv) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the nondisclosure of any of the
intellectual property assets of the Company,
(v) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees,
(vi) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person,
(vii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or limit the
freedom of the Company to engage in any line of business or to compete with any
Person,
(viii) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods,
(ix) each power of attorney that is currently effective and
outstanding,
(x) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages,
(xi) each Applicable Contract for capital expenditures in excess
of Five Thousand Dollars ($5,000.00),
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business, and
(xiii) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter,
Seller (and no related person of Seller) has not or may not acquire any rights
under, and Seller has not or may not become subject to any obligation or
liability under any Contract that relates to the Business of, or any of the
assets owned or used by, the Company, and
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,
each Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
or other laws affecting the enforcement of creditors' rights generally.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
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(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by the Company is or was bound,
(ii) each other Person that has or had any material obligation
or material liability under any Contract under which the Company has or had any
rights is, and at all times has been, in full compliance with all applicable
terms and requirements of such Contract,
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may reasonably contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to reasonably declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract, and
(iv) the Company has given to or received from any other Person,
at any time any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and, to the
Knowledge of Seller and the Company, no such Person has made written demand for
such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 Insurance. Part 3.18 of the Disclosure Letter sets forth a list of
all of the Company's existing insurance policies, the premiums therefore and the
coverage of each policy.
3.19 Environmental Matters. Except as disclosed in Part 3.19 of the
Disclosure Letter, the Company has obtained all applicable permits, licenses and
other authorizations required under any Legal Requirement or Order relating to
pollution or protection of the environment, and Legal Requirement or Order
relating to or imposing liability or standards on conduct concerning any
emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials, hazardous substances or wastes into
ambient air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes including, without limitation, the Comprehensive
Environmental Response Act, Compensation and Liability Act, Resource
Conservation and Recovery Act, Solid Waste Disposal Act, and any so-called
"Superfund" or "Superlien" law, ("Environmental Laws"). The Company is now and
at all times has been in material compliance with all terms and conditions of
such required permits, licenses and authorizations and is also in material
compliance with all other conditions, standards, requirements and obligations
contained in the Environmental Laws. Neither the Company, nor anyone else, has
ever discharged, released or emitted materials that would create liability upon
the Company under the Environmental Laws. Except as disclosed in Part 3.19 of
the Disclosure Letter, the Company is not aware of, nor to the Company's actual
knowledge, has the Company received notice of, any events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
materially interfere with or prevent the Company's continued compliance with or
which may give rise to any liability of the Seller under any Environmental Laws,
or any releases or threatened releases of hazardous substances, pollutants or
contaminants from or onto any property owned or leased by the Company, except
for any liability or release which would not, individually or in the aggregate,
have a material adverse effect on the business, operations or financial
conditions of the Company.
3.20 Employees. The Company has never had employees, however, employees
of the Seller identified in Section 7.7 herein have performed and do perform
services for the Company, and the following provisions apply to those employees
(for purposes of this section "employee or employees"):
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<PAGE> 11
(a) Seller will deliver to Buyer a complete and accurate list of the
following information for each such employee of the Company, including each
person on leave of absence or layoff status: name; job title; current
compensation paid or payable (which shall not be adjusted after the date of this
Agreement other than in the Ordinary Course of Business); vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
the Seller's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock, ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other employee pension benefit
plan or employee welfare benefit plan, or any other employee benefit plan or any
director plan, including a detailed description of applicable benefit plans.
(b) To Seller's Knowledge, no employee or director of the Company is
a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the performance of his
duties as an employee or director of the Company, or (ii) the ability of the
Company to conduct its Business, including any Proprietary Rights Agreement with
Seller or the Company by any such employee or director. To Seller's Knowledge
and except as contemplated by this Agreement, no key employee of the Business
intends to terminate his employment with the Seller.
3.21 Labor Relations; Compliance. There has not been, there is not
presently pending or existing, and to Seller's Knowledge there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company. The
Company has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The Company is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 Intellectual Property. The Company has the right to use each
copyright, trademark, trade name, service mark, patent, franchise, or other
rights listed in Part 3.22 of the Disclosure Letter, and except as otherwise set
forth therein, all of said rights are, and will be on the Closing Date, free and
clear of all royalty obligations, security interests, liens, restrictions and
claims of any kind. The Seller does not have any Knowledge of any pending claims
or demands of any infringement by said rights asserted against the Company by
infringement by any other party. The Seller does not have any Knowledge of any
conflicting use of any of such rights.
