EXECUTION COPY
INSO CORPORATION,
Seller
INSO PROVIDENCE CORPORATION,
Seller
VIEWPORT DEVELOPMENT AB,
Seller
ENIGMA INFORMATION SYSTEMS LTD.,
Buyer and
ENIGMA, INC.,
Buyer
PURCHASE AND SALE AGREEMENT
Dated as of October 18, 1999
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (including the Exhibits and
Schedules hereto, this "Purchase and Sale Agreement") is made and
entered into as of October 18, 1999, by and among Enigma
Information Systems Ltd., a corporation organized under the laws
of Israel and having an address at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇-▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ ("Enigma"); Enigma, Inc., a Delaware corporation and
the wholly owned subsidiary of Enigma, having an address at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Enigma USA" and,
collectively with Enigma, the "Buyers"); INSO Corporation, a
corporation organized and existing under the laws of Delaware and
having an address at ▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ("INSO"); INSO Providence Corporation, a Delaware
corporation and the wholly owned subsidiary of INSO ("INSO
Providence"), having an address at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; ViewPort Development AB, a corporation
organized and existing under the laws of Sweden and having an
address at Stora ▇▇▇▇▇▇▇ ▇▇, ▇-▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
("ViewPort") (INSO, INSO Providence, and ViewPort referred to
collectively herein as the "Sellers").
RECITALS
A. INSO owns directly all of the issued and outstanding shares
of capital stock of INSO Providence and ViewPort. INSO Overseas
Corporation, a company organized under the laws of the State of
Delaware ("INSO Overseas") owns directly of all of the issued
and outstanding shares of capital stock of INSO KK, a company
organized under the laws of the State of Delaware ("INSO KK").
ViewPort owns directly all of the issued and outstanding shares
of capital stock of Synex Information AB ("Synex"). Enigma
owns directly all of the issued and outstanding shares of capital
stock of Enigma USA.
B. For the consideration and on the terms and conditions set
forth in this Purchase and Sale Agreement the Buyers desire to
purchase, and INSO desires to sell, all of the issued and
outstanding shares of ViewPort and INSO Providence and transfer
all such shares to Enigma so that Enigma will own all of such
shares directly, and (2) the parties desire to enter into certain
license and other agreements pertaining to Buyers' purchase of
the foregoing shares and the continued use of certain software
subsequent to the Closing Date (as hereinafter defined).
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants, agreements, representations and warranties
contained in this Purchase and Sale Agreement, and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS; CONSTRUCTION OF AGREEMENT
1.1 Defined Terms. As used in this Purchase and Sale
Agreement, the following words and terms shall have the meanings
specified below:
(a) "Agreement" means any agreement, lease of real and
personal property, loan, indenture, instrument, insurance policy,
license, permit, authorization or other documents and
arrangements, whether written or oral.
(b) [Intentionally omitted]
(c) "Books and Records" means all books of account,
minute books, stock record books and other corporate records of
an Entity.
(d) "Business" means collectively: (i) the current
business operations of INSO and its subsidiaries pertaining to
the "DynaText family of products", including without
limitation, the DynaText, DynaWeb, DynaTag, InStEd products, the
DPSL Software and any related DPSL Assets (if Buyers shall have
elected to have INSO assign its rights to the DPSL Software and
any DPSL Assets as described in Section 7.1(o) hereof), all
other DynaText family components and the service business of
INSO and its subsidiaries (including without limitation INSO
Providence) related to any of the foregoing, and (ii) all
business operations of INSO or its subsidiaries relating to
ViewPort, including without limitation, all business operations
of Synex. As used in this Agreement, the term "Business" does
not include the DynaBase, MediaBank and ▇▇▇▇▇▇▇▇▇ computer
graphics metafile products or any other business of INSO other
than that as set forth above.
(e) "Charter Documents" means documents of formation
required under the laws of any legal entity's jurisdiction of
formation or registration, including without limitation Articles
of Incorporation and By-Laws for a corporation, Memorandum and
Articles for a limited company, partnership agreement and
certificate of limited partnership for a limited partnership and
equivalent documents.
(f) "Claim" has the meaning set forth in Section 9.4
hereof.
(g) "Closing" means the closing of the transactions
provided for herein as provided in Section 2.2 hereof.
(h) "Closing Date" means the date of the Closing.
(i) "COBRA" means the health care coverage continuation
provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(j) "Code" means the United States Internal Revenue Code
of 1986, as amended.
(k) "Customer" means any Person to whom goods or
services are or have been sold, licensed or otherwise provided in
the course of the Business.
(l) "Customer Support Website" has the meaning set
forth in Section 4.23 hereof.
(m) "DPSL Asset" means any contracts or other assets
which have been acquired by INSO from DPSL or which otherwise
relate to the DPSL Software.
(n) "DPSL Software" means that certain software
acquired by INSO from Database Publishing Systems Limited
("DPSL"), a corporation organized under the laws of the United
Kingdom, to be licensed to the Buyers pursuant to the License
Agreement attached hereto as Exhibit F (subject to Section
7.1(o)).
(o) "Employee Benefit Plan" means any employee benefit
plan under the laws of any applicable jurisdiction and, in
respect of U.S. resident employees, has the same meaning as such
term is defined in Section 3(3) of ERISA.
(p) "Employee Claims" has the meaning set forth in
Section 9.7 hereof.
(q) "Entity" means a corporation, limited company,
limited liability company, partnership, association, other
business entity or Governmental Authority.
(r) "ERISA" means the United States Employee Retirement
Income Security Act of 1974, as amended from time to time.
(s) "Governmental Authority" means any national, state,
local court or governmental agency, authority, regulatory body,
department, commission, board, agency or instrumentality or stock
exchange under the laws of any nation.
(t) "Group" has the meaning set forth in Section
4.5(a)(i) hereof.
(u) "Indemnified Losses" has the meaning set forth in
Section 9.2 hereof.
(v) "Indemnified Party" has the meaning set forth in
Section 9.4 hereof.
(w) "Indemnitor" has the meaning set forth in Section
9.4 hereof.
(x) "INSO KK Shares" means all of the issued and
outstanding shares of capital stock of INSO KK.
(y) "INSO Providence Shares" means all of the issued
and outstanding shares of capital stock of INSO Providence.
(z) "INSO Subsidiary" means INSO Providence, INSO KK,
ViewPort, or Synex.
(aa) "Interim Period" has the meaning set forth in
Section 6.7(b) hereof.
(bb) "Knowledge" including the term "know" and other
variations thereof with respect to a party or parties, means the
actual knowledge of such party or parties or the principal
officers and directors of such party or parties who would be
expected to have such information as of the time to which such
statement refers. Where a principal officer or director of a
party or parties has knowledge of circumstances which would
reasonably cause such person to inquire into the facts of the
matter to confirm the truthfulness of the statement to which such
knowledge relates, "Knowledge" means the actual knowledge of such
person after such inquiry. Notwithstanding the foregoing,
"Knowledge" does not include the actual knowledge of ▇▇▇▇▇
Haitto and ▇▇▇▇▇ Lidbaum, if INSO shall receive from Mr. Haitto
and Mr. Lidbaum, by the Closing Date, a certificate upon which
Buyers may rely relating to the accuracy of the representations
and warranties of the Sellers set forth herein.
(cc) "Lease(s)" means all leases, licenses and other
permits currently in effect pursuant to which any INSO Subsidiary
currently occupies premises for the conduct of the Business.
(dd) "Lien" (i) with respect to any security, means any
claim, right, charge, security interest, option or other
encumbrance, or any right of a third party with respect to such
security; (ii) with respect to intellectual property, means any
right, security interest, collateral assignment, charge,
encumbrance, equity or other claim and (iii) with respect to any
other asset means, (a) any mortgage, deed of trust, tax or other
lien, pledge, encumbrance, charge or security interest in or on
such asset or (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention
agreement relating to such asset.
(ee) "Losses" has the meaning set forth in Section 9.1
hereof.
(ff) "Person" means any natural person or any Entity.
(gg) "Post-Closing Audit" has the meaning set forth in
Section 6.8 hereof.
(hh) "Pre-Closing Period" has the meaning set forth in
Section 6.7(b) hereof.
(ii) "Qualified" means duly qualified to do business,
admitted or otherwise authorized to transact business pursuant to
the laws of a particular jurisdiction.
(jj) "Replacement Contract" has the meaning set forth
in Section 6.9(b) hereof.
(kk) "Retained Assets" means (i) all cash, cash
equivalents and similar investments or monetary instruments of
any INSO Subsidiary; (ii) all leases for all INSO Providence
domestic facilities; (iii) the stock of ▇▇▇▇▇▇▇▇▇ Software Inc.;
(iv) the stock of INSO France SARL; (v) all network hardware and
software owned or leased by any INSO Subsidiary; (vi) all source
code control systems and other software programs not used in the
Business owned by any INSO Subsidiary and all source code control
systems and other software programs used in the Business owned by
an INSO Subsidiary to the extent such source code control systems
and other software programs are not transferable to Buyers; (vii)
all software, documentation, test suites and other assets related
to INSO's DynaBase and MediaBank products, including the domain
name ▇▇▇.▇▇▇ and the trademarks EBT and EBT and DESIGN and all
other trademarks (whether or not registered) copyrights, and
patents relating to INSO's DynaBase and MediaBank products and
all other intellectual property relating thereto; (viii) all
furniture, fixtures and equipment associated with INSO Providence
employees other than personal computer equipment of or utilized
by remote sales personnel who shall have accepted employment with
Buyers; (ix) all server hardware other than dedicated systems for
the development of products of the Business; (x) all leasehold
improvements of INSO Providence; (xi) all accounts receivable of
every kind and description of each INSO Subsidiary; (xii) all
contracts, licenses, agreements and understandings related to any
matter or product, other the Business; (xiii) all software
licensed by the Sellers to the Buyers, as contemplated by Section
7.1(o) of this Agreement, and (xiv) all rights of refund, claims,
suits, and similar choses in action related to any matter or
product, other than the Business. For the avoidance of doubt,
Retained Assets include 100% of the issued and outstanding shares
of capital stock of all subsidiaries of INSO Providence other
than INSO KK. Unless Buyers shall have elected to have INSO
assign its rights to the DPSL Software (as described in Section
7.1(o) hereof), the DPSL Software shall constitute Retained
Assets, and all obligations and liabilities relating thereto
shall constitute Retained Liabilities. With respect to each DPSL
Asset, unless Buyers shall have elected to have INSO assign such
DPSL Asset to INSO Providence, such DPSL Asset shall constitute
Retained Assets, and all obligations and liabilities relating
thereto shall constitute Retained Liabilities.
(ll) "Retained Liabilities" means any liability of any
INSO Subsidiary arising from any Retained Asset, other than
liabilities for deferred revenue.
(mm) "Returns" has the meaning set forth in Section
4.5(a)(ii) hereof.
(nn) "Right" means with respect to any security, any
subscriptions, warrants, calls, unsatisfied preemptive rights,
options, conversion rights, commitments or other agreements of
any kind to purchase or to otherwise receive such security or
other rights with respect to such security, including any
preemptive, first refusal rights and registration rights.
(oo) "Sellers' Assets" means all property and assets that
are used in the Business by any of the INSO Subsidiaries and/or
are part of the Sellers' Intellectual Property including, without
limitation, the Customer Support Website and the data contained
therein.
(pp) "Sellers' Indemnified Losses" has the meaning set
forth in Section 9.2 hereof.
(qq) "Sellers' Independent Accountants" has the meaning
set forth in Section 4.3(a) hereof.
(rr) "Sellers' Intellectual Property" means all rights,
title and interest that INSO or any of its subsidiaries
(including, without limitation, INSO Providence, INSO KK,
ViewPort or Synex), may own, control or license in any of the
following:
(i) all Sellers' Hardware, Sellers' Software and
Sellers' Documentation (as those terms are
hereinafter defined). As used herein, (a) the
term "Sellers' Hardware" means, collectively,
all hardware, including any operating systems
software loaded thereon, that are owned,
controlled or licensed for use in connection with
the Business; (b) the term "Sellers' Software"
means, collectively, all computer software that is
owned, controlled or licensed for use in
connection with the Business, including, without
limitation, any and all source code (as opposed to
machine-readable code) and object code versions
thereof and the computer programs, tools and
applications identified on Schedule 1 hereto; and
(c) the term "Sellers' Documentation" means,
collectively, all written materials (and machine-
readable text subject to human-readable display or
printout) that are owned, controlled or licensed
for use in connection with the Business and that
relate to any of the Sellers' Hardware or Sellers'
Software, or any elements thereof. "Sellers'
Documentation" shall include, without limitation,
any documentation used in the development or
maintenance of any of the Sellers' Hardware or
Sellers' Software, including design or development
specifications, flow charts, error reports,
support call reports, bug tracking system and
related correspondence and memoranda. The
Sellers' Software, Sellers' Hardware and Sellers'
Documentation are, collectively, the "Sellers'
System".
(ii) United States and foreign registered and
unregistered copyrights in and to any works owned,
controlled or licensed for use in connection with
the Business, including without limitation (a) the
registered copyrights set forth in Schedule 1
hereto; (b) all common law or other rights to
register and obtain any renewal or extension of
copyright; (c) all other interests accruing by
reason of international copyright conventions,
moral rights laws or otherwise; and (d) the right
to ▇▇▇ for, settle, or release any past, present,
or future infringement of any of the foregoing and
to collect and retain all damages and profits
therefor;
(iii) United States and foreign registered patents, as
such patents may now exist or hereinafter come
into existence, and registrations, licenses, and
applications therefor, owned, controlled or
licensed for use in connection with the Business,
including without limitation: (a) all right,
title, interest and benefit of INSO, INSO
Providence, INSO KK, ViewPort, Synex or any other
subsidiary of INSO in and to the inventions,
discoveries, improvements, processes and formulae,
including generalized features of the sequence,
structure and organization of any hardware and
software owned, controlled or licensed for use in
connection with the Business (including without
limitation the Sellers' System), or otherwise
necessary for the ownership and use of the
Sellers' System; and (b) the filed patent
applications and issued patents listed in Schedule
1 hereto, or such patents that may be granted
therefor and thereon and all continuations-in-
part, divisions, reissues and extensions thereof;
(iv) United States and foreign registered and common
law trademarks, service marks, trade names, and
any corporate names owned, controlled or licensed
for use in connection with the Business,
including, without limitation: (a) the registered
and unregistered trademarks, service marks and
trade names set forth in Schedule 1 hereto; (b)
all other trademark or service ▇▇▇▇ interests
accruing therefor by reason of international
trademark conventions, accompanied by the goodwill
of all business connected with the use of and
symbolized by such marks or names; and (c) the
right to ▇▇▇ for, settle, or release any past,
present, or future infringement thereof or unfair
competition involving any of the foregoing and
retain all damages and profits therefor;
(v) United States and foreign registered and common
law rights in and to any databases and
compilations owned, controlled or licensed for use
in connection with the Business; and
(vi) to the extent not otherwise provided in the
interests set forth in (i), (ii), (iii) or (iv)
above, any other hardware, software, idea, design,
product drawings, concept, data, Customer list(s),
documentation, method, technique, process, skill,
tool, library, adaptation, invention, discovery,
or improvement, whether or not patentable, but
including trade secrets, and know-how, that are
owned, controlled or licensed for use in
connection with the Business, or otherwise
pertaining to the Business.
For the avoidance of doubt, Seller's Intellectual Property
includes all Third-Party Intellectual Property but excludes all
Retained Assets.
(ss) "Shares" means, collectively, the INSO Providence
Shares and the ViewPort Shares.
(tt) "Short Period" has the meaning set forth in Section
6.7(b) hereof.
(uu) "Split Contract" has the meaning set forth in
Section 7.1(m) hereof.
(vv) "Synex Shares" means all of the issued and
outstanding shares of capital stock of Synex.
(ww) "Taxes" has the meaning set forth in Section
4.5(a)(i) hereof.
(xx) "Termination Date" has the meaning set forth in
Section 10.1 hereof.
(yy) "Third Party" means any Person other than INSO,
any INSO Subsidiary or any other subsidiary of INSO.
(zz) "Third Party Intellectual Property" shall mean
the software and hardware products listed on Schedule 1(vv)
hereto.
(aaa) "Sellers' Licenses" has the meaning set forth in
Section 4.4(b) hereof.
(bbb) "Uncompleted Severance Contract" means any Split
Contract as to which a Replacement Contract has not been executed
on or before the Closing Date.
(ccc) "U.S. GAAP" means United States generally accepted
accounting principles, consistently applied during the referenced
time period.
