EXHIBIT 2.1
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
BY AND AMONG
SMARTFORCE PLC,
SKILLSCAPE SOLUTIONS INC.,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ ,
AND
MANPOWER INC.
DATED AS OF OCTOBER 10, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE I PURCHASE AND SALE OF SKILLSCAPE SHARES.................................................1
1.1 Purchase and Sale.................................................................1
1.2 Purchase Price....................................................................1
1.3 Termination of Skillscape Rights..................................................2
1.4 Share Exchange....................................................................2
1.5 Surrender of Skillscape Certificates; Payment of Purchase Price...................2
1.6 No Further Ownership Rights in Skillscape Shares..................................3
1.7 Lost, Stolen or Destroyed Skillscape Certificates.................................3
1.8 Taking of Necessary Action; Further Action........................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF MANAGEMENT SHAREHOLDERS.............................4
2.1 Organization......................................................................4
2.2 Capital Structure.................................................................4
2.3 Subsidiaries......................................................................5
2.4 Authority.........................................................................5
2.5 No Conflict.......................................................................5
2.6 Consents..........................................................................5
2.7 Company Financial Statements......................................................6
2.8 No Undisclosed Liabilities........................................................6
2.9 No Changes........................................................................6
2.10 Tax Matters.......................................................................8
2.11 Restrictions on Business Activities...............................................9
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment....9
2.13 Intellectual Property............................................................10
2.14 Agreements, Contracts and Commitments............................................13
2.15 Governmental Authorization; Compliance with Laws.................................15
2.16 Litigation.......................................................................15
2.17 Accounts Receivable..............................................................16
2.18 Minute Books.....................................................................16
2.19 Brokers' and Finders' Fees.......................................................16
2.20 Employees; Employee Benefit Plans and Compensation...............................16
2.21 Insurance........................................................................19
2.22 Environmental Matters............................................................19
2.23 Agreement........................................................................20
2.24 Securities Exemption Representations.............................................21
2.25 Interested Party Transactions....................................................22
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TABLE OF CONTENTS
(CONTINUED)
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2.26 Shelf Registration Statement Information.........................................22
2.27 Non-Competition..................................................................22
2.28 Representations Complete; Complete Copies of Materials...........................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NON-MANAGEMENT SHAREHOLDER.......................23
3.1 Agreement........................................................................23
3.2 Securities Exemption Representations.............................................25
3.3 Shelf Registration Statement Information.........................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SMARTFORCE.........................................25
4.1 Organization, Standing and Power.................................................26
4.2 Authority........................................................................26
4.3 No Conflict......................................................................26
4.4 Consents.........................................................................26
4.5 Valid Issuance of Ordinary Shares................................................26
4.6 SEC Documents; SmartForce Financial Statements...................................27
4.7 Broker's and Finder's Fees.......................................................27
ARTICLE V CONDUCT PRIOR TO THE EXCHANGE DATE....................................................27
5.1 Conduct of Business of Skillscape................................................27
5.2 No Solicitation..................................................................29
5.3 Strategic Agreements.............................................................30
ARTICLE VI ADDITIONAL AGREEMENTS................................................................30
6.1 Access to Information............................................................30
6.2 Expenses.........................................................................30
6.3 Public Disclosure................................................................30
6.4 Consents.........................................................................31
6.5 Legal Requirements...............................................................31
6.6 Notification of Certain Matters..................................................31
6.7 Additional Documents and Further Assurances......................................31
6.8 Post-Closing Investment Canada Notification......................................31
6.9 Proprietary Information Agreement................................................32
6.10 Source Code Escrow Agreement.....................................................32
6.11 Confidential Information.........................................................32
6.12 Non Competition..................................................................32
6.13 Use of Name......................................................................34
6.14 Necessary Filings................................................................34
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TABLE OF CONTENTS
(CONTINUED)
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6.15 Qualification to Do Business.....................................................34
ARTICLE VII CONDITIONS TO THE SHARE EXCHANGE....................................................34
7.1 Conditions to Obligations of Each Party to Effect the Share Exchange.............34
7.2 Additional Conditions to Obligations of Skillscape and Shareholders..............35
7.3 Conditions to the Obligations of SmartForce......................................36
ARTICLE VIII....................................................................................38
8.1 Survival of Representations and Warranties and Covenants.........................38
8.2 Agreement to Indemnify...........................................................39
8.3 Escrow Arrangements; Limitations on Indemnity....................................40
8.4 Survival of Indemnity; Indemnification Procedures; Time Limits...................41
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................................................44
9.1 Termination......................................................................44
9.2 Effect of Termination............................................................45
9.3 Amendment........................................................................45
9.4 Extension; Waiver................................................................45
ARTICLE X GENERAL PROVISIONS....................................................................46
10.1 Notices..........................................................................46
10.2 Interpretation...................................................................47
10.3 Counterparts.....................................................................47
10.4 Entire Agreement; Assignment.....................................................47
10.5 Severability.....................................................................47
10.6 Other Remedies...................................................................48
10.7 Specific Performance.............................................................48
10.8 Governing Law, Venue.............................................................48
10.9 Rules of Construction............................................................48
10.10 Share Legends....................................................................48
10.11 California Corporate Securities Law..............................................48
Exhibits
Exhibit A - Purchase Price Allocation
Exhibit B - Registration Rights Agreement
Exhibit C - Legal Opinion
Exhibit D - Noncompetition Agreement
Exhibit E - Escrow Agreement
Exhibit F-1 - Management Shareholder Liability
Exhibit F-2 - Non-Management Shareholder Liability
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EXECUTION COPY
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SHARE PURCHASE AGREEMENT (the "AGREEMENT") is
made and entered into as of October 10, 2001 by and among SMARTFORCE PLC, a
public limited company formed under the laws of the Republic of Ireland
("SMARTFORCE"), SKILLSCAPE SOLUTIONS, INC., a company formed under the laws of
British Columbia, Canada ("SKILLSCAPE" or the "COMPANY"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇ ("PARKS" and, together with Houghton, the "MANAGEMENT
SHAREHOLDERS") and MANPOWER INC., a corporation formed under the laws of the
State of Wisconsin ("MANPOWER" or the "NON-MANAGEMENT SHAREHOLDER"). The
Management Shareholders and the Non-Management Shareholder shall sometimes
hereinafter be referred to, collectively, as the "SHAREHOLDERS".
RECITALS
WHEREAS, Shareholders own all of the issued and outstanding common
shares of Skillscape.
WHEREAS, on August 29, 2001, Smartforce and Shareholders executed that
certain Share Purchase Agreement dated as of August 29, 2001 (the "Original
Agreement") pursuant to which SmartForce agreed to acquire from Shareholders,
and Shareholders agreed to sell to SmartForce, the Skillscape Shares (as
hereinafter defined) owned by Shareholders in exchange for the consideration
specified therein terms and conditions thereof (such transaction hereinafter
referred to as the "SHARE EXCHANGE").
WHEREAS, Smartforce and Shareholders desire to amend and restate the
Original Agreement in its entirety as set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SKILLSCAPE SHARES
1.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, at the Share Exchange, SmartForce shall purchase from
Shareholders, and Shareholders shall sell, assign, transfer and deliver to
SmartForce, the Skillscape Shares, if any, owned by Shareholders, free and clear
of any pledge, lien, security interest, encumbrance, charge, claim or other
equitable or third-party interest of any nature whatsoever (collectively,
"LIENS"). The aggregate Purchase Price (as defined below) for all of the
Skillscape Shares is set forth in Section 1.2.
1.2 Purchase Price.
(a) In reliance on the representations, warranties and covenants
of Shareholders contained herein, and in consideration of the aforesaid sale,
assignment, transfer and delivery of the Skillscape Shares, SmartForce shall pay
to Shareholders, in full payment for such Skillscape Shares, and the agreements
of Shareholders made in connection with the transactions contemplated hereby,
the aggregate Purchase Price (as hereafter defined) payable in the form of Stock
Consideration and Cash Consideration in the manner set forth more fully in
Section 1.5 hereof. Each Shareholder shall receive such portion of the Purchase
Price as is pro
rata to his proportional ownership of the Skillscape Shares. Exhibit A attached
hereto sets forth the number of Skillscape Shares held by each such Shareholder,
the Stock Consideration to be issued to such Shareholder and the Cash
Consideration to be paid to such Shareholder pursuant to the Share Exchange. No
fraction of an American Depositary Share will be issued in connection with the
Share Exchange, but in lieu thereof, each Shareholder shall be entitled to
receive from SmartForce an amount of cash (rounded to the nearest whole cent) in
US$ equal to the product of such fraction and the Average Closing Price (as
hereinafter defined).
(b) For purposes of this Agreement: (i) "AMERICAN DEPOSITARY
SHARE" or "ADS" shall mean an American Depositary Share of SmartForce issued in
accordance with that certain Restricted Deposit Agreement (B) dated as of June
8, 1999 ("RESTRICTED DEPOSIT AGREEMENT") among SmartForce, the Bank of New York,
as depositary ("BoNY"), and all owners and beneficial owners from time to time
of the restricted ADSs; (ii) "STOCK CONSIDERATION" shall mean that number of
ADSs calculated by dividing ninety percent (90%) of the Purchase Price by the
Average Closing Price; (iii) "SKILLSCAPE SHARES" shall mean common shares of
Skillscape, without par value; (iv) "SKILLSCAPE RIGHTS" shall mean any options
or warrants or other agreements or commitments to purchase Skillscape Shares or
any securities convertible into or exchangeable, directly or indirectly, for
Skillscape Shares; (v) "CASH CONSIDERATION" shall mean an amount in cash equal
to ten percent (10%) of the Purchase Price; (vi)"PURCHASE PRICE" shall be the
amount calculated by dividing CDN $10,000,000 by the Exchange Rate; (vii)
"EXCHANGE RATE" shall mean 1.5680 which is the noon buying rate for cable
transfers in New York in foreign currencies certified by the Federal Reserve
Bank on the date immediately prior to the Exchange Date (as defined below)
expressed in Canadian Dollars per US$1.00 and (viii) the "AVERAGE CLOSING PRICE"
shall be US$36.41, representing the average of the last sale prices of
SmartForce's ADSs on the Nasdaq National Market for the twenty (20) trading days
ending on and including August 27, 2001.
1.3 Termination of Skillscape Rights. Prior to the Exchange Date,
Skillscape shall cause all outstanding Skillscape Rights to be terminated and of
no further force and effect.
1.4 Share Exchange. The Share Exchange shall occur at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 8:00 a.m., local time, on September 21, 2001 or, if any
consent or approval of any Governmental Entity (as hereinafter defined) required
to be obtained has not been obtained by such date, then the third business day
following the date such approval or consent is obtained, or on such other date
as the parties hereto shall agree, but in no event later than October 31, 2001.
The Share Exchange shall be effected with the delivery of Skillscape
Certificates (as hereinafter defined) by Shareholders in accordance with Section
1.5(a) and the payment of the Purchase Price therefor by SmartForce in
accordance with Section 1.5(b). The date on which the Share Exchange shall occur
is referred to herein as the "EXCHANGE DATE."
1.5 Surrender of Skillscape Certificates; Payment of Purchase Price.
(a) On the Exchange Date, each of the Shareholders shall deliver
or cause to be delivered to SmartForce a certificate or certificates and/or any
other instrument (the "SKILLSCAPE CERTIFICATES") representing all Skillscape
Shares owned by Shareholders, together with all necessary endorsements,
transfers or assignments required for the valid delivery thereof.
(b) Concurrent with the delivery of the Skillscape Certificates
by Shareholders, SmartForce shall pay the Purchase Price to Shareholders as
follows:
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(i) SmartForce shall issue ordinary shares of SmartForce
underlying the ADSs to be issued as payment of the Stock Consideration and shall
deposit such ordinary shares with the Custodian (as defined in the Restricted
Deposit Agreement) for the benefit of BoNY. As soon as practicable following the
Exchange Date, SmartForce shall cause BoNY to deliver to Shareholders American
Depositary Receipts representing the ADSs to be issued as payment of the Stock
Consideration; provided, however, that on behalf of the Shareholders, SmartForce
shall cause ADSs representing ten percent (10%) of the aggregate Purchase Price
to be paid pursuant to this Article I (the "ESCROW AMOUNT") to be deposited in
an escrow account in accordance with the Escrow Agreement (as defined below) and
Section 8.3 below. The portion of the Escrow Amount contributed on behalf of
each Shareholder shall be in proportion to the Purchase Price which each such
Shareholder would otherwise be entitled to receive under this Section 1.5 by
virtue of ownership of outstanding Skillscape Shares; and
(ii) SmartForce shall deliver to Shareholders by certified
check, bank draft or wire transfer of immediately available funds to the
accounts designated by such Shareholders at least three (3) days prior to the
Exchange Date, the Cash Consideration payable to each Shareholder as set forth
on Exhibit A and such cash amount required to be paid, if any, for fractions of
ADSs otherwise issuable as Stock Consideration.
(c) If any ADS is to be issued in a name other than that in which
the Skillscape Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance thereof that the Skillscape Certificate so
surrendered will be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange will have paid to SmartForce or any
agent designated by it any transfer or other taxes required by reason of the
issuance of an ADS in any name other than that of the registered holder of the
Skillscape Certificate surrendered, or established to the satisfaction of
SmartForce or any agent designated by it that such tax has been paid or is not
payable.
1.6 No Further Ownership Rights in Skillscape Shares. All Stock
Consideration and Cash Consideration issued or paid in exchange for Skillscape
Shares in accordance with the terms of this Agreement shall be deemed to have
been issued or paid, as the case may be, in full satisfaction of all rights
pertaining to such Skillscape Shares.
1.7 Lost, Stolen or Destroyed Skillscape Certificates. In the event any
Skillscape Certificates evidencing Skillscape Shares shall have been lost,
stolen or destroyed, SmartForce shall issue, in exchange for such lost, stolen
or destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, of such ADSs and such cash as may be required pursuant to
Section 1.2; provided, however, that SmartForce may, in its sole discretion and
as a condition precedent to the issuance thereof, require the owner of any such
lost, stolen or destroyed Skillscape Certificates to deliver a bond in such sum
as SmartForce may reasonably direct as indemnity against any claim that may be
made against SmartForce with respect to the Skillscape Certificates alleged to
have been lost, stolen or destroyed.
1.8 Taking of Necessary Action; Further Action. If, at any time after
the Share Exchange, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest SmartForce with good, valid and
marketable title to the Skillscape Shares, the officers and directors of
SmartForce and Shareholders shall execute such other documents, and take such
other action, as SmartForce shall reasonably request to effectuate the same.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF MANAGEMENT SHAREHOLDERS
Management Shareholders hereby, severally but not jointly, represent and
warrant to SmartForce as of the date hereof and as of immediately prior to the
Closing, subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate Section number) supplied
separately by the Management Shareholders to SmartForce (the "DISCLOSURE
LETTER") and dated the date hereof and certified by Management Shareholders, as
set forth in this Article II. Any disclosure set forth in any particular Section
of the Disclosure Letter shall be deemed to be disclosed in reference to each
other applicable section solely to the extent such disclosure is apparent on its
face to relate to such applicable section.
2.1 Organization. Skillscape is a corporation duly incorporated, and is
validly existing and in good standing under the laws of British Columbia.
Skillscape has all necessary corporate power, authority and capacity to own its
properties and assets and to carry on its business as presently conducted.
Except as set forth in Section 2.1 of the Disclosure Letter, Skillscape is, or
will be on the Exchange Date, duly registered, licensed or qualified as an
extra-provincial or foreign corporation and in good standing under the laws of
each jurisdiction in which the failure to be so qualified could have a material
adverse effect on the business, assets, prospects, financial condition or
results of operations of Skillscape (a "MATERIAL ADVERSE EFFECT"). Skillscape
has delivered a true and correct copy of its Memorandum and Articles of
Association, which have not been amended since June 19, 2001 (together, the
"CHARTER"), to SmartForce's counsel.
