ASSET PURCHASE AGREEMENT
dated as of August 2, 2000
by and among
DATA SYSTEMS & SOFTWARE INC,
a Delaware corporation,
("Stockholder")
INTERNATIONAL DATA OPERATIONS, INC.,
a Delaware corporation,
("Seller")
and
ECLIPSE NETWORKS, INC.,
a Delaware corporation,
("Purchaser")
Covering the Purchase of Substantially
All of the Assets of
CinNetic,
a division of International Data Operations, Inc.
TABLE OF CONTENTS
Page
1. GENERAL DEFINITIONS.......................................................1
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.............................3
2.1 Purchase and Sale...................................................3
2.2 Delivery of Assets and Transfer Documents...........................3
2.3 Closing; Closing Date...............................................4
3. PURCHASE PRICE............................................................4
3.1 Price and Payment...................................................4
3.2 Purchase Price Adjustment...........................................4
3.3 Excluded Assets.....................................................5
3.4 Assumed Obligations.................................................5
3.5 Excluded Liabilities and Obligations................................6
3.6 Transfer Taxes......................................................6
3.7 Allocation of Purchase Price........................................6
3.8 Escrow Amount.......................................................6
4. REPRESENTATIONS AND WARRANTIES OF SELLER..................................7
4.1 Organization........................................................7
4.2 Ownership...........................................................7
4.3 Financial Statements................................................8
4.4 Events Since the Balance Sheet Date.................................8
4.5 Competing Interests.................................................9
4.6 Notes and Accounts Receivable......................................10
4.7 Employee Matters...................................................10
4.8 Contracts and Agreements...........................................10
4.9 Effect of Agreement................................................12
4.10 Properties, Assets and Leasehold Estates...........................12
4.11 Intellectual Property..............................................13
4.12 Suits, Actions and Claims..........................................13
4.13 Licenses and Permits; Compliance with Governmental Regulations.....14
4.14 Authorization......................................................14
4.15 No Untrue Statements...............................................14
4.16 Records............................................................15
4.17 Work-In-Process....................................................15
4.18 Brokers and Finders................................................15
4.19 Adverse Facts......................................................15
4.20 Deposits...........................................................15
4.21 Workers' Compensation Data.........................................15
4.22 Customer List......................................................15
4.23 No Royalties.......................................................16
4.24 Business...........................................................16
4.25 Subsidiaries.......................................................16
4.26 Non-Competes.......................................................16
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER..............................16
5.1 Incorporation......................................................16
5.2 Authorization......................................................16
5.3 Brokers and Finders................................................17
6. PRE-CLOSING COVENANTS....................................................17
6.1 General............................................................17
6.2 Notices and Consents...............................................17
6.3 Operation of Business..............................................17
6.4 Preservation of Business...........................................17
6.5 Full Access........................................................18
6.6 Notice of Developments.............................................18
6.7 Exclusivity........................................................18
7. CONDITIONS TO OBLIGATION TO CLOSE........................................18
7.1 Conditions to Obligation of the Purchaser..........................18
7.2 Conditions to Obligations of the Seller............................20
8. TERMINATION..............................................................20
8.1 Termination of Agreement...........................................20
8.2 Effect of Termination..............................................21
9. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER ................21
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10. SPECIAL CLOSING AND POST-CLOSING COVENANTS...............................22
10.1 Delivery of Funds and Other Assets Collected by Purchaser;
Power of Attorney..................................................22
10.2 Delivery of Funds and Other Assets Collected by Seller or
Shareholder; Power of Attorney.....................................22
10.3 Employment.........................................................22
10.3 Office Space.......................................................23
10.3 Further Assurances.................................................23
11. INDEMNITIES..............................................................23
11.1 Indemnity by Seller................................................23
11.2 Limitation of Certain Liability....................................24
11.3 Notice of Claim....................................................25
11.4 Right to Defend....................................................25
11.5 Cooperation by Purchaser...........................................26
11.6 Payment............................................................26
11.7 Indemnity by Purchaser.............................................26
12. LEASE AGREEMENT..........................................................26
13. NON-COMPETITION..........................................................27
13.1 Agreement not to Compete...........................................27
13.2 Permitted Activities...............................................27
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................27
15. ASSIGNMENT OF CONTRACTS..................................................28
16. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.........................29
16.1 New Employees of Purchaser.........................................29
16.2 Hiring of Employees................................................29
16.3 Existing Employee Benefit Plans....................................29
16.4 Indemnity Concerning Accrued Benefits..............................29
17. EXPENSES.................................................................29
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18. FURTHER ACTIONS..........................................................30
19. NOTICES..................................................................30
20. GENERAL PROVISIONS.......................................................32
20.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS....................32
20.2 Severability.......................................................32
20.3 Entire Agreement...................................................32
20.5 Assignment.........................................................33
20.6 Amendment; Waiver..................................................33
20.7 Gender; Numbers....................................................33
20.8 Counterparts.......................................................33
20.9 Telecopy Execution and Delivery....................................33
20.10 Arbitration........................................................34
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 2.1 List of Assets
Schedule 2.1(A) Excluded Assets
Schedule 3.4 Assumed Liabilities
Schedule 3.7 Allocation of Purchase Price
Schedule 4.2 Ownership of Assets
Schedule 4.3(A) Financial Statements
Schedule 4.3(B) Exceptions to GAAP on Financial Statements
Schedule 4.4 Events Since the Balance Sheet Date
Schedule 4.5 Competing Interests
Schedule 4.7A Employees
Schedule 4.7B Employee Benefit Plans
Schedule 4.8 Contracts and Agreements
Schedule 4.8A Non-assignable Contracts and Agreements
Schedule 4.9 Effect of Agreement
Schedule 4.11 Intangible Property
Schedule 4.12 Suits, Actions and Claims
Schedule 4.13 Licenses and Permits
Schedule 4.17 Work-in-Process
Schedule 4.21 Workers' Compensation Report
Schedule 4.22 Customer List
Schedule 4.22A Non-continuing Customers
Schedule 7.1(c) Third Party Consents
Schedule 7.1(h) Personnel to Execute Compliance Agreement
Schedule 7.1(o) Employees Covered by Transition Services Agreement
Schedule 13 Non-competition
EXHIBITS
Exhibit A Form of General Warranty Bill of Sale
Exhibit B Form of Escrow Agreement
Exhibit C Form of Compliance Agreement
Exhibit D Opinion of Seller's Counsel
Exhibit E Form of Transition Services Agreement
-vi-
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
this 2nd day of August, 2000, by and among DATA SYSTEMS & SOFTWARE INC., a
Delaware corporation ("Stockholder"), INTERNATIONAL DATA OPERATIONS, INC., a
Delaware corporation ("Seller") and ECLIPSE NETWORKS, INC., a Maryland
corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller is the owner of all right, title and interest in and to the
assets described on Schedule 2.1 hereto (the "Assets"), with such assets being
substantially all of the assets currently used in the CinNetic division operated
by Seller (the "Business");
WHEREAS, Stockholder is the owner of all of the outstanding capital stock
of Seller and is reasonably expected to benefit from the transactions
contemplated by this Agreement;
WHEREAS, Seller desires to sell the Assets to Purchaser and Purchaser
desires to acquire the Assets from Seller, all pursuant to this Agreement as
hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement, and to set forth certain additional
agreements related to the transactions contemplated hereby;
Agreement
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
1.1 Affiliate of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.2 Best Knowledge of Seller means actual knowledge of either Seller
or Stockholder after reasonable inquiry and investigation.
1.3 Control and all derivations thereof shall mean the possession,
direct or indirect, of either (i) the ownership of or ability to direct the
voting of, as the case may be, fifty-one percent (51%) or more of the
equity interests, value or voting power in any Person or (ii) the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.
1.4 Court Order means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in
any arbitration proceeding.
1.5 GAAP shall mean generally accepted accounting principles,
consistently applied.
1.6 Governmental Authority shall mean any and all foreign, federal,
state or local governments, governmental institutions, public authorities
and governmental entities and courts.
1.7 Governmental Requirement shall mean any and all laws (including,
but not limited to, applicable common law principles), statutes,
ordinances, codes, rules, regulations, orders, judgments, writs,
injunctions, decrees, decisions or pronouncements, promulgated, issued,
passed or set forth by any Governmental Authority.
1.8 Intellectual Property shall mean all of the following as they are
related primarily to the Business: (i) patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade
names, corporate or company names, logos, slogans and Internet domain
names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications
and renewals for any of the foregoing; (v) trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
business and marketing plans, and customer and supplier lists and related
information); and (vi) computer software (including but not limited to
data, data bases and documentation).
1.9 License Agreements shall mean (i) the Sun-Netscape Alliance PS
Subcontracting Agreement (which incorporates and/or supercedes the Netscape
Professional Services Subcontract Agreement) and (ii) the Sun Channel
Agreement #43503-3 (Authorized Software Enterprise Partner) (which
incorporates and/or supercedes the Netscape Level 3 Business Partner
Agreement). The principal terms of each of the License Agreements are
summarized on Schedule 1.9 hereto.
