Stock Purchase Agreement - Waypoint Software Corp. and Open Market Inc.
STOCK PURCHASE AGREEMENT
among
WAYPOINT SOFTWARE CORPORATION
THE STOCKHOLDERS LISTED ON
SCHEDULE I ATTACHED HERETO,
and
OPEN MARKET, INC.
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STOCK PURCHASE AGREEMENT
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Agreement (the "Agreement") made as of the 4th day of February, 1997 by and
among Open Market, Inc., a Delaware corporation with its principal office at 245
First Street, Cambridge, MA (the "Buyer"), and Waypoint Software Corporation, a
Massachusetts corporation with its principal office at 180 Canal Street, Boston,
MA (the "Company"), the Stockholders listed on Schedule I attached hereto
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(individually, a "Stockholder" and collectively, the "Stockholders"), who own
all of the issued and outstanding shares of capital stock of the Company. For
purposes hereof, Greg Erman, Michael J. Sullivan and Christopher J. Williams
shall be known collectively herein as the "Management Stockholders".
Preliminary Statement
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WHEREAS, each of the Stockholders owns the number of the issued and
outstanding shares of the common stock, $.01 par value per share (the "Company
Common Stock"), or Series A Convertible Preferred Stock, $.01 par value per
share (the "Series A Stock"), of the Company set forth opposite his or its name
on Schedule I attached hereto (collectively, the "Shares"), which Shares in the
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aggregate represent all of the issued and outstanding shares of capital stock of
every kind and description of the Company.
WHEREAS, the Buyer desires to purchase, and the Stockholders desire to
sell, the Shares for the consideration set forth below, subject to the terms and
upon the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows.
1. Purchase and Sale of the Shares
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1.01 Purchase of the Shares from the Stockholders. Subject to and
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upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each Stockholder
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from each Stockholder, all the Shares owned
by such Stockholder, as set forth opposite such Stockholder's name on Schedule I
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attached hereto. At the Closing, each Stockholder shall deliver to the Buyer
certificates evidencing the Shares owned by such Stockholder duly endorsed in
blank or with stock powers duly executed by such Stockholder.
1.02 Further Assurances. At any time and from time to time after the
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Closing, at the Buyer's request and without further consideration, each of the
Stockholders shall promptly execute and deliver such instruments of sale,
transfer,
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conveyance, assignment and confirmation, and take all such other action as the
Buyer may reasonably request, in order to more effectively transfer, convey and
assign to the Buyer, and confirm the Buyer's title to, all of the Shares owned
by such Stockholder, to assist the Buyer in exercising all rights with respect
thereto and to carry out the purpose and intent of this Agreement.
1.03 Base Purchase Price for the Shares.
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(a) The purchase price to be paid by the Buyer for the Shares shall be
an aggregate amount equal to Eleven Million Dollars ($11,000,000) (the "Base
Purchase Price"), subject to adjustment as set forth in Schedule II hereto. The
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Base Purchase Price shall be payable in the manner described in paragraph (b) of
this Subsection 1.03.
(b) Subject to Section 1.03(d) below, at the Closing, the Buyer shall
deliver to the Stockholders' Representative (as defined below), on behalf of the
Stockholders, certificates for unregistered shares of Common Stock, $.001 par
value per share, of the Buyer (the "Buyer Shares"), in the name of each
Stockholder for the number of Buyer Shares set forth on Schedule II hereto.
(c) Registration of the Buyer Shares shall be conducted in accordance
with the provisions of Appendix I attached hereto.
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(d) At the Closing, certificates representing 10% of the Buyer Shares
otherwise deliverable to the Management Stockholders shall be issued and
delivered to the Buyer, as escrow agent (the "Escrow Agent"), to be held in
escrow in accordance with the provisions of Appendix II attached hereto to
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satisfy all or part of any claims for indemnity pursuant to Section 10 hereof.
1.04 Stockholders' Representative.
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(a) The Stockholders hereby authorize Greg Erman as the Stockholders'
Representative (the "Stockholders' Representative") to (i) take all action
necessary in connection with the waiver of any condition to the obligations of
the Stockholders to consummate the transactions contemplated hereby, or the
defense and/or settlement of any claims for which the Management Stockholders
may be required to indemnify the Buyer or the Company pursuant to Section 10
hereof, (ii) give and receive all notices required to be given under the
Agreement and (iii) take any and all additional action as is contemplated to be
taken by or on behalf of the Stockholders and/or the Management Stockholders by
the terms of this Agreement; provided, however, that notwithstanding any other
provision of this Agreement, the Stockholders' Representative shall have no
authority, prior to the Closing, to agree to any change to, or waiver of, any
material provision of this Agreement without the prior written approval of the
holders of a majority in interest of the outstanding shares of Series A
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Preferred Stock of the Company or, following the Closing, to agree to any change
to, or waiver of, any material provision of this Agreement which would
materially and adversely affect the interests of BancBoston Ventures, Inc. or
Zero Stage Capital V L.P., or their successors or assigns.
(b) In the event that the Stockholders' Representative dies, becomes
unable to perform his responsibilities hereunder or resigns from such position,
Stockholders holding, prior to the Closing, a majority of the Shares shall
select another representative to fill such vacancy and such substituted
representative shall be deemed to be the Stockholders' Representative for
purposes of this Agreement.
(c) All decisions and actions by the Stockholders' Representative,
including, without limitation, any agreement between the Stockholders'
Representative and the Buyer relating to the defense or settlement of any claims
for which the Management Stockholders may be required to indemnify the Buyer
and/or the Company pursuant to Section 10 hereof, shall be binding upon all of
the Stockholders.
(d) By their execution of this Agreement, the Stockholders agree
that:
(i) the Buyer shall be able to rely conclusively on the instructions
and decisions of the Stockholders' Representative as to the settlement of any
claims for indemnification by the Buyer pursuant to Section 10 hereof or any
other actions required to be taken by the Stockholders' Representative
hereunder, and no party hereunder shall have any cause of action against the
Buyer for any action taken by the Buyer in reliance upon the instructions or
decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders;
(iii) the provisions of this Subsection 1.04 are
independent and severable, are irrevocable and coupled with an interest and
shall be enforceable notwithstanding any rights or remedies that any Stockholder
may have in connection with the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions of
this Subsection 1.04 are inadequate; therefore, the Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if the Buyer brings an action to enforce the provisions of this
Subsection 1.04; and
(v) the provisions of this Subsection 1.04 shall be binding upon the
executors, heirs, legal representatives and successors of each Stockholder, and
any references in this Agreement to a Stockholder or the Stockholders shall mean
and
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include the successors to the Stockholder's rights hereunder, whether pursuant
to testamentary disposition, the laws of descent and distribution or otherwise.
(e) Any fees and expenses incurred by the Stockholders' Representative
shall be paid by the Management Stockholders in proportion to their ownership of
Shares as set forth on Schedule I attached hereto; provided, however, that the
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Stockholders shall reimburse the Stockholders' Representative for any fees and
expenses incurred in connection with the services rendered by such person which
financially benefit all Stockholders, and each Stockholder shall severally but
not jointly contribute to reimbursement of such expenses as their interests
appear in the Company prior to the Closing. The Stockholders' Representative
shall give each Stockholder at least fifteen (15) days' prior notice prior to
taking any action after the Closing for which he intends to seek reimbursement
hereunder.
1.05 Closing. The Closing shall take place at the offices of Hale and
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Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at 10:00 a.m., Boston
Time, on February 14, 1997 (the "Closing Date") or at such other place, time or
date as may be mutually agreed upon in writing by the parties. The transfer of
the Shares by the Stockholders to the Buyer shall be deemed to occur at 9:00
a.m., Boston Time, on the Closing Date.
