Exhibit 2.1
ASSET PURCHASE AGREEMENT
dated May 9, 2003
between
GoTrain Corp.
TENERA, Inc.
and
SkillSoft Corporation
TABLE OF CONTENTS
Page
ARTICLE I THE ASSET PURCHASE.....................................................................................1
1.1 Purchase and Sale of Assets...............................................................................1
1.2 Assumption of Liabilities.................................................................................1
1.3 Purchase Price............................................................................................1
1.4 Escrow....................................................................................................2
1.5 The Closing...............................................................................................2
1.6 Allocation................................................................................................3
1.7 Post-Closing Adjustments..................................................................................3
1.8 Further Assurances........................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER..........................................................5
2.1 Organization, Qualification and Corporate Power...........................................................5
2.2 Capitalization............................................................................................5
2.3 Authorization of Transaction..............................................................................6
2.4 Noncontravention..........................................................................................6
2.5 Subsidiaries..............................................................................................6
2.6 Financial Statements......................................................................................7
2.7 Absence of Certain Changes................................................................................7
2.8 Undisclosed Liabilities...................................................................................7
2.9 Tax Matters...............................................................................................7
2.10 Ownership and Condition of Assets........................................................................8
2.11 Owned Real Property......................................................................................9
2.12 Real Property Leases.....................................................................................9
2.13 Intellectual Property...................................................................................10
2.14 Inventory...............................................................................................11
2.15 Contracts...............................................................................................11
2.16 Accounts Receivable.....................................................................................12
2.17 Insurance...............................................................................................12
2.18 Litigation..............................................................................................13
2.19 Warranties..............................................................................................13
2.20 Employees...............................................................................................13
2.21 Employee Benefits.......................................................................................14
2.22 Environmental Matters...................................................................................14
2.23 Legal Compliance........................................................................................14
2.24 Customers and Suppliers.................................................................................14
2.25 Permits.................................................................................................15
2.26 Certain Business Relationships With Affiliates..........................................................15
2.27 Brokers' Fees...........................................................................................15
2.28 Books and Records.......................................................................................15
2.29 Disclosure..............................................................................................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PARENT........................................................16
3.1 Organization, Qualification and Corporate Power..........................................................16
3.2 Authorization of Transaction.............................................................................16
3.3 Noncontravention.........................................................................................16
3.4 Litigation...............................................................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
BUYER PARENT.............................................................................17
4.1 Organization and Corporate Power.........................................................................17
4.2 Authorization of the Transaction.........................................................................17
4.3 Noncontravention.........................................................................................17
ARTICLE V PRE-CLOSING COVENANTS.................................................................................17
5.1 Closing Efforts..........................................................................................17
5.2 Governmental and Third-Party Notices and Consents........................................................18
5.3 Operation of Business....................................................................................18
5.4 Access to Information....................................................................................20
5.5 Exclusivity..............................................................................................20
ARTICLE VI CONDITIONS TO CLOSING................................................................................21
6.1 Conditions to Obligations of the Buyer...................................................................21
6.2 Conditions to Obligations of the Seller..................................................................22
ARTICLE VII COVENANTS...........................................................................................23
7.1 Proprietary Information..................................................................................23
7.2 Solicitation and Hiring..................................................................................23
7.3 Non-Competition..........................................................................................24
7.4 Tax Matters..............................................................................................24
7.5 Sharing of Data..........................................................................................24
7.6 Use of Name..............................................................................................25
7.7 Cooperation in Litigation................................................................................25
7.8 Collection of Accounts Receivable........................................................................25
7.9 Employees................................................................................................25
7.10 Maintenance of Corporate Existence; Restriction on Dividends and Distributions..........................26
7.11 General Waiver..........................................................................................26
ARTICLE VIII INDEMNIFICATION....................................................................................26
8.1 Indemnification by the Seller and Parent.................................................................26
8.2 Indemnification by the Buyer and the Buyer Parent........................................................26
8.3 Indemnification Claims...................................................................................27
8.4 Survival of Representations and Warranties...............................................................30
8.5 Limitations..............................................................................................30
8.6 Treatment of Indemnity Payments..........................................................................31
ARTICLE IX TERMINATION..........................................................................................31
9.1 Termination of Agreement.................................................................................31
9.2 Effect of Termination....................................................................................32
ARTICLE X DEFINITIONS...........................................................................................32
ARTICLE XI MISCELLANEOUS........................................................................................42
11.1 Press Releases and Announcements........................................................................42
11.2 No Third Party Beneficiaries............................................................................42
11.3 Entire Agreement........................................................................................42
11.4 Succession and Assignment...............................................................................42
11.5 Counterparts and Facsimile Signature....................................................................42
11.6 Headings................................................................................................43
11.7 Notices.................................................................................................43
11.8 Governing Law...........................................................................................44
11.9 Amendments and Waivers..................................................................................44
11.10 Severability...........................................................................................44
11.11 Expenses...............................................................................................44
11.12 Submission to Jurisdiction.............................................................................44
11.13 Specific Performance...................................................................................45
11.14 Construction...........................................................................................45
Exhibits
Exhibit A - Escrow Agreement
Exhibit B - ▇▇▇▇ of Sale
Exhibit C - Trademark Assignment
Exhibit D - Instrument of Assumption
Exhibit E - List of New Titles
Exhibit F - Opinion of Seller's counsel
Exhibit G - Opinion of Buyer's counsel
Schedules
Schedule 1.1(b) - Excluded Assets
Schedule 1.6 - Allocation of Purchase Price
Disclosure Schedule
Schedule 7.9 - Transferred Employees
- iii -
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of May 9, 2003 by and
between SkillSoft Corporation, a Delaware corporation (the "Buyer"), GoTrain
Corp., a Delaware corporation (the "Seller") and TENERA, Inc., a Delaware
Corporation, the ("Parent").
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets and assume certain of the liabilities
of the Seller.
Capitalized terms used in this Agreement shall have the meanings
ascribed to them in Article X.
In consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows.
ARTICLE I
THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) Upon and subject to the terms and conditions of this Agreement, the Buyer
shall purchase from the Seller, and the Seller shall sell, transfer, convey,
assign and deliver to the Buyer, at the Closing, for the consideration specified
below in this Article I, all right, title and interest in, to and under the
Acquired Assets.
(b) Notwithstanding the provisions of Section 1.1(a), the Acquired Assets shall
not include the Excluded Assets.
1.2 Assumption of Liabilities.
(a) Upon and subject to the terms and conditions of this Agreement, the Buyer
shall assume and become responsible for, from and after the Closing, the Assumed
Liabilities.
(b) Notwithstanding the terms of Section 1.2(a) or any other provision of this
Agreement to the contrary, the Buyer shall not assume or become responsible for,
and the Seller shall remain liable for, the Retained Liabilities.
1.3 Purchase Price. The Purchase Price of $5,000,000 shall be paid by the
Buyer for the Acquired Assets as follows:
(a) $2,200,000 in cash shall be paid by the Buyer by wire transfer or other
immediately available funds to an account designated by the Seller on the date
of the signing of this Agreement; and
(b) in accordance with Section 1.5(b)(v), $2,800,000 in cash shall be paid by
the Buyer to the Seller at the Closing ("Cash Purchase Price").
1.4 Escrow. At the Closing, $500,000 in cash of the Purchase Price shall be paid
by the Buyer to the Escrow Agent for the purpose of securing the post closing
adjustment set forth in 1.7 of this Agreement and the indemnification
obligations of the Seller set forth in this Agreement. The Escrow Fund shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Fund shall be held as a trust fund and shall not be subject
to any lien, attachment, trustee process or any other judicial process of any
creditor of any party, and shall be held and disbursed solely for the purposes
and in accordance with the terms of the Escrow Agreement.
1.5 The Closing.
(a) The Closing shall take place at the offices of ▇▇▇▇ and ▇▇▇▇ LLP in Boston,
Massachusetts commencing at 9:00 a.m. local time on the Closing Date. All
transactions at the Closing shall be deemed to take place simultaneously, and no
transaction shall be deemed to have been completed and no documents or
certificates shall be deemed to have been delivered until all other transactions
are completed and all other documents and certificates are delivered.
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various certificates, instruments
and documents referred to in Section 6.1;
(ii) the Buyer shall deliver to the Seller the various certificates, instruments
and documents referred to in Section 6.2;
(iii) the Seller shall execute and deliver to the Buyer a ▇▇▇▇ of sale in
substantially the form attached hereto as Exhibit B, one or more trademark
assignments in substantially the form attached hereto as Exhibit C, and such
other instruments of conveyance (such as real estate deeds, assigned
certificates or documents of title, assigned negotiable instruments and stock
transfer powers) as the Buyer may reasonably request in order to effect the
sale, transfer, conveyance and assignment to the Buyer of valid ownership of the
Acquired Assets;
(iv) the Buyer shall execute and deliver to the Seller an instrument of
assumption in substantially the form attached hereto as Exhibit D and such other
instruments as the Seller may reasonably request in order to effect the
assumption by the Buyer of the Assumed Liabilities;
(v) the Buyer shall pay to the Seller, payable by wire transfer or other
delivery of immediately available funds to an account designated by the Seller,
the Cash Purchase Price set forth in Section 1.3, less the amount to be
deposited in escrow pursuant to Section 1.4;
(vi) the Buyer, the Seller and the Escrow Agent shall execute and deliver the
Escrow Agreement and the Buyer shall deposit funds with the Escrow Agent in
accordance with Section 1.4;
- 2 -
(vii) the Seller shall deliver to the Buyer, or otherwise put the Buyer in
possession and control of, all of the Acquired Assets of a tangible nature; and
(viii) the Buyer and the Seller shall execute and deliver to each other a
cross-receipt evidencing the transactions referred to above.
1.6 Allocation. The Buyer and the Seller agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets and the
non-solicitation and non-competition covenants set forth in Sections 7.2 and 7.3
for all purposes (including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as Schedule 1.6.
1.7 Post-Closing Adjustments. The Purchase Price set forth in Section 1.3 shall
be subject to adjustment after the Closing Date as follows:
(a) Within 30 days after the Closing Date, the Seller shall prepare and deliver
to the Buyer the Draft Closing Balance Sheet. The Seller shall prepare the Draft
Closing Balance Sheet in accordance with GAAP applied on a basis consistent with
the application of GAAP to the preparation of the Financial Statements, which
shall set forth the Working Capital Amount.
(b) The Buyer shall deliver to the Seller, by the Objection Deadline Date,
either a notice indicating that the Buyer accepts the Working Capital Amount as
reflected on the Draft Closing Balance Sheet or a detailed statement describing
its objections (if any) to the Working Capital Amount as reflected on the Draft
Closing Balance Sheet. If the Buyer delivers to the Seller a notice accepting
the Working Capital Amount as reflected on the Draft Closing Balance Sheet, or
the Buyer does not deliver a written objection to the Working Capital Amount as
reflected on the Draft Closing Balance Sheet by the Objection Deadline Date,
then, effective as of either the date of delivery of such notice of acceptance
or as of the close of business on the Objection Deadline Date, the Draft Closing
Balance Sheet shall be deemed to be the Final Closing Balance Sheet. If the
Buyer timely objects to the Working Capital Amount as reflected on the Draft
Closing Balance Sheet, such objections shall be resolved as follows:
(i) The Buyer and the Seller shall first use reasonable efforts to resolve such
objections.
(ii) If the Buyer and the Seller do not reach a resolution of all objections set
forth on the Buyer's statement of objections within 10 days after delivery of
such statement of objections, the Buyer and the Seller shall, within 10 days
following the expiration of such 10-day period, engage the Accountant, pursuant
to an engagement agreement executed by the Buyer, the Seller and the Accountant,
to resolve any remaining objections set forth on the Buyer's statement of
objections (the "Unresolved Objections").