3.23 Certain Payments. The Company or, to Seller's Knowledge, any
director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has not directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any affiliate of the Company, or
(iv) in violation of any Legal Requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.24 Customers and Suppliers. Part 3.24 of the Disclosure Letter
contains a list of the customers of the Company (the "Customers") and the
suppliers of the Company (the "Suppliers") for the period from the inception of
the Company through the date of this Agreement. The Seller does not have any
Knowledge as of the date hereof of any termination or cancellation of, or any
modification or change in, the business relationship of the Company with any
Customers or Suppliers or any existing condition or state of facts or
circumstances, except general economic conditions affecting businesses generally
and competitive conditions affecting the Business generally, which has affected
adversely or will adversely affect in any material way the Business of the
Company with the Customers or
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<PAGE> 12
the Suppliers or has prevented or will prevent such business from being carried
on by the Company after the Closing in essentially the same manner as currently
carried on.
3.25 Products Liability. There exist no claims nor have any claims been
threatened against the Company for injury to person or property or any third
parties suffered as a result of the sale of any products sold by the Company
prior to the date of this Agreement. The Seller on behalf of the Company has,
and on the Closing Date will have, full and adequate insurance coverage for
potential products liability claims against it. Unless a policy is a claims made
type policy, the Seller is not obligated to keep it in effect after the Closing
Date. Seller will exercise its Best Efforts to add the Buyer as a named insured
to any policy that remains in effect after the Closing Date.
3.26 Warranties. Part 3.26 of the Disclosure Letter attached hereto sets
forth a true and complete description of the terms of all warranties issued by
the Company and still in effect, or that will be in effect as of the Closing
Date.
3.27 Relationships With Related Persons. Except as set forth in Part
3.27 of the Disclosure Letter, Seller nor any related person of Seller nor of
the Company does not have, or has not had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to the Business. Seller nor any related person of Seller nor of the
Company does not own, or has not owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with the Company, or (ii) engaged in competition with the Company with respect
to any line of the products or services of the Company in any market presently
served by the Company. Except as set forth in Part 3.27 of the Disclosure
Letter, Seller nor any related person of Seller or of the Company is not a party
to any Contract with, or has any claim or right against, the Company.
3.28 Brokers Or Finders. Seller and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement. Seller will indemnify and hold Buyer harmless from any such payment
alleged to be due by or through Seller as a result of the action of Seller or
its officers or agents.
3.29 Disclosure. None of the information and documents which have been
or may be furnished by the Company or any Representatives of the Company to the
Buyer, or any of its Representatives in connection with the transactions
contemplated hereby, or in or pursuant to this Agreement, or in connection with
the Buyer's and its Representative's review of the Business of the Company, is
or will be materially false or misleading or contains or will contain any
material misstatement of fact or omits or will omit any material fact necessary
to be stated in order to make the statements therein not misleading.
3.30 Investment Representations.
(a) Knowledge and Experience. Seller has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its acquisition of the shares the Buyer Common Stock
pursuant to this Agreement (the "Buyer Shares"). Seller recognizes that the
acquisition of the Buyer Shares involves a high degree of risk and is suitable
only for persons of adequate financial means who have no need for liquidity in
the investment in that (i) it may not be able to liquidate the investment in the
event of an emergency, (ii) transferability is restricted, and (iii) it could
sustain a complete loss of its entire investment.
(b) Financial Resources. Seller has sufficient financial resources
to be able to bear the risk of its investment in the Buyer Shares.
(c) Opportunity for Information. Seller has either spoken or met
with, or been given reasonable opportunity to speak with or meet with,
representatives of the Buyer for the purpose of asking questions of, and
receiving answers and information from, such representatives concerning Buyer
and Seller's acquisition of the Buyer Shares. All such questions have been
answered to Seller's full satisfaction. Seller also acknowledges receipt of
copies of Buyer's annual report on Forms 10-KSB for the fiscal year-ended March
31, 2000, quarterly reports on Form 10-QSB for the fiscal quarters ended June
30, 2000 and September 30, 2000, and any current reports on Form 8-K filed since
March 31, 2000, as filed from time to time with the SEC (collectively, the
"Buyer SEC Documents"), copies of which are available via the SEC's website at
www.sec.gov.
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<PAGE> 13
(d) Investment Intent. Seller is acquiring the Buyer Shares for its
own account for investment purposes and not with a view toward the sale or
distribution of all or any part of the Buyer Shares, and no one other than
Seller has any beneficial interest in the Buyer Shares. Seller understands that
the Buyer Shares are being offered pursuant to an exemption under the Securities
Act that depends on, among others, the bona fide nature of Seller's investment
intent. Notwithstanding anything in this subsection to the contrary, Seller may
make distributions of the Buyer Shares to not more than seven (7) creditors of
Seller; provided that no such distribution will occur unless and until the
proposed distributee acknowledges and agrees to be subject to this Section 3.30.
