AGREEMENT
FOR PURCHASE AND SALE OF ASSETS
BY AND AMONG
XXXXX NORTH AMERICA, INC., SELLER
VISTA DMS, INC., PURCHASER
AND
VISTA INFORMATION SOLUTIONS, INC., PARENT
TABLE OF CONTENTS
PAGE
ARTICLE I THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1. Purchase and Sale of Purchased Assets . . . . . . . . . . . . . . . .2
1.2. Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.4. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .4
1.5. Excluded Liabilities. . . . . . . . . . . . . . . . . . . . . . . . .5
1.6. Assignment of Contracts . . . . . . . . . . . . . . . . . . . . . . .5
1.7. Bulk Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE II CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1. Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2. Payment of Consideration. . . . . . . . . . . . . . . . . . . . . . .6
2.3. Closing Price Protection. . . . . . . . . . . . . . . . . . . . . . .7
2.4. Post-Closing Price Protection . . . . . . . . . . . . . . . . . . . .7
2.5. Purchase Price Allocation . . . . . . . . . . . . . . . . . . . . . .8
2.6. Signing Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.7. Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.8. Canadian Goods and Services Tax Elections . . . . . . . . . . . . . .9
ARTICLE III THE CLOSING AND TRANSFER OF PURCHASED ASSETS. . . . . . . . . . . . .9
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.2. Deliveries by Purchaser . . . . . . . . . . . . . . . . . . . . . . .9
3.3. Deliveries by Seller. . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Deliveries by Purchaser and Seller. . . . . . . . . . . . . . . . . 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . . . 11
4.1. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Validity; No Conflict . . . . . . . . . . . . . . . . . . . . . . . 11
4.3. Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 12
4.6. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Interim Change. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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TABLE OF CONTENTS
(CONTINUED)
PAGE
4.8. Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9. Owned Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10. Real Estate Leases. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.11. Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.12. Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.13. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 15
4.14. Software and Information Systems. . . . . . . . . . . . . . . . . . 15
4.15. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.16. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . 16
4.17. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.18. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.19. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.20. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 17
4.21. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.22. Investment Representations; Accredited Investor . . . . . . . . . . 18
4.23. Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.24. Residency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.25. Printing Business . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.26. Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT . . . . . . 20
5.1. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2. Validity; No Conflict . . . . . . . . . . . . . . . . . . . . . . . 20
5.3. Due Organization and Purpose. . . . . . . . . . . . . . . . . . . . 21
5.4. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 22
5.7. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 23
5.8. Interim Change. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.9. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.10. Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 24
5.12. Software and Information Systems. . . . . . . . . . . . . . . . . . 24
5.13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . 25
5.15. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.16. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.17. Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . 26
6.1. Interim Conduct of Business; Operating Board. . . . . . . . . . . . 26
6.2. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3. Records and Documents . . . . . . . . . . . . . . . . . . . . . . . 26
6.4. Consummation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5. Xxxx-Xxxxx-Xxxxxx Consent . . . . . . . . . . . . . . . . . . . . . 26
6.6. Noncompetition. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7. Notification of Breach. . . . . . . . . . . . . . . . . . . . . . . 27
6.8. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9. Interim Financial Statements. . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII COVENANTS OF PURCHASER AND PARENT . . . . . . . . . . . . . . . . . 28
7.1. Interim Conduct of Business . . . . . . . . . . . . . . . . . . . . 28
7.2. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3. Consummation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4. Xxxx-Xxxxx-Xxxxxx Consent . . . . . . . . . . . . . . . . . . . . . 29
7.5. Records and Documents . . . . . . . . . . . . . . . . . . . . . . . 29
7.6. Notification of Breach. . . . . . . . . . . . . . . . . . . . . . . 29
7.7. Investment Canada Notification. . . . . . . . . . . . . . . . . . . 29
7.8. Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII OTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2. Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 31
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TABLE OF CONTENTS
(CONTINUED)
PAGE
8.3. Cooperation and Records Retention with respect to Taxes . . . . . . 31
8.4. Patent Infringement Claims. . . . . . . . . . . . . . . . . . . . . 32
8.5. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.6. Tax Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IX EMPLOYEES AND EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . 33
9.1. Continued Association with Business . . . . . . . . . . . . . . . . 33
9.2. Payroll Records . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3. WARN Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4. Canadian Personnel Matters. . . . . . . . . . . . . . . . . . . . . 33
9.5. Canadian Employees. . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT . . . . 34
10.1. Accuracy of Warranties and Performance of Covenants . . . . . . . . 34
10.2. No Pending Action . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3. Condition of Purchased Assets . . . . . . . . . . . . . . . . . . . 35
10.4. Xxxx-Xxxxx-Xxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5. ICA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER . . . . . . . . . . . 35
11.1. Accuracy of Warranties and Performance of Covenants . . . . . . . . 35
11.2. No Pending Action . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.3. Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . 36
11.4. Xxxx-Xxxxx-Xxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.5. ICA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.6. Director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.7. IBJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.8. Other Consents and Approvals. . . . . . . . . . . . . . . . . . . . 37
ARTICLE XII SURVIVAL AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 37
12.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.3. General Provisions Relating to Indemnification. . . . . . . . . . . 37
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE XIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1. Termination or Abandonment. . . . . . . . . . . . . . . . . . . . . 39
13.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1. Amendments and Waiver . . . . . . . . . . . . . . . . . . . . . . . 40
14.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.3. Expenses; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.4. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.5. Successors and Assigns; Beneficiaries . . . . . . . . . . . . . . . 42
14.6. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.7. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . 42
14.9. Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 43
14.10. Other Rules of Construction . . . . . . . . . . . . . . . . . . . . 43
14.11. Authorship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.12. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 43
14.13. Joint and Several Obligations . . . . . . . . . . . . . . . . . . . 43
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SCHEDULES
1.0 Facilities
1.2(e) E-mail, Internet Sites
1.2(h) Computer Software Programs
1.2(i) Trademarks and Copyrights
1.2(p) Permits and Licenses
1.3(e) Infringers
1.3(f) Excluded Software and Information Systems
4.0 Knowledgeable Persons
4.4 Financial Statements
4.5 Transactions with Affiliates
4.6 Accounts Receivable
4.7 Interim Change
4.8 Purchased Assets
4.9 Owned Real Estate
4.10 Real Estate Leases
4.11 Employee Plans
4.12 Seller's Material Contracts
4.13 Intellectual Property
4.14 Software
4.15 Legal Proceedings; Seller
4.18 Tax Disputes
4.19 Employees
4.20 Environmental Matters
4.21 Insurance
5.2 Consents
5.4 Subsidiaries and Joint Ventures
5.8 Interim Change
5.9 Title to Assets
5.10 Parent's Material Contracts
5.11 Intellectual Property
5.12 Software and Information Systems
5.13 Legal Proceedings; Parent
7.1 Parent's Interim Conduct of Business
9.1 Continuing Association with Business
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EXHIBITS
A. Convertible Note
B. Additional Note
C. Legal Opinion of Counsel for Purchaser and Parent
D. Trademark Assignment
E. Copyright Assignment
F. Legal Opinion of Counsel for Seller
G. General Assignment, Xxxx of Sale and Assumption of Liabilities of
MooreNorth America, Inc.
H. General Conveyance and Assumption of Liabilities of Xxxxx Corporation
Limited
I. [Intentionally Left Blank]
J. Security Agreements
K. Pledge Agreements
L. Printing Services Agreement
M. Transition Services Agreement
N. Preferred Supplier Relationship Agreement
O. Canadian Security Documents
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AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 28th day of July, 1999, by
and among VISTA Information Solutions, Inc., a Delaware corporation
("PARENT"), VISTA DMS, Inc., a Delaware corporation, and a wholly owned
Subsidiary of Parent ("PURCHASER"), and Xxxxx North America, Inc., a Delaware
corporation ("SELLER").
WHEREAS, the Data Management Services Division of Seller in conjunction
with the Data Management Services Division of Xxxxx Corporation Limited, an
Ontario corporation ("XXXXX LIMITED"), is engaged in the business of
providing the following services and products primarily to the residential
real estate industry and to businesses and consumers engaged in real estate
related transactions (collectively, the "BUSINESS"):
(i) computer hardware and software to manage real estate
listings, including, in certain instances, integrated data regarding
tax and school information;
(ii) printed catalogues containing real estate listings;
(iii) computer software specifically targeted at real estate
brokers and agents to help manage prospects and to automate various
daily tasks;
(iv) an internet site under the CYBERHOMES-Registered Trademark-
name which provides a public view of non-commercial properties listed
for sale by real estate brokers;
(v) non-real estate related computer directed printing services,
primarily in Canada (the "CDS BUSINESS");
(vi) access and use of databases compiled by the Seller and
Xxxxx Limited of publicly available information related to ownership
and sales prices of properties; and
(vii) an on demand custom search service of Canadian title,
and government registered documents;
with all of such activities being conducted from the facilities set forth on
SCHEDULE 1.0, (collectively, the "FACILITIES");
WHEREAS, on the terms and subject to the conditions hereinafter set
forth, Purchaser desires to purchase from Seller and Xxxxx Limited and Seller
and Xxxxx Limited desire to sell to Purchaser, subject to the assumption of
the designated liabilities and obligations, certain of the assets, properties
and rights used in the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1. PURCHASE AND SALE OF PURCHASED ASSETS. At the Closing (as
defined below), Seller shall sell, transfer, assign and deliver to Purchaser
(and shall cause Xxxxx Limited to so sell, transfer, assign and deliver) and
Purchaser shall purchase, accept and receive, all of Seller's and Xxxxx
Limited's right, title and interest in and to the Purchased Assets (as
defined below) as they exist at Closing. At Purchaser's election, it may
designate a Canadian subsidiary of Purchaser or Parent to be the assignee of
the Purchased Assets to be conveyed by Xxxxx Limited; provided that Parent
and Purchaser shall be jointly and severally liable to Seller and Xxxxx
Limited for all obligations to be fulfilled by such Canadian assignee in
connection herewith.
