Exhibit 99.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered
into this 10th day of November, 1998, by and among:
GSE Systems, Inc., a Delaware corporation ("GSE Systems"), GSE Process
Solutions, Inc., a Delaware corporation and a wholly-owned subsidiary of
GSE Systems ("Seller"), GSE Process Solutions B.V. ("GSE B.V."), GSE
Process Solutions Singapore (Pte) Limited ("GSE Singapore"), GSE Process
Solutions Belgium N.V. ("GSE Belgium")
and
Valmet Automation (USA), Inc., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller is engaged, among other things, in the line of
business (the "Business") consisting primarily of the marketing,
development and delivery of supervisory control and data acquisition
systems (SCADA) and simulation systems in the oil and gas industry,
including the acquisition, development, marketing, distribution, licensing,
maintenance, and support of the Software Programs (as hereinafter defined);
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy
from Seller, substantially all the assets of Seller used principally in or
dedicated to the Business, and Seller desires to transfer, and Buyer
desires to assume, certain liabilities of Seller arising in connection with
the Business, all upon the terms and conditions and subject to the limited
exceptions set forth herein; and
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements of the parties hereinafter set forth,
the parties hereto, intending to be legally bound, do hereby agree as
follows:
INTERPRETATION
Definitions. In this Agreement, the following terms shall have the
following meanings:
"Agreement" means this agreement and all schedules attached to this
Agreement as the same may be amended from time to time and the expressions
"hereof", "hereto", "hereunder" and similar expressions refer to this
Agreement, including all schedules and not to any particular article or
Article.
"Common Elements" means any aspects of the S/3 Software that are based upon
or consist of material included in the Seller's D/3 DCS software or any
other software of Seller at the time of Closing, including all source code
and other Technical Documentation and object code for such aspects of the
S/3 Software, all working notes and papers and promotional, marketing and
training materials or parts thereof relating to such aspects of the S/3
Software, and all copyrights and patents (if any) relating to such aspects
of the S/3 Software.
"Effective Date" means October 30, 1998.
"GSE Companies" means GSE Systems, GSE B.V., GSE Singapore and GSE Belgium.
"Licensed Software" means the TotalVision Software and the SimSuite
Pipeline Software.
"Physical Assets" means the Computer Equipment, Office Furniture, Technical
Documentation and Business Records and the other physical assets of the
Business, other than the Inventory.
"Projects" means the projects identified in Schedule "B".
"Project Contracts" means the contracts for the projects identified in
Schedule "B", including all amendments and change orders up to the
Effective Date.
"Required Contract Consents" means all consents necessary for the
assignment to Buyer of each of the Software Contracts, the Leases, the
Project Contracts and the Agency Contracts.
"S/3 Development" means the resolution of the tasks and identified
discrepancy reports for the S/3 Software as described in Schedule "E".
"S/3 Software" means Seller's software known as S/3 SCADA, except for the
TotalVision Software, including the software modules identified in the list
attached to this Agreement as Schedule "C" (but not including the
TotalVision Software modules which are marked with an asterisk in Schedule
"C"). The S/3 Software also includes all working notes and papers,
promotional and marketing materials, all copyrights and patents for S/3
SCADA, and all source code, object code and listings for such software, as
well as any program, "workbenches" or tools owned by Seller and used for
the development, maintenance and implementation of the S/3 Software.
"Seller" means GSE Process Solutions, Inc., and, to the extent that any GSE
Company has an interest in any of the Assets, shall be interpreted as
including that GSE Company as required to fully and effectually transfer to
Buyer all of the right, title and interest of that GSE Company in such
Assets.
"SimSuite Development" means the completion of development work as
necessary to fulfill the specification for the Pacific Pipeline Contract,
as attached hereto as Schedule "E".
"SimSuite Pipeline Software" means Seller's software known as SimSuite
Pipeline as described in the functional listing set out in Part I of
Schedule "D" attached hereto, and including, without limitation, the
software modules identified in the list forming Part II of Schedule "D".
The SimSuite Pipeline Software also includes all working notes and papers,
promotional and marketing materials, and all source code, object code and
listings for such software, as well as any program, "workbenches" or tools
owned by Seller and used for the development, maintenance and
implementation of the SimSuite Pipeline Software. SimSuite Pipeline
Software shall also include the pre-existing version of software known as
"Elegant" as listed in Part II of Schedule "D", but shall not include any
other versions of "Elegant" heretofore developed or used by GSE Companies.
"Software Programs" means the S/3 Software and the Licensed Software.
"Technical Documentation" means the system documentation, statements of
principles of operation, schematics, training materials and user guides for
all Software Programs.
"TotalVision Software" means Seller's software known as TotalVision (the
graphical user interface for the S/3 Software and the SimSuite Pipeline
Software), consisting of the software modules marked with an asterisk in
Schedule "C". The TotalVision Software also includes all working notes and
papers, promotional and marketing materials, and all source code, object
code and listings for such software, as well as any program, "workbenches"
or tools owned by Seller and used for the development, maintenance and
implementation of the TotalVision Software. TotalVision does not include
any graphic models, sub-models, or symbols created and used with the S/3
Software and the SimSuite Pipeline Software.
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Upon the terms and subject to the conditions of
this Agreement, Buyer agrees to purchase, accept, and acquire from Seller, and
Seller agrees to sell, transfer, assign, convey, and deliver to Buyer, at the
Closing, all right, title, and interest of Seller in and to all of the rights
and assets, tangible or intangible, used principally in or dedicated to the
Business, as owned or held by Seller, including the Business's products,
technology, goodwill, records, customer lists, trademarks, trade names,
copyrights and patents and certain equipment, but expressly excluding the rights
and assets to be retained by Seller identified in Article 1.3. Subject to such
express exclusion and qualification, the foregoing rights and assets shall
hereinafter collectively be referred to as the "Assets." Without in any way
limiting the generality of the foregoing, the Assets shall include all right and
interest owned or held by Seller or any GSE Company in the following:
a. Accounts Receivable. The following accounts receivable of Seller (and
GSE Singapore in the case of the ECIL Projects identified in Schedule "B")
outstanding as of the Closing relating to the Business (the "Accounts
Receivable"), which consist of accounts receivable relating to:
(1) the Project Contracts (the "Project Receivables") and
(2) the other accounts receivable listed in Schedule 1.1.a.(2) (the
"Remaining Receivables),
but excluding all accounts receivable which should be classified as doubtful in
accordance with GAAP.
b. Work in Progress. All of the work in progress of Seller (and GSE
Singapore in the case of the ECIL Projects identified in Schedule "B") with
respect to the Projects as of the Closing, including all equipment, software and
materials purchased by Seller for delivery to its customers for the Projects
(the "WIP"). The amount of the WIP shall be calculated in accordance with
Article 3.1.
c. Software. All of Seller's rights, title and interests in and to the S/3
Software, including its source and object code, sequence, logic structure,
screens and its Technical Documentation, and including all copyright, patent,
trade secret, and trademark rights and all other proprietary and intellectual
property rights in and to them. Seller agrees that Buyer shall own all rights,
title and interests in and to any improvements, enhancements, updates and
upgrades to the S/3 Software. The parties acknowledge that portions of the S/3
Software being transferred from Seller to Buyer may be derivative of
intellectual property, concepts and/or technology developed and used in
connection with Seller's software known as the D/3 Distributed Control System
(the "D/3 Software") and/or that portions of the D/3 Software, the rights, title
and interests in which are being retained by Seller, may be derivative of
intellectual property, concepts and/or technology developed and used in
connection with the S/3 Software, and therefore agree as follows:
(1) Notwithstanding the foregoing, Buyer agrees that Seller shall
own all rights, title and interests in and to the D/3
Software, including its source and object code, sequence,
logic structure, screens and documentation, and any
improvements, enhancements, updates or upgrades to them,
including all copyright, patent, trade secret, and trademark
rights and all other proprietary and intellectual property
rights in and to them.
(2) Buyer agrees that it shall have no rights or claims that
Seller's use, reproduction, demonstration, adaptation and
display of the D/3 Software constitutes an infringement,
misappropriation, conversion or other misuse of any of Buyer's
rights or interests in and to the S/3 Software, and Buyer, for
itself and for all persons claiming under, by or through
Buyer, does hereby irrevocably and unconditionally release
Seller from, and agrees not to assert, any and all such
claims.
(3) Seller agrees that it shall have no rights or claims that
Buyer's use, reproduction, demonstration, adaptation and
display of the S/3 Software constitutes an infringement,
misappropriation, conversion or other misuse of any of
Seller's rights or interests in and to the D/3 Software, and
Seller, for itself and for all persons claiming under, by or
through Seller, does hereby irrevocably and unconditionally
release Buyer from, and agrees not to assert, any and all such
claims.
d. Software License. A perpetual, worldwide license to Buyer, in the form
of Schedule "A", for the Licensed Software. On Closing, Seller shall deliver to
Buyer copies of all source code, object code and listings for all versions of
the Licensed Software currently in use by customers of the Business, to be held
and used by Buyer in accordance with the terms of Schedule "A".
e. Documentation. The Technical Documentation (except for the SimSuite
Pipeline Software and the TotalVision Software) and copies of all technical and
descriptive materials relating to all third party software embedded in the
Software Programs.
f. Software Contracts. All of the rights and benefits of Seller and each of
the GSE Companies under the following contracts, agreements and licenses
pertaining to the S/3 Software and/or the Licensed Software:
(1) All licenses granted to third parties to use the S/3 Software
and SimSuite Pipeline Software;
(2) All contracts, agreements and licenses respecting the ownership,
licensing, acquisition, and use of Seller's S/3 Software;
(3) The development contracts, work-for-hire agreements, and
consulting agreements listed in Schedule 1.1.f; and
(4) The maintenance and support agreements with Seller's customers
listed in Schedule 1.1.f.
(the "Software Contracts"). As of the date of this Agreement, the Software
Contracts consist of the items listed and classified in Schedule 1.1.f as:
licenses from third parties (development and/or marketing);
licenses and sublicenses to others;
development contracts, work-for-hire agreements, and consulting agreements;
maintenance or support agreements
g. Project Contracts. All rights and benefits and obligations (subject to
the provisions of Article 2) of Seller (and GSE Singapore in the case of the
ECIL Projects identified in Schedule "B") under the Project Contracts. As soon
as possible after Closing, Seller and GSE Singapore shall execute and deliver to
Buyer all such documentation as may be required to assign and transfer to Buyer
the letters of credit for the ECIL Projects identified in Schedule "B".
h. Agency Contracts. All rights and benefits and obligations (subject to
the provisions of Article 2) of Seller and the GSE Companies under the agency,
value added reseller, distributorship, system integrator and other agreements of
a strategic alliance nature listed in Schedule 1.1.h (the "Agency Contracts");
i. Computer Equipment. The computer equipment and devices dedicated to the
Business as listed in Schedule 1.1.i. (including dongles permitting the use of
SL-GMS software) and licenses for all third party programs, tools, utilities,
compilers and other software installed or used on such equipment except for:
software used for accounting, payroll and recording of hours
worked by employees
local area network equipment
the exchange server and related
software installed on that server leased equipment
(the "Computer Equipment"), including Seller's rights under all related
warranties.
j. Office Furniture. All office furniture and other physical assets used in
the Business except for partitions and dividers and the modular furniture
attached thereto (the "Office Furniture"). As of the date of this Agreement, the
Office Furniture consists of all items listed in Schedule 1.1.j.
k. Leases. The leasehold or rental interest of Seller under the equipment
leases listed in Schedule 1.1.k. (the "Leases").
l. Business Records. Copies of all business, accounting and operating
records relating to the Projects, personnel records for the personnel of Seller
who will be employed by Buyer, customer lists, prospects lists, employment and
consulting agreements, supplier lists, information and data respecting leased or
owned equipment, products literature and information, files, correspondence and
mailing lists, advertising materials and brochures, and other business records
used in the Business (the "Business Records").
m. Intellectual Property. All patents, trademarks, service marks, trade
names, and copyrights (including registrations, licenses, and applications
pertaining thereto), and all other intellectual property rights, trade secrets,
and other proprietary information, processes, and formulae principally used in
the Business or otherwise necessary for the ownership and use of the Assets and
the conduct of the Business, including the names "S/3 SCADA," "S/3 Architect"
and "Full Scope SCADA", but excluding all third party software, and proprietary
rights to the Licensed Software, which will be licensed to Buyer in accordance
with the Software License attached hereto as Schedule "A" (the "Intellectual
Property"). As of the date of this Agreement, the Intellectual Property includes
the registered trademarks and service marks, the reserved trade names, the
registered copyrights, and the filed patent applications and issued patents
listed in Schedule 1.1.m.
n. Claims. All claims Seller may have against any person relating to or
arising from the Assets or the Business, including rights to recoveries for
damages for defective goods, to refunds, insurance claims, and chooses in action
("Claims").
o. Inventory. The existing spare parts inventory available for use in the
Business (the "Inventory").
