EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Dated August 8, 2001
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The parties to this agreement are Level 8 Systems, Inc., a
Delaware corporation (the "Seller"), and AppBuilder Solution B.V., a Netherlands
establishment (the "Purchaser").
The Seller, directly and through its subsidiaries, is engaged in the
business (the "Business") of developing, distributing, licensing, maintaining,
and supporting its Geneva AppBuilder Software (formerly known as its Seer HPS
Software) (the "Software"). The parties wish to provide for the purchase by
the Purchaser or its designees from the Seller of all the assets of the Seller
and its subsidiaries relating to the Business and all the Seller's and its
subsidiaries' rights to shares of capital stock, and all the Seller's and its
subsidiaries' rights to acquire shares of capital stock, of Access International
Financial Services, Inc. ("AIFS"), and the assumption by the Purchaser of
certain liabilities and obligations relating to the Business.
Accordingly, the parties agree as follows:
1. Purchase and Sale
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1.1 Assets. At the Closing referred to in section 3, the Seller
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shall, and shall cause its subsidiaries to, sell, transfer, and assign to the
Purchaser or its designees, and the Purchaser shall, or shall cause its
designees to, purchase and acquire from the Seller and its subsidiaries, free
and clear of any lien, security interest, claim, voting agreement, or other
charge or encumbrance ("Liens"), (a) all the assets of the Seller (the
"Assets"), including, without limitation, the assets, properties, and rights
enumerated in clauses 1.1.1 through 1.1.11 below, to the extent they relate to
and are used in the Business, and (b) all the Seller's and its subsidiaries'
rights to shares of capital stock, and all the Seller's and its subsidiaries'
rights to acquire shares of capital stock, of AIFS:
1.1.1 all inventories, supplies, and copies of the Software, and all
the documentation relating to the Software;
1.1.2 all intangible and intellectual property rights of the Seller and
its subsidiaries in the Software, including those set forth on schedule 1.1.2
and all other databases, copyrights, and patent rights relating to the Software;
1.1.3 all the Seller's and its subsidiaries' rights to use all the
trade names, trademarks, and service marks relating to the Software, including
those set forth on schedule 1.1.3, and any abbreviations or variations of such
names, including registrations thereof or registration applications therefor,
and licenses concerning any of them;
1.1.4 all the Seller's and its subsidiaries' rights under all
agreements with its licensees and customers, including all license, maintenance,
service, and support contracts (collectively, "Customer Contracts");
1.1.5 all accounts receivable and notes payable from, and all
rights to invoice, customers and other third parties (including original
equipment manufacturers) for goods and services, including, without limitation,
those provided under the Customer Contracts (regardless of when provided), but
not yet paid as of the Closing (the "Receivables");
1.1.6 all prepaid expenses relating to the Business, including those
set forth on schedule 1.1.6;
1.1.7 all the Seller's and its subsidiaries' rights under agreements
with third parties to use the software and other property of such third
parties, to the extent such software and other property is used in the Business
(collectively, the "Third Party Licenses");
1.1.8 all the Seller's rights (including rights to deposits) under
the equipment leases described on schedule 1.1.8(a) and under the real estate
leases described on schedule 1.1.8(b) (the "Leases");
1.1.9 all the fixed assets described on schedule 1.1.9;
1.1.10 all trade secrets, customer lists, and other rights and
documents owned by the Seller or any of its subsidiaries and embedded in any
of the Assets; and
1.1.11 all the Seller's and its subsidiaries' books and records,
or copies thereof, in both print and electronic media, relating to the
Assets or the Business (it being understood that, to the extent such books and
records contain proprietary or confidential information of the Seller or any
of its subsidiaries or of the Business, each party shall use commercially
reasonable efforts to maintain and preserve the confidentiality of such
nformation).
1.2 Excluded Assets. Notwithstanding anything to the
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contrary in section 1.1, the term "Assets" does not include, and the Seller and
its subsidiaries are not selling or transferring to the Purchaser or any of its
designees, any rights under any agreements the Purchaser is not assuming
pursuant to clause (2) of the last sentence of section 1.3, any rights that
accrue or will accrue to the Seller under this agreement, any of the Seller's or
its subsidiaries' claims for any federal, state, local, or foreign tax refunds,
any prepaid maintenance fees paid by any customer prior to the Closing for
maintenance services to be provided after the Closing, or any other assets
listed on schedule 1.2 (the "Excluded Assets").
1.3 Consideration. As consideration for the Assets to be sold and
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transferred to the Purchaser or its designees, the Purchaser shall (a) pay, or
cause to be paid, to the Seller the Purchase Price (as defined below), and (b)
assume, and pay, perform, and discharge, and indemnify and hold the Seller and
its subsidiaries harmless from and against, the Assumed Liabilities (as defined
below). As used in this agreement: (x) "Purchase Price" means an amount equal
to $20,000,000, increased by the Interest Amount (as defined in section 1.5),
and increased by the Final Net Asset Amount (as defined below), if the Final Net
Asset Amount is a positive number, or reduced by the Final Net Asset Amount, if
the Final Net Asset Amount is a negative number, (y) "Final Net Asset Amount"
means an amount equal to (i) the sum of the Receivables, the prepaid expenses,
and the fixed assets set forth in the Final Accounting Documents referred to in
section 1.4, reduced by (ii) the sum of the Accrued Employee Liability (as
defined below) and the Deferred Revenue Obligation (as defined in schedule 1.3)
set forth in the Final Accounting Documents, and (z) "Assumed Liabilities"
means all liabilities and obligations under the Customer Contracts, the Third
Party Licenses, and the Leases, and all liabilities and obligations of the
Seller and its subsidiaries in respect of accrued vacations, bonuses,
commissions, and unfunded pension and other benefits to, and, in the case of
employees and consultants domiciled outside the United States, pursuant to
employment agreements with, the employees and consultants listed on schedule
4.2.9 who become employees or consultants of the Purchaser or its designees
within 30 days after the Closing (the "Accrued Employee Liability"). The term
"Assumed Liabilities" also includes all severance obligations to the employees
and consultants listed on schedule 4.2.9 who become employees or consultants of
the Purchaser or its designees within 30 days after the Closing.
