EXHIBIT 2
ASSET PURCHASE AGREEMENT
by and between
CommercialWare, Inc., a Delaware corporation,
and
ASA International Ltd., a Delaware corporation
Dated as of March 3, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I....................................................................1
PURCHASE AND SALE OF ASSETS................................................1
SECTION 1.1 DEFINITION..................................................1
SECTION 1.2 DESCRIPTION OF ASSETS TO BE ACQUIRED........................1
SECTION 1.3 NON-ASSIGNMENT OR SUBCONTRACTING OF CERTAIN ASSETS..........2
SECTION 1.4 EXCLUDED ASSETS.............................................2
SECTION 1.5 CUSTOMER INTANGIBLES........................................2
ARTICLE II...................................................................3
LIABILITIES OF SELLER......................................................3
SECTION 2.1 ASSUMPTION OF LIABILITIES...................................3
SECTION 2.2 LIABILITIES NOT ASSUMED.....................................3
ARTICLE III..................................................................3
PURCHASE PRICE.............................................................3
SECTION 3.1 CONSIDERATION...............................................3
SECTION 3.2 PAYMENT OF PURCHASE PRICE...................................3
SECTION 3.3 POST-CLOSING ADJUSTMENT TO PURCHASE PRICE...................4
SECTION 3.4 SECURITY....................................................4
SECTION 3.5 ALLOCATION OF PURCHASE PRICE................................4
ARTICLE IV...................................................................4
REPRESENTATIONS AND WARRANTIES OF PURCHASER................................4
SECTION 4.1 ORGANIZATION................................................4
SECTION 4.2 AUTHORIZATION...............................................5
SECTION 4.3 CAPITALIZATION OF PURCHASER.................................5
SECTION 4.4 NO BREACH OR VIOLATION......................................5
SECTION 4.5 BROKERS.....................................................5
SECTION 4.6 LITIGATION..................................................5
ARTICLE V....................................................................6
REPRESENTATIONS AND WARRANTIES OF SELLER...................................6
SECTION 5.1 ORGANIZATION; GOOD STANDING; POWER..........................6
SECTION 5.2 AUTHORIZATION OF SELLER.....................................6
SECTION 5.3 FINANCIAL STATEMENTS........................................6
SECTION 5.4 ABSENCE OF CERTAIN CHANGES AND EVENTS.......................6
SECTION 5.5 UNDISCLOSED LIABILITIES.....................................7
SECTION 5.6 ACCOUNTS RECEIVABLE.........................................7
SECTION 5.7 INVENTORY...................................................7
SECTION 5.8 TITLE TO ASSETS.............................................8
SECTION 5.9. TAXES.......................................................8
SECTION 5.10 COMPLIANCE WITH LAWS........................................8
SECTION 5.11 CONSENTS....................................................8
SECTION 5.12 INTELLECTUAL PROPERTY.......................................9
SECTION 5.13 CONTRACTS..................................................10
SECTION 5.14 LITIGATION.................................................10
SECTION 5.15 NO BREACH OR VIOLATION.....................................10
SECTION 5.16 BROKERS....................................................11
SECTION 5.17 ENVIRONMENTAL MATTERS......................................11
SECTION 5.18 SUFFICIENCY OF ASSETS......................................11
SECTION 5.19 PRODUCT WARRANTIES AND PRODUCT LIABILITY...................11
SECTION 5.20 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.......................11
SECTION 5.21 INSURANCE..................................................13
SECTION 5.22 FULL DISCLOSURE............................................13
ARTICLE VI..................................................................13
COVENANTS.................................................................13
SECTION 6.1 MAINTENANCE OF BUSINESS....................................13
SECTION 6.2 ACCESS TO INFORMATION......................................13
SECTION 6.3 CONFIDENTIALITY............................................14
SECTION 6.4 CONSENTS...................................................14
SECTION 6.5 RECEIVABLES PAYMENTS.......................................14
SECTION 6.6 NOTIFICATION OF CERTAIN MATTERS............................14
SECTION 6.7 FURTHER ACTION.............................................14
SECTION 6.8 COVENANTS AGAINST DISCLOSURE...............................15
SECTION 6.9 USE OF NAME................................................15
SECTION 6.10 MEDICAL AND DENTAL INSURANCE...............................15
ARTICLE VII.................................................................15
CLOSING...................................................................15
SECTION 7.1 TIME OF CLOSING............................................15
SECTION 7.2 DELIVERIES BY SELLER.......................................15
SECTION 7.3 DELIVERIES BY PURCHASER....................................16
SECTION 7.4 FURTHER ASSURANCES.........................................16
ARTICLE VIII................................................................16
CONDITIONS PRECEDENT TO OBLIGATIONS.......................................16
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER.....................16
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLER........................17
ARTICLE IX..................................................................19
INDEMNIFICATION...........................................................19
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS............................................19
SECTION 9.2 INDEMNIFICATION............................................19
SECTION 9.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
THIRD-PARTY CLAIMS........................................19
SECTION 9.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
NON-THIRD PARTY CLAIMS....................................20
SECTION 9.5 LIMITATIONS................................................20
SECTION 9.6 SET-OFF AGAINST NOTE.......................................21
SECTION 9.7 ARBITRATION................................................21
ARTICLE X...................................................................21
RESTRICTIVE COVENANT......................................................21
SECTION 10.1 SCOPE......................................................21
SECTION 10.2 INJUNCTIVE RELIEF..........................................22
SECTION 10.3 OTHER REMEDIES.............................................22
SECTION 10.4 MODIFY.....................................................22
ARTICLE XI..................................................................22
TERMINATION AND ABANDONMENT...............................................22
SECTION 11.1 TERMINATION................................................22
SECTION 11.2 PROCEDURE AND CONSEQUENCES OF TERMINATION..................23
ARTICLE XII.................................................................23
MISCELLANEOUS PROVISIONS..................................................23
SECTION 12.1 NOTICE.....................................................23
SECTION 12.2 ENTIRE AGREEMENT...........................................23
SECTION 12.3 BINDING EFFECT; ASSIGNMENT.................................24
SECTION 12.4 EXPENSES OF TRANSACTION; TAXES.............................24
SECTION 12.5 WAIVER; CONSENT............................................24
SECTION 12.6 THIRD-PARTY BENEFICIARIES..................................24
SECTION 12.7 COUNTERPARTS...............................................24
SECTION 12.8 SEVERABILITY...............................................24
SECTION 12.9 GOVERNING LAW..............................................24
SECTION 12.10 ATTORNEYS' FEES............................................25
SECTION 12.11 COOPERATION AND RECORDS RETENTION..........................25
SECTION 12.12 ARBITRATION................................................25
EXHIBITS
AA Purchaser's Amended and Restated Certificate of Incorporation
A Form of Shareholders Agreement
BB Form of Junior Promissory Note
B Form of Promissory Note
C Form of Security Agreement
D Xxxx of Sale
E Opinion of Stroock & Stroock & Xxxxx LLP
F Form of Assignment and Assumption Agreement
G Opinion of Xxxxxxx Xxxxxx Xxxx & Ball, P.C.
H Form of Sublease
SCHEDULES
1.2(a) List of Equipment
1.2(b) List of Inventory
1.2(c) List of Contracts
1.2(d) List of Intellectual Property
1.2(e) List of Accounts Receivable
2.1 Assumed Liabilities
3.5 Purchase Price Allocation
5 Disclosure Schedule
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of March 3, 1999 by and between
CommercialWare, Inc., a Delaware corporation ("Purchaser"), and ASA
International Ltd., a Delaware corporation ("Seller").
WHEREAS, Seller is engaged in, among other things, the business of
designing, manufacturing, marketing, selling and servicing computer software
systems for the catalogue direct marketing industry through the Seller's
CommercialWare division (the "Business"); and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires
to transfer to Purchaser the Assets set forth on the Schedules described under
Section 1.1 below, upon the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 DEFINITION. The assets, properties, and rights to be
conveyed, sold, transferred, assigned and delivered to Purchaser pursuant to
Section 1.2 are sometimes hereinafter collectively referred to as the "Assets."
