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EXECUTION COPY
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
by and among
Radian Group, Inc.,
XxxxxxxXxxxx.xxx, Inc.
and
The Founding Stockholders of XxxxxxxXxxxx.xxx, Inc.
Dated as of October 27, 2000
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of October 27, 2000, by and among Radian Group, Inc., a Delaware
corporation (the "Purchaser"), XxxxxxxXxxxx.xxx, Inc., an Iowa corporation
(the "Acquired Company"), and the stockholders of the Acquired Company named
in Exhibit A attached hereto (each, a "Founding Stockholder" and collectively,
the "Founding Stockholders").
WHEREAS, on the date hereof, the Founding Stockholders own
beneficially and of record Ten Million Two Hundred Thousand (10,200,000)
shares (the "Shares") of common stock of the Acquired Company, no par value
per share ("Seller Common Stock"), with the number of Shares owned by each
Founding Stockholder set forth on Exhibit A attached hereto;
WHEREAS, except for the shares of Seller Common Stock owned by
Household International, Inc. ("Household"), the Founding Stockholders own all
of the issued and outstanding capital stock of the Acquired Company;
WHEREAS, on the Closing Date (as defined in Section 1.4 hereof), the
Acquired Company is redeeming from Household One Million Eight Hundred
Thousand (1,800,000) shares of Seller Common Stock owned by Household (the
"Household Shares") pursuant to the terms of a Stock Redemption Agreement (the
"Household Agreement") effective on the Closing by and between the Acquired
Company and Household;
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WHEREAS, the Company desires to purchase from the Founding
Stockholders, and the Founding Stockholders desire to sell to the Purchaser,
the Shares; and
WHEREAS, from and after the Closing, the Purchaser intends to operate
the Acquired Company as its wholly-owned subsidiary and employ the Founding
Stockholders and the Key Employees (as defined below), all pursuant to
employment agreements executed contemporaneously herewith, to manage the
operations of the Acquired Company.
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties, covenants and conditions set forth in this
Agreement, and intending to be legally bound, the parties to this Agreement
mutually agree as follows:
Certain capitalized terms used in this Agreement have the meanings
assigned them in Section 7.10 herein.
SECTION 1. PURCHASE AND SALE OF SHARES.
1.1 Sale of Shares. At the Closing provided for in Section 1.4
hereof, and subject to the terms and conditions herein, and in reliance on the
representations and warranties set forth in Sections 2 and 3 of this Agreement,
the Founding Stockholders shall sell to the Purchaser, and the Purchaser shall
purchase from the Founding Stockholders, all of the Shares for the purchase
price payable to the Founding Stockholders as provided in Section 1.2 hereof
(the "Purchase Price").
1.2 Delivery of the Purchase Price. In consideration of and in
exchange for the Shares purchased by the Purchaser hereunder, the Purchaser
shall deliver to the Founding Stockholders the Purchase Price, consisting of
the following, at the Closing (or at such other time as hereinafter
described):
(a) Five Hundred Thousand and 00/100 Dollars ($500,000.00)
to each Founding Stockholder (One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00) in total) in cash by wire transfer of immediately
available funds;
(b) Three Thousand Three Hundred Thirty-Three (3,333) shares
of the Purchaser's common stock, $.001 par value per share ("Purchaser Common
Stock"), to each Founding Stockholder, with an additional Three Thousand Three
Hundred Thirty-Four (3,334) shares of Purchaser Common Stock to be delivered
by the Purchaser to each Founding Stockholder on the first anniversary of the
date hereof and Three Thousand Three Hundred Thirty-Three (3,333) shares of
Purchaser Common Stock to be delivered by the Purchaser to each Founding
Stockholder on the second anniversary of the date hereof (such total of 30,000
shares of Purchaser Common Stock to be delivered to the Founding Shareholders
to be hereinafter referred to as the "Payment Shares"); and
(c) A nonqualified stock option (each a "Stock Option" and
collectively the "Stock Options") to purchase Six Thousand Six Hundred
Sixty-Seven (6,667) shares of Purchaser Common Stock to each Founding
Stockholder to be issued pursuant to the terms and conditions of the Stock
Option Plan (as defined in Section 7.10 hereof) and substantially on the terms
of the "Stock Option Grant" attached as Exhibit B hereto, at an exercise price
per share
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equal to the average Market Value (as defined in Section 7.10) of the
Purchaser Common Stock for the ten (10) trading days immediately preceding the
Closing Date as reported on the New York Stock Exchange.
(d) The number of Payment Shares to be delivered pursuant to
Section 1.2(b) on the first two anniversary dates of this Agreement shall be
proportionately adjusted for any stock dividend, stock split, or any other
subdivision of the Purchaser Common Stock or any reverse stock split or other
combination of the Purchaser Common Stock.
1.3 Management Earn-Outs.
(a) In addition to the payment of the Purchase Price as
provided for herein, the Purchaser shall pay to the Founding Stockholders, as
additional consideration for the sale of the Shares, subject to the terms and
conditions set forth in this Section 1.3, the following additional amounts of
cash ("Earn-Out"):
(i) with respect to the Business (as defined in
Section 7.10 hereof) for the fiscal year ended December 31, 2001 ("Fiscal
2001"), the Purchaser shall pay an amount, divided equally among the Founding
Stockholders, equal to fifty percent (50%) of Net Income (as defined in
Section 7.10 hereof) of the Business for Fiscal 2001; and
(ii) with respect to the Business for the fiscal year
ended December 31, 2002 ("Fiscal 2002"), the Purchaser shall pay an amount,
divided equally among the Founding Stockholders, equal to twenty-five percent
(25%) of the Net Income for Fiscal 2002.
Net Income shall be determined in accordance with the
provisions of Section 1.3(b) hereof, and shall include only Net Income
generated from the conduct of the Business after the Closing Date, and shall
not include any Net Income generated by the Acquired Company not involving the
Business.
(b) Calculation of Net Income. Within ninety (90) days after
the end of Fiscal 2001 and Fiscal 2002, the Purchaser shall cause to be
prepared and delivered to the Founding Stockholders an income statement (the
"Statement") setting forth the Net Income of the Business for such fiscal
year, as well as reasonably detailed information used in determining such Net
Income. The Statement shall be prepared in accordance with United States
generally accepted accounting principles consistently applied ("GAAP"). The
Purchaser shall adjust Net Income to account for increases or decreases
therein attributable to (A) sales made by the Acquired Company at reduced
prices, for example, for promotional reasons or because the services and
products of the Acquired Company are "bundled" with other services or products
sold by the Purchaser or its Affiliates, or (B) the allocation of special
overhead costs or charges to the Acquired Company other than reasonable
inter-company charges or allocations from the Purchaser or its Affiliates (as
defined in Paragraph 7.10) for services provided to the Acquired Company by
Purchaser or its Affiliates. Each Founding Stockholder shall then have thirty
(30) days following his receipt of the Statement to review the Statement, and
the Statement shall become final and binding upon the parties unless one or
more Founding Stockholders ("Dissenting Stockholders") give written notice of
his or their disagreement (a "Notice of Disagreement") to the Purchaser within
thirty (30) days after receiving the Statement specifying such Founding
Stockholder(s)' disagreement with the Statement. If no Notice of Disagreement
is
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received by the Purchaser within such thirty (30)-day period, the Purchaser
shall pay the Earn-Out amount due for such fiscal year to the Non-Dissenting
Stockholder(s) within fifteen (15) days after the expiration of such initial
thirty (30)-day period. If a Notice of Disagreement is received by the
Purchaser in a timely manner, then the Statement shall become final and
binding upon the parties on the earlier of (x) the date the Purchaser and the
Dissenting Stockholder(s) resolve in writing any differences they may have
with respect to any matter specified in the Notice of Disagreement and (y) the
date any Disputed Matters (as hereinafter defined) are finally resolved in
writing by the Arbitrators (as hereinafter defined) (such date to be
hereinafter referred to as the "Final Determination Date"). Any such Notice of
Disagreement shall state in reasonable detail the nature of any disagreement
so asserted. During a period of thirty (30) days following the date of the
Notice of Disagreement, the Purchaser and the Dissenting Stockholders shall
attempt to promptly resolve in writing any differences that they may have with
respect to any matter specified in the Notice of Disagreement. Any such
resolution shall be evidenced by a written agreement signed by the Purchaser
and the Dissenting Stockholders. If, at the end of such thirty (30)-day
period, any matters remain in dispute, then all such matters as specified in
the Notice of Disagreement as to which such written agreement has not been
reached (the "Disputed Matters") shall be submitted to arbitration as
hereinafter provided. All of the costs and expenses of preparing the Statement
shall be borne by the Purchaser.
Within five (5) business days after the expiration of the
thirty (30)-day period during which the Purchaser and the Dissenting
Stockholder(s) have not been able to enter into a written agreement as to the
Disputed Matters, the Purchaser and the Dissenting Stockholder(s) shall
attempt to agree upon an arbitrator or arbitrators (collectively,
"Arbitrator") to resolve the Disputed Matters. If, within such five
(5)-business day period, the Purchaser and the Dissenting Stockholders are
unable to agree upon the identity of the Arbitrator, the Purchaser and the
Dissenting Stockholders, as a group, shall each select one of the "Big Five"
accounting firms having no other relationship with any party hereto during the
then previous two (2) years and such accounting firms shall agree upon the
identity of a single Arbitrator within the next three (3)-business day period.
If such accounting firms cannot agree as to the identity of the single
Arbitrator during such three (3)-business day period, then each accounting
firm shall select one nominee, and the single Arbitrator shall be chosen as
between such nominees by lot. Unless otherwise provided herein, the single
Arbitrator shall resolve the Disputed Matters in accordance with the
Commercial Rules of the American Arbitration Association. The fees and
expenses of the single Arbitrator with respect to the settlement of all
Disputed Matters shall be borne by the Purchaser. The single Arbitrator's
determination shall be made within thirty (30) days of the single Arbitrator's
selection, shall be set forth in a written statement delivered to the
Purchaser and the Dissenting Stockholders and shall be final, binding and
conclusive and shall be enforceable in accordance with its terms by any court
of competent jurisdiction.
The Purchaser shall pay to each Dissenting Stockholder
one-third (1/3) of the Earn-Out as calculated and finally determined in
accordance with this Section 1.3 within thirty (30) days after the Final
Determination Date.
1.4 Closing; Closing Date. The closing of the purchase and sale of
the Shares as contemplated hereby (the "Closing") shall take place (i) at
10:00 a.m., local time, at the offices of Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP,
Suite 3600, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, as soon as
practicable following the satisfaction or waiver of the conditions set forth
in Section 4 hereof, but in no event later than November 3, 2000 (unless the
Purchaser,
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the Acquired Company and the Founding Stockholders agree in writing to extend
such date) or (ii) at such other place, time or date as the Purchaser, the
Acquired Company and the Founding Stockholders agree in writing. The time and
date upon which the Closing occurs is herein called the "Closing Date".
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY AND THE
FOUNDING STOCKHOLDERS
The Founding Stockholders hereby jointly and severally make to the
Purchaser the representations and warranties contained in this Section 2,
except that each Founding Stockholder makes the representations in Sections
2.2(b), 2.4(b), 2.6 (second sentence) and 2.10 as to such Founding Stockholder
severally as to himself. Such representations and warranties are subject to
the qualifications and exceptions set forth in the disclosure schedule
delivered to the Purchaser pursuant to this Agreement (the "Disclosure
Schedule") and to the occurrence of the transactions contemplated by this
Agreement and related agreements and documents. Subject to the provisions of
Section 4.1(j) and Section 4.2(f), all representations and warranties are made
as of the date of this Agreement unless they expressly provide otherwise.
