ACQUISITION AGREEMENT dated September 19, 2002 by and among DENDRITE INTERNATIONAL, INC. SAI ACQUISITION L.L.C. SOFTWARE ASSOCIATES INTERNATIONAL, LLC SOFTWARE ASSOCIATES INTERNATIONAL INC. THE INTERPUBLIC GROUP OF COMPANIES, INC. IPG SAI HOLDING...
ACQUISITION AGREEMENTdated September 19, 2002 by and among DENDRITE INTERNATIONAL, INC. SAI ACQUISITION L.L.C. SOFTWARE ASSOCIATES INTERNATIONAL, LLC SOFTWARE ASSOCIATES INTERNATIONAL INC. THE INTERPUBLIC GROUP OF COMPANIES, INC. IPG SAI HOLDING CORP. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ |
ACQUISITION AGREEMENTThis Acquisition Agreement (this “Agreement”), dated September 19, 2002, is made by and among Dendrite International, Inc., a New Jersey corporation (“Dendrite”), SAI Acquisition L.L.C., a New Jersey limited liability company (“Buyer”), Software Associates International Inc., a New Jersey corporation (“Parent”), Software Associates International, LLC, a New Jersey limited liability company (“SAI”), The Interpublic Group of Companies, Inc., a Delaware Corporation (“IPG Parent”), IPG SAI Holding Corp., a Delaware Corporation (“IPG”), ▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Gupta”) and ▇▇▇▇▇ ▇▇▇▇▇ (“▇▇▇▇▇”). (Each of Parent and SAI is referred to herein as an “SAI Entity”, and referred to jointly and severally as the “Company” or the “SAI Entities”. Each of Gupta and ▇▇▇▇▇ is referred to herein as a “Parent Shareholder”, and together they are the “Parent Shareholders”. IPG and each Parent Shareholder is referred to herein as a “Seller” and collectively they are the “Sellers”. Each of Parent, SAI, IPG, Gupta and ▇▇▇▇▇ is referred to herein as a “Seller Party” and collectively they are the “Seller Parties”. Each of the Seller Parties and Buyer is referred to herein as a “Party” and collectively they are the “Parties”.) RECITALSThe Company is engaged in the business of developing, licensing and providing related services with respect to software for pharmaceutical companies (the “Business”). Prior to June 28, 2000 the Business was conducted by Parent, and prior to February 29, 2000 the Business was conducted by Parent, SAI Holdings, Inc., a Nevada corporation (“Holdings”) and SAI Products, Inc. a Nevada corporation (“Products Inc.”). Effective on February 29, 2000 Holdings and Products Inc. merged into Parent. On June 28, 2000 Parent transferred substantially all its assets and liabilities to SAI. Parent retained all its employees and currently performs administrative and management services for SAI pursuant to that certain Management Services Agreement effective as of June 28, 2000 by and between Parent and SAI. 783 Common Units and 217 Preferred Units (as defined below), together constituting all of the equity interests of SAI (the “Units”), are currently owned in the aggregate by IPG and Parent in the amounts and percentages set forth on Schedule 3.1B. 1,900,000 shares of Common Stock (as defined below) (the “Parent Stock”), constituting all of the outstanding equity interests of Parent, are currently owned in the aggregate by the Parent Shareholders in the amounts and percentages set forth on Schedule 3.1C. The Parties contemplate that Parent will be merged with and into Buyer (the “Merger”) pursuant to a Plan of Merger (the “Plan of Merger”) in the form attached hereto as Exhibit A. The Parties also contemplate that IPG will sell to Buyer and Buyer will purchase from IPG all of the Units owned by IPG, which Units are identified on Schedule 3.1B (the “IPG Units”). The Merger and the purchase and sale of the IPG Units (the “Unit Purchase” and together with the Merger, collectively, the “Transactions”) will occur simultaneously at a closing hereunder (the “Closing”), all in accordance with and subject to the terms and conditions set forth in this Agreement. |
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Pursuant to the First Amended SAI Holdings, Inc. Long-Term Incentive Stock Option Plan (the “Option Plan”) certain employees and former employees of the Parent listed on Schedule 3.1D (the “Plan Option Holders”) possess options (the “Plan Options”) to purchase shares of Non-Voting Common Stock under SAI Holdings, Inc. Incentive Stock Option Agreements (the “Plan Option Agreements”). Certain non-employees of Parent listed on Schedule 3.1D (the “Non-Plan Option Holders”, and together with the Plan Option Holders, the “Option Holders”) possess options (“Non-Plan Options”, and together with the Plan Options, the “Options”) to purchase shares of Non-Voting Common Stock, which Non-Plan Options were granted outside the Plan pursuant to individual Stock Option Agreements (the “Non-Plan Option Agreements”, and together with the Plan Option Agreements, the “Option Agreements”) and are non-qualified). Certain of the Options, by their current terms, vest, and all of the Options become exercisable only for a period of 90 days after the execution and delivery of this Agreement by the Parties entitling the Option Holders to obtain such shares of Non-Voting Common Stock as listed on Schedule 3.1D. Prior to the Closing referred to herein, Parent will have obtained written offers, in the form attached hereto as Exhibit B (the “Offers”), from Option Holders holding at least ninety percent (90%) of the Options, to amend their Option Agreements by deleting the 90 day exercise period in their Option Agreements and replacing it with a two (2) year exercise period. In addition, the Board of Directors of Parent, as Committee under the Option Plan and the Non-Plan Options, shall have passed resolutions setting forth that after the Closing the Options will entitle each Option Holder to receive .55706 shares of common stock of Dendrite for each share of Non-Voting Common Stock they were entitled to received under the Options, at an exercise price per share equal to the exercise price set forth in the Option Holder’s Option Agreement, divided by .55706. Promptly after the Closing, Dendrite will file a Registration Statement on Form S-8 under the Securities Act of 1933, as amended, for the purpose of registering the Dendrite common stock subject to issuance under those Options as to which Dendrite is eligible to use Form S-8 and will file any required application with NASDAQ in order to list such Dendrite Common Stock. As an inducement for Buyer to consummate the Transactions, IPG Parent has agreed to guarantee the indemnification obligations of IPG set forth in Section 8 of this Agreement, and is a Party to this Agreement solely with respect to IPG’s obligations under Section 8. As an inducement for Sellers to consummate the Transactions, Dendrite has agreed to guarantee the indemnification obligations of Buyer set forth in Section 6.6 of this Agreement. As an inducement for Buyer and the Parent Shareholders to consummate the Transactions, Parent Shareholders have agreed to enter into employment agreements with Dendrite substantially in the form of Exhibit 7.1(i)(iii). Accordingly, in consideration of the premises and other good and valuable consideration, the Parties, intending to be legally bound hereby, agree as follows: 2 |
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“Closing Net Working Capital” means the Net Working Capital of SAI as of the close of business on the day prior to the Closing Date. “COBRA” shall have the meaning ascribed to such term in Sections 3.13(d). “Code” means the Internal Revenue Code of 1986, as amended. “Common Stock” means the voting common stock of Parent, the terms and conditions of which are set forth in the certificate of incorporation of Parent. “Common Units” means voting common units of ownership of SAI, the terms and conditions of which are set forth in the Operating Agreement. “Company Assets” shall mean, collectively, all the Company’s Intangible Property and all of the Tangible Company Properties. “Company Contract” means those contracts which are binding on either SAI or Parent or both of them. “Company Intellectual Property” shall have the meaning ascribed to such term in Section 3.7(a). “Company’s Knowledge” means all facts and information which are or would reasonably be expected to be within the knowledge of the Chief Executive Officer, President, Chief Technology Officer or Chief Financial Officer of SAI. “Conditionally Available Excess” shall have the meaning ascribed to such term in Section 2.2(e). “Confidential Information” means all information, belonging or relating to Buyer (including information belonging or relating to each of the SAI Entities as to which Buyer directly or indirectly acquires an ownership interest at the Closing) which is not generally known to the public, including, without limitation, business or Trade Secrets, price lists, methods, formulas, know-how, customer lists, manufacturing processes, products costs, marketing plans, research and development and financial information. “Control” (including the terms “Controlled by” and “under common Control with”) shall mean the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of stock or other equity interest or as trustee or executor, by contract, or credit arrangement or otherwise. “Current Assets” means current assets, including accounts receivable, inventory, prepaid expenses and other current assets of the Company on a consolidated basis, excluding the current assets of Parent identified on Schedule 2.2(a)(1). 4 |
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“Current Liabilities” means current liabilities, including accounts payable, accrued expenses, and other current liabilities of the Company on a consolidated basis, excluding the current liabilities of Parent identified on Schedule 2.2(a)(2). “Cutoff Date” means September 30, 2002. “Damages” shall have the meaning ascribed to such term in Section 6.6(b). “Deductible” shall have the meaning ascribed to such term in Section 8.3(a) “Defined Benefit Plan” shall have the meaning ascribed to such term in Section 3.13. “Employee Plans” shall have the meaning ascribed to such term in Section 3.13(a). “Employee Welfare Benefit Plan” shall have the meaning ascribed to such term in Section 3.13(f). “Environmental Claims” means claims, liabilities, investigations, litigation, administrative proceedings, or judgments or orders relating to any Hazardous Materials. “Environmental Laws” shall have the meaning ascribed to such term in Section 3.16(c). “ERISA” means the Employment Retirement Income Security Act of 1974, as amended. “ERISA Affiliate” means any Person (other than a Governmental Entity) that, together with the Company as of the relevant measuring date under ERISA, was or is required to be treated as a single employer under Section 414 of the Code. “Escrow Agreement” means the Escrow Agreement, substantially in the form of Exhibit 2.2(c) attached hereto, executed and delivered at the Closing by Buyer, the Parent Shareholders and the Escrow Agent. “Escrow Agent” means Pitney, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP. “Escrow Fund” means the Initial Escrow Amount plus the Replenishment Escrow Amount, if any, together with any interest or other earnings thereon. “Estimated Purchase Price” shall have the meaning ascribed to such term and be calculated as described in Section 2.3(b). “Financial Statements” shall have the meaning ascribed to such term in Section 3.3. “GAAP” means United States generally accepted accounting principles, consistently applied. 5 |
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“Governmental Entity” means any court, tribunal, department, authority, agency, commission, official (acting in his or her capacity as such) or other instrumentality of the United States, or any domestic state, county, city or other political subdivision. “GUST” means the General Agreement on Tariffs and Trade (GATT), (also known as the Uruguay Round Agreements Act (Pub. Law 103-465); the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) (Pub. Law 13-353); the Small Business Job Protection Act of 1996 (SBJPA) (Pub. Law 104-188); the Taxpayer Relief Act of 1997 (TRA’97) (Pub. Law 105-34); and the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA ‘98) (Pub. Law 105-206). The benefit law changes made by the Community Renewal Tax Relief Act of 2000 (Pub. Law 105-554) must also be adopted within the GUST remedial amendment period. “Hazardous Material” means (a) all or any of the following: substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances”; (b) oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (c) any flammable substances or explosives or any radioactive materials; and (d) asbestos in any form or electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million. “Holdings” shall have the meaning ascribed to such term in the Recitals. “Indemnify” shall have the meaning ascribed to such term in Section 6.6(b). “Initial Escrow Amount” shall have the meaning ascribed to such term in Section 2.2(b). “Initial Purchase Price” shall have the meaning ascribed to such term in Section 2.2(a). “Intellectual Property” means all registered and unregistered trademarks, trade names, service marks; Internet domain names, trademark and service ▇▇▇▇ applications; registered and unregistered copyrights (including, without limitation, those in computer programs and software, including all source and object code); patents, patent applications, inventions, software, trade secrets, know-how, designs and processes; mask works; and any rights under any license to any of the foregoing whether or not subject to statutory registration or protection. “Interim Balance Sheet” shall have the meaning ascribed to such term in Section 3.3(a). “Interim Balance Sheet Date” shall have the meaning ascribed to such term in Section 3.3(a). “Interim Period” shall have the meaning ascribed to such term in Article 5. “IPG Indemnification Cap” means an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000.00). 6 |