(iii) The Buyer and the Seller shall jointly submit to the Accountant, within 5
days after the date of the engagement of the Accountant (as evidenced by the
date of the engagement agreement), a copy of the Draft Closing Balance Sheet, a
copy of the statement of objections delivered by the Buyer to the Seller, and a
statement setting forth the resolution of any objections agreed to by the Buyer
and the Seller. Each of the Buyer and the Seller shall submit to the Accountant
- 3 -
(with a copy delivered to the other Party on the same day), within 30 days after
the date of the engagement of the Accountant, a memorandum (which may include
supporting exhibits) setting forth their respective positions on the Unresolved
Objections. Each of the Buyer and the Seller may (but shall not be required to)
submit to the Accountant (with a copy delivered to the other Party on the same
day), within 45 days after the date of the engagement of the Accountant, a
memorandum responding to the initial memorandum submitted to the Accountant by
the other Party. Unless requested by the Accountant in writing, neither Party
may present any additional information or arguments to the Accountant, either
orally or in writing.
(iv) Within 60 days after the date of its engagement hereunder, the Accountant
shall determine whether the objections raised by the Buyer are appropriate and
shall issue a ruling which shall include a balance sheet, comprised of the Draft
Closing Balance Sheet as adjusted pursuant to any resolutions to objections
agreed upon by the Buyer and the Seller and pursuant to the Accountant's
resolution of the Unresolved Objections. Such balance sheet shall be deemed to
be the Final Closing Balance Sheet.
(v) The resolution by the Accountant of the Unresolved Objections shall be
conclusive and binding upon the Buyer and the Seller. The Buyer and the Seller
agree that the procedure set forth in this Section 1.7(b) for resolving disputes
with respect to the Draft Closing Balance Sheet shall be the sole and exclusive
method for resolving any such disputes; provided that this provision shall not
prohibit either Party from instituting litigation to enforce the ruling of the
Accountant.
(vi) The Seller shall be solely responsible for the fees and expenses of the
Accountant if the Accountant determines the objections raised by the Buyer
resulted in net changes to the Working Capital Amount as determined using
Closing Balance Sheet in excess of $25,000. The Buyer shall be solely
responsible for the fees and expenses of the Accountant if the Accountant
determines the objections raised by the Buyer were inappropriate and did not
result in net changes to the Working Capital Amount as determined using Closing
Balance Sheet in excess of $25,000.
(c) If the Working Capital Amount as shown on the Final Closing Balance Sheet is
less than $5,000, the Purchase Price shall be reduced by such deficiency and the
Seller shall pay to the Buyer, by wire transfer or other delivery of immediately
available funds, within three business days after the date on which the Final
Closing Balance Sheet is finally determined pursuant to this Section 1.7, an
amount equal to such deficiency.
(d) If the Working Capital Amount as shown on the Final Closing Balance Sheet
exceeds $5,000, the Purchase Price shall be increased by such excess amount and
the Buyer shall pay to the Seller, by wire transfer or other delivery of
immediately available funds, within three business days after the date on which
the Final Closing Balance Sheet is finally determined pursuant to this Section
1.7, an amount equal to such excess.
(e) If the Purchase Price is adjusted pursuant to this Section 1.7, the
allocation of the Purchase Price among the Acquired Assets as set forth in
- 4 -
Schedule 1.6 attached hereto shall be appropriately modified to reflect
increases or decreases in the various asset categories which give rise to such
adjustments.
1.8 Further Assurances. At any time and from time to time after the Closing, at
the request of either Party and without further consideration, the
non-requesting Party shall execute and deliver such other instruments of sale,
transfer, conveyance, assumption and assignment and take such actions as the
requesting Party may reasonably request to more effectively transfer, convey and
assign to the Buyer, and to confirm the Buyer's rights to, title in and
ownership of, the Acquired Assets and to place the Buyer in actual possession
and operating control thereof and assumption of the Assumed Liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that, except as set
forth in the Disclosure Schedule, the statements contained in this Article II
are true and correct as of the date of this Agreement and will be true and
correct as of the Closing as though made as of the Closing, except to the extent
such representations and warranties are specifically made as of a particular
date (in which case such representations and warranties will be true and correct
as of such date). The Disclosure Schedule shall be arranged in sections and
subsections corresponding to the numbered and lettered sections and subsections
contained in this Article II. The disclosures in any section or subsection of
the Disclosure Schedule shall qualify only the corresponding section or
subsection in this Article II. For purposes of this Article II, the phrase "to
the knowledge of the Seller" or any phrase of similar import shall be deemed to
refer to the actual knowledge of the executive officers of the Seller, as well
as any other knowledge which such executive officers would have possessed had
they made reasonable inquiry of appropriate employees and agents of the Seller
with respect to the matter in question.
2.1 Organization, Qualification and Corporate Power. The Seller is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Seller is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which
jurisdictions constitute the only jurisdictions in which the nature of the
Seller's businesses or the ownership or leasing of its properties requires such
qualification, except for those jurisdictions in which the failure to be so
qualified or in good standing, individually or in the aggregate, has not had and
would not reasonably be expected to have a Seller Material Adverse Effect. The
Seller has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Seller has furnished to the Buyer complete and accurate copies
of its Certificate of Incorporation and by-laws. The Seller is not in default
under or in violation of any provision of its Certificate of Incorporation or
by-laws.
2.2 Capitalization. The authorized capital stock of the Seller consists of
25,000,000 shares of common stock, $0.0001 par value per share, and 5,000,000
shares of preferred stock, $0.00001 par value per share of which, as of the date
of this Agreement, 6,667,000 shares of common stock and no shares of preferred
stock were issued and outstanding, respectively and no shares of Common Stock
- 5 -
were held in the treasury of the Seller. All of the issued and outstanding
shares of Common Stock of the Seller are held of record by the Parent. Section
2.2 of the Disclosure Schedule sets forth a complete and accurate list, as of
the date of this Agreement, of (i) all stockholders of the Seller, indicating
the number and class or series of shares of capital stock of the Seller held by
each stockholder and (for shares other than common stock) the number of shares
of common stock (if any) into which such shares are convertible, (ii) all
outstanding options, warrants or other instruments giving any party the right to
acquire any of capital stock of the Seller, indicating (A) the holder thereof,
(B) the number and class or series of capital stock of the Seller subject
thereto and (for shares other than common stock) the number of shares of common
stock (if any) into which such shares are convertible, (C) the exercise price,
date of grant, vesting schedule and expiration date for each such option,
warrant or other instrument. There are no outstanding agreements or commitments
to which the Seller is a party or which are binding upon the Seller providing
for the redemption of any of its capital stock.
2.3 Authorization of Transaction. The Seller has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Seller of this Agreement and the performance by the Seller of this
Agreement and the Ancillary Agreements and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Seller. Without
limiting the generality of the foregoing, the Board of Directors of the Seller,
at a meeting duly called and held, by the unanimous vote of all directors of the
Seller determined that the sale of assets contemplated by this Agreement is fair
to and in the best interests of the Seller, and its respective stockholders,
approved this Agreement in accordance with the Delaware General Corporation Law.
Without limiting the foregoing, the Seller has obtained the Requisite Seller
Stockholder Approval in accordance with the Delaware General Corporation Law.
This Agreement has been duly and validly executed and delivered by the Seller
and constitutes, and each of the Ancillary Agreements, upon its execution and
delivery by the Seller, will constitute, a valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms.
2.4 Noncontravention. Neither the execution and delivery by the Seller of
this Agreement or the Ancillary Agreements, nor the consummation by the Seller
of the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the Certificate of Incorporation or by-laws of the
Seller, (b) require on the part of the Seller any notice to or filing with, or
any permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Seller is a party or by which the Seller is bound or to which any of
their respective assets is subject.
2.5 Subsidiaries. The Seller has no Subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, limited liability company, joint
venture or other non-corporate business enterprises.
- 6 -
2.6 Financial Statements. The Seller has provided to the Buyer the
Financial Statements. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby,
fairly present the financial condition, results of operations and cash flows of
the Seller as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Seller.
2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which, individually or in the
aggregate, has had, or could reasonably be expected to have in the future, a
Seller Material Adverse Effect, and (b) the Seller has not taken any of the
actions set forth in paragraphs (a) through (n) of Section 5.4.
2.8 Undisclosed Liabilities. The Seller has no liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated and
whether due or to become due), except for (a) liabilities shown on the Most
Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent
Balance Sheet Date in the Ordinary Course of Business and which are reflected on
the Final Closing Balance Sheet and (c) contractual and other liabilities
incurred in the Ordinary Course of Business which are not required by GAAP to be
reflected on a balance sheet.
2.9 Tax Matters.
(a) The Seller has filed on a timely basis all Tax Returns that it was required
to file, and all such Tax Returns were complete and accurate in all material
respects. The Seller is not and has never been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns, other than a group the common parent of which
is Parent. Each Affiliated Group has filed all Tax Returns that it was required
to file with respect to any Affiliated Period, and all such Tax Returns were
complete and accurate in all material respects. The Seller has paid on a timely
basis all Taxes that were due and payable and each member of an Affiliated Group
has paid all Taxes that were due and payable with respect to all Affiliated
Periods. The unpaid Taxes of the Seller for tax periods through the Most Recent
Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding
accruals and reserves for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the Most Recent Balance
Sheet. The Seller has no actual or potential liability for any Tax obligation of
any taxpayer (including any affiliated group of corporations or other entities
that included the Seller during a prior period) other than the Seller. All Taxes
that the Seller or any member of each Affiliated Group is or was required by law
to withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity.
(b) The Parent or Seller has delivered to the Buyer or made available to the
Buyer for inspection complete and correct copies of all federal income Tax
Returns of the Seller, and each Affiliated Group (but, in the case of any such
Affiliated Group, only the portions of such Tax Returns relating to the Seller),
relating to Taxes for all taxable periods for which the applicable statute of
limitations has not yet expired. The federal income Tax Returns of the Parent,
the Seller, and each other member of each Affiliated Group are closed by the
applicable statute of limitations for all taxable years through the taxable year
- 7 -
specified in Section 2.9(b) of the Disclosure Schedule. The Parent or Seller has
delivered or made available to the Buyer complete and correct copies of all
other Tax Returns of the Parent, the Seller, and any Affiliated Group (but in
the case of the Parent or any Affiliated Group, only the portions of such Tax
Returns relating to the Seller) relating to Taxes for all taxable periods for
which the applicable statute of limitations has not yet expired. No examination
or audit of any Tax Return of the Parent, the Seller, or any other member of any
Affiliated Group with respect to an Affiliated Period by any Governmental Entity
is currently in progress or, to the knowledge of the Parent or Seller,
threatened or contemplated. None of the Parent, the Seller, nor any other member
of an Affiliated Group has been informed by any jurisdiction that the
jurisdiction believes that the Parent, the Seller, or any other member of an
Affiliated Group was required to file any Tax Return that was not filed. None of
the Parent, the Seller, nor any other member of an Affiliated Group has (i)
waived any statute of limitations with respect to Taxes or agreed to extend the
period for assessment or collection of any Taxes, (ii) requested any extension
of time within which to file any Tax Return, which Tax Return has not yet been
filed, or (iii) executed or filed any power of attorney with any Taxing
Authority.
(c) The Seller: (i) has not made any payments, is not obligated to make any
payments, or is not a party to any agreement that could obligate it to make any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Code (without regard to Section 280G(b)(4) of the Code); (ii) has any
actual or potential liability for any Taxes of any person (other than the
Seller) under Treasury Regulation Section 1.1502-6 (or any similar provision of
federal, state, local, or foreign law), or as a transferee or successor, by
contract, or otherwise; or (iii) is or has been required to make a basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury
Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Seller: (i) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code; or (ii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.
(e) Section 2.9(e) of the Disclosure Schedule sets forth the state(s) in which
the Seller has registered to do business and/or is subject to Tax jurisdiction,
and it has not in fact done business in any state other than those for which it
has registered to do business.
2.10 Ownership and Condition of Assets.
(a) The Seller is the true and lawful owner, and has good title to, all of the
Acquired Assets, free and clear of all Security Interests, except as set forth
in Section 2.10(a)(i) of the Disclosure Schedule. Upon execution and delivery by
the Seller to the Buyer of the instruments of conveyance referred to in Section
1.5(b)(iii), the Buyer will become the true and lawful owner of, and will
receive good title to, the Acquired Assets, free and clear of all Security
Interests other than those set forth in Section 2.10(a)(ii) of the Disclosure
Schedule.
(b) The Acquired Assets are sufficient for the conduct of the Seller's
businesses as presently conducted and as the Seller presently proposed to be
conducted and constitute all assets used by the Seller in such businesses. Each
tangible Acquired Asset is free from material defects, has been maintained in
- 8 -
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it presently is used.
(c) Section 2.10(c) of the Disclosure Schedule lists individually (i) all
Acquired Assets which are fixed assets (within the meaning of GAAP), indicating
the cost, accumulated book depreciation (if any) and the net book value of each
such fixed asset as of the Most Recent Balance Sheet Date, and (ii) all other
Acquired Assets of a tangible nature (other than inventories).
(d) Each item of equipment, motor vehicle and other asset that is being
transferred to the Buyer as part of the Acquired Assets and that the Seller has
possession of pursuant to a lease agreement or other contractual arrangement is
in such condition that, upon its return to its lessor or owner under the
applicable lease or contract, the obligations of the Seller to such lessor or
owner will have been discharged in full.
2.11 Owned Real Property. The Seller does not have any Owned Real Property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists
all Leases and lists the term of such Lease, any extension and expansion
options, and the rent payable thereunder. The Seller has delivered to the Buyer
complete and accurate copies of the Leases. With respect to each Lease:
(a) such Lease is legal, valid, binding, enforceable and in full force and
effect;
(b) such Lease is assignable by the Seller to the Buyer without the consent or
approval of any party (except as set forth in Section 2.4 of the Disclosure
Schedule) and such Lease will continue to be legal, valid, binding, enforceable
and in full force and effect immediately following the Closing in accordance
with the terms thereof as in effect immediately prior to the Closing;
(c) neither the Seller nor, to the knowledge of the Seller, any other party, is
in breach or violation of, or default under, any such Lease, and no event has
occurred, is pending or, to the knowledge of the Seller, is threatened, which,
after the giving of notice, with lapse of time, or otherwise, would constitute a
breach or default by the Seller or, to the knowledge of the Seller, any other
party under such Lease;
(d) there are no disputes, oral agreements or forbearance programs in effect as
to such Lease;
(e) the Seller has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the leasehold or subleasehold;
(f) to the knowledge of the Seller, all facilities leased or subleased
thereunder are supplied with utilities and other services adequate for the
operation of said facilities; and
(g) the Seller is not aware of any Security Interest, easement, covenant or
other restriction applicable to the real property subject to such lease which
- 9 -
would reasonably be expected to materially impair the current uses or the
occupancy by the Seller of the property subject thereto.
2.13 Intellectual Property.
(a) Section 2.13(a) of the Disclosure Schedule lists (i) each patent, patent
application, copyright registration or application therefor, mask work
registration or application therefor, and trademark, service ▇▇▇▇ and domain
name registration or application therefor of the Seller and (ii) each Customer
Deliverable of the Seller.
(b) The Seller owns or has the right to use all Intellectual Property necessary
(i) to use, manufacture, have manufactured, market and distribute the Customer
Deliverables and (ii) to operate the Internal Systems. Upon execution and
delivery by the Buyer to the Seller of the instruments of conveyance referred to
in Section 1.5(b)(iii), each item of Seller Intellectual Property will be owned
or available for use by the Buyer immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to the
Closing. The Seller has taken all reasonable measures to protect the proprietary
nature of each item of Seller Intellectual Property, and to maintain in
confidence all trade secrets and confidential information, that it owns or uses.
No other person or entity has any rights to any of the Seller Intellectual
Property owned by the Seller (except pursuant to agreements or licenses
specified in Section 2.13(d) of the Disclosure Schedule), and, to the knowledge
of the Seller, no other person or entity is infringing, violating or
misappropriating any of the Seller Intellectual Property.
(c) None of the Customer Deliverables, or the marketing, distribution, provision
or use thereof, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity. To the knowledge of the
Seller, none of the Internal Systems, or the use thereof, infringes or violates,
or constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Section 2.13(c) of the Disclosure Schedule lists any
complaint, claim or notice, or written threat thereof, received by the Seller or
the Parent alleging any such infringement, violation or misappropriation; and
the Seller has provided to the Buyer complete and accurate copies of all written
documentation in the possession of the Seller or the Parent relating to any such
complaint, claim, notice or threat. The Seller has provided to the Buyer
complete and accurate copies of all written documentation in the Seller's or the
Parent's possession relating to claims or disputes known to the Seller
concerning any Seller Intellectual Property.
(d) Section 2.13(d) of the Disclosure Schedule identifies each license or other
agreement pursuant to which the Seller has licensed, distributed or otherwise
granted any rights to any third party with respect to, any Seller Intellectual
Property. Except as described in Section 2.13(d) of the Disclosure Schedule, the
Seller has agreed to indemnify any person or entity against any infringement,
violation or misappropriation of any Intellectual Property rights with respect
to any Customer Deliverables.
(e) Section 2.13(e) of the Disclosure Schedule identifies each item of Seller
Intellectual Property that is owned by a party other than the Seller, and the
license or agreement pursuant to which the Seller uses it (excluding
off-the-shelf software programs licensed by the Seller pursuant to "shrink wrap"
licenses).
- 10 -
(f) The Seller has not disclosed the source code for the Software or other
confidential information constituting, embodied in or pertaining to the Software
to any person or entity, except pursuant to the agreements listed in Section
2.13(f) of the Disclosure Schedule, and the Seller has taken reasonable measure
to prevent disclosure of such source code.
(g) All of the copyrightable materials (including Software) incorporated in or
bundled with the Customer Deliverables have been created by employees of the
Seller within the scope of their employment by the Seller or by independent
contractors of the Seller who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to the Seller. No
portion of such copyrightable materials was jointly developed with any third
party with the exception of the material co-developed under an agreement listed
on Schedule 2.13(g) of the Disclosure Schedule.
(h) The Customer Deliverables and the Internal Systems are free from significant
defects or programming errors and conform in all material respects to the
written documentation and specifications therefor.
2.14 Inventory. The Seller does not maintain an inventory in the Ordinary
Course of Business.
2.15 Contracts.
(a) Section 2.15 of the Disclosure Schedule lists the following agreements
(written or oral) to which the Seller is a party as of the date of this
Agreement:
(i) any agreement (or group of related agreements) for the lease of personal
property from or to third parties;
(ii) any agreement (or group of related agreements) for the purchase or sale of
products or for the furnishing or receipt of services (A) which calls for
performance over a period of more than one year, (B) which involves more than
the sum of $5,000, or (C) in which the Seller has granted manufacturing rights,
"most favored nation" pricing provisions or marketing or distribution rights
relating to any products or territory or has agreed to purchase a minimum
quantity of goods or services or has agreed to purchase goods or services
exclusively from a certain party;
(iii) any agreement concerning the establishment or operation of a partnership,
joint venture or limited liability company;
(iv) any agreement (or group of related agreements) under which it has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness (including capitalized lease obligations) or under which it has
imposed (or may impose) a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement for the disposition of any significant portion of the assets
or business of the Seller (other than sales of products in the Ordinary Course
of Business) or any agreement for the acquisition of the assets or business of
any other entity (other than purchases of inventory or components in the
Ordinary Course of Business);
- 11 -
(vi) any agreement concerning confidentiality or noncompetition;
(vii) any employment or consulting agreement;
(viii) any agreement involving any current or former officer, director or
stockholder of the Seller or an Affiliate thereof;
(ix) any agreement under which the consequences of a default or termination
would reasonably be expected to have a Seller Material Adverse Effect;
(x) any agreement which contains any provisions requiring the Seller to
indemnify any other party (excluding indemnities contained in agreements for the
purchase, sale or license of products entered into in the Ordinary Course of
Business); and
(xi) any other agreement (or group of related agreements) either involving more
than $5,000 or not entered into in the Ordinary Course of Business.
(b) The Seller has delivered to the Buyer a complete and accurate copy of each
agreement listed in Section 2.13 or Section 2.15 of the Disclosure Schedule.
With respect to each agreement so listed: (i) the agreement is legal, valid,
binding and enforceable and in full force and effect; (ii) for those agreements
to which the Seller is a party, the agreement is assignable by the Seller to the
Buyer without the consent or approval of any party (except as set forth in
Section 2.4 of the Disclosure Schedule) and will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to
the Closing; and (iii) neither the Seller nor, to the knowledge of the Seller,
any other party, is in breach or violation of, or default under, any such
agreement, and no event has occurred, is pending or, to the knowledge of the
Seller, is threatened, which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by the Seller or, to the
knowledge of the Seller, any other party under such agreement.
2.16 Accounts Receivable. All accounts receivable of the Seller reflected
on the Most Recent Balance Sheet (other than those paid since such date) are
valid receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. A complete and accurate list of the accounts receivable reflected on the
Most Recent Balance Sheet, showing the aging thereof, is included in Section
2.16 of the Disclosure Schedule. All accounts receivable of the Seller that have
arisen since the Most Recent Balance Sheet Date are valid receivables subject to
no setoffs or counterclaims and are collectible (within 90 days after the date
on which it first became due and payable), net of a reserve for bad debts in an
amount proportionate to the reserve shown on the Most Recent Balance Sheet. The
Seller has not received any written notice from an account debtor stating that
any account receivable is subject to any contest, claim or setoff by such
account debtor.
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, comprehensive general
liability, workers compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety arrangements) to
which the Seller is a party, all of which are in full force and effect. Such
- 12 -
insurance policies are of the type and in amounts customarily carried by
organizations conducting businesses or owning assets similar to those of the
Seller. There is no material claim pending under any such policy as to which
coverage has been questioned, denied or disputed by the underwriter of such
policy. All premiums due and payable under all such policies have been paid, the
Seller is not liable for retroactive premiums or similar payments, and the
Seller is otherwise in compliance in all material respects with the terms of
such policies. The Seller has no knowledge of any threatened termination of, or
premium increase with respect to, any such policy.
2.18 Litigation. There is no Legal Proceeding which is pending or has been
threatened in writing against the Seller, including any proceeding which in any
manner challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement. There are no judgments, orders or decrees
outstanding against the Seller.
2.19 Warranties. No product or service manufactured, sold, leased, licensed
or delivered by the Seller is subject to any guaranty, warranty, right of
return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Seller, which are set
forth in Section 2.19 of the Disclosure Schedule, and (ii) manufacturers'
warranties for which the Seller has any liability. Section 2.19 of the
Disclosure Schedule sets forth the aggregate expenses incurred by the Seller in
fulfilling its obligations under its guaranty, warranty, right of return and
indemnity provisions during each of the fiscal years and the interim period
covered by the Financial Statements; and the Seller does not know of any reason
why such expenses should significantly increase as a percentage of sales in the
future.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a list of all employees of
the Seller, along with the position and the annual rate of compensation of each
such person. Each current or past employee of the Seller has entered into a
confidentiality/assignment of inventions agreement with the Seller, a copy or
form of which has previously been delivered to the Buyer. Section 2.20 of the
Disclosure Schedule contains a list of all employees of the Seller or any
Subsidiary who are a party to a non-competition agreement with the Seller;
copies of such agreements have previously been delivered to the Buyer. Section
2.20 of the Disclosure Schedule contains a list of all employees of the Seller
who are not citizens of the United States. To the knowledge of the Seller, no
key employee or group of employees has any plans to terminate employment with
the Seller (other than for the purpose of accepting employment with the Buyer
following the Closing) or not to accept employment with the Buyer.
(b) The Seller is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes. The Seller has no
knowledge of any organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to
employees of the Seller.
- 13 -
2.21 Employee Benefits. (a) Section 2.21(a) of the Disclosure Schedule
contains a complete and accurate list of all Seller Plans. Complete and accurate
copies of (i) all Seller Plans which have been reduced to writing, (ii) written
summaries of all unwritten Seller Plans, and (iii) all related trust agreements,
insurance contracts and summary plan descriptions.
(b) Section 2.21(b) of the Disclosure Schedule sets forth the policy of the
Seller with respect to accrued vacation, accrued sick time and earned time off
and the amount of such liabilities as of April 30, 2003.
2.22 Environmental Matters. (a) The Seller has complied with all applicable
Environmental Laws. There is no pending or, to the knowledge of the Seller,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the Seller.