(e) Status of Buyer Shares. Seller understands that the Buyer Shares
are not currently registered under the Securities Act or under any state
securities law. Seller understands that because the Buyer Shares have not been
registered, the Buyer Shares cannot be sold unless the Buyer Shares are
subsequently registered or an exemption from registration is available. Seller
understands that the Buyer will be issuing the Buyer Shares to Seller in
reliance on exemptions from the registration requirements of the Securities Act
and state securities law that are available only if the Buyer Shares are not
being offered to the public. Seller understands that the Buyer Shares may not be
sold or otherwise transferred except pursuant to an effective registration
statement under the Securities Act, or pursuant to an available exemption from
registration and an opinion of counsel satisfactory to Buyer that such
registration is not required.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller as follows, each of which representations and warranties shall be
accurate in all material respects as of the date of this Agreement and as of the
Closing Date:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Washington.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Noncompetition Agreement
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents
will constitute the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms. Buyer has the absolute
and unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Part 4.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will reasonably give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to (i) any
provision of Buyer's Organizational Documents, (ii) any resolution adopted by
the board of directors or the stockholders of Buyer, (iii) any Legal Requirement
or Order to which Buyer may be subject, or (iv) any Contract to which Buyer is a
party or by which Buyer may be bound. Except as set forth in Section 4.2 of the
Disclosure Letter, Buyer is not and will not be required to obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.4 Brokers Or Finders. Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
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4.5 Valid Issuance. The Buyer Common Stock to be issued pursuant to this
Agreement will, when issued in accordance with the provisions of this Agreement,
be validly issued, fully paid and nonassessable.
4.6 SEC Filings; Financial Statements.
(a) Buyer has made available to Seller through public data bases
accurate and complete copies of Buyer's Form 10-KSB for its fiscal year ended
March 31, 2000, Buyer's Form 10-QSB for its fiscal quarter September 30, 2000,
all proxy statements and related materials for Buyer's most recent annual
meeting of stockholders, and all Forms 8-K filed by Buyer with the SEC since
March 31, 2000 (the "Buyer SEC Documents"). As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Buyer SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of Buyer
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein.
(b) The consolidated financial statements contained in the Buyer SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes of
the financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q, and except that unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end audit adjustments
(which will not, individually or in the aggregate, be material in magnitude);
and (iii) fairly present the consolidated financial position of Buyer and its
subsidiaries, if any, as of the respective dates thereof and the consolidated
results of operations of Buyer and its subsidiaries, if any, for the periods
covered thereby.
5. COVENANTS OF SELLER.
5.1 Assistance and Information. Between the date of this Agreement and
the Closing Date, Seller will (a) use commercially reasonable efforts to provide
information to and assist Buyer in order to transition the Business to Buyer on
the Closing Date and complete the Contemplated Transactions, and (b) provide
Buyer with information concerning gross sales, operating expenses and additional
financial, operating, and other data and information as Buyer may reasonably
request. The parties ratify and confirm their obligations under that certain
Mutual Nondisclosure Agreement, dated as of September 12, 2000 (the
"Confidentiality Agreement"), between Buyer and Seller, and the confidentiality
provisions of the letter of intent signed by them on November 6, 2000, and all
that information provided under clause (b) hereof will be subject thereto.
5.2 Operation of the Businesses of the Company. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the Company to (a)
conduct the business of the Company only in the Ordinary Course of Business, (b)
use its Best Efforts to preserve intact the current business organization of the
Company, keep available the services of the current officers, employees, and
agents of the Company, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with the Company, (c) confer with Buyer concerning operational
matters of a material nature, and (d) otherwise report periodically to Buyer
concerning the status of the business, operations, and finances of the Company.
Seller shall transfer free and clear of all liens and encumbrances all of the
equipment used by the Company in its operations prior to the Closing Date.
5.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Seller will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Seller will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by
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<PAGE> 15
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Buyer in obtaining all consents identified in Part 4.2 of the
Disclosure Letter.
5.5 Notification. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Seller's representations and warranties, as of the date of this
Agreement, or if Seller or the Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition; provided,
however, that such notice shall not constitute a waiver of such Breach by Buyer.
During the same period, Seller will promptly notify Buyer of the occurrence of
any Breach of any covenant of Seller in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 Payment of Indebtedness by Related Persons. Seller will cause all
indebtedness owed to the Company by Seller or to the Seller by the Company, or
with any related person of Seller to be paid in full prior to Closing.
5.7 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Seller will not, and will cause the Company
and each of its Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or, consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company, or any of the capital stock of
the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 Best Efforts. Between the date of this Agreement and the Closing
Date, Seller will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.