SECTION 1.2 DESCRIPTION OF ASSETS TO BE ACQUIRED. Upon the terms and
subject to the conditions set forth in this Agreement, at the Time of Closing
(as defined in Section 7.1), Seller agrees to convey, sell, transfer, assign,
and deliver to Purchaser, and Purchaser shall purchase from Seller, all rights,
title, and interest of Seller at the Time of Closing in and certain assets,
properties, and rights of Seller which are used primarily in connection with the
Business as set forth below (but excluding the "Excluded Assets," as such term
is defined in Section 1.4 below):
(a) All interests in machinery, equipment, instruments, computer
hardware and software, tooling, hardware and software design libraries, designs,
drawings, blueprint specification sheets, layouts, advertising and promotional
materials, furniture, fixtures, supplies, repair and maintenance parts,
demonstration units and other fixed assets, used primarily in connection with
the Business and specifically listed on SCHEDULE 1.2(A) hereto;
(b) All inventories of raw materials, works-in-process, component
parts, finished goods and supplies, used primarily in connection with the
Business and specifically listed on SCHEDULE 1.2(B) hereto (collectively, the
"Inventory");
(c) All claims and rights under those agreements, contracts, licenses,
leases, franchises, instruments, documents, purchase and sale orders and other
executory commitments related primarily to the Business and specifically listed
on SCHEDULE 1.2(C) hereto (collectively, the "Contracts");
(d) All trademarks, trademark rights, service marks, service xxxx
rights, copyrights, trade names, trade name rights, fictitious business names,
the rights to the name "CommercialWare" and all variants thereof, works of
authorship, inventions, industrial models, industrial designs, utility models
and certificates of invention, designs, emblems and logos, trade secrets,
know-how, manufacturing formulae, technical information, mask work
registrations, inventions, franchises, franchise rights, supplier lists together
with the goodwill associated therewith and other proprietary rights used
primarily in connection with the Business and specifically listed on SCHEDULE
1.2(D) hereto (collectively, the "Intellectual Property");
(e) All accounts receivable of Seller related to the Business and
specifically listed on SCHEDULE 1.2(E) hereto (collectively, the "Accounts
Receivable");
(f) Copies of books, sales invoices, purchase orders and all other
records which relate to or document the Assets (the "Records"); and
(g) All goodwill of the Business (the "Goodwill").
SECTION 1.3 NON-ASSIGNMENT OR SUBCONTRACTING OF CERTAIN ASSETS.
Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment or subcontracting hereunder of any of the Assets shall require
the consent of any other party (or in the event that any of the same shall be
nonassignable or unable to be subcontracted), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or
subcontract or an agreement to assign or subcontract if such assignment or
subcontract or attempted assignment or subcontract would constitute a breach
thereof or result in the loss or diminution thereof, provided, however, that in
each such case, Seller shall use its reasonable commercial efforts to obtain the
consent of such other party to an assignment to Purchaser. If such consent is
not obtained by the Time of Closing, Seller shall cooperate with Purchaser in
any arrangement designed for Purchaser to perform Seller's obligations with
respect to such Asset after the Time of Closing and for Purchaser to receive the
benefits under any such Asset after the Time of Closing, which arrangements may
include enforcement, for the account and benefit of Purchaser of any and all
rights of Seller against any other person arising out of the breach or
cancellation by such other person or otherwise, all of such actions of Seller to
be at the direction and expense of Purchaser.
SECTION 1.4 EXCLUDED ASSETS. Notwithstanding anything to the contrary
set forth in this Agreement, the assets to be transferred to Purchaser pursuant
to this Agreement shall not include any cash or marketable securities as of
January 1, 1999, prepaid taxes or insurance policies, or the Customer
Intangibles, as defined in Section 1.5 below (collectively, the "Excluded
Assets").
SECTION 1.5 CUSTOMER INTANGIBLES. Seller hereby grants to Purchaser an
exclusive, royalty-free, and worldwide license and right to use the Customer
Intangibles in the conduct of the Business, which rights may be sublicensed or
transferred by Purchaser, for a period of ten (10) years beginning on the Time
of Closing (the "License"). In exchange for such License, the Purchaser shall
pay to the Seller a license fee of $300,000, payable $100,000 on each of the
first three anniversaries of the time of Closing (the "License Fee"). During the
term of the License, the Seller shall not use or grant to any other party the
right to use the Customer Intangibles for any purpose which involves the
marketing or sale of computer products or services for the catalogue direct
marketing industry. At the end of the term of the License, the Purchaser shall
have the right to acquire all of Seller's right, title and interest in and to
the Customer Intangibles for a cash payment equal to the fair market value of
the Customer Intangibles on such date, as determined by an appraiser selected by
the Purchaser. For purposes of this Agreement, "Customer Intangibles" shall mean
any and all information regarding the composition, with respect to the Business,
of the customer market, market share, and any other value resulting from the
future provision of goods or services pursuant to relationships with customers
(contractual or otherwise) in the ordinary course of business, including but not
limited to the customer list of the Business.
ARTICLE II
LIABILITIES OF SELLER
SECTION 2.1 ASSUMPTION OF LIABILITIES. Purchaser hereby agrees to
assume, satisfy, or perform when due those current liabilities and obligations
of Seller arising out of or related to the Business (except for liabilities to
the Seller or its subsidiaries) which are listed on the Seller Financial
Statements (as defined below) or on SCHEDULE 2.1 hereto, and (a) are or were
incurred by the Business in the ordinary course of business or (b) arose under
Contracts, including but not limited to all warranty, support and training
obligations and other commitments to customers, vendors and employees of the
Business (collectively, the "Assumed Liabilities").
SECTION 2.2 LIABILITIES NOT ASSUMED. Other than the Assumed
Liabilities, Purchaser shall not assume any liabilities, whether such
liabilities are contingent or otherwise, of Seller in existence on or prior to
the Time of Closing (collectively, the "Excluded Liabilities"). All Excluded
Liabilities shall be retained and paid or discharged by the Seller when due.
Specifically, but not by way of limitation, the Excluded Liabilities shall
include any claims (i) of infringement of a third party's intellectual property
or (ii) arising out of the employment of any individual by the Business (other
than current liabilities incurred in the ordinary course of business such as for
wages and benefits), in each case to the extent that such claims arise out of
the Seller's operation of the Business prior to the Closing.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 CONSIDERATION. Upon the terms and subject to the
conditions contained in this Agreement, in consideration for the Assets and in
full payment therefor, Purchaser will pay, or cause to be paid, the purchase
price set forth in Section 3.2 to Seller.
SECTION 3.2 PAYMENT OF PURCHASE PRICE.
(a) The purchase price ("Purchase Price") to be paid or payable by
Purchaser to Seller for the Assets shall consist of the following: (i) cash in
the amount of Four Million Dollars ($4,000,000) to be paid at the Closing by
certified check or wire transfer (the "Cash Portion of the Purchase Price"),
(ii) a promissory note in the amount of One Million Seven Hundred Thousand
Dollars ($1,700,000) (the "Note"), (iii) a promissory note in the amount of Five
Hundred Thousand Dollars ($500,000) (the "Junior Note"), (iv) 30,000 shares of
the Purchaser's common stock, par value $.01 per share (the "Common Stock"), and
(v) one (1) share of the Purchaser's Series A Preferred Stock (the "Preferred
Stock").
(b) The Common Stock and Preferred Stock shall have rights and
preferences as set forth in Purchaser's Amended and Restated Certificate of
Incorporation, a copy of which is attached hereto as EXHIBIT AA. The shares of
Common Stock and Preferred Stock to be issued pursuant to clauses (iv) and (v)
of the foregoing paragraph shall represent 10% of the issued and outstanding
capital stock of Purchaser on a fully-diluted basis, in accordance with the
shareholder agreement to be entered into by Purchaser, Seller and certain other
parties in the form annexed hereto as EXHIBIT A (the "Shareholder Agreement").