2.1 Organization and Corporate Power. The Acquired Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Iowa and is duly qualified or registered to do business
as a foreign corporation (a) in each jurisdiction listed in Section 2.1 of the
Disclosure Schedule and (b) in each jurisdiction in which the failure to be so
duly qualified or registered has had, or would be reasonably likely to have, a
Material Adverse Effect (as defined in Section 7.10 hereof). The Acquired
Company has all required corporate power and authority to carry on its
business as presently conducted, to enter into and perform this Agreement and
the agreements contemplated hereby to which it is a party and to carry out the
transactions contemplated hereby and thereby. The copies of the Articles of
Incorporation of the Acquired Company (the "Articles") and the Bylaws of the
Acquired Company (the "Bylaws"), as amended to date, which have been furnished
to the Purchaser by the Acquired Company, are correct and complete as of the
date hereof, and the Acquired Company is not in violation of any term of the
Articles or Bylaws. The Acquired Company is the successor of XxxxxxxXxxxx.Xxx
L.C, an Iowa limited liability company (the "LC") pursuant to that certain
Business Transfer Agreement by and between the LC and the Acquired Company,
dated December 30, 1999 (the "Asset Transfer Agreement") The Asset Transfer
Agreement and documents related thereto furnished by the Founding Stockholders
to the Purchaser are true complete and accurate copies of such documents and
constitute all of the documents or instruments relating to such transfer.
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2.2 Authorization and Non-Contravention.
(a) This Agreement and all documents executed pursuant
hereto by the Acquired Company are valid and binding obligations of the
Acquired Company, enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to the enforcement of creditors'
remedies generally and by general principles of equity. The execution,
delivery and performance by the Acquired Company of this Agreement and all
agreements, documents and instruments contemplated hereby to which the
Acquired Company is a party, including, without limitation, the Household
Redemption Agreement, have been duly authorized by any and all necessary
corporate or other action of the Acquired Company. The execution, delivery and
performance by the Acquired Company of this Agreement and all agreements,
documents and instruments contemplated hereby, the redemption of the Household
Shares and the performance of the transactions contemplated by this Agreement
and such other agreements, documents and instruments related hereto do not and
will not (i) violate, conflict with or result in a default (whether after the
giving of notice, lapse of time or both) or loss of benefit under any contract
or obligation to which the Acquired Company is a party or by which any of its
assets are bound, or any provision of the Articles or Bylaws, or cause the
creation of a Claim (as defined in Section 7.10 hereof) upon any of the assets
of the Acquired Company, any of which would have a Material Adverse Effect;
(ii) violate or result in a violation of, or constitute a default (whether
after the giving of notice, lapse of time or both) under, any provision of any
law, regulation or rule, or any order of, or any restriction imposed by, any
court or other governmental agency applicable to the Acquired Company, any of
which would have a Material Adverse Effect; (iii) require from the Acquired
Company any notice to, declaration or filing with, or consent or approval of
any governmental authority or other third party (except that which has been
waived or obtained); or (iv) violate or result in a violation of, or
constitute a default (whether after the giving of notice, lapse of time or
both) under, accelerate any obligation under, or give rise to a right of
termination of, any agreement, permit, license or authorization to which the
Acquired Company is a party or by which the Acquired Company is bound.
(b) The Founding Stockholder has full authority, power and
capacity to enter into and perform this Agreement and all agreements,
documents and instruments contemplated hereby which are to be executed by such
Founding Stockholder and to carry out the transactions contemplated hereby and
thereby. This Agreement and all agreements, documents and instruments executed
by each Founding Stockholder pursuant hereto are valid and binding obligations
of such Founding Stockholder enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to the enforcement of creditors'
remedies generally and by general principles of equity. The execution,
delivery and performance by the Founding Stockholder of this Agreement and all
agreements, documents and instruments to be executed and delivered by such
Founding Stockholder pursuant hereto do not and will not: (i) violate,
conflict with or result in a default (whether after the giving of notice,
lapse of time or both) or loss of benefit under any contract or obligation to
which the Founding Stockholder is a party or by which he or his assets are
bound; (ii) violate or result in a violation of, or constitute a default
(whether after the giving of notice, lapse of time or both) under, any
provision of any law, regulation or rule, or any order of, or any restriction
imposed by, any court or other governmental agency applicable to the Founding
Stockholder; (iii) require from the Founding Stockholder any notice to,
declaration or filing with, or consent or approval of any governmental
authority or other third party (except that which has
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been waived or obtained); or (iv) violate or result in a violation of, or
constitute a default (whether after the giving of notice, lapse of time or
both) under, accelerate any obligation under, or give rise to a right of
termination of, any agreement, permit, license or authorization to which the
Founding Stockholder is a party or by which the Founding Stockholder is bound.
2.3 Corporate Records. The corporate record books of the Acquired
Company accurately reflect all corporate action taken by its stockholders and
board of directors and committees. The copies of the corporate records of the
Acquired Company, as made available to the Purchaser for review, are true and
complete copies of the originals of such documents.
2.4 Capitalization.
(a) As of the date hereof, the authorized capital stock of
the Acquired Company consists of 50,000,000 shares of Seller Common Stock, of
which 12,000,000 shares are issued and outstanding, and all such outstanding
shares are duly authorized, validly issued, fully-paid, nonassessable and,
except as described in Section 2.4(a) of the Disclosure Schedule, free of
preemptive rights. All of such outstanding shares are owned of record and
beneficially by the Founding Stockholders and Household. Section 2.4(a) of the
Disclosure Schedule sets forth the name of each holder of options to purchase
shares of Seller Common Stock, the number of shares subject to each such
option, along with the applicable vesting schedule and the applicable exercise
price. None of the options or rights disclosed in Section 2.4(a) of the
Disclosure Schedule is subject to accelerated vesting by reason of the
transactions contemplated hereby. Except as disclosed in Section 2.4(a) of the
Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind for or relating to the issuance, or sale of, or
outstanding securities convertible into or exercisable or exchangeable for any
shares of capital stock of any class or other equity interests of the Acquired
Company. The Acquired Company has no obligation to purchase, redeem, or
otherwise acquire any of its capital stock or any interests therein, and has
not redeemed any shares of its capital stock in the past three (3) years, or
for such shorter period as it has been in existence as a corporation. The
Acquired Company has duly and validly authorized and reserved 1,200,000 shares
of Seller Common Stock (subject to adjustment) for issuance in connection with
awards granted or exercised under the XxxxxxxXxxxx.Xxx, Inc. 2000 Combined
Incentive and Non-Statutory Stock Option Plan (the "Seller Stock Option
Plan"). Except as described in Section 2.4(a) of the Disclosure Schedule,
there are (i) no preemptive rights, rights of first refusal, put or call
rights or obligations or anti-dilution rights with respect to the issuance,
sale or redemption of the Acquired Company's capital stock, (ii) no rights to
have the Acquired Company's capital stock registered for sale to the public in
connection with the laws of any jurisdiction, and (iii) no documents,
instruments or agreements relating to the voting of the Acquired Company's
voting securities or restrictions on the transfer of the Acquired Company's
capital stock.
(b) Each of the Founding Stockholders is the sole record and
beneficial owner of the shares of Seller Common Stock set forth opposite his
name on Exhibit A attached hereto, free and clear of any Claims, including
Claims of spouses, former spouses and other family members.
2.5 Securities Act. The offer and sale of Shares by the Founding
Stockholders to the Purchaser in accordance with the terms of this Agreement
(assuming the accuracy of the
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representations and warranties contained in Article III hereof) are exempt
from the registration requirements of the 1933 Act and all applicable state
securities laws.
2.6 Subsidiaries; Investments. The Acquired Company does not have
and has not had any direct or indirect Subsidiaries (as defined in Section
7.10 below). Except as disclosed in Section 2.6 of the Disclosure Schedule,
the Acquired Company does not have a strategic partnership or similar
relationship with or own or have any direct or indirect interest in or control
(as defined in Section 7.10 below) over any corporation, partnership, joint
venture or other entity of any kind.
2.7 Financial Statements; Projections.
(a) The Acquired Company has previously furnished to the
Purchaser copies of its audited financial statements for the year ended
December 31, 1999 and unaudited financial statements for the nine-month period
ended September 30, 2000. Such financial statements were prepared in
conformity with GAAP, are consistent in all material respects with the books
and records of the Acquired Company, and fairly present the financial position
of the Acquired Company as of the dates thereof and the results of operations
and cash flows of the Acquired Company for the periods shown therein (subject
to the absence of footnotes and normal year-end adjustments in the case of
unaudited statements).
(b) The projections previously provided to the Company
represent good faith estimates of the performance of the Acquired Company for
the periods stated therein based upon assumptions which were in good faith
believed to be reasonable when made and continue to be reasonable as of the
date hereof; provided, however, that neither the Acquired Company nor the
Founding Stockholders give any guarantee that such projections will be
achieved.
2.8 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect and other than those incurred in
the ordinary course of the Acquired Company's business, the Acquired Company
does not have any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, except liabilities
or obligations (i) stated or adequately reserved against in the balance sheet
of the Acquired Company as of September 30, 2000 contained in the financial
statements referred to in Section 2.7(a) (the "Balance Sheet") or (ii)
incurred as a result of or arising out of the transactions contemplated under
this Agreement.
2.9 Absence of Certain Developments. Since the date of the Balance
Sheet, the Acquired Company has conducted its business only in the ordinary
course consistent with past practice and, except in connection with or as a
result of the transactions contemplated in this Agreement or as set forth in
Section 2.9 of the Disclosure Schedule, there has not been:
(a) any change in the assets, liabilities, condition
(financial or other), properties, business, operations or prospects of the
Acquired Company, which change by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business, has had or
would be likely to have a Material Adverse Effect;
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(b) any mortgage, encumbrance or lien placed on any of the
properties of the Acquired Company;
(c) any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other disposition, of
any properties or assets by the Acquired Company, including any of its
Intellectual Property Assets (as defined below), other than in the ordinary
course of business;
(d) any damage, destruction or loss to the Acquired
Company's properties or assets, whether or not covered by insurance, which has
had or would be likely to have a Material Adverse Effect;
(e) any declaration, setting aside or payment of any
dividend by the Acquired Company, or the making of any other distribution in
respect of the capital stock of the Acquired Company or any distribution to
the Founding Stockholders, or any direct or indirect redemption, purchase or
other acquisition by the Acquired Company of its own capital stock;
(f) any labor trouble or claim of unfair labor practices
involving the Acquired Company, any change in the compensation payable or to
become payable by the Acquired Company to any of its officers or employees
other than normal merit increases to employees in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of such
officers or employees or any establishment or creation of any employment,
deferred compensation or severance arrangement or employee benefit plan with
respect to such persons or the amendment of any of the foregoing;
(g) any resignation, termination or removal of the officers
of the Acquired Company or material loss of personnel of the Acquired Company
or material change in the terms and conditions of the employment of the
Acquired Company's officers or key personnel;
(h) any payment or discharge of a material lien or liability
of the Acquired Company which was not shown on the Balance Sheet or incurred
in the ordinary course of business thereafter;
(i) any contingent liability incurred by the Acquired
Company as guarantor or otherwise with respect to the obligations of others or
any cancellation of any material debt or claim owing to, or waiver of any
material right of, the Acquired Company, including any write-off or compromise
of any accounts receivable other than in the ordinary course of business
consistent with past practice;
(j) any obligation or liability incurred by the Acquired
Company to any of its officers, directors, stockholders or employees, or any
loans or advances made by the Acquired Company to any of its officers,
directors, stockholders or employees, except normal compensation and expense
allowances payable to officers or employees;
(k) any change in accounting methods or practices,
collection policies, pricing policies or payment policies of the Acquired
Company;
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(l) any loss, or any known development that could reasonably
be expected to result in a loss, of any significant supplier, customer,
distributor or account of the Acquired Company;
(m) any amendment or termination of any material contract or
agreement to which the Acquired Company is a party or by which it is bound,
which amendment or termination would have or be likely to have a Material
Adverse Effect;
(n) any arrangements relating to any royalty, dividend or
similar payment based on the revenues, profits or sales volume of the Acquired
Company, whether as part of the terms of the Acquired Company's capital stock
or by any separate agreement;
(o) any agreement with respect to the endorsement of the
Acquired Company's products or services;
(p) any transaction or agreement involving fixed price terms
or fixed volume arrangements;
(q) any other material transaction entered into by the
Acquired Company other than transactions in the ordinary course of business;
(r) except as provided in this Agreement, any amendment to
the Articles of Incorporation or Bylaws; or
(s) any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (r) above.