6. COVENANTS OF BUYER.
6.1 Approvals of Governmental Bodies. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal Requirements to be made by them
to consummate the Contemplated Transactions. Between the date of this Agreement
and the Closing Date, Buyer will, and will cause each Related Person to,
cooperate with Seller with respect to all filings that Seller is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Seller in obtaining all consents identified in Part 3.2 of
the Disclosure Letter; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 Notification. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a Breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition; provided, however, that such notice shall not
constitute a waiver of such Breach by Seller. During the same period, Buyer will
promptly notify Seller of the occurrence of any Breach of any covenant of Buyer
in this Section 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely; provided,
however, that such notice shall not constitute a waiver of such Breach by
Seller.
6.4 DAS License. From the Closing Date until the earlier to occur of (i)
the disposition of substantially all of Seller's assets or (ii) Seller's
dissolution, Seller (but no successor thereto) shall continue to have
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<PAGE> 16
the royalty-free right to use the DAS technology in substantially the same
manner as such technology is currently used by Seller. Buyer hereby acknowledges
that Seller is currently negotiating to sell substantially all of its assets,
excluding the Shares, to a third-party purchaser, and, in connection therewith,
the third-party purchaser has required the Seller and/or the Company to grant a
perpetual license (the "License") to (i) use the Company's DAS technology (
including the right to acquire, subject to clause z below, new releases and any
other upgrades or enhancements of the DAS technology) for internal purposes in
all markets, (ii) resell up to 50 copies of the DAS technology to manufacturers
or distributors of such third-party purchaser. Seller hereby covenants to (i)
provide the specific terms of the License (and all draft license agreements) to
Buyer for Buyer's review and comment and (ii) permit Buyer to participate fully
in all negotiations regarding the License. Buyer hereby agrees to honor, and
cause the Company to honor, the License; provided that (x) neither it nor any of
the 50 resales are assignable, (y) the third-party purchaser and resellers are
required to sign a license and use agreement mutually agreed to by them that
MUST include provisions reasonably necessary to protect the Buyer's interests in
the DAS technology, and (z) the third-party purchaser and resellers are required
to pay license fees, upgrade fees and consulting fees in amounts reasonably
agreed to by them.
6.5 Shelf Registration.
(a) After the Closing Date, Buyer shall (i) file a Registration
Statement with the SEC (on any form which Buyer shall deem appropriate) to
effect a Shelf Registration of all of the Registrable Shares and (ii) use its
Best Efforts to cause such Registration Statement to be declared effective by
the SEC on or prior to the six month anniversary of the Closing Date.
(b) Buyer agrees to use its Best Efforts to keep the Registration
Statement filed pursuant to this Section continuously effective and usable by a
holder of Registrable Shares for the resale of such holder's Registrable Shares
included therein for a period ending on the earlier of (i) two years from the
Closing Date, (ii) such date as all of the Registrable Shares held by such
holder included therein are tradeable without restriction under the applicable
rules and regulations under the Securities Act, during any three-month period
pursuant to Rule 144, including without limitation the volume and other
limitations set forth in Rule 144(e), and (iii) the first date on which all such
holder's Registrable Shares covered by the Shelf Registration have been sold
pursuant to the Registration Statement.
(c) It shall be a condition precedent to the obligations of Buyer to
take any action pursuant to this Section that each holder of Registrable Shares
shall furnish to Buyer such information regarding itself, the Registrable Shares
held by it, and the intended method of disposition of the Registrable Shares as
shall be required to effect the registration of the its Registrable Shares . If
any such information with respect to any holder of Registrable Shares is not
furnished prior to the filing of the Registration Statement, Buyer may exclude
such holder's shares from the Registration Statement. Each holder of Registrable
Shares shall use its reasonable best efforts to cooperate with the Buyer in
connection with the Registration Statement.
(d) Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall not be required to file a Registration Statement or cause
it to be declared or maintained effective at a time (y) when the Buyer, in the
good faith judgement of its board of directors shall determine that any offering
of the Registrable Shares would impede, delay or otherwise interfere with any
pending or contemplated acquisition or other material transaction involving
Buyer or (z) when Buyer is in possession of material information which, in the
good faith judgment of Buyer's board of directors, if disclosed in a
Registration Statement, would be materially harmful to the interests of Buyer
and its holders (any such period in clauses (y) or (z) is referred to as a
"Delay Period"). A Delay Period shall commence on and include the date that
Buyer gives written notice (such notice referred to herein as the "Delay
Notice") to Seller that it is not required to file a Registration Statement or
cause it to be declared or maintained effective pursuant to the provisions of
this Section 6.5 and shall end on the date when Seller is advised in writing by
Buyer that the current Delay Period is over (it being understood that Buyer
shall give such notice to Seller promptly upon making the determination that the
Delay Period is over); provided; however, that Buyer shall not be entitled to
Delay Periods having durations that exceed 45 days in the aggregate during any
calendar year. Seller shall cease all disposition efforts with respect to shares
held by it immediately upon receipt of a Delay Notice.
