Exhibit 10.4
ASSET ACQUISITION AGREEMENT
Asset Acquisition Agreement (this "Agreement") by and among
The Ultimate Software Group of Northern California, Inc., an Illinois
corporation ("Assignor"), The Ultimate Software Group, Inc., a Delaware
corporation (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("Petrushka") dated as of
February 20, 1998.
WHEREAS, the predecessor of Assignor entered into the
Exclusive Reseller Agreement (the "Reseller Agreement") dated February 7, 1995
with The Ultimate Software Group, Ltd. (the "Partnership"), the assets and
liabilities of which were subsequently assigned to and assumed by the Company;
WHEREAS, Assignor desires to assign and transfer to the
Company, and the Company desires to assume from Assignor, certain business
assets and liabilities of Assignor pursuant to the terms hereof;
WHEREAS, the transactions contemplated hereby are intended to
be treated as a pooling of interests business combination by the Company for
financial accounting purposes and as a tax free reorganization for United
States federal income tax purposes;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Assignment. Subject to the terms hereof, Assignor, upon
the Closing Date (as defined below), shall assign, convey, transfer and deliver
to the Company all right, title, benefits and interest in the assets described
on Schedule I hereto except that in the case of Custom Applications (as defined
below) Assignor shall transfer only its interest therein including the source
code (the "Assets") and deliver assignment documents in form and substance
reasonably satisfactory to the Company with respect to such Assets in exchange
for (i) the assumption by the Company of Assignor's obligations, duties and
liabilities described on Schedule II hereto (the "Assumed Liabilities") and
(ii) 12,914 shares (the "Shares") of Class B Common Stock of the Company.
2. Reseller Agreement. Each of the parties hereto agrees that
because the Reseller Agreement is among the Assets being acquired by the
Company hereunder, any rights of Assignor and its affiliates arising thereunder
shall terminate on the Closing Date; provided, however, that the provisions of
this Section 2 shall not constitute a waiver by the Assignor of its rights to
make claims against the Company for indemnification for claims made against it
with respect to the Company's products, other than claims related to Custom
Applications.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to and agrees with Assignor as follows:
(a) Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
power and authority to carry on its business as now conducted and as
proposed to be conducted, and the Company has all requisite power and
authority to enter into and perform this Agreement and the
transactions contemplated hereby.
(b) Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the
authorization, issuance (or reservation for issuance) and delivery of
the Shares and any interest therein has been taken or will be taken
prior to the Closing Date.
(c) Valid Issuance of Shares. The Shares, when issued and
delivered in accordance with the terms hereof, (i) will be duly and
validly issued, fully paid and nonassessable, (ii) will be free of any
pledges, liens, security interests, claims or other encumbrances of
any kind, and (iii) will be issued in compliance with all applicable
federal and state securities laws.
(d) Prospectus. The Company shall provide Assignor with the
preliminary and final prospectuses with respect to its proposed
initial public offering of common stock and any amendments thereto,
promptly after the Company's Registration Statement and amendments
thereto containing such prospectuses are filed with the Securities and
Exchange Commission (the "SEC").
(e) Percentage Interest. As of the Closing Date, the Shares
will represent at least 0.904% of the outstanding capital stock of the
Company on a fully diluted basis determined as if all outstanding
shares of such capital stock had been converted into one class of
common stock of the Company and all then existing options were
exercised on that date.
(f) No Brokers. The Company has not engaged any broker,
finder or any third party who is entitled to any fee or commission in
connection with the transactions contemplated hereby.
(g) Charter. Attached hereto as Exhibit B is a true and
complete copy of the Third Amended and Restated Certificate of
Incorporation of the Company, as amended, and such Third Amended and
Restated Certificate of Incorporation, as amended, is in full force
and effect as of the date hereof.
(h) Reseller Agreement. To the Company's knowledge, Assignor
has not materially breached any of its obligations under the Reseller
Agreement as of the date hereof.
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4. Representations and Warranties of Assignor and Petrushka.
Assignor and Petrushka hereby jointly and severally represent and warrant to
and agree with the Company as follows:
(a) Assets. Assignor is the legal and beneficial owner of the
Assets, free and clear of any lien, charge, encumbrance or adverse
claim, except as set forth on Schedule II hereto, and has the legal
authority to transfer the Assets. There are no assets used in, or
necessary for the operation of, the business of Assignor as presently
operated (the "Business") other than the Assets. The Assets are
substantially all of the assets of Assignor.