2.10 Accounts Receivable; Accounts Payable.
(a) All of the accounts receivable of the Acquired Company
are valid and enforceable claims, are subject to no known set-off or
counterclaim, and, to the knowledge of the Founding Stockholders, are fully
collectible in the normal course of business, after deducting any allowance
for doubtful accounts stated in the Balance Sheet in accordance with generally
accepted accounting principles, which allowance is a reasonable estimate of
the Acquired Company's uncollectible accounts. Since the date of the Balance
Sheet, the Acquired Company has collected its accounts receivable in the
ordinary course of its business and in a manner which is consistent with past
practices and has not accelerated any such collections. As of the date hereof,
and except as described in Section 2.10(a) to the Disclosure Schedule, the
Acquired Company does not have any accounts receivable or loans receivable
from any Person which is affiliated with it or any of its directors, officers,
employees or stockholders.
(b) All accounts payable and notes payable of the Acquired
Company arose in bona fide arms' length transactions in the ordinary course of
business and no such account payable or note payable is delinquent by more
than 60 days in its payment. Since the date of the Balance Sheet, the Acquired
Company has paid its accounts payable in the ordinary course of its business
and in a manner which is consistent with its past practices. As of the date
hereof and except as described in Section 2.10(b) to the Disclosure Schedule,
the Acquired Company has no
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account payable to or lease with any Person which is affiliated with it or any
of its directors, officers, employees or stockholders.
2.11 Transactions with Affiliates. Except as described in Section
2.11 to the Disclosure Schedule, there are no loans, leases, or other
continuing transactions between the Acquired Company and any Founding
Stockholder or any present or former stockholder, director or officer of the
Acquired Company, or any member of such Founding Stockholder's, stockholder's,
officer's or director's immediate family, or any Person controlled by such
Founding Stockholder, stockholder, officer or director. Except as described in
Section 2.11 to the Disclosure Schedule, no stockholder, director or officer
of the Acquired Company, or any of their respective spouses or family members,
owns directly or indirectly, on an individual or joint basis, any interest in,
or serves as an officer or director or in another similar capacity of, any
competitor, customer or supplier of the Acquired Company, or any organization
which has a material contract or arrangement with the Acquired Company.
2.12 Real and Personal Property. Section 2.12 of the Disclosure
Schedule sets forth the addresses and uses of all real property that the
Acquired Company owns, leases or subleases. The Acquired Company has good,
valid and (if applicable) marketable title or valid license to or valid
leasehold interest in all assets material to its business and to those assets
reflected on the Balance Sheet or acquired by it after the date thereof
(except for properties disposed of since that date in the ordinary course of
business), free and clear of all Claims, other than liens for Taxes (as
hereinafter defined) not yet due and payable, minor liens and encumbrances
that do not materially detract from the value of the property subject thereto
or materially impair the operations of the Acquired Company, and liens that
have otherwise arisen in the ordinary course of business. Section 2.12 of the
Disclosure Schedule sets forth a complete and accurate list of all tangible
assets owned or leased by Acquired Company, other than real property,
including, without limitation, computer hardware, office equipment and
furniture and fixtures (the "Equipment") and properly indicates whether each
item of Equipment is owned or leased by the Acquired Company. All Equipment
included in such properties which is necessary to the business of the Acquired
Company is in good condition and repair (ordinary wear and tear excepted), and
all leases of real or personal property to which the Acquired Company is a
party are fully effective and afford the Acquired Company peaceful and
undisturbed possession of the subject matter to the lease. The property and
assets of the Acquired Company are sufficient for the conduct of its business
as presently conducted. To the knowledge of the Founding Stockholders, the
Acquired Company is not in violation of any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of its owned or leased properties, which violation could
reasonably be expected to have a Material Adverse Effect, nor has it received
any notice of any such violation. There are no defaults by the Acquired
Company or by any other party which might curtail in any material respect the
present use of the Acquired Company's property. The performance by the
Acquired Company of this Agreement will not result in the termination of, or
in any increase of any amounts payable under, any of its leases.
2.13 Tax Matters.
(a) The Acquired Company has timely and properly filed all
federal, state, local and foreign tax returns required to be filed by it
through the date hereof, and has paid or
12
caused to be paid all federal, state, local, foreign and other taxes,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, franchise taxes, employment and
payroll related taxes, withholding taxes, transfer taxes, and all
deficiencies, or other additions to tax, interest, fines and penalties owed by
it (collectively, "Taxes"), required to be paid by it through the date hereof
whether disputed or not, except Taxes which have not yet accrued or otherwise
become due, where the failure to file or pay has or would be likely to have a
Material Adverse Effect. All material Taxes and other assessments and levies
which the Acquired Company was or is required to withhold or collect have been
withheld and collected and have been paid over to the proper governmental
authorities. The Acquired Company has delivered to the Purchaser correct and
complete copies of all annual tax returns, examination reports, and any
statements of deficiencies filed by, assessed against, or agreed to by the
Acquired Company since the Acquired Company's inception. The Acquired Company
has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any Tax payment, assessment, deficiency or
collection. Except as set forth in Section 2.13(a) of the Disclosure Schedule,
(i) the Acquired Company has never received notice of any audit or of any
proposed deficiencies from the Internal Revenue Service (the "IRS") or any
other taxing authority (other than routine audits undertaken in the ordinary
course and which have been resolved on or prior to the date hereof); (ii)
there are in effect no waivers of applicable statutes of limitations with
respect to any Taxes owed by the Acquired Company for any year; (iii) neither
the IRS nor any other taxing authority is now asserting or, to the knowledge
of the Founding Stockholders, threatening to assert against the Acquired
Company any deficiency or claim for additional Taxes or interest thereon or
penalties in connection therewith in respect of the income or sales of the
Acquired Company; (iv) the Acquired Company has never been a member of an
affiliated group of corporations filing a combined federal income Tax return
nor does the Acquired Company have any liability for Taxes of any other Person
under Treasury Regulations Section 1.1502-6 (or any similar provision of
foreign, state or local law) or otherwise; and (v) the Acquired Company has
not filed a consent under Section 341(f) of the Internal Revenue Code of 1986,
as amended (the "Code"), concerning collapsible corporations. The Acquired
Company has never been a United States real property holding corporation
within the meaning of Section 897(c)(1)(A)(ii) of the Code. The Acquired
Company is not a party to any Tax allocation or sharing arrangement. The
Acquired Company is not a party to any contract, agreement, plan or
arrangement covering any employee or former employee thereof, that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Acquired Company is not a "foreign person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
(b) The taxable year of the Acquired Company for federal and
state income tax purposes is the fiscal year ended December 31.
(c) The Acquired Company has never been (i) a passive
foreign investment company, (ii) a foreign personal holding company, (iii) a
foreign sales corporation, (iv) a foreign investment company or (v) a person
other than a United States person, each within the meaning of the Code.
2.14 Certain Contracts and Arrangements. Except as set forth in
Section 2.14 of the Disclosure Schedule (with true and correct copies provided
to the Purchaser), the Acquired Company is not a party or subject to or bound
by:
13
(a) any contract or agreement (i) involving a potential
commitment or payment by the Acquired Company in excess of $50,000 annually or
(ii) which is otherwise material and not entered into in the ordinary course
of business;
(b) any contract, or agreement which is not cancelable by
the Acquired Company without penalty on not less than ninety (90) days notice;
(c) any contract which cannot be assigned, requires consent
to be assigned or requires consent to assign as a result of a change in
control;
(d) any contract or agreement containing covenants directly
or explicitly limiting in any material respect the freedom of the Acquired
Company to compete in any line of business or with any person or entity;
(e) any contract or agreement relating to the licensing,
distribution, development, purchase, sale or servicing of its software and
hardware products except in the ordinary course of business consistent with
past practices;
(f) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for borrowing or any
pledge or security arrangement;
(g) any employment contracts, noncompetition agreements or
other agreements with present or former officers, directors, employees or
stockholders of the Acquired Company or Persons related to or affiliated with
such persons, other than at will arrangements in the ordinary course of
business that are terminable without severance obligations;
(h) any stock redemption or purchase agreements or other
agreements affecting or relating to the capital stock of the Acquired Company,
including, without limitation, any agreement with any stockholder of the
Acquired Company which includes anti-dilution rights, registration rights,
voting arrangements, operating covenants or similar provisions;
(i) any pension, profit sharing, retirement or stock options
plans;
(j) any royalty, dividend or similar arrangement based on
the revenues or profits of the Acquired Company or any contract or agreement
involving fixed price or fixed volume arrangements;
(k) any joint venture, partnership, manufacturer,
development or supply agreement;
(l) any acquisition, merger or similar agreement;
(m) any contract with any governmental entity; or
(n) any other material contract not executed in the ordinary
course of business.
All contracts, agreements, leases and instruments set forth in Section
2.14 of the Disclosure Schedule are valid and are in full force and effect and
constitute legal, valid and
14
binding obligations of the Acquired Company and the other parties thereto,
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization and
similar laws relating to the enforcement of creditors' remedies generally and
by general principles of equity. The Founding Stockholders have no knowledge
of any notice or threat to terminate any such contracts, agreements, leases or
instruments, which termination could reasonably be expected to have a Material
Adverse Effect. Neither the Acquired Company nor any other party thereto is in
default in complying with any provisions of any such contract, agreement,
lease or instrument, and no condition or event or fact exists which, with
notice, lapse of time or both, would constitute a default thereunder on the
part of the Acquired Company or any other party thereto, except for any such
default, condition, event or fact that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
2.15 Intellectual Property Assets.
(a) Ownership of Intellectual Property Assets. The Acquired
Company is the exclusive owner of, and has good, valid and marketable title
to, all of the Intellectual Property Assets, as defined below, free and clear
of all mortgages, pledges, charges, liens, equities, security interests, or
other encumbrances or agreements, and has the right to use without payment to
a third party all of the Intellectual Property Assets. Except as described in
Section 2.15(c) of the Disclosure Schedule, no claim is pending or threatened
against the Acquired Company and/or its officers, employees, and consultants
to the effect that the Acquired Company's right, title and interest in and to
the Intellectual Property Assets is invalid or unenforceable by the Acquired
Company. No employee of the Acquired Company has entered into any agreement
that restricts or limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than the Acquired
Company. "Intellectual Property Assets" means: (i) the Products (as such term
is defined in Section 2.15(d) below); (ii) all patents, patent applications,
patent rights, and inventions and discoveries and invention disclosures
(whether or not patented) described in Section 2.15(b) of the Disclosure
Schedule (collectively, "Patents"); (iii) the name Expressclose,"
"Xxxxxxxxxxxx.xxx," all trade names, trade dress, logos, packaging design,
slogans, Internet domain names, registered and unregistered trademarks and
service marks and applications described in Section 2.15(c) of the Disclosure
Schedule (collectively, "Marks"); (iii) all copyrights in both published and
unpublished works, including, without limitation, all compilations, databases
and computer programs, and all copyright registrations and applications, and
all derivatives, translations, adaptations and combinations of the above
described in Section 2.15(d) of the Disclosure Schedule (collectively,
"Copyrights"); (iv) all know-how, trade secrets, confidential or proprietary
information, research in progress, algorithms, data, designs, processes,
formulae, drawings, schematics, blueprints, flow charts, models, prototypes,
techniques, Beta testing procedures and Beta testing results developed by the
Acquired Company (collectively, "Trade Secrets"); (v) all goodwill,
franchises, licenses, permits, consents, approvals, technical information,
lists of telephone numbers and claims of infringement against third parties
arising out of the operation of the Acquired Company (the "Rights"); and (vi)
all customer lists, lists of telephone numbers, business strategies, outlooks,
forecasts and other similar documents described in Section 2.15(f) of the
Disclosure Schedule (collectively, "Other Intangibles"). Section 2.15 of the
Disclosure Schedule constitutes a true, complete and accurate description of
all Intellectual Property Assets.