1.2 Failure to Obtain Consent. Prior to the Closing, Seller and Buyer shall use
their best efforts to obtain the Required Contract Consents. If any Required
Contract Consent is not obtained prior to the Closing, Seller shall continue to
use such best efforts to obtain such consent after Closing. Buyer will cooperate
with Seller in this regard. Until such consent or waiver has been obtained,
Seller shall:
(1) subcontract with Buyer for the provision of the services specified in
such Contract on the same terms set forth in such Contract, and/or
(2) act as agent for Buyer in order to obtain for Buyer the benefits under
such Contract and/or
(3) cooperate with Buyer in any other reasonable arrangement designed to
provide such benefits to Buyer.
Seller and GSE Singapore agree to remit promptly to Buyer all collections or
payments received by Seller or GSE Singapore in respect of all such contracts,
and shall hold all such collections or payments for the benefit of, and promptly
pay the same over to, Buyer; provided, however, that nothing herein shall create
or provide any rights or benefits in or to third parties.
1.3 Excluded Assets. In addition to the items specifically excluded in Article
1.1, Seller shall not sell or assign to Buyer, and Buyer shall not purchase or
accept assignment from Seller, the following assets: all cash, cash equivalents,
accounts receivable other than the Accounts Receivable and the rights of Seller
in and to any of the Licensed Software that will be licensed to Buyer under the
Software License except to the extent identified therein and any other assets
not used principally in or dedicated to the Business (the "Excluded Assets").
ARTICLE II
ASSUMPTION OF CERTAIN LIABILITIES
2.1 Enumeration of Assumed Liabilities. At and after the Closing, Buyer shall
assume and agree to pay or perform those liabilities and obligations of Seller
that are expressly identified in this Article 2.1 (the "Assumed Liabilities") or
are represented by any other covenant, agreement, or indemnity of Buyer in this
Agreement or the other agreements and instruments to be executed and delivered
by Buyer in connection with this Agreement. Subject to the express exclusions
set forth in Article 2.2, the Assumed Liabilities shall consist of, with respect
to the period after the Closing Date:
a. Software Contracts and Leases. Except as limited or otherwise provided
in this Article, all payment and performance obligations arising out of or
relating to the Software Contracts and the Leases, except in each case to the
extent attributable to: (1) any breach or default by Seller or any GSE Company
under any of the same on or before the Effective Date or (2) any material
liability or obligation outside the ordinary course of business not disclosed by
Seller pursuant to this Agreement, insofar as disclosure thereof is required
hereunder and Buyer does not receive property or services of substantially
equivalent value in respect of such liability or obligation;
b. Project Contracts. Subject to Article 2.2, and the maximum amount set
forth in Article10.5, the obligations of Seller (and in the case of the Projects
referred to in Schedule "B" as the ECIL HBCPL and ECIL KBPL projects, the
obligations of GSE Singapore) to complete the Projects in accordance with the
Project Contracts, except to the extent attributable to (1) any breach or
default by Seller or GSE Singapore under any of the same on or before the
Effective Date or (2) any material liability or obligation outside the ordinary
course of business not disclosed by Seller or GSE Singapore pursuant to this
Agreement, insofar as disclosure thereof is required hereunder and Buyer does
not receive payment in respect of such liability or obligation;
c. Warranty Obligations. The Warranty Obligations as defined in Article
10.6.
d. Agency Contracts. All obligations arising out of or relating to the
Agency Contracts, provided that these agreements
only apply to the S/3 Software and SimSuite Pipeline Software and
would not create any new obligations for Buyer with respect to
Buyer's other products and software; and
provided further, that Buyer is not assuming responsibility for: (A) any breach
or default by Seller or any GSE Company or any amounts payable by Seller or any
GSE Company for commissions or other amounts under any of the same on or before
the Effective Date or (B) any material liability or obligation outside the
ordinary course of business not disclosed by Seller or any GSE Company pursuant
to this Agreement, insofar as disclosure thereof is required hereunder and Buyer
does not receive property or services of substantially equivalent value in
respect of such liability or obligation.
2.2 Liabilities Not Assumed. Without in any way expanding the specificity and
limitation of Article 2.1, Buyer shall not assume or be responsible for any of
the following liabilities or obligations expressly identified in this Article
2.2 (the "Excluded Liabilities"):
a. Non-enumerated Liabilities. Any liability or obligation of Seller or any
GSE Company of any kind, known or unknown, contingent or otherwise, not either
enumerated as an Assumed Liability in Article 2.1 or resulting from any other
covenant, agreement, or indemnity of Buyer in this Agreement or the other
agreements and instruments to be executed and delivered by Buyer in connection
with this Agreement.
b. Taxes. Any liability or obligation of Seller or any GSE Company for
foreign or United States federal, state, or local income, franchise, property,
sales or use, or recapture taxes, assessments, and penalties, whether arising
out of the transactions contemplated by this Agreement or otherwise.
c. Violations of Law. Any liability or obligation resulting from violations
of any applicable laws or regulations by Seller or any GSE Company or
infringement of third-party rights or interests.
d. Employee Liabilities. Any employee liabilities relating to present and
past employees of the Business with respect to Seller's plans, programs,
policies, commitments, and other benefit entitlements established or existing on
or prior to Closing (whether or not such liabilities are accrued or payable at
Closing, and whether or not such liabilities are contingent in nature),
including:
(1) Any liability or obligation for workers' compensation.
(2) Any current or future liabilities to employees retiring on,
before, or after Closing, and their dependents.
(3) Any current or future liabilities for benefits that may have been
accrued or earned by any employees associated with the Business on or
before Closing under any pension plans relating to service prior to
the Effective Date.
(4) Any current or future liabilities for claims incurred prior to Closing
and related expenses with respect to any employees associated with the
Business under any welfare or disability plans established or existing
at or prior to Closing, regardless of when filed with Buyer, Seller,
or the claims administrator for any such plan.
(5) Any retrospective premium on pension, savings, thrift, or
profit-sharing plan contribution relating to any employees associated
with the Business incurred or accrued prior to the Effective Date,
regardless of when invoiced or recorded.
(6) Any monetary liability for severance payments that may arise at any
time in favor of any of Seller's employees under any plan, program,
policy, commitment, or other benefit entitlement and relating to
Seller's employment of such employees.
e. Year 2000. Any liability or obligation relating to the Year 2000 and the
failure of any work done or software or equipment supplied by Seller or any GSE
Company to correctly accommodate and process date data without error,
interruption or loss of functionality, including without limitation, century
rollover and leap years, except for:
(1) Obligations assumed by Buyer under the Project Contracts, subject to
the maximum cost to complete as set out in Article 2.1.b. and 10.5;
and
(2) Warranty obligations assumed by Buyer, subject to the maximum
cost as set out in Article 2.1.c. and10.6.
f. Intentionally Deleted.
g. Incidents to Excluded Assets. Any liability or obligation associated
with any of the Excluded Assets, except as specifically otherwise provided in
Article 2.1.
h. Litigation. Any Litigation (as defined in Article 4.19) pending or
threatened against Seller or any GSE Company or the Assets, unless specifically
assumed by Buyer.
ARTICLE III
PRICE AND PAYMENT
3.1 Purchase Price. Subject to the terms and conditions of this Agreement, Buyer
shall pay to Seller, at the time and in the manner set forth in this Article
III, an amount (the "Purchase Price") equal to the sum of:
(a) 100% of the Project Receivables as of the Effective Date;
(b) 75% of the Remaining Receivables as of the Effective Date;
(c) the book value of the Physical Assets as of the Effective Date;
(d) the book value of the Inventory as of the Effective Date;
(e) the WIP Amount (as defined below); and
(f) $1,025,778.00, subject to reduction in accordance with the provisions
of Article 3.5 (the "Earnout Amount").
The "WIP Amount" means the amount as of the Effective Date equal to:
(1) the sum of the contract prices for the Projects adjusted to
account for all change orders, but not including any applicable
sales, use, excise, property or other similar taxes, and adjusted
with respect to the other adjustments as set out in Article 3.8.
minus
(2) the sum of:
(A) the amounts invoiced by Seller (or GSE Singapore in the case of
the ECIL Project Contracts) on the Projects,
(B) the Project ETCs (as defined in Article 10.5), and
(C) the estimated costs of the S/3 Development and SimSuite
Development, which are estimated as of the date of this Agreement to
be $451,556.
3.2 Estimated Closing Balance Sheet and Estimated WIP Amount. At or prior to the
Closing, Seller shall cause to be prepared and delivered to the Buyer, at the
Seller's expense:
(a) an estimated unaudited pro forma balance sheet of the Business as of
the Effective Date (the "Estimated Closing Balance Sheet"), which shall be
prepared in accordance with generally accepted accounting principles ("GAAP"),
subject to mutually agreed adjustments, and on a basis consistent with the
methods, principles, practices and policies employed in the preparation and
presentation of the Financial Statements; and
(b) an estimated calculation of the WIP Amount (the "Estimated WIP
Amount"),
in each case together with the working papers used in the preparation
thereof. The Estimated Closing Balance Sheet shall reflect separately the book
value of each of the Project Receivables, the Remaining Receivables, the
Physical Assets and the Inventory.
3.3 Closing Payment. At Closing, Buyer shall pay Seller, by wire transfer in
immediately available funds to an account designated by Seller, an amount (the
"Closing Payment") equal to the sum of the following amounts less the $100,000
deposit paid by Buyer to Seller under the Letter of Intent between the parties
dated September 16, 1998: (a) the Estimated WIP Amount; and (b) the following
amounts as reflected on the Estimated Closing Balance Sheet:
(1) 100% of the book value of the Project Receivables;
(2) 50% of the book value of the Remaining Receivables (with the remaining
25% to be paid in accordance with Article 3.6); and
(3) 100% of the book value of the Physical Assets and the Inventory.
3.4 Post-Closing Adjustments.
a. As soon as practicable, but in no event later than 30 days following the
Closing Date, Seller shall cause to be prepared and delivered to Buyer, at
Seller's expense:
(1) an unaudited balance sheet of the Business as of the Effective Date
(the "Closing Balance Sheet"), which shall be prepared in accordance
with GAAP and on a basis consistent with the methods, principles,
practices and policies employed in the preparation and presentation of
the Financial Statements, and
(2) a calculation of the WIP Amount (the "WIP Calculation"), in each case
together with the work papers used in the preparation thereof
(collectively, the "Adjustment Documents").
b. Buyer shall have 30 days to review the Adjustment Documents. Unless
Buyer delivers written notice to Seller on or prior to the 15th day after
Buyer's receipt of the Adjustment Documents stating that the Buyer has
objections to the Adjustment Documents, and specifying in detail the nature of
Buyer's objections Buyer shall be deemed to have accepted and agreed to the
Adjustment Documents. If Buyer so notifies Seller of objections to the
Adjustment Documents, Buyer and Seller shall, within 15 days (or such longer
period as they may agree) following such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
c. Any amounts remaining in dispute at the conclusion of the Resolution
Period ("Unresolved Changes") shall be submitted to a firm of independent
certified public accountants who do not represent either of the parties or any
of their respective affiliates (the "Neutral Auditors") within five business
days after the expiration of the Resolution Period. Seller and Buyer will
execute, if requested by the Neutral Auditors, a reasonable engagement letter.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditors shall be borne pro rata by Seller, on the one hand, and Buyer,
on the other hand, in proportion to the allocation of the dollar amount of the
Unresolved Changes between Seller and Buyer made by the Neutral Auditors such
that the prevailing party (or parties) pay a lesser proportion of the fees and
expenses. The Neutral Auditors shall act as an arbitrator to determine, based on
the provisions of this Article 3.4(c) only the Unresolved Changes. The Neutral
Auditors' determination of the Unresolved Changes shall be made within 45 days
of the submission of the Unresolved Changes thereto, shall be set forth in a
written statement delivered to Seller and Buyer and shall be final, binding and
conclusive. The terms "Final Closing Balance Sheet" and "Final WIP Calculation"
as used in this Agreement, shall mean the definitive Closing Balance Sheet and
WIP Calculation, respectively, agreed to (or deemed agreed to) by Seller and
Buyer under Article 3.4(b) or, if Unresolved Changes are submitted to the
Neutral Auditors, such definitive Adjustment Documents, as adjusted to reflect
the determination of the Neutral Auditors under this Article 3.4(c).
d. The Closing Payment shall be (1)increased dollar-for-dollar to the
extent that (A) the book value of the Project Receivables, Physical Assets and
Inventory as shown on the Final Closing Balance Sheet is greater than the book
value of such items as shown on the Estimated Closing Balance Sheet and (B) the
WIP Amount as shown in the Final WIP Calculation is greater than the Estimated
WIP Amount, and (2) increased fifty cents for each dollar by which the book
value of the Remaining Receivables on the Final Closing Balance Sheet exceeds
the book value of the Remaining Receivables on the Estimated Closing Balance
Sheet. The Closing Payment shall be decreased dollar-for-dollar to the extent
that (A) the book value of the Project Receivables, Physical Assets and
Inventory as shown on the Final Closing Balance Sheet is less than the book
value of such items as shown on the Estimated Closing Balance Sheet and (B) the
WIP Amount as shown in the Final WIP Calculation is less than the Estimated WIP
Amount, and (2) decreased fifty cents for each dollar by which the book value of
the Remaining Receivables on the Final Closing Balance Sheet is less than the
book value of the Remaining Receivables on the Estimated Closing Balance Sheet.
e. Any adjustment to the Closing Payment made pursuant to Article 3.4(d)
(the "Final Adjustment") shall be paid by wire transfer of immediately available
funds to a bank account specified by the party (or parties) to which such
payment is owed. If the Final Adjustment is agreed to (or deemed agreed to) by
Seller and Buyer before or during the Resolution Period, then payment thereof
shall be made within 15 days after the date of such agreement (or deemed
agreement). If there are Unresolved Changes at the end of the Resolution Period,
then:
(1) the minimum amount which Seller and Buyer agree is owed pursuant to
Article 3.4(b) shall be paid within 15 days after the end of the
Resolution Period and any additional amounts owing with respect to the
Unresolved Changes shall be paid within 15 days after the resolution
thereof by the Neutral Auditors; or
(2) in all other cases, any and all payments shall be made within 15 days
after the resolution of the Unresolved Changes by the Neutral
Auditors.
