EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of January 22, 1999, by Choice
Information Systems, Inc., a Virginia corporation ("Choice"), Quindeca
Corporation, a Colorado corporation ("Quindeca"), and ▇▇▇▇▇ ▇. Short, an
individual resident in Colorado ("Short").
RECITALS
Based upon the representations, warranties and agreements of Quindeca and
Short contained in this Agreement, Choice wishes to purchase certain assets and
assume certain liabilities of Quindeca, and Quindeca wishes to transfer these
assets and permit Choice to assume these liabilities, subject to payment of the
Purchase Price. Short, as sole shareholder of Quindeca, will be the ultimate
recipient of the purchase price hereunder and therefore Short, with Quindeca,
makes representations and warranties to Choice and agrees to provide
indemnification to Choice as provided in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1.
SALE AND TRANSFER OF SHARES; CLOSING
1.1 Acquired Assets and Assumed Liabilities. On and subject to the terms
and conditions of this Agreement, Choice agrees to purchase from Quindeca, and
Quindeca agrees to sell, transfer, convey, and deliver to Choice, all of the
Acquired Assets at the Closing in consideration for (a) the Purchase Price
specified in Section 1.2 and (b) Choice assuming and becoming responsible for
all of the Assumed Liabilities at the Closing. Choice will not assume or have
any responsibility, however, with respect to any other obligation or liability
of Quindeca not included within the definition of Assumed Liabilities,
including, without limitation, any liability for sales taxes arising as a result
of the transfer of the Acquired Assets by Quindeca to Choice.
1.2 Purchase Price. The purchase price (the "Purchase Price") for the
Acquired Assets will be (a) $944,444 payable in cash to Quindeca and (b) a
certificate representing 24.75 shares of Choice common stock with an agreed-upon
value of $22,455 per share, each delivered at the Closing.
1.3 Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, 35/th/ Floor, Los Angeles, California, at 10:00 a.m. (local
time) on the date of this Agreement, or at such other time and place as the
parties may agree.
1.4 Purchase Price Allocation. The parties agree to allocate the
Purchase Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as Exhibit 1.4.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF QUINDECA AND SHORT.
Quindeca and Short jointly and severally represent and warrant to Choice as
follows:
2.1 Organization and Good Standing. Quindeca is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Colorado, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use, and to perform all its obligations under Applicable Contracts.
Quindeca has no Subsidiaries.
2.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Quindeca and Short, enforceable against each in accordance with
its terms. Quindeca and Short have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement, the Employment
Agreement and the Shareholders Agreement (to the extent either is a party
thereto) and to perform their respective obligations under this Agreement, the
Employment Agreement and the Shareholders Agreement.
(b) Except as set forth in Part 2.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Quindeca, or (B) any
resolution adopted by the board of directors or the shareholders of
Quindeca;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Quindeca, or any of the
assets owned or used by Quindeca, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any material
Governmental Authorization that is held by Quindeca or that otherwise
relates to the business of, or any of the assets owned or used by,
Quindeca;
(iv) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or
with respect to any of the Acquired Assets.
As of the date of this Agreement, Quindeca and Short shall have given all
notices and obtained all Consents required from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
2.3 Title to Properties; Encumbrances. Quindeca owns (with good and
marketable title in the case of real property) all Acquired Assets. Except as
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set forth in Part 2.3 of the Disclosure Letter, all such Acquired Assets are
free and clear of all Encumbrances.
2.4 Condition and Sufficiency of Assets. The equipment of Quindeca is in
good operating condition and repair, and is adequate for the uses to which it is
being put, and none of such equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The equipment of Quindeca is sufficient for the continued
conduct of Quindeca's businesses after the Closing, assuming Quindeca's business
is conducted in substantially the same manner after the Closing as it was
conducted prior to the Closing.
2.5 No Undisclosed Liabilities. Quindeca has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the balance sheet of Quindeca setting forth the
financial condition of Quindeca as of December 31, 1997 (the "Balance Sheet")
delivered to Choice on or prior to the date hereof, and except for liabilities
and obligations incurred by Quindeca in the Ordinary Course of Business since
that date.
2.6 Taxes.
(a) Quindeca has filed or caused to be filed all Federal and state
income Tax Returns and other material Tax Returns that are or were required to
be filed by or with respect to it pursuant to applicable Legal Requirements.
Quindeca has paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment, except such Taxes, if any, as are listed in Part 2.6 of the
Disclosure Letter and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet.