15
(b) Patents. Section 2.15(b) of the Disclosure Schedule sets
forth a complete and accurate list and summary description of all Patents. All
of the issued Patents are currently in compliance in all material respects
with formal legal requirements (including without limitation payment of
filing, examination and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety (90) days after the date of the Closing. In
each case where a Patent is held by the Acquired Company by assignment, the
assignment has been duly recorded with the U.S. Patent and Trademark Office
and all other jurisdictions of registration. No Patent has been or is now
involved in any interference, reissue, re-examination or opposition
proceeding. There is no potentially interfering patent or patent application
of any third party. All products made, used or sold under the Patents have
been marked with the proper patent notice.
(c) Trademarks. Section 2.15(c) of the Disclosure Schedule
sets forth a complete and accurate list and summary description of all Marks.
All Marks that have been registered with the United States Patent and
Trademark Office and/or any other jurisdiction are currently in compliance in
all material respects with formal legal requirements (including without
limitation the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the date of the Closing. In each case where a Xxxx is
held by the Acquired Company by assignment, the assignment has been duly
recorded with the U.S. Patent and Trademark Office and all other jurisdictions
of registration. Except as described in Section 2.15(c) to the Disclosure
Schedule, no Xxxx has been or is now involved in any opposition, invalidation
or cancellation proceeding and no such action is threatened with respect to
any of the Marks. All products and materials containing a Xxxx xxxx the proper
notice where permitted by law.
(d) Copyrights. Section 2.15(d) of the Disclosure Schedule
sets forth a complete and accurate list and summary description of all
Copyrights material to the operation of the Business. All Copyrights that have
been registered with the United States Copyright Office are identified on such
Schedule. All Copyrights identified in Section 2.15(d) of the Disclosure
Schedule are currently in compliance with formal legal requirements, are valid
and enforceable, and are not subject to any fees or taxes or actions falling
due within ninety (90) days after the date of the Closing. In each case where
a Copyright is held by the Acquired Company by assignment, the assignment has
been duly recorded with the U.S. Copyright Office and all other jurisdictions
of registration. None of the source or object code, algorithms, or structure
included in those computer programs and related documentation used or operated
by the Acquired Company as described in Section 2.15(d) of the Disclosure
Schedule (the "Products") is copied from, based upon, or derived from any
other source or object code, algorithm or structure in violation of the rights
of any third party. A complete list of the Products owned by the Acquired
Company is provided in Section 2.15(d) of the Disclosure Schedule, including,
without limitation, the so-called "XxxxxxxXxxxx.xxx Solution."
(e) Trade Secrets. Except as set forth in Section 2.15(e) of
the Disclosure Schedule, the Acquired Company has taken all reasonable
security measures (including, without limitation, entering into appropriate
confidentiality and nondisclosure agreements with all officers, directors,
employees, and consultants of the Acquired Company and any other persons with
access to the Trade Secrets) to protect the secrecy, confidentiality and value
of all Trade Secrets. There has not been any breach by any party to any such
confidentiality or non-disclosure
16
agreement. The Trade Secrets have not been disclosed by the Acquired Company
to any person or entity other than employees or contractors of the Acquired
Company who had a need to know and use the Trade Secrets in the course of
their employment or contract performance, where such disclosure would likely
have a Material Adverse Effect. Except as set forth on Section 2.15(e) of the
Disclosure Schedule, (i) the Acquired Company has not directly or indirectly
granted any rights or interests in the source code of the Products and (ii)
since the Acquired Company developed the source code of the Products, the
Acquired Company has not provided, licensed or disclosed the source code of
the Products to any person or entity. The Acquired Company has the right to
use, free and clear of claims of third parties, all Trade Secrets. No third
party has asserted that the use by the Company of any Trade Secret violates
the rights of such third party.
(f) Other Intangibles. Section 2.15(f) of the Disclosure
Schedule sets forth a complete and accurate list of Other Intangibles that are
material to the business of the Acquired Company.
(g) Exclusivity of Rights. The Acquired Company has the
exclusive right to use, license, distribute, transfer and bring infringement
actions with respect to the Intellectual Property Assets. Except as set forth
on Section 2.15(g) of the Disclosure Schedule, the Acquired Company (i) has
not licensed or granted to anyone rights of any nature to use any of its
Intellectual Property Assets; and (ii) is not obligated to and does not pay
royalties or other fees to anyone for the Acquired Company's ownership, use,
license or transfer of any of its Intellectual Property Assets.
(h) Licenses Received. Except for software licenses granted
to the Acquired Company for off-the-shelf third party software, all licenses
or other agreements under which the Acquired Company is granted rights by
others in Intellectual Property Assets are listed in Section 2.15(h) of the
Disclosure Schedule. All such licenses or other agreements are in full force
and effect, there is no material default by any party thereto and all of the
rights of the Acquired Company thereunder are freely assignable. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to the Purchaser.
(i) Licenses Granted. All material licenses or other
agreements under which the Acquired Company has granted rights to others in
Intellectual Property Assets are listed in Section 2.15(i) of the Disclosure
Schedule. Except as set forth thereon, all such licenses or other agreements
are in full force and effect, and to the knowledge of the Founding
Stockholders, there is no material default by any party thereto. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to the Company.
(j) Affirmative Obligations. The Acquired Company has no
obligation to any other person to maintain, modify, improve or upgrade the
Products.
(k) Sufficiency. The Intellectual Property Assets constitute
all of the assets of the Company necessary for the operation of the Acquired
Company's business as currently conducted.
(l) Infringement. None of the Products used or operated, nor
any process or know-how used, by the Acquired Company infringes or is alleged
to infringe any (i) United States patent issued as of the date of this
Agreement, or to the knowledge of the Founding
17
Stockholders, infringe or is alleged to infringe any patent rights in Canada,
Japan, Australia and any countries which comprise the European Union; (ii)
trademark, service xxxx or trade name; or (iii) copyright or other proprietary
right or is a derivative work based on the work of any other person; where
such infringement of the intellectual property described in the foregoing
subparagraphs (i), (ii) and (iii) would likely have a Material Adverse Effect.
(m) Nondisclosure Contracts. Each of the nondisclosure
and/or confidentiality agreements entered into between the Acquired Company
and persons in connection with disclosures by the Acquired Company relating to
the Products and the Intellectual Property Assets (the "Nondisclosure
Contracts") is a valid and binding obligation of the Acquired Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization and similar laws relating to
the enforcement of creditors' remedies generally and by general principles of
equity. A complete list of all Nondisclosure Contracts is provided on Section
2.15(m) of the Disclosure Schedule.
2.16 Litigation. Except as set forth in Section 2.16 of the
Disclosure Schedule, there is no litigation or governmental or administrative
proceeding or investigation pending or threatened against the Acquired
Company, or affecting the properties, or assets of the Acquired Company, or,
as to matters related to the Acquired Company, against any officer, director,
stockholder or key employee of the Acquired Company in their respective
capacities in such positions, nor has there occurred any event nor does there
exist any condition on the basis of which any such claim may be asserted;
except in each case for litigation, proceedings, investigations or claims
which individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect or which do not call into question the validity
or hinder the enforceability of this Agreement or any other agreements or
transactions contemplated hereby. Section 2.16 of the Disclosure Schedule
includes a description of all litigation, claims, proceedings or
investigations involving the Acquired Company or any of its officers,
directors, stockholders or key employees in connection with the business of
the Acquired Company occurring, arising or existing since the Acquired
Company's inception.
2.17 Collective Bargaining Agreements and Labor Relations. The
Acquired Company has no collective bargaining agreement with any of its
employees related to the Acquired Company, and except as set forth in Section
2.17 of the Disclosure Schedule, has no contract, agreement or understanding
with any employee which may not be terminated at will. There are no labor
negotiations or labor disputes in process, nor are the Founding Stockholders
aware of any threats or strikes, work stoppages or work slowdowns of any of
the Acquired Company's employees.
2.18 Lists of Certain Employees. Section 2.18 of the Disclosure
Schedule contains a list of all managers, employees, consultants, independent
contractors, brokers and sales persons of the Acquired Company who,
individually, received annual salary and bonus for the year ended December 31,
1999 at an annual rate in excess of $100,000, including the current job title
and aggregate annual salary and bonus of each such individual. The employees
listed in Schedule 4.1(e) are the only employees with respect to whom an
"assignment of inventions" agreement is not required.
2.19 Permits; Compliance with Laws. The Acquired Company has all
franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations,
18
qualifications or other rights and privileges (collectively "Permits")
necessary to permit it to own its property and to conduct its business as it
is presently conducted or proposed to be conducted and all such Permits are
valid and in full force and effect, except where the failure to have or obtain
such a Permit could not be reasonably expected to have a Material Adverse
Effect. No Permit is subject to termination as a result of the execution of
this Agreement or consummation of the transactions contemplated hereby. The
Acquired Company is now and has heretofore been in compliance with all
applicable statutes, ordinances, orders, rules and regulations promulgated by
any federal, state, municipal or other governmental authority which apply to
the conduct of its business, except where the failure to so comply could not
have a Material Adverse Effect. The Acquired Company has never entered into or
been subject to any judgment, consent decree, compliance order or
administrative order with respect to any aspect of the business, affairs,
properties or assets of the Acquired Company or received any request for
information, notice, demand letter, administrative inquiry or formal or
informal complaint or claim from any regulatory agency with respect to any
aspect of the business, affairs, properties or assets of the Acquired Company.
2.20 Employee Benefit Programs.
(a) The Acquired Company does not maintain or contribute to
and since its inception has not maintained or contributed to, any employee
benefit, fringe benefit, stock option, equity-based compensation, phantom
stock, bonus or incentive plan, severance pay policy or agreement, retirement,
pension, profit sharing or deferred compensation plan or agreement, or any
similar plan or agreement (an "Employee Benefit Plan") other than the Employee
Benefit Plans identified and described in Section 2.20 of the Disclosure
Schedule attached hereto. A brief description of each Employee Benefit Plan
has been provided to the Purchaser. The terms and operation of each such
Employee Benefit Plan comply and have heretofore complied in all material
respects with all applicable laws and regulations relating to each such
Employee Benefit Plan. There are no unfunded obligations of the Acquired
Company under any retirement, pension, profit-sharing, deferred compensation
plan or similar program. The Acquired Company is not required to make any
payments or contributions to any Employee Benefit Plan pursuant to any
collective bargaining agreement or any applicable labor relations law, and all
Employee Benefit Plans are terminable at the discretion of the Acquired
Company without liability to the Acquired Company upon or following such
termination. Except as described in Section 2.20 of the Disclosure Schedule,
the Acquired Company has never maintained or contributed to any Employee
Benefit Plan providing or promising any health or other nonpension benefits to
terminated employees other than as required by part 6 of subtitle B of title I
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
With respect to any Employee Benefit Plan, there has occurred no "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the Code,
or breach of any duty under ERISA or other applicable law which could result,
directly or indirectly, in any Taxes, penalties or other liability to the
Acquired Company. No litigation, arbitration or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating
to routine claims for benefits) is pending or, to the knowledge of the
Founding Stockholders, threatened with respect to any such Employee Benefit
Plan.