All payments made pursuant to Article 3.4(d) shall be accompanied by interest at
12% from the Closing Date through the date of payment.
3.5 Buyer's Payment of the Earnout Amount. The Earnout Amount shall be paid in
the following manner:
a. From and after the Closing, Buyer shall accumulate license fees in
accordance with the list prices for licenses set forth in Schedule 3.5 for each
copy of the SimSuite Pipeline Software licensed to a customer by Buyer.
b. When Buyer has achieved final system acceptance (as defined in the
Pacific Pipeline Project Contract) for the SimSuite Pipeline Software for the
Pacific Pipeline Project, or such other project with a similar scope and size
located in the continental United States or Canada which would serve as an
alternate reference account, Buyer shall immediately pay all accumulated license
fees due Seller since Closing and thereafter shall pay a license fee to Seller
for each future customer installation of the SimSuite Pipeline Software and any
derivative software product based on the SimSuite Pipeline Software in
accordance with the list prices set forth in Schedule 3.5. Buyer's license fee
payments with respect to such future customer installations shall be made upon
its receipt of funds from such customer.
c. Buyer shall pay to Seller the license fees described in Articles 3.5(a)
and 3.5(b) until the earlier of (1) such time as the aggregate amount of such
license fees paid to Seller equals $1,025,778.00 or (2) the fifth anniversary of
the Effective Date. Thereafter, Buyer shall have no further obligation with
respect to the Earnout Amount or to pay any license fees for the Licensed
Software.
3.6 Buyer's Payments Regarding Remaining Receivables. The 25% of the Remaining
Receivables not paid as part of the Closing Payment will be paid by Buyer to
Seller on a quarterly basis, out of payments received by Buyer from the account
debtors during the previous quarter. After Buyer has collected 50% of a
Remaining Receivable, Buyer will pay to Seller one half of all further payments
received by Buyer in respect of that Remaining Receivable. Such quarterly
payments shall commence on the 15th day of the fourth full calendar month after
the Effective Date and shall continue on the 15th day of the first month of each
quarter thereafter. Each payment shall be accompanied by a statement prepared by
Buyer showing the payments received during such quarter. Seller shall advise
Buyer of any payments on such Receivables received by Seller directly from such
account debtors after the Closing and such amounts shall be credited toward
Buyer's Purchase Price payment obligation hereunder.
3.7 Allocation of Purchase Price.
a. The Purchase Price and the Assumed Liabilities (collectively, the
"Consideration"), to the extent properly taken into account under Article 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), shall be
allocated among the Assets as set forth in this Article 3.7. No later than 30
days after the Closing Date, Buyer shall deliver to Seller a statement
allocating the Consideration among the Assets in accordance with Code Section
1060 and the regulations promulgated thereunder (the "Allocation"). Seller shall
have a period of 10 days after the delivery of the Allocation to present in
writing to Buyer notice of any objections Seller may have to the Allocation.
Unless Seller timely objects, the Allocation shall be binding on the parties
without further adjustment. If Seller shall raise any objections within the
10-day period, Seller and Buyer shall negotiate in good faith and use their best
efforts to resolve such dispute. If the parties fail to agree within 20 days
after delivery of the notice, the disputed items shall be resolved by the
Neutral Auditors. The Neutral Auditors shall resolve the dispute within 30 days
after having the dispute referred to it. The costs, fees and expenses of the
Neutral Auditors shall be borne equally by Buyer and Seller.
b. Seller and Buyer agree to (1) be bound by the Allocation, (2) act in
accordance with the Allocation in the preparation of financial statements and
filing of all tax returns (including filing Form 8594 with its federal income
tax return for the taxable year that includes the date of the Closing) and in
the course of any tax audit, tax review or tax litigation relating thereto and
(3) take no position and cause their affiliates to take no position inconsistent
with the Allocation for federal and state income tax purposes.
c. Not later than 30 days prior to the filing of their respective Forms
8594 relating to the transactions contemplated by this Agreement, each party
shall deliver to the other party a copy of its Form 8594.
3.8 Other Adjustments. The parties agree that certain other adjustments shall be
made in accordance with Schedule 3.8.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GSE SYSTEMS AND SELLER
References to federal, state and local laws or governmental authorities
shall include the laws and governmental authorities of all jurisdictions (both
within and outside of the United States) where Seller or any of the GSE
Companies are carrying on business or where any of the Assets are located. Each
of GSE Systems and Seller, jointly and severally, hereby represents and warrants
to Buyer as follows:
4.1 Organization. Seller and each GSE Company is a corporation validly existing
and in good standing under the laws of its jurisdiction of incorporation with
the corporate power and authority to conduct its business (including the
Business) and to own the Assets. For each of the Project Contracts to which
Seller or GSE Singapore is a party, Seller (or GSE Singapore as the case may be)
is duly qualified or licensed to do business and is in good standing as a
foreign corporation (or, in the case of GSE Singapore, is represented by a
legally-authorized local agent) in the jurisdictions in which the customer
installation site for that Project is located. The jurisdictions listed in
Schedule 4.1 constitute all the jurisdictions in which the conduct of the
Business or the use and ownership of the Assets by such entity makes such
qualification necessary, except for jurisdictions in which the failure of Seller
to be so qualified or licensed will not have a material adverse effect on the
Business.
4.2 Power and Authority. Seller and each GSE Company has the power and authority
to execute, deliver, and perform this Agreement and the other agreements and
instruments to be executed and delivered by it in connection with the
transactions contemplated hereby and thereby, has taken all necessary corporate
action to authorize the execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the transactions contemplated
hereby and thereby. This Agreement is, and the other agreements and instruments
to be executed and delivered by Seller and the GSE Companies in connection with
the transactions contemplated hereby shall be, the legal, valid, and binding
obligations of Seller and the GSE Companies, enforceable in accordance with
their terms.
4.3 No Conflict. Neither the execution and delivery of this Agreement and the
other agreements and instruments to be executed and delivered in connection with
the transactions contemplated hereby or thereby, nor the consummation of the
transactions contemplated hereby or thereby, will violate or conflict with:
(1) any federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree
applicable to Seller or any GSE Company, the Business, or the Assets,
(2) any provision of any charter, bylaw or other governing or
organizational instrument of Seller or any GSE Company, or
(3) except insofar as Required Contract Consents are to be procured prior
to Closing, any mortgage, indenture, license, instrument, trust,
contract, agreement, or other commitment or arrangement to which
Seller or any GSE Company is a party or by which Seller or any GSE
Company or any of the Assets is bound;
except for any such violation or conflict which will not have a material adverse
effect on the Business or the Assets.
4.4 Government Consents. Except for the filing and/or recording of instruments
of conveyance, transfer, or assignment required by all applicable copyright,
patent, or trademark laws or the laws of the jurisdictions in which the Assets
are located, to occur upon Closing, no approval, certification, variance,
license, or permit to or from, or notice, filing, or recording to or with (a
"filing"), any federal, state, or local governmental authorities is necessary
for the execution and delivery of this Agreement and the other agreements and
instruments to be executed and delivered in connection with the consummation of
the transactions contemplated hereby or thereby, or the ownership and use of the
Assets and the conduct of the Business (including by Buyer) except for any such
filing which, if not made, will not have a material adverse effect on the
Business or the Assets.
4.5 Required Contract Consents. Except for the Required Contract Consents, no
approval, consent, or waiver from, or notice, filing, or recording to or with,
any person is necessary for:
(1) the execution and delivery of this Agreement and the other agreements
and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby or the consummation of the
transactions contemplated hereby; or
(2) the ownership and use of the Assets and the conduct of the
Business (including by Buyer).
4.6 Title to Tangible Property. Buyer at Closing shall obtain good and
marketable title to all of the Physical Assets and Inventory free and clear of
all title defects, liens, restrictions, claims, charges, security interests, or
other encumbrances of any nature whatsoever, including any mortgages, leases,
chattel mortgages, conditional sales contracts, collateral security
arrangements, or other title or interest retention arrangements.
4.7 Condition of Property. All of the Physical Assets are in good operating
order, condition, and repair, ordinary wear and tear excepted, but are otherwise
purchased in their "AS IS" "WHERE IS" condition as of the date of this
Agreement.
4.8 Intentionally Deleted.
4.9 Title to Intellectual Property.
a. Ownership. Except for the rights and licenses validly and effectively
established by the Software Contracts, Seller owns, and Buyer shall receive at
Closing good and marketable title to the Intellectual Property free and clear of
all title defects, liens, restrictions, claims, charges, security interests, or
other encumbrances of any nature whatsoever, including any mortgages, leases,
chattel mortgages, conditional sales contracts, collateral security
arrangements, or other title or interest retention arrangements. Each of the GSE
Companies acknowledges, represents and warrants that:
(1) Seller is the owner of the Software Programs; and
(2) No GSE Company has any proprietary rights in the Software
Programs.
b. Intentionally Deleted.
c. Procedures for Copyright Protection. To the best of the knowledge of
Seller and each of the GSE Companies, in no instance has the eligibility of the
Software Programs for protection under applicable copyright law been forfeited
to the public domain by omission of any required notice or any other action.
d. Procedures for Trade Secret Protection. To the best of the knowledge of
Seller and each of the GSE Companies, the Technical Documentation relating to
the Software Programs (1) have at all times been maintained in confidence and
(2) have been disclosed by Seller only to employees, consultants and other
parties pursuant to signed agreement which contain covenants to maintain such
information in confidence.
e. Personnel Agreements. To the best of the knowledge of Seller and each of
the GSE Companies, all personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of the Software Programs and the Technical Documentation, on behalf
of Seller or any GSE Company either (1) have been party to a "work-for-hire"
arrangement or agreement with Seller, in accordance with applicable federal law,
that has accorded Seller full, effective, exclusive, and original ownership of
all tangible and intangible property arising as a result of such contributions
or participation, or (2) have executed appropriate instruments of assignment in
favor of Seller as assignee that have conveyed to Seller full, effective, and
exclusive ownership of all tangible and intangible property arising as a result
of such contributions or participation.
4.10. Absence of Claims to Intellectual Property. No claims have been manifested
to Seller or any GSE Company by any person or entity that the use of the
Intellectual Property or the Licensed Software by Seller or any GSE Company
infringes the intellectual property rights of any third party, and neither
Seller nor any GSE Company knows of any valid basis for any such claim. The use
of the Intellectual Property and the Licensed Software by Seller or any GSE
Company does not, and the use of the Intellectual Property and the Licensed
Software by the Buyer in the same manner used by Seller prior to Closing will
not, infringe the intellectual property rights of any person under the laws of
the United States or Canada or infringe:
(1) a patent or copyright under the laws of the countries listed in
Schedule 4.10; or
(2) a trade secret under the laws of any country, if the same acts also
would constitute a misappropriation of trade secrets under the laws of
the United States.
4.11 Material Contracts. The Software Contracts listed in Schedule 1.1.f, the
Project Contracts, the Agency Contracts, the warranty obligations listed in
Schedule 10.6.b, and the other contracts and commitments listed in Schedule 4.11
(the "Other Contracts") constitute all material contracts, agreements, licenses,
and other commitments and arrangements: (1) entered into by Seller in its
conduct of the Business; or (2) entered into by any GSE Company relating to the
Assets or the Projects; and in effect as of the date of this Agreement, other
than the Leases addressed by Article 4.14. All such contracts are valid,
binding, and enforceable in accordance with their terms and are in full force
and effect. There are no existing material defaults by Seller or any GSE Company
under any such contracts and no act, event, or omission has occurred that,
whether with or without notice, lapse of time, or both, would constitute a
material default thereunder.