(e) In connection with the registration obligations of Buyer
pursuant to and in accordance with this Section 6.5 (and subject to Buyer's
rights and each holder's obligations under this Section 6.5), Buyer will
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use its Best Efforts to effect such registration to permit the sale of such
Registrable Shares in accordance with the intended methods of distribution
thereof, and pursuant thereto Buyer shall:
(i) before filing with the SEC any Registration Statement
or Prospectus, Buyer shall furnish to one counsel selected by (and whose
fees and expenses shall be borne by) the holders of a majority of the
Registrable Shares covered by such Registration Statement drafts of all
such documents proposed to be filed with the SEC and provide such
counsel with a reasonable opportunity to review such documents and
comment thereon with regard to information contained therein regarding
such holders, the Registrable Shares held by them, and the intended
method of disposition of the Registrable Shares. Such counsel shall
conduct its review and deliver its comments, if any, to Seller as
expeditiously as possible;
(ii) notify each holder of Registrable Shares that are
included in a Registration Statement (1) when a Prospectus or any
supplement or amendment has been filed and, with respect to a
Registration Statement or post-effective amendment, when the same has
become effective, (2) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information regarding such holder, (3) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (4) of
the happening of any event that requires the making of any changes in
such Registration Statement, Prospectus or other documents so that they
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. Except during any Delay
Period, upon the occurrence of any event contemplated by Section
6.5(e)(ii)(2) or 6.5(e)(ii)(4), Buyer shall prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each holder of
Registrable Shares agrees that immediately upon receipt of notice of any
event contemplated by this Section 6.5(e)(ii), it will immediately cease
(until such time as the circumstances described in the notice terminate)
all disposition efforts with respect to Registrable Shares held by it
and shall return to Buyer all copies of such the Prospectus in the
possession of such holder (it being agreed that Rule 144 sales shall not
be prohibited by this subsection);
(iii) shall cause all Registrable Shares covered by the
Registration Statement to be listed on each securities exchange and
included in the over-the-counter market, if any, on which similar
securities issued by Buyer are then listed or traded;
(iv) except during any Delay Period, upon the occurrence
of any event contemplated by Section 6.5(e)(ii) above, prepare a
supplement or post-effective amendment to each Registration Statement or
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Shares being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
and
(v) in connection with any disposition of any Registrable
Shares by a holder thereof pursuant to an effective Registration
Statement and Prospectus, reasonably cooperate with such holder to cause
the removal of the restrictive legend referencing the Securities Act
from the stock certificates for such Registrable Shares being sold.
(f) Whether or not the Registration Statement becomes effective, the
Buyer shall pay all costs, fees and expenses incident to the Buyer's performance
of or compliance with its obligations under this Section including, without
limitation, (i) all registration and filing fees, (ii) fees and expenses of
compliance with securities or Blue Sky laws, (iii) printing expenses (including
expenses of printing of a reasonable number of Prospectuses for use by the
holders of Registrable Securities included in such Registration Statement), (iv)
fees and disbursements of counsel and independent certified public accountants
of the Buyer and all other Persons retained by the Buyer in connection with the
Registration Statement (but not the fees and disbursements of counsel for
holders of Registrable
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<PAGE> 18
Securities pursuant to Section 6.5(e)(i) above). Notwithstanding the foregoing,
any discounts, commissions, underwriting or advisory fees, brokers' fees or fees
of similar securities industry professional will be payable by such holders of
Registrable Shares and the Buyer will have no obligation to pay any such
amounts.
(g) In connection with any Registration Statement effected pursuant
to this Agreement:
(i) To the extent permitted by law, Buyer will indemnify
each holder of Registrable Shares included in such Registration
Statement and each person, if any, who controls such holder within the
meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities or expenses, joint or several, or actions in
respect thereof ("Claims") to which each such indemnified party may
become subject under the Securities Act, insofar as such Claims arise
out of or are based upon (X) any untrue statement or alleged untrue
statement of any material fact contained in such Registration Statement
or Prospectus or (Y) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; provided, however, that Buyer shall
not be liable in any such case to the extent such Claim arises out of or
is based upon an untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact made in
such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to Buyer by or on behalf
of such holder or controlling person specifically for use in the
preparation of such Registration Statement or Prospectus. In addition,
notwithstanding the foregoing, the indemnification obligations of Buyer
under this Section 6.5(g)(i) shall not apply to amounts paid in
settlement of any such Claim if such settlement is effected without the
consent of Buyer (which consent shall not be unreasonably withheld).