(b) The charges, accruals, and reserves with respect to Taxes on the
respective books of Quindeca are adequate (determined in accordance with GAAP)
and are at least equal to Quindeca's liability for Taxes. There exists no
proposed tax assessment against Quindeca except as disclosed in the Balance
Sheet or in Part 2.6 of the Disclosure Letter. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by Quindeca. All Taxes that Quindeca is
or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(c) All Tax Returns filed by (or that include on a consolidated
basis) Quindeca are true, correct, and complete in all material respects. There
is no tax sharing agreement that will require any payment by Quindeca after the
date of this Agreement.
(d) Quindeca (and any predecessor of Quindeca) has been a validly
electing "S" corporation within the meaning of Sections 1361 and 1362 of the IRC
at all times during its existence for federal and state tax purposes (that is,
with respect to each state in which Quindeca is doing business or is registered
to do business), and such election shall remain in effect, and Quindeca will be
continue to qualify as an "S" corporation up to and including the Closing Date.
(e) Short has included in his Tax Returns filed prior to the date
hereof his distributive share of income of Quindeca set forth on the Tax Returns
of Quindeca.
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(f) Quindeca has not in the past ten (10) years (A) acquired assets
from another corporation in a transaction in which Quindeca's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
(g) Nothing in this Section 2.6 is intended to cover Taxes arising
from the Contemplated Transactions.
2.7 Compliance with Legal Requirements; Government Authorizations.
(a) Quindeca is, and at all times since January 1, 1994 has been, in
compliance in all material respects with Legal Requirements that are or were
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets. No event has occurred or circumstance exists that
(with or without notice or lapse of time) (i) may constitute or result in a
violation in any material respect by Quindeca of, or a failure on the part of
Quindeca to comply in any material respect with, any Legal Requirement, or (ii)
may give rise to any obligation of Quindeca to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature. Except as set forth
in Part 2.7(a) of the Disclosure Letter, Quindeca has not received, at any time
since January 1, 1994, any notice or other communication from any Governmental
Body or any other Person regarding (i) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or
(ii) any actual, alleged, possible, or potential obligation on the part of
Quindeca to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Except as set forth in Part 2.7(b) of the Disclosure Letter, each
Governmental Authorization that is held by Quindeca or that otherwise relates to
the business of, or to any of the assets owned or used by, Quindeca is valid and
in full force and effect. Such Governmental Authorizations collectively
constitute all of the Governmental Authorizations necessary to permit Quindeca
to lawfully conduct and operate its business in the manner it currently conducts
and operates such business and to permit Quindeca to own and use its assets in
the manner in which it currently owns and uses such assets. Quindeca is, and at
all times since January 1, 1994 has been, in compliance in all material respects
with all of the terms and requirements of each Governmental Authorization.
Except as set forth in Part 2.7(b) of the Disclosure Letter, Quindeca has not
received, at any time since January 1, 1994, any notice or other communication
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or failure to comply with any term
or requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization.
2.8 Legal Proceedings; Orders.
(a) Part 2.8 of the Disclosure Letter lists all pending Proceedings
which have been commenced by or against Quindeca or, to the Knowledge of
Quindeca and Short, that otherwise relate to or may affect the business of, or
any of the assets owned or used by, Quindeca, or that challenge, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions. To the Knowledge of
Quindeca and Short, (1) no such Proceeding has been Threatened, and (2) no event
has occurred or circumstance exists that may give rise to or serve as a basis
for the commencement of any such Proceeding. The Proceedings listed in Part 2.8
of the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of Quindeca.
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(b) There is no Order to which Quindeca, or any of the assets owned
or used by it, is subject, and no shareholder of Quindeca is subject to any
Order that relates to the business of, or any of the assets owned or used by,
Quindeca.
(c) As of the date of this Agreement, no Person has made or
Threatened any claim asserting that such Person (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of, or any other voting, equity, or ownership interest
in, Quindeca, or (b) is entitled to all or any portion of the Purchase Price
payable for the Acquired Assets.
2.9 Contracts; No Defaults.
(a) Part 2.9(a) of the Disclosure Letter contains a complete and
accurate list, and Quindeca and Short have delivered to Choice true and complete
copies, of each of the following that are currently in effect:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by Quindeca of an amount or value in
excess of $10,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to Quindeca of an amount or value in
excess of $10,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts by
Quindeca in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal property leases
and installment and conditional sales agreements having a value per item or
aggregate payments of less than $1,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each employment agreement, collective bargaining agreement and
other Applicable Contract to or with any employee, labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by Quindeca with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of Quindeca or any Affiliate of
Quindeca or limit the freedom of Quindeca or any Affiliate of Quindeca to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments
for goods;
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(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by Quindeca to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
$5,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by Quindeca
other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) No shareholder of Quindeca (and no Related Person of any
shareholder) has or may acquire any rights under, and no shareholder has or may
become subject to any obligation or liability under, any Contract that relates
to the business of, or any of the assets owned or used by, Quindeca.