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“IPG Initial Payment” shall have the meaning ascribed to such term in Section 2.2(a). “IPG Trigger Amount” means $10,400,000.00. “IPG Units” shall have the meaning ascribed to such term in the Recitals. “Legal Requirements” means any requirement arising under any action, law, statute, ordinance, rule, regulation, proceeding, determination or direction of an arbitrator or Governmental Entity, including any environmental and safety requirement. “Lien” means any mortgage, pledge, security interest, encumbrance, easement, restriction, charge, or other lien. “Losses” means any and all assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, penalties, charges, and amounts paid or incident to any of the foregoing or in investigation, defense or settlement of Actions relating to Losses (including, without limitation, reasonable costs, fees and expenses of attorneys, experts, accountants, appraisers, consultants, witnesses, investigators and any other agents of such person). “Material Adverse Effect” means any fact or facts which, individually or collectively, could reasonably be expected to materially adversely impact (i) the business, operations, properties, financial condition or results of operations, or prospects of the Business taken as a whole, (ii) the Transactions, or (iii) the ability of either of the Parent Shareholders, IPG or either of the SAI Entities to perform its obligations under this Agreement. “Merger” shall have the meaning ascribed to such term in the Recitals. “Merger Consideration” shall have the meaning ascribed to such term in Section 2.2(a). “Multiemployer Plan” shall have the meaning ascribed to such term in Section 3.13. “Net Working Capital” means Current Assets less Current Liabilities. “Non-Plan Options” shall have meaning ascribed to such term in the Recitals. “Non-Plan Option Agreements” shall have meaning ascribed to such term in the Recitals. “Non-Plan Option Holders” shall have meaning ascribed to such term in the Recitals. “Non-Voting Common Stock” means the non-voting common stock of Parent issuable upon exercise of the Options, the terms and conditions of which are set forth in the Certificate of Incorporation of Parent. “Objection Notice” shall have the meaning ascribed to such term in Section 2.4(b). 7 |
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“Person” means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or any Governmental Entity. “Personal Property Lease” shall have the meaning ascribed to such term in Section 3.5(d). “Plan of Merger” shall have the meaning ascribed to such term in the Recitals. “Plan Options” shall have the meaning ascribed to such term in the Recitals. “Plan Option Agreements” shall have the meaning ascribed to such term in the Recitals. “Plan Option Holders” shall have the meaning ascribed to such term in the Recitals. “Post-Closing Adjustment Amount” shall have the meaning ascribed to such term in Section 2.4(g). “Previous Period Returns” shall have the meaning ascribed to such term in Section 6.6(a)(i). “Preferred Units” means voting convertible preferred units of ownership of SAI, the terms and conditions of which are set forth in the Operating Agreement. “Previous Tax Period” shall have the meaning ascribed to such term in Section 6.6(a)(i). “Pro Forma S&L Returns” shall have the meaning ascribed to such term in Section 6.6(a)(ii). “products” shall have the meaning ascribed to such term in Section 3.5. “Products Inc.” shall have the meaning ascribed to such term in the Recitals. “Projected Net Working Capital” means a good faith projection of the unaudited statement of Closing Net Working Capital as set forth in Exhibit 2.3(a). “Proportionally” shall mean, as to Sellers, in the proportions set forth on Schedule 2.2(b), and as to the Parent Shareholders, in the same proportion as their relative ownership of Parent Stock as set forth on Schedule 3.1C. 9 |
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“Purchase Price” means the aggregate of the Unit Consideration and the Merger Consideration. “Real Property” shall have the meaning ascribed to such term in Section 3.8(b). “Real Property Leases” shall have the meaning ascribed to such term in Section 3.8(b). “Release Date” means the first anniversary of the Closing Date. “Replenishment Escrow Amount” shall have the meaning ascribed to such term in Section 2.2(d). “Representative” (except when used in the term “Seller Representative”, which is separately defined herein) means a Party’s Affiliates (not including any Governmental Entity) and its officers, directors, principals, attorneys, agents and employees. “Required Consents” shall have the meaning ascribed to such term in Section 7.1(e). “Restricted Affiliate” means, with respect to a Restricted Party, any business, firm, entity or other Person (other than a Governmental Entity) with respect to which such restricted person, serves as an officer, director or partner or member, or is employed by, or serves as a consultant with or has any equity or equity-like interest in (other than an equity interest that is publicly traded and such ownership does not exceed 1% of the outstanding equity interest of such entity) or otherwise owns, manages, operates or controls, directly or indirectly. “Restricted Business” shall have the meaning ascribed to such term in Section 6.3(a). “Restricted Party” shall have the meaning ascribed to such term in Section 6.3(a). “Restricted Parties” shall have the meaning ascribed to such term in Section 6.3(a). “Restricted Period” shall have the meaning ascribed to such term in Section 6.3(a). “S&L Taxes” shall have the meaning ascribed to such term in Section 6.6(a)(ii). “Seller Representative” shall have the meaning ascribed to such term in Section 8.2(c). “Siebel Deadline Date” means the close of business on December 13, 2002. “Siebel Receivable” means those certain outstanding accounts receivable of SAI in the aggregate amount of $900,558.00 due to SAI from Siebel Systems, Inc. “Subscription Agreement” means the Subscription Agreement, dated as of the 28th day of June, 2000, by and among IPG Parent, IPG SAI Acquisition Corp. (now IPG), Parent, SAI, Gupta and ▇▇▇▇▇, as amended. 10 |
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“System” shall have the meaning ascribed to such term in Section 3.7A. “Tangible Company Properties” means the equipment, furniture, machinery, vehicles, structures, fixtures and other tangible property of the Company. “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever (including any Taxes paid with respect to any composite or similar Tax Return), together with any interest or any penalty or addition to tax imposed by any Taxing Authority. “Taxing Authority” means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. “Tax Claim” shall have the meaning ascribed to such term in Section 6.6(f)(i). “Tax Indemnified Party” shall have the meaning ascribed to such term in Section 6.6(f)(i). “Tax Indemnifying Party” shall have the meaning ascribed to such term in Section 6.6(f)(i). “Tax Laws” means the Code, federal, state, county, local or foreign laws relating to Taxes and any regulations or official administrative pronouncements released thereunder. “Tax Returns” means any return (including any composite or similar Tax Return), report, information return, schedule, certificate, statement, election (including, without limitation, any election to be treated as a Subchapter S corporation) or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax. “Transaction Documents” means, collectively, this Agreement and all other agreements, instruments, certificates and other documents relating to any of the Transactions and expressly contemplated by this Agreement, including without limitation the Plan of Merger and the Unanimous Consent to the Merger. “Transactions” shall have the meaning ascribed to such term in the Recitals. “Unanimous Consent to the Merger” means the unanimous written consent of the directors of the Parent and the Parent Shareholders, attached hereto as Exhibit C, approving and adopting the Plan of Merger. 11 |
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(b) At the Closing, Buyer shall pay the Estimated Purchase Price by (i) wire transferring Five Million Three Hundred Six Thousand One Hundred Sixty-Six Dollars ($5,306,166.00) to one or more accounts designated by IPG (the “IPG Initial Payment”), and (ii) delivering to Parent Shareholders a non-transferable, non-negotiable, demand promissory note in the form attached hereto as Exhibit X (the “Demand Note”) which when demanded and paid, shall be paid out by: (A) wire transferring Seven Million Six Hundred Sixteen Thousand Six Hundred Thirty-Four Dollars ($7,616,634.00) in immediately available funds to one or more accounts designated by the Parent Shareholders, and (B) wire transferring, at the direction of the Seller Representative, Two Million Dollars ($2,000,000.00) in immediately available funds to an escrow account (the “Initial Escrow Amount” and collectively with the payment under (A) above referred to as the “Parent Shareholders Initial Payment”); and (ii) in addition to the above, accounting for the Option Amount. (c) The Escrow Fund shall be held by the Escrow Agent pursuant to the terms and conditions set forth in the Escrow Agreement. The Escrow Agent’s fees shall be borne by Buyer. Subject to the terms and conditions of the Escrow Agreement, the Escrow Fund shall be used to satisfy the obligations, if any, of Sellers, to indemnify Buyer in accordance with Section 6.6(b), Section 8.2(a) and to provide security for the collection of the Siebel Receivable. On the first anniversary of the Closing Date (the “Release Date”), subject to the terms and conditions of the Escrow Agreement, the Escrow Agent shall pay Proportionally to the Parent Shareholders that portion of the Escrow Fund remaining on deposit with the Escrow Agent, less an amount equal to (i) any claim of Buyer asserted in writing for indemnification pursuant to Section 6.6 or Section 8 for which recourse may be had to the Escrow Fund, (ii) to the extent not yet paid as of the Release Date, any claim of Buyer for indemnification pursuant to Section 6.6(b) or Section 8.2(a) for which recourse may be had to the Escrow Fund and which has been finally determined in favor of Buyer, and (iii) any unpaid amount of the Siebel Receivable for which Buyer has not been paid as provided by Subsection (e) below, in the manner set forth herein and in the Escrow Agreement. (d) In the event the Siebel Receivable is paid in full in cash to Buyer or any Affiliate of Buyer, Buyer shall promptly notify the Escrow Agent and the Seller Representative thereof. Upon notice from the Buyer, delivered in accordance with this Agreement and the Escrow Agreement, that the Siebel Receivable has been paid in full prior to the Release Date and prior to any payment to Buyer being made under the first sentence of Subsection 2.2(e) below, the Escrow Agent shall pay Proportionally to the Parent Shareholders out of the Escrow Fund remaining on deposit with the Escrow Agent an aggregate amount equal to the lesser of (A) Four Hundred Thousand Dollars ($400,000.00), or (B) the amount of the Escrow Fund remaining on deposit with the Escrow Agent minus an amount equal to (i) any claim of Buyer asserted in writing for indemnification pursuant to Section 6.6 or Section 8 for which recourse may be had to the Escrow Fund and (ii) to the extent not yet paid as of the Release Date, any claim of Buyer for indemnification pursuant to Section 6.6 or Section 8 for which recourse may be had to the Escrow Fund and which has been finally determined in favor of Buyer. 13 |
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(c) Following receipt of any Objection Notice, Buyer and the Seller Representative shall discuss in good faith the applicable objections set forth therein for a period of not to exceed 20 days thereafter and shall, during such period, attempt to resolve the matter or matters in dispute by mutual written agreement. If Buyer and the Seller Representative reach such an agreement, such agreement shall be confirmed in writing and shall revise the Closing Date Statement of Net Working Capital to reflect such agreement, which agreement (and Closing Date Statement of Net Working Capital, as so revised, including the Closing Net Working Capital reflected thereon or calculated therefrom) shall thereafter be final and binding upon Sellers and Buyer for purposes of any post-closing adjustment set forth in this Section 2.4 (and any amounts to be paid pursuant to Section 2.4(g) shall thereupon be paid). (d) If Buyer and the Seller Representative are unable to reach a mutual agreement in whole or in part in accordance with Section 2.4(c) during the 20 day period referred to therein, then Buyer and the Seller Representative shall jointly select an accounting firm of national standing (the “Accounting Firm”), which shall resolve those matters still in dispute with respect to the Closing Date Statement of Net Working Capital and the Closing Net Working Capital reflected thereon or calculated therefrom. If Buyer and the Seller Representative fail to agree on an Accounting Firm within five (5) business days after the expiration of the 20 day period, either party may request the American Arbitration Association to appoint such an Accounting Firm, and such appointment shall be conclusive and binding upon the parties. The Accounting Firm shall make a final and binding resolution of the disputes or disagreements between Buyer and the Seller Representative. The Accounting Firm shall be instructed that, in making its final and binding resolution, it must select either the final position of Buyer in its entirety or the final position of the Seller Representative in its entirety. No appeal from such determination shall be permitted. The costs and expenses for the services of the Accounting Firm shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Sellers. Subject to the foregoing sentence, all fees and expenses of Sellers or the Seller Representative relating to matters described in this Section 2.4 shall be borne Proportionally by Sellers, and all fees and expenses of Buyer relating to matters described in this Section 2.4 shall be borne by Buyer. Sellers and Buyer agree to fully cooperate with each other and with the Accounting Firm to resolve any dispute. (e) Notwithstanding any other provision of this Agreement, including, without limitation, any provision stating that remedies shall be cumulative and not exclusive, this Section 2.4 provides the sole and exclusive method for resolving any and all disputes that may arise between or among the Parties with respect to the determination of Closing Net Working Capital, absent fraud. As among the Parties, each Party hereby irrevocably waives, relinquishes and surrenders on its own behalf and on behalf of its Affiliates (not including any Governmental Entity) and its Representatives all rights to, and agrees that it will not attempt, and shall cause its Affiliates (not including any Governmental Entity) and Representatives not to attempt, to, resolve any such dispute or disputes related to the determination of the Closing Date Statement of Net Working Capital in any manner other than as set forth in this Section 2.4, including without limitation through litigation, absent fraud. Absent fraud, each Party further agrees on its own behalf and on behalf of its Affiliates (not including any Governmental Entity) and Representatives that if one or more of them should initiate any attempt to resolve any such dispute or disputes related to the determination of the Closing Date Statement of Net Working Capital in any manner other than the sole and exclusive manner set forth in this Section 2.4, such initiators shall pay and reimburse all fees, costs and expenses incurred by any other Party as a result of, in connection with or related to such attempt or attempts. Nothing in this Section 2.4(e) shall be deemed, however, to limit in any way a Party’s ability to recover for any breach of a representation or warranty made by the other Party to it in or pursuant to this Agreement or any right of indemnification to which a Party is entitled under Article 8. 16 |