1.2. PURCHASED ASSETS. The "PURCHASED ASSETS" are all of Seller's and
Xxxxx Limited's right, title and interest in and to the following, to the
extent employed solely in the Business:
(a) all accounts and notes receivable (subject to Section
1.3(i));
(b) all inventories;
(c) the office furnishings, equipment, fixtures, supplies and
computer equipment located at the Facilities and including any
computer and other equipment leased or provided by the Business to its
customers;
(d) all Owned Real Estate (as defined below), including the
buildings, structures and improvements situated thereon;
(e) e-mail addresses, Internet user names, addresses and
sites, and telephone and fax numbers listed on SCHEDULE 1.2(e);
(f) all rights and claims under lease or sale contracts,
customer orders, residual rights under operating leases, maintenance
and support agreements, license agreements, dealer and distributor
agreements and other commitments of the Business;
(g) rights and claims under the Material Contracts (as defined
below) and Real Estate Leases (as defined below);
(h) all computer software programs, source codes (including
annotations), object codes, information systems, program
specifications and related materials and documentation used in the
products of the Business and listed on SCHEDULE 1.2(h);
(i) all patents (the "PATENTS") (subject to Section 1.3(e) and
Section 8.4), trade secrets, trademarks, copyrights, trade names,
corporate names, trade styles,
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logos, product designations and service marks and all applications
(pending or in process) and registrations therefor and licenses thereof
used in the Business and listed on SCHEDULE 1.2(i);
(j) all stock in Xxxxx Public Records, Inc. owned by Seller (a
participant in a joint venture);
(k) all sales and promotional literature and art work;
(l) all rights under and pursuant to all warranties,
representations and guarantees made by suppliers of goods or services
to Seller, with respect to the goods and services sold by the
Business;
(m) to the extent assignable to Purchaser, all rights under
agreements with employees and consultants of the Business concerning
confidentiality, noncompetition, nonsolicitation or the assignment of
inventions;
(n) the customer files and all lists of customers, prospects
and vendors;
(o) all business records with respect to the operation of the
Business; and
(p) to the extent assignable to Purchaser, permits and
licenses (and pending applications for any thereof) listed on SCHEDULE
1.2(p);
provided, however, that the definition of Purchased Assets shall not include any
items defined as Excluded Assets in Section 1.3.
1.3. EXCLUDED ASSETS. Notwithstanding anything contained herein to the
contrary, Seller will retain and not transfer, and Purchaser will not acquire
any assets of Seller, other than the Purchased Assets (collectively, the
"EXCLUDED ASSETS"), including the following assets which shall not be sold or
transferred to Purchaser:
(a) all cash and cash equivalents, including cash on hand and
cash in transit (i.e., bank deposits being made by Seller), deposits
and prepaids, other than the Arizona Prepaid Revenue. "ARIZONA
PREPAID REVENUE" shall equal (i) the amount received by the Business
pursuant to Exhibit D to the Xxxxx Lease and License Agreement between
the Business and Arizona Regional Multiple Listing Service, Inc.
("ARIZONA REGIONAL MLS") dated August 10, 1998 (the "ARIZONA
CONTRACT") through the Closing Date, less (ii) any amount paid or
rebated to the Arizona Regional MLS, any state taxing authority and
any other amount expended by the Business under the Arizona Contract
through the Closing Date, less (iii) any amount under clause (i)
recognized as revenue under GAAP (as defined below) through the
Closing Date;
(b) accounting and other records not relating to the operation
of the Business;
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(c) the "XXXXX" name, including any derivations thereof or
names confusingly similar thereto, and any logos, marks, taglines and
other uses based on any of the foregoing;
(d) refunds pertaining to any Federal, foreign, state,
provincial or local tax obligations of Seller to the extent such
refunds do not give rise to an increase in any Assumed Liabilities;
(e) subject to Section 8.4 and Section 8.5, rights in, to or
relating to any actual or potential infringement claims with respect
to the Patents against (i) those parties listed on SCHEDULE 1.3(e) and
their Affiliates, and (ii) such other parties which Purchaser
approves, such approval not to be unreasonably withheld (the "PATENT
INFRINGEMENT CLAIMS");
(f) all computers, software and information systems set forth
on SCHEDULE 1.3(f);
(g) all claims against other portions of Seller, Xxxxx Limited
or their subsidiaries and Affiliates;
(h) all rights to indemnification for, or claims against,
third parties related to the Litigation Matters (as defined below),
including, but not limited to, the indemnification provisions of the
September 24, 1996 Agreement with GeoSystems Global Corporation, as
such provisions relate to the period through Closing;
(i) all intra or intercompany accounts receivable owed by
other units of Seller or Xxxxx Limited; and
(j) items, sold, transferred, disposed of or consumed in the
ordinary course of the operation of the Business prior to Closing.
1.4. ASSUMED LIABILITIES. Except as set forth in Section 1.5, at the
Closing, Purchaser shall assume and agree to discharge promptly as they
become due any and all liabilities and obligations (a) related to or arising
from the operation of the Business or the ownership of the Purchased Assets
in the ordinary course of business, including without limitation all
contracts and obligations which constitute or arise from the Purchased Assets
or to which the Purchased Assets are subject or by which they are bound, as
well as the pending administrative proceeding regarding the sales tax audit
in Arizona described on SCHEDULE 4.15, (b) reflected or disclosed on, or in
the notes to, the 1998 Financial Statements (as defined below), (c) of the
type referred to in (b) but incurred subsequent to December 31, 1998, and (d)
related to or arising from Post-Closing Use (as defined below) (collectively,
the "ASSUMED LIABILITIES"); provided, however, that notwithstanding the
foregoing, none of the Excluded Liabilities (as defined below) shall be
included as Assumed Liabilities. Purchaser and Parent shall jointly and
severally forever defend, indemnify and hold harmless Seller and Xxxxx
Limited from and against any and all liabilities, obligations, claims,
damages (including incidental and consequential damages), costs and expenses
(including court costs and reasonable attorneys' fees) related to or arising
from
-4-
Purchaser's failure to fully perform and discharge the Assumed Liabilities.
Purchaser does not in any way or manner assume or agree to satisfy any
liability of Seller, the Business or Xxxxx Limited other than the Assumed
Liabilities.
1.5. EXCLUDED LIABILITIES.
(a) Notwithstanding anything to the contrary in Section 1.4,
Purchaser shall not assume any liabilities or obligations of Seller or Xxxxx
Limited (i) for Federal, foreign, state, provincial or local taxes accruing
prior to Closing, (ii) arising under benefit plans of Seller or Xxxxx
Limited, other than (except for liabilities under defined benefit plans which
are excluded liabilities hereunder) those liabilities and obligations of the
type which are accrued on the 1998 Financial Statements, such as those
relating to vacation and sick pay, (iii) for intra or intercompany accounts
payable owing to other units of Seller or to Xxxxx Limited, (iv) for
indebtedness for borrowed money, (v) as set forth in Section 1.7, (vi) under
the retention bonus agreements referenced on SCHEDULE 4.19, and (vii) for the
Litigation Matters (as defined below) (the "EXCLUDED LIABILITIES"); provided
that Purchaser shall provide reasonable assistance to Seller at Purchaser's
cost with respect to the administration of any sales tax refunds received by
Seller from the State of Arizona. Seller shall forever defend, indemnify and
hold harmless Purchaser and Parent from and against any and all liabilities,
obligations, claims, damages (including incidental and consequential
damages), costs and expenses (including court costs and reasonable attorneys'
fees) related to or arising from Seller's failure to fully perform and
discharge the Excluded Liabilities. Seller further agrees to pay and
discharge all such liabilities and obligations as they become due.
(b) For purposes of this Agreement, "LITIGATION MATTERS" shall
mean the pending lawsuits and threatened legal proceedings, specifically set
forth in SCHEDULE 4.15, other than the pending administrative proceeding
regarding the sales tax audit in Arizona. For purposes of this Agreement,
"POST-CLOSING USE" shall mean the use, distribution or sale, directly or
indirectly, by the Business, Purchaser, Parent or any of their Affiliates
after the Closing, of the patent and other intellectual property which is the
subject matter of the claims brought by Xxxx X. Xxxxxxxx, as described in
SCHEDULE 4.15.
1.6. ASSIGNMENT OF CONTRACTS. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign the right, title or interest of Seller in, to or under any contract or
any claim or right of any benefit arising thereunder or resulting therefrom if
any attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or adversely affect the rights of Purchaser or
Seller thereunder or if by its nature such contract cannot be assigned. Seller
shall use reasonable commercial efforts to obtain, and Purchaser agrees to
cooperate with Seller in its efforts to obtain, the consent of such third party
to the assignment or transfer thereof to Purchaser where required. If such
consent is not obtained, Seller and Purchaser shall cooperate in any reasonable
arrangements designed to provide Purchaser the obligations and benefits
thereunder such as, by example, entering into a subcontract relationship.
Notwithstanding the foregoing, the obligations of Seller under this
Section shall not include any obligation to make any payment (other than to make
any past due rent or similar payment) or incur any economic burden, other than
its own reasonable legal and administrative costs associated with its
obligations under this Section 1.6, in
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obtaining the consent of such third parties, except for such economic burdens
which Purchaser and Parent agree to discharge.
1.7. BULK TRANSFER. Purchaser hereby waives compliance by Seller with
all applicable bulk transfer, bulk sales and similar laws and requirements of
all jurisdictions in connection with the transactions contemplated hereby,
and Seller shall indemnify Purchaser and Parent for any loss or damage
suffered by Purchaser or Parent as a result of such non-compliance.
ARTICLE II
CONSIDERATION
2.1. CONSIDERATION. The aggregate consideration for the Purchased
Assets shall be a combination of cash, one or more promissory notes of Parent
and shares of common stock, par value $.001 per share, of Parent ("COMMON
STOCK"), payable as set forth in Section 2.2 and the assumption by Purchaser
of the Assumed Liabilities.