The Junior Note shall be in the form annexed hereto as EXHIBIT BB, and the Note
shall be in the form annexed hereto as EXHIBIT B. The principal amount of the
Note is subject to adjustment pursuant to Section 3.3 hereof.
SECTION 3.3 POST-CLOSING ADJUSTMENT TO PURCHASE Price. As soon as
possible after the Time of Closing but in no event later than thirty (30)
calendar days thereafter, Purchaser shall prepare and deliver to Seller, at
Purchaser's expense, audited financial statements for the Business for the year
ended December 31, 1998 (the "Audited Financial Statements"). Such Audited
Financial Statements shall be prepared in a manner consistent with the
principles, practices and procedures used in the preparation of the Seller
Financial Statements set forth in Section 5.3 below. The principal amount of the
Note shall be reduced to the extent that such Audited Financial Statements
require, in accordance with generally accepted accounting principles, a
restatement of the Seller Financial Statements for the nine-months ended
September 30, 1998, which restatement results in a material adverse change to
such Seller Financial Statements; provided, however, that such adjustment shall
first be subject to the limitation set forth in Section 9.5(a) hereof.
SECTION 3.4 SECURITY. The Note and the License Fee shall be secured by
a first lien and security interest in all of the Intellectual Property and any
intellectual property hereafter developed or acquired by the Purchaser, pursuant
to a Security Agreement in the form annexed hereto as EXHIBIT C.
SECTION 3.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated by the parties following the Time of Closing in accordance with
SCHEDULE 3.5 hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
SECTION 4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good corporate standing under the laws of the State of
Delaware.
SECTION 4.2 AUTHORIZATION. Purchaser has full power and authority to
enter into this Agreement, the Note, the Security Agreement, the Shareholder
Agreement (the Note, the Security Agreement and the Shareholder Agreement are
referred to herein as the "Related Agreements"), to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. Purchaser has taken all necessary and appropriate action with
respect to the execution and delivery of this Agreement, the Closing Documents
(as defined below) and the Related Agreements, and each of this Agreement and
the Related Agreements constitutes valid and binding obligations of Purchaser,
enforceable in accordance with their respective terms except as limited by
applicable bankruptcy, insolvency, moratorium, reorganization, or other laws
affecting creditors' rights and remedies generally, by general principles of
equity regardless of whether such enforcement is considered in a proceeding in
equity or at law, and except as the indemnification provisions contained in this
Agreement may be limited by principles of public policy.
SECTION 4.3 CAPITALIZATION OF PURCHASER. The authorized capital stock
of Purchaser consists of 1,000,000 shares of Common Stock and 100 shares of
Series A Preferred Stock, of which 290,722 shares of Common Stock and One (1)
share of Series A Preferred Stock will be issued and outstanding immediately
following the Time of Closing, and there are, and will be, immediately following
the Time of Closing, no other shares of capital stock outstanding or any
warrants, options or other rights to acquire capital stock of the Purchaser
outstanding.
SECTION 4.4 NO BREACH OR VIOLATION. Neither the execution and delivery
of this Agreement or the Related Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, or result in
a violation or breach of, or constitute a default under, any provision of
Purchaser's charter or bylaws, or any contract, indenture, mortgage, lease,
agreement, instrument, commitment or other arrangement to which Purchaser is a
party or by which Purchaser or Purchaser's properties are bound; (ii) violate
any judgment, order, permit, license, injunction, writ, decree or award of any
court or any governmental or regulatory authority or administrative agency
against, or binding upon, Purchaser or upon Purchaser's assets or properties; or
(iii) constitute a violation by Purchaser of any statute, law, rule, ordinance
or regulation of any governmental or regulatory authority or administrative
agency.
SECTION 4.5 BROKERS. Purchaser has not incurred any liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions
with respect to the transactions contemplated by this Agreement.
SECTION 4.6 LITIGATION. There are no claims, suits, actions or legal,
administrative, arbitration or other proceedings or investigations pending or,
to Purchaser's knowledge, threatened by, against or affecting Purchaser or any
of Purchaser's properties or assets or against or affecting any of Purchaser's
officers or directors, which could affect the ability or the right of Purchaser
to complete the transactions contemplated by this Agreement or the Related
Agreements or to fulfill Purchaser's obligations hereunder or thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in a letter specifically referring to this Article
V (the "Disclosure Letter") delivered by Seller to Purchaser and attached hereto
as SCHEDULE 5, Seller hereby represents and warrants to Purchaser that:
SECTION 5.1 ORGANIZATION; GOOD STANDING; POWER. Seller is a
corporation duly organized, validly existing and in good corporate standing
under the laws the State of Delaware, and has the corporate power and authority
to own, lease, and operate its properties and to carry on its businesses
(including, without limitation, the Business) as the same are now being
conducted. Seller is qualified as a foreign corporation and is in good corporate
standing in such other jurisdictions, set forth in the Disclosure Letter, in
which the conduct of its business or its ownership or leasing of its property
requires such qualification, except where the failure to so qualify would not be
materially adverse to the business of the Seller taken as a whole.
SECTION 5.2 AUTHORIZATION OF SELLER. Seller has full corporate power
and authority to enter into this Agreement and the Related Agreements, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby, including, without limitation, the
execution and delivery of this Agreement, the Related Agreements, general
conveyances, bills of sale, assignments, and other documents and instruments
evidencing the conveyance of the Assets or delivered in accordance with Section
7.2 and 7.3 hereunder (the "Closing Documents") and the Related Agreements.
Seller has taken all necessary and appropriate corporate action with respect to
the execution and delivery of this Agreement, the Closing Documents, and the
Related Agreements to which it is a party. This Agreement and the Related
Agreements constitute valid and binding obligations of Seller, enforceable in
accordance with their respective terms except as limited by applicable
bankruptcy, insolvency, moratorium, reorganization, or other laws affecting
creditors' rights and remedies generally, by general principles of equity
regardless of whether such enforcement is considered in a proceeding in equity
or at law, and except as the indemnification provisions contained in this
Agreement may be limited by principles of public policy.
SECTION 5.3 FINANCIAL STATEMENTS. The unaudited financial statements
of the Business as of September 30, 1998 and December 31, 1998 provided to
Purchaser (the "Seller Financial Statements") were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly presented the consolidated financial
position of the Business as at the date thereof and the results of its
operations and cash flows for the periods indicated, except that the financial
statements are unaudited and are subject to normal and recurring year end
adjustments which were not or are not expected to be material in amount.
SECTION 5.4 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since September 30,
1998, there has not been, with respect to the Business and the Assets:
(a) Any event, including, without limitation, fire, explosion,
accident, requisition or taking of property by any governmental agency, flood,
drought, earthquake, or other natural event, riot, act of God or a public enemy,
or damage, destruction, or other casualty, whether covered by insurance or not,
which has had a material adverse effect on the Assets;
(b) Any, mortgage, pledge, lien, security interest, hypothecation,
charge, or other encumbrance imposed or agreed to be imposed on or with respect
to the Assets other than liens arising with respect to taxes not yet due and
payable;
(c) Any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of any of the Assets, other than sales, leases, or
dispositions in the usual and ordinary course of business;
(d) Any modification, waiver, change, amendment, release, rescission,
accord and satisfaction, or termination of, or with respect to, any material
term, condition, or provision of any material contract, agreement, license, or
other instrument to which Seller is a party and relating to the Business or the
Assets, other than any satisfaction by performance in accordance with the terms
thereof in the usual and ordinary course of business;
(e) Any labor disputes or disturbances materially affecting in an
adverse manner the Business, including, without limitation, the filing of any
petition or charge of unfair labor practices with the National Labor Relations
Board;
(f) Any increase in the compensation payable or to become payable by
the Seller to any salaried employees of the Business, or in any insurance,
pension, or other benefits plan, payment or arrangement made for, to or with any
of such salaried employees, except in the ordinary course of business;
(g) Any material contract or other agreement entered into or any
material transaction affecting the Business consummated, except in the ordinary
course of business; or
(h) Any material adverse change in the financial condition or
operation of the Business, or any other event or condition of any character
which materially adversely affects the Assets or the Business.