4.12 Third-Party Components in Software Programs. Seller has validly and
effectively obtained the right and license to use, copy, modify, and distribute
the third-party programming and materials contained in the Software Programs
(including technical documentation associated therewith) pursuant to the
Software Contracts identified as "licenses from third parties (development
and/or marketing)" or "Licenses from third parties (internal use only)" in
Schedule 1.1.f. The Software Programs and Technical Documentation contain no
other programming or materials in which any third party may claim superior,
joint, or common ownership, including any right or license. The Software
Programs and Technical Documentation do not contain derivative works of any
programming or materials not owned in their entirety by Seller and included in
the Assets.
4.13 Third-Party Interests or Marketing Rights in Software Programs. Neither the
Seller nor any of the GSE Companies has granted, transferred, or assigned any
right or interest in the Software Programs, the Technical Documentation, or the
Intellectual Property to any person or entity, except pursuant to the Agency
Contracts and the Software Contracts identified as "licenses and sublicenses to
others" in Schedule 1.1.f. To the best of Seller's knowledge, and the knowledge
of each GSE Company, no licenses to use the Software Programs have been granted
to any end user which permit the end user to make and use copies of the Software
Programs for any purposes other than archival or back-up purposes without paying
additional license fees. To the best of Seller's knowledge, and the knowledge of
each GSE Company, there are no contracts, agreements, licenses, and other
commitments and arrangements in effect with respect to the marketing,
distribution, licensing, or promotion of the Software Programs or any Technical
Documentation, or the Intellectual Property by any independent salesperson,
distributor, sublicensor, or other remarketor or sales organization, except for
the Agency Contracts identified in Schedule 1.1.h.
4.14 Leases. The Leases listed in Schedule 1.1.k. constitute all leasing or
rental contracts, agreements, and other commitments and arrangements with
respect to the Assets in effect as of the date of this Agreement. All Leases are
valid, binding, and enforceable in accordance with their terms and are in full
force and effect. There are no existing material defaults by Seller thereunder,
and no act, event, or omission has occurred that, whether with or without
notice, lapse of time, or both, would constitute a material default thereunder.
4.15 Financial Statements. Schedule 4.15 sets forth the GSE Systems unaudited
proforma balance sheet and profit and loss statement for the Business as at
September 30, 1998 (the "Financial Statements"), prepared in accordance with
GAAP, consistently applied with the principles and procedures employed in prior
periods by Seller and as adjusted by mutual agreement. The Financial Statements
properly reflect all Assets and Assumed Liabilities as then in existence. The
Financial Statements fairly present the results of operation and the financial
position of Seller as of the dates thereof and the periods then ended in
conformity with GAAP consistently applied with the principles and procedures
employed in prior periods by Seller.
4.16 Encumbrances. Except for the Leases, there are no encumbrances, secured or
unsecured on Assets, except for encumbrances which will be discharged prior to
Closing.
4.17 Conduct of Business.
a. Ordinary Course of Business: No Removal or Disposal of Assets. Except as
set forth in Schedule 4.17.a, since August 31, 1998, Seller and each of the GSE
Companies has operated the Business in the ordinary course consistent with past
practices, and have not removed or disposed of any assets that were assets of
the Business as of August 31, 1998, except in the ordinary course.
b. No Material Adverse Change. Except as set forth in Schedule 4.17.b,
since August 31, 1998, there has been no material adverse change in the Business
or the Assets or in the financial condition, operations, or prospects of the
Business.
c. Absence of Joint Ventures, etc. Except as set forth in Schedule 1.1.h,
Seller is not a party to any joint venture or other similar agreement or
arrangement that involves any sharing of profits of the Business or the Assets
or is similar to or competitive with the Business, other than the Software
Contracts identified as "licenses from third parties (development and/or
marketing)" or the Agency Contracts.
4.18 Transition of Agency Contracts. To the best of Seller's knowledge and the
knowledge of GSE Singapore, there is no reason why each of the Agency Contracts
might not be continued by Buyer, after its acquisition of the Business, on
substantially the same level of business and on substantially the same terms as
Seller (or GSE Singapore as the case may be) experienced during the twelve (12)
month period preceding the Closing.
4.19 Litigation. Except as set forth in Schedule 4.19, no claim, action, suit,
proceeding, inquiry, hearing, arbitration, administrative proceeding, or
investigation (collectively, "Litigation") is pending, or, to the best of
Seller's knowledge, and the knowledge of each GSE Company, threatened against
Seller or any GSE Company, or their respective present or former directors,
officers, or employees, or any party to any Software Contract, which could have
a material adverse effect on the Business or any of the Assets. Seller and each
GSE Company knows of no facts that could reasonably be expected to serve as the
basis for Litigation against itself (or the Buyer upon acquisition of the
Business), its present or former directors, officers, or employees, or any party
to the Software Contracts, which could have a material adverse effect on the
Business or the Assets.
4.20 Court Orders, Decrees, and Laws.
a. Compliance With Laws. There is no outstanding or, to the best of
Seller's knowledge, and the knowledge of each GSE Company, threatened order,
writ, injunction, or decree of any court, governmental agency, or arbitration
tribunal against Seller or any GSE Company which could have a material adverse
effect on the Business or the Assets. Neither Seller nor any GSE Company is in
violation of any applicable federal, state, or local law, regulation, ordinance,
zoning requirement, governmental restriction, order, judgment, or decree, or any
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in those laws
affecting, involving, or relating to the Business or the Assets except where
noncompliance has no material adverse effect upon the financial condition,
operation, or prospects of the Business or the Assets, and neither Seller nor
any GSE Company has received any notices of any allegation of any such
violation. The foregoing shall be deemed to include all applicable patent,
copyright, and trademark laws, state trade secret and unfair competition laws,
and to all other applicable laws, including equal opportunity, wage and hour,
and other employment matters, and antitrust and trade regulation laws.
b. Adequacy of Authorizations. Seller and each of the GSE Companies has
obtained all approvals, authorizations, certifications, consents, licenses, or
permits to or from, or filings, notices, or recordings to or with, all
governmental authorities with jurisdiction that are required for the ownership
and use of the Assets and the conduct of the Business under all applicable laws,
except for any such approvals etc. where the failure to obtain such approval
could not have a material adverse effect on the Business or the Assets (the
"Authorizations"). Seller and each of the GSE Companies is in compliance with
all terms and conditions of such required Authorizations, except for any
non-compliance which could not have a material adverse effect on the Business or
the Assets. All of the Authorizations are in full force and effect, and, to the
best of Seller's knowledge, and the knowledge of each GSE Company, no suspension
or cancellation of any of them is being threatened, nor will any of the
Authorizations be affected by the consummation of the transactions described in
this Agreement, except to the extent any such Authorizations are transferable
only upon receipt of government consents.
c. Environmental Compliance. Neither Seller, nor, to the best of Seller's
knowledge, any prior owner, user, controller, or occupant, nor any tenant,
subtenant, prior tenant, or prior subtenant has ever used Hazardous Substances
(as hereinafter defined) on, from, or affecting the Assets or any facility,
site, area, or property owned, used, controlled, or occupied by the Business, in
any manner that violates any federal, state, or local law, regulation,
governmental restriction, order, judgment, or decree governing the use, storage,
treatment, transportation, manufacture, handling, production, or disposal of
Hazardous Substances, except for any such violations which that could not have a
material adverse effect on the Business or the Assets. For purposes hereof,
"Hazardous Substances" include any flammable substances, explosives, radioactive
substances, hazardous substances, hazardous wastes, hazardous or toxic
substances, or related substances defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 USC SS 9601 et
seq.), the Hazardous Materials Transportation Act, as amended (49 USC SS 1801 et
seq.), the Resource Conservation and Recovery Act, as amended (42 USC SS 6901 et
seq.), and in the regulations adopted and publications promulgated pursuant
thereto, or any other federal, state, or local environmental law, ordinance,
rule, or regulation. The term "substance" includes asbestos, polychlorinated
biphenyls, kerosene, and fuel oil. The term "release" means any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment. The term "environment"
means any surface or groundwater water supply, land, surface, or subsurface
strata or the ambient air.
4.21 Taxes.
a. Tax Returns and Payment of Taxes. Except as set forth in Schedule
4.21.a, all tax returns of every kind (including returns of real and personal
property taxes, intangible taxes, withholding taxes, and FICA and unemployment
compensation taxes) relating to the Business that are due to have been filed in
accordance with any applicable law have been duly filed; and all taxes shown to
be due on such returns have been paid in full.
b. Sales Taxes, etc. Schedule 4.21.b identifies (1) each jurisdiction in
which the Business is conducted in which sales, use, excise, or intangible taxes
are due or paid on Software Programs or other Inventory sold or licensed by
Seller or any GSE Company in conjunction with the Business and (2) the Software
Programs or other Inventory subject to taxation in such jurisdiction.
4.22 Personnel and Compensation.
a. List of Personnel. Seller has delivered to Buyer a true and complete
list of the names and current compensation levels of (1) all salaried or annual
employees and (2) all consultants involved in the Business as of the date of
this Agreement.
b. Compensation, etc. Except as set forth in Schedule 4.22.b, Seller is not
subject to, and has no obligation under, any employment, consulting, or
collective bargaining contracts, deferred compensation, pension (as defined in
Section 3(2) of the Employee Retirement Income Security Act (ERISA)),
profit-sharing, bonus, stock option, stock appreciation, stock purchase, or
other nonqualified benefit or compensation commitments, benefit plans,
arrangements, or plans, including any welfare plans (as defined in Section 3(1)
of ERISA), fringe benefit arrangements, or multi-employer plans (as defined in
Section 3(37)(A) of ERISA) of or pertaining to the present or former employees
involved in the Business. Seller has complied with all of its obligations under
the foregoing in all material respects.
c. Retirement Plans. The only retirement plan that Seller has established
for the benefit of persons who are or were involved in the Business is the GSE
Systems Inc. 401K Plan (the "Plan"). The Plan and their administration are the
sole responsibility of Seller.
d. Multi-employer Plan. Neither the Seller nor any predecessor in interest
thereto, nor any trade or business under common control with Seller or any
predecessor in interest thereto (within the meaning of Section 414(i) of the
Internal Revenue Code) has ever contributed to any pension Plan that is a
Multi-employer Plan for the benefit of employees involved in the Business.
e. Adequate Reserves for Welfare Plans. For welfare plans (as defined in
Section 3(2) of ERISA) listed (or required to be listed) in Schedule 4.22.b,
reserves have been established by Seller or its insurance companies at least
sufficient to pay all claims incurred under the provisions of such plans on or
prior to the Effective Date. Seller has not received notice of, nor does it know
any basis for, any retrospective premium charge for claims relating to any
period prior to the Effective Date under such contracts.
f. Compliance with Laws. To the best of Seller's knowledge, Seller is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and occupational safety and health pertaining to the Business
and the employees involved in the Business, and is not engaged in any unfair
labor practice within the meaning of Section 8 of the National Labor Relations
Act. To the best of Seller's knowledge, there is no unfair labor practice,
charge, or complaint or any other matter against or involving a Seller pending
or, to the knowledge of Seller, threatened before the National Labor Relations
Board or any court of law pertaining to the Business or the employees involved
in the Business. There is no labor strike, dispute, slowdown, or stoppage
pending or threatened against Seller pertaining to the Business or the employees
involved in the Business. To the best of Seller's knowledge, (i) no
certification or decertification question or organizational drive exists or has
existed within the past twelve (12) months respecting the Business or the
employees involved in the Business; (ii) Seller has not experienced any
organized work stoppage or other labor difficulty involving the employees of the
Business; (iii) there are no charges, investigations, administrative
proceedings, or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin sexual preference,
handicap, or veteran status) pending or threatened before the Equal Employment
Opportunity Commission or any federal, state, or local agency or court against a
Seller pertaining to the Business or the employees of the Business, and no basis
for any such charge, investigation, administrative proceeding, or complaint
exists; and (vi) there have been no audits of the equal employment opportunity
practices of Seller pertaining to the Business or the employees involved in the
Business.
4.23 Estimates to Complete. The estimates to complete for the Projects attached
hereto as Schedule 3.1, were prepared carefully and to the best of Seller's
ability and to the best of Seller's knowledge, information and belief, the
Estimates to Complete represent accurate estimates of the costs to complete the
Projects.
4.24 Broker's or Finder's Fees. Seller has not authorized any person to act as
broker or finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement in any manner that may or will
impose liability on Buyer.