(ddd) "Unobtained Consents" means any unobtained
consents, approvals or other actions from any Third Party
required to be obtained in connection with (i) the assignment of
the contracts identified on Schedules 4.4, 4.8, 4.14(a) and
4.14(b), (ii) the execution and delivery of any license required
under Section 7.1(o), (iii) the assignment of any source code
agreement or source code escrow agreement required under Section
7.1(t), or (iv) the assignment of any contract or other agreement
required under Section 7.1(v), in each case which have not been
obtained on or before the Closing Date.
(eee) "ViewPort Shares" means all of the issued and
outstanding shares of capital stock of ViewPort.
1.2. Terms Generally. Wherever it appears appropriate from
the context, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns
stated in either the masculine, feminine or neuter shall include
the masculine, feminine and neuter. The words "include",
"includes" and "including" shall mean "including without
limitation". All references herein to Articles, Sections,
Exhibits and Schedules are references to Articles and Sections
of, and Exhibits and Schedules to, this Purchase and Sale
Agreement unless otherwise stated. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature
shall be construed in accordance with U.S. GAAP, as in effect
from time to time.
1.3. Schedules. The terms and conditions of each Schedule to
this Agreement shall be incorporated herein and made a part
hereof, as if fully set forth in this Purchase and Sale
Agreement.
2. SALE AND PURCHASE OF SELLERS' SHARES; CLOSING
2.1. Agreement to Sell. Upon the terms and subject to all of
the conditions contained herein, at the Closing, Sellers hereby
agree to cause INSO to sell, assign and transfer the Shares to
the Buyers, and the Buyers hereby agree to purchase and accept
the Shares on the Closing Date.
2.2. The Closing. The Closing shall take place at the
offices of ▇▇▇▇▇ Raysman ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ at 10:00 a.m. (local
time) on October 29, 1999, or at such other time and place as may
be mutually agreed upon by the parties.
3. CONSIDERATION AND PAYMENT
3.1. Consideration. The aggregate consideration paid for the
Shares shall be Fourteen Million Seven Hundred Fifty Thousand
Dollars ($14,750,000) (the "Purchase Price"), subject to
adjustment based on the tangible net worth of the Business on the
Closing Date, as determined herein, but which consideration shall
in no event exceed $14,750,000. The Purchase Price shall be
allocated as follows: $13,950,000 to the purchase of the INSO
Providence Shares and $800,000 to the purchase of the ViewPort
Shares. The Purchase Price shall be paid as follows: (a) a
deposit of $1,000,000 (the "Deposit") shall be paid to INSO by
wire transfer of immediately available funds concurrently with
the execution of this Agreement, (b) Eight Million Dollars
($8,000,000) shall be paid by wire transfer of immediately
available funds on the Closing Date and (c) a promissory note
substantially in the form of Exhibit 3.1-1 hereto (the
"Promissory Note") which shall provide generally for the
payment of the remainder of the Purchase Price not paid pursuant
to clauses (a) and (b) above (the "Final Payment") in addition
to accrued interest due on such amount, if any, payable on April
30, 2000 as follows: (i) if the Final Payment shall be paid by
December 15, 1999, no interest shall be due or payable, (ii) if
the Final Payment shall be paid after December 15, 1999 but prior
to January 31, 2000, interest at a rate of 6.5% per annum accrued
from the Closing Date until the date on which the Final Payment
shall be paid, and (iii) if the Final Payment shall be paid after
January 31, 2000, interest at a rate of (x) 6.5% per annum
accrued from the Closing Date through and until January 31, 2000
and (y) 13.0% per annum accrued from February 1, 2000 through and
until the date on which the Final Payment shall be paid. The
Final Payment shall be due and payable on April 30, 2000. In
order to secure Buyers' payment obligations under the Promissory
Note, Enigma, Inc. will execute and deliver a stock pledge
agreement (the "Stock Pledge Agreement") substantially in the
form set forth in Exhibit 3.1-2 attached hereto. The Deposit
will be refundable to the Buyers solely pursuant to the terms of
Sections 10.2(b) and 10.2(c) hereof. Within twenty (20) calendar
days of the Closing Date, the Sellers shall provide the Buyers
with a balance sheet of the INSO Subsidiaries as of the Closing
Date, setting forth the tangible liabilities and assets of the
INSO Subsidiaries determined in accordance with U.S. GAAP;
provided, however, that such balance sheet shall not include any
amount for any account receivable, each of which is being
transferred by the Sellers out of the INSO Subsidiaries prior to
the Closing Date (as so adjusted, the "Closing Balance Sheet").
In the event that the tangible net worth of the INSO Subsidiaries
as set forth on the Closing Balance Sheet is less than negative
$815,000, the Purchase Price shall be reduced by 92.5% of the
amount of such deficiency. In the event that the Purchase Price,
as adjusted pursuant to this Section 3.1, shall be greater than
$9,000,000 but less than $14,750,000, the outstanding principal
balance of the Promissory Note shall be reduced to the amount by
which the adjusted Purchase Price exceeds $9,000,000. In the
event the adjusted Purchase Price shall be less than $9,000,000
(i) the Promissory Note shall be deemed to have been paid in full
and (ii) INSO shall immediately pay to Buyers the amount by which
$9,000,000 exceeds the adjusted Purchase Price. In the event
that the Purchase Price is adjusted pursuant to this Section 3.1,
the allocation of the Purchase Price between the INSO Providence
Shares and the ViewPort Shares shall be adjusted by reducing the
current allocation to such shares on a pro rata basis.
3.2. Closing Balance Sheet Dispute Resolution
(a) The Closing Balance Sheet shall be binding upon the
Buyers, unless the Buyers give written notice within thirty (30)
calendar days after their receipt of the Closing Balance Sheet of
disagreement with any of the values or amounts shown on such
Closing Balance Sheet, specifying, as to each such item in
reasonable detail, the nature and extent of such disagreement
(the "Dispute Notice"). If the Buyers and the Sellers are
unable to resolve any such agreement within thirty (30) days
after the date of the Dispute Notice, the disagreement shall be
submitted to arbitration in accordance with the provisions of
Section 3.2(b) below.
(b) In the event that a dispute under Section 3.2(a) is
referred to arbitration, the Sellers and the Buyers shall each
select an independent public accounting firm to represent them in
connection with such arbitration within ten (10) days. Such
accounting firms shall attempt to select a mutually agreeable
arbitrator within twenty (20) additional days. In the event that
an arbitrator is not selected within such twenty (20)-day period,
the parties will ask the American Arbitration Association (the
"AAA") in Boston, Massachusetts to select and assign an
arbitrator. Such arbitration shall be conducted in Boston,
Massachusetts and shall be governed by the rules of the American
Arbitration Association. Within thirty (30) days after the
selection of the arbitrator, the Sellers and the Buyers shall
each submit to the arbitrator a statement of that party's
position with respect to the dispute and a proposed ruling
thereon. The arbitrator shall set a date for a hearing which
date shall be not more than thirty (30) days from the last
submission to the arbitrator. At such hearing, the parties (who
may be represented by counsel) shall present to the arbitrator
their respective positions with respect to the dispute. The
parties shall jointly request that the arbitrator use his or her
best efforts to rule on the dispute within thirty (30) days. The
determination of the arbitrator as to the resolution of the
dispute shall be binding and conclusive upon all parties hereto.
All rulings of the arbitrator shall be in writing and shall be
delivered to the parties hereto. Any arbitration award may be
entered in and enforced by any court having jurisdiction
thereover and the parties hereby consent and submit themselves to
the jurisdiction of the courts of the Commonwealth of
Massachusetts and the United States District Court for the
District of Massachusetts for purposes of the enforcement of any
arbitration award. Following the determination of the arbiter,
the principal balance of the Promissory Note shall be adjusted to
reflect the amount by which the adjusted Purchase Price exceeds
$9,000,000. In the event the Buyers shall have made payments to
Sellers which exceed the adjusted Purchase Price, INSO shall
immediately pay such excess to the Buyers.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant the following to the Buyers:
4.1. Organization, Good Standing and Authority. INSO is a
corporation duly organized and validly existing under the laws of
the State of Delaware. INSO Providence is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. INSO KK is a corporation duly
organized and validly existing under the laws of Japan. Each of
ViewPort and Synex is a company duly organized and validly
existing under the laws of Sweden. Each of the Sellers, INSO KK
and Synex is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased, or operated, or
the business conducted, by it requires such qualification, or
where failure to so qualify or be in good standing is reasonably
likely to have a material adverse effect on the financial
condition, properties, businesses or results of operations of the
Business. This Purchase and Sale Agreement, assuming its due
execution by each other party hereto, constitutes the legal,
valid and binding obligation of each Seller enforceable in
accordance with its terms, subject to bankruptcy, insolvency and
similar laws relating to the enforcement of creditors' rights,
and to general equitable principles. INSO has the legal right,
power, authority and capacity to execute and deliver this
Purchase and Sale Agreement and to perform its obligations
hereunder and to cause its performance by each of INSO Providence
and ViewPort in accordance with the terms hereof. Each of INSO
Providence and ViewPort has the legal right, power, authority and
capacity to perform the transactions to be performed by each of
them pursuant hereto. The execution and delivery of this
Purchase and Sale Agreement has been authorized and ratified by
the Board of Directors of INSO and the performance hereof has
been authorized and ratified by the Boards of Directors of INSO,
INSO Providence and ViewPort.
4.2. Ownership of Shares. INSO owns (beneficially and of
record) all of the INSO Providence Shares and all of the ViewPort
Shares. INSO Providence owns (beneficially and of record) all of
the INSO KK Shares. ViewPort owns (beneficially and of record)
all of the Synex Shares. All of the Shares, all of the INSO KK
Shares and all of the Synex Shares have been duly authorized,
validly issued, are fully paid and nonassessable and were issued
in accordance with all applicable laws. Set forth on Schedule
4.2 hereto is a true and complete list of all of the authorized
classes of capital shares, number of shares of each class
authorized, number of issued and outstanding capital shares of
each class and the name and number of shares held by each holder
thereof for each of INSO Providence, INSO KK, ViewPort, and
Synex. Except as set forth on Schedule 4.2 hereof, no person
owns any capital shares in any of INSO Providence, INSO KK,
ViewPort, or Synex. Except as set forth on Schedule 4.2 hereof
as of the date hereof, the Shares, the INSO KK Shares and the
Synex Shares are free and clear of any Liens. At the Closing,
the Shares, the INSO KK Shares and the Synex Shares shall be free
and clear of any and all Liens. There are no Rights with respect
to any of the Shares, any of the INSO KK Shares or any of the
Synex Shares, or to any other securities of any of INSO
Providence, INSO KK, ViewPort or Synex, including any Rights with
respect to any future offer, sale or issuance of securities of
either such company. INSO has full power and complete authority
to convey the Shares, free and clear of any Lien, and at Closing
shall convey to the Buyers good and valid title thereto, free and
clear of any Lien. Upon consummation of the transactions
provided for herein, Enigma will own directly or indirectly all
of the Shares.
4.3 Financial Condition
(a) Financial Statements. The Sellers have delivered
to the Buyers: (i) audited consolidated balance sheets of INSO
and its subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years ended December
31, 1997 and 1998, together with the reports thereon of Ernst &
Young, LLP, independent certified public accountants (the
"Sellers' Independent Accountants"), and (ii) unaudited
consolidated balance sheets of INSO and its subsidiaries for the
one (1) month period ended January 31, 1999 and the six (6) month
period ended July 31, 1999 and the related unaudited consolidated
statements of operations (collectively, the "Unaudited Financial
Statements"). The Unaudited Financial Statements and notes
fairly present the financial condition and results of operations
of INSO, and its subsidiaries, in accordance with U.S. GAAP and
these financial statements reflect the consistent application of
such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements.
Sellers have provided to the Buyers unaudited statements of
revenue for the Business for the period beginning January 1, 1998
through December 31, 1998 and the period beginning January 1,
1999 through July 31, 1999, and such statements of revenue fairly
reflect the revenue of the Business during the applicable
periods, subject to certain adjustments as set forth by KPMG on
Schedule 4.3 in the course of their audit of such statements of
revenue.
(b) Absence of Certain Changes. Since July 31, 1999,
there has not been: (i) any Lien made or created on any of the
assets of the Business or the Shares; (ii) any loan or advance
between INSO and any of Synex, INSO Providence, INSO KK or
ViewPort which is to be outstanding after the Closing, other than
loans or advances which will be Retained Liabilities; or
(iii) any agreement, in writing or otherwise to do any of the
foregoing.
4.4. Intellectual Property.
(a) Except as set forth in Schedule 4.4 hereto,
Sellers, INSO KK, Synex and/or ViewPort are the sole and
exclusive owner of the entire right, title and interest in and to
all Sellers' Intellectual Property. Unless otherwise set forth
in Schedule 4.4, all of the Sellers' Intellectual Property
(including, without limitation, the Sellers' System) was either
(i) developed by employees of INSO or its subsidiaries within the
scope of their employment; or (ii) developed by independent
contractors who have either (1) been a party to a written "work
for hire" agreement with INSO or its subsidiaries, in accordance
with applicable federal, state and foreign laws, that has
accorded INSO or its subsidiaries, as the case may be, full,
exclusive, and original ownership of all tangible and intangible
property thereby arising, or (2) executed appropriate instruments
of assignment in favor of INSO or its subsidiaries as assignee
that have conveyed to INSO or its subsidiaries, as the case may
be, full, effective and exclusive ownership of all tangible and
intangible property thereby arising.
(b) Schedule 4.4 hereto lists each license or other
agreement pursuant to which INSO, INSO Providence, INSO KK,
ViewPort, Synex or any other subsidiary of INSO has the right to
use Sellers' Intellectual Property not owned exclusively by INSO
Providence, INSO KK, ViewPort or Synex and utilized in connection
with the Business or the development activities of INSO
Providence, INSO KK, ViewPort or Synex (the "Sellers'
Licenses"). The cancellation or expiration of any Seller's
License would not have a material adverse effect on the financial
condition, properties, businesses or results of operations of the
Business.
(c) INSO and its subsidiaries own or possess adequate
licenses or other valid rights to use all of Sellers'
Intellectual Property, and to Seller's Knowledge, there is no
assertion or claim (or basis therefor) challenging ownership (or
right to use, as applicable) by INSO or any of its subsidiaries
of any Seller's Intellectual Property. Subject to Section 4.4(e)
of this Agreement, to Sellers' Knowledge, there are no
infringements of any Sellers' Intellectual Property. There is
no breach or violation of or actual loss of rights accruing to
INSO or any of its subsidiaries under any Seller's License. Each
Seller's License is a legal, valid and binding agreement of INSO
or a Subsidiary of INSO, and each Seller's License is a legal,
valid and binding agreement of the other parties thereto, and
INSO does not anticipate any termination or change to, or receipt
of proposal with respect to, any Seller's License as a result of
the closing of the transactions contemplated by this Agreement or
otherwise. INSO has taken reasonable measures to maintain the
confidentiality of the Sellers' Intellectual Property, including,
without limitation, the research and development results and
other know-how of INSO and its subsidiaries, the value of which
to INSO and its subsidiaries is dependent upon the maintenance of
the confidentiality thereof. The conduct of the Business,
including the use of each item of Sellers' Intellectual Property,
did not and does not infringe upon or conflict with, in any way,
any license, trademark, trademark right, trade name, trade name
right, patent, patent right, database, database rights,
industrial model, invention, service ▇▇▇▇ or copyright of any
third party that is reasonably likely to be material to the
operations of the Business.
(d) Except as set forth in Schedule 4.4 hereto, no
Person other than INSO or its subsidiaries has or has had or is
authorized, by written agreement or otherwise, to have access to
the source code versions of the Sellers' Intellectual Property.
(e) Notwithstanding anything to the contrary contained
in this Section 4.4, Sellers make no representation or warranty
with respect to the Third Party Intellectual Property under this
Section 4.4, except that, to Sellers' Knowledge, there is no
assertion of claim (or basis therefor): (i) challenging ownership
(or the right to use, as applicable) by INSO or any of its
subsidiaries of such Third Party Intellectual Property and (ii)
that the use of such Third Party Intellectual Property in the
conduct of the Business infringes upon or conflicts with, in any
way, any license, trademark, trademark right, trade name, trade
name right, patent, patent right, database, database rights,
industrial model, invention, service ▇▇▇▇ or copyright of any
third party which infringement reasonably likely to be material
to the operations of the Business.
4.5. Tax Matters.
(a) Definitions. For purposes of this Section 4.5,
the following definitions shall apply:
(i) The term "Taxes" means all taxes, however
denominated, including any interest, penalties or other additions
to tax that may become payable in respect thereof, imposed by any
Governmental Authority, which taxes shall include, without
limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal, state, local and
foreign income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, value added tax, duties, excise taxes,
franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation,
Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a
similar nature to any of the foregoing, which INSO and/or any of
its subsidiaries or affiliates (collectively, the "Group") is
required to pay, withhold or collect.