(c) Each Contract identified or required to be identified in Part
2.9(a) of the Disclosure Letter is in full force and effect.
(d) Quindeca is, and at all times since January 1, 1994 has been, in
compliance in all material respects with all applicable terms and requirements
of each Contract under which it has or had any obligation or liability or by
which it or any of the assets owned or used by it is or was bound. Each other
Person that has or had any obligation or liability under any Contract under
which Quindeca has or had any rights is, and at all times since January 1, 1994
has been, in compliance in all material respects with all applicable terms and
requirements of such Contract. No event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with, or
result in a material violation of, or breach of, or give Quindeca or any other
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract. Quindeca has not given to or received from any other
Person, at any time since January 1, 1994, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
Quindeca under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by Quindeca have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
2.10 Environmental Matters. Quindeca is, and at all times has been, in
compliance in all material respects with, and has not been and is not in
violation of or liable in any material respect under, any Environmental Law.
There are no pending or, to the Knowledge of Quindeca and Short, Threatened
claims, Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or
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any other properties and assets (whether real, personal, or mixed) in which
Quindeca has or had an interest.
2.11 Employees. Quindeca has never been and is not presently a party to
any written or oral employment Contract, collective bargaining or other labor
Contract. There has not been, there is not presently pending or existing, and
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting Quindeca
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting Quindeca or
its premises, or (c) any application for certification of a collective
bargaining agent. Quindeca has complied in all material respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Quindeca is not liable in any material respect for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
2.12 Intellectual Property.
(a) Definition of "Intellectual Property Assets." The term
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"Intellectual Property Assets" includes:
(i) the name "Quindeca" and all other fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications owned by Quindeca (collectively, "Marks");
(ii) all patents and patent applications owned by Quindeca
(collectively, "Patents");
(iii) all copyrights owned by Quindeca in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works owned by Quindeca (collectively,
"Rights in Mask Works"); and
(v) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets") owned by
Quindeca.
Quindeca owns all items of the type described in clauses (i) through (v) above
that are used by it in its business other than (A) commercially available
software licensed by Quindeca and (B) intellectual property assets provided by
Choice.
(b) Agreements. Part 2.12(b) of the Disclosure Letter contains a
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complete and accurate list and summary description, including any royalties paid
or received by Quindeca, of all Contracts relating to the Intellectual Property
Assets to which Quindeca is a party or by which Quindeca is bound, except for
any license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $500 under which
Quindeca is the licensee. There are no outstanding and, to the Knowledge of
Quindeca and Short, no Threatened disputes or disagreements with respect to any
such agreement.
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(c) Know-How Necessary for the Business. The Intellectual Property
-----------------------------------
Assets are all those necessary for the operation of Quindeca's business as it is
currently conducted. Except as set forth on Part 2.12(c) of the Disclosure
Letter, Quindeca is the owner of all right, title, and interest in and to each
of the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and has
the right to use without payment to a third party all of the Intellectual
Property Assets. Neither Short nor, to the Knowledge of Quindeca and Short, any
other employee of Quindeca has entered into any Contract that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than Quindeca.
(d) Patents. Quindeca owns no Patents. To the Knowledge of Quindeca and
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Short, none of the products sold, nor any process or know-how used, by Quindeca
infringes or is alleged to infringe any patent or other proprietary right of any
other Person.
(e) Trademarks. Part 2.12(e) of Disclosure Letter contains a complete
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and accurate list and summary description of all Marks, if any. Except as set
forth in Part 2.12(e) of the Disclosure Letter, Quindeca is the owner of all
right, title, and interest in and to each of the Marks, free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims. All Marks that have been registered with the United States Patent and
Trademark Office are currently in compliance with all formal legal requirements
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date. No ▇▇▇▇ has been or is now involved in any
opposition, invalidation, or cancellation and, to the Knowledge of the Sellers,
no such action is Threatened with the respect to any of the Marks. To the
Knowledge of Quindeca and Short, there is no potentially interfering trademark
or trademark application of any third party. No ▇▇▇▇ is infringed or, to the
Knowledge of Quindeca and Short, has been challenged or threatened in any way.
None of the Marks owned by Quindeca or, to the Knowledge of Quindeca and Short,
licensed or otherwise used by Quindeca, infringes or is alleged to infringe any
trade name, trademark, or service ▇▇▇▇ of any third party. All products and
materials containing a ▇▇▇▇ that have been registered as described above bear
the proper federal registration notice where permitted by law.
(f) Copyrights. Part 2.12(f) of the Disclosure Letter contains a
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complete and accurate list and summary description of all Copyrights, if any.