Notwithstanding the foregoing, however, "Assumed Liabilities" does not include
(1) any liabilities or obligations for taxes, for the infringement of
intellectual property rights of third parties, for violations of law, for
breaches of contract, or for tort, in each case based on any facts, events, or
circumstances arising or existing before the Closing, (2) any liabilities or
obligations under any Customer Contracts, Third Party Licenses, or Leases that
cannot be assigned or transferred to the Purchaser or its designees without the
prior written consent of a third party, unless that written consent shall have
been obtained, or (3) any liabilities or obligations for trade payables or
accrued expenses, or for severance or other benefits to employees or consultants
(other than as expressly set forth above).
1.4 Determination of Final Net Asset Amount. The Seller shall cause
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Deloitte & Touche (the "Independent Accountants") to prepare and deliver to the
parties, as promptly as practicable after the Closing, (a) a statement of assets
and liabilities (the "Preliminary Statement of Assets and Liabilities") that
reflects the Receivables (converted into U.S. dollars at the exchange rate in
effect at the Closing), the prepaid expenses, and the fixed assets included in
the Assets, and the Accrued Employee Liability and Deferred Revenue Obligation
included in the Assumed Liabilities, in each case in accordance with generally
accepted accounting principles applied in a manner consistent with the
application of those principles in the Seller's consolidated financial
statements for the year ended December 31, 2000, except as otherwise specified
on schedule 1.4, and (b) a report (the "Independent Accountants' Report")
setting forth the calculation of the Final Net Asset Amount. Prior to delivery
of the Preliminary Statement of Assets and Liabilities and the Independent
Accountants' Report (collectively, the "Accounting Documents"), the Seller shall
use commercially reasonable efforts to cause the Independent Accountants to
deliver to the parties a draft of the proposed Accounting Documents, accompanied
by related back-up material and, at either party's request, shall consult with
that party regarding the proposed Accounting Documents. The Purchaser shall
cooperate with the Seller in the preparation of the Preliminary Statement of
Assets and Liabilities. If, during the 15-day period immediately following the
delivery to the parties of the Accounting Documents (the "Response Period"), the
Purchaser shall have failed to give the Seller written notice that it disagrees
with the Accounting Documents and specifying in reasonable detail any item or
items in the Accounting Documents with which it disagrees (the "Disagreement
Notice"), the Accounting Documents shall become final, binding, and conclusive
on the parties. If, during the Response Period, the Purchaser shall have given
the Seller the Disagreement Notice and the parties shall have resolved the
disagreement pursuant to a written instrument executed and delivered by the
Purchaser and the Seller (the "Settlement Instrument"), the Accounting
Documents, as modified pursuant to the Settlement Instrument, shall become
final, binding, and conclusive on the parties. If, during the Response Period,
the Purchaser shall have given the Seller the Disagreement Notice and the
parties shall have failed to resolve the disagreement pursuant to the Settlement
Instrument, the parties shall submit the disagreement to an independent
accounting firm mutually agreed upon by the parties. If, during the five-day
period immediately following the Response Period, the parties shall not have
agreed on the selection of an independent accounting firm for this purpose,
either party may apply to the American Arbitration Association to select an
independent accounting firm of national standing for this purpose. The parties
shall cooperate with the independent accounting firm selected to resolve any
disagreement set forth in the Disagreement Notice. The Accounting Documents, as
modified in accordance with the Settlement Instrument or the determination of
the independent accounting firm with respect to each disagreement submitted to
it, as the case may be (the "Final Accounting Documents"), shall be final,
binding, and conclusive on the parties. The costs of the Independent
Accountants shall be borne by the Purchaser, and the costs of the American
Arbitration Association and any independent accounting firm (other than the
Independent Accountants) shall be borne by the parties in the proportion
determined by the other independent accounting firm, which determination shall
be based on the relative merits of the parties' positions and shall be final,
binding, and conclusive on the parties.
1.5 Payment of Purchase Price and Assumption of Assumed Liabilities
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(a) At the Closing, (i) the Purchaser shall pay, or cause to be
paid, by wire transfers of immediately available funds, (A) to the Seller,
$7,000,000, and (B) to Bank Hapoalim (the "Bank"), on behalf of the Seller
pursuant to the Credit Instruments (as defined in section 6.1.1(c)),
$12,000,000, and (ii) the Purchaser shall agree to assume, and pay, perform, and
discharge, and indemnify and hold the Seller and its subsidiaries harmless from
and against, the Assumed Liabilities. Notwithstanding anything to the contrary
in this agreement, if the Seller shall have breached section 5.1 by virtue of
failing to pay a payable or payables in a timely manner and the Purchaser shall
have paid the payable or payables (after giving the Seller written notice of the
breach and affording the Seller an opportunity to cure the breach promptly), the
Purchase Price and the amount payable under this section 1.5 shall be reduced by
the sum of the payment or payments. Nothing in the preceding sentence is
intended to affect the Purchaser's rights under section 3.2, 6.1, or otherwise
under this agreement.