(ii) The term "Returns" means all reports,
estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection
with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third
parties.
(b) Returns Filed and Taxes Paid. All Returns required
to be filed by or on behalf of INSO Providence, INSO KK, ViewPort
or Synex prior to the date hereof have been duly filed on a
timely basis (including extensions) and such Returns are true,
complete and correct in all material respects. All Taxes
(including, without limitation, all deposits) for which INSO
Providence, INSO KK, ViewPort or Synex has any liability have
been paid in full on a timely basis, or adequate reserves, as set
forth on Schedule 4.5 hereto, have been established to cover any
such Taxes not paid as of the date of this Purchase and Sale
Agreement. Each of INSO Providence, INSO KK, ViewPort and Synex
has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information
reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no Liens
for Taxes or any property or assets of INSO or any INSO
Subsidiary, other than Liens for Taxes not yet due and payable or
for Taxes that INSO, INSO Providence, INSO KK, ViewPort or Synex
is contesting in good faith through appropriate proceedings and
for which appropriate reserves have been established. None of
INSO Providence, INSO KK, ViewPort, or Synex is delinquent in the
payment of any Taxes.
(c) Returns Furnished. Schedule 4.5 lists all tax
audit reports, statements of deficiencies, other notices of any
kind from Governmental Authorities pertaining to INSO Providence,
INSO KK, ViewPort and Synex relating to Taxes. Except as set
forth on Schedule 4.5, none of INSO Providence, INSO KK, ViewPort
or Synex has incurred a material tax liability in any state,
local, territorial or foreign taxing jurisdiction other than
those for which Returns listed in Section 4.5 have been filed.
(d) Tax Deficiencies; Audits; Statutes of Limitations.
Except as set forth on Schedule 4.5, the Returns of INSO
Providence have never been audited by a Governmental Authority,
nor is any such audit in process, pending, or to the Sellers'
Knowledge, threatened. No deficiencies exist or have been
asserted (either in writing or verbally, formally or informally)
with respect to Taxes of INSO Providence, nor has INSO Providence
received notice (either in writing or verbally, formally or
informally) that it has not filed a Return or paid Taxes required
to be filed or paid by it. INSO Providence is not a party to any
action or proceeding for assessment or collection of Taxes, nor
has such action or proceeding been asserted or, to the Sellers'
Knowledge, threatened, against INSO Providence or any of its
assets. No waiver or extension of any statute of limitations is
in effect with respect to Taxes or Returns of INSO Providence.
Any exceptions to any of the foregoing are set forth on Schedule
4.5 hereto.
(e) Tax Sharing and Other Agreements. INSO
Providence is not (nor during any period in which INSO owned INSO
Providence ever has been) a party to any tax sharing or tax
allocation agreement with any Person that would require any
payment by INSO Providence after the Closing, except that INSO
and INSO Providence file consolidated federal income tax returns
and combined or unitary state tax returns in certain states.
(f) Other Tax Matters. Except as set forth on
Schedule 4.5 INSO Providence is not a party to any "safe harbor
lease" within the meaning of Section 168(f)(8) of the Code as in
effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982, and INSO Providence has not entered
into any compensatory agreements with respect to the performance
of services for which payment thereunder would result in a
nondeductible expense pursuant to section 280G of the. None of
the assets of INSO Providence is tax-exempt use property within
the meaning of Code Section 168(h). INSO Providence has not
participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code. Except as set
forth on Schedule 4.5, INSO Providence has not entered into a
transaction which is being accounted for as an installment
obligation under Section 453 of the Code, nor has INSO Providence
entered into an interest rate swap, currency swap or other
similar transaction. The INSO Providence Shares do not
constitute "United States real property interests" within the
meaning of Section 897(c) of the Code. At the Closing, INSO will
provide Buyer with a statement to that effect meeting the
requirements of Treas. Reg. Sec. 1.1445-2(c)(3) and 1.897.2(h).
Neither INSO nor INSO Providence has filed a consent to the
application of Section 341-(f)(2) of the Code.
4.6. Material Misstatements or Omissions No representation
or warranty by any of the Sellers contained in this Purchase and
Sale Agreement, including the Schedules and Exhibits attached
hereto, and, to the extent that reasonably can be expected to
have a material adverse effect on the Business, no document or
certificate furnished or to be furnished or made available to
Buyers in connection herewith or with the transactions
contemplated herein, e.g., Minutes Books, List of Authorized
Capital Shares, Leases, Employment Contracts, Permits-Licenses,
Material Contracts, Bank Accounts, Assets, etc., contains an
untrue statement of a material fact or omits to state a material
fact necessary to make the statements of fact contained herein or
therein not misleading.
4.7. Ownership of Assets.
(a) Set forth on Schedule 4.7 hereto is a true and
correct list of all of the Sellers' Assets, the owner thereof and
the location thereof. Each INSO Subsidiary owns or controls such
Sellers' Assets free and clear of any Liens. There are no
material assets other than the Sellers' Assets that are owned by
INSO, by any subsidiary of INSO (other than INSO Providence or
ViewPort or their respective subsidiaries), or by any Person
which is not a subsidiary of INSO, that are necessary to operate
the Business as it is currently operated, except as contemplated
by the license agreements to be entered into by the parties under
Section 6.11 and 7.1(o) and the Leases. No parties other than
the INSO Subsidiaries have any rights or claims to any of the
Sellers' Assets.
(b) Set forth on Schedule 4.7 is a true and correct
list of all of the Sellers' Assets located in India.
4.8. Third Party Consents. Except as set forth in Schedule
4.8 hereto, no consent, approval or other action of any third
party, including any Governmental Authority, is required to be
obtained in connection with the transactions contemplated in this
Purchase and Sale Agreement.
4.9. No Litigation. Except as described in INSO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998
(the "INSO 10-K"), its Quarterly Reports on Form 10-Q
subsequent thereto (each as filed with the Securities and
Exchange Commission) and on Schedule 4.9 attached hereto, there
are no legal, administrative, arbitration or other proceedings,
or claims, actions, disputes or investigations, pending or to the
Knowledge of the Sellers threatened against INSO or any INSO
Subsidiary affecting any of the Shares, any of the INSO KK
Shares, any of the Synex Shares or the Sellers' Intellectual
Property and/or which may reasonably be expected to restrict or
prohibit the consummation of the transactions contemplated
herein. Neither INSO nor any of the INSO Subsidiaries is subject
to any judgment, order or decree of any Governmental Authority
which may restrict or prohibit the consummation of the
transactions or would restrict or prohibit the Sellers or the
Buyers from performing their obligations hereunder.
4.10. No Undisclosed Liabilities. The INSO Subsidiaries will
have on the Closing Date no tangible liabilities or obligations
of any nature (contingent, absolute, direct, indirect, matured,
unmatured, accrued or otherwise) except (i) either (A)
liabilities that will be fully reflected or reserved against in
the Closing Balance Sheet (provided, however, that all such
liabilities will relate solely to, and will have been incurred
solely in connection with, the Business and none of such
liabilities shall constitute a Retained Liability or otherwise
will not be related to or not have been incurred in connection
with, the Business) (for which reserves will be appropriate and
reasonable) or will be disclosed in the related notes or (B) in
the case of liabilities for deferred revenue, the cost of
performance with respect to such deferred revenue, and (ii) non-
material liabilities incurred in the ordinary course of business
and consistent with past practice since the date of the Closing
Balance Sheet.
4.11. Books and Records. The Books and Records of the INSO
Subsidiaries, all of which (other than books of account) have
been provided to the Buyers, are complete and correct in all
material respects of all meetings held of, and corporate action
taken by, the stockholders and the Board of Directors of each of
the INSO Subsidiaries.
4.12. No Violation. Neither the execution and delivery of
this Purchase and Sale Agreement nor the consummation or
performance of any of the transactions contemplated herein will,
directly or indirectly: (a) contravene, conflict with or result
(with or without notice or lapse of time) in a material violation
of (1) any of the provisions of the Charter Documents of any
Seller, INSO KK or Synex or (2) any resolution adopted by the
Board of Directors or the stockholders of any Seller, INSO KK or
Synex; (b) contravene, conflict with or result (with or without
notice or lapse of time) in a material violation of any federal,
state, local, municipal, foreign or other law, statute,
ordinance, rule, regulation, directive or other legal requirement
or any order, judgment, injunction, ruling, decision, writ or
sentence rendered by any Governmental Authority to which any
Seller, INSO KK or Synex or any of the Sellers' Assets may be
subject; (c) upon receipt of any required consents, contravene,
conflict with or result (with or without notice or lapse of time)
in a material violation or breach of any of the provisions of, or
give any person or entity the right (with or without notice or
lapse of time) to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or cancel,
terminate or modify, any Agreement, mortgage, license, permit or
authorization to which such Seller, INSO KK or Synex is a party
or under which any Seller, INSO KK or Synex has any rights, or by
which any Seller, INSO KK or Synex or any of the Sellers' Assets
may be bound, the effect of any of which would adversely affect
any of the transactions contemplated herein or the Business or
(d) upon receipt of any required consents, result (with or
without notice or lapse of time) in the imposition or creation of
any Lien upon, or with respect to, any of the Sellers' Assets.
Neither any Seller, INSO KK nor Synex is in default under, or in
material breach or violation of, any contracts, mortgages,
licenses, permits, commitments or restrictions to which such
Seller, INSO KK or Synex is a party or by which such Seller, INSO
KK or Synex is or are bound which may affect the transactions
contemplated herein.
4.13. Bank Accounts and Investments. Schedule 4.13 hereto
sets forth a true and complete list of (i) each financial
institution in which ViewPort or Synex maintains an account or
safety deposit box, the number of such account or safety deposit
box, and the names of all such subsidiary's personnel holding
check signing or withdrawal powers or other authority with
respect thereto and (ii) all certificates of deposit, cash
securities and other investments held by or through such account.
4.14. Contracts and Other Agreements.
(a) Schedule 4.14(a) hereto sets forth a true and
complete list of all Agreements (other than Leases) currently in
effect by, or on behalf of, any INSO Subsidiary of value greater
than $25,000 or a term of longer than one (1) year. No INSO
Subsidiary that is a party to such foregoing Agreement is in
default in any material respect under any such Agreement.
(b) Schedule 4.14(b) hereto sets forth a true and
complete list of all Agreements currently in effect by, or on
behalf of, any INSO Subsidiary which contain a non-assignment
clause the effect of which would require the Sellers to obtain
consent of a third party to complete the transactions
contemplated by this Purchase and Sale Agreement.
4.15. Permits and Licenses. Schedule 4.15 hereto sets forth
a true and complete list of all material permits and licenses
held by any of the Sellers, INSO KK or Synex that are used in the
operation of the Business and the name of the Entity which holds
each such permit or license. Copies of such permits and licenses
have been furnished to Buyer.
4.16. Real Property Leases. Schedule 4.16 hereto sets forth
a true and complete list of all Leases. There is no violation of
any such Lease by any INSO Subsidiary other than violations that,
individually or in the aggregate, would not have a material
adverse impact on such company or the Business.
4.17. Employees; Employee Benefits
(a) Schedule 4.17 sets forth a true and complete list
of all current employees of the INSO, INSO Providence, INSO KK,
ViewPort, Synex or other subsidiary of INSO (including their
names, positions and locations) providing services for, in
connection with or with respect to the operation of Business,
other than legal, financial and administrative services who also
provide such services to INSO or other INSO Subsidiaries. There
currently are no independent contractors engaged by INSO, INSO
Providence, INSO KK, ViewPort or Synex providing services for, in
connection with or with respect to the operation of the Business,
except as set forth on Schedule 4.17.
(b) Schedule 4.17 hereto sets forth true and complete
summaries of all employment contracts with employees identified
in Schedule 4.17, all perquisites paid for by any Seller, INSO KK
or Synex for any such employee who received perquisites with a
value in excess of $1000 in the last fiscal year and all
severance agreements with any such employee (i) to which any
INSO Subsidiary is a party or (ii) to which INSO or any
subsidiary of INSO is a party and which relates to any employee
listed on Schedule 4.17. True and complete copies as currently
in effect of such agreements and any Employee Plan (as defined in
Section 4.17(c) hereof), including, but not limited to, any trust
instruments and/or insurance contracts, if any, forming a part of
any such Employee Plan or any such Agreements, and all currently
applicable amendments thereto, have been made available to each
of the Buyers.
(c) Disclosure of Employee Plans. Schedule 4.17
includes a complete listing or description of all Employee
Benefit Plans and all other pension, retirement, profit sharing,
savings, thrift, stock, deferred compensation, supplemental
retirement, severance, executive compensation, excess benefit,
change of control or parachute, hospitalization, medical or
health, dental, vision, dependent care, educational assistance,
group legal services, life insurance, disability, accidental
death and/or dismemberment, group insurance, supplemental
unemployment income, training, scholarship, tuition
reimbursement, employee discount, subsidized cafeteria, fringe
benefit, stock option, stock purchase, bonus or similar benefit
plans, practices, policies, contracts, or arrangements (whether
written or oral, qualified or nonqualified, funded or unfunded,
foreign or domestic, currently effective or terminated or frozen)
and any trust, escrow, or similar agreement related thereto
(whether or not funded) in respect of any employees identified in
Schedule 4.17 or any other present or former employees,
directors, officers, shareholders, consultants, or independent
contractors of any INSO Subsidiary, which has been in the six (6)
years prior to Closing or currently is sponsored, maintained,
contributed to or required to be contributed to by any INSO
Subsidiary (all of the above being hereinafter individually or
collectively referred to as "Employee Plan" or "Employee
Plans," respectively). Schedule 4.17 also includes a complete
listing of each INSO Subsidiary and identifies which INSO
Subsidiary did in the six (6) years prior to Closing or currently
sponsor, maintain, contribute to or is required to contribute to
each of the Employee Plans.
(d) Operational Compliance. Each Employee Plan has
been maintained, operated, and administered in material
compliance with its terms and any related documents or agreements
and in material compliance with any and all applicable state and
federal and in the case of INSO KK, ViewPort and Synex, foreign
laws, rules and regulations, including but not limited to ERISA,
the Code and COBRA.
(e) Qualified for Tax-Exempt Status. Each Employee Plan
intended to qualify under Code Section 401(a) is in material
compliance with Code Section 401(a), has a favorable
determination letter from the Internal Revenue Service with
respect to its qualified status and has not adopted any plan
amendment since the issuance of such determination letter which
reasonably could be expected to jeopardize the plan's
qualification under Code Section 401(a).
(f) All Contributions Deductible. Except as set forth
Schedule 4.17, all contributions, transfers, and payments made by
or on behalf of any INSO Subsidiary in respect of any Employee
Plan have been or are fully deductible under the Code.
(g) No Risk of Complaints or Claims. There is no
pending or threatened assessment, complaint, claim (other than a
routine claim for benefits), proceeding, audit, voluntary
compliance application or investigation of any kind in or before
any court, tribunal or government agency with respect to any
Employee Plan, nor, to the Knowledge of any INSO Subsidiary, is
there any basis upon which such action can reasonably be expected
to be taken.
(h) No Prohibited Transactions. No INSO Subsidiary
and, to the Knowledge of any INSO Subsidiary, no other Persons
have with respect to any Employee Plan, either engaged in any
"prohibited transactions" within the meaning of ERISA Section
406 or 407 or Code Section 4975 (to which no statutory, class or
individual exemption applies), or breached any duty imposed by
Title I of ERISA, which could result in a material liability for
any INSO Subsidiary; no request is pending with, or contemplated
to be filed with, the Department of Labor for an exemption from,
or an advisory opinion with respect to, any such matter.
(i) Insurance Premiums Paid. Any insurance premium
(including any insurance premium owed to the Pension Benefit
Guaranty Corporation with respect to any Employee Plan that is
required or payable at or before the Closing with respect to any
Employee Plan will have been paid, accrued, and booked on or
before the Closing, and, with respect to any insurance policy
related to any Employee Plan, to the Knowledge of any INSO
Subsidiary there will be no liability of any INSO Subsidiary or
Buyer in the nature of a retroactive rate adjustment, loss
sharing arrangement, or other liability arising wholly or
partially out of events occurring prior to the Closing.
(j) No Payments Due. All benefits, expenses, and
other amounts due and payable under any Employee Plan as of the
Closing, and all contributions, transfers, or payments required
to be made to any Employee Plan by any INSO Subsidiary as of the
Closing, have been timely paid or made, accrued, and booked.