4.25 Related-Party Transactions. Except as disclosed in Schedule 4.25, neither
Seller nor any GSE Company is a party to any contract, agreement, license,
lease, or arrangement, directly or indirectly, with (1) any officer or salaried
employee of the Business who will become an employee of Buyer on the Closing; or
(2) any corporation, trust, partnership or other entity in which any such
officer or salaried employee or Seller or any GSE Company has a material equity
or participating interest; in each case, relating to or involving the Business,
the Assets, or the Assumed Liabilities, except, in each instance, for existing
compensation arrangements.
4.26 Export Control and Related Matters.
a. With respect to the Projects, Seller and GSE Singapore are in compliance
in all material respects with all United States and foreign Export Control Laws.
"Export Control Laws" means all federal, state, local and foreign laws
(including common law), statutes, codes, ordinances, rules, regulations,
executive orders or other requirements, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretations thereof, relating to the export or reexport of
commodities and technologies. Export Control Laws includes the Export
Administration Act of 1979 (24 U.S.C. Sections 2401 - 2420); the International
Emergency Economic Powers Act (50 U.S.C. Sections 1701 - 1706); the Trading with
the Enemy Act (50 U.S.C. Sections 1 et seq.); the Arms Export Control Act (22
U.S.C. Sections 2778, 2779); the International Boycott Provisions of Section 999
of the Code; nuclear non-proliferation legislation and the Export Administration
Regulations.
b. Each of Seller and GSE Singapore has all necessary authority under the
Export Control Laws to conduct its operations pertaining to the Business as
currently conducted, including all necessary (i) Permits for any pending export
transactions for the Business, (ii) Permits for the disclosure of information to
foreign Persons in connection with the Projects and all pending proposals and
bids. and (iii) registrations with Governmental Entities with authority to
implement the Export Control Laws.
c. Seller has not participated directly or indirectly in any boycotts or
other similar practices in violation of the regulations of the United States
Department of Commerce or Section 999 of the Code.
4.27 Year 2000 Compliance. Seller has commenced assessment, testing and
remediation programs with respect to Year 2000 readiness issues affecting the
S/3 Software and the SimSuite Pipeline Software, however, Buyer acknowledges
that such programs have not been completed as of the Effective Date. Seller has
made available to Buyer (or will make available to Buyer promptly after Closing)
copies of the assessments, test results, and other materials in Seller's
possession concerning the Year 2000 readiness of the S/3 Software and the
SimSuite Pipeline Software as of the Effective Date.
4.28 Accounts Receivable. The Accounts Receivable in excess of any reserves
established with respect thereto reflected in the Financial Statements represent
claims actually made in the ordinary course of business and are valid claims as
to which performance has been rendered, there are no defenses, claims, refusals
to pay or rights of setoff or recoupment against any thereof, and at least 50%
of the amount thereof is collectible, net of established reserves, in the
ordinary course of business without cost (other than customary general and
administrative costs) in collection efforts therefor. Seller has good and
marketable title to all of the Accounts Receivable other than the accounts
receivable relating to the Projects for ECIL. GSE Singapore has good and
marketable title to the accounts receivable relating to the Projects for ECIL.
4.29 Previous Deliveries. Seller has made available to Buyer true and complete
copies of all contracts material to the Assets and the Business, including all
Software Contracts, Project Contracts, Agency Contracts, documentation of
Intellectual Property and Leases.
4.30 Disclosure. The representations, warranties, or statements made by Seller
or any GSE Company in this Agreement or in any certificate furnished or to be
furnished to Buyer pursuant to this Agreement taken as a whole, do not contain
and will not contain any untrue statement or omits or will omit to state any
fact necessary to make the statements contained herein or therein not
misleading. Seller has disclosed to Buyer all facts known or reasonably
available to Seller that are material to the financial condition, operation, or
prospects of the Business, the Assets, and the Assumed Liabilities.
4.31 Duty to Make Inquiry. To the extent that any of the representations and
warranties made by Seller or any GSE Company in this Agreement are qualified by
the knowledge of Seller or any GSE Company, Seller and each GSE Company
represents and warrants that it has made due and reasonable inquiry of all
directors, officers and employees responsible for the subject matter thereof, of
Seller and each GSE Company reasonably likely to have knowledge or information
concerning the matters to which such representations and warranties relate.
4.32 Truth at Closing. All of the representations, warranties, and agreements
contained in this Article IV shall be true and correct and in full force and
effect on and as of the Closing Date.
4.33 Cumulative Exceptions. The exceptions and qualifications to the
representations and warranties of Seller and the GSE Companies in this Article
IV which are based upon such exceptions and qualifications not being "material"
or being "in all material respects," or not having a Material Adverse Effect
will not, individually or in the aggregate, have a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation validly existing and in good standing
under the laws of the State of Delaware with the corporate power and authority
to conduct its business and to own and lease its properties and assets.
5.2 Power and Authority. Buyer has the power and authority to execute, deliver,
and perform this Agreement and the other agreements and instruments to be
executed and delivered by it in connection with the transactions contemplated
hereby and thereby, and Buyer has taken all necessary action to authorize the
execution and delivery of this Agreement and such other agreements and
instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and, when such other agreements and instruments are
executed and delivered, the other agreements and instruments to be executed and
delivered by Buyer in connection with the transactions contemplated hereby and
thereby shall be, the legal, valid, and binding obligation of Buyer, enforceable
in accordance with their terms.
5.3 Broker's or Finder's Fees. Buyer has not authorized any person to act as
broker, finder, or in any other similar capacity in connection with the
transactions contemplated by this Agreement.
5.4 No Conflict. Neither the execution and delivery by Buyer of this Agreement
and of the other agreements and instruments to be executed and delivered by
Buyer in connection with the transactions contemplated hereby or thereby, nor
the consummation by Buyer of the transactions contemplated hereby or thereby
will violate or conflict with (1) any federal, state, or local law, regulation,
ordinance, governmental restriction, order, judgement, or decree applicable to
Buyer, or (2) any provision of any charter, bylaw, or other governing or
organizational instrument of Buyer.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of Seller to be performed hereunder shall be subject to
the satisfaction (or waiver by Seller) at or prior to the Closing Date of each
of the following conditions:
6.1 Representations and Warranties True at Closing Date. Buyer's representations
and warranties contained in this Agreement shall be true on and as of the
Closing Date with the same force and effect as though made on and as of such
date; Buyer shall have complied with the covenants and agreements set forth
herein to be performed by it on or before the Closing Date; and Buyer shall have
delivered to Seller a certificate dated the Closing Date and signed by a duly
authorized officer of Buyer to all such effects.
6.2 Litigation. No Litigation shall be threatened or pending against Buyer, GSE
Systems or Seller before any court or governmental agency that, in the
reasonable opinion of counsel for Seller, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with the consummation of the transactions contemplated
by this Agreement.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of Buyer to be performed hereunder shall be subject to
the satisfaction (or the waiver by Buyer) at or prior to the Closing Date of
each of the following conditions:
7.1 Representations and Warranties True at Closing Date. The representations and
warranties of Seller and the GSE Companies contained in this Agreement shall be
true on and as of the Closing Date with the same force and effect as though made
on and as of such date; Seller and each of the GSE Companies shall have complied
with the covenants and agreements set forth herein to be performed by it on or
before the Closing Date; and Seller and each GSE Company shall have delivered to
Buyer a certificate dated the Closing Date and signed by a duly authorized
officer thereof to all such effects.
7.2 Performance. Seller and each GSE Company shall have performed and complied
with all agreements, obligations, and conditions required by this Agreement to
be performed or complied with by them on or prior to the Closing.
7.3 Investigations. Neither any investigation of Seller and each GSE Company by
Buyer, nor the Schedules hereto, nor any other document delivered to Buyer as
contemplated by this Agreement, shall have revealed any facts or circumstances
that, in the good faith judgment of Buyer, reflect in a material adverse way on
the Assets, the Assumed Liabilities, or the business, operations, or prospects
of the Business.
7.4 Consents. All consents to the assignment to Buyer of the maintenance and
support contracts listed in Schedule 1.1.f, the Leases and each of the Project
Contracts shall have been obtained.
7.5 No Litigation. No Litigation shall be threatened or pending against Buyer,
Seller or any GSE Company before any court or governmental agency that, in the
reasonable opinion of counsel for Buyer, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.6 No Material Adverse Change. There shall have been no material adverse change
(whether or not such change is referred to or described in any supplement to the
Schedules) with respect to the Assumed Liabilities, or the financial condition,
results of operations, business or prospects of the Business since September 30,
1998, (the date of the Financial Statements).
7.7 Employment and Termination Agreements. Buyer will offer employment or
services/consulting contracts to certain employees and contractors of Seller
currently dedicated to the Business to be identified prior to the Closing (the
"Key Employees"). On or prior to the Closing:
(a) the Key Employees shall have entered into contracts providing for
their employment by Buyer, in forms satisfactory to Buyer; and
(b) Seller and such individuals shall have entered into Termination
Agreements, the form of which is attached as Schedule 7.7, the
effectiveness of which shall be expressly contingent upon the
occurrence of Closing.
7.8 Temporary Occupancy Agreement. At or prior to the Closing, Buyer and Seller
shall have entered into the Temporary Occupancy Agreement, the form of which is
attached as Schedule 7.8.
7.9 Transition Agreement. At or prior to Closing, Buyer and Seller shall have
entered into an administrative services transition agreement, the form of which
is attached hereto as Schedule 7.9.
7.10 Satisfactory Due Diligence. Buyer shall have completed such due diligence
review and investigation of the Assets, the Assumed Liabilities, the Business
Seller and each of the GSE Companies as Buyer shall have deemed necessary, all
of which must be satisfactory to Buyer; provided that completion of such review
and investigation shall not constitute a waiver by Buyer of any facts or
circumstances affecting the representations or warranties of Seller and the GSE
Companies in this Agreement or preclude or stop Buyer from asserting any failure
or breach of any such representation or warranty or from pursuing any other
rights or remedies granted to Buyer by this Agreement or law or equity.
7.11 Release of Liens. On the Closing, Seller shall deliver UCC Termination
statements for all security interests, encumbrances and liens affecting the
Assets.
ARTICLE VIII
PRE-CLOSING COVENANTS OF SELLER AND BUYER
8.1 Conduct Pending Closing. From the date of this Agreement through the
Closing, Seller and each GSE Company shall (a) continue the Business in the
ordinary course, without substantial change; (b) take steps as are necessary,
appropriate and commercially reasonable to preserve the Business's existing
relationships with customers, suppliers and key employees; and (c) inform Buyer
of the occurrence of any event which may result in a material adverse change to
the Business, its financial condition or operations.
8.2 Notification of Customers. Promptly following the execution of this
Agreement, Seller and Buyer shall jointly notify customers of the Business that
Buyer will be acquiring the Business and will be the successor to Seller, and
will jointly use reasonable efforts to assist in the transfer to Buyer of the
Project Contracts, the Agency Contracts and any other material contracts to be
assumed by Buyer under this Agreement, contingent on the Closing.
8.3 Consents. Buyer and Seller and each GSE Company shall cooperate with one
another and proceed, as promptly as is reasonably practicable, to seek and to
obtain all necessary consents and approvals pursuant to legal obligations,
contractual obligations or otherwise which are requirements for, or
preconditions to, the Closing.
8.4 Transition Arrangements. Buyer and Seller agree to negotiate in good faith
with respect to structuring, prior to the Closing, mutually acceptable
transition arrangements for the system integrators of the Business.
8.5 Project Completion Plan. Buyer and Seller and each GSE Company agree to
follow the provisions of the technical services transition plan set forth in
Schedule 8.5 which states the means and resources for completing certain
unfinished projects as referred to in the plan and carrying out the warranty and
support obligations for those projects and customers.
8.6 Bulk Sales Laws. Buyer and Seller shall cooperate with each other to ensure
compliance with all bulk sales laws and other similar laws in any applicable
jurisdiction in respect of the transactions contemplated by this Agreement.
Seller and each GSE Company, jointly and severally, shall indemnify Buyer from,
and hold Buyer harmless against, any liabilities, damages, costs and expenses
resulting from or arising out of (a) the parties' failure to comply with any
such laws in respect of the transactions contemplated by this Agreement and (b)
any action brought or levy made as a result thereof.
8.7 Exclusive Dealing. From the date of this Agreement through the Closing,
Seller and each GSE Company will not solicit or encourage inquiries or proposals
with respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, or enter into any transaction involving,
any acquisition or purchase of the Assets or any portion thereof. Seller and
each of the GSE Companies will instruct its respective officers, directors,
agents and affiliates, to refrain from doing any of the above. Seller and each
of the GSE Companies will notify Buyer immediately if any such inquiries or
proposals are received by, any such information is received from, or any such
negotiations or discussions are sought to be initiated with it or any of the
other persons or entities referred to above. Seller and each of the GSE
Companies acknowledges and agrees, for itself and each of the persons and
entities referred to above, that any remedy at law for breach of the foregoing
covenant will be inadequate, and in addition to any other relief which may be
available, Buyer will be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages and without regard to the
adequacy of any remedy at law. Notwithstanding, the foregoing, Seller's
obligation of exclusive dealing shall not be binding if a material change or
event (exclusive of a competing offer) shall have occurred that would make
proceeding with the Closing illegal, invalid or contrary to the fiduciary duties
of the board of directors of Seller.