SECTION 5.5 UNDISCLOSED LIABILITIES. There are no material debts,
liabilities or obligations, direct or indirect, with respect to the Business or
to which the Assets are subject, liquidated, unliquidated, accrued, absolute,
contingent, or otherwise, that are not specifically identified in the Seller
Financial Statements, SCHEDULE 2.1 or the Disclosure Letter.
SECTION 5.6 ACCOUNTS RECEIVABLE. The Accounts Receivable are valid,
genuine and existing, arose or will arise in the ordinary course of business,
and, to Seller's knowledge, are collectible at their recorded amounts (net of
any reserves set forth in the Seller Financial Statements or the Disclosure
Letter).
SECTION 5.7 INVENTORY. The Inventory consists of items that are or
upon delivery to Purchaser will be good and merchantable and to Seller's
knowledge are saleable in the ordinary course of business, subject to any
reserves set forth in the Seller Financial Statements or the Disclosure Letter.
SECTION 5.8 TITLE TO ASSETS. Seller has good, valid and marketable
title to the Assets, free and clear of all mortgages, liens, charges, security
interests or other encumbrances of any nature whatsoever except for liens for
current taxes not delinquent, liens imposed by operation of law and liens
incurred in the ordinary course of business, which in any case do not materially
impair the Assets or detract from the Business.
SECTION 5.9. TAXES. With respect to the Business, all taxes due or
payable by Seller, and all interest and penalties thereon, other than taxes
which are not yet due and payable or are being contested in good faith, have
been paid in full.
SECTION 5.10 COMPLIANCE WITH LAWS. Seller is in compliance in all
material respects with all applicable foreign, federal, state, and local laws,
statutes, licensing requirements, rules, and regulations, and judicial or
administrative decisions applicable to the Business where the failure to so
comply could have a material adverse effect on the Business or the Assets.
SECTION 5.11 CONSENTS. The execution and delivery of this Agreement by
the Seller do not, and the performance of this Agreement and the Related
Agreements by the Seller shall not (including the ability by Seller to transfer
the Assets free and clear of all liens and encumbrances of any kind or nature
whatsoever), require any consent approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, or any other third party.
SECTION 5.12 INTELLECTUAL PROPERTY.
(a) SCHEDULE 1.2(D) sets forth a true and complete list of all items
of Intellectual Property used primarily in the Business, and specifies, where
applicable, the jurisdictions in which each such Intellectual Property has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. The Business owns,
or is licensed or otherwise possesses valid rights to use all items of
Intellectual Property used in the Business. SCHEDULE 1.2(D) sets forth a
complete list of all material licenses, sublicenses and other agreements to
which the Business is a party and pursuant to which the Business or any other
person is authorized to use any Intellectual Property (excluding object code
end-user licenses granted to end-users in the ordinary course of business that
permit use of software products without a right to modify, distribute or
sublicense the same ("END-USER LICENSES")) or trade secret of the Business (and,
specifically designating the agreements pursuant to which any party is granted a
source code license by the Business), and includes the identity of all parties
thereto. The execution and delivery of this Agreement by the Seller, and the
consummation of the transactions contemplated hereby, will neither cause the
Business to be in violation or default under any such license, sublicense or
agreement, entitle any other party to any such license, sublicense or agreement
nor cause the release of the source code form of any item of Intellectual
Property to any third party.
(b) Except as set forth in SCHEDULE 1.2(D), there are no outstanding
options, licenses or agreements of any kind relating to any Intellectual
Property held by any third party (other than End-User Licenses), nor is the
Business bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trade secrets, know-how, processes, trademarks,
service marks, trade names, copyrights, licenses, information, proprietary
rights or other rights of any other person or entity.
(c) Except with respect to the persons set forth in SCHEDULE 1.2(D),
each item of such Intellectual Property has been created, conceived of, reduced
to practice or developed by employees or contractors of the Business who have
assigned their rights in such Intellectual Property to the Business. Except with
respect to the persons set forth in SCHEDULE 1.2(D), the Business has taken what
it believes to be reasonable actions to protect the confidentiality of the
confidential Intellectual Property and the enforceability of any trade secrets
with respect thereto, (the parties hereto agreeing that the failure of any of
the Business's employees to sign confidentiality agreements is not an
unreasonable action hereunder). In addition, the Business has taken steps
reasonably calculated to protect the confidentiality of other Intellectual
Property owned by the Business which are not generally available to the public
or customers of the business (the parties hereto agreeing that the failure of
any of the Business's employees to sign confidentiality agreements is not an
unreasonable action hereunder). Except as disclosed in the Disclosure Letter,
each employee of the Business has executed a proprietary information and
inventions agreement and a nondisclosure agreement substantially in the
Business's standard form.
(d) SCHEDULE 1.2(D) identifies each license, sublicense, agreement,
permission and right to use granted by a third party to the Business of any
Intellectual Property, other than end-user licenses related to "off the shelf"
commercial, business or engineering application software products not
incorporated in any way in any product licensed, sold, developed or being
developed by or for the Business ("THIRD PARTY Licenses"). The Seller has
provided Purchaser with copies of all Third Party Licenses. Except as disclosed
on SCHEDULE 1.2(D), the Business is not contractually liable, nor has it made
any contract or arrangement whereby it may become liable, to any Person for any
royalty or other consideration for the use of any Intellectual Property.
(e) To the Seller's knowledge, all computer software included in the
Intellectual Property is year 2000 compliant (that is, (i) it is capable, to the
extent called for, of correctly processing, providing and receiving data within
and between the 20th and 21st centuries (including accounting for all required
leap year calculations) and (ii) all date fields therein use four (4) digit year
fields).
(f) No claims with respect to the Intellectual Property have been
asserted to the Business or are, to the Seller's knowledge, threatened by any
person, (i) to the effect that the manufacture, sale, licensing or use of any of
the products of the Business infringes on any copyright, patent, trademark,
service xxxx, trade secret or other proprietary right, (ii) against the use by
the Business of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Business as currently conducted, or (iii) challenging
the ownership by the Business, validity or effectiveness of any of the
Intellectual Property. All registered trademarks, service marks and copyrights
held by the Business are valid and subsisting. To the Seller's knowledge, the
Business as currently conducted has not and does not infringe on any proprietary
right of any third party. To the Seller's knowledge, there is no unauthorized
use, infringement or misappropriation of any of the Intellectual Property by any
third party, including any employee or former employee of the Business. No
Intellectual Property or product of the Business is subject to any outstanding
decree, order, judgment, or stipulation restricting in any manner the licensing
thereof by the Business.
SECTION 5.13 CONTRACTS. Seller has performed all of its obligations
under the terms of each contract listed on SCHEDULE 1.2(C) to which it is a
party, and is not in default thereunder where such default could have a material
adverse impact on the Business or the Assets.
SECTION 5.14 LITIGATION. There are no claims, suits, actions, or
legal, administrative, arbitration or other proceedings or investigations
pending or, to Seller's knowledge, threatened against or affecting Seller
relating to the Business or involving the Assets, or which could affect the
ability or the right of Seller to complete the transactions contemplated by this
Agreement or the Related Agreements or to fulfill its obligations hereunder or
thereunder.
SECTION 5.15 NO BREACH OR VIOLATION. Neither the execution and
delivery of this Agreement or the Related Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, or result in
a violation or breach of, or constitute a default under, any provision of
Seller's charter or bylaws, or any contract, indenture, mortgage, lease,
agreement, instrument, commitment or other arrangement to which Seller is a
party or by which it or the Assets are bound; (ii) violate any judgment, order,
permit, license, injunction, writ, decree or award of any court or any
governmental or regulatory authority or administrative agency against, or
binding upon, Seller or the Assets; or (iii) constitute a violation by Seller of
any statute, law, rule, ordinance or regulation of any governmental or
regulatory authority or administrative agency.
SECTION 5.16 BROKERS. The Seller has not incurred any liability to any
broker or finder for any brokerage fees, finders' fees or commissions with
respect to the transactions contemplated by this Agreement.
SECTION 5.17 ENVIRONMENTAL MATTERS. With respect to the operation of
the Business, Seller, to its knowledge: (i) has obtained all applicable permits,
licenses and other authorizations which are required under federal, state or
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by Seller; (ii) is in compliance with all terms and
conditions of such required permits, licenses and authorization, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulations, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder; and
(iii) has no knowledge of any contaminated soil or groundwater at any of the
properties owned or operated, leased or previously owned or leased by Seller and
used in the Business.
SECTION 5.18 SUFFICIENCY OF ASSETS. The Assets (excluding the Excluded
Assets) include all the assets necessary to operate the Business in the same
manner as the Business was operated by Seller prior to the Closing.
SECTION 5.19 PRODUCT WARRANTIES AND PRODUCT Liability. Seller has
delivered to Purchaser copies of its warranty policies relating to any of
Seller's products related to the Business other than warranties or guarantees
implied by law. With respect to the Business, Seller is not aware of any claim
asserting (a) any damage, loss or injury caused by any product, or (b) any
breach of any express or implied product warranty or any other similar claim
with respect to any product other than standard warranty obligations (to
replace, repair or refund) made by Seller in the ordinary course of business
except for those claims that, if adversely determined against the Business,
would not have a material adverse change on the results of operations or
financial condition of the Business.
SECTION 5.20 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) The Disclosure Letter lists all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, for the benefit of,
or relating, to, any employee of the Business, (together, the "Employee Plans"),
and a copy of each such Employee Plan has been provided to Purchaser.
(b) (i) There has been no "prohibited transaction", as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Employee Plan, which could result in any material liability of the Seller;
(ii) all Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto, and the Seller has performed all material obligations required to be
performed by it under, and is not in any material respect in default under or
violation of, any of the Employee Plans.
(c) The Seller does not have any stated plan or commitment to
establish any new Employee Plan or modify any Employee Plan (except to the
extent required by law or to conform any such Employee Plan to the requirements
of any applicable law, or as required by this Agreement). Each such Employee
Plan which is intended to qualify under Section 401(a) of the Code, has received
(or an application has been filed to receive) a favorable determination letter
from the Internal Revenue Service with respect to such qualification. To the
Seller's knowledge, nothing has occurred since the date of the most recent such
determination letter that would cause such Employee Plan to lose its ability to
rely on such determination letter.
(d) No Employee Plan provides, or has any liability to provide, life
insurance, medical or other employee welfare benefits to any employee upon his
or her retirement or termination of employment for any reason, except as may be
required by statute.
(e) Except as set forth in the Disclosure Letter, the Business does
not have any employment contracts or consulting agreements currently in effect
that are not terminable at will (other than agreements with the sole purpose of
providing for the confidentiality of proprietary information or assignment of
inventions). A list of all employees, officers and consultants of the Business
and their current compensation (including salary, bonus or commission
arrangements or other contingencies) has previously been delivered to Purchaser.
To the knowledge of the Seller, no employee or consultant of the Business is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other contract or agreement, or any restrictive
covenant relating to the right of any such employee to be employed thereby, or
to use trade secrets or proprietary information of others, and the employment of
such employees does not subject Company to any liability.
(f) Except as set forth in the Disclosure Letter, the Seller, to the
extent it relates to the Business, (i) is in material compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, immigration or other laws governing
the employment of foreign nationals, terms and conditions of employment and
wages and hours, in each case, with respect to employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(g) To the extent it relates to the Business (i) no work stoppage or
labor strike against the Seller is pending or, to the knowledge of the Seller,
threatened; (ii) the Seller is not involved in or, to the knowledge of the
Seller, threatened with, any labor dispute, grievance, or litigation relating to
labor, safety or discrimination matters involving any employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in material liability to the Seller; (iii) the Seller, to its
knowledge, has not engaged in any unfair labor practices within the meaning of
the National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a liability to the Seller; and (iv) the Seller
is not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to employees and
no collective bargaining agreement is being negotiated by the Seller.
SECTION 5.21 INSURANCE. The Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Business.
SECTION 5.22 FULL DISCLOSURE. All documents and other papers delivered
by or on behalf of Seller in connection with this Agreement and the transactions
contemplated hereby are to the best of Seller's knowledge true, complete and
authentic. The information furnished by or on behalf of Seller to Purchaser in
connection with this Agreement and the transactions contemplated hereby does not
contain any untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements made, in the context in which
made, not false or misleading.
ARTICLE VI
COVENANTS
SECTION 6.1 MAINTENANCE OF BUSINESS. During the period from the date
hereof through the Time of Closing, Seller shall, with respect to the Business,
(i) not make or grant any increases in salary or other compensation or bonuses
to employees or terminate any employee (other than in the ordinary course of
business and consistent with past practice), (ii) maintain its employee work
force substantially at its present level and not make any adjustment in wages or
hours of work or enter into any union contract or adopt any new pension,
welfare, benefit or severance plan, other than such adjustments or plans which
apply to the Seller's employees generally, (iii) not make any disposition(s),
license(s) or acquisition(s) of rights, assets or properties other than in the
ordinary course of business and consistent with past practice, (iv) not make any
material capital expenditures (v) not enter into any material agreement(s) or
transaction(s), other than in the ordinary course of business and consistent
with past practice, without the prior written consent of the Purchaser, (vi) not
enter into any agreement(s) or transaction(s) with any person or entity who or
which is a stockholder, director, officer, associate or an affiliate of the
Seller, (vii) use its reasonable commercial efforts to preserve intact its
business organization and the goodwill of those persons/entities having business
relationships with it, and (viii) operate the Business in the ordinary course
and consistent with past practice, and (ix) provide cash necessary to operate
the Business until the Time of Closing; provided, however, that (A) any cash
available to the Business as of January 1, 1999 shall be an Excluded Asset as
set forth in Section 1.4 hereof, and (B) the Purchaser shall, at the Time of
Closing, repay to the Seller by certified check or wire transfer, any net cash
advanced to the Business by the Seller after January 1, 1999 (the "Operating
Cash").
SECTION 6.2 ACCESS TO INFORMATION. The Seller shall grant to the
Purchaser and its representatives access during business hours to all of its
books and records, properties and other assets relating to the Assets and/or the
Business. It is understood that all such reviews made by the Purchaser and its
representatives shall be conducted in such manner so as not to interfere unduly
with the operation of the Business. In connection with such review, the
Purchaser and its representatives shall, with the Seller's prior consent (which
consent shall not be unreasonably withheld or delayed), be permitted to contact
and communicate with customers, employees, distributors and suppliers of the
Business, provided that the Purchaser shall inform such parties that it is
contacting them to evaluate a possible transaction with the Seller.
SECTION 6.3 CONFIDENTIALITY. Any and all information, correspondence,
financial statements, records and other documents transmitted or communicated by
the Seller to the Purchaser shall be received and treated in secrecy and
confidence, and shall not be used by the receiving party, or disclosed by the
receiving party to any person or firm, without the prior express written consent
of the disclosing party, except to its employees, agents and representatives
involved in the transactions contemplated by this Agreement, which persons shall
be advised by the Purchaser of the foregoing obligations of confidentiality. If
the Closing does not occur, or at any time upon the request of the Seller, the
Purchaser agrees to return any and all copies of written materials received by
it from the Seller or its agents. The terms of this Section 6.3 shall survive
the termination of this Agreement.
SECTION 6.4 CONSENTS. Each of Seller and Purchaser shall use its
reasonable commercial efforts to obtain all consents of and authorizations by
third parties which may be required for the consummation of the transactions
contemplated hereby and to make all filings with and give all notices to third
parties that may be necessary or required in order to consummate the sale of the
Assets, and shall take additional actions as the other party may reasonably
request to cooperate so that the transactions contemplated by this Agreement may
be expeditiously consummated.
SECTION 6.5 ACCOUNTS RECEIVABLE PAYMENTS. From and after the Time of
Closing, the Seller shall provide to the Purchaser all the cooperation which the
Purchaser may reasonably request in connection with the collection of the
Accounts Receivable by the Purchaser.
SECTION 6.6 NOTIFICATION OF CERTAIN MATTERS. Each party shall give
prompt notice to the other of (i) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be materially untrue
or inaccurate and (ii) any failure of Purchaser or Seller, as the case may be,
to comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.7 FURTHER ACTION. Upon the terms and subject to the
conditions hereto, each of the parties hereto shall use all reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to
otherwise satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement.
SECTION 6.8 COVENANTS AGAINST DISCLOSURE. Except as required by law,
no party shall disseminate (except to the parties to this Agreement and their
respective officers, directors and advisors) any press release or announcement
concerning the transactions contemplated by this Agreement or the Related
Agreements or the parties hereto or thereto without the prior written consent of
Seller and Purchaser, which consent shall not be unreasonably withheld or
delayed.
SECTION 6.9 USE OF NAME. Purchaser shall promptly following the Time
of Closing cease using the name ASA International Ltd. or any variant thereof or
reference thereto in its conduct of the Business.
SECTION 6.10 MEDICAL AND DENTAL INSURANCE. Seller shall maintain
through March 14, 1999 the medical and dental insurance that is offered at the
Time of Closing to employees of Seller employed in connection with the Business,
and Purchaser shall promptly reimburse Seller for any fees and related costs
incurred by Seller in connection with maintaining such coverage following the
Time of Closing. On or before March 15, 1999, Purchaser shall have in place and
shall provide to the employees of the Business adequate replacement heath and
dental coverage.
ARTICLE VII
CLOSING
SECTION 7.1 TIME OF CLOSING. The transactions contemplated by this
Agreement shall be completed on March 3, 1999 (the "Time of Closing"), and shall
be effective as of January 1, 1999, unless otherwise agreed to in writing by
Purchaser and Seller. The Closing shall take place at the offices of Stroock &
Stroock & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at such
other place or date as may be agreed to in writing by Purchaser and Seller. The
"Closing" shall mean the deliveries to be made by the parties hereto at the Time
of Closing in accordance with this Agreement.
SECTION 7.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver
to Purchaser, all duly and properly executed, the following:
(a) A good and sufficient Xxxx of Sale for the Assets in the form
attached hereto as EXHIBIT D, selling, delivery, transferring, and assigning to
Purchaser an undivided interest in all of all of Seller's right, title, and
interest to the Assets, free and clear of all mortgages, pledges, liens,
encumbrances, security interests, equities, charges, and restrictions of any
nature whatsoever.
(b) An opinion of Stroock & Stroock & Xxxxx LLP, counsel to Seller,
dated the date of the Closing, in the form attached hereto as EXHIBIT E.
(c) The Related Agreements.
(d) Valid assignments for all Contracts and other third party consents
which may be required for the consummation of the transactions contemplated
hereby.
(e) The Sublease described in Section 8.1(f) hereof.
(f) The certificate described in Section 8.1(i) hereof.
SECTION 7.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall
deliver, or cause to be delivered, to Seller, all duly and properly executed,
the following:
(a) The Cash Portion of the Purchase Price.
(b) The Related Agreements.
(c) An opinion of Xxxxxxx Krooks Xxxx & Ball, P.C., counsel to
Purchaser, dated the date of the Closing, in the form attached hereto as EXHIBIT
G.
(d) The Assignment and Assumption Agreement in the form annexed hereto
as EXHIBIT F and any third party consents which may be required for the
consummation of the transactions contemplated hereby.
(e) The certificates described in Section 8.2(i) hereof.
(f) The Sublease.
(g) The Operating Cash described in Section 6.1 hereof.
SECTION 7.4 FURTHER ASSURANCES. At or after the Time of Closing, each
party shall each prepare, execute, and deliver, at the preparer's expense, such
further instruments of conveyance, sale, assignment, or transfer, and shall take
or cause to be taken such other or further action, as any party shall reasonably
request of any other party at any time or from time to time in order to perfect,
confirm, or evidence in Purchaser title to all or any part of the Assets or to
consummate, in any other manner, the terms and provisions of this Agreement or
the Related Agreements.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Each and every
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing, of the following conditions
(unless waived in writing by Purchaser):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller set forth in Article V of this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Time of Closing as if such representations
and warranties were made as of such date and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and other
obligations under this Agreement and the Related Agreements which are to be
performed or complied with by the Seller, shall have been fully performed and
compiled within all material respects at or prior to the Time of Closing,
including the delivery of the instruments and documents in accordance with
Section 7.2 hereof.
(c) CONSENTS. All necessary agreements and consents of any parties to
any Contracts which are material to the Business and all other necessary
governmental and other consents which in the reasonable judgment of the
Purchaser are necessary in order to consummate the transactions contemplated
hereby, shall have been obtained, and true and complete copies thereof shall
have been delivered to the Purchaser.
(d) ABSENCE OF LITIGATION. No material action, suit or proceeding
before any court or any governmental body or authority against the Seller or the
Assets, or pertaining to the transactions contemplated hereby, shall have
instituted on or before the Time of Closing.
(e) EXECUTION OF RELATED AGREEMENTS. Purchaser shall have received
fully executed copies of the Related Agreements.
(f) EXECUTION OF SUBLEASE. Purchaser shall have received fully
executed copies of the Sublease, in the form annexed hereto as EXHIBIT H,
pursuant to which the Purchaser shall agree to sublease premises at 00 Xxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx, from the Seller (the "Sublease").
(g) EMPLOYMENT AGREEMENT. Purchaser shall have received fully executed
copies of an employment agreement between Purchaser and Xxxxxx Xxxxx ("Xxxxx")
on terms acceptable to Purchaser; provided, however, that in the event Askin
does not enter into such an agreement, Purchaser shall waive this condition in
exchange for Seller's agreement to pay the cost of an executive recruiter to
hire a replacement of Askin.
(h) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, prospects, operations or condition (financial or
otherwise) of the Business ("Adverse Changes") from September 30, 1998, except
such Adverse Changes which result from (i) the termination of Askin's employment
or (ii) as result of Seller entering into this Agreement or the letter of intent
between Xxxxxxx Xxxxx & Co. and Seller dated as of November 10, 1998 (the
"Letter of Intent").
(i) CERTIFICATE OF PRESIDENT. Seller shall have delivered to Purchaser
a certificate executed by its President, dated the date of the Closing, to the
effect that the conditions set forth in subsections (a)-(h) of this Section 8.1
have been satisfied.
(j) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Purchaser and under this Agreement shall be satisfactory to
Purchaser and its counsel.
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller to be performed at the Time of Closing shall be subject to
the satisfaction as of or before such time of the following conditions (unless
waived in writing by Seller):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Purchaser set forth in Article IV of this Agreement shall have been true and
correct in all material respects when made and shall be true and correct at and
as of the Time of Closing as if such representations and warranties were made as
of such date and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and other
obligations under this Agreement and the Related Agreements which are to be
performed or complied with by the Purchaser, shall have been fully performed and
compiled within all material respects at or prior to the Time of Closing,
including the delivery of the instruments and documents in accordance with
Section 7.3 hereof.
(c) CONSENTS. All necessary agreements and consents of any parties to
any Contracts which are material to the Business and all other necessary
governmental and other consents which in the reasonable judgment of the Seller
are necessary in order to consummate the transactions completed hereby, shall
have been obtained and true and complete copies thereof shall have been
delivered to the Seller.
(d) ABSENCE OF LITIGATION. No material action, suit or proceeding
before any court or any governmental body or authority against the Purchaser or
Seller, the Assets, or pertaining to the transactions contemplated hereby, shall
have instituted on or before the Time of Closing.
(e) EXECUTION OF RELATED AGREEMENTS. Purchaser shall have fully
executed and delivered copies of the Related Agreements to which Purchaser is a
party.
(f) EXECUTION OF SUBLEASE. Seller shall have received fully executed
copies of the Sublease.
(g) CAPITALIZATION OF PURCHASER. Purchaser shall have received cash of
at least Four Million Dollars ($4,000,000) in exchange for a combination of
subordinated notes and ninety percent (90%) of the outstanding capital stock of
the Purchaser on a fully-diluted basis.