(k) Defined Benefit Plans. No INSO Subsidiary has (or
has had within the past six (6) years) an obligation to
contribute to, or otherwise sponsors or maintains (or has
sponsored or maintained within the past six (6) years), a defined
benefit plan or a pension plan subject to the minimum funding
standard of Section 302 of ERISA or Code Section 412.
(l) No Funding Deficiencies. No Employee Plan
maintained by any INSO Subsidiary has or has incurred an
accumulated funding deficiency within the meaning of Section 302
of ERISA or Code Section 412, nor has any waiver of the minimum
funding standards of ERISA Section 302 and Code Section 412 been
requested of or granted by the IRS with respect to any such
Employee Plan, nor has any lien in favor of any Employee Plan
arisen under Code Section 412(n) or ERISA Section 302(f).
(m) Foreign Plans. Except as set forth on Schedule
4.17, no Employee Plan is a plan established and maintained
outside the United States.
(n) Multi-employer and Multiple Employer Plans. No INSO
Subsidiary has or has had within the past six (6) years an
obligation to contribute to, a "multiemployer plan" (as defined
in Section 3(37) and 4001(a)(3) of ERISA), a "multiple employer
plan" (within the meaning of Section 413(b) and (c) of the Code
and regulations promulgated thereunder) or a "multiple employer
welfare arrangement" (as defined in Section 3(40) of ERISA).
(o) Post-Retirement and Post-Termination Benefits. No
Employee Plan provides benefits, including without limitation,
death, severance or medical benefits, beyond termination of
service or retirement other than (i) continuation of health care
coverage mandated by law, (ii) death or retirement benefits under
any Employee Plan intended to be qualified under Code Section
401(a), (iii) deferred compensation reflected on the books of any
INSO Subsidiary or (iv) death or retirement or medical benefits
under arrangements identified on Schedule 4.17 that are not
intended to qualify under Code Section 401(a).
(p) Bonding of Plan Officials. Each "fiduciary" and
"plan official" as defined in ERISA Section 412 of each
Employee Plan is bonded to the extent required by ERISA Section
412.
(q) No Leased Employees. There are no leased
employees within the meaning of Code Section 414(n) or (o), or
the regulations thereunder, who perform services for, in
connection with or with respect to the operation of the Business.
(r) No Indemnification Agreements. Except as provided
in Schedule 4.17, no INSO Subsidiary and no Employee Plan has
agreed to guarantee or indemnify the performance of any person
with respect to any Employee Plan.
(s) Unfunded and Uninsured Liabilities. Except as
provided Schedule 4.17, the Financial Statements of each INSO
Subsidiary contain adequate accruals for (i) bonuses, vacation
pay and deferred compensation earned but not received as of the
Closing and (ii) incurred or continuing claims under Employee
Plans that remain unpaid as of the Closing and which are not
funded by insurance or otherwise.
(t) Decrease of Accrued Benefits. Any Employee Plan
that has been amended to provide for a significant reduction in
future benefit accrual (including a plan that has been frozen),
has satisfied the notice requirements imposed by ERISA Section
204(h) (if applicable).
(u) Amendment or Termination of Employee Plans.
Except as provided on Schedule 4.17 and subject to the provisions
of any applicable collective bargaining agreement and the
provisions of applicable law (including without limitation, ERISA
and the Code), each INSO Subsidiary has an unrestricted right to
amend or terminate each of the Employee Plans at any time.
(v) Triggering Events. The execution and performance
of this Agreement will not (i) constitute a stated triggering
event under any Employee Plan that will result in any payment
(whether of severance pay or otherwise) becoming due from any
INSO Subsidiary to any officer, employee, former employee or
dependents of an employee, or (ii) directly accelerate the time
of payment or vesting, or increase the amount of compensation due
to any employee, former employee, officer or director of any INSO
Subsidiary from any INSO Subsidiary.
4.18. Brokers and Finders. None of the Sellers nor any of
their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the
transactions contemplated herein.
4.19. Insurance. Each INSO Subsidiary is adequately
insured on a consolidated basis with INSO in accordance with
industry practice in the following areas: liability, theft,
fidelity, casualty, errors and omissions, and other similar
normal forms of business insurance held by each INSO Subsidiary.
4.20. Year 2000. Each item of the Sellers' Intellectual
Property used in the course of the Business has been produced,
tested, and/or modified so that it is Year 2000 Compliant as of
the date hereof and as of the Closing Date. Without limitation
of the foregoing, any of Sellers' Intellectual Property that has
been provided to any Customer on or before the Closing Date (or
which Sellers is obligated to provide to any Customer as of the
Closing Date) is Year 2000 Compliant and will not require any
updates or modification in order to render such Sellers'
Intellectual Property Year 2000 Compliant. The term "Year 2000
Compliant" as used herein means that (x) the Sellers' Hardware
and Sellers' Software is fully functional and will perform in
accordance with its applicable specifications prior to, during,
and after the calendar year 2000 A.D., and that such Sellers'
Hardware and Sellers' Software shall perform during each such
period of time without any error or degradation of performance or
functionality (including, without limitation an abnormal end to
all or part of processing) relating to date functionality and/or
data, which, by way of illustration and not limitation,
represents or references different centuries or more than one
century or leap years; and (y) without limiting the generality of
the foregoing, that the Sellers' Hardware and Sellers' Software
(i) shall not provide, or cause any software and/or system with
which the Sellers' System operates or interfaces to provide,
invalid or incorrect results as a result of date functionality
and/or data, or otherwise cause any software and/or system which
with the Sellers' System interfaces to experience any degradation
of performance or functionality (including, without limitation an
abnormal end to all or part of processing) specifically arising
from date functionality and/or data; (ii) has been developed and
designed to be fully interoperable with software, hardware and
data to ensure year 2000 compatibility, including, but not
limited to, date data century recognition and calculations which
accommodate same century and multi-century and leap year formulas
and date values; and (iii) shall effectively and accurately
manage and manipulate data derived from, involving or relating in
any way to dates including single century formulas and multi-
century or leap year formulas, and will not generate incorrect
values or invalid. Notwithstanding anything to the contrary
contained in this Section 4.20, Sellers make no representation or
warranty with respect to the Year 2000 compatibility of the Third
Party Intellectual Property, except that, to Sellers' Knowledge,
such Third Party Intellectual Property is Year 2000 compliant.
4.21. Assignment of Licenses. Except as set forth on
Schedule 4.21, the assignment to Buyer of any agreement relating
to any Seller's License does not violate the terms of such
agreement.
4.22. Customer Lists. Set forth on Schedule 4.22 hereto is
a true and correct list of all of the Customers in all material
respects as to current Customers and prepared in good faith with
respect to former Customers.
4.23. Customer Support Site. Set forth on Schedule 4.23
hereto is a true and correct list of (i) all software (whether or
not owned by INSO or any of its affiliates) used by or on behalf
of Sellers in connection with the hosting or maintenance of the
Sellers' customer support website relating to the Business (the
"Customer Support Website") and any 800-customer support
number, together with a list of all Agreements relating to any
such software; and (ii) all Agreements relating to the hosting
or maintenance of the Customer Support Website or any such
customer support number. Neither any Seller nor any affiliate of
any Seller is in default in any material respect under any such
Agreement.
4.24. Subsidiaries. Except as set forth on Schedule 4.24
(other than subsidiaries that are to be transferred to INSO as
contemplated by Section 7.1(r) hereof), (i) INSO Providence will,
on the Closing Date, have no subsidiaries other than INSO KK, and
will have no investment in any other Entity, other than the INSO
KK Shares and (ii) ViewPort, on the Closing Date, will have no
subsidiaries, other than Synex, and will have no investment in
any other Entity, other than the Synex Shares.
4.25. ViewPort Acquisition Agreements. Sellers have
provided to Buyer true and correct copies of the agreements
relating to its acquisition of the capital stock of ViewPort
(collectively, the "ViewPort Acquisition Documents".) INSO's
obligations under the ViewPort Acquisition Documents have been
fully performed, and INSO is not in default of any of its
obligations under the ViewPort Acquisition Documents. The
consummation of the transaction contemplated by this Purchase and
Sale Agreement will not violate any provision of the ViewPort
Acquisition Documents.
4.26. [Intentionally Omitted]
4.27. Non-Interference Disabling Procedures. Sellers warrant
and represent that, to their Knowledge, no item of Sellers'
Intellectual Property contains any program routine, device, or
other undisclosed feature, including, without limitation, a time
bomb, virus, software lock, drop-dead device, malicious logic,
worm, trojan horse, bug, error, defect or trap door, that is
intended for the purpose of deleting, disabling, deactivating,
interfering with, or otherwise harming any item of Sellers'
Intellectual Property or Buyers' hardware, data, or computer
programs or codes, or that is capable of providing access or
produce modifications not authorized by Buyers (collectively,
"Disabling Procedures"). The foregoing representation and
warranty shall not apply to Third Party Intellectual Property,
except that to INSO's Knowledge, there is no Disabling Procedure
in any portion of the Third Party Intellectual Property.
4.28. Additional Pass-Through of Warranties. INSO hereby
assigns to Buyers any and all manufacturers' or suppliers'
warranties, guarantees, representations, services agreements and
indemnities, if any, with respect to any Third Party Intellectual
Property to the extent assignable by INSO. To the extent such
warranties, guarantees, representations, services agreements and
indemnities are not assignable by INSO, INSO agrees that Buyers
may assert or enforce any right that INSO may have to enforce
such warranties, guarantees, representations, service agreements
and indemnities, or if such can only be enforced by INSO and in
its own name, upon Buyers' request and at Buyers' sole expense,
INSO shall take all reasonable action requested by Buyers to
enforce such warranties, representations, service agreements and
indemnities.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Enigma hereby represents and warrants to INSO as follows:
5.1. Authority. This Purchase and Sale Agreement, assuming
its due execution by each other party hereto, constitutes the
legal, valid and binding obligation of each of the Buyers,
enforceable against them in accordance with its terms. Buyers
have the legal right, power, authority and capacity to execute
and deliver this Purchase and Sale Agreement, and to perform the
obligations hereunder. The execution and delivery of this
Purchase and Sale Agreement and the performance hereof has been
authorized and ratified by the Boards of Directors of Buyers.
5.2. Organization and Good Standing. Enigma is a
corporation duly organized and in good standing under the laws of
Israel. Enigma USA is a corporation duly organized and in good
standing under the laws of the State of Delaware.
5.3. No Violation. Neither the execution and delivery of
this Purchase and Sale Agreement nor the consummation or
performance of any of the transactions contemplated herein will,
directly or indirectly: (i) contravene, conflict with or result
in a violation of (1) any of the provisions of the current
Charter Documents of each Buyer or (2) any resolution adopted by
the Board of Directors or the stockholders of each Buyer or (3)
any Agreement to which any Buyer is a party or (ii) contravene,
conflict with or result in a violation of any federal, state,
local, municipal, foreign or other law, statute, ordinance, rule,
regulation, directive or other legal requirement or any order,
judgment, injunction, ruling, decision, writ or sentence rendered
by any Governmental Authority currently applicable to either
Buyer may be subject.
5.4. Third Party Consents. No consent, approval or other
action of any third party, including any Governmental Authority,
is required to be obtained in connection with the transactions
contemplated in this Purchase and Sale Agreement.
5.5. No Litigation. There are no legal, administrative,
arbitration or other proceedings, or claims, actions, disputes or
investigations, pending or threatened against the Buyers or any
subsidiaries of the Buyer which may restrict or prohibit the
consummation of the transactions contemplated herein. Neither
the Buyer nor any of their subsidiaries are subject to any
judgment, order or decree of any Governmental Authority which may
restrict or prohibit the consummation of the transactions or
would restrict or prohibit the Sellers or the Buyers from
performing their obligations hereunder.
5.6. Brokers and Finders. To the extent Buyers or any of
their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the
transactions contemplated herein, Sellers shall be held harmless
from paying any such brokerage fees, commissions or finders'
fees.
5.7. Financing. The Buyers have and will have on the
Closing Date sufficient funds available to pay the Purchase
Price, pursuant to the conditions set forth in Section 3.1.
6. PRE AND POST-CLOSING COVENANTS AND AGREEMENTS
Buyers and Sellers hereby severally, but not jointly, covenant
and agree as follows (provided, however, that all obligations of
any INSO Subsidiary hereunder that survive the Closing Date, or
which arise following the Closing Date, shall, notwithstanding
anything contained herein to the contrary, be an obligation of
INSO):
6.1. Filings. Following the execution hereof, Buyers and
Sellers shall make or cause to be made all filings, if any,
including tax filings, which are required in order to comply with
any law, rule or regulation necessary in connection with the
consummation of the transactions contemplated herein. Each party
will furnish to the other such reasonable assistance as it may
request in connection with the preparation of any filings with or
submissions to any Governmental Authority.
6.2. No Corporate Borrowings or Liens. From the date hereof
through the Closing Date (i) INSO shall not take any action, and
shall not cause INSO Providence, INSO KK, ViewPort or Synex to
take any action, to cause either of INSO Providence or ViewPort,
(ii) INSO Providence shall not take any action, and shall not
cause INSO KK to take any action, to cause INSO KK and (iii)
ViewPort shall not take any action, and shall not cause Synex to
take any action, to cause Synex, except in the ordinary course of
their respective businesses consistent with past practices, to
borrow monies for any reason or draw down on any line of credit
or long-term debt obligation, or become the guarantor, surety or
endorser of the obligation of any other person, partnership,
corporation or other business entity or create, incur or permit
to exist any Lien on any of the Sellers' Assets or on any of the
Shares, any of the INSO KK Shares or any of the Synex Shares.
6.3. Conduct of the Business.
(a) Conduct of the Business. From the date hereof
until the Closing Date, (i) INSO shall not itself, and shall not
cause INSO Providence, INSO KK, ViewPort or Synex to take any
action to cause either of INSO Providence, ViewPort, (ii) INSO
Providence shall not itself, and shall not cause INSO KK to take
any action to cause INSO KK and (iii) ViewPort shall not itself,
and shall not cause Synex to take any action to cause Synex to,
conduct their businesses outside of the ordinary course of the
Business.
(b) Employees. From the date hereof through the
Closing Date, INSO shall not itself, and shall not cause either
of INSO Providence, INSO KK, ViewPort or Synex to terminate any
current employees of the INSO Subsidiaries or INSO listed on
Schedule 6.3(a) (the "Certain Employees") or to cease (i)
maintaining the current salaries of such employees; (ii)
maintaining in effect without modification all benefit plans
currently in effect for such employees or (iii) otherwise make
any other changes to benefits payable to any such employees. As
soon as practicable after the date hereof, Buyer agrees to offer
employment to all persons listed on Schedule 6.3(a) hereof.
Schedule 6.3(b) sets forth a list of persons to whom the Buyer
may offer employment within three (3) months of the Closing Date.
The terms of such employment will be mutually agreed upon between
Buyers and the employees. Following the Closing Date, (a) INSO
shall be prohibited from offering employment for twelve (12)
months to any employee of Buyers, Buyers' successors or the INSO
Subsidiaries and (b) Buyers shall be prohibited from offering
employment for twelve (12) months to any employee of INSO or any
of its subsidiaries (other than the persons listed on Schedules
6.3(a) and 6.3(b) hereto). The Buyers (w) will promptly offer
employment to each of the Certain Employees who will not become
an employee of the Buyers by operation of law following the
Closing, (x) will not reduce the compensation or materially alter
the benefits of the Certain Employees, (y) will provide to the
Certain Employees a bonus, equal to the greater of $10,000 or 15%
of their base salary as of the Closing Date, but in no event
equal to an amount greater than $20,000, payable in three equal
installments at the end of the third, sixth and ninth month as an
employee of Enigma or its subsidiaries if they are then so
employed and (z) will offer to the Certain Employees a relocation
allowance equal to $10,000 for costs incurred by such Certain
Employees in relocating from the Providence, Rhode Island area to
the Burlington, Massachusetts area, such relocation allowance to
be paid within ten (10) business days of receipt by Buyers of
evidence of such relocation.
(c) Transfers. Other then in the ordinary course of
business consistent with past practice or as permitted by Section
7.1(r) hereof, from the date hereof through the Closing Date,
INSO shall not itself, and shall not cause either of INSO
Providence, INSO KK, ViewPort or Synex to, (i) sell, transfer or
assign any of the Sellers' Assets or any of the Shares or (ii)
mortgage, pledge, encumber or otherwise subject any of the
Sellers' Assets, any of the Shares, any of the INSO KK Shares or
any of the Synex Shares to any Lien.
(d) Corporate Changes. From the date hereof through
the Closing Date, the INSO Subsidiaries shall not amend their
respective Charter Documents or make any changes in the terms or
amount of their respective authorized, issued or outstanding
capital shares (including authorizing, selling, redeeming or
purchasing any shares thereof).
(e) Distributions. From the date hereof through the
Closing Date, INSO and ViewPort shall not take any steps to
procure that any of INSO Providence, INSO KK, ViewPort or Synex
shall declare, set aside or pay any dividend or other
distribution in respect of its capital shares.
(f) Issuances. INSO and ViewPort shall not take any
steps, from the date hereof through the Closing, to cause or
permit any capital shares, other securities, or Rights to capital
shares or to any other security, in any of INSO Providence, INSO
KK, ViewPort or Synex to be issued prior to the Closing, other
than to carry out the transactions contemplated herein.
(g) No Liens. Prior to the Closing Date: (i) INSO
shall not itself, and shall not permit any of INSO Providence,
INSO KK, ViewPort or Synex to, create, incur, assume or permit to
exist any Lien on any of the Shares, any of the Synex Shares, any
of the INSO KK Shares or any of the Sellers' Assets, (ii) INSO
Providence shall not itself and shall not permit INSO KK to
create, incur, assume or permit to exist any Lien on the INSO KK
Shares or on any of the Sellers' Assets and (iii) ViewPort shall
not itself and shall not permit Synex to create, incur, assume or
permit to exist any Lien on the Synex Shares or any of the
Sellers' Assets. From the date hereof through the Closing Date,
each of INSO, INSO Providence and ViewPort shall maintain good
and valid title to the Shares, the INSO KK Shares, the Synex
Shares and the Sellers' Assets, respectively, free and clear of
any Lien.
(h) Contracts. From the date hereof through the
Closing Date, INSO shall, and shall cause each of INSO
Providence, INSO KK, ViewPort or Synex to, refrain from entering,
amending or terminating any Agreement that would materially
adversely affect the Business, the ability of the parties hereto
to consummate the transactions provided for herein, or the
Sellers' Assets, including, without limitation, any Agreement
pursuant to which any of INSO Providence, INSO KK, ViewPort or
Synex agrees to indemnify, defend or hold any person harmless
from any liability. Without the prior consent of Buyers, from
the date hereof through the Closing Date, INSO shall not, and
shall not permit any of INSO Providence, INSO KK, ViewPort or
Synex, except in the ordinary course of business consistent with
past practice or as explicitly contemplated in this Purchase and
Sale Agreement, to enter into Agreements with INSO or any
subsidiary or affiliate of INSO.
(i) Insurance. From the date hereof through the
Closing Date, INSO shall not take any action to cause the
discontinuance of any material policies of fire, general
liability, errors and omissions, product liability, employment
practices, officers and directors, workers' compensation and
other forms of insurance owned or held by, or which covers any
operations or activities of, any of INSO Providence, INSO KK,
ViewPort or Synex, or covers the Sellers' Assets, to which INSO
is a party, beneficiary or covered person.
(j) Taxes. INSO, at its cost and expense, shall and
shall cause INSO Providence, INSO KK, ViewPort and Synex to
prepare and timely file all Returns and amendments thereto
required to be filed by them and/or in respect of the Business
for periods on or before the Closing Date including, without
limitation all Returns for short taxable periods ending on or
before the Closing Date. INSO shall and shall cause INSO
Providence, INSO KK, ViewPort and Synex, in respect of the
Business, to pay and discharge all Taxes, assessments and
governmental charges upon or against it, or any of its properties
or assets, and all liabilities at any time existing, before the
same shall become delinquent and before penalties accrue thereon.
INSO shall provide Buyers with prompt access to any documents or
information necessary to file any Returns pursuant to Section 6.7
of this Purchase and Sale Agreement.
(k) Matters Affecting Leases. From the date hereof
through and after the Closing Date, INSO shall take all
reasonable action necessary, including obtaining any consents if
necessary, to permit INSO Providence to continue to occupy the
portion of the premises in which the INSO employees who will
become employees of Buyers or INSO Providence are currently
located for a period of forty-five (45) days after Closing until
INSO Providence makes alternative arrangements, with all rent,
utility, maintenance and other financial obligations under and
with respect to each such Lease divided pro rata based upon the
relative amount of space occupied.
(l) [Intentionally Omitted]
(m) [Intentionally Omitted]
(n) Public Statements. Prior to the Closing Date,
without the prior written consent of the other parties hereto,
the parties hereto will not make, issue or release any oral or
written public announcement, filing or statement concerning, or
acknowledgment of the existence of, or reveal the terms,
conditions and status of the transactions contemplated herein
except (i) as required by law, in which case the party required
to make the disclosure shall use reasonable efforts to notify the
other party thereof and discuss with such other party the wording
thereof and (ii) Buyers may disclose the terms hereof for
purposes of raising financing in order to consummate the
transactions hereof; provided, however, that any person to whom
disclosure of this Purchase and Sale Agreement is made is
notified of the confidential nature of such information. After
the Closing Date, the Parties may issue a joint press release or
similar communication describing the transactions contemplated
herein; provided, however, that INSO shall deliver a draft of the
proposed press release to Buyers at least two (2) business days
prior to the Closing Date, and INSO and Buyers shall use their
best efforts to agree upon the wording of the press release.
Notwithstanding anything to the contrary contained in this
Section 6.3(n), the parties hereto will not make, issue or
release any oral or written public announcement, filing or
statement concerning, or acknowledgment of the existence of, or
reveal the terms, conditions and status of the transactions
contemplated herein prior to the receipt by INSO of the Deposit.
6.4. Confidentiality. Except as set forth expressly in
Section 6.3(n) hereof, between the date of this Purchase and Sale
Agreement and the Closing Date, each party shall maintain in
confidence, and cause its directors, officers, employees, agents
and advisors to maintain in confidence, and not use to the
detriment of another party nor any of the INSO Subsidiaries any
written, oral or other information obtained in confidence from
another party in connection with this Purchase and Sale Agreement
or the transactions contemplated herein, unless such information
is already known to such party or to others not bound by a duty
of confidentiality or unless such information becomes publicly
available through no fault of such Party, unless the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation
of the transaction contemplated by this Purchase and Sale
Agreement or unless the furnishing or use of such information is
required by law or necessary or appropriate in connection with
any legal proceedings.
6.5. Best Efforts and Cooperation.
(a) Each party will use those efforts that a prudent
person desirous of achieving a result would use under similar
circumstances to ensure that such result is achieved as
expeditiously as possible in order to cause all conditions to the
consummation of the transactions contemplated herein to be
satisfied, and shall not take any action that would cause any of
its representations and warranties in this Purchase and Sale
Agreement not to be true and correct as of the Closing Date,
including in connection with the assignment of title to all
patent rights, trademark rights and copyrights in and to the
Sellers' Intellectual Property. Each party agrees to execute and
to deliver such instruments, in form and substance mutually
agreeable to the parties, as another party may reasonably require
in order to carry out the terms of this Purchase and Sale
Agreement or the transactions contemplated herein. The parties
acknowledge and agree that time shall be of the essence in
Closing the transactions contemplated herein.
(b) Each party agrees that it will and will cause
its affiliates or subsidiaries to execute and deliver from time
to time such additional instruments, documents, conveyances and
assurances and take such other actions as may be necessary or
otherwise reasonably requested by the other party to give effect
to the rights and obligations provided for herein.
(c) INSO shall cooperate, and shall cause its
affiliates and subsidiaries to cooperate, with Buyers and its
professional consultants in the conduct of the Post Closing
Audit, and shall make its and their Books and Records, and its
and their directors, officers, employees and independent
certified public accountants, available to Buyers and its
professional consultants in connection with the conduct of the
Post Closing Audit.
6.6. Notification of Certain Matters. If, prior to the
Closing, any party shall obtain Knowledge of any facts,
circumstances or information which, if they prevailed on the
Closing Date, would constitute a breach of a representation,
warranty or covenant made by such party or another party hereto,
or which would cause one or more of the Schedules to this
Purchase and Sale Agreement produced by such party to be
inaccurate, then such party shall promptly notify the other party
or parties of such breach or inaccuracy. In the case of any such
breach or inaccuracy, the party in breach shall promptly take
such action as may be appropriate under the circumstances to cure
such breach or resolve any such inaccuracy prior to the Closing
Date.
6.7. Tax Matters and Post-Closing Cooperation.
(a) INSO shall pay any transfer and sales Taxes, if
any, arising from or relating to the transactions contemplated by
this Purchase and Sale Agreement.
(b) In order to appropriately apportion any Taxes
relating to a period that includes (but that would not, but for
this section, close on) the Closing Date, the parties hereto
will, to the extent permitted by applicable law, elect with the
relevant taxing authorities to treat for all purposes the Closing
Date as the last day of the taxable period of the INSO
Subsidiaries that immediately precedes the Closing Date, and such
period shall be treated as a "Short Period" and a "Pre-Closing
Period" for purposes of this Purchase and Sale Agreement. In any
case where applicable law does not permit the INSO Subsidiaries
to treat the Closing Date as the last day of a Short Period, then
for purposes of this Purchase and Sale Agreement, the portion of
such Taxes that is attributable to the operations of the INSO
Subsidiaries for such Interim Period (as defined below) shall be
the total amount of such Taxes for the taxable period in question
multiplied by a fraction, the numerator of which is the number of
days in the Interim Period, and the denominator of which is the
total number of days in the entire taxable period in question.
"Interim Period" means, with respect to any Taxes imposed on the
INSO Subsidiaries on a periodic basis for which the Closing Date
is not the last day of a Short Period, the period of time
beginning on the first day of the actual taxable period that
includes (but does not end on) the Closing Date and ending on and
including the Closing Date. The parties shall be responsible to
pay their respective apportionment of the Taxes as calculated
pursuant to this Section 6.7(b).
(c) INSO agrees that it will cooperate with Buyers
and their respective representatives, in a prompt and timely
manner, in connection with (i) the preparation and filing of and
(ii) any administrative or judicial proceedings involving, any
return of tax or information filed or required to be filed by or
for the Sellers or Buyers for all taxable years through the
taxable year that includes the Closing Date.
(d) Buyers shall file and control any Returns of the
INSO Subsidiaries required to be filed after the Closing Date
with respect to any taxable year ending after the Closing Date.
Without further consideration, but at Buyers' expense for out of
pocket costs, including without limitation, professional fees,
INSO agrees that it shall provide, and shall cause its
accountants and other representatives, subject to customary
professional terms of engagement, to provide to Buyers, on a
timely basis, the information that it or the accountants or other
representatives have within their control and that may be
reasonably necessary or related to (i) the preparation of any and
all Returns required to be filed by Buyers and (ii) audits or
other tax determinations or proceedings by or before Governmental
Authorities, such information to be provided in the form in which
it has in the past been maintained by the applicable Seller, its
accountants or other representatives.
(e) Transfer Pricing Information. INSO agrees that
it shall provide and shall cause its accountants and other
representatives to provide to Buyers, on a timely basis,
information concerning the pricing for any transaction between
any of the Sellers and any company within INSO's control for any
partial tax period prior to the Closing that is not ended at the
Closing sufficient to establish that such pricing was on an arm's
length basis including, where reasonably necessary, information
on comparable transactions with unrelated parties and information
as to profit margins and markups. Where such information is
requested by any tax authority from any of the Sellers for a
period that has ended prior to the Closing, INSO agrees to
cooperate in providing such information to such tax authority.
(f) 338(h)(10) Election. The Buyers agree that they
will not make an election pursuant to Code Section 338(h)(10)
with respect to the transactions contemplated by this Purchase
and Sale Agreement.
6.8. Post Closing Audit. INSO agrees that to assist
KPMG with its post closing audit of the Business (the "Post
Closing Audit"), INSO shall prepare (i) balance sheets of the
Business as of December 31, 1997 and 1998 and related statements
of operations, changes in stockholder's equity and cash flows for
the years then ended, and (ii) balance sheets as of September 30,
1998 and 1999 and related statements of operations, changes in
stockholder's equity and cash flows for the nine (9) months ended
September 30, 1998 and 1999 and any other periods prior to the
Closing Date that Enigma may need to satisfy the filing
requirements of the Securities Act of 1933, as amended. INSO
agrees at the Buyers cost and expense to cooperate with KPMG in
the preparation of the Post Closing Audit and to take such
actions reasonably necessary for KPMG to complete the Post
Closing Audit.
6.9. Consents. (a) After the Closing, INSO agrees that it
shall (with Buyers' cooperation) use all commercially reasonable
efforts to secure each Unobtained Consent. With respect to each
contract, agreement, source code license or source code escrow
agreement (each, an "Unassigned Contract") to which there
exists an Unobtained Consent, if an INSO Subsidiary is not a
party to such Unassigned Contract, upon obtaining such consent,
INSO (or the subsidiary of INSO which is a party to such
Unassigned Contract) shall assign such Unassigned Contract to
INSO Providence and INSO Providence shall assume such Unassigned
Contract by an Assignment and Assumption Agreement in the form of
Exhibit 7.1(v) attached hereto.
(b) After the Closing, INSO agrees that it shall (with
Buyers' cooperation), with respect to each Uncompleted Severance
Contract, use all commercially reasonable efforts (i) to obtain
all consents, approvals or other actions from any party to such
contract to sever and replace such contract in the manner
specified in Section 7.1(m) and (ii) to replace such contract
with a Replacement Contract in the manner specified in Section
7.1(m).
6.10. Transition Training. After the Closing, INSO agrees
that it shall provide to Buyers, free of charge, a team of
developers, including ▇▇. ▇▇▇▇ ▇▇▇▇▇, to assist the Buyers in the
training of personnel and the implementation of computer software
and hardware. The team of developers, including ▇▇. ▇▇▇▇▇, shall
be available at a location in Boston, Massachusetts or
Providence, Rhode Island selected by Buyers, beginning on
November 15, 1999 and shall remain available during one (1) week
(40 man hours) from such date. INSO further agrees that it shall
make ▇▇▇▇ ▇▇▇▇▇ or another person who has similar or more
detailed knowledge of the architecture and coding schemes within
the Business including, without limitation, the DynaText and
DynaWeb products available as a consultant to Buyers following
the Closing Date. ▇▇. ▇▇▇▇▇ shall also be made available on a
reasonable basis and as reasonably requested by Buyers, to
provide, free of charge, a maximum of 50 additional hours of
consulting time from the period beginning on the Closing Date and
ending one (1) year from the Closing Date. Following the
utilization by Buyers of all 50 hours of consulting time and for
a period of time ending two (2) years after the Closing Date, ▇▇.
▇▇▇▇▇ or another person who has similar or more detailed
knowledge of the architecture and coding schemes within the
Business including, without limitation, the DynaText and DynaWeb
products shall be made available, on a reasonable basis and as
reasonably requested by Buyers with the provision of reasonable
notice, to provide additional hours of consulting services to
Buyers and shall be compensated for the provision of such
services at the rate of $250.00 per hour. Notwithstanding
anything to the contrary contained in this Section 6.10, if,
during the two (2) year period occurring after the Closing Date,
▇▇. ▇▇▇▇▇ ceases to be employed by INSO or any subsidiary or
affiliate thereof and the consulting services of ▇▇. ▇▇▇▇▇ are
requested by Buyers, INSO shall be required to substitute another
person who has similar or more detailed knowledge of the
architecture and coding schemes within the Business including,
without limitation, the DynaText and DynaWeb products for ▇▇.
▇▇▇▇▇. In addition, Buyers shall have the services of ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (to the extent ▇▇. ▇▇▇▇▇▇ is employed by Sellers)
available full time to assist in the transition of the Business
for a period of up to six months after the Closing Date. Buyers
shall be responsible for ▇▇. ▇▇▇▇▇▇'▇ base salary and any
expenses (including reimbursable travel and entertainment
expenses incurred by ▇▇. ▇▇▇▇▇▇) in connection with such
transitional services.
6.11. Customer Support. For a period of one hundred and
twenty (120) days following the Closing Date, INSO shall, at no
additional charge to Buyers, provide all reasonably requested
support including, without limitation, the support described on
Schedule 4.23 attached hereto in the transitioning of the
Customer Support Website and any related hosting services and the
800-customer support number to Buyers or a third party vendor
selected by Buyers in its sole discretion, including, without
limitation, the transfer and any necessary conversion of all
software, HTML/XML databases and consulting regarding technology
hosting requirements. In connection with maintenance of the
Customer Support Website, INSO shall enter into a License and
Maintenance Agreement in the form annexed hereto as Exhibit E
with respect to the DynaBase software described on Schedule 6.11
hereto (the "DynaBase Software"). Notwithstanding the
foregoing, INSO will provide reasonable support to Buyers, free
of charge, for a period of one (1) year following the Closing
Date with respect to the use of DynaBase Software. Thereafter,
INSO will continue to provide such support for use of the
DynaBase Software at the rate of (i) $10,000 for the period of
one (1) year following the first anniversary of the Closing Date,
and (ii) $15,000 for the period of one (1) year following the
second anniversary of the Closing Date. Following the third
anniversary of the Closing, INSO will provide such support at its
customary rates.
6.12. Certain Covenants of Buyers relating to DynaBase.
Subject to Section 11 of this Agreement, Buyers hereby grant to
INSO a worldwide, nonexclusive, irrevocable, royalty-free
license, under the patents listed on Schedule 6.12, to make (and
have made), to offer to sell and sell (and have offered for sale
and have sold), import (and have imported), distribute (and have
distributed) and use any product service, process or other
subject matter covered by the patents listed on Schedule 6.12
solely in the production, development and/or marketing of the
DynaBase Software and any non-material improvements thereto or
direct successor products thereof, solely to the extent such
patents would be necessarily infringed otherwise.
6.13. Domain Names; Links.
(a) INSO will use its commercially reasonable best
efforts to transfer to INSO Providence as soon as practicable
following the Closing the domain names ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ and
▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ (the "Domain Names"). Without limitation of the
foregoing, INSO will cooperate with Buyers and Network Solutions,
Inc. (and/or any other domain name registration authority) to
facilitate the filing and processing of all forms and other
formalities and tasks that are or become necessary to efficiently
and effectively complete the process of causing the transfer of
registration of the Domain Names to Buyers. Following the
Closing Date, INSO will not use the Domain Names for any purpose,
including without limitation as a domain name or as the name of
any Internet web site. For a period of one hundred twenty (120)
days following the Closing, INSO shall provide a link on its web
site (▇▇▇.▇▇▇▇.▇▇▇), referring inquiries relating to the Sellers'
Assets to a web address provided in writing by the Buyers.
(b) Buyers will use their commercially reasonable
best efforts to transfer to INSO as soon as practicable following
the Closing the domain name ▇▇▇.▇▇▇.▇▇▇ (the "EBT Domain
Name"). Without limitation of the foregoing, Buyers will
cooperate with INSO and Network Solutions, Inc. (and/or any other
domain name registration authority) to facilitate the filing and
processing of all forms and other formalities and tasks that are
or become necessary to efficiently and effectively complete the
process of causing the transfer of registration of the EBT Domain
Name to INSO. Following the Closing Date, Buyers and INSO
Providence will not use the EBT Domain Name for any purpose,
including without limitation as a domain name or as the name of
any Internet web site.
6.14. List of Retained Assets. Prior to the Closing, INSO
shall use good faith efforts to provide Buyers with as detailed a
list of the Retained Assets as possible and shall consult with
Buyers as to the inclusion on such list of any item that Buyers
do not consider to be a Retained Asset. Within twenty (20)
calendar days after the Closing, INSO shall provide to Buyers (i)
a complete and final list of the Retained Assets and (ii) the
Closing Balance Sheet.
6.15. Accounts Receivable. Payments received from a
customer of the Business, whether before or after the Closing
Date, shall be allocated to the oldest outstanding accounts
receivable for such customer, unless such customer has a good
faith dispute as to the propriety of a particular invoice. The
parties hereto agree to cooperate in good faith to resolve any
disputes regarding the allocation of payments. Upon receipt by
the Buyers of a payment not subject to a good faith dispute and
allocated to an outstanding account receivable to which INSO is
entitled, the Buyers shall remit such payment to INSO within
fifteen (15) days after the end of the calendar month in which
such payment is received by the Buyers.
6.16. Transfer of Third Party Software. INSO agrees that,
prior to the Closing, it shall, with respect to Third Party
Intellectual Property consisting of software that Sellers have
identified on Schedule 4.7 as not being capable of transfer out
of the control of INSO, consult with Buyers to assist them in
determining whether such software can, in fact, be transferred to
Buyers for use in the operation of the Business.
7. CONDITIONS PRECEDENT TO CLOSING
7.1. Conditions Precedent to Obligations of Buyers. The
obligation of the Buyers to purchase the Shares hereunder is
subject to the satisfaction of each of the following conditions.
Notwithstanding anything to the contrary contained herein, the
Buyers collectively shall have the right, in their sole
discretion, to waive all or any part of each such condition and
to close the transactions contemplated herein.
(a) Correctness of Representations and Warranties.
The representations and warranties of the Sellers contained in
this Purchase and Sale Agreement shall not be untrue or
inaccurate on the Closing Date in a manner which can reasonably
be expected to have a material adverse effect on the Business.
Buyers shall have received certificates dated the Closing Date
and executed on behalf of each Seller to the effect that all such
representations and warranties are true and accurate in all
material respects.
(b) Performance of Covenants and Agreements. All
covenants and agreements contained in this Purchase and Sale
Agreement, including any of the Exhibits and Schedules hereto,
required to be performed by any of the Sellers, INSO KK or Synex
prior to Closing shall have been performed in all material
respects. Buyers shall have received certificates dated the
Closing Date and executed on behalf of each Seller, INSO KK and
Synex stating that all such covenants have been performed.
(c) Opinion of Sellers' Counsel. Buyers shall have
received from each of INSO's attorney and INSO Providence's
attorney, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP an opinion dated the
Closing Date covering such matters as set forth in Exhibit B-1
attached hereto and from INSO's General Counsel an opinion dated
the Closing Date covering such matters as set forth in Exhibit B-
2 attached hereto. Such opinions shall be issued for the benefit
of the Buyers. In rendering such opinion, such counsel may rely
on advice from Governmental Authorities, factual certificates,
opinions of local counsel (so long as such local counsel opinions
are rendered for the benefit of the Buyers) and such other
matters as such counsel may deem reasonably appropriate and as
are acceptable to Buyers' counsel. Such opinions may also
contain such assumptions and qualifications as such counsel deems
appropriate and as are reasonably acceptable to Buyers' counsel.
(d) Good Title to Shares and Assets. INSO shall have
transferred all of the Shares to Enigma USA free and clear of all
Liens. Buyers shall have received evidence reasonably
satisfactory to it that all actions have been taken necessary to
vest in INSO Providence and ViewPort, upon transfer of the Shares
to the Buyers, title to all of the Sellers' Assets required for
the operation of the Business and to vest in the Buyers title to
all of the applicable Sellers' Assets in both cases, free and
clear of all Liens.
(e) Good Standing. Buyers shall have received
a certificate of good standing, or if not available for such
jurisdiction, a certificate of an executive officer of INSO as
to good standing with respect to each of the INSO Subsidiaries
and in each jurisdiction where such INSO Subsidiary is formed
and is required to be Qualified except those jurisdictions where
failure to be so Qualified would not have a material adverse
effect on the Business.
(f) No Prohibition of Transaction. No order shall
have been issued by any Governmental Authority to enjoin,
restrain or prohibit the Closing.
(g) Compliance with Law. The Sellers shall have
obtained any and all material permits, approvals and consents of
Governmental Authorities which counsel for Buyers may reasonably
deem necessary or appropriate so that consummation of the
transactions contemplated herein will be in compliance with
applicable laws and requirements of Governmental Authorities,
including those consents of Governmental Authorities specifically
set forth on Schedule 4.8.
(h) Consents. INSO shall have furnished Buyers
with evidence of receipt of all material consents required to
affect the sale of the Shares to enable INSO Providence, INSO KK,
ViewPort or Synex to continue to enjoy the material benefit of
the Sellers' Assets. Without limitation of the foregoing, INSO
shall have furnished Buyers with evidence of receipt of all
consents, approvals or other actions of third parties required to
be obtained in connection with the assignment of the contracts
identified in Schedule 4.4, 4.8, 4.14(a) or 4.14(b) and/or in
connection with the transactions contemplated in this Purchase
and Sale Agreement; provided, however, that with respect to each
Unobtained Consent, this Section 7.1(h) shall be deemed to have
been satisfied if INSO shall have used all commercially
reasonable efforts to secure such Unobtained Consent before the
Closing Date, including, without limitation, the notification of
Third Parties to request that they perform any necessary actions
required under the related agreements.
(i) [Intentionally omitted]
(j) Books and Records. Buyers shall have received
all of the Books and Records of the INSO Subsidiaries.
(k) Resignation of Officers and Directors. Buyers
shall have received written resignations, effective as of the
Closing, from the members of the Board of Directors and corporate
officers of each of ViewPort, INSO Providence, INSO KK and Synex
with the exception of ▇▇▇▇▇ Haitto and ▇▇▇▇▇ Lidbaum, as set
forth on Schedule 7.1 hereto, stating that such directors and
officers are resigning from their respective positions as
director or officer of ViewPort, INSO Providence, INSO KK and
Synex, or the Buyers shall have received evidence reasonably
satisfactory that each of such officers and directors has been
duly removed from his or her position(s) with ViewPort, INSO
Providence, INSO KK and/or Synex, as applicable.
(l) Certificates. Each of the Sellers shall have
delivered to the Buyers such certificates of their respective
officers, directors and others to evidence compliance with the
conditions set forth in this Section 7.1 as may be reasonably
requested by Buyers.
(m) Severance of Agreements. With respect to the
agreements marked "*" or "**" in Schedule 4.4, 4.14(a) or
4.14(b) (collectively, the "Split Contracts"), Sellers shall
have caused each such agreement to be replaced by an agreement
with INSO Providence in form and substance reasonably
satisfactory to Buyers (each a "Replacement Contract"), which
such agreement will relate solely to the Business, neither INSO
nor any subsidiary of INSO (other than the INSO Subsidiaries)
will be a party thereto or will have any rights thereunder, and
will not relate to any of the Retained Assets; provided, however,
that with respect to each Split Contract, this Section 7.1(m)
shall be deemed to have been satisfied if INSO shall have used
all commercially reasonable efforts to secure all necessary
consents, approvals and other actions of any Third Party to such
contract before the Closing Date, including, without limitation,
the notification of each such Third Party to request that they
perform any necessary actions required under their respective
agreements. All rights of INSO or any affiliate of INSO (other
than an INSO Subsidiary) under any Split Contract or Uncompleted
Severance Contract which are not a right of INSO Providence under
the related Replacement Contract shall constitute Retained
Assets. All obligations and liabilities of INSO or any affiliate
of INSO (other than an INSO Subsidiary) under any Split Contract
or any Uncompleted Severance Contract which are not an obligation
or a liability of INSO Providence under the related Replacement
Contract shall constitute Retained Liabilities.
(n) Existing Indebtedness and Intercompany
Indebtedness. As of the Closing, there shall be no indebtedness
owed by any INSO Subsidiary to (i) INSO or (ii) any subsidiary or
affiliate of INSO.
(o) Intellectual Property. To the extent that
INSO or any subsidiary of INSO (other than the INSO Subsidiaries)
owns any of the Sellers' Intellectual Property, all such Sellers'
Intellectual Property shall have been transferred to INSO
Providence pursuant to agreements in form and substance
reasonably satisfactory to Buyers. To the extent that any other
Person (other than any INSO Subsidiary) owns any of the Sellers'
Intellectual Property, all such Sellers' Intellectual Property
shall have been licensed to INSO Providence pursuant to
agreements in form and substance satisfactory to Buyers in their
sole discretion; provided, however, that as to any such item of
Seller's Intellectual Property as to which an Unobtained Consent
exists on the Closing Date, this Section 7.1(o) shall be deemed
to have been satisfied if INSO shall have used all commercially
reasonable efforts to secure all necessary consents, approvals
and other actions of any Third Party to the related license
before the Closing Date, including, without limitation, the
notification of each such Third Party to request that they
perform any necessary actions required under their respective
agreements. Without limitation of the foregoing, (i) INSO shall
have entered into a License Agreement (the "Multilicense") with
Buyers in the form of Exhibit D hereto with respect to that
certain plug-in to DynaText and DynaWeb, viewing and conversion
technology contained within DynaTag and searching technology
proprietary to Lernout & Hauspie Speech Products N.V., each as
described in more detail in the Multilicense, (ii) INSO shall
have entered into a License Agreement with Buyers in the form of
Exhibit E with respect to the DynaBase Software (the "DynaBase
License"), and (iii) INSO shall have entered into a License
Agreement (the "DPSL License") with the Buyers in the form
attached hereto as Exhibit F relating to the DPSL Software;
provided, however, at Buyers' election on the Closing Date or
within one (1) year thereafter, INSO shall have assigned to
Buyers all of its right, title and interest in and to the DPSL
Software and any DPSL Assets that Buyers may agree to acquire,
all at no additional cost to Buyers.
(p) INSO Overseas and INSO KK. Prior to the
Closing Date, INSO Overseas shall have transferred to INSO
Providence, free and clear of all Liens, all shares of the
capital stock of INSO KK owned by INSO Overseas. On the Closing
Date, INSO Providence shall be the owner of the INSO KK Shares.
(q) Employees. Either Buyers (i) shall have
entered into employment agreements with the Certain Employees or
(ii) the Certain Employees shall remain employed by the INSO
Subsidiaries on the Closing Date, such that at least 70% of the
Certain Employees shall be employees of Enigma or its affiliates
immediately following the Closing.
(r) Assets and Liabilities. Prior to the Closing
Date, (i) Sellers shall have caused to be removed from each INSO
Subsidiary the Retained Assets by the declaration by each INSO
Subsidiary of a dividend to INSO of the related Retained Assets,
provided, however, that the aggregate net worth of the INSO
Subsidiaries on the Closing Date, after giving effect to such
dividends but without giving effect to the removal of
receivables, shall be greater than zero, and (ii) each INSO
Subsidiary shall have assigned to INSO, and INSO shall have
assumed, by an Assignment and Assumption Agreement in the form of
Exhibit 6.3(m-1) annexed hereto, each of the Retained
Liabilities, (iii) INSO shall either have retained the Retained
Assets or have contributed each of the Retained Assets to a
wholly-owned subsidiary of INSO ("New Sub"), (iv) to the extent
that INSO has retained the Retained Assets, INSO shall have
assumed the Retained Liabilities, by an Assignment and Assumption
Agreement in the form of Exhibit 6.3(m-1) annexed hereto and (v)
to the extent that INSO shall have assigned to New Sub the
Retained Assets, New Sub shall have assumed such Retained
Liabilities, and INSO shall have guaranteed the performance of
New Sub's obligations relating thereto, by an Assignment and
Assumption Agreement in the form of Exhibit 6.3(m-2) annexed
hereto.
(s) Tokyo Lease. Buyers shall have received
evidence in form and substance reasonably satisfactory to Buyers
and their counsel that notice of termination has been made under
the lease listed on Schedule 4.16 relating to property located in
Tokyo, Japan and that INSO shall remain solely obligated to pay
any rent obligations until such termination is effective.
(t) Treatment of Source Code. With respect to the
source code of any of Sellers' Intellectual Property that has
been licensed to a third party or is subject to an escrow
arrangement, INSO shall have assigned to INSO Providence,
pursuant to agreements in form and substance satisfactory to
Buyers in their sole discretion, all of its rights and interests
in the source code licenses set forth in Schedule 4.4 under the
heading "License Agreement Under Which Source Code Licenses Are
Granted" and all source code escrow agreements set forth in
Schedule 4.4 under the heading "Source Code Escrow Agreements";
provided, however, that as to any such source code license or
source code escrow agreement as to which an Unobtained Consent
exists on the Closing Date, this Section 7.1(t) shall be deemed
to have been satisfied if INSO shall have used all commercially
reasonable efforts to secure all necessary consents, approvals
and other actions of any Third Party to the assignment of such
source code license or source code escrow agreement, as the case
may be, before the Closing Date, including, without limitation,
the notification of each such Third Party to request that they
perform any necessary actions required under their respective
agreements. Buyers shall have received a fully executed copy of
each such agreement.
(u) Material Adverse Changes. INSO shall have
notified Buyers of any material adverse changes in the Business,
including but not limited to, changes in the financial condition,
results of operations, net book value, business, assets or
prospects of the INSO Subsidiaries from the date of the Unaudited
Financial Statements to the Closing Date.
(v) Assignment of Contracts. Prior to the Closing
Date, INSO and each subsidiary of INSO (other than the INSO
Subsidiaries) shall have assigned to INSO Providence, and INSO
Providence shall have assumed, by an Assignment and Assumption
Agreement in the form of Exhibit 7.1(v) annexed hereto, each of
the contracts or other agreements listed in Schedule 4.4 hereto
to which INSO or a subsidiary of INSO (other than an INSO
Subsidiary) is a party; provided, however, that as to any such
contract or other agreement as to which an Unobtained Consent
exists on the Closing Date, this Section 7.1(v) shall be deemed
to have been satisfied if INSO shall have used all commercially
reasonable efforts to secure all necessary consents, approvals
and other actions of any Third Party to the assignment of such
contract or other agreement, as the case may be, before the
Closing Date, including, without limitation, the notification of
each such Third Party to request that they perform any necessary
actions required under their respective agreements. INSO shall
have delivered a fully executed copy of such Assignment and
Assumption Agreement to Buyers on or before the Closing Date.
7.2. Conditions Precedent to Obligation of Sellers. The
obligation of the Sellers under this Purchase and Sale Agreement
to sell the Shares is subject to the satisfaction of each of the
following conditions. Notwithstanding anything to the contrary
contained herein, the Sellers collectively shall have the right
to waive all or any part of each such condition and to close the
transactions contemplated herein.
(a) Correctness of Representations and Warranties.
There shall be no representation or warranty of Buyers contained
in this Purchase and Sale Agreement which is untrue or inaccurate
in any material respect on the Closing Date. INSO shall have
received a certificate dated the Closing Date and executed by or
on behalf of Buyers to the effect that all such representations
and warranties are true and accurate in all material respects.
(b) Performance of Covenants and Agreements. All
covenants and agreements contained in this Purchase and Sale
Agreement or any of the Exhibits required to be performed by
Buyers prior to Closing shall have been performed. INSO shall
have received a certificate dated the Closing Date and executed
by or on behalf of Buyers stating that such covenants have been
performed.
(c) Opinion of Buyers' Counsel. INSO shall have
received from Buyers' attorney, ▇▇▇▇▇ Raysman ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, an opinion dated the Closing Date, covering such
matters as set forth in Exhibit H, in the form set forth in
Exhibit H. Such opinion shall be issued for the benefit of INSO.
In rendering such opinions such counsel may rely on advice from
Governmental Authorities, factual certificates, opinions of local
counsel (so long as such local counsel opinions are rendered for
the benefit of INSO) and such other matters as such counsel may
deem reasonably appropriate and as are acceptable to INSO's
counsel. Such opinion may also contain such assumptions and
qualifications as such counsel deems appropriate and as are
acceptable to INSO's counsel.
(d) No Prohibition of Transaction. No proceeding or
regulation or legislation shall have been instituted, or to
Buyers' Knowledge, threatened or proposed before, nor any order
issued by, any Governmental Authority to enjoin, restrain,
prohibit or obtain substantial damages in respect of, relating
to, or arising out of, this Purchase and Sale Agreement or the
consummation of the transactions provided for herein.
(e) License. Buyers shall have entered into a
License Agreement with INSO in the form of Exhibit I hereto with
respect to the DynaTag conversion software, the DynaText
electronic publishing and dynamic delivery software and the
DynaWeb electronic publishing and dynamic delivery software, each
as described more fully in Exhibit I.
8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All statements contained herein or in any certificate, schedule
or other document delivered pursuant hereto shall be deemed
representations and warranties by the person delivering the same.
All representations and warranties shall survive for the later of
a period of two (2) years after the Closing Date or the
applicable statute of limitations with respect to the
representations contained in Section 4.5 and 4.17 (tax
warranties) and in each case, shall not be affected by any
investigation at any time made by or on behalf of the Buyers or
INSO.
9. INDEMNIFICATIONS; REMEDIES
9.1. By INSO. INSO shall indemnify, defend and hold
harmless each Buyer against any and all losses, claims,
liabilities, damages, actions, costs or expenses, including
reasonable attorneys' fees and costs ("Losses"), regardless of
whether an action has been filed or asserted against any Buyer
arising after the Closing Date, arising from, in connection with
or with respect to: (a) any misrepresentation, breach or
inaccuracy of any representation or warranty of any Seller under
this Purchase and Sale Agreement including, without limitation,
any item of Sellers' Intellectual Property (subject to the
limitations set forth in Section 4.4(e) and the last sentence of
Section 4.20) used in the course of the Business not being Year
2000 Compliant as of the date hereof and/or as of the Closing
Date, or (b) nonfulfillment of or failure to comply with any
agreement, condition or covenant on the part of any Seller, INSO
KK or Synex pursuant to this Purchase and Sale Agreement or in
any agreement or document delivered pursuant hereto or in
connection herewith or with the Closing of the transactions
contemplated herein (the "Buyers' Indemnified Losses"), (c) any
misrepresentation, breach or inaccuracy of any representation or
warranty of INSO under the DynaBase License, the DPSL License or
the Multilicense, (d) breach of any agreement listed on Schedule
4.4, 4.8, 4.14(a) or 4.14(b) or breach of any Unassigned
Contract by reason of the existence of any Unobtained Consent,
(e) the inability of INSO or any affiliate of INSO to assign any
agreement specified in the preceding clause (e) or any
Unassigned Contract by reason of an Unobtained Consent, (f) the
violation of any agreement specified in the preceding clause (e)
or any Unassigned Contract by the consummation of the
transactions contemplated by this Purchase and Sale Agreement,
or (g) the inability or failure of INSO or any affiliate of INSO
to replace any Uncompleted Severance Contract with a Replacement
Contract including, without limitation, any loss of revenue to
INSO Providence by reason of such Replacement Contract not being
provided; provided, however, that INSO shall have no liability
hereunder for (i) any Losses if such Losses would not have
arisen, but for any act or failure to act of any of the Buyers
and (ii) any material misrepresentation, breach or inaccuracy of
any representation or warranty of any Seller of which any of the
Buyers had notice on or prior to the Closing Date.
9.2. Buyers' Promise to Indemnify. Buyers shall indemnify,
defend and hold harmless INSO against any and all Losses,
regardless of whether an action has been filed or asserted
against INSO arising after the Closing Date, arising from, in
connection with or with respect to: (a) any misrepresentation,
breach or inaccuracy of any representation or warranty of Buyers
under this Purchase and Sale Agreement or (b) nonfulfillment of
or failure to comply with any agreement, condition or covenant
on the part of Buyers under this Purchase and Sale Agreement or
in any agreement or document delivered pursuant hereto or in
connection herewith or with the Closing of the transactions
contemplated herein (the "Sellers' Indemnified Losses" and
collectively with the Buyers' Indemnified Losses, the
"Indemnified Losses"); provided, however, that Buyers shall have
no liability for any Losses if such Losses would not have
arisen, but for any act or failure to act of any Seller and (ii)
any material misrepresentation, breach or inaccuracy of any
representation or warranty of any Buyer of which any of the
Sellers had notice on or prior to the Closing Date.
9.3. Indemnities for Tax Liabilities.
(a) INSO's Indemnity for Tax Liability to the US
and Foreign Jurisdictions. From and after the Closing Date, INSO
shall indemnify, defend, and hold the Buyers harmless from and
against any and all Taxes that may be imposed upon or assessed
against the Sellers or the Sellers' Assets:
(i) with respect to all taxable periods ending
on or prior to the Closing Date to the extent
not reflected on the Closing Balance Sheet; or
(ii) with respect to any and all Taxes of the
Sellers or the Sellers' Assets for periods prior
to the Closing Date or allocated to the INSO
Subsidiaries pursuant to Section 6.7(b) to the
extent not reflected on the Closing Balance Sheet.
INSO shall also pay and will indemnify and hold the
Buyers harmless from and against any losses, damages,
liabilities, obligations, deficiencies, costs and expenses
(including reasonable expenses and fees for attorneys and
accountants) (the "Related Costs") incurred in connection with
the Taxes for which INSO is responsible to indemnify the Buyers
pursuant to this Section 9.3(a) (or any asserted deficiency,
claim, demand, action, suit, proceeding, judgment or assessment,
including the defense or settlement thereof, relating to such
Taxes) or the enforcement of this Section 9.3(a).
(b) Tax Treatment of Indemnity Payments. The
Buyers and the Sellers agree to treat any indemnity payment made
pursuant to this Section 9.3, as an adjustment to the
consideration paid pursuant to Article 3 of this Purchase and
Sale Agreement for federal, state, local and foreign income tax
purposes.
9.4. Procedure for Indemnification of Third Party Claims.
(a) Notwithstanding anything contained in this
Agreement: the parties shall not be entitled to any
indemnification under Section 9.1 or 9.2 of this Agreement unless
the aggregate amount of Losses exceeds $50,000 in the aggregate.
Neither party shall be entitled to indemnification in respect of
the first $50,000 of Losses. The aggregate amount of payments by
INSO under Section 9.1 of this Agreement shall not exceed thirty
percent (30%) of the Purchase Price except for (i) Losses or
taxes as to which Buyers are entitled to indemnification under
Sections 9.1(d), 9.1(e), 9.1(f), 9.1(g) and 9.3 hereof or (ii)
any breach of Sections 4.2, 4.4, 4.5, 4.20, 6.4, and 6.7 hereof,
or (iii) any breach of the representations or warranties of INSO
contained in the DynaBase License, the DPSL License or the
Multilicense. Notwithstanding anything to the contrary contained
in this Purchase and Sale Agreement, the aggregate amount of all
payments by INSO under Article 9 of this Purchase and Sale
Agreement shall not exceed the Purchase Price.
(b) The provisions of this Section 9.4 shall govern
all indemnification obligations under the Purchase and Sale
Agreement. If there is, asserted by a third party, any claim,
liability or obligation (a "Claim") that, in the judgment of a
party indemnified pursuant to Section 9.1, 9.2 or 9.7 (an
"Indemnified Party") may give rise to any Indemnified Losses, or
if the Indemnified Party determines the existence of a Claim,
whether or not the same shall have been asserted, such
Indemnified Party shall give the party from whom indemnification
is sought (the "Indemnitor") notice pursuant to Section 12.2
within thirty (30) days of the assertion of any Claim, or within
ten (10) days of receipt of notice of the filing and service upon
the Indemnified Party of any lawsuit based upon such assertion,
or, with respect to a Claim not yet asserted against the
Indemnified Party, promptly upon the determination by an
executive officer of the Indemnified Party of the existence of
the same, which notice shall describe the Claim in reasonable
detail, and shall include the amount (estimated if necessary) of
the related Indemnified Loss. Failure by the Indemnified Party
to give timely notice pursuant to Section 12.2 shall not relieve
the Indemnitor of its obligations, except to the extent that the
Indemnitor is actually and materially prejudiced by such failure
to give timely notice. The Indemnified Party shall permit the
Indemnitor to assume the defense of such Claim and any litigation
resulting therefrom (and to prosecute by way of counterclaim or
third party complaint any claim against such third party arising
out of or relating to the Claim in question) upon receipt by the
Indemnified Party of Indemnitor's written acknowledgment of its
obligation to indemnify the Indemnified Party with respect to the
Claim and its agreement to assume the defense of all claims or
counts of such Claim. After giving such notice of assumption,
the Indemnitor shall not be liable under this Purchase and Sale
Agreement for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with such defense but the
Indemnitor shall be responsible for all such expenses incurred by
the Indemnified Party in connection with the Claim prior to such
assumption. Notwithstanding the foregoing, any Indemnified Party
shall be entitled to conduct its own defense at the cost and
expense of the Indemnitor if the Indemnified Party can establish,
by reasonable evidence, that the conduct of its defense by the
Indemnitor would reasonably be likely to prejudice the
Indemnified Party due to the nature of any claims or
counterclaims presented or by virtue of a conflict between the
interest of the Indemnified Party and the Indemnitor, and
provided further that in any event the Indemnified Party may
participate in such defense at its own expense. Counsel selected
by the Indemnitor or by the Indemnified Party to defend any Claim
shall be subject to the reasonable approval of the other party.
If the Indemnitor fails to assume the defense of any such Claim
as provided above within a reasonable time (which shall be such
period of time as will not, in the judgment of the Indemnified
Party, result in prejudice to the rights of the Indemnified
Party) after due notice has been given of a Claim, then until
such time as the Indemnitor shall make such assumption, the
Indemnified Party shall have the right to prosecute and conduct
its own defense by counsel of its choice, and in connection
therewith shall have full right to conduct the defense thereof
and to enter into any compromise or settlement thereof without
the consent of the Indemnitor. Such defense shall be at the cost
and expense of the Indemnitor if the Indemnitor subsequently
assumes such defense as provided above, or if it is subsequently
determined that the Indemnitor is or was obligated to defend or
indemnify the Indemnified Party with respect to such Claim. The
Indemnitor shall not, without the prior written consent of the
Indemnified Party, consent to the terms of any compromise or
settlement of any Claim or litigation defended by the Indemnitor
in accordance herewith (other than terms related solely to the
payment of money damages and only after the Indemnitor has
furnished the Indemnified Party with such evidence as the
Indemnified Party may reasonably request of the Indemnitor's
capacity to pay promptly the amount of such money damages at such
times as provided in the compromise or settlement) which consent
will not be unreasonably withheld or delayed in circumstances
where compromise or settlement would not materially adversely
affect the Indemnified Party. The Indemnitor shall not, except
with the prior written consent of the Indemnified Party, consent
to entry of any judgment or enter into any compromise or
settlement of an action or portion of an action relating to the
Indemnified Party which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the
Indemnified Party of an unconditional release in respect of such
Claim or litigation. If the Indemnitor chooses to defend any
Claim, the Indemnified Party shall cooperate with the Indemnitor
and make available to the Indemnitor any personnel or any books,
records or other documents within its control that are necessary
appropriate or reasonably requested for such defense. The
Indemnitor shall pay the Indemnified Party's actual out-of-pocket
expenses incurred in connection with such cooperation.
9.5. Exclusive Remedy. Following the Closing, the
rights and remedies of Buyers and INSO to indemnification under
this Article 9 shall be the exclusive remedy of such parties with
respect to claims based upon a breach or alleged breach of the
representations and warranties or nonfulfillment of or a failure
to comply with any agreement, condition or covenant contained
herein.
9.6. Subrogation. To the extent that an Indemnitor
reimburses an Indemnified Party for any Indemnified Loss
sustained by such Indemnified Party, such Indemnitor shall be
subrogated to all rights, claims and causes of action the
Indemnified Party may have against insurers with respect to any
insurance policy held by the Indemnified Party which may cover
such Indemnified Loss, including without limitation claims
brought under title policies, if permitted by such policies of
insurance.
9.7. Employees.
(a) Upon the consummation of the transactions
provided for herein, Buyers shall not have any obligation or
liabilities to or with respect to any employee, officer,
director, consultant or agent of any Seller, INSO KK or Synex for
all periods prior to Closing: (i) for payment of wages,
commissions, vacation pay (whether accrued or otherwise),
salaries, fees, bonuses, reimbursable employee business expenses,
pensions or contributions under any benefit plans or any other
compensation, bonus or perquisites, current or deferred or (ii)
under any health, profit sharing, pension, deferred compensation,
stock option, stock purchase, severance, retainer, consulting,
health, welfare or incentive plan or agreement any written or
unwritten plan, policy, arrangement or commitment providing for
fringe benefits to employees, including vacation, paid holiday,
personal leave, employee discount, perquisites, educational
benefit or similar programs (collectively, "Employee Claims").
(b) INSO shall indemnify, defend and hold harmless
each Buyer against any and all Losses, regardless of whether an
action has been filed or asserted against either Buyer arising
after the Closing Date, arising from, in connection with or with
respect to any Employee Claim.
(c) INSO shall indemnify, defend, hold harmless
each Buyer against any and all Losses, regardless whether an
action has been filed or asserted against any Buyer after the
Closing Date, arising from or in connection with an act or
omission by any Seller, INSO KK or Synex or any employee of
Synex, INSO KK or any Seller (including without limitation the
employees identified in Schedule 4.17) arising out of or relating
to (a) federal, state, or other laws or regulations for the
protection of persons who are members of a protected class or
category of persons, (b) sexual discrimination or harassment, (c)
employee benefits, (d) any representations, oral or written, made
by any Seller, INSO KK or Synex to any employee of Synex, INSO KK
or any Seller, and (e) any other aspect of the employment
relationship or the termination of the employment relationship
relating to the employees of any Seller, INSO KK or Synex arising
prior to the date such employee becomes an employee of a Buyer as
contemplated herein, if applicable, including but not limited to
claims for breach of an expressed or implied contract of
employment and claims relating to salaries, employee benefit
plans, severance, termination liabilities, claims arising under
the occupational health and safety or other applicable federal,
state or local laws or regulations, including plant closing or
mass layoff laws, the Employee Retirement Income Security Act of
1974 or the related provisions of the Internal Revenue Code of
1986.
10. TERMINATION
10.1 Termination Events. Subject to the provisions of
this Section 10.1, this Purchase and Sale Agreement may be
terminated by written notice given at or prior to the Closing in
the manner hereinafter provided:
(a) by mutual consent of each of the Buyers and
Sellers;
(b) [Intentionally Omitted.]