Quindeca is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims. None of the Copyrights have
been registered. All the Copyrights are currently in compliance with formal
legal requirements, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
date of Closing. No Copyright is infringed or, to the Knowledge of Quindeca and
Short, has been challenged or threatened in any way. None of the subject matter
of any of the Copyrights infringes or is alleged to infringe any copyright of
any third party or is a derivative work based on the work of a third party. All
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(g) Trade Secrets. With respect to each Trade Secret, the documentation
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relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual. Quindeca has taken all
reasonable precautions to protect the secrecy, confidentiality, and value of its
Trade Secrets. Quindeca has good
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title and an absolute (but not necessarily exclusive) right to use the Trade
Secrets. The Trade Secrets are not part of the public knowledge or literature,
and, to the Knowledge of Quindeca and Short, have not been used, divulged, or
appropriated either for the benefit of any Person or to the detriment of
Quindeca. No Trade Secret is subject to any adverse claim or has been challenged
or threatened in any way.
2.13 Computer Software.
(a) Performance. To the Knowledge of Quindeca and Short, each of the
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computer software products owned by Quindeca, other than commercially available
software programs not marketed by Quindeca (the "Software Products") performs in
accordance with specifications, documentation and other written material used in
connection with the sale, license, distribution, marketing or use thereof. Part
2.13(a) of the Disclosure Letter contains a complete list of Software Products
sold, licensed, distributed or marketed by Quindeca since January 1, 1994.
(b) Development. No shareholder or, to the Knowledge of Quindeca and
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Short, employee of Quindeca is in default under any employment Contract relating
to the Software Products, any noncompetition or confidentiality Contract or any
other Contract or restrictive covenant relating to the Software Products or
their development or exploitation. The Software Products do not include any
inventions of Short made prior to the time such Short became an employee of
Quindeca or made outside of the scope of Short's employment, nor any property or
any previous employer of Short. To the Knowledge of Quindeca and Short, the
Software Products do not include any inventions of any employee other than Short
made prior to the time such employee became an employee of Quindeca or made
outside of the scope of such employee's employment, nor any property or any
previous employer of such employee.
(c) Title. All right, title and interest in and to the Software
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Products owned by Quindeca, is free and clear of all liens. No government
funding was utilized in the development of any of the Software Products owned by
Quindeca, or, to the Knowledge of Quindeca and Short, any other Software
Products. The sale, license, distribution, marketing or use of the Software
Products by Quindeca does not violate any rights of any other Person, and
Quindeca has not received any communication alleging such violation. Except as
set forth in Part 2.13(c) of the Disclosure Letter, Quindeca has no obligation
to compensate any Person for the sale, license, distribution, marketing or use
of the Software Products. Quindeca has not granted to any other Person any
license, option or other right in or to any of the Software Products, except for
non-exclusive, royalty-bearing, end-user licenses granted by Quindeca in the
Ordinary Course of Business pursuant to license agreements substantially in the
form attached in Part 2.13(c) of the Disclosure Letter (the "End-User
Licenses").
(d) Maintenance. Quindeca has no obligation to any other Person to
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maintain, modify, improve or upgrade any of the Software Products, except for
any such obligations set forth in the End-User Licenses or under a maintenance
agreement. Certain maintenance agreements are listed in Part 2.13(d) of the
Disclosure Letter.
(e) Year 2000. The Software Products currently being sold,
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distributed or marketed by Quindeca (i) include Year 2000 date conversion and
capabilities including, but not limited to: date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, correct sort ordering, and date data interface values that reflect the
century; (ii) automatically compensates for and manages and manipulates data
involving dates, including single century formulas and multi-century formulas,
and will not cause an abnormal abort within the application
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or result in the generation of incorrect values or invalid inputs involving such
date; (iii) provides that all date-related user interface functionalities and
data fields include the indication of the correct century; (iv) provides that
all date-related system-to-system or application-to-application data interface
functionalities will include the indication of the correct century; and (v) will
continue to comply with clauses (i) through (iv) above. All data processing by
the Software Products currently being sold, distributed or marketed by Quindeca
includes four digit year format and recognizes and correctly processes dates for
leap years. Quindeca has no obligation to modify, improve or upgrade any of the
Software Products previously sold, distributed or marketed by Quindeca in order
to ensure their compliance with the Year 2000 capabilities described in this
Section 2.13(e).
(f) Protection of the Proprietary Nature of the Software Products.
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Quindeca has kept secret and has not disclosed the source code for the Software
Products to any Person other than certain employees, licensed customers and
contractors of Quindeca. Quindeca has taken all reasonable measures to protect
the security, confidentiality and value of the Software Products.