(b) Each Employee Benefit Plan which has ever been
maintained by the Acquired Company and which has been intended to qualify
under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the IRS regarding its
19
qualification under such section, or the time period for submitting a
determination letter request and adopting retroactive amendments under Code
Section 410(b) and the corresponding regulations is open as of the Closing
Date, and each such Employee Benefit Plan has, in fact, been qualified under
the applicable section of the Code from the effective date of such Employee
Benefit Plan through and including the Closing Date (or, if earlier, the date
that all of such Employee Benefit Plan's assets were distributed). No event or
omission has occurred which would cause any such Employee Benefit Plan to lose
its qualification under the applicable Code section, and each asset held under
any such Employee Benefit Plan may be liquidated or terminated without the
imposition of any redemption for surrender charge or comparable liability.
Except as set forth in Section 2.20 of the Disclosure Schedule, the Acquired
Company has never maintained any Employee Benefit Plan which has been subject
to title IV of ERISA or Code Section 412, including, but not limited to, any
"multiemployer plan" (as defined in Section 3(37) or Section 4001(a)(3) of
ERISA). Each reference to "Company" in this Section 2.20 also refers to any
other entity which would have ever been considered a single employer with the
Acquired Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Acquired Company for purposes of ERISA Section 302(d)(8)(C).
2.21 Environmental Matters. No hazardous waste, substances or
materials or oil or petroleum products have been generated, transported, used,
disposed, stored or treated by the Acquired Company in such a way as to have a
Material Adverse Effect, and no hazardous wastes, substances or materials or
oil or petroleum products have been released, discharged, disposed,
transported, placed or otherwise caused to enter the soil or water in, under
or upon any real property owned, leased or operated by the Acquired Company in
such a way as to have a Material Adverse Effect.
2.22 Insurance. The physical properties, assets, business,
operations, employees, officers and directors of the Acquired Company are
insured to the extent disclosed in Section 2.22 of the Disclosure Schedule,
with copies of such policies having been provided to the Purchaser. Except as
set forth in Section 2.22 of the Disclosure Schedule and claims for health
care benefits in the ordinary course of business, there is no material claim
by the Acquired Company pending under any such policies. Said insurance
policies and arrangements are in full force and effect, all premiums with
respect thereto are currently paid, and the Acquired Company is in compliance
in all material respects with the terms thereof. To the knowledge of the
Founding Stockholders, there is no threatened termination of any such policies
or arrangements.
2.23 Investment Banking; Brokerage. Except as set forth in Section
2.23 of the Disclosure Schedule, there are no claims for investment banking
fees, brokerage commissions, broker's or finder's fees or similar compensation
(exclusive of professional fees to lawyers and accountants) in connection with
the transactions contemplated by this Agreement payable by the Acquired
Company or based on any arrangement or agreement made by or on behalf of the
Acquired Company or the Founding Stockholders.
2.24 Customers. Section 2.24 of the Disclosure Schedule sets forth
the name of each customer of the Acquired Company who accounted for more than
five percent (5%) of the revenues of the Acquired Company for fiscal year 1999
and for the period ended September 30, 2000 (the "Customers"), together with
the names of any persons or entities with which the Company has a material
strategic partnership or similar relationship ("Partners"). The relationships
of the Acquired Company with its Customers and Partners are good commercial
20
working relationships. No Customer or Partner of the Acquired Company has
canceled or otherwise terminated its relationship with the Acquired Company,
or has decreased materially its usage or purchases of the services or products
of the Acquired Company. No Customer, or Partner has, to the knowledge of the
Founding Stockholders, any plan or intention to terminate, to cancel or
otherwise materially and adversely modify its relationship with the Acquired
Company or to decrease materially or limit its usage, purchase or distribution
of the services or products of the Acquired Company.
2.25 Suppliers. The Acquired Company's relationships with its major
suppliers are good commercial working relationships, and, within the last
twelve months, no supplier that the Acquired Company has paid or is under
contract to pay at an annual rate of $100,000 or more has canceled, materially
modified, or otherwise terminated its relationship with the Acquired Company,
or materially decreased its services, supplies or materials to the Acquired
Company, nor, to the knowledge of the Founding Stockholders, does any supplier
have any plan or intention to do any of the foregoing in a manner which would
be reasonably likely to have a Material Adverse Effect. Section 2.25 of the
Disclosure Schedule sets forth a list of all suppliers and vendors of the
Acquired Company to whom during the year 2000 the Acquired Company made
payments at an annual rate of $100,000 or more.
2.26 Investment Intent. Each Founding Stockholder is acquiring the
Purchaser Common Stock for its own account, for investment purposes only, and
not with a view to the distribution thereof. Each Founding Stockholder agrees
that he will not, directly or indirectly, offer, transfer, sell, assign,
pledge, hypothecate or otherwise dispose of any such Purchaser Common Stock
(or solicit any offers to buy, purchase, or otherwise acquire or take a pledge
of the Purchaser Common Stock) except in compliance with the 1933 Act and
applicable state securities laws.
2.27 Disclosure. This Agreement, the Disclosure Schedule and the
certificates and statements furnished pursuant to this Agreement by or on
behalf of the Acquired Company or the Founding Stockholders and all other
information provided by the Acquired Company and the Founding Stockholders to
the Purchaser in connection with the transactions contemplated hereby, do not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they were made. There
is no material fact directly relating to the assets, liabilities, business,
operations, condition (financial or other) or prospects of the Acquired
Company (including any competitive developments, other than facts which relate
to general economic or industry trends or conditions) that materially
adversely affects the same that has not been set forth in this Agreement or in
the Disclosure Schedule.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Founding Stockholders the
following:
3.1 Organization and Corporate Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser has all required corporate power
and authority to carry on its business as presently
21
conducted, to enter into and perform this Agreement and the agreements
contemplated hereby to which it is a party, and to carry out the transactions
contemplated hereby and thereby.
3.2 Authorization and Non-Contravention. This Agreement and all
documents executed pursuant hereto by the Purchaser are valid and binding
obligations of the Purchaser, enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to the enforcement of creditors'
remedies generally and by general principles of equity. The execution,
delivery and performance by the Purchaser of this Agreement and all
agreements, documents and instruments contemplated hereby, the issuance of the
Payment Shares pursuant to Section 1.2(b), the issuance of the Stock Options
pursuant to Section 1.2(c) and the performance of all other transactions
contemplated by this Agreement and such other agreements, documents and
instruments related hereto do not and will not (i) violate, conflict with or
result in a default (whether after the giving of notice, lapse of time or
both) or loss of benefit under any contract or obligations to which the
Purchaser is a party or by which any of its assets are bound, or any provision
of its Articles of Incorporation or Bylaws, or cause the creation of any Claim
upon any of assets of the Purchaser which would have, or would be reasonably
likely to have a Purchaser Material Adverse Effect (as defined in Section
7.10); (ii) violate or result in a violation of, or constitute a default
(whether after the giving of notice, lapse of time or both) under, any
provision of any law, regulation or rule, or any order of, or any restriction
imposed by, any court or other governmental agency applicable to the
Purchaser, any of which would have a Purchaser Material Adverse Effect; (iii)
require from the Purchaser any notice to, declaration or filing with, or
consent or approval of any governmental authority or any third party (except
that which has been waived or obtained); or (iv) violate or result in a
violation of, or constitute a default (whether after the giving of notice,
lapse of time or both) under, accelerate any obligation under, or give rise to
a right of termination of, any agreement, permit, license or authorizations to
which the Purchaser is a party or by which the Purchaser is bound.
3.3 Issuance of Securities. The Payment Shares to be delivered by
the Purchaser to the Founding Shareholders pursuant to Section 1.2(b) and the
shares of Purchaser Common Stock to be issued upon the exercise of the Stock
Options to be issued by the Purchaser pursuant to Section 1.2(c), are duly
authorized and, when issued in accordance with the terms of this Agreement and
the terms of the Stock Options, will be validly issued, fully paid and
nonassessable and free and clear of all Claims, except for any Claims created
by the Founding Stockholders and restrictions on transferability imposed by
federal and state securities laws. Upon the delivery to the Founding
Stockholders of the certificates evidencing the Payment Shares, the Founding
Stockholders shall acquire valid title to the Payment Shares.
3.4 SEC Filings. The Purchaser has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents required to be filed by it prior to the date hereof under each of
the Securities Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the respective rules
and regulations thereunder, (i) all of which, as amended, if applicable,
complied when filed in all material respects with all applicable requirements
of the applicable Act and the rules and regulations thereunder, and (ii) none
of which, as amended, if applicable, including any financial statements, notes
thereto or schedules included therein, contains any untrue statement of
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not
22
misleading. The consolidated statements of financial position and the related
consolidated statements of income, shareholders' equity and cash flows
(including the related notes thereto) of the Purchaser (the "Purchaser
Financial Statements") included in the forms, statements, reports and
documents filed by the Purchaser with the SEC since December 31, 1999 (the
"Purchaser SEC Reports") comply as to form in all material respects with
applicable accounting requirements and the rules and regulations of the SEC
with respect thereto, are in accordance with the books and records of the
Purchaser, have been prepared in accordance with GAAP applied on a basis
consistent with prior periods, and present fairly the consolidated financial
position of the Purchaser and its subsidiaries as of their respective dates,
and the consolidated results of their operations and their cash flows for the
periods presented therein. The authorized capital stock of the Purchaser is as
set forth in the Purchaser SEC Reports.
3.5 No Material Adverse Change. Except as disclosed in the
Purchaser SEC Reports, and except for the transactions contemplated hereby, no
event has occurred that would require the Purchaser to file with the SEC a
Current Report on Form 8-K for which a Current Report on Form 8-K has not been
filed by the Purchaser.
3.6 No Proceedings. There are no legal or governmental proceedings
pending to which the Purchaser or any of its subsidiaries is a party or of
which any property of the Purchaser or any of its subsidiaries is subject,
other than as set forth in the Purchaser SEC Reports and other than litigation
or governmental proceedings incident to the kind of business conducted by the
Purchaser and its subsidiaries which, if determined adversely to the Purchaser
and its subsidiaries, would not individually or in the aggregate result in a
Purchaser Material Adverse Effect; and, to the knowledge of the Purchaser, no
such proceedings are threatened by governmental authorities or others.
3.7 Investment Intention; Legend. The Purchaser is purchasing the
shares of Seller Common Stock for its own account, for investment purposes
only, and not with a view to the distribution thereof. The Purchaser agrees
that it will not, directly or indirectly, offer, transfer, sell, assign,
pledge, hypothecate or otherwise dispose of any such Seller Common Stock (or
solicit any offers to buy, purchase, or otherwise acquire or take a pledge of
the Seller Common Stock) except in compliance with the 1933 Act. The Purchaser
acknowledges and agrees that the following legend shall be typed on each
certificate evidencing the Shares of Seller Common Stock sold hereunder to the
Purchaser:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
3.8 Investment Banking; Brokerage Fees. The Purchaser has not
incurred or become liable for any investment banking fees, brokerage
commissions, broker's or finder's fees or
23
similar compensation (exclusive of professional fees to lawyers and
accountants) in connection with the transactions contemplated by this
Agreement.