2.2. PAYMENT OF CONSIDERATION. At Closing, Purchaser shall:
(a) pay to Seller and Xxxxx Limited, as provided in Section
2.5 below, Twenty-Six Million Dollars ($26,000,000) (the cash payment
being referred to as the "CASH CONSIDERATION");
(b) deliver to Seller Parent's convertible promissory note in
the original aggregate principal amount of Sixteen Million Five
Hundred Thousand Dollars ($16,500,000), subject to possible adjustment
as set forth in Section 2.3, in the form attached hereto as EXHIBIT A
(the "CONVERTIBLE NOTE"); and
(c) deliver to Seller that number of shares of Common Stock
determined by dividing (i) Ten Million Dollars ($10,000,000) (the
"COMMON STOCK AMOUNT"), by (ii) the average of the Average Daily
Prices (as defined below) of the Common Stock for the thirty (30)
consecutive trading days immediately preceding the third trading day
prior to the Closing Date (as defined below) (the "AVERAGE CLOSING
PRICE"); provided, however, that for purposes of the computation in
this Section 2.2(c), Section 2.4, and the Convertible Note, (but not
for other provisions in this Article II) in no event shall the Average
Closing Price be greater than $14.00 or less than $10.00. "AVERAGE
DAILY PRICE" shall mean the average of the closing bid and ask, as
applicable on a given day on the Nasdaq Stock Market, or if the Common
Stock does not trade on the Nasdaq Stock Market, on the primary
exchange or market (including the OTC Bulletin Board) on which the
Common Stock so trades.
Seller shall provide wire transfer instructions to Purchaser not less
than twenty-four (24) hours prior to the Closing. All payments hereunder
shall be made in U.S. dollars by wire transfer or other immediately available
funds, and all currency amounts referred to throughout this Agreement are to
U.S. dollars.
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2.3. CLOSING PRICE PROTECTION. In the event that the Average Closing
Price is less than $10.00, in addition to the rights of Seller set forth in
Section 13.1(d) Seller shall have the option, in its sole and absolute
discretion, to cause the Cash Consideration or the principal amount of the
Convertible Note (or a combination thereof) to be increased by an amount
equal to (A) the difference between $10.00 and the Average Closing Price,
multiplied by (B) the number of shares of Common Stock to be issued pursuant
to Section 2.2(c).
2.4. POST-CLOSING PRICE PROTECTION.
(a) If the average of the Average Daily Prices of the Common
Stock for the thirty (30) consecutive trading days immediately preceding the
third trading day prior to the date which is eighteen (18) months from the
Closing Date (the "SUBSEQUENT AVERAGE PRICE" and the "SUBSEQUENT DATE"), is
less than the Average Closing Price, Seller shall have the option, in its
sole and absolute discretion, to either: (i) cause Parent to pay Seller in
cash, an amount equal to the difference (subject to a maximum of 50% of the
Average Closing Price) between the Average Closing Price and the Subsequent
Average Price, multiplied by the aggregate of the number of shares of Common
Stock issued pursuant to Sections 2.2(c) and 2.6 and held by Seller on the
Subsequent Date (the "ADDITIONAL CASH CONSIDERATION"); (ii) cause Parent to
issue to Seller that number of additional shares of Common Stock determined
by dividing the Additional Cash Consideration by the Subsequent Average
Price; or (iii) cause Parent to pay cash and issue additional shares of
Common Stock as provided in the preceding clauses with a combined value
equivalent to the Additional Cash Consideration; provided, however, in no
event shall the additional shares of Common Stock so issued, when added to
the other securities acquired or issuable pursuant to this Agreement
(including the Convertible Note) by Seller, equal or exceed 20% of the number
of outstanding shares of Common Stock, computed consistent with the rules of
the Nasdaq Stock Market (the "NASDAQ LIMITATION"). Any fractional shares
resulting from the calculation set forth in clauses (ii) and (iii) shall be
rounded to the nearest whole number. In lieu of paying cash to Seller as
provided in this Section 2.4(a), Parent shall have the option, in its sole
discretion (subject to compliance with the Nasdaq Limitation), to deliver to
Seller Parent's convertible promissory note in the original aggregate
principal amount of the Additional Cash Consideration, in the form attached
hereto as EXHIBIT B (the "ADDITIONAL NOTE").
(b) All amounts to be paid, the Additional Note to be issued or
certificates for shares of Common Stock to be issued pursuant to this Section
2.4 shall be paid in immediately available funds or delivered by Purchaser,
as the case may be, within five (5) business days from the Subsequent Date.
(c) Notwithstanding the foregoing, this Section 2.4 shall be of
no further force or effect, if prior to the Subsequent Date: (i) Parent
provides Seller with thirty days notice (the "INITIAL NOTICE") of the filing
of a registration statement for a public offering of Common Stock to be
firmly underwritten by an investment banking firm which has routinely
completed transactions of similar size or greater (all of the expenses for
which, other than underwriting discounts and fees of any counsel for Seller,
being paid for by Parent); (ii) the Initial Notice provides an option in
favor of Seller to dispose of up to all of the Common Stock acquired by
Seller pursuant to Article II hereof, and in the event Seller elects to
participate in such offering, the number of shares of Common Stock Seller
decides to sell is not reduced by the investment
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banking firm underwriting the offering prior to the execution of the
underwriting agreement establishing the terms of the offering (which
underwriting agreement, in customary form, Seller is permitted to enter
into); (iii) such offering closes within one hundred twenty (120) days of the
Initial Notice at a net price to Seller (i.e., after underwriting discounts)
of $14.00 per share; and (iv) if Seller elects to participate in such
offering, it receives the proceeds from the sale of the Common Stock in
conformance with clause (iii) above.
2.5. PURCHASE PRICE ALLOCATION.
(a) Immediately following the date hereof and prior to Closing,
Seller shall cause an analysis to be prepared by a qualified third party to
determine the portion of the Purchase Price attributable to the Purchased
Assets owned by Seller on the one hand and Xxxxx Limited on the other hand
and among classes of Canadian assets, as needed for Canadian tax purposes.
The allocable percentage attributable to Xxxxx Limited shall be paid by
Purchaser (or its assignee) directly to Xxxxx Limited out of the Cash
Consideration. The parties shall report the transaction to all taxing
authorities consistent with such third party analysis. The cost of the
analysis shall be shared equally by Seller and Purchaser.
(b) Within 60 days after the Closing Date, Purchaser will
provide to Seller copies of IRS Form 8594 and any required exhibits thereto
with Purchaser's proposed allocation of the purchase price, set forth in
Section 2.2 that is allocable to the United States Purchased Assets and
Assumed Liabilities. Within 15 days after the receipt of such form, Seller
will propose to Purchaser any changes to such form (and in the event no such
changes are proposed to Purchaser within such time period, the Seller will be
deemed to have agreed to, and accepted, the draft of such form). Purchaser
and Seller will endeavor in good faith to resolve any differences with
respect to the allocation within 15 days after Purchaser's receipt of written
notice of objection from Seller.
2.6. SIGNING PAYMENT.
(a) On or promptly following the date hereof, as an inducement
to Seller to enter into this Agreement, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, Purchaser has
caused to be issued to Seller 501,505 shares of Common Stock, which amount
has been fully earned (the "SIGNING PAYMENT"). Notwithstanding anything
contained herein to the contrary, if this Agreement is terminated pursuant to
Section 13.1(a), (b) or (d) (other than, with respect to Section 13.1(b), as
a result of actions of Purchaser or Parent) or Section 10.1, Seller promptly
shall return the Signing Payment to Purchaser. In all other cases, the
Signing Payment shall be retained by Seller.
(b) Contemporaneously with the execution of this Agreement (i)
Purchaser is causing its legal counsel to deliver an opinion as to the
execution and delivery of the Agreement, the Signing Payment and other
matters set forth therein, and (ii) Parent and Seller are entering into a
Registration Rights Agreement with respect to the Signing Payment and all
other Common Stock to be issued as provided herein and the Test Marketing
Agreement. Parent is also delivering a certified copy of the Credit
Agreement with IBJ Whitehall Bank & Trust.
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2.7. ADJUSTMENT. The numbers of shares of Common Stock and the prices
referred to in Article II shall be equitably adjusted for stock splits, stock
dividends, recapitalization and the like occurring after the date hereof.
2.8. CANADIAN GOODS AND SERVICES TAX ELECTIONS.
(a) Seller hereby represents and warrants to Parent and
Purchaser that Xxxxx Limited is registered for purposes of Part IX of the
Excise Tax Act (Canada);
(b) Purchaser hereby represents and warrants to Seller that
Purchaser is registered, and its assignee will be registered, for purposes of
Part IX of the Excise Tax Act (Canada); and
(c) Seller shall cause Xxxxx Limited to execute jointly with
Purchaser or with Purchaser's Canadian assignee, as the case may be, in
prescribed form, and Purchaser or its Canadian assignee shall file within the
time stipulated and in the manner prescribed by the Excise Tax Act (Canada),
the necessary elections under the Excise Tax Act (Canada) that no tax be
payable pursuant to the Excise Tax Act (Canada) with respect to the purchase
and sale of the Purchased Assets. Purchaser, Parent and Canadian assignee
shall indemnify and hold harmless Xxxxx Limited in respect of any goods and
services tax or penalties and interest that may be assessed against Xxxxx
Limited under the Excise Tax Act (Canada) as a result of the transactions
under this Agreement not being eligible for such elections.
ARTICLE III
THE CLOSING AND TRANSFER OF PURCHASED ASSETS
3.1. CLOSING. Subject to the terms hereof, the transactions
contemplated by this Agreement (the "CLOSE" or "CLOSING") shall occur at the
offices of Xxxx, Xxxx Xxxx Freidenrich LLP, San Diego, California, at 10:00
A.M. on September 30, 1999, or at such other time or place as may be mutually
agreed upon by the parties (the "CLOSING DATE"). The Closing shall be deemed
to take place as of the close of business on the Closing Date.
3.2. DELIVERIES BY PURCHASER. At the Closing, Purchaser shall deliver
the following:
(a) the Cash Consideration by wire transfer of immediately
available funds;
(b) the Convertible Note;
(c) certificates evidencing the number of shares of Common
Stock to be issued to Seller pursuant to Section 2.2(c);
(d) an officer's certificate to the effect set forth in
Section 11.1;
(e) any resale exemption certificates or other similar items
as may be reasonably requested by Seller;
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(f) a legal opinion of counsel for Purchaser and Parent as to
the matters described on EXHIBIT C; and
(g) such other instruments or documents as may be reasonably
necessary or appropriate to carry out the transactions contemplated
hereby.
3.3. DELIVERIES BY SELLER. At the Closing, Seller shall deliver or
cause to be delivered the following:
(a) Transfer/Deed of Land for the parcel of Owned Real Estate;
(b) Trademark Assignments in substantially the form attached
hereto as EXHIBIT D;
(c) Copyright Assignments in substantially the form attached
hereto as EXHIBIT E;
(d) Patent assignments in forms to be mutually agreed upon by
the parties;
(e) an officer's certificate to the effect set forth in
Section 10.1;
(f) a legal opinion of counsel for Seller as to the matters
described on EXHIBIT F; and
(g) such other instruments or documents as may be reasonably
necessary or appropriate to carry out the transactions contemplated by
this Agreement.
3.4. DELIVERIES BY PURCHASER AND SELLER. At the Closing, Purchaser
and Seller shall deliver the following:
(a) General Assignment, Xxxx of Sale and Assumption of
Liabilities between Purchaser and Seller in substantially the form
attached hereto as EXHIBIT G;
(b) General Conveyance and Assumption of Liabilities between
Parent, Purchaser and its Canadian assignee and Xxxxx Limited in
substantially the form attached hereto as EXHIBIT H (to include an
unconditional guaranty of Purchaser and Parent of the obligations of
the Canadian assignee and any transfer documents related to
intellectual property included in the Purchased Assets and owned by
Xxxxx Limited) (the "CANADIAN TRANSFER AGREEMENT");
(c) Assignment of Patent Infringement Claims between Purchaser
and Seller reflecting Section 1.3(e), Section 8.4 and Section 8.5 in
the form to be mutually agreed upon by the parties;
(d) Security Agreements in substantially the forms attached
hereto as EXHIBIT J;
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(e) Pledge Agreements in substantially the forms attached
hereto as EXHIBIT K;
(f) Printing Services Agreement in substantially the form
attached hereto as EXHIBIT L;
(g) Transition Services Agreement in substantially the form
attached hereto as EXHIBIT M, if desired by the Purchaser;
(h) A Preferred Supplier Relationship Agreement in
substantially the form attached hereto as EXHIBIT N; and
(i) Charge/Mortgage of Land, General Security Agreement and
Hypothec on the Universality of Movable Property in substantially the
forms attached hereto as EXHIBIT O (the "CANADIAN SECURITY DOCUMENTS")
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as set forth below.
For purposes of this Agreement, a "MATERIAL ADVERSE EFFECT" shall mean any
effect which is materially adverse to the Business and the Purchased Assets
when taken as a whole. For purposes of this Agreement, the phrase "TO THE
KNOWLEDGE OF SELLER," or other language of similar effect, shall mean to the
actual knowledge at the time of execution of this Agreement of the persons
listed on SCHEDULE 4.0. The exceptions, modifications, descriptions and
disclosures in any Schedule prepared by Seller and attached hereto are made
for all purposes of this Agreement and are exceptions to all representations
and warranties set forth in this Agreement or in any agreement or instrument
delivered pursuant to or in connection with this Agreement in all cases as to
which a reasonably knowledgeable business person would expect. Disclosure of
any items not otherwise required to be disclosed shall not create any
inference of materiality.
4.1. AUTHORITY. Each of Seller and Xxxxx Limited has the full right,
power and authority, without the consent of any other person, to execute and
deliver this Agreement and the agreements contemplated hereby to which it is
a party and to consummate the transactions contemplated on its part hereby
and thereby. All corporate acts required to be taken by Seller to authorize
the execution and delivery of this Agreement and all agreements and
transactions contemplated hereby have been duly and properly taken. All
corporate acts required to be taken by Xxxxx Limited to authorize the
execution and delivery of the Canadian Transfer Agreement, the other specific
conveyance documents to be executed by Xxxxx Limited and all transactions
contemplated thereby have been duly and properly taken.
4.2. VALIDITY; NO CONFLICT. This Agreement has been, and the
agreements and other documents to be delivered by Seller and Xxxxx Limited at
Closing will be, duly executed and delivered and constitute the valid and
legally binding obligations of Seller and Xxxxx Limited enforceable against
each in accordance with their respective terms. The execution and delivery
by such parties of such documents to which each is a party and the
consummation of the
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transactions contemplated hereby and thereby will not (immediately, with
notice, the passage of time or any combination thereof) result in the
creation of any lien, charge or encumbrance or the acceleration of any
indebtedness or other obligation of Seller or Xxxxx Limited and are not
prohibited by, do not violate or conflict with any provision of, and do not
and will not (immediately, with notice, the passage of time or any
combination thereof) constitute a default under or a breach of (i) the
charter or by-laws of each of Seller and Xxxxx Limited, (ii) any note, bond,
indenture, contract, agreement, permit, license or other instrument to which
either of Seller or Xxxxx Limited is a party or by which either of Seller or
Xxxxx Limited is bound, (iii) any order, writ, injunction, decree or judgment
of any court or governmental agency applicable to such parties, or (iv) any
law, rule or regulation applicable to such parties, except in each of the
foregoing cases for such creations, accelerations, terminations, violations,
conflicts, breaches, defaults, charges or encumbrances which in the aggregate
will not have a Material Adverse Effect on the Purchased Assets, Assumed
Liabilities or Seller's ability to consummate the transactions contemplated
hereby.
4.3. DUE ORGANIZATION. Seller is a corporation duly organized, in
good standing and validly existing under the laws of Delaware. Xxxxx Limited
is a corporation duly incorporated, in good standing and validly existing
under the laws of Ontario, Canada.
4.4. FINANCIAL INFORMATION.
(a) The financial statements of the Business for the three years
ended December 31, 1998 and attached hereto as SCHEDULE 4.4 (the "FINANCIAL
STATEMENTS") present the financial position and results of operations of the
Business in conformity with United States generally accepted accounting
principles subject to the disclosures, if any, contained therein ("GAAP").
(b) The Financial Statements are in compliance in all material
respects with the requirements of Regulation S-X of the Securities Act of
1933.
4.5. TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE
4.5, no Affiliate of Seller:
(a) owns, directly or indirectly, any material debt, equity or
other interest or investment in any corporation, association or other
entity which is a competitor, customer, contractor or supplier of the
Business;
(b) has any cause of action against the Business;
(c) has any material interest in or owns any material property
or right used in the conduct of the Business; or
(d) is a party to any material contract, lease, agreement,
arrangement or commitment used in the Business.
"AFFILIATE" shall mean any corporation, partnership, trust, limited liability
company or other entity which, directly or indirectly, controls, is
controlled by, or is under common control with
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any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity.
4.6. ACCOUNTS RECEIVABLE. SCHEDULE 4.6 sets forth an accurate,
correct and complete aging in all material respects as of the date indicated
thereon of all accounts receivable included in the Purchased Assets (the
"ACCOUNTS RECEIVABLE"). All Accounts Receivable arose in the ordinary course
of business. No Accounts Receivable are subject to prior assignment, claim,
lien or security interest.
4.7. INTERIM CHANGE. Except as set forth in SCHEDULE 4.7, since
December 31, 1998, the Business has been operated in the ordinary course of
business, consistent with past practice and, without limiting the foregoing,
there has not been:
(a) any material damage to, destruction of or claim against
material assets of the Business, or any disposition of any material
assets of the Business, other than sales in the ordinary course of
business on terms consistent with past practice;
(b) the incurrence of any material Assumed Liability,
including without limitation, with respect to prepaid revenue, other
than in the ordinary course of business;
(c) any new or revised arrangement relating to the employment,
compensation or benefits of an employee of the Business, other than
normal salary adjustments or otherwise in the ordinary course of
business;
(d) the sale, lease or license of any Intellectual Property or
Software (as defined below) other than in the ordinary course of
business;
(e) any material change in the status of any Material
Contract, other than in the ordinary course of business; or
(f) any agreement to take any of the foregoing actions.
4.8. PURCHASED ASSETS. Seller and Xxxxx Limited have good title to
the personal property included in the Purchased Assets which each purports to
own (except such property as has been disposed of in the ordinary course of
business); and at the Closing, Purchaser will receive the Purchased Assets
free and clear of any liens, claims or encumbrances, except for (a) liens,
claims or encumbrances which will be discharged upon payment by Purchaser of
the associated Assumed Liabilities, (b) liens, claims and encumbrances set
forth on SCHEDULE 4.8, or (c) liens, claims or encumbrances which arise by
operation of law ("PERMITTED LIENS"). The Purchased Assets constitute all of
the assets owned by Seller and Xxxxx Limited which are material to and
employed in the operation of the Business, other than with respect to the
matters contemplated by the Transition Services Agreement and the following
activities: (i) payroll; (ii) fixed asset record keeping and management
systems; (iii) Tax matters; (iv) Lotus Notes software; (v) general and
administrative support provided by or at the direction of Corporate; and (vi)
telecommunications systems.
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4.9. OWNED REAL ESTATE. SCHEDULE 4.9 sets forth an accurate, correct
and complete list of each parcel of real property owned by Seller or Xxxxx
Limited and employed primarily in the Business (the "OWNED REAL ESTATE"),
including the street address. Except as provided on SCHEDULE 4.9, Seller or
Xxxxx Limited is the legal and beneficial owner of all right, title and
interest in and has good and marketable title to all Owned Real Estate,
including the buildings, structures and improvements situated thereon and
appurtenances thereto, in each case free and clear of all liens, other than
Permitted Liens and the "PERMITTED ENCUMBRANCES" listed on SCHEDULE 4.9.
4.10. REAL ESTATE LEASES. SCHEDULE 4.10 lists all real property leased
or subleased by Seller or Xxxxx Limited (as lessee or lessor) and used in the
Business (the "LEASED REAL ESTATE"), including identification of the lease or
sublease (the "REAL ESTATE LEASES") and the street address of the Leased Real
Estate. Seller or Xxxxx Limited (as lessee), as the case may be, have been
in peaceable possession of the premises covered by each Real Estate Lease
since the commencement of the original term of such Real Estate Lease. True
and correct copies of each Real Estate Lease have been made available to
Purchaser.
4.11. EMPLOYEE PLANS. SCHEDULE 4.11 lists all of the material employee
benefit plans which are sponsored, maintained or contributed to by Seller or
Xxxxx Limited for the benefit of the employees of the Business currently
performing services (collectively, the "EMPLOYEE PLANS"). The Employee Plans
have been operated in conformance with applicable laws in all material
respects.
4.12. MATERIAL CONTRACTS. SCHEDULE 4.12 lists all written contracts
and agreements primarily related to the Business, the Purchased Assets or the
Assumed Liabilities meeting any of the descriptions set forth below (the
"MATERIAL CONTRACTS"):
(a) all Real Estate Leases;
(b) all agreements for the borrowing of money;
(c) any joint venture or partnership agreements;
(d) all purchase orders, agreements or commitments obligating
the Business to sell, deliver, license or support any product with an
annual revenue in excess of $70,000;
(e) all purchase orders and other contracts for the purchase
of materials or services requiring annual payments in excess of
$70,000;
(f) all equipment leases and other personal property leases
requiring annual payments in excess of $70,000;
(g) any agreement not to compete or otherwise restricting
activities of the Business;
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(h) all written employment contracts that cannot be terminated
on not less than 90 days' notice; and
(i) all other contracts, commitments, agreements, arrangements
and understandings which provide for annual payment of $70,000 or more
to or from the Business.
Except as set forth on SCHEDULE 4.12, each Material Contract is valid and
binding and is in full force and effect as to Seller and is assignable
hereunder without notice to or consent of a third party. No event has
occurred which is or, after the giving of notice or passage of time, or both,
would constitute a default under or a breach of any Material Contract by the
Business or, to the knowledge of Seller, by any other party thereto, which
could reasonably be expected to result in a Material Adverse Effect. True
and correct copies of each Material Contract have been made available to
Purchaser.
4.13. INTELLECTUAL PROPERTY. SCHEDULE 4.13 sets forth a correct and
complete list of all material patents, trademarks, trade names, trade styles,
service marks, registered copyrights and applications for any of the
foregoing owned by or utilized in the Business other than Software (the
"INTELLECTUAL PROPERTY"). Except as set forth in SCHEDULE 4.13, with respect
to the Intellectual Property, (a) Seller is the owner and has adequate rights
to use the Intellectual Property; (b) no action, suit, proceeding or
investigation is pending or, to knowledge of Seller, threatened; (c) none of
the Intellectual Property interferes with, infringes upon, conflicts with or
otherwise violates the rights of others or to Seller's knowledge, is being
interfered with or infringed upon by others in a manner which would have a
Material Adverse Effect; (d) none of the Intellectual Property is subject to
any outstanding order, decree, judgment, stipulation or charge; (e) there are
no royalty, commission or similar arrangements, and no licenses, sublicenses
or agreements, pertaining to any of the Intellectual Property; and (f) to the
knowledge of Seller, no third party is infringing upon the Intellectual
Property in a manner which could reasonably be expected to have a Material
Adverse Effect.
4.14. SOFTWARE AND INFORMATION SYSTEMS.
(a) For purposes of this Section, the term "SOFTWARE" means all
computer software programs, program specifications, charts, procedures,
source codes (including annotations), object codes, input data, diagnostic
and other routines, data bases and report layouts and formats, record file
layouts, diagrams, functional specifications and narrative descriptions and
flow charts material to and owned or used in the Business, other than for
financial, general or administrative activities. For purposes of this
Section 4.14, the term "COMPUTER SOFTWARE PROGRAMS" includes any set of
arithmetic, algorithmic and/or logical instructions meant to run on, or to
control the operation of, any computer (i) whether those instructions are a
complete program, a collection of programs making up a subsystem or system,
or are merely subroutines or meant to operate in conjunction with other
software, and (ii) whether such instructions must be run through another
computer program before being useable on a computer, whether such
instructions can be used at execution time only in conjunction with another
computer program (i.e., an "INTERPRETER") or whether such instructions are in
a form that can be run on a computer
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"AS IS," except for any necessary interfaces with the computer's microcode,
operating system or reference-resolving routines.
(b) SCHEDULE 4.14 sets forth a correct and complete list of all
Software and identifies specifically (i) Software as to which the source code
is owned by Seller ("OWNED SOFTWARE"); (ii) Software which is licensed to
Seller by third parties other than so called "SHRINK WRAP" software; and
(iii) Software purchased by or licensed to Seller solely for resale or
sublicense to its customers (Software described in the foregoing subsections
(ii) and (iii) being referred to collectively as the "THIRD PARTY SOFTWARE").
(c) Except as provided on SCHEDULE 4.14 or SCHEDULE 4.15, with
respect to the Software:
(i) Seller is the owner of, and has the exclusive
right to use the Owned Software free and clear of any claims of
ownership of others, except rights to use the Software granted
to customers of the Business in the ordinary course of
business;
(ii) the Owned Software and the licensing or
sublicensing thereof does not violate or infringe any trade
secret rights, copyrights, mask copyrights, patents or other
rights of others in a manner which would result in a Material
Adverse Effect and, to Seller's knowledge, no assertion to the
contrary has been made by any third party to Seller which could
reasonably be expected to result in a Material Adverse Effect;
and
(iii) to the knowledge of Seller, the Business has not
copied or used any of the Third Party Software in violation of
the applicable license or otherwise violated any of its
agreements or the rights of others with respect thereto.
4.15. LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 4.15, (a) the
Business is not engaged in or a party to or, to the knowledge of Seller,
threatened with any material action, suit or other legal proceeding, (b)
Seller has no knowledge of any investigation threatened by any governmental
or regulatory authority with respect to the Purchased Assets or Assumed
Liabilities, and (c) the Purchased Assets and Assumed Liabilities are not
subject to any judgment, order, writ, injunction, stipulation or decree of
any court or any governmental agency directly applicable thereto.
4.16. COMPLIANCE WITH LAW. To Seller's knowledge, the operation of the
Business complies with all applicable statutes, codes, laws, ordinances,
rules and regulations, except where non-compliance could not reasonably be
expected to result in a Material Adverse Effect.
4.17. PERMITS. To Seller's knowledge, Seller or Xxxxx Limited have all
the permits from all Federal, state and local authorities as are necessary
for the conduct of the Business as conducted on the date hereof, except where
the failure to have any permit could not reasonably be expected to result in
a Material Adverse Effect.
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4.18. TAXES. Seller and Xxxxx Limited have filed, or will file when
due, all reports and returns ("TAX RETURNS") of all Federal, state, local,
provincial and other foreign income, gross receipts, sales, use, ad valorem,
value added, franchise, withholding, payroll, employment, excise, property,
goods and services, capital or other tax returns, and paid when due all taxes
together with any penalties, additions to or additional amounts with respect
thereto and any interest (collectively referred to as "TAXES" and
individually as a "TAX") required to be filed or paid except, to the extent
Seller or Xxxxx Limited is reasonably disputing any such Taxes (none of which
disputes could reasonably be expected to result in a Material Adverse
Effect), relating to the Business or the Purchased Assets for the periods
ending on or before the Closing. When filed, all Tax Returns were correct
and complete in all material respects. No Taxing authority is asserting any
claim to additional payments or has notified Seller or Xxxxx Limited of any
dispute which could reasonably be expected to be material to the Business.
4.19. EMPLOYEES.
(a) The Business has paid or properly accrued in accordance with
GAAP for all wages, salaries, commissions, bonuses and other cash
compensation (other than accrued holiday and sick pay) to which employees and
former employees of the Business are entitled.
(b) Except as set forth on SCHEDULE 4.19 with respect to the
Business, (i) to the knowledge of Seller, Seller has complied with all
applicable laws regarding labor, employment and employment practices, terms
and conditions of employment, occupational safety and health and wages and
hours, except in such instances as could not reasonably be expected to result
in a Material Adverse Effect, (ii) Seller is not a party to or bound by, any
collective bargaining agreement or other written contract concerning
employment and, to Seller's knowledge, (A) no part of the Business has been
certified as a unit appropriate for collective bargaining and (B) there is no
certification application pending or, to Seller's knowledge, threatened by
any employees of the Business, and (iii) there is no labor strike or labor
dispute, slowdown or organized stoppage pending or, to the knowledge of
Seller, threatened against the Business. The Business has not experienced
any labor strikes or material labor disputes, slowdowns or organized
stoppages in the past three (3) years.
4.20. ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 4.20 or disclosed in the
Environmental Reports (as defined below), to Seller's knowledge, the
operation and use of the Owned Real Estate or the Leased Real Estate, are
each in compliance with all applicable Environmental Laws, except in such
instances as could not reasonably be expected to result in a Material Adverse
Effect.
(b) Except as set forth on SCHEDULE 4.20 or disclosed in the
Environmental Reports, as permitted in accordance with any applicable
Environmental Laws, or in such instances as could not reasonably be expected
to result in a Material Adverse Effect, to the knowledge of Seller, there are
no Hazardous Materials present in the surface water, groundwater or soil
(either surface or subsurface) at the Owned Real Estate or the Leased Real
Estate.
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(c) Seller has made available to Purchaser copies and results of
any material reports, studies, analysis, tests or monitoring possessed or
initiated by Seller or Xxxxx Limited within the last five (5) years
pertaining to Hazardous Materials in, on or under the Owned Real Estate or
the Leased Real Estate or concerning compliance with Environmental Laws (the
"ENVIRONMENTAL REPORTS"). The representations and warranties contained in
Sections 4.16, 4.17, 4.20 are deemed to be made subject to and modified by
the disclosures set forth in SCHEDULE 4.20 and the Environmental Reports, and
this Section 4.20 shall not be deemed to be breached with respect to any
matter disclosed in SCHEDULE 4.20 or the Environmental Reports.
"ENVIRONMENTAL LAWS" means all present federal, state and provincial
administrative, regulatory and judicial laws, rules, statutes, codes,
ordinances, regulations, directives, binding interpretations, binding
policies, licenses, permits, approvals, plans, authorizations, rulings,
injunctions, decrees, judgments, guidelines and any similar items, which are
in effect as of the date hereof relating to the protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata).
"HAZARDOUS MATERIALS" means any solid, liquid or gaseous material, alone or
in combination, mixture or solution, which are now defined, listed or
identified as "HAZARDOUS" (including "SUBSTANCES" or "WASTES"), "TOXIC", a
"POLLUTANT" or a "CONTAMINANT" pursuant to any Environmental Law which is
applicable to the site in question, including asbestos, chlorinated solvents,
polychlorinated biphenyls, radon, fuel oil, petroleum (including its
derivatives, by products or other hydrocarbons) and any other dangerous,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic material which is prohibited, limited, controlled or regulated
under any Environmental Law.
4.21. INSURANCE. SCHEDULE 4.21 sets forth a summary of the insurance,
insurance programs and fidelity bonds maintained with respect to the Business
and the Purchased Assets ("INSURANCE").
4.22. INVESTMENT REPRESENTATIONS; ACCREDITED INVESTOR.
(a) Seller has been advised that the issuance of the Common
Stock in connection with this Agreement is expected to be effected pursuant
to an exemption from registration under the Securities Act (as defined in
Section 5.5), and Seller accordingly agrees not to sell, pledge, transfer or
otherwise dispose of any Common Stock issued to Seller pursuant to this
Agreement, except pursuant to a registration statement under the Securities
Act for registration of the Common Stock or an applicable exemption under the
Securities Act.
(b) Seller has been advised that Parent will issue stop transfer
instructions to its transfer agent with respect to any Common Stock received
by Seller pursuant to this Agreement, and that there will be placed on the
certificates representing such Common Stock, or any substitutions therefor,
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT.
THESE
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SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE ACT OR WHEN ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION.
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend), and Parent shall so instruct its transfer
agent, if a registration statement respecting the sale of shares has been
declared effective under the Securities Act or an opinion is delivered to the
effect that registration is not required.
(c) Seller is acquiring the Common Stock for investment for
Seller's own account only and not with a view to, or for resale in connection
with, any "DISTRIBUTION" thereof within the meaning of the Securities Act.
(d) Seller understands that the Common Stock has not been
registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Seller's investment intent as expressed herein.
(e) Seller is an "ACCREDITED INVESTOR" under Rule 501
promulgated by the SEC.
4.23. BROKERS' FEES. Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Purchaser or Parent
could become liable or obligated.
4.24. RESIDENCY. Xxxxx Limited is not and will not be on the Closing
Date, a non-resident of Canada within the meaning of the Income Tax Act
(Canada).
4.25. PRINTING BUSINESS. The Business is not involved in Canada in any
publication, distribution or sale of books, magazines, periodicals or
newspapers in print or machine readable form, other than the sole activity of
printing or typesetting.
4.26. DISCLAIMER. The representations and warranties set forth in this
Article IV are the only representations and warranties made by Seller with
respect to the Business and the Purchased Assets. EXCEPT AS SPECIFICALLY SET
FORTH HEREIN, ALL WARRANTIES, EXPRESS OR IMPLIED, ARE HEREBY DISCLAIMED AND
EXCLUDED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND PARENT
Purchaser and Parent, jointly and severally, hereby represent and
warrant to Seller as of the date hereof, and as of the Closing Date, as set
forth below. For purposes of this Agreement, a "PARENT MATERIAL ADVERSE
EFFECT" shall mean any effect which is materially adverse to Parent and its
Subsidiaries when taken as a whole. The exceptions, modifications,
descriptions and disclosures in any Schedule prepared by Purchaser and Parent
and attached hereto are made for all purposes of this Agreement and are
exceptions to all representations and warranties set forth in this Agreement
or in any agreement or instrument delivered pursuant to or in connection with
this Agreement in all cases as to which a reasonably knowledgeable person
would expect. Disclosure of any items not otherwise required to be disclosed
shall not create any inference of materiality. For purposes of this
Agreement, "PARENT ENTITIES" or "PARENT ENTITY" shall mean Purchaser, Parent
and all direct or indirect Subsidiaries (as defined below).
5.1. AUTHORITY. Each of Purchaser, Parent and Canadian assignee has
full right, power and authority, without the consent of any other person, to
execute and deliver this Agreement and the agreements contemplated hereby and
to consummate the transactions contemplated hereby and thereby. All
corporate acts required to be taken by Purchaser, Parent and Canadian
assignee to authorize the execution and delivery of this Agreement and the
agreements contemplated hereby and all transactions contemplated hereby and
thereby have been duly and properly taken. The approval of the stockholders
of Parent is not required with respect to this Agreement or the transactions
contemplated hereby.
5.2. VALIDITY; NO CONFLICT. This Agreement has been, and the
agreements and other documents to be delivered by Purchaser, Parent and their
Subsidiaries at Closing will be, duly executed and delivered by Purchaser and
Parent and will constitute lawful, valid and legally binding obligations of
Purchaser, Parent and their Subsidiaries enforceable in accordance with their
respective terms. Except as set forth on SCHEDULE 5.2, the execution and
delivery by Purchaser and Parent of this Agreement and the agreements
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby will not (immediately, with notice, the passage of time or
any combination thereof) result in the creation of any lien, charge or
encumbrance (other than as contemplated by this Agreement) or the
acceleration of any indebtedness or other obligation of any Parent Entity and
are not prohibited by, do not violate or conflict with any provision of, and
do not and will not (immediately, with notice, the passage of time or any
combination thereof) result in a default under or a breach of (i) the charter
or by-laws of each Parent Entity, (ii) any contract, agreement, permit,
license or other instrument to which any Parent Entity is a party or by which
any Parent Entity is bound, (iii) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (iv) any law, rule or
regulation applicable to such parties, except for such creations,
accelerations, terminations, violations, conflicts, breaches, defaults,
charges or encumbrances which, in the aggregate will not have a Parent
Material Adverse Effect or an adverse effect on Purchaser's or Parent's
ability to consummate the transactions contemplated hereby. Except as set
forth on SCHEDULE 5.2, the consent of Xxxxxxxxxxx.xxx, Inc. to the
transactions contemplated hereby has been obtained.
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5.3. DUE ORGANIZATION AND PURPOSE. Each of Purchaser and Parent is
and the Canadian Subsidiary designated pursuant to Section 1.1 will be when
organized, a corporation duly organized, in good standing and validly
existing under the laws of its jurisdiction of incorporation or formation.
Purchaser is a direct, wholly-owned Subsidiary of Parent, formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby. The Canadian assignee designated pursuant to Section
1.1 will be a direct, wholly-owned Subsidiary of Purchaser formed solely for
the purpose of engaging in the transactions contemplated hereby and operating
the portion of the Business associated with the assets it acquires, will be
engaged in no other business activities and, following Closing, will conduct
its operations in the ordinary course of business.
5.4. CAPITAL STRUCTURE.
(a) As of the date hereof, the authorized capital stock of
Parent consists of 43,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock, par value $.001 per share ("PREFERRED STOCK"), of which
200,000 shares were authorized as Series B, 670,000 shares were authorized as
Series C, 240,000 shares were authorized as Series D, 2,500 shares were
authorized as Series E and 2,500 shares were authorized as Series F. At July
26, 1999, (i) 18,457,681 shares of Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable and free of
preemptive rights, (ii) no shares of Common Stock and Preferred Stock were
held in treasury of Parent or by Subsidiaries of Parent, (iii) no shares of
Series B or Series E Preferred Stock were issued and outstanding, 282,607
shares of Series C were issued and outstanding, 18,712 shares of Series D
were issued and outstanding, and 2,500 shares of Series F were issued and
outstanding, all of which were validly issued, fully paid and non-assessable
and free of preemptive rights, and (iv) 7,841,767 shares of Common Stock were
reserved for issuance pursuant to outstanding options, convertible securities
or other rights to purchase or otherwise acquire shares of Common Stock or
Preferred Stock, including under Parent's benefit plans or arrangements or
pursuant to any similar plans assumed by Parent in connection with any
acquisition, business combination or similar transaction (collectively, the
"PARENT STOCK PLANS"). As of the date of this Agreement, except as set forth
above and except for the issuance of shares of Common Stock pursuant to the
Parent Stock Plans, no shares of capital stock or other voting securities of
Parent were issued, reserved for issuance or outstanding. All of the shares
of Common Stock to be issued in accordance with this Agreement will be, when
so issued, duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights. As of the date of this Agreement, except for (i)
this Agreement and (ii) as set forth above, there are no options, warrants,
calls, rights, puts or agreements to which any Parent Entity is a party or by
which any of them is bound obligating any Parent Entity to issue, deliver,
sell or redeem, or cause to be issued, delivered, sold or redeemed, any
additional shares of capital stock (or other voting securities or equity
equivalents) of any Parent Entity or obligating any Parent Entity to grant,
extend or enter into any such option, warrant, call, right, put or agreement.
(b) As of the date of this Agreement, each outstanding share of
capital stock (or other voting security or equity equivalent) of each Subsidiary
of Parent is duly authorized, validly issued, fully paid and nonassessable and,
except for director or qualifying shares or as set forth on SCHEDULE 5.4, each
such share (or other voting security or equity equivalent) is owned by
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Parent, free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on voting rights,
charges and other encumbrances of any nature whatsoever. Except as set forth
above, Parent does not have any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into
or exercisable for securities having the right to vote) with the stockholders
of Parent on any matter. Exhibit 21 to Parent Annual Report on Form 10-KSB
for the year ended December 31, 1998 (the "PARENT ANNUAL REPORT"), as filed
with the Securities and Exchange Commission (the "SEC"), is a true, accurate
and correct statement in all material respects of all of the information
required to be set forth therein by the regulations of the SEC. "SUBSIDIARY"
means any corporation, partnership, limited liability company, joint venture
or other legal entity of which Parent (either alone or through or together
with any other Subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors, or other governing body
of such corporation, partnership, limited liability company, joint venture or
other legal entity.
(c) SCHEDULE 5.4 sets forth a list as of the date hereof of all
Subsidiaries and Joint Ventures (as defined below) of Parent and the
jurisdiction in which such Subsidiary or Joint Venture is organized.
SCHEDULE 5.4 also sets forth as of the date hereof the nature and extent of
the ownership and voting interests held by Parent in each such Joint Venture.
As used in this Agreement, "JOINT VENTURE" means, with respect to a party,
any corporation, limited liability company, partnership, joint venture or
other entity which is not a Subsidiary of such party and in which (i) such
party, directly or indirectly, owns or controls any shares of any class of
the outstanding voting securities or other equity interests, or (ii) such
party or a Subsidiary of such party is a general partner.
5.5. SEC REPORTS. No report, registration statement, prospectus,
schedule, definitive proxy statement or other document, each as amended,
filed by Parent with the SEC pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") since January 1, 1996 and prior to the date
hereof (the "PARENT REPORTS") contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected in a subsequent Parent Report. Parent has timely filed all Parent
Reports and other documents required to be filed by it under the Securities
Act and the Exchange Act, and, as of their respective dates, all Parent
Reports complied in all material respects with the published rules,
regulations and interpretations of the SEC with respect thereto.
5.6. FINANCIAL STATEMENTS. Parent has previously made available to
Seller copies of (a) the consolidated balance sheets of Parent and its
Subsidiaries as of December 31, 1996, December 31, 1997 and December 31,
1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1996 through 1998,
inclusive, as reported in the Parent Annual Report, in each case accompanied
by the audit report of the independent accountants for Parent, and (b) the
unaudited consolidated balance sheets of Parent and its Subsidiaries as of
March 31, 1999 and March 31, 1998, and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flows for the
three months ended March 31, 1999 and March 31, 1998, as reported in Parent's
quarterly report on
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Form 10-QSB for the period ended March 31, 1999 filed with the SEC under the
Exchange Act. The March 31, 1999 consolidated balance sheet of Parent and
its Subsidiaries (including the related notes, where applicable) (the "PARENT
BALANCE SHEET") and the other financial statements referred to herein
(including the related notes, where applicable) fairly present the
consolidated financial position and results of the consolidated operations
and cash flows and changes in stockholders' equity of Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; and each of such statements (including the related notes,
where applicable) complies in all material respects with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto and each of such statements has been prepared in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except in the case of unaudited interim
statements, as permitted by Form 10-QSB (subject, in the case of unaudited
interim statements, to normal year-end adjustments and the absence of
footnotes thereto). The books and records of Parent and its Subsidiaries are
true and accurate in all material respects and have been, and are being ,
maintained in accordance with generally accepted accounting principles and
applicable legal and regulatory requirements.
5.7. TRANSACTIONS WITH AFFILIATES. Except as disclosed in the Parent
Annual Report, no Affiliate of any Parent Entity:
(a) owns, directly or indirectly, any material debt, equity or
other interest or investment in any corporation, association or other
entity which is a competitor, customer, contractor or supplier of any
Parent Entity;
(b) has any cause of action against any Parent Entity;
(c) has any material interest in or owns any material property
or right used in the conduct of the business of any Parent Entity; or
(d) is a party to any material contract, lease, agreement,
arrangement or commitment with respect to the Parent Entities or their
respective businesses.
5.8. INTERIM CHANGE. Except as disclosed in the Parent Annual Report
or as set forth in SCHEDULE 5.8, since December 31, 1998, each of the Parent
Entities has been operated in the ordinary course, consistent with past
practice and, without limiting the foregoing, there has not been:
(a) any material damage to, destruction of or claim against
any Parent Entity, or any disposition of any material assets, other
than sales in the ordinary course of business on terms consistent with
past practice;
(b) the incurrence of any material liability or obligation,
other than in the ordinary course of business;
(c) any new or revised arrangement relating to the
compensation or benefits of an employee of any Parent Entity, other
than normal salary adjustments or otherwise in the ordinary course of
business;
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(d) any material change in the status of any Parent Material
Contract (as defined below); or
(e) any agreement to take any of the foregoing actions.
5.9. TITLE TO ASSETS. The Parent Entities have good title to all of
the real and personal property which each of them purports to own (except
such property as has been disposed of in the ordinary course of business or
described in Parent's SEC Reports); and such assets are free and clear of any
liens, claims or encumbrances, except for (a) liens, claims and encumbrances
which do not materially detract from the value or interfere with the present
use of such assets as a group, (b) liens, claims and encumbrances set forth
on SCHEDULE 5.9, or (c) liens, claims or encumbrances which arise by
operation of law.
5.10. MATERIAL CONTRACTS. Except as disclosed in the Parent Annual
Report, there are no other material contracts required to be disclosed
pursuant to Item 601 of Regulation S-B under the Securities Act
(collectively, the "PARENT MATERIAL CONTRACTS"). SCHEDULE 5.10 sets forth
all agreements in which Parent or Purchaser has agreed not to compete or
otherwise restrict the scope of its business activities.
5.11. INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 5.11,
with respect to all material patents, trademarks, trade names, trade styles,
service marks, copyrights and applications for any of the foregoing owned by
and utilized by the Parent Entities, other than Software (the "PARENT
INTELLECTUAL PROPERTY"), (a) Parent is the owner and has adequate rights to
use the Parent Intellectual Property; (b) no action, suit, proceeding or
investigation is pending or, to Parent's knowledge, threatened; (c) none of
the Parent Intellectual Property interferes with, infringes upon, conflicts
with or otherwise violates the rights of others or, to Parent's knowledge, is
being interfered with or infringed upon by others in a manner which would
have a Parent Material Adverse Effect; (d) none is subject to any outstanding
order, decree, judgment, stipulation or charge; and (e) there are no royalty,
commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Parent Intellectual Property.
5.12. SOFTWARE AND INFORMATION SYSTEMS.
(a) For purposes of this Section, the term "SOFTWARE" means all
computer software programs, program specifications, charts, procedures, source
codes (including annotations), object codes, input data, diagnostic and other
routines, data bases and report layouts and formats, record file layouts,
diagrams, functional specifications and narrative descriptions and flow charts
owned or used by the Parent Entities, other than for financial, general or
administrative activities. For purposes of this Section, the term "COMPUTER
SOFTWARE PROGRAMS" includes any set of arithmetic and/or logical instructions
meant to run on, or to control the operation of, any computer (i) whether those
instructions are a complete program, a collection of programs making up a
subsystem or system, or are merely subroutines or meant to operate in
conjunction with other software, and (ii) whether such instructions must be run
through another computer program before being useable on a computer, whether
such instructions can be used at execution time only in conjunction with another
computer program (i.e., an "INTERPRETER") or whether such instructions are in a
form that can be run on a computer "AS IS," except for any necessary interfaces
with the computer's microcode, operating system or
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reference-resolving routines. For purposes of this Section, Software as to
which the source code is owned by the Parent Entities is referred to as
"OWNED SOFTWARE".
(b) Except as provided on SCHEDULE 5.12, with respect to the
Software:
(i) A Parent Entity is the owner of, and has the
exclusive right to use the Owned Software free and clear of any
claims of ownership of others, except rights to use the
Software granted to customers of the Parent Entities;
(ii) the Owned Software and the licensing or
sublicensing thereof does not violate or infringe any trade
secret rights, copyrights, mask copyrights, patents or other
rights of others in a manner which would result in a Parent
Material Adverse Effect and, to Parent's knowledge, no
assertion to the contrary has been made by any third party
which would reasonably be expected to result in a Parent
Material Adverse Effect; and
(iii) to the knowledge of Parent, no Parent Entity has
copied or used any of the Software employed in its business in
violation of the applicable license or otherwise violated any
of its agreements or the rights of others with respect thereto.
5.13. LEGAL PROCEEDINGS. Except as disclosed in Parent Annual Report,
a subsequent report filed with the SEC or as set forth in SCHEDULE 5.13, (a)
no Parent Entity is engaged in or a party to or, to the knowledge of Parent,
threatened with any action, suit or other legal proceeding, (b) Parent has no
knowledge of any investigation threatened by any governmental or regulatory
authority with respect to the Parent Entities or their respective businesses,
and (c) none of the assets of the Parent Entities are subject to any
judgment, order, writ, injunction, stipulation or decree of any court or any
governmental agency directly applicable thereto.
5.14. COMPLIANCE WITH LAW. To Parent's knowledge, the operation of the
respective businesses of the Parent Entities complies in all material
respects with all applicable statutes, codes, laws, ordinances, rules and
regulations, except where non-compliance could not reasonably be expected to
result in a Parent Material Adverse Effect.
5.15. PERMITS. To Parent's knowledge, the Parent Entities currently
have all the permits from all Federal, state and local authorities as are
necessary for the conduct of its business on the date hereof, except where
the failure to have any permit could not reasonably be expected to result in
a Material Adverse Effect.
5.16. TAXES. Each of the Parent Entities have filed, or will file when
due, all Tax Returns and have paid all Taxes required to be paid when due,
except to the extent a Parent Entity is disputing any such Taxes in good
faith, for the periods up to the Closing.
5.17. BROKERS' FEES. Neither Purchaser nor Parent has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Seller
could become liable or obligated.
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ARTICLE VI
COVENANTS OF SELLER
6.1. INTERIM CONDUCT OF BUSINESS; OPERATING BOARD. From the date
hereof until the Closing, Seller shall use all reasonable efforts to operate
the Business consistent with past practice and in the ordinary course of
business, except as otherwise specifically provided herein. Seller shall not
sell, lease or otherwise dispose of the Purchased Assets except in the
ordinary course of business. Seller shall collect its accounts receivable
and pay its accounts payable consistent with past practice. Within ten
business days of the date hereof, Seller will create a group to be known as
the "OPERATING BOARD" to develop strategic direction for the Business. The
Operating Board will consist of Xxx Xxx and two employees of Seller
designated by Seller.
6.2. ACCESS. From the date hereof through the Closing Date, Seller
shall give Parent and Purchaser and their representatives reasonable access
during normal business hours and under reasonable circumstances to all
properties and records of the Business and furnish Parent and Purchaser with
all financial and other information in its possession relating to the
Business and the Purchased Assets as Parent or Purchaser may from time to
time reasonably request. Parent and Purchaser shall not contact any
employee, customer or supplier of Seller without the prior written consent of
an officer of Seller.
6.3. RECORDS AND DOCUMENTS. Following the Closing Date, Seller shall
grant to Purchaser and its representatives, at Purchaser's reasonable
request, reasonable access to and the right to make copies at its expense of
those records and documents in Seller's possession related to the Business,
the Purchased Assets or the Assumed Liabilities as may be reasonably
necessary for Purchaser's operation of the Business after the Closing and
which do not constitute Purchased Assets.
6.4. CONSUMMATION. Subject to the terms and conditions provided
herein, Seller agrees to use all reasonable efforts to take, or cause to be
taken all actions and to do, or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement in accordance with
its terms; except that this covenant shall not require Seller to make any
payment or incur any economic burden not provided for herein.
6.5. XXXX-XXXXX-XXXXXX CONSENT. As promptly as possible, but in any
event not later than five (5) business days after the execution hereof,
Seller shall file, at its cost, with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the United States Department of Justice (the
"ANTITRUST DIVISION") a premerger notification in accordance with the
Xxxx-Xxxxx-Xxxxxx Act (the "HSR ACT") with respect to the sale of the
Purchased Assets pursuant to this Agreement. Seller shall furnish promptly
to the FTC and the Antitrust Division any additional information requested by
either of them pursuant to the HSR Act in connection with such filings and
shall diligently take, or cooperate in the taking of, all steps that are
necessary or desirable and proper to expedite the termination of the waiting
period under the HSR Act.