2.2 Capital Structure.
(a) The authorized capital of Skillscape consists of 100,000,000
shares of Class A stock, without par value, of which 1,265,823 shares of Class A
stock are issued and outstanding and 100,000,000 shares of Class B stock,
without par value, of which no shares are issued and outstanding. Except as set
forth in Section 2.2 of the Disclosure Letter, all issued and outstanding shares
of the capital stock of Skillscape have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares created by statute, the Charter or any other agreement to which
Skillscape is a party or by which it is bound. Section 2.2(a) of the Disclosure
Letter sets forth the names and the number, class and kind of shares held by
each of the Shareholders of Skillscape. No issued and outstanding shares of the
capital stock of Skillscape are owned by anyone other than the Shareholders.
Each of the Shareholders owns and has good and marketable title to all of the
shares opposite his or its name in Section 2.2(a) of the Disclosure Letter as
the legal and beneficial owner thereof, free and clear of any Liens, and all
such shares were issued in compliance with the registration and prospectus
requirements of federal and provincial securities laws. Immediately following
the Share Exchange as provided in this Agreement, SmartForce shall own all
issued and outstanding capital stock of Skillscape, free and clear of any Liens.
(b) Skillscape does not have any employee or director stock
option plans. Except as set forth in Section 2.2(b) of the Disclosure Letter,
there are no options, warrants, calls, preemptive rights, rights of first
refusal or other rights, commitments or agreements of any character, written or
oral, to which Skillscape is a party or by which it is bound obligating
Skillscape to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any of the capital stock of
Skillscape. Except as set
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forth in Section 2.2(b) of the Disclosure Letter, there are no options,
warrants, calls, preemptive rights, rights of first refusal or other rights,
commitments or agreements of any character, written or oral, to which Skillscape
is a party or by which it is bound obligating Skillscape to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement.
2.3 Subsidiaries. Skillscape does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Skillscape has all requisite corporate power and
authority to enter into this Agreement and any Related Agreements (as
hereinafter defined) to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and any Related Agreements to which Skillscape is a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Skillscape, and no further action
is required on the part of Skillscape to authorize the Share Exchange, the
Agreement, any Related Agreements to which it is a party and the transactions
contemplated hereby and thereby. This Agreement has been, and each of the
Related Agreements to which Skillscape is a party will be on the Exchange Date,
duly executed and delivered by Skillscape and, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, upon execution
will constitute the valid and binding obligations of Skillscape, enforceable
against Skillscape in accordance with their respective terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief or
other equitable remedies. The "RELATED AGREEMENTS" shall mean all such ancillary
agreements required in this Agreement to be executed and delivered in connection
with the transactions contemplated hereby, including the Non-Competition
Agreement (as defined in Section 7.3(t) herein), the Registration Rights
Agreement (as defined in Section 2.26), the Escrow Agreement (as defined in
Section 8.3) and the Trust Agreement (as defined in the Escrow Agreement).
2.5 No Conflict. Except as set forth in Section 2.5 of the Disclosure
Letter, the execution and delivery by Skillscape of this Agreement and any
Related Agreements to which Skillscape is a party do not, and, the consummation
of the transactions by Skillscape contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "CONFLICT") (i) any provision of the Charter,
(ii) any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise or license to which Skillscape is a party or its
assets or properties are subject, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Skillscape or its properties or
assets.
2.6 Consents. Except as set forth in Section 2.6 of the Disclosure
Letter, no consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other U.S. or Canadian federal, state, provincial, county, local
or other foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") or any third party, including a party to any agreement
with Skillscape (so as not to trigger any Conflict), is required by or with
respect to Skillscape in connection with the execution and delivery of this
Agreement and any Related Agreements to which Skillscape is a party or the
consummation of the transactions contemplated hereby and thereby, except for
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and
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filings (i) as may be required under applicable securities laws or (ii) as are
set forth in Section 2.6 of the Disclosure Letter.
2.7 Company Financial Statements. Section 2.7(a) of the Disclosure
Letter includes (i) Skillscape's review engagement financial statements (balance
sheet, statement of operations and deficit and statement of cash flows) as of
and for the twelve month period ended December 31, 2000, together with the notes
thereto and accompanied by a review engagement report thereon of Skillscape's
accountants ("REVIEWED FINANCIAL STATEMENTS") and (ii) Skillscape's internally
prepared financial statements (balance sheet and income statement) as of and for
the seven month period ended July 31, 2001 ("INTERNAL FINANCIAL STATEMENTS").
Such Reviewed Financial Statements and Internal Financial Statements are
referred to collectively as the "FINANCIAL STATEMENTS." The Reviewed Financial
Statements are complete and correct and have been prepared in accordance with
generally accepted accounting principles in Canada ("CANADIAN GAAP"), applied on
a basis consistent throughout the periods indicated therein. The Internal
Financial Statements are complete and correct as of July 31, 2001 and have been
prepared on a basis consistent throughout the periods indicated therein and
consistent with the Reviewed Financial Statements, except as otherwise disclosed
in Section 2.7 of the Disclosure Letter. As the review engagement report
attached to the Reviewed Financial Statements indicates, a "review" of the
Reviewed Financial Statements does not constitute an audit and, therefore, no
audit opinion has been expressed on the Financial Statements. The Financial
Statements present fairly the financial condition and operating results of
Skillscape as of the dates and during the period indicated therein, subject in
the case of the Internal Financial Statements to normal year end adjustments,
which will not be material in amount or significance or which are set forth in
Section 2.7 of the Disclosure Letter. The balance sheet of Skillscape as of
December 31, 2000 is hereinafter referred to as the "BALANCE SHEET." December
31, 2000 is hereinafter referred to as the "BALANCE SHEET DATE." The Balance
Sheet does not include any reserves, write-offs or non-recurring charges in an
amount that is not consistent with Skillscape's past practices.
2.8 No Undisclosed Liabilities.
(a) Skillscape does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance with Canadian
GAAP) ("LIABILITIES"), except for (i) as reflected or reserved against in the
Balance Sheet, (ii) incurred since the Balance Sheet Date in the ordinary course
of business or otherwise not greater than US $25,000, in the aggregate, or (iii)
disclosed in Section 2.8 of the Disclosure Letter.
(b) Skillscape does not have any Liabilities, except as reflected
or reserved against in the Balance Sheet, incurred since the Balance Sheet Date
in the ordinary course of business or otherwise not greater than CDN$1,000,000,
in the aggregate, or disclosed in Section 2.8 of the Disclosure Letter.
2.9 No Changes. Since the Balance Sheet Date, except as set forth in
Section 2.9 of the Disclosure Letter, there has not been, occurred or arisen
any:
(a) transaction related to or otherwise affecting Skillscape
except in the ordinary course of business as conducted on that date;
(b) amendments or changes to the Charter of Skillscape;
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(c) capital expenditure or commitment for capital expenditure by
Skillscape, either exceeding US$25,000, in the aggregate, or US$5,000
individually;
(d) destruction of, damage to or loss of any assets of Skillscape
(whether or not covered by insurance) having an aggregate fair market value
exceeding US$25,000 or, except for refunds made to customers in the ordinary
course of business, loss of any business or customers of Skillscape that (i)
accounted for US$25,000 or more of Skillscape's revenues for fiscal year 2000 or
(ii) is estimated to account for US$25,000 or more of Skillscape's projected
revenue for fiscal year 2001;
(e) labor or employment dispute or claim of which Skillscape or
Management Shareholders are aware (Section 2.9(e) of the Disclosure Letter
includes a list of all employees who have been terminated by Skillscape since
December 31, 2000);
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Skillscape;
(g) revaluation by Skillscape of any of its assets, other than
depreciation or amortization as required by Canadian GAAP and reflected on the
Balance Sheet;
(h) declaration, setting aside or payment of any dividends on or
any other distribution (whether in cash, stock or property) in respect of any
Skillscape Shares or profits, or any split, combination or reclassification of
Skillscape Shares or the issuance or authorization of the issuance of any of the
securities in respect of, in lieu of or in substitution for any share in the
stated capital of Skillscape, or the repurchase, redemption or other
acquisition, directly or indirectly, of any Skillscape Shares (or options,
warrants or other rights exercisable therefor);
(i) increase in the salary or other compensation (whether in
cash, stock, equity securities, property or otherwise) payable or to become
payable by Skillscape to any of its officers, directors, employees or
consultants, or the declaration, payment or commitment or obligation of any kind
for the payment, by Skillscape of a bonus or other additional salary or
compensation to any such person, except as made in the ordinary course of
business, consistent with past practices;
(j) sale, lease, license or other disposition of any of the
assets or properties of Skillscape ("SALES"), except Sales in the ordinary
course of business;
(k) to the knowledge of each of Management Shareholders,
amendment or termination or violation of any material contract, agreement, lease
or license to which Skillscape is a party or by which it is bound;
(l) other than trade debt in ordinary course of business
consistent with past practices, any loan or guaranty by Skillscape to any person
or entity or incurrence of any indebtedness by Skillscape, issuance or sale of
any debt securities of Skillscape or guaranteeing of any debt securities by
Skillscape of others;
(m) waiver or release of any material right or claim of
Skillscape, including any write-off or other compromise of any account
receivable of Skillscape;
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(n) commencement, notice, threat of commencement of any lawsuit
or proceeding against or investigation of Skillscape or its affairs;
(o) notice of any claim of ownership by a third party of any
Company Intellectual Property (as defined below) or, to the knowledge of any of
the Management Shareholders, infringement by Skillscape of any third party's
intellectual property rights;
(p) issuance or sale by Skillscape of any Skillscape Shares or
Skillscape Rights or of any other securities of Skillscape;
(q) change in pricing or royalties set or charged by Skillscape
other than in the ordinary course of business;
(r) any event or condition of any character, that is reasonably
likely to have a Material Adverse Effect on Skillscape the cost of which is
reasonably likely exceed US$25,000; or
(s) agreement by Skillscape or any officer or employees of
Skillscape to do any of the things described in the preceding clauses (a)
through (r) (other than by negotiations with SmartForce and its representatives
regarding the transactions contemplated by this Agreement or acts otherwise
permitted by such clauses (a) through (r)).
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, (i)
"TAX" or, collectively, "TAXES," means (A) any and all federal, provincial,
state and local taxes, assessments and other imposts in respect of its income,
business or assets, governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, goods and services,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts; and (B) any liability for the payment of any amounts of
the type described in clause (A) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity; (ii)
"CANADIAN TAX" or, collectively, "CANADIAN TAXES" means any and all Canadian
federal, provincial and local Taxes; and (iii) "FOREIGN TAX" or, collectively,
"FOREIGN TAXES" means any and all U.S. or foreign federal, state, provincial and
local Taxes.
(b) Tax Returns and Audits. Except as set forth in Section
2.10(b) of the Disclosure Letter, Skillscape as of the Exchange Date will have
prepared and timely filed all required federal, state, provincial, local and
foreign returns, estimates, information statements and reports ("RETURNS") for
all previous years and all required quarterly installments due for the current
fiscal year relating to any and all Canadian Taxes and, to the knowledge of any
of the Management Shareholders, Foreign Taxes concerning or attributable to
Skillscape or its operations and such Returns are true and correct and have been
completed in accordance with applicable law. Skillscape as of the Exchange Date
(i) will have paid or accrued all Canadian Taxes and, to the knowledge of any of
the Management Shareholders, Foreign Taxes it is required to pay or accrue and
(ii) will have withheld and timely remitted all income taxes, including Canadian
Pension Plan contributions and applicable insurance premiums all workers
compensation board returns, corporation capital tax returns, goods and service
tax returns, provincial sales tax returns and other reports and information
required to be filed with
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all applicable governmental authorities, agencies or regulatory bodies and other
Canadian Taxes required to be withheld or collected and remitted pursuant to the
laws of British Columbia and Canada and in provinces thereof where Skillscape is
responsible for such withholdings and remittances, as applicable. Skillscape has
not been delinquent in the payment or remittance of any Canadian Tax or, to the
knowledge of any of the Management Shareholders, Foreign Taxes nor is there any
Canadian Tax deficiency or reassessment or, to the knowledge of any of the
Management Shareholders, Foreign Tax deficiency or reassessment outstanding,
assessed, notified or, to the knowledge of any Management Shareholders, proposed
against Skillscape, nor has Skillscape executed any waiver of any statute of
limitations, entered into any agreement or other arrangement providing for an
extension of time with respect to the filing of any return or extending of the
period for the assessment or collection of any Canadian Tax or, to the knowledge
of any of the Management Shareholders, Foreign Tax government charge or
deficiency, nor is there any action, suit, litigation, arbitration, proceeding,
investigation or claim, including appeals and applications for review, in
progress, threatened, pending or relating to Skillscape or its assets or
business in respect of, or discussions underway with any governmental authority
relating to any such tax or governmental charge or deficiency. No audit or other
examination of any Return of Skillscape is presently in progress, nor has
Skillscape been notified of any request for such an audit or other examination.
Skillscape does not have any liabilities for unpaid Canadian Taxes or Foreign
Taxes which have not been accrued or reserved against in accordance with
Canadian GAAP on the Balance Sheet, whether asserted or unasserted, contingent
or otherwise and Management Shareholders have no knowledge of any basis for the
assertion of any such liability attributable to Skillscape, its assets or
operations. Skillscape has made available to SmartForce or its legal counsel,
copies of all foreign, federal, provincial and local income, sales, use and
goods and services Returns filed for all periods as to which any applicable
statute of limitations has not expired. There are no Liens on the assets of
Skillscape relating to or attributable to Canadian Taxes or, to the knowledge of
any of the Management Shareholders, Foreign Taxes, other than Liens for Taxes
not yet due and payable. There are no contingent tax liabilities nor any grounds
which could prompt a reassessment. Skillscape's tax basis in its assets for
purposes of determining its future amortization, depreciation and other income
tax deductions is accurately reflected on Skillscape's tax books and records.
Management Shareholders have no knowledge of any basis for the assertion of any
claim relating or attributable to Canadian Taxes or Foreign Taxes which, if
adversely determined, would result in any Lien on the assets of Skillscape.
Skillscape does not presently and has not held in the past any real property
within the United States. Skillscape is not entitled to, has not applied for and
has not received any research and development tax credits. The Management
Shareholders are not non-residents of Canada, as defined in the Income Tax Act
(Canada). Skillscape is a Canadian-controlled private corporation, as defined in
the Income Tax Act (Canada) and has been one since its incorporation. Skillscape
is a registrant for the purposes of the good and services tax provided for under
the Excise Tax Act and its registration number is 895008944 RT.
2.11 Restrictions on Business Activities. Except as set forth in Section
2.11 of the Disclosure Letter, there is no agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which Management
Shareholders, Skillscape or any of its officers is a party or otherwise binding
upon Management Shareholders, Skillscape or any of its officers that has or is
reasonably likely to have the effect of prohibiting or impairing any business
practice of Skillscape, any acquisition of property (tangible or intangible) by
Skillscape or the conduct of business by Skillscape. Without limiting the
foregoing, Skillscape has not entered into any agreement under which it is
restricted from selling, licensing or otherwise distributing any of its products
or services to any class of customers, in any geographic area, during any period
of time or in any segment of the market.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
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(a) Section 2.12(a) of the Disclosure Letter sets forth a list of
all real property currently owned or leased by Skillscape and, in the case of
leased property (the "LEASED REAL PROPERTY"), the name of the lessor, the date
of the lease, the termination date of the lease, if any, and each amendment
thereto and the aggregate annual rental and/or other fees payable under any such
lease. All such leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default). All such leases afford
Skillscape peaceful and undisturbed possession of the real property subject to
such lease.