(b) Not later than three business days after the Final Accounting Docu
become final, binding, and conclusive on the parties, (i) if the Final Net Asset
Amount is a positive number, the Purchaser shall pay, or cause to be paid, to
the Seller, by wire transfer of immediately available funds, an amount equal to
the sum of (A the Final Net Asset Amount plus (B) an amount in the nature of
interest on the Final Net Asset Amount at the rate of 8% a year from the date of
the Closing to the date of payment, and (ii) if the Final Net Asset Amount is a
negative number, the Seller shall pay the Purchaser or its designee, by wire
transfer of immediately available funds, an amount equal to the sum of (A the
Final Net Asset Amount plus (B) an amount in the nature of interest on the Final
Net Asset Amount at the rate of 8% a year from the date of the Closing to the
date of payment.
(c) Not later than February 28, 2002, the Purchaser
shall pay, or cause to be paid, to the Seller, by wire transfer of immediately
available funds, $1,000,000, plus an amount in the nature of simple interest on
$1,000,000 at the six-month treasury rate for United States securities published
in The New York Times on the date of the Closing, from the date of the Closing
to the date of payment (the "Interest Amount").
1.6 Seller's Failure to Pay Certain Liabilities.
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If, at any time before the first anniversary of the Closing, (a) the Purchaser
determines that a liability or obligation of the Seller or any of its
subsidiaries that was not an Assumed Liability but related to the Business and
arose out of any fact, event, or circumstance prior to the Closing has not been
paid, performed, or discharged, (b) the Purchaser determines that the failure of
the Seller to pay, perform, or discharge the liability or obligation has or
could reasonably be expected adversely to affect the Purchaser, and (c) that
liability or obligation is paid, performed, or discharged by the Purchaser, the
Purchaser shall give notice to the Seller of those facts and furnish the Seller
with appropriate information concerning the liability or obligation. The Seller
shall indemnify and hold the Purchaser harmless from and against any such
liability or obligation. If the Seller gives notice to the Purchaser of its
objection to that notice, the parties shall consult with respect to the matter,
and their written determination with respect to the matter shall be final,
binding, and conclusive on the parties. If the parties fail to reach agreement
within 30 days after the Seller shall have given the notice of objection, the
dispute shall be resolved in accordance with the procedures set forth in section
10.
1.7 Allocation. The Purchaser and the Seller agree
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that $20,000,000 of the Purchase Price is allocable to the intellectual property
included in the Assets.
2. Receivables. If, at any time after the
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Closing, the Seller or any of its subsidiaries receive payment in respect of any
Receivable, the Seller shall, not later than three business days after that
receipt, pay the Purchaser an amount equal to the amount so received. If the
Seller fails to pay that amount when it is due, the Seller shall, in addition to
paying the Purchaser that amount, also pay the Purchaser an amount in the nature
of simple interest on that amount at the rate of 8% a year from the date the
payment was due to the date of actual payment.
3. Closing
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3.1 Closing Date. The closing of the transactions contemplated by this
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agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. (New York time) on
the second business day following the fulfillment or waiver in writing of the
conditions specified in sections 6.1.1(b) and 6.2.6 (or at such other place or
on such other date as the parties may agree in writing). At the Closing, the
parties shall execute and deliver, or cause to be executed and delivered, the
documents and other items referred to in section 7.
3.2 Termination. This agreement may be terminated at any time
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prior to the Closing: (a) by a written agreement between the parties; (b) by
the Purchaser, if any condition specified in section 6.1 shall not have been
satisfied or waived in writing by the Purchaser on or before September 30, 2001;
(c) by the Seller, if any condition specified in section 6.2 shall not have been
satisfied or waived in writing by the Seller on or before September 30, 2001; or
(d) by the Seller at any time prior to the Closing, if a Superior Proposal (as
defined below) is received and a majority of the disinterested members of the
Seller's board of directors determines in good faith that it is necessary to
terminate this agreement and to enter into an agreement to effect the Superior
Proposal in order to comply with the fiduciary duties of the Seller's board of
directors under applicable law. For purposes of this agreement, the term
"Superior Proposal" means a bona fide written proposal made by a third party
relating to any direct or indirect acquisition or purchase of (i) the Assets, or
(ii) all or substantially all the business or assets of the Seller (including,
without limitation, by way of merger) (A) on terms a majority of the
disinterested members of the Seller's board of directors reasonably determines
in good faith to be more favorable to the Seller and its stockholders than the
transactions contemplated by this agreement, and (B) that is reasonably capable
of being consummated (taking into account, among other things, all legal,
financial, regulatory, and other aspects of such proposal and the identity of
the party making such proposal). If either party terminates this agreement
because the condition specified in sections 6.1.4 and 6.2.4 shall not have been
satisfied or waived by each party or if the Seller terminates this agreement
pursuant to clause (d) above, the Seller shall reimburse the Purchaser for
legal, accounting, and other reasonable out-of-pocket expenses in connection
with the transactions contemplated by this agreement up to a maximum of $750,000
in the aggregate. Except as set forth in the immediately preceding sentence,
upon termination in accordance with this section 3.2, no party shall have any
liability or obligation under this agreement, except for any liability or
obligation resulting from its breach of any warranty or agreement, or any
misrepresentation, in this agreement prior to termination.
4. Representations and Warranties
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4.1 Representations and Warranties of the Purchaser. The Purchaser
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represents and warrants to the Seller as follows:
4.1.1 Authorization; Enforceability. The
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execution, delivery, and performance of this agreement by the Purchaser have
been duly authorized by all necessary action of the Purchaser, and this
agreement constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
4.1.2 Non-Contravention. The execution,
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delivery, and performance of this agreement by the Purchaser will not (a)
violate or conflict with any law, regulation, order, writ, judgment, injunction,
or decree applicable to the Purchaser or any of its properties, (b) violate or
conflict with the Purchaser's organizational documents, or (c) conflict with,
result in a breach of, or constitute a default under any contract to which the
Purchaser is a party or by which any of its properties is bound.
4.1.3 Brokers or Finders. The Purchaser has
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not employed or utilized the services of any investment banker, broker, or
finder in connection with the transactions contemplated by this agreement.