(ii) To the extent permitted by law, each selling holder
of Registrable Shares shall indemnify Buyer, each of its directors, each
of its officers who has signed such Registration Statement, each person,
if any, who controls Buyer within the meaning of Section 15 of the
Securities Act, any other holder selling Registrable Shares in such
Registration Statement and any controlling person of any other holder,
against any Claims to which each such indemnified party may become
subject under the Securities Act, insofar as such Claims arise out of or
are based upon (X) any untrue statement or alleged untrue statement of
any material fact contained in such Registration Statement or Prospectus
or (Y) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading; in each case to the extent (and only to the
extent) that such Claim occurs in reliance upon and in conformity with
written information furnished by such holder expressly for use in
connection with such Registration Statement or Prospectus. The indemnity
obligations under this Section 6.5(g)(ii) shall not apply to amounts
paid in settlement of any such Claim if such settlement is effected
without the consent of such holder, which consent shall not be
unreasonably withheld.
(h) Buyer hereby covenants that, from and after the Closing Date, it
will file in a timely manner all reports required to be filed by it under the
Exchange Act and the rules and regulations adopted by the SEC thereunder, to
enable the holders of Registrable Shares to sell its Registrable Shares without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC.
(i) Seller may assign its rights and obligations under this Section
to any transferee or transferees of the shares of Buyer Common Stock issued to
Seller pursuant to this Agreement; provided, that the Buyer is, promptly after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act; and provided, further, that such transferee
agrees to be bound by all obligations of a holder of Registrable Shares set
forth in this Section 6.5.
(j) Each holder of Registrable Shares shall have the right to
specific performance by the Company of the provisions of this Section 6.5. The
Company hereby irrevocably waives, to the extent that it may do so under
applicable law, any defense based on the adequacy of a remedy at law which may
be asserted as a bar to the remedy of specific performance in any action brought
against the Company for specific performance of this Agreement by any holder of
Registrable Shares.
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<PAGE> 19
6.6 Employee Shares. In connection with and in partial consideration for
the agreement of each of the persons listed in Section 7.9 below to accept
employment with Buyer, Buyer covenants to issue an aggregate of 25,000 shares of
Buyer Common Stock divided, at Buyer's discretion, among such persons listed in
Section 7.9 who accept employment with Buyer, which shares shall not be subject
to any vesting or forfeiture conditions. Prior to each such issuance and as a
condition to Buyer's obligations under this Section 6.6, each such employee
shall be required to make certain representations and warranties to Buyer to
enable Buyer to issue the shares to such person in reliance on exemptions from
the registration requirements of the Securities Act (such as Section 4(2)) and
applicable state securities law. If the Buyer does not issue all of the Employee
Shares to such individuals within one hundred eighty (180) days of the Closing
Date, Buyer shall issue all remaining Employee Shares to the Seller.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation
to purchase the Shares and to take the other actions required to be taken by
Buyer at the Closing is subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (any of which may be waived by Buyer, in
whole or in part):
7.1 Accuracy of Representations. All of Seller's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
7.2 Seller's Performance.
(a) All of the covenants and obligations that Seller are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered, and each of the other covenants and obligations in
Section 5 must have been performed and complied with in all respects.
7.3 Consents. Each of the Consents identified in subparts and of Part
3.2 of the Disclosure Letter, and each Consent identified in Part 4.2 of the
Disclosure Letter, must have been obtained and must be in full force and effect.
7.4 Additional Documents. Seller shall deliver or cause to be delivered
to Buyer such other documents as Buyer may reasonably request for the purpose of
(a) evidencing the accuracy of any of Seller's representations and warranties,
(b) evidencing the performance by either Seller of, or the compliance by either
Seller with, any covenant or obligation required to be performed or complied
with by such Seller, (c) evidencing the satisfaction of any condition referred
to in this Section 7, or (d) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, any of the Buyer, or (b) is entitled to all or any
portion of the Purchase Price payable for the Shares.
7.7 No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material
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<PAGE> 20
adverse consequence under, (a) any applicable Legal Requirement or Order, or (b)
any Legal Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Body.
7.8 Due Diligence. [INTENTIONALLY OMITTED]
7.9 Key Employees. The following employees of the Seller shall agree to
accept employment with the Buyer on terms and conditions acceptable to the
Buyer: Tom Wynne, Ernie Friesen, Mike Arthur and Maureen Christiansen.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to sell the Shares and to take the other actions required to be taken
by Seller at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4.
8.3 Consents. Each of the Consents identified in Subpart of Part 3.2 of
the Disclosure Letter must have been obtained and must be in full force and
effect.