(b) Liabilities; Litigation. Assignor has no known
liabilities, fixed or contingent, including contractual liabilities,
other than the Assumed Liabilities. There is no pending or, to the
knowledge of Assignor, threatened action or proceeding affecting the
Assets or the Business before any court, governmental agency or
arbitrator, which may materially adversely affect the Assets or the
Business or which could affect the legality, validity or
enforceability of this Agreement.
(c) Consents; No Conflicts. The execution, delivery and
performance of this Agreement by Assignor and Petrushka and the
consummation by Assignor and Petrushka of the transactions
contemplated hereby (x) do not contravene (i) Assignor's
organizational documents, (ii) any law or (iii) any contractual
restriction binding on or affecting Assignor or Petrushka and (y)
except as set forth on Schedule IV, do not require the consent,
approval, permission or other authorization of any court, arbitrator
or governmental, administrative or self-regulatory authority or
consent under any material lease, license, agreement or other material
instrument of Assignor, Petrushka or the Business and (z) do not
require any stockholder, director, partnership or other authorization
or action, other than authorizations that have been duly obtained or
will be obtained prior to the Closing Date and actions that have been
duly taken or will be taken prior to the Closing Date.
(d) Financial Statements. Assignor has delivered to the
Company any and all financial information of Assignor to enable the
Company to prepare annual and quarterly financial statements for
Assignor, for the years ended December 31, 1995, December 31, 1996 and
December 31, 1997 (the "Financial Statements"). The financial
statements have been reviewed by Assignor and fairly present, in all
material respects, the financial position and results of operations as
of the dates and for the periods indicated therein.
(e) No Brokers. Assignor has not engaged any broker, finder
or any other third party who is entitled to any fee or commission in
connection with the transactions contemplated hereby.
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(f) Investor Certificates. Within 10 days after the date
hereof or, if earlier, on the Closing Date, the Assignor shall deliver
a certificate of each shareholder of the Assignor in the form attached
hereto as Exhibit A.
(g) Investment Intent. Assignor (i) has such knowledge,
sophistication and experience in business and financial matters that
it is capable of evaluating the merits and risks of an investment in
the Shares and any interest therein, (ii) can bear the economic risk
of an investment in the Shares and any interest therein for an
indefinite period of time and can afford a complete loss of such
investment, and (iii) is acquiring the Shares and any interest therein
for its own account and not with a view to, or for a sale in
connection with, a distribution in violation of any applicable
securities laws of any jurisdiction.
(h) No Registration. Assignor understands that the offering
and the issuance of the Shares have not been and will not be
registered or qualified under the laws of any jurisdiction regarding
the offering or sale of securities, and that the Shares and any
interest therein may not be resold or otherwise transferred by
Assignor unless any such subsequent sale or transfer is duly
registered and qualified under the applicable securities laws or is
exempt from such registration and qualification.
(i) Access to Information. Assignor (i) has been furnished
with, and hereby acknowledges the receipt and review of, (a) a copy of
a draft (the "Draft Prospectus") of the Preliminary Prospectus of the
Company dated December 31, 1997 and any attachments thereto, (b) the
audited financial statements of the Company for the fiscal years ended
December 31, 1995 and December 31, 1996, respectively, and (c)
unaudited financial statements of the Company as of and for the period
ended September 30, 1997, (ii) has been afforded the opportunity to
obtain such additional information from the Company and its
representatives as Assignor has deemed necessary in order to evaluate
the merits, risks and other considerations relating to an acquisition
of Shares and any interest therein, (iii) fully understands the risks
and other considerations relating to the investment contemplated
hereby, and (iv) with respect to tax, employee benefits and other
financial and economic considerations related to the investment
contemplated hereby, has relied solely on the advice of Assignor's own
professional advisors.
(j) Draft Prospectus. Assignor understands that (i) the Draft
Prospectus is a preliminary draft and that future drafts may contain
material changes from the Draft Prospectus and (ii) there can be no
assurance that an initial public offering of the Company's stock will
be consummated in the near future or ever or that the Registration
Statement filed in connection therewith will be declared effective by
the SEC.
(k) Assignor Information. All written information which
Assignor has heretofore furnished or furnishes herewith to the Company
in connection with the transactions contemplated hereby is correct and
complete in all respects as of the date of this Agreement, and if
there should be any change in such information
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prior to the consummation of the transactions contemplated hereby,
Assignor will immediately furnish such revised or corrected
information to the Company.