4.2 Representations and Warranties of the Seller. The Seller
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represents and warrants to the Purchaser as follows:
4.2.1 Authorization; Enforceability. The
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execution, delivery, and performance of this agreement by the Seller have been
duly authorized by all necessary corporate action of the Seller, and this
agreement constitutes the valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
4.2.2 Non-Contravention. The execution,
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delivery, and performance of this agreement by the Seller will not (a) violate
or conflict with any law, regulation, order, writ, judgment, injunction, or
decree applicable to it or any of its subsidiaries or any of their respective
properties, (b) violate or conflict with its certificate of incorporation or
bylaws, or (c) subject to obtaining consents to the assignment and assumption of
the contracts listed on schedule 4.2.2 (collectively, the "Required Consents")
and the consent referred to in section 6.2.6, conflict with, result in a breach
of, or constitute a default under any material contract to which it or any of
its subsidiaries is a party or by which any of their respective properties is
bound. Except for the Required Consents and the consent referred to in section
6.2.6, no consent, approval, order, authorization, or notification of, or
registration, declaration, or filing with, any person, entity, or government is
required to be obtained or made by or with respect to the Seller or any of its
subsidiaries or any of the Assets or the Business in connection with the
execution and delivery by the Seller of this agreement or the consummation of
the transactions contemplated by this agreement.
4.2.3 Title to Assets. The Seller and its
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subsidiaries have good and marketable title to all the Assets, free and clear of
any Lien, except for the lien of taxes not yet due and payable and the other
items set forth on schedule 4.2.3.
4.2.4 Contracts, Etc.
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4.2.4.1 The Seller has furnished the Purchaser an accurate and
complete list, and true and correct copies, of all the Customer Contracts.
Schedule 4.2.4.1 is an accurate and complete list of all the material Customer
Contracts, Third Party Licenses, and Leases. All the Customer Contracts, Third
Party Licenses, and Leases are, to the knowledge of the Seller, valid and
binding upon the other parties thereto, and are in full force and effect and
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.2.4.2 Neither the Seller nor any of its subsidiaries has received
any payment from any party with which or whom the Seller or any of its
subsidiaries is currently contracting in connection with or as an inducement for
entering into any Customer Contract currently in effect, except for payment for
actual services rendered or to be rendered of a type and amount consistent with
amounts customarily charged for such services.
4.2.5 Litigation. Except as set forth on schedule 4.2.5, there is no
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suit, action, proceeding, claim, or investigation pending or, to the knowledge
of the Seller, threatened against, or affecting, the Assets or the Business, and
there exists no basis or grounds for any such suit, action, proceeding, claim,
or investigation that is material to the Business or the Assets. None of the
items described on schedule 4.2.5, singly or in the aggregate, could, if
adversely determined, have a material adverse effect on the Assets or the
Business, or the right of the Seller to consummate the transactions contemplated
by this agreement.
4.2.6 Intellectual Property
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4.2.6.1 Schedule 4.2.6.1 sets forth a complete and
correct list of all material trademarks, trade names, service marks, service
names, brand names, copyrights, and patents, and registrations thereof and
applications therefor, owned, leased, or licensed by the Seller or any of its
subsidiaries and relating to the Assets or the Business, together with a
complete list of all licenses granted by or to the Seller or any of its
subsidiaries with respect to any of the above. All such trademarks, trade
names, service marks, service names, brand names, copyrights, and patents are
owned, leased, or licensed by the Seller or its subsidiaries, free and clear of
all Liens, except as otherwise set forth on schedule 4.2.6.1. To the knowledge
of the Seller, neither the Seller nor any of its subsidiaries is infringing or
otherwise violating any third party's rights in any copyright, patent, trade
secret, know-how, trademark, trade name, service ▇▇▇▇, or other intellectual
property rights in connection with the Business.
4.2.6.2 Except as set forth on schedule 4.2.6.2, the Seller has the
exclusive right and title to the Software, taken as a whole (with the exception
of trade secrets for which exclusive rights may not be available, and provided
that no representation is made that the Software (excluding the related
trademarks, trade names, logos, service marks, and service names) is covered by
any form of intellectual property rights, other than copyright, trade secret
rights and rights to those patents identified on schedule 4.2.6.1), free and
clear of all claims, including claims or rights of the shareholders of the
Seller or any other joint owners, employees, agents, consultants, customers,
licensees, or any other parties who may have been involved in the development,
creation, marketing, maintenance, enhancement, or licensing of the Software.
Except as set forth on schedule 4.2.6.2, (a) there are no honoraria, royalties,
fees, or other payment payable by the Seller or any of its subsidiaries to any
person or entity by reason of the ownership, use, license, sale, or disposition
of the Software, and (b) the Software is not dependent on any Embedded Software
(as defined in section 4.2.6.3) in order to operate fully in the manner in which
it is intended. No Software has been delivered by or on behalf of the Seller to
any other parties, except as set forth on schedule 4.2.6.2, except pursuant to
contracts requiring such other parties not to reverse engineer or decompile the
Software and otherwise to keep the Software confidential. To the Seller's
knowledge, no such other party has breached any such obligation not to reverse
engineer or decompile the Software and to keep the Software confidential .