8.8 Access. From the date of this Agreement through the Closing, Seller will
afford Buyer's designated employees, auditors, legal counsel and other
authorized representatives all reasonable opportunity and access to inspect,
investigate and audit the Assets, Liabilities, contracts, operations, and other
items relevant to the operation of the Business. Buyer agrees to conduct such
inspection, investigation and audit in a non-disruptive manner and at such times
and places reasonably determined by Seller.
8.9 Notification. During the period between the date of this Agreement and the
earlier of the termination of this Agreement and the Closing Date (the
"Pre-Closing Period"), Seller and each GSE Company shall promptly notify Buyer
in writing of:
(1) the discovery by Seller or any GSE Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by Seller or any GSE
Company in this Agreement;
(2) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or
warranty made by Seller or any GSE Company in this Agreement if (A)
such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(3) any breach of any covenant or obligation of Seller or any GSE Company
contained in this Agreement;
(4) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Article VI or VII
impossible or unlikely.
8.10. Updates to Seller's Schedules. If any event, condition, fact or
circumstance that is required to be disclosed pursuant to Article 8.9 requires
any change in Seller's Schedules, or if any such event, condition, fact or
circumstance would require such a change assuming Seller's Schedules were dated
as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then Seller shall promptly deliver to Buyer an
update to Seller's Schedules specifying such change. No such update shall be
deemed to supplement or amend Seller's Schedules for the purpose of (A)
determining the accuracy of any of the representations and warranties made by
Seller or any GSE Company in this Agreement, or (B) determining whether any of
the conditions set forth in Article VII has been satisfied.
8.11 Hiring of Employees. Seller shall use its best efforts to enable Buyer to
hire, on such terms as Buyer may reasonably establish, such of its employees and
contractors currently dedicated to the Business as Buyer may specify on or
before Closing. For any employees of the Business hired by Buyer on or within
three months after the Closing, Buyer shall provide the normal benefits package
it provides to other similarly situated U.S. employees of Buyer. Such continuing
employees shall not be subject to pre-existing condition exclusions (unless such
pre-existing exclusions would otherwise apply to other similarly situated U.S.
employees of Buyer) and shall be credited with service credit for all purposes
under such plans (other than for benefit accrual purposes under any pension
plans maintained by Buyer), including but not limited to vacation/holiday time
and sick days, equal to the service credit they have under the corresponding
Buyer benefit plans. Seller and Seller's 401(k) and welfare plans and other
benefit plans and programs shall have no obligations, independent of a rollover
request directed by any such Employees, to transfer any assets representing
accrued benefits or entitlements of such employees of the Business to any plans
maintained or created by Buyer. Such employees of the Business shall be treated
under all benefit plans and programs of Seller as having terminated their
employment with Seller and its subsidiaries and affiliates as of the date of
Closing (except for such employees who are, in accordance with Seller's normal
policies, eligible for retirement or a bridge to retirement, which employees may
be placed on leave of absence) and all accrued benefits and entitlements of such
employees of the Business under Seller's benefit plans and programs shall be
paid or otherwise discharged as required in accordance with the provisions of
the plans, subject to applicable law, provided that such service credits shall
not result in Buyer's assumption of any accrued but unpaid or untaken
vacation/holiday time or sick days.
8.12 COBRA. Seller shall be responsible for the collection of premiums and all
related costs of benefits offered under the continuation of benefits provisions
of the Consolidated Omnibus Budget Reconciliation Act for all employees of the
Business and their dependents not kept in the continuous employ of such Seller
following Closing.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement is first terminated as provided in Article
XIII, the closing of the purchase and sale of the Assets and the transfer and
assumption of the Assumed Liabilities (the "Closing") shall take place at the
offices of Seller at 10:00 a.m., November 10, 1998 or such earlier or later date
as the parties may agree in writing (the "Closing Date"), and shall be effective
as of 11:59 p.m. local time on October 30, 1998 (the "Effective Date").
9.2 Actions at Closing. At Closing, Buyer and Seller and each GSE Company shall
take the following actions, in addition to such other actions as may otherwise
be required under this Agreement:
a. Seller shall deliver the following to Buyer:
(1) ▇▇▇▇ of Sale for the Assets
(2) The License Agreement for the Licensed Software;
(3) The Temporary Occupancy Agreement;
(4) The Transition Agreement;
(5) Assignment and assumption agreements for the Project Contracts,
including an assignment of the Project Receivables
(6) An assignment agreement covering the assignment of:
the Agency Contracts;
all copyright, trademark and patent registrations; and
the Software Contracts;
(7) An assignment agreement covering the assignment of the Remaining
Receivables;
(8) Consents from customers to the assignment of the Project
Contracts;
(9) Consents from agents / representatives to the assignment of the
Agency Contracts;
(10) Consents from customers to the assignment of the maintenance and
support agreements listed in Schedule 1.1.f;
(11) (Intentionally Deleted)
(12) The certificates required under Article 7.1 as to the accuracy of
the representations and warranties contained herein, the
compliance with the covenants and agreements contained herein,
and the satisfaction of the conditions to Closing contained
herein.
(13) The Technical Documentation, including the source code libraries
and listings for each version of the Software Programs;
(14) Copies of the Business Records;
(15) Certificates of good standing for Seller and GSE Systems;
(16) All sales and marketing materials relating to the Software
Programs;
(17) Training materials relating to the Software Programs;
(18) The Estimated Closing Balance Sheet and calculation of the
Estimated WIP Amount (Article 3.2);
(19) UCC Termination statements or other documentation satisfactory to
Buyer to discharge all security interests, encumbrances and liens
affecting the Assets.
(20) Such other bills of sale, assignments, and other instruments of
conveyance and transfer as Buyer may reasonably request to effect
the assignment to Buyer of the Assets.
b. Entry Into Premises. Seller shall give Buyer access to the facilities of
the Business in accordance with the Temporary Occupancy Agreement.
c. Payment of Initial Payment. Buyer shall make the payments required in
Article 3.3 in full by wire transfer of immediately available funds.
d. Assumption Agreement. Buyer shall deliver to Seller an assumption
agreement pursuant to which Buyer assumes and agrees to pay and perform the
Assumed Liabilities.
e. Certificates. Buyer shall deliver the certificates required under
Article 6.1 as to the accuracy of the representations and warranties contained
herein, the compliance with the covenants and agreements contained herein, and
the satisfaction of the conditions to Closing contained herein.
9.3 Further Assurances. At and after the Closing, without further consideration,
Seller and each GSE Company shall take all such other action and shall procure
or execute, acknowledge, and deliver all such further certificates, conveyance
instruments, consents, and other documents as Buyer or its counsel may
reasonably request (1) to vest in Buyer, and perfect and protect Buyer's right,
title, and interest in, and enjoyment of, the Assets and the Business, or (2) to
ensure more effectively the compliance of Seller and each GSE Company with its
agreements, covenants, warranties, and representatives under this Agreement.
ARTICLE X
COVENANTS OF SELLER AND BUYER FOLLOWING CLOSING
10.1 Tax Matters.
a. Seller's Right and Responsibility for Pre-closing Tax Matters. Seller
shall have the right and responsibility to direct the handling of all tax
matters affecting or relating to the conduct of the Business prior to the
Closing Date, including the prosecution of all administrative and judicial
remedies, the settlement of all issues, and the execution of agreements,
consents, or waivers, extending the statute of limitations, provided that no
such action, agreement, or stipulation shall have any effect on the tax position
or liability of Buyer, including as successor to the Business, or result in any
increase in the Assumed Liabilities.
b. Buyer's Cooperation. Buyer shall use its reasonable efforts to provide
Seller such assistance as it may reasonably request in connection with matters
relating to taxes, including information with respect to Seller's preparation of
any returns of taxes, any audit or other examination by any taxing authority,
any judicial or administrative proceeding relating to Seller's liability for
taxes, or any claims arising hereunder respecting the Business. Buyer shall
retain and provide Seller with records or information which may be relevant to
any such return, audit, examination, proceeding, or determination, and Buyer
shall retain all such books and records for so long as necessary in keeping with
applicable statutes of limitations.
10.2 Transfer Taxes. All sales, transfer, and similar taxes and fees (including
all recording fees, if any) incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by Seller and Seller shall file
all necessary documentation with respect to such taxes.
10.3 Non-Compete.
a. For the period beginning on the Effective Date and continuing until the
fourth anniversary of the Effective Date, Seller and each GSE Company shall not,
and shall use their commercially reasonable efforts to cause their directors,
officers, employees and affiliates not to:
(1) cause, induce or encourage any actual or prospective customer,
supplier, manufacturer or licensor of the Business, or any other
Person who has a business relationship with Buyer, to terminate
or change any such actual or prospective relationship in a manner
which would be adverse to the Business; or
(2) conduct, participate or engage, directly or indirectly (whether
as a principal, sole proprietor, partner, stockholder, agent,
consultant, subcontractor, joint venturer, team member or in any
other capacity), acquire, own or have any interest (other than a
three percent (3%) or less ownership in an entity whose
securities are traded on a recognized securities exchange or
quotation system), in any business, or support any product or any
business, that is competitive with the Business (as conducted on
the Effective Date or at any time during the two years
immediately prior to the Effective Date).
The covenant in the foregoing sentence shall encompass the activities of Seller
and each of the GSE Companies and their affiliates in all areas of the world.
Seller and each of the GSE Companies acknowledges that the Business is a
worldwide business and agrees that this covenant is reasonable with respect to
its duration, geographical area and scope.
b. The covenants and undertakings contained in this Article 10.3 relate to
matters which are of a special, unique and extraordinary character and a
violation of any of the terms of this Article 10.3 will cause irreparable injury
to Buyer, the amount of which will be impossible to estimate or determine and
which cannot be adequately compensated. Therefore, Buyer will be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction in the event of a breach of this Article 10.3. The rights
and remedies provided by this Article 10.3 are cumulative and in addition to any
other rights and remedies which Buyer may have hereunder or at law or in equity.
If Buyer were to seek damages for any breach of this Article 10.3, the portion
of the Purchase Price delivered to Seller hereunder which is attributed by the
parties to the foregoing covenant shall not be considered a measure of or limit
on such damages.
c. The parties agree that, if any court of competent jurisdiction in a
final nonappealable judgment determines that a specified time period, a
specified geographical area, specified business limitation or any other relevant
feature of this Article 10.3 is unreasonable, arbitrary or against public
policy, then a lesser time period, geographical area, business limitation or
other relevant feature which is determined to be reasonable, not arbitrary and
not against public policy may be enforced against the applicable party.
d. Notwithstanding the above, that the foregoing restrictions shall not
apply:
(1) in the event that Seller or any GSE Company is acquired, merged
with, or becomes controlled by, a third party acting at arms
length, who is engaged in a business which is competitive with
the Business, provided that Seller or any GSE Company does not
participate in such business using its personnel, products or
services;
(2) to the sale of SimSuite Pipeline Software licenses by Seller in
the markets in which Buyer's rights are or become non-exclusive
under the terms and conditions of the Software License Agreement.
10.4 Non-solicitation of Personnel. For a period of eighteen (18) months after
the Effective Date, except with respect to employees of Seller who shall be
offered employment with Buyer in connection with the transactions contemplated
hereby, neither party shall, without the prior written consent of the other
party, solicit for employment any person who was an employee of the other party
as of the Effective Date; provided, however, that either party may offer
employment to or employ persons whose employment has been involuntarily
terminated by the other party after the Effective Date.
10.5 Project Overruns.
a. Definitions
"Project Costs" means the total of the following costs incurred by Buyer to
complete the Projects in accordance with the Project Contracts, up to the start
of the warranty period:
The total hours worked on the Projects by Buyer's personnel at the
rate of $ 73.55 USD per hour;
All hardware, software, licenses, documentation and other materials
at Buyer's cost;
All reasonable travel, accommodation and living expenses incurred by
Buyer's personnel while working on the Projects.
Project Costs for the Mobile Gas Project shall be calculated as set forth in
Schedule 3.8.