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(f) The Purchase Price shall be calculated based upon the final calculation of the Closing Net Working Capital as determined in this Section 2.4 and shall be calculated at the time the Closing Date Statement of Net Working Capital (and the Closing Net Working Capital reflected thereon or calculated therefrom) becomes final and binding on the Parties pursuant to this Section 2.4. If the Closing Net Working Capital as reflected on or calculated from such final and binding Closing Date Statement of Net Working Capital: (i) is greater than or equal to the Base Amount, then the Purchase Price shall be equal to (A) the Initial Purchase Price plus (B) the amount, if any, by which the Closing Net Working Capital exceeds the Base Amount; or (ii) is less than the Base Amount, then the Purchase Price shall be equal to (A) the Initial Purchase Price minus (B) the amount by which the Base Amount exceeds the Closing Net Working Capital. (g) If the Purchase Price as so calculated (i) is greater than the Estimated Purchase Price, Buyer shall pay Proportionally to Sellers the amount by which the Purchase Price exceeds the Estimated Purchase Price, or (ii) is less than the Estimated Purchase Price, Sellers shall pay Proportionally (subject to Section 2.4(h) below) to Buyer the amount by which the Estimated Purchase Price exceeds the Purchase Price (the amount of either such adjustment, a “Post-Closing Adjustment Amount”). Any Post-Closing Adjustment Amount payable by a Party pursuant to this Section 2.4(g) shall be paid promptly by the Party required to pay such Post-Closing Adjustment Amount, but in no event later than ten (10) business days following the determination of such Post-Closing Adjustment Amount. Payment by a Party of any Post-Closing Adjustment Amount shall be made in immediately available funds via wire transfer to an account designated by the Party entitled to receive such payment in writing. Any Post-Closing Adjustment Amount payable under this Section 2.4(g) shall be made without interest, except that if the payment is made later than the date provided for above in this Section 2.4(g), then such Post-Closing Adjustment Amount shall be paid with interest thereon from and including the Closing Date, but excluding the date of payment, calculated at the prime rate of interest as published by The Wall Street Journal on the first business day after the final determination of the Purchase Price, plus 2%. (h) If the Closing Net Working Capital is less than $5,446,228, then IPG and the Parent Shareholders shall pay Proportionally to Buyer only that portion of the Post Closing Adjustment Amount attributable to the difference between the Base Amount and $5,446,228 and the Parent Shareholders (but not IPG) shall pay Proportionally to Buyer the remainder of the Post Closing Adjustment Amount. If the Closing Net Working Capital is equal or greater than $5,446,228, but less than the Base Amount, then IPG and the Parent Shareholders shall pay Proportionally to Buyer the full Post Closing Adjustment Amount. If the Closing Net Working Capital is greater than the Base Amount, then Buyer shall pay Proportionally to IPG and the Parent Shareholders the full Post Closing Adjustment Amount. 17 |
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2.5 Closing Costs and Transfer Fees. Each Party shall be responsible to pay all transfer Taxes, stock transfer Taxes, and any other Taxes, fees or other charges imposed under applicable law, rules or regulations on such Party by reason of the Transactions (and any deficiency, interest or penalty asserted with respect thereto) if any. 2.6 Closing Date, Time and Place. The closing of the Transactions, including, without limitation, the transfer and delivery of all documents and instruments necessary to consummate the Transactions (the “Closing”) shall be held at the offices of Buyer’s counsel, or at such other location as the parties may agree, on September 19, 2002, or as soon as practicable, but in any event within five business days after the satisfaction by each Party (or waiver by the other Parties) of such Party’s obligations and covenants hereunder and of each of the conditions specified in Article 7 (the “Closing Date”). The Closing may be held in such other place or on such other date or at such other time as shall be mutually agreed by the Parties. The Closing shall not be deemed to have occurred until all actions necessary to complete all Transactions have occurred or been waived in writing. 3. REPRESENTATIONS AND WARRANTIES OF SELLERSThe Parent Shareholders, Parent and SAI hereby jointly and severally make to Buyer the representations and warranties set forth in Section 3.1 through 3.22, inclusive. IPG hereby makes to Buyer the representations and warranties set forth in Section 3.23 through 3.26, inclusive. It is understood that any references to the Company, Parent or SAI in this Article 3 or elsewhere in this Agreement includes the predecessors to such entity or entities, unless the context clearly requires otherwise. 3.1 Organization and Capitalization. (a) Each of the SAI Entities is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the State of New Jersey. Each of the SAI Entities has the requisite power and authority to carry on its Business as now conducted. Schedule 3.1A identifies those jurisdictions in which Parent or SAI is qualified to do business as a foreign corporation or limited liability company, as the case may be, and Parent or SAI, as the case may be, is in good standing in each such jurisdiction. There are no other jurisdictions where the failure of either of the SAI Entities to be so qualified or in good standing would, reasonably be expected to, have a Material Adverse Effect. (b) All of the outstanding membership interest of SAI is owned by Parent and IPG in the amounts and percentages set forth on Schedule 3.1B, all of the outstanding equity interests of Parent are owned by the Parent Shareholders in the amounts and percentages as set forth on Schedule 3.1C, , and except as set forth on Schedule 3.1D, there are no outstanding options, warrants or other agreements to purchase any securities of SAI or Parent. Neither SAI Entity owns or holds any right to acquire any capital stock or any other security, interests or investment in any other Person, other than investments which constitute cash or cash equivalents. 18 |
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(a) licensing agreements for the license of trademarks or service marks to be used in connection with the design, development, manufacture or sale of products or services; (b) contracts or purchase orders to license, sell, maintain, or service products or provide consulting or other services to and for any customer involving $25,000 or more annually; (c) contracts currently in effect and not fully performed for the purchase or sale of any assets or property relating to or used or held for use in connection with the conduct of the Business for consideration in excess of $25,000; (d) contracts for the lease or sublease as lessee, lessor, sublessee or sublessor of personal property used or held for use in the Business requiring payments in excess of $25,000 annually (a “Personal Property Lease”); (e) any contracts currently in effect with any director, officer or employee of either SAI or Parent and any contracts with provisions which would be put into effect and which would otherwise, by their plain meaning, affect the contract as a result of the death, disability or termination of employment or relationship of any director, officer or employee of SAI or Parent; (f) contracts or agreements containing currently in effect non-competition covenants limiting the ability of either SAI or Parent to operate the Business or to sell, transfer or otherwise dispose of any assets or property relating to or used or held for use in connection with the Business or which would so limit the ability of SAI or Parent after the Closing Date, or contracts or agreements containing any currently in effect exclusive or non-terminable licensing provisions with respect to any Intellectual Property used in the Business; (g) partnership, joint venture, teaming, consortium, or other similar contracts, arrangements or agreements relating to the Business having provisions that are currently in effect; (h) development contracts relating to the Business having provisions that are currently in effect or pursuant to which any current product of the Company was, in whole or in part, designed or developed; or (i) agency, dealer, franchise or similar agreements relating to the Business having provisions that are currently in effect. Except as set forth on Schedule 3.5: (i) all of the Company Contracts required to be listed on Schedule 3.5 are valid, binding and in full force and effect, and the Company has not been notified in writing by any party of such party’s intention or desire to terminate any such Company Contract or modify it in any material respect; 21 |
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(ii) the Company has not received any outstanding written notice of any infringement or misappropriation by, or conflict with, any Person with respect to any of the Company Intellectual Property (including any demand or request that the Company license rights from any Person or cease licensing or servicing any of its products), (iii) the conduct of the Business, including without limitation, the license to and use by customers of the Company Intellectual Property subject to and in accordance with Company Contracts, and the use of the Company Intellectual Property by the Company has not infringed, misappropriated, or violated, and does not infringe, misappropriate or violate, any Intellectual Property or other proprietary right of any other Person, and (iv) the Company Intellectual Property has not, to the Company's Knowledge, been infringed, misappropriated or violated by any other Person. (c) Except as set forth on Schedule 3.7(c), neither of the SAI Entities has entered into any agreement to indemnify any other person against any charge of infringement, violation or misappropriation of any Intellectual Property. Except as set forth on Schedule 3.7(c), there are no royalties, fees or other payments payable by either of the SAI Entities to any person by reason of the ownership, use, sale, license or other disposition of any Intellectual Property. (d) Except as set forth on Schedule 3.7(d), neither of the SAI Entities is or will be as a result of the execution and delivery of this Agreement or the closing of the Transaction or other performance of the obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Company Intellectual Property or any third party Intellectual Property. (e) Except as set forth on Schedule 3.7(e), neither SAI Entity has been served with process, or is aware that any person is intending to serve process on either SAI Entity or any customer of either SAI Entity, in any suit, action or proceeding which involves a claim of infringement, violation or misappropriation of any Intellectual Property of any third party. Neither SAI Entity has brought any action, suit or proceeding for infringement, violation or misappropriation of any Intellectual Property or breach of any license or agreement involving any Company Intellectual Property against any third party. (f) Except as set forth in Schedule 3.7(f), all officers, employees and consultants of each of the SAI Entities and each of their predecessors have executed and delivered to such entity an agreement regarding the protection of proprietary information and the assignment to the such entity of any Intellectual Property arising from services performed for the such entity by such persons. 23 |