(h) EMPLOYMENT OFFERS. Purchaser shall have offered employment to all
of those employees of Seller employed in connection with the Business with at
least the same compensation and providing comparable benefits (including but not
limited to health, welfare, pension, vacation, savings and severance benefits)
as currently received by such employees, such offers of employment to be
contingent on the Closing. Such offers of employment shall recognize all service
with the Seller prior to the Time of Closing for purposes of eligibility and
vesting under any employee pension or benefit plan maintained or established by
Purchaser, and shall provide such employees full credit for any accrued but
unused vacation or other benefits. The Purchaser shall have reserved shares to
be issued under an employee stock option plan for issuance to certain of the
employees of Seller that become employees of Purchaser after the Closing.
(i) CERTIFICATE OF AUTHORIZED OFFICER. Purchaser shall have delivered
to Seller a certificate executed by an authorized officer of Purchaser, dated
the date of the Closing, to the effect that the conditions set forth in
subsections (a)-(h) of this Section 8.2, have been satisfied.
(j) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Seller under this Agreement shall be satisfactory to Seller and its
counsel.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.
(a) The representations and warranties of Seller set forth in Section
5.17 hereof shall survive for the applicable statute of limitations period; the
representations and warranties of the Seller set forth in Section 5.8 hereof
shall survive indefinitely; and all other representations and warranties and
covenants of each party to this Agreement shall survive until the second
anniversary of the Closing.
(b) As used in this Article IX, any reference to a representation,
warranty, or covenant contained in any, section of this Agreement shall include
the Schedules, Exhibits and disclosure in the Disclosure Letter .
SECTION 9.2 INDEMNIFICATION. The Seller hereby agrees to indemnify,
defend and hold harmless Purchaser and each of its officers, directors,
employees, stockholders and other affiliates ("Affiliates") against any and all
losses, liabilities, damages, demands, claims, suits, actions, judgments, and
causes of action, assessments, costs, and expenses, including, without
limitation, interest, penalties, reasonable attorneys' fees, and all expenses
incurred in investigating, preparing, and defending against any litigation,
commenced or threatened, and any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation (collectively, "Damages"), asserted
against, resulting from, imposed upon, or incurred or suffered by Purchaser and
each of its Affiliates, directly or indirectly, as a result of or arising, from
or in connection with any inaccuracy in or breach or nonfulfillment of any of
the representations, warranties, covenants, or agreements made by the Seller in
this Agreement or any facts or circumstances constituting such an inaccuracy,
breach, or nonfulfillment (all of which shall also be referred to as
"Identifiable Claims"), including, without limitation, liability for an Excluded
Liability which is imposed upon Purchaser as transferee of the Assets.
SECTION 9.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY
CLAIMS.
(a) If Purchaser determines to seek indemnification under this Article
IX with respect to the existence of a claim giving rise to Damages resulting
from the assertion of liability by third parties, Purchaser shall give notice to
Seller within 60 days of Purchaser becoming aware of any such Identifiable Claim
or of facts upon which any such Identifiable Claim will be based; the notice
shall set forth such material information with respect thereto as is then
reasonably available to Purchaser. In case any such liability is asserted
against Purchaser, and Purchaser notifies Seller thereof, Seller will be
entitled, if it so elects by written notice delivered to Purchaser within 15
days after receiving Purchaser's notice, to assume the defense thereof with
counsel satisfactory to Purchaser. Notwithstanding the foregoing, (i) Purchaser
shall also have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of Purchaser unless
Purchaser shall reasonably determine that there is a conflict of interest
between Purchaser, and Seller with respect to such Identifiable Claim or there
are or may be legal defenses available to Purchaser, which are different from or
additional to those available to Seller or a difference of position or potential
difference of position exists between Seller and Purchaser, that would make such
separate representation advisable in the reasonable opinion of counsel to
Purchaser, in which case the fees and expenses of such counsel will be borne by
Seller, (ii) Purchaser shall not have any obligation to give any notice of any
assertion of liability by a third party unless such assertion is in writing, and
(iii) the rights of Purchaser to be indemnified hereunder in respect of
Identifiable Claims resulting from the assertion of liability by third parties
shall not be adversely affected by its failure to give notice pursuant to the
foregoing unless, and, if so, only to the extent that, Seller is materially
prejudiced thereby. With respect to any assertion of liability by a third party
that results in an Identifiable Claim, the parties hereto shall make available
to each other all relevant information in their possession material to any such
assertion.
(b) In the event that Seller, within 15 days after receipt of the
aforesaid notice of an Identifiable Claim, falls to assume the defense of
Purchaser against such Identifiable Claim, Purchaser shall have the right to
undertake the defense, compromise, or settlement of such action on behalf of and
for the account, expense, and risk of Seller.
(c) Notwithstanding anything in this Article IX to the contrary,
Purchaser shall have the right to participate in such defense, compromise, or
settlement and Seller shall not, without Purchaser's written consent (which
consent shall not be unreasonably withheld), settle or compromise any
Identifiable Claim or consent to entry of any document in respect thereof unless
such settlement, compromise, or consent includes as an unconditional term
thereof the giving by the claimant or the plaintiff to Purchaser a release from
all liability in respect of such Identifiable Claim.
SECTION 9.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD
PARTY CLAIMS. In the event that Purchaser asserts the existence of a claim
giving rise to Damages (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to Seller. Such
written notice shall state that it is being given pursuant to this Section 9.4,
specify the nature and amount of the claim asserted. If Seller, within thirty
(30) days after the mailing of notice by Purchaser, shall not give written
notice to Purchaser announcing its intent to contest such assertion of
Purchaser, such assertion shall be deemed accepted and the amount of claim shall
be deemed a valid claim. In the event, however, that Seller contests the
assertion of a claim by giving such written notice to Purchaser within said
period, then the parties shall act in good faith to reach agreement regarding
such claim. In the event that arbitration shall arise with respect to any such
claim, the prevailing party shall be entitled to reimbursement of costs and
expenses incurred in connection with such litigation including reasonable
attorneys' fees, if the parties hereto, acting in good faith, cannot reach
agreement with respect to such claim within ten (10) days after such notice.
SECTION 9.5 LIMITATIONS. Notwithstanding anything else in this
Agreement, except as provided herein:
(a) There shall be no liability to Seller or any Affiliate from
indemnification under this Article IX until the total of all claimed losses
exceeds One Hundred Thousand Dollars ($100,000), in which case all claimed
losses in the aggregate in excess of One Hundred Thousand Dollars ($100,000)
shall be recoverable;
(b) No claim for indemnification may be made by Purchaser more than
two (2) years following the Time of Closing; provided, however, that (i) claims
related to an alleged breach of the representations and warranties of Seller set
forth in SECTION 5.17 may be made during the applicable statute of limitations
period, and (ii) claims related to an alleged breach of the representations and
warranties of Seller set forth in SECTION 5.8 may be made at any time;
(c) The maximum amount for which Seller shall indemnify Purchaser
pursuant to this Article IX shall be Three Million Dollars ($3,000,000);
provided, however, that such limitation shall not apply to claims based upon an
alleged breach by Seller of (i) its obligation to pay the Excluded Liabilities,
(ii) the representations and warranties of Seller set forth in Section 5.12
hereof, or (iii) Seller's obligations pursuant to Article X hereof; and
(d) If the Purchaser is covered by insurance for Damages that are
subject of indemnification, the Purchaser shall recover only an amount equal to
its Damages, net of any insurance proceeds or other recoveries received by
Purchaser with regard thereto.
SECTION 9.6 SET-OFF AGAINST NOTE OR LICENSE FEE. Any amount to which
Purchaser shall become entitled pursuant to the provisions of this Article IX
shall be paid, to the extent possible, as an offset to any unpaid principal or
interest outstanding on the Note or any unpaid portion of the License Fee.
SECTION 9.7 ARBITRATION. Any dispute arising under this Article IX
shall be resolved by arbitration pursuant to the provisions of Section 12.12
herein.