8.4 Additional Documents. Buyer shall deliver or cause to be delivered
to Seller such other documents as Seller may reasonably request for the purpose
of (a) evidencing the accuracy of any representation or warranty of Buyer, (b)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (c)
evidencing the satisfaction of any condition referred to in this Section 8, or
(d) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.5 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
9. TERMINATION.
9.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived or cured within five (5) days after the receipt of notice of such
Breach from the non-breaching party,
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with its obligations under this Agreement) and Seller have not waived
such condition on or before the Closing Date,
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(c) by mutual consent of Buyer and Seller, or
(d) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
15, 2000, or such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of termination under
Section 9.1 is in addition to any other rights and remedies it may have under
this Agreement or otherwise, and the exercise of a right of termination will not
be an election of remedies.
10. INDEMNIFICATION; REMEDIES.
10.1 Survival; Right to Indemnification not affected by Knowledge.
Subject to the next sentence, all representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificates delivered pursuant to Sections 2.4(a)(v) and
2.4(b)(ii), and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. Except with respect to
Section 6.5, neither Buyer nor Seller shall be liable hereunder unless written
notice of the indemnification claim is given by the indemnified party to the
indemnifying party within twelve (12) months after the Closing Date.
10.2 Indemnification and Payment of Damages by Seller. Seller will
indemnify and hold harmless Buyer, the Company, and its respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons"), for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in
this Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by Seller pursuant to this Agreement,
(b) any Breach by Seller of any covenant or obligation of Seller in
this Agreement,
(c) any product shipped or manufactured by, or any services provided
by, the Company prior to the Closing Date,
(d) any liability or obligation of the Company arising from or
accruing from the operation of the Company prior to the Closing Date, not on the
Company's November 15, 2000 balance sheet or incurred in the Ordinary Course of
Business thereafter (whether known or unknown and whether absolute, accrued,
contingent, or otherwise),
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or the Company (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.3 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Seller, and its Representatives, stockholder, and
affiliates (collectively, the "Seller Indemnified Persons") and will pay to the
Seller Indemnified Persons the amount of any Damages arising, directly or
indirectly, from or in connection with:
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(a) any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement,
(c) any liability or obligation of the Company arising from or
accruing from the operation of the Company by Buyer subsequent to the Closing
Date, and
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.4 Procedure for Indemnification-Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section
10.2 or 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.4(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are paid in full by
the indemnifying party, and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within thirty (30) days after
the indemnified party's notice is given, give notice to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Seller and Buyer hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agrees that process may be served on Seller with respect to such a
claim anywhere in the world.
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(e) Each of Seller and Buyer shall make a good faith attempt to seek
indemnification from any third parties, including insurers, who may be liable
upon any claims made against Seller or Buyer and for which the other party would
be liable under this Section 10. To the extent either party indemnifies the
other party for claims upon which third parties, including insurers, may be
liable, the indemnified party shall, to the extent permissible, subrogate to the
indemnifying party its rights with respect to such claims.
10.5 Limitations on Liability. Notwithstanding anything in Section 10 to
the contrary, neither party shall have any indemnification obligation hereunder
unless and until the aggregate amount of all Damages exceeds $25,000 (the
"Deductible"), at which time the Indemnified Persons shall be entitled to
indemnification for the full amount of such Damages in excess of the Deductible.
Notwithstanding anything contained in this Agreement, the aggregate liability of
any party under this Section 10 shall not exceed the value (as determined
pursuant to Section 10.7) of the 50% of the shares of Buyer Common Stock
received by Seller pursuant to this Agreement (it being agreed that in no event
shall Seller be required to deliver to all Buyer Indemnified Persons in the
aggregate pursuant to this Section 10 a number of shares of Buyer Common Stock
which exceeds 50% of the shares of Buyer Common Stock received by Seller
pursuant to this Agreement).
10.6 Legend. Seller understands that the certificates representing 50%
of the shares of Buyer Common Stock received by Seller pursuant this Agreement
(the "Subject Shares") shall bear a legend on the reverse to the effect that the
shares of Buyer Common Stock represented by such certificate are subject to this
Section 10. On the 12-month anniversary of the Closing Date, so long as no
reasonable claims are pending hereunder, Buyer shall cause its transfer agent to
issue to Seller (or its assignees) one or more certificates evidencing the
Subject Shares free and clear of the foregoing legend. If on the 12-month
anniversary of the Closing Date, one or more reasonable claims are pending
pursuant to Section 10.2 (a), the foregoing legend shall remain on the number of
Subject Shares reasonably necessary to satisfy such claim until such claim is
resolved with finality (at which time Buyer shall cause its transfer agent to
issue unlegended certificates to Seller to the extent resolved in favor of
Seller) and (b) Buyer shall be required to cause its transfer agent to issue to
Seller (or its assignees) one or more certificates evidencing all of the Subject
Shares not described in the forgoing clause (a) free and clear of the foregoing
legend.