(l) Schedule of Contracts. Attached hereto as Schedule V is a
true and complete list of all oral and written contracts and
agreements entered into by Assignor through the date hereof. Complete
copies of all such written contracts and complete descriptions of all
such oral contracts have been delivered to the Company.
(m) Certain Accounting Matters. Assignor has not knowingly
taken or agreed to take any action that would prevent the Company from
accounting for the transactions contemplated hereby as a pooling of
interest business combination.
(n) Shareholder Agreements. Assignor acknowledges that it is
the parties' intention that the transactions contemplated by this
Agreement be accounted for as a pooling of interests business
combination and that each of the shareholders of Assignor may be
deemed to be an "affiliate" of Assignor within the meaning of Rule 145
promulgated under the Securities Act. Accordingly, Assignor shall
deliver within 10 days after the date hereof or, if earlier, on the
Closing Date, an agreement of each shareholder of Assignor wherein
such shareholder covenants and agrees that he, she or it will not (i)
knowingly take any action after the date hereof to cause the
transactions contemplated hereby not to be accountable under the
pooling of interests method of accounting, or (ii) sell, transfer,
pledge, dispose of or otherwise part with any interest in or with
respect to, or in any other manner reduce his, her or its investment
risk with respect to, (A) any shares of capital stock of Assignor at
any time prior to the Closing Date, and (B) any shares of the
Company's stock received by such shareholder in connection with the
transactions contemplated hereby or otherwise until such time as the
Company publishes financial results covering at least 30 days of
combined operations of the Company and Assignor or (iii) from the
Closing Date until the time the Company publishes financial results
covering at least thirty days of combined operations of the Company
and Assignor, directly or indirectly sell or purchase or enter into
any agreement, contract or arrangement to sell or purchase any put or
call options or other derivative securities (including any short
sales) with respect to shares of the Company's stock or enter into any
other agreements, contracts or arrangements providing for the
alteration of such shareholder's investment risk with respect to the
Shares.
(o) Reseller Agreement. To Assignor's knowledge, the Company
has not materially breached any of its obligations under the Reseller
Agreement as of the date hereof.
(p) Purchaser Representative. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ has agreed to
act as the purchaser representative of any Shareholders who are not
"accredited investors" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.
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5. Securities Laws. Assignor hereby acknowledges and agrees
that:
(a) Subject to Assignor's right to distribute the Shares to
its current shareholders, the Shares must be held indefinitely unless
subsequently registered under the Securities Act and under any
applicable state securities laws or unless an exemption from such
registration is available.
(b) the Shares will not be registered under the Securities
Act on the grounds that the offering and sale thereof contemplated by
this Agreement will be exempt from registration under the Securities
Act, and that the Company's reliance upon such exemption is predicated
upon the representations of Assignor set forth herein.
(c) "stop transfer" instructions shall be placed against the
Shares on the transfer books of the Company and that the
certificate(s) evidencing the Shares shall bear a legend, in addition
to any legend required by applicable state securities laws, in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED
OF FOR VALUE UNLESS A REGISTRATION STATEMENT HAS BECOME
EFFECTIVE WITH RESPECT TO SUCH SECURITIES UNDER THE
SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR IN THE
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION
THERE IS AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND THE APPLICABLE STATE
SECURITIES LAWS OR SUCH REGISTRATION IS NOT OTHERWISE
REQUIRED."
6. Due Diligence; Termination. (a) Assignor shall afford any
and all authorized representatives of the Company access, during
normal business hours, to its employees, properties, books, contracts
and records and shall furnish promptly all information concerning its
business, properties and personnel and copies of any of its books,
records or contracts as the Company or its representatives shall
request; provided, that no investigation pursuant to this Section 6
shall effect or be deemed to modify any representation or warranty
made in this Agreement by Assignor.
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(b) Until the earlier of (i) the Closing Date and (ii) the
date which is ten days after the Company prepares the Financial
Statements of Assignor pursuant to Section 4(d) hereof, the Company
shall have the right to terminate this Agreement if the Company shall
determine in its sole discretion, based on its investigation of
Assignor pursuant to Section 6(a) or a review of such Financial
Statements, that consummating the transactions contemplated hereby
would not be in the best interests of the Company.