(b) The Seller has no liabilities or obligations arising from the release of any
Materials of Environmental Concern into the environment.
(c) The Seller is not a party to or bound by any court order, administrative
order, consent order or other agreement with any Governmental Entity entered
into in connection with any legal obligation or liability arising under any
Environmental Law.
(d) Set forth in Section 2.22(d) of the Disclosure Schedule is a list of all
documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Seller (whether conducted by or on behalf
of the Seller or a third party, and whether done at the initiative of the Seller
or directed by a Governmental Entity or other third party) which the Seller has
possession of or access to. A complete and accurate copy of each such document
has been provided to the Buyer.
(e) The Seller is not aware of any material environmental liability of any solid
or hazardous waste transporter or treatment, storage or disposal facility that
has been used by the Seller.
2.23 Legal Compliance. The Seller is currently conducting, and have at all
times since October 1, 1999 conducted, its business in compliance with each
applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, except for any
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Seller Material Adverse Effect. The
Seller has not received any notice or communication from any Governmental Entity
alleging noncompliance with any applicable law, rule or regulation.
2.24 Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets
forth a list of (a) each customer that accounted for more than 1% of the
consolidated revenues of the Seller during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
- 14 -
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or service to the
Seller. No such customer or supplier has indicated within the past year that it
will stop, or decrease the rate of, buying products or supplying products, as
applicable, to the Seller. No unfilled customer order or commitment obligating
the Seller to process, manufacture or deliver products or perform services will
result in a loss to the Seller upon completion of performance. No purchase order
or commitment of the Seller is in excess of normal requirements, nor are prices
provided therein in excess of current market prices for the products or services
to be provided thereunder.
2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of all
Permits issued to or held by the Seller. Such listed Permits are the only
Permits that are required for the Seller to conduct its business as presently
conducted or as proposed to be conducted. Each such Permit is in full force and
effect; the Seller is in compliance with the terms of each such Permit; and, to
the knowledge of the Seller, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit is assignable by the Seller to the
Buyer without the consent or approval of any party and will continue in full
force and effect immediately following the Closing.
2.26 Certain Business Relationships With Affiliates. No Affiliate of the
Seller
(a) owns any property or right, tangible or intangible, which is used in the
business of the Seller, (b) has any claim or cause of action against the Seller,
or (c) owes any money to, or is owed any money by, the Seller, except for those
open balances related to transactions or relationships listed on Section 2.26 of
the Disclosure Schedule. Section 2.26 of the Disclosure Schedule describes any
transactions or relationships between the Seller and any Affiliate thereof which
occurred or have existed since the beginning of the time period covered by the
Financial Statements.
2.27 Brokers' Fees. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.28 Books and Records. The minute books and other similar records of the
Seller contain complete and accurate records of all actions taken at any
meetings of the Seller's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Seller accurately reflect in all material
respects the assets, liabilities, business, condition (financial or otherwise)
and results of operations of the Seller has been maintained in accordance with
good business and bookkeeping practices. Section 2.28 of the Disclosure Schedule
contains a list of all bank accounts and safe deposit boxes of the Seller and
the names of persons having signature authority with respect thereto or access
thereto.
2.29 Disclosure. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Seller pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
- 15 -
The Seller has disclosed to the Buyer all material information relating to the
business of the Seller or the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Buyer that the statements
contained in this Article III are true and correct as of the date of this
Agreement and will be true and correct as of the Closing as though made as of
the Closing.
3.1 Organization, Qualification and Corporate Power. The Parent is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Parent is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction where the nature of the Parent's businesses or the ownership
or leasing of its properties requires such qualification, except for those
jurisdictions in which the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect. The Parent has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Parent is not in
default under or in violation of any provision of its Certificate of
Incorporation or by-laws.
3.2 Authorization of Transaction. The Parent has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Parent of this Agreement and, the
performance by the Parent of this Agreement and the consummation by the Parent
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Parent. Without limiting the
generality of the foregoing, the Board of Directors of the Parent, at a meeting
duly called and held, by the unanimous vote of all directors of the Parent
determined that the sale of assets contemplated by this Agreement is fair to and
in the best interests of the Parent and its stockholders, approved this
Agreement in accordance with the Delaware General Corporation Law. This
Agreement has been duly and validly executed and delivered by the Parent and
constitutes a valid and binding obligation of the Parent, enforceable against
the Parent in accordance with its terms.
3.3 Noncontravention. Neither the execution and delivery by the Parent of
this Agreement, nor the consummation by the Parent of the transactions
contemplated hereby, will (a) conflict with or violate any provision of the
Certificate of Incorporation or by-laws of the Parent, (b) require on the part
of the Parent any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Parent is a party or by which it is bound or
to which any of its assets is subject.
- 16 -
3.4 Litigation. There is no Legal Proceeding which is pending or has been
threatened in writing against the Parent which in any manner challenges or seeks
to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE BUYER PARENT
The Buyer represents and warrants to the Seller that the statements
contained in this Article IV are true and correct as of the date of this
Agreement and will be true and correct as to the Closing as though made as of
the Closing.
4.1 Organization and Corporate Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Buyer is not in default under or in violation of any
provision of its Certificate of Incorporation or by-laws.
4.2 Authorization of the Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Buyer of this Agreement and the Ancillary Agreements and the consummation
by the Buyer of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against it in accordance with its terms.
4.3 Noncontravention. Neither the execution and delivery by the Buyer of
this Agreement or the Ancillary Agreements, nor the consummation by the Buyer of
the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the Certificate of Incorporation or by-laws of the
Buyer, (b) require on the part of the Buyer any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
is a party or by which it is bound or to which any of its assets is subject.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Closing Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
- 17 -
Date and (ii) the conditions to the obligations of the other Party to consummate
the transactions contemplated by this Agreement are satisfied.
5.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at its expense,
all waivers, permits, consents, approvals or other authorizations from
Governmental Entities, and to effect all registrations, filings and notices with
or to Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to otherwise comply with all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement.
(b) The Seller shall use its Reasonable Best Efforts to obtain, at its expense,
all such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be listed in the Disclosure
Schedule.
(c) If (i) any of the Assigned Contracts or other assets or rights constituting
Acquired Assets may not be assigned and transferred by the Seller to the Buyer
(as a result of either the provisions thereof or applicable law) without the
consent or approval of a third party, (ii) the Seller, after using its
Reasonable Best Efforts, is unable to obtain such consent or approval prior to
the Closing and (iii) the Closing occurs nevertheless, then (A) such Assigned
Contracts and/or other assets or rights shall not be assigned and transferred by
the Seller to the Buyer at the Closing and the Buyer shall not assume the
Seller's liabilities or obligations with respect thereto at the Closing, (B) the
Seller shall continue to use its Reasonable Best Efforts to obtain the necessary
consent or approval as soon as practicable after the Closing, (C) upon the
obtaining of such consent or approval, the Buyer and the Seller shall execute
such further instruments of conveyance (in substantially the form executed at
the Closing) as may be necessary to assign and transfer such Assigned Contracts
and/or other assets or rights (and the associated liabilities and obligations of
the Seller) to the Buyer, and (D) from and after the Closing until the
assignment of each such Assigned Contract pursuant to clause (C) above, the
Buyer shall perform and fulfill, on a subcontractor basis, the obligations of
the Seller or the applicable Subsidiary to be performed under such Assigned
Contract, and the Seller or such Subsidiary shall promptly remit to the Buyer
all payments received by it under such Assigned Contract for services performed
during such period.
(d) Seller shall obtain, at its expense, Tax good standing certificates or other
documentation satisfactory to Buyer to the effect that Buyer shall incur no
liability as a successor, transferee or otherwise for Tax or other liabilities
of Seller in each jurisdiction to which Seller may be subject to Tax.
5.3 Operation of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing, the Seller shall
conduct its operations in the Ordinary Course of Business and in compliance with
all applicable laws and regulations and, to the extent consistent therewith, use
its Reasonable Best Efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
- 18 -
relationships with customers, suppliers and others having business dealings with
it. Without limiting the generality of the foregoing, prior to the Closing, the
Seller shall not without the written consent of the Buyer:
(a) issue or sell any stock or other securities of the Seller or any options,
warrants or other rights to acquire any such stock or other securities (except
pursuant to the conversion or exercise of options, warrants or other convertible
securities outstanding on the date hereof);
(b) declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) create, incur or assume any indebtedness (including obligations in respect
of capital leases); assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person or entity; or make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any employment or
severance agreement or arrangement of the type described in Section 2.21(k) or
(except for normal increases in the Ordinary Course of Business for employees
who are not Affiliates) increase in any manner the compensation or fringe
benefits of, or materially modify the employment terms of, its directors,
officers or employees, generally or individually, or pay any bonus or other
benefit to its directors, officers or employees (except for existing payment
obligations listed in Section 2.21 of the Disclosure Schedule) or hire any new
officers or (except in the Ordinary Course of Business) any new employees;
(e) acquire, sell, lease, license or dispose of any assets or property
(including any shares or other equity interests in or securities of any
corporation, partnership, association or other business organization or division
thereof), other than purchases and sales of assets in the Ordinary Course of
Business;
(f) mortgage or pledge any of its property or assets or subject any such
property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation or
liability other than in the Ordinary Course of Business, however, Seller may pay
amounts owed to the Parent as of the date hereof under the credit agreement
dated October 17, 2002 by and between the Seller and Parent;
(h) amend its charter, by-laws or other organizational documents in a manner
that could have an adverse effect on the transactions contemplated by this
Agreement;
(i) change its accounting methods, principles or practices, except insofar as
may be required by a generally applicable change in GAAP, or make any new
elections, or changes to any current elections, with respect to Taxes that
affect the Acquired Assets;
(j) enter into, amend, terminate, take or omit to take any action that would
constitute a violation of or default under, or waive any rights under, any
- 19 -
contract or agreement of a nature required to be listed in Section 2.12, Section
2.13 or Section 2.15 of the Disclosure Schedule;
(k) make or commit to make any capital expenditure in excess of $5,000 per item
or $25,000 in the aggregate;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by this Agreement with
the knowledge that such action or failure to take action would result in (i) any
of the representations and warranties of the Seller set forth in this Agreement
becoming untrue or (ii) any of the conditions to the Closing set forth in
Article VI not being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing actions.
5.4 Access to Information.
(a) The Seller shall authorize representatives of the Buyer to have full access
(at all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Seller) to all premises, properties, financial, tax
and accounting records (including the work papers of the Seller's independent
accountants), contracts, other records and documents, and personnel, of or
pertaining to the Seller for the purpose of performing such inspections and
tests as the Buyer deems necessary or appropriate.
(b) Within 30 days after the end of each month ending prior to the Closing,
beginning with April 30, 2003 the Seller shall furnish to the Buyer an unaudited
income statement for such month and a balance sheet as of the end of such month,
prepared on a basis consistent with the Financial Statements. Such financial
statements shall present fairly the financial condition and results of
operations of the Seller as of the dates thereof and for the periods covered
thereby, and shall be consistent with the books and records of the Seller.
(c) The Buyer (i) shall treat and hold as confidential any Confidential
Information, (ii) shall not use any of the Confidential Information except in
connection with this Agreement, and (iii) if this Agreement is terminated for
any reason whatsoever, shall return to the Seller all tangible embodiments (and
all copies) thereof which are in its possession.
5.5 Exclusivity.
(a) The Seller and the Parent shall not, and the Seller and the Parent shall
require each of its officers, directors, employees, representatives and agents
not to, directly or indirectly, (i) initiate, solicit, encourage or otherwise
facilitate any inquiry, proposal, offer or discussion with any party (other than
the Buyer) concerning any merger, reorganization, consolidation,
recapitalization, business combination, liquidation, dissolution, share
exchange, sale of stock, sale of material assets or similar business transaction
involving the Seller, (ii) furnish any non-public information concerning the
business, properties or assets of the Seller to any party (other than the Buyer)
or (iii) engage in discussions or negotiations with any party (other than the
Buyer) concerning any such transaction.
- 20 -
(b) The Seller and the Parent shall each immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above were
pending that the Seller or the Parent, whichever is applicable, is terminating
such discussions or negotiations. If the Seller or the Parent receives any
inquiry, proposal or offer of the nature described in paragraph (a) above, the
Seller or the Parent, whichever is applicable, shall, within one business day
after such receipt, notify the Buyer of such inquiry, proposal or offer,
including the identity of the other party and the terms of such inquiry,
proposal or offer.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement to be consummated at
the Closing is subject to the satisfaction of the following additional
conditions:
(a) the Seller shall have obtained at its own expense (and shall have provided
copies thereof to the Buyer) all of the waivers, permits, consents, approvals,
certificates or other authorizations, and effected all of the registrations,
filings and notices, referred to in Section 5.2 which are required on the part
of the Seller, except for any failure of which to obtain or effect would not,
individually or in the aggregate, have a material adverse effect on the right of
the Buyer to own, operate or control the Acquired Assets following the Closing
or on the ability of the Parties to consummate the transactions contemplated by
this Agreement;
(b) the representations and warranties of the Seller and the Parent set forth in
the first sentence of Sections 2.1 and 3.1 and in Sections 2.3 and 3.2 and any
representations and warranties of the Seller or the Parent set forth in this
Agreement that are qualified as to materiality shall be true and correct in all
respects, and all other representations and warranties of the Seller or the
Parent set forth in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing as
though made as of the Closing, except to the extent such representations and
warranties are specifically made as of a particular date (in which case such
representations and warranties shall be true and correct as of such date);
(c) the Seller shall have performed or complied with in all material respects
its agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Closing;
(d) no Legal Proceeding shall be pending or threatened wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own, operate or
control any of the Acquired Assets, or to conduct the business of the Seller as
currently conducted, following the Closing, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(e) the Seller shall have delivered to the Buyer the Seller Certificate;
- 21 -
(f) the Seller shall have delivered to the Buyer an update, as of the date prior
to the Closing Date, of each list contained in the Disclosure Schedule that
lists or describes Acquired Assets (including the lists set forth in Sections
2.5, 2.10(c), 2.11, 2.12, 2.13, 2.15, 2.17, 2.21(a) and 2.25 of the Disclosure
Schedule);
(g) the Seller shall have delivered to the Buyer documents evidencing the
release or termination of all Security Interests on the Acquired Assets, and
copies of filed UCC termination statements with respect to all UCC financing
statements evidencing Security Interests, other than Security Interests which
are listed in Section 2.10 of the Disclosure Schedule under the heading
"Permitted Security Interests";
(h) the Seller shall have provided to the Buyer all necessary documentation of
(i) compliance with any applicable environmental transfer statute and (ii)
transfer of all material Permits required under Environmental Laws;
(i) the Seller, to the Buyer's satisfaction which shall not be unreasonably
withheld, shall have made satisfactory progress towards the completion of the 25
new Environmental Safety and Health Compliance courses (the "ESH Courses"), the
titles of which are set forth on Exhibit E attached hereto;
(j) the Buyer shall have received from counsel to the Seller an opinion in
substantially the form attached hereto as Exhibit F, addressed to the Buyer and
dated as of the Closing Date;
(k) the Buyer shall have received such other certificates and instruments
(including certificates of good standing of the Seller and the Parent in their
jurisdiction of organization and the various foreign jurisdictions in which they
are qualified, certified charter documents, certificates as to the incumbency of
officers and the adoption of authorizing resolutions) as it shall reasonably
request in connection with the Closing;
(l) Seller shall have delivered to the Buyer the certificate or certificates
referred to in Section 5.2(d); and
(m) The board of directors of the Parent of the Buyer shall have ratified the
Agreement and the transactions contemplated hereby.
6.2 Conditions to Obligations of the Seller. The obligation of the Seller
to consummate the transactions contemplated by this Agreement to be consummated
at the Closing is subject to the satisfaction of the following additional
conditions:
(a) the representations and warranties of the Buyer set forth in the first
sentence of Section 4.1 and in Section 4.2 and any representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of the Buyer set forth in this Agreement shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing as though made as of the Closing, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date);
- 22 -
(b) the Buyer shall have performed or complied with in all material respects its
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Closing;
(c) no Legal Proceeding shall be pending or threatened wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(d) the Buyer shall have delivered to the Seller the Buyer Certificate;
(e) the Seller shall have received from counsel to the Buyer an opinion in
substantially the form attached hereto as Exhibit G, addressed to the Seller and
dated as of the Closing Date; and
(f) the Seller shall have received such other certificates and instruments
(including certificates of good standing of the Buyer in its jurisdiction of
organization, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing.
ARTICLE VII
COVENANTS
7.1 Proprietary Information. From and after the Closing, neither the Parent
nor the Seller shall disclose or make use of (except to pursue its rights, under
this Agreement or the Ancillary Agreements), and shall use its best efforts to
cause all of its Affiliates not to disclose or make use of, any knowledge,
information or documents of a confidential nature or not generally known to the
public with respect to Acquired Assets, the Seller's business or the Buyer or
its business (including the financial information, technical information or data
relating to the Seller's products and names of customers of the Seller), as well
as filings and testimony (if any) presented in the course of any arbitration of
a Dispute pursuant to Section 8.3 and the arbitral award and the Arbitrator's
reasons therefor relating to the same), except to the extent that such
knowledge, information or documents shall have become public knowledge other
than through improper disclosure by the Seller, the Parent or an Affiliate. The
Seller and the Parent shall enforce, for the benefit of the Buyer, all
confidentiality, invention assignments and similar agreements between the Seller
and any other party relating to the Acquired Assets or the business of the
Seller which are not Assigned Contracts.
7.2 Solicitation and Hiring. For a period of two (2) years after the
Closing Date, neither the Parent nor the Seller shall, either directly or
indirectly (including through an Affiliate), (a) solicit or attempt to induce
any Restricted Employee to terminate his employment with the Buyer or any
subsidiary of the Buyer or (b) hire or attempt to hire any Restricted Employee;
provided, that this clause (b) shall not apply to any individual whose
employment with the Buyer or a subsidiary of the Buyer has been terminated for a
period of six months or longer. The Seller and the Parent shall enforce, for the
benefit of the Buyer, all confidentiality, non-solicitation and non-hiring
- 23 -
assignments and similar agreements between the Seller and any other party which
are not Assigned Contracts.
7.3 Non-Competition.
(a) For a period of two (2) years after the Closing Date, neither the Parent nor
the Seller shall, either directly or indirectly as a stockholder, investor,
partner, consultant or otherwise, (i) design, develop, manufacture, market, sell
or license any product or provide any service anywhere in the world which is
competitive with any product designed, developed (or under development),
manufactured, sold or licensed or any service provided by the Seller within the
three-year period prior to the Closing Date or (ii) engage anywhere in the world
in any business competitive with the business of the Seller as conducted as of
the Closing Date or during the three-year period prior to the Closing Date. The
Seller and the Parent shall enforce, for the benefit of the Buyer, all
non-competition and similar agreements between the Seller and any other party
which are not Assigned Contracts.
(b) The Seller and the Parent each agree that the duration and geographic scope
of the non-competition provision set forth in this Section 7.3 are reasonable.
In the event that any court determines that the duration or the geographic
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the Parties agree that the provision shall remain in full force
and effect for the greatest time period and in the greatest area that would not
render it unenforceable. The Parties intend that this non-competition provision
shall be deemed to be a series of separate covenants, one for each and every
county of each and every state of the United States of America and each and
every political subdivision of each and every country outside the United States
of America where this provision is intended to be effective.
(c) The Parent and the Seller shall, and shall each use its best efforts to
cause its Affiliates to, refer all inquiries regarding the business, products
and services of the Seller to the Buyer.
7.4 Tax Matters. All transfer taxes, deed excise stamps and similar charges
related to the sale of the Acquired Assets contemplated by this Agreement shall
be paid by the Seller.
7.5 Sharing of Data.
(a) The Seller shall have the right for a period of seven years following the
Closing Date to have reasonable access to such books, records and accounts,
including financial and tax information, correspondence, production records,
employment records and other records that are transferred to the Buyer pursuant
to the terms of this Agreement for the limited purposes of concluding its
involvement in the business conducted by the Seller prior to the Closing Date
and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall have
the right for a period of seven years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
accounting records (including the work papers of the Seller's independent
accountants), tax records, correspondence, production records, employment
records and other records that are retained by the Seller and the Parent
pursuant to the terms of this Agreement to the extent that any of the foregoing
is needed by the Buyer for the purpose of conducting the business of the Seller
- 24 -
after the Closing and complying with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations.
Neither the Buyer, the Parent, nor the Seller shall destroy any such books,
records or accounts retained by it without first providing the other Party with
the opportunity to obtain or copy such books, records, or accounts at such other
Party's expense.
(b) Promptly upon request by the Buyer made at any time following the Closing
Date, the Seller and the Parent shall authorize the release to the Buyer of all
files pertaining to the Seller, the Acquired Assets or the business or
operations of the Seller held by any federal, state, county or local
authorities, agencies or instrumentalities.
7.6 Use of Name. Neither the Parent nor the Seller shall use, and shall not
permit any Affiliate to use, GoTrain or any name reasonably similar thereto
after the Closing Date in connection with any business related to, competitive
with, or an outgrowth of, the business conducted by the Seller on the date of
this Agreement. Within 30 days following the Closing, the Seller shall amend its
Certificate of Incorporation and other corporate records, if necessary, to
comply with this provision.
7.7 Cooperation in Litigation. From and after the Closing Date, each Party
shall fully cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such other Party relating to or arising out of the conduct of the
business of the Seller or the Buyer prior to or after the Closing Date (other
than litigation among the Parties and/or their Affiliates arising out the
transactions contemplated by this Agreement). The Party requesting such
cooperation shall pay the reasonable out-of-pocket expenses incurred in
providing such cooperation (including legal fees and disbursements) by the Party
providing such cooperation and by its officers, directors, employees and agents,
but shall not be responsible for reimbursing such Party or its officers,
directors, employees and agents, for their time spent in such cooperation.
7.8 Collection of Accounts Receivable. The Seller agrees that it shall
forward promptly to the Buyer any monies, checks or instruments received by the
Seller after the Closing Date with respect to the accounts receivable purchased
by the Buyer from the Seller pursuant to this Agreement. The Seller shall
provide to the Buyer such reasonable assistance as the Buyer may request with
respect to the collection of any such accounts receivable, provided the Buyer
pays the reasonable out-of-pocket expenses of the Seller and its officers,
directors and employees incurred in providing such assistance. The Seller hereby
grants to the Buyer a power of attorney to endorse and cash any checks or
instruments payable or endorsed to the Seller or its order which are received by
the Buyer and which relate to accounts receivable purchased by the Buyer from
the Seller.
7.9 Employees. Effective as of the Closing, the Seller shall terminate the
employment of each of its employees designated on Schedule 7.9 attached hereto
(which may be updated prior to the Closing by the mutual agreement of the Buyer
and the Seller). The Buyer shall offer employment to each such employee,
terminable at the will of the Buyer. The Seller hereby consents to the hiring of
any such employees by the Buyer and waives, with respect to the employment by
the Buyer of such employees, any claims or rights the Seller may have against
- 25 -
the Buyer or any such employee under any non-competition, confidentiality or
employment agreement.
7.10 Maintenance of Corporate Existence; Restriction on Dividends and
Distributions. The Seller shall maintain its corporate existence and shall not
disclose, set aside or pay any dividend or other distribution in cash or other
property (other than capital stock of the Seller) in respect of its stock, for a
period of one year following the Closing Date.
7.11 ESH Courses. Within one year from the date of the Closing, the Seller
shall complete the ESH Courses.
7.12 General Waiver. As of the date of this Agreement, the Parent, the
Seller, the Affiliated Group and each of their parents, subsidiaries and
Affiliates each hereby irrevocably remise, release, waive and forever discharge
any and all claims or rights of any nature (other than any claims or rights that
may arise out of the transactions contemplated by this Agreement) that they may
have against the Buyer, its Affiliates, the Buyer Parent, its subsidiaries or
any of the subsidiaries of the Buyer Parent.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Seller and Parent. The Seller and Parent shall
indemnify the Buyer in respect of, and hold the Buyer harmless against, Damages
incurred or suffered by the Buyer or any Affiliate thereof resulting from,
relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the Closing Date, of
any representation or warranty of the Seller or the Parent contained in this
Agreement, any Ancillary Agreement or any other agreement or instrument
furnished by the Seller or the Parent to the Buyer pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller contained in
this Agreement, any Ancillary Agreement or any agreement or instrument furnished
by the Seller or the Parent to the Buyer pursuant to this Agreement; or
(c) any Retained Liabilities.
8.2 Indemnification by the Buyer and the Buyer Parent. The Buyer and the
Buyer Parent shall indemnify the Seller in respect of, and hold it harmless
against, any and all Damages incurred or suffered by the Seller resulting from,
relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the Closing Date, of
any representation or warranty of the Buyer contained in this Agreement, any
Ancillary Agreement or any other agreement or instrument furnished by the Buyer
to the Seller pursuant to this Agreement;
- 26 -
(b) any failure to perform any covenant or agreement of the Buyer contained in
this Agreement, any Ancillary Agreement or any other agreement or instrument
furnished by the Buyer to the Seller pursuant to this Agreement; or
(c) any Assumed Liabilities.
8.3 Indemnification Claims.
(a) An Indemnified Party shall give written notification to the Indemnifying
Party of the commencement of any Third Party Action. Such notification shall be
given within 20 days after receipt by the Indemnified Party of notice of such
Third Party Action, and shall describe in reasonable detail (to the extent known
by the Indemnified Party) the facts constituting the basis for such Third Party
Action and the amount of the claimed damages; provided, however, that no delay
or failure on the part of the Indemnified Party in so notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or liability caused by or arising
out of such failure. Within 20 days after delivery of such notification, the
Indemnifying Party may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such Third Party Action with counsel reasonably
satisfactory to the Indemnified Party; provided that (i) the Indemnifying Party
may only assume control of such defense if (A) it acknowledges in writing to the
Indemnified Party that any damages, fines, costs or other liabilities that may
be assessed against the Indemnified Party in connection with such Third Party
Action constitute Damages for which the Indemnified Party shall be indemnified
pursuant to this Article VIII and (B) the ad damnum is less than or equal to the
amount of Damages for which the Indemnifying Party is liable under this Article
VIII and (ii) the Indemnifying Party may not assume control of the defense of
Third Party Action involving criminal liability or in which equitable relief is
sought against the Indemnified Party. If the Indemnifying Party does not, or is
not permitted under the terms hereof to, so assume control of the defense of a
Third Party Action, the Indemnified Party shall control such defense. The
Non-controlling Party may participate in such defense at its own expense. The
Controlling Party shall keep the Non-controlling Party advised of the status of
such Third Party Action and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such Third Party Action (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such Third Party Action. The fees and
expenses of counsel to the Indemnified Party with respect to a Third Party
Action shall be considered Damages for purposes of this Agreement if (i) the
Indemnified Party controls the defense of such Third Party Action pursuant to
the terms of this Section 8.3(a) or (ii) the Indemnifying Party assumes control
of such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such Third Party Action. The
Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any Third Party Action without the prior written consent
of the Indemnified Party, which shall not be unreasonably withheld, conditioned
or delayed; provided that the consent of the Indemnified Party shall not be
required if the Indemnifying Party agrees in writing to pay any amounts payable
pursuant to such settlement or judgment and such settlement or judgment includes
- 27 -
a complete release of the Indemnified Party from further liability and has no
other adverse effect on the Indemnified Party. The Indemnified Party shall not
agree to any settlement of, or the entry of any judgment arising from, any such
Third Party Action without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld, conditioned or delayed.
(b) In order to seek indemnification under this Article VIII, an Indemnified
Party shall deliver a Claim Notice to the Indemnifying Party. If the Indemnified
Party is the Buyer and is seeking to enforce such claim pursuant to the Escrow
Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to
the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying Party
shall deliver to the Indemnified Party a Response, in which the Indemnifying
Party shall: (i) agree that the Indemnified Party is entitled to receive all of
the Claimed Amount (in which case the Response shall be accompanied by a payment
by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by
check or by wire transfer; provided that if the Indemnified Party is the Buyer
and is seeking to enforce such claim pursuant to the Escrow Agreement, the
Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
executed by both parties instructing the Escrow Agent to disburse the Claimed
Amount to the Buyer), (ii) agree that the Indemnified Party is entitled to
receive the Agreed Amount (in which case the Response shall be accompanied by a
payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount,
by check or by wire transfer; provided that if the Indemnified Party is the
Buyer and is seeking to enforce such claim pursuant to the Escrow Agreement, the
Indemnifying Party and the Indemnified Party shall deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
executed by both parties instructing the Escrow Agent to disburse the Agreed
Amount to the Buyer) or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount.
(d) During the 30-day period following the delivery of a Response that reflects
a Dispute, the Indemnifying Party and the Indemnified Party shall use good faith
efforts to resolve the Dispute. If the Dispute is not resolved within such
30-day period, the Indemnifying Party and the Indemnified Party shall discuss in
good faith the submission of the Dispute to binding arbitration, and if the
Indemnifying Party and the Indemnified Party agree in writing to submit the
Dispute to such arbitration, then the provisions of Section 8.3(e) shall become
effective with respect to such Dispute. The provisions of this Section 8.3(d)
shall not obligate the Indemnifying Party and the Indemnified Party to submit to
arbitration or any other alternative dispute resolution procedure with respect
to any Dispute, and in the absence of an agreement by the Indemnifying Party and
the Indemnified Party to arbitrate any Dispute, such Dispute shall be resolved
in a state or federal court sitting in the State of Delaware in accordance with
Section 11.12. If the Indemnified Party is the Buyer and is seeking to enforce
the claim that is the subject of the Dispute pursuant to the Escrow Agreement,
the Indemnifying Party and the Indemnified Party shall deliver to the Escrow
Agent, promptly following the resolution of the Dispute (whether by mutual
agreement, arbitration, judicial decision or otherwise), a written notice
executed by both parties instructing the Escrow Agent as to what (if any)
portion of the Escrow Fund shall be disbursed to the Buyer and/or the Seller
(which notice shall be consistent with the terms of the resolution of the
Dispute).
- 28 -
(e) If, as set forth in Section 8.3(d), the Indemnified Party and the
Indemnifying Party agree to submit any Dispute to binding arbitration, the
arbitration shall be conducted by a single arbitrator (the "Arbitrator") in
accordance with the Commercial Rules in effect from time to time and the
following provisions.
(i) In the event of any conflict between the Commercial Rules in effect from
time to time and the provisions of this Agreement, the provisions of this
Agreement shall prevail and be controlling.
(ii) The parties shall commence the arbitration by jointly filing a written
submission with the Wilmington, Delaware office of the AAA in accordance with
Commercial Rule 5 (or any successor provision).
(iii) No depositions or other discovery shall be conducted in connection with
the arbitration.
(iv) Not later than 30 days after the conclusion of the arbitration hearing, the
Arbitrator shall prepare and distribute to the parties a writing setting forth
the arbitral award and the Arbitrator's reasons therefor. Any award rendered by
the Arbitrator shall be final, conclusive and binding upon the parties, and
judgment thereon may be entered and enforced in any court of competent
jurisdiction (subject to Section 11.12), provided that the Arbitrator shall have
no power or authority to grant injunctive relief, specific performance or other
equitable relief.
(v) The Arbitrator shall have no power or authority, under the Commercial Rules
or otherwise, to (x) modify or disregard any provision of this Agreement,
including the provisions of this Section 8.3(e), or (y) address or resolve any
issue not submitted by the parties.
(vi) In connection with any arbitration proceeding pursuant to this Agreement,
each party shall bear its own costs and expenses, except that the fees and costs
of the AAA and the Arbitrator, the costs and expenses of obtaining the facility
where the arbitration hearing is held, and such other costs and expenses as the
Arbitrator may determine to be directly related to the conduct of the
arbitration and appropriately borne jointly by the parties (which shall not
include any party's attorneys' fees or costs, witness fees (if any), costs of
investigation and similar expenses) shall be shared equally by the Indemnified
Party and the Indemnifying Party.
(f) Notwithstanding the other provisions of this Section 8.3, if a third party
asserts (other than by means of a lawsuit) that an Indemnified Party is liable
to such third party for a monetary or other obligation which may constitute or
result in Damages for which such Indemnified Party may be entitled to
indemnification pursuant to this Article VIII, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VIII, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article
- 29 -
VIII, for any such Damages for which it is entitled to indemnification pursuant
to this Article VIII (subject to the right of the Indemnifying Party to dispute
the Indemnified Party's entitlement to indemnification, or the amount for which
it is entitled to indemnification, under the terms of this Article VIII).
8.4 Survival of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in Section 8.1(a)
and Section 8.2(a) shall (a) survive the Closing and (b) shall expire on the
date one year following the Closing Date, except that (i) the representations
and warranties set forth in Sections 2.1, 2.3, 3.1, 3.2 and 4.1 and 4.2 shall
survive the Closing without limitation and (ii) the representations and
warranties set forth in Sections 2.9, 2.21 and 2.22 shall survive until 30 days
following expiration of all statutes of limitation applicable to the matters
referred to therein. If an Indemnified Party delivers to an Indemnifying Party,
before expiration of a representation or warranty, either a Claim Notice based
upon a breach of such representation or warranty, or an Expected Claim Notice
based upon a breach of such representation or warranty, then the applicable
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and funds have been retained in escrow after the Termination Date
(as defined in the Escrow Agreement) with respect to such Expected Claim Notice,
the Indemnifying Party and the Indemnified Party shall promptly deliver to the
Escrow Agent a written notice executed by both parties instructing the Escrow
Agent to disburse such retained funds to the Seller in accordance with the terms
of the Escrow Agreement. The rights to indemnification set forth in this Article
VIII shall not be affected by (i) any investigation conducted by or on behalf of
an Indemnified Party or any knowledge acquired (or capable of being acquired) by
an Indemnified Party, whether before or after the date of this Agreement or the
Closing Date with respect to the inaccuracy or noncompliance with any
representation, warranty, covenant or obligation which is the subject of
indemnification hereunder or (ii) any waiver by an Indemnified Party of any
closing condition relating to the accuracy of any representations and warranties
or the performance of or compliance with agreements and covenants.
8.5 Limitations.
(a) Notwithstanding anything to the contrary herein, the Seller shall not be
liable under this Article VIII unless and until the aggregate Damages for which
it would otherwise be liable under this Article VIII exceed $62,500 (at which
point the Seller shall become liable for the aggregate Damages under this
Article VIII, and not just amounts in excess of $62,500); provided that the
limitations set forth in this sentence shall not apply to a claim pursuant to
Section 8.1(a) relating to a breach of the representations and warranties set
forth in Sections 2.1, 2.3, 3.1 or 3.2 or to a breach of the covenants set forth
in Article VI. For purposes solely of this Article VIII, all representations and
warranties of the Seller in Article II (other than Sections 2.7 and 2.29) and
the Parent in Article III shall be construed as if the term "material" and any
reference to "Seller Material Adverse Effect" or "Parent Material Adverse
Effect", respectively (and variations thereof) were omitted from such
representations and warranties.
- 30 -
(b) Notwithstanding anything to the contrary herein, the Buyer shall not be
liable under this Article VIII unless and until the aggregate Damages for which
it would otherwise be liable under this Article VIII exceed $62,500 (at which
point the Buyer shall become liable for the aggregate Damages under this Article
VIII, and not just amounts in excess of $62,500) provided that the limitation
set forth in this sentence shall not apply to a claim pursuant to Section 8.2(a)
relating to a breach of the representations and warranties set forth in Sections
4.1 or 4.2.
(c) The Escrow Agreement is intended to secure Seller's obligations under
Section 1.7 of this Agreement and the indemnification obligations of the Seller
under this Agreement. However, the rights of the Buyer under this Article VIII
shall not be limited to the Escrow Fund nor shall the Escrow Agreement be the
exclusive means for the Buyer to enforce such rights; provided that the Buyer
shall not attempt to collect any Damages directly from the Seller unless there
are no remaining funds held in escrow pursuant to the Escrow Agreement.
(d) Except with respect to claims based on fraud, after the Closing, the rights
of the Indemnified Parties under this Article VIII and the Escrow Agreement
shall be the exclusive remedy of the Indemnified Parties with respect to claims
resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement contained in this Agreement.
8.6 Treatment of Indemnity Payments. Any payments made to an Indemnified
Party pursuant to this Article VIII or pursuant to the Escrow Agreement shall be
treated as an adjustment to the Purchase Price for tax purposes.
ARTICLE IX
TERMINATION
9.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) the Buyer may terminate this Agreement by giving written notice to the
Seller in the event the Seller or the Parent is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (b) or (c) of Section 6.2 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Buyer to the Seller of written
notice of such breach;
(c) the Seller may terminate this Agreement by giving written notice to the
Buyer in the event the Buyer is in breach of any representation, warranty or
covenant contained in this Agreement, and such breach, individually or in
combination with any other such breach, (i) would cause the conditions set forth
in clauses (a) or (b) of Section 6.3 not to be satisfied and (ii) is not cured
within 20 days following delivery by the Seller to the Buyer of written notice
of such breach;
- 31 -
(d) the Buyer may terminate this Agreement by giving written notice to the
Seller if the Closing shall not have occurred on or before June 30, 2003 by
reason of the failure of any condition precedent under Section 6.1 or 6.2
(unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement); or
(e) the Seller may terminate this Agreement by giving written notice to the
Buyer if the Closing shall not have occurred on or before June 30, 2003 by
reason of the failure of any condition precedent under Section 6.1 or 6.3
(unless the failure results primarily from a breach by the Seller or the Parent
of any representation, warranty or covenant contained in this Agreement).
9.2 Effect of Termination. If either Party terminates this Agreement
pursuant to Section 9.1, all obligations of the Parties hereunder shall
terminate without any liability of either Party to the other Party (except for
any liability of a Party for willful breaches of this Agreement) provided
however that the Seller shall be entitled to keep the sums paid by the Buyer
pursuant to Section 1.3(a) and provided further that obligations set forth in
Section 7.11 shall survive the termination of this Agreement and be binding upon
the Parties in perpetuity.
ARTICLE X
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have
the meaning set forth below.
"AAA" shall mean the American Arbitration Association.
"Accountant" shall mean KPMG LLP.
"Acquired Assets" shall mean all of the assets, properties and rights
of the Seller existing as of the Closing, including:
(a) all cash, short-term investments, deposits, bank accounts and other similar
assets;
(b) all trade and other accounts receivable and notes and loans receivable that
are payable to the Seller, and all rights to unbilled amounts for products
delivered or services provided, together with any security held by the Seller
for the payment thereof;
(c) all inventories of raw materials, work in process, finished goods, supplies,
packaging materials, spare parts and similar items, wherever located, including
consignment inventory and inventory held on order or in transit;
(d) all computers, machinery, equipment, tools and tooling, furniture, fixtures,
supplies, leasehold improvements, motor vehicles and other tangible personal
property;
- 32 -
(e) all real property, leaseholds and subleaseholds in real property, and
easements, rights-of-way and other appurtenants thereto;
(f) all Intellectual Property;
(g) all rights under Assigned Contracts;
(h) all securities owned by the Seller;
(i) all claims, prepayments, deposits, refunds, causes of action, chooses in
action, rights of recovery, rights of setoff and rights of recoupment;
(j) all Permits;
(k) all books, records, accounts, ledgers, files, documents, correspondence,
lists (including customer and prospect lists), employment records related to
employees joining the Buyer, manufacturing and procedural manuals, Intellectual
Property records, sales and promotional materials, studies, reports and other
printed or written materials; and
(l) all rights of the Seller in and with respect to the assets associated with
its Employee Benefit Plans.
"Affiliate" shall mean any affiliate, as defined in Rule 12b-2 under
the Securities Exchange Act of 1934.
"Affiliated Group" shall mean a group of corporations with which the
Seller has filed (or was required to file) consolidated, combined, unitary or
similar Tax Returns.
"Affiliated Period" shall mean any period in which the Seller was a
member of an Affiliated Group.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Ancillary Agreements" shall mean the Escrow Agreement, the ▇▇▇▇ of
sale and other instruments of conveyance referred to in Section 1.5(b)(iii), and
the instrument of assumption and other instruments referred to in Section
1.5(b)(iv).
"Arbitrator" shall have the meaning set forth in Section 8.3(e).
"Assigned Contracts" shall mean any contracts, agreements or
instruments to which the Seller is a party, including any agreements or
instruments securing any amounts owed to the Seller, any leases or subleases of
real property, any employment contracts and any licenses or sublicenses relating
to Intellectual Property.
"Assumed Liabilities" shall mean all of the following liabilities of
the Seller:
(a) all liabilities of the Seller set forth on the face of (and not solely in
any notes to) the Most Recent Balance Sheet, to the extent they have not been
paid or discharged prior to the Closing;
- 33 -
(b) all liabilities of the Seller which have arisen after the date of the Most
Recent Balance Sheet in the Ordinary Course of Business, including with respect
to frequency and amount, to the extent that they have not been paid or
discharged prior to the Closing; provided that this clause (b) shall not
encompass any such liabilities which relate to any breach of contract, breach of
warranty, tort, infringement or violation of law or which arose out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
demand;
(c) all obligations of the Seller arising after the Closing under the Assigned
Contracts; and
(d) all obligations of the Seller to its customers for the repair, replacement
or return of products manufactured or sold in the Ordinary Course of Business
prior to the Closing, but only to the extent that (i) such obligations are not
the subject of claims or litigation required to be disclosed in Section 2.18 of
the Disclosure Schedule attached hereto and (ii) the cost to the Buyer of
fulfilling such obligations does not exceed $2,500 in any one instance or
$10,000 in the aggregate.
"Buyer" shall have the meaning set forth in the first paragraph of this
Agreement.
"Buyer Certificate" shall mean a certificate to the effect that each of
the conditions specified in clauses (a) through (c) (insofar as clause (c)
relates to Legal Proceedings involving the Buyer) of Section 6.3 is satisfied in
all respects.
"Buyer Parent" shall have the meaning set forth in Section 1.3(c).
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Indemnified Party.
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Indemnified Party and the Claimed Amount of such Damages, to the extent then
known, (ii) a statement that the Indemnified Party is entitled to
indemnification under Article VIII for such Damages and a reasonable explanation
of the basis therefor, and (iii) a demand for payment in the amount of such
Damages.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement.
"Closing Date" shall mean the date two business days after the
satisfaction or waiver of all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (excluding the
delivery at the Closing of any of the documents set forth in Article VI), or
such other date as may be mutually agreeable to the Parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Rules" shall mean the Commercial Arbitration Rules of the
AAA.
- 34 -
"Confidential Information" shall mean any confidential or proprietary
information of the Seller or the Parent that is furnished in writing to the
Buyer by the Seller or the Parent in connection with this Agreement and is
labeled confidential or proprietary; provided, however, that it shall not
include any information (A) which, at the time of disclosure, is available
publicly, (B) which, after disclosure, becomes available publicly through no
fault of the Buyer, (C) which the Buyer knew or to which the Buyer had access
prior to disclosure or (D) which the Buyer rightfully obtains from a source
other than the Seller or the Parent.
"Controlling Party" shall mean the party controlling the defense of any
Third Party Action.
"Customer Deliverables" shall mean (a) the products that the Seller (i)
currently manufactures, markets, sells or licenses, or (ii) has manufactured,
marketed, sold or licensed within the previous three years, or (iii) currently
plans to manufacture, market, sell or license in the future and (b) the services
that the Seller (i) currently provides, or (ii) has provided within the previous
three years, or (iii) currently plans to provide in the future.
"Damages" shall mean any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), diminution in
value, monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including amounts paid in settlement,
interest, court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation), other than those costs and expenses of arbitration of a Dispute
which are to be shared equally by the Indemnified Party and the Indemnifying
Party as set forth in Section 8.3(e)(vi).
"Debentures" shall mean those certain Series 1 and Series 2 convertible
subordinated debentures issued by the Seller on February 15, 2002 to Polmeroy
Limited and Columbia Nova Investments, AVV. .
"Disclosure Schedule" shall mean the disclosure schedule provided by
the Seller to the Buyer on the date hereof and accepted in writing by the Buyer.
"Disclosure Statement " shall mean a written proxy or information
statement which includes a summary of this Agreement.
"Dispute" shall mean the dispute resulting if the Indemnifying Party in
a Response disputes its liability for all or part of the Claimed Amount.
"Draft Closing Balance Sheet" shall mean a consolidated balance sheet
reflecting only the Acquired Assets and Assumed Liabilities as of the Closing
(without giving effect to the transactions contemplated by this Agreement).
"Employee Benefit Plan" shall mean any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
- 35 -
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation.
"Environmental Law" shall mean any federal, state or local law,
statute, rule, order, directive, judgment, Permit or regulation or the common
law relating to the environment, occupational health and safety, or exposure of
persons or property to Materials of Environmental Concern, including any
statute, regulation, administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace or
other areas of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping of Materials of Environmental
Concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to
Materials of Environmental Concern; (vii) the protection of wild life, marine
life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed
receptacles; and (ix) health and safety of employees and other persons. As used
above, the term "release" shall have the meaning set forth in CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any entity which is, or at any applicable
time was, a member of (1) a controlled group of corporations (as defined in
Section 414(b) of the Code), (2) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (3) an affiliated service
group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the Seller.
"Escrow Agreement" shall mean an escrow agreement in substantially the
form attached hereto as Exhibit A.
"Escrow Agent" shall mean U. S. Bank National Association.
"Escrow Fund" shall mean the fund established pursuant to the Escrow
Agreement and including the amount paid by the Buyer to the Escrow Agent at the
Closing pursuant to Section 1.4.
"ESH Courses" shall have the meaning set forth in Section 6.1(i).
"Excluded Assets" shall mean the following assets of the Seller:
(a) the corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books and other documents relating to the organization and
existence of the Seller as a corporation;
- 36 -
(b) all rights relating to refunds, recovery or recoupment of Taxes;
(c) any of the rights of the Seller under this Agreement or under the Ancillary
Agreements; and
(d) those assets listed on Schedule 1.1(b) attached hereto.
"Expected Claim Notice" shall mean a notice that, as a result of a
legal proceeding instituted by or written claim made by a third party, an
Indemnified Party reasonably expects to incur Damages for which it is entitled
to indemnification under Article VIII.
"Financial Statements" shall mean:
(a) the unaudited balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Seller as of the end of and for each
of the last three fiscal years; and
(b) the Most Recent Balance Sheet and the unaudited consolidated statements of
income, changes in stockholders' equity and cash flows for the three months
ended as of the Most Recent Balance Sheet Date.
"Final Closing Balance Sheet" shall mean the balance sheet determined
pursuant to the procedures set forth in Section 1.7(b).
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"Indemnified Party" shall mean a party entitled, or seeking to assert
rights, to indemnification under Article VIII of this Agreement.
"Indemnifying Party" shall mean the party from whom indemnification is
sought by the Indemnified Party.
"Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility
model, certificate of invention and design patents, patent applications,
registrations and applications for registrations;
(b) trademarks, service marks, trade dress, Internet domain names, logos, trade
names and corporate names and registrations and applications for registration
thereof;
(c) copyrights and registrations and applications for registration thereof;
(d) mask works and registrations and applications for registration thereof;
(e) computer software, data and documentation;
- 37 -
(f) inventions, trade secrets and confidential business information, whether
patentable or nonpatentable and whether or not reduced to practice, know-how,
manufacturing and product processes and techniques, research and development
information, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information;
(g) other proprietary rights relating to any of the foregoing (including
remedies against infringements thereof and rights of protection of interest
therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
"Internal Systems" shall mean the internal systems of the Seller that
are used in its business or operations, including computer hardware systems,
software applications and embedded systems.
"Lease" shall mean any lease or sublease pursuant to which the Seller
leases or subleases from another party any real property.
"Legal Proceeding" shall mean any action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator.
"Materials of Environmental Concern" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.
"Most Recent Balance Sheet" shall mean the unaudited balance sheet of
the Seller as of the Most Recent Balance Sheet Date.
"Most Recent Balance Sheet Date" shall mean March 31, 2003.
"Non-controlling Party" shall mean the party not controlling the
defense of any Third Party Action.
"Objection Deadline Date" shall mean the date [15 days] after delivery
by the Buyer to the Seller of the Draft Closing Balance Sheet.
"Ordinary Course of Business" shall mean the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount).
"Owned Real Property" shall mean each item of real property owned by
- 38 -
the Seller. "Parent" shall have the meaning set forth in the first paragraph of
this Agreement.
"Parent Material Adverse Effect" shall mean any material adverse
change, event, circumstance or development with respect to, or material adverse
effect on, the business, assets, liabilities, capitalization, prospects,
condition (financial or otherwise), or results of operations of the Parent and
its subsidiaries, taken as a whole. For the avoidance of doubt, the parties
agree that the terms "material", "materially" or "materiality" as used in this
Agreement with an initial lower case "in" shall have their respective customary
and ordinary meanings, without regard to the meaning accented to Parent Material
Adverse Effect.
"Parties" shall mean the Buyer and the Seller.
"Permits" shall mean all permits, licenses, registrations,
certificates, orders, approvals, franchises, variances and similar rights issued
by or obtained from any Governmental Entity (including those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property).
"Purchase Price" shall mean the purchase price to be paid by the Buyer
for the Acquired Assets at the Closing, as set forth in Section 1.3, as it may
be adjusted pursuant to Section 1.7.
"Reasonable Best Efforts" shall mean best efforts, to the extent
commercially reasonable.
"Requisite Seller Stockholder Approval" shall mean the approval of the
sale of the Acquired Assets by the Seller to the Buyer as contemplated by this
Agreement by a majority of the votes represented by the outstanding shares of
capital stock of the Seller entitled to vote thereon.
"Response" shall mean a written response containing the information
provided for in Section 8.3(c).
"Restricted Employee" shall mean any person who either (i) was an
employee of the Buyer on either the date of this Agreement or the Closing Date
or (ii) was an employee of the Seller on either the date of this Agreement or
the Closing Date and received an employment offer from the Buyer within five
business days following the Closing Date.
"Retained Liabilities" shall mean any and all liabilities or
obligations (whether known or unknown, absolute or contingent, liquidated or
unliquidated, due or to become due and accrued or unaccrued, and whether claims
with respect thereto are asserted before or after the Closing) of the Seller
which are not Assumed Liabilities. The Retained Liabilities shall include,
without limitation, all liabilities and obligations of the Seller:
(a) for income, transfer, sales, use or other Taxes arising in connection with
the consummation of the transactions contemplated by this Agreement (including
any income Taxes arising as a result of (i) the transfer by the Seller to the
Buyer of the Acquired Assets; or (ii) the Seller having deferred gain on any
"deferred intercompany transaction" (within the meaning of Treasury Regulation
ss.1.1502-13));
- 39 -
(b) for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated by this Agreement;
(c) under this Agreement or the Ancillary Agreements;
(d) for any Taxes, including deferred taxes or taxes measured by income of the
Seller earned prior to the Closing, any liabilities for federal or state income
tax and FICA taxes of employees of the Seller which the Seller is legally
obligated to withhold, any liabilities of the Seller for employer FICA and
unemployment taxes incurred, and any liabilities of the Seller for sales, use or
excise taxes or customs and duties;
(e) under any agreements, contracts, leases or licenses which are listed on
Schedule 1.1(b);
(f) arising prior to the Closing under the Assigned Contracts, and all
liabilities for any breach, act or omission by the Seller prior to the Closing
under any Assigned Contract;
(g) for repair, replacement or return of products manufactured or sold prior to
the Closing, except to the extent set forth in clause (e) of the definition of
Assumed Liabilities;
(h) arising out of events, conduct or conditions existing or occurring prior to
the Closing that constitute a violation of or non-compliance with any law, rule
or regulation (including Environmental Laws), any judgment, decree or order of
any Governmental Entity, or any Permit or that give rise to liabilities or
obligations with respect to Materials of Environmental Concern;
(i) to pay severance benefits to any employee of the Seller whose employment is
terminated (or treated as terminated) in connection with the consummation of the
transactions contemplated by this Agreement, and all liabilities resulting from
the termination of employment of employees of the Seller prior to the Closing
that arose under any federal or state law or under any Employee Benefit Plan
established or maintained by the Seller;
(j) to indemnify any person or entity by reason of the fact that such person or
entity was a director, officer, employee, or agent of the Seller or was serving
at the request of the Seller as a partner, trustee, director, officer, employee,
or agent of another entity (whether such indemnification is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such indemnification is pursuant to any statute,
charter document, bylaw, agreement, or otherwise);
(k) under the Debentures.
(l) injury to or death of persons or damage to or destruction of property
occurring prior to the Closing (including any workers compensation claim); and
(m) for medical, dental and disability (both long-term and short-term benefits),
whether insured or self-insured, owed to employees or former employees of the
Seller based upon (A) exposure to conditions in existence prior to the Closing
- 40 -
or (B) disabilities existing prior to the Closing (including any such
disabilities which may have been aggravated following the Closing).
"Security Interest" shall mean any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than (i) mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation and (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, in each case arising in the Ordinary
Course of Business of the Seller and not material to the Seller.
"Seller" shall have the meaning set forth in the first paragraph of
this Agreement.
"Seller Certificate" shall mean a certificate to the effect that each
of the conditions specified in Section 6.1 and clauses (a) through (d) (insofar
as clause (d) relates to Legal Proceedings involving the Seller) of Section 6.2
is satisfied in all respects.
"Seller Intellectual Property" shall mean the Intellectual Property
owned by or licensed to the Seller and covering, incorporated in, underlying or
used in connection with the Customer Deliverables or the Internal Systems.
"Seller Material Adverse Effect" shall mean any material adverse
change, event, circumstance or development with respect to, or material adverse
effect on, (i) the business, assets, liabilities, capitalization, prospects,
condition (financial or other), or results of operations of the Seller or (ii)
the ability of the Buyer to operate the business of the Seller immediately after
the Closing. For the avoidance of doubt, the parties agree that the terms
"material", "materially" or "materiality" as used in this Agreement with an
initial lower case "m" shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to Seller Material Adverse
Effect.
"Seller Plan" shall mean any Employee Benefit Plan maintained, or
contributed to, by the Seller or any ERISA Affiliate.
"Software" shall mean any of the software owned by the Seller.
"Subsidiary" shall mean any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the Seller
holds stock or other ownership interests representing (a) more than 50% of the
voting power of all outstanding stock or ownership interests of such entity or
(b) the right to receive more than 50% of the net assets of such entity
available for distribution to the holders of outstanding stock or ownership
interests upon a liquidation or dissolution of such entity.
"Tax Returns" shall mean all reports, returns, declarations, statements
or other information required to be supplied to a taxing authority in connection
with Taxes.
"Taxes" (including, with correlative meaning, the terms "Tax" and
"Taxable") shall mean all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation, income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, assets, sales, use, transfer, withholding, employment, unemployment
- 41 -
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise, networth, capital stock, gains and other taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof.
"Taxing Authority" shall mean a Governmental Entity responsible for the
imposition or collection of Taxes.
"Third Party Action" shall mean any suit or proceeding by a person or
entity other than a Party for which indemnification may be sought by a Party
under Article VIII.
"Unresolved Objections" shall have the meaning set forth in Section
1.7(b)(ii).
"Working Capital Amount" shall mean the excess of the assets over the
liabilities, as shown on the applicable balance sheet.
ARTICLE XI
MISCELLANEOUS
11.1 Press Releases and Announcements. Neither Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; provided, however, that
either Party may make any public disclosure it believes in good faith is
required by applicable law, regulation or stock market rule (in which case the
disclosing Party shall use reasonable efforts to advise the other Party and
provide it with a copy of the proposed disclosure prior to making the
disclosure).
11.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
11.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, with respect to the subject matter hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided that the Buyer may assign some or all of
its rights, interests and/or obligations hereunder to one or more Affiliates of
the Buyer.
11.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
- 42 -
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
11.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered four
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent for next
business day delivery via a reputable nationwide overnight courier service, in
each case to the intended recipient as set forth below:
If to the Seller: Copy to:
---------------- -------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇, Esq.
If to the Parent: Copy to:
---------------- -------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇, Esq.
If to the Buyer: Copy to:
--------------- -------
SkillSoft Corporation ▇▇▇▇ and ▇▇▇▇ LLP
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Vice President, Administration
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Either Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
- 43 -
actually is received by the party for whom it is intended. Either Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
11.8 Governing Law. This Agreement (including the validity and
applicability of the arbitration provisions of this Agreement, the conduct of
any arbitration of a Dispute, the enforcement of any arbitral award made
hereunder and any other questions of arbitration law or procedure arising
hereunder) shall be governed by and construed in accordance with the internal
laws of the State of Delaware, without giving effect to any choice or conflict
of law provision or rule (whether of the State of Delaware any other
jurisdiction) that would cause the application of laws of any jurisdictions
other than those of the State of Delaware.
11.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing; provided, however, that any
amendment effected subsequent to the Requisite Seller Stockholder Approval shall
be subject to any restrictions contained in the Delaware General Corporation
Law. No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by each of the Parties. No waiver by either
Party of any right or remedy hereunder shall be valid unless the same shall be
in writing and signed by the Party giving such waiver. No waiver by either Party
with respect to any default, misrepresentation, or breach of warranty or
covenant hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
11.11 Expenses. Except as set forth in Section 1.7, Article VIII and the
Escrow Agreement, each Party shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. The Seller agrees that none of the costs and
expenses (including legal fees and expenses) incurred by it in connection with
this Agreement or the transactions contemplated hereby will be (a) borne by the
Parent or (b) paid until after the Closing.
11.12 Submission to Jurisdiction. Each Party (a) submits to the
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement or the
Ancillary Agreements (including any action or proceeding for the enforcement of
any arbitral award made in connection with any arbitration of a Dispute
hereunder), (b) agrees that all claims in respect of such action or proceeding
- 44 -
may be heard and determined in any such court, (c) waives any claim of
inconvenient forum or other challenge to venue in such court, and (d) agrees not
to bring any action or proceeding arising out of or relating to this Agreement
or the Ancillary Agreements in any other court; provided in each case that,
solely with respect to any arbitration of a Dispute, the Arbitrator shall
resolve all threshold issues relating to the validity and applicability of the
arbitration provisions of this Agreement, contract validity, applicability of
statutes of limitations and issue preclusion, and such threshold issues shall
not be heard or determined by such court. Each party agrees to accept service of
any summons, complaint or other initial pleading made in the manner provided for
the giving of notices in Section 11.7, provided that nothing in this Section
11.12 shall affect the right of either Party to serve such summons, complaint or
other initial pleading in any other manner permitted by law.
11.13 Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement (including Sections 7.1, 7.2 and 7.3) are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each Party agrees that the other Party shall be entitled to an injunction or
other equitable relief to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and provisions hereof
in any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition to any other
remedy to which it may be entitled, at law or in equity. Notwithstanding the
foregoing, the Parties agree that if a Dispute is submitted to arbitration in
accordance with Section 8.3(d) and Section 8.3(e), then the foregoing provisions
of this Section 11.13 shall not apply to such Dispute, and the provisions of
Section 8.3(d) and Section 8.3(e) shall govern availability of injunctive
relief, specific performance or other equitable relief with respect to such
Dispute.
11.14 Construction.
(a) The language used in this Agreement shall be deemed to be the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against either Party.
(b) Any reference to any federal, state, local, or foreign statute or law shall
be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
(c) Any reference herein to "including" shall be interpreted as "including
without limitation".
(d) Any reference to any Article, Section or paragraph shall be deemed to refer
to an Article, Section or paragraph of this Agreement, unless the context
clearly indicates otherwise.
- 45 -
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
BUYER
By:_________________________________
Title:_______________________________
SELLER
By:_________________________________
Title:_______________________________
PARENT
By:_________________________________
Title:_______________________________
[Signature Page to Asset Purchase Agreement]
- 46 -