(b) Skillscape has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal or mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Financial
Statements or in Section 2.12(b) of the Disclosure Letter and except for liens
for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
(c) The equipment and other tangible personal property owned or
leased by Skillscape (i) is in good operating condition, subject to normal wear
and tear, and (ii) has been reasonably maintained.
(d) The assets owned or leased by Skillscape, or which it
otherwise has the right to use, constitute all of the properties and assets,
tangible or intangible, held for use or used in connection with the business of
Skillscape and are adequate to conduct such business as currently conducted.
(e) To the knowledge of each of Management Shareholders, there
are no, and at the time of the Share Exchange there will not be, any material
physical or mechanical defects on the Leased Real Property. Except as disclosed
in Section 2.12(e) of the Disclosure Letter, to the knowledge of each of
Management Shareholders the buildings, structures and improvements located on
the Leased Real Property including, without limitation, the roofs, parking lots,
plumbing, heating, air conditioning, water, sewer, gas, electrical and life
safety systems are in good condition and repair and are in compliance with
applicable laws. Skillscape has no outstanding claims or liabilities in respect
of the construction thereof. All installation and connection charges due and
payable with respect to public utilities required for the normal operation of
Skillscape's business as currently conducted have been paid in full or are
provided for and all such utilities are sufficient for the operation of
Skillscape's business as currently conducted. There are no pending or, to the
knowledge of any of the Management Shareholders, threatened condemnations,
eminent domain, expropriation or similar proceedings that would affect all or
any portion of the Leased Real Property.
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
"INTELLECTUAL PROPERTY" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof and
equivalent or similar rights anywhere in the world in inventions and discoveries
("PATENTS"); (ii) all rights in inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing;
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(iii) all copyrights, copyrights registrations and applications therefor, mask
works (if any) and all other rights corresponding thereto throughout the world;
(iv) all rights in industrial designs and any registrations and applications
therefor and all goodwill associated therewith throughout the world; (v) all
rights in trade names, logos, common law trademarks and service marks, trademark
and service ▇▇▇▇ registrations and applications therefor and all goodwill
associated therewith throughout the world; (vi) all rights in databases and data
collections and all rights therein throughout the world; (vii) all rights in
computer software including all source code, object code, firmware, development
tools, files, records and data and all documentation related to any of the
foregoing throughout the world; (viii) all World Wide Web addresses, sites and
domain names; and (ix) any similar, corresponding or equivalent rights to any of
the foregoing throughout the world.
"COMPANY-OWNED INTELLECTUAL PROPERTY" means any Intellectual
Property that is owned by or exclusively licensed to Skillscape.
"COMPANY INTELLECTUAL PROPERTY" means any Intellectual Property
that is necessary or desirable to the operation of Skillscape's business,
including the design, manufacture, development, sale and use of the products or
performance of the services of Skillscape's business as it currently is
conducted or contemplated to be conducted.
(b) Registered Intellectual Property. Section 2.13(b) of the
Disclosure Letter (i) sets forth a complete list of all of the following
Company-Owned Intellectual Property, whether U.S. or foreign: (A) patents,
patent applications (including provisional applications); (B) registered
trademarks, applications to register trademarks, intent-to-use applications, or
other registrations related to trademarks; (C) registered copyrights and
applications for copyright registration; (D) Internet Domain name registrations;
and (E) any other Company-Owned Intellectual Property that is the subject of an
application, certificate or registration issued by or recorded by any state,
government or other public legal authority (all of the foregoing, the
"REGISTERED INTELLECTUAL PROPERTY") and (ii) specifies, where applicable, the
jurisdictions in which each such Intellectual Property rights have been issued
or registered or in which an application for such issuance and registration has
been filed including the respective registration or application for such
issuance and registration has been filed, including the respective registration
or application numbers and the names of all registered owners. Section 2.13(b)
of the Disclosure Letter lists any proceedings or actions before any court,
tribunal (including the United States Patent Office or equivalent authority
anywhere in the world) related to any of the Registered Intellectual Property.
Skillscape has complied with all applicable disclosure requirements and has not
committed any fraudulent act in the application for and maintenance of any
Registered Intellectual Property of Skillscape. Each item of Registered
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees in connection with such Registered Intellectual
Property have been made and all necessary documents and certificates in
connection with such Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property. Section 2.13(b) of the Disclosure Letter
lists all actions and payments that must be made in the six month period
following the Exchange Date in connection with the preservation or maintenance
of the Registered Intellectual Property. To the knowledge of Skillscape and its
Management Shareholders, Skillscape is not barred from seeking patents on
material potentially patentable inventions of Skillscape by "on-sale" or similar
bars to patentability or by failure to apply for a patent on such inventions
within the time required.
(c) Intellectual Property Contracts. The contracts, licenses,
sublicenses and agreements listed on Section 2.13(c)(i) of the Disclosure Letter
include all contracts, licenses, sublicenses and agreements
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(other than "shrink wrap" or similar end user license agreements of software to
Company that require license fees under $1,000, and under which Company uses
off-the-shelf versions of generally commercially available software) with
respect to any of the Company Intellectual Property ("INTELLECTUAL PROPERTY
CONTRACTS"). All of the Intellectual Property Contracts are in full force and
effect. Except as set forth in Section 2.13(c)(ii) of the Disclosure Letter,
neither the execution nor delivery of the Agreement, nor the consummation of the
transactions contemplated hereby or thereby will violate or result in the
breach, modification, cancellation, termination, or suspension of any of the
Intellectual Property Contracts. Skillscape is in compliance with, and has not
breached any term of, any of the Intellectual Property Contracts, and, to the
knowledge of Skillscape and its Management Shareholders, all other parties to
the Intellectual Property Contracts are in compliance with, and have not
breached any term of, such contracts, licenses, sublicenses and agreements.
Following the Exchange Date, SmartForce will be permitted to exercise all of
Skillscape's rights under the Intellectual Property Contracts without the
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which Skillscape would otherwise be required to pay.
Except as listed on Section 2.13(c)(iii) of the Disclosure Letter, there are no
contracts, licenses, sublicenses or agreements between Skillscape and any other
person with respect to the Company Intellectual Property under which there is
any dispute known to Management Shareholders, regarding the scope of any such
contract, license, sublicense or agreement, or performance under any such
contract, license, sublicense or agreement, including with respect to any
payments to be made or received by Skillscape thereunder.
(d) Ownership of Company Intellectual Property. Except as set
forth on Section 2.13(d) of the Disclosure Letter: (i) Skillscape owns and has
good and exclusive title to each item of the Company-Owned Intellectual
Property, including all Registered Intellectual Property, free and clear of any
Lien; (ii) Skillscape owns or has the right to use or operate under all the
Company Intellectual Property; (iii) the Company-Owned Intellectual Property and
the rights of Skillscape under the Intellectual Property Contracts constitutes
all of the Intellectual Property necessary for the conduct of Skillscape's
business as conducted; (iv) Skillscape is the exclusive owner of all trademarks
and trade names used in connection with the operation or conduct of the
Business; and (v) no person or entity has any rights to use any of the
Company-Owned Intellectual Property nor has Skillscape granted to any person or
entity or authorized any person or entity to retain any rights in the Company
Intellectual Property. To the extent that any work, invention or material
relating to Skillscape's business or assets or properties has been developed or
created by an employee or a third party for Skillscape, Skillscape has a written
agreement with such employee or third party with respect thereto and Skillscape
thereby has obtained ownership of, and is the exclusive owner of, all
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(e) Infringement of Company Intellectual Property. Except as
listed on Section 2.13(e) of the Disclosure Letter, to the knowledge of
Skillscape and each of its Management Shareholders, no person or entity has or
is infringing or misappropriating any of the Company Intellectual Property.
(f) Infringement of Third Party Intellectual Property. Except as
set forth in Section 2.13(f) of the Disclosure Letter, the operation of
Skillscape's business as currently conducted has not, does not and will not
infringe or misappropriate the Intellectual Property of any other person or
entity. Except as set forth in Section 2.13(f) of the Disclosure Letter, no
claims with respect to any of the Company Intellectual Property have been
asserted or, to the knowledge of Skillscape or any of the Management
Shareholders, threatened by any person or entity.
(g) Restrictions on Use of Company Intellectual Property. No
Company Intellectual Property, or product of Skillscape produced using or
embodying the Company Intellectual Property, is subject
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to any proceedings or outstanding decree, order, judgment, or stipulation
restricting in any material manner the use or licensing thereof by Skillscape,
or which may materially affect the validity or enforceability of any
Company-Owned Intellectual Property.
(h) Protection of Intellectual Property. Skillscape has taken all
steps that are set forth in Section 2.13(h)(i) of the Disclosure Letter to
protect its rights in its confidential information and trade secrets or any
trade secrets or confidential information of third parties provided to it
related thereto, and, without limiting the foregoing, except as provided in
Section 2.13(h)(ii) of the Disclosure Letter, Skillscape has enforced a policy
requiring each and every employee and contractor to execute proprietary
information and confidentiality agreements substantially in their standard forms
("SKILLSCAPE PROPRIETARY INFORMATION AGREEMENT"). Except as provided in Section
2.13(h)(iii) of the Disclosure Letter, Skillscape has not licensed any computer
software source code included in the Company-Owned Intellectual Property to any
third party in source code format.
(i) No Obligations Resulting from Transaction. Except as set
forth in Section 2.13(i) of the Disclosure Letter, neither this Agreement nor
the transactions contemplated by this Agreement, including the assignment by
operation of law or otherwise of any contracts or agreements to which Skillscape
is a party, will result in (i) SmartForce granting to any third party any right
to or with respect to any Company Intellectual Property, (ii) SmartForce being
bound by, or subject to, any non-compete or other restriction on the operation
or scope of their respective businesses or (iii) SmartForce being obligated to
pay any royalties or other amounts to any third party in excess of those payable
by Skillscape prior to the Exchange Date. The consummation of the transactions
contemplated by this Agreement will not result in the loss of, or otherwise
adversely affect, any ownership rights of Skillscape in any Company-Owned
Intellectual Property or result in the breach or termination of any license,
contract or agreement to which Skillscape is a party with respect to any Company
Intellectual Property.
(j) Except as set forth in Section 2.13(j) of the Disclosure
Letter, each software product of Company conforms in all material respects to
the specifications and documentation therefor and is otherwise in compliance
with applicable law. To the knowledge of each of Management Shareholders,
Company has secured any export licenses that are necessary or appropriate for
the distribution of any of the Company's products outside Canada. The Company's
products do not contain any virus, Trojan horse, worm, or other software
routines or hardware components designed to permit unauthorized access, to
disable, erase, or otherwise harm software, hardware or data.
2.14 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 2.14(a) of the Disclosure
Letter, Skillscape does not have any continuing obligations under, is not a
party to or is not bound by:
(i) any collective bargaining agreements, or any
contract with or commitment to any trade unions, employee bargaining agent or
affiliated bargaining agent (collectively, "LABOR representatives") and
Skillscape has not conducted any negotiations with respect to any such future
contracts or commitments;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations or is otherwise
required by statute or case law to provide any of the foregoing;
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(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(v) any agreement or plan, including, without
limitation, any share option plan, share appreciation rights plan or share
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, except as provided herein;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease or license of real or personal
property having annual lease payments individually in excess of US$3,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of Skillscape or its affiliates to engage in
any line of business or to compete with any person;
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of US$5,000;
(xi) any agreement, contract or commitment relating to
the disposition or acquisition of material assets or any interest in any
business enterprise outside the ordinary course of Skillscape's business;
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof;
(xiii) any purchase order or contract for the purchase
of raw materials, other than purchase orders made in the ordinary course of
business and involving not more than US$5,000;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any agreement, contract or commitment with any
customer which accounted for, or is expected to account during Skillscape's
current fiscal year, for more than 5% of Skillscape's revenue or trade payables;
or
(xvii) any other agreement, contract or commitment
that involves $5,000 or more or that cannot be canceled without penalty within
thirty (30) days.
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(b) Except as noted in Section 2.14(b) of the Disclosure Letter,
Skillscape is in compliance with and has not breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under, any
of the terms or conditions of (i) any agreement, contract or commitment required
to be set forth in Section 2.14(a) of the Disclosure Letter, or (ii) any other
agreement, contract or commitment to which it is a party or by which it is bound
(any such agreement, contract or commitment referenced in the preceding clauses
(i) and (ii), a "CONTRACT"), nor is either Shareholder aware of any event that
would constitute such a breach, violation or default with the lapse of time,
giving of notice or both. Each Contract is in full force and effect and, except
as otherwise disclosed in Section 2.14(b) of the Disclosure Letter, is not
subject to any default thereunder of which Management Shareholders are aware by
any party obligated to Skillscape pursuant thereto. Each of the Contracts (i)
constitutes a legal, valid and binding obligation of Skillscape in accordance
with its terms and (ii) to the knowledge of each of the Management Shareholders,
constitutes a legal, valid and binding obligation of each of the other parties
thereto, enforceable against such other parties thereto in accordance with its
terms. There has been no cancellation, termination, limitation or modification
or any notice of cancellation, termination, limitation or modification of any
such Contract and, to the knowledge of any of the Management Shareholders, there
is no event which could reasonably be expected to result in a cancellation,
termination, limitation or modification of any such Contract. Skillscape has
obtained, or will obtain prior to the Exchange Date, all necessary consents,
waivers and approvals of parties to any Contract as are required thereunder in
connection with consummation of the Share Exchange or to remain in effect
without modification after the Share Exchange.
2.15 Governmental Authorization; Compliance with Laws. Section 2.15 of
the Disclosure Letter accurately lists each consent, license, permit, grant or
other authorization issued to Skillscape by a Governmental Entity (a) pursuant
to which Skillscape currently operates or holds any interest in any of its
assets or properties or (b) which is required for the operation of its business
or the holding of any such interest (herein collectively called
"AUTHORIZATIONS"). All Authorizations are in full force and effect and
constitute all Authorizations required to permit Skillscape to operate or
conduct its business as currently conducted or proposed to be conducted or hold
any interest in its properties or assets. Skillscape has complied in all
material respects with, is not in violation in any material respect of, and has
not received any notices of violation with respect to, any foreign, federal,
state, provincial or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, assets
or properties.
2.16 Litigation. There is no action, suit, claim, proceeding or
arbitration of any nature against Skillscape or any of its assets or properties
or any of its officers, directors or Management Shareholders in their capacities
as such in which service of process has been made. To the knowledge of each of
Management Shareholders, there is no action, suit, claim, proceeding or
arbitration of any nature pending or threatened against Skillscape or any of its
assets or properties or any of its officers, directors or Management
Shareholders in their capacities as such. To the knowledge of each of Management
Shareholders, there is no investigation pending or threatened against Skillscape
or any of its assets or properties or any of its officers, directors or
Management Shareholders in respect of Skillscape by or before any Governmental
Entity. To the knowledge of each of Management Shareholders, no Governmental
Entity has at any time challenged or questioned the legal right of Skillscape to
manufacture, offer or sell any of its products in the present manner or style
thereof. Without limiting the generality of the foregoing, to the knowledge of
each of Management Shareholders no complaint, grievance, claim, work order or
investigation has been filed, made or commenced against Skillscape pursuant to
the Human Rights Code, the Occupiers Liability Act, the Health Act, the Worker's
Compensation Act, the Employment Standards Act and any other applicable act in
the Province of British Columbia, or any similar legislation of Canada or any
province hereof where Skillscape does business or has employees.
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2.17 Accounts Receivable.