(c) The Company shall have the right to terminate this
Agreement if the Company does not receive requisite approval of the
transactions contemplated hereunder from its preferred stockholders on
or before February 22, 1998.
7. Closing. Subject to the satisfaction or waiver of (i)
Section 6(c) hereof and (ii) the conditions set forth in Section 9
hereof, consummation of the transactions contemplated by Section 1
hereof (the "Closing") shall take place at the offices of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
on a date (the "Closing Date") which is the earlier of (a) March 31,
1998 and (b) the date specified in a written notice given by the
Company no less than five (5) days prior to such date.
8. Covenants.
(a) Interim Operations. Prior to the Closing Date, unless the
Company has consented in writing thereto, Assignor:
(i) shall conduct its operations according to its usual,
regular and ordinary course in substantially the
same manner as heretofore conducted;
(ii) shall use its reasonable efforts to preserve intact
its business organization and goodwill and maintain
satisfactory relationships with those persons having
business relationships with it;
(iii) shall promptly notify the Company of (x) any
material change in its condition (financial or
otherwise), business, properties, assets,
liabilities or the normal course of its business or
of its properties, (y) any material litigation or
material governmental complaints, investigations or
hearings (or communications indicating that the same
may be contemplated), or (z) the breach of any
representation or warranty contained herein;
(iv) shall not issue any shares of its capital stock or
securities;
(v) shall not (w) incur, create, assume or otherwise
become liable for borrowed money or assume,
guarantee, endorse or otherwise become responsible
or liable for the obligations of any other
individual, corporation or other entity, (x) make
any loans or advances to any other person, except in
each case in the ordinary
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course of business, (y) acquire (including, without
limitation, for cash or shares of stock, by merger,
consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or
other business organization or division thereof or
any assets, or make any investment either by
purchase of stock or securities, contributions of
capital or property transfer or, except in the
ordinary course of business, consistent with past
practice, purchase any property or assets of any
other person or (z) effect a sale or other
disposition of any of the Assets or allow the
creation of any lien or encumbrance thereon;
(vi) shall not (x) declare, set aside or pay any dividend
or make any other distribution or payment with
respect to any shares of its capital stock or other
ownership interests or (y) directly or indirectly
redeem, purchase or otherwise acquire any shares of
its capital stock or make any commitment for any
such action;
(vii) shall not amend or otherwise change its articles of
incorporation or bylaws or equivalent organizational
documents
(viii) shall not increase the compensation payable or to
become payable to its officers or employees, pay any
employment related or other bonus to its
shareholder, or, except as presently bound to do,
grant any severance or termination pay to, or enter
into any employment or severance agreement with, any
of its directors, officers or other employees;
(ix) shall not take any action other than in the ordinary
course of business and in a manner consistent with
past practice with respect to accounting policies or
procedures; and
(x) shall not agree, in writing or otherwise, to take
any of the foregoing actions or take any action
which would make any representation or warranty in
this Agreement untrue or incorrect as of the Closing
Date.
(b) Trading in Company Stock. Except as otherwise expressly
consented to by the Company, from the date of this Agreement until the
Closing Date, Assignor will not directly or indirectly purchase or
sell (including short sales) any shares of the Company's stock, or
sell, transfer, pledge, dispose of or otherwise part with any interest
in or with respect to or in any other manner reduce its investment
risk with respect to any shares of the Company's stock to be received
pursuant to this Agreement.
(c) Confidentiality of Prospectus. Assignor acknowledges and
agrees that the Draft Prospectus is highly confidential, that it may
not be photocopied, distributed or otherwise communicated to persons
other than Assignor, Assignor's
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shareholders and the respective representatives thereof, and that upon
receipt by Assignor of a preliminary or final prospectus of the
Company, the Draft Prospectus will be returned to the Company.
(d) Custom Applications. Assignor shall provide on the date
hereof a Schedule VI which lists by customer, all custom applications,
including, without limitation, custom programs, modules and interfaces
(other than software purchased by Assignor from the Company) ("Custom
Applications") which have been provided to any customer of the
Assignor. Assignor shall provide source code with respect to all
Custom Applications on or before the Closing Date.
(e) Assignor's Name. From and after the Closing, Assignor
shall not use the name "The Ultimate Software Group" or any expression
containing the word "Ultimate" or "US Group", or expression similar
thereto or derivative in whole or in part therefrom. As promptly as
practicable (and in any event within thirty days) following the
Closing, Assignor will change its name to a name complying with the
immediately preceding sentence, and shall deliver to the Company
written evidence of such name change.