SECTION 4. CLOSING CONDITIONS AND DELIVERIES.
4.1 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation of the Purchaser to consummate the Closing shall be
subject to the satisfaction on or prior to the Closing of each of the following
conditions:
(a) Examination and Investigation. (i) The Purchaser shall
have been entitled, through its employees, representatives, agents and
contractors, to make an investigation and examination of the assets,
properties, business and operations of the Acquired Company. Any such
investigation and examination shall have been conducted at reasonable times,
under reasonable circumstances and at the Purchaser's expense. Investigation
by the Purchaser shall not diminish or obviate any of the representations,
warranties, covenants or agreements of the Founding Stockholders under this
Agreement. In order that the Purchaser may have had full opportunity to make
such physical, business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of the Acquired
Company, the Acquired Company shall have made available or shall have caused
to have been made available to the representatives of the Purchaser during
such period all such information and copies of such documents concerning the
affairs of the Acquired Company as such representatives may have reasonably
requested and shall have permitted the agents, contractors and representatives
of the Purchaser reasonable access to the properties of the Acquired Company;
and
(ii) The Purchaser shall have received a Disclosure
Schedule in form and substance reasonably satisfactory to it.
(b) Redemption of Seller Common Stock Owned by Household and
Cancellation of Option. The Acquired Company shall have entered into a Stock
Redemption Agreement, on terms and conditions satisfactory to Purchaser, (the
"Household Agreement") with Household pursuant to which (i) the Acquired
Company shall have agreed to redeem the Household Shares pursuant to the terms
and conditions set forth in the Household Agreement, and (ii) Household shall
have agreed to cancel all of its rights relating to Seller Common Stock
pursuant to (a) its option to acquire 750,000 shares of Common Stock of
XxxxxxxXxxxx.xxx, (b) that certain Securities Purchase Agreement between the
Acquired Company and Household dated as of January 7, 2000, and (c) all
agreements and documents related thereto. In consideration of the foregoing,
the Acquired Company, Purchaser and Household shall enter the arrangements
described in Exhibit C attached hereto.
(c) Employment Contracts. The Founding Stockholders shall
execute employment agreements in form and substance reasonably acceptable to
Purchaser (including as to the items disclosed in Schedule 10(a)) and
substantially in the form of Exhibit D; and the key employees identified on
Schedule 4.1(c) attached hereto (collectively, the "Key Employees") shall
execute employment agreements in form and substance reasonably acceptable to
Purchaser.
(d) Exchange Agreements. Certain of the employees listed on
Schedule 4.1(d) (as indicated thereon) shall have entered into "Option
Exchange Agreements" with the Acquired Company and Purchaser, in form and
substance reasonably acceptable to Purchaser and
24
substantially in the form of Exhibit E attached hereto pursuant to which they
shall exchange their outstanding options to purchase Seller Common Stock for
options to acquire that number of shares of Purchaser Common Stock set forth
opposite their respective names in Schedule 4.1(d) hereto. The remaining
employees listed on Schedule 4.1(d) (as indicated thereon) shall have entered
into "Option Receipt Agreements" with the Acquired Company and Purchaser, in
form and substance reasonably satisfactory to Purchaser, pursuant to which
such employees will agree to accept options to acquire that number of shares
of Purchaser Common Stock set forth opposite their respective names in
Schedule 4.1(d) hereto in return for certain agreements on the part of such
employees.
(e) Confidentiality Agreement. The employees of the
Acquired Company identified on Schedule 4.1(e) hereof shall execute and
deliver to the Purchaser a confidentiality agreement substantially in the form
of Exhibit F attached hereto.
(f) Authorization. The Board of Directors and stockholders
of the Acquired Company shall have duly adopted resolutions in form and
substance reasonably satisfactory to the Purchaser and shall have taken all
action necessary for the purpose of authorizing the Acquired Company to
consummate all of the transactions contemplated hereby;
(g) Approvals, Consents and Waivers. The Acquired Company
and the Founding Stockholders shall have made all filings with and
notifications of governmental authorities, regulatory agencies and other
entities required to be made by such parties in connection with the execution
and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the business of the
Acquired Company subsequent to the Closing and the Purchaser shall have
received copies of all authorizations, waivers, consents and permits, in form
and substance reasonably satisfactory to the Purchaser, including any and all
notices, consents and waivers required from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required to permit the continuation of
the business of the Acquired Company and the consummation of the transactions
contemplated by this Agreement and to avoid a breach, default, termination,
acceleration or modification of any indenture, loan or credit agreement or any
other material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award as a result of, or in connection with, the execution and
performance of this Agreement;
(h) Certificates of Good Standing and Qualification. The
Acquired Company and the Founding Stockholders shall deliver certificates
issued by (i) the Secretary of State of Iowa certifying that the Acquired
Company has legal existence and is in good standing; and (ii) the Secretary of
State (or similar authority) of each jurisdiction in which the Acquired
Company has qualified to do business as a foreign corporation (or is required
to be so qualified) as to such foreign qualification;
(i) Secretary's Certificate. The Acquired Company shall
deliver a certificate executed by the Secretary of the Acquired Company
certifying (i) the names of the officers of the Acquired Company authorized to
sign this Agreement and the other agreements, documents and instruments
executed by the Acquired Company pursuant hereto, together with the true
signatures of such officers; (ii) copies of consent actions taken by the Board
of Directors and
25
stockholders of the Acquired Company authorizing the appropriate officers of
the Acquired Company to execute and deliver this Agreement and all agreements,
documents and instruments executed by the Acquired Company pursuant hereto,
and to consummate the transactions contemplated hereby and thereby;
(j) Bringdown. Each Founding Stockholder shall have
delivered a certificate confirming that (i) the representations of the
Founding Stockholders remain true, complete and accurate as of the Closing
Date and (ii) the Founding Stockholders have performed all of the agreements
and covenants required to be performed by them on or before the Closing Date.
(k) Opinion of Counsel. The Acquired Company and the
Founding Stockholders shall deliver an opinion of Winthrop & Weinstine, P.A.,
counsel for the Acquired Company and each of the Founding Stockholders, dated
as of the Closing Date, substantially in the form of Exhibit G attached
hereto;
(l) Stock Certificates. The Founding Stockholders shall
deliver or cause to be delivered to the Purchaser share certificates
representing the Shares, together with share transfer powers duly endorsed in
blank for transfer;
(m) Other Documents and Certificates. The Acquired Company
and the Founding Stockholders shall deliver such other supporting documents
and certificates as the Purchaser may reasonably request and as may be
required pursuant to this Agreement;
(n) All Proceedings Satisfactory. All corporate and other
proceedings of the Acquired Company taken prior to or at the Closing in
connection with the transactions contemplated by this Agreement, and all
documents and evidences incident thereto, shall be reasonably satisfactory in
form and substance to the Purchaser;
(o) No Litigation. No action or proceeding by or before any
court, administrative body or governmental agency shall have been instituted
or threatened which seeks to enjoin, restrain or prohibit, or might result in
damages in respect of, this Agreement or the complete consummation of the
transactions contemplated by this Agreement. No law or regulation shall be in
effect and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains or prohibits this Agreement
or the complete consummation of the transactions contemplated in this
Agreement;
(p) No Violation or Injunction. The consummation of the
transactions contemplated by this Agreement shall not be in violation of any
law or regulation, and shall not be subject to any injunction, stay or
restraining order; and
(q) Board Resignation. The directors of the Acquired Company
shall have tendered their resignation from the Board of Directors of the
Acquired Company; provided, however, that one of the Founding Stockholders to
be selected by the Founding Stockholders shall be appointed at Closing to
serve on the Acquired Company's Board of Directors for a period of one (1)
year after Closing, and the remaining two Founding Stockholders shall be
entitled to receive notices of, attend and observe meetings of the Acquired
Company's Board occurring after Closing for a period of one (1) year after
Closing.
26
4.2 Conditions Precedent to the Obligation of the Acquired Company
and Founding Stockholders to Close. The obligation of the Acquired Company and
the Founding Stockholders to consummate the Closing shall be subject to the
satisfaction on or prior to the Closing of each of the following conditions:
(a) No Litigation. No action or proceeding by or before any
court administrative body or governmental agency shall have been instituted or
threatened which seeks to enjoin, restrain or prohibit, or might result in
damages in respect of, this Agreement or the complete consummation of the
transactions contemplated by this Agreement. No law or regulation shall be in
effect and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains or prohibits this Agreement
or the complete consummation of the transactions contemplated in this
Agreement;
(b) No Violation or Injunction. The consummation of the
transactions contemplated by this Agreement shall not be in violation of any
law or regulation, and shall not be subject to any injunction, stay or
restraining order;
(c) Reimbursement of Fees. The Purchaser shall have
reimbursed the Acquired Company for reasonable and customary legal expenses
associated with the preparation and review of this Agreement and all
agreements and documents related hereto and the consummation of the
transactions contemplated hereby and thereby.
(d) Payment of the Purchase Price. The Purchaser shall have
paid the Purchase Price pursuant to Section 1.2 hereof.
(e) Issuance of Options. The Purchaser shall have entered
into Option Exchange Agreements with all employees listed on Schedule 4.1(d).
(f) Bringdown. Purchaser shall have delivered a certificate
executed by an officer of Purchaser confirming that (i) the representations of
Purchaser remain true, complete and accurate as of the Closing and (ii)
Purchaser has performed all of the agreements and covenants required to be
performed by it on or before the Closing Date.
(g) Opinion of Counsel. The Purchaser shall deliver an
opinion of Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP reasonably satisfactory to the
Purchaser, dated as of the Closing Date.
SECTION 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
5.1 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants, and agreements of the Acquired
Company, the Founding Stockholders and the Purchaser made in this Agreement,
in the Disclosure Schedule delivered to the Purchaser and all agreements,
documents and instruments executed and delivered in connection herewith (a)
shall be deemed to have been relied upon by the party or parties to whom they
are made, and shall survive the Closing regardless of any investigation on the
part of such party or its representatives,
27
and (b) shall bind the parties' successors and assigns, whether so expressed
or not, and, except as otherwise provided in this Agreement, all such
representations, warranties, covenants and agreements shall inure to the
benefit of the parties and their respective successors and permitted assigns,
whether so expressed or not. Notwithstanding the foregoing, the
representations and warranties contained herein shall expire and terminate and
be of no further force and effect after the date which is three (3) years
following the Closing , except that any written claim for breach thereof made
prior to such expiration date and delivered to the party against whom such
indemnification is sought shall survive thereafter and, as to any such claim,
such applicable expiration will not affect the rights to indemnification of
the party making such claim.
5.2 Indemnification. Each of the Founding Stockholders, on his or
her own behalf and on behalf of the Founding Stockholder's successors,
executors, administrators, estate, heirs and permitted assigns (collectively,
the "Stockholder Indemnifying Parties"), jointly and severally, agrees to
defend, indemnify and hold the Purchaser, its Affiliates, stockholders,
directors, officers, employees and agents and each person who controls any of
them within the meaning of Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(collectively, the "Indemnified Parties" and, individually, an "Indemnified
Party") harmless from and against any and all damages, liabilities, losses,
Taxes, penalties, reasonable costs and expenses (including, without
limitation, reasonable fees of a single counsel representing the Indemnified
Parties), as the same are incurred, of any kind or nature whatsoever (whether
or not arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any such Indemnified Party( individually, a "Loss" and,
collectively, "Losses") based upon, arising out of, or by reason of (i) any
breach of any representation or warranty made by the Founding Stockholders in
Section 2 of this Agreement (including, without limitation, in the Disclosure
Schedule) or (ii) any breach of any agreement or covenant of the Founding
Stockholders set forth herein.