(a) Set forth in Section 2.17(a) of the Disclosure Letter is a
list of all accounts receivable of Skillscape reflected on the Balance Sheet
("ACCOUNTS RECEIVABLE") along with a range of days elapsed since invoice as of
the date of the Balance Sheet. All Accounts Receivable of Skillscape (i) arose
in the ordinary course of business, (ii) represent bona fide indebtedness
incurred by the applicable account debtors in the amounts invoiced by Skillscape
and stated on its books and records, subject to collection, (iii) are carried at
values determined in accordance with Canadian GAAP, consistently applied, and
(iv) are not subject to any defenses, counterclaims or claims for set off. The
reserves against the Accounts Receivable have been established in accordance
with Canadian GAAP, and based upon a review of such Accounts Receivable,
Management Shareholders reasonably believe such reserves to be adequate. No
person has any Lien on any of such Accounts Receivable and no request or
agreement for deduction or discount has been made with respect to any of such
Accounts Receivable. To the knowledge of Management Shareholders, none of such
Accounts Receivable is owed by a person or entity that has sought the protection
of any bankruptcy or insolvency law or is the subject of any dispute as to
payment.
(b) All the inventories of Skillscape reflected on the Balance
Sheet and Skillscape's books and records on the date hereof were purchased,
acquired or produced in the ordinary course of business and in a manner
consistent with Skillscape's regular inventory practices and are set forth on
Skillscape's books and records in accordance with the practices and principles
of Skillscape. The reserves against such inventory has been established in
accordance with Canadian GAAP. The presentation of inventory on the Balance
Sheet conforms to Canadian GAAP and such inventory is stated at the lower of
cost (determined using the first-in, first-out method) or net realizable value.
All items of such inventory are and, from the date hereof until the Share
Exchange will be, of a quality and quantity that are salable in the ordinary
course of business, consistent with past practices, at normal ▇▇▇▇-ups.
2.18 Minute Books. The minute books of Skillscape made available to
counsel for SmartForce are the only minute books of Skillscape and contain all
consented directors and shareholders resolutions since the formation of
Skillscape.
2.19 Brokers' and Finders' Fees. Neither Management Shareholders nor
Skillscape has incurred, nor will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby. At
Closing, Management Shareholders shall provide to SmartForce a complete and
accurate copy of any completed engagement letter, contract, final invoice and/or
agreement in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employees; Employee Benefit Plans and Compensation.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "APPLICABLE LAW" means all applicable Canadian
federal, provincial or local laws, regulations and orders and all applicable
Canadian federal, provincial or local regulatory policies.
(ii) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, deferred compensation,
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termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether formal
or informal, funded or unfunded, written or unwritten, and whether or not
legally binding, which is or has been maintained, contributed to, or required to
be contributed to, by Skillscape or any Employee Benefits Affiliate for the
benefit of any "EMPLOYEE" (as defined below), and pursuant to which Skillscape
or any Employee Benefits Affiliate has or may have any material liability
contingent or otherwise;
(iii) "EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of Skillscape or any Employee Benefits
Affiliate;
(iv) "EMPLOYEE BENEFITS AFFILIATE" shall mean any
person or entity under common control with Skillscape (within the meaning of
Section 414(b),(c), (m) or (o) of the U.S. Internal Revenue Code of 1986, as
amended);
(v) "EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement or contract between
Skillscape or any Employee Benefits Affiliate and any Employee or consultant;
(vi) "CCRA" shall mean the Canada Customs and Revenue
Agency;
(b) Schedule. Section 2.20(b) of the Disclosure Letter contains
an accurate and complete list of each Company Employee Plan including any trust
agreement, statement of investment policies and procedures, insurance contract,
employee brochure and all amendments thereto prepared in connection with each
Company Employee Plan and each Employee Agreement, together with a schedule of
all liabilities, whether or not accrued, under each such Company Employee Plan
or Employee Agreement. Skillscape does not have any plan or commitment to
establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
SmartForce in writing, or as required by this Agreement), or to enter into any
Company Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. Skillscape has provided to SmartForce, if any, (i)
correct and complete copies of all documents embodying or relating to each
Company Employee Plan and each Employee Agreement including all amendments
thereto and written interpretations thereof; (ii) the most recent annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
three most recent annual reports, if any, required under Applicable Law in
connection with each Company Employee Plan or related trust; (iv) if
Skillscape's Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, with respect to each Company Employee Plan; (vi) all CCRA or other
applicable government agency correspondence relating to Company Employee Plans
and copies of all applications and correspondence to or from the CCRA or other
applicable regulatory authority with respect to any Company Employee Plan; (vii)
all communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Skillscape; and (viii) all
registration statements and prospectuses, if any, prepared in connection with
each Company Employee Plan.
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(d) Employee Plan Compliance. Except as set forth on Section
2.20(d) of the Disclosure Letter, (i) Skillscape has performed in all material
respects all obligations required to be performed by it under each Company
Employee Plan and each Company Employee Plan has been established, registered,
administered and maintained in accordance with its terms and in compliance with
all applicable laws, statutes, orders, rules, directives and regulations; (ii)
there are no actions, suits or claims pending, or, to the knowledge of
Management Shareholders, threatened or anticipated (other than routine claims
for benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan, (iii) all reports, returns and similar documents with
respect to any Employee Plan required to be filed with any government agency
distributed to any Employee Plan participant have been duly filed on a timely
basis or distributed; (iv) each Company Employee Plan other than mandatory
government agency plans can be amended, terminated or otherwise discontinued
after the Exchange Date in accordance with its terms, without liability to
Skillscape, SmartForce, or any of its Employee Benefits Affiliates (other than
ordinary administration expenses typically incurred in a termination event); (v)
there are no inquiries or proceedings pending or, to the knowledge of Management
Shareholders, threatened by any state, federal, provincial or local regulatory
agency with respect to any Company Employee Plan; and (vi) neither Skillscape
nor any Employee Benefits Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan.
(e) U.S. Company Employee Plan. Neither Skillscape nor any
Employee Benefits Affiliate now have, nor have they ever had the obligation to
maintain, establish, sponsor, participate in, or contribute to any Company
Employee Plan for the benefit of Employees who perform (or performed) services
within the United States.
(f) No Post-Employment Obligations. Except as set forth in
Section 2.20(f) of the Disclosure Letter, no Company Employee Plan provides, or
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and Skillscape has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute.
(g) Effect of Transaction. Except as set forth in Section 2.20(g)
of the Disclosure Letter, the execution of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(h) Employment Matters. Neither Skillscape nor any Employee
Benefits Affiliate now have, nor have they ever had, any Employees employed by
Skillscape, or otherwise resident, outside of Canada. Skillscape (i) is in
compliance in all material respects with all applicable Canadian federal,
provincial and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to employment insurance benefits, Canada
Pension Plan or other
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benefits or obligations for Employees (other than routine payments to be made in
the normal course of business and consistent with past practice).
(i) Labor. No work stoppage or labor strike against Skillscape is
pending or, to the knowledge of Management Shareholders, threatened. Except as
set forth in Section 2.20(i) of the Disclosure Letter, Skillscape is not
involved in or, to the knowledge of the Management Shareholders, threatened
with, any labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in
liability to Skillscape. Neither Skillscape nor any of its subsidiaries has
engaged in any unfair labor practices within the meaning of the Employment
Standards Act or the Labor Relations Code which would, individually or in the
aggregate, directly or indirectly result in a liability to Skillscape.
Skillscape is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by
Skillscape and the Management Shareholders are not aware of any current attempts
to organize, establish or certify any labor union or employee association with
respect to any future collective agreement.
2.21 Insurance. Section 2.21 of the Disclosure Letter lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of Skillscape. There
is no claim by Skillscape pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid timely and Skillscape is otherwise in material compliance
with the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Management Shareholders do not have
any knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
2.22 Environmental Matters.
(a) Hazardous Material. Skillscape has not: (i) operated any
underground storage tanks at any property that Skillscape has at any time owned,
operated, occupied or leased; or (ii) illegally released any material amount of
any substance that has been designated or defined by any Governmental Entity or
by applicable federal, state, provincial or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
defined as "waste" pursuant to the Waste Management Act of British Columbia or
any other British Columbia or Canadian law, statute, rule or regulations
promulgated pursuant to said laws, (a "HAZARDOUS MATERIAL"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present, as a result of the deliberate actions of Skillscape, or,
to the Management Shareholders' knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that Skillscape has at
any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Skillscape has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Exchange Date, nor has Skillscape disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "HAZARDOUS MATERIALS ACTIVITIES") in
violation of any rule, regulation, treaty or statute
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promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) Permits. Skillscape currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of Skillscape's Hazardous Material
Activities, if any, and other businesses of Skillscape as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Skillscape's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activities of Skillscape. The
Management Shareholders are not aware of any fact or circumstance which could
involve Skillscape in any environmental litigation or impose upon Skillscape any
environmental liability.
2.23 Agreement.
(a) Each of this Agreement and the Related Agreements has been,
and each of the Related Agreements to which any of the Management Shareholders
is a party will be on the Exchange Date, duly and validly executed and delivered
by, or on behalf of, each of the Management Shareholders and, assuming due
authorization, execution and delivery by the other parties hereto and thereto,
upon execution will constitute a valid and binding obligation of each of the
Management Shareholders, enforceable against each of the Management Shareholders
in accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies.
(b) The execution and delivery of this Agreement and any Related
Agreement to which any of the Management Shareholders is a party do not, and the
consummation of the transactions by each of the Management Shareholders
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time or
both), or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of benefit under any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise
or license to which any of the Management Shareholders is a party, or any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Entity applicable to any of the Management Shareholders
that would preclude any of the Management Shareholders from entering into this
Agreement or any Related Agreements to which any of the Management Shareholders
is a party, or consummating the transactions contemplated hereby and thereby
other than as set forth in Section 2.23(b) of the Disclosure Letter.
(c) No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required to be made or obtained by any of the Management Shareholders
in connection with the execution and delivery by any of the Management
Shareholders of this Agreement and any Related Agreements to which any of the
Management Shareholders is a party or the performance by Management Shareholders
of their respective obligations hereunder and thereunder or the consummation by
Management Shareholders of the transactions contemplated herein or therein.
(d) Each of the Management Shareholders is the beneficial and
record owner of the Skillscape shares set forth in Section 2.2(a) of the
Disclosure Letter, free and clear of any and all Liens, and
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has the sole right to transfer Skillscape Shares owned by such Shareholder to
SmartForce. Upon delivery of Skillscape Certificates representing such
Skillscape Shares to SmartForce, together with a duly executed transfer
instrument, SmartForce will receive good and valid title to such Skillscape
Shares, free and clear of any and all Liens.
(e) Except as set forth in Section 2.23(e) of the Disclosure
Letter, each Management Shareholder has had an opportunity to review with his
tax advisors the tax consequences to such Management Shareholder of the Share
Exchange and the transactions contemplated by this Agreement or the Related
Agreements. Each Management Shareholder understands that he must rely solely on
his advisors and not on any statements or representations by SmartForce,
Skillscape or any of their respective agents. Each Management Shareholder
understands that he (and not SmartForce or Skillscape) shall be responsible for
his own tax liability that may arise as a result of the Share Exchange or any
other transactions contemplated by this Agreement or the Related Agreements.
(f) Each Management Shareholder will have sufficient assets,
after sale of the Skillscape Shares owned by such Management Shareholder as
contemplated hereby, to satisfy all of such Management Shareholder's obligations
to his creditors, as the same become due and payable.
(g) Each Management Shareholder is a resident of Canada under the
Income Tax Act (Canada).
2.24 Securities Exemption Representations.
(a) Management Shareholders have had an opportunity to discuss
SmartForce's management, business and financial condition with SmartForce's
management.
(b) Management Shareholders acknowledge that the ADSs must be
held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Management Shareholders
are aware of the provisions of Rule 144 promulgated under the Securities Act.
(c) Management Shareholders acknowledge that the securities of
SmartForce offered hereby have not been registered under the Securities Act and
may be only offered, sold, pledged or otherwise transferred, including in the
United States or to or for the account or benefit of U.S. Persons, (i) pursuant
to an effective registration statement as to the securities under the Securities
Act or (ii) pursuant to an exemption from the registration requirements of the
Securities Act in which case such Management Shareholder shall have provided an
opinion of counsel satisfactory to SmartForce that registration under the
Securities Act is not required.
(d) Each Management Shareholder residing in British Columbia is
acquiring ADS's having an aggregate acquisition cost of at least CDN $100,000 as
principal for their own account, not for the benefit of any other person, and
not with a view to the resale or distribution of all or any of the ADS.
(e) Each Management Shareholder has been independently advised as
to the applicable hold period imposed in respect of the ADS by applicable
securities legislation in his jurisdiction of residence and confirms that no
representation has been made respecting the applicable hold periods under
applicable Canadian provincial securities legislation for the ADS and is aware
of the risks and other characteristics of the
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ADS and of the fact that Management Shareholders may not be able to resell the
ADS except in accordance with applicable securities legislation in their
province of residence.
(f) Each Management Shareholder resident in British Columbia
acknowledges that such Management Shareholder has been informed by SmartForce
that such Management Shareholder must file an initial trade report in the form
prescribed by British Columbia BOR #95/17 within 10 days of the date of an
initial subsequent trade of an ADS by the Management Shareholder.
(g) Each Management Shareholder has not become aware of any
advertisement in printed media of general and regular paid circulation, radio,
television or otherwise with respect to the distribution of the ADS.
(h) Each Management Shareholder acknowledges that no prospectus
has been filed by SmartForce with the British Columbia or Alberta Commission in
connection with the issuance of the ADS, the issuance is exempted from the
prospectus requirements of the Securities Act of British Columbia, the
Securities Act of Alberta and the rules and regulations thereunder.
2.25 Interested Party Transactions. No officer, director, or employee of
Skillscape or holder of Skillscape Shares (or any spouse or member of the
immediate family of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an economic interest),
has or has had directly or indirectly, (i) any economic interest in any entity
which furnished or sold, or furnishes or sells, services or products that
Skillscape furnishes or sells, or proposes to furnish or sell, or (ii) any
economic interest in any entity that purchases from or sells or furnishes to,
Skillscape, any goods or services or (iii) any beneficial interest in any
contract or agreement set forth in Section 2.14 of the Disclosure Letter;
provided, that passive ownership of no more than one percent (1%) of the
outstanding stock of a publicly traded corporation shall not be deemed an
"interest in any entity" for purposes of this Section 2.25.
2.26 Shelf Registration Statement Information. The information supplied
or to be supplied by Skillscape and Management Shareholders specifically for
inclusion in the registration statement contemplated by the Registration Rights
Agreement attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT")
does not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
2.27 Non-Competition.
(a) Management Shareholders acknowledge that it is a condition to
the obligation of SmartForce to complete the transactions contemplated by this
Agreement that Management Shareholders enter into the non-competition covenants
in Section 6.12;
(b) Management Shareholders acknowledge that the provisions of
Section 6.12 are necessary in order that SmartForce receives the full benefit of
the goodwill of the purchased business and in order to permit SmartForce to
preserve that goodwill and, accordingly, Management Shareholders are each to
enter into the agreements in Section 6.12 in order to ensure that the goodwill
of the purchased business is not impaired by action of Management Shareholders;
(c) Management Shareholders acknowledge that the provisions of
Section 6.12 are an integral part of the transaction contemplated by this
Agreement under which the Management Shareholders
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are receiving significant benefit and that the consideration for the transaction
included a premium for the future services of Management Shareholders in the
conduct of the business of the Company; and
(d) Management Shareholders acknowledge that SmartForce is
relying on the agreements and acknowledgements given herein and in Section 6.12
by Management Shareholders.