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(g) No former officer, employee or consultant of either of the SAI Entities or of any of their predecessors has or could have any right, title, interest or other claim in, to or under any of the Company Intellectual Property. (h) Each of the SAI Entities has, to the extent it deemed necessary and appropriate, obtained or entered into written agreements with third parties in connection with the disclosure to, or use or appropriation by, third parties, of any Company Intellectual Property that is not otherwise protected by a patent, a patent application, registered copyright or trademark, or other registration or legal scheme; and there is no situation where it would reasonably be deemed necessary and appropriate to obtain or enter into such a written agreement, where such a written agreement was not obtained (i) Except as set forth on Schedule 3.7(i), there are no outstanding options, licenses or agreements of any kind relating to any of the Company Intellectual Property, nor is either of the SAI Entities bound by or a party to any options, licenses or agreements of any kind, including without limitation obligations to pay any royalties or other payments with respect to the Intellectual Property Rights of any other Person. (j) It is not necessary to use in the Business any inventions of any employees of either of the SAI Entities (or people either currently intends to hire) made prior to his or her employment by either of the SAI Entities. (k) To the Company’s Knowledge, no employee or consultant of either SAI Entity material to the conduct of the Business as presently conducted is obligated under any agreement (including licenses, covenants or commitments of any nature) or subject to any judgment, decree or order of any court or administrative agency, or any other restriction that would materially interfere with the use of his or her best efforts to carry out his or her duties for the SAI Entities or to promote the interests of the SAI Entities or that would materially conflict with the SAI Entities’ business as currently conducted or as proposed to be conducted. At no time during the conception of or reduction of any of the Company Intellectual Property to practice was any developer, inventor or other contributor to such Intellectual Property operating under any grants from any governmental entity or agency or private source, performing research sponsored by any governmental entity or agency or private source or subject to any employment agreement or invention assignment or nondisclosure agreement or other obligation with any third party that could reasonably be expected to have a Material Adverse Effect. 3.7A Internal Computer System. The computer systems used by the Company in its normal business operations, including its hardware and software (the “System”), are operational in all material respects and function in all material respects in accordance with the needs of the Company. The Company is not in breach of any software license agreements for the System and all material licenses relating to the System are currently in full force and effect, and there are no defaults by either the Company, with respect to any material license for the System, or, to the Company’s Knowledge, by either the owner or licensor with respect to any material license for the System. All licenses for the System are assignable to Buyer without the consent of the licensor, or, if any consent is required, shall be acquired. Except as set forth on Schedule 3.7A(1), (i) all of the software used by the Company in its internal business operations is “off the shelf” software for which the Company has obtained a standard license applicable to the use thereof by the Company, and (ii) except as set forth on Schedule 3.7A(2), the Company has not agreed with any licensor of such software to any restriction on assignability other than restrictions contained in the standard terms of such standard licenses. 24 |
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3.8 Real Property. (a) No Owned Real Property. The Company does not own any real property. (b) Leased Real Property. Schedule 3.8 lists and describes briefly all real property leased or subleased to the Company (the “Real Property”). The Company has delivered to Buyer correct and complete copies of the leases and subleases listed on Schedule 3.8 and all modifications thereof (collectively, the “Real Property Leases”). Except as set forth on Schedule 3.8, with respect to the Real Property and each of the Real Property Leases: |
(i) each Real Property Lease is, to the Company’s Knowledge, legal, valid, binding, enforceable, and in full force and effect; |
(ii) to the Company’s Knowledge, no party to any Real Property Lease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration of any Real Property Lease; |
(iii) to the Company’s Knowledge, no party to any Real Property Lease has repudiated any material provision thereof; |
(iv) there are no disputes, oral agreements, or forbearance programs in effect as to any Real Property Lease which would have a Material Adverse Effect on the Company’s continued use of the premises covered by such Real Property Lease; |
(v) SAI has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in any leasehold or subleasehold created pursuant to any Real Property Lease; and |
(vi) no Real Property Lease has been materially modified in any respect, except to the extent that such modifications are in writing and have been delivered or made available to Buyer. |
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(c) With respect to the Real Property, the portions of the buildings located on the Real Property that are used in the Business are in the aggregate sufficient to satisfy the Company’s current business activities as conducted thereon and except as set forth on Schedule 3.8(c), to the Company’s Knowledge, there is no latent material defect in the structural elements, the mechanical systems (including, without limitation, all heating, ventilating, air conditioning, plumbing, electrical, utility and sprinkler systems) therein, the utility systems servicing such real property and the roofs which have not been disclosed to Buyer in writing prior to the date of this Agreement. The Company has not received written notice of (a) any condemnation, eminent domain or similar proceeding affecting any portion of the Real Property or any access thereto, (b) any special assessment or pending improvement Liens to be made by any Governmental Entity which may affect the Company’s use of any of the Real Property to conduct the Business, or (c) any violations by the Company of building codes and/or zoning ordinances or other governmental regulations with respect to the Real Property which have not been previously complied with. 25 |
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3.12 Taxes. Except as set forth on Schedule 3.12: (a) All Tax Returns required to have been filed prior to the date hereof by or with respect to any SAI Entity have been duly and timely filed (including any extensions). Each such Tax Return correctly and completely in all respects reflects the Tax liability and all other information required to be reported thereon. Each such Tax Return has been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and payable prior to the date hereof by each of the SAI Entities, whether or not shown on any Tax Return, have been paid as of the date hereof. (b) There are no pending actions, tax audits or Tax examinations by any Taxing Authority in connection with assessing additional Taxes against or in respect of either of the SAI Entities for any past period. The Company has not received any written notice from and no information has been requested in writing by any Taxing Authority with respect to any dispute or claim concerning any Tax liability of either of the SAI Entities and, to the Company’s Knowledge, no such dispute or claim has been threatened, claimed or raised by any Taxing Authority . There are no unresolved disputes or claims concerning any Tax liability of either of the SAI Entities. To the Company’s Knowledge there are no other requests for information by any Taxing Authority concerning any potential Tax liability of either of the SAI Entities (c) There are no Liens for Taxes upon the assets and properties of any SAI Entity. There are no Liens for Taxes on any of the capital stock of Parent or the membership interests of SAI. (d) Other than with respect to Taxes incurred as a result of the Closing of the Transactions, Taxes that either of the SAI Entities were or are required by law to withhold, collect or pay prior to the date hereof have been duly withheld or collected and, to the extent required, paid to the appropriate Taxing Authority. The amount of any liability for either of the SAI Entities’ unpaid Taxes for all periods ending on or prior to the Closing Date will not exceed the amount of any current liability accruals for such Taxes (excluding reserves for deferred Taxes) on the books and records of the SAI Entities as such accruals are reflected on the Financial Statements. (e) Neither of the SAI Entities has received any written ruling related to Taxes or entered into any agreement with a Taxing Authority relating to Taxes that is now in effect. (f) Neither of the SAI Entities has agreed to make or is required to make adjustments under Section 481(a) of the Code by reason of a change in accounting method or otherwise. (g) Neither of the SAI Entities has made any payments nor is obligated to make any payments, nor is a party to any contract, agreement or arrangement covering any current or former employee or consultant of either of the SAI Entities that under any circumstances could require it to make or give rise to any payments that are not deductible as a result of the provisions set forth in Section 280G of the Code or the Treasury Regulations thereunder or would result in an excise tax to the recipient of any such payment under Section 4999 of the Code. 27 |
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(h) There are no outstanding waivers of limitations in respect of Taxes of either of the SAI Entities. (i) Neither of the SAI Entities has filed any consent agreement under Section 341(f) of the Code concerning collapsible corporations. (j) Neither of the SAI Entities has received any written notice from any Taxing Authority with respect to any claim that has ever been made by any Taxing Authority in a jurisdiction where either of the SAI Entities does not file Tax Returns that either of the SAI Entities is or may be subject to Taxes in that jurisdiction. To the Company’s Knowledge there are no other requests for information by any Taxing Authority in any jurisdiction where either of the SAI Entities does not file Tax Returns. (k) Neither of the SAI Entities are involved in, subject to, or a party to, any joint venture, partnership, contract, agreement, or other arrangement that is treated as a partnership for federal, state, local or foreign Tax purposes. (l) Neither of the SAI Entities are a party to any Tax sharing, Tax indemnity, or Tax allocation agreement, and are not liable for any Tax liability of any other Person. (m) Neither SAI, nor its Unit holders have filed an affirmative election with any Taxing Authority on Form 8832 to have SAI classified as an association taxable as a corporation for federal tax purposes. (n) No property of either SAI Entity is “tax exempt use property” within the meaning of Section 168(h) of the Code. (o) SAI Holdings, Inc. was a valid S Corporation, as defined in the Code, for federal income tax purposes from and after January 1, 1997 (resulting from the election made on January 24, 1997). Effective February 24, 2000, upon the merger of SAI Holdings, Inc. into Parent, and for all periods up to and including the date hereof, Parent, as the successor entity, continued as a valid S Corporation for federal income tax purposes. Except for the federal election, neither SAI Holdings, Inc. nor Parent, its successor, has affirmatively elected S Corporation status for any state or other jurisdiction in which it conducts its business and therefore files as a C Corporation in those jurisdictions which require an affirmative election (e.g., New York State, New York City, New Jersey and Pennsylvania) to be taxed as an S Corporation. 28 |
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(d) The Company has complied, and currently complies, in all respects with the applicable continuation requirements for its welfare benefit plans, including (1) Section 4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA, which provisions are hereinafter referred to collectively as “COBRA”, and (2) any applicable state statutes mandating health care or other welfare benefit continuation coverage for employees and/or their dependents. (e) The form of all Employee Plans is in compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in compliance with such laws and the written Employee Plan documents. Neither the Company nor, to the Company’s Knowledge, any fiduciary of an Employee Plan has violated the requirements of Section 404 of ERISA. All required reports and descriptions of the Employee Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required) timely filed with the IRS, the U.S. Department of Labor or other Governmental Entity and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with respect to the Employee Plans have been appropriately given, except where the failure to timely file or give notice would not be reasonably expected to have a Material Adverse Effect. (f) Except as set forth on Schedule 3.13(f), each Employee Plan that is intended to be qualified under Section 401(a) of the Code either (i) has received or applied for a favorable determination letter from the IRS covering the laws referred to as “GUST” (through and including the Community Renewal Tax Reduction Act of 2000), or (ii) with respect to any Employee Plan that is a standardized prototype plan, has received a favorable opinion letter from the IRS covering GUST, and to the Company’s Knowledge there are no circumstances that will or could result in revocation of any such favorable determination letter or opinion letter. Each trust created under any Employee Plan has been determined to be exempt from taxation under Section 501(a) of the Code, and to the Company’s Knowledge there are no circumstances that will or could result in a revocation of such exemption. Each “employee welfare benefit plan” as defined in Section 3(1) of ERISA (an “Employee Welfare Benefit Plan”) that utilizes a funding vehicle described in Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code has been the subject of a notification by the IRS that such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the plan complies with Section 505 of the Code, unless the IRS does not, as a matter of policy, issue such notification with respect to the particular type of plan. With respect to each Employee Plan, no event has occurred or condition exists that will or could give rise to a loss of any intended tax consequence or to any Tax under Section 511 of the Code. 30 |