10.7 Payment of Damages; Value of Buyer Common Stock. All Damages, if
any, which may become due to from Seller to a Buyer Indemnified Person shall be
payable by delivery of shares of Buyer Common Stock. Seller hereby pledges and
grants to Buyer a security interest in the certificates representing one-half
(1/2) of the Purchase Price to secure Buyer's indemnification obligations under
this Section 10, which pledge shall terminate at such time as Buyer is obligated
hereunder to deliver unlegended certificates for the pledged shares. For
purposes of this Section 10, the Buyer Common Stock shall be valued at the
average of the closing prices of the Buyer Common Stock as reported by the
Nasdaq for the 30 trading days ending on the date upon which it is determined
with finality that Damages are payable to a Buyer Indemnified Person.
10.8 Exclusivity. The parties hereto agree that, from and after the
Closing Date, with respect to any Breach or violation of any representation or
warranty or any covenant, obligation or other term set forth in this Agreement,
the only relief available to the party indemnified for such Breach in respect of
such Breach shall be (a) Damages, but only to the extent properly claimable
hereunder as may be limited pursuant to this Section 10; (b) specific
performance if a court of competent jurisdiction in its discretion grants the
same; or (c) injunctive relief or declaratory relief if a court of competent
jurisdiction in its discretion grants the same.
11. GENERAL PROVISIONS.
11.1 Expenses, Taxes. Buyer and Seller shall pay their own respective
expenses and the fees and expenses of their respective counsel and accountants
and other experts. Seller shall bear all transfer taxes, gains taxes, recording
taxes and similar taxes payable or determined to be payable in connection with
the execution, delivery and performance of this Agreement and the transfer of
the Shares contemplated hereby.
11.2 Survival of Representations and Warranties, Etc. [INTENTIONALLY
OMITTED]
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11.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action, or compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach. The waiver by any party hereto at or
before the Closing Date of any condition to its obligations hereunder which is
not fulfilled shall preclude such party from seeking redress from the other
party hereto for breach of any representation, warranty, covenant or agreement
contained in this Agreement.
11.4 Assignments, Successors, and no Third-Party Rights. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
11.5 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
three (3) days after deposit by certified or registered first class mail,
postage prepaid, return receipt requested, to the party to whom the same is so
given or made:
(a) If to the Buyer, to Charles R. Osenbaugh
Timeline, Inc.
3055 112th Avenue NE, Suite 106
Bellevue, WA 98005
With a copy to Richard Hack, Jr.
Lasher, Holzapfel, Sperry & Ebberson
601 Union Street, Suite 2600
Seattle, Washington, 98101-4000
(b) If to the Seller, to Neal, Gerber &
Eisenberg Attention: Ross D.
Emmerman 2 North La Salle Street,
Suite 2100 Chicago, IL 60602
or to such other address as such party shall have specified by notice to the
other party hereto.
11.6 Entire Agreement. This Agreement (including the schedules, exhibits
and attachments hereto) constitutes the entire agreement and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof and cannot be changed or terminated orally;
provided that the confidentiality provisions of the letter of intent between the
parties signed on November 6, 2000 and the Confidentiality Agreement shall
survive until the Closing Date.
11.7 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
11.8 Governing Law; Venue. This Agreement shall be construed as to both
validity and performance and enforced in accordance with and governed by the
laws of the State of Washington, without giving effect to the choice of law
principles thereof. Venue for any action under this Agreement shall lie in King
County, Washington.
11.9 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought.
11.10 Public Announcements. The parties shall not make any public
announcement regarding the Contemplated Transaction without the prior party's
written approval of the announcement, which in the case of the Seller, shall not
be unreasonably withheld.
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11.11 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.12 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13 Time Of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.15 Attorneys' Fees. If any party hereto resorts to legal process to
enforce or construe any term of this Agreement or rights arising hereunder, the
prevailing party will be entitled to recover its reasonable attorney' fees,
costs and expensed incurred in connection with the proceeding.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
SELLER: BUYER:
ORALIS.COM, INC. TIMELINE, INC.
By: /s/ Pierre Gallant By: /s/ Charles R. Osenbaugh
-------------------------------- --------------------------------------
Pierre Gallant, President Charles R. Osenbaugh, President
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EXHIBITS TO STOCK PURCHASE AGREEMENT
Exhibit 2.4(a)(ii) Goodwill and Noncompetition Agreement
Exhibit 2.4(a)(iii) Release Agreement
Exhibit 2.4(c)(i) Legal Opinion of Neal, Gerber & Eisenberg
Exhibit 2.4(c)(iii) Legal Opinion of Lasher Holzapfel Sperry & Ebberson
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