2
1.10 Material (whether or not capitalized) shall, where appropriate in
context of its use in making the representations and warranties set forth
in Article III, be deemed to mean an amount of money greater than $20,000
individually or $50,000 in the aggregate.
1.11 Net Working Capital of Business shall mean the sum of all current
Assets transferred pursuant to this Agreement, excluding cash, related
party accounts, notes receivable, accounts receivables more than 60 days
past due, and income tax related accounts, less all current assumed
liabilities of the Business as of Closing, including, without limitation,
accrued Taxes through the Closing Date and any payments due to employees,
subcontractors, vendors or customers as a result of the transactions
contemplated hereby, in each case as determined in accordance with past
practices of Seller (which past practices are in accordance with GAAP).
1.12 Person shall mean any natural person, any Governmental Authority
and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not
limited to, corporations, partnerships, joint ventures, joint stock
companies, trusts, estates, companies and associations, whether organized
for profit or otherwise.
1.13 Taxes shall mean any and all income, excise, franchise or other
taxes and all other charges or fees imposed or collected by any
Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies,
assessments and other charges with respect thereto.
1.14 Transfer Period shall mean the period commencing on the Closing
Date and expiring 90 days after the Closing Date.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING DATE.
2.1 Purchase and Sale. Seller hereby agrees to sell, assign, transfer
and deliver to Purchaser all right, title and interest in and to the Assets
(as more fully described on Schedule 2.1 hereto), free and clear of any
liens or encumbrances of any nature whatsoever (except for any liens,
encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder). Purchaser hereby agrees to purchase from Seller the Assets in
consideration for the Purchase Price (as hereinafter defined) payable as
set forth in Section 3 below.
2.2 Delivery of Assets and Transfer Documents. At the Closing
(hereinafter defined in Section 2.3), Seller shall have taken all steps
necessary to put Purchaser in possession of the Assets, free and clear of
any liens or encumbrances of any nature whatsoever (except for liens,
encumbrances or obligations, if any, expressly assumed by Purchaser
hereunder), and have
3
delivered to Purchaser (i) a duly executed general warranty bill of sale
covering the Assets, in the form of and containing the same terms and
provisions as the General Warranty Bill of Sale attached hereto as Exhibit
A, (ii) duly executed assignments for all accounts receivable, patents,
trademarks, trade names and similar intangible property included in the
Assets, in form and substance acceptable to Purchaser and in recordable
form as appropriate, and (iii) such other duly executed transfer and
release documents which Purchaser has reasonably requested to evidence the
transfer of the Assets to Purchaser free and clear of any liens or
encumbrances of any nature whatsoever (except for liens, encumbrances or
obligations, if any, expressly assumed by Purchaser hereunder).
2.3 Closing; Closing Date. Subject to the terms and conditions herein
contained, the consummation of the transactions referred to above shall
take place (the "Closing") at the offices of Hogan & Hartson L.L.P., 555
13th Street, N.W., Washington, D.C., on a date and time mutually agreed
upon by the parties, but in no event later than August 7, 2000 (the
"Closing Date").
3. PURCHASE PRICE.
3.1 Price and Payment.
(a) The aggregate consideration for the Assets and the
Non-Competition Agreements (set forth in Section 13 below) shall be an
amount equal to $1,300,000 (the "Purchase Price"), subject to the
working capital and contract adjustments provided in Sections 3.2(a)
and (b) below.
(b) At the Closing, Purchaser shall cause the Purchase Price to
be paid to Seller or its designee by wire transfer of immediately
available funds.
3.2 Purchase Price Adjustments.
(a) Working Capital Adjustment. The Purchase Price shall be
increased or decreased on a dollar-for-dollar basis by the amount by
which the Net Working Capital of the Business is more or less than
$250,000 on the Closing Date (the "Net Working Capital Adjustment").
The Net Working Capital of the Business shall be initially determined
at the time of Closing by an estimate of Seller in good faith and any
adjustment as a result thereof shall reduce or increase the Purchase
Price payable pursuant to Section 3.1 above; provided, however, that
any increase in the Purchase Price payable at Closing shall be
initially limited to 75% of such increase (with the full amount of
such increase to be deferred until such time as the E&Y Determination
(as defined below) or the Final Computation (as defined below) has
been made. Following the Closing, the Net Working Capital of the
Business shall be subsequently determined within sixty
4
(60) days after the Closing Date by Ernst & Young, LLP, in accordance
with the terms of this Agreement (at the expense of Purchaser), which
determination (the "E&Y Determination") shall be submitted in writing
to Seller and Purchaser no later than sixty (60) days after the
Closing. If within ten (10) days after receipt of the E&Y
Determination, Seller delivers written notice to Purchaser that Seller
disagrees with the E&Y Determination (the "Disagreement Notice"), then
Seller and Purchaser shall attempt in good faith to mutually determine
the correct amount of the Net Working Capital of Seller within ten
(10) days after Seller delivers the Disagreement Notice to Purchaser.
If Seller and Purchaser cannot in good faith mutually determine the
correct amount of the Net Working Capital of Seller within such ten
(10) day period, then Seller and Purchaser will mutually select
another accounting firm, to be considered a "Big Six" accounting firm,
to compute the Net Working Capital of Seller, which computation (the
"Final Computation") shall be final, conclusive and binding on the
parties. In the event of a Final Computation, Purchaser and Seller
shall jointly pay the expense of the Final Computation. If Seller does
not deliver the Disagreement Notice on a timely basis to Purchaser,
Seller shall be deemed to agree with and accept the E&Y Determination,
which shall be final and conclusive against Purchaser and Seller. Any
required payment by Seller or Purchaser by virtue of a Net Working
Capital Adjustment (net of any preliminary adjustment made at Closing)
shall be made by Seller or Purchaser, as the case may be, within ten
(10) days of the receipt of the E&Y Determination or the Final
Computation.
(b) Contract Adjustment. The Purchase Price shall be adjusted
upward by Five Hundred Thousand Dollars ($500,000) (the "Adjustment
Amount") in the event that Seller shall have provided to Purchaser
within the Transfer Period evidence reasonably satisfactory to
Purchaser that (i) each of the License Agreements is in full force and
effect in accordance with the terms and provisions represented by
Seller to Purchaser on the Closing Date on Schedule 1.9 hereto, (ii)
each of the License Agreements has been transferred into the name of
Purchaser and each such transfer has been consented to by the other
party to such agreement or Purchaser shall have entered into
substantially similar agreements on substantially similar terms, and
(iii) Purchaser shall be entitled to enjoy all the rights and benefits
currently enjoyed by the Business under each of the License Agreements
as described by Seller to Purchaser on Schedule 1.9 hereto. Any
required payment by Purchaser to Seller pursuant to this Section
3.2(b) shall be made in cash within ten (10) days of Seller's
satisfaction in full of the requirements of this Section 3.2(b). At
Closing, Purchaser shall deliver the Adjustment Amount to the Escrow
Agent pursuant to Section 3.8 below.
3.3 Excluded Assets. The Assets shall not include any of the assets
listed on Schedule 2.1A hereto (collectively, the "Excluded Assets").
3.4 Assumed Obligations. Purchaser hereby assumes the obligations of
Seller under all contracts and agreements transferred by Seller to
Purchaser under this Agreement that are listed and described on Schedule
3.4 hereto (the "Assumed Liabilities and Obligations");
5
provided that Purchaser specifically does not assume any liabilities of
Seller under such contracts or agreements with respect to any breaches of
such contracts or agreements occurring on or before the Closing Date or any
damages to third parties resulting from acts, events or omissions occurring
on or before the Closing Date.
3.5 Excluded Liabilities and Obligations.
(a) Except as expressly set forth in Section 3.4 above, Purchaser
shall not assume and shall not be liable or responsible for any debt,
obligation or liability of the Business, Seller, Stockholder or any
other Affiliate of Seller, or any claim against any of the foregoing
parties, of any kind, whether known or unknown, contingent, absolute
or otherwise arising out of or relating to the conduct of the Business
prior to the Closing Date (the "Excluded Liabilities").
(b) Except for the Assumed Liabilities and Obligations expressly
provided for in Section 3.4 hereof, Seller and Stockholder shall
jointly and severally forever defend, indemnify and hold harmless
Purchaser from and against any and all liabilities, obligations,
losses, claims, damages (including incidentals and consequential
damages), costs and expenses (including court costs and reasonable
attorney's fees) related to or arising from the Business prior to the
Closing Date.
3.6 Transfer Taxes. Purchaser and Seller acknowledge and agree that
the consideration (including, without limitation the Purchase Price and any
adjustments thereto) is deemed to have been paid for any sales, use,
transfer or other similar tax purposes by Purchaser to Seller pursuant to
this Agreement, and includes and is inclusive of any and all sales, use,
transfer or other similar tax imposed as a result of the consummation of
the transactions contemplated by this Agreement. Seller and Stockholder
hereby agree to pay and discharge, and to indemnify Purchaser against, and
protect, save and hold Purchaser harmless from, any liability, obligation,
claim, assessment or deficiency (whether or not ultimately successful) for
any and all sales, use, transfer or other similar taxes (and any and all
interest, penalties, additions to tax and fines thereon or related thereto)
resulting or arising from or incurred in connection with the consummation
of the sale of the Assets pursuant to this Agreement.
3.7 Allocation of Purchase Price. The Purchase Price shall be
allocated as set forth in Schedule 3.7 attached hereto, and made a part
hereof.
3.8 Escrow Amount. Pursuant to the Escrow Agreement to be entered into
among Purchaser, Seller and First Union National Bank, N.A. (the "Escrow
Agent"), substantially in the form of Exhibit B hereto, the Adjustment
Amount shall be delivered to the Escrow Agent at Closing. All fees and
expenses of the Escrow Agent shall be paid by Purchaser.
6
The Adjustment Amount shall be held pursuant to the terms of the Escrow
Agreement and shall be available for payment to Seller in the event Seller
satisfies the requirements of Section 3.2(b) above. In the event Seller
satisfies its obligations under Section 3.2(b) in full prior to the
expiration of the Transfer Period, Purchaser agrees to instruct the Escrow
Agent to disburse to Seller the Adjustment Amount (together with any
interest on the Adjustment Amount) within 10 days of Seller's satisfaction
of Section 3.2(b), but in no event later than the last day of the Transfer
Period. In the event Seller fails to satisfy its obligations under Section
3.2(b) in full prior to the expiration of the Transfer Period, the
Adjustment Amount (together with any interest on the Adjustment Amount)
shall be returned to Purchaser. Purchaser and Seller agree that each will
execute and deliver such reasonable instruments and documents as are
furnished by any other party to enable such furnishing Party to receive
those portions of the Adjustment Amount to which the furnishing Party is
entitled under the provisions of the Escrow Agreement and this Agreement
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller and Stockholder hereby
jointly and severally represent and warrant to Purchaser as follows:
4.1 Organization. Stockholder is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted except where any such failure would not reasonably
be expected to have a material adverse effect on the financial condition,
operating results, assets, or business prospects of the Business. Seller is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is duly authorized, qualified and
licensed under all applicable Governmental Requirements to carry on its
business in the places and in the manner as now conducted except where any
such failure would not reasonably be expected to have a material adverse
effect on the financial condition, operating results, assets, or business
prospects of the Business. Seller is qualified to do business in every
jurisdiction in which the failure to so qualify might reasonably be
expected to have a material adverse effect on the financial condition,
operating results, assets, or business prospects of the Business.
4.2 Ownership. Seller owns all of the Assets constituting the
Business. Except as listed on Schedule 4.2 hereto, there are no options,
rights or other grants currently outstanding for the acquisition or
purchase of any of the Assets. All of the properties and assets necessary
for the continued operation of the Business as currently conducted
(including, without limitation, all books, records, computers and computer
software and data processing systems) are included in the Assets being
purchased by Purchaser pursuant to this Agreement and are owned, leased or
licensed by the Business and are reasonably suitable for the purposes for
which they are currently being used. All of the outstanding capital stock
of Seller is owned by the Stockholder.
7
4.3 Financial Statements. Seller has delivered to Purchaser copies of
the following financial statements for the Business, all of which financial
statements are included in Schedule 4.3(A) hereto:
(a) Unaudited Summary Balance Sheet of the Business (the
"Reference Balance Sheet") as of June 30, 2000 (the "Balance Sheet
Date") and Unaudited Summary Statement of Operations of the Business
for the six-month period ended June 30, 2000;
(b) Unaudited Summary Balance Sheet of the Business as of
December 31, 1999; and
(c) Unaudited Summary Statement of Operations of the Business for
the year ended December 31, 1999.
Except as set forth on Schedule 4.3(B) hereto, the financial statements supplied
to Purchaser by Seller, whether or not included in Schedule 4.3(A) hereto, have
been prepared in accordance with GAAP and present fairly the consolidated
financial condition of the Business as of the dates thereof and for the periods
indicated thereon. The Reference Balance Sheet reflects, as of the Balance Sheet
Date, all liabilities, debts and obligations of any nature of Seller related to
the Business and the Assets, whether accrued, absolute, contingent or otherwise,
and whether due, or to become due, including, but not limited to, liabilities,
debts or obligations on account of taxes or other governmental charges, or
penalties, interest or fines thereon or in respect thereof, to the extent such
items are required to be reflected on such balance sheet under GAAP.
4.4 Events Since the Balance Sheet Date. Except as set forth on
Schedule 4.4 hereto, since the Balance Sheet Date, there has not been:
(a) any change in the condition (financial or otherwise) or in
the properties, assets, liabilities, business or prospects of the
Business, except normal and usual changes in the ordinary course of
business, none of which, individually or in the aggregate, has had a
material adverse effect on the condition (financial or otherwise),
properties, assets, liabilities, business or prospects of the
Business;
(b) any labor trouble, strike or any other occurrence, event or
condition affecting the employees of the Business that adversely
affects the condition (financial or otherwise) of the Assets or the
Business.
8
(c) any material breach or default by Seller or Stockholder or,
to the Best Knowledge of Seller, by any other party, under any
agreement or obligation included in the Assets or by which any of the
Assets are bound;
(d) any damage, destruction or loss (whether or not covered by
insurance), which materially adversely affects the Assets or the
Business;
(e) any material change in the types, nature, composition or
quality of the services of the Business, any material adverse change
in the contributions of any of the service lines of the Business to
the revenues or gross income of such Business, or any material adverse
change in the sales, revenue or net income of the Business;
(f) any transaction related to or affecting the Assets or the
Business other than transactions in the ordinary course of business of
Seller; or
(g) any other occurrence, event or condition that has materially
adversely affected (or can reasonably be expected to have a material
adverse effect on) the Assets or the Business.
4.5 Competing Interests. Except as set forth on Schedule 4.5 hereto,
neither Seller or Stockholder, nor, to the Best Knowledge of Seller, any
stockholder or officer of Seller, and no Associate (as hereinafter defined)
of Seller:
(a) owns, directly or indirectly, any equity interests in, or is
a director, officer or employee of, or consultant to, any entity which
is a competitor, supplier or customer of the Business, or, to the Best
Knowledge of Seller, a competitor, supplier or customer of Purchaser
or an Associate of Purchaser (except for ownership, if any, of less
than one percent (1%) by value of the outstanding capital stock of any
corporation the capital stock of which is traded on a nationally
recognized securities exchange); or,
(b) owns, directly or indirectly, in whole or in part, any
property, asset or right which is associated with the Assets or the
Business, or which Seller is presently operating or using in
connection with or the use of which is necessary for or material to
the operation of the Business.
For purposes of this Agreement, the term "Associate" shall mean with
respect to a Person (other than an individual), any Person Controlling,
Controlled by or under common Control with such Person, and any director or
officer of such Person and any Associate of any such Person.
9
4.6 Notes and Accounts Receivable. All notes and accounts receivable
of Seller which are part of the Assets are reflected properly on the
Business's books and records, are valid receivables subject to no setoffs
or counterclaims, are presently current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject
only to a reserve for bad debts set forth on the face of the Reference
Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the date of Closing in accordance with the past
customs and practices of the Business.
4.7 Employee Matters. Schedule 4.7(A) hereto, sets forth a true and
complete list of the names of and current annual compensation paid by
Seller to each corporate or administrative (non-temporary) employee of
Seller utilized in connection with the operation of the Business. Except as
specifically described on Schedule 4.7(B) hereto, neither Seller nor
Stockholder have any employee benefit plans (including, but not limited to,
pension plans and health or welfare plans), arrangements or understandings,
whether formal or informal relating to any employees of the Business.
Purchaser will have no liability with respect to any such plans as a result
of the transactions contemplated by this Agreement. Seller does not now and
has never contributed to a "multi-employer plan" as defined in section
4001(a)(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Seller is not a party to any collective bargaining or
other union agreements. Seller has not, within the last five (5) years, had
or been threatened with any union activities, work stoppages or other labor
trouble with respect to its employees engaged in the Business which had or
might have had a material adverse effect on the Business. Other than wage
increases in the ordinary course of business, since the Balance Sheet Date,
Seller has not made any commitment or agreement to increase the wages or
modify the conditions or terms of employment of any of the corporate or
administrative (non-temporary) employees of Seller used in connection with
the Business.
4.8 Contracts and Agreements. Schedule 4.8 hereto, sets forth a true
and complete list of and briefly describes (including termination date) all
of the following contracts, agreements, leases, licenses, plans,
arrangements or commitments, written or oral, that relate to the Assets or
the Business and are currently in force (including all amendments,
supplements and modifications thereto):
(a) all contracts, agreements, or commitments in respect of the
sale of services;
(b) all offers, tenders or the like outstanding and capable of
being converted into an obligation of Seller by the passage of time or
by an acceptance or other act of some other person or entity or both;
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(c) all sales or agency agreements or franchises or legally
enforceable commitments or obligations with respect thereto;
(d) all collective bargaining agreements, union agreements,
employment agreements, consulting agreements or agreements providing
for the services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements or
commitments of any nature whatsoever, whether or not legally binding,
and all agreements with any present or former officer or stockholder
of Seller;
(f) all loan or credit agreements, indentures, guarantees (other
than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all
equipment financing obligations, lease and lease-purchase agreements
relating to or affecting the Assets or the Business;
(g) all leases related to the Assets or the Business, and all
other contracts, agreements or legally enforceable commitments
relating to or affecting the Assets or the Business;
(h) all performance bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit
and guaranties;
(i) all consent decrees and other judgments, decrees or orders,
settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(j) all accounts, notes and other receivables, and all security
therefor, and all documents and agreements related thereto;
(k) all contracts or agreements of any nature with any 5% or
greater stockholder of Seller, or any Associate (as defined in Section
4.5 above) of such stockholders; and
(l) all contracts, commitments and agreements entered into
outside the ordinary course of the operation of the Business.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments and all other such items included in the Assets, but not
specifically described above, (collectively, the "Contracts") are valid, binding
and in full force and effect in accordance with their terms and
11
conditions and there is no existing default thereunder or breach thereof by
Seller, or, to the Best Knowledge of Seller, by any other party to the
Contracts, or any conditions which, with the passage of time or the giving of
notice or both, will constitute such a default by Seller, or, to the Best
Knowledge of Seller, by any other party to the Contracts, and the Contracts will
not be breached by or give any other party a right of termination as a result of
the transactions contemplated by this Agreement. Seller is not aware of any
reason why any of such Contracts which relate to the sale of goods or services
(i) will result in a loss to Purchaser on completion by performance or (ii)
cannot readily be fulfilled or performed by Purchaser with the Assets on time
without undue or unusual expenditure of money or effort. Copies of all of the
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the Contracts listed in Schedule 4.8 hereto, have
been delivered by Seller to Purchaser, and such copies and descriptions are
true, complete and accurate and include all amendments, supplements or
modifications thereto. To the Best Knowledge of Seller, other than under the
provisions of any Contract with a stated termination date prior to the Closing
Date, no purchaser of services under any Contract will stop or decrease its rate
of buying services (on an annualized basis) from Seller prior to the Closing
Date. No one has advised Seller that any Contract assigned to Purchaser by
Seller pursuant to the transactions contemplated by this Agreement will be
terminated by any customer prior to, on or after the Closing or that any
existing relationship with any customer will expire upon termination of any
existing Contract. Except as set forth on Schedule 4.8A hereto, all of the
Contracts may be assigned to Purchaser without the approval or consent of any
Person.
4.9 Effect of Agreement. Except as set forth on Schedule 4.9, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (i) result in any breach of any
of the terms or conditions of, or constitute a default under, the
Certificate of Incorporation or Bylaws of Seller or Stockholder, or any
commitment, mortgage, note, bond, debenture, deed of trust, contract,
agreement, license or other instrument or obligation to which either Seller
or Stockholder is now a party or by which Seller or Stockholder or any of
their properties or assets may be bound or affected; (ii) result in any
violation of any Governmental Requirement; (iii) cause Purchaser to lose
the benefit of any right or privilege included in the Assets; (iv) relieve
any Person of any obligation (whether contractual or otherwise) or enable
any Person to terminate any such obligation or any right or benefit enjoyed
by Seller or to exercise any right under any agreement in respect of the
Assets or the Business; or (v) require notice to or the consent,
authorization, approval or order of any Person (except as may be
contemplated by the last sentence of Section 4.8 hereof). To the Best
Knowledge of Seller, the business relationships of clients, customers and
suppliers of the Business will not be adversely affected by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.10 Properties, Assets and Leasehold Estates. Seller has good and
marketable title to all the Assets, free and clear of all mortgages, liens,
pledges, conditional sales agreements, charges, easements, covenants,
assessments, options, restrictions and encumbrances of any nature
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whatsoever. All leases pursuant to which real property is leased in
connection with the Business are in good standing, valid and enforceable
with respect to their terms.
4.11 Intellectual Property. Schedule 4.11 lists and briefly describes
all material Intellectual Property owned or utilized by the Business that
is being conveyed to Purchaser pursuant to this Agreement. Seller has
furnished Purchaser with copies of all material license agreements
(including software licensing agreements) to which the Business is a party,
either as licensor or licensee, with respect to any Intellectual Property.
Subject to the terms of such license agreements, the Business has legal
title to or the right to use all the Intellectual Property and all
inventions, processes, designs, formulae, trade secrets and know-how
utilized in the conduct of the Business as presently conducted and as
currently planned by the Business without material impediment, without the
payment of any royalty or similar payment. Seller has not transferred,
encumbered or licensed to any Person any rights to own or use any portion
of the items listed on Schedule 4.11 hereto or any other intangible
property included in the Assets. To the Best Knowledge of Seller, none of
the items listed on Schedule 4.11 hereto or any other intangible property
included in the Assets is being infringed upon by any Person. The Seller
has not received notice of any charge, claim, demand, complaint, action,
suit, hearing, proceeding or investigation which challenges the Business's
ownership or licensing of any Intellectual Property, the Business's current
uses of its Intellectual Property or its compliance with the terms and
conditions of any contracts, licenses, agreements or Court Orders involving
the Intellectual Property. The Business owns and possesses all right, title
and interest in and to, or has the right to use pursuant to a valid
license, all the Intellectual Property necessary for the operation of the
Business as presently conducted and all such Intellectual Property is set
forth on Schedule 4.11. Except as set forth on Schedule 4.11, the
Business's use of each item of the Intellectual Property owned or licensed
by the Business (i) will not be terminated or materially modified as a
result of the sale of the Assets and the assignment thereof contemplated
hereby; (ii) does not infringe upon the rights of any other Person based on
the Business's current use of such items or its currently proposed use of
such items without material impediment; (iii) is in compliance with the
material terms and conditions of all license or other agreements relating
to such items; and (iv) does not violate any material Governmental
Requirement or Courts Orders applicable to the Business or, to the Best
Knowledge of Seller, any other party to any material license or other
agreement relating to such Intellectual Property. The Company is not in
default (whether or not after the giving of notice or the lapse of time or
both) under any material license, contract or other agreement relating to
any Intellectual Property.
4.12 Suits, Actions and Claims. Except as set forth in Schedule 4.12
hereto, (i) there are no suits, actions, claims, inquiries or
investigations by any Person, or any legal, administrative or arbitration
proceedings in which the Business is engaged or which are pending or, to
the Best Knowledge of Seller, threatened against or affecting the Business
or Assets or any of its properties, or which question the validity or
legality of the transactions contemplated hereby, (ii) to
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the Best Knowledge of Seller, no basis or grounds for any such suit,
action, claim, inquiry, investigation or proceeding exists, and (iii) there
is no outstanding order, writ, injunction or decree of any Governmental
Authority against or affecting Seller with respect to the Business or
Assets. Without limiting the foregoing, Seller has no knowledge of any
state of facts or the occurrence of any event forming the basis of any
present or potential claim against Seller or Stockholder with respect to
the Business or the Assets.
4.13 Licenses and Permits; Compliance with Governmental Regulations.
Schedule 4.13 hereto, sets forth a true and complete list of all licenses
and permits necessary for the conduct of the Business. Seller has all such
licenses and permits validly issued to it and in its name, and all such
licenses and permits are in full force and effect. No violations are or
have been recorded in respect of such licenses or permits and no proceeding
is pending or, to the Best Knowledge of Seller, threatened seeking the
revocation or limitation of any of such licenses or permits. All such
licenses and permits that are necessary for the conduct of the Business are
included in the Assets. To the Best Knowledge of Seller, Seller has
complied with all Governmental Requirements applicable to the Business, and
all Governmental Requirements with respect to the distribution and sale of
products and services by the Business.
4.14 Authorization. Each of Seller and Stockholder has full legal
right, power and authority to enter into and deliver this Agreement and to
consummate the transactions set forth herein and to perform all the terms
and conditions hereto to be performed by it. The execution and delivery of
this Agreement by each of Seller and Stockholder and the performance by
them of the transactions contemplated herein has been duly and validly
authorized by all requisite corporate action of Seller and Stockholder, and
this Agreement has been duly and validly executed and delivered by Seller
and Stockholder and is the legal, valid and binding obligation of each of
Seller and Stockholder, enforceable against each of them in accordance with
its terms, except as limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity.
4.15 No Untrue Statements. The statements, representations and
warranties of Seller set forth in this Agreement and the Schedules hereto
and in all other documents and information furnished to Purchaser and its
representatives in connection herewith do not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements, representations and warranties made herein and therein, taken
as a whole, not misleading. There is no fact that is not disclosed to
Purchaser in this Agreement or the Schedules hereto that adversely affects
or, so far as Seller can now reasonably foresee, could adversely affect the
condition (financial or otherwise) of any of the Assets or the Business or
the ability of Seller or Stockholder to perform their obligations under the
Agreement.
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4.16 Records. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements quotations, correspondence and historic
revenue data of the Business since January 1, 1998, have been kept properly
and contain records of all matters required to be included therein by any
Governmental Requirement, and such books, records and minutes are true,
accurate and complete and (except for corporate minute books and stock
records) are included in the Assets. Seller agrees to store for a period of
at least three (3) years from the Closing Date all of Seller's tax and
accounting records (other than those solely with respect to the Business
which are included in the Assets) for the three (3) year period prior to
the Closing Date. Such records shall be made available for inspection and
copying by Purchaser upon reasonable advance notice and during reasonable
business hours. Seller further agrees that if Seller intends to destroy any
of such tax or accounting records during the period ending six (6) years
after the Closing Date, Seller will first notify Purchaser and provide
Purchaser with an opportunity to take possession of such records within a
period of not less than thirty (30) days following such notice.
4.17 Work-In-Process. Except as set forth on Schedule 4.17 hereto,
Seller has not received any payments with respect to any work-in-process
with respect to the Business.
4.18 Brokers and Finders. No broker or finder has acted for Seller or
Stockholder in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf
of Seller or Stockholder.
4.19 Adverse Facts. Seller is not aware (after having made all
reasonable inquiries) of any fact or matter not disclosed in this Agreement
or in the Schedules hereto, other than generally known facts about the
industry or economy, which might be reasonably expected to materially
adversely affect the Assets or the Business after Closing.
4.20 Deposits. Neither Seller nor Stockholder now hold, nor does
either Seller or Stockholder expect to receive between the date hereof and
the Closing Date, any deposits or prepayments by third parties with respect
to any of the Assets or the Business which are not reflected as liabilities
on the Reference Balance Sheet.
4.21 Workers' Compensation Data. All data set forth in the workers'
compensation report of Seller attached hereto as Schedule 4.21 is true,
correct and complete as of the date thereof.
4.22 Customer List. Schedule 4.22 hereto sets forth a true, correct
and complete list of all customers of the Business to which Seller has sold
or provided services in excess of
15
$50,000 per annum during the three (3) years immediately preceding the date
hereof. This list provides an accurate statement of the gross revenues
received from each such customer by the Business during the fifteen (15)
month period ended June 30, 2000 and an estimate of those for the two month
period ended July 31, 2000. To the Best Knowledge of Seller, no current
customer of the Business listed on Schedule 4.22 hereto, which has agreed
to a continuing relationship with the Business, will stop or decrease its
rate of buying services (on an annualized basis) from Seller prior to the
Closing Date, or to the extent any such customer becomes a customer of
Purchaser pursuant to the transactions contemplated by this Agreement, from
Purchaser after the Closing Date. Schedule 4.22A hereto sets forth a list
of all the customers of the Business known to the Seller that will not be
continuing customers of the business.
4.23 No Royalties. No royalty or similar item or amount is being paid
or is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business or the Assets.
4.24 Business. All of the revenues generated by Seller from the
Business have been earned and received by Seller, and not through or in any
Subsidiary (as hereinafter defined).
4.25 Subsidiaries. Seller does not own any Subsidiaries. As used in
this Agreement, the word "Subsidiary" means any corporation or other
organization, whether incorporated or unincorporated, of which such party
or any other Subsidiary of such party is a general partner, or at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries.
4.26 Non-Competes. None of the employees of the Business are parties
to any confidentiality, non-disclosure, non-solicitation and
non-competition agreements with Seller or Stockholder.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
5.1 Incorporation. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Purchaser has full legal right and corporate power
to enter into and deliver this Agreement and to consummate the transactions
set forth herein and to perform all the terms and conditions hereof to be
performed by it. This Agreement has been duly executed
16
and delivered by Purchaser and is a legal, valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency, or other laws affecting
generally the rights of the creditors or by principals of equity. The
execution and delivery of this Agreement by Purchaser and the performance
by Purchaser of the transactions contemplated herein have been duly and
validly authorized by all requisite corporate action of Purchaser.
5.3 Brokers and Finders. No broker or finder has acted for Purchaser
in connection with this Agreement or the transactions contemplated by this
Agreement and, no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser.
6. PRE-CLOSING COVENANTS. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
6.1 General. Each of the parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable to consummate
and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 7 below).
6.2 Notices and Consents. Seller will give any notices to third
parties, and Seller and Stockholder will each use its best efforts to
obtain any third party consents that the Purchaser may request in
connection with the matters pertaining to Seller or Stockholder disclosed
or required to be disclosed by this Agreement, including those items set
forth on Schedule 4.8A. Each of the parties will take any additional action
that may be necessary, proper or advisable in connection with any other
notices to, filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties that it may be
required to give, make or obtain.
6.3 Operation of Business. Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any
transaction outside the ordinary course of business. Without limiting the
generality of the foregoing, Seller will not engage in any practice, take
any action, embark on any course of inaction, or enter into any transaction
of the nature described in Section 4.4 hereof.
6.4 Preservation of Business. Seller will keep the business and
properties of the Business substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
17
6.5 Full Access. Seller will permit representatives of Purchaser to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Seller, to all premises,
properties, books, records, contracts, tax records, and documents of or
pertaining to the Business.
6.6 Notice of Developments. Seller will give prompt written notice to
Purchaser of any material development affecting the assets, liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Business. Each party will give prompt written notice to
the other of any material development affecting the ability of the parties
to consummate the transactions contemplated by this Agreement. No
disclosure by any party pursuant to this Section 6.6, however, shall be
deemed to amend or supplement the Schedules or Exhibits hereto, or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant for purposes of Sections 7.1(a), 7.1(b) or 11.
6.7 Exclusivity. Seller and Stockholder will not, with respect to the
Business or the Assets, (i) solicit, initiate, or encourage the submission
of any proposal or offer from any person relating to any (A) liquidation,
dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction
or business combination involving Seller, or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort
or attempt by any person to do or seek any of the foregoing. Seller will
notify Purchaser immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
7. CONDITIONS TO OBLIGATION TO CLOSE.
7.1 Conditions to Obligation of Purchaser. The obligations of
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 4
hereof shall be true and correct in all material respects at and as of
the Closing Date;
(b) Seller and Stockholder shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing;
(c) Seller and Stockholder shall have procured all of the third
party consents specified on Schedule 7.1(c);
(d) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign
18
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (i) prevent consummation of
any of the transactions contemplated by this Agreement, (ii) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of
Purchaser to own, operate, or control the Assets (and no such
judgment, order decree, stipulation, injunction, or charge shall be in
effect);
(e) Seller shall have delivered to Purchaser a certificate
(without qualification as to knowledge or materiality or otherwise) to
the effect that each of the conditions specified above in Section
7.1(a)-(d) is satisfied in all respects;
(f) [INTENTIONALLY DELETED];
(g) [INTENTIONALLY DELETED];
(h) Purchaser shall have received from each person listed in
Schedule 7.1(h) an executed Compliance Agreement in substantially the
form and substance attached hereto as Exhibit C;
(i) all actions and approvals to be taken by Seller or
Stockholder in connection with the consummation of the transactions
contemplated hereby (including approval of Seller's or Stockholder's
stockholders if required by law) and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to
Purchaser;
(j) Purchaser shall have received from Ehrenreich, Eilenberg &
Krause, LLP, counsel for Seller and Stockholder, an opinion addressed
to Purchaser dated the date of the Closing, and in form and substance
attached hereto as Exhibit D;
(k) [INTENTIONALLY DELETED];
(l) [INTENTIONALLY DELETED];
(m) Seller shall not have experienced any material adverse change
in the Business;
(n) Seller shall not have lost any continuing material customer
or customers nor shall the same have significantly curtailed the
buying of services from Seller. For purposes of this Section 7.1(n), a
"material customer" shall mean a customer to whom Seller invoiced at
least $50,000 of services in calendar year 1999; and
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(o) Purchaser shall have received from Seller an executed
Transition Services Agreement in form and substance substantially
similar to Exhibit E hereto, pursuant to which certain employees of
Seller designated on Schedule 7.1(o) hereto shall be assigned to
Purchaser, and shall be dedicated exclusively and devoted full-time to
performing the services requested by Purchaser in connection with the
operation of the Business (the "Transition Services Agreement").
Purchaser may waive any condition specified in this Section 7.1 if it
executes a writing so stating at or prior to the Closing.
7.2 Conditions to Obligations of Seller. The obligations of Seller and
Stockholder to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 5
above shall be true and correct in all material respects at and as of
the Closing Date;
(b) Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(d) Purchaser shall have delivered to Seller and Stockholder a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 7.2(a)-(c) is satisfied in all respects.
Seller or Stockholder may waive any condition specified in this
Section 7.2 if it executes a writing so stating at or prior to the Closing.
8. TERMINATION.
8.1 Termination of Agreement. Certain of the parties may terminate
this Agreement as provided below:
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(a) Purchaser, Seller and Stockholder may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) Purchaser may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event Seller
is in breach;
(c) Purchaser may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing if the Closing shall
not have occurred on or before August 7, 2000 by reason of the failure
of any condition precedent under Section 7 hereof (unless the failure
results primarily from Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement);
(d) Seller or Stockholder may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing if the
Closing shall not have occurred on or before August 7, 2000 by reason
of the failure of any condition precedent under Section 7 hereof
(unless the failure results primarily from Seller or Stockholder
breaching any representation, warranty, or covenant contained in this
Agreement).
(e) Purchaser shall have the right in its good faith discretion,
to terminate this Agreement at any time if any material adverse change
in the Business or Assets occurs or if any information is subsequently
disclosed in the Schedules to be delivered by Seller hereunder after
the date of execution of this Agreement which information may
reasonably be expected to have a material adverse effect on the
Business or the Assets following the Closing.
8.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 8.1 above, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party
(except for any liability of any party then in breach of this Agreement).
Notwithstanding the foregoing, the parties' obligations under Article 14
and Section 20.10 shall survive the termination of this Agreement.
9. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER. All statements of fact
contained in this Agreement or in any written statement (including financial
statements), certificate, schedule or other document delivered by or on behalf
of Seller or Stockholder pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and warranties
of Seller and Stockholder hereunder. Other than the agreement of Seller set
forth in Section 10.3 below, which shall survive for a period of 60 months from
the Closing Date, all indemnifications, guarantees, covenants, agreements,
representations and warranties made by Seller or Stockholder hereunder or
pursuant
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hereto or in connection with the transactions contemplated hereby shall survive
the Closing for a period of 12 months and one day from the Closing Date,
regardless of any investigation at any time made by or on behalf of Purchaser.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS.
10.1 Delivery of Funds and Other Assets Collected by Purchaser; Power
of Attorney. To the extent Purchaser receives any funds or other assets in
payment of the Excluded Assets, Purchaser shall immediately deliver such
funds or assets to Seller and take all steps necessary to vest title to
such funds or assets in Seller. Purchaser hereby designates Seller as
Purchaser's true and lawful attorney-in-fact, with full power of
substitution, to execute or endorse for the benefit of Seller any checks,
notes or other documents received by Purchaser in payment of or in
substitution or exchange for any of the Excluded Assets. Purchaser hereby
acknowledges and agrees that the power of attorney set forth in the
preceding sentence is coupled with an interest, and further agrees to
execute and deliver to Seller from time to time any documents or
instruments reasonably requested by Seller to evidence such power of
attorney.
10.2 Delivery of Funds and Other Assets Collected by Seller or
Stockholder; Power of Attorney. To the extent Seller or Stockholder
receives any funds or other assets in payment of (i) receivables or (ii)
work-in-process incurred on or after the Closing Date, or in connection
with any other Assets being sold to Purchaser hereto, each of Seller and
Stockholder shall immediately deliver such funds and assets to Purchaser
and take all steps necessary to vest title to such funds and assets in
Purchaser. Seller hereby designates Purchaser and its officers as Seller's
true and lawful attorney-in-fact, with full power of substitution, to
execute or endorse for the benefit of Purchaser any checks, notes or other
documents received by Purchaser in payment of or in substitution or
exchange for any of the Assets. Seller hereby acknowledges and agrees that
the power of attorney set forth in the preceding sentence is coupled with
an interest, and further agrees to execute and deliver to Purchaser from
time to time any documents or instruments reasonably requested by Purchaser
to evidence such power of attorney.
10.3 Employment. Seller and Stockholder hereby agree (i) to use
commercially reasonable efforts to maintain the employment of the
individuals set forth on Schedule 7.1(o) hereto, (ii) not to terminate the
employment of any individual set forth on Schedule 7.1(o) hereto without
the prior written consent of Purchaser except for cause, and (iii) so long
as the Transition Services Agreement is in effect or Purchaser otherwise
agrees in writing, each of the individuals set forth on Schedule 7.1(o)
hereto, other than Deborah Searle, shall be dedicated exclusively and
devoted full-time by Seller and Stockholder to performing the services
requested by Purchaser in connection with the operation of the Business
after the Closing Date.
22
10.4 Office Space. Seller shall have the right to use one office and
three cubicles at Purchaser's office space located at 700 Pete Rose Way,
Cincinnati, Ohio without charge until August 31, 2000.
10.5 Further Assurances. Purchaser hereby agrees (i) that during the
Transfer Period it shall cooperate with Seller and take all such actions as
are reasonably necessary to effectuate the transfer of the License
Agreements or enter into substantially similar agreements, and (ii) to
issue instructions to the Escrow Agent to release the Adjustment Amount to
the Seller upon satisfaction by Seller of the conditions set forth in
Section 3.2(b).
11. INDEMNITIES.
11.1 Indemnity by Seller. Seller and Stockholder shall and hereby do,
jointly and severally, indemnify, hold harmless and defend Purchaser, its
Affiliates and their officers, directors, stockholders, employees, agents,
representatives and consultants (collectively, the "Indemnified Parties")
at all times from and after the date of this Agreement, from and against
any and all penalties, demands, damages, punitive damages, losses, loss of
profits, liabilities, suits, costs, costs of any settlement or judgment,
claims of any and every kind whatsoever, refund obligations (including,
without limitation, interest and penalties thereon), remediation costs and
expenses (including, without limitation, reasonable attorneys' fees), of or
to any of the Indemnified Parties ("Damages"), which may now or in the
future be paid, incurred or suffered by or asserted against the Indemnified
Parties by any Person resulting or arising from or incurred in connection
with any one or more of the following (provided that this Section 11 shall
not apply to any items that have been expressly assumed by Purchaser under
this Agreement):
(a) any liability or claim for liability (whether in contract, in
tort or otherwise, and whether or not successful) of or against Seller
or Stockholder or related in any way to the Business or Assets of any
of them (including any liability of Seller or Stockholder under all
ERISA laws) to the extent that such liability relates to the Business
prior to the Closing Date;
(b) any liability or claim for liability (whether in contract, in
tort or otherwise, and whether or not successful) related in any way
to the Assets or the Business to the extent such liability arises in
connection with any action, omission or event occurring on or prior to
the Closing Date;
(c) any liability or claim for liability (whether in contract, in
tort or otherwise, and whether or not successful) related to any
liens, obligations or encumbrances of any nature whatsoever against or
in any way related to the Assets or the Business which have not been
expressly assumed by Purchaser hereunder;
23
(d) any liability or claim for liability (whether in contract, in
tort or otherwise, and whether or not successful) related to the Taxes
of Seller or Stockholder;
(e) any liability or claim for liability (whether or not
successful) related to any lawsuit or threatened lawsuit or claim
involving Seller or Stockholder, including but not limited to, those
items listed on Schedule 4.12 hereto;
(f) any misrepresentation, breach of warranty or nonfulfillment
of any covenant or agreement on the part of Seller or Stockholder
under this Agreement or from any misrepresentation in or omission from
any list, schedule, certificate or other instrument furnished or to be
furnished to Purchaser pursuant to the terms of this Agreement;
(g) any liability or claim for liability against Purchaser or any
of the Assets to the extent such liability or claim for liability
arises in connection with the failure of Purchaser and Seller to
comply with any applicable bulk transfer law; and
(h) all actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including costs of court and
reasonable attorneys' fees) incident to any of the foregoing.
11.2 Limitation of Certain Liability. To the extent the Indemnified
Parties incur or suffer Damages for any matter for which Seller and
Stockholder are obligated to indemnify, hold harmless and defend Purchaser
under Section 11.1(f) above, Seller and Stockholder shall not be liable for
any such Damages (i) until Purchaser has suffered aggregate losses by
reason of all such misrepresentations, breaches of warranty and/or
non-fulfillments of covenants or agreements on the part of Seller and/or
Stockholder in excess of a $50,000 threshold (at which point Seller and
Stockholder will be obligated to indemnify Purchaser from and against all
such aggregate losses including losses back to the first dollar), and (ii)
in excess of the Purchase Price, as adjusted; provided, however, that the
limitations set forth in (i) and (ii) above specifically shall not apply to
Damages (y) resulting from or attributable to intentional fraud or any
willful misconduct by Seller and Stockholder, or (z) for any matter or
matters (other than those set out in Section 11.1(f) above) for which
Seller or Stockholder is obligated to indemnify, hold harmless and defend
Purchaser. The provisions of this Section 11 will terminate on the second
anniversary of the Closing Date (except for any claims for Damages made
prior to such date which claims shall continue after such date until
finally resolved or in the event of any claims for Damages arising out of a
breach of Section 10.3 below, which shall survive for a period of five
years from the Closing Date).
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11.3 Notice of Claim. Purchaser agrees that upon its discovery of
facts giving rise to a claim for indemnity under the provisions of this
Agreement, including receipt by it or any Indemnified Party of notice of
any demand, assertion, claim, action or proceeding, judicial or otherwise,
by any person with respect to any matter as to which any of the Indemnified
Parties are entitled to indemnity under the provisions of this Agreement
(such actions being collectively referred to in this Section 11 as the
"Claim"), Purchaser will give prompt notice thereof in writing to Seller
and Stockholder; provided that any delay in giving or failure to give such
notice shall not limit the rights of Purchaser or any Indemnified Party to
indemnity hereunder, and Purchaser shall have no liability for such delay
or failure, except to the extent that Seller and Stockholder are shown to
have been materially damaged by such delay or failure.
11.4 Right to Defend. Seller and Stockholder shall be entitled at
their sole cost and expense to contest and defend by all appropriate legal
proceedings any Claim with respect to which either Seller or Stockholder is
called upon to indemnify any of the Indemnified Parties under the
provisions of this Agreement; provided, however, that notice of the
intention so to contest shall be delivered by Seller and Stockholder to
Purchaser within twenty (20) days from the effective date of notice to
Seller and Stockholder by Purchaser of the assertion of the Claim, and
provided, further that such right to contest and defend shall exist only if
Seller and Stockholder have (i) admitted in writing to Purchaser the
obligation of Seller and Stockholder to pay the indemnified obligations to
the Indemnified Parties with respect to the Claim and (ii) have provided
the Indemnified Parties with satisfactory evidence of Seller and
Stockholder's ability to pay any indemnity obligation that reasonably may
arise under the Claim. Any such contest may be conducted in the name and on
behalf of Purchaser. Such contest shall be conducted by reputable attorneys
employed by Seller and Stockholder and reasonably acceptable to Purchaser,
but Purchaser shall have the right to participate in such proceedings and
to be represented by attorneys of its own choosing at its cost and expense.
If, after such opportunity, Seller and Stockholder have not satisfied all
requirements for the contest of a claim by them (i.e., timely election,
admission of liability and proof of ability regarding payment), then Seller
and Stockholder shall (i) at their expense, except for travel expenses
requested to be incurred by Purchaser, reasonably cooperate with Purchaser
with respect to defense of the Claim, and (ii) be bound by the result
obtained with respect to the Claim by Purchaser. At any time after the
commencement of defense of any Claim, Seller and Stockholder may request
Purchaser to accept a bona fide offer from the other parties to the Claim
for a cash settlement payable solely from Seller and Stockholder (which
places no burdens or restrictions on Purchaser and does not otherwise
prejudice Purchaser), whereupon such action shall be taken unless Purchaser
determines that the contest should be continued, and so notifies Seller and
Stockholder in writing within fifteen (15) days of such request from Seller
and Stockholder. In the event that, after such a request by Seller and
Stockholder for acceptance of a bona fide cash settlement offer, Purchaser
determines that the contest should be continued, Seller and Stockholder
shall be liable for indemnity hereunder only to the extent of the lesser of
(i) the amount which the other party to the contested Claim had agreed to
accept in settlement as of the time Seller and
25
Stockholder made its request therefor to Purchaser or (ii) such amount for
which Seller and Stockholder may be liable with respect to such Claim by
reason of the provisions hereof.
11.5 Cooperation by Purchaser. If requested by Seller and Stockholder,
Purchaser and its officers and employees shall reasonably cooperate with
Seller and Stockholder and its counsel in contesting any Claim with respect
to which Seller and Stockholder have satisfied all requirements for a
contest by them as set forth in Section 11.4 above; provided that Seller
and Stockholder shall reimburse Purchaser for any actual out-of-pocket
expenses incurred by it in so cooperating.
11.6 Payment. Seller and Stockholder shall promptly pay to Purchaser
or such other Indemnified Party as may be entitled to indemnity hereunder
in cash the amount of any Damages to which Purchaser or such Indemnified
Party may become entitled by reason of the provisions of this Agreement.
11.7 Indemnity by Purchaser. Purchaser agrees to indemnify, hold
harmless and defend Seller and Stockholder at all times from and after the
date of this Agreement, from and against any and all Damages which may now
or in the future be paid, incurred or suffered by or asserted against
Seller and Stockholder by any Person resulting or arising from or incurred
in connection with:
(a) any liability or claim for liability (whether in contract, in
tort or otherwise, and whether or not successful) related in any way
to the Assets or the Business to the extent such liability arises in
connection with any action, omission or event occurring after the
Closing Date;
(b) any misrepresentation, breach of warranty or nonfulfillment
of any covenant or agreement on the part of Purchaser under this
Agreement or from any misrepresentation in or omission from any list,
schedule, certificate or other instrument furnished or to be furnished
by Purchaser pursuant to the terms of this Agreement, and
(c) all actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including costs of court and
reasonable attorneys' fees) incident to any of the foregoing.
12. LEASE AGREEMENT. Purchaser shall assume the leases for the office space
currently used by Seller in connection with the operation of the Business.
Purchaser will, from and after Closing, hold harmless Seller from any liability
thereunder accruing after Closing.
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13. NON-COMPETITION.
13.1 Agreement Not to Compete. As an inducement for Purchaser to enter
into this Agreement and in return for the payment of $180,000 as provided
by Section 3.1(a), the parties hereby agree to the provisions of this
Section 13. For a period commencing on the date hereof through the second
anniversary of the Closing Date, neither Seller nor Stockholder, shall
within the territorial boundaries of North America (i) solicit directly or
indirectly any of the Accounts (as hereinafter defined) of the Business or
otherwise compete with the activities of the Business, (ii) be employed by
or otherwise render services to, or own any interest in, any Person that
directly or indirectly (a) competes with the Business as it is currently
conducted, or (b) solicits directly or indirectly any of the Accounts of
the Business, or (iii) solicit directly or indirectly for employment by
Seller or Stockholder any of the employees of the Business. For purposes of
this Section 13.1, the term "Accounts" shall mean any Person located in
North America for which Seller has performed services with respect to the
Business during the period beginning eighteen (18) months prior to the date
hereof and ending on the second anniversary of the Closing Date. Each of
Seller and Stockholder agrees that the limitations set forth herein on the
rights of Seller and its Affiliates to compete with the the Business are
reasonable and necessary for the protection of Purchaser. In this regard,
Seller and Stockholder specifically agree that the limitations as to period
of time and geographic area, as well as all other restrictions on its
activities specified herein, are reasonable and necessary for the
protection of Purchaser. Seller and Stockholder further recognize and agree
that violation of any of the agreements contained in this Section 13 will
cause irreparable damage or injury to Purchaser, the exact amount of which
may be impossible to ascertain, and that, for such reason, among others,
Purchaser and its Affiliates shall be entitled to an injunction, without
the necessity of posting a bond, restraining any further violation of such
agreements. Such rights to any injunction shall be in addition to, and not
in limitation of, any other rights and remedies Purchaser and its
Affiliates may have against Seller or Stockholder and their Affiliates,
including, but not limited to, the recovery of damages. Further, it is
agreed by Seller and Stockholder that in the event the provisions of this
Agreement should ever be deemed to exceed the time or geographic
limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations permitted.
13.2 Permitted Activities. Notwithstanding the provisions of Section
13.1 above, Purchaser recognizes and hereby agrees that either
Stockholder's or Seller's engaging in the activities described on Schedule
13 hereto shall not be deemed to be a violation of the provisions of
Section 13.1(ii)(a).
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Seller and Stockholder each
recognizes and acknowledges that it has and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, list of
27
customers, and costs and financial information) that after the consummation of
the transactions contemplated hereby will be valuable, special and unique
property of Purchaser. Seller and Stockholder each agree that it will not
disclose, and it will use its best efforts to prevent disclosure by any other
Person of, any such confidential information to any Person, except to authorized
representatives of Purchaser. Seller and Stockholder recognize and agree that
violation of any of the agreements contained in this Section 14 will cause
irreparable damage or injury to Purchaser, the exact amount of which may be
impossible to ascertain, and that, for such reason, among others, Purchaser
shall be entitled to an injunction, without the necessity of posting bond,
therefor, restraining any further violation of such agreements. Such rights to
any injunction shall be in addition to, and not in limitation of, any other
rights and remedies Purchaser may have against Seller or Stockholder.
15. ASSIGNMENT OF CONTRACTS. Notwithstanding any other provision of this
Agreement, nothing in this Agreement or any related document shall be construed
as an attempt to assign (i) any contract which, as a matter of law or by its
terms, is nonassignable without the consent of the other parties thereto unless
such consent has been given, or (ii) any contract or claims as to which all of
the remedies for the enforcement thereof enjoyed by Seller would not, as a
matter of law or by its terms, pass to Purchaser as an incident of the transfers
and assignments to be made under this Agreement. In order, however, that the
full value of every contract and claim of the character described in clauses (i)
and (ii) above and all claims and demands on such contracts may be realized for
the benefit of Purchaser, Seller, at the request and expense and under the
direction of Purchaser, shall take all such action and do or cause to be done
all such things as will, in the opinion of Purchaser, be necessary or proper in
order that the obligations of Seller under such contracts may be performed in
such manner that the value of such contract will be preserved and will inure to
the benefit of Purchaser, and for, and to facilitate, the collection of the
monies due and payable and to become due and payable thereunder to Purchaser in
and under every such contract and claim incurred after the Closing. Seller shall
promptly pay over to Purchaser all monies collected by or paid to it in respect
of every such contract, claim or demand to the extent such monies are earned by
Purchaser on or after the Closing Date. Nothing in this Section 15 shall relieve
Seller of its obligation to obtain any consents required for the transfer of the
Assets and all rights thereunder to Purchaser, or shall relieve Seller from any
liability to Purchaser for failure to obtain such consents.
28
16. SPECIAL PROVISIONS REGARDING EMPLOYEES OF SELLER.
16.1 New Employees of Purchaser. It is the intention of Purchaser, and
Seller hereby acknowledges and agrees with such position, that any
employees of the Business that Purchaser hires will be new employees of
Purchaser as of the Closing Date or the date of hire, whichever is later.
Except as set forth in Section 16.3 below, such new employees shall be
entitled only to such compensation and employee benefits as are agreed to
by such employees and Purchaser, or as are otherwise provided by Purchaser,
in its sole discretion.
16.2 Hiring of Employees.
(a) Purchaser will use its reasonable efforts to hire the
existing employees of Seller engaged in the Business in connection
with its purchase of the Assets; provided, however, that Purchaser
shall be entitled to review employee records, conduct employee
interviews and employee screening procedures used by Purchaser in its
business, and may refuse to offer employment to any employee of Seller
if such employee fails to meet the hiring criteria of Purchaser.
(b) As a condition to their employment by Purchaser, all existing
employees of Seller listed in Schedule 7.1(h) shall execute and
deliver to Purchaser a Compliance Agreement, each in form and
substance acceptable to Purchaser.
16.3 Existing Employee Benefit Plans. Purchaser shall have no
obligation after the Closing to continue any pension plans or work benefit
plans currently offered by Seller to its employees. Seller agrees to
indemnify and hold harmless Purchaser from and against any claim which may
arise because of the failure to continue such pension plans or work benefit
programs.
16.4 Indemnity Concerning Accrued Benefits. Except as expressly
assumed by Purchaser hereunder and as reflected in the Net Working Capital
of Seller, Seller and Stockholder jointly and severally agree to indemnify
and hold harmless Purchaser from and against any and all accrued and
outstanding employee benefits, salary, vacation pay, bonuses, commissions
and other emoluments of its employees and from any other employee related
matters or liabilities with respect to Seller's employees to and through
the Closing Date.
17. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, Seller and Stockholder will pay all of their costs and expenses and
Purchaser will pay all of its costs and expenses, incurred in connection with
the preparation of and execution of this Agreement and the consummation of the
transactions contemplated hereby.
29
18. FURTHER ACTIONS. In case at any time after the Closing any further
action is legally necessary or reasonably desirable (as determined by any of the
Parties) to carry out the purposes of this Agreement and the transactions
contemplated hereby, each of the Parties will take such further action
(including the execution and/or delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article XI below). Seller and Stockholder
acknowledge and agree that from and after the Closing, Purchaser will be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Business, which shall be maintained
at the chief executive office of Purchaser; provided, however, that Seller and
Stockholder shall be entitled to reasonable access to and to make copies of such
books and records at their sole cost and expense, and Purchaser will maintain
all of the same for a period of at least five (5) years after Closing.
Thereafter, Purchaser will offer such documentation to Seller and Stockholder
before disposal thereof. Seller and Stockholder further agree to convey all
rights to any Intellectual Property reasonably related to the Business to
Purchaser. Purchaser and Seller each agree to use their respective best efforts
to cause Sun Microsystems to enter into a Hardware Value-Added Reseller
Agreement with Purchaser within the Transfer Period.
19. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar instantaneous electronic
transmission device or mailing first class, postage prepaid, certified United
States mail, return receipt requested, as follows:
(a) If to Purchaser, at:
Eclipse Networks, Inc.
c/o Thoma Cressey Equity Stockholders
600 Montgomery Street
27th Floor
San Francisco, CA 94111
Attention: Joseph Bonocore
Tel No.:(415) 983-0499
Fax No.:(415) 981-1010
30
With a copy to:
Thoma Cressey Equity Stockholders
600 Montgomery Street
27th Floor
San Francisco, CA 94111
Attention: Joseph Bonocore
Tel No.:(415) 983-0499
Fax No.:(415) 981-1010
With a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: J. Hovey Kemp
Tel No.:(202) 637-5623
Fax No.:(202) 637-5910
(b) If to Seller or Stockholder, at:
International Data Operations, Inc.
200 Route 17
Mahwah, New Jersey 07430
Attention: Shlomie Morgenstern
Tel No.:(201) 529-2026
Fax No.:(201) 529-3163
With a copy to:
Ehrenreich, Eilenberg & Krause LLP
11 East 44th Street
17th Floor
New York, New York 10017
Attention: Sheldon Krause, Esq.
Tel No.:(212) 986-9700
Fax No.:(212) 986-2399
31
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Section 19
shall be effective (i) if delivered personally, when delivered, (ii) if sent by
telex or telegram or by facsimile or other similar instantaneous electronic
transmission device, twenty-four (24) hours after sending, and (iii) if mailed,
forty-eight (48) hours after mailing.
20. GENERAL PROVISIONS.
20.1 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT-OF-LAWS RULES AS
APPLIED IN DELAWARE. THE SECTION HEADINGS CONTAINED HEREIN ARE FOR PURPOSES
OF CONVENIENCE ONLY, AND SHALL NOT BE DEEMED TO CONSTITUTE A PART OF THIS
AGREEMENT OR TO AFFECT THE MEANING OR INTERPRETATION OF THIS AGREEMENT IN
ANY WAY.
20.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or
the State of Delaware, or under any other applicable laws of any other
jurisdiction, then the parties hereto agree that such provision shall be
deemed modified for purposes of performance of this Agreement in such
jurisdiction to the extent necessary to render it lawful and enforceable,
or if such a modification is not possible without materially altering the
intention of the parties hereto, then such provision shall be severed
herefrom for purposes of performance of this Agreement in such
jurisdiction. The validity of the remaining provisions of this Agreement
shall not be affected by any such modification or severance, except that if
any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no
material alteration), then the parties hereto shall use their best
reasonable effort to agree to appropriate equitable amendments to this
Agreement in light of such severance, and if no such agreement can be
reached within a reasonable time, any party hereto may initiate arbitration
under the then current rules of the American Arbitration Association to
determine and effect such appropriate equitable amendments.
20.3 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party
hereto which is not embodied in this Agreement, and no party hereto shall
be bound by or
32
liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
20.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective heirs,
executors, administrators, representatives, successors and assigns.
20.5 Assignment. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto
without the prior written consent of the other parties hereto.
20.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by
the party waiving compliance. The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect
the right to enforce the same. No waiver by any party of any condition
contained in this Agreement, or of the breach of any term, provisions,
representation, warranty or covenant contained in this Agreement, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or as a waiver of any
other condition or of the breach of any other term, provision,
representation, warranty or covenant.
20.7 Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed
to include all other genders. All plurals used in this Agreement shall,
where appropriate, be deemed to be singular, and vice versa.
20.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of the parties
reflected hereon as signatories.
20.9 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or
more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered
valid, binding and
33
effective for all purposes. At the request of any party hereto, all parties
hereto agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
20.10 Arbitration. The Parties agree to submit to arbitration, in
accordance with these provisions, any disputed claim or controversy, other
than those seeking equitable relief, arising from or related to the alleged
breach of this Agreement or any disputed indemnification claim made
pursuant to this Article XI. The Parties further agree that the arbitration
process agreed upon herein shall be the exclusive means for resolving all
disputes made subject to arbitration herein, but that no arbitrator shall
have authority to expand the scope of these arbitration provisions. Any
arbitration hereunder shall be conducted under the Commercial Arbitration
Rules of the American Arbitration Association (AAA). Either Party may
invoke arbitration procedures herein by written notice for arbitration
containing a statement of the matter to be arbitrated. The Parties shall
then have fourteen (14) days in which they may identify a mutually
agreeable, neutral arbitrator. After the fourteen (14) day period has
expired, the parties shall prepare and submit to the AAA a joint
submission, with each Party to contribute half of the appropriate
administrative fee. In the event the parties cannot agree upon a neutral
arbitrator within fourteen (14) days after written notice for arbitration
is received, their joint submission to the AAA shall request arbitrators
who are practicing attorneys with professional experience in the field of
corporate law, and the Parties shall attempt to select an arbitrator from
the panel according to AAA procedures. Unless otherwise agreed by the
Parties, the arbitration hearing shall take place in Chicago, Illinois, at
a place designated by the AAA. All arbitration procedures hereunder shall
be confidential. Each Party shall be responsible for its costs incurred in
any arbitration, and the arbitrator shall not have authority to include all
or any portion of said costs in an award regardless of which Party
prevails. The award of the arbitrator arbitrator may not include equitable
relief. Any arbitration awarded shall be accompanied by a written statement
containing a summary of the issues in controversy, a description of the
award, and an explanation of the reasons for the award.
34
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written. "PURCHASER"
ECLIPSE NETWORKS, INC.
By: /s/ Joseph Bonocore
-----------------------------------
Name: Joseph Bonocore
Title: President & Chief Executive Officer
"STOCKHOLDER"
DATA SYSTEMS & SOFTWARE INC.
By: /s/ Shlomie Morgenstern
-----------------------------------
Name: Shlomie Morgenstern
Title: Vice President - Operations
"SELLER"
INTERNATIONAL DATA OPERATIONS, INC.
By: /s/ Shlomie Morgenstern
-----------------------------------
Name: Shlomie Morgenstern
Title: Vice President
35