2.28 Representations Complete; Complete Copies of Materials. None of the
representations or warranties made in this Article II (as modified by the
Disclosure Letter), nor any statement made in any schedule, certificate,
document or instrument furnished by Skillscape or Shareholders pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. There is no event, fact or condition that materially
and adversely affects the business, assets, financial condition or results of
operations of Skillscape, or that reasonably could be expected to do so, that
has not been set forth in this Agreement or in the Disclosure Letter. Skillscape
has delivered to SmartForce true and complete copies of each agreement,
contract, commitment or other document that is referred to in the Disclosure
Letter or that has been requested by SmartForce or its counsel. Skillscape
acknowledges that the results of any due diligence investigation or examination
conducted by SmartForce or its counsel or representatives shall not relieve
Skillscape of its obligations with respect to the representations and warranties
made in this Agreement or reduce the rights of SmartForce to pursue such
remedies at law or hereunder as it would otherwise have in the absence of having
conducted such investigation or examination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF NON-MANAGEMENT SHAREHOLDER
The Non-Management Shareholder represents and warrants to SmartForce, as
of the date hereof and as of immediately prior to the Closing, as set forth in
this Article III.
3.1 Agreement.
(a) The Non-Management Shareholder is a corporation duly
incorporated and organized, and is validly existing under the laws of the State
of Wisconsin; (ii) the Non-Management Shareholder has all requisite corporate
power and authority to enter into this Agreement and each of the Related
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby; and (iii) the execution and delivery of this
Agreement and any Related Agreements to which the Non-Management Shareholder is
a party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Non-Management Shareholder, and no further action is required on the part of the
Non-Management Shareholder to authorize the Share Exchange, the Agreement, any
Related Agreements to which it is a party and the transactions contemplated
hereby and thereby.
(b) Each of this Agreement and the Related Agreements has been,
and each of the Related Agreements to which the Non-Management Shareholder is a
party will be on the Exchange Date, duly and validly executed and delivered by,
or on behalf of, the Non-Management Shareholder and, assuming due authorization,
execution and delivery by the other parties hereto and thereto, upon execution
will constitute a
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valid and binding obligation of the Non-Management Shareholder, enforceable
against the Non-Management Shareholder in accordance with their respective
terms, subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief or other equitable remedies.
(c) The execution and delivery of this Agreement and any Related
Agreement to which the Non-Management Shareholder is a party does not, and the
consummation of the transactions by the Non-Management Shareholder contemplated
hereby and thereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time or both), or give rise to
a right of termination, cancellation, modification or acceleration of any
obligation or loss of benefit under (i) the Certificate of Incorporation or
other organizational documents of such Non-Management Shareholder, (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise or license to which such Non-Management Shareholder is a
party, or (iii) any statute or law or any judgment, decree, order, regulation or
rule of any court or other Governmental Entity applicable to such Non-Management
Shareholder that would preclude the Non-Management Shareholder from entering
into this Agreement or any Related Agreements to which the Non-Management
Shareholders is a party, or consummating the transactions contemplated hereby
and thereby.
(d) No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required to be made or obtained by the Non-Management Shareholder in
connection with the execution and delivery the Non-Management Shareholder of
this Agreement and any Related Agreements to which the Non-Management
Shareholder is a party or the performance by the Non-Management Shareholder of
his, her or its obligations hereunder and thereunder or the consummation by the
Non-Management Shareholder of the transactions contemplated herein or therein.
(e) The Non-Management Shareholder is the beneficial and record
owner of the Skillscape shares set forth in Section 2.2(a) of the Disclosure
Letter, free and clear of any and all Liens, and has the sole right to transfer
the Skillscape Shares owned by the Non-Management Shareholder to SmartForce.
Upon delivery of Skillscape Certificates representing the Skillscape Shares held
by the Non-Management Shareholder to SmartForce, together with a duly executed
transfer instrument, SmartForce will receive good and valid title to the
Skillscape Shares, free and clear of all Liens.
(f) The Non-Management Shareholder has had an opportunity to
review with his, her or its respective tax advisors the tax consequences to the
Non-Management Shareholder of the Share Exchange and the transactions
contemplated by this Agreement or the Related Agreements. The Non-Management
Shareholder understands that he, she or it must rely solely on his, her or its
advisors and not on any statements or representations by SmartForce, Skillscape
or any of their respective agents. The Non-Management Shareholder understands
that he, she or it (and not SmartForce or Skillscape) shall be responsible for
his, her or its own tax liability that may arise as a result of the Share
Exchange or any other transactions contemplated by this Agreement or the Related
Agreements.
(g) The Non-Management Shareholder will have sufficient assets,
after sale of the Skillscape Shares owned by the Non-Management Shareholder as
contemplated hereby, to satisfy all of the Non-Management Shareholder's
obligations to his, her or its creditors, as the same become due and payable.
(h) The Non-Management Shareholder is not a resident of Canada
under the Income Tax Act (Canada).
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3.2 Securities Exemption Representations.
(a) The Non-Management Shareholder has substantial knowledge and
experience in financial and business matters so that he, she or it is capable of
evaluating the merits and risks of his, her or its investment in SmartForce, has
the capacity to protect his, her or its own interests, and has a pre-existing
business or close personal relationship with SmartForce and certain of its
officers, directors or controlling persons. The Non-Management Shareholder has
had an opportunity to discuss SmartForce's management, business and financial
condition with SmartForce's management.
(b) The Non-Management Shareholder is acquiring the ADSs for
investment for his, her or its own account, and not as a nominee or agent, and
not with the view to, or for resale in connection with, any distribution
thereof. The Non-Management Shareholder understands that the ADSs have not been,
and will not be, registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT") by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Non-Management Shareholder's representations as expressed herein. The
Non-Management Shareholder is an "Accredited Investor" as defined in Rule 501 of
Regulation D promulgated under the Securities Act.
(c) The Non-Management Shareholder acknowledges that the ADSs
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from the registration is available. The
Non-Management Shareholder is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of securities purchased in
a private placement subject to the satisfaction of certain conditions,
including, among other things, the existence of a public market for the
securities, the availability of certain current public information about
SmartForce, the resale occurring not less than one year after a party has
acquired and given full consideration for the security to be acquired, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" and the number of securities being sold during any three-month
period not exceeding specified limitations under certain circumstances.
(d) The Non-Management Shareholder acknowledges that the
securities of SmartForce offered hereby have not been registered under the
Securities Act and may only be offered, sold, pledged or otherwise transferred,
including in the United States or to or for the account or benefit of U.S.
Persons, pursuant to an effective registration statement as to the securities
under the Securities Act or an opinion of counsel satisfactory to SmartForce
that registration under the Securities Act is not required.
3.3 Shelf Registration Statement Information. The written information
supplied or to be supplied by the Non-Management Shareholder specifically for
inclusion in the registration statement contemplated by the Registration Rights
Agreement does not and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SMARTFORCE
SmartForce hereby represents and warrants to Shareholders as of the date
hereof and as of immediately prior to the Closing as set forth in this Article
IV.
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4.1 Organization, Standing and Power. SmartForce is a public limited
company duly organized and validly existing under the laws of the Republic of
Ireland. SmartForce has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets, prospects, financial condition, or
results of operations of SmartForce (a "SMARTFORCE MATERIAL ADVERSE Effect") or
the ability of SmartForce to consummate the transactions contemplated hereby.
4.2 Authority. SmartForce has all requisite corporate power and
authority to enter into this Agreement and any Related Agreements to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and any Related Agreements to which
SmartForce is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of SmartForce and no further action is required on the part of
SmartForce to authorize the Share Exchange, the Agreement, any Related
Agreements to which it is a party, and the transactions contemplated hereby and
thereby. This Agreement has been, and each of the Related Agreements to which
SmartForce is a party will be on the Exchange Date, duly executed and delivered
by SmartForce and, assuming due authorization, execution and delivery by other
parties hereto and thereto, upon execution will constitute the valid and binding
obligation of SmartForce, enforceable against SmartForce in accordance with
their respective terms, except as such enforceability may be limited by the laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 No Conflict. The execution and delivery by SmartForce of this
Agreement and any Related Agreements to which SmartForce is a party do not, and
the consummation by SmartForce of the transactions contemplated hereby and
thereby will not, conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of any
benefit under (i) any provision of the Memorandum and the Articles of
Association of SmartForce, (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise or license to which
SmartForce is a party or its assets or properties are subject, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to SmartForce or its properties or assets, other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which would
not have a material adverse effect on the ability of SmartForce to consummate
the transactions contemplated hereby and thereby.
4.4 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party is required by or with respect to SmartForce in connection with the
execution and delivery of this Agreement and any Related Agreement to which
SmartForce is a party by SmartForce or the consummation by SmartForce of the
transactions contemplated hereby and thereby, except for (i) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state and federal securities laws and the laws
of any foreign country, (ii) listing of the ADSs on the Nasdaq National Market,
and (iii) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a material adverse
effect on the ability of SmartForce to consummate the transactions contemplated
hereby and thereby.
4.5 Valid Issuance of Ordinary Shares. The Ordinary Shares of SmartForce
underlying the ADSs to be issued pursuant to the Share Exchange will be, at the
Share Exchange, duly authorized, validly issued and not subject to any call,
preemptive or similar rights. Upon issuance of the ADSs issued pursuant to
Article I,
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the right, title and interest to such ADSs (other than the Escrow Shares) will
be transferred to Shareholders, free and clear of all Liens. The ADSs issued to
the Shareholders, when issued and delivered to the Shareholders in accordance
with this Agreement, shall be qualified for quotation on the Nasdaq National
Market (subject to compliance with applicable securities laws).
4.6 SEC Documents; SmartForce Financial Statements. SmartForce has
furnished or made available to Shareholders a true and complete copy of (i) its
annual report on Form 10-K, as amended, for the year ended December 31, 2000;
and (ii) its definitive proxy statement in connection with its 2001 annual
meeting of shareholders (together the "SEC DOCUMENTS"), which SmartForce filed
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), with
the Securities and Exchange Commission (the "SEC"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act, and the SEC Documents did not contain any untrue statement
of a material fact or omit a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by
subsequently filed documents with the SEC. The financial statements of
SmartForce, including the notes thereto, included in the SEC Documents (the
"SMARTFORCE FINANCIAL STATEMENTS") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles in the United States consistently
applied (except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of SmartForce at the dates thereof and of its
operations and cash flows for the periods then ended (subject in the case of
unaudited financial statements, to normal audit adjustments). Since December 31,
2000, there has not been, occurred or arisen any event or condition which has
had a material adverse effect on the business, assets (including intangible
assets), financial conditions or results of operations of SmartForce and
subsidiaries, taken as a whole and involves amounts, or results in damages,
individually or in the aggregate, in excess of US$5,000,000. Since December 31,
2000, SmartForce has filed all forms, reports and documents with the SEC
required to be filed by it pursuant to the U.S. federal securities laws and the
rules and regulations of the SEC (collectively, "SECURITIES LAWS"), each of
which complied as to form, at the time such form, document or report was filed,
in all material respects with the applicable requirements of all Securities
Laws, except for such failures to file or to comply with Securities Laws as are
not, individually or in the aggregate, materially adverse to SmartForce.
4.7 Broker's and Finder's Fees. No broker, finder or investment banker
is entitled to any brokers', finders' or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of SmartForce.
ARTICLE V
CONDUCT PRIOR TO THE EXCHANGE DATE
5.1 Conduct of Business of Skillscape. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Exchange Date, Skillscape and each of the Management
Shareholders agree (except to the extent that SmartForce shall otherwise consent
in writing) to carry on Skillscape's business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, to pay its
debts and Taxes when due, to pay or perform other obligations when due, and, to
the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors,
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licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Exchange Date.
Skillscape and Management Shareholders shall promptly notify SmartForce of any
event or occurrence not in the ordinary course of business of Skillscape, and
any event which could reasonably be expected to have a Material Adverse Effect
on Skillscape. Without limiting the generality of the foregoing and except as
expressly contemplated by this Agreement or disclosed in Schedule 5.1 of the
Disclosure Letter, neither Skillscape nor any of the Management Shareholders
shall, without the prior written consent of SmartForce, which consent shall not
be unreasonably withheld:
(a) Permit any of the events, facts or circumstances described in
Section 2.9 to occur other than in the ordinary course of business, consistent
with past practices;
(b) Enter into any commitment or transaction not in the ordinary
course of business;
(c) Transfer to any person or entity any rights to Company
Intellectual Property;
(d) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of Skillscape;
(e) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements,
contracts, licenses, permits or leases set forth or described in the Disclosure
Letter;
(f) Commence any litigation;
(g) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for Skillscape Shares, or repurchase, redeem or otherwise
acquire, directly or indirectly, any shares of its capital stock (or options,
warrants or other rights exercisable therefor);
(h) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(i) Cause or permit any amendments to the Charter;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(l) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of Skillscape or
guarantee any debt securities of others;
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(m) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to written
agreements outstanding on the date hereof or as otherwise required under the
Employment Standards Act;
(n) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its employees;
(o) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable;
(p) Pay, discharge or satisfy, in an amount in excess of US$1,000
(in any one case) or US$5,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
other than in the ordinary course of business, consistent with past practices;
(q) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes; or
(r) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (q) above, or any other action that
would prevent Skillscape from performing or cause Skillscape not to perform its
covenants hereunder.
5.2 No Solicitation. Until the earlier of the Exchange Date and the date
of termination of this Agreement pursuant to the provisions of Section 9.1
hereof, neither Skillscape nor any of the Shareholders will (nor will Skillscape
or any of the Shareholders permit any of Skillscape's officers, directors,
agents, representatives or affiliates to), directly or indirectly, take any of
the following actions with any party other than SmartForce and its designees:
(a) Solicit, conduct discussions with or engage in negotiations
with any person, relating to the possible acquisition of Skillscape (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise) or
any Material (as defined below) portion of the Skillscape Shares or its capital
stock or assets;
(b) Provide information with respect to Skillscape to any person,
other than SmartForce, relating to the possible acquisition of Skillscape
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any Material portion of the Skillscape Shares or its capital stock
or assets, except as may be reasonably required to fulfill Skillscape's
obligations hereunder to consummate the Share Exchange;
(c) Enter into an agreement with any person, other than
SmartForce, providing for the acquisition of Skillscape (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
Material portion of the Skillscape Shares or its capital stock or assets; or
(d) Make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of Skillscape (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise) or
any Material portion of the Skillscape Shares or its capital stock or assets by
any person, other than by SmartForce.
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In addition to the foregoing, if Skillscape or Shareholders receives
prior to the Exchange Date or the termination of this Agreement any offer or
proposal relating to any of the above, Skillscape or Shareholders, as the case
may be, shall promptly notify SmartForce thereof, including information as to
the identity of the offeror or the party making any such offer or proposal and
the specific terms of such offer or proposal, as the case may be, and such other
information related thereto as SmartForce may reasonably request. For purposes
of the foregoing, "Material" shall mean greater than five (5) percent of the
assets or equity interest in Skillscape.
5.3 Strategic Agreements. Skillscape agrees that it will not enter into
any strategic alliance, joint development or joint marketing agreement during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Exchange Date unless it has first
consulted with and received the prior written consent of the Vice President,
Finance and Chief Financial Officer of SmartForce.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. Management Shareholders and Skillscape shall
afford SmartForce and its accountants, counsel and other representatives
(collectively, the "REPRESENTATIVES") reasonable access during normal business
hours upon reasonable notice during the period prior to the Exchange Date to all
of the properties, books, contracts, commitments, records and all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of Skillscape as SmartForce may request
so that SmartForce can perform a full and complete investigation of Skillscape's
business and financial condition, including without limitation access upon
reasonable request to employees, customers and vendors of Skillscape for due
diligence inquiry and copies of internal financial statements, business plans
and projections; provided, however, that any inquiry or investigation pursuant
to this Section 6.1 shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Skillscape; and provided
further that in the event SmartForce requests to contact customers or vendors of
Skillscape prior to the Exchange Date, each Management Shareholder shall have
the right to participate in all such interviews or inquiries if he so elects.