4.2.6.3 Schedule 4.2.6.3 contains a complete and accurate list of all
software under which the Seller or any of its subsidiaries is a licensee,
lessee, or otherwise has obtained the right to use software that is embedded
into or constitutes a part of the Software (the "Embedded Software"). Schedule
4.2.6.3 also sets forth a list of all license fees, rents, royalties, or other
charges that the Seller or any of its subsidiaries is required or obligated to
pay with respect to Embedded Software. Except as set forth on schedule 4.2.6.3,
the Seller or one or more of its subsidiaries has the right and license to use,
sublicense, modify, and copy the Embedded Software, free and clear of any
limitations or encumbrances, except as may be set forth in any Third Party
License. To the Seller's knowledge, the Seller and its subsidiaries are in full
compliance with all provisions of all Third Party Licenses. Neither the Seller
nor any of its subsidiaries has published or disclosed any Embedded Software to
any other party, except, in the case of Embedded Software that the Seller or its
subsidiaries lease or market to others, in accordance with and as permitted by
any license, lease, or similar agreement relating to the Embedded Software and
except pursuant to contracts requiring such other parties not to reverse
engineer or decompile such Embedded Software and otherwise to keep the Embedded
Software confidential. To the Seller's knowledge, no party to whom the Seller
or any of its subsidiaries has disclosed Embedded Software has breached such
obligation not to reverse engineer or decompile such Embedded Software and to
keep the Embedded Software confidential.
4.2.6.4 The transactions contemplated by this agreement will not
cause a breach or default under any Third Party License or impair the
Purchaser's ability pursuant to any Third Party License to use, license, sell,
or dispose of the Software in the same manner as the Software is currently used,
licensed, sold, or disposed of by the Seller and its subsidiaries. Neither the
Seller nor any of its subsidiaries has infringed or is infringing any third
party's patent, copyright, or other intellectual property rights with respect to
the Software, and, to the knowledge of the Seller, no other person or entity is
infringing any patent, copyright, or other intellectual property rights of the
Seller or any of its subsidiaries with respect to the Software.
4.2.6.5 Except as set forth on schedule 4.2.6.5,
the Seller and its subsidiaries and, to the best of the knowledge of the Seller,
each other party to any licensing or similar arrangements under which the Seller
or any of its subsidiaries is the licensor or has otherwise granted the right to
use the Software, are in full compliance therewith and are not in breach of any
obligations with respect thereto.
4.2.6.6 Except as set forth on schedule 4.2.6.6, neither the
Seller nor any of its subsidiaries has granted any marketing or brokering rights
in the Software to any third party, other than the Purchaser.
4.2.6.7 The Seller and its subsidiaries have taken reasonable
steps (including, without limitation, entering into appropriate confidentiality,
non-disclosure, and non-competition agreements with all officers, directors, and
employees of the Seller and its subsidiaries with access to or knowledge of any
of the Software or other confidential or trade secret information of the Seller)
in order to protect, safeguard, and, to the extent consistent with industry
practice, maintain the secrecy and confidentiality of, and the Seller's and its
subsidiaries' proprietary rights in, the Software and other confidential or
trade secret information of the Seller and its subsidiaries included in the
Assets, including, without limitation, all trademarks, trade names, service
marks, service names, brand names, copyrights, and patents, registrations
thereof and applications therefor, owned, leased, or licensed by the Seller or
any of its subsidiaries.
[Section 4.2.7 is intentionally omitted]
4.2.8 Absence of Changes. Except as set forth on schedule
--------------------
4.2.8, since December 31, 2000, the Seller and its subsidiaries have operated
the Business in the ordinary course and consistent with past practice, and:
4.2.8.1 there has been no material adverse change in the Business
taken as a whole;
4.2.8.2 neither the Seller nor any of its subsidiaries has
entered into any transaction or incurred any liability or obligation with
respect to the Business, other than in the ordinary course of business and
consistent with past practice;
4.2.8.3 neither the Seller nor any of its subsidiaries has billed
customers, collected receivables, or paid payables of the Business in a manner
or at a rate that is not in the ordinary course of business and consistent with
past practice; and
4.2.8.4 neither the Seller nor any of its subsidiaries has granted
or agreed to grant any increase in salary or compensation to any employee or
consultant of the Business, or entered into any employment, consulting, bonus,
or other agreement with any employee or consultant of the Business, except in
the ordinary course of business and consistent with past practice.
4.2.9 Employees and Consultants. Schedule 4.2.9 is a complete
--------------------------
and correct list of all the employees and consultants who currently provide
services to the Business. Schedule 4.2.9 sets forth the compensation paid to
each such employee and consultant in the year ended December 31, 2000, and the
current rate of compensation payable to each such employee and consultant.
Schedule 4.2.9 also sets forth a complete and correct list of all agreements,
understandings, plans, and policies, written or oral, applicable to each
employee and consultant of the Business.
4.2.10 Related Party Matters. Except as set
-----------------------
forth on schedule 4.2.10, (a) the Seller and its subsidiaries do not use
any Assets, except in the conduct of the Business, and (b) except for the
Assets, the Business does not use any assets or rights owned or used by the
Seller or any of its subsidiaries.
4.2.11 Brokers or Finders. Except as set forth on schedule
4.2.11,
-------------------
the Seller has not employed or utilized the services of any investment banker,
broker, or finder in connection with the transactions contemplated by this
agreement.
5. Further Agreements of the Parties
-------------------------------------
5.1 Ordinary Course. From the date of
----------------
this agreement through the Closing, the Seller shall, and shall cause its
subsidiaries to, carry on the Business in the ordinary course and consistent
with past practice. The Seller shall use its best efforts to keep the Purchaser
informed about any significant matter affecting the Business, and shall refrain
from taking any action with respect to any such matter, without the prior
written consent of the Purchaser. From the date of this agreement through the
Closing, the Seller shall not, and shall not permit any of its subsidiaries to,
without the Purchaser's prior written consent, engage in any action (including,
without limitation, any of the actions described in sections 4.2.8.2 through
4.2.8.4) that, if engaged in after December 31, 2000 and on or before the date
of this agreement, would constitute a breach of the representations and
warranties of the Seller in section 4.2.8. From the date of this agreement
through the Closing, the Seller shall, and shall cause its subsidiaries to, use
commercially reasonable efforts to retain the services of its respective
employees and consultants and to maintain satisfactory relationships with
respect to its customers and others with whom it has business relations.