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(g) There is no pending proceeding or any proceeding threatened in writing relating to any Employee Plan, nor is there any basis for such proceeding. Neither the Company nor any fiduciary of an Employee Plan has engaged in a transaction with respect to any Employee Plan that, assuming the taxable period of such transaction expired as of the date hereof, would be reasonably expected to subject the Company to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or a violation of Section 406 of ERISA. The Transactions will not result in the potential assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l) of ERISA nor result in a violation of Section 406 of ERISA. (h) The Company has maintained workers’ compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise except as set forth on Schedule 3.13(h). (i) Except as required by Legal Requirements and as set forth on Schedule 3.13(i), the consummation of the Transactions (or the agreement to enter into the Transactions) will not accelerate the time of vesting or the time of payment, or increase the amount, of compensation and other benefits due to any director, employee, officer, former employee or former officer of the Company. There are no contracts or arrangements providing for payments that could subject the Company to liability for Tax under Section 4999 of the Code. (j) Except for the continuation coverage requirements of COBRA, the Company does not have any obligations or potential liability for compensation (or other benefits) to employees, former employees or their respective dependents following termination of employment or retirement under any of the Employee Plans that are Employee Welfare Benefit Plans. (k) Except as set forth on Schedule 3.13(k), none of the Transactions (or the agreement to enter into the Transactions) will result in an amendment, modification or termination of any of the Employee Plans. No written or oral representations have been made to any employee or former employee of the Company promising or guaranteeing any employer payment or funding for the continuation of medical, dental, life or disability coverage for any period of time beyond the end of the current plan year (except to the extent of coverage required under COBRA). Except as set forth on Schedule 3.13(k), no written or oral representations have been made to any employee or former employee of the Company concerning the employee benefits of Buyer. (l) Set forth on Schedule 3.1D is a list of all individuals who hold unexpired Options (vested and unvested), and the terms of such Options (including grant date, size of original grant, redeemed Options, Options currently outstanding, exercise price, vesting status and vesting period). Except as set forth in Schedule 3.1D, all Options were granted under the First Amended SAI Holdings, Inc. Long-Term Incentive Stock Option Plan. No Options were exercised prior to the date of this Agreement. Except for the Options associated with Offers that have been received and accepted by the Company, and except as set forth on Schedule 3.1D, all Options (to the extent they are outstanding as of the date of this Agreement) qualify as incentive stock options under Section 422 of the Code, and have so qualified at all times in all respects since the date on which they were granted. 31 |
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(c) Except as set forth on Schedule 3.16(c), the Company has complied with and is currently in compliance in all material respects with all applicable environmental laws, statutes, regulations, orders, Permits or other legal requirements (“Environmental Laws”), including obtaining and maintaining in effect all Permits required by applicable Environmental Laws. 3.17 Product Liability. Other than as set forth on Schedule 3.17, there has been no claim, recall or demand, or to the Company’s Knowledge, investigation or other indication received by either of the SAI Entities concerning alleged defective or potentially defective products or services (other than in the ordinary course of business and other than customer dissatisfaction returns and complaints in the normal course of business). There is no material defect in the product quality, design, engineering or safety of any product developed, manufactured, distributed, licensed or sold by either of the SAI Entities. All products licensed or sold by either of the SAI entities have complied in all material respects with all applicable governmental, and other mandatory requirements. 3.18 Affiliate Transactions. All loans, sales, purchases and other transactions in excess of $25,000, between either of the SAI Entities and any Affiliate (not including any Governmental Entity) of the Company which have occurred since January 1, 2001 or are currently in effect are set forth on Schedule 3.18. 3.19 Insurance. All of the properties, assets and operations of the SAI Entities are insured for the benefit of the SAI Entities and will be so insured through the Closing Date. All insurance policies carried by the SAI Entities are listed and described on Schedule 3.19. Neither SAI Entity has received written notice of any pending or threatened termination or non-renewal with respect to any insurance policy listed or required to be listed on Schedule 3.19, and neither SAI Entity is in default with respect to any obligation pursuant to any such insurance policy that would entitle any carrier to limit, restrict, modify, deny or terminate any coverage. Other than described on Schedule 3.19, there are no pending claims against such insurance by either of the SAI Entities as to which insurers are defending under reservation of rights or have denied liability. 3.20 Brokers. Except as set forth on Schedule 3.20, no finder, broker, agent or other intermediary has worked for or on behalf of either of the Parent Shareholders or either of the SAI Entities in connection with the negotiation or consummation of any of the Transactions, and no Person is entitled to receive any brokerage commission, finder’s fee or other compensation or fee as a result thereof. 3.21 Consents. Except as otherwise set forth on Schedule 3.21, neither the execution and delivery of this Agreement nor the carrying out of any of the Transactions will: (a) violate, conflict with, result in a breach of, constitute a default under (whether with or without notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or give any other party the right to terminate, any Permit binding upon or applicable to either of the SAI Entities; or 33 |
4. REPRESENTATIONS AND WARRANTIES OF BUYERBuyer makes the following representations and warranties to each of Sellers: 4.1 Organization. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New Jersey. 4.2 Authorization; Binding Effect; No Conflict. This Agreement and the Plan of Merger each has been duly executed and delivered by Buyer and Buyer has all requisite power and legal capacity to execute and deliver this Agreement and all other Transaction Documents to which it is a party, to consummate the Transactions and the other transactions contemplated by this Agreement and the other Transaction Documents to which it is a party and to perform its obligations under this Agreement and other the Transaction Documents to which it is a party. The execution and delivery of this Agreement and all other Transaction Documents to which it is a party have been duly authorized by Buyer. This Agreement and the Plan of Merger constitute, and all other Transaction Documents to be executed and delivered by Buyer will constitute, the legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms. Neither the execution and delivery of this Agreement or any other Transaction Documents, nor the consummation of the Transactions, will currently, or after notice or lapse of time or both, (i) result in a violation of the certificate of formation or operating agreement of Buyer, or (ii) result in a violation by Buyer, of any law, statute, ordinance or regulation applicable to it, other than any violation which would not have a Material Adverse Effect on the ability of Buyer to perform its obligations under this Agreement, or (iii) result in a violation by Buyer of any judgment, order or decree of any court or quasi-judicial tribunal applicable to it, other than any violation which would not have a Material Adverse Effect on the ability of Buyer to perform its obligations under this Agreement. 4.3. Litigation. No suit, action or other proceeding is pending or, to the knowledge of Buyer, threatened before any Governmental Entity seeking to restrain Buyer from entering into or consummating this Agreement, or seeking to prohibit Buyer’s entry into this Agreement or prohibit Buyer from consummating the Transactions. 4.4 Governmental Consents. Except as otherwise set forth on Schedule 4.4, neither the execution and delivery of this Agreement nor the carrying out of any of the Transactions will require Buyer to obtain or make any waiver, consent, action, approval or authorization of, or registration, declaration, notice or filing with, any Governmental Entity or other Person. 4.5 Brokers. Except as set forth on Schedule 4.5, no finder, broker, agent or other intermediary has worked for or on behalf of Buyer in connection with the negotiation or consummation of any of the Transactions, and no Person is entitled to receive any brokerage commission, finder’s fee or other compensation or fee as a result thereof. 35 |
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(j) not introduce any material change with respect to the operation of the Business, including any method, principle or practice of accounting, (k) not merge into or with or consolidate with, any other Person or acquire the business or assets of any Person, and (l) not declare or pay any dividends or make any distributions to any shareholder or member, except to the extent in an amount equal to the federal and state income tax liability of the Sellers attributed solely to the income allocated to such Sellers from Parent or SAI for the period from January 1, 2002 to the Closing or for any prior period. (m) promptly notify Buyer of any event or condition which would reasonably be expected to cause any condition precedent in Article 7 hereof not to be fulfilled. 5.3 Notices of Certain Events.The Company shall promptly notify Buyer of: (a) any notice or communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions; (b) any notice or communication from any Governmental Entity in connection with the Transactions; (c) any actions, suits, claims, investigations or proceedings commenced or, to the Company’s Knowledge, threatened against (i) the Business or (ii) the consummation of the Transactions; (d) any damage or destruction by fire or other casualty of any material Company Asset, or in the event that any material Company Asset or part thereof becomes the subject of any proceeding or, to the Company’s Knowledge, threatened proceeding for the purpose of taking all or any part thereof or right relating thereto by condemnation, eminent domain or other similar governmental action; (e) any notice from a customer whose purchases from the Business exceeded One Hundred Thousand Dollars ($100,000.00) during either of 2001 or 2000, stating such customer’s intention to terminate or substantially curtail, or amend in a material respect which would be adverse to the Company, its relationship with the Company; (f) any notice from a Person from whom the Business purchased in excess of One Hundred Thousand Dollars ($100,000.00) during either of 2001 or 2000, stating such Person’s intention to terminate or substantially curtail its relationship with the Company; and (g) the occurrence of any event that causes any of the representations and warranties of any of the SAI Entities in this Agreement to be or become untrue or inaccurate in any material respect. 37 |
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5.4 Preservation of Business and Relationships. The Company shall use commercially reasonable efforts to preserve its business organizations intact, to keep available to Buyer the present officers and employees engaged in the Business and to preserve the Business’ present relationship with suppliers, customers and others having business relationships with them. 5.5 No Shop. From the date of this Agreement until the earlier of (i) the Closing Date, or (ii) the termination of this Agreement, the Company and Sellers shall not, and each of them shall cause its stockholders, unitholders, members, officers, directors, employees, Affiliates (other than any Governmental Entity) and other agents not to, directly or indirectly, take any action to solicit, initiate or encourage any offer or proposal or indication of interest in a merger, consolidation or other business combination involving any equity interest in, or a substantial portion of the assets of the Company, other than in connection with the transactions contemplated by this Agreement. The Company and each of Sellers shall promptly advise Buyer of the terms of any offer, proposal or indication of interest that it or he receives or of which he or it otherwise becomes aware. 5.6 Consents to Transactions. If any of the Transactions would constitute a breach or default of, or give rise to a right of termination or cancellation under, or in any way materially adversely affect the rights of the Company under, a Company Contract, Real Property Lease or Personal Property Lease specifically identified on Schedule 5.6, unless the consent of a party to such Company Contract, Real Property Lease or Personal Property Lease has been obtained, then prior to the Closing, Buyer shall use commercially reasonable efforts to obtain the consents of such other party to the extent that Buyer determines that such consent is necessary or desirable in connection with the Transactions. Prior to the Closing, the Company shall use commercially reasonable efforts to obtain (or assist Buyer in obtaining) any such consents to the extent that Buyer has specifically requested such effort. 5.7 Actions to Effect the Transactions. The Company, Sellers and Buyer shall each use commercially reasonable efforts to approve or cause to be approved, and effect or cause to be effected, the Transactions, including without limitation (i) taking commercially reasonable actions necessary or appropriate to satisfy all conditions precedent and to enable the delivery at Closing of the agreements and documents contemplated by Article 7 (other than action involving the payment of funds which it or he is not otherwise obligated to make), and (ii) executing and filing such documents and certificates as may be necessary or reasonably appropriate in order to consummate the Transactions. 5.8 Employee Information. The Company shall provide Buyer with completed I-9 forms and attachments with respect to all employees of the Business as are subject to such requirement. 38 |