(f) Cooperation; Tax Schedule. Following the Closing Date,
Assignor shall promptly forward to the Company such financial and
reporting data and other information with respect to the Assets and
Assumed Liabilities as the Company may from time to time reasonably
request, for any reasonable business purpose, including, without
limitation, the preparation of tax returns and financial statements.
Within sixty (60) days following the Closing Date, Assignor shall
prepare and deliver to the Company a schedule indicating the federal
income tax basis and state income basis, if different, of each of the
Assets and Assumed Liabilities.
(g) Options. The Company hereby agrees that from the date
hereof until April 30, 1998, the Company will not issue any options to
purchase shares of capital stock of the Company to any persons who are
officers of the Company as of the date hereof.
(h) Piggyback Registration Rights. (i) If at any time within
one year following the Closing Date the Company proposes to
register (including for this purpose a registration effected
by the Company for shareholders of the Company other than
Assignor or Assignor's existing shareholders) securities
under the Securities Act of 1933 in connection with a public
offering solely for cash on Form ▇-▇, ▇-▇ or S-3 (or any
replacement or successor forms), the Company shall promptly
give each person or entity which is a shareholder of Assignor
on the date hereof (each a "Holder") written notice of such
registration (a "Piggyback Registration"). Upon the written
request of each Holder given within 20 days following the
date of such notice, the Company shall, subject to Section
8(h)(ii), cause to be included in such registration statement
and use its best efforts to be registered under the
Securities Act all Shares that each such Holder shall
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have requested to be registered; provided, however, that such
right of inclusion shall not apply to (i) the registration
statement for the initial public offering of the Company's
securities, or (ii) any registration statement covering an
underwritten offering of convertible debt securities, unless
the underwriters' representative or agent expressly consents
thereto. The Company shall have the absolute right to
withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 8(h)
without any obligation or liability to any Holder.
(ii) If the underwriters' representative or agent shall
advise the Company in writing (with a copy to each Holder
that requests that its securities be included in such
registration) that, in the opinion of the underwriter,
marketing factors require a limitation of the number of
securities requested to be included in such registration,
then the Company will include in such registration, to the
extent of the amount and class which the Company is so
advised can be sold without such material adverse effect in
such offering: first, all securities proposed to be sold by
the Company for its own account; second, all securities
requested to be included in such registration by ▇.▇. ▇▇▇▇▇▇
Investment Corporation, Sixty Wall Street SBIC Fund, L.P.,
HarbourVest Partners V-Direct Fund L.P. and their respective
permitted assigns; third, the Shares requested to be included
in such registration by Holders pursuant to this Section
8(h), and all other securities being registered pursuant to
the exercise of contractual rights comparable to the rights
granted in this Section 8(h), in proportion (as nearly as
practicable) to the amount of such Shares and securities of
the Company owned by each holder thereof requesting inclusion
of such Shares and securities in such registration; and
fourth, all other securities requested to be included in such
registration.
(iii) The Company shall bear and pay all expenses
incurred in connection with any registration, filing or
qualification of Shares with respect to a registration
pursuant to this Section 8(h), including without limitation
all registration, filing, and qualification fees, printers'
and accounting fees relating or apportionable thereto and the
fees and disbursements of one counsel for all holders of the
Company's securities being registered in such registration
(selected by the holders of a majority of such securities
being registered), but excluding underwriting discounts and
commissions relating to the Shares being registered.
(i) Material Changes of the Company. Prior to the Closing
Date, the Company shall promptly notify the Assignor of (x) any
material change in its condition (financial or otherwise), business,
properties, assets, liabilities or normal course of its business or
its properties, (y) any material litigation or material governmental
complaints, investigations or hearings (or communications indicating
that the same may be contemplated), or (z) the breach of any
representation or warranty contained herein.
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(j) Consents. Upon request of the Company, Assignor shall use
its reasonable efforts (which shall not include the payment of any
consideration) to obtain any and all consents required in connection
with the transactions contemplated by this Agreement. The Company
shall reasonably cooperate (which shall not include the payment of any
consideration) with Assignor in obtaining such consents.
(k) Transfer of Shares. Following the Closing, on written
request of Assignor, and redelivery of the Shares originally issued in
the name of Assignor on the Closing Date, the Company shall reissue
the Shares in the names of those persons and entities which are
shareholders of Assignor on the date hereof (as specified by
Petrushka) and shall record such shareholders as the owners of the
Shares in the share register maintained by the Company or its agent.
Such reissued shares shall be returned promptly to Assignor for
delivery to Assignor's shareholders and shall be subject to the terms
of this Agreement, including without limitation Section 5 hereof.
(l) Information. Upon the earlier of (i) 60 days following
the initial public offering of the Company's common stock and (ii) 330
days after the Closing Date, upon Assignor's request, the Company will
promptly provide Assignor with such information as shall be necessary
to allow Assignor to verify the accuracy of the representation made in
Section 3(e) hereof.
9. Conditions to Closing. (a) The obligations of the Company
under this Agreement are subject to the fulfillment or waiver on or before the
Closing Date of the following conditions:
(i) Representations and Warranties. The representations
and warranties of Assignor contained in Section 4
shall be true on and as of the Closing Date with the
same effect as though such representations and
warranties had been made on and as of the Closing
Date.
(ii) Performance. Assignor shall have performed and
complied with all agreements, obligations and
conditions contained in this Agreement.
(iii) No Material Adverse Change. There shall have been no
material adverse change in the condition of Assignor
or the Assets since the date hereof.
(iv) Pooling Letter. The Company shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇▇"), a letter dated the
Closing Date, confirming that the transactions
contemplated hereby, if consummated, can properly be
accounted for as a pooling of interests combination
in accordance with GAAP and the criteria of
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Accounting Principles Board Opinion No. 16 and the
regulations of the SEC.
(v) Approvals. The Company shall have obtained all
requisite approvals of its Board of Directors and
stockholders for the transactions contemplated by
this Agreement.
(vi) Balance Sheet. Assignor shall have delivered to the
Company sufficient financial information in order
for the Company to prepare a balance sheet of the
Assignor, dated as of the day prior to the Closing
Date, prepared in accordance with Assignor's
accounting practices, consistently applied, and
which shall be subject to review or audit by
▇▇▇▇▇▇▇▇ at the sole discretion of the Company.
Assignor shall reasonably cooperate with the Company
and ▇▇▇▇▇▇▇▇ in the preparation of a balance sheet
dated as of the Closing Date, prepared in accordance
with generally accepted accounting principles. Such
balance sheet shall demonstrate that the assets of
Assignor, other than the Reseller Agreement and
other intangible assets, have an aggregate value
greater than the aggregate value of the liabilities
of Assignor; provided, that in the event the
aggregate value of the liabilities exceeds the value
of such assets, Assignor shall pay the Company, as
additional consideration for the Shares, such
difference within five days of the receipt of such
balance sheet dated as of the Closing Date provided
that such payment shall not be considered an act of
Assignor for purposes of Section 4(m) hereof.
(vii) Updated Schedules. Assignor shall have prepared and
delivered to the Company updated Schedules I, II,
IV, V and VI which reflect, as of the Closing Date,
the information required to be stated therein.
(viii) Other Documents. The Company shall have received
such other documents as it shall reasonably request
prior to the Closing.
(b) The obligations of Assignor under this Agreement are
subject to the fulfillment or waiver on or before the Closing Date of
each of the following conditions:
(i) Representations and Warranties. The representations
and warranties of the Company contained in Section 3
and in Schedule III hereto shall be true on and as
of the Closing Date with the same effect as though
such representations and warranties had been made on
and as of the date thereof.
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(ii) No Material Adverse Change. There shall have been no
material adverse change in the condition of the
Company since the date hereof.
(iii) Delivery of Shares. The Company shall have delivered
the Shares specified in Section 1.
10. Certain Tax Matters. The parties to this Agreement intend
that the transactions contemplated hereby (and the distribution of the Shares
of the Company to the Assignor's shareholders) (collectively, the
"Transaction") will constitute a reorganization described in Section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the "Code") and
each party agrees that it will not knowingly take any action which would result
in the Transaction not so qualifying. However, each of the parties to this
Agreement acknowledges that it is relying solely upon its respective advisors
in determining the tax consequences of the Transaction and will not rely on any
representation or assurance of the other party other than the representations
and covenants set forth in this Agreement or any other agreement or certificate
delivered in connection herewith. None of the Company, the Assignor or the
shareholders of the Assignor will take any tax reporting position or make any
tax election inconsistent with the characterization of the Transaction
qualifying as a reorganization described in Section 368(a)(1)(C) of the Code,
except as may be required upon examination (or as the result of a prior
determination) by the Internal Revenue Service or any other tax authority.
11. Waiver. Subject to the consummation of the transactions
contemplated hereby, except as provided in Section 2 hereof, each of the
parties hereto hereby releases and discharges the other party, its partners,
employees, parents, subsidiaries, affiliates, successors and assigns from all
actions, causes of action, suits, debts, agreements, judgments, claims, and
demands whatsoever, in law or equity which such party ever had, now have or
hereafter can, shall or may have, for, upon or by reason of any claim relating
to the Reseller Agreement and the relationship of the parties thereunder.
12. Indemnification. (a) Assignor and Petrushka hereby
jointly and severally agree to indemnify and hold harmless the Company and any
fiduciary, officer, director, employee, agent or controlling person of the
Company (each, an "Indemnified Person") against any and all losses, claims,
damages, expenses and liabilities (or actions in respect thereof) whatsoever by
reason of or arising from (i) any breach of the representations and warranties
of this Agreement, (ii) any failure by the Assignor to comply with any covenant
in this Agreement and (iii) any liabilities whether known or unknown, fixed or
contingent (including contractual liabilities) of Assignor or any of its
affiliates, other than the Assumed Liabilities provided, however that ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ will only be liable under this Section 12(a) for up to an aggregate
amount equal to $1.6 million. Assignor will reimburse any Indemnified Person
for all expenses (including reasonable attorneys' fees) as they are incurred by
any such Indemnified Person in connection with investigating, preparing or
defending any such action or claim, whether or not in connection with pending
or threatened litigation in which any Indemnified Person is a party.
13
(b) The Company hereby agrees to indemnify and hold harmless
the Assignor and Petrushka and any fiduciary, officer, director,
employee, agent or controlling person of the Operating Company (each,
an "Indemnified Person") against any and all losses, claims, damages,
expenses and liabilities (or actions in respect thereof) whatsoever by
reason of or arising from (i) any breach of the Company's
representations and warranties in this Agreement and (ii) any failure
by the Company to comply with any of its covenants in this Agreement.
The Company will reimburse any Indemnified Person for all expenses
(including reasonable attorneys' fees) as they are incurred by any
such Indemnified Person in connection with investigating, preparing or
defending any such action or claim, whether or not in connection with
pending or threatened litigation in which any Indemnified Person is a
party.
(c) Promptly after the receipt by any party hereto of notice
of any third party claim or the commencement of any third party
action, suit or proceeding subject to indemnification hereunder (a
"Third Party Claim"), such party (the "Indemnified Party") will, if a
claim in respect thereto is to be made against any party obligated to
provide indemnification hereunder (the "Indemnifying Party"), give
such Indemnifying Party reasonable written notice of such Third Party
Claim; provided, however, that the failure to provide such notice will
not relieve the Indemnifying Party of any of its or his obligations,
or impair the right of the Indemnified Party to indemnification,
pursuant to this Section 12 unless, and only to the extent that, such
failure materially prejudices the Indemnifying Party's opportunity to
defend or compromise the Third Party Claim. Such Indemnifying Party
shall have the right, at its option, to defend at its own expense and
by its own counsel any Third Party Claim, provided that (i) the
Indemnifying Party acknowledges in writing (at the time such
Indemnifying Party elects to assume such defense) its obligation under
this Section 12 to indemnify the Indemnified Party with respect to
such Third Party Claim, (ii) such counsel is reasonably satisfactory
to the Indemnified Party, (iii) the Indemnified Party is kept fully
informed of all developments, and is furnished with copies of all
documents and papers, related thereto and is given the right to
participate in the defense and investigation thereof as provided
below, and (iv) such counsel proceeds with diligence and in good faith
with respect thereto. If the Indemnifying Party shall undertake to
defend any Third Party Claim, such Indemnifying Party shall notify the
Indemnified Party of its intention to do so promptly (and in any event
no later than thirty (30) days) after receipt of notice of the Third
Party Claim, and the Indemnified Party agrees to cooperate in good
faith with the Indemnifying Party and its counsel in the defense of
such Third Party Claim. Notwithstanding the foregoing, the Indemnified
Party shall have the right to participate in the defense and
investigation of any Third Party Claim with its own counsel at its own
expense, except that the Indemnifying Party shall bear the expense of
such separate counsel if (A) in the written opinion of counsel to the
Indemnified Party reasonably acceptable to the Indemnifying Party, use
of counsel of the Indemnifying Party's choice would be expected to
give rise to a conflict of interest, (B) there are or may be legal
defenses available to the Indemnified Party
14
that are different from or additional to those available to the
Indemnifying Party, (C) the Indemnifying Party shall not have employed
counsel to represent the Indemnified Party within a reasonable time
after notice of the Third Party Claim is given to the Indemnifying
Party or notice that the Indemnifying Party intends to assume the
defense of the Third Party Claim is given to the Indemnified Party or
(D) the Indemnifying Party shall authorize the Indemnified Party to
employ separate counsel at the expense of the Indemnifying Party. The
Indemnifying Party shall not settle any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be
unreasonably withheld; provided, however, that an Indemnified Party
shall not be required to consent to any settlement involving the
imposition of equitable remedies.