5.2 Representations and Warranties. The
-------------------------------
Seller shall not, and shall not permit any of its subsidiaries to, take or agree
or commit to take any action that would result in any of the Seller's
representations or warranties in this agreement being untrue such that the
condition set forth in section 6.1.2 would not be satisfied.
5.3 Consents. The Seller shall use
--------
commercially reasonable efforts, and the Purchaser shall cooperate with the
Seller, to obtain prior to the Closing all the Required Consents and to resolve
all impracticalities of assignments or transfers necessary to sell and transfer
the Assets. Notwithstanding the foregoing, if any Required Consent is not
obtained and failure to obtain the Required Consent is waived in writing by the
Purchaser prior to the Closing, the Seller shall continue to use commercially
reasonable efforts to obtain any such Required Consent (and, if and when such
Required Consents are obtained, the assumption of the applicable Contract shall
be effected in accordance with this agreement). Nothing in this agreement shall
be construed as an attempt to assign any agreement that is not assignable
without the consent of the other party or parties to the agreement. If any
Contract is not assignable without such consent, the Seller shall try to obtain
consent to the assignment to the Purchaser as soon as possible, and, in any
event, at the written request of the Purchaser, shall request in writing such
consent from the other party or parties within 10 days after the request. If
any such consent is not obtained, the Seller shall use reasonable efforts to
give the Purchaser the benefit of the Contract to the same extent as if it had
been assigned, and the Purchaser shall cooperate with the Seller in those
efforts and indemnify and hold the Seller harmless from and against all
liabilities and obligations under the Contract.
5.4 Advice of Changes. The Seller and the
-------------------
Purchaser
shall give prompt notice to the other upon becoming aware of (a) the occurrence,
or failure to occur, of any event that would be likely to cause any
representation or warranty of that party in this agreement to be untrue or
inaccurate in any material respect, and (b) any failure on its part to comply
with or satisfy any condition to the obligations of the other under section 6.1
or 6.2, as the case may be. The notifying party shall use commercially
reasonable efforts to prevent or promptly remedy any matter that is or would be
the subject of any such notice.
5.5 Public Announcements. No press
---------------------
release or announcement concerning the transactions contemplated by this
agreement shall be issued by either party without the prior consent of the other
party, except as such release or announcement may be required by law, in which
case the party required to make the release or announcement shall allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance.
5.6 Access to Information. From the date
---------------------
of this agreement through the Closing, the Seller shall give the Purchaser and
its representatives, upon reasonable notice, reasonable access during normal
business hours to the properties, records, books of account, employees,
consultants, and customers of the Business, as the Purchaser deems reasonably
necessary or advisable.
5.7 Commercially Reasonable Efforts. Each
-------------------------------
party shall use commercially reasonable efforts to cause to be fulfilled the
conditions to the other party's obligations under section 6.1 or 6.2, as the
case may be.
5.8 Employees and Consultants
---------------------------
(a) The Purchaser, directly or through one or more of its designees,
shall offer employment to all the employees and consultants listed on schedule
4.2.9 on terms that, in the aggregate, are no less favorable to the respective
employees and consultants than the terms on which they currently are employed or
engaged by the Seller and its subsidiaries; provided, however, that, except for
-----------------
the Accrued Employee Liability, the Purchaser is not assuming, or agreeing to
pay, perform, or discharge, any other liability or obligation of the Seller or
its subsidiaries to any of their employees or consultants, except for the
severance obligations to the employees and consultants listed on schedule 4.2.9
who become employees or consultants of the Purchaser or one or more of its
designees within 30 days after the Cloising. The Purchaser shall use its
commercially reasonable efforts to encourage all such offerees to accept the
offers referred to above, and shall, or shall cause its designees to, take on
all employees and consultants who accept such offers.
(b) Prior to the Closing, the Seller shall cause the entire account balance
(including the entire balance of the theretofore unvested employer
contributions) of all the Offeree Employees who accept the offers of employment
contemplated by section 6.1.5 to be fully vested under the Seller's 401(k) Plan.
(c) Prior to the Closing, the Seller shall take all action required under
all applicable employment laws to enable the Purchaser to carry out its
obligations under this agreement in respect of employees and consultants.
(d) After the Closing and before the first anniversary of the Closing, the
Purchaser shall not, and shall not permit any of its controlled affiliates to,
on its own behalf or on behalf of others, solicit for employment or engagement
any of the Seller's or its subsidiaries' employees or individual consultants who
were employed or engaged by the Seller or any of its subsidiaries on the date of
this agreement, except for those listed on schedule 4.2.9.
5.9 Registration Rights Agreement.
-------------------------------
The Seller shall comply with the
provisions of the registration rights agreement dated as of June 13, 1995
between the Seller and Liraz Systems, Ltd. ("Liraz"), as amended as of the date
of this agreement.
5.10 Information. As promptly as practicable
-----------
after the date of this agreement, the Seller shall furnish Liraz the information
described on schedule 5.10 with respect to the Software (the "Segment and
Geographical Information") for each of the three months ended March 31, 2001 and
June 30, 2001, and shall afford Liraz and its representatives access to the
Seller's books and records, and shall otherwise cooperate with Liraz and its
representatives, to enable them as promptly as practicable after the date of
this agreement, at Liraz's cost, to prepare the Segment and Geographical
Information for each of the years ended December 31, 1999 and 2000 and the
period from July 1, 2001 to the Closing.