"Project ETC's" means the maximum Project Costs agreed to be assumed by
Buyer to complete the Projects in accordance with the Project Contracts as shown
in Schedule "B".
b. Project Overruns. Buyer's agreement as set forth in Article 2.1(b), to
assume the obligations of Seller to complete the Projects in accordance with the
Project Contracts shall be limited to the amount of the Project ETC's. The total
Project Costs incurred by Buyer for the Projects in excess of the aggregate
Project ETC's with labor charges discounted by 20% (the "Project Overruns")
shall be reimbursed by Seller to Buyer. Buyer shall keep accurate and detailed
records of the Project Costs incurred by Buyer. Buyer will invoice Seller and
GSE Systems for the amount of any unbilled Project Overruns quarterly commencing
on the 15th day of the fourth full calendar month after the Effective Date and
continuing on the 15th day of the first month of each quarter thereafter. Buyer
shall provide with each invoice, a calculation of the Project Overruns. Seller
and GSE Systems shall pay such invoiced Project Overruns to Buyer within 30 days
of receipt of each invoice. Buyer will provide Seller with copies of the time
records for Buyer's Project personnel, invoices and other supporting
documentation as Seller may reasonably request.
c. Mitigation of Overruns. Buyer shall act reasonably to mitigate any
Project Overrun and will use its commercially reasonable efforts to obtain
additional compensation by change orders for any work to be done on a Project
which is not clearly within the scope of the applicable Project Contract.
10.6 Warranty Obligations.
a. "Warranty Costs" means the total of the following costs incurred by
Buyer to carry out the warranty obligations of Seller described in sub-paragraph
b. below (the "Warranty Obligations"):
The total hours worked by Buyer's personnel in performing the
Warranty Obligations at Buyer's demand service cost rate of $73.55
USD per hour;
All hardware, software, licenses, documentation and other materials
at Buyer's cost;
All reasonable travel, accommodation and living expenses incurred by
Buyer's personnel while working on the Projects.
b. "Warranty Obligations" means the warranty, maintenance and ongoing
support obligations of Seller relating to the S/3 Software and SimSuite Pipeline
projects listed in Schedule 10.6.b. attached hereto, including the warranty
obligations under the Project Contracts to repair or replace any hardware or
software supplied by Seller (and covered under the warranty provided by Seller)
and which is defective or does not meet the contractual specifications, but
excluding any responsibility of Buyer for:
(1) any breach or default by Seller or any GSE Company under any of
the same on or before the Effective Date unless disclosed to
Buyer in the schedules to this Agreement;
(2) any liability under such contracts and warranty terms for
special, incidental, indirect, consequential, or punitive damages
based on actions taken, or software or equipment supplied by
Seller or any GSE Company prior to Closing; or
(3) any material liability or obligation outside the ordinary course
of business not disclosed by Seller and the GSE Companies
pursuant to this Agreement, insofar as disclosure thereof is
required hereunder and Buyer does not receive property or
services of substantially equivalent value in respect of such
liability or obligation.
c. Performance of Warranty Obligations. Buyer agrees to perform the work
required to fulfill Seller's Warranty Obligations and the Warranty Costs
incurred by Buyer shall be reimbursed by Seller to Buyer in accordance with
sub-paragraph d. below.
d. Reimbursement of Warranty Costs. Buyer shall keep accurate and detailed
records of the Warranty Costs incurred by Buyer. After one (1) year from the
Effective Date, Buyer shall prepare and deliver to Seller and GSE Systems: (1) a
calculation of the Warranty Costs incurred by Buyer since the Effective Date;
and (2) an invoice for the amount of those Warranty Costs calculated as follows:
(A) for the first $107,161 in Warranty Costs, Buyer shall invoice such costs to
Seller without a discount, and (B) for any Warranty Costs in excess of $107,161,
Buyer shall invoice such costs at a discount of 20%. Thereafter, Buyer will
invoice Seller and GSE Systems for the amount of any additional unbilled
Warranty Costs quarterly. Seller and GSE Systems shall pay such invoiced
Warranty Costs to Buyer within 30 days of receipt of each invoice. Buyer will
provide Seller with copies of the time records for Buyer's service personnel who
performed the warranty work, invoices and other supporting documentation as
Seller may reasonably request.
e. Mitigation of Costs. Buyer shall act reasonably to mitigate any Warranty
Costs and will use commercially reasonable efforts to obtain compensation for
any work to be done which is not clearly covered by warranty.
10.7 Development Overruns.
a. "Development Costs" means the costs incurred by Buyer to complete the
S/3 Development and SimSuite Development. These costs will be the total hours
worked by Buyer's personnel in completing the development of the software at the
rate of $64.06 USD per hour. Development Costs shall be as further defined in
Schedule 3.8.
b. Development Overruns. Seller and GSE Systems shall reimburse Buyer for
any Development Costs incurred by Buyer which exceed the maximum costs as set
out below:
S/3 Software $188,798
SimSuite Pipeline Software $262,758
Total $451,556
Any Development Costs incurred by Buyer in excess of $451,556 shall be invoiced
by Buyer to Seller and GSE Systems with a discount of 20% (the "Development
Overruns").
c. Quarterly Calculation. Buyer will invoice Seller and GSE Systems for the
amount of any unbilled Development Overruns quarterly commencing on the 15th day
of the fourth full calendar month after the Effective Date and continuing on the
15th day of the first month of each quarter thereafter. Buyer shall provide with
each invoice, a calculation of the Development Overruns. Seller and GSE Systems
shall pay such invoiced Development Overruns to Buyer within 30 days of receipt
of each invoice. Buyer will provide Seller with copies of the time records for
Buyer's Research and Development personnel who performed the development work
and other supporting documentation as Seller may reasonably request.
10.8 Limitation on Overrun Reimbursement. Notwithstanding the provisions of
Articles 10.5 and 10.7 and any other provision of this Agreement to the
contrary, the total of:
(1) payments by Seller to Buyer in respect of Warranty Costs in
excess of $107,161; and
(2) the amounts payable by Seller to Buyer for Project Overruns and
Development Overruns under Articles 10.5 and 10.7;
shall not exceed in the aggregate the sum of $800,000 USD. This limitation shall
not be interpreted as affecting or limiting any other indemnity obligations of
Seller under this Agreement, including the provisions set out in Article 10.9.
10.9 Year 2000.
a. Seller has agreed to indemnify Buyer for liabilities relating to the
Year 2000 pursuant to Articles 2.2.e. and 11.1. Following Closing, the parties
shall jointly develop a plan for management of the Year 2000 issues relating to
Seller's existing installed customer base, including:
* testing and assessment of the Year 2000 Compliance of the Software
Programs and the prior versions of the Software Programs installed at
customer sites;
* development of patches for the S/3 Software on the VMS platform that
will enable existing customers to modify or upgrade their existing
versions of the S/3 Software to a version which will be Year 2000
Compliant; and
* providing information to existing customers regarding the foregoing.
Buyer agrees to implement this plan using the same policies and procedures as it
employs in managing the Year 2000 issue for Buyer's existing customer base. The
parties understand and agree that Year 2000 "patches" will be developed by Buyer
on an as-required basis in connection with projects or work undertaken for
customers. Buyer will not claim indemnity for costs related to the development
and administration of the aforesaid plan.
b. Buyer will provide Seller with monthly reports summarizing the status of
the implementation of the agreed upon plan.
c. Seller shall be not be obligated to indemnify Buyer under Article 11.1
of this Agreement for Buyer's costs relating to any claim relating to the Year
2000 compliance of products sold by Seller or any GSE Company to a particular
customer, if Buyer is able to recover the costs associated with such claim
through income derived from work for that customer in connection with a system
upgrade or other Year 2000 related work or patches paid for by that customer.
d. Prior to performing or committing to perform any work to correct any
defects or problems relating to the Year 2000, which would be the subject of a
claim by Buyer for indemnity under Article 11.1, Buyer shall give notice to
Seller and Seller shall have the right to participate in the investigation and
settlement of each such claim. Buyer shall not settle or compromise any claims
resulting from such defects or problems without the prior written consent of
Seller, which shall not be unreasonably withheld. In the event that Buyer is
obligated to carry out any work or supply any software or equipment for which
Buyer cannot obtain compensation from the customer, Seller will reimburse Buyer
for the following costs incurred by Buyer to carry out that work:
* The total hours worked by Buyer's personnel in performing the work at
the rate of $80.00 USD per hour;
* All hardware, software, licenses, documentation and other materials at
Buyer's cost;
* All reasonable travel, accommodation and living expenses incurred by
Buyer's personnel in completing such work.
Seller's obligation to reimburse Buyer for the foregoing costs is not subject to
the limits set forth in Articles 10.8 and 11.7.
10.10 Destruction of Source Code Copies. Promptly following Closing, each GSE
Company shall destroy any and all copies of the source codes for the S/3
Software in its possession (except for the Common Elements as may be embodied in
other software of Seller or GSE Companies) and shall, upon Buyer's request,
provide a certification from an authorized officer stating that such destruction
has taken place; provided, however, that Seller may retain a copy of the S/3
Software for archival purposes only.
10.11 Monthly Status Reports. In connection with Articles 10.5, 10.6 and 10.7,
Buyer agrees to provide monthly status reports to Seller which set forth in
detail reasonably acceptable to Seller:
(a) the current status of such activities; and
(b) in the event of any overruns, the corrective action, if any, to be
taken to mitigate such overruns.
ARTICLE XI
INDEMNITY
11.1 Indemnification by GSE Systems and Seller. GSE Systems and Seller, jointly
and severally, shall indemnify, defend, and hold harmless Buyer and its
respective successors and assigns and the directors, officers, employees,
managing partners and agents of each (collectively, the "Buyer Group"), at, and
at any time after, the Closing, from and against any and all demands, claims,
actions, or causes of action, assessments, losses, damages, liabilities, costs,
and expenses, including reasonable fees and expenses of counsel, other expenses
of investigation, handling, and litigation, and settlement amounts
(collectively, a "Loss" or "Losses"), asserted against, resulting to, imposed
upon, or incurred by the Buyer Group, directly or indirectly, by reason of,
resulting from, or arising in connection with any of the following:
a. Breach of Obligation. Any breach of any representation, warranty, or
agreement of Seller or any of the GSE Companies contained in or made pursuant to
this Agreement, including the agreements and other instruments contemplated
hereby.
b. Excluded Liabilities. The failure of Seller or any GSE Company to pay or
discharge any Excluded Liabilities when the same shall become due and payable.
c. Failure to Obtain Consents. Any failure to obtain the Required Contract
Consents.
d. Noncompliance with Bulk Sales Law. Any failure to comply with any "bulk
sales" or similar laws relating to notices to creditors.
11.2 Indemnification by Buyer. Buyer shall indemnify, defend, and hold harmless
Seller and its successors and assigns and the directors, officers, employees,
and agents of Seller (collectively, the "Seller Group"), at, and at any time
after, the Closing, from and against any and all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts (collectively, a
"Loss" or "Losses"), asserted against, resulting to, imposed upon, or incurred
by the Seller Group, to the extent arising from any of the following:
a. Breach of Obligation. Any breach of any representation, warranty, or
agreement of Buyer contained in or made pursuant to this Agreement, including
the agreements and other instruments contemplated hereby.
b. Assumed Liabilities. Any of the Assumed Liabilities, except insofar as
such Loss represents an Excluded Liability.
11.3 Notice of Claim. The party entitled to indemnification hereunder (the
"Claimant") shall promptly deliver to the party liable for such indemnification
hereunder (the "Obligor") notice in writing (the "Required Notice") of any claim
for recovery under Article 11.1 or Article 11.2, specifying in reasonable detail
the nature of the Loss, and, if known, the amount, or an estimate of the amount,
of the liability arising therefrom (the "Claim"). The Claimant shall provide to
the Obligor as promptly as practicable thereafter information and documentation
reasonably requested by the Obligor to support and verify the claim asserted,
provided that, in so doing, it may restrict or condition any disclosure in the
interest of preserving privileges of importance in any foreseeable litigation.
11.4 Defense. In connection with any claim giving rise to indemnity hereunder
arising out of any claim or legal proceeding by any person who is not a
Claimant, the Obligor at its sole cost and expense may, upon written notice to
the Claimant, elect to assume the defense of any such claim or legal proceeding.
If the Obligor has so elected to assume the defense of any such claim or legal
proceeding, such defense shall be conducted by counsel chosen by the Obligor,
provided that such counsel is reasonably satisfactory to the Claimant. The
Claimant shall be entitled to participate in (but not control) the defense of
any such action with its own counsel and at its own expense. If the Obligor has
elected to assume the defense of any claim or legal proceeding as provided
herein, the Claimant shall not be entitled to indemnification for legal fees and
expenses relating to such claim or proceeding that are incurred by the Claimant
after the time at which the Obligor has so elected. The Claimant shall not
settle or compromise any indemnified liability without the prior written consent
of the Obligor, which shall not be unreasonably withheld. In the event that the
Obligor shall so assume such defense, it shall not compromise or settle any such
claim, action, or suit unless (i) the Claimant gives its prior written consent,
which shall not be unreasonably withheld, or (ii) the terms of the compromise or
settlement of such claim, action, or suit provide that the Claimant shall have
no responsibility for the discharge of any settlement amount and impose or
create no other obligations, liabilities or duties on the Claimant, and the
compromise or settlement discharges all rights against the Claimant with respect
to such claim, action, or suit. The Claimant will reasonably cooperate with the
defense of any such claim, action, or suit and will provide such personnel,
technical support, and access to information as may be reasonably requested by
the Obligor in connection with such defense.