(c) by the Buyers on the Termination Date, if the
conditions set forth in Section 7.1 hereof have not been
satisfied on or by the Termination Date; provided, however, that
in the event such conditions are not satisfied on or by the
Termination Date, INSO shall have the right to extend, at its
sole discretion and without the return of the Deposit, the
Termination Date, for thirty (30) days, and each of the dates set
forth in Section 3.1 hereof shall be amended, mutatis mutandis to
reflect such delay ; or
(d) by INSO on the Termination Date, if the
conditions set forth in Section 7.2 hereof have not been
satisfied on or by the Termination Date;
provided, however, that in the case of Sections 10.1(c) and
10.(d), no party may terminate this Purchase and Sale Agreement
if such party is the cause of the failure of the other party to
meet any of its respective conditions precedent to Closing. As
used herein the "Termination Date" means October 29, 1999.
10.2. Effect of Termination; Liquidated Damages.
(a) In the event this Purchase and Sale Agreement
is terminated pursuant to this Article 10, all further
obligations of the parties hereunder shall terminate, except that
the provisions of Sections 6.3(n), 6.4 and 10.2 shall survive and
continue in full force and effect. Nothing in this Section 10.2
shall relieve any party from liability for any willful breach of
its obligations under this Purchase and Sale Agreement prior to
the termination hereof. Any termination of this Purchase and
Sale Agreement pursuant to Section 10.1 shall be merely an
election to terminate this Purchase and Sale Agreement and shall
not be deemed to be an election of remedies.
(b) In the event this Purchase and Sale Agreement is
terminated by reason of the Buyers not having satisfied one or
more of the conditions specified in Section 7.2 hereof and
Sellers shall have satisfied all of the conditions specified in
Section 7.1 hereof, Buyers shall pay to Sellers, in recognition
of the losses, costs and damages which Buyers reasonably
anticipate would be incurred by Sellers by reason of such failure
on the part of Buyers, as liquidated damages and not as a
penalty, the amount of $1,000,000, and Sellers shall be permitted
to retain the Deposit in payment in full of such liquidated
damages. Notwithstanding anything to the contrary contained in
this Purchase and Sale Agreement, in the event this Purchase and
Sale Agreement is terminated, the payment of such amount by
Buyers or the retention of the Deposit pursuant to this Section
10.2(b) will be the Sellers' sole remedy with respect to the
failure of the Buyers to close the transactions contemplated by
this Purchase and Sale Agreement.
(c) In the event this Purchase and Sale Agreement is
terminated by reason of the Sellers not having satisfied one or
more of the conditions specified in Section 7.1 hereof and Buyers
shall have satisfied all of the conditions specified in Section
7.2 hereof, other than the performance of any covenant with
respect to Section 5.7 hereof, Sellers shall refund the Deposit
to Buyers within one (1) business day of notice of termination of
this Purchase and Sale Agreement by wire transfer of immediately
available funds on such date. Notwithstanding anything to the
contrary contained in this Purchase and Sale Agreement, the
refund of the Deposit pursuant to this Section 10.2(c) will be
the Buyers' sole remedy with respect to the failure of the
Sellers to close the transactions contemplated by this Purchase
and Sale Agreement.
11. NON-COMPETE, NON-PROMOTE AND NON-DEVELOP
11.1 Non-Competition. For a period of twenty-four (24)
months after the Closing Date, INSO will not, directly or
indirectly, through any subsidiary, joint venture, partnership or
similar entity:
(a) (i) promote, market or license software products
to the technical publications departments of manufacturing
entities, (ii) design changes to or design specifications for any
software product promoted, marketed or licensed to the technical
publication departments of manufacturing entities; (iii) promote,
market or license software products for the purpose of
distributing, publishing or displaying electronic technical
maintenance manuals and instructional maintenance documentation
or (iv) design changes to or design specifications for software
products for the primary purpose of distributing, publishing or
displaying electronic technical maintenance manuals and
instructional maintenance documentation;
(b) promote, market, license, design changes to or
make design specifications for software products, including,
without limitation, Dual Prism, for the primary purpose of making
such software products more efficient at handling and
distributing technical information in Standard General ▇▇▇▇-up
Language ("SGML") form for electronic technical maintenance
manuals and/or instructional maintenance documentation ; or
(c) directly or indirectly perform, supervise,
procure, or otherwise be involved in browser customization work
for interactive or online electronic technical maintenance
manuals.
Notwithstanding the foregoing, the parties hereto understand and
acknowledge that (i) Buyers shall, for the two (2) year period
beginning on the Closing Date, continue to operate in good faith
and on a basis consistent with Sellers' past practice with
respect to Sellers' distributor in Finland (Index Information
Technologies), (ii) INSO shall not be required, in connection
with the licensing or sale of its products to limit the rights
that the purchaser or licensee of such software obtains upon such
sale or license, (iii) INSO shall be permitted to engage in the
promotion, marketing and licensing of its software products on an
unrestricted basis to Lucent Technologies and its affiliates, but
solely in connection with an application to distribute the
technical maintenance manuals for the current INSO Product Data
Management System via the World Wide Web and (iv) Sellers shall
be entitled to present their information distribution
technologies products to Nokia and its affiliates, directly or
indirectly, without limitation under this Section 11.1 without
the prior written approval of Buyers.
12. GENERAL PROVISIONS
12.1. Further Assurances. Each party shall, upon request of
another party, from time to time after the Closing, execute and
deliver, and use its reasonable best efforts to cause other
persons to execute and deliver all such further documents and
instruments, and will do or use its reasonable best efforts of
cause to be done such other acts, as such other party may
reasonably request more completely to consummate and make
effective the contemplated transactions, including any necessary
license agreements not specifically described herein and any
agreement with respect to the transfer of domain names among the
parties.
12.2. Effectiveness of Agreement. This Purchase and
Sale Agreement will have no force or effect on the parties hereto
unless prior to the close of business on the day occurring two
(2) business days following the execution of this Purchase and
Sale Agreement the Deposit is received by wire transfer in
immediately available funds by INSO.
12.3. Notices. Notices and other communications
provided for herein shall be in writing (including wire,
telecopy or similar writing) and shall be sent, delivered, or
telecopied to:
If to Enigma or Enigma USA, to:
Enigma Information Systems
Ltd.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇'▇▇▇-▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Voice: ▇▇▇▇ (▇) ▇▇▇-▇▇▇▇
Fax: ▇▇▇▇ (▇) ▇▇▇-▇▇▇▇
Enigma, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ Raysman ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Voice: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Seller to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
INSO Corporation
▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
Voice: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Advokatfirman ▇▇▇▇▇ KB ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Smalandsgatan 20 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP
Box 1703 One International ▇▇▇▇▇
▇-▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SwedenAttention: Tele: ▇▇▇-▇▇▇-▇▇▇▇
Voice: Fax: ▇▇▇-▇▇▇-▇▇▇▇
Fax:
12.4. Assignment. Neither the Purchase and Sale
Agreement nor any of the rights and obligations of the parties
hereunder, shall be assigned, conveyed or otherwise transferred
by any party without the prior written consent of the other
parties. Nothing contained in this Purchase and Sale Agreement,
express or implied, is intended to confer upon any person or
entity other than the parties hereto and their successors in
interest and permitted assignees, any rights or remedies under or
by reason of this Purchase and Sale Agreement unless expressly so
stated to the contrary.
12.5. Entire Purchase and Sale Agreement. This Purchase
and Sale Agreement and the Schedules, Exhibits and certificates
and other documents specifically referred to herein or required
to be delivered pursuant to the terms hereof represent the entire
Purchase and Sale Agreement of the parties hereto with respect to
the subject matter hereof superseding all prior Agreements,
understandings, discussions, negotiations and commitments of any
kind; provided, however, that the Mutual Confidentiality
Agreement, dated as of June 18, 1999, by and between INSO and
Enigma (the "Confidentiality Agreement") shall remain in full
force and effect. This Purchase and Sale Agreement may not be
amended or supplemented, nor may any rights hereunder be waived,
except in a writing signed by each of the parties.
12.6. Section Headings. The section headings in this
Purchase and Sale Agreement are included for convenience only,
are not a part of this Purchase and Sale Agreement and shall not
be used in construing it.
12.7. Severability. In the event that any provision or any
part of any provision of this Purchase and Sale Agreement is held
to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not affect the validity or
enforceability of any other provision or part hereof.
12.8. Counterparts. This Purchase and Sale Agreement may
be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
12.9. Governing Law. The validity, interpretation,
enforceability, and performance of this Purchase and Sale
Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to
conflicts of law principles.
12.10. Jurisdiction; Consent to Service of Process. Each
party hereby irrevocably and unconditionally submits, for itself
and its property, to the jurisdiction of any state court or
Federal court of the United States of America sitting in the
District of Massachusetts in the Commonwealth of Massachusetts,
and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Purchase and Sale
Agreement, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such
Massachusetts state or federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
IN WITNESS WHEREOF, the parties have duly executed this Purchase
and Sale Agreement as of the date first above mentioned.
ENIGMA INFORMATION SYSTEMS LTD.
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
ENIGMA, INC.
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
INSO CORPORATION
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
INSO PROVIDENCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
VIEWPORT AB
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
TABLE OF CONTENTS
DEFINITIONS; CONSTRUCTION OF AGREEMENT
Defined Terms
Terms Generally
Schedules
SALE AND PURCHASE OF SELLERS' SHARES; CLOSING
Agreement to Sell
The Closing
CONSIDERATION AND PAYMENT
Consideration
Closing Balance Sheet Dispute Resolution
REPRESENTATIONS AND WARRANTIES OF SELLERS
Organization, Good Standing and Authority
Ownership of Shares
Financial Condition
Intellectual Property
Tax Matters
Material Misstatements or Omissions
Ownership of Assets
Third Party Consents
No Litigation
No Undisclosed Liabilities
Books and Records
No Violation
Bank Accounts and Investments
Contracts and Other Agreements
Permits and Licenses
Real Property Leases
Employees; Employee Benefits
Brokers and Finders
Insurance
Year 2000
Assignment of Licenses
Customer Lists
Customer Support Site
Subsidiaries
ViewPort Acquisition Agreements
Non-Interference Disabling Procedures
Additional Pass-Through of Warranties
REPRESENTATIONS AND WARRANTIES OF BUYER
Authority
Organization and Good Standing
No Violation
Third Party Consents
No Litigation
Brokers and Finders
PRE AND POST-CLOSING COVENANTS AND AGREEMENTS
Filings
No Corporate Borrowings or Liens
Conduct of the Business
Confidentiality
Best Efforts and Cooperation
Notification of Certain Matters
Tax Matters and Post-Closing Cooperation
Post Closing Audit
Transition Training
Customer Support
Certain Covenants of Buyers relating to DynaBase
Domain Names; Links
List of Retained Assets
Accounts Receivable
Transfer of Third Party Software
CONDITIONS PRECEDENT TO CLOSING
Conditions Precedent to Obligations of Buyers
Treatment of Source Code
Conditions Precedent to Obligation of Sellers
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
INDEMNIFICATIONS; REMEDIES
By INSO
Buyers' Promise to Indemnify
Indemnities for Tax Liabilities
Procedure for Indemnification of Third Party Claims
Exclusive Remedy
Subrogation
Employees
TERMINATION
Termination Events
Effect of Termination; Liquidated Damages
NON-COMPETE, NON-PROMOTE AND NON-DEVELOP
Non-Competition
GENERAL PROVISIONS
Further Assurances
Effectiveness of Agreement
Notices
Assignment
Entire Purchase and Sale Agreement
Section Headings
Severability
Counterparts
Governing Law
Jurisdiction; Consent to Service of Process
EXHIBITS & SCHEDULES
Exhibits
Exhibit 3.1-1 - Promissory Note
Exhibit 3.1-2 - Form of Stock Pledge Agreement
Exhibit 6.3(m-1) - Assignment and Assumption Agreement
Exhibit 6.3(m-2) - Assignment and Assumption Agreement
Exhibit 7.1(v) - Assignment and Assumption Agreement
Exhibit B-1 - Sellers' Counsel Opinion
Exhibit B-2 - INSO General Counsel Opinion
Exhibit D - Multilicense Agreement
Exhibit E - DynaBase License Agreement
Exhibit F - DPSL License Agreement
Exhibit H - Buyers' Counsel Opinion
Exhibit I - DynaTag License Agreement
Schedules
Schedule 1 - Sellers Intellectual Property
Schedule 1.1(vv) - Third Party Intellectual Property
Schedule 4.2 - Shares
Schedule 4.3 - Certain Changes - KPMG Adjustments
Schedule 4.4 - Seller's Licenses; Source Code
Schedule 4.5 - Tax Matters
Schedule 4.7 - Sellers' Assets
Schedule 4.8 - Required Consents
Schedule 4.9 - Threatened Proceedings
Schedule 4.13 - Swedish Bank Accounts
Schedule 4.14(a) - Agreements
Schedule 4.14(b) - Agreements Containing Non-Assignment Clauses
Schedule 4.15 - Permits and Licenses
Schedule 4.16 - Leases
Schedule 4.17 - List of Employees
Schedule 4.21 - Assignment of Licenses
Schedule 4.22 - Customers
Schedule 4.23 - Customer Support Site
Schedule 4.24 - Subsidiaries
Schedule 6.3(a) - List of Employees to be Offered Employment by Enigma
Schedule 6.3(b) - Persons To Whom Buyer May Offer Employment Within 3 Months
Schedule 6.11 - DynaBase Software Description
Schedule 6.12 - DynaText and DynaWeb Patents to be Licensed
Schedule 7.1 - Board of Directors and Corporate Officers
FIRST AMENDMENT OF
PURCHASE AND SALE AGREEMENT
FIRST AMENDMENT OF PURCHASE AND SALE AGREEMENT (the
"Amendment"), made as of the 28th day of October 1999, by and
among Enigma Information Systems Ltd., a corporation organized
under the laws of Israel and having an address at ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ("Enigma"); Enigma Information
Retrieval Systems, Inc., a Delaware corporation and the wholly
owned subsidiary of Enigma, having an address at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Enigma Information USA"); INSO
Corporation, a corporation organized and existing under the laws
of Delaware and having an address at ▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ("INSO"); INSO Providence Corporation, a
Delaware corporation and the wholly owned subsidiary of INSO
("INSO Providence"), having an address at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; ViewPort Development AB, a corporation
organized and existing under the laws of Sweden and having an
address at Stora ▇▇▇▇▇▇▇ ▇▇, ▇-▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
("ViewPort").
W I T N E S S E T H:
WHEREAS, Enigma, Enigma, Inc., INSO, INSO Providence and
ViewPort entered into an Agreement of Purchase and Sale dated as
of October 18, 1999 (the "Agreement;" all terms defined in the
Agreement, unless otherwise defined, having the same meanings when
used in this Amendment);
WHEREAS, the subsidiary of Enigma that intended to execute
the Agreement is Enigma Information USA, not Enigma, Inc., and the
execution of the Agreement by Enigma, Inc. was in error and is of
no force and effect;
WHEREAS, the parties hereto intend to correct such error by
amending the Agreement such that Enigma Information USA becomes a
party to the Agreement in place and instead of Enigma, Inc. and
assumes all of the rights and obligations of Enigma, Inc.
thereunder; and
WHEREAS, the parties hereto also desire to amend (i)
Schedules 4.17 and 6.3(a) to the Agreement to reflect the
addition of ▇▇▇▇▇ ▇▇▇▇▇▇ as an individual to be offered employment
by Enigma Information USA and (ii) Schedules 4.2, 4.13 and 4.17 to
correct typographical errors contained therein.
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. The Agreement (including without limitation all
exhibits and schedules thereto) is hereby amended by deleting the
words "Enigma, Inc." wherever they appear therein and by
substituting therefor the words "Enigma Information Retrieval
Systems, Inc."
2. Schedule 4.2 to the Agreement is hereby amended to read
as set forth in Annex 1
3. Schedule 4.13 to the Agreement is hereby amended to
read as set forth in Annex 2
4. Schedule 4.17 to the Agreement is hereby amended to
read as set forth in Annex 3 hereto.
5. Schedule 6.3(a) to the Agreement is hereby amended to
read as set forth in Annex 4 hereto.
6. By its execution of this Amendment, Enigma Information
USA acknowledges, confirms and agrees that it assumes all rights
and obligations of Enigma, Inc. under the Agreement as if Enigma
Information USA had executed the Agreement as of October 18, 1999.
7. Except as hereby amended, the Agreement is hereby
ratified and confirmed to be in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this
Amendment as of the date hereinabove set forth.
ENIGMA INFORMATION SYSTEMS LTD.
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
ENIGMA INFORMATION RETRIEVAL
SYSTEMS, INC.
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
INSO CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
INSO PROVIDENCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
VIEWPORT DEVELOPMENT AB
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director