6. Conditions to Closing
-----------------------
6.1 Conditions to Obligations of the Purchaser.
-----------------------------------------------
The obligations of the Purchaser to consummate the transactions under this
agreement is subject to the fulfillment, prior to or at the Closing, of each of
the following conditions (any or all of which may be waived by the Purchaser):
6.1.1 (a) the documents and other items referred to
in sections 7.1 and 7.3 shall have been delivered, (b) written evidence of the
Required Consents listed on schedule 6.1.1 shall have been delivered, and (c)
written evidence that the Seller, the Bank, and Liraz shall have executed and
delivered agreements in the form of, or to the effect set forth in, exhibit
6.1.1 (the "Credit Instruments") shall have been delivered;
6.1.2 all the Seller's representations and warranties
in this agreement shall be true and correct in all material respects at the
Closing as if made again at and as of that time;
6.1.3 the Seller shall have performed all the
covenants in this agreement that are required to have been performed by it prior
to or at the Closing;
6.1.4 ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin (the "Seller's Financial
Advisor") shall not have withdrawn or materially modified its opinion to the
Seller's board of directors dated August 7, 2001 as to the fairness, from a
financial point of view, of the consideration to the Seller in the transactions
contemplated by this agreement (the "Fairness Opinion");
6.1.5 at least 85% of the non-administrative
employees and consultants
listed on schedule 4.2.9 (it being understood that project managers and sales
personnel are included within the term "non-administrative employees and
consultants") and all the individuals listed on schedule 6.1.5 to whom the
Purchaser or its designees shall have offered employment pursuant to section
5.8(a) shall have accepted such offers of employment, and such acceptances shall
be in full force and effect; and
6.1.6 there shall not be in effect any injunction
or restraining order issued by a court of competent jurisdiction in any action
or proceeding against the consummation of the transactions contemplated by this
agreement.
6.2 Conditions to Obligations of the Seller. The
---------------------------------------
obligations of the Seller to consummate the transactions under this agreement is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by the Seller):
6.2.1 (a) the documents and other items referred to
in sections 7.2 and 7.3 shall have been delivered, and (b) written evidence
that the Seller, the Bank, and Liraz shall have executed and delivered the
Credit Instruments shall have been delivered;
6.2.2 all the Purchaser's representations and
warranties in this agreement shall be true and correct in all material respects
at the Closing as if made again at and as of that time;
6.2.3 the Purchaser shall have performed all
the covenants in this
agreement that are required to have been performed by it prior to or at the
Closing;
6.2.4 the Seller's Financial Advisor shall not have
withdrawn or materially modified the Fairness Opinion;
6.2.5 there shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction in any action or
proceeding against the consummation of the transactions contemplated by this
agreement; and
6.2.6 ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated shall have
approved the transactions contemplated by this agreement.
7. Documents to be Delivered at the Closing
----------------------------------------------
7.1 Documents to be Delivered by the Seller. At
---------------------------------------
the Closing, the Seller shall deliver, or cause to be delivered, to the
Purchaser (or as the Purchaser designates) the following:
7.1.1 assignments and other instruments of transfer
sufficient to transfer to the Purchaser or its designees all the Assets;
7.1.2 a certificate of an executive officer of the
Seller confirming that the conditions specified in sections 6.1.2, 6.1.3, and
6.1.4 have been fulfilled; and
7.1.3 an opinion of Powell, Goldstein, ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, in form reasonably satisfactory to counsel to the Purchaser, as to
the matters set forth in exhibit 7.1.3.
7.2 Documents to be Delivered by the Purchaser.
----------------------------------------------
At the Closing, the Purchaser shall deliver, or cause to be delivered, to the
Seller (or as the Seller designates) the following:
7.2.1 agreements and other instruments sufficient to
carry out the obligations of the Purchaser under section 1.3(b);
7.2.2 a certificate of an executive officer of the
Purchaser confirming that the conditions specified in sections 6.2.2, 6.2.3, and
6.2.4 have been fulfilled; and
7.2.3 an opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, in form
reasonably satisfactory to counsel to the Seller, as to the matters set forth in
exhibit 7.2.3.
7.3 Service and Other Agreement.
-----------------------------
At the Closing, the Purchaser and the Seller shall execute and deliver
agreements in the forms included in exhibit 7.3.
8. Indemnification. The Seller shall
---------------
indemnify and hold the Purchaser harmless from and against all losses,
liabilities, damages, and expenses (including reasonable attorneys' fees) as and
when incurred arising out of or based upon (a) any breach of warranty or
agreement, or any misrepresentation, by it under this agreement, or (b) any
liability or obligation of the Seller or any of its subsidiaries arising out of
any facts, events, or circumstances prior to the Closing, other than the Assumed
Liabilities. The Purchaser shall indemnify and hold the Seller harmless from
and against all losses, liabilities, damages and expenses (including reasonable
attorneys' fees) as and when incurred arising out of or based upon (c) any
breach of warranty or agreement, or any misrepresentation, by it under this
agreement, (d) any Assumed Liability, or (e) any liability or obligation arising
out of the conduct of the Business after the Closing (except as otherwise
expressly provided in this agreement). It is understood and agreed that the
certificates referred to in sections 7.1.2 and 7.2.2 shall be deemed to
constitute representations and warranties of the respective parties for all
purposes of this section 8. If any claim is made against a party that, if
sustained, would give rise to a liability of the other party under this
agreement, the party against whom the claim is made shall promptly cause notice
of the claim to be delivered to the other party and shall afford the other party
and its counsel, at its sole expense, the opportunity to defend or settle the
claim. The failure to provide the notice referred to above shall not relieve
the indemnifying party of liability under this agreement, except to the extent
the indemnifying party has actually been prejudiced by such failure. If any
claim is compromised or settled without the consent of the indemnifying party,
no liability shall be imposed upon the indemnifying party by reason of the
claim.