5.3 Notice; Payment of Losses; Defense of Claims.
(a) An Indemnified Party shall give written notice of a Loss
to the party required to provide such indemnification hereunder (individually
and collectively, an "Indemnifying Party") promptly after becoming aware
thereof , which notice shall specify in reasonable detail the amount, nature
and source of the claim and include therewith copies of any notices or other
documents received from third parties with respect to such claim ; provided,
however, that failure to give such notice shall not limit the right of an
Indemnified Party to recover indemnity or reimbursement except to the extent
that the Indemnifying Party suffers any prejudice or harm with respect to such
claim as a result of such failure. The Indemnified Party shall also provide
the Indemnifying Party with such further information concerning any such
claims as the Indemnifying Party may reasonably request by written notice.
(b) Within thirty (30) calendar days after receiving notice
of a claim for indemnification or reimbursement, the Indemnifying Party shall,
by written notice to the Indemnified Party, either (i) concede or deny
liability for the claim in whole or in part, or (ii) in the case of a claim
asserted by a third party, advise that the matters set forth in the notice
are, or will be, subject to contest or legal proceedings not yet finally
resolved. If the Indemnifying Party concedes liability in whole or in part, it
shall, within twenty (20) business days of such concession, pay the amount of
the claim to the Indemnified Party to the extent of the liability
28
conceded. Any such payment shall be made in immediately available funds equal
to the amount of such claim so payable. If the Indemnifying Party denies
liability in whole or in part or advises that the matters set forth in the
notice are, or will be, subject to contest or legal proceedings not yet
finally resolved, then the Indemnifying Party shall make no payment (except
for the amount of any conceded liability payable as set forth above) until the
matter is resolved in accordance with this Agreement.
(c) In the case of any third party claim, if within twenty
(20) days after receiving the notice described in the preceding paragraph
5.3(a), the Indemnifying Party (i) gives written notice to the Indemnified
Party stating that the Indemnified Party would be liable under the provisions
hereof for indemnity in the amount of such claim if such claim were valid and
that the Indemnifying Party disputes and intends to defend against such claim,
liability or expense at the Indemnifying Party's own cost and expense and (ii)
provides assurance reasonably acceptable to such Indemnified Party that such
indemnification will be paid fully and promptly if required and such
Indemnified Party will not incur cost or expense during the proceeding, then
counsel for the defense shall be selected by the Indemnifying Party (subject
to the consent of such Indemnified Party, which consent shall not be
unreasonably withheld) and such Indemnifying Party shall not be required to
make any payment with respect to such claim, liability or expense as long as
the Indemnifying Party is conducting a good faith and diligent defense at its
own expense. If the Indemnifying Party assumes such defense in accordance with
the preceding sentence, it shall have the right, with the consent of such
Indemnified Party, which consent shall not be unreasonably withheld, to settle
all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the Indemnifying Party's obligation to
indemnify such Indemnified Party therefor will be fully satisfied by payment
of money by the Indemnifying Party pursuant to a settlement which includes a
complete release of such Indemnified Party. The Indemnifying Party shall keep
such Indemnified Party apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall
furnish such Indemnified Party with all documents and information that such
Indemnified Party shall reasonably request and shall consult with such
Indemnified Party prior to acting on major matters, including settlement
discussions. Notwithstanding anything herein stated, such Indemnified Party
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the Indemnifying Party and
the Indemnified Party and representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
reasonable expense of separate counsel for such Indemnified Party shall be
paid by the Indemnifying Party provided that such Indemnifying Party shall be
obligated to pay for only one counsel for the Indemnified Party in any
jurisdiction. If no such notice of intent to dispute and defend is given by
the Indemnifying Party, or if such diligent good faith defense is not being or
ceases to be conducted, such Indemnified Party may undertake the defense of
(with counsel selected by such Indemnified Party), and shall have the right to
compromise or settle such claim, liability or expense (exercising reasonable
business judgment) with the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. If such claim, liability or expense is one
that by its nature cannot be defended solely by the Indemnifying Party, then
such Indemnified Party shall make available all information and assistance
that the Indemnifying Party may reasonably request and shall cooperate with
the Indemnifying Party in such defense.
5.4 Limitation on Contribution and Certain Other Rights. Each of
the Founding Stockholders hereby agrees that if, following the Closing, any
payment is made by such
29
Founding Stockholder, or otherwise becomes due from such Founding Stockholder,
pursuant to Section 5.2 in respect of any Losses (a "Loss Payment"), such
Founding Stockholder shall have no rights against the Acquired Company, or any
director, officer or employee thereof (in their capacity as such), whether by
reason of contribution, indemnification, subrogation or otherwise, in respect
of any such Loss Payment, and shall not take any action against the Acquired
Company or any such person with respect thereto.
5.5 Purchaser's Right to Withhold Earn-Out. Without prejudice to
any other remedies against the Founding Stockholders, if the Purchaser shall
have a claim for a Loss, it shall have the right, until complete and final
resolution of such claim, to withhold any portion of the Earn-Out that remains
due under Section 1.3 hereof, in an amount equal to such Loss. Upon complete
and final resolution of any such claim, and without prejudice to Purchaser's
other remedies, Purchaser shall have the right to offset its Loss against the
Purchase Price previously withheld and the balance, if any, shall be paid to
the Founding Stockholders.
SECTION 6. COVENANTS AND AGREEMENTS.
6.1 Covenants of the Purchaser. The Purchaser agrees that it shall
comply with the following covenants from and after the Closing:
(a) Cash Investment. (i) During the twelve (12) months
following the Closing, the Purchaser shall invest up to Five Million and
00/100 Dollars ($5,000,000.00) in cash (the "Cash Investment") to fund the
operations of the Acquired Company, including therein the amount funded by
Purchaser at Closing pursuant to subparagraph (a)(ii). The officers of the
Acquired Company shall have the right to commit individual expenditures, not
to exceed Two Hundred Thousand and 00/100 Dollars ($200,000.00) per
expenditure, so long as such expenditures, together with the amounts funded
pursuant to Section 6(a)(ii) and any expenditures in excess of $200,000 (for
which approval of the Acquired Company's Board of Directors shall be
required), do not exceed in the aggregate the Cash Investment. The officers
shall promptly report to such Board of Directors any expenditures so
committed.
(ii) Promptly after Closing, Purchaser shall fund the
expenditures of the Acquired Company set forth in Schedule 6 hereto by
transferring the aggregate amount set forth in Schedule 6 to the Acquired
Company's account by paying directly the expenditures identified on Schedule
6, as determined by Purchaser in its discretion.
(b) Automated Valuation Warranty Product. As soon as
practicable after Closing, but no later than December 31, 2000, the Purchaser
shall provide the automated valuation warranty product to the Acquired Company
on terms and conditions reasonably satisfactory to the Purchaser and the
Founding Stockholders, provided that such terms and conditions shall be
reasonably consistent with market terms applicable to comparable products. The
Purchaser understands the importance of its agreement and covenant hereunder
to provide the automated valuation warranty product to the Acquired Company
and that such agreement and covenant is essential to the performance of the
Business.
6.2 Registration Statement on Form S-3.
30
(a) As soon as reasonably practicable after the Closing, but
in any event on or before December 31, 2000, the Purchaser shall file with the
SEC a Registration Statement on Form S-3, any successor short-form
registration statement promulgated by the SEC, or any other appropriate form
of registration statement ("Registration Statement") to register the resale by
the Founding Stockholders of the "Registrable Securities" under the 1933 Act
(as defined in Paragraph (e) below). After the Registration Statement is
filed, the Purchaser shall use its best efforts to (i) have the Registration
Statement declared effective by the SEC, (ii) thereafter prepare and file, as
the Purchaser shall determine may be required under the 1933 Act and the rules
and regulations thereunder, a prospectus supplement or supplements to the
prospectus contained in the Registration Statement or a post-effective
amendment or amendments to the Registration Statement and, with respect to any
post-effective amendment, cause such post-effective amendment to be declared
effective by the SEC, and (iii) maintain the effectiveness of the Registration
Statement until the earlier of (A) the date two (2) years from the date of
effectiveness of the Registration Statement, or (B) the sale of all of the
Registrable Securities pursuant to the Registration Statement. The Purchaser
further agrees that it will (1) furnish to the Founding Stockholders such
reasonable number of copies of the Registration Statement, preliminary
prospectus and prospectus supplement, final prospectus and prospectus
supplement and such other documents as such Founding Stockholders may
reasonably request in order to facilitate the public offering of the
Registrable Securities, (2) use its best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under such state
securities or blue sky laws of such jurisdictions as the requesting Founding
Stockholder may reasonably request in writing within twenty (20) days
following the original filing of the Registration Statement, except that the
Purchaser shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified, (3) notify the Founding
Stockholders, promptly after it shall receive notice thereof, of the time when
the Registration Statement has become effective or a supplement to any
prospectus forming a part of the Registration Statement has been filed, (4)
notify the Founding Stockholders promptly of any request by the SEC for the
amending or supplementing of the Registration Statement or prospectus or
prospectus supplement or for additional information, (5) prepare and file with
the SEC, promptly upon the request of any Founding Stockholder, any amendments
or supplements to the Registration Statement or prospectus or prospectus
supplement which, in the opinion of counsel for Purchaser, is required under
the 1933 Act or the rules and regulations thereunder in connection with the
distribution and resale of the Registrable Securities by such Founding
Stockholder, (6) prepare and promptly file with the SEC and promptly notify
the Founding Stockholders of the filing of such amendment or supplement to the
Registration Statement or prospectus or prospectus supplement as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
1933 Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus or prospectus supplement as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, and (7) advise the
Founding Stockholders, promptly after Purchaser shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening
of any proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued. Each Founding Stockholder hereby agrees to
cooperate with all reasonable requests by Purchaser necessary to effectuate
the preparation and filing of the Registration Statement and agrees to
31
provide the Purchaser with all information required in connection therewith in
a timely manner and to comply with the procedures specified in Section 6.2(b)
below.
(b) Prior to any sales of Registrable Securities under the
Registration Statement by a Founding Stockholder, the Founding Stockholder
contemplating the sales will provide Purchaser with written notice of such
intention, addressed to Purchaser's Chief Financial Officer (a "Sale Notice").
Purchaser will notify such Founding Stockholder within two (2) business days
following receipt of the Sale Notice as to whether sales by the Founding
Stockholder may be made or will be limited as provided below. Upon notice from
Purchaser permitting sales by the Founding Stockholder, for a period beginning
on the date of receipt by the Founding Stockholder of such notice and ending
45 days thereafter (the "Window Period"), the Founding Stockholder may offer
and sell Registrable Securities from time to time pursuant to the Registration
Statement. Anything in this Agreement to the contrary notwithstanding, the
ability of a Founding Stockholder to sell Registrable Securities pursuant to
the Registration Statement and this Agreement shall be suspended in the event
that, upon receiving a Sale Notice or during any Window Period, Purchaser's
Chief Financial Officer certifies to the Founding Stockholders that, in the
good faith judgment of such officer (upon consultation to the extent
practicable with the Board of Directors of Purchaser), (x) the sale would
interfere in any material respect with any financing, acquisition, corporate
reorganization or other similar material transaction under consideration by
Purchaser, or (y) there is some other material development relating to the
condition (financial or otherwise) of Purchaser that has not been generally
publicly disclosed and as to which Purchaser deems advisable upon the advice
of counsel at the time of the Sale Notice not to publicly disclose; provided,
however, that upon any such event specified in (x) or (y) above, Purchaser may
not suspend sales by Founding Stockholders under the Registration Statement
for a period of more than sixty (60) days from the date of such certification
by Purchaser's Chief Financial Officer. If, upon receipt of the Sale Notice,
Purchaser has reasonably determined that it is necessary to file and cause to
be declared effective a post-effective amendment to the Registration Statement
or file a new or amended prospectus supplement or to otherwise cause
disclosure to be made under the 1934 Act and incorporated by reference into
the Registration Statement, and Purchaser determines not to rely on the
preceding sentence in order to delay the making of such disclosure, Purchaser
will take such action within seven (7) business days following receipt of the
applicable Sale Notice.