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(e) Each Restricted Party acknowledges that any breach of the provisions of this Section 6.3 by any Restricted Party will result in irreparable injury to Buyer and the Business (following the consummation of the transactions contemplated hereby), and that Buyer’s remedies at law would be inadequate and insufficient. Accordingly, in the event of any such breach of any of the provisions of this Section 6.3, Buyer shall be entitled to preliminary and/or permanent injunctive relief, in addition to all such other legal and equitable remedies as may be available to Buyer therefor. In the event any of the provisions of this Section 6.3 are determined by a court of competent jurisdiction to be contrary to any applicable law, or for any reason to be unenforceable or invalid as written, the parties acknowledge that such court, if permitted by applicable law, shall modify any of such provisions so as to permit enforcement thereof as so modified. If a Restricted Party violates any of such Restricted Party’s obligations under this Section 6.3, then the time period hereunder shall be extended with respect to that Restricted Party by the period of time equal to that period beginning when the activities constituting such violation commenced and ending when the activities constituting such violation terminated. (f) Each of Gupta and ▇▇▇▇▇ acknowledges and agrees that: (i) the provisions of this Section 6.3 are separate, apart and independent from any employment agreements between such individuals and Dendrite (or any Affiliate (not including any Governmental Entity) of Dendrite), including, without limitation, the Employment Agreements, and (ii) the provisions of this Section 6.3 are and shall at all times be enforceable regardless of any breach, cancellation or termination by any party, for any reason or no reason, or the expiration of any such employment agreement, and (iii) such employment agreements do not and shall not serve as any consideration for the obligations of such individuals under this Section 6.3. 6.4 Access to Records. Following the Closing, Buyer will afford Sellers, their respective counsel and accountants, and each of Sellers will afford Buyer, its counsel and accountants, during normal business hours, reasonable access to the books, records and other data relating to the Business in its or his possession with respect to periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax returns, (ii) the determination or enforcement of rights and obligations under this Agreement, (iii) compliance with the requirements of any Governmental Entity, (iv) the determination or enforcement of the rights and obligations of any indemnified party hereunder, or (v) in connection with any actual or threatened Action. Further, each Party agrees for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such books, records and other data unless such Party shall first offer in writing to surrender such books, records and other data to the other Party and such other Party shall not agree in writing to take possession thereof during the ten (10) day period after such offer is made. 6.5 Customer and Other Business Relationships. After the Closing, each of Sellers will cooperate with Buyer in reasonable respects that do not involve the expenditure of their funds, in its efforts to continue and maintain for the benefit of Buyer those business relationships of the Company existing prior to the Closing, including relationships with lessors, employees, licensors, customers, suppliers and others. Each of Sellers will refer to Buyer all inquiries relating to such business. Each of Sellers shall not, directly or through any of his or its officers, employees, agents or stockholders or Affiliates (not including any Governmental Entity), intentionally take any action that he or it knows, or reasonably expects, would either diminish in any material respect the value of the Business after the Closing or interfere in any material respect with the Business to be engaged in after the Closing, including disparaging the name or business of SAI, Parent or Buyer. 40 |
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6.6 Tax Matters. (a) Tax Periods Ending on or before the Closing Date. |
(i) Buyer and Sellers agree that for Tax purposes the books and records of each of the SAI Entities shall be closed on the Closing Date. For any taxable period of either of the SAI Entities that ends on or before the Closing Date (the “Previous Tax Period”), the Parent Shareholders shall, at their sole cost and expense, timely prepare and timely file with the appropriate Taxing Authority all Tax Returns, reports and forms required to be filed by or on behalf of the SAI Entities (the “Previous Period Returns”). Except as expressly set forth below, the Parent Shareholders shall be responsible for the payment of all Taxes for such Previous Tax Periods to the extent not paid or provided for in the Financial Statements. The Parent Shareholders shall furnish to Dendrite for its consent, which consent shall not be unreasonably withheld, copies of each Previous Period Return prior to filing. If Dendrite does not object within ten (10) business days of receipt of such Previous Period Returns, Dendrite shall be deemed to consent to such Previous Period Returns and the Parent Shareholders shall file same with the appropriate Taxing Authority. The Parent Shareholders agree to file, or cause to be filed, all Tax Returns, reports and forms for any Previous Tax Period on the basis that the relevant taxable period ended as of the close of business on the Closing Date. The Parent Shareholders shall, to the extent required by applicable law, include any income, gain, loss, deduction or other Tax items for such Previous Tax Periods on their individual income tax returns in a manner consistent with the Schedule K-1‘s for such Previous Tax Periods. |
(ii) Notwithstanding anything to the contrary set forth in Section 6.6(a)(i), Dendrite shall, at its sole cost and expense, prepare the portion of all Tax Returns to be filed by the Company with the Taxing Authorities of any state or local jurisdiction for the Previous Tax Period which ends on the Closing Date on a pro forma basis (the “Pro Forma S&L Returns”) which reports the tax consequences of the Closing of the Transactions and the Taxes due, if any, to such Taxing Authorities which relate to the Transactions (the “S&L Taxes”). Dendrite shall furnish to the Parent Shareholders for their consent, which consent shall not be unreasonably withheld, a copy of the Pro Forma S&L Returns not less than sixty (60) days prior to filing of the Previous Period Returns which will report the Tax consequences of the Transactions. If the Parent Shareholders do not object within ten (10) business days of receipt of a Pro Forma S&L Returns, the Parent Shareholders shall be deemed to consent to such Pro Forma S&L Returns and the Parent Shareholders shall cause the Previous Period Returns that they are required to file pursuant to Section 6.6(a)(i) to reflect the Tax consequences of the Transactions in the manner set forth in the Pro Forma S&L Returns. Dendrite shall be responsible for the payment of all S&L Taxes. |
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(iii) Neither Dendrite nor the Parent Shareholders shall cause the statute of limitations to be extended with respect to any Previous Period Returns of the Company without the express written consent of the other party. |
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(b) Tax Indemnification by the Parent Shareholders. To the extent not accrued for on the Financial Statements, the Parent Shareholders shall indemnify each of the SAI Entities, Dendrite and Buyer and hold them harmless from and against (“Indemnify”) any Loss or other damage including, but not limited to, all reasonable out of pocket costs and expenses (including reasonable attorney fees) incurred by any of them in connection with any Tax Claim (“Damages”) incurred in connection with, arising out of, resulting from or incident or attributable to (i) all Taxes (or the non-payment thereof) of each of the SAI Entities for all Previous Tax Periods, provided, however, that notwithstanding the foregoing, the Parent Shareholders shall not be required to Indemnify any of the SAI Entities, Dendrite or Buyer for any Tax or Damages arising out of or attributable to any extraordinary action taken or caused to be taken by Buyer on the Closing Date or any S&L Taxes; (ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Parent is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations §1.1502-6 or any analogous or similar state, local, or foreign law or regulations; (iii) any and all Taxes of any Person (other than an SAI Entity) imposed on either of the SAI Entities as a transferee or successor, by contract or pursuant to any law, rule, or regulation, which Taxes relate to an event or transaction occurring before the Closing Date; (iv) the investigation, attempt to avoid, defense or settlement of any Action related to any of the foregoing; and (v) successfully enforcing the indemnity under this Section 6.6(b). (c) Tax Indemnification by the Buyer. The Buyer shall Indemnify the Parent Shareholders for any Taxes or Damages arising out of or attributable to (i) any Tax of either of the SAI Entities for any Tax Period that begins on or after the Closing Date; (ii) any S&L Taxes; (iii) any income or similar Taxes owed to any state or local jurisdiction (other than New Jersey) which are imposed on or relate to the Transactions; and (iv) any extraordinary action taken or caused to be taken by Buyer on the Closing Date. (d) Cooperation. Each of Sellers, Parent, SAI and Buyer shall reasonably cooperate, and shall cause their respective affiliates, officers, employees, agents, auditors and Representatives reasonably to cooperate, in preparing and filing all Previous Period Returns. (e) Refunds and Credits. Any refunds or credits of Taxes of Parent or SAI for any Previous Tax Period shall be for the account of the Parent Shareholders. Any refunds or credits of Parent or SAI for any taxable period beginning after the Closing Date shall be for the account of Buyer. Buyer shall, if the Parent Shareholders so request and at the Parent Shareholders’ expense, file for and obtain any refunds or credits, or cause Parent or SAI, as the case may be, to file for and obtain any refunds or credits, to which the Parent Shareholders are entitled. Buyer shall permit the Parent Shareholders to control the prosecution of any such refund claim, provided that the Parent Shareholders bear the costs of prosecuting such refund claims and that the Parent Shareholders do not take any position in such refund claims that would have the effect of shifting income to a period for which Buyer is responsible for Taxes of Parent or SAI. 42 |
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(f) Procedures Relating to Indemnification of Tax Claims. |
(i) Notwithstanding any other provision in this Agreement, this Section 6.6(f) shall govern any and all indemnification related to, arising from or in connection with Taxes of Parent and SAI. If one party is responsible for the payment of Taxes under this Agreement (the “Tax Indemnifying Party”), and the other party (the “Tax Indemnified Party”) receives written notice of any deficiency, proposed adjustment, assessment, audit, examination, suit, dispute or other claim (a “Tax Claim”) with respect to such Taxes, the Tax Indemnified Party shall promptly notify the Tax Indemnifying Party in writing of such Tax Claim and shall provide the Tax Indemnifying Party such information as the Tax Indemnifying Party may reasonably request. If notice of a Tax Claim is not given to the Tax Indemnifying Party within a sufficient period of time to allow such party effectively to contest such Tax Claim, or in reasonable detail to apprise such party of the nature of the Tax Claim, the Tax Indemnifying Party shall not be liable to the Tax Indemnified Party (or any of its Representatives) to the extent that the Tax Indemnifying Party’s position is actually prejudiced as a result thereof. |
(ii) With respect to any Tax Claim, the Tax Indemnifying Party shall, at its expense, assume and control all proceedings taken in connection with such Tax Claim (including selection of counsel) and, without limiting the foregoing, may pursue or forego any and all administrative proceedings with any Taxing Authority with respect thereto, and may either pay the Tax claimed and ▇▇▇ for a refund or contest the Tax Claim in any permissible manner. |
(iii) The Tax Indemnified Party and each of its respective Affiliates shall cooperate with the Tax Indemnifying Party in contesting any Tax Claim, which cooperation shall include the retention and (upon the Tax Indemnifying Party’s request) the provision to the Tax Indemnifying Party of records and information which are reasonably relevant to such Tax Claim, and making employees available, upon reasonable prior request during normal business hours, to provide additional information or explanation of any material provided hereunder, or to testify at proceedings relating to such Tax Claim. The Tax Indemnifying Party shall bear all out-of-pocket costs of such contest. |
(iv) Except as otherwise previously agreed in writing, none of the Tax Indemnified Party, Parent or SAI or any of their respective officers, directors, employees, stockholders, agents or Representatives shall settle or otherwise compromise any Tax Claim. |
(g) Procedures Relating to Other Tax Assessments.