SmartForce will make available to Shareholders and Skillscape such publicly
available information about SmartForce as Skillscape shall request. No
information or knowledge obtained in any investigation shall affect or be deemed
to modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the transactions contemplated
hereby.
6.2 Expenses. Whether or not the Share Exchange is consummated, all fees
and expenses incurred in connection with the Share Exchange, including all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation of the terms and conditions of this Agreement
and the consummation of the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses; provided,
however, that Shareholders shall be obligated to pay all fees and expenses
incurred by the Company in connection with the Share Exchange, including all
legal, accounting, financial advisory, consulting and all other fees and
expenses.
6.3 Public Disclosure. SmartForce, Skillscape and Shareholders agree
that, except as required by law with respect to the public disclosure
obligations of SmartForce, neither SmartForce, on the one hand, and Skillscape
and Shareholders, on the other hand, shall without the prior written consent of
the other party,
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make any public or private statement or communication with respect to, or
otherwise disclose or permit the disclosure of the existence of discussions
regarding this Agreement and the transactions contemplated hereby, except to
directors, officers, employees and legal and financial advisors with a need to
know. SmartForce also agrees that if SmartForce is required to make such
disclosure it will notify Skillscape and Shareholders of such requirement prior
to making such disclosure; provided that the foregoing shall not preclude any
party from making any announcement or other disclosure if such party is advised
by its counsel that such announcement or disclosure is required to be made by
U.S., Canadian or Irish law, the rules of the Nasdaq National Market or the New
York Stock Exchange or from obtaining the consents required pursuant to Sections
2.6 and 6.4 hereof.
6.4 Consents. Management Shareholders and Skillscape shall promptly
apply for or otherwise seek, and use their respective best efforts to obtain,
all consents, waivers and approvals required to be obtained by it for the
consummation of the Share Exchange, and Management Shareholders and Skillscape
shall use their best efforts to obtain all consents, waivers and approvals
required under any of Skillscape's Contracts in order to preserve Skillscape's
rights and benefits thereunder.
6.5 Legal Requirements. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable best efforts
to take promptly, or cause to be taken, all reasonable actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to (i) consummate and make effective the
transactions contemplated hereby, (ii) to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings and, (iii)
to remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement; provided that neither SmartForce nor Skillscape
shall be required to agree to any divestiture by SmartForce or Skillscape or any
of SmartForce's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of SmartForce or its subsidiaries or affiliates or
Skillscape or its affiliates, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock.
6.6 Notification of Certain Matters. Skillscape and Shareholders shall
give prompt notice to SmartForce, and SmartForce shall give prompt notice to
Skillscape and Shareholders, of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would be likely to result in
the failure of Shareholders, Skillscape or SmartForce, as the case may be, to
satisfy the conditions of Section 7.2(a) and Section 7.3(a), respectively, and
(ii) any failure of SmartForce, Skillscape and Shareholders, as the case may be,
to comply with or satisfy in all material respects any covenant, condition or
agreement to be complied with or satisfied by it or them hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.6 shall not
limit or otherwise affect any remedies available to the party receiving such
notice.
6.7 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
6.8 Post-Closing Investment Canada Notification. The Management
Shareholders shall use their reasonable best efforts to assist SmartForce in
filing a notification form with the Industry Canada- Director of
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Investments pursuant to Section 36 of the Investment Canada Act as soon as
practicable, but in no event later than 45 days, after the Exchange Date.
6.9 Proprietary Information Agreement. Management Shareholders shall use
their reasonable best efforts to assist SmartForce to cause each employee of
Skillscape to execute and deliver SmartForce's standard form proprietary
information and confidentiality agreement (the "SMARTFORCE PROPRIETARY
AGREEMENT") prior to or on the Exchange Date.
6.10 Source Code Escrow Agreement. Skillscape shall enter into a source
code escrow agreement with SmartForce and an escrow agent to be selected by
SmartForce, in a form satisfactory to SmartForce (the "SOURCE CODE ESCROW
AGREEMENT"), pursuant to which Skillscape shall appoint such escrow agent as a
trustee for all deposits of software source materials (such as source code and
documentation for which ▇▇▇▇▇▇ ▇▇▇▇▇▇ currently acts as a custodian or trustee
under the terms of the license agreements set forth in Section 6.10 of the
Disclosure Letter), provided that the transfer of the source code pursuant to
such Source Code Escrow Agreement shall be subject to any requirements to obtain
the consent of the other party to such license agreements. Skillscape and the
Management Shareholders shall use their reasonable best efforts to assist
SmartForce in transferring the software source code materials from ▇▇▇▇▇▇ ▇▇▇▇▇▇
to the escrow agent including, without limitation, providing all such notices
to, or obtaining all such approvals, authorizations or consents from such third
parties to effectuate such transfer.
6.11 Confidential Information. SmartForce, Skillscape and each of the
Shareholders agrees not to use any Confidential Information (as defined below)
for any purpose except in connection with the transactions contemplated by this
Agreement. Each party agrees not to disclose any Confidential Information to
third parties, except for counsel, accountants and other designated advisors or
representatives for each such party in connection with the Agreement. In the
event that this Agreement is terminated in accordance with Article IX, upon the
written request of any party hereto, the other parties hereto shall promptly
either return to such requesting party or destroy any Confidential Information
in the possession of such parties hereunder. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" shall mean any information disclosed to either party
in connection with the transactions contemplated by this Agreement. The term
"Confidential Information" does not, however, include any information which (i)
is or becomes generally available to the public other than as a result of a
breach of this Agreement by the receiving party or its Representatives, (ii) was
within the receiving party's possession prior to its being furnished to the
receiving party by or on behalf of the disclosing party, provided that the
source of such information was not known by the receiving party to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party, (iii) is or becomes
available to the receiving party on a non-confidential basis from a source other
than the disclosing party or any of its Representatives, provided that such
source was not known by the receiving party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the disclosing party or any other party with respect to such
information, (iv) is disclosed by the disclosing party to a third party without
a duty of confidentiality, (v) is independently developed by the recipient
without use of Confidential Information, (vi) is disclosed under operation of
law, or (vii) is disclosed by the recipient or its Representatives with the
discloser's prior written approval.
6.12 Non Competition.
(a) Definitions. Unless otherwise defined in this Agreement,
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(i) "AFFILIATE" means a person that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with SmartForce;
(ii) "RESTRICTED BUSINESS" means (i) the business of,
and the provision of services in connection with, (A) the design, development,
manufacturing, sale, distribution, deployment, and marketing of interactive
software for business and professional education, and (B) online learning
environments relating to business and professional education; (ii) the provision
of services for the creation or deployment of technology-based business and
professional education; and (iii) any other business engaged in by SmartForce or
any of its Affiliates during the period Shareholders provide services to
SmartForce or any of its Affiliates;
(iii) "RESTRICTED TERRITORY" means the counties, cities
and states of the United States of America, the Provinces of Canada and each
political subdivision and/or nation throughout the world in which SmartForce or
any Affiliates are engaging in the Restricted Business;
(iv) "ENGAGING IN" a business means to carry on, work
with, be employed by, consult for, solicit customers for, advise, contribute, or
sell or license intellectual property to, any enterprise or endeavor, either
individually, in partnership or in conjunction with any person, firm,
association, partnership, joint venture, limited liability company, corporation
or other business, whether as principal, agent, shareholder, partner, joint
venturer, member, director, officer, employee, consultant, licensor or in any
other manner whatsoever. However, nothing contained in this Agreement shall
prohibit Shareholders from (i) being employed by or serving as a consultant to
SmartForce (or any Affiliate of SmartForce), (ii) acquiring or holding at any
one time less than one percent (1%) of the outstanding securities of any
publicly traded company, (iii) holding stock of SmartForce, or (iv) acquiring or
holding an interest in a mutual fund, limited partnership, venture capital fund
or similar entity of which Shareholders are not an employee, officer or general
partner and have no power to make, participate in or directly influence the
investment decisions of such mutual fund, limited partnership, venture capital
fund or investment entity; and
(v) "INFORMATION" means all confidential or proprietary
information, intellectual property (including trade secrets) and confidential
facts relating to the business and affairs of the Company.
(b) Non-Competition Covenant.
(i) Non-Competition. Each Management Shareholder hereby
covenants and agrees with SmartForce that, for the Twenty-Four (24) months
following the Exchange Date, he shall not (except for and on behalf of
SmartForce or an Affiliate of SmartForce), either directly or indirectly, engage
in any Restricted Business in the Restricted Territory, without the prior
written consent of the Board of Directors of SmartForce. Management Shareholders
further acknowledge that the nature of SmartForce's business is such that if
Management Shareholders were to become engaged in a Restricted Business in the
Restricted Territory during the Twenty-Four (24) months following the Exchange
Date for any reason, it would be very difficult for Management Shareholders not
to rely on or use SmartForce's trade secrets and confidential information or the
goodwill that SmartForce had acquired in connection with this Agreement.
(ii) Non-Solicitation of Customers. In addition to, and
not in limitation of, the non-competition covenants of the Management
Shareholders in Section 6.12(b)(i) above, each Management Shareholder agrees
with SmartForce that for the Twenty-Four (24) months following the Exchange
Date, he will not, on his own behalf or on behalf of another person or entity,
or directly or indirectly (other than for
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SmartForce or any Affiliate), (i) solicit, interfere with, induce or entice away
any person or entity that is a client, customer or agent of SmartForce or any
Affiliate of SmartForce, or (ii) in any manner persuade or attempt to persuade
any such person or entity to discontinue a business relationship with SmartForce
or an Affiliate of SmartForce.
(iii) Non-Solicitation of Employees or Consultants. In
addition to, and not in limitation of, the non-competition covenants of the
Management Shareholders in Section 6.12(b)(i) above, each Management Shareholder
agrees with SmartForce that for the Twenty-Four (24) months following the
Exchange Date Management Shareholders will not, either for Management
Shareholders or for any other person or entity, directly or indirectly, solicit,
induce or attempt to induce any employee, consultant or contractor of SmartForce
or any of its Affiliates to terminate his or her employment or his or her
services with SmartForce or any of its Affiliates or to take employment with
another party, or otherwise interfere in any manner with the contractual or
employment relationship or association between such persons and/or entities and
SmartForce or any of its Affiliates. Management Shareholders agree that this
Section 6.12(b)(iii) shall apply regardless of whether such employee, consultant
or contractor of SmartForce or any Affiliate made an initial contact or inquiry
of such other person or entity regarding employment or other engagement of
services.
6.13 Use of Name. From and after the date of this Agreement,
Shareholders will not without the prior written consent of SmartForce use or
consent to or cooperate in the use of the name "SmartForce," or "Skillscape" or
any similar names thereto in any business other than that of SmartForce or any
Affiliate.
6.14 Necessary Filings. Management Shareholders shall use their
reasonable best efforts to assist SmartForce to cause any and all filings with
any governmental body, agency, official or authority necessary with respect to
the Share Exchange to be filed including, but not limited to, the filing of Form
45-902F with the British Columbia Securities Commission within ten (10) days
following the Exchange Date.
6.15 Qualification to Do Business. Skillscape and Management
Shareholders shall use their reasonable best efforts to assist SmartForce in
determining whether Skillscape is required to register, become licensed or
qualify as an extra-provincial or foreign corporation in any jurisdictions other
than British Columbia where the failure to be so qualified could have a Material
Adverse Effect on Skillscape ("FOREIGN JURISDICTIONS"), and Skillscape shall
assist SmartForce in actually registering, licensing or qualifying Skillscape in
such Foreign Jurisdictions.
ARTICLE VII
CONDITIONS TO THE SHARE EXCHANGE
7.1 Conditions to Obligations of Each Party to Effect the Share
Exchange. The respective obligations of each party to this Agreement to effect
the Share Exchange shall be subject to the satisfaction at or prior to the
Exchange Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing or challenging the consummation of the Share Exchange
shall be in effect nor shall any proceeding brought by any Governmental Entity
seeking the foregoing be pending.
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(b) Applicable Law. No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Share Exchange.
(c) No Proceedings. No proceeding challenging this Agreement or
the transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Share Exchange shall have been instituted by any third
party before any court, arbitrator or governmental body, agency or official and
be pending.
7.2 Additional Conditions to Obligations of Skillscape and Shareholders.
The obligations of Skillscape and Shareholders to consummate the Share Exchange
and the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Exchange Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Skillscape
and the Shareholders.
(a) Representations and Warranties. The representations and
warranties of SmartForce in this Agreement shall be true and correct in all
respects on and as of the Exchange Date as though such representations and
warranties were made on and as of such time except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
such time, except in such cases where the failure to be so true and correct
would not have a Material Adverse Effect on SmartForce. Skillscape and
Shareholders shall have received a certificate, dated the Exchange Date, with
respect to the foregoing signed on behalf of SmartForce by its President and
Chief Financial Officer;
(b) Agreements and Covenants. SmartForce shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Exchange Date (which performance or compliance shall be subject to SmartForce's
ability to cure as provided in Section 9.1(f) below). Skillscape and
Shareholders shall have received a certificate, dated the Exchange Date, with
respect to the foregoing signed on behalf of SmartForce by its President and
Chief Financial Officer.
(c) Amendment to Manpower License. SmartForce and Manpower shall
enter into an amendment to the Manpower Agreement (as defined below), in form
and substance reasonably satisfactory to SmartForce and Manpower (the "LICENSE
AMENDMENT") pursuant to which Article VIII of the Manpower Agreement (as defined
below) shall be amended such that (i) except as set forth in subsection (ii)
below, the provisions contained in Article VIII shall continue except that the
provisions shall terminate at such time as the expiration or earlier termination
of the license agreement(s) between SmartForce and Manpower dated as of June 26,
1999, as amended (the "SMARTFORCE LICENSE AGREEMENT") pursuant to the terms
thereof (such period being the "LICENSE TERM"); (ii) the royalty free license to
use the Starter Skills Dictionary (including the Skills definition and job
templates) shall continue indefinitely beyond the License Term and (iii) the
royalty free license to use the Skillscape products specified in Article VIII
(including, without limitation, the Skill Screener, Competency Manager and the
Starter Skills Dictionary) during the License Term shall be amended to include
any enhancements or changes to such Skillscape products (whether existing as of
the date of this Agreement or arising during the License Term) including those
tied or related to the integration of such products with the library and/or
other rights licensed to Manpower under the SmartForce License Agreement.
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7.3 Conditions to the Obligations of SmartForce. The obligations of
SmartForce to consummate the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Exchange Date of each of the following
conditions, any of which may be waived, in writing, exclusively by SmartForce:
(a) Representations and Warranties. The representations and
warranties of Shareholders in this Agreement shall be true and correct in all
respects on and as of the Exchange Date as though such representations and
warranties were made on and as of such time except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
such time, except in such cases where the failure to be so true and correct
would not have a Material Adverse Effect on Skillscape or Shareholders.
SmartForce shall have received a certificate, dated the Exchange Date, with
respect to the foregoing signed on behalf of each Shareholder and Skillscape by
its President and Chief Financial Officer;
(b) Agreements and Covenants. Skillscape and Shareholders shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Exchange Date (which performance or compliance
shall be subject to their ability to cure as provided in Section 9.1(e) below).
SmartForce shall have received a certificate, dated the Exchange Date, with
respect to the foregoing signed on behalf of each Shareholder and Skillscape by
its President and Chief Financial Officer.
(c) Consents. All consents, waivers, and approvals listed on the
Disclosure Letter or as otherwise may be required to be obtained in order to
enable Skillscape to continue to enjoy all of its material rights and benefits
following consummation of the Share Exchange shall have been obtained.
(d) No Material Adverse Effect. No event, occurrence, fact,
condition, change, development or effect shall have occurred, exist or come to
exist that, individually or in the aggregate, has constituted or resulted in, or
could reasonably be expected to constitute or result in, a Material Adverse
Effect on Skillscape. From the date hereof through the Exchange Date, there
shall not have occurred any Material Adverse Effect on Skillscape.
(e) No Litigation. No action, suit, or proceeding shall be
pending or threatened before any Governmental Entity wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or any of
the Related Agreements, (B) cause any of the transactions contemplated by this
Agreement or any of the Related Agreements to be rescinded following
consummation, or (C) materially affect in an adverse manner the right of
SmartForce to own Skillscape or operate its business (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect).
(f) Skillscape Shares. Shareholders shall have transferred and
delivered to SmartForce Skillscape Certificates representing all issued and
outstanding Skillscape Shares, duly endorsed in blank.
(g) Employee Matters. Skillscape shall have obtained the consent
of the party with whom Skillscape has contracted with respect to any key
contracts that contain a change of control clause or otherwise require the
consent of such contracting party, if and to the extent required in the
reasonable judgment of SmartForce's counsel.
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(h) Canadian Regulatory Approvals. All Canadian regulatory
approvals, which are, in SmartForce's judgment, necessary or desirable shall
have been obtained to SmartForce's satisfaction.
(i) Convertible Securities. All unexercised securities
convertible into or exchangeable for the capital stock of Skillscape, including
all unexercised options and warrants, shall have been terminated with the
written consent of the holders thereof and Skillscape shall have provided
evidence, in a form reasonably acceptable to SmartForce, of the foregoing.
(j) Transaction Exemption. The offer and issuance of the ADSs
pursuant to the terms of this Agreement shall be exempt from the registration
requirements of Section 5 of the Securities Act and applicable Canadian
securities laws.
(k) Necessary Filing. All actions by or in respect of or filings
with any governmental body, agency, official or authority necessary to permit
the consummation of the Share Exchange shall have been obtained.
(l) Registration Rights Agreement. Shareholders shall have
executed and delivered to SmartForce the Registration Rights Agreement.
(m) Escrow Agreement. Shareholders shall have executed and
delivered to SmartForce the Escrow Agreement.
(n) Trust Agreement. Shareholders shall have executed and
delivered to SmartForce the Trust Agreement.
(o) Engagement Letter, Invoice. Shareholders shall provide to
SmartForce a copy of all final invoices in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby.
(p) Legal Opinion. SmartForce shall have received the legal
opinion of Johns, Southward, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Skillscape
and Shareholders, in substantially the form attached hereto as Exhibit C.
(q) Intentionally Blank.
(r) Transfer of Source Code Escrows. Skillscape shall have
executed and delivered to SmartForce the Source Code Escrow Agreement.
(s) Resignation of Directors and Officers. SmartForce shall have
received the written resignations of each of the directors and officers of
Skillscape.
(t) Noncompete Agreements. SmartForce and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇ shall have entered into a Noncompetition Agreement,
substantially in the form attached hereto as Exhibit D ("NONCOMPETITION
AGREEMENTS").
(u) Proprietary Information Agreements. SmartForce shall have
received fully executed proprietary information and confidentiality agreements,
in form and substance acceptable to SmartForce, from
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Skillscape and each of the employees of Skillscape who have not executed a
Skillscape Proprietary Information Agreement prior to the date of this
Agreement.
(v) Amendment to Manpower License. SmartForce and Manpower shall
enter into the License Amendment pursuant to which Article VIII of the Manpower
Agreement shall be amended such that (i) except as set forth in subsection (ii)
below, the provisions contained in Article VIII shall continue except that the
provisions shall terminate at such time as the expiration or earlier termination
of the SmartForce License Agreement pursuant to the terms thereof; (ii) the
royalty free license to use the Starter Skills Dictionary (including the Skills
definition and job templates) shall continue indefinitely beyond the License
Term and (iii) the royalty free license to use the Skillscape products specified
in Article VIII (including, without limitation, the Skill Screener, Competency
Manager and the Starter Skills Dictionary) during the License Term shall hereby
be amended to include any enhancements or changes to such Skillscape products
(whether existing as of the date of this Agreement or arising during the License
Term) including those tied or related to the integration of such products with
the library and/or other rights licensed to Manpower under the SmartForce
License Agreement.
(w) Secretary's Certificate. Skillscape shall have delivered to
SmartForce a certificate dated the Exchange Date and signed on its behalf by its
Secretary to the effect that (i)(A) the Skillscape Memorandum and Articles of
Association attached to the certificate are true, correct, officially certified
and have not been amended since the date of the last amendment affixed thereto,
(B) attached to the certificate is a true and correct copy of the Skillscape
By-laws as in effect on the date thereof and at all times since the adoption of
the resolutions in clause (C) below is annexed to such certificate, (C) attached
to the certificate are the resolutions by the Shareholders and Board of
Directors of Skillscape authorizing the actions taken in connection with the
transactions contemplated by this Agreement; (ii) the Skillscape officers
executing this Agreement and Related Agreement are incumbent officers of
Skillscape and the signatures on such certificate or certificates are their
genuine signatures; and (iii) Skillscape is in good standing in the provinces of
British Columbia. The certificates referred to above in (iii) shall attach
certificates of good standing certified by the appropriate provincial or local
official dated as of a date not more than ten days prior to the Exchange Date.
(x) Agreement to Termination of Manpower Agreement. Skillscape
and the Shareholders shall have provided an agreement, instrument or document,
in form and substance reasonably satisfactory to SmartForce, executed by
Skillscape and each of the Shareholders pursuant to which (i) all of the
provisions contained in that certain Shareholders Agreement dated January 28,
1997 ("Manpower Agreement") by and among Skillscape and the Shareholders shall
be terminated other than the provisions contained in Article VIII therein (which
shall remain in full force and effect, as amended in Section 6.17 above) and
(ii) each of the Shareholders shall waive any and all preemptive rights, rights
of first refusal or similar rights provided in the Manpower Agreement, the
Charter or otherwise with respect to the Share Exchange.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND COVENANTS, INDEMNITY, ESCROW
8.1 Survival of Representations and Warranties and Covenants. All
representations and warranties in this Agreement, the Related Agreements or in
any certificate, schedule, statement, document or instrument delivered pursuant
to this Agreement and all covenants to be performed prior to the Share Exchange
shall survive the Share Exchange for the specified periods set forth below in
Section 8.2 (each, an applicable
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"INDEMNITY TERMINATION DATE"); provided, however, that in the event that any
Indemnitee (as defined below) shall provide an Officer's Certificate (as defined
below) pursuant to Section 8.4 prior to the applicable Indemnity Termination
Date then such Indemnifiable Claim (as defined below) shall survive the
Indemnity Termination Date and the Shareholders shall remain liable for Damages
after the applicable Indemnity Termination Date resulting from such
Indemnifiable Claim until such time as the parties execute a Settlement
Memorandum (as defined below), receive an Arbitration Decision (as defined
below) or receive the Final Judgment (as defined below) with respect to such
Indemnifiable Claim.
8.2 Agreement to Indemnify.
(a) Each of the Management Shareholders agrees, severally but not
jointly, to indemnify and hold SmartForce and its officers and directors
("INDEMNITEES") harmless from and against and pay or reimburse the Indemnitees
for any and all losses, claims, damages, costs, expenses or other liabilities
(whether absolute, accrued, conditional or otherwise, and whether or not arising
from third party claims) (including reasonable attorneys' fees and expenses
incurred in the investigation or defense of any of the same or in asserting any
of their respective rights hereunder)(collectively, "DAMAGES") resulting from or
arising out of:
(i) any breach of or inaccuracy in any representations
and warranties of any of the Management Shareholders or Skillscape set forth in
this Agreement, the Related Agreements or in any certificate, schedule,
statement, document or instrument delivered pursuant to this Agreement or any of
the Related Agreements (other than the representations and warranties contained
in Sections 2.2 (Capital Structure), 2.8(b) (Undisclosed Liabilities), 2.13(d)
and (f) (Intellectual Property), 2.16 (Litigation) and 2.23(d) (Title to
Shares)),
(ii) any breach or default by any of the Management
Shareholders or Skillscape of any covenant, obligation or other agreement of the
Management Shareholders or Skillscape under this Agreement, the Related
Agreements or any certificate, schedule, statement, document or instrument
delivered pursuant to this Agreement or the Related Agreements, and
(iii) any breach of or inaccuracy in any of the
representations and warranties of any of the Management Shareholders or
Skillscape set forth in Section 2.2 (Capital Structure), Section 2.8(b)
(Undisclosed Liabilities), Sections 2.13(d) and (f) (Intellectual Property),
Section 2.16 (Litigation) and Section 2.23(d)(Title to Shares). (each of
(a)(i),(ii) and (iii), a "MANAGEMENT INDEMNIFIABLE CLAIM".)
The indemnification provided in Sections 8.2(a)(i) and (ii) shall
survive the Share Exchange for a period ending on the applicable Indemnity
Termination Date of one (1) year from the Exchange Date and the indemnification
provided in Section 8.2(a)(iii) shall survive the Share Exchange for a period
ending on the applicable Indemnity Termination Date of two (2) years from the
Exchange Date; provided, however, that to the extent that any Indemnitee is
exercising any non-monetary equitable remedies available to such Indemnitee with
respect to any Indemnifiable Claim (including, without limitation, the remedy of
specific performance), the applicable Indemnity Termination Date under Section
8.2(a)(ii) shall be two (2) years from the Exchange Date.
(b) Each of the Non-Management Shareholders agrees, severally,
but not jointly, to indemnify and hold harmless the Indemnitees from and against
and pay or reimburse the Indemnitees for any and all Damages resulting from or
arising out of:
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(i) any breach of or inaccuracy in any representations
and warranties of such Non-Management Shareholder set forth in this Agreement,
the Related Agreements or in any certificate, schedule, statement, document or
instrument pursuant to this Agreement or any of the Related Agreements, and
(ii) any breach or default by any of the
Non-Management Shareholders of any covenant, obligation or other agreement of
any of the Non-Management Shareholders under this Agreement, the Related
Agreements or any certificate, schedule, statement, document or instrument
delivered pursuant to this Agreement or the Related Agreements.(each of (i) and
(ii), a "NON-MANAGEMENT INDEMNIFIABLE CLAIM").
Hereinafter, each of a Management Indemnifiable Claim and a Non-Management
Indemnifiable Claim will sometimes collectively be referred to as "INDEMNIFIABLE
CLAIMS". The indemnification provided in Section 8.2(b) shall survive the Share
Exchange for a period ending on the applicable Indemnity Termination Date of one
(1) year from the Exchange Date; provided, however, that to the extent that any
Indemnitee is exercising any non-monetary equitable remedies available to such
Indemnitee with respect to any Indemnifiable Claim (including, without
limitation, the remedy of specific performance), the applicable Indemnity
Termination Date under Section 8.2(b)(ii) shall be two (2) years from the
Exchange Date.
(c) It is understood and agreed between SmartForce and the
Management and Non-Management Shareholders that any liability that accrues to
the Shareholders is several and not joint as between the Management and
Non-Management Shareholders and as between each of them.
8.3 Escrow Arrangements; Limitations on Indemnity.
(a) As partial security for the obligations set forth in Section
8.2 of each Shareholder pursuant to this Article VIII, the Escrow Amount shall
be deposited with ▇▇▇▇▇ Fargo, N.A., as an escrow agent, and shall be controlled
pursuant to the terms of the escrow agreement (the "ESCROW AGREEMENT") in the
form attached hereto as Exhibit E. SmartForce shall pay all expenses related to
the establishment and maintenance of the escrow account.
(b) Notwithstanding anything contained in this Agreement to the
contrary:
(i) with respect to any Indemnifiable Claims under
Sections 8.2(a)(i), 8.2(a)(ii) and 8.2(b) recovery against the Escrow Amount
shall be the exclusive monetary remedy of any Indemnitee for Damages pursuant to
this Article VIII; and
(ii) with respect to any Indemnifiable Claims under
Sections 8.2(a)(iii), recovery against the Escrow Amount shall be the
non-exclusive monetary remedy of any Indemnitee for Damages pursuant to this
Article VIII; provided, however, that the Indemnitees shall be required to
proceed, first, against the Escrow Amount and may recover monetary damages from
a Management Shareholder in excess of such Management Shareholders's pro-rata
interest in the Escrow Amount only to the extent such Management Shareholder's
pro-rata interest in the Escrow Account has been exhausted or would otherwise be
insufficient to satisfy an Indemnifiable Claim for which a Dispute Notice (as
defined below) was not provided pursuant to Section 8.3(d) or is otherwise
required to be paid pursuant to a Settlement Memorandum, Arbitration Decision or
Final Judgment.
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(c) No indemnification shall be required under Article VIII of
this Agreement with respect to any Indemnifiable Claim until the aggregate
amount of the Indemnitees' Damages which the Indemnitees would recover under
such sections, but for this Section 8.3, exceeds US$25,000, after which such
Indemnitees shall be entitled to recover for Damages in excess of US$25,000 in
accordance with the provisions of this Article VIII.
(d) The maximum aggregate amount which the Indemnitees may
recover for Damages pursuant to the indemnity set forth in Section 8.2 of this
Agreement or the Escrow Agreement shall be limited to the Purchase Price;
provided, however, that (i) the maximum individual liability of any Management
Shareholder under Sections 8.2(a)(i) and (a)(ii) of this Agreement shall be
limited to such Management Shareholder's pro rata portion of the Escrow Amount
which shall be set forth opposite such Management Shareholder's name on Exhibit
F-1 to this Agreement, (ii) the maximum individual liability of any Management
Shareholder under Section 8.2(a)(iii) of this Agreement shall be limited to such
amounts as shall be set forth opposite such Management Shareholder's name on
Exhibit F-2 to this Agreement and (iii) the maximum individual liability of any
Non-Management Shareholder under Section 8.2(b) of this Agreement shall be
limited to the Non-Management Shareholder's pro rata portion of the Escrow
Amount which shall be set forth opposite the Non-Management Shareholder's name
on Exhibit F-1 to this Agreement. With respect to any liability of the
Non-Management Shareholder under Section 8.2 of this Agreement such liability
shall be recovered from the Escrow Amount and the Non-Management Shareholder's
pro rata portion of the Escrow Amount shall be the sole and exclusive monetary
remedy of the Indemnitees for any Damages against the Non-Management Shareholder
arising as a result of this Agreement or the transactions contemplated
hereunder.
(e) Notwithstanding anything contained herein to the contrary,
Indemnitees shall be entitled to exercise any non-monetary equitable remedies
available to such Indemnitee with respect to any Indemnifiable Claim or the
enforcement of this Agreement including, without limitation, the remedy of
specific performance.
8.4 Survival of Indemnity; Indemnification Procedures; Time Limits.
(a) The indemnification obligations of each Shareholder pursuant
to Section 8.2 shall apply only to those claims for indemnification for which
SmartForce has given written notice thereof on behalf of any Indemnitee,
specifying the Indemnifiable Claim and the Damages alleged in reasonable detail
(the "OFFICER'S CERTIFICATE") to each of the Shareholders on or prior to the
applicable Indemnity Termination Date; provided, however, that in the event that
any Indemnitee shall provide an Officer's Certificate pursuant to Section 8.4
prior to the applicable Indemnity Termination Date then such Indemnifiable Claim
shall survive the Indemnity Termination Date and the Shareholders shall remain
liable for Damages after the applicable Indemnity Termination Date resulting
from such Indemnifiable Claim until such time as the parties execute a
Settlement Memorandum, receive an Arbitration Decision (as defined below) or
receive the Final Judgment (as defined below) with respect to such Indemnifiable
Claim.The parties hereto agree that the indemnification procedures set forth in
clauses (b), (c), (d) and (e) of this Section 8.4 below and, in addition, the
provisions contained in the Escrow Agreement, shall apply to any claims for
Damages resulting from any Indemnifiable Claims.
(b) If SmartForce delivers an Officer's Certificate in accordance
with Section 8.4(a) on behalf of an Indemnitee, upon the expiration of thirty
(30) calendar days after receipt of the Officer's Certificate by the
Shareholders, subject to the provisions of Section 8.4(c) hereof and the other
limitations set
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forth in this Article VIII or the Escrow Agreement, (i) the Escrow Agent shall
promptly transfer, deliver and assign to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Trustee under the
Trust Agreement, such number of Escrow Shares (rounded down to the nearest whole
share) as is equal to the number resulting from dividing the amount of the
Damages by an amount equal to the Average Closing Price per share and (ii) to
the the extent that the Damages exceed the Escrow Amount ("EXCESS DAMAGES"),
with respect to an Indemnifiable Claim under Section 8.2(a)(iii), the Management
Shareholders shall deliver to such Indemnitees an amount equal to such Excess
Damages in readily payable funds in the currency of the United States. To the
extent that any Indemnifiable Claim shall be satisfied out of the Escrow, the
Officer's Certificate shall also be delivered to the Escrow Agent in the manner
specified in the Escrow Agreement.
(c) For a period of thirty (30) calendar days after the receipt
of such Officer's Certificate by Shareholders, Shareholders shall be entitled to
review the Officer's Certificate and the basis of the Indemnifiable Claim. If
Shareholders desire to dispute the Indemnifiable Claim or the Damages set forth
in the Officer's Certificate, Shareholders may do so by providing written notice
of such dispute to SmartForce, the Indemnitees and the Escrow Agent prior to the
expiration of such thirty (30) day period, with the basis for such dispute set
forth in reasonable detail (the "DISPUTE NOTICE"). If, within thirty (30)
calendar days after the receipt of such Officer's Certificate by Shareholders
(the "DISPUTE PERIOD"), SmartForce and the Indemnitees receive a Dispute Notice
from Shareholders, neither the Escrow Agent nor the Shareholders shall be
required to transfer, deliver or assign to Trustee any Escrow Shares or pay any
readily available funds in the currency of the United States, as applicable,
until either:
(i) the Shareholders collectively execute a Settlement
Memorandum (as defined below) and, to the extent that such Indemnifiable Claim
shall be satisfied out of the Escrow, such Settlement Memorandum shall be
furnished to the Escrow Agent; or
(ii) there is a final decision of an arbitration panel
appointed in accordance with Section 8.4(d) below ("ARBITRATION DECISION"); or
(iii) there is a final judgment of a court of
competent jurisdiction after all appeals have been exhausted or expired ("FINAL
JUDGMENT").
Upon the execution of the Settlement Memorandum or the Arbitration Decision or
Final Judgment, the Escrow Agent and/or the Management Shareholders shall
transfer, deliver or assign to the Trustee the Escrow Shares or pay readily
available funds of the United States, as applicable, in accordance with such
Settlement Memorandum, Arbitration Decision or Final Judgment.
(d) If a Dispute Notice is received within the Dispute Period in
accordance with Section 8.4(c) above, SmartForce, the Indemnitees and
Shareholders shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. In the event of
resolution of such dispute, SmartForce, the Indemnitees and the Shareholders
shall collectively execute a memorandum setting forth such resolution and, if
applicable, the amount of any damages payable to the Indemnity or the Trustee,
as applicable ("SETTLEMENT MEMORANDUM"). To the extent that any Indemnifiable
Claim shall be satisfied out of the Escrow, such Settlement Memorandum shall
also be furnished to the Escrow Agent. If SmartForce, the Indemnitees and the
Shareholders are unable to resolve such dispute within twenty (20) calendar days
from SmartForce's and the Indemnitees' receipt of the Dispute Notice, then
Shareholders, on the one hand, and SmartForce and the Indemnitees, on the other,
may demand, by written notice to the other, that such issue shall be settled by
binding arbitration held in San Mateo, California (an "ARBITRATION DEMAND") or
such other
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venue mutually agreed to by the Indemnifying Parties and SmartForce; provided,
however, that in the event the dispute involves an Indemnifiable Claim under
Section 8.2(a)(iii), SmartForce and the Indemnitees shall have the right to
bring any such claim before a state or federal court of competent jurisdiction
residing in the County of Santa ▇▇▇▇▇ in the State of California in lieu of
arbitration.
(e) To the extent that an Arbitration Demand has been made, all
claims shall be settled by three arbitrators in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"ARBITRATION RULES"). The Shareholders, on the one hand, and SmartForce, on the
other, shall each designate one (1) arbitrator within thirty (30) calendar days
after the delivery of the Arbitration Demand. Such two (2) designated
arbitrators shall then mutually agree upon and designate a third arbitrator. The
arbitrators shall permit such discovery as they determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as practicable, and
if reasonably practicable, within 120 days after the selection of the
arbitrators. The final decision of a majority of the three arbitrators shall be
furnished to Shareholders, SmartForce, the Indemnitee and the Escrow Agent (to
the extent applicable) and shall constitute a conclusive determination of the
issue in question, binding upon all parties and shall not be contested by any of
them; provided, however that with respect to any Arbitration Decision rendered
pursuant to a claim under paragraph 8.2(a)(iii) hereof that such Arbitration
Decision shall be appealable. The non-prevailing party in any arbitration or
litigation shall bear all of the fees and costs associated with any dispute
hereunder and shall reimburse the prevailing party for all of its reasonable
attorney's fees incurred in connection with any arbitration hereunder. The
amount of the reasonable attorney's fees to be awarded to the prevailing party
in any arbitration hereunder shall be determined by the arbitrators.
(f) In order for any Indemnitee to be entitled to any
indemnification provided for under this Agreement arising out of or involving a
claim or demand made by any other person, firm, governmental authority,
corporation or other third party that an Indemnitee reasonably believes may
result in an Indemnifiable Claim (a "THIRD PARTY CLAIM"), the Indemnitee must
provide written notice to the Shareholders, setting forth the specific facts and
circumstances, in reasonable detail, of the Third Party Claim within forty-five
(45) calender days of actual notice of the Third Party Claim ("THIRD PARTY CLAIM
NOTICE"). Thereafter, the Indemnitee shall deliver to the Shareholders (each, an
"INDEMNIFYING PARTY") as soon as practicable all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim; provided, however, that failure to give such Third Party Claim Notice
and/or to deliver such copies on a reasonably timely basis shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually and materially prejudiced as a result of such failure
and in the event the Indemnifying Party shall have been actually and materially
prejudiced as a result of such failure then Indemnitee shall only be barred from
seeking indemnification as to only that portion of the Third Party Claim for
which the Indemnifying Party is actually and materially prejudiced.
(g) If a Third Party Claim is made against the Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if the Indemnifying Party so chooses and acknowledges in writing its obligation
to indemnify the Indemnitee therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee. If the Indemnifying Party assumes such defense, then the Indemnitee
shall have the right to participate in the defense thereof and to employ counsel
and participate in its defense, at its own expense, separate from the counsel
employed by the Indemnifying Party. The Indemnifying Party shall appoint and
direct lead counsel. The Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnitee for any period during which the
Indemnifying Party has not assumed the defense thereof. If the Indemnifying
Party chooses to defend any Third Party Claim, all the parties hereto shall
cooperate in the defense or prosecution of such Third Party
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Claim. Such cooperation shall include the retention and (upon the Indemnifying
Party's request) the provision to the Indemnifying Party of records that are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. If the Indemnifying Party, within a reasonable
time after receipt of an Indemnification Notice relating to a Third Party Claim,
chooses not to assume defense of a Third Party Claim or fails to defend such
Third Party Claim actively and in good faith, the Indemnitee will (upon further
notice) have the right to undertake the defense, compromise or settlement of
such Third Party Claim or consent to the entry of judgment with respect to such
Third Party Claim, on behalf of, and for the account and risk of, the
Indemnifying Party, and the Indemnifying Party shall have no right to challenge
the Indemnitee's defense, compromise, settlement or consent to judgment. Without
the express written consent of the Indemnitee, the Indemnifying Party may not
compromise or settle any Third Party Claim:
(i) without obtaining a complete and general release
of all claims by the third party including, but not limited to, those against
the Indemnitee;
(ii) in an amount exceeding the amount the
Indemnifying Party is obligated to pay under this Agreement and financially
capable of paying at the time such Third Party Claim is compromised or settled;
or
(iii) if such compromise or settlement would involve
any remedy other than monetary damages.
(h) The indemnification obligation of any of the Shareholders
shall be adjusted so as to give effect to any direct net reduction in federal,
state, local or foreign income or franchise tax liability actually realized at
any time by SmartForce as a result of the satisfaction by any of the
Shareholders of the Indemnifiable Claims with respect to which indemnification
is sought hereunder.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
may be terminated at any time prior to the Share Exchange:
(a) by mutual consent of all the parties hereto; or
(b) by any party hereto if the Share Exchange has not occurred on
or prior to October 31, 2001 other than due to the failure of the party seeking
to terminate this Agreement to perform its obligations under this Agreement
which are required to be performed at or prior to the Exchange Date, or
(c) by SmartForce or Shareholders if (i) there shall be a final
nonappealable order of a court of competent jurisdiction in effect preventing
consummation of the Share Exchange or (ii) there shall be any action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Share Exchange by any Governmental Entity which would make the
consummation of the Share Exchange illegal; or
(d) by SmartForce if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Share Exchange by any Governmental Entity
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which would; (i) prohibit ownership or operation by SmartForce or Skillscape of
all or a material portion of the business of Skillscape; or (ii) compel
SmartForce or Skillscape to dispose of all or a material portion of the business
or assets of SmartForce or Skillscape as a result of the Share Exchange; or
(e) by SmartForce if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Skillscape or Shareholders, as the case may be, and due to such
breach, Shareholders or Skillscape would not be able to satisfy the requirements
of Section 7.3(a) or 7.3(b) as of such date, provided that, if such breach is
curable by Skillscape or Shareholders, as the case may be, within twenty (20)
days through the exercise of its reasonable best efforts, then for so long as
Skillscape or Shareholders, as the case may be, continues to exercise such
reasonable best efforts SmartForce may not terminate this Agreement under this
Section 9.1(e) unless such breach is not cured within such twenty (20) day
period (but no cure period shall be required for a breach which by its nature
cannot be cured); or
(f) by Skillscape or Shareholders, as the case may be, none of
them are in material breach of their obligations under this Agreement and there
has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of SmartForce, and due to such breach,
SmartForce would not be able to satisfy the requirements of Section 7.2(a) or
7.2(b) as of such date, provided that, if such breach is curable by SmartForce
within fifteen (15) days through the exercise of its reasonable best efforts,
then for so long as SmartForce continues to exercise such reasonable best
efforts Skillscape or Shareholders, as the case may be, may not terminate this
Agreement under this Section 9.1(f) unless such breach is not cured within such
fifteen (15) day period (but no cure period shall be required for a breach which
by its nature cannot be cured); or
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of SmartForce, Skillscape or
Shareholders or their respective officers, directors or Shareholders; provided,
however, that each party shall remain liable for any breaches of this Agreement
prior to its termination; and provided further that the provisions of Sections
6.2 and 6.3 and Articles IX and X of this Agreement shall remain in full force
and effect and survive any termination of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in Section 6.11
hereof, all of which obligations shall survive termination of this Agreement in
accordance with the terms thereof.
9.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed by or on behalf of each
of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Exchange Date,
SmartForce, on the one hand, and Shareholders, on behalf of themselves and
Skillscape, on the other, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations of the other party hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered by hand or delivered by
overnight courier, freight prepaid, or sent via facsimile (with acknowledgment
of complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to SmartForce, to: SmartForce PLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Skillscape or
Shareholders to: Skillscape Solutions Inc.
#▇▇▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Manpower, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.:
with a copy to: ▇▇▇▇▇, Southward ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
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Suite 202-911 ▇▇▇▇▇, P.O Box 847
Victoria, B.C.
Canada V8W 2R9
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective when received, and shall in any event be
deemed to have been received (i) when delivered, if delivered personally or sent
by telecopy and confirmed in writing or (ii) four (4) business days after the
business day of deposit with overnight courier, addressed and shipped as
aforesaid.
10.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When a reference is made in this
Agreement to Exhibits, such reference shall be an Exhibit to this Agreement
unless otherwise indicated. As used in this Agreement, the phrase "to the best
of [a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware,"
and similar phrases shall mean the knowledge of such party, or of the officers
and directors of such party, after careful consideration of the matters set
forth in the representation that is so qualified and a reasonably diligent
review of all files, documents, agreements and other materials in such person's
possession or subject to his or her control.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the Disclosure Letter
and Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer upon
any other person any rights or remedies hereunder; and (c) shall not be
assigned, by operation of law or otherwise, except as otherwise specifically
provided and except that SmartForce may transfer or assign its rights hereunder
to any wholly owned subsidiary, directly or indirectly, of SmartForce, or to any
party that acquires Skillscape or all or substantially all of its assets from
SmartForce or its subsidiaries, but no such transfer or assignment will relieve
SmartForce of its obligations. Without limiting the generality of clause (b) of
this Section 10.4, the transactions contemplated by this Agreement shall not be
deemed to constitute the purchase of all or substantially all of the assets or
any assumption of liabilities of Skillscape or Shareholders and SmartForce shall
not be liable to any creditor of Skillscape or Shareholders by reason of the
consummation of the Share Exchange or any other transaction contemplated hereby.
10.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable
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provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with,
and not exclusive of, any other remedy conferred hereby or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. Notwithstanding any provision of this Agreement to
the contrary, the parties expressly agree that reasonable attorney's fees may be
recoverable in connection with any action to enforce contractual rights under
Section 6.12 of this Agreement.
10.7 Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this Agreement
and agree that the obligations of the parties hereunder shall be specifically
enforceable in accordance with the terms stated herein.
10.8 Governing Law, Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to applicable principles of conflicts of laws thereof. Each of the parties
hereto consents to personal jurisdiction before the state and federal courts
residing in the State of California, County of Santa ▇▇▇▇▇ and hereby waives any
claims of inconvenient forum.
10.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.10 Share Legends. The ADSs to be issued pursuant to this Agreement
shall have endorsed thereon a restrictive legend substantially as follows:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) Any legend required to be placed thereon by applicable blue
sky laws of any state.
10.11 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
[Remainder of this page left blank intentionally.]
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EXECUTION COPY
IN WITNESS WHEREOF, each party hereto has caused this Share Purchase
Agreement to be duly executed on its behalf, all as of the date first written
above.
SMARTFORCE PLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President, Finance and
Chief Financial Officer
SKILLSCAPE SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SHAREHOLDERS
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
MANPOWER INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: V.P. and General Counsel
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INDEX OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A List of Shareholders
Exhibit B Registration Rights Agreement
Exhibit C Legal Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ et. al
Exhibit D Form of Employment and Non-Competition Agreement
Exhibit E Escrow Agreement
Exhibit F1-2 Liability Limits
Copies of the Exhibits listed above may be obtained by the Commission upon
request.