(c) In connection with the registration of the resale of the
Registrable Securities, Purchaser shall bear the following fees, costs and
expenses: all registration, filing, National Association of Securities
Dealers, Inc. and New York Stock Exchange or other exchange listing fees,
printing expenses, fees and disbursements of counsel and accountants for
Purchaser, all internal Purchaser expenses of the Purchaser and all legal fees
and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the resale of the Registrable
Securities are to be registered or qualified. Fees and disbursements of
counsel and accountants for the Founding Stockholders, any underwriting
discounts and commissions and transfer taxes relating to the resale of the
Registrable Securities included in the offering, and any other expenses
incurred by the Founding Stockholders not expressly included above, shall be
borne by the Founding Stockholders.
(d) With respect to such registration:
32
(i) Subject to compliance by a holder of Registrable
Securities with Section 6.2(b), Purchaser will indemnify and hold harmless
each holder of Registrable Securities which are included in the Registration
Statement, and any underwriter (as defined in the 0000 Xxx) for such holder
and each person, if any, who controls such holder or such underwriter within
the meaning of the 1933 Act, from and against, and will reimburse such holder
and each such underwriter and controlling person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any prospectus or prospectus
supplement contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that Purchaser will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information
furnished by such holder, such underwriter or such controlling person in
writing specifically for use in the preparation thereof.
(ii) Each holder of Registrable Securities which are
included in the Registration Statement will indemnify and hold harmless
Purchaser, its directors and officers, and any controlling person thereof and
any underwriter from and against, and will reimburse Purchaser, its directors
and officers, and any such controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which Purchaser or
any controlling person and any underwriter may become subject under the 1933
Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue or alleged untrue statement of any material
fact contained in the Registration Statement, any prospectus or prospectus
supplement contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in strict conformity with written information
furnished by such holder specifically for use in the preparation thereof.
(e) For the purposes of this Section 6.2, the term
"Registrable Securities" shall mean (i) the Payment Shares and (ii) any
Purchaser Common Stock or other securities of the Purchaser issued or issuable
with respect to such Payment Shares by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or a sale of all or substantially all of
Purchaser's assets.
(f) The Founding Stockholders acknowledge and agree that the
following legend shall be typed on each certificate evidencing any of the
shares of Purchaser Common Stock issued hereunder held at any time by the
Founding Stockholders:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE
33
OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2)
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
ACT RELATING TO THE DISPOSITION OF SECURITIES AND (3) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS
OF A STOCK PURCHASE AGREEMENT DATED AS OF OCTOBER 27, 2000,
INCLUDING THEREIN CERTAIN RESTRICTIONS REQUIRING THE HOLDER TO
NOTIFY THE COMPANY PRIOR TO ANY SALE. A COMPLETE AND CORRECT
COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
6.3 Rule 144 Reporting; Legal Opinions. With a view to making
available the benefits of certain rules and regulations of the SEC that may
permit the resale of Purchaser Common Stock to the public without
registration, for a period of two (2) years after the Closing, Purchaser
agrees to use its commercially reasonable efforts to make and keep "current
public information" (as contemplated by Rule 144 of the Securities and
Exchange Commission under the Securities Act of 1933 ("Rule 144")) regarding
Purchaser available. In addition, upon the request of any Founding
Stockholder, the Purchaser shall cause a legal opinion or opinions to be
issued as soon as practicable after such request is made (but not more than
five (5) business days after such request is made) to the effect that the
Payment Shares may be sold in a transaction pursuant to Rule 144.
SECTION 7. GENERAL.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be (i) delivered personally, (ii) sent
by facsimile transmission (provided that a confirmation copy shall be sent the
same day for delivery by a reputable overnight international courier service),
(iii) sent by a certified or registered mail, postage prepaid, or (iv) sent by a
reputable overnight or international courier service. Any such notice shall be
deemed given when so delivered personally or sent by facsimile transmission
(provided that a confirmation copy shall be sent the same day for delivery by a
reputable overnight international courier service) or if mailed, five (5)
business days after the date of deposit in the United States mail, or if sent by
overnight courier service, five (5) business days after delivery to such courier
service. Notice of change of address shall also be governed by this Section 7.
Notices and other communications shall be addressed as follows:
(i) If to the Purchaser:
Radian Group, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
34
Attn: General Counsel
with a copy to
Xxxxxxxx Xxxxxxxx Xxxxx and Xxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esq.
(ii) If to the Company:
XxxxxxxXxxxx.xxx, Inc.
000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Xx.
with a copy to
Winthrop & Weinstine, P.A.
3000 Xxxx Xxxxxxxx Plaza
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxxxxx, Esq.
(iii) If to the Founding Stockholders:
Xx. Xxxxxx X. Xxxxxxx, Xx.
000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Xx. Xxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Xx. Xxxxxx Xxx Xxxxxxx, Xx.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
with copies to
Winthrop & Weinstine, P.A.
3000 Xxxx Xxxxxxxx Plaza
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx, Esq.
Any party may by notice given in accordance with this Section 7.1 to the other
parties designate another address or person for receipt of notice hereunder.
35
7.2 Publicity. The Purchaser, the Acquired Company, and the
Founding Stockholders shall not issue any press release or make any public
disclosure regarding this Agreement or the transactions contemplated hereby
unless such press release or public disclosure is approved by all other
parties to this Agreement. Notwithstanding the foregoing, each of the parties
hereto may, in documents required to be filed by it with the SEC or other
regulatory bodies, make such statements with respect to this Agreement or the
transactions contemplated hereby as each may be advised by legal counsel is
legally necessary or advisable.
7.3 Waivers and Amendments.
(a) For the purposes of this Agreement and all agreements,
documents and instruments executed pursuant hereto, no course of dealing
between or among any of the parties hereto and no delay on the part of any
party hereto in exercising any rights hereunder or thereunder shall operate as
a waiver of the rights hereof and thereof. No covenant or provision hereof may
be waived otherwise than by a written instrument signed by the party or
parties so waiving such covenant or other provision as contemplated herein.
(b) This Agreement may be amended, superseded, canceled,
renewed or extended only by a written instrument signed by all parties hereto.
7.4 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State
of Delaware, without giving effect to conflict of laws principles thereof.
7.5 Section Headings and Gender; Construction. The descriptive
headings in this Agreement have been inserted for convenience only and shall
not be deemed to limit or otherwise affect the construction of any provision
thereof or hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
and vice versa, as the context may require. The parties have participated
jointly in the negotiation and drafting of this Agreement and the other
agreements, documents and instruments executed and delivered in connection
herewith with counsel sophisticated in investment transactions. In the event
an ambiguity or question of intent or interpretation arises, this Agreement
and the agreements, documents and instruments executed and delivered in
connection herewith shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement and the
agreements, documents and instruments executed and delivered in connection
herewith.
7.6 Severability of Provisions. If any provision or any portion of
any provision of this Agreement or the application of any such provision or
any portion thereof to any person or circumstance shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion
of such provision as is held invalid or unenforceable to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
7.7 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns. This
36
Agreement is not assignable without the prior written consent of the other
party, except that the Purchaser may assign its rights hereunder to any direct
or indirect wholly-owned subsidiary of the Purchaser.
7.8 Counterparts; Signatures. This Agreement may be executed
simultaneously in any number of counterparts, each of which when so executed
and delivered shall be taken to be an original; but such counterparts shall
together constitute but one and the same document. The facsimile signatures of
the parties hereto shall be deemed to be original signatures, provided that
the original signature page is received by the other parties to this Agreement
within five (5) business days of the date of signing.
7.9 Entire Agreement; Integration. This Agreement, including the
exhibits, documents and instruments referred to herein or therein, constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, including, without limitation, the provisions of the
letter of intent between the parties hereto in respect of the transactions
contemplated herein, which provisions of the letter of intent shall be
completely superseded by the representations, warranties, covenants and
agreements of the Company contained herein.
7.10 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Affiliate" of a person shall mean (i) with respect to
an individual, any member of such individual's family (including any child,
step-child, parent, step-parent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law);
(ii) with respect to an entity, any executive officer, director, controlling
stockholder, or controlling partner or investor in such entity or in any
affiliate of such entity; and (iii) with respect to a person or entity, any
person or entity which directly or indirectly controls, is controlled by, or
is under common control with such person or entity.
(b) "Business" shall mean the providing of credit reports,
flood certifications, title products, the Lender Master Protection Program,
online property valuations, funding services, recordation and closing services
to the mortgage industry through a web browser-based application.
(c) "Claim" shall mean any lien, security interest, pledge,
mortgage, deed of trust or encumbrance.
(d) "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of a
Person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
(e) "Market Value" shall mean the closing price of the
Purchaser Common Stock as reported on the New York Stock Exchange on the date
or dates under consideration.
(f) "Material Adverse Effect" means any effect that would
reasonably be expected to be materially adverse to the Business or the assets
of the Business taken as a whole;
37
provided, however, that any adverse change, circumstance or effect that is
primarily caused by conditions affecting the United States economy as a whole
or the general conditions in the industry in which the Business operates shall
not be taken into account in determining whether there has been or would be a
"Material Adverse Effect."
(g) "Net Income" shall mean net income after tax for the
relevant period calculated in accordance with GAAP.
(h) "Person" means an individual, corporation, partnership,
association, trust or any unincorporated organization;
(i) "Purchaser Material Adverse Effect" means any effect
that would reasonably be expected to be materially adverse to the assets,
liabilities, condition (financial or otherwise), business, results of
operations or prospects of the Purchaser; provided, however, that any adverse
change, circumstance or effect that is primarily caused by conditions
affecting the United States economy as a whole or the general conditions in
the industry in which the Purchaser operates shall not be taken into account
in determining whether there has been or would be a Purchaser Material Adverse
Effect.
(j) "Stock Option Plan" shall mean the CMAC Investment
Corporation Equity Compensation Plan (Amended and Restated as of February 20,
2000).
(k) "Subsidiary" of a person means any corporation more than
fifty percent (50%) of whose outstanding voting securities, or any
partnership, limited liability company joint venture or other entity more than
fifty percent (50%) of whose total equity interest, is directly or indirectly
owned by such person.
[SIGNATURES ON FOLLOWING PAGE]
38
IN WITNESS WHEREOF, the parties have executed this Agreement or have
caused this Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above written.
RADIAN GROUP, INC.
By: /s/ C. Xxxxxx Xxxxx
------------------------------------
Name: C. Xxxxxx Xxxxx
Title: Chief Financial Officer
XXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chief Executive Officer
FOUNDING STOCKHOLDERS
/s/ Xxxxxx X. Xxxxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxxxx, Xx.
/s/ Xxxxxx Xxx Xxxxxxx, Xx.
----------------------------------------
Xxxxxx Xxx Xxxxxxx, Xx.
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx