ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DOCUCORP INTERNATIONAL, INC.,
AS BUYER
and
NEWBRIDGE CORPORATION
AS SELLER
DATED: SEPTEMBER 24, 2004
TABLE OF CONTENTS
PAGE
ARTICLE 1 SALE AND PURCHASE.............................................1
1.1 Sale and Purchase of Assets......................................1
1.2 Payment or Assumption of Liabilities.............................1
1.3 Purchase Price...................................................2
1.4 Holdback Amount..................................................2
1.5 Closing..........................................................3
1.6 Allocation of Purchase Price; Section 338(h)(10) Election........3
1.7 Public Announcements.............................................4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER......................4
2.1 Organization and Good Standing...................................4
2.2 Ownership........................................................4
2.3 No Ownership Interests...........................................4
2.4 Authority........................................................4
2.5 No Conflicts.....................................................5
2.6 Consents and Approvals...........................................5
2.7 Title to Properties; Condition...................................5
2.8 Financial Statements.............................................6
2.9 Customary Business Practice......................................6
2.10 Absence of Certain Changes or Events.............................7
2.11 Absence of Defaults..............................................9
2.12 Compliance with Laws.............................................9
2.13 Tax Returns and Reports..........................................9
2.14 Litigation......................................................10
2.15 Customers and Suppliers.........................................10
2.16 Accounts Receivable and Accounts Payable........................11
2.17 Inventories.....................................................11
2.18 ERISA and Related Matters.......................................11
2.19 Contracts and Commitments.......................................13
2.20 Patents, Trademarks and Copyrights..............................14
2.21 Insurance.......................................................14
2.22 Employees.......................................................14
2.23 Labor Agreements; Disputes......................................14
2.24 Regulatory Filings..............................................15
2.25 Environmental and Health and Safety Matters.....................15
2.26 Brokers/Advisors................................................17
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TABLE OF CONTENTS
(continued)
2.27 Disclosure......................................................17
2.28 Transactions with Affiliates....................................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER......................18
3.1 Organization and Good Standing..................................18
3.2 Authority of Buyer..............................................18
3.3 No Conflicts....................................................18
3.4 Consents and Approvals..........................................19
3.5 Brokers.........................................................19
3.6 Litigation......................................................19
ARTICLE 4 COVENANTS OF SELLER..........................................19
4.1 Approvals.......................................................19
4.2 Compliance with Legal Requirements..............................19
4.3 Change of Corporate Name........................................20
4.4 Confidentiality.................................................20
4.5 Required Financial Statements...................................20
4.6 Payments Received Post-Closing..................................20
4.7 Cooperation and Support.........................................20
ARTICLE 5 COVENANTS OF BUYER...........................................21
5.1 Approvals.......................................................21
5.2 Compliance with Legal Requirements..............................21
5.3 Books and Records...............................................21
5.4 Payment of Assumed Liabilities..................................21
5.5 Indemnification for Guarantees..................................21
ARTICLE 6 DELIVERIES TO BUYER AT CLOSING...............................21
6.1 Consents, Authorizations, Etc...................................21
6.2 Corporate Action by Seller......................................22
6.3 Employment and Noncompetition Agreements........................22
6.4 Instruments of Conveyance.......................................22
6.5 Physical Possession and Control.................................22
6.6 Specific Assignments............................................22
6.7 Other Requested Documents.......................................22
ARTICLE 7 DELIVERIES TO SELLER AT CLOSING.............................22
7.1 Corporate Action by Buyer.......................................22
7.2 Delivery of Purchase Price......................................23
7.3 Assumption of Assumed Liabilities...............................23
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ARTICLE 8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...................23
ARTICLE 9 INDEMNIFICATION..............................................23
9.1 Indemnification of Buyer Indemnitees............................23
9.2 Indemnification of Seller Indemnitees...........................23
9.3 Method of Asserting Claims, Etc.................................24
9.4 Payment of Indemnity............................................26
9.5 Adverse Consequences............................................26
ARTICLE 10 NOTICES......................................................26
ARTICLE 11 MISCELLANEOUS................................................27
11.1 Incorporation of Schedules; Entire Agreement....................27
11.2 Waiver..........................................................27
11.3 Amendment.......................................................27
11.4 Counterparts....................................................28
11.5 Headings........................................................28
11.6 Governing Law...................................................28
11.7 Risk of Loss....................................................28
11.8 Binding Effect..................................................28
11.9 Expenses........................................................28
11.10 Further Assurances..............................................28
11.11 No Third Party Beneficiary......................................28
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SCHEDULES
Schedule 1.1 Subsidiaries
Schedule 1.2 Assumed Liabilities
Schedule 2.2 Liens on Stock of Subsidiaries
Schedule 2.5 Conflicts
Schedule 2.7 Claims
Schedule 2.8 Financial Statements
Schedule 2.10 Absence of Conflicts
Schedule 2.11 Defaults
Schedule 2.13 Tax Matters
Schedule 2.14 Litigation
Schedule 2.15 Customers and Suppliers
Schedule 2.16 Accounts Receivable and Accounts Payable
Schedule 2.18 Employee Benefit Plans
Schedule 2.19 Contracts and Commitments
Schedule 2.20 Patents, Trademarks and Copyrights
Schedule 2.21 Insurance
Schedule 2.22 Employee Matters
Schedule 2.28 Transactions with Affiliates
Schedule 5.4 Payment of Assumed Liabilities
Schedule 5.5 Indemnification for Guarantees
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of September 24, 2004 (together
with the schedules attached hereto, the "AGREEMENT") is by and between Docucorp
International, Inc., a Delaware corporation (the "BUYER"), and Newbridge
Corporation, a Texas corporation (the "SELLER").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the business and assets of Seller for the purchase price and upon
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth herein and in reliance upon the representations and
warranties contained herein, the parties hereto covenant and agree as follows:
ARTICLE 1
SALE AND PURCHASE
1.1 SALE AND PURCHASE OF ASSETS. On the terms and subject to the
conditions contained in this Agreement, Seller shall sell, transfer, convey,
assign and deliver to Buyer, at the Closing (as hereinafter defined) on the
Closing Date (as hereinafter defined), and Buyer shall purchase from Seller,
subject to all liens, encumbrances, mortgages, pledges, charges, options,
rights, security interests, agreements or claims of any nature whatsoever,
recorded or unrecorded (individually a "LIEN" and collectively the "Liens"), all
of Seller's right, title and interest in and to all of Seller's properties and
assets, wherever located (the "ASSETS"), including without limitation, all
assets included in the Financial Statements (as hereinafter defined) of Seller
and all of the capital stock of Seller's subsidiaries set forth on SCHEDULE 1.1
(the "SUBSIDIARIES"). Seller's business (the "BUSINESS") is operated by, and all
accounts and notes receivable, bank accounts, machinery and equipment, office
furniture and equipment, furnishings, fittings, accessories, appliances,
computer software, contracts, licenses, permits, customer contact lists, rights
to the name "Newbridge," "Newbridge Information Services," "Matrix Digital
Technologies" and any derivative or similar names, operating rights, rights to
telephone numbers, intellectual property, trade secrets, proprietary rights,
customer and marketing data, inventions, URLs, confidential business
information, books and records and other rights and tangible or intangible
assets in any way pertaining to, related, identified to or with, or otherwise
used or useable in Seller's Business are owned by, the Subsidiaries.
1.2 PAYMENT OR ASSUMPTION OF LIABILITIES. Buyer shall assume the
Assumed Liabilities (as defined below) on the Closing Date and shall perform
such Assumed Liabilities in accordance with their terms or otherwise arrange for
their discharge. The term "ASSUMED LIABILITIES" shall mean (i) the performance
by Buyer of the contractual obligations of Seller and the Subsidiaries under all
of the contracts of Seller and the Subsidiaries ("ASSUMED CONTRACTS"), and (ii)
the assumption of the liabilities of Seller and the Subsidiaries as set forth in
the Financial Statements or on SCHEDULE 1.2 or incurred in the ordinary course
of the Business since August 31, 2004; provided, however, Buyer shall neither
assume nor agree to pay, perform or discharge the following debts, liabilities
and obligations (the "EXCLUDED LIABILITIES"):
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(a) VIOLATION OF REPRESENTATIONS, ETC. Debts, obligations or
liabilities which arise or exist in violation of any of the
representations, warranties, covenants or agreements of Seller contained
in this Agreement or in any statement or certificate delivered to Buyer
by or on behalf of Seller on or before the Closing Date pursuant to this
Agreement or in connection with the transactions contemplated hereby.
(b) CONTINGENT LIABILITIES. Contingent liabilities known to
Seller and not disclosed to Buyer in writing.
(c) TAXES DUE ON SALE. Debts, obligations or liabilities of
Seller for federal, state, county, local, foreign or other income or
transfer taxes or assessments (including interest and penalties thereon,
if any) of any kind whatsoever arising from the sale, transfer or
delivery of the Business or the Assets pursuant to this Agreement
(including without limitation taxes arising from the deemed sale of
assets resulting from the Section 338(h)(10) Election described herein),
which taxes shall be solely the responsibility of Seller.
(d) LITIGATION. Debts, expenses, obligations or liabilities
of Seller arising out of any action, suit, arbitration or proceeding
pending as of the Closing Date and that has not been disclosed to Buyer
in writing.
(e) TRANSACTION EXPENSES. Transaction expenses of Seller
including without limitation accountant's and attorneys' fees incurred
in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated hereby.
(f) SELLER'S EQUITY ARRANGEMENTS. Any amounts owed to any
employee or shareholder of Seller pursuant to Seller's stock option plan
or any similar equity compensation plan.
1.3 PURCHASE PRICE. In consideration for the sale and assignment by
Seller to Buyer of the Business and the Assets, (i) Seller shall assign and
Buyer shall assume the Assumed Liabilities and (ii) Buyer shall pay to Seller
Two Million Five Hundred FIFTY Thousand NO/100 Dollars ($2,550,000.00), (the
"PURCHASE PRICE"), less the Holdback Amount (as hereinafter defined). The
Purchase Price less the Holdback Amount (the "INITIAL PURCHASE PRICE") shall be
payable at the Closing in cash as set forth in Section 1.5 below.
1.4 HOLDBACK AMOUNT.
(a) An amount equal to ten percent (10%) of the Purchase
Price (the "HOLDBACK AMOUNT") shall be withheld for a period of 180 days
following the Closing Date (the "HOLDBACK PERIOD") from the Purchase
Price payable at Closing as security for any indemnification claims
raised on or before the last day of the Holdback Period.
(b) On the 90th day following the Closing, one-half of the
Holdback Amount shall be released to Seller less the amount of any
indemnification claims which have been raised prior to such date. On the
180th day following the Closing, the remaining one-half of the Holdback
Amount shall be released to Seller less the amount of any additional
indemnification claims which have been raised prior to such date. Any
amounts retained
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by the Buyer for the satisfaction of indemnification claims shall be
retained by Buyer until resolution of such claims and promptly paid
following and in accordance with such resolution.
1.5 CLOSING. Subject to the terms and conditions hereof, the
consummation of the sale and purchase of the Business and the Assets provided
for herein (the "CLOSING") shall take place on September 24, 2004 (the "CLOSING
DATE") at the offices of the Buyer's counsel in Dallas, Texas, at 9:00 a.m.
local time, or at such other place or time upon which Buyer and Seller may
mutually agree in writing. At the option of the parties to this Agreement,
documents to be delivered at the Closing may be delivered to the place of
Closing by facsimile transmission on the Closing Date, and the original
documents shall be delivered to the place of Closing on the first business day
following the Closing Date. At the Closing, Buyer shall pay the Initial Purchase
Price to or for the benefit of Seller by wire transfer in immediately available
federal funds and shall pay the other amounts required to be paid at Closing
pursuant to Section 5.4. Each of Buyer and Seller shall further deliver such
certificates and other documents required to be delivered by such party pursuant
to Articles 6 and 7 hereof.
1.6 ALLOCATION OF PURCHASE PRICE; SECTION 338(H)(10) ELECTION.
(a) Buyer and Seller will join in making a timely election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any comparable elections, with respect to the
purchase of the shares of the capital stock of the Subsidiaries, under
any state or local income tax law (each a "Section 338(h)(10)
Election"). Buyer represents and warrants that it is qualified to make
such election. If the Section 338(h)(10) Election is made, Buyer and
Seller shall (i) negotiate in good faith and agree to an allocation of
the purchase price among the assets of the Subsidiaries that are deemed
to have been acquired pursuant to Section 338(h)(10) of the Code and
comparable state income tax provisions (the "Section 338 Asset
Allocation Schedule") and (ii) within ninety (90) days after the Closing
Date, exchange completed and properly executed copies of Internal
Revenue Service Form 8023A, the required schedules related thereto, and
comparable state forms and schedules, all of which are to be prepared on
a basis consistent with the Section 338 Asset Allocation Schedule. If
any changes are required to be made to these forms or schedules
(including the Section 338 Asset Allocation Schedule) as a result of
information that first becomes available after the Closing Date, the
parties shall promptly and in good faith reach an agreement as to the
precise changes required to be made. Buyer will prepare all documents
and materials necessary in connection with making a Section 338(h)(10)
Election, and Seller agrees to assist Buyer and cooperate with Buyer in
connection therewith, including filing a copy of the election in its tax
return as required by the Code.
(b) Buyer and the Seller will prepare and file all tax
returns and reports with respect to taxes including if necessary,
Internal Revenue Service Form 8594 and comparable state forms in a
manner consistent with the Section 338(h)(10) Election and
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the valuation of the assets as set forth in the Section 338 Asset
Allocation Schedule. All taxes imposed on the deemed sale of assets
resulting from the Section 338(h)(10) Election will be included in
Seller's tax returns as applicable and will be paid by Seller.
1.7 PUBLIC ANNOUNCEMENTS. Before making any public announcements
with respect to this Agreement or the transactions contemplated hereby, Seller
and Buyer shall each consult with the other and shall use good faith efforts to
agree upon the text of a joint announcement to be made by Seller and Buyer or
use good faith efforts to obtain the other party's approval of the text of any
public announcement to be made; PROVIDED, HOWEVER, THAT Buyer shall have final
approval with respect to any public announcements.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that:
2.1 ORGANIZATION AND GOOD STANDING. Each of Seller and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of Seller and the
Subsidiaries has all requisite corporate power and authority to own, hold, use
and lease its properties and assets and to conduct its business as it is now
being conducted. Each of Seller and the Subsidiaries is duly qualified as a
foreign corporation and is in good standing in all jurisdictions in which the
character of the properties and assets now owned or leased by it or the nature
of the business now conducted by it requires it to be so qualified, except for
those jurisdictions in which failure to so qualify would not have a material
adverse effect on Seller or the Subsidiaries taken as a whole. Seller has
delivered to Buyer true, complete and correct copies of its articles or
certificate of incorporation and bylaws of Seller and each of the Subsidiaries,
each as amended to the date of this Agreement.
2.2 OWNERSHIP. Seller is the record and beneficial holder of all of
the issued and outstanding capital stock of each of the Subsidiaries free and
clear of all liens, claims and encumbrances other than as set forth on SCHEDULE
2.2. There is no existing option, warrant, call, commitment or other agreement
with respect to the capital stock of any Subsidiary of Seller.
2.3 NO OWNERSHIP INTERESTS. Except for the Subsidiaries, Seller does
not own or control, directly or indirectly, shares of capital stock, debt
instruments or other securities of any corporation or hold, directly or
indirectly, any interest in any trust, partnership, limited partnership, joint
venture, business association, limited liability company, unincorporated
business, proprietorship, business enterprise or other business entity
whatsoever that is in any way engaged directly or indirectly in the Business or
that otherwise has any interest in and to any of the Assets.
2.4 AUTHORITY. Seller has all requisite corporate power and
authority to enter into, execute and deliver this Agreement and the documents
contemplated hereby to be executed by Seller and to perform the obligations to
be performed by Seller hereunder and thereunder, respectively. The execution,
delivery and compliance by Seller with the terms of this Agreement and the
documents contemplated hereby to be executed by Seller, and the consummation by
Seller of the transactions contemplated hereby and thereby, have been, or will
be before the
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Closing, duly authorized by all necessary corporate action by Seller. This
Agreement has been duly executed and delivered by Seller, and this Agreement
constitutes, and the documents contemplated hereby to be executed by Seller,
upon their execution and delivery as herein provided will constitute, the legal,
valid and binding obligations of Seller, as applicable, enforceable against
Seller in accordance with the terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
2.5 NO CONFLICTS. Except as set forth on SCHEDULE 2.5, the execution
and delivery of this Agreement and the documents contemplated hereby to be
executed by Seller do not, and compliance by Seller with the terms hereof and
thereof and consummation by Seller of the transactions contemplated hereby and
thereby will not, (a) violate or conflict with any existing term or provision of
any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction
or decree applicable to Seller; (b) conflict with or result in a breach of or
default under any of the terms, conditions or provisions of the articles of
incorporation or bylaws of Seller or any agreement or instrument to which Seller
is a party or otherwise subject, or by which Seller, and the Business or any of
the Assets may be bound; (c) result in the creation or imposition of any Lien
upon the Business or any of the Assets; (d) give to others any right of
termination, cancellation, acceleration or modification in or with respect to
any agreement or instrument to which Seller is a party or otherwise subject, or
by which Seller, the Business or the Assets may be bound or subject; or (e)
breach any fiduciary duty owed by Seller to any person or entity.
2.6 CONSENTS AND APPROVALS. The execution and delivery by Seller of
this Agreement and the documents contemplated hereby to be executed by Seller,
compliance by Seller with the terms hereof and thereof and consummation by
Seller of the transactions contemplated hereby and thereby do not require Seller
to obtain any consent, approval or action of, make any filings with or give any
notice to any public, governmental or judicial authority, other than with
respect to regulatory filings of a routine nature required in the ordinary
course of business following the Closing to inform parties of the closing of the
transactions hereunder.
2.7 TITLE TO PROPERTIES; CONDITION.
(a) Seller has, and upon the sale, assignment, transfer and
conveyance of the Assets to Buyer there will be vested in Buyer, good
and marketable title to the Assets free and clear of all liens, claims
and encumbrances other than as set forth on SCHEDULE 2.7.
(b) The Assets have been installed, operated and maintained
in accordance with accepted industry practice, are free from latent
defects or defects of workmanship or materials, are suitable for the
purposes for which they have been and are being employed in the
operation of the Business and are in good operating condition and
repair, ordinary wear and tear excepted. Copies of all leases, operating
agreements, maintenance agreements, management agreements, mortgages and
other contracts, documents or agreements applicable to the Assets have
been provided or made available to Buyer. Except as set forth on
SCHEDULE 2.7, there are no actual, pending or, to the knowledge of
Seller, threatened claims against the Assets
5
that could give rise to a Lien, or acts or incidents which could give
rise to any such claims, relating to or arising out of the Assets or the
operation of the Business. The Assets and the assets of the Subsidiaries
constitute all assets, properties and rights necessary or used in the
Business as presently operated by Seller and the Subsidiaries and are
owned or leased by Seller and the Subsidiaries and not by any affiliate
of Seller (other than the Subsidiaries) or other party. As to each
contract that constitutes part of the Assets, such contract is in full
force and effect, no notice of cancellation or termination or default
has been received by Seller and, to Seller's knowledge, no event or
condition has occurred or exists which, with notice or lapse of time or
both, would constitute a default thereunder. The transfer contemplated
hereby will not affect the validity or enforceability of such contracts.
As to each lease or license, the leasehold or licensee's interest which
constitutes part of the Assets is in full force and effect, no notice of
cancellation or termination under any option or right reserved to the
lessor or licensor under such lease or license or notice of default has
been received by Seller and, except as set forth on SCHEDULE 2.7 or to
the knowledge of Seller, no event or condition has occurred or exists
which, with notice or lapse of time or both, would constitute a default
thereunder. Seller has not assigned its interest under any such lease or
license or subleased the premises demised thereby or sublicensed the
right or license granted thereby. Except as set forth on SCHEDULE 2.7,
Seller has the right to transfer all of its right, title and interest in
the leases and licenses included in the Assets without any consent, and
the transfer contemplated hereby will not affect their validity or
enforceability. The Facilities (as defined in Section 2.25 below) have
free and uninterrupted access to and from a dedicated public
right-of-way through a valid and subsisting easement, and such access is
adequate for the use being made of the parcel being accessed as the
Business is presently conducted. Except as set forth on SCHEDULE 2.7,
there are no imperfections of title, Liens, security interest, claims or
other charges or encumbrances affecting the real property covered by any
lease to be assigned to Buyer pursuant to this Agreement that interferes
or may in the future interfere with the use of the Assets or the
operation of the Business.
2.8 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 2.8 are true
and complete copies of (a) the unaudited balance sheet of Seller and the
Subsidiaries as of August 31, 2004, the unaudited statements of income, retained
earnings, and cash flows of Seller and the Subsidiaries for the interim period
commencing on January 1, 2004 and ending on August 31, 2004, and (b) the audited
balance sheets of Seller and the Subsidiaries as of December 31, 2003, 2002 and
2001 and the related statements of income, retained earnings, and cash flows for
the years then ended, including the notes relating thereto (collectively the
"FINANCIAL STATEMENTS"). The Financial Statements present fairly, in all
material respects, the consolidated financial position of Seller and the
Subsidiaries as of the dates indicated, and the consolidated results of its
operations and its cash flows for the periods then ended in conformity with
accounting principles generally accepted in the United States of America;
PROVIDED, HOWEVER, that the unaudited Financial Statements do not include (i)
footnote disclosures, and (ii) normal recurring year-end adjustments relating to
tax accruals. Except as set forth on SCHEDULE 1.2 or incurred or acquired in the
ordinary course of the Business after August 31, 2004, there are no material
liabilities, contingent or definite, and no material assets of Seller or the
Subsidiaries that are not accounted for in the Financial Statements and such
detailed schedules.
2.9 CUSTOMARY BUSINESS PRACTICE. Neither Seller nor any officer,
director, employee or agent of Seller acting on behalf of Seller or the
Subsidiaries, has made or authorized the
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making of, directly or indirectly, any offer, payment or promise to pay any
money or give anything of value to (a) any official or employee of a
Governmental Body, (b) any political party or official thereof or any candidate
for political office or (c) except entertainment usual or customary in the
industry and gifts of nominal value, any customer, supplier, or competitor of
Seller or any employee, officer or director thereof in order to assist such
company in obtaining or retaining business for or with, or directing business
to, any person, nor engaged in any other practice (including without limitation
violation of any antitrust law or law regulating minority business enterprises),
which would subject the Business to any damage or penalty in any civil, criminal
or governmental litigation or proceeding or which could be used as the basis for
termination or modification of any material contract, license or other
instrument related to the Business to which Seller is a party. For purposes
hereof, the term "GOVERNMENTAL BODY" shall mean any court or any foreign or
domestic federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on the
Financial Statements or on SCHEDULE 2.10, there has not been, occurred or arisen
any of the following as they relate to the Business or the Assets since August
31, 2004:
(a) any transaction by Seller or the Subsidiaries except in
the ordinary course of business;
(b) any capital expenditure by Seller or the Subsidiaries
greater than $10,000;
(c) any change in, or any event, condition or state of facts
of any character peculiar to the Assets or the operation of the Business
that individually or in the aggregate adversely affects the Business or
the Assets, or that affects the validity or enforceability of this
Agreement;
(d) any destruction, damage or loss suffered by the Business
or with respect to any Asset (whether or not covered by insurance);
(e) any declaration, setting aside or payment of a dividend
or other distribution or commitment, obligation or other agreement made
with any party with respect to the payment of any dividend or the making
of any distribution in respect of any of the capital stock of Seller, or
any direct or indirect redemption, purchase or other acquisition by
Seller of any of its capital stock;
(f) any increase in the salary or other compensation,
including without limitation all wages, salary, deferred payment
arrangements, bonus payments and accruals, profit sharing arrangements,
payment in respect of stock options or phantom stock options or similar
arrangements, stock appreciation rights or similar rights, incentive
payments, pension or employment benefit contributions or similar
payments, payable or to become payable by Seller or the Subsidiaries to
any of their officers, directors or employees, or the declaration,
payment or commitment or obligation of any kind for the payment by
Seller or the Subsidiaries of a bonus or increased or additional salary
or compensation to any such person;
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(g) any sale, lease or other disposition of any Asset or the
assets of the Subsidiaries, except in the ordinary course of business
consistent with past practice;
(h) any mortgage, pledge or other encumbrance of any Asset
or the assets of the Subsidiaries;
(i) any forgiveness of any debt owed to Seller or the
Subsidiaries;
(j) any amendment or termination of any material contract,
agreement or license to which Seller or the Subsidiaries is a party or
to which any of the Assets are subject, except in the ordinary course of
business;
(k) any breach of the terms of any contract or agreement
that is material to the Business;
(l) any commencement, notice of commencement or, to the
knowledge of Seller, threat of commencement of any litigation or any
governmental proceeding against or investigation of Seller or the
Subsidiaries or the affairs of Seller or the Subsidiaries;
(m) any issuance or sale by Seller of any of the capital
stock of any class of Seller or any of the Subsidiaries, or of any other
of its securities or other ownership interests, or any commitment,
obligation or agreement to do so;
(n) any liabilities that have not been disclosed in the
Financial Statements, other than those incurred in the ordinary course
of business since August 31, 2004;
(o) any waiver or release of any right or claim of Seller or
the Subsidiaries;
(p) any amendment to any national, federal, state,
municipal, local, foreign or other tax returns or reports that have been
filed by Seller or the Subsidiaries in any jurisdiction;
(q) any labor trouble or claim of wrongful discharge or
other unlawful labor practice or action;
(r) any transactions by Seller with an affiliate or related
party (other than the Subsidiaries);
(s) any change by Seller in accounting methods or principles
applicable to the Business or the Assets that would be required to be
disclosed under generally accepted accounting principles;
(t) any borrowing of funds, agreement to borrow funds or
guaranty by Seller affecting or relating to the Business and/or the
Assets, or any termination or amendment of any evidence of indebtedness,
contract, agreement, deed, mortgage, lease, license or other instrument
to which Seller or the Subsidiaries are bound or by which any of the
Assets are bound or to which any of the Assets are subject other than in
the ordinary course of business consistent with past practices;
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(u) any payment for executive or similar perquisites, such
as automobile expenses, sports tickets or the payment of any expense
reports of any employee of Seller not accurately documented by legible
and appropriate receipts; or any direct or indirect distribution of cash
or other assets and benefits to any officer of Seller or the
Subsidiaries except for normal payments of salary and other compensation
benefits, reimbursement for business expenses in a manner consistent
with the past practices of Seller or the Subsidiaries;
(v) any acquisitions of any assets, equipment or inventory,
other than in the ordinary course of business consistent with past
practice;
(w) any entry into any commitment of any kind, or the
occurrence of any event giving rise to any contingent liability not
covered by the foregoing that would have an adverse effect on Seller,
the Assets or the Business;
(x) any discretionary contributions to any Plans (as defined
in Section 2.18 herein); or
(y) any contract, commitment or agreement to do any of the
foregoing.
2.11 ABSENCE OF DEFAULTS. Except as set forth on SCHEDULE 2.11,
Seller is not in default, and no event has occurred which with notice or lapse
of time or both would constitute a default, in any way under any term or
provision of any material agreement or instrument to which Seller is a party or
by which Seller is bound that relates to or would affect the Business or by or
to which any of the Assets is bound or subject or that could adversely affect
the ability of Seller to consummate the transactions contemplated hereby.
2.12 COMPLIANCE WITH LAWS. There has been no failure by Seller to
comply in any material respect with any federal, state or local law, statute,
ordinance, rule or regulation in any respect that could have an adverse effect
on Buyer's ability to conduct normal operations of the Business with the Assets
after the Closing or on the ability of Seller to consummate the transactions
contemplated hereby.
2.13 TAX RETURNS AND REPORTS. Except as set forth on SCHEDULE 2.13,
Seller has filed all federal, state, local and foreign Tax reports and Tax
Returns (including pursuant to extensions) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed, all such returns and reports were materially correct as filed and
Seller has paid all Taxes shown thereon or otherwise claimed to be due, and with
respect to any Taxes that have accrued but are not yet due, the accrual set
forth in the Financial Statements is materially correct. Seller and the
Subsidiaries have withheld and, if payable, paid all Taxes which they are
required to withhold from, and pay relating to, compensation paid to employees
of Seller or the Subsidiaries. Except for any potential liability for sales tax
arising out of the ongoing state sales tax audit as summarized on SCHEDULE 2.13,
Seller has not received any notice of assessment or proposed assessment by the
Internal Revenue Service ("IRS") or any other taxing authority in connection
with any Tax Returns and there are no pending tax examinations of any Tax
Returns of or tax claims in respect of the Tax Returns asserted against Seller
or the Subsidiaries. To Seller's knowledge, there has been no disregard of any
applicable statute,
9
regulation, rule or revenue ruling in the preparation of any Tax Return
applicable to Seller or the Subsidiaries. To Seller's knowledge, there are no
tax liens on any of the Assets or the Assets of the Subsidiaries, except for
Liens for current taxes not yet due and payable. To Seller's knowledge, there is
no basis for any additional assessment of any Taxes, penalties or interest with
respect to Seller or the Subsidiaries. Except for the current extension related
to the ongoing sales tax audit, Seller has not waived any law or regulation
fixing, or consented to the extension of, any period of time for assessment of
any Taxes which waiver or consent is currently in effect. As used in this
Agreement, "TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, ad valorem, personal and real property, excise
or other taxes, fees, stamp taxes and duties, assessments or charges of any kind
whatsoever (whether payable directly or by withholding), together with all
interest and all penalties, additions to tax or additional amounts imposed by
any taxing or other authority with respect thereto and "TAX RETURN" means all
Tax returns and forms required to be filed or furnished with respect to the
Assets or the Business.
2.14 LITIGATION. Except as set forth on SCHEDULE 2.14, (a) there are
no actions, claims, suits, investigations or proceedings pending against Seller
for which Seller has been served with process or IN REM against any of the
Assets or, to the knowledge of Seller, threatened against Seller or IN REM
against any of the Assets, at law or in equity, in any court, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or other instrumentality which would (i) adversely affect
the validity or enforceability of this Agreement or the documents contemplated
hereby to be executed by Seller, (ii) restrict the continuing transaction of
business with the customers of the Business, (iii) delay consummation of the
transactions contemplated hereby or (iv) establish a Lien against any of the
Assets; and (b) Seller is not in violation of any order, decree, judgment,
award, determination, ruling or regulation of any court, governmental
department, commission, board, bureau, agency or other instrumentality, the
result of which violation individually or violations in the aggregate has had or
may have an adverse effect on the Business or the Assets or would (i) adversely
affect the validity or enforceability of this Agreement or the documents
contemplated to be executed by Seller, (ii) restrict the continuing transaction
of business with the customers of the Business, (iii) delay consummation of the
transactions contemplated hereby; or (iv) establish a Lien against any of the
Assets.
2.15 CUSTOMERS AND SUPPLIERS. The names and addresses of the
customers and suppliers of Seller and the Subsidiaries since January 1, 2004
have been provided or made available to Buyer. The relationships of Seller and
the Subsidiaries with their customers are satisfactory, and Seller is not aware
of any unresolved disputes with any of such customers. Except as set forth in
Schedule 2.15, since January 1, 2004, no customer or supplier has modified or
notified in writing the Seller or the Subsidiaries of its intent to not renew or
to cancel, limit or modify its relationship with Seller or the Subsidiaries.
Seller and the Subsidiaries have shared or provided copies of their customer
lists with third parties pursuant to confidentiality and nonuse agreements.
Except in connection with prior discussions with third parties regarding the
sale of the Assets and the Business, neither Seller nor the Subsidiaries have
transferred any customer files of the Business to any party at any time before
the Closing and will not transfer copies of any such lists or files to any party
after the Closing.
10
2.16 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
(a) SCHEDULE 2.16 sets forth an accurate list of the
accounts and notes receivable of Seller and the Subsidiaries outstanding
as of the Closing Date, including an accurate aging of all such accounts
and notes receivable due in 30-day aging categories. Receivables from
and advances to employees, and any entities or persons related to or
affiliated with the Seller or the Subsidiaries are separately identified
on SCHEDULE 2.16 as of such date. The accounts and notes receivable of
Seller and the Subsidiaries reflected in the Financial Statements and
all such accounts and notes receivable arising thereafter and on or
before the Closing Date on SCHEDULE 2.16 arose from BONA FIDE
transactions in the ordinary course of business. The trade and other
accounts and notes receivable of Seller and the Subsidiaries which are
classified as current assets on the Financial Statements and/or SCHEDULE
2.16 are BONA FIDE receivables, are stated in accordance with generally
accepted accounting principles and, to the knowledge of Seller, are
fully collectible after giving effect to any bad debt reserves expressly
set forth in the Financial Statements. To the knowledge of Seller, no
material counterclaims or offsetting claims with respect to such
accounts and notes receivables are pending or threatened.
(b) SCHEDULE 2.16 also sets forth an accurate list of all
accounts payable of Seller and the Subsidiaries as of the Closing Date.
All the accounts and notes payable reflected in the Financial
Statements, and all accounts and notes payable arising thereafter and
before the date hereof arose from BONA FIDE transactions in the ordinary
course of business and are stated in accordance with generally accepted
accounting principles.
2.17 INVENTORIES. As of the Closing Date, the inventories of Seller
and the Subsidiaries consist of raw materials, goods in process and finished
goods, are saleable in the ordinary course of business of Seller and the
Subsidiaries, and are not excessive in kind or amount in light of such business.
All inventories are carried on the books of Seller and the Subsidiaries at the
lower of cost or market pursuant to the normal inventory valuation policy of
Seller or the Subsidiaries, as applicable. Neither Seller nor the Subsidiaries
are committed as of the date hereof, nor will they be committed as of the
Closing Date, to purchase inventories in amounts greater than are required in
the ordinary course of its business. With respect to inventories in the hands of
suppliers for which Seller or the Subsidiaries will be committed as of the
Closing Date, such inventories on the Closing Date will be usable in the
ordinary course of business as presently being conducted. All such inventories
referred to above are usable within one (1) year of the Closing Date.
2.18 ERISA AND RELATED MATTERS.
(a) SCHEDULE 2.18 sets forth an accurate schedule of each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
deferred compensation arrangements sponsored, maintained or contributed
to currently by Seller or any ERISA Affiliate (each such plan and
arrangement being herein referred to as a "PLAN"), true, complete and
correct copies of which have been provided to Buyer. Except as set forth
on SCHEDULE 2.18, neither Seller nor any ERISA Affiliate sponsors,
maintains or contributes, currently or at any time during the preceding
five years, to any plan, program, fund or arrangement that
11
constitutes an "employee benefit plan," nor does Seller or any ERISA
Affiliate have any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or
annuity, retiree medical benefits or "excess benefit plan" (within the
meaning of Section 3(36) of ERISA) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning given that
term in Section 3(2) of ERISA, and the term "ERISA Affiliate" means any
entity that is a member of the same controlled group as Seller, as
described in Section 414 of the Code. During the six years immediately
preceding the Closing Date, neither the Seller nor any ERISA Affiliate
has maintained or been obligated to contribute to any "pension plan"
within the meaning of Section 3(37) of ERISA.
(b) All Plans listed on SCHEDULE 2.18 are in compliance in
all material respects with all applicable provisions of ERISA, the Code
and the regulations issued thereunder, as well as with all other
applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of Seller with respect
to any Plan have either been fulfilled in their entirety or are fully
reflected on the Financial Statements.
(c) Each Plan that is intended to qualify under Section
401(a) of the Code (a "QUALIFIED PLAN") has been determined by the IRS
to be so qualified. Except as disclosed on SCHEDULE 2.18, all reports
and other documents required to be filed with any governmental agency or
distributed to Plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) have been timely
filed or distributed. Seller has not engaged in any transaction
prohibited under the provisions of Section 406 of ERISA or Section 4975
of the Code. No Plan has incurred, and neither Seller nor any ERISA
Affiliate has incurred, any liability for excise tax or penalty due to
the IRS or any liability to the Pension Benefit Guaranty Corporation.
There have been no terminations, partial terminations or discontinuances
of contributions to any such Qualified Plan during the preceding five
years without notice to and approval by the IRS and payment of all
obligations and liabilities attributable to such Qualified Plan.
(d) Each Plan which is a "group health plan," as defined in
Section 607(1) of ERISA or Section 5000(b)(1) of the Code, has been
operated in material compliance with provisions of Part 6 and 7 of Title
I, Subtitle B of ERISA, Sections 1171-1179 of the Social Security Act
(relating generally to the security and electronic transfer of health
information) and Sections 4980B, 9801-9803, 9811, 9812, and 9831-9833 of
the Code at all times. To the extent the group health plan is a "health
plan" within the meaning of 45 C.F.R. Parts 160 and 164, but not a
"small health plan" within the meaning of 45 C.F.R. Parts 160 and 164,
it satisfies the privacy requirements described in regulations issued
under Sections 262 and 264 of the Health Insurance Portability and
Accountability Act of 1996 or, if the group health plan is a "small
health plan" within the meaning of 45 C.F.R. Parts 160 and 164, will
satisfy the privacy requirements described in such regulations by April
1, 2004.
12
2.19 CONTRACTS AND COMMITMENTS. SCHEDULE 2.19 sets forth a list of
all of the following material documents or agreements, or summaries of material
oral agreements or understandings, relating to the Business or the Assets to
which, on the date of this Agreement, Seller or the Subsidiaries are a party, or
which relate to or affect Seller and the Business, the Assets or the
transactions contemplated hereby and all documents or agreements which may
require any action or consent in connection with such transactions, as they may
have been amended to the date hereof:
(a) any written employment or consulting agreement, contract
or commitment with any employee, officer or director or any contract or
agreement with other consultants;
(b) any agreement, contract or commitment with any party
containing any covenant limiting the ability of Seller or the
Subsidiaries or any employee of Seller or the Subsidiaries to engage in
business or to compete in any location or with any person;
(c) any partnership or joint venture agreement with any
party or any arrangements with any party with respect to the sharing of
or in the profits or revenues of Seller, including without limitation
any licensing or royalty agreements;
(d) any agreement or instrument relating to the borrowing of
money, or the direct or indirect guarantee of any obligation for, or an
agreement to service the repayment of, borrowed money or any other
contingent obligations in respect of indebtedness of any other party;
(e) any agreement, contract or commitment relating to the
future disposition or acquisition of any investment in any party or of
any interest in any business enterprise involving the Business or the
Assets;
(f) any contract or commitment for capital expenditures or
the acquisition or construction of fixed assets;
(g) any contract or commitment for the sale or furnishing of
materials, supplies, merchandise, equipment or services;
(h) any written or unwritten agreement, contract, commitment
or other arrangement, between or among Seller or the Subsidiaries and
any of the affiliates of or parties related to Seller or the
Subsidiaries;
(i) any contract which grants to any person a preferential
right to purchase any of the assets of Seller or the Subsidiaries;
(j) any contract, agreement or commitment with respect to
the discharge or removal of a Contaminant (as defined in Section 2.25
below) other than in the ordinary course of business; and
(k) any other agreement or instrument not made in the
ordinary course of business.
13
True and complete copies of such documents and agreements have been delivered or
made available to Buyer. There is no course of dealing, waiver, side agreement,
arrangement or understanding applicable to any such contract of Seller.
2.20 PATENTS, TRADEMARKS AND COPYRIGHTS. Neither Seller nor the
Subsidiaries own or are a licensee or sublicensee of any patents, trademarks,
registered copyrights or other intellectual property rights except for (i) the
patents, trademarks and copyrights set forth on SCHEDULE 2.20, (ii) the
corporate names that are being sold hereunder; (iii) such rights that are
incorporated by the manufacturers into the Assets, without granting Seller any
specified rights therein; and (iv) software license agreements and related
contracts, pursuant to which the payment of all costs, fees and royalties have
been duly and timely paid by Seller and no event of default has occurred
thereunder. There have been no claims made, and Seller has not received any
notice and does not otherwise know or have reason to believe that the operation
of the Business or any of the Assets is in conflict with the rights of others.
2.21 INSURANCE. SCHEDULE 2.21 sets forth a true, complete and correct
list of all insurance policies of any kind or nature covering Seller and the
Subsidiaries with respect to the Business and the Assets, including without
limitation policies of life, fire, theft, employee fidelity, worker's
compensation, property and other casualty and liability insurance, and indicates
the type of coverage, name of insured, the insurer, the premium, the expiration
date of each policy and the amount of coverage for statutory workers'
compensation. Set forth on SCHEDULE 2.21 is a list of any currently pending
claims and any claims asserted under such policies or similar policies within
the last three (3) years. The premiums for the insurance policies listed in
SCHEDULE 2.21 that are due and payable have been fully paid. The insurance
afforded under such policies or certificates is in full force and effect and
will continue to cover Seller with respect to the Business and the Assets
through the Closing. True, complete and correct copies of each such policy have
been made available to Buyer.
2.22 EMPLOYEES. Seller has provided to Buyer lists of all employees
of Seller and the Subsidiaries, the dates of hire and the rates of pay for each
employee of Seller or the Subsidiaries, and all commission, bonus or other
compensation or expense reimbursement or allowance arrangements between Seller
or the Subsidiaries and any of their employees. SCHEDULE 2.22 lists each
management or employment contract or contract for personal services and a
description of any understanding or commitment between Seller or the
Subsidiaries and any officer, consultant, director, employee, independent
contractor or other person or entity. True and complete copies of such contracts
and descriptions of such understandings and commitments have been delivered to
Buyer. As of the Closing Date, neither Seller nor the Subsidiaries have made any
statement or communication of any kind regarding whether, or the terms and
conditions upon which, any such employee may be employed by Buyer. Seller has
taken all necessary actions to comply with the Worker Adjustment and Retraining
Notification Act (the "WARN ACT") through the Closing Date, to the extent it is
subject to the WARN Act, and Buyer shall have no disclosure or announcement
obligations under the WARN Act as a result of the transactions contemplated by
this Agreement.
2.23 LABOR AGREEMENTS; DISPUTES. Neither Seller nor the Subsidiaries
are a party to and have no obligation under any collective bargaining agreement
or other labor union contract, white paper or side agreement with any labor
union or organization, nor any obligation to
14
recognize or deal with any labor union or organization. There are no existing
or, to Seller's knowledge, pending activities or efforts of any labor union or
organization (or representatives thereof) relating to any strikes, demands,
slowdowns, work stoppages or lock-outs of any kind, or overt threats thereof, by
or with respect to any of its employees, or any actual or claimed
representatives thereof, and no such activities, efforts, strikes, demands,
slowdowns, work stoppages or lock-outs occurred during the three-year period
preceding the date hereof. There are no charges or complaints involving any
federal, state or local civil rights enforcement agency or court; complaints or
citations under the Occupational Safety and Health Act or any state or local
occupational safety act or regulation; unfair labor practice charges or
complaints with the National Labor Relations Board; or other claims, charges,
actions or controversies pending, or, to Seller's knowledge, threatened or
proposed, involving Seller or the Subsidiaries and any employee, former employee
or any labor union or other organization representing or claiming to represent
such employees' interests, which could adversely affect the Business. Seller and
the Subsidiaries are and have heretofore been in compliance in all respects with
all laws, rules and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, the sponsorship,
maintenance, administration and operation of (or the participation of its
employees in) employee benefit plans and arrangements and occupational safety
and health programs, and Seller is not engaged in any violation of any law, rule
or regulation related to employment, including unfair labor practices or acts of
employment discrimination, which could materially adversely affect the Business.
2.24 REGULATORY FILINGS. Seller and the Subsidiaries have filed all
reports, statements, documents, registrations, filings or submissions required,
in connection with the operation of the Business or the Assets, to be filed by
Seller or the Subsidiaries with any federal, state, municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality. All such filings complied in all material respects with
applicable law when filed and no deficiencies have been asserted by any such
regulatory authority with respect to such filings or submissions.
2.25 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.
(a) As used in this Section 2.25(a) and Section 9.1(b) all
terms appearing in initial capitals shall have the meaning given them in
Section 2.25(b) hereof. With respect to the Business and the Facilities,
(i) to the knowledge of Seller, the operations of Seller comply with all
applicable environmental, health and safety statutes, treaties,
conventions, rules, ordinances, and regulations in all jurisdictions in
which Seller conducts business, including, without limitation, all
Environmental Laws applicable to the jurisdictions in which operations
are conducted; (ii) none of the operations of Seller are subject to any
judicial or administrative proceeding alleging the violation of any
Environmental Law; (iii) none of the operations of Seller are the
subject of any federal or state investigation evaluating whether any
Remedial Action is needed to respond to a Release of any Contaminant or
other substance into the environment; (iv) Seller has not filed any
notice under any Environmental Law applicable to the jurisdiction in
which operations of Seller are conducted indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a
Release of a Contaminant or other substance into the environment; (v)
Seller has no contingent liability in connection with any Release of any
Contaminant or other substance into the environment, including, without
15
limitation, any contingent liability for failure to report a Release;
(vi) none of the operations of Seller involve the generation,
transportation, treatment or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 (in effect as of the date of this
Agreement) or any state equivalent thereof, in violation of any
Environmental Law applicable to the jurisdiction in which operations of
Seller are conducted, including, without limitation, statutes,
regulations and laws pertaining to permits and manifests; (vii) Seller
has not disposed of any hazardous waste or substance or other material
by placing it in or on the ground or waters of any premises owned,
leased or used by Seller in violation of any Environmental Law
applicable to the jurisdiction in which operations of Seller are
conducted nor has any lessee or prior owner; (viii) to the knowledge of
Seller, no underground storage tanks or surface impoundments are, on any
of the locations upon which the operations of Seller are conducted, in
violation of any Environmental Law applicable to the jurisdiction in
which operations of Seller are conducted; and (ix) no Lien in favor of
any governmental authority for (A) any liability under Environmental
Laws applicable to the jurisdiction in which operations of Seller with
respect to the Business are conducted, or (B) damages arising from or
costs incurred by such governmental authority in response to a release
of a Contaminant or other substance into the environment has been filed
or attached to any of the assets of Seller or, to the knowledge of
Seller, any of the locations upon which the operations of Seller with
respect to the Business are conducted.
(b) ENVIRONMENTAL DEFINITIONS. Each of the following terms
shall have the meaning indicated below:
"CONTAMINANT" shall mean those substances or materials that are
defined as hazardous or toxic or that are regulated by or form the basis
of liability under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances, or any other material or substance that constitutes a
health, safety or environmental hazard to any person or property.
"ENVIRONMENTAL CLAIM" shall mean any notice of violation,
claim, demand, abatement or other order or direction (conditional or
otherwise) by any governmental authority or any person for personal
injury (including sickness, disease or death), tangible or intangible
property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon (i) the
existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
non-accidental Releases) of or exposure to any Contaminant, into or onto
the environment (including, without limitation, the air, ground, water
or any surface) at, in, by, from or related to the Facilities, (ii) the
transportation, storage, treatment or disposal of materials in
connection with the operation of the Facilities or (iii) the violation
or alleged violation of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental authority,
agency or court relating to environmental matters connected with the
Facilities.
"ENVIRONMENTAL LAWS" shall mean all federal, state or local laws
relating to health, safety or the environment, including, without
limitation, the Comprehensive
16
Environmental Response, Compensation and Liability Act ("CERCLA") (42
U.S.C. ss. 9601 ET SEQ.), the Hazardous Material Transportation Act (49
U.S.C. ss. 1801 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET
SEQ.), the Clean Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Toxic
Substances Control Act, as amended (15 U.S.C. ss. 2601 ET SEQ.), the
National Environmental Policy Act (42 U.S.C. ss. 4321 ET SEQ.), the Oil
Pollution Act (33 U.S.C. ss. 2701 ET SEQ.), and the Occupational Safety
and Health Act (29 U.S.C. ss. 651 ET SEQ.), as these laws have been
amended or supplemented, and any analogous state or local statutes,
rules or ordinances and the regulations promulgated pursuant thereto.
"FACILITIES" shall mean real and personal property owned, leased
or used by Seller with respect to the Business, including, without
limitation, the Assets.
"PERMIT" shall mean any permit, approval, authorization, license
variance, or permission required from a governmental authority under any
applicable Environmental Laws.
"RELEASE" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, or out of any property
owned or leased by Seller, including the movement of any Contaminant
through or in the air, soil, surface water, groundwater or property and
including without limitation the meanings of such words as set forth in
the Environmental Laws.
"REMEDIAL ACTION" shall mean all actions required or voluntarily
undertaken to (1) clean up, remove, treat, or in any other way address
any Contaminant in the indoor or outdoor environment; (2) prevent the
Release or threat of Release, or minimize the further Release of any
Contaminant so it does not migrate or endanger or threaten to endanger
public health or welfare of the indoor or outdoor environment; or (3)
perform pre-remedial studies and investigations and post-remedial
monitoring and care.
2.26 BROKERS/ADVISORS. All negotiations with respect to this
Agreement and the transactions contemplated hereby have been carried out by
Seller with Buyer, without the intervention of any person on behalf of Seller in
such manner as to give rise to any valid claim by any person against Buyer for a
finder's fee, brokerage commission or similar payment.
2.27 DISCLOSURE. To Seller's knowledge, each response by Seller or
through its officers, employees or other representatives to inquiries in
connection with the due diligence performed by representatives of Buyer, as
revised or updated by subsequent disclosures and this Agreement, was complete
and accurate in all material respects. Copies of the most recent versions of all
documents and other written information referred to herein or in the schedules
that have been delivered or made available to Buyer are true, correct and
complete copies thereof and include all amendments, supplements or modifications
thereto or waivers thereunder. To Seller's knowledge, such documents and other
written information do not omit any material facts necessary, in light of the
circumstances under which such information was furnished, to make the statements
set forth therein not misleading in any material respect. Except as expressly
set forth in this Agreement and the schedules or in the certificates or other
documents delivered pursuant
17
hereto, Seller has no knowledge of any facts which will or may reasonably be
expected to have any material adverse effect on the value of the Business or the
Assets.
2.28 TRANSACTIONS WITH AFFILIATES. Except as otherwise set forth on
SCHEDULE 2.28, there are no contracts or arrangements (formal or informal,
written or oral) related directly or indirectly to the Business or the Assets
between Seller and any other persons controlling, under common control with or
controlled by Seller.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Seller that:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2 AUTHORITY OF BUYER. Buyer has all requisite corporate power and
authority to enter into this Agreement and the documents contemplated hereby to
be executed by Buyer and to perform the obligations to be performed by Buyer
hereunder and thereunder. The execution, delivery and compliance by Buyer with
the terms of this Agreement and the documents contemplated hereby to be executed
by Buyer, and the consummation by Buyer of the transactions contemplated hereby
and thereby have been, or will be before the Closing, duly authorized by all
necessary corporate actions by Buyer. This Agreement has been duly executed and
delivered by Buyer. This Agreement constitutes, and the documents contemplated
hereby to be executed by Buyer upon its execution and delivery as herein
provided will constitute the legal, valid and binding obligations of Buyer,
enforceable against the Buyer in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
3.3 NO CONFLICTS. The execution and delivery of this Agreement by
Buyer, and the consummation of the transactions contemplated hereby, and the
execution and delivery by Buyer of, and the consummation of the transactions
contemplated by, the documents contemplated hereby to be executed by Buyer, will
not (a) violate or conflict with any existing term or provision of any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction or
decree applicable to Buyer; (b) conflict with or result in a breach of or
default under any of the terms, conditions or provisions of the articles of
incorporation or bylaws of Buyer or any agreement or instrument to which Buyer
is a party or by which Buyer or any of the assets or properties thereof may be
bound or subject; (c) result in the creation or imposition of any Lien upon the
assets or properties of Buyer; (d) give to others any right of termination,
cancellation, acceleration or modification in or with respect to any agreement
or instrument to which Buyer is a party, or by which Buyer or any of the assets
or properties thereof may be bound or subject; or (e) breach any fiduciary duty
of Buyer to any person or entity.
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3.4 CONSENTS AND APPROVALS. The execution and delivery by Buyer of
this Agreement and the documents contemplated hereby to be executed by Buyer,
compliance by Buyer with the terms hereof and thereof, and the consummation by
Buyer of the transactions contemplated hereby and thereby, do not require Buyer
to obtain any consent, approval or action of, or make any filing with or give
any notice to (other than filings and press releases required under applicable
securities laws) any corporation, person or firm or other entity or any public,
governmental or judicial authority, other than with respect to regulatory
filings of a routine nature required in the ordinary course of business
following the Closing to inform parties of the closing of the transaction
hereunder.
3.5 BROKERS. All negotiations with respect to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
Seller, without the intervention of any person on behalf of Buyer in such manner
as to give rise to any valid claim by any person against Seller for a finder's
fee, brokerage commission or similar payment.
3.6 LITIGATION. There are no actions, claims, suits, investigations,
inquiries or proceedings pending against Buyer or, to the knowledge of Buyer,
overtly threatened against Buyer, at law or in equity, in any court, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or other instrumentality which could
reasonably be expected to materially and adversely affect the validity or
enforceability of this Agreement or the documents contemplated hereby to be
executed by Buyer and Buyer is not in violation of any order, decree, judgment,
award, determination, ruling or regulation of any court, governmental
department, commission, board, bureau, agency or other instrumentality.
ARTICLE 4
COVENANTS OF SELLER
Seller covenants and agrees with Buyer that:
4.1 APPROVALS. Seller shall take all reasonable steps, and shall use
reasonable commercial efforts to obtain, and shall cooperate with Buyer in
obtaining, as promptly as possible, all approvals, authorizations and clearances
of governmental and regulatory bodies and officials required to consummate the
transactions contemplated hereby. Seller shall provide such other information
and communications to governmental and regulatory authorities, as such
governmental and regulatory authorities or Buyer may reasonably request and
shall use reasonable commercial efforts to obtain the requisite consents of
third parties required to consummate the transactions contemplated hereby but
only if no material payment or other material concessions are required of Seller
to obtain such consents. Except as otherwise set forth herein, Seller shall not
be required to make any material payment or other material concession or to
assume any obligation in connection with obtaining such consents.
4.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller shall use reasonable
commercial efforts to comply promptly with all requirements which federal or
state law may impose on Seller or any of its affiliates with respect to the
transactions contemplated by this Agreement, and will promptly cooperate with
and furnish information to Buyer in connection with any such requirements
imposed upon them in connection therewith.
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4.3 CHANGE OF CORPORATE NAME. Seller shall, no later than the first
business day following the Closing Date, cause (i) an amendment to the articles
or certificate of incorporation of Seller to be filed changing the name thereof
to a name not in violation of the assignment of right to Seller's and
subsidiaries' names as contemplated in Section 1.1 and (ii) all of Seller's
assumed names to be abandoned, if any, so as not to interfere with the ability
of Buyer (or its affiliates) to use the "Newbridge Corporation," "Newbridge
Information Services" and "Matrix Digital Technologies" names or any derivatives
thereof. Seller shall take all necessary action to file such amendments and
abandon such names within the required time period. Seller shall not, directly
or indirectly, use the "Newbridge Corporation," "Newbridge Information Services"
and "Matrix Digital Technologies" names or any derivative or similar names in
any manner or for any reason following the Closing except as may be reasonably
necessary to transition the Business and Assets to Buyer.
4.4 CONFIDENTIALITY. Seller shall not disclose directly or
indirectly or allow any of its respective affiliates to disclose directly or
indirectly to third parties, other than to Seller's legal counsel, accountants
or, in connection with the transactions contemplated herein, other professional
advisors nor will Seller use for its own benefit or the benefit of any third
party or allow any of its affiliates to use for their own benefit or the benefit
of any third party, any trade secrets, customer and supplier lists, marketing
arrangements, business plans, projections, financial information, training
manuals, pricing manuals, product and service development plans, market
strategies, internal performance statistics, business secrets or other
information relating to the Business or the Assets or any information that
Seller has obtained from Buyer in connection with this Agreement with respect to
Buyer or any of its affiliates, unless disclosure may otherwise be required
pursuant to applicable law or governmental or judicial authority; provided,
however, that the party being required to disclose such information shall notify
Buyer party promptly after receipt of any demand for disclosure to provide Buyer
with an opportunity to legally prevent such disclosure.
4.5 REQUIRED FINANCIAL STATEMENTS. Seller shall cooperate with
Buyer, including, without limitation, by providing appropriate responses and
representation letters to the auditors, in the preparation of such audited and
unaudited balance sheets, income statements and other financial statements with
respect to the business of Seller for such fiscal years and interim periods as
may be determined by Buyer, upon the advice of its counsel and independent
public accountant, to be required by the rules and regulations of the Securities
and Exchange Commission in connection with filings that may be made or may be
required to be made by Buyer under the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and any related rules, regulations
or state statutes, rules or regulations.
4.6 PAYMENTS RECEIVED POST-CLOSING. After the Closing, any
additional payments received by Seller with respect to the Business or the
Assets shall constitute a portion of the Assets and Seller shall forward such
payments to Buyer within five (5) business days of the receipt thereof.
4.7 COOPERATION AND SUPPORT. After the Closing Date, Seller shall
assist Buyer in transitioning the Assets and Business to Buyer and, in
connection therewith, Seller shall provide adequate support and assistance (for
no additional consideration) as may be reasonably requested by Buyer.
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ARTICLE 5
COVENANTS OF BUYER
Buyer covenants and agrees with Seller that:
5.1 APPROVALS. Buyer shall take all reasonable steps, and shall use
reasonable commercial efforts to obtain, and shall cooperate with Seller in
obtaining, as promptly as possible, all approvals, authorizations and clearances
of governmental and regulatory bodies and officials required to consummate the
transactions contemplated hereby. Buyer shall provide such other information and
communications to governmental and regulatory authorities as such governmental
and regulatory authorities or Seller may reasonably request and shall use
reasonable commercial efforts to obtain any requisite consents of third parties,
to the extent required to consummate the transactions contemplated hereby but
only if no payment or other concessions are required of Buyer to obtain such
consents. Notwithstanding any other language herein, Buyer shall not be required
to make any material payment or other material concession or assume any material
obligation (other than with respect to contracts expressly assumed hereunder
that constitute Assumed Liabilities) in connection with obtaining such consents.
5.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Buyer shall use reasonable
commercial efforts to comply promptly with all requirements which federal or
state law may impose on them or any of their affiliates with respect to the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to Seller in connection with any such requirements imposed
upon them in connection therewith.
5.3 BOOKS AND RECORDS. Buyer shall retain the Seller's books and
records related to the operation of the Business or the Assets, to the extent
Buyer receives and is in possession of same, in accordance with Buyer's
corporate retention policies, and shall provide Seller reasonable access during
normal business hours to such books and records for any reasonable business
purpose for a period not to exceed eighteen (18) months following the Closing
Date.
5.4 PAYMENT OF ASSUMED LIABILITIES. At Closing, Buyer shall pay the
liabilities of Seller and the Subsidiaries set forth on SCHEDULE 5.4. Subsequent
to the Closing, Buyer shall use its commercially reasonable efforts to obtain
the release of all guarantors of such liabilities from any and all guarantees of
such liabilities.
5.5 INDEMNIFICATION FOR GUARANTEES. Buyer agrees to indemnify Blayne
Lequeux, Michael Weaver and Kenneth Murphy (collectively, the "Guarantors") for
any and all claims against any of them which might arise out of the guarantees
by the Guarantors for the obligations listed on SCHEDULE 5.5, all of which are
Assumed Liabilities of Buyer.
ARTICLE 6
DELIVERIES TO BUYER AT CLOSING
Except as may be waived in writing by Buyer, Seller shall deliver the
following to Buyer at Closing:
6.1 CONSENTS, AUTHORIZATIONS, ETC. Evidence reasonably satisfactory
to Buyer that all orders, consents, permits, authorizations, approvals and
waivers of every governmental entity
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or third party required for the consummation of the transactions contemplated
hereby, and all filings, registrations and notifications to or with all
governmental entities required with respect to the consummation of such
transactions, shall have been obtained or given.
6.2 CORPORATE ACTION BY SELLER. A Secretary's Certificate, dated as
of the Closing Date, certifying as to all resolutions of the Board of Directors
and stockholders of Seller authorizing this Agreement and the transactions
contemplated by this Agreement, and attesting to the incumbency and signature
specimens with respect to the officers of Seller executing the Agreement and any
other documents delivered pursuant to the Agreement by or on behalf of Seller.
6.3 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Executed counterparts
from Blayne Lequeux, Fred Parrish, Ken Aiken, Marilyn Souders and Mark Sutton of
employment and noncompetition agreements in form satisfactory to Buyer.
6.4 INSTRUMENTS OF CONVEYANCE. Executed bills of sale, assignments,
warranty deeds and other instruments conveying title to the Assets as set forth
in Section 1.1, and duly endorsed certificates for all of the capital stock of
the Subsidiaries. All such instruments of conveyance shall be in form and
content reasonably satisfactory to Buyer and its counsel.
6.5 PHYSICAL POSSESSION AND CONTROL. Effective physical possession
and control of the tangible Assets shall have been tendered by Seller to Buyer.
6.6 SPECIFIC ASSIGNMENTS. Specific assignments of the names
"Newbridge Corporation," "Newbridge Information Services," "Matrix Digital
Technologies," the Assumed Contracts and any proprietary information and permits
that Buyer may reasonably request to assure their continuity, together with any
consents to such assignments that may be required, including, without
limitation, for the Assumed Contracts.
6.7 OTHER REQUESTED DOCUMENTS. Further instruments and documents, in
form and content reasonably satisfactory to counsel for Buyer, as may be
necessary or reasonably appropriate to consummate the transactions contemplated
hereby.
ARTICLE 7
DELIVERIES TO SELLER
AT CLOSING
Except as may be waived in writing by Seller, Buyer shall deliver the
following to Seller at Closing:
7.1 CORPORATE ACTION BY BUYER. A Secretary's Certificate dated as of
the Closing Date, certifying as to all resolutions of the Board of Directors of
Buyer authorizing this Agreement and the transactions contemplated by this
Agreement, and attesting to the incumbency and signature specimens with respect
to the officers of Buyer executing the Agreement and any other documents
delivered pursuant to the Agreement by or on behalf of Buyer.
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7.2 DELIVERY OF PURCHASE PRICE. The Initial Purchase Price in the
manner described in Section 1.5.
7.3 ASSUMPTION OF ASSUMED LIABILITIES. An executed assignment and
assumption agreement for the Assumed Liabilities in form satisfactory to Seller.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The respective representations and warranties made by the parties in
this Agreement or in any certificate or document executed and delivered by
either party to the other party pursuant to this Agreement, shall survive the
Closing Date and the consummation of the transactions contemplated hereby, until
the expiration of the Holdback Period.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER INDEMNITEES. Seller hereby agrees to
indemnify and hold the Buyer Indemnitees (as defined below) harmless from and
against:
(a) any and all Adverse Consequences (as defined in Section
9.5) resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of Seller under
the terms of this Agreement;
(b) any and all Adverse Consequences suffered or incurred by
Buyer resulting from (i) any Environmental Claim, including without
limitation any claim arising under any Environmental Law arising out of
the operation of the Facilities or any historical use of the Facilities
or the underlying property, and (ii) any voluntary or involuntary
investigation, removal, cleanup and/or remediation of any contaminant
present at or arising out of the operation of the Facilities or any
historical use of the Facilities or the underlying property; and
(c) any and all Adverse Consequences related to or arising
from the Excluded Liabilities.
9.2 INDEMNIFICATION OF SELLER INDEMNITEES. Buyer agrees to indemnify
and hold the Seller Indemnitees (as defined below) harmless from and against:
(a) any and all Adverse Consequences resulting from any
misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of Buyer under the terms of this Agreement;
(b) any and all Adverse Consequences related to or arising
from the Assumed Liabilities; and
(c) any and all Adverse Consequences arising as a result of
the ownership of the Assets and/or the use and operation of the Assets
from and after the Closing Date.
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9.3 METHOD OF ASSERTING CLAIMS, ETC. The items listed in Section 9.1
and Section 9.2 are sometimes collectively referred to herein as "DAMAGES";
PROVIDED that such reference shall be understood to mean the respective damages
from and against which Buyer and its affiliates and their respective
subsidiaries, officers, directors, stockholders, agents and attorneys (the
"BUYER INDEMNITEES") or Seller and its respective officers, directors, agents
and attorneys (the "SELLER INDEMNITEES"), as the case may be, are indemnified as
the context requires. The person claiming indemnification hereunder, whether a
Buyer Indemnitee or a Seller Indemnitee, is sometimes referred to as the
"INDEMNIFIED PARTY" and the party against whom such claims are asserted
hereunder is sometimes referred to as the "INDEMNIFYING PARTY". All claims for
indemnification by an Indemnified Party under Section 9.1 or Section 9.2 hereof,
as the case may be, shall be asserted and resolved as follows:
(a) If any claim or demand for which an Indemnifying Party
would be liable for Damages to an Indemnified Party hereunder is overtly
asserted against or sought to be collected from such Indemnified Party
by a third party (a "THIRD PARTY CLAIM"), such Indemnified Party shall
with reasonable promptness (but in no event later than thirty (30) days
after the Third Party Claim is so asserted or sought against the
Indemnified Party) notify in writing the Indemnifying Party of such
Third Party Claim enclosing a copy of all papers served, if any, and
specifying the nature of and specific basis for such Third Party Claim
and the amount or the estimated amount thereof to the extent then
feasible, which estimate shall not be conclusive of the final amount of
such Third Party Claim (the "CLAIM NOTICE"). For this purpose the
commencement of any audit or other investigation respecting Taxes shall
constitute a Third Party Claim. Notwithstanding the foregoing, failure
to so provide a Claim Notice as provided above shall not relieve the
Indemnifying Party from its obligation to indemnify the Indemnified
Party with respect to any such Third Party Claim except to the extent
that a failure to so notify the Indemnifying Party in reasonably
sufficient time prejudices the Indemnifying Party's ability to defend
against the Third Party Claim. The Indemnifying Party shall have thirty
(30) days from delivery of the Claim Notice (the "NOTICE PERIOD") to
notify the Indemnified Party (i) whether or not the Indemnifying Party
disputes the liability of the Indemnifying Party to the Indemnified
Party hereunder with respect to such Third Party Claim and (ii) whether
or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such
Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party does not dispute
its liability to the Indemnified Party and that the Indemnifying Party
desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Article 9, then the Indemnifying Party shall have
the right to defend, at its sole cost and expense, such Third Party
Claim by all appropriate proceedings, which proceedings shall be
diligently prosecuted by the Indemnifying Party to a final conclusion or
settled at the discretion of the Indemnifying Party (but only if the
Indemnifying Party is liable hereunder to the Indemnified Party for the
full amount of, and all obligations under, such settlement; otherwise,
no such settlement shall be agreed to without the prior written consent
of the Indemnified Party). If the Indemnifying Party is liable hereunder
to the Indemnified Party for the full amount of such Third Party Claim,
the Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; PROVIDED,
HOWEVER, that the Indemnified
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Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party is actually
entitled to indemnification hereunder or if the Indemnifying Party
assumes the defense with respect to the Third Party Claim as permitted
hereunder), to file during the Notice Period any motion, answer or other
pleadings which the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party
and not prejudicial to the Indemnifying Party (it being understood and
agreed that if an Indemnified Party takes any such action which is
prejudicial and conclusively causes a final adjudication which is
adverse to the Indemnifying Party, the Indemnifying Party shall be
relieved of its obligations hereunder with respect to such Third Party
Claim); and PROVIDED FURTHER, that if requested by the Indemnifying
Party, the Indemnified Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim which the Indemnifying Party
elects to contest, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any
person. The Indemnified Party may participate in, but not control
(except if the Indemnifying Party is not liable hereunder to the
Indemnified Party for the full amount of such Third Party Claim, in
which case whichever of the Indemnifying Party or the Indemnified Party
is liable for the largest amount of Damages with respect to the Third
Party Claim shall control), any defense or settlement of any Third Party
Claim with respect to which the Indemnifying Party is participating
pursuant to this Section 9.3(b), and except as provided in the preceding
sentence, the Indemnified Party shall bear its own costs and expenses
with respect to such participation.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the Indemnifying Party
does not dispute its liability to the Indemnified Party and that the
Indemnifying Party desires to defend the Indemnified Party pursuant to
this Article 9, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be promptly and vigorously prosecuted by the Indemnified Party to
a final conclusion or settled. The Indemnified Party shall have full
control of such defense and proceedings, including any compromise or
settlement thereof; PROVIDED, HOWEVER, that if requested by the
Indemnified Party, the Indemnifying Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting, or, if appropriate and related to the
Third Party Claim in question, in making any counterclaim against the
person asserting the Third Party Claim, or any cross-complaint against
any person. Notwithstanding the foregoing provisions of this Section
9.3(c), if the Indemnifying Party has timely notified the Indemnified
Party that the Indemnifying Party disputes its liability to the
Indemnified Party and if such dispute is resolved in favor of the
Indemnifying Party by final, nonappealable order of a court of competent
jurisdiction, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this
Section 9.3(c) or of the Indemnifying Party's participation therein at
the Indemnified Party's request and the Indemnified Party shall
reimburse the Indemnifying Party in full for all costs and expenses of
such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party
pursuant to this
25
Section 9.3(c) (other than a dispute as to the Indemnifying Party's
liability to the Indemnified Party) and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(d) If any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a Third Party Claim,
the Indemnified Party shall notify the Indemnifying Party of such claim
by the Indemnified Party, specifying the nature of and specific basis
for such claim and the amount of the estimated amount of such claim (the
"INDEMNITY NOTICE"). If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days from delivery of the Indemnity
Notice that the Indemnifying Party disputes such claim, the amount or
estimated amount of such claim as specified by the Indemnified Party
shall be conclusively deemed a liability of the Indemnifying Party. If
the Indemnifying Party has timely disputed such claim, as provided
above, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction or as the parties otherwise at such time
agree.
9.4 PAYMENT OF INDEMNITY. Any indemnity claim shall be paid in cash
by the Indemnifying Party to or on behalf of the appropriate Indemnified Party;
provided, however, no claim for indemnification under Section 9.1(a) or (b)
shall be brought unless the Damages suffered by the Indemnified Party exceed
$25,000. Except for claims for Damages related to the Excluded Liabilities set
forth in Section 1.2(b), (c), (d) and (e), no claim shall be brought for
indemnification after the expiration of the Holdback Period and the aggregate of
all indemnity claims brought against Seller shall not exceed the Holdback
Amount.
9.5 ADVERSE CONSEQUENCES. As used in this Agreement, the term
"ADVERSE CONSEQUENCES" shall mean actions, claims, suits, debts, liabilities,
obligations, losses, costs, deficiencies, penalties, fines, expenses and other
judgments (at equity or in law) and damages whenever arising or incurred,
including without limitation, amounts paid in settlement and reasonable
attorneys fees and expenses.
ARTICLE 10
NOTICES
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received, if so given) by personal delivery, telegram, telecopy,
telex, registered or certified mail, postage prepaid, return receipt requested
or a nationally recognized overnight courier to the parties at the following
addresses:
If to Seller, to:
Newbridge Corporation
14681 Midway Road, Suite 210
Addison, Texas 75001
Attention: Mr. Blayne Lequeux
26
With a copy to:
Jones Day
2727 North Harwood Street
Dallas, Texas 75201
Attention: Sally L. Crawford
If to Buyer, to:
Docucorp International, Inc.
5910 N. Central Expressway
Suite 800
Dallas, Texas 75206
Attention: Michael D. Andereck, CEO
With a copy to:
Hallett & Perrin
2001 Bryan Street, Suite 3900
Dallas, Texas 75201
Attention: Bruce H. Hallett
Any party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new address, but
no such notice shall be deemed to have been given until it is actually received
by the party sought to be charged with the contents.
ARTICLE 11
MISCELLANEOUS
11.1 INCORPORATION OF SCHEDULES; ENTIRE AGREEMENT. The Schedules
attached hereto are an integral part of this Agreement and are incorporated
herein by this reference and the specific references thereto contained herein.
This Agreement supersedes all prior discussions and agreements among the parties
with respect to the subject matter of this Agreement, and this Agreement,
including the Schedules hereto to be delivered in connection herewith, contains
the sole and entire agreement among the parties hereto with respect to the
subject matter hereof.
11.2 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof; such waiver
shall be in writing and shall be executed by the chairman, president or a vice
president of each of the parties as applicable. A waiver on one occasion shall
not be deemed to be a waiver of the same or any other matter on a future
occasion.
11.3 AMENDMENT. This Agreement may be modified or amended only by a
writing duly executed by or on behalf of all the parties hereto.
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11.4 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
11.5 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 GOVERNING LAW. Except as otherwise provided herein, this
Agreement and all rights and obligations hereunder, including matters of
construction, validity and performance shall be governed by the laws of the
State of Texas without giving effect to the principles of conflicts of laws
thereof.
11.7 RISK OF LOSS. The risk of any loss, damage, impairment,
confiscation or condemnation of the Assets or any part thereof shall be upon
Seller at all times before the Closing Date.
11.8 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns;
PROVIDED, HOWEVER, that this Agreement or any right or part hereunder shall not
be voluntarily assigned by either party hereto without the prior written consent
of the other party hereto, except that Buyer may assign its rights and
obligations hereunder to a wholly owned, direct or indirect, subsidiary of
Buyer.
11.9 EXPENSES. Seller shall pay its own legal and other professional
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, the expenses of legal
counsel and accountants engaged by them. Buyer shall be responsible for expenses
of legal counsel engaged by the Buyer, the expenses of its due diligence review
(including expenses of any building and machinery inspections) and other
expenses incurred by Buyer in connection herewith and not expressly allocated
hereunder.
11.10 FURTHER ASSURANCES. Seller, on the one hand, and Buyer, on the
other hand, at any time after the Closing Date, will promptly execute,
acknowledge and deliver any further deeds, assignments, conveyances and other
assurances, documents and instruments of transfer, reasonably requested by the
other parties and necessary to comply with the representations, warranties and
covenants contained herein and will take any action consistent with the terms of
this Agreement that may reasonably be requested by the other parties for the
purpose of assigning, transferring, granting, conveying, vesting and confirming
ownership in or to Buyer, or reducing to Buyer's possession, any or all of the
Assets or effecting the assumption of the Assumed Liabilities.
11.11 NO THIRD PARTY BENEFICIARY. Any agreement to perform any
obligation or pay any amount and any assumption of any obligation herein
contained, express or implied, shall be only for the benefit of the parties
hereto and their respective successors and permitted assigns as expressly
permitted in this Agreement, and such agreements and assumptions shall not inure
to the benefit of any obligee, whomever, it being the intention of the
undersigned that no one shall be or be deemed to be a third party beneficiary of
this Agreement other than parties that may have a right to indemnification under
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
BUYER:
Docucorp International, Inc.,
a Delaware corporation
By:
------------------------------------
Michael D. Andereck
Chief Executive Officer
SELLER:
Newbridge Corporation
a Texas corporation
By:
---------------------------------------
Blayne S. Lequeux
President and Chief Executive Officer
29