11.5 Time of Assertion.
a. No indemnification shall be payable by Buyer with respect to matters as
to which Buyer has not received notice from GSE Systems or Seller within
eighteen (18) months after the Closing Date, except that such limitation shall
not apply to (1) Losses based on Assumed Liabilities or (2) any breach occurring
after the Closing Date of any covenant or agreement of Buyer contained in this
Agreement or any other instrument or agreement to be executed and delivered by
Buyer in connection with the transactions contemplated hereby.
b. No indemnification shall be payable by GSE Systems or Seller to Buyer
with respect to matters as to which GSE Systems and Seller have not received
notice from Buyer within eighteen (18) months after the Closing Date, except:
(1) that such limitation shall not apply to:
(A) Losses based on Excluded Liabilities;
(B) any breach occurring on or after the Closing of any covenant or
agreement of Seller or any GSE Company contained in this
Agreement or any other instrument or agreement to be executed and
delivered by either party in connection with the transactions
contemplated hereby;
(C) any breach of the representations and warranties of Seller
contained in 4.5 (Required Contract Consents), 4.6 (Title to
Tangible Property), 4.9 (Title to Intellectual Property), 4.12
(Third Party Components in Software Programs), or 4.13 (Third
Party Interests or Marketing Rights in Software Programs), or
4.16 (Encumbrances), or
(D) any instance of fraud or any knowing and willful breach by Seller
or any GSE Company of any other provision of this Agreement or
any other instrument or agreement to be executed and delivered by
either party in connection with the transactions contemplated
hereby,
(2) any claim for indemnification for Losses arising from a breach of the
representations and warranties set forth in 4.20 (Court Orders,
Decrees, and Laws) but only to the extent they relate to environmental
matters or in 4.21 (Taxes) shall survive until six (6) months after
the expiration of the applicable statute of limitations for such
matters,
(3) any claim for indemnification for Losses arising from a breach of the
representations and warranties set forth in Section 4.10 (Absence of
Claims to Intellectual Property) that arise out of infringement of any
patent that is issued after the Closing Date and as to which neither
GSE Systems nor the Seller had notice regarding any application
therefor as of the Closing Date or exercising reasonable diligence
should have had such notice as of the Closing Date shall survive if
notice of such claim is provided by Buyer to GSE Systems and Seller
within three years of the Closing Date; and
(4) any claim for indemnification for Losses arising from a breach of the
representations and warranties set forth in Section 4.10 (Absence of
Claims to Intellectual Property) that is not covered by the
immediately preceding clause shall not be subject to the limitation
set forth in this subsection (b).
11.6 Remedies. The right to indemnification provided for in this Article shall
be the exclusive remedy of a party in connection with any breach by the other
party of its representations and warranties contained in Articles 4 and 5,
(except for a breach of Articles 4.9 - Title to Intellectual Property, 4.10 -
Absence of Claims & Non-Infringement, 4.12 - Third Party Components in Software
Programs, 4.13 - Third Party Interests or Marketing Rights in Software
Programs), but shall not be the exclusive remedy of a party in connection with
any breach by the other party of its covenants or other obligations contained in
this Agreement.
11.7 Limitation on Indemnity Obligations. Notwithstanding any other provision
contained in this Agreement, the obligations of GSE Systems and Seller to
indemnify the Buyer Group with respect to claims by the Buyer Group for breach
of any of the representations and warranties contained in the Article 4 of this
Agreement (except for the representations and warranties excluded as described
below) shall be limited to a maximum of $5,000,000 USD, in the aggregate. This
limitation shall not apply to any claims by Buyer under Article 11.1.b.
(Excluded Liabilities), or Articles 4.9 (Title to Intellectual Property), 4.10
(Absence of Claims), 4.12 (Third Party Components in Software Programs), 4.13
(Third Party Interests or Marketing Rights in Software Programs), 4.16
(Encumbrances), 4.19 (Litigation), 4.20 (Court Orders), 4.21 (Taxes), or Article
10.9 (Year 2000).
ARTICLE XII
CONFIDENTIALITY
12.1 Confidentiality Obligation of Buyer Prior to Closing. Until Closing (and,
if this Agreement is terminated for any reason, forever thereafter), Buyer
shall, and shall use its commercially reasonable efforts to cause its personnel
and agents to, hold in strict confidence, not disclose to any person without the
prior written consent of Seller, and not use in any manner except in connection
with the transactions contemplated hereby, any confidential business or
technical information obtained from Seller in connection with the transactions
contemplated hereby concerning the Business or the Assets. This obligation shall
cease to apply to Buyer upon the occurrence of Closing. In the event that this
Agreement terminates for any reason, Buyer shall return to Seller or destroy all
materials in its possession containing any such confidential information,
including all copies, extracts, adaptations, and transcriptions thereof.
12.2 Confidentiality Obligation of GSE Systems and Seller Following Closing.
Following the occurrence of Closing, Seller and each GSE Company shall, and
shall use its best efforts to cause its personnel and agents to, hold in strict
confidence, not disclose to any person without the prior written consent of
Buyer, and not use in any manner whatsoever, any confidential business or
technical information remaining in its possession concerning the Business or the
Assets. Such confidential information specifically includes all source code,
system and user documentation, and other Technical Documentation pertaining to
the Software Programs, including any proposed design and specifications for
future products and products in development, marketing plans, and all other
technical and business information concerning the Business. Promptly following
Closing, Seller and each GSE Company shall surrender to Buyer or, at Buyer's
option, destroy all materials remaining in its possession containing any such
confidential information, including all copies, extracts, adaptations, and
transcriptions thereof.
12.3 Permitted Disclosures. Notwithstanding Articles 12.1 and 12.2, either party
may disclose confidential information (1) where necessary to any regulatory
authorities or governmental agencies pursuant to legal process or (2) if
required by court order or decree.
12.4 Scope of Confidential Information. For purposes of this Agreement,
information shall not be deemed confidential (1) if such information is
available in full from public sources; (2) if such information is received from
a third party not under an obligation to keep such information confidential; or
(3) if the recipient can conclusively demonstrate that such information was
independently developed by the recipient.
ARTICLE XIII
TERMINATION PRIOR TO CLOSING
13.1 Termination of Agreement. This Agreement may be terminated at any time
prior to the Closing:
a. Mutual Consent. By the mutual consent of Buyer and Seller;
b. Deadline. By Buyer in writing, without liability, if the Closing shall
not have occurred on or before November 30, 1998 and by Seller, in writing,
without liability, if the Closing shall not have occurred on or before November
30, 1998 (provided the terminating party is not in material breach of its
representations, warranties, covenants or agreements under this Agreement); or
c. Material Breach. By Buyer or Seller in writing, without liability, if
the other party shall (1) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date
or (2) materially breach any of its representations, warranties, agreements, or
covenants contained herein, provided that such failure or breach is not cured
within ten (10) days after such party has been notified of the other party's
intent to terminate this Agreement pursuant hereto.
13.2 Termination of Obligations. Termination of this Agreement pursuant to this
Article XIII shall terminate all obligations of the parties hereunder, except
for the obligations set forth in Article XIII, and, except in connection with
termination pursuant to Article 13.2c, there shall be no liability on the part
of Buyer or Seller or their respective officers or directors.
ARTICLE XIV
MISCELLANEOUS
14.1 Entire Agreement. This Agreement (including the Schedules), and the other
certificates, agreements, and other instruments to be executed and delivered by
the parties in connection with the transactions contemplated hereby; constitute
the sole understanding of the parties with respect to the subject matter hereof.
No amendment, modification, or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
14.2 Parties Bound by Agreement; Successors and Assigns. The terms, conditions,
and obligations of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and the respective successors and assigns thereof. Buyer
shall have the right to assign this Agreement, in whole or in part, to any
affiliates of Buyer or to designate any of its affiliates (to the extent
permitted by law) to receive directly the Assets or to exercise any of the
rights or Buyer, or to perform any of its obligations. Except as provided in the
preceding sentence, Seller and Buyer shall not voluntarily assign this
Agreement, in whole or in part, whether by operation of law or otherwise,
without the prior written consent of the other parties hereto, and any such
assignment contrary to the terms hereof shall be null and void and of no force
and effect. In no event shall the assignment by Seller or Buyer of its
respective rights or obligations hereunder, whether before or after the Closing,
release Seller or Buyer from its respective liabilities and obligations
hereunder.
14.3 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original and all of
which shall constitute the same instrument.
14.4 Headings. The headings of the Articles and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
14.5 Modification and Waiver. Any of the terms or conditions of this Agreement
may be waived in writing at any time by the party that is entitled to the
benefits thereof. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar).
14.6 Expenses. Seller and Buyer shall each pay all costs and expenses incurred
by it or on its behalf in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants, and counsel.
14.7 Notices. Any notice, request, instruction, or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
if to Seller to:
a. If to GSE Systems or Seller to:
GSE Systems, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
or to such other person or address as Seller shall furnish to Buyer in writing
pursuant to the above.
b. If to Buyer to:
Valmet Automation (USA), Inc.
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.,
▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other person or address as Buyer shall furnish to Seller in writing
pursuant to the above. Any notice that is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice that is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the fourth business day after the day it is so placed in the mail.
14.8 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Maryland without giving effect to the
principles of conflicts of law thereof.
14.9 Public Announcements. GSE Systems, Seller and Buyer shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the transactions contemplated
hereby. Neither GSE Systems, Seller nor Buyer shall issue any such press release
or make any public statement without the agreement of the other party, except as
such party's counsel advises in writing may be required by law. The parties
shall agree on the text of a press release to be issued on the Closing.
14.10 Third-Party Beneficiaries. With the exception of (1) the parties to this
Agreement and (2) the Buyer Group and the Seller Group with respect to the
matters inuring to their benefit under Article XI, there shall exist no right of
any person to claim a beneficial interest in this Agreement or any rights
occurring by virtue of this Agreement.
14.11 Survival of Agreements. All covenants, agreements, representations, and
warranties made herein shall survive the execution and delivery of this
Agreement and the Closing and shall not be deemed waived or otherwise affected
by any investigation made by any party hereto, provided however, that the
representations and warranties shall only survive as per Article XI -
Indemnification.
14.12 "Including". Words of inclusion shall not be construed as terms of
limitation herein, so that references to "included" matters shall be regarded as
nonexclusive, non-characterizing illustrations.
14.13 Access to Information.
(a) Upon reasonable notice stating any reasonable purpose, including but
not limited to obtaining information relevant to tax returns, third party
claims, litigation involving the requesting party or as otherwise required for
the conduct of Buyer's or Seller's business, each party shall, but only to the
extent necessary to satisfy the requesting party's stated purpose, (i) give to
the other and its authorized representatives reasonable access, during regular
business hours, following the Closing, to any and all of the contracts, books,
records and data of or relating to the Business, the Purchased Assets or the
Assumed Liabilities, and (ii) cause to be furnished promptly to the other party
from time to time all information in its possession relating to the Business,
the Assets or the Assumed Liabilities as may be reasonably requested, provided,
however, that the obligations of this paragraph are subject to the prior receipt
by the disclosing party of the required consents of third parties (including
employees with respect to personnel records), and further subject of the
execution and delivery by the requesting party and its representatives of
confidentiality agreements.
(b) Buyer agrees that it will keep the Business Records for a period of
five (5) years after the Closing, or for any longer period as may be required by
any governmental agency or in accordance with paragraph (a) above. In the event
Buyer wished to destroy the Business Records after that time, it shall first
give ninety (90) days' prior written notice to Seller and Seller shall have the
right at its option to take possession of the Records provided that it does so
no later than sixty (60) days after the end of such ninety (90) day period.
(c) Seller agrees that any information obtained by it pursuant to
paragraphs (a) and (b) of this Article14.13 shall be held in confidence as
provided in Article XII hereof, and that it shall not disclose the same to any
person, or use such confidential information in any manner whatsoever, except
with the prior written approval of Buyer or if disclosure of such confidential
information is necessary for Seller's regulatory, tax, litigation, or other
reasonable purposes or is otherwise required by law.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf on the date indicated.
VALMET AUTOMATION (USA), INC. GSE SYSTEMS, INC.,
By: per :
Name: Name:
Title: Title:
GSE PROCESS SOLUTIONS, INC. GSE PROCESS SOLUTIONS B.V.
By: per :
Name: Name:
Title: Title:
GSE PROCESS SOLUTIONS GSE PROCESS SOLUTIONS
SINGAPORE (PTE) LIMITED BELGIUM N.V.
By: per :
Name: Name:
Title: Title: