EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
EDT LEARNING, INC.,
A DELAWARE CORPORATION,
("PURCHASER")
AND
MENTERGY, INC.,
A DELAWARE CORPORATION,
AND, ITS TWO WHOLLY-OWNED SUBSIDIARIES:
LEARNLINC CORP.,
A DELAWARE CORPORATION,
AND
▇▇▇▇▇-▇▇▇▇▇ COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
(COLLECTIVELY "SELLER" OR "MENTERGY")
TABLE OF CONTENTS
PAGE
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SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE PURCHASED ASSETS............1
1.1 CONVEYANCE OF PURCHASED ASSETS....................................1
1.2 EXCLUDED ASSETS...................................................2
1.3 PURCHASE PRICE....................................................3
1.4 ASSUMPTION OF LIABILITIES.........................................3
1.5 PURCHASE PRICE ALLOCATION.........................................4
1.6 SUBSEQUENT ACTIONS................................................4
1.7 LEARNLINC ACCOUNTS RECEIVABLE.....................................4
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER..........................4
2.1 CORPORATE EXISTENCE; GOOD STANDING................................4
2.2 POWER AND AUTHORITY FOR TRANSACTIONS..............................5
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.................5
2.4 CORPORATE AUTHORIZATIONS..........................................6
2.5 CONSENTS..........................................................6
2.6 SELLER'S FINANCIAL INFORMATION....................................6
2.7 LEASES............................................................6
2.8 CONDITION OF PURCHASED ASSETS.....................................7
2.9 TITLE TO AND ENCUMBRANCES ON PROPERTY.............................7
2.10 INTELLECTUAL PROPERTY.............................................7
2.11 PAYROLL INFORMATION; EMPLOYEES....................................7
2.12 LEGAL PROCEEDINGS.................................................8
2.13 CUSTOMERS, RESELLERS AND CONTRACTS................................8
2.14 SUBSEQUENT EVENTS. ..............................................8
2.15 TAXES.............................................................9
2.16 LIABILITIES; DEBT................................................10
2.17 INTENTIONALLY OMITTED............................................10
2.18 EMPLOYEE BENEFIT PLANS...........................................10
2.19 NO UNTRUE REPRESENTATIONS........................................10
2.20 BROKERS AND FINDERS..............................................10
2.21 LIMITATION OF REPRESENTATIONS AND WARRANTIES OF MENTERGY,
LTD. AGREEMENTS................................................10
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................11
3.1 CORPORATE EXISTENCE: GOOD STANDING...............................11
3.2 POWER AND AUTHORITY..............................................11
3.3 FINANCIAL STATEMENTS.............................................11
3.4 SEC DOCUMENTS AND REPORTS........................................11
3.5 LEGAL PROCEEDINGS................................................11
3.6 NO UNDISCLOSED LIABILITIES.......................................12
3.7 NO VIOLATION OF LAW..............................................12
3.8 BROKERS AND FINDERS..............................................12
3.9 PRIORITY OF SECURITY INTEREST....................................12
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SECTION 4. COVENANTS OF SELLER..............................................12
SECTION 5. COVENANTS OF PURCHASER...........................................12
SECTION 6. PURCHASER'S CONDITIONS PRECEDENT.................................13
6.1 REPRESENTATIONS AND WARRANTIES...................................13
6.2 COVENANTS AND CONDITIONS.........................................13
6.3 PROCEEDINGS......................................................13
6.4 CLOSING DELIVERIES...............................................13
6.5 CONSENTS AND APPROVALS...........................................13
6.6 APPROVAL BY THE BOARD OF DIRECTORS...............................13
6.7 DUE DILIGENCE REVIEW.............................................13
6.8 NO MATERIAL ADVERSE CHANGE.......................................13
6.9 EMPLOYEES OF SELLER..............................................13
6.10 PREMISES LEASE...................................................14
6.11 RELEASE OF MENTERGY, LTD.........................................14
SECTION 7. SELLER CONDITIONS PRECEDENT......................................14
7.1 REPRESENTATIONS AND WARRANTIES...................................14
7.2 COVENANTS AND CONDITIONS.........................................14
7.3 PROCEEDINGS......................................................14
7.4 CLOSING DELIVERIES...............................................14
7.5 EMPLOYEES OF SELLER..............................................14
7.6 CONSENTS AND APPROVALS...........................................14
7.7 NO MATERIAL ADVERSE CHANGE.......................................14
SECTION 8. CLOSING DELIVERIES...............................................15
8.1 DELIVERIES OF SELLER.............................................15
8.2 DELIVERIES OF PURCHASER..........................................16
8.3 DELIVERIES SUBSEQUENT TO CLOSING.................................16
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, INDEMNITY............17
9.1 SURVIVAL OF CLOSING..............................................17
9.2 INDEMNIFICATION OF PURCHASERS....................................17
9.3 MAXIMUM INDEMNITY OBLIGATION.....................................17
9.4 PRIORITY OF OFFSET...............................................17
9.5 INDEMNIFICATION OF SELLER........................................17
9.6 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS..............17
9.7 EFFECT OF INVESTIGATION..........................................18
SECTION 10. TERMINATION......................................................18
SECTION 11. MISCELLANEOUS....................................................19
11.1 KNOWLEDGE........................................................19
11.2 NOTICES..........................................................19
11.3 SUCCESSORS AND ASSIGNS...........................................19
11.4 ENTIRE AGREEMENT.................................................20
11.5 GOVERNING LAW; SEVERABILITY......................................20
11.6 SCHEDULES AND EXHIBITS...........................................20
11.7 WAIVERS..........................................................20
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11.8 HEADINGS.........................................................20
11.9 COUNTERPARTS.....................................................20
11.10 CONFIDENTIALITY..................................................20
11.11 EXPENSES.........................................................20
11.12 NO THIRD PARTY BENEFICIARIES.....................................20
11.13 FURTHER ASSURANCES. .............................................21
iii
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, ("Agreement") made and executed to be
effective on November 4, 2002, (the "Effective Date") by and among EDT Learning,
Inc., a Delaware corporation ("Purchaser" or "EDT"), and Mentergy, Inc., a
Delaware corporation together with its wholly-owned subsidiaries LearnLinc
Corp., a Delaware corporation and ▇▇▇▇▇-▇▇▇▇▇ Communications, Inc. a Delaware
corporation (collectively "Seller" or "Mentergy").
WITNESSETH:
WHEREAS, Seller has created, owns and maintains certain software which it
uses in the operation of its e-learning business located primarily in Troy, New
York identified under the trade name and operating division known as
"LearnLinc"; and,
WHEREAS, Purchaser sells and distributes certain software and related
services to corporate clients in the e-Learning business and therefore wishes to
acquire the assets of Mentergy related to LearnLinc and its ▇▇▇▇ operations;
and,
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser wishes to
acquire from Seller, all right, title and interest in and to the LearnLinc
software and related assets (as more fully defined herein), all upon the terms
and subject to the conditions set forth herein; and
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE PURCHASED ASSETS.
The purchase and sale of the Purchased Assets provided for in this
Agreement (the "Closing") will occur within two (2) business days following the
satisfaction of all conditions precedent defined herein including specifically
the approval of the transaction by the District Court of Tel Aviv before which
the restructuring proceedings of Mentergy, Ltd. have been brought but in all
events on or before November 30, 2002 (the actual date of Closing being
hereafter referred to as the "Closing Date")., The sale of the Purchased Assets
shall be based on the respective representations, warranties and agreements of
Purchaser and Seller contained herein as of the Effective Date and shall be
subject to the terms and conditions herein stated.
1.1 CONVEYANCE OF PURCHASED ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Seller shall sell, convey,
transfer, deliver and assign to Purchaser all of Seller's right, title and
interest in and to the assets of Seller's Business known as and directly related
to the LearnLinc software and operating division business located in Troy, NY
(the "LearnLinc Business") (without any associated debts, liens or encumbrances
thereupon, except as expressly otherwise provided herein) (the "Purchased
Assets"). Without limiting the foregoing, the Purchased Assets specifically
include as pertains to the LearnLinc Business:
(a) All tangible personal property, plant, furniture, fixtures,
computer hardware, other equipment and other tangible assets related to the
LearnLinc Business located in Troy, NY, including specifically those items
described in SCHEDULE 1.1(a) to this Agreement;
(b) All LearnLinc and TestLinc software related to the LearnLinc
Business (the "Software") including all source code, object code (both the
current versions 6.1, and all prior versions and all translations of the current
and prior version into languages other than English) in electronic format, all
user documentation, all URL's associated with the LearnLinc Software, websites,
all user websites whether for sales of the LearnLinc Software or for technical
support of the LearnLinc Software, debug lists, all beta versions of the
Software, all project plans related to the Software, all third party and
proprietary computer programs used to create, support and test the LearnLinc
Software, technical support manuals, customer databases, and all software used
on a licenses basis as a part of or related to the LearnLinc Business, including
specifically those items described in SCHEDULE 1.1(b), provided however that
Seller is conveying to Purchaser only a co-equal, undivided, royalty free,
right, title and interest in the source code which is the Application Sharing
feature (aka "AppShare"), Audio Video Engine (aka "AV Engine"), and Record and
Playback features contained only within TrainNet version 5.0 (the "Shared
Code"), and with all other software and code excluded from such co-ownership,
and with any with all future versions, enhancements, and improvements made by
each party of the Shared Code being exclusively owned by the party responsible
for these changes without such co-ownership after the Closing Date.;
(c) All intangible rights related to the LearnLinc Business, including
all trade names, service marks, copyrights, patents, all derivations thereof,
together with any and all other names, slogans, trademarks, service marks, and
logos, trade secrets, intellectual capital used exclusively in the LearnLinc
Business and the LearnLinc Software, including specifically those items
described in SCHEDULE 1.1(c) this Agreement;
(d) All available books and records of Seller's LearnLinc Business
(relating to bills of sale, purchase receipts, executed equipment leases, the
Mentergy Employee Handbook), together with accounts receivable (with collections
provided for in Section 1.7 herein), , vendor deposits, pre-payments, inventory,
customer agreements for purchase or license of the Software (whether for the use
of the Software or maintenance of the Software), customer lists, sales pipeline
prospects, reseller agreements, VAR agreements, specifically those items
described in SCHEDULE 1.1(d) to this Agreement, provided that Purchaser, on
request, shall promptly provide a copy to Seller as is needed for audit or tax
purposes, or to respond to any judicial, administrative, arbitral, or regulatory
request;
(e) All transferable licenses (software or otherwise) and other
regulatory approvals necessary for or incident to the operation of the LearnLinc
Business and LearnLinc Software; and,
(f) All marketing and promotional materials used in, required for or
incident to the marketing or promotion of the products and services related to
LearnLinc (whether in electronic or tangible printed form), educational
programs, training materials, and all other intangible rights to sell or license
any of the LearnLinc Software or LearnLinc Business.
1.2 EXCLUDED ASSETS. There shall be excluded from the Purchased Assets and
Seller shall retain all of its right, title and interest in and to the excluded
assets all tangible and intangible property or right related to Mentergy's
products and services (other than LearnLinc) (i.e., other than identified in
Section 1.1 above and accordingly directly related to the LearnLinc Business and
LearnLinc Software). For purposes of clarification, the excluded assets (the
"Excluded Assets") specifically include the following assets, and Purchaser,
shall acquire no right thereto:
(a) those assets physically located in the Troy, NY office and listed
on SCHEDULE 1.2, together with all cash collected from the Seller's accounts
receivable prior to the Effective Date (except and provided in Section 1.7) cash
equivalents and short-term investments, accounts receivable related to the
Mentergy business (i.e., other than the LearnLinc accounts receivable
transferred under Section 1.7), all minute books, stock records and corporate
seals, all rights to any Mentergy trade or business name (other than related to
the LearnLinc Software, LearnLinc Business, or TestLinc), all rights to deposits
and prepaid expenses (listed on SCHEDULE 1.2), claims for refunds (listed on
SCHEDULE 1.2), or rights to offset (listed on SCHEDULE 1.2); all insurance
policies and rights thereto (listed on SCHEDULE 1.2); any contract of Seller not
specifically identified as part of the Purchased Assets and concerning the
Mentergy business, all personnel records, other records that Seller is required
by law to retain in its possession, all claims for refund of taxes and other
governmental charges of whatever nature of Mentergy; all rights in connection
with any employee benefit or welfare plan unrelated to the employees located in
Troy, New York and any employer contribution related to those Mentergy
employees; and,
(b) all rights of Seller under this Agreement and the collateral
documents executed by Seller in connection with the Closing.
1.3 PURCHASE PRICE. In consideration for the conveyance for all right title
and interest in and to the Purchased Assets by Seller and the execution of this
Agreement and all related agreements, Purchaser shall at Closing:
(a) Assume only those liabilities directly related to the LearnLinc
Software and LearnLinc Business operations located in Troy, NY, as specifically
identified and described in the Assignment and Assumption Agreement in the form
attached hereto;
(b) Tender in cash in immediately available funds to the wire transfer
coordinates set forth in SCHEDULE 1.3(b) the sum of Two Hundred and Fifty
Thousand and 00/100 Dollars ($250,000.00);
(c) Tender a fully executed promissory note in the form of note
attached as Exhibit "D", (the "Promissory Note") in favor of Seller, as payee
and Purchaser as Maker with an original principal sum of Two Hundred and Fifty
Thousand and 00/100 Dollars ($250,000.00), bearing interest at the annual rate
of six percent (6.000%), with interest paid quarterly and the entire lump sum
principal and all accrued and unpaid interest paid on the first annual
anniversary of the date of the promissory note, said Promissory Note being
secured by the LearnLinc software and all revenue thereon, including maintenance
as more particularly set forth in the security agreement, and Uniform Commercial
Code Financing Statement in the form attached as Exhibit F hereto (the "Security
Agreement"); and,
(d) Tender a fully executed Royalty Agreement in the form of agreement
attached as Exhibit "E" which provides for the payment to Seller of a royalty
equal to twenty percent (20.000%) of the revenues collected by Purchaser from
the sale or license of the LearnLinc Software (including all license, revenues
and maintenance revenues, but excluding any related services like training,
support or customization fees), with the maximum amount ever due to Purchaser
under the Royalty Agreement being the total sum of Five Million and 00/100
Dollars ($5,000,000.00) (the "Maximum Royalty"); provided further that should
Purchaser ever cease to make available for sale the LearnLinc Software, during
the three (3) year period beginning with the Closing Date, then Purchaser will
pay after notice and failure to cure such default within 30 days of notice,
regardless of the revenues collected, an amount equal to One Million and 00/100
Dollars ($1,000,000.00); and provided further that such royalty fees shall be
offset by the fixed sum of one hundred twenty thousand and 00/100 Dollars
($120,000.00) from the first dollar due thereunder until fully offset (the
foregoing being intended as a brief summary of the terms of the Royalty
Agreement, with the controlling terms to be as provided in the Royalty
Agreement).
1.4 ASSUMPTION OF LIABILITIES. Except for debts and obligations
specifically listed on, Exhibit "A" of the Assignment and Assumption Agreement
and as provided for in the manner and means described by the Assignment and
Assumption Agreement, Purchaser shall not assume any other liabilities,
commitments or obligations of Seller in connection with the consummation of the
transactions contemplated by this Agreement.
1.5 PURCHASE PRICE ALLOCATION. The purchase price shall be allocated for
federal income tax purposes as set forth on SCHEDULE 1.5; provided, however,
that the parties intend that SCHEDULE 1.5 shall not be delivered at Closing but
rather shall be agreed to by the parties within thirty (30) days subsequent to
Closing
1.6 SUBSEQUENT ACTIONS. Seller will from time to time subsequent to the
Closing Date, at Purchaser's request and without further consideration, execute
and deliver such other instruments of conveyance, assignment and transfer, and
take such other actions, as Purchaser may reasonably request in order to more
effectively convey, assign, transfer to and vest in Purchaser the Purchased
Assets pursuant to the terms of this Agreement.
1.7 LEARNLINC ACCOUNTS RECEIVABLE. Seller will transfer to Purchaser at
Closing, without recourse to Seller all of Seller's LearnLinc accounts
receivable representing all sales booked for the LearnLinc Business but not
collected prior to Effective Date. Seller will segregate its accounts receivable
into those on the Seller's books prior to September 30, 2002 (the "September
A/R") and those accrued after September 30, 2002 through the Effective Date (the
"October A/R"). Seller warrants and represents that all sales made in September
and thereafter in October prior to the Effective Date will be recorded in the
normal course of business, and that Seller will not attempt to accelerate the
collection of cash from any sale in September or October other than in the
ordinary course. Seller may attempt to collect cash due from the September A/R
in the normal course, and Seller will retain all cash collected prior to the
Effective Date from the September or October A/R. At and after Closing, all
uncollected accounts receivable (September A/R and October A/R) will be
transferred to Purchaser without recourse to Seller. At and after the Effective
Date, Seller will not attempt to ▇▇▇▇ or collect from any LearnLinc Customer,
whether from sales arising after the Effective Date by either party or from any
of the September A/R or October A/R. Any cash collected after the Effective Date
by Seller from the Customers on the transferred September A/R or October A/R
(whether from A/R or new sales) will be immediately remitted to Purchaser (after
the check tendering payment to Seller has cleared Seller's bank). For the ninety
(90) day period beginning with the Effective Date, upon collection of cash from
the September A/R, Purchaser will immediately tender to Seller twenty five
percent (25.000%) of such cash collected (after the check tendering payment to
Purchaser has cleared Purchaser's bank). For the ninety (90) day period
beginning with the Effective Date, upon collection of cash from the October A/R,
Purchaser will tender to Seller twenty five percent (25.000%) of the cash
collected from software licensing only, (i.e., excluding cash from the
collection of maintenance fees). Purchaser will not attempt to delay the
collection of cash from the September A/R or the October A/R or from any sale
arising after the Effective Date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Purchaser the following as of the
Effective Date:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has all necessary corporate powers to own, license and convey
the Purchased Assets and to carry on Seller's Business as such business is now
being conducted. Seller is qualified to do business as a foreign corporation in
New York state and each other state or jurisdiction where qualification is
required in connection with Seller's Business, with states and other
jurisdictions in which Seller is qualified listed on SCHEDULE 2.1 attached
hereto.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Upon approval of the transaction
by the District Court of Tel Aviv before which the restructuring proceedings of
Mentergy, Ltd. have been brought: (A) Seller has the corporate power to execute,
deliver and perform this Agreement and all agreements and other documents
executed and delivered by it pursuant to this Agreement or to be executed and
delivered by it on both the Effective Date and the Closing Date, and has taken
all action required by federal and state law (including the State of Delaware
and the State of New York), its Articles of Incorporation, and its Bylaws, to
authorize the execution, delivery and performance of this Agreement and such
related documents; (B) Seller has the legal capacity to enter into and perform
this Agreement and the other agreements to be executed and delivered by it in
connection herewith; (C) Seller has obtained the necessary approval of its Board
of Directors and stockholders in order to consummate the transactions
contemplated herein; (D) This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Seller, and constitute or will
constitute the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditor's rights generally or the availability of equitable remedies; (E)
Seller acknowledges that the Purchased Assets are being transferred in an arms
length transaction, and for what Seller believes is fair value and in a
contemporaneous exchange; (F) Seller will not take in any bankruptcy or
receivership any position which puts in jeopardy the transfer of the Purchase
Assets to the Purchaser, and will join the Purchaser in any motion filed by the
Purchaser to protect the transfer from a claim by any creditor of Seller that
the transaction described herein is a fraudulent transfer (as defined in the
Bankruptcy Code); (G) The execution and delivery of this Agreement, and the
agreements executed and delivered by Seller pursuant to this Agreement or to be
executed and delivered by Seller on the Effective Date or Closing Date, do not,
and the consummation of the actions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws of Seller; and (H)
Except as set forth in SCHEDULE 2.2, the execution and delivery of this
Agreement, and the agreements executed and delivered by Seller pursuant to this
Agreement will not result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which Seller is a party or by which Seller is bound, or
violate any material restrictions of any kind to which Seller is subject, or
result in any lien or encumbrance on any of the Purchased Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. Except as set forth
in SCHEDULE 2.3(a): Seller has obtained all material permits, governmental
authorizations and approvals required to be maintained by Seller in connection
with the operation of the Purchased Assets or required to own and operate the
LearnLinc Software, and such permits, authorizations and approvals have been
duly obtained and are in full force and effect. Seller has not been served with
process that there are any proceedings pending, and to Seller's knowledge no
such proceedings are threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any thereof of any
such material permit, authorization or approval. Set forth in SCHEDULE 2.3 is a
true and correct description of all licenses, royalties, assignments and other
similar agreements relating to or concerning the use of other third party's
copyrights, trademarks, trade names, service marks, computer programs and other
computer software, technology, know-how or processes that Seller is licensed or
authorized to use in relation to the LearnLinc Software or LearnLinc Business
(the "Third Party Rights"). Except for the restrictions described in SCHEDULE
2.3 AND UPON APPROVAL OF THIS TRANSACTION BY ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
before which the restructuring proceedings of Mentergy, Ltd. have been brought,
Seller owns a royalty free irrevocable worldwide license and unrestricted right
to use all of the Third Party Rights including all embedded computer programs,
if any, necessary to use the LearnLinc Software and operate the LearnLinc
Business without conflict with the rights of Third Parties. Except for any
restrictions described in SCHEDULE 2.3, use of the Third Party Rights does not
require additional consent to Purchaser and the Third Party Rights are freely
transferable. Seller has not received notice that any claim has been asserted by
any Third Party to Seller concerning the ownership of or right to use any the
Third Party Rights, or involves, or has resulted in the infringement of, any
Third Party Right, and Seller to its knowledge does not know of any valid basis
for any such claim. To Seller's knowledge, each of the Third Party Rights is
valid and subsisting, has not been cancelled, abandoned or otherwise terminated
and, to Seller's knowledge, no proceedings have been instituted, are pending or
are threatened against Seller that challenge the rights of Seller with respect
to the Third Party Rights or any software used by Seller in its ordinary course
of the LearnLinc Business.
2.4 CORPORATE AUTHORIZATIONS. Seller, at Closing will deliver true and
correct copies of Seller's Board of Directors and stockholder's resolutions
authorizing this transaction, execution of the agreements and transfer of the
Purchased Assets to Purchaser.
2.5 CONSENTS. Seller has obtained or by the Closing will have obtained all
material consents, authorizations and licenses with any lender, lessor,
manufacturer or supplier which is required to authorize the execution, delivery
and performance of this Agreement by the Seller or required in connection with
the operation of the LearnLinc Software or the LearnLinc Business by Purchaser
after the Closing Date.
2.6 SELLER'S FINANCIAL INFORMATION. Seller has attached as SCHEDULE 2.6
Seller's financial statements (balance sheet, income statement and statement of
cash flows), at and for the fiscal year ending December 31, 2001, and unaudited
financial statements (balance sheet, income statement and statement of cash
flows) at and for the period ending August 30, 2002 (with the immediately
foregoing date being the "Financials Date") for Seller (the "Financial
Statements"), along with the divisional income statement for the calendar year
period ending August 30, 2002 for Mentergy (the ("Mentergy Divisional Income
Statement"). The information contained in the Financial Statements, including
the notes thereto, for the periods reflected therein, have been prepared in
accordance with generally accepted accounting principles, consistently applied.
The Financial Statements, in all material respects: (i) truly and accurately
reflect the results of the operations; (ii) fairly and accurately present the
financial position of Seller inclusive of the LearnLinc division as of the dates
indicated therein; and, (iii) are in accordance with the books and records of
Seller which have been properly maintained and are complete and correct in all
respects. To the knowledge of Seller, the Mentergy Divisional Income Statement
is a true and correct and materially accurate report of the estimated breakout
of income and expenses between divisions of Mentergy (including the LearnLinc
Business) for the interim period specified in accordance with the books and
records of Seller. Seller will provide to Purchaser, at Seller's expense, within
fifty (50) days of the Closing Date audited financial statements for the
LearnLinc Business for the prior two twelve month periods and the year to date
period ending September 30, 2002 (including a balance sheet, income statement
and statement of cash flows), and such other documents reasonably requested by
Purchaser (with such request for other documents being delivered to Seller
within ten (10) days of the Closing Date) which will enable and are to be used
by Purchaser to file Form 8-K reflecting the transaction between Seller and
Purchaser. Seller will be responsible for the retention of a CPA firm which is
capable of providing such audited financial statements and will be responsible
for the expense associated with the audit of the LearnLinc Business. Upon tender
of the audit papers and consent, Purchaser will reimburse Seller the greater of
one-half of the costs incurred or $25,000.
2.7 LEASES. Seller has attached as SCHEDULE 2.7 a list of all real property
and personal property leases affecting or concerning the Purchased Assets or the
LearnLinc Software as of the Effective Date. Except as disclosed in SCHEDULE
2.7, all such leases listed are valid and enforceable in accordance with their
respective terms, any payments required therein are fully paid, and there is not
under any such lease any existing material default by Seller, or any condition
or event of which Seller has knowledge which with notice or lapse of time, or
both, would constitute a default. Seller has assigned to Purchaser all leases
which are required by Purchaser to own the LearnLinc Software and operate the
LearnLinc Business.
2.8 CONDITION OF PURCHASED ASSETS. All tangible computer equipment,
copiers, postage machine and other tangible equipment and office furniture (the
"Furniture and Equipment") transferred to Purchaser under this Agreement are
being transferred on an AS IS, WHERE IS BASIS without any warranty or condition
or state of repair other than as may be expressly provided otherwise in this
Agreement. Concerning the Furniture and Equipment there are NO IMPLIED
WARRANTIES of merchantability, fitness, or fitness for any particular purpose,
all such implied warranties being expressly disclaimed. Furthermore, all
accounts receivable are transferred to Purchaser without recourse, and Seller
makes no representation or warranty as to their collectability.
2.9 TITLE TO AND ENCUMBRANCES ON PROPERTY. Seller owns good, valid and
marketable title to all of the Purchased Assets, free and clear of any liens,
exceptions or encumbrances, except for those, if any, which are set forth in
SCHEDULE 2.9 attached hereto.. Seller owns good, valid and marketable title to
all of the Purchased Assets, free and clear of any claims and charges except for
those, if any, which are set forth in (i) Schedule 2.9 attached hereto or, (ii)
the Assignment and Assumption Agreement (but limited to the amounts expressly
set forth in the Assignment and Assumption Agreement)
2.10 INTELLECTUAL PROPERTY. Seller has attached as SCHEDULE 2.10 a true and
correct description of all proprietary rights it owns related to the LearnLinc
Software or the LearnLinc Business, including all technology, know-how,
processes, computer programs and other computer software (including any
copyrights inhering therein), registered and pending applications for
trade-marks, trade-names, Internet domain names, service marks, patents and
copyrights (the "Proprietary Rights"). upon approval of the transaction by the
District Court of Tel Aviv before which the restructuring proceedings of
Mentergy, Ltd. have been brought: (A) Seller owns or has the unrestricted
royalty free irrevocable worldwide right to use all of its Proprietary Rights
necessary to conduct its LearnLinc business without conflict with the rights of
others. (B) Except as referenced in SCHEDULE 2.10(a), Seller has the sole and
exclusive right to use the Proprietary Rights without infringing or violating
the rights of any third parties. (C) Use of the Proprietary Rights does not
require the consent of any other person and the Proprietary Rights are freely
transferable without consent of any party including Seller. (D) Except as
described in SCHEDULE 2.10(a), no claim has been asserted to Seller by any
person to the ownership of or right to use any the Proprietary Right or
challenging or questioning the validity or effectiveness of any Proprietary
Right, and Seller does not know of any valid basis for any such claim. Except as
described in SCHEDULE 2.10(a), Seller has no knowledge of any claim that any
current or former employee, consultant or independent contractor claims any
interest in, or right to use, the Proprietary Rights, nor has any current or
former employee, consultant or independent contractor retained any interest in
or to any of the Proprietary Rights. Each of the Proprietary Rights is valid and
subsisting, has not been cancelled, abandoned or otherwise terminated.
2.11 PAYROLL INFORMATION; EMPLOYEES. Attached hereto is a list of the
following: on SCHEDULE 2.11(a) the name of each material consultant, or
independent contractor that was engaged by Seller in connection with Seller's
LearnLinc Business during the six (6) month period ending with the Effective
Date; on SCHEDULE 2.11(b) LIST of all Seller's current or former employees
related to the LearnLinc Business who worked for Seller during the six (6) month
period ending with the Effective Date (Seller's "Employees"); and on SCHEDULE
2.11(c) a list of all material oral or written independent contractor agreements
(and all amendments thereto) during the six (6) month period ending with the
Effective Date to which Seller is a party and which require Seller to pay
compensation in relation to the LearnLinc business. To its knowledge, Seller has
provided true and accurate copies of all employment agreements, independent
contractor agreements, employee manuals, materials, policies, procedures, work
for hire agreements and work-related rules. To its knowledge, Seller has not
engaged in any unfair or illegal labor practice. There are no employment claims
concerning any compensation claims, unfair labor practice charges or complaints
pending or threatened by any current or former employee who worked for Seller
concerning the LearnLinc Business.
2.12 LEGAL PROCEEDINGS. Other than as set forth on SCHEDULE 2.12, and upon
approval of the transaction by the District Court of Tel Aviv before which the
restructuring proceedings of Mentergy, Ltd. have been brought, Seller and the
Purchased Assets are not party to or subject to any pending litigation,
governmental investigation, condemnation or other proceeding against or relating
to or affecting the LearnLinc Software, the LearnLinc Business or any of the
Purchased Assets, or the transactions contemplated by this Agreement, and Seller
Does not have any have knowledge of any threatened, proceeding to that effect
and to the knowledge of Seller, no basis for any such action exist.
2.13 CUSTOMERS, RESELLERS AND CONTRACTS. To the knowledge of Seller:
(a) Set forth in SCHEDULE 2.13(a) is a complete list of all of the
individuals and entities who has ever purchased the LearnLinc Software (the
"Customers") providing their name, date of purchase and version of the software
purchased (the "Customer Lists").
(b) Set forth in SCHEDULE 2.13(b) is a complete and accurate list of
all persons and entities who have executed a maintenance agreement providing for
maintenance and support of the LearnLinc Software during the twenty four (24)
month period ending with the Effective Date (the "Maintenance Agreements"),
providing the name, date of execution and date of expiration.
(c) Set forth as SCHEDULE 2.13(c) is a complete and accurate list of
the persons or entities who have the right to license or sell the LearnLinc
Software (the "Resellers"), providing the name, and execution date. Seller has
disclosed to Purchaser, whether oral or written all material outstanding
contracts, obligations and commitments of Seller relating to Seller's LearnLinc
Business and the LearnLinc Software , and provided true copies of all written
contracts.
(d) Except as set forth in SCHEDULE 2.13(d), all Customer Agreements,
Maintenance Agreements and Reseller Agreements (collectively the "Contracts")
are valid, binding and enforceable in accordance with their terms and are in
full force and effect, and no defenses, offsets or counterclaims have been
asserted or may be made by any party thereto. Seller is not in default of any
Contract. Except as indicated herein, there is not under any such Contract a
requirement that a party to such Contract other than Seller consent to the
assignment of such Contract to Purchaser in connection with the consummation of
the transactions contemplated by this Agreement.
2.14 SUBSEQUENT EVENTS. Except as set forth on SCHEDULE 2.14, Seller has
not, in connection with Seller's Business, since the Financials Date:
(a) Knowingly incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease, license
or commitment, relating to Seller's LearnLinc Business, except in connection
with the negotiation and performance of this Agreement, other than in the
ordinary course of business or knowingly incurred any indebtedness other than in
the ordinary course of business;
(b) Knowingly discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability in
connection with Seller's LearnLinc Business (absolute, accrued, contingent or
otherwise) other than (i) liabilities shown or reflected on Seller's balance
sheet at the Financials Date (the "Balance Sheet") and such as would have a
material adverse effect on the Purchased Assets or (ii) liabilities incurred
since the Financials Date in the ordinary course of business;
(c) Lost or terminated any employee, customer or supplier of Seller's
LearnLinc Business, that has, individually or in the aggregate, had a material
adverse effect on its business and such as would have a material adverse effect
on the Purchased Assets;
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Purchased Assets;
(e) Sold or contracted to sell or transferred or contracted to
transfer any of the Purchased Assets used in the conduct of Seller's LearnLinc
Business, or canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(f) Except in the ordinary course of business consistent with past
practices, granted any increase in the rates of pay of employees, independent
contractors or agents whose employment relates to Seller's LearnLinc Business,
or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of such person and such as would have a material
adverse effect on the Purchased Assets;
(g) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00) relating to Seller's LearnLinc Business;
(h) Except for this Agreement and any other agreements executed and
delivered pursuant to this Agreement, entered into any material transaction
related to Seller's LearnLinc Business other than in the ordinary course of
business or permitted hereunder;
(i) Experienced damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting Seller's LearnLinc Business, or
experienced any other material adverse change in the financial condition,
Purchased Assets, prospects, or liabilities of Seller's LearnLinc Business;
(j) Suffered any material adverse change related to Seller's LearnLinc
Business or to the Purchased Assets.
2.15 TAXES. Except for federal income taxes arising under the year 2000 and
2001 Federal tax return, and except as set forth in SCHEDULE 2.15, Seller has
filed all tax returns (including tax reports and other statements) required to
be filed by it. Seller has made all payments of taxes (including any interest,
penalty or addition thereto) required to be made by it, on or before the
Effective Date, with respect to income taxes, real and personal property taxes,
or sales taxes (except for the taxes due to the NYS Department of Tax and
Finance in the amount of $11,311.21 as disclosed in the Assignment and
Assumption Agreement), use taxes, employment taxes, excise taxes and other
taxes. All such filed tax returns are complete and accurate in all material
respects and properly reflect the relevant taxes for the periods covered
thereby. Except as would not reasonably be expected to have a material adverse
effect on the business or operations of Seller, Seller has no tax liability
which would have an impact upon or a claim upon the Purchased Assets, except for
real and personal property taxes for the current period not yet due and payable
and sales, use, employment and similar taxes for periods as to which such taxes
have not yet become due and payable. Seller has not received any notice that any
tax deficiency or delinquency has been asserted against Seller. To Seller's
knowledge, there are no other audits relating to taxes of Seller threatened,
pending or in process. Seller is not currently the beneficiary of any waiver of
any statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or deficiency.
There are no liens or encumbrances relating to taxes on or to the knowledge of
Seller threatened against any of the Purchased Assets. To its knowledge, Seller
has withheld and paid all taxes required by law to have been withheld and paid
by it. Seller has delivered to Purchaser correct and complete copies of Seller's
three most recently filed annual state and federal income tax returns, together
with all examination reports and statements of deficiencies assessed against or
agreed to by Seller during the three (3) calendar year period preceding the
Effective Date.
2.16 LIABILITIES; DEBT. Except to the extent reflected in the Assignment
and Assumption Agreement, Seller did not have, as of the Financials Date, and
has not incurred since that date and will not have incurred as of the Effective
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, related to Seller's
LearnLinc Business or the LearnLinc Software, which would have a material
adverse effect on the LearnLinc Business or Purchased Assets.
2.17 INTENTIONALLY OMITTED.
2.18 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 2.18 attached
hereto, Seller has not established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, with regard to Seller's
LearnLinc Business, (a) any bonus or other type of compensation or employment
plan, program, agreement, policy, commitment, contract or arrangement (whether
or not set forth in a written document); (b) any pension, profit-sharing,
retirement or other plan, program or arrangement; or (c) any other employee
benefit plan, fund or program, including, but not limited to, those described in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans have been operated and administered in all material
respects in accordance with all applicable laws, rules and regulations,
including without limitation, ERISA, the Internal Revenue Code of 1986, as
amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay
Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as
amended, and the related rules and regulations adopted by those federal agencies
responsible for the administration of such laws.
2.19 NO UNTRUE REPRESENTATIONS. No representation or warranty by Seller in
this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by, executive officers or directors of Seller and
furnished or to be furnished to Purchaser pursuant hereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained therein not misleading.
2.20 BROKERS AND FINDERS. Seller shall be responsible for the payment of
any fees, costs or expenses associated with any broker or agent retained and
engaged by Seller in connection with the transactions contemplated by this
Agreement (the Seller's "Broker"). Provided further that Seller may instruct
that EDT Learning should remit a portion of the Purchase Price which would be
due to Seller be instead paid to Seller's Broker. Upon receipt of written
instruction, Purchaser will remit such sums as Seller shall direct in writing to
Seller's Broker. However, any payment of consideration to Seller's Broker shall
not increase the amount, nor accelerate the timing, of any consideration due to
Seller. Any sums remitted to any Seller's Broker shall be a mere courtesy on the
part of Purchaser without direct obligation between Purchaser and Seller's
Broker. Since the remittance of any sums to Seller's Broker shall be a mere
disbursement courtesy, Purchaser shall not be liable to Seller or Seller's
Broker for the failure to properly allocate such sums between Seller and
Seller's Broker, provided that the correct amount is paid in total when due.
Furthermore, Seller shall hold harmless and indemnify Purchaser (and its
shareholders, directors, officers, employees, agents, successors and assigns)
from and against any and all damages sustained by Purchaser as a result of any
claims by Seller's Broker to any portion of the consideration due hereunder.
2.21 LIMITATION OF REPRESENTATIONS AND WARRANTIES OF MENTERGY, LTD.
AGREEMENTS. Seller makes no representations or warranties regarding the
Investment Agreement between Mentergy, Ltd (formerly Gilat Communications, Ltd)
and Protocol Learning Systems Ltd (aka "Mentergy Europe") regarding the
termination of the reselling of LearnLinc in Europe, and regarding the
Memorandum of Understanding between Purchaser and Mentergy Ltd.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Seller the following as of the
Effective Date:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Purchaser is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY. Purchaser has corporate power to execute, deliver
and perform this Agreement and all agreements and other documents executed and
delivered by it pursuant to this Agreement or to be executed and delivered on
the Effective Date and Closing Date, and has taken all actions required by law,
its Certificate of Incorporation, its Bylaws or otherwise, to authorize the
execution, delivery and performance of this Agreement and such related
documents. Purchaser has the legal capacity to enter into and perform this
Agreement and the other agreements to be executed and delivered by it in
connection herewith. This Agreement and all agreements and documents executed
and delivered in connection herewith have been or will be as of the Closing
Date, duly executed and delivered by Purchaser, and constitute or will
constitute the legal, valid, and binding obligations of Purchaser enforceable
against Purchaser in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement and the agreements related hereto
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Effective Date or Closing Date do not and, the consummation of
the transactions contemplated hereby will not, violate any provision of the
Certificate of Incorporation or Bylaws of Purchaser or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement instrument, order, arbitration award, judgment or decree to which
Purchaser is a party or by which it is bound, or violate any restrictions of any
kind to which Purchaser is subject.
3.3 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.3 are Purchaser's
audited financial statements for the fiscal year ended March 31, 2002 and the
unaudited financial statements for the interim period ending June 30, 2002 (with
June 30, 2002 being hereinafter referred to as the "Purchaser Financials Date"),
reflecting the results of the operations and financial condition of Purchaser at
such dates which have been prepared in accordance with generally accepted
accounting principles, consistently applied (the "Financial Statements"). The
Financial Statements: (i) fairly and accurately present the financial position
of Purchaser as of the dates indicated and present the results of Purchaser's
operations for the periods then ended; and (ii) are in accordance with the books
and records of Purchaser, as the case may be, which have been properly
maintained and are complete and correct in all material respects.
3.4 SEC DOCUMENTS AND REPORTS. Other than as set forth on SCHEDULE 3.4,
Purchaser has filed all required documents with the Securities and Exchange
Commission (the "SEC") up to and including the Effective Date (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended, as the case may be, and, at the respective
times they were filed, none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.5 LEGAL PROCEEDINGS. Other than as set forth on SCHEDULE 3.5, neither
Purchaser nor any of its affiliates is subject to any pending, nor does
Purchaser have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Purchaser (or any of its affiliates), the operations, business or
prospects of Purchaser's business, or the transactions contemplated by this
Agreement, and, to the knowledge of Purchaser, no basis for any such action
exists, nor is there any legal impediment of which Purchaser has knowledge to
the continued operation of Purchaser's business in its ordinary course. 3.6 NO
UNDISCLOSED LIABILITIES. Except as and to the extent reflected in the Financial
Statements or as expressly shown in SCHEDULE 3.6, Purchaser has no liability or
obligation whatsoever, whether matured, unmatured, absolute, contingent or
otherwise, except for liabilities and obligations incurred in the ordinary
course of its business since the Purchaser Financials Date, which, in the
aggregate, would reasonably be expected to have a material adverse effect on the
operations, assets or financial condition of Purchaser or its business.
3.7 NO VIOLATION OF LAW. Purchaser has not been nor shall it be as of the
Effective Date (by virtue of any action, omission to act, contract to which it
is a party or any occurrence or state of facts whatsoever) in violation of any
applicable local, state or federal law, ordinance, regulation, order, injunction
or decree, or any other requirement of any governmental body, agency or
authority or court binding on it, or relating to its property or business which,
in the aggregate, has or is reasonably likely to have a material adverse effect
on the business, assets or financial position of Purchaser.
3.8 BROKERS AND FINDERS. Neither Purchaser, nor any of its shareholders,
directors, officers, employees or agents has retained any broker or finder in
connection with the transactions contemplated by this Agreement.
3.9 PRIORITY OF SECURITY INTEREST. Not withstanding the "Effective Date"
proviso in the introduction to this Section 3, upon execution of the Security
Agreement and filing of the Financing Statement, Seller will have a first lien
purchase money security interest in and to the collateral set forth in the
Security Agreement. At Closing, purchaser will execute or authorize the filing
of a financing statement and such other documents reasonably requested by Seller
to perfect Seller's security interest and to assert that Seller's security
interest is a purchase money security interest as defined in the Uniform
Commercial Code.
SECTION 4. COVENANTS OF SELLER.
Seller agrees that between the date hereof and the Closing Date, Seller
shall use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Except for
the Memorandum of Understanding between Purchaser and Mentergy, Ltd. And except
for the Investment Agreement between Gilat Communications Ltd (currently
Mentergy Ltd) and Protocol Learning Systems Ltd (aka "Mentergy Europe")
regarding reselling LearnLinc in Europe, Seller will, before or upon Closing,
cause the termination of any licensing or sales agreements with any party which
provides for the sale or license of the LearnLinc Software on an exclusive basis
within any territory in the United States, without causing a breach of that
agreement or any additional costs or damages to Purchaser.
SECTION 5. COVENANTS OF PURCHASER.
Purchaser agrees that between the date hereof and the Closing Date,
Purchaser shall use its best efforts to cause the consummation of the
transactions contemplated hereby in accordance with its terms and provisions. At
the Effective Date, Purchaser will offer employment to certain personnel who
currently sell, develop and support the LearnLinc software located in Troy, NY
and listed on SCHEDULE 2.11(b), except for those listed on SCHEDULE 6.9. For
those employees identified on Schedule 6.9 who are either not offered employment
by Purchaser or who decline employment with Purchaser, then Purchaser will pay
to those employees the accrued vacation, and two (2) weeks severance identified
on SCHEDULE 6.9. Purchaser will provide to Mentergy, Inc. its standard license,
which is the same as had been used by Mentergy for its customers, providing for
a license to utilize version 6.1 of the LearnLinc software for up to one hundred
(100) users for the exclusive purpose of internal use (the "Internal Use
License") by Mentergy, Inc., who may not sell, re-sell, host in an ASP model for
compensation, distribute, transfer, lease, sub-lease or otherwise convey this
Internal Use License to any other entity or party. Mentergy, Inc. will protect
against any distribution, resale, transfer or copying of this Internal Use
License to any entity.
SECTION 6. PURCHASER'S CONDITIONS PRECEDENT.
The obligations of Purchaser hereunder are subject to the fulfillment or
waiver of each of the following conditions before or upon the Closing Date:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller contained herein shall have been true and correct in all material
respects as of the Effective Date.
6.2 COVENANTS AND CONDITIONS. Seller shall have performed and complied with
all covenants and conditions required by this Agreement to be performed and
complied with by Seller prior to the Closing Date.
6.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened in writing, asserted, instituted or
entered to restrain or prohibit the carrying out of the transactions
contemplated hereby and no bankruptcy proceeding involving Seller shall have
commenced.
6.4 CLOSING DELIVERIES. Purchaser shall have received all documents, duly
executed by Seller in a form satisfactory to Purchaser and its counsel, referred
to in SECTION 8.1.
6.5 CONSENTS AND APPROVALS. Seller shall have obtained third-party
approvals and consents to the consummation of the transactions contained herein
on terms and conditions reasonably satisfactory to Purchaser, including approval
to the transaction contemplated herein by the District Court of Tel Aviv before
which the restructuring proceedings of Mentergy, Ltd. have been brought..
6.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors and
Stockholders of Seller.
6.7 DUE DILIGENCE REVIEW. By the Effective Date, Purchaser shall have
completed a due diligence review of Seller's LearnLinc Business, and its legal,
financial and operating condition, including its financial statements, the
results of which shall be satisfactory to Purchaser in its sole discretion.
6.8 NO MATERIAL ADVERSE CHANGE. Except as provided in the Schedules hereto,
including SCHEDULE 6.8, no material adverse change in the condition (financial
or otherwise), operations, liabilities, business or prospects of Seller relating
to Seller's LearnLinc Business, the LearnLinc Software or in general the
condition of the Purchased Assets shall have occurred since the Financials Date
up to the Effective Date.
6.9 EMPLOYEES OF SELLER. Before or upon the Effective Date, Seller shall
have terminated all employees, consultants and independent contractors
identified on SCHEDULE 2.11 (a), (b) AND (c) and Seller shall have presented
Purchaser a list of all accrued vacation or other compensation claims payable to
Seller's Employees accrued as of the Effective on SCHEDULE 6.9. Seller will
tender to Purchaser written evidence in a form reasonably satisfactory to
Purchaser of the termination of that employment relationship with Seller and the
release by the Employees of all employment claims against Seller and Purchaser
(the "Employee Releases")other than those employees listed in SCHEDULE 6.9,
whose releases will provided within 52 days subsequent to the Effective Date,
(providing that EDT's liabilities for severance and accrued vacation do not
change as a result of such delay).
6.10 PREMISES LEASE. Purchaser will have obtained an irrevocable commitment
from the landlord of the ▇▇▇▇ premises to lease to Purchaser the ▇▇▇▇ premises,
with provisions providing for a term not to exceed 24 months, the reduction of
the premises by one-half, the deferment of any past due rent into future
periods, and the monthly rental not exceeding $5,000 per month.
6.11 RELEASE OF MENTERGY, LTD.. Seller shall have delivered a release of
any security interest or lien on the Purchase Assets (other than those
identified on Schedule 2.9), including from Mentergy, Ltd. whereby Mentergy Ltd.
releases any claim or lien on the Purchased Assets.
SECTION 7. SELLER CONDITIONS PRECEDENT.
The obligations of Seller hereunder are subject to the fulfillment or
waiver of each of the following conditions before or upon the Closing Date:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser contained herein shall have been true and correct in all material
respects as of the Effective Date.
7.2 COVENANTS AND CONDITIONS. Purchaser shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Purchaser prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened in writing, asserted, instituted or
entered to restrain or prohibit the carrying out of the transactions
contemplated hereby.
7.4 CLOSING DELIVERIES. Seller shall have received all documents, duly
executed by Purchaser in form satisfactory to Seller and its counsel, referred
to in SECTION 8.2.
7.5 EMPLOYEES OF SELLER. As of the Effective Date, Purchaser shall have
offered employment to those Employees chosen by Seller and such chosen Employees
shall have accepted employment with Purchaser.
7.6 CONSENTS AND APPROVALS. Seller shall have obtained all necessary
government and other third-party approvals and consents to the consummation of
the transactions contained herein including approval to the transaction
contemplated herein by the District Court of Tel Aviv before which the
restructuring proceedings of Mentergy, Ltd. have been brought.
7.7 NO MATERIAL ADVERSE CHANGE. Except as provided in the Schedules hereto,
no material adverse change in the condition (financial or otherwise),
operations, liabilities, business or prospects of Purchaser shall have occurred
since the date of its last public filing.
SECTION 8. CLOSING DELIVERIES.
8.1 DELIVERIES OF SELLER. At the Closing, Seller shall deliver to Purchaser
the following, all of which shall be in a form reasonably satisfactory to
counsel to Purchaser; provided that any of the following which is in the form
attached as an Exhibit to this Agreement, shall be deemed satisfactory:
(a) a copy of the resolutions of the Boards of Directors authorizing
the execution, delivery and performance of this Agreement and all related
documents and agreements to be executed by Seller in connection therewith;
(b) certificates of the Secretaries of Seller certifying as to the
incumbency of the directors and officers of Seller, certifying as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Seller, and certifying that certain documents
provided to Purchaser, and the authorizing resolutions referred to hereinabove,
are true and correct copies of the originals thereof;
(c) certificates of the Presidents of Seller, dated as of the Closing
Date, as to (i) the truth and correctness of the representations and warranties
of Seller contained herein; (ii) the performance of and compliance by Seller
with all covenants contained herein; and (iii) the satisfaction of all
conditions precedent of Seller contained herein;
(d) the following certificates, establishing that Seller is in
existence and is in good standing to transact business in the respective states:
(i) FOR MENTERGY, INC: Delaware (September 19,2002)
(ii) FOR ▇▇▇▇▇-▇▇▇▇▇ COMMUNICATIONS INC: New York (September 19,
2002), Delaware (September 19, 2002), Utah (September 20, 2002)
(iii) FOR LEARNLINC CORPORATION: Delaware (September 19, 2002),
New York (September 25, 2002)
(e) a ▇▇▇▇ of Sale executed by Seller in the form of EXHIBIT A;
(f) an Assignment and Assumption Agreement executed by Seller in the
form of EXHIBIT B (the "Assignment and Assumption Agreement");
(g) an Assignment of Trademarks executed by Seller in the form of
EXHIBIT C;
(h) all authorizations, consents, approvals, permits and licenses
required herein;
(i) the Employee Releases;
(j) such other instruments and documents as reasonably requested by
Purchaser to carry out and effect the purpose and intent of this Agreement.
(k) Seller shall have delivered a release from Mentergy, Ltd. whereby
Mentergy Ltd. releases any claim or lien on the Purchased Assets.
8.2 DELIVERIES OF PURCHASER. At the Closing, Purchaser shall deliver to
Seller the following, all of which shall be in a form satisfactory to counsel to
Seller; provided that any of the following which is in the form attached as an
Exhibit to this Agreement, shall be deemed satisfactory:
(a) Cash by wire transfer the sum of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00) made payable to Seller (or in such proportions to
Seller and Seller's broker as Seller shall instruct
(b) a fully executed promissory note in the original principal sum of
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000) in the form of Exhibit
"D",
(c) a fully executed Royalty Agreement in the form of Exhibit "E";
(d) The Security Agreement and the Financing Statement and License
Agreement;
(e) a copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements each certified by the Secretary of Purchaser as
being true and correct copies of the original thereof;
(f) a certificate of the Chief Executive Officer of Purchaser as of
the Closing Date, as to (i) the truth and correctness of the representations and
warranties of Purchaser contained herein; (ii) the performance of and compliance
by Purchaser with all covenants contained herein; and (iii) the satisfaction of
all conditions precedent of Purchaser contained herein;
(g) a certificate of the Secretary of Purchaser certifying as to the
incumbency of the directors and officers of Purchaser and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Purchaser;
(h) certificates, dated within thirty (30)days of the Closing Date, of
the Secretary of the State of Delaware, New York, and Arizona establishing that
Purchaser is in existence and is in good standing to transact business in the
States of Delaware, New York, and Arizona
(i) the Assignment and Assumption Agreement executed by Purchaser;
(j) such other instruments and documents as reasonably requested by
Seller to carry out and effect the purpose and intent of this Agreement.
8.3 DELIVERIES SUBSEQUENT TO CLOSING. Within 30 days of Closing Seller will
deliver to Purchaser an opinion of counsel to Seller in a form reasonably
acceptable to Purchaser opining as to the validity of: (i) the execution and
delivery of this Agreement and the other documents to be executed pursuant
hereto, (ii) the good standing and authority of Seller, and (iii) the
enforceability of this Agreement and the other agreements and documents to be
executed by Seller in connection herewith (with Seller responsible for the costs
thereof but with Purchaser providing upon its tender reimbursement of the
greater of one-half of the costs or $7,500.00), and for purposes of this opinion
Purchaser agrees that the opinion of Seller's counsel can be based upon
certificates of Seller, Mentergy, Ltd., and the opinion of Israeli counsel for
Mentergy, Ltd. regarding Mentergy, Ltd. and Seller.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, INDEMNITY.
9.1 SURVIVAL OF CLOSING. All representations and warranties in this
Agreement, including any certificate or Schedule made a part thereof or Exhibit
delivered pursuant to this Agreement, shall survive the Closing and continue in
full force and effect until the third anniversary of the Closing Date (referred
to herein as the "Indemnity Termination Date"). Notwithstanding the foregoing,
the provisions of SECTION 2.15 shall continue for six (6) months after the
expiration of the applicable statute of limitations for assessment of additional
taxes. All claims for indemnification under this Agreement made by either party
must be made by the Indemnity Termination Date (other than claims by Purchaser
under Section 2.15 which must be made by the expiration of six (6) months after
the expiration of the applicable statute of limitations for assessment of
additional taxes).
9.2 INDEMNIFICATION OF PURCHASERS. From and after the Closing, subject to
the limitations set forth in SECTION 9.4, Seller, and its successors and
assigns, will indemnify and hold harmless Purchaser, (and Purchaser's officers,
directors, stockholders, employees and subsidiaries) (collectively, the
"Indemnified Persons"), from and against any loss, liability, claim, damage,
expense (including reasonable costs of investigation and defense and reasonable
attorneys' fees and expenses) (collectively, "Damages") incurred by the
Indemnified Person, (i) as a result of any breach of any representation or
warranty, covenant or agreement made by Sellers in this Agreement, or any other
certificate or document delivered by Sellers pursuant to this Agreement, or (ii)
as a result of any claim for breach, misrepresentation or warranty made by any
Customer, Reseller, Employee or Creditor of Seller related to the operation by
Seller of the LearnLinc Business or sale and license of the LearnLinc Software
prior to the Effective Date. Notwithstanding the foregoing, no such
indemnification under this Section shall be available unless written notice
thereof has been delivered to Sellers prior to the Indemnity Termination Date
specifying in reasonable detail the information or circumstances giving rise to
the claim for indemnity and, to the extent reasonably ascertainable, the
expected Damages related thereto.
9.3 MAXIMUM INDEMNITY OBLIGATION. Seller's indemnity obligation to
Purchaser shall not exceed the sum of Five Million Seven Hundred Seventy Five
Thousand and 00/100 Dollars ($5,750,000.00).
9.4 PRIORITY OF OFFSET. All Damages fully and finally determined to be owed
by Sellers to the Indemnified Persons under Section 9.2 shall be satisfied first
out of offset of the sums due under Section 1.7 (Accounts Receivable) second
against the Purchaser's Promissory Note and third from offset of any sums due
under the Royalty Agreement.
9.5 INDEMNIFICATION OF SELLER. From and after the Closing Purchaser, and
its successors and assigns, will indemnify and hold harmless Seller, (and
Seller's officers, directors, stockholders, employees and subsidiaries)
(collectively, the "Seller Indemnified Persons"), from and against any loss,
liability, claim, damage, expense (including reasonable costs of investigation
and defense and reasonable attorneys' fees and expenses) (collectively,
"Seller's Damages") incurred by the Seller Indemnified Person (i) as a result of
any breach of any representation or warranty, covenant or agreement made by
Purchasers in this Agreement, or any other certificate or document delivered by
Purchasers pursuant to this Agreement, (ii) as a result of any claim for breach,
misrepresentation or warranty made by any customer, reseller, employee or
creditor of Purchaser related to the operation by Purchaser of the LearnLinc
Business or sale and license of the LearnLinc Software after to the Effective
Date, or (iii) any breach by Purchaser in the Assignment and Assumption
Agreement.
9.6 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS. Promptly after
receipt by an Indemnified Person of notice of the commencement of any action,
arbitration, audit, hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, judicial or investigative, whether formal or informal,
public or private) commenced, brought, conducted or heard by or before or
otherwise involving any governmental body or arbitrator (a "Proceeding") against
it, such Indemnified Person will, if a claim is to be made against a party
obligated to provide indemnity under this Section 9, give notice to the
indemnifying parties of the commencement of such Proceeding, but the failure of
the Indemnified Person to notify the indemnifying parties will not relieve the
indemnifying parties of any liability that indemnifying parties may have to any
Indemnified Persons, except to the extent the indemnifying parties are
materially prejudiced thereby. If any Proceeding is brought against an
Indemnified Person and the Indemnified Person gives notice to the indemnifying
parties of the commencement of such Proceeding, the indemnifying parties will be
entitled to participate in such Proceeding and, to the extent that they wish
(unless the indemnifying parties are also parties to such Proceeding and the
Indemnified Person determines in good faith that joint representation would be
inappropriate, or the indemnifying parties fail to provide reasonable assurance
to the Indemnified Persons of their financial capacity to defend such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the Indemnified Persons and, after notice from the indemnifying parties to
the Indemnified Persons of their election to assume the defense of such
Proceeding. If the indemnifying parties assume the defense of a Proceeding, (i)
it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; and (ii) no compromise or settlement of such claims may be
effected by the indemnifying parties without the Indemnified Persons' consent.
If notice is given to the indemnifying parties of the commencement of any
Proceeding and the indemnifying parties do not, within twenty (20) days after
the Indemnified Persons' notice is given, give notice to the Indemnified Persons
of their election to assume the defense of such Proceeding, the indemnifying
parties will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the Indemnified Persons. With respect to
any Proceeding both the Indemnified Persons and the indemnifying parties, as the
case may be, shall keep the other parties fully informed of the Proceeding at
all stages thereof and to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other
in order to ensure the proper and adequate defense of any Proceeding brought by
any third party. With respect to any Proceeding, the parties agree to cooperate
in such a manner as to preserve in full (to the extent possible) the
confidentiality of all confidential business records and the attorney-client and
work-product privileges.
9.7 EFFECT OF INVESTIGATION. No investigation or inquiry made by either
party shall, regardless of the Closing of the transactions contemplated hereby,
affect or limit any representation or warranty made by the other party or in any
Schedule delivered by any of them pursuant hereto or any right of
indemnification contained in this Agreement.
SECTION 10. TERMINATION.
This Agreement may be terminated:
(a) at Closing by Purchaser by delivery of written notice to Seller if
any representation or warranty of Seller contained in this Agreement or in any
certificate or other document executed and delivered by Seller pursuant to this
Agreement is untrue or breached in any material respect or if Seller fails to
comply in any material respect with any covenant or agreement contained herein;
(b) at Closing by Seller by delivery of written notice to Purchaser if
any representation or warranty of Purchaser contained in this Agreement or in
any certificate or other document executed and delivered by Purchaser pursuant
to this Agreement is untrue or breached in any material respect or if Purchaser
fails to comply in any material respect with any covenant or agreement contained
herein;
(c) by Purchaser by delivery of written notice to Seller if the
transactions contemplated hereby shall not have been consummated by November 30,
2002; or
(d) by Seller by delivery of written notice to Purchaser if the
transactions contemplated hereby shall not have been consummated by November 30,
2002.
SECTION 11. OPERATION OF LEARNLINC BUSINESS BETWEEN EFFECTIVE DATE AND CLOSING
DATE
Commencing on the Effective Date through the Closing Date, Purchaser shall
operate the LearnLinc Business as if Closing had occurred on the Effective Date.
In the event that this Agreement is terminated prior to Closing, all property,
assets and liabilities shall be returned to the parties as if this Agreement had
never been executed and Purchaser shall be entitled to reimbursement from Seller
for any out of pocket expenses incurred during its period of operation of the
LearnLinc Business and the parties agree to act in good faith and to take such
steps as are reasonably necessary (including Purchaser's release of Seller's
employees) to effect the foregoing.
SECTION 12. MISCELLANEOUS.
12.1 KNOWLEDGE. For purposes of this Agreement, the phrase "knowledge of
Seller" or similar such phrase shall mean the actual knowledge of ▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
12.2 NOTICES.
If to Purchaser:
EDT Learning, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller:
Mentergy, Inc.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Or such other address as shall be furnished in writing by any party to the
other party. All such notices shall be considered received: (a) if transmitted
by certified mail, return receipt requested, with proper postage prepaid, upon
the fifth (5th) business day after mailing; (b) if transmitted by overnight
carrier, on the next business day; and (c) if transmitted by personal delivery,
upon receipt.
12.3 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable, by
operation of law or otherwise, without the prior written consent of all parties.
Subject to the foregoing, this Agreement shall inure to the benefit of, be
enforceable by and be binding upon the parties, their successors and permitted
assigns.
12.4 ENTIRE AGREEMENT. This Agreement and the Exhibits, Schedules,
certificates and other documents delivered pursuant hereto or incorporated
herein by reference, contain and constitute the entire agreement among the
parties and supersede and cancel any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties
relating to the transactions contemplated by this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
12.5 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without giving
effect to the principles of conflicts of law thereof, provided, however, that
the laws of the respective jurisdictions of incorporation of each of the parties
shall govern the relative rights, obligations, powers, duties and other internal
affairs of such party and its board of directors.
12.6 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this
Agreement are by reference made a part hereof.
12.7 WAIVERS. No failure on the part of any party hereto to exercise, and
no delay in exercising, any right, power or remedy created hereunder shall
operate as a waiver thereof (subject to the time limits on indemnification set
forth in SECTION 9.1 above), nor shall any single or partial exercise of any
right, power or remedy by any such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. No waiver by any
party hereto of any breach of or default in any term or condition of this
Agreement shall constitute a waiver of or assent to any succeeding breach of or
default in the same or any other term or condition hereof.
12.8 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. For purposes of executing
this Agreement, facsimile signature shall be given the same force and effect as
an original signature.
12.10 CONFIDENTIALITY. The parties agree that they will not make any public
comment, statement, communication or disclosure about the existence or contents
of this Agreement or activities relating to the consummation of the transactions
contemplated herein without prior approval of the other party, except as may be
required by law, as may be necessary to obtain the required consents, licenses,
permits or approvals pursuant to SECTION 2.5 herein, or as may be necessary in
the ordinary course of business.
12.11 EXPENSES. Except as otherwise provided for herein, each party will be
responsible for payment of all fees and expenses incurred by that party in
connection with this Agreement and the consummation of the transactions
contemplated thereby regardless of whether this Agreement is terminated without
consummation of the transaction contemplated hereby.
12.12 NO THIRD PARTY BENEFICIARIES. Nothing contained in this Agreement
(express or implied) is intended or shall be construed to confer upon or give to
any person, corporation or other entity, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
12.13 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
EDT LEARNING, INC. MENTERGY, INC.
By: _________________________________ By: ____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Its: ___________________________________
Title: President Title: _________________________________
Date: _______________________________ Date: __________________________________
LEARNLINC CORP.
By: _________________________________
Its: ________________________________
Title: ______________________________
Date: _______________________________
▇▇▇▇▇-▇▇▇▇▇ COMMUNICATIONS, INC.
By: _________________________________
Its: ________________________________
Title: ______________________________
Date: _______________________________