(i) Notwithstanding any other provision in this Agreement, if an SAI Entity, or a successor thereof, receives written notice of any deficiency, proposed adjustment, assessment, audit, examination, suit, dispute or other claim which could result in either Parent Shareholder being required to pay additional Taxes (an “Assessment”), the Buyer shall cause such SAI Entity, or successor thereof, to promptly notify the Parent Shareholders in writing of such Assessment and shall provide the Parent Shareholders such information as the Parent Shareholders may reasonably request. |
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(ii) With respect to any Assessment, the Parent Shareholders shall, at their expense, assume and control all proceedings taken in connection with such Assessment (including selection of counsel) and, without limiting the foregoing, may pursue or forego any and all administrative proceedings with any Taxing Authority with respect thereto, and may either pay the Tax claimed and ▇▇▇ for a refund or contest the Assessment in any permissible manner. |
(iii) The Buyer shall cause such SAI Entity, or successor thereof, to cooperate with the Parent Shareholders in contesting any Assessment, which cooperation shall include the retention and (upon the Parent Shareholders’ request) the provision to the Parent Shareholders of records and information which are reasonably relevant to such Assessment, and making employees available, upon reasonable prior request during normal business hours, to provide additional information or explanation of any material provided hereunder, or to testify at proceedings relating to such Assessment. |
(iv) The Parent Shareholders may settle or otherwise compromise any Assessment as they mutually agree. |
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(h) Tax Related Adjustments. Buyer and the Parent Shareholders agree that any indemnity payment made under this Agreement will be treated by the parties on their Tax Returns as an adjustment to the Purchase Price paid by Buyer unless required by applicable Tax Law to treat such payment as other than an adjustment to the Purchase Price. (i) Dendrite Guarantee. Buyer is a limited liability company wholly-owned by Dendrite and Dendrite hereby irrevocably and unconditionally guarantees to Sellers and their successors the full and prompt payment in cash, when and as due, of all amounts due from Buyer under this Section 6.6, whether now existing or hereafter arising. This guarantee is an absolute and unconditional guarantee of full payment and not of collection and is in no way conditional upon any requirement that Sellers first attempt to collect or seek payment from Buyer, or upon any other contingency. Dendrite agrees that it is not necessary for Parent Shareholders, in order to enforce this guarantee, to institute suit or exhaust its legal remedies against Buyer; but the sole condition precedent to enforcement of the obligations of Dendrite hereunder is that Buyer does not timely perform its payment obligations in accordance with the terms of this Section 6.6. Dendrite hereby waives (a) notice of acceptance of this guarantee; (b) notice of any change in the terms of this Agreement or any agreement relating to the obligations guaranteed; (c) presentment and demand for payment of any indebtedness to Buyer; (d) protest and notice of dishonor or default to Buyer which Buyer might otherwise be entitled under a guarantee; and (e) all defenses based on suretyship or impairment of collateral or any other similar defense. 44 |
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6.7 Copyright and Trademark Registration and Assignments. As of the Closing, Buyer shall become responsible for the Intellectual Property assigned, sold or transferred hereunder, including but not limited to copyright registrations and recordations of copyrighted work, trademark and service ▇▇▇▇ applications and Internet domain names. Parent Shareholders shall cooperate with Buyer and will sign all documents reasonably necessary to transfer ownership and record such transfer of Company Intellectual Property to Buyer and to register such documents with the appropriate Governmental Entity. 6.8 Severance. Buyer shall make or shall cause the Company after the Closing to make the severance payments set forth on Schedule 6.8. 6.9 Parent Bonus Pool. The Company shall prior to the Closing have accrued and funded Two Hundred Thousand Dollars ($200,000) (the “Parent Bonus Pool Contribution”) into the Bonus Pool to be paid to the employees of the Company under the Company’s bonus plan. Buyer shall (i) make a contribution to the Bonus Pool of One Hundred Thousand Dollars ($100,000) subject to the achievement of the goals set forth below, and (ii) pay the Bonus Pool in January 2003 in the allocations and to the employees of the Company (other than the Parent Shareholders) as designated by the Parent Shareholders. With respect to the Buyer’s contribution to the Bonus Pool under (i) above, the goal to be achieved is: the Company shall have met or exceeded the revenue goal of the Company’s 2002 plan of $22.4 million. 6.10 Employee Benefit Plans. Buyer agrees to cause the Company to initially retain the Company’s benefit plans as in effect on the Closing Date as disclosed to Buyer by the Company prior to the Closing; provided, however, that nothing in this Agreement shall restrict the Buyer or the Company from, or restrict Buyer from causing the Company to, change or terminate any of the Company’s benefit plans after the Closing Date. No employee of the Company shall, in any manner, be a third party beneficiary of this Section 6.10 or have any right to rely upon or enforce the provisions of this Section 6.10. 6.12 Parent Shareholder Guarantees. After the Closing, Buyer will use commercially reasonable efforts to cause (or assist the Parent Shareholders in causing) the Parent Shareholders to be released from the personal guarantees listed on Schedule 6.12. If the Parent Shareholders are not released from any such personal guarantee, the Buyer will indemnify and hold harmless the Parent Shareholders from and against any and all Losses incurred by the Parent Shareholders under or with respect to such unreleased guarantee in connection with, arising out of, or resulting from any act or omission after the Closing. 6.13 Siebel Receivable. From the Closing through the Release Date, Buyer shall use commercially reasonably efforts to collect (or assist the Parent Shareholders in collecting) the Siebel Receivable. 6.14 Business Plan. Parent Shareholders shall, as soon as practicable after the Closing, provide Dendrite with a business plan covering the post-Closing business of the Company. 45 |
(i) such unit certificates, executed unit powers and other instruments of conveyance which are necessary or desirable to effect the sale of the Units; |
(ii) such stock certificates, executed stock powers and other instruments of conveyance which are necessary or desirable to effect the sale of the Parent Stock; |
(iii) Employment Agreements, in the form of Exhibit 7.1(i)(iii), duly executed and delivered by each of Messrs. Gupta and ▇▇▇▇▇; |
(iv) the Escrow Agreement; and |
(v) such other documents relating to the Transactions as Buyer reasonably requests from Sellers and which are customary in similar transactions. |
(j) Company Closing Documents. The Company will have delivered to Buyer the following documents:
(i) a certificate signed by Parent’s Chief Executive Officer or Chief Financial Officer, dated the Closing Date, stating that the conditions specified in Sections 7.1(a) through 7.1(d), inclusive, have been fully satisfied; |
(ii) a copy of the resolutions duly adopted by the board of directors and shareholders or unitholders, as the case may be, of each SAI Entity authorizing that SAI Entity’s execution, delivery and performance of the Transaction Documents to which that SAI Entity is a party and the consummation of the Transactions, as in effect as of the Closing, certified by an officer of that SAI Entity; |
(iii) a certificate (dated not less than 5 business days prior to the Closing) of the Secretary of State of each state set forth on Schedule 3.1A with respect to SAI and Parent as to the good standing of SAI and Parent in such states; |
(iv) copies of the Required Consents; |
(v) statutory letters and forms of UCC termination statements for the financing statements set forth on Schedule 7.1(j)(v); and |
(vi) such other documents relating to the Transactions as Buyer reasonably requests from the Company and which are customary in similar transactions. |
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7.2 Conditions of Sellers’ Obligations. Sellers’ obligation to effect the Transactions at the Closing is subject to the satisfaction as of the Closing of the following conditions precedent: (a) Representations and Warranties. Each representation and warranty set forth in Article 4 will be true and correct in all material respects at and as of the Closing as though then made, except to the extent of any change solely caused by the Transactions. 47 |
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(b) Covenants. Buyer will have performed and observed in all material respects each covenant or other obligation required to be performed and observed by it pursuant to the Transaction Documents prior to the Closing. (c) Compliance with Applicable Laws. The consummation of the Transactions will not be prohibited by any Legal Requirement or subject any of the Sellers to any penalty, liability, or other onerous condition arising under any Legal Requirement or imposed by any Governmental Entity. (d) Proceedings. No action, suit or proceeding will be pending or threatened before any Governmental Entity the result of which could prevent or prohibit the consummation of any of the Transactions, cause any such Transaction to be rescinded following such consummation or adversely affect Buyer’s performance of its obligations pursuant to the Transaction Documents, and no judgment, order, decree, stipulation, injunction or charge having any such effect will exist. (e) Buyer Closing Documents. Buyer will have delivered to each of the Sellers the following documents: |
(i) a certificate signed by Buyer’s president or chief financial officer, dated the Closing Date, stating that the conditions specified in Sections 7.2(a) through 7.2(d), inclusive, have been fully satisfied; |
(ii) a copy of the resolutions duly adopted by the management committee and members of Buyer authorizing Buyer’s execution, delivery and performance of the Transaction Documents to which Buyer is a party and the consummation of the Transactions, as in effect as of the Closing, certified by an officer of Buyer; |
(iii) Employment Agreements with each of Messrs. Gupta and ▇▇▇▇▇, in the form of Exhibit 7.1(i)(iii), duly executed and delivered by Buyer; |
(iv) the Escrow Agreement; and |
(v) such other documents relating to the Transactions to be consummated at the Closing as Sellers reasonably request from Buyer and which are customary in similar transactions. |
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(f) Payment of Estimated Purchase Price. Buyer will have paid the Estimated Purchase Price in accordance with Section 2.2. All corporate and other proceedings or actions taken or required to be taken by Buyer in connection with the Transactions, and all documents incident thereto, must be reasonably satisfactory in form and substance to Sellers and their legal counsel. Any condition set forth in this Section 7.2 may be waived only in a writing executed by the Seller Representative. 48 |