2. Representations of the Stockholders.
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Each Stockholder severally represents and warrants to the Buyer as
follows:
(a) such Stockholder has good and marketable title to the Shares which
are to be transferred to the Buyer by such Stockholder pursuant hereto, free and
clear (except as set forth on Schedule 2.0) of any and all covenants,
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conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. Schedule I
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attached hereto sets forth a true and correct description of all Shares owned by
such Stockholder;
(b) such Stockholder has the full right, power and authority to enter
into this Agreement and to transfer, convey and sell to the Buyer at the Closing
the Shares to be sold by such Stockholder hereunder and, upon consummation of
the purchase contemplated hereby, the Buyer will acquire from such Stockholder
good and marketable title to such Shares, free and clear of all covenants,
conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever;
(c) such Stockholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court
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or other governmental body which would prevent the execution or delivery of this
Agreement by such Stockholder or the transfer, conveyance and sale of the Shares
to be sold by such Stockholder to the Buyer pursuant to the terms hereof;
(d) no broker or finder has acted for such Stockholder in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of such Stockholder;
(e) such Stockholder will be acquiring the Buyer Shares hereunder for
its own account and such Stockholder has no present arrangement (whether or not
legally binding) at any time to sell any such Buyer Shares to or through any
person or entity; provided, however, that by making the representations herein,
such Stockholder does not agree to hold such Buyer Shares for any minimum or
other specific term and reserves the right to dispose of such Buyer Shares at
any time in accordance with federal and state securities laws applicable to such
disposition subject to the provisions of Appendix I attached hereto. Such
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Stockholder understands that such Buyer Shares must be held indefinitely unless
such Buyer Shares are subsequently registered under the Securities Act or an
exemption from registration is available;
(f) such Stockholder is an "accredited investor" (as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933), and such Stockholder has such experience in business and financial
matters that he or it is capable of evaluating the merits and risks of an
investment in such Buyer Shares. Such Stockholder acknowledges that an
investment in the Buyer Shares involves a high degree of risk;
(g) such Stockholder has full power and authority to enter into and to
perform this Agreement in accordance with its terms. This Agreement has been
duly authorized and validly executed and delivered by such Stockholder and is a
valid and binding agreement of such Stockholder enforceable against such
Stockholder in accordance with its terms, subject to bankruptcy, insolvency or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies, and subject also to other equitable principles of general
application;
(h) such Stockholder, if a corporation, partnership or trust, is duly
organized, validly existing, and in good standing under the laws of the place of
its organization and has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Buyer;
(i) the execution and delivery of this Agreement by such Stockholder
and any other documents or instruments executed by such Stockholder in
connection herewith, and the consummation of the transactions contemplated
hereby and
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thereby, and compliance with the requirements thereof, will not in any material
respect violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award applicable to such Stockholder, or the provision of any
indenture, instrument or agreement to which such stockholder is a party or is
subject, or by which such Stockholder or any of its assets is bound, or conflict
with or constitute a material default thereunder, or result in the creation or
imposition of any lien on the Shares pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any fiduciary duty
owed by such Stockholder to any third party, or require the approval of any
third party pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which such Stockholder is subject;
(j) such Stockholder has received all documents, records, books and
other information pertaining to such Stockholder's investment in the Buyer that
have been requested by such Stockholder. Such Stockholder further acknowledges
that it understands that the Buyer is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and such Stockholder has reviewed or received copies of any such reports
that have been requested by it. Such Stockholder has carefully reviewed the
representations concerning the Buyer contained in this Agreement and has made
inquiry concerning the Buyer, its business and its personnel; the officers of
the Buyer have made available to such Stockholder any and all written
information which it has requested and have answered all inquiries made by such
Stockholder; and
(k) such Stockholder understands that the stock certificates
representing the Buyer Shares shall bear a legend substantially to the following
effect:
"The shares represented by the certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold or otherwise transferred, pledged or hypothecated unless and
until such shares are registered under such Act or an opinion of
counsel satisfactory to the Company is obtained to the effect that
such registration is not required."
3. Representations of the Management Stockholders and the Company
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Each of the Management Stockholders and the Company, jointly and
severally, represent and warrant to the Buyer that:
3.01 Organization. The Company is a corporation duly organized,
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validly existing and in good corporate standing under the laws of The
Commonwealth of Massachusetts, and has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. The Company is duly qualified to do
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business and in good standing in all jurisdictions in which its ownership of
property or the character of its business requires such qualification except
where the failure to be so qualified would not have a material adverse effect on
the business, assets, results of operations, prospects or financial condition of
the Company, taken as a whole (a "Material Adverse Effect"). Copies of the
Articles of Organization and By-laws of the Company, each as amended to date,
have been previously delivered to the Buyer, are complete and correct, and no
amendments have been made thereto or have been authorized since the date
thereof. The Company does not directly or indirectly own any equity or similar
interest in any corporation, partnership, joint venture or other entity.
3.02 Capitalization of the Company.
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The Company's authorized capital stock consists of (a) 300,000 shares
of Common Stock, $.01 par value per share (the "Common Stock"), of which 75,000
shares are issued and outstanding on the date hereof and (b) 100,000 shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which (i)
28,335 have been designated Series A Convertible Preferred Stock (the "Series A
Stock") and are issued and outstanding and (ii) 71,665 remain undesignated; the
shares of Common Stock and the Series A Stock are held of record and
beneficially owned by the Stockholders as set forth on Schedule I. All such
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issued and outstanding shares of Common Stock and Series A Stock have been, and
on the Closing Date will be, duly and validly issued and are, or will be on such
date, fully paid and non-assessable. Except as set forth on Schedule 3.03,
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there are not, and on the Closing Date there will not be, outstanding (i) any
options, warrants or other rights to purchase from the Company any capital stock
of the Company; (ii) any securities convertible into or exchangeable for shares
of such stock; or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other securities of
the Company. No shares of the issued and outstanding shares of Common Stock are
held in the treasury of the Company.
3.03 Authorization. The execution and delivery by the Company of this
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Agreement and the agreements provided for herein, and the consummation by the
Company of all transactions contemplated hereunder and thereunder by the
Company, have been duly authorized by all requisite action on the part of the
Company. This Agreement has been duly executed by the Company and the
Stockholders. This Agreement and all other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby to
which the Company or any of the Stockholders is a party constitute the valid and
legally binding obligations of the Company and the Stockholders, enforceable
against them in accordance with their respective terms. The execution, delivery
and performance by the Company and the Stockholders of this Agreement and the
agreements provided for herein, and the consummation by the Company and the
Stockholders of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the
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Company or any of the Stockholders where such violation would have a Material
Adverse Effect; (b) violate the provisions of the Articles of Organization or
By-laws of the Company; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator; or (d) conflict with or result in the
breach or termination of any material term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Company
pursuant to, any indenture, mortgage, deed of trust or other instrument or
agreement to which the Company is a party or by which the Company or any of its
properties is or may be bound. Schedule 3.02 attached hereto sets forth a true,
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correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by the Company of the
transactions contemplated by this Agreement, the receipt of which shall be a
condition precedent to the Buyer's obligation to consummate the transactions
contemplated hereby.
3.04 Financial Statements.
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Attached hereto as Schedule 3.04 is (i) a list of all assets and
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liabilities of the Company as of January 31, 1997 and (ii) a ledger of all
payments made or receipts received by the Company from October 18, 1996 through
January 31, 1997. Schedule 3.04 is true, correct and complete in all material
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respects.
3.05 Absence of Undisclosed Liabilities. Except as set forth on
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Schedule 3.05 and as and to the extent (a) reflected in Schedule 3.04 or (b)
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incurred in the ordinary course of business since January 31, 1997, and not
material in amount, either individually or in the aggregate, the Company has no
liability or obligation, secured or unsecured, whether accrued, absolute,
contingent, unasserted or otherwise, which is material to the condition
(financial or otherwise) of the assets, properties, business or prospects of the
Company. For purposes of this Section 3.05, "material" means any amount in
excess of $5,000.
3.06 Litigation. Except as set forth on Schedule 3.06 attached
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hereto, (a) there is no action, suit or proceeding to which the Company is a
party (either as a plaintiff or defendant) pending or, to the best knowledge of
the Management Stockholders, threatened before any court or governmental agency,
authority, body or arbitrator and, to the best knowledge of the Management
Stockholders, there is no basis for any such action, suit or proceeding, (b)
neither the Company nor, to the best knowledge of the Management Stockholders,
any officer, director or employee of the Company has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any
governmental agency, authority or body from engaging in or continuing any
conduct or practice in connection with the business, assets, or properties of
the Company and (c) there is not in existence on the date hereof any order,
judgment or decree of any court, tribunal or agency enjoining or requiring the
Company to take any action of any kind with respect to its business, assets or
properties.
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3.07 Insurance. Schedule 3.07 attached hereto sets forth a true,
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correct and complete list of all fire, theft, casualty, general liability,
workers compensation, product liability, automobile and other insurance policies
maintained by the Company and of all life insurance policies maintained on the
lives of any of their employees, specifying the type of coverage, the amount of
coverage, the premium, the insurer and the expiration date of each such policy
(collectively, the "Insurance Policies") and all claims made under such
Insurance Policies since the inception of the Company. True, correct and
complete copies of all Insurance Policies received by the Company have been
previously (or upon receipt, will be) delivered by the Company to the Buyer.
The Insurance Policies are in full force and effect. All premiums due on the
Insurance Policies or renewals thereof have been paid, and there is no default
under the Insurance Policies. The Company has not received any notice or other
communication from any issuer of the Insurance Policies canceling or materially
amending any of the Insurance Policies, increasing any deductibles or retained
amounts thereunder, or increasing the annual or other premiums payable
thereunder, and, to the best knowledge of the Management Stockholders, no such
cancellation, amendment or increase of deductibles, retainages or premiums is
threatened. The Company has no outstanding claims or disputes with any
insurance carrier regarding claims, settlements or premiums and the Company has
not failed to give any notice or present any claim under any Insurance Policy in
due and timely fashion.
3.08 Personal Property. Schedule 3.08 attached hereto sets forth (i)
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a true, correct and complete list of all items of tangible personal property
owned by the Company as of the date hereof having either a net book value per
unit or an estimated fair market value per unit in excess of $1,000; or not
owned by the Company but in the possession of, or used or useful in, the
business of the Company and having rental payments therefor in excess of $1,000
per month or $12,000 per year (collectively, the "Personal Property"); and (ii)
a description of the owner of, and any agreement relating to the use of, each
item of Personal Property not owned by the Company. Except as disclosed in
Schedule 3.08:
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(a) the Company has good and marketable title to each item of Personal
Property free and clear of all material liens, leases, encumbrances, claims
under bailment and storage agreements, equities, conditional sales contracts,
security interests, charges and restrictions, except for liens, if any, for
personal property taxes not due;
(b) no officer, director, stockholder or employee of the Company, nor
any spouse, child or other relative or affiliate thereof, owns directly or
indirectly, in whole or in part, any of the Personal Property described in
Schedule 3.08;
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(c) each item of Personal Property not owned by the Company is in such
condition that upon the return of such property to its owner in its present
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condition at the end of the relevant lease term or as otherwise contemplated by
the applicable agreement between the Company and the owner or lessor thereof,
the obligations of the Company to such owner or lessor will be discharged;
(d) the Personal Property is in good operating condition and repair
(normal wear and tear excepted) is currently used by either the Company in the
ordinary course of its business and normal maintenance has been consistently
performed with respect to the Personal Property; and
(e) the Company owns or otherwise has the right to use all of the
Personal Property now used or useful in the operation of their business or the
use of which is necessary for or useful in the performance of any material
contract, letter of intent or proposal to which it is a party.
3.09 Intangible Property.
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Schedule 3.09 attached hereto sets forth: (i) a true, correct and
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complete list and, where appropriate, a description of, all items of intangible
property (other than unregistered copyrights, trade secrets, know-how and other
confidential information) owned by, or used or useful in connection with the
business of, the Company, including, but not limited to, United States and
foreign patents, trade names, trademarks, trade name and trademark
registrations, copyright registrations, and applications for any of the
foregoing (the "Intangible Property"); and (ii) a true, correct and complete
list of all licenses or similar agreements or arrangements to which the Company
is a party, either as licensee or licensor, with respect to the Intangible
Property (other than commercially available, off-the-shelf software available on
a retail basis at a cost of not more than $5,000 in the aggregate). The term
"Intangible Property" shall include all copyrights, trade secrets, know-how and
other confidential information of the Company. Schedule 3.09(a) attached hereto
sets forth a list of Company's products developed and under development (the
"Company Products").
Except as otherwise disclosed in Schedule 3.09:
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(a) the Company is the sole and exclusive owner of all right, title
and interest in and to the Company Products, the Intangible Property and all
designs, permits, labels and packages used on or in connection therewith, free
and clear of all liens, security interests, charges, encumbrances, equities or
other adverse claims;
(b) the Company has the right and authority to use, and to continue to
use after the Closing, the Company Products, the Intangible Property and any
third party materials used by the Company as of the Closing in connection with
the conduct of its business in the manner presently conducted and as
contemplated, and
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such use or continuing use does not (and, to the best knowledge of the Company
and the Management Stockholders, will not) conflict with, infringe upon,
misappropriate or otherwise violate any rights of any other person, corporation
or entity;
(c) neither the Management Stockholders nor the Company has received
notice of, or has any knowledge of any basis for, a pleading or threatened
claim, interference action or other judicial or adversarial proceeding against
the Company or any Stockholder that any of the operations, activities, products
(including products under development), services or publications of the Company
or any of its customers or distributors using the Company Products or services
of the Company infringes or, to the knowledge of the Management Stockholders or
the Company, will infringe (directly, contributorily or by inducement) any
patent, trademark, trade name, copyright, trade secret or other property right
of a third party, or that it is illegally or otherwise using the trade secrets,
or other confidential information of others in an unauthorized manner;
(d) there are no outstanding, nor to the best knowledge of the
Management Stockholders, any threatened disputes or other disagreements with
respect to any licenses or similar agreements or arrangements described in
Schedule 3.10 or with respect to infringement by a third party of any of the
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Intangible Property or of the ownership of the Intangible Property or with
respect to infringement of third party intellectual property rights by any
Company Products;
(e) Neither the Stockholders nor the Company has any disputes with or
claims against any third party for infringement by such third party of any
Intangible Property;
(f) the Intangible Property is sufficient to conduct the Company's
business as presently conducted and as presently contemplated;
(g) the Company has taken all commercially reasonable steps to
protect its right, title and interest in and to the Intangible Property and the
continued use of the Company Products and the Intangible Property;
(h) no officer, director, stockholder or employee of the Company nor
any spouse, child or other relative or affiliate thereof, owns directly or
indirectly, in whole or in part, any of the Intangible Property; and
(i) neither the Company nor any Management Stockholder has any
knowledge that any third party is infringing, or will threaten to infringe,
misappropriate or otherwise violate any of the Intangible Property in which the
Company has ownership rights.
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3.10 Leases. A true, correct and complete copy of the sole lease of
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real property to which the Company is a party and all amendments, modifications
and supplemental agreements thereto (the "Lease"), has previously been delivered
by the Company to the Buyer. The Lease is in full force and effect, binding and
enforceable against the Company and, to the best knowledge of the Company and
the Management Stockholders, each of the other parties thereto in accordance
with its respective terms and has not been modified or amended since the date of
delivery to the Buyer. No party to the Lease has sent written notice to the
other claiming that such party is in default thereunder and that such default
remains uncured. There has not occurred any event which would constitute a
breach of or default in the performance of any covenant, agreement or condition
contained in the Lease, nor has there occurred any event which with the passage
of time or the giving of notice or both would constitute such a breach or
material default. The Company is not obligated to pay any leasing or brokerage
commission relating to the Lease and will not have any obligation to pay any
leasing or brokerage commission upon the renewal of the Lease. No construction,
alteration or other leasehold improvement work with respect to the Lease remains
to be paid for or to be performed by the Company. The Financial Statements
contain adequate reserves to provide for the restoration of the property subject
to the Lease at the end of the Lease term, to the extent required by the Lease.
3.11 Inventory. The Company has no inventory.
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3.12 Accounts Receivable. A true, correct and complete list of the
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accounts and notes receivable of the Company are set forth on Schedule 3.04.
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3.13 Tax Matters.
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(a) The Company has filed all Tax Returns (as defined below) that they
were required to file, and all such Tax Returns were correct and complete in all
material respects. The Company paid all Taxes (as defined below) that are shown
to be due on any such Tax Returns. The unpaid Taxes of the Company for Tax
periods through December 31, 1996 do not exceed the accruals and reserves for
Taxes set forth on the Current Balance Sheet. The Company has no actual or
potential liability for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities that included
the Company during a prior period) other than the Company. All Taxes that the
Company is or was required by law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
governmental entity. For purposes of this Agreement, "Taxes" mean all taxes,
charges, fees, levies, or other similar assessments or liabilities, including,
without limitation, income, gross receipts, ad valorem, premium, value added,
excise, real property, personal property, sales, use, transfer, transfer gains,
withholding, employment, payroll, unemployment insurance, social security,
business license, occupation, business organization, stamp, environmental, and
franchise taxes imposed
-12-
<PAGE>
by the United States of America or any state, local, or foreign government, or
any agency thereof, or other political subdivision of the United States or any
such government, and any interest, fines, penalties, assessments, or additions
to Tax resulting from, attributable to, or incurred in connection with any Tax
or any contest or dispute thereof. For purposes of this Agreement, "Tax Returns"
means all reports, returns, declarations, statements, or other information
required to be supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since its inception.
No examination or audit of any Tax Returns by any governmental entity is
currently in progress or, to the knowledge of the Company, threatened or
contemplated.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
and none of the assets of the Company are subject to an election under Section
341(f) of the Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The
Company is not a party to any Tax allocation or sharing agreement or any Tax
indemnity agreement. The Company has not waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency. The Company has never been a member of an affiliated
group of corporations, within the meaning of Section 1504 of the Code. The
Company has not agreed to make, nor is it required to make, any adjustments
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise. The Company has not participated in, nor will participate in, an
international boycott within the meaning of Section 999 of the Code. The Company
is not a party to any agreement, contract, arrangement, or plan that has
resulted, or would result, separately or in the aggregate, in the payment of any
excess "parachute payments" within the meaning of Section 280G of the Code.
3.14 Books and Records. The general ledgers and books of account of
-----------------
the Company are, in all material respects, complete and correct and have been
maintained in all material respects in accordance with good business practice
and in accordance with all applicable procedures required by laws and
regulations.
3.15 Contracts and Commitments.
-------------------------
(a) Schedule 3.15 attached hereto contains a true, complete and
-------- ----
correct list and a brief description of the following contracts and agreements,
whether written or oral (collectively, the "Contracts"):
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<PAGE>
(i) all loan agreements, indentures, mortgages and guaranties to which
the Company is a party or by which the Company or any of its property is bound;
(ii) all pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases and lease
purchase agreements to which the Company is a party or by which the Company or
any of its property is bound;
(iii) all contracts, agreements, commitments, purchase orders or other
understandings or arrangements to which the Company is a party or by which the
Company or any of its property is bound which (A) involve payments or receipts
by the Company of more than $10,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under which full performance
(including payment) has not been rendered by all parties thereto or (B) which
may materially adversely affect the condition (financial or otherwise) or the
properties, assets, business or prospects of the Company;
(iv) all employment and consulting agreements, executive compensation
plans, bonus plans, deferred compensation agreements, pension plans, retirement
plans, employee stock option or stock purchase plans and group life, health and
accident insurance and other employee benefit plans, agreements, arrangements or
commitments to which the Company is a party or by which the Company or any of
its property is bound;
(v) all agency, distributor, sales representative, franchise or
similar agreements to which the Company is a party or by which the Company or
any of its property is bound;
(vi) all contracts, agreements or other understandings or arrangements
between the Company and any of the Stockholders or their affiliates;
(vii) all leases, whether operating, capital or otherwise, under which
the Company is lessor or lessee;
(viii) all contracts, agreements and other documents or information
relating to past disposal of waste (whether or not hazardous);
(ix) all contracts, agreements or other arrangements imposing a non-
competition or non-solicitation obligation on the Company or any of the
Management Stockholders; and
-14-
<PAGE>
(x) any other material agreements or contracts entered into by the
Company or any of the Management Stockholders.
(b) Except as set forth on Schedule 3.15:
-------- ----
(i) each Contract is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and the Company
does not have any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
(ii) the Company has fulfilled all material obligations required
pursuant to the Contracts to have been performed by the Company on its part
prior to the date hereof, and the Company has no reason to believe that it will
not be able to fulfill, when due, all of its obligations under the Contracts
which remain to be performed after the date hereof;
(iii) the Company is not in breach of or default under any Contract,
and no event has occurred which, with the passage of time or giving of notice or
both, would constitute such a default, result in a loss of rights or result in
the creation of any lien, charge or encumbrance, thereunder or pursuant thereto;
(iv) to the best knowledge of the Stockholders, there is no existing
breach or default by any other party to any Contract, and no event has occurred
which, with the passage of time or giving of notice or both, would constitute a
default by such other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or pursuant thereto;
(v) there are not and, since inception of the Company have not been,
any claims of a non-routine nature relating to the Company by customers of the
Company under any warranties, whether express or implied;
(vi) the Company is not restricted by any Contract from carrying on
its business anywhere in the world; and
(vii) the Company has no written or oral contracts to sell products or
perform services which are expected to be performed at, or to result in, a loss.
(c) True, correct and complete copies of all Contracts have previously
been delivered by the Company or the Management Stockholders to the Buyer.
-15-
<PAGE>
3.16 Compliance with Agreements and Laws. The Company has all
-----------------------------------
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities necessary to
conduct its business and own and operate its assets (collectively, the
"Permits"). Schedule 3.16 attached hereto sets forth a true, correct and
-------- ----
complete list of all such Permits, copies of which have previously been
delivered by the Company or the Stockholders to the Buyer. The Company is not
in violation of any material law, regulation or ordinance (including, without
limitation, laws, regulations or ordinances relating to building, zoning,
environmental, disposal of hazardous substances, land use or similar matters)
relating to its properties. The business of the Company as conducted since
inception of the Company has not violated, and on the date hereof does not
violate, in any material respect, any federal, state, local or foreign laws,
regulations or orders (including, but not limited to, any of the foregoing
relating to employment discrimination, occupational safety, environmental
protection, hazardous waste, conservation, or corrupt practices), the
enforcement of which would have a material adverse effect on the results of
operations, condition (financial or otherwise), assets, properties business or
prospects of the Company. The Company has not received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance.
3.17 Employee Relations.
------------------
(a) The Company is in compliance with all federal, state and municipal
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, the failure to comply with which shall not
result in a material adverse effect upon the Company, and is not engaged in any
unfair labor practice, and there are no arrears in the payment of wages or
social security taxes.
(b) None of the employees of the Company is represented by any labor
union; and the Company has no continuing obligation for health, life, medical
insurance or other similar fringe benefits to any former employee of the
Company.
(c) Schedule 3.17 sets forth a true, correct and complete list of the
-------- ----
current payroll of the Company, including the job descriptions and salary or
wage rates of each of their employees, showing separately for each employee, the
maximum amounts paid or payable as salary and bonus for the period ended
December 31, 1996.
(d) For purposes of this Subsection 3.17, the term "employee" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the business of the Company.
-16-
<PAGE>
3.18 Employee Benefit Plans.
----------------------
(a) Except as listed on Schedule 3.18, the Company does not now
-------------
contribute to, or participate in, and has not in the past had, or otherwise
contributed to, any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.
(b) Schedule 3.18 attached hereto contains a true, correct and
-------------
complete list of all pension, benefit, profit sharing, retirement, deferred
compensation, welfare, insurance, disability, bonus, vacation pay, severance pay
and other similar plans, programs and agreements, whether reduced to writing or
not, relating to any of the Company's employees, or maintained at any time since
inception of the Company by the Company or by any other member of any controlled
group of corporations, group of trades or businesses under common control, or
affiliated service group (as defined for purposes of Section 414(b), (c) and
(m), respectively, of the Code) (the "Employee Plans") and, except as set forth
on Schedule 3.18 attached hereto, the Company has no obligations, contingent or
-------------
otherwise, past or present, under applicable law or the terms of any Employee
Plan.
3.19 Absence of Certain Changes or Events.
------------------------------------
(a) Except as set forth on Schedule 3.19 attached hereto, since
-------- ----
October 19, 1996, the Company has not entered into any transaction which is not
in the usual and ordinary course of business, and, without limiting the
generality of the foregoing, the Company has not:
(i) incurred any material obligation or liability for
borrowed money;
(ii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability other than current liabilities reflected in the
Current Balance Sheet;
(iii) mortgaged, pledged or subjected to lien, charge or
other encumbrance any of its properties or assets;
(iv) sold or purchased, assigned or transferred any of its
tangible assets or canceled any debts or claims, except for inventory sold and
materials purchased in the ordinary course of business;
(v) made any material amendment to or termination of any
Contract or done any act or omitted to do any act which would cause the breach
of any Contract;
-17-
<PAGE>
(vi) suffered any material losses of personal or real
property, whether insured or uninsured, and whether or not in the control of the
Company or waived any rights of any value;
(vii) authorized any declaration or payment of dividends by
the Company, or paid any such dividends, or authorized any transfer of assets of
any kind whatsoever;
(viii) received notice of any litigation, warranty claim or
products liability claims;
(ix) made any material change in the terms, status or
funding condition of any Employee Plan, as defined in Subsection 3.18 hereof;
(x) made, or committed to make, any changes in the
compensation payable to any officer, director, employee or agent of the Company,
or any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents;
(xi) incurred any capital expenditure in excess of $5,000 in
any instance or $10,000 in the aggregate;
(xii) made any material alteration in the manner of keeping
the books, accounts or records of the Company, or in the accounting practices
therein reflected; or
(xiii) suffered any material adverse change in the results
of operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Company taken as a whole.
(b) Neither the Company nor the Management Stockholders have knowledge
of any existing or threatened occurrence, event or development which, as far
reasonably as can be foreseen, could have a material adverse effect on the
business, properties, assets, condition (financial or otherwise) or prospects of
the Company taken as a whole.
3.20 Customers. Schedule 3.20 attached hereto sets forth a true,
--------- -------- ----
correct and complete list of the names of each customer of the Company since the
date of inception. The Company has good customer relations and none of the
customers of the Company has notified the Company that it intends to discontinue
its relationship with the Company and neither the Company nor the Management
Stockholders have
-18-
<PAGE>
knowledge of any existing or threatened occurrence, event or development which,
as far as can be reasonably foreseen, could have a material adverse effect on
the relationship of the Company with any customer.
3.21 Suppliers. The Company requires no supplies that are material to
---------
the business or operations of the Company.
3.22 Warranty and Product Liability Claims. There have been no
-------------------------------------
warranty or product liability claims made against the Company.
3.23 Prepayments and Deposits. Schedule 3.23 attached hereto sets
------------------------ -------- ----
forth all prepayments and deposits, which have been received by the Company as
of the date hereof, from customers for products to be shipped, or services to be
performed, after the Closing Date.
3.24 Indebtedness to and from Officers, Directors and Stockholders.
-------------------------------------------------------------
Except as set forth on Schedule 3.24 attached hereto, the Company is not
-------- ----
indebted, directly or indirectly, to any person who is an officer, director or
stockholder of the Company or any affiliate of any such person in any amount
whatsoever other than for salaries for services rendered or reimbursable
reasonable business expenses, all of which have been reflected on the Current
Financial Statements, and no such officer, director, stockholder or affiliate is
indebted to the Company except for advances made to employees of the Company in
the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
3.25 Banking Facilities. Schedule 3.25 attached hereto sets forth a
------------------ -------- ----
true, correct and complete list of:
(a) each bank, savings and loan or similar financial institution
in which the Company has an account or safety deposit box and the numbers of the
accounts or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box facility, together with
a description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
3.26 Powers of Attorney and Suretyships. Except as set forth on
----------------------------------
Schedule 3.26 attached hereto, the Company has no general or special powers of
- -------- ----
attorney outstanding (whether as grantor or grantee thereof) or has any
obligation or liability (whether actual, accrued, accruing, continent or
otherwise) as guarantor, surety, co- signer, endorser, co- maker, indemnitor or
otherwise in respect of the obligation of any
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<PAGE>
person, corporation, partnership, joint venture, association, organization or
other entity, except as endorser or maker of checks or letters of credit,
respectively, endorsed or made in the ordinary course of business.
3.27 Conflicts of Interest. Except as set forth on Schedule 3.27
--------------------- -------- ----
attached hereto, no officer, director or Management Stockholder of the Company
nor, to the best knowledge of the Management Stockholders, any Stockholder, now
has or within the last year had, either directly or indirectly:
(a) an equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity which
furnishes or sells, or during such period furnished or sold services or products
to the Company, or purchases, or during such period purchased from the Company
any goods or services, or otherwise does, nor during such period did business
with the Company; or
(b) a beneficial interest in any contract, commitment or agreement
to which the Company is or was a party or under which it is or was obligated or
bound, or to which any of its properties may be or may have been subject, other
than stock options and other contracts, commitments or agreements between the
Company and such persons in their capacities as employees, officers, directors
or stockholders of the Company.
3.28 Regulatory Approvals. All consents, approvals, authorizations or
--------------------
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company and which are necessary for the execution
and delivery by the Stockholders and the Company of this Agreement or any
documents to be executed and delivered by the Stockholders or the Company in
connection herewith are set forth on Schedule 3.28 attached hereto and have
-------- ----
been, or prior to the Closing Date will be, obtained and satisfied.
3.29 Disclosure. The information concerning the Company set forth in
----------
this Agreement, the Exhibits and Schedules attached hereto and any document,
statement or certificate furnished or to be furnished to the Buyer pursuant
hereto, does not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary to make the statements and facts contained herein or therein, in light
of the circumstances in which they are made, not false and misleading. The
Management Stockholders and the Company have disclosed to the Buyer all material
facts pertaining to the transactions contemplated by this Agreement and the
Exhibits hereto. Copies of all documents heretofore or hereafter delivered or
made available to the Buyer pursuant to this Agreement were or will be complete
and accurate copies of such documents.
-20-
<PAGE>
4. Representations of the Buyer
----------------------------
The Buyer represents and warrants to each Stockholder as follows:
4.01 Organization and Authority. The Buyer is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority (corporate and other) to own
its properties and to carry on its business as now being conducted. The Buyer
has full power to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. Certified copies of the Certificate of Incorporation and the Bylaws of
the Buyer, as amended to date, have been previously delivered to the
Stockholders, are complete and correct, and no amendments have been made thereto
or have been authorized since the date thereof.
4.02 Capitalization of the Buyer. On the date hereof, the Buyer's
---------------------------
authorized capital stock consists of 100,000,000 shares of common stock, $.001
par value, of which 28,407,750 shares were issued and outstanding as of December
31, 1996. All of the outstanding shares of capital stock of the Buyer have been
and on the Closing Date will be duly and validly issued and are, or will be,
fully paid and non-assessable.
4.03 Authorization. Except as set forth in Schedule 4.03 attached
------------- -------- -----
hereto, the execution and delivery of this Agreement by the Buyer, and the
agreements provided for herein, and the consummation by the Buyer of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action. This Agreement and all such other agreements and
written obligations entered into and undertaken in connection with the
transactions contemplated hereby constitute the valid and legally binding
obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms. The execution, delivery and performance of this Agreement and
the agreements provided for herein, and the consummation by the Buyer of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Buyer; (b) violate the provisions
of the Buyer's Certificate of Incorporation or By-laws; (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (d) conflict with or result in the breach or termination of any material term
or provision of, or constitute a default under, or cause any acceleration under,
or cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Buyer pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Buyer is a party or by which the Buyer is
or may be bound.
4.04 Regulatory Approvals. All consents, approvals, authorizations
--------------------
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the
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<PAGE>
transactions contemplated by this Agreement have been, or will be prior to the
Closing Date, obtained and satisfied.
4.05 Buyer Shares. Prior to the Closing Date, Buyer will take all
------------
actions necessary to authorize and approve the issuance of the Buyer Shares, and
as of the Closing Date, the Buyer Shares will, when issued in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable.
4.06 Commission Filings. Buyer has filed and delivered to the Company
------------------
and made available to the Stockholders all forms, reports and documents required
to be filed by Buyer with the Securities and Exchange Commission ("SEC") under
the Exchange Act since May 28, 1996 (collectively, the "SEC Documents"). The
SEC Documents (i) at the time filed, complied in all material respects with the
applicable requirements of the Exchange Act, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such SEC
Documents or necessary in order to make the statements in such SEC Documents, in
the light of the circumstances under which they were made, not misleading. As
of their respective dates, the financial statements of Buyer included in the SEC
Documents (the "Buyer Financial Statements") complied when filed as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, and were, when
filed, in accordance with the books and records of Buyer, complete and accurate
in all material respects, and presented fairly the consolidated financial
position and the consolidated results of operations, changes in stockholders'
equity and cash flows of Buyer and its subsidiaries as of the dates and for the
periods indicated, in accordance with generally accepted accounting principles,
consistently applied, subject in the case of interim financial statements to
normal year-end adjustments and the absence of certain footnote information.
4.07 No Material Adverse Changes. Since the date of the most recent
---------------------------
SEC Documents, no event has occurred which has had a material adverse effect on
the results of operations, condition (financial or otherwise), assets,
properties, business or prospects of the Buyer and no action, suit, claim or
proceeding has been filed, or threatened in writing, which if adversely
determined, would result in a material adverse affect on the Buyer or its
business.
4.08 Litigation. Except as described in the SEC Documents (i) there
----------
is no action, suit, judicial or administrative proceeding, arbitration or
investigation pending, or, to the knowledge of Buyer, threatened, against or
involving Buyer or any of its subsidiaries, or any of their properties or
rights, before any court, arbitrator, or administrator or governmental body,
(ii) there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
against Buyer or any of its subsidiaries; or (iii) neither Buyer nor any of its
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<PAGE>
subsidiaries is in violation of any term of any judgment, decree, injunction or
order outstanding against them which, in the case of any of clauses (i), (ii) or
(iii), would have a material adverse effect on the results of operations,
condition (financial or otherwise), assets, properties, business or prospects of
the Buyer or would prevent the consummation of this Agreement.
4.09 Disclosure. The Buyer has made available to the Stockholders any
----------
and all written information which they or any one of them have requested and has
answered all inquiries made by the Stockholders. No representation or warranty
by the Buyer in this Agreement or in any Exhibit hereto, or in any list,
statement, document or information set forth in or attached to any Schedule
delivered or to be delivered pursuant hereto, contains any untrue statement of a
material fact or omits any material fact necessary, in light of the
circumstances in which they are made, in order to make the statements contained
therein not false or misleading. The Buyer has disclosed to the Company all
material facts pertaining to the transactions contemplated by this Agreement.
5. Access to Information; Public Announcements
-------------------------------------------
5.01 Access to Management, Properties and Records. From the date of
--------------------------------------------
this Agreement until the Closing Date, the Management Stockholders and the
Company shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable notice and
during normal business hours to all management personnel, offices, properties,
books and records of the Company, so that the Buyer may have full opportunity to
make such investigation as it shall desire to make of the management, business,
properties and affairs of the Company and the Buyer shall be permitted to make
abstracts from, or copies of, all such books and records subject to the
obligations of confidentiality contained in Section 5.02 below. The Management
Stockholders and the Company shall furnish to the Buyer such financial and
operating data and other information as to the business of the Company as the
Buyer shall reasonably request.
5.02 Confidentiality. The Company and the Buyer have executed a
---------------
Confidentiality Agreement, dated as of November 6, 1996, the provisions of which
shall expressly apply to all Proprietary Information (as defined in said
Confidentiality Agreement) disclosed to Buyer and its authorized representatives
in the course of the investigation contemplated by Section 5.01.
5.03 Public Announcements. The parties agree that prior to the
--------------------
Closing Date any and all general public pronouncements or other general public
communications concerning this Agreement and the purchase and sale of the Shares
by the Buyer, and the timing, manner and content of such disclosures, shall be
subject to the mutual agreement of the Stockholders' Representative and the
Buyer.
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<PAGE>
5.04 No Solicitation. If the Closing does not occur, for the one-year
---------------
period beginning as of the date hereof, without the consent of the Company,
neither the Buyer nor any affiliate thereof shall (i) solicit any person who is
an employee of Company on the date hereof to terminate his or her employment
with the Company or become an employee of Buyer or (ii) hire any such person.
6. Pre-Closing Covenants of the Management Stockholders and the Company.
---------------------------------------------------------------------
From and after the date hereof and until the Closing Date:
6.01 Conduct of Business. The Company shall carry on its business
-------------------
diligently and substantially in the same manner as heretofore and shall not make
or institute any unusual or new methods of purchase, sale, shipment or delivery,
lease, management, accounting or operation. All of the property of the Company
shall be used, operated, repaired and maintained in a normal business manner
consistent with past practice.
6.02 Absence of Material Changes. Without the prior written consent
---------------------------
of the Buyer, in each case, or except as set forth on Schedule 6.02, the Company
-------------
shall not:
(a) take any action to amend its charter documents or by-laws;
(b) issue any stock, bonds or other corporate securities or grant
any option or issue any warrant to purchase or subscribe for any of such
securities or issue any securities convertible into such securities;
(c) incur any obligation or liability (absolute or contingent),
except current liabilities incurred and obligations under contracts entered into
in the ordinary course of business;
(d) declare or make any payment or distribution to its
stockholders in cash or with respect to its stock or purchase or redeem any
shares of its capital stock;
(e) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of their respective assets or properties;
(f) sell, assign, or transfer any of its assets;
(g) cancel any debts or claims, except in the ordinary course of
business;
(h) merge or consolidate with or into any corporation or other
entity;
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<PAGE>
(i) make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or increase
the rate of compensation payable or to become payable by it to any of its
officers, directors or employees;
(j) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination, revocation
or cancellation of any such election or any consent or compromise or settle any
claim for past or present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any of its executory contracts
of a material value or which are material in amount;
(m) take or permit any act or omission constituting a breach or
default under any contract, indenture or agreement by which it or its properties
are bound;
(n) fail to (i) preserve the possession and control of its assets and
business, (ii) keep in service its present officers and key employees, (iii)
preserve the goodwill of its consumers, suppliers, agents, brokers and others
having business relations with it, and (iv) keep and preserve its business
existing on the date hereof until the Closing Date;
(o) fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary and regular course of
business and maintain in good repair its business premises, fixtures, machinery,
furniture and equipment;
(p) enter into any lease, contract, agreement or understanding, other
than those entered into in the ordinary course of business calling for payments
which in the aggregate do not exceed $10,000 for each such lease, contract,
agreement or understanding;
(q) incur any capital expenditure;
(r) engage any new employee;
(s) materially alter the terms, status or funding condition of any
Employee Plan; or
(t) commit or agree to do any of the foregoing in the future.
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<PAGE>
6.03 Communications with Customers and Suppliers.
-------------------------------------------
(a) Unless instructed otherwise by the Buyer in writing, the
Company will continue to accept customer orders in the ordinary course of
business and consistent with past practice for all products or services offered
by the Company but expected to be shipped after the Closing Date.
(b) The Company and the Buyer will cooperate in communications
with suppliers and customers to accomplish the transfer of the Shares to the
Buyer on the Closing Date.
6.04 Compliance with Laws. The Company will continue to comply in all
--------------------
material respects with all laws and regulations which are applicable to it or to
the conduct of its business and will perform and comply in all material respects
with all contracts, commitments and obligations by which they are bound.
6.05 Continued Truth of Representations and Warranties. Neither the
-------------------------------------------------
Stockholders nor the Company will take any actions which would result in any of
the representations or warranties set forth in Sections 2 and 3 hereof being
untrue.
6.06 Continuing Obligation to Inform. From time to time prior to the
-------------------------------
Closing, the Management Stockholders will deliver or cause to be delivered to
the Buyer supplemental information concerning events subsequent to the date
hereof which would render any statement, representation or warranty in this
Agreement or any information contained in any Schedule attached hereto
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.07 Exclusive Dealing. Neither the Stockholders nor the Company
-----------------
will, directly or indirectly, through any officer, director, agent or otherwise,
(a) solicit, initiate or encourage submission of proposals or offers from any
person relating to an acquisition or purchase of all or a material portion of
the assets of or an equity interest in the Company or any merger, consolidation
or business combination with the Company, or (b) participate in any discussions
or negotiations regarding, or furnish to any other person, any non-public
information with respect to or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Stockholders and the Company
agree to promptly notify the Buyer of any such proposal or offer, or any inquiry
or contact with respect thereto received by the Company or any of the
Stockholders.
7. Best Efforts to Obtain Satisfaction of Conditions. The
--------------------------------------------------
Stockholders, the Company and the Buyer covenant and agree to use their
reasonable best efforts to obtain the satisfaction of the conditions specified
in this Agreement.
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<PAGE>
8. Conditions to Obligations of the Buyer. The obligations of the
--------------------------------------
Buyer under this Agreement are subject to the fulfillment, at the Closing Date,
of the following conditions precedent, each of which may be waived in writing in
the sole discretion of the Buyer:
8.01 Continued Truth of Representations and Warranties of the
--------------------------------------------------------
Stockholders and the Company; Compliance with Covenants and Obligations. The
- ------------------------------------------------------------------------
representations and warranties of the Stockholders and the Company shall be true
on and as of the Closing Date as though such representations and warranties were
made on and as of such date (even though they purport to have been given on a
date prior to the Closing Date), except for any changes permitted by the terms
hereof or consented to in writing by the Buyer. The Stockholders and the
Company shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by each of them prior to or at the Closing Date.
8.02 Performance by the Stockholders and the Company. At the Closing,
-----------------------------------------------
the Stockholders and the Company shall have delivered to the Buyer a certificate
signed by each such Stockholder and the President of the Company as to their
compliance with Subsection 8.01 hereof.
8.03 Governmental Approvals. All governmental agencies, department,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Stockholders and the Company of the transactions
contemplated by this Agreement and the operation of the business of the Company
by the Buyer shall have consented to, authorized, permitted or approved such
transactions.
8.04 Consent of Lenders, Lessors and Other Third Parties. The
---------------------------------------------------
Stockholders and the Company shall have received and delivered to the Buyer all
requisite consents and approvals of all lenders, lessors and other third parties
whose consent or approval is required in order for the Stockholders and the
Company to consummate the transactions contemplated by this Agreement, including
without limitation, those set forth on Schedule 3.02 attached hereto.
-------- ----
8.05 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own the Shares or to own or operate the business of
the Company after the Closing.
-27-
<PAGE>
8.06 Opinion of Counsel and Other Documents. The Buyer shall have
--------------------------------------
received (i) an opinion of Testa, Hurwitz & Thibeault LLP, counsel to the
Company and (ii) certificate from each of BancBoston Ventures, Inc. and Zero
Stage Capital V, L.P., each dated as of the Closing Date and reasonably
satisfactory to the Buyer or its counsel.
8.07 Employment Agreements. On or prior to the Closing Date, the
---------------------
Buyer shall have executed employment agreements and other arrangements with each
of Greg Erman, Michael J. Sullivan and Christopher Williams in the forms of
Exhibits A, B and C.
- ----------- - -
8.08 Cash Available. On the Closing Date, the Company will have in
--------------
the aggregate available cash for working capital purposes of not less than
$525,000
8.09 No Indebtedness. On the Closing Date, except for trade payable
---------------
set forth on Schedule 3.04 the Company shall have no long term or short term
-------------
indebtedness.
8.10 Trade Payables. On the Closing Date, the Company will not have
--------------
obligations in excess of $50,000 in the aggregate to suppliers and vendors of
goods and services and other trade creditors which have been outstanding for
more than 30 days.
8.11 Closing Deliveries. The Buyer shall have received at or prior to
------------------
the Closing, such documents, instruments or certificates as the Buyer may
reasonably request including, without limitation:
(a) the stock certificates representing the Shares duly endorsed
in accordance with Subsection 1.01 of this Agreement;
(b) a certificate of the Secretary of State of The Commonwealth
of Massachusetts as to the legal existence and good standing of the Company in
Massachusetts;
(c) certificates of the Secretary of the Company attesting to the
incumbency of the Company's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Subsection 3.01;
(d) where required by the applicable Lease, estoppel certificates
from each lessor from whom the Company leases real or personal property
consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no outstanding
claims against the Company under such Lease;
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<PAGE>
(e) written resignations of all members of the Company's Board of
Directors;
(f) the original corporate minute books and stock record books of
the Company and all corporate seals;
(g) a cross receipt executed by the Buyer and the Stockholders;
and
(h) a certificate of the President of the Company certifying that
all Company Products and components thereof, including all source code, is
present at the Company's business premises.
9. Conditions to Obligations of the Stockholders
---------------------------------------------
The obligations of the Stockholders under this Agreement are subject
to the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Stockholders' Representative (subject in all cases, to Section 16 hereof), who
shall have the power and authority to bind all of the Stockholders:
9.01 Continued Truth of Representations and Warranties of the Buyer;
---------------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
- -----------------------------------------
of the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Stockholders'
Representative. The Buyer shall have performed and complied in all material
respects with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
9.02 Corporate Proceedings. All corporate and other proceedings
---------------------
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
9.03 Governmental Approvals. All governmental agencies, departments,
----------------------
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
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<PAGE>
9.04 Consents of Lenders, Lessors and Other Third Parties. The Buyer
----------------------------------------------------
shall have received all requisite consents and approvals of all lenders, lessors
and other third parties whose consent or approval is required in order for the
Buyer to consum mate the transactions contemplated by this Agreement.
9.05 Adverse Proceedings. No action or proceeding by or before any
-------------------
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Stockholders to transfer the Shares.
9.06 Opinion of Counsel. The Stockholders shall have received an
------------------
opinion of Hale and Dorr LLP, counsel to the Buyer, dated as of the Closing
Date, reasonably satisfactory to the Stockholders' Representative or his
counsel.
9.07 Employment Offers. Buyer shall have offered full-time employment
-----------------
to each of Joe Condon, Doug Herrick, Bob Kuszewski and Karl Wright which offers
(i) shall include a base annual salary at least equal to each such person's
annual salary immediately prior to the date hired and an option for the purchase
of shares of common stock of Buyer in an amount commensurate with the policy of
the Buyer with respect hereto and (ii) shall be subject to such person entering
into a non- disclosure, non- solicitation and invention agreement and a non-
compete agreement (for the period ending 12 months after the termination of
employment with Buyer) reasonably satisfactory to the Buyer. The Stockholders'
Representative may waive this condition in his sole discretion.
9.08 Closing Deliveries. The Stockholders shall have received at or
------------------
prior to the Closing such documents, instruments or certificates as the Buyer
may reasonably request including, without limitation:
(a) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of the Buyer in Delaware;
(b) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents and by-laws
delivered pursuant to Subsection 4.01;
(c) the Buyer Shares in satisfaction of the Base Purchase Price;
and
(d) a cross receipt executed by the Buyer and the Stockholders.
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<PAGE>
10. Indemnification
---------------
10.01 By the Management Stockholders. If the Closing occurs, the
------------------------------
Management Stockholders, jointly and severally, hereby indemnify and hold
harmless the Buyer and the Company from and against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any legal, accounting or other expenses for investigating or defending any
actions or threatened actions) (collectively, the "Losses") in connection with
each and all of the following (a "Breach of Warranty"):
(a) any misrepresentation or breach of any representation or
warranty made by the Stockholders or the Company in this Agreement;
(b) any breach of any covenant, agreement or obligation of
the Stockholders or the Company contained in this Agreement; and
(c) any misrepresentation contained in any statement,
certificate or schedule furnished by the Stockholders or the Company pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement.
10.02 Claims for Indemnification. Whenever any claim shall arise
--------------------------
for indemnification under this Section 10, the Buyer or the Company, as the case
may be, seeking indemnification (the "Indemnified Party"), shall promptly notify
the Stockholders' Representative of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Stockholders' Representative, who shall have the power and authority to bind all
of the Stockholders; provided, however, that if suit shall have been instituted
-------- -------
against the Indemnified Party and the Stockholders' Representative shall not
have taken control of such suit after notification thereof as provided in
Subsection 10.03 of this Agreement, the Indemnified Party shall have the right
to settle or compromise such claim upon giving notice to the Stockholders'
Representative as provided in Subsection 10.03.
10.03 Defense by the Management Stockholders. In connection with
--------------------------------------
any claim which may give rise to indemnity hereunder resulting from or arising
out of any claim or legal proceeding by a person other than the Indemnified
Party, the Stockholders' Representative, at the sole cost and expense of the
Management Stockholders, may, upon written notice to the Indemnified Party,
assume the defense of any such claim or legal proceeding if the Stockholders'
Representative acknowledges to the Indemnified Party in writing the obligation
of the Management Stockholders to
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<PAGE>
indemnify the Indemnified Party with respect to all elements of such claim. If
the Stockholders' Representative assumes the defense of any such claim or legal
proceeding, the Stockholders' Representative shall select counsel reasonably
acceptable to the Indemnified Party to conduct the defense of such claims or
legal proceedings and at the sole cost and expense of the Management
Stockholders shall take all steps necessary in the defense or settlement
thereof. The Stockholders' Representative shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Stockholders' Representative
does not assume the defense of any such claim or litigation resulting therefrom
within 15 days after the date such claim is made: (a) the Indemnified Party may
defend against such claim or litigation in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Stockholders' Representative, on such
terms as the Indemnified Party may deem appropriate, and (b) the Stockholders'
Representative shall be entitled to participate in (but not control) the defense
of such action, with its counsel and at its own expense. If the Management
Stockholders or the Stockholders' Representative thereafter seek to question the
manner in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Management Stockholders or the
Stockholders' Representative shall have the burden to prove by a preponderance
of the evidence that the Indemnified Party did not defend or settle such third
party claim in a reasonably prudent manner.
10.04 Payment of Indemnification Obligation. Any claims for
-------------------------------------
indemnification by the Buyer or the Company under this Section 10 or under any
other provision of this Agreement shall be satisfied in accordance with the
Escrow Agreement. All indemnification by the Management Stockholders hereunder
(to the extent not satisfied in the manner specified in the preceding sentence)
shall be effected promptly by delivery and transfer to the Buyer of Buyer Shares
or, at the election of the Stockholders' Representative, by payment of cash or
delivery of a cashier's or certified check in the amount of the indemnification
liability.
10.05 Survival. The representations and warranties of the Company
--------
and the Stockholders in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the date
which is one year after the Closing Date (except that the representations and
warranties in Section 3.09 of this Agreement shall continue until 18 months
after the Closing Date). The representations and warranties of the Company and
the Management Stockholders in Section 3.09 of this Agreement shall not be
affected by any examination made for or on behalf of the Buyer or the knowledge
of any of the Buyer's officers, directors, stockholders, employees or agents.
If a notice of a claim is properly given before the expiration of any such
period, then (notwithstanding the expiration of such period) the representation
or warranty applicable to such claim shall survive until, but only for the
purposes of, the resolution
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<PAGE>
of such claim. The Management Stockholders shall not be liable hereunder for a
breach of any representation, warranty or covenant (other than the
representations and warranties in Section 3.09) to the extent that prior to the
Closing the Buyer had actual knowledge of any such breach and an appreciation of
the magnitude of the adverse impact of such breach.
10.06 Limitations.
-----------
(a) Notwithstanding anything to the contrary herein, the
aggregate liability of the Management Stockholders under this Section 10 shall
not exceed $3,000,000, except that in the case of Losses incurred in connection
with any breach of the representations and warranties in Section 3.09 hereof,
the aggregate liability of the Management Stockholders under this Section 10
shall not exceed the aggregate value of the Buyer Shares issued to or on behalf
of the Management Stockholders hereunder as set forth on Schedule II. Except
-----------
with respect to claims based on fraud or, solely in the case of Stockholders who
are not Management Stockholders, breach of the covenants set forth in Sections
6.07, 11.01 and 13.01, the rights of the Indemnified Party under this Section 10
shall be the exclusive remedy of the Indemnified Party with respect to claims
resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Company or the Stockholders
contained in this Agreement; provided, further that no Stockholder other than a
Management Stockholder shall be liable for the fraud of any other Stockholder or
the Company. Stockholders who are not Management Stockholders shall have no
common law or other indemnification or contribution obligation to the Management
Stockholders in respect of this Agreement or any indemnification paid hereunder.
(b) Notwithstanding anything to the contrary herein, an
Indemnified Party shall be entitled to indemnification under this Section 10
only when the aggregate of all Losses claimed by such Indemnified Party exceeds
$50,000 and at such time the Management Stockholders shall pay the full amount
thereof. All claims for Losses shall be net of, and offset by, any insurance
proceeds, reduction of tax liabilities or receipt of tax benefit actually
received by Buyer or the Company that are attributable to such Losses. Any
liability for indemnification under this Section 10 shall be reduced to the
extent any Losses are reduced by such a recovery or reduction.
(c) The indemnification provisions contained in this Section
10 shall terminate upon the sale to a third party of all or substantially all of
the business of Buyer, pursuant to a merger, business combination, sale of
assets or otherwise ("Sale"); provided, however, that the indemnification
provisions contained herein relating to a breach of the representations and
warranties in Section 3.09 hereof shall not terminate to the extent the Buyer,
in connection with such Sale, has an indemnification obligation which may arise
as a result of a breach of the representations and warranties in Section 3.09
hereof; provided, however, that the indemnification obligations and the
limitations on liability set forth in this Section 10 shall be reduced to the
shortest period
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<PAGE>
of time and the lowest limit on liability for which the Buyer may be obligated
in any such Sale with respect to a breach of the representations and warranties
in Section 3.09 hereof.
11. Post-Closing Agreements
-----------------------
The Stockholders agree that from and after the Closing Date:
11.01 Proprietary Information.
-----------------------
(a) Each of the Stockholders and each of their affiliates (as such
term is defined in the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder; individually, an "Affiliate" and,
collectively, "Affiliates") shall hold in confidence and shall use their best
efforts to have all officers, directors and personnel who continue after the
Closing to be employed by any such Stockholder or any Affiliate thereof to hold
in confidence all knowledge and information of a secret or confidential nature
with respect to the business of the Company and not to disclose, publish or make
use of the same without the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by the Stockholders.
(b) Each Stockholder agrees that the remedy at law for any breach of
this Subsection 11.01 would be inadequate and that the Buyer shall be entitled
to injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Subsection 11.01.
12. Termination
-----------
12.01 Termination of Agreement. The parties may terminate this
------------------------
Agreement as provided below:
(a) the Buyer and the Company may terminate this Agreement by mutual
written consent;
(b) Buyer may terminate this Agreement by giving written notice to the
Company in the event the Company or any Stockholder is in breach, and the
Company may terminate this Agreement by giving written notice to the Company in
the event Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement, provided that the breaching party has not
cured such breach within ten (10) days following notice thereof from a
nonbreaching party;
(c) Buyer may terminate this Agreement by giving written notice to the
Company if the Closing shall not have occurred on or before February 21, 1997 by
reason of the failure of any condition precedent hereunder (unless the failure
results
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<PAGE>
primarily from a breach by Buyer of any representation, warranty, or
covenant contained in this Agreement); or
(d) The Company may terminate this Agreement by giving written notice
to Buyer if the Closing shall not have occurred on or before February 21, 1997
by reason of the failure of any condition precedent hereunder (unless the
failure results primarily from a breach by the Company of any representation,
warranty or covenant contained in this Agreement).
12.02 Availability of Remedies at Law. In the event this
-------------------------------
Agreement is terminated by the Buyer or the Stockholders, pursuant to the
provisions of this Section 12, the parties hereto shall have available to them
all remedies afforded to them by applicable law. Nothing herein shall relieve
any party from liability for any breach of this Agreement.
13. Brokers
-------
13.01 For the Stockholders and the Company. Each of the
------------------------------------
Stockholders and the Company represent and warrant that no person, firm or
corporation has acted in the capacity of broker or finder on its behalf to bring
about the negotiation of this Agreement. The Stockholders severally agree to
indemnify and hold harmless the Buyer against any claims or liabilities asserted
against it by any person acting or claiming to act as a broker or finder on
behalf of the Stockholders or the Company.
13.02 For the Buyer. The Buyer agrees to pay all fees, expenses
-------------
and compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Buyer agrees to indemnify and hold harmless the
Stockholders against any claims or liabilities asserted against it by any person
acting or claiming to act as a broker or finder on behalf of the Buyer.
14. Notices: Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if delivered personally or sent by telex,
facsimile transmission (with confirmation by first class mail or overnight
courier), overnight courier, first class mail, postage prepaid, addressed as
follows or to such other address of which the parties may have given notice:
To the Buyer: Open Market, Inc.
245 First Street
Cambridge, MA 02142
Attention: Legal Counsel
fax: (617) 949-7140
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<PAGE>
With a copy to: John H. Chory, Esq
Hale and Dorr LLP
60 State Street
Boston, MA 02109
fax: (617) 526-5000
To the Stockholders: c/o Greg Erman
136 Powder Mill Road
Sudbury, MA 01776
fax: (617) 723-3100
With a copy to: John Hession, Esq.
Testa, Hurwitz & Thibeault LLP
125 High Street
Boston, MA 02110
fax: (617) 248-7100
and Gregory L. White, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110
fax: (617) 951-2125
Unless otherwise specified herein,
such notices or other communications shall be deemed received (a) on the date
delivered, if delivered personally, or (b) three business days after being sent,
if sent by registered or certified mail.
15. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Stockholders and the Company, on the other hand,
may not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that the Buyer may assign this
Agreement, and its rights and obligations hereunder, to a subsidiary or
affiliate of the Buyer. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer, the Stockholders, and the
Company from any obligation or liability under this Agreement.
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<PAGE>
16. Entire Agreement; Amendments; Attachments
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer, the Company and the Stockholders holding a
majority of the Shares (who shall have the authority to bind all of the
Stockholders) may amend or modify this Agreement, in such manner as may be
agreed upon, by a written instrument executed by the Buyer and such majority of
the Stockholders; provided, however, that notwithstanding any other provision of
this Agreement, prior to the Closing, any amendment or modification to, or
waiver of, any material provision of this Agreement shall also require the
written approval of the holders of a majority in interest of the outstanding
shares of Series A Preferred Stock of the Company and, following the Closing,
any amendment or modification to, or waiver of, any material provision of this
Agreement which would materially and adversely affect the interests of
BancBoston Ventures, Inc. or Zero Stage Capital V L.P., or their successors or
assigns, shall require the approval of BancBoston Ventures, Inc. or Zero Stage
Capital V L.P.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
17. Severability
------------
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
18. Investigation of the Parties
----------------------------
All representations and warranties contained herein which are made to
the best knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.
19. Expenses
--------
The costs and expenses (including legal and accounting fees and
expenses) incurred by Buyer in connection with this Agreement and the
transactions contemplated
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<PAGE>
hereby shall be borne by Buyer, and, except for legal fees and expenses incurred
by the Company and Stockholders in an amount up to $35,000 which shall be paid
by the Buyer at the Closing, the costs and expenses (including legal and
accounting fees and expenses) incurred by the Company and the Stockholders in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Stockholders. If this Agreement is terminated for any reason due to
a material breach by Buyer, the Buyer shall reimburse the Company for the
expenses incurred by it in connection with the transactions contemplated hereby,
up to $35,000; provided, however, that nothing in this Section 19 shall relieve
Buyer from any liability (in excess of such $35,000 payment) with respect to a
breach by Buyer of this Agreement.
20. Legal Fees
----------
In the event that legal proceedings are commenced by the Buyer against
the Stockholders (or the Company, if the transactions contemplated hereby are
not consummated), or by the Stockholders against the Buyer, in connection with
this Agreement or the transactions contemplated hereby, the party or parties
which do not prevail in such proceedings shall pay the reasonable attorneys'
fees and other costs and expenses, including investigation costs, incurred by
the prevailing party in such proceedings.
21. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the law of The Commonwealth of Massachusetts.
22. Section Headings
----------------
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
23. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
OPEN MARKET, INC.
By: /s/Regina O. Sommer
----------------------------------------------
Title: Chief Financial Officer
------------------------------------------
WAYPOINT SOFTWARE CORPORATION
By: /s/ Greg Erman
--------------------------------------------
Title: President & CEO
------------------------------------------
STOCKHOLDERS:
/s/ Greg Erman
-------------------------------------------------
Gregory Erman
/s/ Michael J. Sullivan
------------------------------------------------
Michael J. Sullivan
/s/ Christopher Williams
------------------------------------------------
Christopher Williams
/s/ Michael I. Barach
------------------------------------------------
Michael I. Barach
BANCBOSTON VENTURES, INC.
By:/s/ Peter R. Roberts
----------------------------------------------
Its: V.P.
--------------------------------------------
ZERO STAGE CAPITAL V L.P.
By: Zero Stage Capital Associates, L.P.
By:/s/ Stanley Fung
---------------------------------------------
Its: General Partner
--------------------------------------------
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