ARTICLE X
RESTRICTIVE COVENANT
SECTION 10.1 SCOPE. Seller agrees that for a period of three (3) years
from the Time of Closing, Seller shall not directly or indirectly, engage (a)
individually, (b) as an officer, (c) as a director, (d) as an employee, (e) as a
consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than five percent (5%)
interest in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the design, development, production, marketing
or sale of computer products or services for the catalogue direct marketing
industry. In addition, Seller agrees that it will not, directly or indirectly,
use, communicate, disclose or disseminate to any person, firm or corporation any
confidential information regarding the clients, customers or business practices
of the Business. Seller also agrees that it shall not, directly or indirectly,
take any action which constitutes an interference with or a disruption of any of
the Business' activities including, without limitation, the solicitation of
Business' customers, employees, or agents. The restrictive covenant described in
this Article X is intended to apply throughout the world.
SECTION 10.2 INJUNCTIVE RELIEF. Seller acknowledges that the
restrictions contained in Section 10.1, in view of the nature of the business in
which Purchaser is engaged, are reasonable and necessary in order to protect the
legitimate interests of Purchaser, and that any violation thereof could result
in irreparable injuries to Purchaser. Seller acknowledges that, in the event of
a breach or threatened breach of the restrictions of Section 10.1, Purchaser
shall be entitled to obtain from any court of competent jurisdiction,
preliminary and permanent injunctive relief restraining Seller from any
violation of the foregoing.
SECTION 10.3 OTHER REMEDIES. Nothing herein shall be construed as
prohibiting Purchaser from pursuing any other remedies available for such breach
or threatened breach, including recovery of damages and an equitable accounting
of all earnings, profits and other benefits arising from such violation, from
Seller.
SECTION 10.4 MODIFY Seller acknowledges its intention that Purchaser
shall have the broadest possible protection of the value of the business of
Purchaser in the trade area set forth above consistent with public policy, and
it will not violate the intent of the parties if any court of competent
jurisdiction should determine, in an appropriate decree, that, consistent with
established precedent of the forum state, the public policy of such state
requires a more limited restriction in geographical area or duration of the
aforesaid covenant.
ARTICLE XI
TERMINATION AND ABANDONMENT
SECTION 11.1 TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time notwithstanding
board or stockholder approval, but not later than the Time of Closing:
(a) at any time by the written agreement of the Seller and the
Purchaser;
(b) by Purchaser or Seller, if there has been a material breach of any
representation, warranty, covenant or agreement set forth in this Agreement and
the breaching party fails to cure within five (5) business days after notice
thereof is given;
(c) by Purchaser or Seller, if any permanent injunction or other order
of a court or other competent authority preventing the sale of Assets shall have
become final and nonappealable or, in Purchaser's or Seller's reasonable good
faith judgment, shall render unlikely within a reasonable period of time the
consummation of the sale of Assets on the terms contemplated hereby;
(d) by Purchaser or Seller, if any governmental or administrative
agency shall have issued a temporary restraining order, preliminary injunction
or permanent injunction or other order preventing, the consummation of the sale
of Assets or any litigation shall be pending, the ultimate resolution of which
is likely to (i) result in the issuance of such an order or injunction, or the
imposition against Purchaser or Seller, of substantial damages if the sale of
Assets is consummated, (ii) prohibit Purchaser's ownership or operation of all
or a material portion of the Business as a result of the sale of Assets, (iii)
materially limit or restrict Purchaser's conduct or operation of the Business
after the Time of Closing, or (iv) render Purchaser or Seller unable to
consummate the sale of Assets. In the event any such order or injunction shall
have been issued, each party agrees to use its reasonable efforts to have any
such injunction lifted; or
(e) by Purchaser or Seller if, on or before February 25, 1999 the
condition set forth in Section 8.2(g) has not been satisfied.
SECTION 11.2 PROCEDURE AND CONSEQUENCES OF Termination. In the event
of termination pursuant to Section 11.1 hereof, written notice thereof shall
forthwith be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action. If
this Agreement is terminated as provided herein, neither party hereto shall have
any further obligation or liability to the other party, except as that (i) the
provisions of Section 6.3 and Section 12.4 hereof shall survive such
termination; and (ii) in the event of a termination pursuant to Section 10.1(b),
the non-breaching party shall be entitled to recover its actual out-of-pocket
expenses incurred in connection with the transactions contemplated by this
Agreement from the breaching party.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be delivered to the parties at the address
set forth below, or at such other address that they designate by notice to all
other parties in accordance with this Section 12.1. Any party delivering notice
to Purchaser shall deliver a copy to 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: President, and Xxxxxxx Xxxxxx Xxxx & Ball, P.C.,
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Bruno Xxx Xxxxx, Esq. Any
party delivering notice to Seller shall deliver a copy to: 00 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000, Attention: President, and Stroock & Xxxxxxx
Xxxxx LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attention: Xxxx X. Xxxxxx, Esq. All notices and communications shall be deemed
to have been received: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of telex or facsimile transmission, on the date on
which the sender receives confirmation by telex or facsimile transmission that
such notice was received by the addressee, provided that a copy of such
transmission is additionally sent by mail as set forth in (iv) below; (iii) in
the case of overnight air courier, on the second business day following the day
sent, with receipt confirmed by the courier, and (iv) in the case of mailing by
first class certified or registered mail, postage prepaid, return receipt
requested, on the fifth business day following such mailing.
SECTION 12.2 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, and the documents referred to herein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter, including but
not limited to the Letter of Intent.
SECTION 12.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon Seller, the Purchaser, and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be transferred or assigned (by operation of law or
otherwise) by any party without the prior written consent of the other parties
hereto.
SECTION 12.4 EXPENSES OF TRANSACTION; TAXES. Each party shall bear its
own costs and expenses in connection with this Agreement and the transactions
contemplated hereby. Seller shall pay all applicable sales, use, excise,
transfer, documentary and any other similar taxes arising out of the purchase
and sale of the Assets.
SECTION 12.5 WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented rescinded, or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have otherwise
agreed in writing, no waiver by that party of any condition of this Agreement or
breach by the other party of any of its obligations or representations hereunder
or thereunder shall be deemed to be a waiver of any other condition or
subsequent or prior breach of the same or any, other obligation or
representation by the other party, nor shall any forbearance by the first party
to seek a remedy for any noncompliance or breach by the other party be deemed to
be a waiver by the first party of its rights and remedies with respect to such
noncompliance or breach.
SECTION 12.6 THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided for in this Agreement, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation, or legal entity, other than the parties hereto, any rights,
remedies, or other benefits under or by reason of this Agreement.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 12.8 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
SECTION 12.9 GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of New York
without regard to its conflict of laws provisions. Subject to the provisions of
Section 12.12 hereof, any suit or action arising in connection herewith shall be
exclusively brought in the federal or state courts located in New York County,
New York.
SECTION 12.10 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or to protect the
rights obtained hereunder the prevailing party shall be entitled to its
reasonable attorneys' fees, costs, and disbursements in addition to any other
relief to which it may be entitled.
SECTION 12.11 COOPERATION AND RECORDS RETENTION. Seller and Purchaser
shall (i) each provide the other with such assistance as may reasonably be
requested by them in connection with the preparation of any tax return,
statement, report, form or other document (hereinafter collectively a "Tax
Return"), or in connection with any audit or other examination by any taxing
authority or any judicial or administrative proceedings relating to liability
for taxes, (ii) each retain and provide the other, with any records or other
information which may be relevant to any such Tax Return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other for any
period.
SECTION 12.12. ARBITRATION. The parties hereby covenant, stipulate and
agree that any controversy or claim arising out of, or relating to this
Agreement, or breach thereof, shall be settled by binding expedited arbitration
in accordance with the Commercial Arbitration Rules, before a single arbitrator
of the American Arbitration Association in New York City, New York. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
SELLER:
By: /s/ Xxxxxxxx XxXxxxxx
---------------------------------
Title: Vice President and Treasurer
PURCHASER:
By: /s/ Xxxxxx Xxxxx
----------------------------
Title: Chief Operating Officer
