EXHIBIT 2.4
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
BY AND AMONG
CBT GROUP PLC,
KNOWLEDGE WELL LIMITED,
KNOWLEDGE WELL GROUP LIMITED,
SHAREHOLDERS OF KNOWLEDGE WELL LIMITED,
AND
SHAREHOLDERS OF KNOWLEDGE WELL GROUP LIMITED
DATED AS OF MARCH 30, 1999
TABLE OF CONTENTS
Page
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ARTICLE I - PURCHASE AND SALE OF SHARES.................................... 1
1.1 Purchase and Sale................................................... 1
1.2 Acquisition Price................................................... 1
1.3 Share Exchange...................................................... 2
1.4 Closing Mechanics................................................... 2
1.5 Payment of Acquisition Price........................................ 5
1.6 No Further Ownership Rights in KnowledgeWell Shares................. 6
1.7 Lost, Stolen or Destroyed KnowledgeWell Certificates................ 6
1.8 Stock Options....................................................... 6
1.9 Taking of Necessary Action; Further Action.......................... 7
1.10 Tax-Free Reorganization............................................. 7
1.11 Termination of the Prior Share Purchase Agreement................... 7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............ 7
2.1 Organization of KnowledgeWell....................................... 7
2.2 KnowledgeWell Capital Structure..................................... 8
2.3 Subsidiaries........................................................ 9
2.4 Authority........................................................... 9
2.5 KnowledgeWell Financial Statements.................................. 9
2.6 No Undisclosed Liabilities.......................................... 11
2.7 No Changes.......................................................... 12
2.8 Tax and Other Returns and Reports................................... 13
2.9 Restrictions on Business Activities................................. 22
2.10 Title to Properties; Absence of Liens and Encumbrances.............. 22
2.11 Intellectual Property............................................... 22
2.12 Agreements, Contracts and Commitments............................... 26
2.13 Interested Party Transactions....................................... 28
2.14 Compliance with Laws................................................ 28
2.15 Litigation.......................................................... 28
2.16 Insurance........................................................... 28
2.17 Minute Books........................................................ 29
2.18 Environmental Matters............................................... 29
2.19 Brokers' and Finders' Fees; Third Party Expenses.................... 30
2.20 United States Employee Matters and Benefit Plans.................... 30
2.21 Ireland Employee Matters and Benefits Plans......................... 33
2.22 Borrowed Moneys..................................................... 37
2.23 Grants, etc. Not Repayable.......................................... 37
2.24 Oral Contracts...................................................... 37
2.25 Returns Up-to-Date.................................................. 37
2.26 Insolvency.......................................................... 37
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TABLE OF CONTENTS
(CONTINUED)
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2.27 Stamp Duty and Capital Duty......................................... 38
2.28 VAT................................................................. 39
2.29 Shelf Registration Statement Information............................ 40
2.30 Representations Complete............................................ 40
2.31 Proxy Statements Complete........................................... 40
ARTICLE III - ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS............................................................. 40
3.1 Authority........................................................... 40
3.2 Conflicts........................................................... 41
3.3 Consents............................................................ 41
3.4 Title............................................................... 41
3.5 Taxes............................................................... 41
3.6 Sufficient Assets................................................... 41
3.7 Release of Liabilities.............................................. 41
3.8 Investment Experience............................................... 41
3.9 Investment.......................................................... 42
3.10 Rule 144............................................................ 42
3.11 Nature of Solicitation; Access to Data.............................. 42
3.12 Accredited Shareholder.............................................. 42
3.13 Shelf Registration Statement Information............................ 42
3.14 Representations Complete............................................ 43
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF CBT......................... 43
4.1 Organization, Standing and Power.................................... 43
4.2 Authority........................................................... 43
4.3 No Conflict......................................................... 43
4.4 Consents............................................................ 44
4.5 Capital Structure................................................... 44
4.6 SEC Documents; CBT Financial Statements............................. 45
4.7 Broker's and Finder's Fees.......................................... 45
ARTICLE V - CONDUCT PRIOR TO THE CLOSING DATE.............................. 46
5.1 Conduct of Business of KnowledgeWell................................ 46
5.2 No Solicitation..................................................... 48
ARTICLE VI - ADDITIONAL AGREEMENTS......................................... 49
6.1 Proxy Statement; Shareholder Meetings............................... 49
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TABLE OF CONTENTS
(CONTINUED)
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6.2 Access to Information............................................... 49
6.3 Expenses............................................................ 49
6.4 Public Disclosure................................................... 50
6.5 Consents............................................................ 50
6.6 FIRPTA Compliance................................................... 50
6.7 Reasonable Efforts.................................................. 50
6.8 Notification of Certain Matters..................................... 50
6.9 Affiliate Agreements................................................ 50
6.10 Additional Documents and Further Assurances......................... 51
6.11 NMS Listing......................................................... 51
6.12 Form S-8............................................................ 51
6.13 Repurchase of "C" Ordinary Shares................................... 51
6.14 Tax-Free Reorganization............................................. 51
6.15 Resale Registration Statement....................................... 51
6.16 Restricted ADR Facility............................................. 52
ARTICLE VII - CONDITIONS TO THE SHARE EXCHANGE............................. 52
7.1 Conditions to Obligations of Each Party to Effect the
Share Exchange...................................................... 52
7.2 Additional Conditions to Obligations of Shareholders................. 52
7.3 Additional Conditions to the Obligations of CBT...................... 53
7.4 No Additional Conditions............................................. 54
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW;
INDEMNITY.............................................................. 55
8.1 Survival of Representations, Warranties and Covenants................ 55
8.2 Agreement to Indemnify............................................... 55
8.3 Escrow Arrangements; Limits of Liability............................. 55
8.4 Survival of Indemnity; Indemnification Procedures; Time
Limits.............................................................. 56
8.5 Representative; Power of Attorney.................................... 57
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER............................. 58
9.1 Termination.......................................................... 58
9.2 Effect of Termination................................................ 59
9.3 Amendment............................................................ 59
9.4 Extension; Waiver.................................................... 59
ARTICLE X - GENERAL PROVISIONS............................................. 60
10.1 Notices............................................................. 60
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TABLE OF CONTENTS
(CONTINUED)
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10.2 Interpretation...................................................... 61
10.3 Counterparts........................................................ 61
10.4 Entire Agreement; Successors; Assignment............................ 61
10.5 Severability........................................................ 62
10.6 Other Remedies...................................................... 62
10.7 Governing Law; Jurisdiction......................................... 62
10.8 Rules of Construction............................................... 62
10.9 Specific Performance................................................ 62
10.10 Share Legends....................................................... 63
10.11 California Corporate Securities Law................................. 63
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A List of Shareholders
Exhibit B Registration Rights Declaration
Exhibit C Form of KnowledgeWell Affiliates Agreement
Exhibit D Form of Lock-up Agreement
Exhibit E Form of Escrow Agreement
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
This AMENDED AND RESTATED SHARE PURCHASE AGREEMENT (this "Agreement") is
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made and entered into as of March 30, 1999 by and among CBT Group PLC, a public
limited company formed under the laws of Ireland ("CBT"), Knowledge Well
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Limited, a private limited company formed under the laws of Ireland ("KW
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Limited"), Knowledge Well Group Limited, a private limited company formed under
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the laws of Ireland ("KW Group" and, collectively with KW Limited,
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"KnowledgeWell"), and the shareholders of KW Limited and KW Group listed on
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Exhibit A hereto (collectively, "Shareholders," and individually, a
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"Shareholder").
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RECITALS
WHEREAS, the Shareholders will at Closing (as hereinafter defined) own all
of the issued shares in the capital of each of KW Limited and KW Group.
WHEREAS, CBT desires to acquire from the Shareholders, and the Shareholders
desire to sell to CBT, the KnowledgeWell Shares (as hereinafter defined) owned
by the Shareholders (the "Share Exchange"), in exchange for the consideration
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specified herein and subject to the terms and conditions hereof.
WHEREAS, the parties hereto desire to amend and restate that certain Share
Purchase Agreement (the "Prior Share Purchase Agreement") entered into as of
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November 30, 1998 by and among CBT, KnowledgeWell and the Shareholders.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
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PURCHASE AND SALE OF KNOWLEDGEWELL SHARES
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1.1 Purchase and Sale. Subject to the terms and conditions set forth in
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this Agreement, at the Share Exchange, CBT shall purchase from the Shareholders,
and the Shareholders, as beneficial owners, shall sell, assign, transfer and
deliver to CBT, the KnowledgeWell Shares free and clear of any pledge, lien,
charge, security interest, encumbrance, claim or other equitable or third-party
interest ("Liens").
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1.2 Acquisition Price.
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(a) In reliance on the representations, warranties and covenants of
the Shareholders contained herein, and in consideration of the aforesaid sale,
assignment, transfer and
delivery of the KnowledgeWell Shares, CBT shall pay to each Shareholder, in full
payment for each KnowledgeWell Share so sold, assigned, transferred and
delivered by such Shareholder and the agreements of such Shareholder made in
connection with the transactions contemplated hereby, the following: such number
of CBT American Depositary Shares ("ADSs") (or, in the event that a Restricted
----
ADR Facility is not arranged prior to the Closing Date as contemplated in
Section 6.16 of this Agreement, such number of Ordinary Shares of IR9.375p in
the capital of CBT ("CBT Ordinary Shares")) as is equal to the Exchange Ratio.
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For purposes of this Agreement, the "Exchange Ratio" shall mean the quotient
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(rounded to the nearest 1/10,000th) obtained by dividing (x) 4,837,209 by (y)
the sum of (i) the total number of KnowledgeWell Shares in issue immediately
prior to the Closing plus (ii) the total number of shares in of any class
issuable upon exercise of all options, warrants and similar rights outstanding
immediately prior to the Closing. For purposes of this Agreement, "Acquisition
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Price" shall mean the 4,837,209 Ordinary Shares or ADSs, as the case may be,
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issuable pursuant to this Agreement.
(b) For purposes of this Agreement, "KnowledgeWell Shares" shall mean
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(i) all of the issued "A" Ordinary Shares of US$0.25 each and "C" Ordinary
Shares of IR25p each in the capital of KW Limited and (ii) all of the issued
Ordinary Shares of US$0.01 each and the convertible preference shares of US$0.01
each in the capital of KW Group.
(c) The Exchange Ratio shall be appropriately adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into CBT Ordinary Shares
or ADSs), reorganization, recapitalization or other like change with respect to
CBT Ordinary Shares or ADSs occurring after the date hereof and prior to the
Closing Date (as hereinafter defined).
(d) No fraction of an Ordinary Share or ADS will be issued, but in
lieu thereof, each Shareholder who would otherwise be entitled to a fraction of
an Ordinary Share or ADS (after aggregating all fractional Ordinary Shares or
ADSs to be received by such Shareholder) shall be entitled to receive from CBT
an amount of cash (rounded to the nearest whole cent) equal to the product of
(i) such fraction, multiplied by (ii) the closing price of an ADS on November
27, 1998, as reported on the Nasdaq National Market.
1.3 Share Exchange. Unless this Agreement is earlier terminated pursuant
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to Section 9.1, the closing of the Share Exchange (the "Closing") will take
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place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VII, at
the offices of Binchys' Solicitors, 43 Fitzwilliam Place, Dublin 2, Ireland,
unless another place or time is agreed to by CBT and the Shareholders. The date
upon which the Closing occurs is herein referred to as the "Closing Date". The
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signing of this Agreement by a Shareholder shall constitute a waiver of all pre-
emption rights in relation to his, her or its KnowledgeWell Shares being
transferred pursuant to this Agreement.
1.4 Closing Mechanics. At Closing the following business shall be
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transacted and the following documents shall be signed and delivered.
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(a) The Shareholders shall deliver or procure to be delivered to CBT
or its legal counsel:
(i) duly executed and completed transfers in favor of CBT (or as
it shall direct) in respect of the KnowledgeWell Shares together with the
relative certificates therefor (the "KnowledgeWell Certificates");
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(ii) duly executed and completed transfers into the names of such
persons as CBT may direct in respect of any shares in KnowledgeWell Inc. (the
"Subsidiary") not registered in the name of KW Group together with the share
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certificates for the whole of the issued share capital of the "Subsidiary";
(iii) any other documents which may be required to give good
title to the KnowledgeWell Shares (including any power of attorney under which
any document required to be delivered under this Section has been executed or
signed) or which may be necessary to enable CBT to procure the registration of
the same in the name of CBT or its nominee;
(iv) all the title deeds and documents relating to the properties
at Block 1, Blackrock Business Park, Blackrock, County Dublin, Ireland and 1701
Directors Boulevard, Suite 920, Austin, Texas 78764, USA occupied by
KnowledgeWell and the Subsidiary (together the "Properties");
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(v) the Certificate of Incorporation, statutory books and Common
Seals of each of KW Limited and KW Group and the Subsidiary and all prints of
the Memorandum and Articles of Association or Bylaws thereof in the possession
or under the control of the Shareholders;
(vi) at the offices of KnowledgeWell and the Subsidiary all the
records of KnowledgeWell and the Subsidiary together with all securities, deeds,
documents of title, insurance policies, check books and other books, papers and
documents relating to KnowledgeWell and the Subsidiary which are in the
Shareholders possession or under their control;
(vii) a letter of resignation in such form as CBT may require of
Jim Middleton and Martin Scully resigning as directors and of Molyneux
Secretarial Services Limited resigning as the Secretary of KW Limited and KW
Group and from any other office or employment that said persons may hold with
either of those companies and acknowledging that he or it has no outstanding
claims against either of those companies whether for compensation for loss of
office or otherwise whatsoever;
(viii) a letter of resignation in such form as CBT may require of
Caplin Meehan of 3 College Green, Dublin 2, Ireland resigning as Accountants for
and Auditors of KW Limited and KW Group and acknowledging that they have no
outstanding claims against either of those companies whether for compensation
for loss of office or otherwise whatsoever, with the exception of fees
outstanding at the date of resignation (whether billed or not) and containing
the statement referred to in sub-section 185(2)(a) of the Companies Act, 1990 of
Ireland;
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(ix) a letter of resignation in such form as CBT may require of
Hays & Co. resigning as Accountants for and Auditors of the Subsidiary and
acknowledging that they have no outstanding claims against the Subsidiary
whether for compensation for loss of office or otherwise whatsoever;
(x) instruments in such form as CBT may require duly executed by
all of the members of KW Limited and KW Group and all the members (other than KW
Group) of the Subsidiary waiving any pre-emption or other similar rights which
they may have either under the Articles of Association of KW Limited or KW Group
or Bylaws of the Subsidiary or otherwise in relation to the KnowledgeWell Shares
or any of them or in relation to any shares in the Subsidiary.
(b) The Shareholders shall procure a meeting of the Board of Directors
of each of KW Limited and KW Group to be held at which the following business
shall be transacted:
(i) the appointment of Bill Beamish as an additional director of
each of those companies;
(ii) the acceptance of the resignations of the directors,
secretary and auditors of each of these companies as referred to in sub-clauses
1.4 (vii) and (viii) above and the appointment as secretary and auditors of each
of those companies of such persons or firms as CBT may nominate;
(iii) the situation of the registered office of each of those
companies shall be changed to Belfield Office Park, Clonskeagh, Dublin 4,
Ireland;
(iv) the registration of CBT or its nominees as holder of the
KnowledgeWell Shares subject to the submission of duly stamped and completed
transfers of the KnowledgeWell Shares;
(v) the adoption of Bank Mandates in forms satisfactory to CBT in
substitution for and to the exclusion of the existing mandates; and
(vi) the accounting reference date of each of KW Group and KW
Limited shall be changed to December 31.
(c) The Shareholders shall procure a meeting of the Board of Directors
of the Subsidiary to be held at which the following business shall be
transacted:
(i) the appointment of Eric Murphy as an additional director of
the Subsidiary;
(ii) the acceptance of the resignation of the auditors of the
Subsidiary referred to in sub-clauses 1.4 (ix) above and the appointment as
auditors of the Subsidiary of such persons or firms as CBT may nominate;
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(iii) the registration of CBT or its nominees as the holder of
those shares in the Subsidiary not registered in the name of KW Group; and
(iv) the adoption of Bank Mandates in a form satisfactory to CBT
in substitution for and to the exclusion of the existing mandates.
(d) Each of the Shareholders shall repay and procure the repayment of
all sums owed to KnowledgeWell or the Subsidiary by him, her or it or any
connected person of his, hers or its or any company controlled by him, her or
it. For the purposes of the foregoing, each Shareholder (with the intention of
binding not only himself, herself or itself, but also his, her or its successors
and assigns and (in the case of an individual) his or her estate after his or
her death) hereby severally and not jointly represents and warrants to CBT that
no monies are owed to KnowledgeWell or the Subsidiary by such Shareholder or any
connected person of his, her or it or any company controlled by him, her or it
as at November 30, 1998. For purposes of this Section 1.4(d), the term
"connected person" and "control" shall have the meanings ascribed to those terms
by Sections 16(3) and 16(1), respectively, of the Finance (Miscellaneous
Provisions) Act 1968 of Ireland.
1.5 Payment of Acquisition Price.
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(a) Upon Closing, CBT shall make available to each Shareholder as
payment of such Shareholder's part of the Acquisition Price in accordance with
this Article I Ordinary Shares of CBT in the name of such Shareholder; provided,
however, that CBT shall cause 402,000 Ordinary Shares to be issued pursuant to
Section 1.2(a) (the "Escrow Amount") to be deposited into an escrow account
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pursuant to Section 8.3 below.
(b) Notwithstanding Section 1.5(a), in the event that a Restricted ADR
Facility (the "Restricted ADR Facility") has been arranged with The Bank of New
-----------------------
York prior to Closing as contemplated by Section 6.16, then upon Closing, CBT
shall make available to each Shareholder as payment of such Shareholder's part
of the Acquisition Price in accordance with this Article I Restricted American
Depositary Receipts ("ADRs") of CBT in the name of such Shareholder issued in
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accordance with a Restricted Deposit Agreement among CBT, The Bank of New York,
as depository (the "Depository"), and all owners and beneficial owners of such
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ADRs (the "Deposit Agreement"), which ADRs shall represent that number of ADSs
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to be issued to that Shareholder as payment of such Shareholder's part of the
Acquisition Price in accordance with Section 1.2(a). Prior to or concurrent
with the Share Exchange, CBT shall deliver or cause to be delivered to the
Custodian (as defined in the Deposit Agreement), in accordance with the Deposit
Agreement, the Ordinary Shares represented by the ADSs to be issued in
connection with the Share Exchange, with instructions to the Depository to
create and deliver the ADRs representing the ADSs to each Shareholder as
provided above; provided, however, that CBT shall cause the ADRs representing
402,000 ADSs to be issued pursuant to Section 1.2(a) (the "Escrow Amount") to be
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deposited into an escrow account pursuant to Section 8.3 below.
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(c) If any ADR or Ordinary Share, as the case may be, is to be issued
in a name other than that of the Shareholder entitled thereto pursuant to the
Share Exchange, it will be a condition of the issuance thereof that the person
requesting such exchange will have paid to CBT or any agent designated by it any
transfer or other taxes required by reason of the issuance of an ADR or Ordinary
Share in any name other than that of the registered holder of the KnowledgeWell
Certificate surrendered, or established to the satisfaction of CBT or any agent
designated by it that such tax has been paid or is not payable.
1.6 No Further Ownership Rights in KnowledgeWell Shares. All ADSs or
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Ordinary Shares, as the case may be, issued in exchange for KnowledgeWell Shares
in accordance with the terms of this Agreement (including any cash paid in
respect of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such KnowledgeWell Shares.
1.7 Lost, Stolen or Destroyed KnowledgeWell Certificates. In the event
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any KnowledgeWell Certificates evidencing KnowledgeWell Shares shall have been
lost, stolen or destroyed, then upon Closing, the holder thereof shall be
required to deliver an indemnity in such form as CBT may require in respect of
such lost, stolen or destroyed certificate and CBT may in its sole discretion
require the owner of any such lost, stolen or destroyed KnowledgeWell
Certificates to deliver a bond in such sum as CBT may reasonably direct as part
of any such indemnity against any claim that may be made against CBT with
respect to the KnowledgeWell Certificates alleged to have been lost, stolen or
destroyed.
1.8 Stock Options. At the Closing, all options to purchase shares in
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KnowledgeWell then outstanding and unexercised under the KnowledgeWell Limited
1998 Share Option Plan or the KnowledgeWell Group Limited 1998 Share Option Plan
(collectively, the "KnowledgeWell Option Plans") shall be assumed by CBT in
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accordance with provisions described below.
(a) At the Closing, each outstanding unexercised option to purchase
"A" Ordinary Shares of US$0.25 each in the capital of KW Limited ("KW Limited
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Options") or Ordinary Shares of US$0.01 each in the capital of KW Group ("KW
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Group Options" and, collectively with KW Limited Options, "KnowledgeWell
- ------------- -------------
Options")) under the KnowledgeWell Option Plans, whether vested or unvested,
shall be, in connection with the Share Exchange, assumed by CBT. Each
KnowledgeWell Option so assumed by CBT under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the
KnowledgeWell Option Plans and/or as provided in the respective option
agreements governing such KnowledgeWell Option immediately prior to the
Closing, except that (A) such KnowledgeWell Option shall be exercisable for that
number of whole CBT Ordinary Shares equal to the product of the number of shares
of KnowledgeWell that were issuable upon exercise of such KnowledgeWell Option
immediately prior to the Closing multiplied by the Exchange Ratio rounded down
to the nearest whole number of CBT Ordinary Shares and (B) the per share
exercise price for the CBT Ordinary Shares issuable upon exercise of such
assumed KnowledgeWell Option shall be equal to the quotient determined by
dividing the exercise price per share at which such KnowledgeWell Option was
exercisable immediately prior to the Closing by the Exchange Ratio, rounded up
to the nearest whole cent.
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(b) It is the intention of the parties that KnowledgeWell Options
assumed by CBT qualify following the Closing as incentive stock options as
defined in Section 422 of the Code to the extent KnowledgeWell Options qualified
as incentive stock options immediately prior to the Closing.
(c) Promptly following the Closing, CBT will issue to each holder of
an outstanding KnowledgeWell Option a document evidencing the foregoing
assumption of such KnowledgeWell Option by CBT.
1.9 Taking of Necessary Action; Further Action. If, at any time after
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the Share Exchange, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest CBT with full right, title and
possession to the KnowledgeWell Shares, the Shareholders will take all such
lawful and necessary action.
1.10 Tax-Free Reorganization. The parties hereto intend that the Share
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Exchange shall constitute a reorganization within the meaning of Section 368 of
the United States Internal Revenue Code of 1986 (the "Code"). The parties
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hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
1.11 Termination of the Prior Share Purchase Agreement. The parties
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hereto agree that all rights and obligations under the Prior Share Purchase
Agreement shall be terminated in their entirety and shall be superseded and
governed by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to CBT as of
November 30, 1998, subject to matters fairly and accurately disclosed in the
disclosure letter supplied by KnowledgeWell to CBT (the "KnowledgeWell
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Disclosure Letter") and dated as of November 30, 1998, as follows (for the
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purposes of the following warranties and representations (i) unless otherwise
indicated, the term "KnowledgeWell" shall be deemed to include where relevant
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having regard to the context each of KW Limited, KW Group and the Subsidiary,
and (ii) subject to matters fairly and accurately disclosed in the KnowledgeWell
Disclosure Letter, no other information relating to KnowledgeWell of which CBT
has knowledge (actual or constructive) shall prejudice any claim made by CBT
under such warranties or representations or operate to reduce any amount
recoverable):
2.1 Organization of KnowledgeWell.
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(a) Each of KW Limited and KW Group is a corporation duly
incorporated under the laws of Ireland and has complied in all respects with the
filing requirements of the Companies Acts, 1963 to 1990 of Ireland. Each of KW
Limited and KW Group has the corporate power to own its properties and to carry
on its business as now being conducted. Each of KW Limited and KW Group is
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duly qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets), financial
condition or results of operations of KnowledgeWell (herein after referred to as
a "Material Adverse Effect").
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2.2 KnowledgeWell Capital Structure.
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(a) The authorized share capital of KW Limited consists of
US$5,000,000 divided into 19,872,000 "A" Ordinary Shares of US$0.25 each, of
which 9,658,813 are issued and outstanding, 1,289,000 "B" Ordinary Shares of
US$0.025 each, none of which are issued or outstanding, and IR(Pounds)1,000,000
divided into 4,000,000 "C" Ordinary Shares of IR25p each, of which 2,428,376 are
issued and outstanding. The authorized share capital of KW Group consists of
US$250,000 divided into 23,000,000 Ordinary Shares of US$0.01 each, of which
8,023,320 are issued and outstanding, and 2,000,000 Convertible Preference
Shares of US$0.01 each ("KW Preferred"), of which 1,635,493 are issued and
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outstanding. The issued shares of KW Limited and KW Group (collectively,
"KnowledgeWell Share Capital") are held by the persons, with the domicile
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addresses and in the amounts set forth in Schedule 2.2(a) of the KnowledgeWell
Disclosure Letter. All of the issued shares of KnowledgeWell Share Capital are
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights created by statute, the Articles of Association or Bylaws
of KnowledgeWell or any agreement to which KnowledgeWell is a party or by which
it is bound. Subject to the stock transfer forms being represented duly stamped
and the register of members being completed, as a result of the Share Exchange,
CBT will be the record and sole beneficial owner of all KnowledgeWell Share
Capital and rights to acquire or receive KnowledgeWell Share Capital. The
copies of the Memorandum and Articles of Association of each of KW Limited and
KW Group delivered by KnowledgeWell to CBT are true, complete and accurate and
have embodied therein or annexed thereto a copy of every such resolution or
agreement as is referred to in section 143(2) of the Companies Act, 1963 of
Ireland. The copy of the Bylaws of the Subsidiary delivered by KnowledgeWell to
CBT are true, complete and accurate;
(b) KW Limited has reserved 3,000,000 "A" Ordinary Shares of US$0.25
each for issuance to employees and consultants pursuant to the KnowledgeWell
Limited 1998 Share Option Plan, of which 2,706,566 shares are subject to
outstanding, unexercised options. KW Group has reserved 3,000,000 Ordinary
Shares of US$0.01 each for issuance to employees and consultants pursuant to the
KnowledgeWell Group Limited 1998 Share Option Plan, of which 2,706,566 shares
are subject to outstanding, unexercised options. Schedule 2.2(b) of the
KnowledgeWell Disclosure Letter sets forth for each outstanding KnowledgeWell
Option: the name of the company which has granted the option, the name of the
holder of such option, the domicile address of such holder, the number of
ordinary shares of the relevant company subject to such option, the exercise
price of such option and the vesting schedule for such option, including the
extent vested to date and whether the exercisability of such option will be
accelerated and become exercisable by the transactions contemplated by this
Agreement. Except for KnowledgeWell Options described in Schedule 2.2(b) of the
KnowledgeWell Disclosure Letter, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which
KnowledgeWell is a party or by which it is bound obligating KnowledgeWell to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold,
-8-
repurchased or redeemed, any shares in the capital of KnowledgeWell. Except for
KnowledgeWell Options described in Schedule 2.2(b) of the KnowledgeWell
Disclosure Letter, there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which KnowledgeWell is a party
or by which it is bound obligating KnowledgeWell to grant, extend, accelerate
the vesting of, change the price of, otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement.
2.3 Subsidiaries. KW Limited does not have and has never had any
------------
subsidiaries and does not otherwise own and has never otherwise owned any shares
of capital stock or any interest in, or control, directly or indirectly, any
other corporation, partnership, association, joint venture or other business
entity. Except for the Subsidiary, KW Group does not have and has never had any
subsidiaries and does not otherwise own and has never otherwise owned any shares
of capital stock or any interest in, or control, directly or indirectly, any
other corporation, partnership, association, joint venture or other business
entity.
2.4 Authority. KnowledgeWell has all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of KnowledgeWell. KW Limited's
and KW Group's Boards of Directors have unanimously approved the Share Exchange
and this Agreement. This Agreement has been duly executed and delivered by
KnowledgeWell and constitutes the valid and binding obligation of KnowledgeWell,
enforceable in accordance with its terms. Except as set forth in Schedule 2.4
of the KnowledgeWell Disclosure Letter, the execution and delivery of this
Agreement by KnowledgeWell does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
--------
the Memorandum and Articles of Association of KW Limited or KW Group or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to KnowledgeWell or its properties or
assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
-------------------
third party (so as not to trigger any Conflict), is required by or with respect
to KnowledgeWell in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (ii) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth in Schedule 2.4 of the
KnowledgeWell Disclosure Letter and (iii) such consents, waivers,
authorizations, filings, approvals and registrations which would not
individually or in the aggregate, have a material adverse effect on the ability
of KnowledgeWell to consummate the transactions contemplated hereby.
-9-
2.5 KnowledgeWell Financial Statements.
----------------------------------
(a) Schedule 2.5 of the KnowledgeWell Disclosure Letter sets forth
(i) KW Limited's audited balance sheet as of October 31, 1997 and the related
audited statements of operations and cash flows for the period then ended, (ii)
KW Limited's unaudited balance sheet as of October 31, 1998 (the "KW Limited
----------
Balance Sheet") and the related unaudited statements of operations and cash
- -------------
flows for the twelve-month period then ended, (iii) KW Group's unaudited
consolidated balance sheet as of October 31, 1998 (the "KW Group Balance Sheet"
----------------------
and, collectively with the KW Limited Balance Sheet, the "Balance Sheets") and
--------------
the related unaudited consolidated statements of operations and cash flows for
the period from incorporation (collectively, the "KnowledgeWell Financial
-----------------------
Statements"). The accounting reference date of each of KW Limited, KW Group and
- ----------
the Subsidiary is 31 October.
(b) The audited KnowledgeWell Financial Statements:
(i) give a true and fair view of KnowledgeWell in all
respects as at October 31, 1998 (the "Accounts Date");
-------------
(ii) comply with the requirements of the Companies Acts,
1963 to 1990 of Ireland and all regulations to be construed as one with those
Acts;
(iii) have been prepared in accordance with the best
generally accepted and adopted accounting principles in Ireland and all
applicable Statements of Standard Accounting Practice ("SSAP");
----
(c) The audited and unaudited KnowledgeWell Financial Statements:
(i) have been prepared on a basis consistent with that
adopted for preceding accounting periods;
(ii) are not affected by any unusual, extraordinary,
exceptional or non-recurring items or by any other factor rendering the results
thereof (or any of them) unusually better or worse than they (or any of them)
might otherwise be or have been;
(iii) are true, complete and accurate and properly reflect
the financial position of KnowledgeWell as at the Accounts Date and of its
results for the accounting period ending on that date;
(iv) correctly and accurately disclose all the assets and
liabilities (whether ascertained, contingent, deferred or otherwise and whether
or not quantified or disputed) of KnowledgeWell as at the Accounts Date and make
full provision and/or reserve for all such liabilities and for all capital
commitments of KnowledgeWell up to the Accounts Date;
-10-
(v) make full provision for any foreseeable losses which may
arise on Closing and/or on realization of stock and work-in-progress and/or on
completion of any existing or proposed contract;
(vi) make adequate provision for all bad and doubtful debts
of KnowledgeWell and for depreciation of the fixed assets of KnowledgeWell
having regard to their original cost and estimated useful life;
(vii) correctly and accurately disclose all financial
commitments in existence as at the Accounts Date; and
(viii) include all such reserves and provisions for Tax as
are necessary to cover all liabilities for Tax (whether or not assessed) of
KnowledgeWell up to the Accounts Date and, in particular, but without prejudice
to the generality of the foregoing attributable to profits, gains, income,
receipts, and loans and distributions made to participators and associates and
payments from which Tax is deductible.
(d) The KnowledgeWell Financial Statements do not include any
intangible assets and the value attributed to each fixed asset of KnowledgeWell
does not exceed the current market value thereof as at the Accounts Date. The
basis of valuing such fixed assets has not been changed during the period since
incorporation and nor has there been any revaluation of fixed assets during such
period.
(e) The rate of depreciation applied in respect of each fixed asset
has been consistently applied over the period since incorporation and is
adequate to write down the value of such fixed assets to its net realizable
value as at the end of its useful working life and the fixed assets have been
depreciated in accordance with the relevant SSAP for the relevant financial
year.
(f) All the accounts, books, ledgers and financial and other records
of whatsoever kind of KnowledgeWell have at November 30, 1998 been fully,
properly and accurately maintained and contain true and accurate records of all
matters required to be entered therein under the Companies Acts, 1963 to 1990
and any other relevant statutes or regulations and will, pending Closing,
continue to be so maintained and there are at November 30, 1998 and will pending
Closing be no material inaccuracies or discrepancies of any kind contained or
reflected therein or in any of them. At November 30, 1998 they give and reflect
and at Closing will give and reflect a true and fair view of the financial,
contractual and trading position of KnowledgeWell and of its plant and
machinery, fixed and current assets and liabilities (actual and contingent),
debtors and creditors and stock-in-trade and work-in-progress.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6 of
--------------------------
the KnowledgeWell Disclosure Letter, KnowledgeWell does not have any material
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), which
individually or in the aggregate,
-11-
(i) has not been reflected in the Balance Sheets, or (ii) has not arisen in the
ordinary course of KnowledgeWell's business since October 31, 1998, consistent
with past practices.
2.7 No Changes. Except as set forth in Schedule 2.7 of the KnowledgeWell
----------
Disclosure Letter, since October 31, 1998, there has not been, occurred or
arisen any:
(a) transaction by KnowledgeWell except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Memorandum and Articles of
Association of KW Limited or KW Group;
(c) capital expenditure or commitment by KnowledgeWell of US$25,000
in any individual case or US$100,000 in the aggregate.
(d) destruction of, damage to or loss of any material assets,
business or customer of KnowledgeWell (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by KnowledgeWell;
(g) revaluation by KnowledgeWell of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the share capital of KnowledgeWell, or any direct
or indirect redemption, purchase or other acquisition by KnowledgeWell of any of
its share capital;
(i) increase in the salary or other compensation payable or to become
payable by KnowledgeWell to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by KnowledgeWell, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
(j) sale, lease, license or other disposition of any of the assets or
properties of KnowledgeWell, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which KnowledgeWell is a party or by which it is bound;
-12-
(l) loan by KnowledgeWell to any person or entity, incurring by
KnowledgeWell of any material indebtedness, guaranteeing by KnowledgeWell of any
material indebtedness, issuance or sale of any debt securities of KnowledgeWell
or guaranteeing of any debt securities of others except for advances to
employees for travel and business expenses in the ordinary course of business,
consistent with past practices;
(m) waiver or release of any material right or material claim of
KnowledgeWell, including any material write-off or other material compromise of
any account receivable of KnowledgeWell;
(n) to KnowledgeWell's knowledge, commencement or notice or threat of
commencement of any lawsuit or proceeding against or investigation of
KnowledgeWell or its affairs;
(o) notice of any claim of ownership by a third party of the
Intellectual Property of KnowledgeWell (as defined in Section 2.11 below) or of
infringement by KnowledgeWell of any third party's Intellectual Property rights;
(p) issuance or sale by KnowledgeWell of any of its share capital, or
securities exchangeable, convertible or exercisable therefor, or of any other of
its securities;
(q) change in pricing or royalties set or charged by KnowledgeWell to
its customers or licensees except in the ordinary course of business, or in
pricing or royalties set or charged by persons who have licensed Intellectual
Property to KnowledgeWell except in the ordinary course of business;
(r) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on KnowledgeWell; or
(s) negotiation or agreement by KnowledgeWell or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with CBT and its representatives regarding
the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, "Taxes", means any and all national, federal, state, local and
-----
foreign taxes, assessments and other governmental charges, duties, impositions,
levies and liabilities, whenever imposed, including without limitation taxes
based upon or measured by gross receipts, income, profits, sales, capital gain,
use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
-13-
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8 of
----------------------
the KnowledgeWell Disclosure Letter:
(i) KnowledgeWell as of the Closing Date will have prepared and
filed all required national, U.S. federal, U.S. state, U.S. local and non-U.S.
returns, estimates, information statements and reports ("Returns") relating to
-------
any and all Taxes concerning or attributable to KnowledgeWell or its operations
and such Returns are true and correct in all material respects and have been
completed in accordance with applicable law.
(ii) KnowledgeWell as of the Closing Date: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all U.S. federal and U.S. state income taxes,
FICA, FUTA and other Taxes required to be withheld.
(iii) KnowledgeWell has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
KnowledgeWell, nor has KnowledgeWell executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of KnowledgeWell
is presently in progress, nor has KnowledgeWell been notified of any request for
such an audit or other examination.
(v) KnowledgeWell does not have any liabilities for unpaid U.S.
federal, state, U.S. local or non-U.S. Taxes which have not been accrued or
reserved against in accordance with GAAP on the Balance Sheets, whether asserted
or unasserted, contingent or otherwise, and KnowledgeWell has no knowledge of
any basis for the assertion of any such liability attributable to KnowledgeWell,
its assets or operations.
(vi) KnowledgeWell has provided to CBT copies of all U.S. federal
and U.S. state income and all U.S. state sales and use Tax Returns for all
periods since the date of KnowledgeWell's incorporation.
(vii) There are (and as of immediately following the Closing
there will be) no Liens on the assets of KnowledgeWell relating to or
attributable to Taxes.
(viii) KnowledgeWell has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of KnowledgeWell.
(ix) None of KnowledgeWell's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(x) As of the Closing Date, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or
-14-
former employee of KnowledgeWell that, individually or collectively, will, or
would reasonably be expected to, give rise to the payment of any amount that
would not be deductible pursuant to Section 280G or 162 of the Code.
(xi) KnowledgeWell is not a party to a tax sharing or allocation
agreement nor does KnowledgeWell owe any amount under any such agreement.
(c) General
-------
(i) All returns, computations, notices and items of information
which are, or have been, required to be made or given by KnowledgeWell for any
Tax purpose have been made or given within the requisite periods and on a proper
basis and are up-to-date and correct, and none of them is, or is likely to be,
the subject of any dispute with the Irish Revenue Commissioners (the "Revenue
-------
Commissioners") or other Tax authorities.
- -------------
(ii) All Tax, including amounts required by statute to be
deducted by KnowledgeWell in respect of payments made by it, which KnowledgeWell
is liable to pay prior to Closing has been or will be so paid prior to Closing.
(iii) KnowledgeWell has not paid, or become liable to pay, any
fine, penalty or interest charged by virtue of the Taxes Consolidation Act, 1997
("TCA"), the Value Added Tax Act, 1972, of Ireland or any other statutory
---
provision relating to Tax, and it has not committed any act or made any omission
which might constitute an offense under section 1078 of the TCA.
(iv) Schedule 2.8(c)(iv) of the KnowledgeWell Disclosure Letter
sets out full particulars of any agreement or arrangement between KnowledgeWell
and the Revenue Commissioners or other Tax authorities pursuant to which
KnowledgeWell is authorized not to comply with a requirement which, but for such
agreement or arrangement, would be its statutory obligation, and KnowledgeWell
has not taken any action which has had, or will have, the result of altering,
prejudicing or in any way disturbing any arrangement or agreement which it has
previously had with the Revenue Commissioners or other Tax authorities.
(v) The KnowledgeWell Disclosure Letter contains full and
accurate particulars of all transactions effected otherwise than in the ordinary
course of business since the Accounts Date in respect of which KnowledgeWell is
required to make a specific return to the relevant Tax authorities and in
respect of which the time for making such return will expire on or after
Closing.
(vi) No transaction has been effected by KnowledgeWell in respect
of which any consent or clearance from the Revenue Commissioners or other Tax
authorities was required:
(1) without such consent or clearance having been validly
obtained before the transaction was effected;
-15-
(2) otherwise than in accordance with the terms of, and so
as to satisfy any conditions attached to, such consent or clearance; or
(3) otherwise than at a time when, and in circumstances in
which, such consent or clearance was valid and effective,
and, in any case where such consent or clearance was required, no circumstances
have arisen which might reasonably be expected to cause such consent or
clearance to be or become invalid or to be withdrawn by the Tax authority
concerned.
(vii) All particulars furnished to the Revenue Commissioners or
other Tax authorities in connection with the application for any consent or
clearance by KnowledgeWell made since the Accounts Date fully and accurately
disclosed all facts and circumstances material to the decision of the Revenue
Commissioners or such other authorities.
(viii) KnowledgeWell is not and will not become liable to pay, or
make reimbursement or indemnity in respect of, any Tax (or amounts corresponding
thereto) in consequence of the failure by any other person to discharge that Tax
within any specified period or otherwise, where such Tax relates to a profit,
income or gain, transaction, event, omission or circumstance arising, occurring
or deemed to arise or occur whether wholly or partly prior to Closing.
(ix) The KnowledgeWell Disclosure Letter includes a correct and
complete list and full particulars with express reference to this clause (c)(ix)
of all matters relating to Tax in respect of which KnowledgeWell (either alone
or jointly with any other person) has, or at Closing will have, an outstanding
entitlement:
(1) to make any claim for relief under the TCA or any other
statutory provision relating to Tax;
(2) to make any election for one type of relief, or one
basis, system or method of Tax, as opposed to another;
(3) to make any appeal (including a further appeal) against
an assessment to Tax;
(4) to make any application for the postponement, or
payment by instalment of, Tax; or
(5) to disclaim any allowance or relief
such particulars being reasonably sufficient to enable CBT to procure that
any time limit to such entitlement expiring within six months after Closing
can be met.
-16-
(x) No notice of attachment has been served on KnowledgeWell
under section 1002 of the TCA.
(xi) KnowledgeWell has not received, nor will it prior to
Closing earn, deposit interest subject to retention of Tax under section 257 of
the TCA.
(xii) KnowledgeWell has not since its incorporation taken a
fixed charge on the book debts of any company, nor will it take any such fixed
charge prior to Closing.
(xiii) KnowledgeWell has never been, nor is it now, assessable to
tax under section 1034 or 1035 of the TCA.
(xiv) KnowledgeWell has not received any notice under section
811(6) of the TCA or engaged in, or been a party to, a tax avoidance transaction
within the meaning of section 811(2) of the TCA or any other transaction or
series of transactions or scheme or arrangement of which the main purpose, or
one of the main purposes, was or could be said to be the avoidance or deferral
of, or a reduction in the liability to, Tax.
(xv) KnowledgeWell has properly operated the pay as you earn
and social welfare contribution systems (including levies), deducting and
accounting for Tax and maintaining records as required by law, and it has not
suffered any PAYE audit by the Revenue Commissioners since the Accounts Date nor
has it been notified that any such audit will or is expected to be made.
(d) Corporation Tax
---------------
(i) Neither KW Limited nor KW Group is, or has at any stage
since its incorporation been resident for Tax purposes in a country other than
Ireland.
(ii) Schedule 2.8(d)(ii) of the KnowledgeWell Disclosure Letter
includes a correct and complete list and full particulars of any liability to
Tax in a country other than Ireland.
(iii) (1) Schedule 2.8(d)(iii) of the KnowledgeWell Disclosure
Letter includes a statement of all distributable reserves of KnowledgeWell which
carry a reduced tax credit.
(2) Where relief under chapter 1 of part 14 of the TCA
has been claimed by either KW Limited or KW Group, such relief was claimed, and
is being claimed, on a correct and proper basis.
(iv) No relief (whether by way of deduction, reduction, set-
off, exemption, repayment, allowance or otherwise) from, against or in respect
of any tax has been claimed or given to KnowledgeWell which could or might be
effectively withdrawn, postponed, restricted or otherwise lost as a result of
any act, omission, event or circumstance arising or occurring at or at any time
before, Closing, and KnowledgeWell has not at any time claimed any relief from
Tax under part 10 of the TCA.
-17-
(v) Nothing has been done and no event or series of events has
occurred or will as a result of any contract, agreement or arrangement entered
into before Closing occur, which might when taken together with the entry into
or Closing of this Agreement cause or contribute to the disallowance to either
KW Limited or KW Group of the carry forward of any losses or excess charges on
income or surplus advance corporation tax.
(vi) The use of losses incurred by, or charges paid by, either
of KW Limited or KW Group is not restricted by section 454, 455 or 456 of the
TCA.
(vii) (1) Neither KW Limited, KW Group nor the Subsidiary
incurred a loss on the disposal or deemed disposal of an asset (other than
trading stock) in relation to which their ability to set the whole of that loss
against any chargeable gain arising in the same or later accounting period is or
may be restricted or excluded.
(2) Neither KW Limited nor KW Group has made, nor are
they entitled to make, a claim under section 538 of the TCA.
(viii) None of KW Limited, KW Group or the Subsidiary has made a
claim for capital allowances in respect of any asset which is leased to or from,
or hired to or from, any of the other of them, and since the Accounts Date,
KnowledgeWell has not done, or omitted to do, or agreed to do or permitted to be
done, any act, or suffered any occurrence, as a result of which any balancing
charge has arisen or may arise under sections 274 or 288 of the TCA, nor has
there been or might there be any disallowance of excess relief by virtue of
section 403 of the TCA.
(ix) (1) If each of the assets (other than trading stock) of
KnowledgeWell was disposed of for a consideration equal to the book value of
that asset shown in or adopted for the purpose of the KnowledgeWell Financial
Statements, no liability to corporation tax on chargeable gains or balancing
charges under section 274 or 288 of the TCA not fully provided for in the
KnowledgeWell Financial Statements would arise.
(2) For the purpose of determining the liability to
corporation tax on chargeable gains, there shall be disregarded any reliefs and
allowances available to KnowledgeWell other than amounts falling to be deducted
under chapter 2 of part 19 of the TCA.
(3) KnowledgeWell has not since the Accounts Date
acquired any asset (other than trading stock) in circumstances such that
sections 584, 585, 586 or 587 of the TCA applied to its acquisition.
(x) The KnowledgeWell Disclosure Letter includes a correct and
complete list and full particulars of all dividends paid since the date of
incorporation of KnowledgeWell out of patent income disregarded for the purposes
of corporation tax by virtue of section 234 of the TCA.
(xi) Each of KW Limited and KW Group are regarded as close
companies for Irish tax purposes. Except as disclosed in the Schedule 2.8(d)(xi)
of the KnowledgeWell Disclosure
-18-
Letter none of the said companies has any liability to Tax pursuant to part 13
of the TCA or will incur any such liability in respect of any accounting period
prior to Closing.
(xii) Each of KW Limited, KW Group and the Subsidiary at
November 30, 1998, carried on an activity which is a trade for the purposes of
Tax and has not ceased, and will not as a result of any contract, agreement or
arrangement entered into before Closing cease, to carry on such activity.
(xiii) KnowledgeWell has never received nor become entitled to
any income which is particular income within the meaning of section 1004 of the
TCA nor any particular gains to which section 1005 of the TCA could apply.
(xiv) KnowledgeWell:
(1) does not own nor has it agreed to acquire any asset,
nor has it received or agreed to receive any services or facilities (including
without limitation the benefit of any licences or agreements), the consideration
for the acquisition or provision of which was or will be in excess of its market
value, or otherwise than on an arm's length basis;
(2) does not own nor has it agreed to dispose of any
asset, nor has it provided or agreed to provide any services or facilities
(including without limitation the benefit of any licences or agreements), the
consideration for the disposal or provision of which was or will be less than
its market value, or otherwise than on an arm's length basis;
(3) has not disposed of or acquired any asset in such
circumstances that the provisions of section 547 of the TCA applied or could
apply thereto; and
(4) has not since the Accounts Date appropriated any
asset owned by it to or from trading stock.
(xv) None of KW Limited, KW Group or the Subsidiary has since
the respective date of its incorporation:
(1) repaid or agreed to repay, or redeemed or agreed to
redeem, or purchased or agreed to purchase, any of its share capital; or
(2) capitalized or agreed to capitalize in the form of
debentures or redeemable shares any profits or reserves of any class or
description.
(xvi) No rents, interest, annual payments, emoluments or other
sums of an income nature paid or payable by KnowledgeWell or which KnowledgeWell
is under an obligation to pay in the future are, or (under the law as presently
in force) may be, wholly or partially disallowable as deductions or charges in
computing profits for the purpose of corporation tax by reason of any statutory
provision relating to Tax.
-19-
(xvii) No securities, within the meaning of section 135(8) of
the TCA issued by KnowledgeWell and remaining in issue at November 30, 1998 were
issued in such circumstances that any interest or other distribution out of
assets in respect thereof falls to be treated as a distribution under section
130(2)(d) of the TCA, nor has KnowledgeWell agreed to issue securities (within
that meaning) in such circumstances.
(xviii) Section 138 of the TCA does not apply to dividends paid
or received by any of KW Limited, KW Group or the Subsidiary.
(xix) No asset owned by KnowledgeWell has at any time since its
acquisition by KnowledgeWell been subjected to a reduction in value such that
any allowable loss arising on its disposal is likely to be reduced or eliminated
or any chargeable gain arising on its disposal is likely to be increased.
(xxi) KnowledgeWell has not entered into any transaction to
which the provisions of section 98, 99 or 199 of the TCA have been or could be
applied.
(xx) KnowledgeWell has not since the Accounts Date received
any payment to which section 782 of the TCA is applicable.
(xxi) (1) There is set out in Schedule 2.8(d)(xxii) of the
KnowledgeWell Disclosure Letter details of all share schemes established by
KnowledgeWell and approved pursuant to Part 17 of the TCA.
(2) None of KW Limited, KW Group or the Subsidiary has
been a qualifying research and development company or a qualifying sponsoring
company within the meaning of Chapter III of Part I of the Finance Act, 1986, of
Ireland.
(xxiii) (1) Schedule 2.8(d)(xxiii)(1) of the KnowledgeWell
Disclosure Letter includes a correct and complete list and full particulars of
all arrangements and agreements relating to group relief (as described in
Chapter 5 of Part 2 of the TCA) to which any of KW Limited, KW Group or the
Subsidiary are or have been a party since the respective date of its
incorporation.
(2) All claims made by KW Limited, KW Group or the
Subsidiary for group relief were, when made, valid and have been or will be
allowed by way of relief from corporation tax.
(3) Except as disclosed in Schedule 2.8(d)(xxiii)(3)
of the KnowledgeWell Financial Statements, none of KW Limited, KW Group or the
Subsidiary has since the Accounts Date made, nor are they liable to make, any
payment under any such arrangement or agreement.
-20-
(4) Each of KW Limit ed, KW Group and the Subsidiary
has received any payments due to it under any such arrangements or agreement for
surrender of group relief made by it.
(xxiv) (1) Schedule 2.8(d)(xxiv)(1) of the KnowledgeWell
Disclosure Letter includes a correct and complete list and full particulars of
all arrangements and agreements relating to the surrender of advance corporation
tax (as described in section 166 of the TCA) to which any of KW Limited, KW
Group or the Subsidiary are or have been a party in the period since their
respective incorporation.
(2) All claims made by any of KW Limited, KW Group or
the Subsidiary for the surrender of advance corporation tax were, when made,
valid and have been or will be allowed by way of relief from corporation tax
payable by the particular company to whom the advance corporation tax was
surrendered.
(3) Except as disclosed in Schedule 2.8(d)(xxiv)(3) of
the KnowledgeWell Disclosure Letter none of KW Limited, KW Group or the
Subsidiary has since the Accounts Date paid, or is liable to pay, any advance
corporation tax which is or may become incapable of set-off against its
liability to corporation tax.
(4) Each of KW Limited, KW Group or the Subsidiary has
received all payments due to it under any such arrangements or agreements for
the surrender of advance corporation tax.
(xxv) Schedule 2.8(d)(xxv) of the KnowledgeWell Disclosure
Letter includes a correct and complete list and full particulars of all
elections made by any of KW Limited, KW Group or the Subsidiary under section
165 of the TCA.
(xxvi) The entry into or Closing of this Agreement will not
result in any profit or gain being deemed to accrue to any of KW Limited, KW
Group or the Subsidiary for Tax purposes, whether pursuant to section 623 of the
TCA or otherwise.
(xxvii) KnowledgeWell has not purchased an asset subject to a
claim made under section 620 of the TCA, nor has it made any other claim which
would affect the amount of the chargeable gain or allowable loss which would,
but for such claim, have arisen on a disposal of any of its assets.
(xxviii) KnowledgeWell has not entered into any transaction as a
result of which it could be assessed to Tax under Chapter 1 Part 22 of the TCA.
(e) Capital Acquisitions Tax.
------------------------
-21-
(i) There is no outstanding charge for unpaid capital
acquisitions tax over any asset of KnowledgeWell or in relation to any shares in
the capital of any of KW Limited, KW Group or the Subsidiary.
(ii) There are not in existence any circumstances whereby any
such power as is mentioned in section 35(8) of the Capital Acquisitions Tax Act,
1976, of Ireland could be exercised in relation to any shares, securities or
other assets of or owned by KnowledgeWell.
(iii) Since the Accounts Date, no taxable gift (as defined by
section 6 of the Capital Acquisitions Tax Act, 1976, of Ireland) or taxable
inheritance (as defined by section 12 of the same Act) has been received by any
of KW Limited, KW Group or the Subsidiary, nor have any of KW Limited, KW Group
or the Subsidiary been disponers (as defined by section 2 of the same Act) for
the purposes of capital acquisitions tax.
2.9 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which KnowledgeWell is a party or otherwise binding upon KnowledgeWell which has
or reasonably could be expected to have the effect of prohibiting or impairing
any business practice of KnowledgeWell, any acquisition of property (tangible or
intangible) by KnowledgeWell or the conduct of business by KnowledgeWell.
Without limiting the foregoing, KnowledgeWell has not entered into any agreement
under which KnowledgeWell is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) KnowledgeWell owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) of the KnowledgeWell Disclosure Letter sets
forth a list of all real property currently, or at any time in the past, leased
by KnowledgeWell, the name of the lessor and the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate annual
rental and/or other fees payable under any such lease. All such current leases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of material default (or event which with notice or
lapse of time, or both, would constitute a material default).
(b) KnowledgeWell has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the KnowledgeWell
Financial Statements or in Schedule 2.10(b) of the KnowledgeWell Disclosure
Letter and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby. The buildings on the Properties have been properly and
soundly constructed and are in a good and substantial state of repair and
condition and no high alumina cement, woodwool, calcium chloride, sea dredged
aggregates or asbestos material was used in the construction
-22-
thereof and KnowledgeWell has no outstanding claims or liabilities in respect of
the construction of the buildings of the Properties.
(c) Notwithstanding the foregoing paragraphs (a) and (b), no
representation or warranty made in such paragraphs relate to the property at
Block 1, Blackrock Industrial Estate, Blackrock, County Dublin as such property
is dealt with by way of a certificate of title furnished to CBT by Binchys
Solicitors at November 30, 1998.
2.11 Intellectual Property.
---------------------
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and
---------------------
all rights in, arising out of, or associated therewith: (i) all Irish, United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and continuations-
in-part thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout the
world; (iv) all mask works, mask work registrations and applications therefor,
and all other rights corresponding thereto throughout the world; (v) all
industrial designs and any registrations and applications therefor throughout
the world; (vi) all trade names, logos, common law trademarks and service marks;
trademark and service mark registrations and applications therefor throughout
the world; (vii) all databases and data collections and all rights therein
throughout the world; and (vii) all computer software including all source code,
object code, firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded, and all documentation related to any of
the foregoing throughout the world.
"Intellectual Property of KnowledgeWell" shall mean any Intellectual
--------------------------------------
Property that is owned by or exclusively licensed to KnowledgeWell.
"currently" means, as used in this section, the period beginning six
---------
years prior to the Closing Date and ending on such date.
(b) Schedule 2.11(b) of the KnowledgeWell Disclosure Letter lists all
of KnowledgeWell's Irish and United States and foreign: (i) patents, patent
applications (including provisional applications); (ii) registered trademarks,
applications to register trademarks, intent-to-use applications, or other
registrations related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) mask work registrations and
applications to register mask works; and (v) any other Intellectual Property of
KnowledgeWell that is the subject of an application, certificate or registration
issued by or recorded by any state, government or other public legal authority,
all of the foregoing, the "Registered Intellectual Property".
--------------------------------
-23-
(c) Schedule 2.11(c) of the KnowledgeWell Disclosure Letter lists any
proceedings or actions before any court, tribunal (including the Irish Patents
Office ("IPO") and the United States Patent Office ("PTO") or equivalent
--- ---
authority anywhere else in the world) related to any of the Registered
Intellectual Property.
(d) KnowledgeWell has complied with all applicable disclosure
requirements and has not committed any fraudulent act in the application for and
maintenance of any patent, trademark or copyright of KnowledgeWell.
(e) Each item of Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been made or paid and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in Ireland, the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Schedule 2.11(e) of the KnowledgeWell
Disclosure Letter lists all actions and payments that must be made in the six
month period following the Closing Date in connection with the preservation or
maintenance of the Registered Intellectual Property.
(f) KnowledgeWell is not barred from seeking patents on material
potentially patentable inventions of KnowledgeWell by "on-sale" or similar bars
to patentability or by failure to apply for a patent on such inventions within
the time required.
(g) The contracts, licenses and agreements listed in Schedule 2.11(g)
of the KnowledgeWell Disclosure Letter include all contracts, licenses and
agreements, to which KnowledgeWell is a party with respect to any Intellectual
Property with a potential value or cost in excess of US$20,000.
(h) The contracts, licenses and agreements listed in Schedule 2.11(g)
of the KnowledgeWell Disclosure Letter are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of the contracts, licenses and agreements listed in Schedule 2.11(g)
of the KnowledgeWell Disclosure Letter. KnowledgeWell is in compliance with,
and has not breached any term of, the contracts, licenses and agreements listed
in Schedule 2.11(g) of the KnowledgeWell Disclosure Letter, and, to the
knowledge of KnowledgeWell, all other parties to the contracts, licenses and
agreements listed in Schedule 2.11(g) of the KnowledgeWell Disclosure Letter
are, in compliance with, and have not breached any term of, such contracts,
licenses and agreements.
(i) Except as set forth in Schedule 2.11(i) of the KnowledgeWell
Disclosure Letter: (i) no person has any rights to use any of the Intellectual
Property of KnowledgeWell; and (ii) KnowledgeWell has not granted to any Person,
nor authorized any Person to retain, any rights in the Intellectual Property of
KnowledgeWell.
(j) Except as set forth in Schedule 2.11(j) of the KnowledgeWell
Disclosure Letter: (i) KnowledgeWell owns and has good and exclusive title to
each item of Intellectual Property of
-24-
KnowledgeWell, including all Registered Intellectual Property listed in Schedule
2.11(b) of the KnowledgeWell Disclosure Letter, free and clear of any lien or
encumbrance; (ii) KnowledgeWell owns, or has the right, pursuant to a valid
Contract to use or operate under, all other Intellectual Property of
KnowledgeWell; and (iii) KnowledgeWell is the exclusive owner of all trademarks
and trade names used in connection with the operation or conduct of the business
of KnowledgeWell, including the sale of any products or the provision of any
services by KnowledgeWell.
(k) The operation of the business of KnowledgeWell as such business
currently is conducted, or is reasonably is contemplated to be conducted,
including KnowledgeWell's design, development, manufacture, marketing and sale
of the products or services of KnowledgeWell (including with respect to products
currently under development) has not, does not and will not infringe or
misappropriate the Intellectual Property of any other Person or constitute
unfair competition or trade practices under the laws of any jurisdiction
(l) KnowledgeWell has not received notice from any person that the
operation of the business of KnowledgeWell, including its design, development,
manufacture and sale of its products (including with respect to products
currently under development) and provision of its services, infringes or
misappropriates the Intellectual Property of any Person or constitutes unfair
competition or trade practices under the laws of any jurisdiction.
(m) KnowledgeWell owns or has the right to all Intellectual Property
necessary to the conduct of its business as it currently is conducted or is
reasonably contemplated to be conducted, including, without limitation, the
design, development, manufacture and sale of all products currently manufactured
or sold by KnowledgeWell or under development by KnowledgeWell and the
performance of all services provided or contemplated to be provided by
KnowledgeWell.
(n) Schedule 2.11(n) of the KnowledgeWell Disclosure Letter lists all
contracts, licenses and agreements between KnowledgeWell and any other Person
wherein or whereby KnowledgeWell has agreed to, or assumed, any obligation or
duty to warrant, indemnify, hold harmless or otherwise assume or incur any
obligation or liability with respect to the infringement or misappropriation by
KnowledgeWell or such other Person of the Intellectual Property of any other
Person.
(o) Except as listed in Schedule 2.11(o) of the KnowledgeWell
Disclosure Letter, there are no contracts, licenses and agreements between
KnowledgeWell and any other person with respect to the Intellectual Property of
KnowledgeWell under which there is any dispute known to KnowledgeWell regarding
the scope of such agreement, or performance under such agreement including with
respect to any payments to be made or received by KnowledgeWell thereunder.
(p) Except as listed in Schedule 2.11(p) of the KnowledgeWell
Disclosure Letter, to the knowledge of KnowledgeWell, no person has or is
infringing or misappropriating any of the Intellectual Property of
KnowledgeWell.
-25-
(q) Except as listed in Schedule 2.11(q) of the KnowledgeWell
Disclosure Letter, there have been, and are, no claims asserted against
KnowledgeWell or against any customer of KnowledgeWell, related to any product
or service of KnowledgeWell.
(r) No Intellectual Property of KnowledgeWell, or product or service
of KnowledgeWell is subject to any proceeding or outstanding decree, order,
judgment, or stipulation restricting in any manner the use or licensing thereof
by KnowledgeWell, or which may affect the validity, use or enforceability of
such Intellectual Property of KnowledgeWell.
(s) KnowledgeWell has taken all steps that are reasonably required to
protect KnowledgeWell's rights in KnowledgeWell's confidential information and
trade secrets or any trade secrets or confidential information of third parties
provided to KnowledgeWell, and, without limiting the foregoing, KnowledgeWell
has and enforces a policy requiring each employee and contractor to execute
proprietary information and confidentiality agreements substantially in
KnowledgeWell's standard forms and all current and former employees and
contractors of KnowledgeWell have executed such an agreement.
(t) KnowledgeWell owns exclusively and has good title to all
copyrighted works that are KnowledgeWell products or which KnowledgeWell
otherwise purports to own, except for those copyrighted works licensed to
KnowledgeWell listed in Schedule 2.11(t) of the KnowledgeWell Disclosure Letter.
(u) To the extent that any work, invention, or material has been
developed or created by a third party for KnowledgeWell, KnowledgeWell has a
written agreement with such third party with respect thereto and KnowledgeWell
thereby has obtained ownership of, and is the exclusive owner of, all
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(v) Notwithstanding any other provision of this Agreement, it is
understood and agreed that KnowledgeWell will not be deemed to be in violation
of any representation, warranty, covenant or agreement under this Agreement,
including without limitation any representation, warranty, covenant or agreement
relating to Intellectual Property, due to any matter that relates to the
Intellectual Property licensed from CBT pursuant to the Software License
Agreement dated October 22, 1997 between KW Limited and CBT, as amended.
2.12 (a) Agreements, Contracts and Commitments. Except as set forth in
-------------------------------------
Schedule 2.12(a) of the KnowledgeWell Disclosure Letter, KnowledgeWell does not
have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
-26-
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement with a
firm or other organization,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of US$5,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement containing any covenant limiting the freedom
of KnowledgeWell or its present and future affiliated entities to engage in any
line of business or to compete with any person,
(x) any agreement relating to capital expenditures and
involving future payments in excess of US$20,000,
(xi) any agreement relating to the disposition or acquisition
of assets or any interest in any business enterprise outside the ordinary course
of KnowledgeWell's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving US$20,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which KnowledgeWell has granted
or may grant in the future, to any party a source-code license or option or
other right to use or acquire source-code, or
-27-
(xvii) any other agreement that involves US$20,000 or more or is
not cancelable without penalty within thirty (30) days.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, as are all noted in Schedule 2.12(b) of the
KnowledgeWell Disclosure Letter, KnowledgeWell has not materially breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, and there are no circumstances reasonably likely to give
rise to any material breach, violation or default under any of the terms or
conditions of any agreement, contract or commitment required to be set forth in
Schedule 2.12(a) or 2.11(b) of the KnowledgeWell Disclosure Letter (any such
agreement, contract or commitment, a "Contract"). Each Contract is in full
--------
force and effect and, except as otherwise disclosed in Schedule 2.12(b) of the
KnowledgeWell Disclosure Letter, is not subject to any material default
thereunder of which KnowledgeWell has knowledge by any party obligated to
KnowledgeWell pursuant thereto.
2.13 Interested Party Transactions. Except as set forth in Schedule 2.13
-----------------------------
of the KnowledgeWell Disclosure Letter, to KnowledgeWell's knowledge, no
officer, director or shareholder of KnowledgeWell (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had a material economic
interest), has or has had, directly or indirectly, (i) an economic interest in
any entity which furnished or sold, or furnishes or sells, services or products
that KnowledgeWell furnishes or sells, or proposes to furnish or sell, (ii) an
economic interest in any entity that purchases from, or sells or furnishes to,
KnowledgeWell, any goods or services or (iii) a beneficial interest in any
contract or agreement set forth in Schedule 2.12(a) or 2.12(b) of the
KnowledgeWell Disclosure Letter; provided, that (x) ownership of no more than
one percent (1%) of the outstanding voting stock of a publicly traded
corporation and no more than ten percent (10%) of the outstanding equity of any
other entity shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13 and (y) this provision shall only apply if the
terms and conditions applicable to the subject relationship are materially less
favorable to KnowledgeWell than the terms and conditions that could be obtained
in an arms-length relationship.
2.14 Compliance with Laws. To KnowledgeWell's knowledge, KnowledgeWell
--------------------
and its officers and employees have complied in all material respects with, are
not in material violation of, and have not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation.
2.15 Litigation. Except as set forth in Schedule 2.15 of the
----------
KnowledgeWell Disclosure Letter, KnowledgeWell is not engaged in nor is there
any action, suit or proceeding of any nature pending or, to KnowledgeWell's
knowledge threatened, against KnowledgeWell, its properties or any of its
officers or directors, in their respective capacities as such or any person for
whose acts or defaults KnowledgeWell is or may be vicariously liable. Except as
set forth in Schedule 2.15 of the KnowledgeWell Disclosure Letter, to
KnowledgeWell's knowledge, there is no investigation pending or threatened
against KnowledgeWell, its properties or any of its officers or directors by or
before any governmental entity. Schedule 2.15 of the KnowledgeWell Disclosure
Letter sets forth, with respect
-28-
to any pending or threatened action, suit, proceeding or investigation, the
forum, the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No governmental entity has at any time
challenged or questioned the legal right of KnowledgeWell to manufacture, offer
or sell any of its products in the present manner or style thereof.
2.16 Insurance.
---------
(a) All material assets of KnowledgeWell of an insurable nature have
at all material times been and are at November 30, 1998 insured in amounts
representing their full replacement or reinstatement value against fire and
other risks (including without limiting the generality of the foregoing loss of
profit) normally insured against by persons carrying on the same classes of
business as those carried on by KnowledgeWell and KnowledgeWell has at all
material times been and is at November 30, 1998 adequately covered against
accident, damage, injury, third party public liability (including products
liability and defamation liability) loss of profits and other risks normally
insured against by persons carrying on the same classes of business as those
carried on by KnowledgeWell. All such policies are and will at Closing be in
full force and effect and nothing has been done or omitted to be done which
would make any policy of insurance void or voidable or which is likely to result
in an increase in premium. All of such insurance policies have been disclosed
to CBT and are listed in Schedule 2.16(a) of the KnowledgeWell Disclosure
Letter.
(b) With respect to the insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of KnowledgeWell, there is no claim by KnowledgeWell
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and KnowledgeWell is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). To KnowledgeWell's knowledge, there is no threatened
termination of, or material premium increase with respect to, any of such
policies.
2.17 Minute Books. The minute books of KnowledgeWell provided to counsel
------------
for CBT are the only minute books of KnowledgeWell and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
shareholders or actions by written consent since the time of incorporation of
KnowledgeWell.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. KnowledgeWell has not: (i) operated any
------------------
underground storage tanks at any property that KnowledgeWell has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act
-29-
of 1976, as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
------------------
safely maintained. No Hazardous Materials are present, as a result of the
deliberate actions of KnowledgeWell, or, to KnowledgeWell's knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that KnowledgeWell has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. KnowledgeWell has not
------------------------------
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has KnowledgeWell disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "Hazardous Materials
-------------------
Activities") in violation of any rule, regulation, treaty or statute promulgated
- ----------
by any Governmental Entity in effect prior to or as of November 30, 1998 to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. KnowledgeWell currently holds all environmental
-------
approvals, permits, licenses, clearances and consents (the "Environmental
-------------
Permits") necessary for the conduct of KnowledgeWell's Hazardous Material
- -------
Activities and other businesses of KnowledgeWell as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to
KnowledgeWell's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activities of KnowledgeWell.
KnowledgeWell is not aware of any fact or circumstance which could involve
KnowledgeWell in any environmental litigation or impose upon KnowledgeWell any
environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. KnowledgeWell has
------------------------------------------------
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.20 United States Employee Matters and Benefit Plans.
------------------------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.20(a)(i) below (such definition shall only apply to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with KnowledgeWell within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
-30-
(ii) "ERISA" shall mean the Employee Retirement Income Security
-----
Act of 1974, as amended;
(iii) "KnowledgeWell Employee Plan" shall refer to any plan,
---------------------------
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by KnowledgeWell or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which KnowledgeWell or any
Affiliate has or may have any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of KnowledgeWell or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between KnowledgeWell or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
------------------
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each KnowledgeWell Employee
------------
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) of the KnowledgeWell Disclosure Letter
--------
contains an accurate and complete list of each KnowledgeWell Employee Plan and
each Employee Agreement, together with a schedule of all liabilities, whether or
not accrued, under each such KnowledgeWell Employee Plan or Employee Agreement.
KnowledgeWell does not have any plan or commitment to establish any new
KnowledgeWell Employee Plan or Employee Agreement, to modify any KnowledgeWell
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such KnowledgeWell Employee Plan or Employee Agreement to the
requirements of any applicable law, or as required by this Agreement), or to
enter into any KnowledgeWell Employee Plan or Employee Agreement, nor does it
have any intention or commitment to do any of the foregoing.
(c) Documents. KnowledgeWell has provided to CBT (i) correct and
---------
complete copies of all documents embodying or relating to each KnowledgeWell
Employee Plan and each Employee Agreement including all amendments thereto and
written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each KnowledgeWell Employee Plan; (iii) the
three most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each KnowledgeWell
Employee Plan or related trust; (iv) if a KnowledgeWell Employee Plan is funded,
the most recent annual and periodic accounting of that
-31-
KnowledgeWell Employee Plan's assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each KnowledgeWell Employee Plan; (vi)
all IRS determination letters and rulings relating to KnowledgeWell Employee
Plans and copies of all applications and correspondence to or from the IRS or
the Department of Labor ("DOL") with respect to any KnowledgeWell Employee Plan;
---
(vii) all communications material to any Employee or Employees relating to any
KnowledgeWell Employee Plan and any proposed KnowledgeWell Employee Plans, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any material liability to KnowledgeWell; and (viii)
all registration statements and prospectuses prepared in connection with each
KnowledgeWell Employee Plan.
(d) Employee Plan Compliance. Except as set forth in Schedule 2.20(d)
------------------------
of the KnowledgeWell Disclosure Letter, (i) KnowledgeWell has performed in all
material respects all obligations required to be performed by it under each
KnowledgeWell Employee Plan and each KnowledgeWell Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any KnowledgeWell Employee Plan; (iii) there
are no actions, suits or claims pending, or, to the knowledge of KnowledgeWell,
threatened or anticipated (other than routine claims for benefits) against any
KnowledgeWell Employee Plan or against the assets of any KnowledgeWell Employee
Plan; and (iv) each KnowledgeWell Employee Plan can be amended, terminated or
otherwise discontinued after the Closing Date in accordance with its terms,
without liability to KnowledgeWell, CBT or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event); (v)
there are no inquiries or proceedings pending or, to the knowledge of
KnowledgeWell or any affiliates, threatened by the IRS or DOL with respect to
any KnowledgeWell Employee Plan; and (vi) neither KnowledgeWell nor any
Affiliate is subject to any penalty or tax with respect to any KnowledgeWell
Employee Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the
Code.
(e) Pension Plans. KnowledgeWell does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has KnowledgeWell contributed to
-------------------
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.20(g) of the KnowledgeWell Disclosure Letter, no KnowledgeWell Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and
KnowledgeWell has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided
-32-
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
---------------------
(i) Except as provided in Section 1.8 of this Agreement or
as set forth in Schedule 2.20(h)(i) of the KnowledgeWell Disclosure Letter, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any KnowledgeWell
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth in Schedule 2.20(h)(ii) of the
KnowledgeWell Disclosure Letter, no payment or benefit which will or may be made
by KnowledgeWell or CBT or any of their respective Affiliates with respect to
any Employee will be characterized as an "excess parachute payment", within the
meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. KnowledgeWell (i) is in compliance in all
------------------
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against KnowledgeWell is
-----
pending or, to the knowledge of KnowledgeWell, threatened. Except as set forth
in Schedule 2.20(j) of the KnowledgeWell Disclosure Letter, KnowledgeWell is not
involved in or, to the knowledge of KnowledgeWell, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate have a Material Adverse Effect on
KnowledgeWell. Neither KnowledgeWell nor any of its subsidiaries has engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act which would, individually or in the aggregate, directly or indirectly result
in a liability to KnowledgeWell. Except as set forth in Schedule 2.20(j) of the
KnowledgeWell Disclosure Letter, KnowledgeWell is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by KnowledgeWell.
-33-
2.21 Ireland Employee Matters and Benefits Plans.
-------------------------------------------
(a) There are not in existence any service agreements with directors
or employees of Knowledge Well which cannot be terminated by three months notice
or less or (whether or not reduced to writing) by reasonable notice without
giving rise to any claim for damages or compensation (other than the statutory
redundancy payment or statutory compensation for unfair dismissals).
(b) The information set out in the KnowledgeWell Disclosure Letter,
comprises accurate disclosure of all retirement, death, superannuation and
pension benefits and schemes actually or contingently agreed, or due, or
accrued, or proposed in respect of all of the present and former employees of
KnowledgeWell (all such schemes and benefits being hereinafter called the
"Pension Schemes").
(c) There are no gratuitous payments, pensions, or benefits payable,
promised, undertaken or being paid by KnowledgeWell to any directors,
consultants, employees or former directors consultants or employees of
KnowledgeWell.
(d) KnowledgeWell:
(i) has not given any undertaking or assurance (whether legally
enforceable or not) to any Relevant Employee or to any widow, child or dependant
of any Relevant Employee as to the continuance, introduction, improvement or
increase of any benefit of a kind described in paragraph (b) above; or
(ii) is not paying or has not in the period since incorporation
paid any benefit of the kind described in paragraph (c) above to any Relevant
Employee or the widow, child or dependant of any Relevant Employee.
(e) The Pension Schemes have been registered pursuant to the
provisions of the Pensions Act, 1990, of Ireland.
(f) The Pension Schemes are exempt approved schemes within the
meaning of Sections 15 and 16 of the Finance Act, 1972, of Ireland and comply
with and have at all times been administered in accordance with all applicable
laws, regulations and requirements (including those of the Revenue Commissioners
and of trust law) and KnowledgeWell is not aware of any reason why such exempt
status should or could be withdrawn.
(g) True copies of all of the Definitive and interim Trust Deeds,
Rules, Explanatory Booklets and Announcements relating to the Pension Schemes
have been delivered to CBT and copies thereof are contained in the KnowledgeWell
Disclosure Letter, and KnowledgeWell has no obligation to any employee or former
employee in relation to death in service, pension, superannuation or analogous
benefits except as provided in the said Deeds, Rules, Booklets and
Announcements.
-34-
(h) All of the Pension Schemes are fully, properly and adequately
funded with respect to existing and prospective liabilities having regard to
current funding rates, assets and investment and liability assumptions of the
Pension Schemes and no increase in funding rates is proposed or has been
recommended in relation to any of the Pension Schemes. Schedule 2.21(h) of the
KnowledgeWell Disclosure Letter contains a true copy of the latest reports and
valuations of all of the Pension Schemes by the actuary or actuaries advising
thereon and since the dates of such reports all recommendations contained
therein have been fully implemented and no material change has occurred in the
assets, valuations, liabilities or funding rates of any of the Pension Schemes
or as to the assumptions according to which the same are calculated.
(i) All benefits (other than any refund of members' contributions
with interest where appropriate) payable under the Pensions Schemes on the death
of any person while in employment to which the Pension Schemes relate are
insured fully under a policy with an insurance company of good repute and there
are no grounds on which that company might avoid liability thereunder.
(j) Contributions to the Pension Schemes are not paid in arrears and
all contributions and other amounts which have fallen due for payment have been
paid and no fees, charges or expenses referable to the Pension Schemes for which
KnowledgeWell is or may become liable (whether wholly or in part) have been
incurred but not paid and KnowledgeWell has reimbursed any person who has paid
any such fees, costs or expenses if and to the extent that KnowledgeWell is or
may become liable so to do.
(k) KnowledgeWell:
(i) has been admitted to participation in the Pension Schemes
on the same terms as apply to all other employers participating in the Schemes;
(ii) has observed and performed those provisions of the Pension
Schemes which apply to it;
(iii) may terminate its liability to contribute to the Pension
Schemes without notice, without the consent of any person and without further
payment;
(iv) has at all material times held or been named in a
contracting-out certificate referable to the Pensions Scheme.
(l) The trustees of the Pension Scheme are not engaged in any
litigation or arbitration proceedings and so far as KnowledgeWell is aware no
litigation or arbitration proceedings are pending or threatened by or against
the trustees of the Pension Scheme and there are no facts likely to give rise to
any litigation or arbitration.
-35-
(m) Except as set forth in the KnowledgeWell Financial Statements
there are no amounts owing to any present or former directors of KnowledgeWell
other than remuneration agreed due or for reimbursement of business expenses
properly incurred.
(n) Except to the extent (if any) to which provision or allowance has
been made in the KnowledgeWell Financial Statements, KnowledgeWell has not made
or agreed to make any payment to or provided or agreed to provide any benefit
for any present or former officer or employee which is not allowable as a
deduction for the purposes of Tax.
(o) No liability has been incurred by KnowledgeWell for breach of any
contract of service for redundancy payment or for compensation for wrongful or
unfair dismissal or for failure to comply with any order for the reinstatement
or re-engagement of any employee and no gratuitous payment has been made or
promised by KnowledgeWell in connection with the termination or proposed
termination of the employment of any present or former director or employee.
(p) KnowledgeWell is not involved in any industrial or trade dispute
or any dispute or negotiation regarding a claim of material importance with any
trade union or organization or body of employees or any dispute arising out of
or affected by or otherwise relating to the provisions of the Employment
Statutes as defined in 2.21(r)(iii) below and there are no agreements or other
arrangements (whether or not legally binding) between KnowledgeWell and any
trade union or other body representing employees.
(q) Except for the KnowledgeWell Option Plans, KnowledgeWell has not
in existence nor is it proposing to introduce any share incentive scheme, share
option scheme or profit sharing scheme for all or any part of its directors or
employees.
(r) KnowledgeWell has in relation to each of its employees (and so
far as is relevant to each of its former employees);
(i) complied in all material respects with all obligations
imposed on it by any statutory provision or regulation and codes of conduct
relevant to the relations between it and its employees or any recognized trade
union and has maintained adequate and suitable records regarding the service of
each of its employees; and
(ii) complied in all material respects with all collective
agreements for the time being having effect as regards such relations or the
conditions of service of its employees;
(iii) complied in all material respects with the following
regulations of Ireland: the Redundancy Payments Acts, 1967-1991, the Minimum
Notice and Terms of Employment Act, 1973 to 1991, the Organization of Working
Time Act, 1997, the Anti-Discrimination (Pay) Act, 1974, the Protection of Young
Persons (Employment) Act, 1976, the Unfair Dismissals Acts, 1977 to 1993, the
Protection of Employment Act, 1977 to 1993, the Employment Equality Act, 1977,
the European Communities (Safeguarding of Rights of Employees on Transfer of
Undertakings) Regulations, 1980, the Maternity Protection of Employees Act,
1981, the Pensions Act, 1990, the
-36-
Payment of Wages Act, 1991 and the Worker Protection (Regular Part Time
Employees) Act, 1991 (the "Employment Statutes").
-------------------
(s) No KnowledgeWell employee in receipt of a salary at a basic rate
in excess of IR(Pounds)40,000 per annum has advised KnowledgeWell formally or
informally that he or she is terminating or considering terminating his or her
employment with the company and to KnowledgeWell's knowledge, there are no
circumstances likely to give rise to such termination. KnowledgeWell has no
existing dispute with any of its employees of a material nature and to
KnowledgeWell's knowledge, there are no circumstances reasonably likely to give
rise to a dispute with any of its employees of a material nature.
(t) To KnowledgeWell's knowledge, all persons in receipt of income at
a basic rate in excess of IR(Pounds)40,000 per annum who have during the period
since the Relevant Accounting Date habitually or normally carried out duties of
a full time nature on behalf of KnowledgeWell in connection with its business
and affairs are not planning to terminate employment with KnowledgeWell at or
after Closing.
(u) No change has been made since the Accounts Date by KnowledgeWell
in the rate or basis of the emoluments or other terms of any contract of
service, contract for services or otherwise of any directors or employees of
KnowledgeWell who at any time since the said date were in receipt of emoluments
at the rate of IR(Pounds)40,000 per annum or more.
(v) True and complete particulars of the total numbers of
KnowledgeWell's full time and part time employees as at the Accounts Date, their
dates of commencement of employment or appointment to office, and terms and
conditions of their employment including their remuneration and other benefits
have been disclosed to CBT and are referred to or contained in Schedule 2.21(v)
of the KnowledgeWell Disclosure Letter and there has been no material change in
such numbers since the Accounts Date.
(w) KnowledgeWell is not under any contractual or other obligation to
increase the rates of remuneration of or make any bonus or incentive or other
similar payment to any of its officers or employees at any future date.
(x) KnowledgeWell has not given to any person any power or attorney or
other authority (express, implied or ostensible) which is still outstanding.
(y) KnowledgeWell has not entered into any recognition agreement with
a trade union nor has it done any act which might be construed as recognition.
2.22 Borrowed Moneys. KnowledgeWell has not received notice (whether
---------------
formal or informal) from any lenders of money to it in respect of or as a
preliminary to the demand by such persons for payment of any money owing by
KnowledgeWell to such persons and KnowledgeWell is not aware of any
circumstances likely to give rise to such notice being given to it.
-37-
2.23 Grants, etc. Not Repayable. Except for disposals in the ordinary
--------------------------
course of business KnowledgeWell has not done or failed to do any act or thing
which could result in all or any part of a government grant or other similar
payment or allowance made or due to be made by it becoming repayable or being
forfeited by it.
2.24 Oral Contracts. No tender, quotation or offer issued or made at any
--------------
time by KnowledgeWell is or will become capable of giving rise to a contract by
an order or acceptance by another party or parties, except in the ordinary
course of business and on terms calculated to yield a gross profit margin
consistent with the prudent carrying on of the business of KnowledgeWell.
2.25 Returns Up-to-Date.
------------------
(a) All returns, particulars, resolutions and other documents required
to be filed or to be delivered on behalf of KnowledgeWell to the Registrar of
Companies of Ireland or any other applicable jurisdiction have been correctly
and properly made up and so filed or delivered within the period prescribed.
(b) All charges in favor of KnowledgeWell have (if appropriate) been
registered in accordance with the provisions of the Companies Acts, 1963 to 1990
of Ireland.
2.26 Insolvency.
----------
(a) No order has been made or petition presented or resolution passed
for the winding up of KnowledgeWell to the Shareholders, there are no grounds on
which any such order or petition could be made or presented to the Shareholders
and no such resolution is contemplated by the members or any of them.
(b) No distress, execution or other process has been levied on any of
the assets of KnowledgeWell, nor has any of KW Limited, KW Group or the
Subsidiary stopped payment or become insolvent or unable to pay its debts for
the purposes of Section 214 of the Companies Act, 1963 of Ireland.
(c) No power to appoint a receiver or administrative receiver has been
exercised or has arisen in respect of the business or any of the assets of
KnowledgeWell and there is no unfulfilled or unsatisfied judgment or Court order
outstanding against any of KW Limited, KW Group or the Subsidiary.
2.27 Stamp Duty and Capital Duty.
---------------------------
(a) KnowledgeWell has duly complied with and has no liability under
Section 1 of the Stamp Act, 1891, of Ireland as substituted by the provisions of
Section 94 of the Finance Act, 1991, of Ireland.
-38-
(b) All documents in existence and any others which may be existing
at Closing in the enforcement of which KnowledgeWell is, was or may be or become
interested have been duly stamped or adequate provision has been made therefor
in the KnowledgeWell Financial Statements.
(c) No relief or exemption has been obtained from companies capital
duty or stamp duty and, without prejudice to the generality of the foregoing, no
relief, exemption or reduction has been obtained from companies capital duty or
stamp duty under Section 72 of the Finance Act, 1973, of Ireland or from stamp
duty under Section 19 of the Finance Act, 1952, of Ireland or Statutory
Instrument No. 244 of 1979, of Ireland or Statutory Instrument No. 272 of 1981,
of Ireland or Section 31 of the Finance Act, 1965, of Ireland which has (a)
become liable to forfeiture or (b) been obtained in respect of a transaction
carried out within the period within which it may become liable to forfeiture
and pending Closing no relief or exemption under any of the said enactments will
be claimed and all stamp duty or capital duty which has become or pending
Closing will become payable by KnowledgeWell has been or will be duly paid.
(d) All capital duty and/or stamp duty payable by KnowledgeWell in
respect of any of the transactions referred to in the following Sections of the
Finance Act, 1973, of Ireland has been duly and promptly paid by KnowledgeWell
so that there is no liability in respect thereof or any interest thereon:
(i) Section 63;
(ii) Section 64;
(iii) Section 68; and
(iv) Section 69 and 70.
(e) All other capital and/or stamp duty howsoever arising or payable
has been paid by KnowledgeWell and there is no outstanding liability therefor or
interest thereon.
(f) KnowledgeWell has not executed an instrument in respect of which
fines could be imposed pursuant to Section 5 of the Stamp Act, 1891, of Ireland
as substituted by Section 97 of the Finance Act, 1991, of Ireland.
(g) KnowledgeWell is not liable for any penalty imposed by Section
103 of the Finance Act, 1991, of Ireland.
(h) KnowledgeWell and its employees have not done or omitted to do
anything which could give rise to a liability on KnowledgeWell for a fine,
penalty, interest, charge or additional duty under the Stamp Act, 1891, of
Ireland as amended.
-39-
2.28 VAT.
---
(a) Each of KW Limited and KW Group is a registered and taxable
person for the purposes of the VAT legislation (as hereinafter defined) and:
(i) Neither of them has at any time been treated as a member of
a group (other than that comprising KW Group and the Subsidiary alone) for such
purposes and no application for either of them to be so treated has at any time
been or pending Closing will be made and no act or transaction has been or
pending Closing will be effected in consequence whereof either KW Limited or KW
Group is or may be held liable for any Value Added Tax chargeable against some
other company except, in the case of KW Group, the Subsidiary;
(ii) Each of them has complied and pending Closing will comply
in all respects with the VAT legislation;
(iii) Each of them has given, obtained, made and maintained and
pending Closing will give, obtain, make and maintain full, complete, correct and
up to date invoices, records and other documents appropriate or requisite for
the purposes of the VAT legislation;
(iv) Neither of them is and will not pending Closing be in
arrears with any payment or returns or notifications thereunder or liable to any
abnormal or non-routine payment or any forfeiture or penalty or to the operation
of any penal provision and where payment is not yet due or receivable has
provided for such payment;
(v) neither of them has been and pending Closing neither of
them will be required by the appropriate fiscal authorities to give security;
and
(vi) all supplies made and to be made pending Closing by either
of them are taxable supplies and neither of them is or will pending Closing be
denied credit for any input tax;
(b) For the purposes of this clause the "VAT legislation" means the
---------------
Value Added Tax Act, 1972, of Ireland and all orders, rules, regulations,
notices, provisions, directions or conditions made, laid down, given or imposed
thereunder.
2.29 Shelf Registration Statement Information. The information supplied by
----------------------------------------
KnowledgeWell for inclusion in the registration statement contemplated by the
Declaration of Registration Rights attached hereto as Exhibit B (the "Rights
--------- ------
Declaration") does not contain, and will not contain at the effective date of
- -----------
such registration statement, any untrue statement of a material fact or omit,
and will not omit at the effective date of such registration statement, to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
2.30 Representations Complete. None of the representations or warranties
------------------------
made by the Shareholders (as modified by the KnowledgeWell Disclosure Letter),
nor any statement made in the KnowledgeWell Disclosure Letter or certificate
furnished by KnowledgeWell pursuant to this
-40-
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein, in
the light of the circumstances under which they were made, not misleading.
2.31 Proxy Statements Complete. None of the statements made or furnished
-------------------------
by KnowledgeWell in or in connection with documents mailed or delivered to the
shareholders of CBT in connection with soliciting their approval of this
Agreement (it being acknowledged that KnowledgeWell shall have the opportunity
to review and comment on such documents prior to any such mailing or
delivering), contains or will contain at the date of such mailing or delivery or
the date of the CBT shareholder vote, any untrue statement of a material fact,
or omits or will omit at the date of such mailing or delivery or the date of the
CBT shareholder vote to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, represents and warrants to CBT
as of November 30, 1998 as follows:
3.1 Authority. This Agreement and each agreement attached as an exhibit
---------
hereto (collectively, the "Related Agreements") to which such Shareholder is a
------------------
party have been duly and validly executed and delivered by, or on behalf of,
Shareholder and, assuming due authorization, execution and delivery by the other
parties hereto and thereto, constitute valid and binding obligations of
Shareholder, enforceable against Shareholder in accordance with their respective
terms, subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.2 Conflicts. Neither the execution and delivery of each of this
---------
Agreement and the Related Agreements to which such Shareholder is a party nor
the performance by Shareholder of his, her or its respective obligations
hereunder or thereunder, violate, conflict with, or constitute a default under
any agreement or commitment to which Shareholder is a party, or violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Entity applicable to Shareholder that would preclude
Shareholder from entering into this Agreement or the Related Agreements to which
such Shareholder is a party or consummating the transactions contemplated hereby
or thereby.
3.3 Consents. No consent, waiver, approval, order or authorization of, or
--------
declaration, filing or registration with, any Governmental Entity or any third
party is required to be made or obtained by Shareholder in connection with the
execution and delivery by Shareholder of each of this Agreement and the Related
Agreements to which such Shareholder is a party or the performance by
Shareholder of
-41-
his, her or its obligations hereunder or thereunder or the consummation by
Shareholder of the transactions contemplated herein or therein.
3.4 Title. Shareholder has the sole right to transfer the KnowledgeWell
-----
Shares registered in his, her or its name to CBT. Upon delivery of
KnowledgeWell Certificates representing such KnowledgeWell Shares to CBT,
together with a duly executed transfer instrument, CBT will receive good title
to such KnowledgeWell Shares, free and clear of all Liens.
3.5 Taxes. Shareholder has had an opportunity to review with his, her or
-----
its respective tax advisors the tax consequences to Shareholder of the Share
Exchange and the transactions contemplated by this Agreement. Shareholder
understands that he, she or it must rely solely on his, her or its advisors and
not on any statements or representations by CBT, KnowledgeWell or any of their
respective agents. Shareholder understands that he, she or it (and not CBT or
KnowledgeWell) shall be responsible for his, her or its own tax liability that
may arise as a result of the Share Exchange or any other transactions
contemplated by this Agreement or the Related Agreements.
3.6 Sufficient Assets. Shareholder will have sufficient assets, after
-----------------
sale of the KnowledgeWell Shares owned by Shareholder as contemplated hereby, to
satisfy all of Shareholder's obligations to his, her or its creditors, as the
same become due and payable.
3.7 Release of Liabilities. Shareholder has procured the release of
----------------------
KnowledgeWell and the Subsidiary unconditionally from all liability whatsoever
(actual or contingent) to the Shareholder and/or to third parties in respect of
the liabilities and obligations of Shareholder, including, without prejudice to
the generality of the foregoing, all guarantees given by KnowledgeWell and/or
the Subsidiary to the bankers of the Shareholder.
3.8 Investment Experience. Shareholder has substantial experience in
---------------------
evaluating and investing in private placement transactions so that Shareholder
is capable of evaluating the merits and risks of receiving CBT's securities in
the Share Exchange. Shareholder, by reason of his, her or its business or
financial experience or the business or financial experience of its professional
advisors who are unaffiliated with and who are not compensated by CBT or any
affiliate of CBT, directly or indirectly, has the capacity to protect its own
interests in connection with the Share Exchange.
3.9 Investment. Shareholder is acquiring CBT's shares for investment for
----------
Shareholders' own account, not as a nominee or agent, and not with the view to,
or for resale in connection with, any distribution thereof. Shareholder
understands that the CBT shares to be received in the Share Exchange have not
been, and will not be, registered under the United States Securities Act of
1933, as amended (the "Securities Act") by reason of a specific exemption from
--------------
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
Shareholder's representations as expressed herein. If Shareholder is not an
individual, Shareholder has not been formed for the specific purpose of
acquiring CBT's shares in the Share Exchange.
-42-
3.10 Rule 144. Shareholder acknowledges that the CBT shares to be received
--------
are characterized as "Restricted Securities" and must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
such registration is available. Shareholder is aware of the provisions of Rule
144 promulgated under the Securities Act, which permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including (except as limited by Rule 144(k)), among other
things, the existence of a public market for the shares, the availability of
certain current public information about CBT, the resale occurring at least one
year after a party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" (as provided by Rule 144(f)) and the number of shares being
sold during any three-month period not exceeding specified limitations.
3.11 Nature of Solicitation; Access to Data. Shareholder has had the
--------------------------------------
opportunity to ask questions of and receive answers from CBT or a person acting
on its behalf concerning the terms and conditions of this transaction as well as
to obtain any information requested by Shareholder. Shareholder has asked such
questions and received such answers as were necessary to enable him or it to
make an informed decision as to whether to participate in the Share Exchange.
Shareholders' decision to so participate is based in part on the answers to such
questions as Shareholder and its representatives have raised concerning the
transaction and on his or its own evaluation of the risks and merits of CBT's
business activities. Shareholder confirms that at no time was Shareholder
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general advertising in
connection and concurrently with such communicated offer.
3.12 Accredited Shareholder. Shareholder is an "Accredited Investor" as
----------------------
that term is defined in Rule 501 of Regulation D, promulgated by the United
States Securities and Exchange Commission under the Securities Act.
3.13 Shelf Registration Statement Information. The information supplied by
----------------------------------------
Shareholder for inclusion in the registration statement contemplated by the
Rights Declaration does not contain, and will not contain at the effective date
of such registration statement, any untrue statement of a material fact or omit,
and will not omit at the effective date of such registration statement, to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
3.14 Representations Complete. None of the statements furnished by
------------------------
Shareholder in or in connection with documents mailed or delivered to the
shareholders of CBT in connection with soliciting their approval of this
Agreement, contains or will contain at the Closing Date, the date of such
mailing or delivery or the date of the CBT vote, any untrue statement of a
material fact, or omits or will omit at the Closing Date, the date of such
mailing or delivery or the date of the CBT vote to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CBT
-43-
CBT represents and warrants to each Shareholder as of November 30, 1998 as
follows:
4.1 Organization, Standing and Power. CBT is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of Ireland. CBT
has the corporate power to own its properties and to carry on its business as
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business, assets, financial condition, or results
of operations of CBT or the ability of CBT to consummate the transactions
contemplated hereby.
4.2 Authority. CBT has all requisite corporate power and authority to
---------
enter into this Agreement and the Related Agreements to which CBT is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Related Agreements to which CBT is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of CBT
and no further action is required on the part of CBT to authorize the Share
Exchange, this Agreement, the Related Agreements to which CBT is a party and the
transactions contemplated hereby or thereby, except for approval by the
shareholders of CBT and as expressly set forth elsewhere herein. This Agreement
and each Related Agreement to which CBT is a party has been duly executed and
delivered by CBT and, assuming due authorization, execution and delivery by
other parties hereto, constitute the valid and binding obligations of CBT,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 No Conflict. The execution and delivery of this Agreement and the
-----------
Related Agreements to which CBT is a party do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default under (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under (i) any provision of
the Memorandum and the Articles of Association of CBT or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to CBT or its properties or assets, other than any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have a material adverse effect on the ability of CBT to
consummate the transactions contemplated hereby and thereby.
4.4 Consents. No consent, approval, order or authorization of, or
--------
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to CBT in connection with the execution and
delivery of this Agreement and the Related Agreements to which CBT is a party by
CBT or the consummation by CBT of the transactions contemplated hereby and
thereby, except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws and the laws of any foreign country, and (ii)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not have a material adverse effect on the ability
of CBT to consummate the transactions contemplated hereby and thereby.
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4.5 Capital Structure.
-----------------
(a) The authorized share capital of CBT is IR(Pounds)11,250,000
divided into 120,000,000 Ordinary Shares, par value IR9.375 pence per share, of
which 44,355,890 shares were issued and outstanding as of October 31, 1998. No
shares of preferred stock are issued or outstanding. All such shares of CBT have
been duly authorized and validly issued, and all such issued and outstanding
shares are fully paid and nonassessable. An aggregate of 4,049,007 Ordinary
Shares are subject to outstanding, unexercised options issued to employees,
directors and consultants pursuant to CBT employee benefit plans, and 3,640,537
shares remain available for future grant. There are no other options, warrants,
calls, rights, commitments or agreements of any character to which CBT is a
party or by which it is bound obligating CBT to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of CBT or obligating CBT to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement.
(b) The CBT Ordinary Shares to be issued pursuant to the Share
Exchange will be, at the Share Exchange, duly authorized, validly issued, fully
paid, not subject to any call, preemptive or similar rights and nonassessable.
Upon issuance of the Ordinary Shares issued pursuant to Article I, the right,
title and interest to such Ordinary Shares will be transferred to the
Shareholders, free and clear of all liens, charges, encumbrances, security
interests and claims.
(c) CBT meets all requirements for the qualification of the inclusion
and quotation of ADSs on the Nasdaq National Market System ("NMS"). ADSs to be
---
issued pursuant to the Share Exchange or in connection with the resale of
Ordinary Shares issued in the Share Exchange, as the case may be, will be
included and quoted in the NMS.
4.6 SEC Documents; CBT Financial Statements. CBT has made available to
---------------------------------------
each Shareholder true and complete copies of CBT's annual report on Form 10-K
for the fiscal year ended December 31, 1997 and quarterly reports on Form 10-Q
for each of the three fiscal quarters in the period ended September 30, 1998,
which CBT filed under the United States Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with the Securities and Exchange Commission (the
------------
"SEC") and of its registration statement on Form S-4 (Registration Statement No.
---
333-51159), which CBT filed under the Securities Act with the SEC (collectively,
the "SEC Documents"). As of their respective dates, the SEC Documents complied
-------------
in all material respects with the requirements of the Exchange Act and the
Securities Act, as applicable, and the SEC Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. The financial statements
of CBT, including the notes thereto, included in the SEC Documents (the "CBT
---
Financial Statements") comply as to form in all material respects with
- --------------------
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles in the United States consistently applied and
fairly present in all material respects the consolidated financial position of
CBT at the dates thereof and of its operations and cash flows for the periods
then ended. Except as set forth in Schedule 4.6, since September 30, 1998, there
have not been any changes in the assets, liabilities, financial condition,
business or operations of CBT from that reflected in the SEC
-45-
Documents except changes which have not been, either individually or in the
aggregate, materially adverse to CBT. Except as set forth in Schedule 4.6, since
September 30, 1998, there has not been, occurred or arisen any event or
condition which has had a material adverse effect on the business, assets
(including intangible assets), financial conditions or results of operations of
CBT and subsidiaries, taken as a whole. Since September 30, 1998, CBT has filed
all forms, reports and documents with the SEC required to be filed by it
pursuant to the U.S. federal securities laws and the rules and regulations of
the SEC (collectively, "Securities Laws"), each of which complied as to form, at
---------------
the time such form, document or report was filed, in all material respects with
the applicable requirements of all Securities Laws, except for such failures to
file or to comply with Securities Laws as are not, individually or in the
aggregate, materially adverse to CBT and its subsidiaries, taken as a whole.
None of the statements made by CBT in or in connection with documents mailed or
delivered to the shareholders of CBT in connection with soliciting their
approval of this Agreement contains or will contain at the Closing Date or the
date of the CBT shareholder vote, any untrue statement of a material fact, or
omits or will omit at the Closing Date or the date of the CBT shareholder vote
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
4.7 Broker's and Finder's Fees. Except for Lehman Brothers Inc., no
--------------------------
broker, finder or investment banker is entitled to any brokers', finders' or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of CBT.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING DATE
5.1 Conduct of Business of KnowledgeWell. During the period from November
------------------------------------
30, 1998 and continuing until the earlier of (i) the termination of this
Agreement and (ii) the Closing Date, the Shareholders, as shareholders, and
Martin Scully, as a director, shall procure that KnowledgeWell shall (except to
the extent that CBT shall otherwise consent in writing) carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, pay its debts and Taxes when due, pay or perform other
obligations when due, and, to the extent consistent with such business, use all
reasonable efforts consistent with past practice and policies to preserve intact
its present business organization, keep available the services of its present
officers and key employees and preserve their relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired its goodwill and
ongoing business at the Closing Date. KnowledgeWell shall promptly notify CBT of
any event or occurrence or emergency not in the ordinary course of its business,
and any material event involving KnowledgeWell or its business. Such
representatives and advisors as CBT requests may be designated to work with
KnowledgeWell with regard to the management and operations of KnowledgeWell.
Subject to such representatives and advisors being reasonably available,
KnowledgeWell will consult with such representatives and advisors with respect
to any action that may materially affect the business of
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KnowledgeWell. KnowledgeWell will furnish to such representatives and advisors
such information as they may reasonably request for this purpose. Except as
expressly contemplated by this Agreement or disclosed in Schedule 5.1, the
Shareholders, as shareholders, and Mr. Scully, as a director, shall procure that
KnowledgeWell shall not (and KW Group shall cause the Subsidiary to not),
without the prior written consent of CBT (which consent shall not be
unreasonably withheld):
(a) Enter into any commitment or transaction not in the ordinary
course of business.
(b) Transfer to any person or entity any rights to KnowledgeWell
Intellectual Property Rights (other than pursuant to end-user licenses in the
ordinary course of business);
(c) Enter into or amend any material agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of KnowledgeWell;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the KnowledgeWell Disclosure Letter;
(e) Commence any litigation;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
share capital, or split, combine or reclassify any of its share capital or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of share capital of KnowledgeWell, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its share
capital (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares upon exercise or conversion of
presently outstanding KnowledgeWell Options or KW Preferred, create, issue,
grant, deliver or sell or authorize or propose the creation, issuance, grant,
delivery or sale of, or purchase or propose the purchase of, any of its share
capital or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;
(h) Cause or permit any amendments to its Memorandum or Articles of
Association or Bylaws (as the case may be) or pass any resolution by its
members;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
material assets;
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(j) Sell, lease, license or otherwise dispose of any of its properties
or assets, other than in the ordinary course of business;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of KnowledgeWell or guarantee
any debt securities of others, or create, extend, grant or issue any loan,
mortgage, charge, debenture, guarantee, warranty or other form of security or
agree to do so;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to standard
written agreements outstanding on November 30, 1998;
(m) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates of its employees;
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of US$10,000 (in
any one case) or US$50,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the KnowledgeWell
Financial Statements (or the notes thereto) or liabilities, claims or
obligations arising in the ordinary course of business after October 31, 1998 or
expenses consistent with the provisions of this Agreement incurred in connection
with any transaction contemplated and permitted hereby;
(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Incur any capital commitment in excess of US$25,000, or acquire
any assets on lease, purchase, credit sale or deferred terms;
(r) Co-opt any person to its board of directors;
(s) Enter into any strategic alliance, development or joint marketing
agreement except in the ordinary course of business; or
(t) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through (s) above, or any other action that would
prevent KnowledgeWell from performing or cause KnowledgeWell not to perform its
covenants hereunder.
-48-
5.2 No Solicitation. Until the earlier of (i) the Closing Date and (ii)
---------------
the date of termination of this Agreement pursuant to the provisions of Section
9.1 hereof, KnowledgeWell will not (nor will KnowledgeWell permit any of
KnowledgeWell's officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than CBT and its designees: (a) solicit, conduct discussions with or engage in
negotiations with any person, relating to the possible acquisition of
KnowledgeWell or any of its subsidiaries (whether by way of share exchange,
purchase of share capital, purchase of assets or otherwise) or any material
portion of its or their share capital or assets, (b) provide information with
respect to it or any of its subsidiaries to any person, other than CBT, relating
to the possible acquisition of KnowledgeWell (whether by way of share exchange,
purchase of share capital, purchase of assets or otherwise) or any material
portion of its or their share capital or assets, (c) enter into an agreement
with any person, other than CBT, providing for the acquisition of KnowledgeWell
(whether by way of share exchange, purchase of share capital, purchase of assets
or otherwise) or any material portion of its share capital or assets or (d) make
or authorize any statement, recommendation or solicitation in support of any
possible acquisition of KnowledgeWell or any of its subsidiaries (whether by way
of share exchange, purchase of share capital, purchase of assets or otherwise)
or any material portion of its or their share capital or assets by any person,
other than by CBT. In addition to the foregoing, if KnowledgeWell receives prior
to the Closing Date or the termination of this Agreement any offer or proposal
relating to any of the above, KnowledgeWell shall promptly notify CBT thereof,
including information as to the identity of the offeror or the party making any
such offer or proposal and the specific terms of such offer or proposal, as the
case may be, and such other information related thereto as CBT may reasonably
request.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Proxy Statement; Shareholder Meetings. As promptly as practicable
-------------------------------------
after the execution of this Agreement, CBT shall prepare, and KnowledgeWell
shall assist in preparing, a Proxy Statement (the "Proxy Statement") relating to
---------------
the solicitation of the approval of the shareholders of CBT of this Agreement.
CBT shall file with the SEC the Proxy Statement as soon as is reasonably
practicable following preparation thereof. KnowledgeWell shall provide to CBT
and its counsel for inclusion in the Proxy Statement, in form and substance
reasonably satisfactory to CBT and its counsel, such information concerning
KnowledgeWell, its operations, capitalization, technology, share ownership and
other material as CBT or its counsel may reasonably request. Each of CBT and
KnowledgeWell shall use its reasonable efforts to respond to any comments of the
SEC, to have the Proxy Statement approved by the SEC as promptly as practicable
after such filing and to cause the Proxy Statement to be mailed to CBT's
shareholders at the earliest practicable time. Each party will notify the other
parties hereto promptly of the receipt of any comments from the SEC or its staff
and of any request by the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply the other party
with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff, on the other hand,
with respect to the Proxy Statement. Whenever any event occurs which should be
set forth in an amendment or
-49-
supplement to the Proxy Statement, CBT or KnowledgeWell, as the case may be,
shall promptly inform the other company of such occurrence and cooperate in
filing with the SEC or its staff.
6.2 Access to Information. Subject to any applicable contractual
---------------------
confidentiality obligations (which each party shall use its reasonable best
efforts to cause to be waived) each party shall afford the others and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Closing Date to (a) all of its
properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request, including without limitation all information required by CBT's
accountants to perform an audit in accordance with United States Generally
Accepted Accounting Principles ("GAAP") of the financial statements of
----
KnowledgeWell for the year ended October 31, 1997. No information or knowledge
obtained in any investigation pursuant to this Section 6.2 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Share Exchange.
6.3 Expenses. Whether or not the Share Exchange is consummated, all fees
--------
and expenses incurred in connection with the Share Exchange including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties ("Third Party Expenses") incurred in
--------------------
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby (i) by CBT and the
Independent Committee of the Board of Directors of CBT shall be the obligation
of CBT and (ii) by KnowledgeWell and the Shareholders shall be the joint and
several obligation of the Shareholders, provided that if the necessary approvals
under Section 60 of the Ireland Companies Act 1963 have been obtained, such
Third Party Expenses shall be the obligation of Knowledge Well.
6.4 Public Disclosure. Upon execution and delivery of this Agreement by
-----------------
the parties hereto, CBT and KnowledgeWell shall release a jointly prepared
announcement describing the Share Exchange.
6.5 Consents. KnowledgeWell shall use its reasonable efforts to obtain
--------
the consents, waivers and approvals under any of the Contracts as may be
required in connection with the Share Exchange (all of such consents, waivers
and approvals are set forth in KnowledgeWell Disclosure Letter) so as to
preserve all rights of, and benefits to KnowledgeWell thereunder.
6.6 FIRPTA Compliance. On the Closing Date, KnowledgeWell shall deliver to
-----------------
CBT a properly executed statement in a form reasonably acceptable to CBT for
purposes of satisfying CBT's obligations under Treasury Regulation Section
1.1445-2(c)(3).
6.7 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations
-50-
and filings and to remove any injunctions or other impediments or delays, legal
or otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties hereto
the benefits contemplated by this Agreement; provided that CBT shall not be
required to agree to any divestiture by CBT or KnowledgeWell or any of CBT's
subsidiaries or affiliates of share capital or of any business, assets or
property of CBT or its subsidiaries or affiliates or KnowledgeWell or its
affiliates, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, properties and share capital.
6.8 Notification of Certain Matters. The Shareholders shall give prompt
-------------------------------
notice to CBT, and CBT shall give prompt notice to the Shareholders, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Shareholder and
CBT, respectively, contained in this Agreement to be untrue or inaccurate at or
prior to the Closing Date except as contemplated by this Agreement (including
KnowledgeWell Disclosure Letter) and (ii) any failure of the Shareholders,
KnowledgeWell or CBT, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.8 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
6.9 Affiliate Agreements.
--------------------
(a) Prior to the Exchange Date, each Shareholder shall cause to
be delivered to CBT a certificate of an officer of KnowledgeWell on behalf of
KnowledgeWell identifying all persons who are "affiliates" (as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act) of KnowledgeWell
(collectively, the "KnowledgeWell Affiliates").
------------------------
(b) Prior to the Exchange Date, KnowledgeWell shall cause each
KnowledgeWell Affiliate to execute and deliver a written agreement in the form
attached as Exhibit C (the "Affiliate Agreement"), that he will not sell, offer
---------
to sell, or otherwise dispose of any of the Ordinary Shares or ADSs, as the case
may be, issued to him pursuant to the Share Exchange, except in compliance with
Rule 145 or another exemption for the registration requirements of the
Securities Act. CBT shall be entitled to place appropriate legends on the
certificates evidencing any Ordinary Shares or ADSs, as the case may be, or
other CBT securities to be received by KnowledgeWell Affiliates, and to issue
appropriate stop transfer instructions to the transfer agent for CBT Ordinary
Shares and, if applicable, the Depositary consistent with the terms of such
Affiliate Agreement.
6.10 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
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6.11 NMS Listing. CBT shall authorize for listing on the NMS the ADRs
-----------
with respect to the securities issued in connection with the Share Exchange,
upon official notice of issuance.
6.12 Form S-8. CBT shall file a registration statement on Form S-8 for
--------
the CBT Ordinary Shares issuable with respect to assumed KnowledgeWell Options
no later than fifteen business days after the Closing Date.
6.13 Repurchase of "C" Ordinary Shares. William G. McCabe hereby
---------------------------------
covenants and agrees that on or prior to the Closing Date he will acquire all of
the "C" Ordinary Shares of IR25p each in the capital of KW Limited in issue from
the holder thereof. Mr. McCabe hereby further covenants and agrees that
following such acquisition, and in any event not later than the Closing Date, he
will exercise the options held by him pursuant to the Option Agreements dated
August 31, 1998 in respect of shares in each of KW Limited and KW Group and that
in the event of his failing to exercise such options as aforesaid, such options
shall forthwith lapse and shall be of no further force and effect. Any shares
issued to Mr. McCabe pursuant to the exercise of the foregoing options shall be
deemed to be "KnowledgeWell Shares" for purposes of this Agreement.
6.14 Tax-Free Reorganization. The parties hereto shall not take any
-----------------------
action either prior to or after the Closing that could reasonably be expected to
cause the Share Exchange to fail to qualify as a "reorganization" under Section
368(a) of the Code.
6.15 Resale Registration Statement. CBT shall file, within thirty (30)
-----------------------------
days following the Closing Date, a registration statement on Form S-3 with the
SEC covering the resale of the Ordinary Shares and the ADSs representing such
Ordinary Shares received by the Shareholders hereunder. CBT shall use its
reasonable best efforts to cause such registration statement to be declared
effective under the Securities Act as promptly as reasonably practicable. Any
such registration shall be subject to the terms and conditions set forth in the
Rights Declaration. CBT covenants that with respect to information contained in
the registration statement and supplied by CBT in connection therewith, such
information will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each Shareholder covenants that with
respect to information contained in the registration statement and supplied in
writing by such Shareholder in connection therewith, such information will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
6.16 Restricted ADR Facility. CBT shall use its reasonable best efforts
-----------------------
to arrange a Restricted ADR Facility at the Bank of New York with respect to the
Ordinary Shares to be issued to the Shareholders hereunder, such that at the
Closing the Shareholders will receive Restricted ADSs (each representing one
restricted Ordinary Share) in lieu of restricted Ordinary Shares.
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ARTICLE VII
CONDITIONS TO THE SHARE EXCHANGE
7.1 Conditions to Obligations of Each Party to Effect the Share Exchange.
--------------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the Share
Exchange shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Shareholder Approval. The Share Purchase Agreement, the Share
--------------------
Exchange and the issuance of CBT Ordinary Shares (or ADSs representing such
Ordinary Shares) pursuant to the Share Exchange shall have been approved by the
shareholders of CBT (who are not also Shareholders) by the requisite vote under
applicable law and CBT's Articles of Association.
(b) No Injunctions or Restraints; Illegality; HSR Act. (i) No
-------------------------------------------------
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Share Exchange shall
be in effect; (ii) all waiting periods under the HSR Act shall have expired or
terminated early; and (iii) either (A) the Irish Minister for Enterprise and
Employment (the "Minister") shall have informed CBT in writing that he has
--------
decided not to make an order under Section 9 of the Mergers, Take-Overs and
Monopolies (Control) Act, 1978, as amended (the "Mergers Act"), in relation to
-----------
the sale and purchase of the Knowledge Well Shares hereunder, (B) the Minister
shall have made a conditional order in relation to such sale and purchase on
terms acceptable to CBT and the Shareholders, (C) the relevant period under
Section 6 of the Mergers Act shall have expired without the Minister having so
informed CBT or having made any order, or (D) the Minister shall have confirmed
that the Mergers Act does not apply.
7.2 Additional Conditions to Obligations of Shareholders. The obligations
----------------------------------------------------
of Shareholders to consummate the Share Exchange and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by William G. McCabe and/or Gregory M. Priest, as the
representatives on behalf of the Shareholders:
(a) Representations and Warranties. The representations and warranties
------------------------------
of CBT contained in this Agreement shall have been true and correct in all
material respects as of November 30, 1998. In addition, the representations and
warranties of CBT contained in Section 4.5(a) of this Agreement shall be true
and correct in all material respects on and as of the Closing Date, and the
Shareholders shall have received a certificate to such effect signed by a vice
president of CBT.
(b) Agreements and Covenants. CBT shall have performed or complied
------------------------
(which performance or compliance shall be subject to CBT's ability to cure as
provided in Section 9.1(e) below) in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing Date, and the Shareholders shall have received a
certificate to such effect signed by a vice president of CBT.
-53-
(c) Nasdaq Listing. The CBT ADSs issuable to the Shareholders
--------------
pursuant to this Agreement or upon resale of Ordinary Shares issuable to the
Shareholders shall have been authorized for listing on the NMS upon official
notice of issuance.
(d) Restricted ADR Facility. The Restricted ADR Facility shall have
-----------------------
been arranged such that the Shareholders are able to receive Restricted ADRs in
lieu of restricted Ordinary Shares.
7.3 Additional Conditions to the Obligations of CBT. The obligations of
-----------------------------------------------
CBT to consummate the Share Exchange and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by CBT:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Shareholders contained in this Agreement shall have been true and correct
in all material respects as of November 30, 1998. In addition, the
representations and warranties of the Shareholders contained in Sections 2.2 and
3.4 of this Agreement shall be true and correct in all material respects on and
as of the Closing Date. CBT shall have received a certificate with respect to
the foregoing signed by William G. McCabe and/or Gregory M. Priest, as the
representatives on behalf of the Shareholders.
(b) Agreements and Covenants. KnowledgeWell and the Shareholders
------------------------
shall have performed or complied (which performance or compliance shall be
subject to KnowledgeWell's or the Shareholders' ability to cure as provided in
Section 9.1(d) below) in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it or them, as
the case may be, on or prior to the Closing Date, and CBT shall have received a
certificate to such effect signed by the Chief Executive Officer of
KnowledgeWell (to the extent applicable to KnowledgeWell) and by William G.
McCabe and/or Gregory M. Priest, as the representatives on behalf of the
Shareholders (to the extent applicable to the Shareholders).
(c) Legal Opinion. CBT shall have received a legal opinion on Irish
-------------
law matters from Mason, Hayes & Curran, Irish legal counsel to KnowledgeWell, in
form and substance reasonably satisfactory to CBT.
(d) Affiliate Agreements. Each of the KnowledgeWell Affiliates shall
--------------------
have delivered an executed Affiliate Agreement which shall be in full force and
effect.
(e) Employment and Noncompetition Agreements. Each of William G.
----------------------------------------
McCabe, Gregory M. Priest, Jeffrey Newton, William Beamish, William Lewis and
John M. Grillos shall have executed and delivered to CBT an Employment and
Noncompetition Agreement in form and substance reasonably satisfactory to CBT
and consistent with all applicable laws, and all such Employment and
Noncompetition Agreements shall be in full force and effect.
(f) Audited Financial Statements. CBT's independent accountants shall
----------------------------
have completed an audit of the financial statements of KnowledgeWell. Such
audited financial statements shall have been prepared in accordance with GAAP
and shall confirm that the
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KnowledgeWell Financial Statements present fairly, in all material respects, the
financial position of KnowledgeWell as of the dates and during the periods
indicated therein. Such audited financial statements shall, in the view of CBT's
independent accountants, satisfy the requirements of Regulation S-X and shall be
sufficient for the requirements of the SEC with respect to CBT's reporting
obligations under the U.S. federal securities laws.
(g) Preference Shares; "C" Ordinary Shares. Immediately prior to the
--------------------------------------
Closing, each Shareholder shall have voluntarily converted all of his, her or
its shares of KW Preferred into Ordinary Shares of US$0.01 each of KW Group on a
one-for-one basis, no KW Preferred shall be in issue or outstanding, and no "C"
Ordinary Shares of KW Limited shall be in issue or outstanding. Any Ordinary
Shares issued pursuant to the conversion of the KW Preferred shall be deemed to
be "KnowledgeWell Shares" for purposes of this Agreement.
(h) William G. McCabe, Gregory M. Priest, Peregrine Company Managers
Limited, William Beamish, John Grillos and Patricia Grillos, ITech Partners
L.P., Finite Properties Limited and Molyneux Secretarial Services Limited shall
have executed a Lock-Up Agreement in the form attached hereto as Exhibit D.
---------
7.4 No Additional Conditions. Except for the conditions set forth in
------------------------
Sections 7.1, 7.2 and 7.3 of this Agreement, no other statement, term or
provision of this Agreement shall constitute a condition to the obligations of
the parties to consummate the Share Exchange.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW; INDEMNITY
8.1 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement and all covenants to be performed prior to the
Closing Date shall not in any respect be extinguished or affected by the Closing
shall survive the Share Exchange for a period ending at 5:00 p.m., California
time, on the date two (2) years from the Closing Date, provided that
representations and warranties related to Tax shall survive the Share Exchange
for a period ending at 5:00 p.m., California time, on the date six (6) years
from the Closing Date.
8.2 Agreement to Indemnify.
----------------------
(a) Each Shareholder agrees, jointly and severally, to indemnify and
hold CBT and its affiliates, officers, directors, employees and shareholders
(collectively, the "CBT Indemnitees") harmless against any losses, claims,
---------------
damages, costs, expenses or other liabilities (including reasonable attorneys'
fees and expenses) (collectively, "Damages") resulting from (i) any breach of or
-------
inaccuracy in any representations and warranties of the Shareholders set forth
in Article II of this Agreement or in any certificate delivered by the
Shareholders or KnowledgeWell pursuant to this Agreement, or (ii) any breach or
default by KnowledgeWell or the Shareholders of any covenant, obligation or
other
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agreement of KnowledgeWell or the Shareholders set forth in this Agreement
(each, a "CBT Indemnifiable Claim," which term shall include a claim made
-----------------------
pursuant to the following sentence). In addition, each Shareholder agrees,
severally and not jointly, to indemnify and hold the CBT Indemnitees harmless
against any Damages resulting from any breach of or inaccuracy in any
representations and warranties of such Shareholder set forth in Article III of
this Agreement.
(b) Subject to Section 8.4, the liability of the Shareholders under
this indemnity (other than in respect of Damages resulting from any breach of or
inaccuracy in any representations or warranties of the Shareholders relating to
Tax) shall expire at 5:00 p.m., California time, on the second anniversary of
the Closing Date (the "Two-Year Indemnity Termination Date"), and the liability
-----------------------------------
of the Shareholders under this indemnity in respect of Damages resulting from
any breach of or inaccuracy in any representations or warranties of the
Shareholders relating to Tax shall expire at 5:00 p.m., California time, on the
sixth anniversary of the Closing Date (the "Six-Year Indemnity Termination Date"
-----------------------------------
and, collectively with the Two-Year Indemnity Termination Date, the "Indemnity
---------
Termination Dates").
- -----------------
8.3 Escrow Arrangements; Limits of Liability.
----------------------------------------
(a) In no event shall (i) any Shareholder be liable to CBT, any other
CBT Indemnitees or anyone claiming through either of them under this Article
VIII or any other theory of liability for Damages or other amounts in connection
with the transactions contemplated by this Agreement or any of the Related
Agreements in excess of the lesser of (A) such Shareholder's pro rata share
(assuming exercise of all of such Shareholder's Knowledge Well Options assumed
by CBT regardless of whether such options are vested or unvested) of the
Acquisition Price and (B) such Shareholder's pro rata share (assuming exercise
of all of such Shareholder's Knowledge Well Options assumed by CBT regardless of
whether such options are vested or unvested) of the aggregate amount of such
Damages or other amounts or (ii) any CBT Indemnitee be reimbursed for any
Damages under this Article VIII or any other theory of liability in connection
with the transactions contemplated by this Agreement or any of the Related
Agreements until the aggregate of all Damages exceeds US$500,000 (after which
all Damages, including such US$500,000, shall become payable in accordance with
the provisions of this Article VIII). As partial security for the obligations of
each Shareholder pursuant to this Article VIII, the Escrow Amount shall be
deposited with an escrow agent and shall be controlled pursuant to the terms of
the escrow agreement (the "Escrow Agreement") in substantially the form
----------------
attached hereto as Exhibit E.
---------
(b) For purposes of determining the amount of any Damages incurred by
the CBT Indemnitees, the amount of any Damages shall be reduced to the extent of
(i) any net tax benefit actually realized by the CBT Indemnitees arising from
the incurrence or payment by the CBT Indemnitees of the indemnifiable loss to
which such Damages relate and after giving full effect to the actual tax effect
of receipt of the indemnification payments to the CBT Indemnitees, if any, and
(ii) any amounts previously received by the CBT Indemnitees pursuant to this
Article VIII for losses resulting from the same facts or events.
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(c) Nothing in this Agreement shall in any way diminish any obligation
on the part of CBT under applicable law to attempt to mitigate its loss. If the
amount of any Damages, at any time subsequent to the making of a payment
hereunder in respect thereof, is reduced (i) by recovery, settlement or
otherwise under or pursuant to any insurance coverage or (ii) pursuant to any
claim, recovery, settlement or otherwise against or with any person or entity
that is not an affiliate of a CBT Indemnitee, the amount of such reduction, in
each case less any costs or expenses of recovery (including attorney's fees and
expenses), will be repaid by the CBT Indemnitees to (A) the Escrow Agent to be
controlled pursuant to the terms of the Escrow Agreement if such repayment is
made prior to the Two-Year Indemnity Termination Date or (B) the Shareholders if
such repayment is made after the Two-Year Indemnity Termination Date.
(d) CBT confirms to the Shareholders that, as of November 30, 1998, it
had not formulated nor is it in the process of formulating any claim under this
Agreement. The information supplied by Knowledge Well or its professional
advisers to the Shareholders or their agents, representatives or advisors in
connection with the representations and warranties and indemnities in this
Agreement and the contents of the Knowledge Well Disclosure Letter or otherwise
in relation to the business or affairs of Knowledge Well shall not be deemed a
representation, warranty or guarantee of its accuracy by Knowledge Well to the
Shareholders, and the Shareholders hereby irrevocably waive any claim against
Knowledge Well (and its employees and agents) which any of them might otherwise
have in respect of it.
8.4 Survival of Indemnity; Indemnification Procedures; Time Limits.
--------------------------------------------------------------
(a) The indemnification obligations of each Shareholder pursuant to
Section 8.2 for amounts up to the Escrow Amount shall apply only to those claims
for indemnification as to which CBT has given written notice thereof pursuant to
the terms of the Escrow Agreement on or prior to the relevant Indemnity
Termination Date; provided that the foregoing shall not limit the liability of
such Shareholder for Damages incurred by CBT Indemnitees after the relevant
Indemnity Termination Date that result from a CBT Indemnifiable Claim if CBT
Indemnitees have given written notice of such CBT Indemnifiable Claim prior to
the relevant Indemnity Termination Date. CBT and each Shareholder agree that
the indemnification procedures set forth in the Escrow Agreement shall apply to
all claims for Damages up to the Escrow Amount resulting from a CBT
Indemnifiable Claim. Notwithstanding the foregoing, any claim for Damages in
respect of any breach of or inaccuracy in any representation or warranties of
the Shareholders relating to Tax made after the Two-Year Indemnity Termination
Date shall be administered in accordance with paragraph (c) of this Section 8.4
regardless of whether the amount is less than or exceeds the Escrow Amount.
(b) The indemnification obligations of each Shareholder pursuant to
Section 8.2 for amounts in excess of the Escrow Amount shall apply only to those
claims for indemnification as to which CBT has given written notice thereof
pursuant to the terms of paragraph (c) of this Section 8.4 on or prior to the
relevant Indemnity Termination Date; provided that the foregoing shall not limit
the liability of such Shareholder for Damages incurred by CBT Indemnitees after
the relevant Indemnity Termination Date that result from a CBT Indemnifiable
Claim if CBT Indemnitees have given written
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notice of such CBT Indemnifiable Claim prior to the relevant Indemnity
Termination Date. CBT and each Shareholder agree that the indemnification
procedures set forth in paragraph (c) of this Section 8.4 shall apply to all
claims for Damages in excess of the Escrow Amount resulting from a CBT
Indemnifiable Claim.
(c) If any CBT Indemnitee shall incur Damages that exceed the Escrow
Amount, there shall be delivered to each Shareholder a certificate signed in
good faith on behalf of CBT by an officer of CBT or by a member of the Special
Committee (an "Officer's Certificate") stating that a CBT Indemnitee has paid,
---------------------
properly accrued, or reasonably anticipates that it will have to pay or accrue
Damages in an amount specified in such Officer's Certificate, with the basis for
such claim set forth in reasonable detail. Each Officer's Certificate shall be
delivered to each Shareholder in the manner specified in Section 10.1 hereof.
In the event CBT becomes aware of a third-party claim which CBT believes may
result in a demand which exceeds the Escrow Amount, CBT shall, as soon as
reasonably practicable, notify each Shareholder of such claim, and each
Shareholder shall be entitled, at their individual expense, to participate in
any defense of such claim. Delay in providing such notice shall not eliminate
such claim except to the extent that the Shareholders are prejudiced thereby.
CBT shall have the right in its sole discretion to settle any such claim;
provided, however, that except with the consent of a given Shareholder, no
settlement of any such claim with third-party claimants shall be determinative
of the validity and quantum of any claim against such Shareholder. In the event
that a given Shareholder has consented to any such settlement, such Shareholder
shall have no power or authority to object to the amount of any claim by CBT
against such Shareholder with respect to such settlement.
8.5 Representative; Power of Attorney.
---------------------------------
(a) Each Shareholder hereby appoints Gethin Taylor of Peregrine
Company Managers Limited as agent and attorney-in-fact (the "Representative")
--------------
for such Shareholder to give and receive notices and communications, to
authorize delivery to CBT of ADSs or Ordinary Shares, as the case may be, from
the Escrow Amount in satisfaction of claims by CBT, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
such claims, to perform such other obligations and make such other decisions as
are set forth in the Escrow Agreement, and to take all actions necessary or
appropriate in the judgment of the Representative for the accomplishment of the
foregoing. Such agency may be changed by the Shareholders from time to time upon
not less than thirty (30) days prior written notice to CBT; provided that the
Representative may not be removed unless holders of a two-thirds interest of the
Escrow Amount agree to such removal and to the identity of the substituted
agent. The Representative may resign upon not less than thirty (30) days prior
written notice to CBT and to all holders of an interest in the Escrow Amount.
Any vacancy in the position of the Representative may be filled by approval of
the holders of a majority in interest of the Escrow Amount. No bond shall be
required of the Representative, and the Representative shall not receive
compensation for his or her services. Notices or communications to or from the
Representative shall constitute notice to or from each of the Shareholders.
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(b) The Representative shall not be liable for any act done or omitted
hereunder as Representative while acting in good faith and without recklessness.
The Shareholders shall severally indemnify the Representative and hold the
Representative harmless against any loss, liability or expense incurred without
recklessness or bad faith on the part of the Representative and arising out of
or in connection with the acceptance or administration of the Representative's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Representative.
(c) A decision, act, consent or instruction of the Representative
shall be final, binding and conclusive upon each of such Shareholders, and the
Escrow Agent and CBT may rely upon any such decision, act, consent or
instruction of the Representative as being the decision, act, consent or
instruction of each Shareholder. The Escrow Agent and CBT are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Representative.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
-----------
may be terminated and the Share Exchange abandoned at any time prior to the
Closing Date:
(a) by mutual consent of the Shareholders or their attorneys and CBT;
(b) by CBT or by William G. McCabe and/or Gregory M. Priest, as the
representatives on behalf of the Shareholders, if: (i) the Closing Date has not
occurred by June 30, 1999 (provided that the right to terminate this Agreement
under this clause 9.1(b)(i) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Closing Date to occur on or before such date); (ii) there
shall be a final nonappealable order of a federal or state court in the United
States or a court in Ireland in effect preventing consummation of the Share
Exchange; or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Share Exchange by any
Governmental Entity that would make consummation of the Share Exchange illegal;
(c) by CBT if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Share Exchange, by any Governmental Entity, which would: (i) prohibit CBT's or
KnowledgeWell's ownership or operation of any material portion of the business
of KnowledgeWell or (ii) compel CBT or KnowledgeWell to dispose of or hold
separate, as a result of the Share Exchange, any material portion of the
business or assets of KnowledgeWell or CBT;
(d) by CBT if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this
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Agreement on the part of KnowledgeWell or any Shareholder and as a result of
such breach the conditions set forth in Section 7.3(a) or 7.3(b), as the case
may be, would not then be satisfied; provided, however, that if such breach is
curable by KnowledgeWell or such Shareholder within thirty (30) days through the
exercise of its reasonable best efforts, then for so long as KnowledgeWell or
such Shareholder continues to exercise such reasonable best efforts CBT may not
terminate this Agreement under this Section 9.1(d) unless such breach is not
cured within thirty (30) days (but no cure period shall be required for a breach
which by its nature cannot be cured);
(e) by William G. McCabe and/or Gregory M. Priest, as the
representatives on behalf of the Shareholders, if KnowledgeWell and the
Shareholders are not in material breach of their respective obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of CBT and as a
result of such breach the conditions set forth in Section 7.2(a) or 7.2(b), as
the case may be, would not then be satisfied; provided, however, that if such
breach is curable by CBT within thirty (30) days through the exercise of its
reasonable best efforts, then for so long as CBT continues to exercise such
reasonable best efforts Messrs. McCabe and/or Priest, as the representatives on
behalf of the Shareholders, may not terminate this Agreement under this Section
9.1(e) unless such breach is not cured within thirty (30) days (but no cure
period shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
9.1, it shall be sufficient for such action to be authorized by the Independent
Committee of the Board of Directors of CBT on behalf of CBT or by William G.
McCabe and/or Gregory M. Priest, as the representatives on behalf of the
Shareholders, as the case may be.
9.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of CBT, KnowledgeWell or the
Shareholders, or their respective officers, directors or shareholders, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; and provided further that the provisions of Sections 6.3 and
Article X of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
9.3 Amendment. Except as is otherwise required by applicable law after
---------
the shareholders of CBT approve this Agreement, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Closing Date, CBT, on the
-----------------
one hand, and KnowledgeWell and William G. McCabe and/or Gregory M. Priest, as
the representatives on behalf of the Shareholders, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or
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waiver shall be valid only if set forth in an instrument in writing signed on
behalf of CBT by a member of the Independent Committee of the Board of
Directors, on behalf of KnowledgeWell by an officer or director of KW Limited or
KW Group, and on behalf of the Shareholders by William G. McCabe and/or Gregory
M. Priest, as the representatives on behalf of the Shareholders.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to CBT, to:
CBT Group PLC
Belfield Office Park, Clonskeagh
Dublin 4
Ireland
Attention: Jack Hayes / Company Secretary
Telephone No.: 011-353-1-283-0077
Facsimile No.: 011-353-1-208-1296
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven V. Bernard
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
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(b) if to KnowledgeWell, to:
KnowledgeWell, Inc.
1701 Directors Blvd., Suite 920
Austin, Texas 78735
Attention: Chief Executive Officer
Telephone No.: (512) 462-9223
Facsimile No.: (512) 373-7557
(c) if to the Representative:
Peregrine Corporate Services Limited
Burleigh Manor
Peel Road
Douglas Isle of Man
Attention: Gethin Taylor
Telephone No.: (441-624) 626-586
Facsimile No.: (441-624) 673-827
(d) if to a Shareholder, at such Shareholder's address as is
specified on Exhibit A to this Agreement.
10.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. As used in this Agreement, the phrase "to the best of
[a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware,"
and similar phrases shall mean the actual knowledge of such party, or of the
officers and directors of such party, after careful consideration of the matters
set forth in the representation that is so qualified and after performing or
causing to be performed a reasonably diligent review of all files, documents,
agreements and other materials in such person's possession or subject to his or
her control. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Successors; Assignment. This Agreement, the
----------------------------------------
schedules and Exhibits hereto, and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
-62-
the parties with respect to the subject matter hereof; (b) are not intended to
confer upon any other person any rights or remedies hereunder; and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided. Notwithstanding the foregoing, this Agreement shall be binding upon
and enforceable against administrators, executors, representatives, heirs,
legatees and devisees of the Shareholders.
10.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforce able, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. Notwithstanding any provision of this Agreement
to the contrary, the parties expressly agree that reasonable attorney's fees may
be recoverable in connection with any action to enforce contractual rights under
Section 6.15 of this Agreement.
10.7 Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto hereby consents to the jurisdiction
and venue of any state or U.S. federal court in California with respect to
matters arising out of or related to this Agreement, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
-63-
10.10 Share Legends. All certificates representing any of the CBT Ordinary
-------------
Shares or ADRs to be issued pursuant to this Agreement shall have endorsed
thereon a restrictive legend substantially as follows:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend required to be placed thereon by applicable blue sky
laws of any state or under the laws of Ireland.
10.11 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
-----------------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
(Remainder of page intentionally left blank)
-64-
IN WITNESS WHEREOF, CBT, KW Limited, KW Group, the Representative (as to
matters set forth in Section 8.5 only), the Shareholders, the Escrow Agent and
Martin Scully (as to matters set forth in Section 5.1 only) have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
CBT GROUP PLC KNOWLEDGE WELL LIMITED
By /s/ John P. Hayes By
________________________________ ________________________________
Name: John P. Hayes Name:
Title: Director Title:
KNOWLEDGE WELL GROUP LIMITED ESCROW AGENT
By________________________________ By________________________________
Name: Name:
Title: Title:
SHAREHOLDER REPRESENTATIVE
By________________________________ By________________________________
Name: Name:
Title:
MARTIN SCULLY
__________________________________
Martin Scully
***SHARE PURCHASE AGREEMENT***
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