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(b) Claims for Losses. If a Claim for Losses is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall give written notice (a “Claim Notice”) to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under this Section 8.2; provided, however, if any Action is filed against any party entitled to the benefit of and seeking indemnity hereunder, the applicable Claim Notice shall be given to the indemnifying party as promptly as practicable (and in any event within fifteen (15) business days after the service of the citation or summons). Provided that the Claim Notice is made prior to the expiration of the survival period for the underlying representation, warranty, covenant or agreement as set forth in Section 8.1, then the failure of any indemnified party to give notice which is timely under the prior sentence shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party is actually and materially prejudiced by such failure. After receiving a Claim Notice relating to a Claim by or against any third party, the indemnifying party shall be entitled, at its own cost, risk and expense, upon written notice to the indemnified party: (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage attorneys of its own choice to handle and defend the same (unless the named parties to such Action include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, in which event the indemnified party shall be entitled, at the indemnifying party’s cost, risk and expense, to separate counsel of its own choosing), and (iii) to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the indemnified party, such consent not to be unreasonably withheld (it being understood that the failure of the indemnified party to give such consent shall not be considered unreasonable in respect of any compromise or settlement that does not include an unconditional release of such indemnified party from all liabilities arising out of, or that may arise out of, such claim). In such circumstance, the indemnified party may, at its own cost, participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. If the indemnifying party fails to assume the defense of such claim within fifteen (15) business days after receipt of the Claim Notice, the indemnified party against which such claim has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying party’s cost and expense, the defense, compromise or settlement of such claim on behalf of and for the account and risk of the indemnifying party; provided, however, that such Claim shall not be compromised or settled without the written consent of the indemnifying party, which consent shall not be unreasonably withheld (it being understood that the failure of the indemnifying party to give such consent shall not be considered unreasonable in respect of any compromise or settlement that does not include an unconditional release of such indemnifying party from all liabilities arising out of, or that may arise out of, such claim). In the event the indemnified party assumes the defense of the claim, the indemnified party will keep the indemnifying party reasonably informed of the progress of any such defense, compromise or settlement. The parties shall cooperate in all reasonable respects with each other in the investigation, trial and defense of any such claim for Losses or Action and any appeal arising therefrom. 50 |
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(b) Special IPG Indemnification Condition. Notwithstanding anything to the contrary contained in this Agreement, except for the breach or inaccuracy of any representation or warranty set forth in Sections 3.23, 3.24, 3.25, or 3.26, for which IPG shall be liable even if the IPG Trigger Amount has not been reached, IPG will not have any liability under this Section 8 for indemnification unless and until the aggregate liability of the Sellers for indemnification under this Section 8 exceeds the IPG Trigger Amount; provided, further, that IPG shall only be liable for the net amount by which any such Losses exceeds the IPG Trigger Amount and (ii) in no event shall IPG’s liability for Losses exceed the amount of the IPG Indemnification Cap. (c) Calculation of Losses. Payments by Buyer or any Buyer Indemnitee of amounts for which Buyer or such Buyer Indemnitee is entitled to be indemnified under Section 8.2 hereof shall not be a condition precedent to recovery. (d) Losses Net of Insurance. The Losses indemnified under this Agreement shall be determined net of any amounts actually recovered by the indemnified party under insurance policies with respect to such Losses; provided, however, that such insurance proceeds are paid within twelve (12) months of the event giving rise to the indemnity obligation. 8.4 IPG Parent Guarantee. IPG is a wholly-owned subsidiary of IPG Parent and IPG Parent hereby irrevocably and unconditionally guarantees to Buyer and its successors the full and prompt payment in cash, when and as due, of all amounts due from IPG under this Section 8, whether now existing or hereafter arising. This guarantee is an absolute and unconditional guarantee of full payment and not of collection and is in no way conditional upon any requirement that Buyer first attempt to collect or seek payment from IPG or upon any other contingency. IPG Parent agrees that it is not necessary for Buyer, in order to enforce this guarantee, to institute suit or exhaust its legal remedies against IPG; but the sole condition precedent to enforcement of the obligations of IPG Parent hereunder is that IPG does not timely perform its payment obligations in accordance with the terms of this Section 8. IPG Parent hereby waives (a) notice of acceptance of this guarantee, (b) notice of any change in the terms of this Agreement or any agreement relating to the obligations guaranteed, (c) presentment and demand for payment of any indebtedness to IPG; (d) protest and notice of dishonor or default to IPG which IPG might otherwise be entitled under a guarantee, and (e) all defenses based on suretyship or impairment of collateral or any other similar defense. 52 |
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8.5 Breach of Contract Claims. Buyer agrees that neither Buyer nor any Buyer Indemnitee will bring a cause of action for breach of contract with respect to breaches of the representations and warranties contained in this Agreement after the applicable survival period under Section 8.1 except for such as relate to Claim Notices provided under Section 8.2, fraud, or intentional misrepresentations. 9. MISCELLANEOUS9.1 Assignment; No Third Party Beneficiary. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any Party without the prior written consent of the other Parties, except that Buyer shall be entitled to assign its rights and delegate its duties under this Agreement to any wholly-owned subsidiary of Buyer, so long as such assignee agrees in writing to be bound by the terms and conditions hereof, on a joint and several basis with Buyer, such written agreement to be in form and substance reasonably satisfactory to the Seller Representative. No such assignment shall relieve Buyer of any of its obligations under this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, and no other Person shall have any right, benefit or obligation under this Agreement as a third party beneficiary or otherwise. 9.2 Governing Law; Jurisdiction and Venue. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS, BOTH SUBSTANTIVE AND PROCEDURAL OF THE STATE OF NEW JERSEY (WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS OF NEW JERSEY LAW). Except as otherwise expressly provided for in this Agreement, each Party hereby irrevocably submits to the non-exclusive jurisdiction of the Federal District Court for the District of New Jersey and the courts of the State of New Jersey located in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 53 |
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If
to any of the SAI Entities, to: 55 |
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with a copy, which shall not constitute notice, to: 56 |
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or to such other place and with such other copies as each Party may designate as to itself by written notice to the others. 9.6 Termination. This Agreement may be terminated at any time prior to Closing: (a) By mutual written consent of Buyer and Sellers; (b) By Buyer or Seller if the Closing shall not have occurred on or before the Cutoff Date; provided, however, that this provision shall not be available to Buyer if and so long as Sellers have the right to terminate this Agreement under Section 9.6(d), and this provision shall not be available to Sellers if and so long as Buyer has the right to terminate this Agreement under Section 9.6(c); (c) By Buyer if there is a material breach of any representation or warranty of any of the Seller Parties set forth in Article 3 or any covenant or agreement to be complied with or performed by any of the Seller Parties pursuant to the terms of this Agreement, or the occurrence of any event which results or would result in the failure of a condition in Section 7.1 to be satisfied on or prior to the Closing Date; provided, however, that Buyer may not terminate this Agreement prior to the Closing unless each of the Seller Parties has been provided notice of such breach or failure and, if curable, shall have failed to cure the same within thirty (30) days of such notice; or (d) By the Seller Representative if there is a material breach of any representation or warranty set forth in Article 4 or of any covenant or agreement to be complied with or performed by Buyer pursuant to the terms of this Agreement, or the occurrence of any event which results or would result in the failure of a condition set forth in Section 7.2 to be satisfied on or prior to the Closing Date; provided, however, that the Seller Representative may not terminate this Agreement prior to the Closing Date unless Buyer has been provided notice of such breach or failure and, if curable, shall have failed to cure the same within thirty (30) days of such notice. In the event of termination of this Agreement, no Party shall have any liability under this Agreement to any other Party, except for any willful breach of this Agreement occurring prior to the termination of this Agreement. Upon any such termination, each Party will redeliver all documents, work papers and other material of any other Party relating to the Transactions, whether so obtained before or after the execution hereof, to the Party furnishing the same. The provisions of Section 9.9 shall continue in full force and effect notwithstanding any termination of this Agreement 9.7 Expenses. Except as otherwise specified in this Agreement, each Party shall pay its own costs and expenses incurred or to be incurred in negotiating and preparing this Agreement and carrying out the Transactions including without limitation the fees and expenses of attorneys, investment bankers, finders, brokers, accountants and other professionals. 57 |
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. |
| SOFTWARE ASSOCIATES INTERNATIONAL INC. By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ —————————————— Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Title: CEO |
SOFTWARE ASSOCIATES INTERNATIONAL, LLC By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ —————————————— Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Title: CEO |
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ —————————————— ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually |
By: ▇▇▇▇▇ ▇▇▇▇▇ —————————————— ▇▇▇▇▇ ▇▇▇▇▇, individually |
| IPG SAI HOLDING CORP. By: ▇▇▇▇▇▇▇▇ ▇. CAMERA —————————————— Name: ▇▇▇▇▇▇▇▇ ▇. Camera Title: President |
DENDRITE INTERNATIONAL, INC. By: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ —————————————— Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Title: Vice President, General Counsel and Secretary |
| SAI ACQUISITION L.L.C. By: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ —————————————— Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Title: Vice President, General Counsel and Secretary of Dendrite International, Inc., as sole member |
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As guarantor of IPG’s payment obligations set forth in Section 8 hereof only, |
| THE INTERPUBLIC GROUP OF COMPANIES, INC. By: ▇▇▇▇▇▇▇▇ ▇. CAMERA —————————————— Name: ▇▇▇▇▇▇▇▇ ▇. Camera Title: Senior V.P. |
Exhibit 2.3(a)(Projected Net Working Capital)PROJECTED NET WORKING CAPITAL
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| Current assets: | |||
| Cash and cash equivalents | $ 2,602,180 | ||
| Accounts receivable | 5,801,894 | ||
| Prepaid expenses and other current assets | 173,332 | ||
| Total current assets | 8,577,405 | ||
| Included Current Liabilities: | |||
| Accrued expenses | (593,278 | ) | |
| Accrued compensation | (200,000 | ) | |
| Income taxes payable | (25,000 | ) | |
| Deferred revenue | (1,141,015 | ) | |
| Current portion of note payable | (37,820 | ) | |
| Current portion of capital lease obligations | (550,789 | ) | |
| Total included current liabilities | (2,547,902 | ) | |
| Projected Net Working Capital | 6,029,503 | ||