Exhibit 10.1
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
by and among
COMVERSE, INC.
and
THE SELLING STOCKHOLDERS
_______________
Dated as of April 7, 2006
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TABLE OF CONTENTS
PAGE
Article I DEFINITIONS.....................................................................................1
1.1 Certain Definitions.............................................................................1
1.2 Terms Defined Elsewhere in this Agreement.......................................................8
1.3 Other Definitional and Interpretive Matters.....................................................9
Article II SALE AND PURCHASE OF SHARES, PURCHASE PRICE; CLOSING...........................................10
2.1 Sale and Purchase of Shares....................................................................10
2.2 Purchase Price.................................................................................11
2.3 Payment of Purchase Price......................................................................11
2.5 Purchase Price Adjustment......................................................................11
2.6 Earnout........................................................................................13
2.7 Calculation of Earn-Out; Dispute...............................................................16
2.8 Payment of Earn-Out Amount.....................................................................17
2.9 Closing Date...................................................................................17
2.10 Deliveries Prior to the Closing Date...........................................................17
2.11 Deliveries on the Closing Date.................................................................17
Article III REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLING STOCKHOLDERS............................18
3.1 Organization and Good Standing.................................................................18
3.2 Authorization of Agreement.....................................................................18
3.3 Conflicts; Consents of Third Parties...........................................................19
3.4 Ownership and Transfer of Shares...............................................................19
3.5 Litigation.....................................................................................19
3.6 Financial Advisors.............................................................................19
Article IV REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.........................................20
4.1 Organization and Good Standing.................................................................20
4.2 Authorization of Agreement.....................................................................20
4.3 Conflicts; Consents of Third Parties...........................................................20
4.4 Capitalization.................................................................................21
4.5 Subsidiaries...................................................................................21
4.6 Corporate Records..............................................................................22
4.7 Financial Statements...........................................................................22
4.8 No Undisclosed Liabilities.....................................................................23
4.9 Absence of Certain Developments................................................................23
4.10 Taxes..........................................................................................25
4.11 Real Property..................................................................................26
4.12 Tangible Personal Property.....................................................................27
4.13 Intellectual Property..........................................................................27
4.14 Material Contracts.............................................................................30
4.15 Employee Benefits Plans........................................................................31
4.16 Labor..........................................................................................32
4.17 Litigation.....................................................................................33
4.18 Compliance with Laws; Permits..................................................................33
4.19 Insurance......................................................................................33
4.21 Related Party Transactions.....................................................................34
4.22 Customers and Suppliers........................................................................34
4.23 Product Warranty; Product Liability............................................................35
4.24 Banks; Power of Attorney.......................................................................35
4.25 Certain Payments...............................................................................35
4.26 Financial Advisors.............................................................................35
Article V REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................35
5.1 Organization and Good Standing.................................................................36
5.2 Authorization of Agreement.....................................................................36
5.3 Conflicts; Consents of Third Parties...........................................................36
5.4 Litigation.....................................................................................36
5.5 Financial Advisors.............................................................................36
Article VI COVENANTS......................................................................................37
6.1 Access to Information; Confidentiality.........................................................37
6.2 Conduct of the Business Pending the Closing....................................................37
6.3 Third Party Consents...........................................................................41
6.4 Governmental Consents and Approvals............................................................41
6.5 Further Assurances.............................................................................41
6.6 No Shop........................................................................................42
6.7 Non-Competition; Non-Solicitation; Confidentiality.............................................43
6.8 Confidentiality................................................................................43
6.9 Publicity......................................................................................44
6.10 Use of Name....................................................................................44
6.11 Related-Party Transactions with Non-Management Affiliates......................................44
6.12 Fees and Expenses..............................................................................45
6.13 Notification of Certain Matters................................................................45
6.14 Debt...........................................................................................45
6.17 Resignation of Directors.......................................................................46
Article VII CONDITIONS TO CLOSING..........................................................................46
7.1 Conditions Precedent to Obligations of Purchaser...............................................46
7.2 Conditions Precedent to Obligations of the Selling Stockholders................................48
Article VIII INDEMNIFICATION................................................................................48
8.1 Survival of Representations and Warranties.....................................................48
8.2 Indemnification................................................................................49
8.3 Indemnification Procedures.....................................................................50
8.4 Limitations on Indemnification.................................................................52
8.5 Calculation of claim...........................................................................53
8.6 Selling Stockholders' Information..............................................................54
8.7 Indemnity Escrow...............................................................................54
8.8 Tax Matters....................................................................................55
Article IX TERMINATION....................................................................................55
9.1 Termination of Agreement.......................................................................55
9.2 Procedure Upon Termination.....................................................................56
9.3 Effect of Termination..........................................................................56
Article X MISCELLANEOUS..................................................................................56
10.1 Expenses.......................................................................................56
10.2 Stockholder Representative.....................................................................56
10.3 Specific Performance...........................................................................57
10.4 Submission to Jurisdiction; Consent to Service of Process......................................57
10.5 Entire Agreement; Amendments and Waivers.......................................................58
10.6 Governing Law..................................................................................58
10.7 Notices........................................................................................58
10.8 Severability...................................................................................59
10.9 Binding Effect; Assignment.....................................................................59
10.10 Non-Recourse...................................................................................59
10.11 Counterparts...................................................................................59
Exhibit A - Selling Stockholders Information
Exhibit B - Escrow Agreement
Exhibit C - Non-Employee Selling Stockholders
Exhibit D - Option Holders
Exhibit E - Minority Stockholders
Exhibit F - Financial Investors
Exhibit G - Amendment Agreement
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated April 7, 2006 (the "AGREEMENT"),
by and among Comverse, Inc., a Delaware corporation ("PURCHASER"), and certain
stockholders of Netcentrex S.A., a company organized under the laws of France
(the "COMPANY") listed on the signature pages hereof under the heading "Selling
Stockholders" and such Minority Stockholders (as hereinafter defined) as may
hereafter become parties hereto after the date hereof in accordance with Section
10.12 (collectively, the "SELLING STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, the Selling Stockholders and the Minority Stockholders own an
aggregate of 20,774,955 shares of the Company (together with the ordinary shares
issued upon exercise of Company Options prior to the Closing, the "SHARES"),
divided into 13,971,970 ordinary shares, (euro)0.03 par value per share and
6,772,985 B shares, (euro)0.03 par value per share, which constitute 100% of the
issued and outstanding shares of capital stock of the Company at the date hereof
(excluding the ordinary shares of the Company held by the Company);
WHEREAS, certain Selling Stockholders executing this Agreement as of
the date hereof are financial institutions listed on Exhibit F attached hereto
(the "FINANCIAL INVESTORS;" the Selling Stockholders other than the Financial
Investors are referred to herein as the "NON-FINANCIAL INVESTOR STOCKHOLDERS");
WHEREAS, 3,261,507 Shares (the "MINORITY SHARES") are held by the
Persons listed in Exhibit E (the "MINORITY STOCKHOLDERS") who are not parties to
this Agreement as of the date hereof but who may become parties to this
Agreement in accordance with Section 10.12;
WHEREAS, the persons listed on Exhibit D are the beneficial and record
owners of 100% of the Company Options in the proportions set forth on Exhibit D.
WHEREAS, as a result of the exercise of the Company Options (as defined
below), a maximum of 898,423 new shares may be issued prior to Closing.
WHEREAS, the Selling Stockholders desire to sell to Purchaser, and
Purchaser desires to purchase from the Selling Stockholders, all Shares held by
the Selling Stockholders for the purchase price and upon the terms and
conditions hereinafter set forth; and
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties, intending to be
legally bound, hereby agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings specified in this Section 1.1:
"2006 TARGET OPERATING INCOME" shall mean the sum of (a)
(euro)7,700,000 and (b) the product of the Closing Stub Period and
(euro)2,600,000.
"2006 TARGET REVENUE" shall mean the sum of (a)
(euro)35,800,000 and (b) the product of the Closing Stub Period and
(euro)13,900,000.
"2007 TARGET REVENUE" shall mean (euro)77,800,000.
"2007 TARGET OPERATING INCOME" shall mean (euro)15,500,000.
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person, and
the term "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.
"BALANCE SHEET ADJUSTMENT" shall mean the sum of the Closing
Working Capital Adjustment and the Closing Cash Adjustment, to the extent that
such amount is greater than zero, it being understood and agreed that such
amount shall be zero if the resulting sum is less than zero.
"BUSINESS DAY" means any day of the year on which national
banking institutions in both New York, New York and in Paris, France are open to
the public for conducting business and are not required or authorized to close.
"CARVE OUT OPTIONS" shall mean Unvested Company Options in
respect of 400,000 underlying ordinary shares of the Company.
"CASH" means the cash and bank deposits as reflected in bank
statements, and certificates of deposit less escrowed amounts or other
restricted cash balances and less the amounts of any unpaid checks, drafts and
wire transfers issued on or prior to the date of determination, calculated in
accordance with GAAP applied on a basis consistent with the preparation of the
Financial Statements, it being understood that in no event shall shares of the
Company's capital stock held by the Company be deemed Cash.
"CASH EXTRACTION" means the distribution of Cash by the
Company or any of the Subsidiaries by declaring, setting aside, making or paying
any dividend or other distribution in respect of the capital stock of, or other
ownership interests in, the Company or any of the Subsidiaries, by reducing the
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share capital, repurchasing, redeeming or otherwise acquiring any outstanding
shares of the capital stock or other securities of, or other ownership interests
in, the Company or any of the Subsidiaries, by effecting any recapitalization,
reclassification, or like change in the capitalization of the Company or any of
the Subsidiaries, or otherwise, during the period commencing on the date hereof
and ending on the Closing Date; it being understood that, any cash extraction
shall be made in respect of all of the Shares on a pro rata basis.
"CHANGE IN CONTROL PAYMENTS" means (i) any severance,
retention, "stay around," bonus, accelerated payment or other similar payment to
any Person payable by the Company or any of its Subsidiaries under any Contract
by which the Company or any of its Subsidiaries is bound, one condition to the
payment of which is the Company entering into this Agreement or the consummation
of any of the transactions contemplated hereby and (ii) all cash payments made
or obligations incurred (including, without limitation, any Taxes and social
contribution costs and, to the extent paid or incurred, the Option Payments) by
the Company or the Subsidiaries at or prior to the Closing in respect of the
cancellation or exercise of Company Options other than the Carve Out Options.
"CLOSING BALANCE SHEET" means the consolidated balance sheet
of the Company and the Subsidiaries as of the open of business on the Closing
Date prepared in accordance with GAAP applied using the same accounting methods,
practices, principles, policies and procedures (including with respect to
revenue recognition (for purposes of clarity, license revenue is to be
recognized upon acceptance)), with consistent classifications, judgments and
valuation and estimation methodologies that were used in the preparation of the
Company's audited Financial Statements for the most recent fiscal year end as if
such Closing Balance Sheet was as of a fiscal year end.
"CLOSING CASH" means the consolidated Cash and any short-term,
highly liquid investments that are both readily convertible to known amounts of
cash and having such maturity that they present insignificant risk of changes in
value because of changes in interest rates such as Treasury bills, commercial
paper, money market funds, and any other cash equivalents of the Company and the
Subsidiaries as of the open of business on the Closing Date, it being understood
that in no event shall shares of the Company's capital stock held by the Company
be included in Closing Cash.
"CLOSING CASH ADJUSTMENT" means (euro)3,000,000 less Closing
Cash, it being understood that this amount shall be equal to zero in the event
that Closing Cash exceeds (euro)3,000,000.
"CLOSING NET INDEBTEDNESS" means the Indebtedness of the
Company and its Subsidiaries as of the Closing Date less the Closing Cash, it
being understood that, if the Closing Cash exceeds the consolidated Indebtedness
of the Company and the Subsidiaries on the Closing Date, "CLOSING NET
INDEBTEDNESS" shall be zero.
"CLOSING STUB PERIOD" shall mean the quotient obtained by
dividing the positive number of days between the Closing Date and June 30, 2006
(including, for this purpose, June 30, 2006) by 91.
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"CLOSING WORKING CAPITAL" means (i) the consolidated Included
Current Assets of the Company and the Subsidiaries, less (ii) the consolidated
Included Liabilities of the Company and the Subsidiaries, determined as of the
open of business on the Closing Date.
"CLOSING WORKING CAPITAL ADJUSTMENT" means (euro)3,000,000
less the Closing Working Capital less the Closing Cash Adjustment, it being
understood that if the resulting amount is less than zero, the Closing Working
Capital Adjustment shall be zero.
"COMPANY OPTIONS" means the outstanding 2,623,585 options de
souscription d'actions issued by the Company.
"COMPANY TRANSACTION EXPENSES" means the sum of (i) the
aggregate amount of all out-of-pocket fees and expenses, incurred by or on
behalf of, or paid or to be paid by, the Company or any of the Subsidiaries and
set forth on Schedule 4.26; (ii) the aggregate amount of Change in Control
Payments; and (iii) all cash payments made or obligations incurred at or prior
to Closing in respect of the acquisition by the Company of all outstanding
shares of Netcentrex Desarrollos S.L. prior to the Closing in excess of
(euro)420,000.
"CONSOLIDATED TAX RETURN" shall mean all Tax Returns relating
to Taxes of a consolidated, combined or unitary group which includes both (i)
one of the Selling Stockholders and at least one Subsidiary (other than the
Company and the Subsidiaries) and (ii) the Company or any of the Subsidiaries.
"CONTRACT" means any contract, agreement, indenture, note,
bond, mortgage, loan, instrument, lease, license, commitment or other
arrangement, understanding, undertaking, commitment or obligation, whether
written or oral.
"ESCROW ACCOUNT" means a separate account, set up pursuant to
the Escrow Agreement, where the Indemnity Escrow Amount is held for disbursement
by the Escrow Agent.
"ESCROW AMOUNT" means the Indemnity Escrow Amount.
"ESTIMATED CLOSING BALANCE SHEET" shall mean the estimated
consolidated balance sheet of the Company and the Subsidiaries as of the open of
business on the Closing Date prepared by the Company in accordance with GAAP
applied using the same accounting methods, practices, principles, policies and
procedures (including with respect to revenue recognition (for purposes of
clarity, license revenue is to be recognized upon acceptance)), with consistent
classifications, judgments and valuation and estimation and accrual
methodologies that were used in the preparation of the Company's audited
Financial Statements for the most recent fiscal year end as if such Estimated
Closing Balance Sheet were being prepared and audited as of a fiscal year end
and utilizing all information available to the Company through the date of
delivery thereof to Purchaser.
"EXCHANGE RATE" shall mean the currency exchange rate
maintained by the Bank of France on the relevant date of determination.
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"GAAP" means generally accepted accounting principles in
France as of the date hereof used for consolidation purposes (i.e. according to
CRC No. 99-02 and for the purposes of clarity, using the Exchange Rate).
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"INCLUDED CURRENT ASSETS" means current assets net of any
reserves, including, without limitation, accounts receivable, inventory and
prepaid expenses, but excluding deferred tax assets determined in accordance
with GAAP applied using the same accounting methods, practices, principles,
policies and procedures, with consistent classifications, judgments and
valuation and estimation methodologies that were used in the preparation of the
Company's audited Financial Statements for the most recent fiscal year end as if
such accounts were being prepared and audited as of a fiscal year end.
"INCLUDED LIABILITIES" means all Liabilities, including,
without limitation, operating accounts payable, deferred revenues, advance
payments, accrued Taxes, Indebtedness (for purposes of clarity, including both
short-term and long-term obligations) and accrued expenses, but excluding up to
(euro)350,000 of the subsidies reflected on the Financial Statements for the
most recent fiscal year end, determined in accordance with GAAP applied using
the same accounting methods, practices, principles, policies and procedures,
with consistent classifications, judgments and valuation and estimation
methodologies that were used in the preparation of the Company's audited
Financial Statements for the most recent fiscal year end as if such accounts
were being prepared and audited as of a fiscal year end.
"INDEBTEDNESS" of any Person means, without duplication, (i)
the principal, accreted value, accrued and unpaid interest, prepayment and
redemption premiums or penalties (if any), unpaid fees or expenses and other
monetary obligations in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property (including shares or Intellectual Property rights),
all conditional sale obligations of such Person and all obligations of such
Person under any title retention agreement (but excluding trade accounts payable
and other accrued current liabilities arising in the Ordinary Course of Business
(other than the current liability portion of any indebtedness for borrowed
money)), including, without limitation, with respect to the Company, all
obligations under (A) that certain Share Purchase Agreement dated January 27,
2006 by and among the Company and the shareholders of NeoTIP and the agreements
contemplated thereby and (B) that certain agreement between NeoTIP and France
Telecom dated August 8, 2005; (iii) all obligations of such Person under leases
required to be capitalized in accordance with GAAP; (iv) all obligations of such
Person for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction; (v) all obligations of such Person
under interest rate or currency swap transactions (valued at the termination
value thereof); (vi) all obligations of the type referred to in clauses (i)
through (v) of any other Person for the payment of which such first Person is
responsible or liable, directly or indirectly, as obligor, guarantor, surety or
otherwise, including guarantees of such obligations; and (vii) all obligations
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of the type referred to in clauses (i) through (vi) of any other Persons secured
by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien on any property or asset of
such first Person (whether or not such obligation is assumed by such Person).
"INDEMNITY ESCROW AMOUNT" means $24,600,000.
"INTELLECTUAL PROPERTY" means all intellectual property rights
owned or used by the Company and the Subsidiaries arising from or in respect of
the following, whether protected, created or arising under the Laws of the
United States, France or any other jurisdiction: (i) all patents and
applications therefor, including continuations, divisionals,
continuations-in-part, or reissues of patent applications and patents issuing
thereon, and all similar rights arising under the Laws of any jurisdiction
(collectively, "PATENTS"), (ii) all trademarks, service marks, trade names,
service names, brand names, trade dress rights, logos, Internet domain names and
corporate names and general intangibles of a like nature, together with the
goodwill associated with any of the foregoing, and all applications,
registrations and renewals thereof, (collectively, "MARKS"), (iii) copyrights
and registrations and applications therefor, works of authorship and mask work
rights (collectively, "COPYRIGHTS"), (iv) discoveries, concepts, ideas, research
and development, know-how, formulae, inventions, compositions, manufacturing and
production processes and techniques, technical data, procedures, designs,
drawings, specifications, databases, and other proprietary or confidential
information, including customer lists, supplier lists, pricing and cost
information, and business and marketing plans and proposals of the Company and
the Subsidiaries, in each case excluding any rights in respect of any of the
foregoing that comprise or are protected by Copyrights or Patents (collectively,
"TRADE SECRETS"), and (v) all Software and Technology of the Company and the
Subsidiaries.
"INTELLECTUAL PROPERTY LICENSES" means (i) any grant by the
Company or any Subsidiary to another Person of any right to use any of the
Intellectual Property, and (ii) any grant by another Person to the Company or
any Subsidiary of a right to use such Person's intellectual property rights
included in the Intellectual Property.
"INVESTOR STOCKHOLDERS" means the "Investisseur du Premier
Tour," the "Investisseur du Second Tour" and the "Investisseur du Troisieme
Tour" as each is defined in the Shareholders Agreement.
"KNOWLEDGE" means, with respect to any Person that is not an
individual, the actual knowledge of such Person's directors and executive
officers or, in the case of an individual, his or her actual knowledge.
"LAW" means any domestic, foreign, international, federal,
state or local law (including common law), statute, code, ordinance, rule,
regulation, Order or other requirement having the force of law.
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"LEGAL PROCEEDING" means any judicial, administrative or
arbitral actions, suits, mediation, investigation, inquiry, proceedings or
claims (including counterclaims) by or before a Governmental Body.
"LIABILITY" means any and all debt, loss, damage, adverse
claim, fine, penalty, liability or obligation (whether direct or indirect, known
or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, matured or unmatured, determined or determinable, liquidated or
unliquidated, or due or to become due, and whether in contract, tort, strict
liability or otherwise), and including all costs and expenses relating thereto
including all fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and costs of investigation).
"LIEN" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, proxy, voting trust or agreement, transfer restriction
under any shareholder or similar agreement, encumbrance or any other restriction
or limitation whatsoever.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
on the financial condition, assets, liabilities, businesses, results of
operations of the Company or any of its Subsidiaries or (ii) the ability of the
Selling Stockholders and the Minority Stockholders to consummate the
transactions contemplated by, or perform their respective obligations under,
this Agreement or the other Seller Documents to which they are a party, other
than, in the case of clause (i), a material adverse change resulting from an
Excluded Matter. For the purpose of this paragraph, "EXCLUDED MATTER" means any
one or more of the following: (i) the effect of any event that generally affects
the industry in which the Company and/or Subsidiaries operates (including as a
result of (ii) below), provided that the Company and the Subsidiaries are not
disproportionately adversely affected; (ii) the effect of any event arising in
connection with earthquakes, acts of war, sabotage or terrorism, military
actions or the escalation thereof, provided that the Company and the
Subsidiaries are not disproportionately adversely affected; or (iii) the effect
of any action taken by Purchaser or its Affiliates with respect to the
Transactions contemplated hereby or with respect to the Company and/or
Subsidiaries, including their employees.
"NON-EMPLOYEE SELLING STOCKHOLDERS" shall mean those Selling
Stockholders listed on Exhibit C.
"OPTION HOLDERS" means the Persons owning Company Options, a
list of whom is set forth on Exhibit D.
"ORDER" means any order, injunction, judgment, doctrine,
decree, ruling, writ, assessment or arbitration award of a Governmental Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary and usual
course of day-to-day operations of the business of the Company and the
Subsidiaries through the date hereof consistent with past practice.
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"PERMITS" means any approvals, authorizations, consents,
licenses, permits or certificates of a Governmental Body.
"PERMITTED EXCEPTIONS" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been delivered to Purchaser; (ii) statutory liens for
current Taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve has been established therefor in
the Financial Statements in accordance with GAAP; (iii) mechanics', carriers',
workers', and repairers' Liens arising or incurred in the Ordinary Course of
Business that are not material to the business, operations and financial
condition of the Company Property so encumbered and that are not resulting from
a breach, default or violation by the Company or any of the Subsidiaries of any
Contract or Law; and (iv) zoning, entitlement and other land use and
environmental regulations by any Governmental Body, provided that such
regulations have not been violated.
"PERSON" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"SOFTWARE" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, screens, user
interfaces, report formats, firmware, development tools, templates, menus,
buttons and icons, and (iv) all documentation including user manuals and other
training documentation related to any of the foregoing.
"SUBSIDIARY" means any Person of which (i) a majority of the
outstanding share capital, voting securities or other equity interests are
owned, directly or indirectly, by the Company or (ii) the Company is entitled,
directly or indirectly, to appoint a majority of the board of directors, board
of managers or comparable body of such Person.
"TAXES" means all taxes, whether direct or indirect, tariffs,
contributions or charges, fees, duties, levies, assessed or collected by or
under the authority of any Taxing Authority and payable by the Company and its
Subsidiaries in accordance with Tax regulations, including without limitation
corporate income tax, withholding tax, local taxes, value added tax,
registration and transfer duties, customs duties, social contributions. Such
Taxes shall also include interest, fines, penalties or additions attributable
thereto or attributable to any failure to comply with any requirement regarding
Tax Returns or Tax regulations.
"TAXING AUTHORITY" means any Governmental Body responsible for
the administration of any Tax.
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"TAX RETURN" means any return, report or statement required to
be filed with respect to any Tax (including any elections, declarations,
schedules or attachments thereto, and any amendment thereof) including any
information return, claim for refund, amended return or declaration of estimated
Tax, and including, where permitted or required, combined, consolidated or
unitary returns for any group of entities that includes the Company, any of the
Subsidiaries, or any of their Affiliates.
"TECHNOLOGY" means, collectively, all designs, formulae,
algorithms, procedures, methods, techniques, ideas, know-how, research and
development, technical data, programs, subroutines, tools, materials,
specifications, processes, inventions (whether patentable or unpatentable and
whether or not reduced to practice), apparatus, creations, improvements, works
of authorship and other similar materials, and all recordings, graphs, drawings,
reports, analyses, and other writings, and other tangible embodiments of the
foregoing, in any form whether or not specifically listed herein, and all
related technology, that are used in, incorporated in, embodied in, displayed by
or relate to, or are used by the Company or any Subsidiary.
"UNVESTED COMPANY OPTIONS" shall mean those Company Options
exercisable for ordinary shares of the Company at an exercise price of
(euro)6.00 per ordinary share which are not exercisable and remain subject to
vesting.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
- ---- -------
2006 Earn-Out Period Section 2.5(b)
2007 Earn-Out Period Section 2.5(d)
2006 Operating Income Amount Section 2.5(c)
2006 Revenue Amount Section 2.5(b)
2006 Target Operating Income Section 2.5(c)
2006 Target Revenue Section 2.5(b)
2007 Operating Income Amount Section 2.5(e)
2007 Revenue Amount Section 2.5(d)
2007 Target Operating Income Section 2.5(e)
2007 Target Revenue Section 2.5(d)
Acquisition Transaction 6.6(a)
Agreement Recitals
Antitrust Laws 6.4
Assumed Options 7.1(l)
Arbiter 2.4(b)(iii)
Audited Financial Statements 7.1(j)
Balance Sheet 4.7(a)
Balance Sheet Date 4.7(a)
Basket 8.4(a)
Cap 8.4(b)
9
Term Section
- ---- -------
Chinese Venture 6.2(b)(xxiii)
Closing 2.8
Closing Date 2.8
Common Stock 4.4(a)
Company Recitals
Company Marks 6.9
Company Permits 4.18(b)
Company Plans 4.15(a)
Company Property 4.11(c)
Confidential Information 6.1/6.7(c)
Confidentiality Agreement 6.1
Contractual Agreements 6.16
Copyrights 1.1 (in Intellectual Property definition)
Earn-Out Amount 2.5(a)
Earn-Out Payment Date 2.7
Earn-Out Statement 2.6(a)
Employees 4.15(a)
Escrow Agent 8.7
Escrow Agreement 8.7
Estimated Purchase Price Adjustment 2.4(a)
Financial Statements 4.7(a)
Indemnity Escrow Amount 8.5
Losses 8.2(a)
Marks 1.1 (in Intellectual Property definition)
Material Contracts 4.14(a)
Option Holdback 2.3(a)
Option Payments 6.13
Other Company Equity Rights 4.4(b)
Outstanding Shares Recitals
Patents 1.1 (in Intellectual Property definition)
Per Share Price 2.2
Personal Property Leases 4.12(b)
Preemptive Right 6.18
Promisors 6.16
Purchase Price 2.2
Purchase Price Adjustment 2.4(a)
Purchase Price Excess 2.4(b)(iv)
Purchaser Recitals
Purchaser Documents 5.2
Purchaser Indemnified Parties 8.2(a)
Real Property Lease 4.11(a)
Related Persons 4.21
Representatives 6.6(a)
Restricted Business 6.7(a)
10
Term Section
- ---- -------
Revised Statements 8.6(b)(iv)
Selling Stockholders Recitals
Selling Stockholder Documents 3.2
Selling Stockholder Indemnified Parties 8.2(b)
Shareholders Agreement 6.6
Shares Holdback 2.3(a)
Stockholder Representative 10.2(a)
Straddle Period 8.6(c)
Shares Recitals
Survival Period 8.1
Tax Benefit 8.5(a)
Tax Claim 8.6(d)(i)
Termination Date 9.1(a)
Third Party Claim 8.3(b)
Trade Secrets 1.1 (in Intellectual Property definition)
Unresolved Claims 8.5
US GAAP 2.5(a)(ii)
1.3 Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of
time before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Euros. Any reference in this Agreement to (euro) shall mean
Euros.
Exhibits/Schedules. The Exhibits and Schedules to this
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein (for purposes of clarity, provisions set forth in Articles
III, IV and V shall be read together with the corresponding Schedule (if any)
referenced therein, which shall be incorporated herein by reference). Any
capitalized terms used in any Schedule or Exhibit but not otherwise defined
therein shall be defined as set forth in this Agreement.
11
Gender and Number. Any reference in this Agreement to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.
Headings. The provision of a Table of Contents, the division
of this Agreement into Articles, Sections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in construing or interpreting this Agreement. All references in
this Agreement to any "Section" are to the corresponding Section of this
Agreement unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(b) Purchaser and certain Selling Stockholders (other than the
Financial Investors) have participated jointly in the negotiation and drafting
of this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly drafted by
the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party (including, for purposes of clarity, the Financial
Investors) by virtue of the authorship of any provision of this Agreement.
(c) For purposes of clarity and solely for purposes of this
Agreement, no Financial Investor shall have any joint liability hereunder with
any other Selling Stockholder.
ARTICLE II
SALE AND PURCHASE OF SHARES, PURCHASE PRICE; CLOSING
2.1 Sale and Purchase of Shares. Upon the terms and subject to
the conditions contained herein, on the Closing Date, each Selling Stockholder
agrees to sell to Purchaser, free and clear of any and all Liens, and Purchaser
agrees to purchase from each Selling Stockholder, the Shares owned by such
Selling Stockholder set forth opposite such Selling Stockholder's name on
Exhibit A hereto.
2.2 Purchase Price. The aggregate purchase price to be paid by
Purchaser for the Shares shall be the sum of (a) $164,000,000 (the "PURCHASE
PRICE") less the Purchase Price Adjustment and (b) solely with respect to the
Non-Financial Investor Stockholders, the Earn Out Amount, if any, provided for
in Section 2.5. The "PER SHARE PRICE" shall mean the quotient obtained by
dividing (i) the Purchase Price by (ii) the aggregate number of Shares.
2.3 Payment of Purchase Price.
12
(a) On the Closing Date, Purchaser shall pay the Purchase
Price less the sum of (i) the Estimated Purchase Price Adjustment, (ii)
$2,000,000 (the "HOLDBACK"), (iii) the product of the Per Share Price and the
number of Shares (if any) which are not tendered at Closing as permitted by
Section 7.1(n) (the "SHARES HOLDBACK"), (iv) the excess (if any) ("OPTION
HOLDBACK") of (A) the sum of (1) the product of the Per Share Price and the
number of Assumed Options and (2) the amount of Taxes or social contribution
costs which would be incurred by the Company upon exercise of such Assumed
Options over (B) the sum of the exercise prices of each Assumed Option and (v)
the Indemnity Escrow Amount, by wire transfer of immediately available funds
into accounts designated in writing by the Stockholder Representative (provided
that the Stockholder Representative may designate for each Financial Investor a
separate wire as specified therein and that the aggregate number of separate
destination accounts shall not exceed twenty) not less than three Business Days
prior to the Closing Date, with the Purchase Price to be paid to the Selling
Stockholders by the Stockholder Representative and the Persons identified in the
above-referenced written notice in accordance with Exhibit A. For the purposes
of clarity and consistent with Exhibit A, the Indemnity Escrow Amount shall not
be deducted from the amounts payable to the Financial Investors and the Investor
Stockholders hereunder. Each of the Stockholder Representative and the Persons
identified in and executed in counterpart the above-referenced notice shall be
responsible for making all payments to the Selling Stockholders and Minority
Parties after receipt of the amounts from Purchaser.
(b) On the Closing Date, Purchaser shall pay the Escrow Amount
to the Escrow Agent in cash payable by wire transfer of immediately available
funds for deposit into the Escrow Account.
2.4 Purchase Price Adjustment.
(a) The "PURCHASE PRICE ADJUSTMENT" shall mean the sum of (i)
Balance Sheet Adjustment, (ii) any and all Company Transaction Expenses incurred
prior to the Closing Date and (iii) the Closing Net Indebtedness; provided,
however, that if the Purchase Price Adjustment, as calculated in accordance with
the foregoing, exceeds, $24,600,000, then the Purchase Price Adjustment shall be
$24,600,000. Not later than three Business Days prior to the Closing Date, the
Company shall provide to Purchaser its good faith estimates (based on the most
current information available to the Company) of the Estimated Closing Balance
Sheet and estimated Purchase Price Adjustment (derived, to the extent
applicable, from the Estimated Closing Balance Sheet) and the Stockholder
Representative and Purchaser shall seek to agree, in good faith, upon an
estimate of the Purchase Price Adjustment (the "ESTIMATED PURCHASE PRICE
ADJUSTMENT"); provided, however, in the event that the Stockholder
Representative and the Purchaser fail or are unable to so agree on the Estimated
Purchase Price Adjustment, the Purchase Price payable at the Closing shall be
reduced based upon the Estimated Purchase Price Adjustment furnished by the
Company (which shall be deemed to be the Estimated Purchase Price Adjustment for
purposes hereof) and any dispute concerning the amounts thereof after the
Closing shall be resolved in accordance with Section 2.4. Each of the Purchase
Price Adjustment and the Estimated Purchase Price Adjustment shall be calculated
13
applying the Exchange Rate in effect as of the date of delivery of the Estimated
Closing Balance Sheet and the Closing Balance Sheet, as applicable.
(b) Post-Closing Date Purchase Price Adjustment.
(i) Following the Closing, the Purchase Price shall be
adjusted as provided herein to reflect the difference between the
Estimated Purchase Price Adjustment and the Purchase Price Adjustment,
as finally determined pursuant to this Section 2.4(b) Within 60 days
following the Closing Date, Purchaser shall deliver to the Stockholder
Representative the Closing Balance Sheet, together with a calculation
of the Purchase Price Adjustment (derived from the Closing Balance
Sheet and/or such other books and records of the Company and the
Subsidiaries as are applicable).
(ii) Subject to the execution of customary auditors'
confidentiality and liability release undertakings (covering "secret
d'affaires") by the Selling Stockholders on its behalf and on behalf of
its representatives (including its auditors), Purchaser shall provide
Selling Stockholders' auditors with full and prompt access to the books
and records and relevant personnel of Purchaser, the Company and
Subsidiaries and their statutory auditors for the purpose of reviewing
the Closing Balance Sheet. Such access shall be (x) during normal
business hours and upon reasonable advance notice, (y) up until the
final determination of the Purchase Price Adjustment, and (z) as the
case may be, in the course of any dispute or litigation arising out of
the Closing Balance Sheet, to the extent that such dispute or
litigation is permitted under the present Agreement. The Selling
Stockholders shall use such access for the sole purpose of the
determination of the Purchase Price Adjustment. In addition, Selling
Stockholders' auditors shall have full access to the accounting books
and records, work papers, schedules or additional documents prepared,
used or otherwise generated by the statutory auditors of the Company
and Subsidiaries.
(iii) The Closing Balance Sheet and calculation of the
Purchase Price Adjustment delivered by Purchaser to the Stockholder
Representative shall be conclusive and binding upon the parties unless
the Stockholder Representative, within sixty (60) days after delivery
thereof, notifies Purchaser in writing that the Stockholder
Representative disputes any of the amounts set forth therein,
specifying the nature of the dispute and the basis therefor. The
parties shall in good faith attempt to resolve any dispute and, if the
parties so resolve all disputes, the Closing Balance Sheet and the
Purchase Price Adjustment, as amended to the extent necessary to
reflect the resolution of the dispute, shall be conclusive and binding
on the parties. If the parties do not reach agreement in resolving the
dispute within 20 calendar days after notice is given by the
Stockholder Representative to Purchaser pursuant to the second
preceding sentence, the parties shall submit the dispute to a mutually
satisfactory partner in the Paris office of the accounting firm of
Ernst & Young LLP or, if no partner at such firm will act, to a partner
at such other nationally recognized independent accounting firm which
is mutually agreeable to the Stockholder Representative and Purchaser
(the "ARBITER") for resolution. If the parties cannot agree on the
14
selection of a partner at an independent accounting firm to act as
Arbiter, the parties shall request the Commercial Court of Paris
("Tribunal de commerce de Paris") to appoint such a partner, and such
appointment shall be conclusive and binding on the parties. Promptly,
but no later than 20 calendar days after acceptance of his or her
appointment as Arbiter, the Arbiter shall determine (it being
understood that in making such determination, the Arbiter shall be
functioning as an expert and not as an arbitrator), based solely on
written submissions by Purchaser and the Stockholder Representative,
and not by independent review, only those issues in dispute and shall
render a written report as to the resolution of the dispute and the
resulting computation of the Purchase Price Adjustment which shall be
conclusive and binding on the parties. All proceedings conducted by the
Arbiter shall take place in Paris. In resolving any disputed item, the
Arbiter (x) shall be bound by the provisions of this Section 2.4 and
(y) may not assign a value to any item greater than the greatest value
for such items claimed by either party or less than the smallest value
for such items claimed by either party. The fees, costs and expenses of
the Arbiter shall be allocated to and borne by Purchaser and the
Selling Stockholders based on the inverse of the percentage that the
Arbiter's determination (before such allocation) bears to the total
amount of the total items in dispute as originally submitted to the
Arbiter. For example, should the items in dispute total in amount to
$1,000 and the Arbiter awards $600 in favor of the Selling
Stockholders' position, 60% of the costs of its review would be borne
by Purchaser and 40% of the costs would be borne by the Selling
Stockholders.
(iv) Upon final determination of the Purchase Price
Adjustment, if the Purchase Price Adjustment exceeds the Estimated
Purchase Price Adjustment (the "PURCHASE PRICE EXCESS"), the Selling
Stockholders shall pay to Purchaser the amount, if any, by which the
Purchase Price Excess exceeds the Holdback. Any amounts payable by the
Selling Stockholders under this clause shall be payable on a pro rata
basis based upon the relative number of Shares held by such Selling
Stockholder as compared to the aggregate number of Shares held by the
Selling Stockholders, promptly, but no later than five Business Days
after such final determination, together with interest thereon from the
Closing Date to the date of payment thereof as determined below. If the
Purchase Price Excess is less than the Holdback, Purchaser shall pay to
the Stockholder Representative, on behalf of Selling Stockholders, on a
pro rata basis based upon the relative number of Shares held by such
Selling Stockholder as compared to the aggregate number of Shares held
by the Selling Stockholders, the amount of such difference promptly,
but no later than five Business Days after such final determination,
together with interest thereon from the Closing Date to the date of
payment thereof as determined below. The payments to be made in
accordance with this Section 2.4(b)(iv) by Purchaser shall be made by
wire transfer of immediately available funds into accounts designated
in writing by the Stockholder Representative (provided that the
Stockholder Representative may designate for each Financial Investor a
separate wire as specified therein and that the aggregate number of
separate destination accounts shall not exceed twenty).
15
(v) Upon final determination of the Purchase Price Adjustment,
if the amount thereof is less than the Estimated Purchase Price
Adjustment, Purchaser shall pay to the Selling Stockholders, on a pro
rata basis based upon the relative number of Shares held by such
Selling Stockholder as compared to the aggregate number of Shares held
by the Selling Stockholders, the sum of (A) the amount of such
difference and (B) the Holdback, promptly, but no later than five
Business Days after such final determination, together with interest
thereon from the Closing Date to the date of payment thereof as
determined below. The payments to be made in accordance with this
Section 2.4(b)(v) by Purchaser shall be made by wire transfer of
immediately available funds into accounts designated in writing by the
Stockholder Representative (provided that the Stockholder
Representative may designate for each Financial Investor a separate
wire as specified therein and that the aggregate number of separate
destination accounts shall not exceed twenty).
(vi) For the purposes of this Section 2.4(b), interest will be
payable by the Selling Stockholders at the "prime" rate, as announced
by The Wall Street Journal, Eastern Edition, from time to time to be in
effect, calculated based on a 365 day year and the actual number of
days elapsed.
2.5 Earnout.
(a) The earn-out payment (the "EARN-OUT AMOUNT") shall be
equal to the sum of (i) the 2006 Revenue Amount, (ii) the 2007 Revenue Amount,
(iii) the 2006 Operating Income Amount and (iv) the 2007 Operating Income
Amount.
(b) The 2006 Revenue Amount.
(i) The 2006 Revenue Amount shall be equal to:
(1) zero, if 2006 Actual Revenue is less than
sixty-five percent (65%) of 2006 Target
Revenue;
(2) six-hundred sixty-six thousand and five
hundred US dollars ($666,500), if 2006
Actual Revenue is equal to or exceeds
sixty-five percent (65%) of 2006 Target
Revenue and is less than eighty percent
(80%) of 2006 Target Revenue; or
(3) two million six hundred sixty-six thousand
US dollars ($2,668,000) multiplied by a
fraction, the numerator of which shall be
2006 Actual Revenue and the denominator of
which shall be the 2006 Target Revenue, if
the 2006 Actual Revenue is equal to or
exceeds eighty percent (80%) of the 2006
Target Revenue and is below the 2006 Target
Revenue; or
(4) two million six hundred sixty-eight thousand
US dollars ($2,668,000), if 2006 Actual
Revenue is equal to or exceeds one hundred
percent (100%) of 2006 Target Revenue.
16
(ii) The 2006 Actual Revenue shall mean the Company's revenue
(chiffre d'affaires), determined in accordance with generally accepted
accounting principles in the United States applied consistent with
Purchaser's past practice ("US GAAP"), for the period starting on the
Closing Date and ending on January 31, 2007 (the "2006 EARN-OUT
PERIOD"), provided, however, that 2006 Actual Revenue shall be
calculated as if the Company and the Subsidiaries continued to operate
independently from Purchaser throughout the 2006 Earn-Out Period.
(c) The 2006 Operating Income Amount.
(i) The 2006 Operating Income Amount shall be equal to:
(1) zero, if 2006 Actual Operating Income is
less than sixty-five percent (65%) of 2006
Target Operating Income; or
(2) six hundred sixty-six thousand and five
hundred US dollars ($666,500), if 2006
Actual Operating Income is equal to or
exceeds sixty-five percent (65%) of 2006
Target Operating Income and is less than
eighty percent (80%) of 2006 Target
Operating Income; or
(3) two million six hundred sixty-eight thousand
US dollars ($2,668,000) multiplied by a
fraction, the numerator of which shall be
2006 Actual Operating Income and the
denominator of which shall be the 2006
Target Operating Income, if the 2006 Actual
Operating Income is equal to or exceeds
eighty percent (80%) of the 2006 Target
Operating Income and is below the 2006
Target Operating Income; or
(4) two million six hundred sixty-six thousand
US dollars ($2,668,000), if 2006 Actual
Operating Income is equal to or exceeds one
hundred percent (100%) of 2006 Target
Operating Income.
(ii) The 2006 Actual Operating Income shall mean the Company's
operating income, determined in accordance with US GAAP, for the 2006
Earn-Out Period, provided, however, that the 2006 Actual Operating
Income shall be calculated as if the Company and the Subsidiaries
continued to operate independently from Purchaser throughout the 2006
Earn-Out Period.
(d) The 2007 Revenue Amount.
(i) The 2007 Revenue Amount shall be equal to:
(1) zero, if the 2007 Actual Revenue Amount is
below sixty-five percent (65%) of the 2007
Target Revenue Amount; or
17
(2) two million six hundred sixty-six thousand
US dollars ($2,666,000), if 2007 Actual
Revenue is equal to or exceeds sixty-five
percent (65%) of the 2007 Target Revenue and
is less than eighty percent (80%) of 2007
Target Revenue; or
(3) five million three hundred thirty-two
thousand US dollars ($5,332,000) multiplied
by a fraction, the numerator of which shall
be 2007 Actual Revenue and the denominator
of which shall be the 2007 Target Revenue,
if the 2007 Actual Revenue is equal to or
exceeds eighty percent (80%) of the 2007
Target Revenue and is below the 2007 Target
Revenue; or
(4) five million three hundred thirty-two
thousand US dollars ($5,332,000), if the
2007 Actual Revenue is equal to or exceeds
the 2007 Target Revenue.
(ii) The 2007 Actual Revenue shall mean the Company's revenue
(chiffre d'affaires), determined in accordance with US GAAP, for the
period starting on February 1, 2007 and ending on January 31, 2008 (the
"2007 EARN-OUT PERIOD"), provided, however, that the 2007 Actual
Revenue shall be calculated as if the Company and the Subsidiaries
continued to operate independently from Purchaser throughout the 2007
Earn-Out Period.
(e) The 2007 Operating Income Amount.
(i) The 2007 Operating Income Amount shall be equal to:
(1) zero, if the 2007 Operating Income is below
sixty-five percent (65%) of the 2007 Target
Operating Income; or
(2) two million six hundred sixty-six thousand
US dollars ($2,666,000), if 2007 Actual
Operating Income is equal to or exceeds
sixty-five percent (65%) of the 2007 Target
Operating Income and is less than eighty
percent (80%) of 2007 Target Operating
Income;
(3) five million three hundred thirty-two
thousand US dollars ($5,332,000), multiplied
by a fraction, the numerator of which shall
be 2007 Actual Operating Income and the
denominator of which shall be the 2007
Target Operating Income, if the 2007 Actual
Operating Income is equal to or exceeds
eighty percent (80%) of the 2007 Target
Operating Income and is below the 2007
Target Operating Income; or
(4) five million three hundred thirty-two
thousand US dollars ($5,332,000), if the
2007 Actual Operating Income is equal to or
exceeds the 2007 Target Operating Income.
18
(ii) The 2007 Actual Operating Income shall mean the Company's
operating income (resultat d'exploitation), determined in accordance
with US GAAP, for the 2007 Earn-Out Period; provided, however, that the
2007 Actual Operating Income shall be calculated as if the Company and
the Subsidiaries continued to operate independently from Purchaser
throughout the 2007 Earn-Out Period.
2.6 Calculation of Earn-Out; Dispute.
(a) No later than sixty (60) days after each of January 31,
2007 and January 31, 2008, Purchaser shall deliver to the Stockholder
Representative a statement (each, an "EARN-OUT STATEMENT"), setting forth in
reasonable detail the calculation of the Earn-Out Amount for the 2006 Earn-Out
Period or the 2007 Earn-Out Period. The Non-Financial Investor Stockholders and
Purchaser acknowledge and agree that the Earn-Out Statement shall be prepared in
accordance with US GAAP and the actual results will be converted to Euros using
the Exchange Rate in effect as of January 31, 2007 and January 31, 2008, as
applicable.
(b) The Stockholder Representative shall have forty-five (45)
days after the delivery of the Earn-Out Statement to review the Earn-Out
Statement and to object to the calculation of the Earn-Out in writing,
specifying the nature of the dispute and the basis therefor. The parties shall
in good faith attempt to resolve any dispute and, if the parties so resolve all
disputes, the Earn-Out Statement, as amended to the extent necessary to reflect
the resolution of the dispute, shall be conclusive and binding on the parties.
If the parties do not reach agreement in resolving the dispute within 20
calendar days after notice is given by the Stockholder Representative to
Purchaser pursuant to the second preceding sentence, the parties shall submit
the dispute to the Arbiter selected as set forth in Section 2.4(a)(iii) and
resolve the dispute in accordance with the terms and conditions set forth in
Section 2.4(a)(iii).
(c) Subject to the execution of customary auditors'
confidentially and liability release undertakings (covering "secret d'affaires")
by the Stockholder Representative and Purchaser on its behalf and on behalf of
its representatives (including its auditors), Purchaser shall provide
Stockholder Representative's auditors with prompt and reasonable access to the
books and records and relevant personnel of Purchaser, the Company and
Subsidiaries and to their statutory auditors for the purpose of reviewing the
Earn-Out Statement. Such access shall be (i) during normal business hours and
upon reasonable advance notice, (ii) up until the final determination of the
Earn-Out Amount, and (iii) as the case may be, in the course of any dispute or
litigation arising out of the Earn-Out Statement, to the extent that such
dispute or litigation is permitted under this Agreement. The Stockholder
Representative shall use such access for the sole purpose of the determination
of the Earn-Out Amount.
2.7 Payment of Earn-Out Amount. No later than ten (10)
Business Days after the final determination (in accordance with Section 2.6) of
the Earn-Out Statement for the 2006 Earn-Out Period and the 2007 Earn-Out Period
(each, an "EARN-OUT PAYMENT DATE"), Purchaser shall pay to the Stockholder
Representative, on behalf of the Non-Financial Investor Stockholders, the 2006
Revenue Amount and the 2006 Operating Income Amount, or of the 2007 Revenue
19
Amount and the 2007 Operating Income Amount, as the case may be, due hereunder,
in accordance with the instructions provided by the Stockholder Representative
to Purchaser at least five (5) Business Days before the Earn-Out Payment Date.
The Stockholder Representative shall be responsible for making all payments of
the Earn-Out Amount to the Non-Financial Investor Stockholders after receipt of
the amounts from Purchaser.
2.8 Closing Date. The consummation of the sale and purchase of
the Shares provided for in Section 2.1 hereof (the "CLOSING") shall take place
at the offices of Weil, Gotshal & Manges LLP located at 2, rue de la Baume,
75008 Paris (or at such other place as the parties may designate in writing) at
10:00 a.m. (Paris time) on a date to be specified by the parties (the "CLOSING
DATE"), which date shall be no later than the second Business Day after the
satisfaction or waiver of the conditions set forth in Article VIII (other than
conditions that by their nature are to be satisfied at Closing, but subject to
the satisfaction or waiver of those conditions at such time), unless another
time, date or place is agreed to in writing by the parties hereto.
2.9 Deliveries Prior to the Closing Date. No later than three
Business Days prior to the Closing Date and together with the Estimated Closing
Balance Sheet, the Company shall deliver to Purchaser the final invoices in
respect of Company Transaction Expenses and the statement setting forth an
estimate of Company Transaction Expenses, pursuant to Section 6.11.
2.10 Deliveries on the Closing Date. At the Closing, the
Selling Stockholders shall deliver or cause the Company to deliver, as
applicable, to Purchaser:
(a) Subject to Section 7.1(l), satisfactory evidence that (i)
each Option Holder has validly exercised his/her Company Options with effect
prior to the Closing (a certified copy of the minutes of the meeting of the
board of directors of the Company authorizing the increase of the share capital
of the Company and the correlative amendment of the by laws as a result of the
exercise of the Company Options), and (ii) satisfactory evidence that all
options granted by the Company other than the Company Options have been validly
and irrevocably discharged and/or that any rights under such options have been
validly waived with effect prior to the Closing Date and without any penalties
or indemnities;
(b) Copies of the releases from Affiliates of the Company,
pursuant to Section 6.10;
(c) For each of the Selling Stockholders an "ordre de
mouvement" (transfer form) for the transfer of the Shares owned by such Person
to Purchaser free and clear of all Liens;
(d) All statutory registers and other books and records
relating to the Company and its Subsidiaries including, but not limited to, the
Company's comptes d'actionnaires and registre des mouvements de titres;
20
(e) Evidence that the Company's works council has been
consulted and has given an opinion regarding the acquisition of the Shares by
Purchaser;
(f) All instruments and documents necessary to release any and
all Liens on the Shares other than Permitted Exceptions;
(g) The Escrow Agreement executed by the Escrow Agent,
Purchaser and the Stockholder Representative; and
(h) Deliveries contemplated by Section 7.1.
2.11 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver to the Selling Stockholders:
(a) The Closing Amount;
(b) Deliveries contemplated by Section 7.2; and
(c) Such other documents as are required to be delivered by
Purchaser to Selling Stockholders at or prior to the Closing under this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLING STOCKHOLDERS
Each Selling Stockholder, other than the Investor
Stockholders, severally and not jointly, hereby represents and warrants to
Purchaser that:
3.1 Organization and Good Standing In the event that such
Selling Stockholder is a corporation or other legal entity, such Selling
Stockholder is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or establishment and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now conducted.
In the event that such Selling Stockholder is a corporation or other legal
entity, such Selling Stockholder is duly qualified or authorized to do business
as a foreign corporation or other legal entity and is in good standing under the
laws of each jurisdiction in which it owns or leases real property and each
other jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization.
3.2 Authorization of Agreement. Such Selling Stockholder has
all requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, or instrument or certificate
contemplated by this Agreement or to be executed by such Selling Stockholder in
connection with the consummation of the transactions contemplated by this
Agreement (the "SELLING STOCKHOLDER DOCUMENTS"), and to consummate the
21
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each of the Selling Stockholder Documents, and
the consummation of the transactions contemplated hereby and thereby, has been
duly authorized and approved by all required action on the part of such Selling
Stockholder. This Agreement has been, and each of the Selling Stockholder
Documents will be at or prior to the Closing, duly and validly executed and
delivered by such Selling Stockholder and (assuming due authorization, execution
and delivery by Purchaser) this Agreement constitutes, and each of the Selling
Stockholder Documents when so executed and delivered will constitute, legal,
valid and binding obligations of such Selling Stockholder, enforceable against
such Selling Stockholder in accordance with its terms.
3.3 Conflicts; Consents of Third Parties.
(a) Except as set forth in Schedule 3.3(a), none of the
execution and delivery by such Selling Stockholder of this Agreement or the
Selling Stockholder Documents, the consummation of the transactions contemplated
hereby or thereby, or compliance by such Selling Stockholder with any of the
provisions hereof or thereof will conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination or cancellation under any provision of (i) the
certificate of incorporation and by-laws or comparable organizational documents
of such Selling Stockholder; (ii) any Contract or Permit to which any Selling
Stockholder is a party or by which any of the properties or assets of such
Selling Stockholder are bound; or (iii) any Law applicable to such Selling
Stockholder or by which any of the properties or assets of such Selling
Stockholder are bound.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of such Selling Stockholder in
connection with the execution and delivery of this Agreement, the Selling
Stockholder Documents, the compliance by such Selling Stockholder with any of
the provisions hereof, or the consummation of the transactions contemplated
hereby, except for any filings required to be made under applicable Antitrust
Laws.
3.4 Ownership and Transfer of Shares. Except as set forth in
Schedule 3.4, such Selling Stockholder is the record and beneficial owner of the
Shares indicated as being owned by such Selling Stockholder on Exhibit A, free
and clear of any and all Liens. Such Selling Stockholder has the power and
authority to sell, transfer, assign and deliver such Shares as provided in this
Agreement, and such delivery will convey to Purchaser good and marketable title
to such Shares, free and clear of any and all Liens.
3.5 Litigation. Except as set forth in Schedule 3.5, there is
no Legal Proceeding pending or, to the Knowledge of such Selling Stockholder,
threatened against such Selling Stockholder or to which such Selling Stockholder
is otherwise a party relating to this Agreement, the Selling Stockholder
Documents or the transactions contemplated hereby or thereby.
3.6 Financial Advisors. Except as set forth on Schedule 3.6,
no Person has acted, directly or indirectly, as a broker, finder or financial
advisor for such Selling Stockholder in connection with the transactions
22
contemplated by this Agreement and no Person is or will be entitled to any fee
or commission or like payment in respect thereof. Each Financial Investor
further acknowledges that such Financial Investor is obligated to deliver to the
Stockholder Representative 1% of the consideration to which each Financial
Investor is entitled to hereunder at Closing for purposes of covering
transaction expenses; any such amounts not so utilized to be refunded by the
Stockholder Representative on the 30th Business Day after Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
The Selling Stockholders, other than the Financial Investors
and the Investor Stockholders (and for purposes of clarity, the term "Selling
Stockholders" as used in this Article IV shall exclude the Financial Investors
and the Investor Stockholders), severally and not jointly, hereby represent and
warrant, to Purchaser, subject to the exceptions provided in the Schedules to
this Agreement furnished by the Selling Stockholders with specific reference to
the Sections hereof to which such exceptions relate (it being understood and
agreed by the parties, however, that disclosure of any fact or item in any such
Schedule shall, should the existence of such fact or item be relevant to any
other Section of this Agreement, be deemed disclosed with respect to such other
Section of this Agreement but only to the extent that such relevance is readily
apparent on the face of such disclosure (without the need for investigation or
inquiry by Purchaser)), that:
4.1 Organization and Good Standing. The Company is a French
societe anonyme duly organized, validly existing and in good standing under the
laws of France and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now conducted. The
Company is duly qualified or authorized to do business and is in good standing
under the laws of each jurisdiction in which it owns or leases real property and
each other jurisdiction in which the conduct of its business or the ownership of
its properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing would not be
reasonable likely to cause a Material Adverse Effect.
4.2 Intentionally Omitted.
4.3 Conflicts; Consents of Third Parties.
(a) Except as set forth in Schedule 4.3, none of the execution
and delivery by the Company of this Agreement, the consummation of the
transactions contemplated hereby or thereby, or compliance by the Company with
any of the provisions hereof or thereof will conflict with, or result in any
violation or breach of, conflict with or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or give rise to any obligation of the Company to make any payment under,
or to the increased, additional, accelerated or guaranteed rights or
23
entitlements of any Person under, or result in the creation of any Liens upon
any of the properties or assets of Company or any Subsidiary under, any
provision of (i) the certificate of incorporation and by-laws or comparable
organizational documents of the Company or any Subsidiary; (ii) any Contract or
Permit to which the Company or any Subsidiary is a party or by which any of the
properties or assets of the Company or any Subsidiary are bound; or (iii) any
Law applicable to the Company or any Subsidiary or any of the properties or
assets of the Company or any Subsidiary.
(b) Except as set forth in Schedule 4.3 and except for any
filings required to be made under applicable Antitrust Laws, no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Company or any Subsidiary in connection with (i) the execution and delivery of
this Agreement, the Company Documents, respectively, the compliance by the
Company with any of the provisions hereof and thereof, or the consummation of
the transactions contemplated hereby or thereby, or (ii) the continuing validity
and effectiveness immediately following the Closing of any Permit or Contract of
the Company or any Subsidiary.
4.4 Capitalization.
(a) The authorized capital stock of the Company consists of
14,891,690 ordinary shares and 6,772,985 B shares (collectively, the "COMMON
STOCK"). As of the date hereof, there are 21,664,675 shares of Common Stock
issued and outstanding. All of the issued and outstanding shares of Common Stock
were duly authorized for issuance and are validly issued, fully paid and
non-assessable and were not issued in violation of any purchase or call option,
right of first refusal, subscription right, preemptive right or any similar
rights. All of the outstanding shares of Common Stock are owned of record by the
holders and in the respective amounts as are set forth on Schedule 4.4(a).
(b) Schedule 4.4(b) sets forth the holders of Company Options
and the respective number of shares of Common Stock subject to each outstanding
Company Option, and the applicable exercise price, expiration date and vesting
date. Except for Company Options described in Schedule 4.4(b), there is no
existing option, warrant, call, right or Contract to which any Person (including
the Selling Stockholder or the Company) is a party requiring, and there are no
securities of the Company outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional shares of capital
stock or other equity securities of the Company or other securities convertible
into, exchangeable for or evidencing the right to subscribe for or purchase
shares of capital stock or other equity securities of the Company. Except as set
forth in Schedule 4.4(b), there are no obligations, contingent or otherwise, of
the Company or any Subsidiary to (i) repurchase, redeem or otherwise acquire any
shares of Common Stock or the capital stock or other equity interests of any
Subsidiary, or (ii) provide material funds to, or make any material investment
in (in the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any Person. Except as set forth on
Schedule 4.4(b), there are no outstanding stock appreciation, profit
participation or similar rights with respect to the Company or any of the
Subsidiaries. Except as set forth on Schedule 4.4(b), each Option Holder has
24
executed a Contractual Agreement with the Company. There are no bonds,
debentures, notes or other indebtedness of the Company or the Subsidiaries
having the right to vote or consent (or, convertible into, or exchangeable for,
securities having the right to vote or consent) on any matters on which
stockholders (or other equityholders) of the Company of the Subsidiaries may
vote. There are no voting trusts, irrevocable proxies or other Contracts or
understandings to which the Company or any Subsidiary or any Selling Stockholder
is a party or is bound with respect to the voting or consent of any shares of
Common Stock or the equity interests of any Subsidiary.
4.5 Subsidiaries. Schedule 4.5(a) sets forth the name of each
Subsidiary, and, with respect to each Subsidiary, the jurisdiction in which it
is incorporated or organized, the jurisdictions, if any, in which it is
qualified to do business, the number of shares of its authorized capital stock,
the number and class of shares thereof duly issued and outstanding, the names of
all directors, officers and holders of powers of attorney to act for each such
Subsidiary, the names of all stockholders or other equity owners and the number
of shares of stock owned by each stockholder or the amount of equity owned by
each equity owner. Except as set forth on Schedule 4.5(b), each Subsidiary is a
duly organized and validly existing corporation, partnership or other entity in
good standing under the laws of the jurisdiction of its incorporation or
organization and is duly qualified or authorized to do business as a foreign
corporation or entity and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing has not had and would
not reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 4.5(b), each Subsidiary has all requisite corporate or entity
power and authority to own its properties and carry on its business as presently
conducted. The outstanding shares of capital stock or equity interests of each
Subsidiary are validly issued, fully paid and non-assessable and were not issued
in violation of any purchase or call option, right of first refusal,
subscription right, preemptive right or any similar right. All such shares or
other equity interests represented as being owned by the Company or any of the
Subsidiaries are owned by them free and clear of any and all Liens. No shares of
capital stock are held by any Subsidiary as treasury stock. There is no existing
option, warrant, call, right or Contract to which any Subsidiary is a party
requiring, and there are no convertible securities of any Subsidiary outstanding
which upon conversion would require, the issuance of any shares of capital stock
or other equity interests of any Subsidiary or other securities convertible into
shares of capital stock or other equity interests of any Subsidiary. The Company
does not own, directly or indirectly, any capital stock or equity securities of
any Person other than the Subsidiaries. Except as set forth on Schedule 4.5,
there are no material restrictions on the ability of the Subsidiaries to make
distributions of cash to their respective equity holders.
4.6 Corporate Records.
(a) The Company has delivered to Purchaser true, correct and
complete copies of the certificates of incorporation (each certified by the
Secretary of State or other appropriate official of the applicable jurisdiction
of organization) and by-laws (each certified by the secretary, assistant
secretary or other appropriate officer) or comparable organizational documents
25
of the Company and each of the Subsidiaries in each case as amended and in
effect on the due date hereof, including all amendments thereto.
(b) The minute books of the Company and each Subsidiary
previously made available to Purchaser contain true, correct and complete
records of all meetings and accurately reflect all other corporate action of the
stockholders and board of directors of the Company and the Subsidiaries. The
stock certificate books and stock transfer ledgers of the Company and the
Subsidiaries previously made available to Purchaser are true, correct and
complete. All stock transfer taxes levied, if any, or payable with respect to
all transfers of shares of the Company and the Subsidiaries prior to the date
hereof have been paid and appropriate transfer tax stamps affixed.
4.7 Financial Statements.
(a) The Company has delivered to Purchaser copies of (i) the
audited balance sheets of the Company as at December 31, 2004 and December 31,
2003 and the related statements of income and of cash flows of the Company for
the years then ended and the unaudited consolidated balance sheets of the
Company and the Subsidiaries as at December 31, 2005 and the related
consolidated statements of income and of cash flows of the Company and the
Subsidiaries for the years then ended (such statements are referred to herein as
the "FINANCIAL STATEMENTS"). Each of the Financial Statements is complete and
correct in all material respects, has been prepared in accordance with GAAP
(subject, in the case of the Financial Statements as at December 31, 2005 and
for the year ending on December 31, 2005, to the absence of notes and normal
period-end adjustments in accordance with past practice) consistently applied by
the Company without modification of the accounting principles used in the
preparation thereof throughout the periods presented and presents fairly the
consolidated financial position, results of operations and cash flows of the
Company and the Subsidiaries as at the dates and for the periods indicated
therein.
The consolidated balance sheet of the Company as at December
31, 2005 is referred to herein as the "BALANCE SHEET" and December 31, 2005 is
referred to herein as the "BALANCE SHEET DATE."
(b) All books, records and accounts of the Company and the
Subsidiaries are accurate and complete and are maintained in all material
respects in accordance with all applicable Laws.
4.8 No Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any Liability of any nature required to be reflected or reserved
against on the Balance Sheet or in the notes thereto in accordance with GAAP,
and not so reflected or reserved, other than Liabilities incurred in the
Ordinary Course of Business since the Balance Sheet Date that are immaterial to
the Company and the Subsidiaries taken as a whole.
4.9 Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on Schedule 4.9, since the
Balance Sheet Date (i) the Company and the Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business and (ii) there has
not been any event, change, occurrence or circumstance that, individually or in
26
the aggregate with any such events, changes, occurrences or circumstances, has
had or would reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, since the Balance Sheet Date:
(i) there has not been any damage, destruction or loss,
whether or not covered by insurance, with respect to the property and
assets of the Company or any Subsidiary having a replacement cost of
more than (euro)50,000;
(ii) except for the Cash Extraction, there has not been any
declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of capital stock of the Company
or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interest in, the Company or any
Subsidiary;
(iii) neither the Company nor any Subsidiary has awarded or
paid any bonuses to employees of the Company or any Subsidiary with
respect to the fiscal year ended December 31, 2005, except to the
extent accrued on the Balance Sheet, or entered into any employment,
deferred compensation, severance or similar agreement (nor amended any
such agreement) or agreed to materially increase the compensation
payable or to become payable by it to any of the Company's or any
Subsidiary's directors, officers, employees, agents or representatives
or agreed to materially increase the coverage or benefits available
under any severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with such
directors, officers, employees, agents or representatives;
(iv) there has not been any change by the Company or any
Subsidiary in accounting or Tax reporting principles, methods or
policies;
(v) neither the Company nor any Subsidiary has made or
rescinded any election relating to Taxes or settled or compromised any
claim relating to Taxes;
(vi) neither the Company nor any Subsidiary has entered into
any transaction or Contract other than in the Ordinary Course of
Business;
(vii) neither the Company nor any Subsidiary has failed to
promptly pay and discharge current liabilities in excess of
(euro)50,000, except where disputed in good faith by appropriate
proceedings; neither the Company nor any Subsidiary has made any loans,
advances or capital contributions to, or investments in, any Person or
paid any fees or expenses to any Selling Stockholder or any director,
officer, partner, stockholder or Affiliate of any Selling Stockholder;
(viii) neither the Company nor any Subsidiary has (A)
mortgaged, pledged or subjected to any Lien any of its assets, or (B)
acquired any assets or sold, assigned, transferred, conveyed, leased or
27
otherwise disposed of any assets of the Company or any Subsidiary,
except, in the case of clause (B), for assets acquired, sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the Ordinary
Course of Business and with a value in excess of (euro)50,000;
(ix) neither the Company nor any Subsidiary has discharged or
satisfied any Lien, or paid any Liability in excess of (euro)50,000,
except in the Ordinary Course of Business;
(x) neither the Company nor any Subsidiary has canceled or
compromised any debt or claim or amended, canceled, terminated,
relinquished, waived or released any Contract or right except in the
Ordinary Course of Business and which in the aggregate, would not be
material to the Company and the Subsidiaries taken as a whole;
(xi) neither the Company nor any Subsidiary has made or
committed to make any capital expenditures or capital additions or
betterments in excess of (euro)100,000 in the aggregate;
(xii) neither Company nor any Subsidiary has issued, created,
incurred, assumed, guaranteed, endorsed or otherwise become liable or
responsible with respect to (whether directly, contingently, or
otherwise) any Indebtedness in an amount in excess of (euro)50,000 in
the aggregate;
(xiii) the Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property except
in the Ordinary Course of Business;
(xiv) neither the Company nor any Subsidiary has instituted or
settled any Legal Proceeding resulting in a loss of revenue or payment
in excess of (euro)50,000; and
(xv) none of the Selling Stockholders or the Company has
agreed, committed, arranged or entered into any understanding to do
anything set forth in this Section 4.9.
4.10 Taxes.
(a) (i) All Tax Returns required to be filed by or on behalf
of each of the Company, any Subsidiary and any affiliated group of which the
Company or any Subsidiary is or was a member have been duly and timely filed
with the appropriate Taxing Authority in all jurisdictions in which such Tax
Returns are required to be filed (after giving effect to any valid extensions of
time in which to make such filings), and all such Tax Returns are true, complete
and correct; and (ii) all Taxes payable by or on behalf of each of the Company,
any Subsidiary and any Affiliated Group of which the Company or any Subsidiary
is or was a member, either payable individually or jointly and severally with
any other Person, and whether or not shown on any Tax Return, have been fully
and timely paid. With respect to any period for which Tax Returns have not yet
been filed or for which Taxes are not yet due or owing, the Company has made due
28
and sufficient accruals for such Taxes in the Financial Statements and its books
and records. All required estimated Tax payments sufficient to avoid any
underpayment penalties or interest have been made by or on behalf of the Company
and each Subsidiary.
(b) Except as set forth in Schedule 4.10(b), the Company and
each Subsidiary has complied in all material respects with all applicable Laws
relating to the payment and withholding of Taxes and has duly and timely
withheld and paid over to the appropriate Taxing Authority all amounts required
to be so withheld and paid under all applicable Laws.
(c) All deficiencies asserted or assessments made as a result
of any examinations by any Taxing Authority of the Tax Returns of, or including,
the Company or any Subsidiary, have been fully paid, and, there are no other
audits or investigations by any Taxing Authority in progress, nor has the
Selling Stockholders, the Company or any of the Subsidiaries received any notice
from any Taxing Authority that it intends to conduct such an audit or
investigation. No issue has been raised by a Taxing Authority in any prior
examination of the Company or any Subsidiary which, by application of the same
or similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(d) Neither the Company nor any Subsidiary nor any other
Person on their behalf has (i) requested any extension of time within which to
file any Tax Return, which Tax Return has since not been filed, (ii) granted any
extension for the assessment or collection of Taxes, which Taxes have not since
been paid, or (iii) granted to any Person any power of attorney that is
currently in force with respect to any Tax matter.
(e) Except as set forth in Schedule 4.10(e), neither the
Company nor any Subsidiary has been or is a party to any partnership, joint
venture, Tax sharing, consolidation, allocation, indemnity or similar agreement
or arrangement (whether or not written) pursuant to which it will have any
obligation to make any payments after the Closing.
(f) Neither the Company nor any Subsidiary (i) is subject to
any rulings of any Taxing Authority, or has entered into any written and legally
binding agreement or is currently under negotiations to enter into any such
agreements with any Taxing Authority, that would affect the situation of any of
the Company or the Subsidiaries in any time period ending after the Closing
Date; (ii) has made any commitment or entered into any agreement or taken any
action resulting in a Tax deferral or Tax deferral liability; (iii) benefits
from a specific Tax regime subordinated to the respect of any undertaking
whatsoever; (iv) has consented to, or may be found liable as a result of any
restructuring or similar transactions or (v) has waived any statute of
limitations in respect of Taxes, or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(g) There are no liens as a result of any unpaid Taxes upon
any of the assets of the Company or any Subsidiary.
29
(h) The Tax credits and Tax losses reported in the Tax returns
of the Company and of the Subsidiaries are valid and will not be affected by the
transactions contemplated by this Agreement.
4.11 Real Property.
(a) Schedule 4.11(a) sets forth a complete list of (i) all
real property and interests in real property leased by the Company and the
Subsidiaries (individually, a "REAL PROPERTY LEASE" and collectively, the "REAL
PROPERTY LEASES" ) as lessee or lessor, including a description of each such
Real Property Lease (including the name of the third party lessor or lessee and
the date of the lease or sublease and all amendments thereto). Neither the
Company nor any of its Subsidiaries own any title to or interest in real
property other than the Real Property Leases. The Real Property Leases
constitute all interests in real property currently used, occupied or currently
held for use in connection with the business of the Company and the Subsidiaries
and which are necessary for the continued operation of the business of the
Company and the Subsidiaries as the business is currently conducted. To the
Knowledge of the Selling Stockholders, all of such properties and buildings,
fixtures and improvements thereon (i) are in good operating condition without
structural defects, and all mechanical and other systems located thereon are in
good operating condition, and no condition exists requiring material repairs,
alterations or corrections and (ii) are suitable, sufficient and appropriate in
all respects for their current uses. None of the improvements located on such
properties constitute a legal non-conforming use or otherwise require any
special dispensation, variance or special permit under any Laws. The Company has
delivered to Purchaser true, correct and complete copies of the Real Property
Leases, together with all amendments, modifications or supplements, if any,
thereto.
(b) Each of the Company and the Subsidiaries, as applicable,
has a valid, binding and enforceable leasehold interest under each of the Real
Property Leases under which it is a lessee, free and clear of all Liens other
than Permitted Exceptions. Each of the Real Property Leases is in full force and
effect. Neither the Company nor an Subsidiary is in material default under any
Real Property Lease, and, to the Knowledge of the Selling Stockholders, no event
has occurred and no circumstance exists which, if not remedied, and whether with
or without notice or the passage of time or both, would result in such a
material default. Neither the Company nor any Subsidiary has received or given
any notice of any material default by the Company or any Subsidiary under any of
the Real Property Leases and, to the Knowledge of the Selling Stockholders, no
other party is in default thereof, and no party to any Real Property Lease has
exercised any termination rights with respect thereto.
(c) The Company and the Subsidiaries have all certificates of
occupancy and Permits of any Governmental Body necessary for the current use and
operation of each property leased under the Real Property Leases (the "COMPANY
PROPERTY"), and the Company and the Subsidiaries have fully complied with all
material conditions of the Permits applicable to them. No material default or
violation, or, to the Knowledge of the Selling Stockholders, event that with the
lapse of time or giving of notice or both would become a material default or
violation, has occurred in the due observance of any Permit.
30
(d) There does not exist any actual or, to the Knowledge of
the Selling Stockholders, threatened or contemplated condemnation or eminent
domain proceedings that affect any Company Property or any part thereof, and
neither the Company nor any Subsidiary has received any written notice of the
intention of any Governmental Body or other Person to take or use all or any
part thereof.
(e) Neither the Company nor any Subsidiary has received any
notice from any insurance company that has issued a policy with respect to any
Company Property requiring performance of any structural or other repairs or
alterations to such Company Property.
(f) Neither the Company nor any Subsidiary owns, holds, is
obligated under or is a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
4.12 Tangible Personal Property.
(a) The Company and the Subsidiaries have good and marketable
title to all of the items of tangible personal property used in the business of
the Company and the Subsidiaries (except as sold or disposed of subsequent to
the date hereof in the Ordinary Course of Business and not in violation of this
Agreement), free and clear of any and all Liens, other than the Permitted
Exceptions. All such items of tangible personal property which, individually or
in the aggregate, are material to the operation of the business of the Company
and the Subsidiaries are in good condition and in a state of good maintenance
and repair (ordinary wear and tear excepted) and are suitable for the purposes
used.
(b) Schedule 4.12(b) sets forth all leases of personal
property involving annual payments in excess of (euro)50,000 relating to
personal property ("PERSONAL PROPERTY LEASES") used in the business of the
Company or any of the Subsidiaries or to which the Company or any of the
Subsidiaries is a party or by which the properties or assets of the Company or
any of the Subsidiaries is bound. To the Knowledge of the Selling Stockholders,
all of the items of personal property under the Personal Property Leases are in
good condition and repair (ordinary wear and tear excepted) and are suitable for
the purposes used, and such property is in all material respects in the
condition required of such property by the terms of the lease applicable thereto
during the term of the lease. The Company has delivered to Purchaser true,
correct and complete copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.
(c) The Company and each of the Subsidiaries have valid and
enforceable leasehold interests under each of the Personal Property Leases under
which it is a lessee. Each of the Personal Property Leases is in full force and
effect and neither the Company nor any Subsidiary has received or given any
notice of any default or event that with notice or lapse of time, or both, would
constitute a material default by the Company or any Subsidiary under any of the
Personal Property Leases and, to the Knowledge of the Selling Stockholders, no
other party is in material default thereof, and no party to the Personal
Property Leases has exercised any termination rights with respect thereto.
31
4.13 Intellectual Property.
(a) Schedule 4.13(a) sets forth an accurate and complete list
of all Patents, Marks and Copyrights owned or used by the Company or any
Subsidiary. Schedule 4.13(a) lists the jurisdictions in which each such item of
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed.
(b) Except as disclosed in Schedule 4.13(b) and to the
Knowledge of the Selling Stockholders, the Company or a Subsidiary is the sole
and exclusive owner of all right, title and interest in and to (i) all of the
Patents, Marks and Copyrights used by the Company and the Subsidiaries, and (ii)
each of the other Copyrights in any works of authorship prepared by or for the
Company or a Subsidiary that resulted from or arose out of any work performed by
or on behalf of the Company or any Subsidiary or by any employee, officer,
consultant or contractor of any of them, in each case free and clear of all
Liens or obligations to others. To the Knowledge of the Selling Stockholders,
the Company or a Subsidiary is the sole and exclusive owner of, or has valid and
continuing rights to use, sell and license, as the case may be, all other
Intellectual Property used, sold or licensed by the Company or the Subsidiaries
in their businesses as presently conducted, free and clear of all Liens or
obligations to others (except for those specified licenses included in Schedule
4.13(e)).
(c) Except as set forth on Schedule 4.13(c), the Intellectual
Property owned, used, practiced or otherwise commercially exploited by the
Company or any Subsidiary, the development, manufacturing, licensing, marketing,
importation, offer for sale, sale or use of the Products or Technology in
connection with the business as presently conducted, and the Company's and the
Subsidiaries' present business practices and methods, do not infringe, violate
or constitute an unauthorized use or misappropriation of any Copyright, Mark,
Trade Secret or other similar right, or, to the Knowledge of the Selling
Stockholders, any Patent, of any Person (including pursuant to any
non-disclosure agreements or obligations to which the Company or any Subsidiary
or any of their present or former employees is a party, and including any
intellectual property that might exist with respect to open software or other
intellectual property publicly available for certain types of use). The
Intellectual Property owned by or licensed to the Company and the Subsidiaries
includes all of the intellectual property rights used by the Company and the
Subsidiaries to conduct their business in the manner in which such business is
currently being conducted.
(d) Except with respect to licenses of commercial
off-the-shelf Software, and except pursuant to the Intellectual Property
Licenses listed in Schedule 4.13(d), neither the Company nor any of the
Subsidiaries is required, obligated, or under any liability whatsoever, to make
any payments by way of royalties, fees or otherwise or provide any other
consideration of any kind, to any owner or licensor of, or other claimant to,
any Intellectual Property, or any other Person, with respect to the use thereof
or in connection with the conduct of the business of the Company and the
Subsidiaries as currently conducted.
(e) Schedule 4.13(e) sets forth a complete and accurate list
of all Contracts to which the Company or any Subsidiary is a party (i) granting
any Intellectual Property or Intellectual Property Licenses involving
individually annual payments in excess of (euro)500,000, (ii) containing a
32
covenant not to compete or otherwise limiting its ability to use or exploit
fully any of the Intellectual Property or (iii) containing an agreement to
indemnify any other Person against any claim of infringement, violation,
misappropriation or unauthorized use of any Intellectual Property. The Company
has delivered to Purchaser true, correct and complete copies of each Contract
set forth on Schedule 4.13(e), together with all amendments, modifications or
supplements thereto.
(f) Each of the Intellectual Property Licenses is in full
force and effect and is the legal, valid and binding obligation of the Company
and/or the Subsidiaries, enforceable against them in accordance with its terms.
Neither the Company nor any Subsidiary is in material default under any
Intellectual Property License, nor, to the Knowledge of the Selling
Stockholders, is any other party to any Intellectual Property License in default
thereunder, and no event has occurred that with the lapse of time or the giving
of notice or both would constitute a material default thereunder. No party to
any of the Intellectual Property Licenses has made a written material claim or
demand against the Company for penalties or exercised any termination rights
with respect thereto.
(g) No Trade Secret of the Company or any Subsidiary as
presently conducted has been authorized to be disclosed or has been actually
disclosed by the Company or any Subsidiary to any employee or any third party
other than pursuant to a written non-disclosure agreement including restrictions
on the disclosure and use of the Intellectual Property. The Company and the
Subsidiaries have taken security measures to protect the secrecy,
confidentiality and value of all the Trade Secrets of the Company and the
Subsidiaries, including invention disclosures, not the subject of any patents
owned or patent applications filed by the Company or a Subsidiary.
(h) As of the date hereof, neither the Company nor any of the
Subsidiaries is the subject of any pending or, to the Knowledge of the Selling
Stockholders, threatened Legal Proceedings which involve a claim of
infringement, misappropriation, unauthorized use, or violation of any
intellectual property rights by any Person against the Company or the
Subsidiaries or challenging the ownership, use, validity or enforceability of
any material Intellectual Property. All of the Company's and the Subsidiaries'
rights in and to material Intellectual Property are valid and enforceable.
(i) Except as set forth on Schedule 4.13(i), to the Knowledge
of the Selling Stockholders, no Person is infringing, violating, misusing or
misappropriating any material Intellectual Property of the Company or any
Subsidiary, and no such claims have been made against any Person by the Company
or any Subsidiary.
(j) There are no Orders to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound which restrict, in
any material respect, the right to use any of the Intellectual Property.
(k) The consummation of the transactions contemplated hereby
will not, in and of itself, result in the loss or impairment of Purchaser's
right to own or use any of the Intellectual Property other than such loss or
impairment resulting solely from any restrictions or qualities attributable to
Purchaser.
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(l) No present or former employee has any right, title, or
interest, directly or indirectly, in whole or in part, in any material
Intellectual Property owned or used by the Company or any Subsidiary. To the
Knowledge of the Selling Stockholders, no employee, consultant or independent
contractor of the Company or any Subsidiary is, as a result of or in the course
of such employee's, consultant's or independent contractor's engagement by the
Company or any Subsidiary, in default or breach of any material term of any
employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement.
(m) Schedule 4.13(m) sets forth a complete and accurate list
of (i) all Software that is owned exclusively by the Company or any Subsidiary
that is material to the operation of the business of the Company and the
Subsidiaries and (ii) all Software that is used by the Company or any Subsidiary
in the business of the Company and the Subsidiaries that is not exclusively
owned by the Company or any Subsidiary, excluding Software available on
reasonable terms through commercial distributors or in consumer retail stores
for a license fee of no more than (euro)50,000.
(n) The incorporation of any open source software into the
products of the Company or any of the Subsidiaries has not resulted in any
transfer of ownership to a third party of any Intellectual Property or Software
of the Company that is material to the business of the Company and its
Subsidiaries.
4.14 Material Contracts.
(a) Schedule 4.14(a) sets forth, by reference to the
applicable subsection of this Section 4.14(a), all of the following Contracts to
which the Company or any of the Subsidiaries is a party or by which any of them
or their respective assets of properties are bound (collectively, the "MATERIAL
CONTRACTS"):
(i) Contracts with any Selling Stockholder or Affiliate
thereof or any current or former officer, director, stockholder or
Affiliate of the Company or any of the Subsidiaries;
(ii) Contracts with any labor union or association
representing any employee of the Company or any of the Subsidiaries;
(iii) Contracts for the sale of any of the assets of the
Company or any of the Subsidiaries other than in the Ordinary Course of
Business or for the grant to any Person of any preferential rights to
purchase any of its assets;
(iv) Contracts for joint ventures, strategic alliances,
partnerships, licensing arrangements, or sharing of profits or
proprietary information;
(v) Contracts containing covenants of the Company or any of
the Subsidiaries not to compete in any line of business or with any
Person in any geographical area or not to solicit or hire any person
with respect to employment or covenants of any other Person not to
compete with the Company or any of the Subsidiaries in any line of
34
business or in any geographical area or not to solicit or hire any
person with respect to employment;
(vi) Contracts relating to the acquisition (by merger,
purchase of stock or assets or otherwise) by the Company or any of the
Subsidiaries of any operating business or material assets or the
capital stock of any other Person;
(vii) Contracts relating to the incurrence, assumption or
guarantee of any Indebtedness or imposing a Lien on any of the assets
of the Company or any Subsidiary, including indentures, guarantees,
loan or credit agreements, sale and leaseback agreements, purchase
money obligations incurred in connection with the acquisition of
property, mortgages, pledge agreements, security agreements, or
conditional sale or title retention agreements;
(viii) purchase Contracts giving rise to Liabilities of the
Company or any of the Subsidiaries in excess of (euro)500,000 in any
fiscal year;
(ix) all Contracts providing for payments by or to the Company
or any of the Subsidiaries in excess of (euro)500,000 in any fiscal
year or (euro)500,000 in the aggregate during the term thereof;
(x) all Contracts obligating the Company or any of the
Subsidiaries to provide or obtain products of services for a period of
one year or more or requiring the Company to purchase or sell a stated
portion of its requirements or outputs;
(xi) Contracts under which the Company or any of the
Subsidiaries has made advances or loans to any other Person;
(xii) Contracts providing for severance, retention or Change
in Control Payments;
(xiii) Contracts for the employment of any individual on a
full-time, part-time or consulting or other basis providing annual
compensation in excess of (euro)100,000;
(xiv) material management Contracts and Contracts with
independent contractors or consultants (or similar arrangements) that
are not cancelable without penalty or further payment and without more
than 30 days' notice;
(xv) outstanding Contracts of guaranty, surety or
indemnification, direct or indirect, by the Company or any of the
Subsidiaries;
(xvi) Contracts (or group of related Contracts) which involve
the capital expenditure of more than (euro)100,000 annually or
(euro)100,000 in the aggregate;
(xvii) all material Contracts which do not contain a
limitation of liability provision; and
35
(xviii) Contracts that are otherwise material to the Company
and the Subsidiaries.
(b) Each of the Material Contracts is in full force and effect
and is the legal, valid and binding obligation of the Company or any Subsidiary,
and to the Knowledge of the Selling Stockholders, each other Person which is
party thereto, enforceable against each of them in accordance with its terms.
The consummation of the transactions contemplated by this Agreement, shall not,
in and of itself, except as otherwise stated in Schedule 4.14(b), result in the
termination of any Material Contract or result in any loss, impairment, penalty
or other adverse consequence thereunder. Neither the Company nor any Subsidiary
is in material default under any Material Contract, nor, to the Knowledge of the
Selling Stockholders, is any other party to any Material Contract in breach of
or default thereunder, and no event has occurred that with the lapse of time or
the giving of notice or both would constitute a breach or default on the
Company, any Subsidiary or any other party thereunder. No party to any of the
Material Contracts has exercised any termination rights with respect thereto,
and no party has given notice of any material dispute with respect to any
Material Contract. The Company has delivered to Purchaser true, correct and
complete copies of all of the Material Contracts, together with all amendments,
modifications or supplements thereto.
(c) All Change in Control Payments are set forth on Schedule
4.14(c).
4.15 Employee Benefits Plans.
(a) Schedule 4.15(a) sets forth a correct and complete list of
all employee benefit plans, and all other plans, programs, agreements, policies,
including bonus plans, employment, consulting or other compensation agreements,
incentive, equity or equity-based compensation, or deferred compensation
arrangements, change in control, termination or severance plans or arrangements,
stock purchase, severance pay, sick leave, vacation pay, salary continuation for
disability, hospitalization, medical insurance, life insurance and scholarship
plans and programs maintained by the Company or to which the Company contributed
or is obligated to contribute thereunder for current or former employees of the
Company, in each case, other than as provided under applicable Law or collective
bargaining agreements disclosed on Schedule 4.16(a) (the "EMPLOYEES")
(collectively, the "COMPANY PLANS"). The aggregate costs to the Subsidiaries in
respect of all employees, including salaries, benefit plans, and all other
plans, programs, agreements, policies, including bonus plans, employment,
consulting or other compensation agreements, incentive, equity or equity-based
compensation, or deferred compensation arrangements, change in control,
termination or severance plans or arrangements, stock purchase, severance pay,
sick leave, vacation pay, salary continuation for disability, hospitalization,
medical insurance, life insurance and scholarship plans and programs maintained
by the Subsidiaries or to which the Subsidiaries contributed or is obligated to
contribute thereunder for current or former employees of the Subsidiaries does
not exceed $200,000 per calendar month.
(b) Correct and complete copies of the following documents,
with respect to each of the Company Plans, have been made available or delivered
to Purchaser by the Company, to the extent applicable: (i) any plans, all
amendments thereto and related trust documents, insurance contracts or other
36
funding arrangements, and amendments thereto; (ii) summary plan descriptions;
(iii) written communications to employees relating to the Company Plans.
(c) The Company Plans have been maintained in all material
respects in accordance with their terms and with all provisions of applicable
Law and regulations. No fiduciary has any liability for breach of fiduciary duty
or any other failure to act or comply in connection with the administration or
investment of the assets of any Company Plan.
4.16 Labor.
(a) Except as set forth on Schedule 4.16(a), neither the
Company nor any of the Subsidiaries is a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company or any of the Subsidiaries. The
Company has delivered or otherwise made available to Purchaser true, correct and
complete copies of the labor or collective bargaining agreements listed on
Schedule 4.16(a), together with all amendments, modifications or supplements
thereto.
(b) No Employees are represented by any labor organization. No
labor organization or group of Employees has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Knowledge of the Selling
Stockholders, threatened to be brought or filed. There is no organizing activity
involving the Company or any of the Subsidiaries pending or, to the Knowledge of
the Selling Stockholders, threatened by any labor organization or group of
Employees.
(c) There are no (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) material grievances or other labor disputes
pending or, to the Knowledge of the Selling Stockholders, threatened against or
involving the Company or any of the Subsidiaries. There are no unfair labor
practice charges, grievances or complaints pending or, to the Knowledge of the
Selling Stockholders, threatened by or on behalf of any Employee or group of
Employees.
(d) There are no complaints, charges or claims against the
Company or any of the Subsidiaries pending or, to Knowledge of the Selling
Stockholders, threatened that could be brought or filed, with any Governmental
Body based on, arising out of, in connection with or otherwise relating to the
employment or termination of employment of or failure to employ, any individual.
Except as set forth in Schedule 4.16(d), each of the Company and the
Subsidiaries is in material compliance with all Laws relating to the employment
of labor, including all such Laws relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except for immaterial non-compliance.
(e) Schedule 4.16(e) sets forth an accurate and complete list
of the entire workforce of the Company and the Subsidiaries, including the
37
names, duration of employment agreement and dates of hire of all employees of
the Company and the Subsidiaries.
4.17 Litigation. Except as set forth in Schedule 4.17, there
is no Legal Proceeding pending or, to the Knowledge of the Selling Stockholders,
threatened against the Company or any of the Subsidiaries (or to the Knowledge
of the Selling Stockholders, pending or threatened, against any of the officers,
directors or employees of the Company or any of the Subsidiaries with respect to
their business activities on behalf of the Company), or to which the Company or
any of the Subsidiaries is otherwise a party before any Governmental Body; nor
to the Knowledge of the Company nor the Selling Stockholders is there any
reasonable basis for any such Legal Proceeding. Except as set forth on Schedule
4.17, neither the Company nor any Subsidiary is subject to any Order, and
neither the Company nor any Subsidiary is in breach or violation of any Order.
Except as set forth on Schedule 4.17, neither the Company nor any Subsidiary is
engaged in any legal action to recover monies due it or for damages sustained by
it.
4.18 Compliance with Laws; Permits.
(a) The Company and the Subsidiaries have been and are in
compliance in all material respects with all Laws applicable to its business,
operations or assets. Neither the Company nor any Subsidiary has received any
notice of or been charged with the violation of any Laws. To the Knowledge of
the Selling Stockholders, neither the Company nor any Subsidiary is under
investigation with respect to the violation of any Laws and there are no facts
or circumstances which would reasonable be expected to form the basis of any
such violation.
(b) Schedule 4.18 contains a list of all Permits which are
required for the operation of the business of the Company and the Subsidiaries
as presently conducted, other than those the failure of which to possess is
immaterial ("COMPANY PERMITS"). The Company and the Subsidiaries have all
Company Permits. Neither the Company nor any Subsidiary is in material default
or violation of a Company Permit and, to the Knowledge of the Selling
Stockholders, no event has occurred which, with notice or the lapse of time or
both, would constitute a default or violation, in any material respect of any
term, condition or provision of any Company Permit and there are no facts or
circumstances which could form the basis for any such default or violation.
There are no Legal Proceedings pending or, to the Knowledge of the Selling
Stockholders, threatened, relating to the suspension, revocation or modification
of any Company Permit.
4.19 Insurance. The Company and the Subsidiaries have
insurance policies in full force and effect (a) for such amounts as are
sufficient for all requirements of Law and all agreements to which the Company
or any of the Subsidiaries is a party or by which it is bound, and (b) which are
in such amounts, with such deductibles and against such risks and losses, as are
reasonable for the business, assets and properties of the Company and the
Subsidiaries. Set forth in Schedule 4.19 is a list and a short description of
all insurance policies applicable to the Company or any of the Subsidiaries
setting forth, in respect of each such policy, the policy name, type and amount
of coverage and annual premium, whether the policies may be terminated upon
consummation of the transactions contemplated hereby. Excluding insurance
38
policies that have expired and been replaced in the Ordinary Course of Business,
no insurance policy has been cancelled within the last two years and, to the
Knowledge of the Selling Stockholders, no threat has been made to cancel any
insurance policy of the Company or any of the Subsidiaries during such period.
Except as noted on Schedule 4.19, the consummation of the transactions
contemplated hereby, in and of itself, shall not result in the termination of
any such insurance or any loss or impairment thereunder. To the Knowledge of the
Selling Stockholders, no event has occurred, including the failure by the
Company or any of the Subsidiaries to give any notice or information or the
Company or any of the Subsidiaries giving any inaccurate or erroneous notice or
information, which limits or impairs the rights of the Company or any of the
Subsidiaries under any such insurance policies.
4.20 Accounts and Notes Receivable and Payable.
(a) All accounts and notes receivable of the Company and the
Subsidiaries have arisen from bona fide transactions in the Ordinary Course of
Business consistent with past practice and are payable on ordinary trade terms.
None of the accounts or the notes receivable of the Company or any of the
Subsidiaries (i) are subject to any setoffs or counterclaims or (ii) represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement.
(b) All accounts payable of the Company and the Subsidiaries
reflected in the Balance Sheet or arising after the date thereof are the result
of bona fide transactions in the Ordinary Course of Business and have been paid
or are not yet due and payable.
4.21 Related Party Transactions. Except as set forth on
Schedule 4.21, no employee, officer, director, stockholder, partner or member of
the Company of any of the Subsidiaries, any member of his or her immediate
family or, to the Knowledge of the Selling Stockholders, any of their respective
Affiliates ("RELATED PERSONS") (i) owes any amount to the Company or any of the
Subsidiaries nor does the Company or any of the Subsidiaries owe any amount to,
or has the Company or any of the Subsidiaries committed to make any loan or
extend or guarantee credit to or for the benefit of, any Related Person, (ii) is
involved in any business arrangement or other relationship with the Company or
any of the Subsidiaries (whether written or oral), (iii) owns any property or
right, tangible or intangible, that is used by the Company or any of the
Subsidiaries, (iv) has any claim or cause of action against the Company or any
of the Subsidiaries or (v) owns any direct or indirect interest of any kind in,
or controls or is a director, officer, employee or partner of, or consultant to,
or lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Company or any Subsidiary.
4.22 Customers and Suppliers.
(a) Schedule 4.22 sets forth a list of the ten (10) largest
customers and the ten (10) largest suppliers of the Company and the
Subsidiaries, as measured by the euro amount of purchases therefrom or thereby,
during the fiscal year ended December 31, 2005 showing the approximate total
sales by the Company and the Subsidiaries to each such customer and the
39
approximate total purchases by the Company and the Subsidiaries from each such
supplier, during such period. (b) Since the Balance Sheet Date and until the
date hereof, no customer or supplier listed on Schedule 4.22 has terminated its
relationship with the Company or any of the Subsidiaries or materially reduced
or changed the pricing or other terms of its business with the Company or any of
the Subsidiaries and, to the Knowledge of the Selling Stockholders, no customer
or supplier listed on Schedule 4.22 has notified the Company or the Subsidiaries
that it intends to terminate or materially reduce or change the pricing or other
terms of its business with the Company or any of the Subsidiaries.
4.23 Product Warranty; Product Liability.
(a) Except as set forth on Schedule 4.23, each product
manufactured, sold or delivered by the Company or any of the Subsidiaries in
conducting its business has been in conformity with all product specifications
all express and implied warranties and all applicable Laws. Neither the Company
nor any of the Subsidiaries has any liability for replacement or repair of any
such products or other damages in connection therewith or any other customer or
product obligations not reserved against on the Balance Sheet. Neither the
Company nor any of the Subsidiaries has sold any products or delivered any
services that included a warranty for a period of longer than one year.
(b) Neither the Company nor any of the Subsidiaries has any
material liability arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product designed,
manufactured, assembled, repaired, maintained, delivered, sold or installed, or
services rendered, by or on behalf of the Company or any of the Subsidiaries.
4.24 Banks; Power of Attorney. Schedule 4.24 contains a
complete and correct list of the names and locations of all banks in which
Company or any Subsidiary has accounts or safe deposit boxes and the names of
all persons authorized to draw thereon or to have access thereto. Except as set
forth on Schedule 4.24, no person holds a power of attorney to act on behalf of
the Company or any Subsidiary.
4.25 Certain Payments. None of the Company, any Subsidiary or
any Selling Stockholder nor, to the Knowledge of the Selling Stockholders, any
director, officer, employee, or other Person associated with or acting on behalf
of any of them, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business for the Company
or any Subsidiary, (ii) to pay for favorable treatment for business secured by
the Company or any Subsidiary, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any
Subsidiary, or (iv) in violation of any Law, or (b) established or maintained
any fund or asset with respect to the Company or any Subsidiary that has not be
recorded in the books and records of the Company and the Subsidiaries.
40
4.26 Financial Advisors. Except as set forth on Schedule 4.26,
no Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Selling Stockholders, the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement and no Person is
or will be entitled to any fee or commission or like payment in respect thereof.
Except as set forth on Schedule 4.26, the Company and the Subsidiaries have not
incurred or paid any fees or expenses in connection with the process of selling
the Company or otherwise relating to the negotiation, preparation or execution
of this Agreement or any documents or agreements contemplated hereby or the
performance or consummation of the transactions contemplated hereby, including
(A) any fees and expenses associated with obtaining necessary or appropriate
waivers, consents or approvals of any Governmental Body or third parties on
behalf of the Company or any of the Subsidiaries; (B) any fees or expenses
associated with obtaining the release and termination of any Liens; (C) all
brokers' or finders' fees; and (D) fees and expenses of counsel, advisors,
consultants, investment bankers, accountants, and auditors and experts.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Selling
Stockholders that:
5.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate properties and carry on its business.
5.2 Authorization of Agreement. Purchaser has full corporate
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this Agreement or
to be executed by Purchaser in connection with the consummation of the
transactions contemplated hereby and thereby (the "PURCHASER DOCUMENTS"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Purchaser of this Agreement and each Purchaser
Document have been duly authorized by all necessary corporate action on behalf
of Purchaser. This Agreement has been, and each Purchaser Document will be at or
prior to the Closing, duly executed and delivered by Purchaser and (assuming the
due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and each Purchaser Document when so
executed and delivered will constitute, the legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its respective
terms.
5.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Schedule 5.3 hereto, none of the
execution and delivery by Purchaser of this Agreement and of the Purchaser
Documents, the consummation of the transactions contemplated hereby or thereby,
or the compliance by Purchaser with any of the provisions hereof or thereof will
conflict with, or result in violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination or
cancellation under any provision of (i) the certificate of incorporation and
41
by-laws or comparable organizational documents of such Purchaser; (ii) any
Contract, or Permit to which Purchaser is a party or by which any of the
properties or assets of Purchaser are bound; (iii) any Order of any Governmental
Body applicable to Purchaser or by which any of the properties or assets of
Purchaser are bound; or (iv) any applicable Law.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Purchaser in connection with the
execution and delivery of this Agreement or the Purchaser Documents or the
compliance by Purchaser with any of the provisions hereof or thereof, except for
any filings required to be made under applicable Antitrust Laws.
5.4 Litigation. There are no Legal Proceedings pending or, to
the Knowledge of Purchaser, threatened against Purchaser or to which Purchaser
is otherwise a party relating to this Agreement, the Purchaser Documents or the
transactions contemplated hereby and thereby.
5.5 Financial Advisors. No Person has acted, directly or
indirectly, as a broker, finder or financial advisor for Purchaser in connection
with the transactions contemplated by this Agreement and no Person is entitled
to any fee or commission or like payment in respect thereof.
ARTICLE VI
COVENANTS
6.1 Access to Information; Confidentiality. The Selling
Stockholders (other than the Financial Investors) shall cause the Company and
the Subsidiaries to, afford to Purchaser and its accountants, counsel, financial
advisors and other representatives access, during normal business hours upon
reasonable notice throughout the period prior to the Closing, to the Company's
and the Subsidiaries' respective properties and facilities (including all owned
or leased real property and the buildings, structures, fixtures, appurtenances
and improvements erected, attached or located thereon), books, financial
information (including working papers and data in the possession of the
Company's or the Subsidiaries' or their respective independent public
accountants, internal audit reports, and "management letters" from such
accountants with respect to the Company's or any of the Subsidiaries' systems of
internal control), Contracts and records of the Company and the Subsidiaries
and, during such period, shall furnish promptly such information concerning the
businesses, properties and personnel of the Company and the Subsidiaries as
Purchaser shall reasonably request; provided, however, such investigation shall
not unreasonably disrupt the Company's operations and no such investigation or
inspection shall be conducted more frequently than twice per month. Prior to the
Closing, the Selling Stockholders (other than the Financial Investors) shall
generally keep Purchaser informed as to all material matters involving the
operations and businesses of the Company and each of the Subsidiaries. All
nonpublic information provided to, or obtained by, Purchaser in connection with
the transactions contemplated hereby shall be "CONFIDENTIAL INFORMATION" for
purposes of the Confidentiality Agreement dated May 9, 2005 between Purchaser
42
and the Company (the "CONFIDENTIALITY AGREEMENT"), the terms of which shall
continue in force until the Closing; provided that Purchaser and the Selling
Stockholders (other than the Financial Investors) may disclose such information
as may be necessary in connection with seeking necessary consents and approvals
as contemplated hereby. Notwithstanding the foregoing, the Selling Stockholders
(other than the Financial Investors) shall not be required to disclose any
information if such disclosure would contravene any applicable Law. No
information provided to or obtained by Purchaser pursuant to this Section 6.1
shall limit or otherwise affect the remedies available hereunder to Purchaser
(including Purchaser's right to seek indemnification pursuant to Article VIII),
or the representations or warranties of, or the conditions to the obligations
of, the parties hereto.
6.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly provided in this Agreement
or with the prior written consent of Purchaser, between the date hereof and the
Closing, the Selling Stockholders (other than the Financial Investors) shall
cause the Company and the Subsidiaries to:
(i) conduct the respective businesses of the Company and the
Subsidiaries only in the Ordinary Course of Business;
(ii) use their commercially reasonable efforts to (A) preserve
the present business operations, organization (including officers and
employees) and goodwill of the Company and the Subsidiaries and (B)
preserve the present relationships with Persons having business
dealings with the Company and the Subsidiaries (including customers and
suppliers);
(iii) maintain (A) all of the material assets and properties
of, or used by, the Company and the Subsidiaries in their current
condition, ordinary wear and tear excepted, and (B) insurance upon all
of the properties and assets of the Company and the Subsidiaries in
such amounts and of such kinds comparable to that in effect on the date
of this Agreement;
(iv) (A) maintain the books, accounts and records of the
Company and the Subsidiaries in the Ordinary Course of Business, (B)
continue to collect accounts receivable and pay accounts payable
utilizing normal procedures and without discounting or accelerating
payment of such accounts, and (C) comply with all contractual and other
obligations of the Company and the Subsidiaries;
(v) undertake reasonable efforts to comply with the capital
expenditure plan of the Company and the Subsidiaries for the fiscal
year 2006, including making such capital expenditures in the amounts
and at the times set forth in such plan;
(vi) maintain the key employees of the Company and the
Subsidiaries; and
(vii) comply in all material respects with all applicable
Laws.
43
(b) Without limiting the generality of the foregoing, except
as otherwise expressly provided in this Agreement or with the prior written
consent of Purchaser, the Selling Stockholders (other than the Financial
Investors) shall cause the Company and the Subsidiaries not to:
(i) other than in connection with any Cash Extraction and the
Option Payments, declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of, or other ownership
interests in, the Company or any of the Subsidiaries or repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock
or other securities of, or other ownership interests in, the Company or
any of the Subsidiaries;
(ii) transfer, issue, sell, pledge, encumber or dispose of any
shares of capital stock or other securities of, or other ownership
interests in, the Company or any of the Subsidiaries or grant options,
warrants, calls or other rights to purchase or otherwise acquire shares
of the capital stock or other securities of, or other ownership
interests in, the Company or any of the Subsidiaries, other than the
issuance of ordinary shares of the Company as a result of the exercise
of the Company Options;
(iii) other than in connection with any Cash Extraction
permitted hereunder, effect any recapitalization, reclassification,
stock split, combination or like change in the capitalization of the
Company or any of the Subsidiaries, or amend the terms of any
outstanding securities of the Company or any Subsidiary;
(iv) amend the certificate of incorporation or by-laws or
equivalent organizational or governing documents of the Company or any
of the Subsidiaries;
(v) (A) increase the salary or other compensation of any
director, officer or employee of the Company or any of the
Subsidiaries, except for normal increases in the Ordinary Course of
Business set forth on Schedule 6.2(b)(v) attached hereto, (B) grant any
unusual or extraordinary bonus, benefit or other direct or indirect
compensation to any director, officer, employee or consultant, (C)
increase the coverage or benefits available under any (or create any
new) severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other
employee benefit plan or arrangement made to, for, or with any of the
directors, officers, employees, agents or representatives of the
Company or any of the Subsidiaries or otherwise modify or amend or
terminate any such plan or arrangement, (D) enter into any employment,
deferred compensation, severance, special pay, consulting,
non-competition or similar agreement or arrangement with any directors
or officers of the Company or any Subsidiary (or amend any such
agreement to which the Company or any of the Subsidiaries is a party);
or (E) otherwise enter into or alter any employment, change in control,
transaction or sale bonus, deferred compensation, severance,
retirement, consulting or managerial services agreement with respect to
any director, officer, employee or independent contractor of the
Company or any of the Subsidiaries, except for (1) normal promotion,
44
merit or cost-of-living increases to non-executive employees or
independent contractors and (2) the hiring of new employees with a
maximum of (euro)60,000 in total annual target compensation (including
bonus) (other than sales employees who shall have a maximum of
(euro)80,000 in total annual target compensation (including bonus));
provided, however that the aggregate total annual target compensation
(including bonus) of all such hires shall not exceed (euro)500,000;
(vi) issue, create, incur, assume, guarantee, endorse or
otherwise become liable or responsible with respect to (whether
directly, contingently or otherwise) any Indebtedness; (ii) except in
the Ordinary Course of Business, pay, repay, discharge, purchase,
repurchase or satisfy any Indebtedness of the Company or any of the
Subsidiaries; or (iii) modify the terms of any Indebtedness or other
Liability;
(vii) subject to any Lien or otherwise encumber or, except for
Permitted Exceptions, permit, allow or suffer to be encumbered, any of
the properties or assets (whether tangible or intangible) of, or used
by, the Company or any of the Subsidiaries;
(viii) acquire any material properties or assets or sell,
assign, license, transfer, convey, lease or otherwise dispose of any of
the material properties or assets of, or used by, the Company and the
Subsidiaries, other than in the Ordinary Course of Business;
(ix) enter into or agree to enter into any merger or
consolidation with any corporation or other entity, and not engage in
any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities, of any other
Person;
(x) cancel or compromise any debt or claim or waive or release
any material right of the Company or any of the Subsidiaries except in
the Ordinary Course of Business;
(xi) enter into any commitment for capital expenditures of the
Company and the Subsidiaries in excess of (euro)50,000 for any
individual commitment and (euro)100,000 for all commitments in the
aggregate;
(xii) enter into, modify or terminate any labor or collective
bargaining agreement of the Company or any of the Subsidiaries or,
through negotiation or otherwise, make any commitment or incur any
liability to any labor organization with respect to the Company or any
of the Subsidiaries;
(xiii) introduce any material change with respect to the
operation of the Company or any of the Subsidiaries, including any
material change in the types, nature, composition or quality of its
products or services, or, other than in the Ordinary Course of
Business, make any change in product specifications or prices or terms
of distributions of such products or change its pricing, discount,
allowance or return policies or grant any pricing, discount, allowance
45
or return terms for any customer or supplier not in accordance with
such policies;
(xiv) enter into any transaction or enter into, modify or
renew any Contract which by reason of its size, nature or otherwise is
not in the Ordinary Course of Business;
(xv) except for transfers of cash pursuant to normal cash
management practices in the Ordinary Course of Business, make any
investments in or loans to, or pay any fees or expenses to, or enter
into or modify any Contract with any Related Persons;
(xvi) make a change in its accounting or Tax reporting
principles, methods or policies;
(xvii) (i) make, change or revoke any Tax election, settle or
compromise any Tax claim or liability or enter into a settlement or
compromise, or change (or make a request to any taxing authority to
change) any material aspect of its method of accounting for Tax
purposes, or (ii) prepare or file any Tax Return (or any amendment
thereof) unless such Tax Return shall have been prepared in a manner
consistent with past practice and the Company shall have provided
Purchaser a copy thereof (together with supporting papers) at least
three Business Days prior to the due date thereof for Purchaser to
review and approve (such approval not to be unreasonably withheld or
delayed);
(xviii) enter into any Contract, understanding or commitment
that restrains, restricts, limits or impedes the ability of the Company
or any Subsidiary to compete with or conduct any business or line of
business in any geographic area or solicit the employment of any
persons;
(xix) terminate, amend, restate, supplement or waive any
rights under any (A) Material Contract, Real Property Lease, Personal
Property Lease or Intellectual Property License, other than in the
Ordinary Course of Business or (B) Permit;
(xx) settle or compromise any pending or threatened Legal
Proceeding or any claim or claims for, or that would result in a loss
of revenue of, an amount that could, individually or in the aggregate,
reasonably be expected to be greater than (euro)50,000;
(xxi) change or modify its credit, collection or payment
policies, procedures or practices, including acceleration of
collections or receivables (whether or not past due) or fail to pay or
delay payment of payables or other liabilities;
(xxii) take any action which would adversely affect the
ability of the parties to consummate the transactions contemplated by
this Agreement;
46
(xxiii) make any capital contributions or distributions of any
kind to, or in respect of, the proposed joint venture with Beijing
Polywin Technology Co. Ltd., a Chinese corporation (to be named
Poly-Netcentrex Co. Ltd.) (the "CHINESE VENTURE"), including, without
limitation, the capital contribution of (euro)250,000 to be made within
six months after such joint venture obtaining the required certificates
to do business in China; and
(xxiv) agree to do anything (A) prohibited by this Section
6.2, (B) which would make any of the representations and warranties of
the Selling Stockholders in this Agreement or any of the Selling
Stockholder Documents or Company Documents untrue or incorrect in any
material respect or could result in any of the conditions to the
Closing not being satisfied or (C) that would be reasonably expected to
have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary set forth herein,
(i) in no event shall the Selling Stockholders cause the Company and any of the
Subsidiaries effect any Cash Extraction which results in aggregate Cash
distributions in respect of the Shares in excess of the sum of (A)
(euro)21,417,000 and (B) the amount of cash actually received by the Company in
connection with exercise by the Option Holders of Company Options. The Cash
Extraction shall be effected as described in Schedule 6.1.
6.3 THIRD PARTY CONSENTS. The Selling Stockholders (other than
the Financial Investors) and the Company shall use, and the Company shall cause
the Subsidiaries to use, their commercially reasonable efforts to obtain at the
earliest practicable date all consents, waivers and approvals from, and provide
all notices to, all Persons that are not a Governmental Body, which consents,
waivers, approvals and notices are required to consummate, or in connection
with, the transactions contemplated by this Agreement, including the consents,
waivers, approvals and notices referred to in Sections 3.3(b) and 4.3(b) hereof
(except for such matters covered by Section 6.4). All such consents, waivers,
approvals and notices shall be in writing and in form and substance satisfactory
to Purchaser, and executed counterparts of such consents, waivers and approvals
shall be delivered to Purchaser promptly after receipt thereof, and copies of
such notices shall be delivered to Purchaser promptly after the making thereof.
Notwithstanding anything to the contrary in this Agreement, neither Purchaser
nor any of its Affiliates (which for purposes of this sentence shall include the
Company) shall be required to pay any amounts in connection with obtaining any
consent, waiver or approval.
6.4 Governmental Consents and Approvals. Each of Purchaser and
the Selling Stockholders (other than the Financial Investors) shall use its
commercially reasonable efforts to obtain at the earliest practical date all
consents, waivers, approvals, Orders, Permits, authorizations and declarations
from, make all filings with, and provide all notices to, all Governmental Bodies
which are required to consummate, or in connection with, the transactions
contemplated by this Agreement, including the consents, waivers, approvals,
Orders, Permits, authorizations, declarations, filings and notices referred to
in Sections 3.3(b) and 4.3(b). Each of Purchaser and the Selling Stockholders
(other than the Financial Investors) shall, and the Selling Stockholders (other
47
than the Financial Investors) shall cause the Company to, use commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Body with respect to the transactions contemplated by this
Agreement under any Law, including any Laws that are designed to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, the "ANTITRUST LAWS"). Without limiting the
foregoing, Purchaser and Selling Stockholders (other than the Financial
Investors) shall, and the Selling Stockholders (other than the Financial
Investors) shall cause the Company to, (i) make all filings required of each of
them or any of the Company or their respective Subsidiaries or Affiliates under
any Antitrust Law with respect to the transactions contemplated hereby as
promptly as practicable and, in any event, within five (5) Business Days after
the date of this Agreement, (ii) comply at the earliest practicable date with
any request under Antitrust Laws for additional information, documents, or other
materials received by each of them or any of their respective Subsidiaries or
Affiliates from any Governmental Body in respect of such filings or such
transactions, and (iii) cooperate with each other in connection with any such
filing (including, to the extent permitted by applicable Law, providing copies
of all such documents to the non-filing parties prior to filing and considering
all reasonable additions, deletions or changes suggested in connection
therewith) and in connection with resolving any investigation or other inquiry
of any Governmental Body under any Antitrust Laws with respect to any such
filing or any such transaction. Each such party shall use commercially
reasonable efforts to furnish to each other party hereto all information
required for any application or other filing to be made pursuant to any
applicable Law in connection with the transactions contemplated by this
Agreement.
6.5 Further Assurances. Subject to, and not in limitation of,
Section 6.4, each of the Selling Stockholders and Purchaser shall use his or its
commercially reasonable efforts to (i) take, or cause to be taken, all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement and (ii) cause the fulfillment at the earliest practicable date of all
of the conditions to their respective obligations to consummate the transactions
contemplated by this Agreement.
6.6 No Shop.
(a) Other than in connection with the exercise (if any) of the
drag along right contained in the shareholders' agreement among the Company and
certain of its shareholders dated as of December 1, 1999, as amended on November
17, 2000 (the "SHAREHOLDERS Agreement"), the Selling Stockholders shall not, and
shall cause the Company, the Subsidiaries, any of the Affiliates, directors,
officers, employees, representatives or agents of the Selling Stockholders, the
Company or any of the Subsidiaries (collectively, the "REPRESENTATIVES") to,
directly or indirectly, (i) discuss, encourage, negotiate, undertake, initiate,
authorize, recommend, propose or enter into, whether as the proposed surviving,
merged, acquiring or acquired corporation or otherwise, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any material amount of the assets of the Company or any of the Subsidiaries
or any capital stock or other ownership interests of the Company or any of the
Subsidiaries (including, without limitation, any public offering or registration
of shares of the Company) other than the transactions contemplated by this
Agreement (an "ACQUISITION TRANSACTION"), (ii) facilitate, encourage, solicit or
48
initiate discussions, negotiations or submissions of proposals or offers in
respect of an Acquisition Transaction, (iii) furnish or cause to be furnished,
to any Person, any information concerning the business, operations, properties
or assets of the Company or the Subsidiaries in connection with an Acquisition
Transaction, or (iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing, including without limitation, in
connection with the exercise of preemptive rights under the Shareholders
Agreement.
(b) The Selling Stockholders (other than the Financial
Investors) shall, and shall cause the Company to, notify Purchaser orally and in
writing promptly (but in no event later than 24 hours) after receipt by any of
the Selling Stockholders, the Company, the Subsidiaries or any of the
Representatives thereof of any proposal or offer from any Person other than
Purchaser to effect an Acquisition Transaction or any request for non-public
information relating to the Company or any of the Subsidiaries or for access to
the properties, books or records of the Company or any Subsidiary by any Person
other than Purchaser. Such notice shall indicate the identity of the Person
making the proposal or offer, or intending to make a proposal or offer or
requesting non-public information or access to the books and records of the
Company, the material terms of any such proposal or offer, or modification or
amendment to such proposal or offer and copies of any written proposals or
offers or amendments or supplements thereto. The Selling Stockholders (other
than the Financial Investors) shall keep Purchaser informed, on a current basis,
of any material changes in the status and any material changes or modifications
in the material terms of any such proposal, offer, indication or request.
(c) The Selling Stockholders (other than the Financial
Investors) shall, and shall cause the Company, the Subsidiaries and their
Representatives to, immediately cease and cause to be terminated any existing
discussions or negotiations with any Persons (other than Purchaser) conducted
heretofore with respect to any Acquisition Transaction. The Selling Stockholders
(other than the Financial Investors) agree not to (and the Selling Stockholders
(other than the Financial Investors) agree to cause the Company and the
Subsidiaries not to) release any third party from the confidentiality and
standstill provisions of any agreement to which the Company or any of the
Subsidiaries is a party.
6.7 Non-Competition; Non-Solicitation; Confidentiality.
(a) For a period of three (3) years from and after the Closing
Date, the Selling Stockholders (other than the Non-Employee Selling
Stockholders, the Investor Stockholders and the Financial Investors) shall not,
and shall cause their Affiliates not to, directly or indirectly, own, manage,
engage in, operate, control, work for, consult with, render services for, do
business with, maintain any interest in (proprietary, financial or otherwise) or
participate in the ownership, management, operation or control of, any business,
whether in corporate, proprietorship or partnership form or otherwise, engaged
in developing software that enables voice or video internet protocol
communications and/or services or that otherwise competes with the Company or
any of the Subsidiaries (a "RESTRICTED BUSINESS"); provided, however, that the
restrictions contained in this Section 6.7(a) shall not (i) restrict the
49
acquisition by such Selling Stockholders, directly or indirectly, of less than
5% of the outstanding capital stock of any company engaged in a Restricted
Business and (ii) restrict Theodore Martin from engaging in the activities set
forth on Schedule 6.7(a).
(b) For a period of three (3) years from and after the Closing
Date, the Selling Stockholders (other than the Non-Employee Selling
Stockholders, the Investor Stockholders and the Financial Investors) shall not,
and shall cause their directors, officers, employees and Affiliates not to,
directly or indirectly: (i) cause, solicit, induce or encourage any employees of
the Company or the Subsidiaries to leave such employment or hire, employ or
otherwise engage any such individual; or (ii) cause, induce or encourage any
material client, customer, supplier, or licensor of the Company or any of the
Subsidiaries (including any existing or former customer of the Company or the
Subsidiaries) or any other Person who has a material business relationship with
the Company or any of the Subsidiaries, to terminate or adversely modify any
such actual relationship.
(c) From and after the Closing Date, the Selling Stockholders
shall not and shall cause their directors, officers, employees and Affiliates
not to, directly or indirectly, disclose, reveal, divulge or communicate to any
Person other than authorized officers, directors and employees of Purchaser or
use or otherwise exploit for its own benefit or for the benefit of anyone other
than Purchaser, any Confidential Information (as defined below). The Selling
Stockholders shall not have any obligation to keep confidential (or cause its
officers, directors or Affiliates to keep confidential) any Confidential
Information if and to the extent disclosure thereof is specifically required by
applicable Law; provided, however, that in the event disclosure is required by
applicable Law, the Selling Stockholders shall, to the extent reasonably
possible, provide Purchaser with prompt notice of such requirement prior to
making any disclosure so that Purchaser may seek an appropriate protective
order. For purposes of this Section 6.7(c), "CONFIDENTIAL INFORMATION" means any
information with respect to the Company or any of the Subsidiaries, including
methods of operation, customer lists, products, prices, fees, costs, Technology,
inventions, Trade Secrets, know-how, Software, marketing methods, plans,
personnel, suppliers, competitors, markets or other specialized information or
proprietary matters. "CONFIDENTIAL INFORMATION" does not include, and there
shall be no obligation hereunder with respect to, information that (i) is
generally available to the public on the date of this Agreement or (ii) becomes
generally available to the public other than as a result of a disclosure not
otherwise permissible hereunder.
(d) The covenants and undertakings contained in this Section
6.7 relate to matters which are of a special, unique and extraordinary character
and a violation of any of the terms of this Section 6.7 will cause irreparable
injury to Purchaser, the amount of which will be impossible to estimate or
determine and which cannot be adequately compensated. Accordingly, the remedy at
law for any breach of this Section 6.7 will be inadequate. Therefore, Purchaser
will be entitled to a temporary and permanent injunction, restraining order or
other equitable relief from any court of competent jurisdiction in the event of
any breach of this Section 6.7 without the necessity of proving actual damage.
The rights and remedies provided by this Section 6.7 are cumulative and in
addition to any other rights and remedies which Purchaser may have hereunder or
at law or in equity.
50
6.8 Publicity.
(a) None of the Purchaser or Selling Stockholders shall (and
the Selling Stockholders (other than the Financial Investors) shall cause the
Company not to) issue any press release or public announcement concerning this
Agreement or the transactions contemplated hereby without obtaining the prior
written approval of the other party hereto, which approval will not be
unreasonably withheld or delayed, unless disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which
Purchaser or its Affiliates lists securities, provided that, to the extent
required by applicable Law, the party intending to make such release shall, to
the extent legally permissible, promptly consult with the other party with
respect to the text thereof before making any such public statement or
announcement.
(b) Each of Purchaser and the Selling Stockholders agrees that
the terms of this Agreement shall not be disclosed or otherwise made available
to the public and that copies of this Agreement shall not be publicly filed or
otherwise made available to the public, except where such disclosure,
availability or filing is required by applicable Law and only to the extent
required by such Law, the terms of this Agreement are available in the public
domain without breach of this Section by such party or in order to comply with
such party's obligations under the Shareholders Agreement or other provision of
this Agreement. In the event that such disclosure, availability or filing is
required by applicable Law, each of Purchaser and the Selling Stockholders (as
applicable) agrees to use its commercially reasonable efforts to obtain
confidential treatment of this Agreement by any other Governmental Body and to
redact such terms of this Agreement the other party shall request.
6.9 Use of Name. The Selling Stockholders (other than the
Financial Investors) hereby agree that upon the Closing, the Company shall have
the sole right to the use of the name "Netcentrex" or similar names and any
service marks, trademarks, trade names, d/b/a names, fictitious names,
identifying symbols, logos, emblems, signs or insignia related thereto or
containing or comprising the foregoing, or otherwise used in the business of the
Company and the Subsidiaries, including any name or mark confusingly similar
thereto and the Marks listed on Schedule 4.13(a) (collectively, the "COMPANY
MARKS"). The Selling Stockholders (other than the Financial Investors) shall
not, and shall not permit their respective Affiliates to, use such name or any
variation or simulation thereof or any of the Company Marks. Each of the Selling
Stockholders (other than the Financial Investors) shall, and shall cause each
its Affiliates to, immediately after the Closing, cease to hold itself out as
having any affiliation with the Company or any of its Affiliates.
6.10 Related-Party Transactions with Non-Management
Affiliates. On or prior to the Closing Date, the Selling Stockholders (other
than the Financial Investors) shall cause the Company and the Subsidiaries to
(a) terminate all Contracts with any of the Selling Stockholders or their
respective Affiliates (other than (i) those Contracts set forth on Schedule 6.10
and (ii) Contracts between the Company and the Subsidiaries, Contracts between
the Company and the Subsidiaries and their respective officers and employees and
Contracts the continuation of which Purchaser has approved in writing) and (b)
deliver releases executed by such Affiliates with whom the Company has
terminated such Contracts pursuant to this Section 6.10 providing that no
51
further payments are due, or may become due, under or in respect of any such
terminated Contacts; provided that in no event shall the Selling Stockholders
(other than the Financial Investors) cause the Company or any of the
Subsidiaries to pay any fee or otherwise incur any expense or financial exposure
with respect to any such termination or release.
6.11 Fees and Expenses. No later than three Business Days
prior to the Closing Date, the Selling Stockholders (other than the Financial
Investors) shall deliver to Purchaser (i) final invoices in respect of the
Company Transaction Expenses from third-party service providers to whom payments
are required to be made by the Company or any of the Subsidiaries, and (ii) a
statement of the Company setting forth an estimate of the aggregate amount of
Company Transaction Expenses (whether or not paid as of such date) as of the
Closing Date. On the Closing Date prior to the Closing, the Selling Stockholders
(other than the Financial Investors) shall deliver to Purchaser a statement of
the Company setting forth the aggregate amount of Company Transaction Expenses
as of the Closing Date (whether or not paid as of such date). The Selling
Stockholders (other than the Financial Investors) shall cause the Company to pay
and discharge all such Company Transaction Expenses at or prior to the Closing.
All final invoices shall provide that the amounts set forth therein represent
payment in full for all fees and expenses payable by the Company in connection
with the transactions contemplated by this Agreement.
6.12 Notification of Certain Matters. The Selling Stockholders
(other than the Financial Investors) shall give notice to Purchaser and
Purchaser shall give notice to the Selling Stockholders, as promptly as
reasonably practicable upon becoming aware of (a) any fact, change, condition,
circumstance, event, occurrence or non-occurrence that has caused or is
reasonably likely to cause any representation or warranty in this Agreement made
by it to be untrue or inaccurate in any respect at any time after the date
hereof and prior to the Closing, (b) any material failure on its part to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder or (c) the institution of or the threat of institution
of any Legal Proceeding against any of the Selling Stockholders, the Company or
any of the Subsidiaries related to this Agreement or the transactions
contemplated hereby; provided that the delivery of any notice pursuant to this
Section 6.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice, or the representations or
warranties of, or the conditions to the obligations of, the parties hereto.
6.13 Option Payments. The Selling Stockholders (other than the
Financial Investors) shall cause the Company to make an offer, no later than
fifteen (15) days prior to Closing, of payment (the "OPTION PAYMENTs") to the
Option Holders holding the outstanding Company Options in respect of ordinary
shares of the Company having an exercise price of no less than (euro)6.00 per
ordinary share in an amount equal to approximately (euro)1.00 in respect of each
underlying ordinary share held by such Option Holder as indemnity in
consideration for the cancellation of such Company Options; provided, however,
that, if Purchaser so elects by written notice to the Company prior to the
Closing, the Company shall not commit or distribute such bonuses in respect of
the Carve Out Options. Subject to Section 7.1(l), the Option Payments shall be
made or the obligations incurred (which, for the purposes of clarity, shall
52
require irrevocable acceptance by such Option Holder) prior to, or concurrent
with, the Closing.
6.14 Release. Each Selling Stockholder hereby agrees to
unconditionally release and forever discharge Purchaser, its Affiliates and the
respective affiliates, officers and directors of Purchaser and its Affiliates,
at the Closing, from (a) any and all obligations or duties the Company might
have to such Selling Stockholder and (b) any and all claims of Liability,
whether legal or equitable, of every kind and nature, which such Selling
Stockholder ever had, now has or may claim against the Company; provided,
however, that this release shall exclude (i) those Liabilities of Purchaser
under this Agreement, (ii) if such Selling Stockholder is a director, officer or
employee of the Company or any Subsidiary of the Company, this release shall
exclude, to the extent applicable, (A) compensation (including bonuses), if any,
for the current pay period not yet paid, (B) reimbursement for expenses incurred
by such Selling Stockholder in the ordinary course of his or her employment
which are reimbursable under the expense reimbursement policies of the Company
or any Subsidiary and (C) accrued vacation, subject to the policies on accrual
and carryforward of the Company or any Subsidiary and (iii) any claims against
any officer or director of the Company based on fraud (but not including any
claim for which such officer or director is entitled to indemnification from the
Company or any Purchaser Indemnified Party). This Section 6.14 shall be for the
benefit of, and shall be enforceable by, the Company, Purchaser, any other
subsidiary of Purchaser, and their respective affiliates, officers and
directors.
6.15 Resignation of Directors. The Selling Stockholders (other
than the Financial Investors) shall cause each of the directors of the Company
and the Subsidiaries set forth on Schedule 6.15 to submit a letter of
resignation effective on or before the Closing Date or shall otherwise cause the
removal of such director prior to the Closing Date.
6.16 Drag Along Covenant. Purchaser, as beneficiary of (i) the
drag-along right provided for in Section 9 of the Shareholders Agreement and
(ii) the drag-along rights provided for in each Section 2 of the "contractual
agreements" entered into between the Company and each Option Holder (the
"CONTRACTUAL AGREEMENTS"), agrees to exercise such drag-along rights in
accordance with the terms of the Shareholders Agreement and the Contractual
Agreements within thirty (30) days after the date hereof with respect to all
Shares or Company Options held by Persons bound by the Shareholders Agreements
and the Contractual Agreements (the "PROMISORS"); by providing written notice
(which shall be countersigned by the Selling Stockholders as of such date) to
the requisite Promisors, which Promisors shall be identified by the Stockholder
Representative, of its intention to exercise such rights as to require the sale
of Shares to Purchaser at (but not prior to) the Closing on the terms and
subject to the conditions set forth herein, it being understood that (a) each
holder of Shares will be given the option of being treated as either a
Non-Financial Investor Stockholder or Financial Investor under this Agreement
and (b) only holders of Shares who are Investor Stockholders will be entitled to
be treated as Investor Stockholders under this Agreement. Purchaser agrees to
purchase any and all Shares which may be tendered by Persons entitled to the
tag-along rights provided by Section 10 of the Shareholders Agreement, under the
same terms and conditions as those offered to the Selling Stockholders; it being
53
understood that (a) each holder of Shares will be given the option of being
treated as either a Non-Financial Investor Stockholder or Financial Investor
under this Agreement and (b) only holders of Shares who are Investor
Stockholders will be entitled to be treated as Investor Stockholders under this
Agreement. Purchaser shall, upon acquisition of the Shares pursuant to its
exercise of the drag along rights or another Person's exercise of his or its tag
along rights, execute a deed of adherence to the Shareholders Agreement, in
accordance with Section 22 of the Shareholders Agreement.
6.17 Shares and Company Options. The Selling Stockholders
shall, and shall the Company to, use their best efforts to cause (a) all Option
Holders to exercise their Company Options or to accept the Option Payments in
consideration for the cancellation of the Company Options held by them and (b)
all Minority Stockholders to enter into this Agreement and to agree to tender
the Shares held by them at Closing.
6.18 Preemptive Right. Each Selling Stockholder waives to the
fullest extent possible the benefit of the preemptive right accruing to the
benefit of such Selling Stockholder provided for in Section 8 of the
Shareholders Agreement (the "PREEMPTIVE RIGHT") and acknowledges that the
execution and delivery of this Agreement, shall be deemed notification by and to
such Selling Stockholder as required in Section 8.2 of the Shareholders
Agreement; provided, however, that, vis-a-vis the relevant third parties
concerned by the Preemptive Right but not party to this Agreement, each Selling
Stockholder shall provide due notification of such contemplated transfer of the
Shares held by such Selling Stockholder in accordance with the terms and
conditions of Section 8.2 of the Shareholders Agreement and pursuant to the
draft letter attached hereto as Exhibit 6.18.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions precedent (any or all of which may be waived by
Purchaser in whole or in part to the extent permitted by applicable Law):
(a) (i) the representations and warranties of the Selling
Stockholders contained in Article III, the first sentence of Section 4.1
(Organization), Section 4.4 (Capitalization) and Section 4.5 (Subsidiaries)
shall be true and correct in all respects, in each case, as of the date of this
Agreement and as of the Closing (as though made on the Closing Date), and (ii)
all other representations and warranties of the Selling Stockholders contained
herein shall be true and correct as of the date of this Agreement and as of the
Closing (as though made on the Closing Date), except to the extent that the
representations and warranties referred to in this clause (ii) expressly speak
as of an earlier date (in which case such representations and warranties shall
be true and correct on and as of such earlier date), such that the aggregate of
any and all breaches of the representations and warranties referred to in this
clause (ii) are not, in the aggregate, likely to, result in a Material Adverse
Effect;
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(b) the Selling Stockholders shall have performed and complied
in all material respects with all obligations and agreements required in this
Agreement to be performed or complied with by them on or prior to the Closing
Date;
(c) there shall not have been or occurred any event, change,
occurrence or circumstance that, individually or in the aggregate with any such
events, changes, occurrences or circumstances, has had or could reasonably be
expected to have a Material Adverse Effect since the Balance Sheet Date;
(d) no Legal Proceedings (other than those set forth on
Schedule 3.5) shall have been instituted or threatened or claim or demand made
against the Selling Stockholders, the Company or any of the Subsidiaries, or
Purchaser, seeking to restrain or prohibit, or to obtain substantial damages
with respect to, the consummation of the transactions contemplated hereby, and
there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby;
(e) Purchaser shall have received a statement signed by the
Stockholder Representative in form and substance reasonably satisfactory to
Purchaser, dated the Closing Date, to the effect that each of the conditions
specified above in Sections 7.1(a)-(d) have been satisfied in all respects.
(f) (i) the Selling Stockholders, the Company or the
Subsidiaries shall have obtained or made any other consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Body required to be obtained or made by it in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby and (ii) Purchaser shall have obtained all consents, waivers and
approvals under all Antitrust Laws and those consents, waivers and approvals
referred to in Sections 3.3(c) and 4.3(c) hereof;
(g) none of Theodore Martin and Olivier Hersent shall have
repudiated any of the terms of their respective employment mandates with the
Company dated as of the date hereof;
(h) Purchaser, the Stockholder Representatives and the Escrow
Agent shall have entered into and executed the Escrow Agreement substantially in
the form of Exhibit B hereto;
(i) Purchaser shall have received the items listed in Sections
2.9 and 2.10;
(j) Purchaser shall have received (1) the audited balance
sheets of the Company and the Subsidiaries as at December 31, 2005 and the
related consolidated statements of income and cash flows of the Company and the
Subsidiaries prepared in accordance with US GAAP and (2) the audited balance
sheets of the Company and the Subsidiaries as at December 31, 2005 and the
related consolidated statements of income and cash flows of the Company and the
Subsidiaries for the year then ended prepared in accordance with GAAP (the
"AUDITED FINANCIAL STATEMENTS") and revenue and operating income, as reflected
55
in the Audited Financial Statements, shall not be less than 90% of revenue and
operating income, respectively, as reflected in the Financial Statements as at
December 31, 2005 and for the year ending on December 31, 2005; and
(k) The Company shall own all of the issued and outstanding
securities of each of its Subsidiaries (other than the Chinese Venture);
(l) All outstanding options de souscription ou d'achat
d'actions issued by the Company shall have been waived or exercised, and upon
exercise thereof the Options Holders shall enter into this Agreement; provided,
however that this condition shall be deemed satisfied (1) if Company Options
with an exercise price of (euro)6.00 per ordinary share of the Company
representing no more than 100,000 underlying ordinary shares remain outstanding
or (2) if Purchaser elects to waive the required Option Payments in respect of
the Carve Out Options and the Carve Out Options remain outstanding (the Company
Options (if any) referenced in subsection (1) and (2) above shall be
collectively referred to herein as the "ASSUMED OPTIONS"); provided, in each
case, the Assumed Options shall be subject to Contractual Agreements between the
Option Holder thereof and the Company and such Assumed Options shall not relate
to the purchase of outstanding shares of the Company's capital stock held by the
Company;
(m) Purchaser shall have received a waiver, amendment,
acknowledgement or other written instrument substantially in the form delivered
to the Stockholder Representative on the date hereof and attached hereto as
Exhibit G in respect of the scope of intellectual property rights owned by
Company or its Subsidiaries transferred to California State University pursuant
to that certain Contract No. 2000015342 made and entered into March 3, 2005;
(n) At least 96.5% of the Shares shall have been tendered or
sold to Purchaser pursuant to the exercise of the drag along rights contemplated
by Section 6.16 hereof by the Minority Stockholders and Selling Stockholders at
Closing pursuant to this Agreement (none of which shall have been repudiated
their obligations hereunder prior to Closing); and
(o) the Estimated Purchase Price Adjustment shall be less than
$24,600,000.
7.2 Conditions Precedent to Obligations of the Selling
Stockholders. The obligations of the Selling Stockholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions precedent
(any or all of which may be waived by the Selling Stockholders in whole or in
part to the extent permitted by applicable Law):
(a) the representations and warranties of Purchaser set forth
in this Agreement qualified as to materiality shall be true and correct, and
those not so qualified shall be true and correct in all material respects, in
each case, as of the date of this Agreement and as of the Closing as though made
at and as of the Closing, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
56
representations and warranties qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, on and as of such earlier date);
(b) Purchaser shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by Purchaser on or prior to the Closing Date;
(c) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby; and
(d) Purchaser shall have obtained or made any other consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Body required to be obtained or made by it in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(e) The Preemptive Rights shall not have been exercised by any
party to the Shareholders Agreement; provided, however, that such condition
shall be deemed satisfied to the extent that such exercise is effected by a
Selling Stockholder in contravention of the terms of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement shall
survive the Closing through and including the eighteen (18) month anniversary of
the Closing Date; provided, however, that the representations and warranties (a)
of the Selling Stockholders (other than the Financial Investors) set forth in
Sections 3.1 (Organization), 3.2 (Authorization), 3.4 (Ownership), 3.6
(Financial Advisors), 4.1 (Organization), 4.4 (Capitalization), 4.5
(Subsidiaries) and 4.28 (Financial Advisors), shall survive the Closing
indefinitely, (b) of the Selling Stockholders set forth in Sections 4.10 (Taxes)
and 4.15 (Employee Benefit Plans) shall survive the Closing until 90 days
following the expiration of the applicable statute of limitations with respect
to the particular matter that is the subject matter thereof and (c) of Purchaser
set forth in Sections 5.1 (Organization), 5.2 (Authorization) and 5.6 (Financial
Advisors) shall survive the Closing indefinitely (in each case, the "SURVIVAL
PERIOD"); provided, however, that any obligations under Sections 8.2(a)(i) and
8.2(b)(i) shall not terminate with respect to any Losses as to which the Person
to be indemnified shall have given notice (stating in reasonable detail the
basis of the claim for indemnification) to the indemnifying party in accordance
with Section 8.3(a) before the termination of the applicable Survival Period.
8.2 Indemnification.
(a) Subject to Sections 8.1, 8.4 and 8.6 hereof, the Selling
Stockholders (other than the Investor Stockholders and the Financial Investors)
hereby agree, jointly and severally, to indemnify and hold Purchaser, the
57
Company, and their respective directors, officers, employees, Affiliates,
stockholders, agents, attorneys, representatives, successors and assigns
(collectively, the "PURCHASER INDEMNIFIED PARTIES") harmless from and against,
and pay to the applicable Purchaser Indemnified Parties the amount of, any and
all losses, liabilities, claims, obligations, deficiencies, demands, judgments,
damages (including incidental and consequential damages), interest, fines,
penalties, claims, suits, actions, causes of action, assessments, awards, costs
and expenses (including costs of investigation and defense and attorneys' and
other professionals' fees), actually incurred, whether or not involving a third
party claim (individually, a "LOSS" and, collectively, "LOSSES"), but solely
from the amounts remaining from the Indemnity Escrow Amount held by the Escrow
Agent (subject to the immediately following sentence and to the terms of the
Escrow Agreement):
(i) based upon, attributable to or resulting from the failure
of any of the representations or warranties made by the Selling
Stockholders in this Agreement (other than in Article III) or in any
Selling Stockholder Document or Company Document to be true and correct
in all respects at and as of the date hereof and at and as of the
Closing Date;
(ii) based upon, attributable to or resulting from the failure
of any of the representations and warranties made by each Selling
Stockholder in Article III to be true and correct in all respects as of
the date hereof and at and as of the Closing Date;
(iii) based upon, attributable to or resulting from the breach
of any covenant or other agreement on the part of the Selling
Stockholders under this Agreement;
(iv) arising from or related to any Indebtedness of the
Company and the Subsidiaries as of the Closing Date not otherwise
included in calculation of the decrease of the Purchase Price required
by Section 2.2(i) hereof;
(v) arising from or related to any Company Transaction
Expenses incurred prior to the Closing Date not otherwise included in
calculation of the decrease of the Purchase Price required by Section
2.2(ii) hereof;
(vi) arising from or related to any Change in Control Payments
not otherwise included in calculation of the decrease of the Purchase
Price required by Section 2.2(iv) hereof;
(vii) costs and Liabilities incurred by the Company and the
Subsidiaries in connection with, or associated with, any Cash
Extraction, to the extent not reflected in the Included Liabilities;
(viii) based upon, attributable to or resulting from the
contemplated public offering of shares of the Company prior to the
Closing Date to the extent not reflected in the Included Liabilities;
58
(ix) arising from or related to any fees, commissions, or like
payments by any Person having acted or claiming to have acted, directly
or indirectly, as a broker, finder or financial advisor for the Selling
Stockholders or the Company or the Subsidiaries in connection with the
transactions contemplated by this Agreement;
(x) costs and Liabilities incurred by the Company, Purchaser
or their Affiliates in connection with the cancellation or exercise of
the Assumed Options (including, without limitation, Taxes and social
contribution costs) in excess of the Option Holdback; and
(xi) costs and Liabilities incurred by the Company, Purchaser
or their Affiliates in connection with any and all litigation or claims
brought by, or on behalf of shareholders of the Company, related to the
transactions contemplated by this Agreement or related to any period
prior to Closing (other than as a result of, or arising out of,
Purchaser's breach of this Agreement).
Notwithstanding the foregoing, each of the Selling
Stockholders, other than the Investor Stockholders and the Financial Investors,
shall be severally (pro rata in accordance with the Shares to be sold by such
Selling Stockholder hereunder as compared with the total number of Shares to be
sold hereunder) personally liable for (a) any amount of Losses in excess of the
balance of the Indemnity Escrow Amount being held by the Escrow Agent in
accordance with the terms hereof and (b) any amount of Losses related to the
failure to be true and correct of any of the representations and warranties of
such Selling Stockholder set forth in Section 3.1 (Organization), 3.2
(Authorization), 3.4 (Ownership), and 3.6 (Financial Advisors) (it being
understood that, in the case of this clause (b), only such Selling Stockholder's
pro rata share of the then Indemnity Escrow Amount shall be available to satisfy
claims with respect to such Selling Stockholder's breach of such representations
and warranties).
The representations and warranties of Financial Investors (for
the avoidance of doubt, only those contained in Article III hereof) shall
survive the Closing until the third anniversary of the Closing (such period
shall be the "SURVIVAL PERIOD" applicable to the representations and warranties
made by the Financial Investors). Each of the Financial Investors, shall be
severally (pro rata in accordance with the Shares to be sold by such Financial
Investors hereunder as compared with the total number of Shares to be sold
hereunder) personally liable for any amount of Losses related to the failure to
be true and correct of any of the representations and warranties of such
Financial Investor set forth in Article III.
(b) Subject to Sections 8.1 and 8.4, Purchaser hereby agrees
to indemnify and hold the Selling Stockholders and their respective Affiliates,
stockholders, agents, attorneys, representatives, successors and permitted
assigns (collectively, the "SELLING STOCKHOLDER INDEMNIFIED PARTIES") harmless
from and against, and pay to the applicable Selling Stockholder Indemnified
Parties the amount of any and all Losses:
(i) based upon, attributable to or resulting from the failure
of any of the representations or warranties made by Purchaser in this
59
Agreement or in any Purchaser Document to be true and correct in all
respects at the date hereof and as of the Closing Date; and
(ii) based upon, attributable to or resulting from the breach
of any covenant or other agreement on the part of Purchaser under this
Agreement or any Purchaser Document.
(c) The right to indemnification or any other remedy based on
representations, warranties, covenants and agreements in this Agreement, shall
not be affected by any investigation conducted at any time, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of, or compliance with, any such representation,
warranty, covenant or agreement. The waiver of any condition based on the
accuracy of any such representation or warranty, or on the performance of or
compliance with any such covenant or agreements, will not affect the right to
indemnification or any other remedy based on such representations, warranties,
covenants and agreements. Until the Closing Date, Purchaser shall notify the
Stockholder Representative of breaches of any of the representations and
warranties made by the Selling Stockholders in Article IV of this Agreement in
respect of any developments between the date hereof and the Closing Date of
which Purchaser becomes aware and which relate solely to matters first arising
or occurring between the date hereof and the Closing Date that cause a
representation or warranty which is true and correct as of the date hereof not
to be correct when made as of the Closing Date.
8.3 Indemnification Procedures.
(a) A claim for indemnification for any matter not involving a
third party claim may be asserted by notice to the party from whom
indemnification is sought; provided, however, that failure to so notify the
indemnifying party shall not preclude the indemnified party from any
indemnification which it may claim in accordance with this Article VIII in the
absence of prejudice for the Company, its Subsidiaries and the Selling
Stockholders.
(b) In the event that any Legal Proceedings shall be
instituted or that any claim or demand shall be asserted by any third party in
respect of which indemnification may be sought under Section 8.2 hereof
(regardless of the limitations set forth in Section 8.4) (a "THIRD PARTY
CLAIM"), the indemnified party shall promptly cause written notice of the
assertion of any Third Party Claim of which it has knowledge which is covered by
this indemnity to be forwarded to the indemnifying party. The failure of the
indemnified party to give reasonably prompt notice of any Third Party Claim
shall not release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such failure.
Subject to the provisions of this Section 8.3, the indemnifying party shall have
the right, at its sole expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the indemnified party, and to defend
against, negotiate, settle or otherwise deal with any Third Party Claim which
relates to any Losses indemnified against hereunder. If the indemnifying party
elects to defend against, negotiate, settle or otherwise deal with any Third
Party Claim which relates to any Losses indemnified by it hereunder, it shall
60
within five days of the indemnified party's written notice of the assertion of
such Third Party Claim (or sooner, if the nature of the Third Party Claim so
requires) notify the indemnified party of its intent to do so; provided, that
the indemnifying party must conduct the defense of the Third Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard. If the indemnifying party elects not to defend against, negotiate,
settle or otherwise deal with any Third Party Claim which relates to any Losses
indemnified against hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to indemnify the
indemnified party for such Losses under this Agreement, the indemnified party
may defend against, negotiate, settle or otherwise deal with such Third Party
Claim. If the indemnified party defends any Third Party Claim, then the
indemnifying party shall reimburse the indemnified party for the expenses of
defending such Third Party Claim upon submission of periodic bills. If the
indemnifying party shall assume the defense of any Third Party Claim, the
indemnified party may participate, at his or its own expense, in the defense of
such Third Party Claim; provided, however, that such indemnified party shall be
entitled to participate in any such defense with separate counsel at the expense
of the indemnifying party if (i) so requested by the indemnifying party to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a conflict or potential conflict exists between the indemnified party and
the indemnifying party that would make such separate representation advisable;
and provided, further, that the indemnifying party shall not be required to pay
for more than one such counsel for all indemnified parties in connection with
any Third Party Claim. The parties hereto agree to provide reasonable access to
the other to such documents and information as may be reasonably requested in
connection with the defense, negotiation or settlement of any such Third Party
Claim. Notwithstanding anything in this Section 8.3 to the contrary, neither the
indemnifying party nor the indemnified party shall, without the written consent
of the other party, settle or compromise any Third Party Claim or permit a
default or consent to entry of any judgment unless the claimant or claimants and
such party provide to such other party an unqualified release from all liability
in respect of the Third Party Claim. If the indemnifying party makes any payment
on any Third Party Claim, the indemnifying party shall be subrogated, to the
extent of such payment, to all rights and remedies of the indemnified party to
any insurance benefits or other claims of the indemnified party with respect to
such Third Party Claim.
(c) After any final decision, judgment or award shall have
been rendered by a Governmental Body of competent jurisdiction and the
expiration of the time in which to appeal therefrom, or a settlement shall have
been consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement, in each case with respect to an Third
Party Claim hereunder, the indemnified party shall forward to the indemnifying
party notice of any sums due and owing by the indemnifying party pursuant to
this Agreement with respect to such matter and the indemnifying party shall pay
all of such remaining sums so due and owing to the indemnified party, subject to
Section 8.5, by wire transfer of immediately available funds within five
Business Days after the date of such notice. In addition, Purchaser shall be
entitled to offset amounts owed to the Purchaser Indemnified Parties under this
Article VIII (for purposes of clarity, amounts shall be deemed owed to any
Purchaser Indemnified Party if a claim (other than a Third Party Claim) made by
any Purchaser Indemnified Party under Section 8.3(a) is not contested, or if
such claim is contested or relates to a Third Party Claim, upon final decision,
judgment or award being rendered by a Governmental Body of competent
61
jurisdiction and the expiration of the time in which to appeal therefrom, upon
settlement, or upon entering into a mutually binding agreement between the
indemnified party and the indemnifying party), other than amounts owed by the
Financial Investors, against its obligation to make payments under Section 2.5,
2.6 or 2.7 hereof, in the event that, and to the extent that, such amounts,
together with the amount of the then Unresolved Claims, exceed the then balance
of the Indemnity Escrow Amount being held by the Escrow Agent.
8.4 Limitations on Indemnification.
(a) An indemnifying party shall not have any liability under
Section 8.2(a)(i) or Section 8.2(b)(i), unless the aggregate amount of Losses
incurred by the indemnified parties and indemnifiable thereunder based upon,
attributable to or resulting from the failure of any of the representations or
warranties to be true and correct exceeds $600,000 (the "BASKET") and, in such
event, the indemnifying party shall be required to pay the entire amount of such
all Losses in excess of the Basket; provided that the Basket limitation shall
not apply to (i) Losses related to the failure to be true and correct of any of
the representations and warranties set forth in Section 3.1 (Organization), 3.2
(Authorization), 3.4 (Ownership), 3.6 (Financial Advisors), 4.1 (Organization),
4.4 (Capitalization), 4.5 (Subsidiaries), 4.28 (Financial Advisors), 5.1
(Organization), 5.2 (Authorization) and 5.6 (Financial Advisors) and (ii) Losses
relating to the failure to be true and correct of any of the representations and
warranties made by the Financial Investors.
(b) Subject to the following sentence, neither the Selling
Stockholders nor Purchaser shall be required to indemnify any Person under
Section 8.2(a)(i) or 8.2(b)(i) for an aggregate amount of Losses exceeding
$24,600,000 (the "CAP") in connection with Losses related to the failure to be
true and correct of any of the representations or warranties of the Selling
Stockholders or Purchaser in Articles III, IV and V, respectively; provided that
(i) there shall be no Cap with respect to Losses related to the failure to be
true and correct of any of the representations or warranties contained in
Sections 3.1 (Organization), 3.2 (Authorization), 3.4 (Ownership), 3.6
(Financial Advisors), 4.1 (Organization), 4.4 (Capitalization), 4.5
(Subsidiaries), 4.7 (Ownership), and 4.28 (Financial Advisors), and 5.1
(Organization), 5.2 (Authorization) and 5.6 (Financial Advisors) of this
Agreement and (ii) to the extent that the Losses related to the failure to be
true and correct of any representation of warranty contained in Section 4.13
(Intellectual Property) exceed the Cap, the Cap, solely with respect to such
Losses, shall be increased to $41,000,000. The Liability of each Financial
Investor under this Article VIII may not exceed the amount of the Purchase Price
paid by Purchaser to such Financial Investor.
(c) Notwithstanding the foregoing, the Selling Stockholders
(other than the Financial Investors) shall not be obliged to indemnify with
respect to any single claim (or a series of related claims resulting from a
similar defect or cause) under Section 8.2 if the entire amount of Losses
relating to such claim (or series of related claims) is less than twenty
thousand dollars ($20,000) (net of VAT, if applicable).
(d) Solely for purposes of determining the Losses hereunder in
respect of any failure of any representations or warranties to be true and
correct or the breach of any covenants and agreements, any materiality or
62
Material Adverse Effect qualifications in the representations, warranties,
covenants and agreements shall be disregarded.
(e) From and after the Closing, except in the event of fraud
(in which case the parties shall be entitled to exercise all of their rights,
and seek all damages available to them, under law or equity) and in respect of
Section 6.7 hereof, the sole and exclusive remedy for any breach or failure to
be true and correct, or alleged breach or failure to be true and correct, of any
representation or warranty or any covenant or agreement in this Agreement, shall
be indemnification in accordance with this Article VIII; provided, however, that
nothing contained herein shall limit in any manner any and all rights available
to Purchaser in the event that any Selling Stockholder shall not have good title
to its Shares, have the requisite authority to become a party to this Agreement,
perform its obligations hereunder or sell the Shares held by such Selling
Stockholder to Purchaser pursuant hereto free and clear or Liens.
Notwithstanding the foregoing, this Section 8.4(e) shall not operate to
interfere with or impede the operation of the provisions of Article IX or
Article II providing for the (i) resolution of certain disputes relating to the
Purchase Price between the parties and/or by an Arbiter and (ii) limit the
rights of the parties to seek equitable remedies (including specific performance
or injunctive relief).
(f) The Selling Stockholders shall have no right of
contribution or other recourse against the Company or the Subsidiaries or their
respective directors, officers, employees, Affiliates, agents, attorneys,
representatives, assigns or successors for any Third Party Claims asserted by
Purchaser Indemnified Parties, it being acknowledged and agreed that the
covenants and agreements of the Company are solely for the benefit of the
Purchaser Indemnified Parties.
8.5 Calculation of Claim.
(a) The amount of the indemnifying party's Liability under
this Article VIII shall be net of (i) any amounts recovered by the indemnified
party under applicable insurance policies and other savings that have been
realized by the indemnified party and (ii) any reserves specifically applicable
to, and in respect of, such Claim to the extent taken into account in connection
with the calculation of Closing Working Capital. If an indemnifying party's
obligation under this Article VIII arises in respect of an adjustment which
makes allowable to the indemnified party, any of its Affiliates or, in the case
of Purchaser, effective upon the Closing, the Company or any Subsidiary any
deduction, amortization, exclusion from income or other allowance (a "TAX
BENEFIT") which would not, but for such adjustment, be allowable, then any
payment by the indemnifying party to the indemnified party shall be an amount
equal to (x) the amount otherwise due but for this subsection (a), minus (y) the
present value of the Tax Benefit multiplied by the maximum corporate Tax rate in
effect at the time the relevant adjustment is made or, in the case of a credit,
by 100 percent. The present value referred to in the preceding sentence shall be
determined using a discount rate equal to the mid-term applicable rate in effect
at the time the relevant adjustment is made and assuming that the Tax Benefit
will be used at the earliest date or dates allowable by applicable Law.
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(b) Notwithstanding anything to the contrary elsewhere in this
Agreement, no party shall, in any event, be liable to any other Person for any
consequential, incidental, indirect, special or punitive damages of such other
Person, including loss of future revenue, income or profits, diminution of value
or loss of business reputation or opportunity relating to the breach or alleged
breach hereof; provided, that the foregoing shall not be construed to preclude
recovery by the indemnified party in respect of Losses directly incurred from
Third Party Claims. For purposes of clarity, it is understood that Purchaser
shall not be entitled to recover amounts under this Article VIII after applying
to the amount of any such loss actually incurred a multiple representing the
multiple used to value the Company and the Subsidiaries in connection with the
transactions contemplated hereby. For illustrative purposes, if Purchaser valued
the Company and the Subsidiaries for purposes of the transactions contemplated
by this Agreement by multiplying revenues of the Company and the Subsidiaries as
of a specified measurement date by ten (10) and, after the Closing, Purchaser
suffers an actual loss of $100 which results in a direct reduction to the
revenues as of such measurement date by $100, based solely on such hypothetical
fact pattern, Purchaser would be entitled to recover $100 rather than $1,000
(the amount by which the proposed valuation would have been decreased as a
result of such revenue reduction, $100 multiplied by $1,000).
(c) The Selling Stockholders and Purchaser shall each take
commercially reasonable actions to mitigate their damages.
(d) No Liability (whether in contract, tort or otherwise)
shall attach to the Selling Stockholders in respect of any Claim or under
Section 8.2, to the extent that the Claim occurs solely as a result of, or the
portion of the Claim that is increased solely as a result of:
(i) any willful misconduct, gross negligence or bad faith of
the Company or Purchaser in respect of such Claim with respect to any
period following the Closing Date;
(ii) any change in the accounting principles or practices of
Purchaser introduced or having effect after the Closing Date;
(iii) any increase in the rates of Taxation made after the
date hereof; or
(iv) any change in law or regulation or in its interpretation
or administration by relevant local courts, by the Tax authorities or
by any other monetary or regulatory authority (whether or not having
the force of law) after the date hereof; or
(v) any Tax solely resulting from timing difference in the
corresponding charge (reintegration of depreciation, reintegration of
provisions) will only be taken into account to the extent of the costs
of related penalties, late payment interests or fines.
8.6 Selling Stockholders' Information. In the event that the
Selling Stockholders shall have paid to any Purchaser Indemnified Party an
amount in respect of a Claim and subsequent to the making of such payment, such
Purchaser Indemnified Party recovers (it being agreed that such Purchaser
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Indemnified Party shall use commercially reasonable efforts to recover any such
amounts to which it becomes entitled to recover in respect of such Claim) from
some third party (including insurance proceeds) a sum in respect of such
original Claim, then Purchaser shall promptly upon receipt of the sum so
recovered from a third party, distribute such sum to the Selling Stockholders,
provided that the amount so distributed shall, in no event, exceed the amount
originally paid by the Selling Stockholders in respect of such original Claim.
8.7 Indemnity Escrow. On the Closing Date, Purchaser shall, on
behalf of the Selling Stockholders other than the Investor Stockholders and the
Financial Investors, pay to a financial institution that agrees to act as escrow
agent (the "ESCROW AGENT") under the Escrow Agreement attached hereto as Exhibit
B, with such changes as may be reasonably requested by the Escrow Agent (the
"ESCROW AGREEMENT"), at the Closing in immediately available funds, to the
account designated by the Indemnity Escrow Agent, an amount equal to $24,600,000
(the "INDEMNITY ESCROW AMOUNT"), in accordance with the terms of this Agreement
and the Escrow Agreement, which will be executed at the Closing, by and among
Purchaser, the Stockholder Representative, on behalf of the Selling Stockholders
other than the Investor Stockholders and the Financial Investors, and the Escrow
Agent (the "ESCROW AGREEMENT"). Any payment the Selling Stockholders (other than
the Investor Stockholders and the Financial Investors) are obligated to make to
any Purchaser Indemnified Parties pursuant to this Article VIII shall be paid
first, to the extent there are sufficient funds in the Escrow Account, by
release of funds to the Purchaser Indemnified Parties from the Escrow Account by
the Escrow Agent in accordance with the terms of the Escrow Agreement and shall
accordingly reduce the Indemnity Escrow Amount and, second, to the extent the
Indemnity Escrow Amount is insufficient to pay any remaining sums due, then the
Selling Stockholders (other than the Investor Stockholders and the Financial
Investors) shall be required to pay (on a pro rata basis in accordance with
their ownership of Shares immediately prior to Closing) all of such additional
sums due and owing to the Purchaser Indemnified Parties by wire transfer of
immediately available funds within five Business Days after the date of such
notice. On the January 8, 2007, if the sum of (a) the amount of the Escrow
Amount utilized for any indemnification claim and (b) the amount of claims for
indemnification under this Article VIII asserted prior thereto but not yet
resolved (at any time, "UNRESOLVED CLAIMS") is less than $3,000,000, the Escrow
Agent shall release the excess of (1) Indemnity Escrow Amount (to the extent not
utilized to pay Purchaser for any indemnification claim) over (2) $19,200,000,
to the Stockholder Representative, on behalf of the Selling Stockholders other
than the Investor Stockholders and the Financial Investors. On the eighteen (18)
month anniversary of the Closing Date, the Indemnity Escrow Agent shall release
the Indemnity Escrow Amount (to the extent not utilized to pay Purchaser for any
indemnification claim) to the Stockholder Representative, , on behalf of the
Selling Stockholders other than the Investor Stockholders and the Financial
Investors, except that the Escrow Agent shall retain an amount (up to the total
amount then held by the Escrow Agent) equal to the amount of then Unresolved
Claims. The Indemnity Escrow Amount retained for Unresolved Claims shall be
released by the Escrow Agent (to the extent not utilized to pay Purchaser for
any such claims resolved in favor of Purchaser) upon their resolution in
accordance with this Article VIII and the terms of the Escrow Agreement.
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8.8 Tax Matters.
(a) Transfer Taxes. Purchaser shall be liable for and shall
pay all sales, use, stamp, documentary, filing, recording, transfer or similar
fees or taxes or governmental charges as levied by any Governmental Body
including any interest and penalties) in connection with the transactions
contemplated by this Agreement.
(b) Disputes. Any dispute as to any matter covered hereby
shall be resolved by an independent accounting firm mutually acceptable to the
Stockholder Representative and Purchaser. The fees and expenses of such
accounting firm shall be borne equally by the Selling Stockholders other than
the Investor Stockholders and the Financial Investors, on the one hand, and
Purchaser on the other. If any dispute with respect to a Tax Return is not
resolved prior to the due date of such Tax Return, such Tax Return shall be
filed in the manner which the party responsible for preparing such Tax Return
deems correct.
(c) Tax Treatment of Indemnity Payments. The Selling
Stockholders and the Purchaser agree to treat any indemnity payment made
pursuant to this Article VIII as an adjustment to the Purchase Price for all
income tax purposes.
ARTICLE IX
TERMINATION
9.1 Termination of Agreement. This Agreement may be terminated
prior to the Closing as follows:
(a) At the election of the Stockholder Representative or
Purchaser on or after July 1, 2006 (such date, as it may be extended under
Section 9.2(a), the "TERMINATION DATE"), if the Closing shall not have occurred
by the close of business on such date, provided that the terminating party is
not in material default of any of its obligations hereunder;
(b) by mutual written consent of the Stockholder
Representative and Purchaser;
(c) by written notice from Purchaser to the Stockholder
Representative that there has been an event, change, occurrence or circumstance,
individually or in the aggregate with any such events, changes, occurrences or
circumstances that has had or would reasonable be expected to have a Material
Adverse Effect;
(d) by the Stockholder Representative or Purchaser if there
shall be in effect a final nonappealable Order of a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; it being agreed that,
subject to the last sentence of Section 6.4(b) hereof, the parties hereto shall
promptly appeal any adverse determination which is not nonappealable (and pursue
such appeal with reasonable diligence); provided, however, that the right to
terminate this Agreement under this Section 9.1(d) shall not be available to a
66
party if such Order was primarily due to the failure of such party to perform
any of its obligations under this Agreement;
(e) by Purchaser if any Selling Stockholder or the Company
shall have breached or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, or if any representation or
warranty of any Selling Stockholder or the Company shall have become untrue, in
either case such that the conditions set forth in Sections 7.1(a) or 7.1(b)
would not be satisfied and such breach is incapable of being cured or, if
capable of being cured, shall not have been cured within ten (10) days following
receipt by the Stockholder Representative of notice of such breach from the
Purchaser; or
(f) by the Stockholder Representative if Purchaser shall have
breached or failed to perform any of its representations, warranties, covenants
or agreements set forth in this Agreement, or if any representation or warranty
of Purchaser shall have become untrue, in either case such that the conditions
set forth in Sections 7.2(a) or 7.2(b) would not be satisfied and such breach is
incapable of being cured or, if capable of being cured, shall not have been
cured within ten (10) days following receipt by Purchaser of notice of such
breach from the Stockholder Representative.
9.2 Procedure Upon Termination. In the event of termination
and abandonment by Purchaser or the Stockholder Representative, or both,
pursuant to Section 9.1, written notice thereof shall forthwith be given to the
other party or parties, and this Agreement shall terminate, and the purchase of
the Shares hereunder shall be abandoned, without further action by Purchaser,
the Company or the Selling Stockholders.
9.3 Effect of Termination. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to
Purchaser, any Selling Stockholder or the Company; provided, however, that the
obligations of the parties set forth in this Section 9.3, Article X and Section
6.8 hereof shall survive any such termination and shall be enforceable
hereunder; provided further, however, that nothing in this Section 9.3 shall
relieve Purchaser, any Selling Stockholder or the Company of any liability for a
breach of the covenants in this Agreement prior to the effective date of
termination.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise provided in this Agreement,
the Selling Stockholders and Purchaser shall each bear its own expenses incurred
in connection with the negotiation and execution of this Agreement and each
other agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby, it being
understood that in no event shall the Company bear any of such costs and
expenses.
10.2 Stockholder Representative.
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(a) Each Selling Stockholder (other than the Financial
Investors) hereby irrevocably appoints Theodore Martin (the "STOCKHOLDER
REPRESENTATIVE") as such Selling Stockholder's representative, attorney-in-fact
and agent, with full power of substitution to act in the name, place and stead
of such Selling Stockholder with respect to the transfer of such Selling
Stockholder's Shares to Purchaser in accordance with the terms and provisions of
this Agreement and the execution and delivery of the Escrow Agreement and to act
on behalf of such Selling Stockholder in any amendment of or litigation or
arbitration involving this Agreement or the Escrow Agreement and to do or
refrain from doing all such further acts and things, and to execute all such
documents, as such Stockholder Representative shall deem necessary or
appropriate in conjunction with any of the transactions contemplated by this
Agreement, including the power:
(i) to take all action necessary or desirable in connection
with the waiver of any condition to the obligations of the Selling
Stockholders to consummate the transactions contemplated by this
Agreement;
(ii) to negotiate, execute and deliver all ancillary
agreements, statements, certificates, statements, notices, approvals,
extensions, waivers, undertakings, amendments and other documents
required or permitted to be given in connection with the consummation
of the transactions contemplated by this Agreement (it being understood
that such Selling Stockholder shall execute and deliver any such
documents which the Stockholder Representative agrees to execute);
(iii) to terminate this Agreement if the Selling Stockholders
are entitled to do so;
(iv) to give and receive all notices and communications to be
given or received under this Agreement and to receive service of
process in connection with the any claims under this Agreement,
including service of process in connection with arbitration; and
(v) to take all actions which under this Agreement may be
taken by the Selling Stockholders and to do or refrain from doing any
further act or deed on behalf of the Selling Stockholder which the
Stockholder Representative deems necessary or appropriate in his sole
discretion relating to the subject matter of this Agreement as fully
and completely as such Selling Stockholder could do if personally
present.
(b) The Financial Investors hereby irrevocably appoints the
Stockholder Representative as such Financial Investor's representative,
attorney-in-fact and agent, with full power of substitution to act in the name,
place and stead of such Financial Investor with respect to Sections 2.3, 2.4 and
9.1.
(c) If Theodore Martin becomes unable to serve as Stockholder
Representative, Olivier Hersent, or such other Person or Persons as may be
designated by a majority of the Selling Stockholders, shall succeed as the
Stockholder Representative.
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10.3 Specific Performance. The Selling Stockholders
acknowledge and agree that a breach of this Agreement would cause irreparable
damage to Purchaser and that Purchaser will not have an adequate remedy at law.
Therefore, the obligations of the Selling Stockholders under this Agreement,
including the Selling Stockholders' obligation to sell the Shares to Purchaser,
shall be enforceable by a decree of specific performance issued by any court of
competent jurisdiction, and appropriate injunctive relief may be applied for and
granted in connection therewith. Such remedies shall, however, be cumulative and
not exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
10.4 Submission to Jurisdiction; Consent to Service of
Process. The parties hereto hereby irrevocably submit to the exclusive
jurisdiction of any court located within the ressort de la Cour d'Appel de Paris
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or any suit, action proceeding related
thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.
10.5 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto), the Selling Stockholder Documents
and the Purchaser Documents represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and,
subject to Section 10.12, can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of France applicable to contracts made and
performed in such state.
10.7 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
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facsimile (with written confirmation of transmission) or (iii) one Business Day
following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to any Selling Stockholder, to:
Theodore Martin Martin
9, rue de Chanzy
75011 Paris
France
With a copy to:
Xenia Legendre
Skadden, Arps, Slate, Meagher & Flom LLP
68, rue du Faubourg Saint Honore
75008 Paris
Paris
and
CDC ENTREPRISES INNOVATION
Valery HUOT
Tour Maine Montparnasse - 33, Avenue du Maine - B.P. 180 -
75755 Paris Cedex 15 France
INNOVACOM
Denis CHAMPENOIS
23 rue royale
75008 Paris France
with a copy to:
Fabrice PATRIZIO Orrick - RAMBAUD MARTEL 25, Boulevard de
l'amiral bruix 75782 paris cedex 16 France
70
If to Purchaser, to:
c/o Comverse Technology, Inc.
909 Third Avenue
New York, NY 10022
United States of America
Attn: Paul Robinson, Vice President of Legal and General Counsel
Facsimile: (212) 652-6725
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile: (212) 310-8007
Attention: David Zeltner, Esq.
10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any law or
public policy, all other terms or provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
10.9 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement shall create or be
deemed to create any third party beneficiary rights in any person or entity not
a party to this Agreement except as provided below. No assignment of this
Agreement or of any rights or obligations hereunder may be made by either the
Selling Stockholders or Purchaser (by operation of law or otherwise) without the
prior written consent of the other parties hereto and any attempted assignment
without the required consents shall be void; provided, however, that Purchaser
may assign this Agreement and any or all rights or obligations hereunder
(including Purchaser's rights to purchase the Shares and Purchaser's rights to
seek indemnification hereunder) to any Affiliate of Purchaser, provided,
however, that Purchaser shall provide written notice to the Stockholder
Representative of any such assignment prior to any such assignment being made
and an undertaking in such notice to remain jointly liable for the performance
by the assignee of all obligations undertaken by the Purchaser under this
Agreement. Upon any such permitted assignment, the references in this Agreement
to Purchaser shall also apply to any such assignee unless the context otherwise
requires.
10.10 Non-Recourse. No past, present or future director,
officer, employee, incorporator, member, partner, stockholder, Affiliate, agent,
attorney or representative of Purchaser or the Selling Stockholders shall have
any liability for any obligations or liabilities of Purchaser or the Selling
Stockholders, as the case may be, under this Agreement or for any claim based
on, in respect of, or by reason of, the transactions contemplated hereby.
71
10.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
10.12 Additional Parties. After the date hereof, one or more
Minority Stockholders who are not parties to this Agreement as of such date may
be added as "Selling Stockholders" party hereto upon the execution by such
Minority Stockholder of a counterpart of the Agreement and delivery thereof to
Purchaser and the execution by Purchaser and delivery thereof to such Minority
Stockholder without the consent or vote of any of the Selling Stockholders. In
addition, Minority Stockholders may become "Selling Stockholders" party hereto
without the consent or vote of any of the Selling Stockholders as a result of
the exercise of the drag along rights as contemplated in Section 6.16 hereof.
** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK**
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
COMVERSE, INC.
By: /s/ David Kreinberg
-------------------------------
Name: David Kreinberg
Title: Authorized Signatory
SELLING STOCKHOLDERS:
Theodore Martin-Martin Bernard Jannes
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin
Attorney-in-Fact
Olivier Hersent Fabio Ferrari
/s/ Olivier Hersent /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin
Attorney-in-Fact
Herve Goguely Eric Draghi
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
Eric Hassid Dominique Lanfranchi
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
73
Nicolas Jordan Francois Duliege
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
For: Montisambert Jean-Marie Pironneau
(formerly Chausson Finance)
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
Guillaume Widmer Alain Fernando-Santana
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
Boris Dezier Christophe Chausson
/s/ Theodore Martin-Martin /s/ Theodore Martin-Martin
- ----------------------------------- -----------------------------------
Theodore Martin-Martin Theodore Martin-Martin
Attorney-in-Fact Attorney-in-Fact
For: Technocom Ventures For: FCPR CDC Innovation 2000
By: /s/ By: /s/ C. Pardex
------------------------------- -------------------------------
Name: Name: C. Pardex
Title: Managing Director Title: Managing Director
For: Intel Atlantic For: V1 FCPR
(formerly Viventures FCPR)
By: /s/ Diane Labrador By:
------------------------------- -------------------------------
Name: Diane Labrador Name:
Title: Assistant Treasurer Title:
74
For: Crescendo World Fund For: Innovacom3
By: By: /s/
------------------------------- -------------------------------
Name: Name:
Title: Title:
For: Eagle Ventures Fund For: CDC Entreprises Innovation
By: By: /s/ C. Pardex
------------------------------- -------------------------------
Name: Name: C. Pardex
Title: Title: Managing Director
75