2.14 Relationship with Customers. Quindeca has used its reasonable
business efforts to maintain, and currently maintains, in all material respects,
good working relationships with all of its customers. Each of Quindeca's
contracts with its customers and related customer relationships which have been
terminated (other than by expiration of its stated term) or canceled during the
one year period ended on the Closing Date are set forth and described on Part
2.14 of the Disclosure Letter. During that one year period, none of Quindeca's
current customers has given Quindeca written notice terminating, canceling or
threatening to terminate or cancel any contract or relationship with Quindeca.
2.15 Certain Payments. Since January 1, 1994, neither Quindeca nor any
director, officer, agent, or employee of Quindeca, or to the Knowledge of
Quindeca and Short, any other Person associated with or acting for or on behalf
of Quindeca, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of Quindeca or any
Affiliate of Quindeca, or (iv) in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of Quindeca.
2.16 Disclosure. No representation or warranty of Quindeca and Short in
this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
2.17 Relationships with Related Persons. No shareholder of Quindeca or
any Related Person of any shareholder or of Quindeca has, or since January 1,
1994 has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to Quindeca's business.
No shareholder of Quindeca or any Related Person of any shareholder or of
Quindeca is, or since January 1, 1994 has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with Quindeca other than business dealings or transactions conducted
in the Ordinary Course of Business with Quindeca at substantially prevailing
market prices and on substantially prevailing market terms, or (ii) engaged in
competition with Quindeca with respect to any line of the products or services
of Quindeca in any market presently served by
10
Quindeca. Except as set forth in Part 2.17 of the Disclosure Letter, no
shareholder of Quindeca or any Related Person of any shareholder or of Quindeca
is a party to any Contract with, or has any claim or right against, Quindeca.
2.18 Brokers or Finders. Neither Quindeca nor Short incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CHOICE
Choice represents and warrants to Quindeca and Short as follows:
3.1 Organization and Good Standing. Choice is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Choice, enforceable against Choice in accordance with its terms.
Choice has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement, the Employment Agreements and the Shareholders
Agreement and to perform its obligations under this Agreement, the Employment
Agreements and the Shareholders Agreement.
(b) Neither the execution and delivery of this Agreement by Choice
nor the consummation or performance of any of the Contemplated Transactions by
Choice will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Choice's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of Choice;
(iii) any Legal Requirement or Order to which Choice may be subject;
or
(iv) any Contract to which Choice is a party or by which Choice may
be bound.
Choice is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against Choice and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Choice's Knowledge, no such Proceeding has been
Threatened.
3.4 Brokers and Finders. Choice and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Quindeca and Short harmless from any
such payment alleged to be due by or through Choice as a result of the action of
Choice or its officers or agents.
11
ARTICLE 4.
TERMINATION
This Agreement may, by notice given prior to or at the Closing, be
terminated by either Choice or by both Quindeca and Short at any time after the
date of this Agreement if the Closing shall not have occurred on the date of
this Agreement.
ARTICLE 5.
INDEMNIFICATION; REMEDIES
5.1 Survival. All representations, warranties and obligations in this
Agreement and the Disclosure Letter will survive the Closing.
5.2 Indemnification and Payment of Damages by Quindeca and Short.
Subject to the provisions set forth below, Quindeca and Short, jointly and
severally, will indemnify and hold harmless Choice and its Representatives,
shareholders and controlling persons (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or warranty made by Quindeca or
Short in this Agreement or the Disclosure Letter;
(b) any Breach by Quindeca or Short of any obligation of such Person
in this Agreement or the Employment Agreement;
(c) any Excluded Liabilities; or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Quindeca or Short (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The amount of Damages computed hereunder for an Indemnified Person shall be
reduced by the amount of proceeds actually received by the Indemnified Person
from any insurance policy covering such Damages. The remedies provided in this
Section 5.2 are the sole and exclusive remedy of each Indemnified Person under
this Agreement for any of the matters covered by clauses (a) through (d) above,
provided that these indemnification provisions are in addition to and not in
derogation of any statutory or common law remedy for fraud that may be available
to any Indemnified Person.
5.3 Indemnification and Payment of Damages by Choice. Subject to the
provisions set forth below, Choice will indemnify and hold harmless Quindeca and
Short, and will pay to Quindeca and Short the amount of any Damages arising,
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Choice in this Agreement or in any
certificate delivered by Choice pursuant to this Agreement, (b) any Breach by
Choice of any covenant or obligation of Choice in this Agreement, (c) any
liability included within the Assumed Liabilities, or (d) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with Choice (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions. The amount of Damages computed hereunder for
Quindeca and Short shall be reduced by the amount of proceeds actually received
by Quindeca or Short from any insurance policy covering such Damages. The
remedies provided in this Section 5.3 are the sole and exclusive remedy
12
of Quindeca and Short under this Agreement for any of the matters covered by
clauses (a) through (d) above, provided that these indemnification provisions
are in addition to and not in derogation of any statutory or common law remedy
for fraud that may be available to Quindeca or Short.