13. Miscellaneous.
(a) Notices Any notices or other communications required or
permitted to be given or delivered under this Agreement shall be in
writing and shall be sufficiently given to a party if delivered
personally or mailed by registered or certified mail, postage prepaid,
return receipt requested, or by overnight delivery by a
nationally-recognized courier or by telecopier, as follows (or to such
other address or person as either party may from time to time
designate to the other in writing):
To Assignor or Petrushka:
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
The Ultimate Software Group of Northern California, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
To the Company:
The Ultimate Software Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice or other communication shall be deemed to be given as of the
date it is personally delivered, five (5) days after being deposited in the
United States mail, one (1) day after being deposited with a nationally
recognized courier for overnight delivery or the date it is transmitted via
telecopier, answerback received (followed promptly by delivery of such notice
in accordance with one of the other methods above).
(b) Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of all of the parties and their
successors, legal representatives and assigns. Neither party hereto
may transfer its rights hereunder
15
without the prior written consent of the other party, which consent
may be given or withheld for any reason or no reason.
(c) Severability. If any provision hereof is held to be
illegal or unenforceable, such provision shall be fully severable, and
the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by such provision's severance;
provided, however, that if a court of competent jurisdiction shall
determine that any provision hereof is illegal or unenforceable, the
parties hereto will accept the written decision of such court as to
what would be enforceable, and the parties shall use reasonable
efforts, including, but not limited to the amendment of this
Agreement, to ensure that this Agreement shall reflect as closely as
practicable the intent of the parties hereto.
(d) Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto
had signed the same document. All counterparts shall be construed
together and shall constitute one instrument.
(e) Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings
pertaining thereto.
(f) Governing Law. This Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of
the State of Delaware, and all rights and remedies shall be governed
by such laws without regard to principles of conflict of laws.
(g) State Securities Laws. The offer and sale of the Shares
is intended to be exempt from registration under the securities laws
of certain states. Assignor must note that there are restrictions on
transfer of the Shares, as agreed upon in Section 5 of this Agreement.
(h) Survival. The representations, warranties and indemnities
of the parties set forth in this Agreement shall survive for a period
of one year from the Closing Date. Any claim which is made as a result
of a breach or a claimed breach of a representation, warranty or
covenant contained herein shall be timely if made on or before the
first anniversary of the Closing Date.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
16
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
17
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be executed as of the day and year first above written.
THE ULTIMATE SOFTWARE GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
THE ULTIMATE SOFTWARE GROUP OF NORTHERN
CALIFORNIA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT A
INVESTOR CERTIFICATION
_______________________________________ hereby certifies that he or she EITHER:
(Check Box that Applies)
[ ] 1. meets one or more of the following criteria:
(A) He or she is a person having individual net
worth, or joint net worth with his or her
spouse, exceeding $1,000,000; or
(B) He or she is a person having an income in
excess of $200,000 in each of the two (2)
most recent years or a joint income with
his or her spouse in excess of $300,000 in
each of those years and having a reasonable
expectation of reaching the same income
level in the current year.
[ ] 2. does not meet either of the criterion described
in 1(A) or (B) above and acknowledges that he or
she has appointed ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as his or her
purchaser representative.
---------------------------------
Dated: ___________________
[Exhibit B intentionally omitted]
[Schedules intentionally omitted]