9. Insurance. The Purchaser shall have the
---------
right to (a) assert claims (and the Seller shall use commercially reasonable
efforts to assist the Purchaser in asserting claims) with respect to the
Business under insurance policies of the Seller that are "occurrence basis"
policies ("Occurrence Basis Policies") arising out of insured incidents
occurring from the date coverage first commenced until the Closing, to the
extent the Occurrence Basis Policies so allow, and (b) continue to prosecute
claims with respect to the Business properly asserted with the insurance carrier
prior to the Closing (and the Seller shall use commercially reasonable efforts
to assist the Purchaser in connection therewith) under insurance policies of the
Seller that are on a "claims made" basis ("Claims Made Policies") arising out of
insured incidents occurring from the date coverage first commenced until the
Closing, to the extent the Claims Made Policies so allow; provided, however,
-----------------
that all the Seller's costs and expenses incurred in connection with the
foregoing are promptly paid by the Purchaser. All recoveries in respect of such
claims shall be for the account of the Purchaser. In addition, the Purchaser
may purchase (at its own expense), at any time, discovery coverage with respect
to Claims Made Policies to provide coverage with respect to such Claims Made
Policies for claims submitted by the Purchaser after the Closing with respect to
incidents occurring prior to the Closing, and all recoveries under such
discovery coverage shall be for the account of the Purchaser. The Seller shall
not amend, commute, terminate, buy-out, extinguish liability under, or otherwise
modify any Occurrence Basis Policies or Claims Made Policies under which the
Purchaser has rights to assert claims pursuant to this section 9 in a manner
that would adversely affect any such rights of the Purchaser. In the event the
Purchaser consents to any such action, the Seller shall pay the Purchaser its
equitable share (based on the amount of premiums paid by or allocated to the
Business in respect of the applicable policy) of any proceeds received by the
Seller as a result of such action (after deducting the Seller's reasonable costs
and expenses incurred in connection with such action).
10. Arbitration.
-----------
Any dispute or controversy arising under or in
connection with this agreement shall be settled exclusively by arbitration to be
held in the City of New York before a single arbitrator in accordance with the
rules of the American Arbitration Association then in effect. As part of his
award, the arbitrator shall make a fair allocation between the parties of the
fee and expenses of the American Arbitration Association and the cost of any
transcript, taking into account the merits of the parties' claims and defenses.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction, and the parties irrevocably consent to the jurisdiction of the New
York courts for that purpose. The parties waive personal service in connection
with any such arbitration; any process or other papers under this provision may
be served outside the state of New York by at least 10 days' written notice
given in accordance with section 11.5. The arbitrator may grant injunctive or
other relief.
11. Miscellaneous
-------------
11.1 Further Assurances. Each party shall, without further
-------------------
consideration, take such action and execute and deliver such documents as the
other party reasonably requests to carry out this agreement. From time to time
after the Closing, the Seller shall cooperate with, and respond to reasonable
requests for information from, the Purchaser to enable the Purchaser and its
designees more effectively to assume control of the Business.
11.2 Expenses. Each party shall bear its own expenses
--------
in connection with the negotiation and preparation of this agreement and all
duties and obligations required to be performed by it under this agreement. Any
state or local sales, transfer, or similar taxes payable in connection with the
sale of assets under this agreement shall be borne by the Seller.
11.3 Governing Law. This agreement shall be governed by
--------------
and construed in accordance with the law of the state of New York, without
giving effect to its conflict of law principles.
11.4 Headings. The section headings of this agreement are
--------
for reference purposes only, and are to be given no effect in the construction
or interpretation of this agreement.
11.5 Notices. All notices and other communications under
-------
this agreement shall be in writing and may be given by any of the following
methods: (a) personal delivery; (b) facsimile transmission; (c) registered or
certified mail, postage prepaid, return receipt requested; or (d) overnight
delivery service. Notices shall be sent to the appropriate party at its address
or facsimile number given below (or at such other address or facsimile number
for that party as shall be specified by notice given under this section 11.5):
(y) if to the Seller, to it at:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Suite 1600
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention.: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(z) if to the Purchaser, to it at:
▇/▇ ▇▇▇▇▇ Systems, Ltd.
c/▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & Kerson LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed received upon (e) actual
receipt by the addressee, (f) actual delivery to the appropriate address, or (g)
in the case of a facsimile transmission, upon transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming that the
number of pages constituting the notice have been transmitted without error. In
the case of notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.
11.6 Separability. The invalidity of unenforceability of
------------
any provision of this agreement shall not affect the validity or enforceability
of any other provision of this agreement, which shall remain in full force and
effect.
11.7 Waiver. Either party may waive compliance by the other
------
party with any provision of this agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in writing and
signed by the waiving party.
11.8 Counterparts. This agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
11.9 Entire Agreement. This agreement (with its schedules
-----------------
and exhibits) contains, and is intended as, a complete statement of all the
terms of the arrangements
between the parties with respect to the matters provided for, supersedes all
previous agreements and understandings between the parties with respect to those
matters, and cannot be changed or terminated orally.
▇▇▇▇▇ ▇ SYSTEMS, INC.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
APPBUILDER SOLUTION B.V.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
Name:
Title:
GUARANTY
Dated August 8, 2001
--------------------
The undersigned hereby (a) unconditionally guarantees
to Level 8 Systems, Inc. (the "Seller") the prompt and full payment and
performance when due of all obligations of AppBuilder Solution B.V. (the
"Purchaser") to the seller arising under the above agreement, (b) agrees that
the above agreement may be modified by the parties in any respect without
affecting the undersigned's obligations under this guaranty, and (iii) agrees to
indemnify and hold the seller harmless from and against any loss, liability,
damage, or expense (including reasonable attorneys' fees) that it may incur as a
result of the failure by the Purchaser to pay or perform any of its obligations
under the above agreement.
LIRAZ SYSTEMS, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