5.4 Time Limitations.
(a) If the Closing occurs, Quindeca and Short will have no liability
(for indemnification or otherwise) with respect to any matters covered by
paragraphs (a) or (b) of Section 5.2, or paragraph (c) of Section 5.2, other
than those specified in Section 2.6 and for the amount of any Excluded
Liabilites paid by any Indemnified Person, unless on or before the date one year
after the Closing Date an Indemnified Person notifies Short of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Choice. A claim with respect to the matters covered by Section
2.6, for the amount of any Excluded Liabilities paid by any Indemnified Person,
or the matters covered by paragraph (d) of Section 5.2 or any other claim not
based upon any matter covered by paragraphs (a), (b) or (c) of Section 5.2 may
be made at any time. For the avoidance of doubt, the parties agree that the time
limitations decribed in the first sentence above apply to any Damages incurred
by any Indemnified Person in connection with the Excluded Liabilities, such as
legal costs and expenses, but do not apply to the actual payment of any Excluded
Liabilities by any Indemnified Person.
(b) If the Closing occurs, Choice will have no liability (for
indemnification or otherwise) with respect to any matters covered by paragraphs
(a) or (b) of Section 5.3, unless on or before the date one year after the
Closing Date Short notifies Choice of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Quindeca and Short.
Any other claim with respect to the matters covered by paragraph (c) or (d) of
Section 5.3 or any other claim not based upon any matter covered by paragraphs
(a) or (b) of Section 5.3 may be made at any time.
5.5 Limitations on Amount--Quindeca and Short. Quindeca and Short will
have no liability (for indemnification or otherwise) with respect to the matters
described in clause (a) or (b) of Section 5.2, or paragraph (c) of Section 5.2,
until the total of all Damages with respect to such matters exceeds $10,000, and
then only for the amount by which such Damages exceed $10,000; provided that
these limits will not apply to any Breach of any of the representations and
warranties of Quindeca and Short of which either Quindeca or Short had Knowledge
at any time prior to the date on which such representation and warranty is made
or any intentional Breach by Quindeca or Short of any covenant or obligation,
and Quindeca and Short will be jointly and severally liable for all Damages with
respect to such Breaches. Notwithstanding any other provision of this
Agreement, the aggregate liability of Quindeca and Short under this Agreement to
Indemnified Persons under paragraphs (a), (b) or (c) of Section 5.2 (other than
for Breaches of Section 2.6 and for the amount of any Excluded Liabilities paid
by any Indemnified Person) will be limited to $188,889. In any event, the
matters excluded from this dollar limitation of $188,889 shall be counted in
determining whether this dollar limitation has been exceeded. For the avoidance
of doubt, the parties agree that the amount limitations decribed above apply to
any Damages incurred by any Indemnified Person in connection with the Excluded
Liabilities, such as legal costs and expenses, but do not apply to the actual
payment of any Excluded Liabilities by any Indemnified Person. No Indemnified
Person will pay any Excluded Liabilities except in compliance with the
procedures provided in Section 5.7 of this Agreement.
5.6 Limitations on Amount--Choice. Choice will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 5.3 until the total of all Damages with respect to such
matters exceeds $10,000, and then only for the amount by which such Damages
13
exceed $10,000. However, this Section 5.6 will not apply to any Breach of any of
Choice's representations and warranties of which Choice had Knowledge at any
time prior to the date on which such representation and warranty is made or any
intentional Breach by Choice of any covenant or obligation, and Choice will be
liable for all Damages with respect to such Breaches. Notwithstanding any other
provision of this Agreement, the aggregate liability of Choice under this
Agreement to Quindeca and Short under paragraphs (a) and (b) of Section 5.3 will
be limited to $188,889.
5.7 Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 5.2
or 5.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 5.7(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Federal or state income Taxes of the indemnified party, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Article 5 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, 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. Neither the
indemnified party nor the indemnifying party may concede, settle or compromise
any claim without the consent of the other party, which consent will not be
unreasonably withheld.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) The parties hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on any party with respect to such a claim anywhere in the
world.
14
5.8 Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
5.9 Other Limitations. Any indemnification payable under Section 5.2
shall be, to the extent permitted by law, an adjustment to the Purchase Price.
No indemnification payable under Section 5.2 of this Agreement may be offset in
any manner against obligations or amounts owed by Choice to Short under the
Employment Agreement, except as specified in the Employment Agreement. Each
indemnified person shall have the duty to use its commercially reasonable
efforts to mitigate the amount of any Damages that the indemnified person may
suffer as a result of or arising out of or relating to any breach of a
representation or warranty or failure to perform any covenant under this
Agreement, provided that the indemnified party shall be entitled to recover from
the indemnifying party mitigation costs incurred by the indemnified party.
There shall be no indemnification obligation under this Article 5 for any
indirect, special or consequential damages of the indemnified persons.
ARTICLE 6.
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 6:
"Acquired Assets" means all right, title, and interest in and to all of the
assets of Quindeca, including but not limited to all of its (a) real property,
leaseholds and subleaseholds therein, improvements, fixtures, and fittings
thereon, and easements, rights-of-way, and other appurtenants thereto (such as
appurtenant rights in and to public streets), (b) tangible personal property
listed in Exhibit 1.4, (c) Intellectual Property Assets, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, (d) leases,
subleases, and rights thereunder, (e) all Applicable Contracts, (f) Governmental
Authorizations, and (g) business goodwill of Quindeca, including customer lists,
any creative materials, advertising and promotional materials, studies, reports,
and other printed or written materials relating to the business of Quindeca;
provided, however, that the Acquired Assets shall not include (i) 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,
blank stock certificates, and other documents relating to the organization,
maintenance, and existence of Quindeca as a corporation, (ii) any of the rights
of Quindeca under any Plans, (iii) Accounts Receivable, notes receivable and
other receivables, (iv) claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes), (v) books
of account, records, ledgers, files, documents, correspondence, lists, (vi) all
cash and cash equivalents (including securities and short term investments) or
(vii) any of the rights of Quindeca under this Agreement.
"Applicable Contract" means any Contract (a) under which Quindeca has or
may acquire any rights, (b) under which Quindeca has or may become subject to
any obligation or liability, or (c) by which Quindeca or any of the assets owned
or used by it is or may become bound.
"Assumed Liabilities" means all obligations of Quindeca under the
Applicable Contracts disclosed in Part 2.9(a) of the Disclosure Letter (except
for any liabilities for breach of any Applicable Contract). "Assumed
Liabilities" shall not include any other liabilities of Quindeca or Short,
15
including without limitation, (i) any liability of Quindeca or Short for Taxes,
(ii) any Liability of Quindeca for the unpaid Taxes of any Person (other than
any of Quindeca and its Subsidiaries) under U.S. Treasury Regulations Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (iii) any obligation of
Quindeca to indemnify any Person (including any shareholder of Quindeca) by
reason of the fact that such Person was a director, officer, employee, or agent
of any of Quindeca and its Subsidiaries or was serving at the request of any
such entity 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), (iv) any liability shown on the
Balance Sheet other than any liability under an Applicable Contract, (v) any
liability of Quindeca under any Plan, (vi) any liability of Quindeca for costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, or (vii) any liability or obligation of Quindeca under this
Agreement.
"Balance Sheet" is defined in Section 2.5.
A "Breach" of a representation, warranty, covenant, obligation, or other
provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"Closing" is defined in Section 1.3.
"Closing Date" is the date and time as of which the Closing actually takes
place.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" mean all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Acquired Assets by Quindeca to Choice;
(b) the assumption by Choice of the Assumed Liabilities;
(c) the execution, delivery, and performance of the Employment Agreement
and the Shareholders Agreement;
(d) the performance by Choice, Quindeca and Short of their respective
covenants and obligations under this Agreement; and
(e) Choice's acquisition and ownership of the Acquired Assets.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Choice" is defined in the first paragraph of this Agreement.
"Damages" is defined in Section 5.2.
"Disclosure Letter" means the disclosure letter delivered by Quindeca and
Short to Choice concurrently with the execution and delivery of this Agreement.
16
"Employment Agreement" means the Employment Agreement to be entered into by
Short with Choice at the Closing.
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities" mean any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"Environmental Law" means any Legal Requirement that is designed to
minimize, prevent, punish, or remedy the consequences of actions that damage or
threaten the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Excluded Liabilities" means all liabilities and obligations of Quindeca
and Short prior to Closing, other than Assumed Liabilities.
"Facilities" mean any real property, leaseholds, or other interests
currently or formerly owned or operated by Quindeca and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by Quindeca.
17
"GAAP" means generally accepted United States accounting principles.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement, other than actions under a Contract with a Governmental Body.
"Governmental Body" means any (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or quasi-
governmental authority of any nature (including any governmental agency, branch,
department, official, or entity and any court or other tribunal); (d) multi-
national organization or body; or (e) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"Intellectual Property Assets" is defined in Section 2.12(a).
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter or a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Occupational Safety and Health Law" means any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Organizational Documents" mean the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to any of the
foregoing.
18
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plans" means all employee benefit plans (as defined in Section 3(3) of
ERISA) and all other profit-sharing, bonus, deferred compensation, stock option,
severance pay, "parachute", insurance, short-term or long-term incentive
compensation, or retirement plan, program, agreement or arrangement sponsored by
Quindeca or to which Quindeca is required to contribute.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price" is defined in Section 1.2.
"Related Person" with respect to a particular individual means: (a) each
other member of such individual's Family; (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity). With respect to a specified Person other
than an individual: (a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person; (b) any Person that holds a Material
Interest in such specified Person; (c) each Person that serves as a director,
officer, partner, executor, or trustee of such specified Person (or in a similar
capacity); (d) any Person in which such specified Person holds a Material
Interest; and (e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) the individual's
brothers, sisters and children, and (iv) any other natural person who resides
with such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of voting securities or other voting interests representing at least
10% of the outstanding voting power or equity interests in a Person.
"Release"means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" means with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Shareholders Agreement" means the Shareholders Agreement to be entered
into by Choice, Quindeca, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and Daily Journal
Corporation at the Closing.
"Subsidiary" means with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
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directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax Return"means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"means a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing).
ARTICLE 7.
GENERAL PROVISIONS
7.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
7.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Choice and Quindeca mutually
agree, except as may be required by Legal Requirements. Quindeca and Short each
acknowledge that, at or subsequent to the Closing Date, Choice's principal
shareholder will be Daily Journal Corporation, which may determine in its sole
discretion whether and how to disclose this Agreement and the Contemplated
Transactions pursuant to the requirements of the Federal securities laws.
Quindeca, Short and Choice will consult with each other concerning the means by
which Quindeca's employees, customers, and suppliers and others having dealings
with Quindeca will be informed of the Contemplated Transactions, and Choice will
have the right to be present for any such communication.
7.3 Confidentiality. Choice, Quindeca and Short will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of Choice and Quindeca to maintain in confidence, and not use to the
detriment of another party any written, oral, or other information obtained in
confidence from another party in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information is
or becomes publicly available through no fault of such party, (b) the use of
such information is necessary or appropriate in making any filing or obtaining
any consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
Legal Requirements.
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If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
7.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Quindeca and Short:
Quindeca Corporation
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Short
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Choice:
CHOICE Information Systems, Inc.
c/o Daily Journal Corporation
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
7.5 Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of Los Angeles, or, if it has or can acquire jurisdiction,
in the United States District Court for the Central District of California, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
7.6 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
7.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative, except as expressly stated in this Agreement.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be
21
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
7.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties, and any prior understandings or
representations, with respect to its subject matter and constitutes (along with
the documents referred to in this Agreement) a complete and exclusive statement
of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
7.9 Disclosure Letter. The disclosures in the Disclosure Letter, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement, unless and only
to the extent such disclosures clearly cross-reference other representations or
warranties in this Agreement. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
7.10 Assignments, Successors and Third-Party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Choice may assign any of its rights under this
Agreement to Daily Journal Corporation or to any Subsidiary of Daily Journal
Corporation or Choice. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
7.11 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
7.12 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
7.13 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
7.14 Governing Law. This Agreement will be governed by the laws of the
State of California without regard to conflicts of laws principles.
7.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
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Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
7.16 Release.
(a) Quindeca and Short hereby release and forever discharge Choice
from any and all claims, demands, Proceedings, causes of action, Orders,
obligations, Contracts, agreements, indebtedness, and liabilities whatsoever,
whether known or unknown, at law or in equity, which Quindeca or Short now have
or have ever had against Choice arising at or prior to the Closing Date or on
account of or arising out of any matter, cause or event occurring at or prior to
the Closing Date, other than sales commissions owed by Choice to Quindeca as of
the date of this Agreement and amounts payable by Choice to Quindeca for
services as a subcontractor of Choice for customers of Choice from July 1, 1998
through the date of this Agreement, in each case to the extent such amounts are
reflected on the Preliminary Balance Sheet or Final Balance Sheet of Choice
(each as defined in the Stock Purchase Agreement being entered into as of the
date hereof among Choice, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and Daily Journal
Corporation), and other than obligations of Choice to Quindeca or Short pursuant
to the terms of this Agreement, the Employment Agreement or the Shareholders
Agreement.
(b) Quindeca and Short hereby irrevocably covenant to refrain from,
directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any Proceeding of any kind against
Choice, based on the matters released hereby.
(c) Quindeca and Short hereby waive any rights which may be conferred
upon them by virtue of Section 1542 of the Civil Code of the State of California
(or any similar statute) which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THIS RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
CHOICE INFORMATION SYSTEMS, INC.
By:___________________________________
Name:
Title:
QUINDECA CORPORATION
By:___________________________________
Name:
Title:
/s/ ▇▇▇▇▇ ▇. Short
______________________________________
▇▇▇▇▇ ▇. Short
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