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6.6. NONCOMPETITION.
(a) As additional consideration for the payments to be made by
Purchaser hereunder, Seller agrees for three (3) years from the Closing Date,
not to, directly or indirectly, including through Affiliates, engage or have
a controlling equity interest in a business that engages in or controls a
business in direct competition with the Business as currently conducted
within North America (collectively, the "PROHIBITED ACTIVITIES"). Nothing
contained in this Section shall limit the activities of Seller or its
Affiliates with respect to: (i) the CDS Business or any other commercial
printing activities; (ii) any activities expressly contemplated by this
Agreement; (iii) any business acquired after the date hereof if the
Prohibited Activities did not generate greater than 10% of the revenues of
such business during its fiscal year immediately prior to the acquisition and
if the Prohibited Activities would not constitute a "SIGNIFICANT SUBSIDIARY"
(as defined in the rules and regulations under the Exchange Act) of Seller;
(iv) any business conducted by an entity which hereafter directly or
indirectly acquires Seller or Xxxxx Limited; or (v) any ownership interest in
Parent or its successors. In no event shall the ownership of less than five
percent of any publicly traded company be deemed to be a violation of this
Section.
(b) The parties agree that the duration, scope and geographic
area for which the covenant not to compete set forth in this Section 6.6 is
to be effective are reasonable and appropriate. In the event that any court
of competent jurisdiction determines that the duration, scope or area
provided for in this Section 6.6 are unreasonable and that such covenant is
to that extent unenforceable, such covenant shall remain in full force and
effect for the greatest time period and scope and in the greatest
geographical area that would not render it unenforceable.
(c) The parties agree that damages would be an inadequate remedy
for Purchaser in the event of a breach or threatened breach of this Section
and thus, in any such event, Purchaser may, either with or without pursuing
any potential damage remedies, immediately seek to obtain and enforce an
injunction prohibiting Seller and its Affiliates from violating this Section.
6.7. NOTIFICATION OF BREACH. Seller shall promptly notify Purchaser
of any information which makes, or if known to Purchaser or Parent would
make, any representation, warranty or covenant of Purchaser or Parent
contained herein untrue. If a breach is cured (whether or not the subject of
a notice) prior to the Closing (other than a breach of Section 5.5), such
breach shall be deemed not to have occurred for all purposes of this
Agreement.
6.8. ACCOUNTANTS. Seller shall request and take commercially
reasonable efforts to cause its accountants to provide their consent to the
inclusion of their report on the Financial Statements (a) in the filings of
Parent with the SEC and (b) for other reasonable purposes of Parent and
Purchaser. Any and all costs or expenses related to obtaining such consents
shall be borne by Purchaser.
6.9. INTERIM FINANCIAL STATEMENTS. Not later than August 15, 1999,
Seller shall deliver balance sheets and statements of operations as of and
for the periods ending June 30, 1999 and 1998, which shall be prepared on a
basis consistent, in all material respects, with the Financial Statements,
except as to footnote disclosures and normal year-end adjustments and
accruals.
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ARTICLE VII
COVENANTS OF PURCHASER AND PARENT
7.1. INTERIM CONDUCT OF BUSINESS. From the date hereof until the
Closing, Purchaser and Parent shall use and Parent shall cause each
Subsidiary to use, all reasonable efforts to operate their respective
businesses consistent with past practice and in the ordinary course of
business, except as set forth on SCHEDULE 7.1 or as otherwise specifically
provided herein (including without limitation, Section 5.4 hereof), provided,
however, the Parent shall not:
(a) declare, set aside or pay any dividend or make any other
distribution with respect to the capital stock of Parent;
(b) redeem or otherwise acquire any capital stock of Parent;
(c) amend or otherwise change the certificate of incorporation
or by-laws of the Parent or Purchaser;
(d) merge or consolidate with or agree to merge or consolidate
with, nor purchase or agree to purchase all or substantially all of
the assets of, nor otherwise acquire, any corporation, partnership, or
other business organization or division thereof;
(e) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its material assets, properties,
rights or claims, other than in the ordinary course of business
consistent with past practices;
(f) authorize or effect any stock split, stock dividend,
recapitalization or similar transaction;
(g) authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any securities
or obligations convertible into shares of its capital stock of any
class (except with respect to currently outstanding warrants, options
or convertible securities) or issue or grant any option, warrant or
other right to purchase any shares of its capital stock of any class,
except pursuant to employee benefit plans consistent with past
practice; or
(h) agree to do any of the foregoing.
7.2. ACCESS. From the date hereof through the Closing Date, the
Parent Entities shall give Seller and its representatives access during
normal business hours and under reasonable circumstances to all properties
and records of their respective businesses and furnish Seller with all
financial and other information in its possession relating to their
businesses and assets as Seller may from time to time reasonably request.
Seller shall not contact any employee, customer or supplier of the Parent
Entities without the prior written consent of an officer of Parent.
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7.3. CONSUMMATION. Subject to the terms and conditions provided
herein, Purchaser and Parent agree to use all reasonable efforts to take, or
cause to be taken all actions and to do, or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
in accordance with its terms.
7.4. XXXX-XXXXX-XXXXXX CONSENT. As promptly as possible, but in any
event not later than five (5) business days after the execution hereof,
Parent and Purchaser shall file at their cost with the FTC and the Antitrust
Division, including payment of the required filing fee, a premerger
notification in accordance with the HSR Act with respect to the purchase of
the Purchased Assets pursuant to this Agreement. Parent and Purchaser shall
furnish promptly to the FTC and the Antitrust Division any additional
information requested by either of them pursuant to the HSR Act in connection
with such filings and shall diligently take, or cooperate in the taking of,
all steps that are necessary or desirable and proper to expedite the
termination of the waiting period under the HSR Act.
7.5. RECORDS AND DOCUMENTS. Following the Closing Date, Purchaser
shall grant to Seller and its representatives, at Seller's reasonable
request, reasonable access to and the right to make copies at its expense of
those records and documents covering any period prior to the Closing related
to the Business or the Purchased Assets as may be reasonably necessary for
litigation, preparation of financial statements, tax returns and audits or
other valid business purposes. If Purchaser elects to dispose of such
records, Purchaser shall first give Seller sixty (60) days' written notice,
during which period Seller shall have the right to take such records without
further consideration.
7.6. NOTIFICATION OF BREACH. Purchaser shall promptly notify Seller
of any information which makes, or if known to Seller would make, any
representation, warranty or covenant of Seller contained herein untrue. If a
breach is cured (whether or not the subject of a notice) prior to the
Closing, such breach shall be deemed not to have occurred for all purposes of
this Agreement.
7.7. INVESTMENT CANADA NOTIFICATION. As promptly as reasonably
possible, but in any event not later than ten (10) business days after this
date, Parent and Purchaser shall file with Industry Canada a notice of
investment and any supplemental information which may be required in
connection therewith pursuant to the Investment Canada Act ("ICA") which
filings shall comply in all material respects with the requirements of the
ICA. The Seller shall co-operate fully with the Purchaser and Parent in
connection with the preparation of such filing and the Purchaser and Parent
shall use all reasonable efforts to respond to any requests for supplemental
information from Industry Canada.
7.8. BOARD OF DIRECTORS.
(a) If Seller so elects, so long as Seller owns greater than five
percent (5%) of the issued and outstanding Common Stock of Parent, (i) Parent
shall use its best efforts to cause one designee of Seller (the "DESIGNEE") to
be elected to Parent's Board of Directors and (ii) Seller shall be entitled to
submit an additional designee for consideration in good faith through the then
current Parent Board of Directors nomination process (the "ADDITIONAL
DESIGNEE"). If the
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Additional Designee is recommended through the nomination process, Parent
shall use its best efforts to cause the Additional Nominee to be elected. In
the event that either the Designee or the Additional Designee is not so
elected, in addition to any other available rights of Seller, Seller shall
have the right to appoint one observer for each such person not elected at
all meetings of the Board of Directors of Parent and all committees thereof,
and such observer shall be: (i) entitled to notice of all meetings of the
Board of Directors and its committees of Parent in accordance with the time
periods set forth in Parent's by-laws, as if a member of the Parent Board of
Directors; (ii) provided with all materials provided to the Parent's Board of
Directors and its committees; (iii) provided a copy of any resolutions of the
Parent Board of Directors and its committees to be adopted by written consent
at the same time that the resolutions are delivered to the members of the
Parent Board of Directors and its committees; and (iv) entitled to
reimbursement of all out-of-pocket expenses related to the attendance of any
meetings of the Parent Board of Directors and its committees in accordance
with the most favorable policies applicable to any other observer of the
Parent Board of Directors, if such policies are established.
(b) If Seller elects to exercise its rights pursuant to Section
7.8(a), Parent shall cause the Designee and, subject to Section 7.8(a)(ii),
the Additional Designee, to be (i) nominated, (ii) recommended for election
by the Board of Directors of Parent, and (iii) included for election in the
Parent's proxy statements.
(c) If Seller elects to appoint the Designee and, if desired,
the Additional Designee and Seller owns greater than five percent (5%) of the
issued and outstanding Common Stock of Parent, Parent shall continue to be
obligated pursuant to this Section 7.8; provided, however, that Seller may
change the Designee and Additional Designee at any time and, as long as the
Designee or Additional Designee resigns as a director, the Board of Directors
of Parent shall take appropriate action so that the replacement shall replace
the then existing Designee or Additional Designee, as the case may be, as a
member of the Parent's Board of Directors as soon as practicable after Parent
receives notice of such change.
(d) At Closing, Parent shall deliver to Seller an agreement in a
form reasonably acceptable to Seller from the stockholders of Parent who are,
or who have representatives as, Directors of Parent, agreeing that each of
them will vote all of their shares of Common Stock and Preferred Stock of
Parent for the election to the Board of Directors of the Designee and
Additional Designee, as the case may be, at the Parent's 1999 annual
stockholders meeting.
(e) Notwithstanding anything to the contrary, if this Agreement
terminates as provided in Article XIII, and Seller is entitled to retain the
Signing Payment, Seller shall nonetheless be entitled to the benefits
provided in this Section 7.8 with respect to a single Designee reasonably
acceptable to Parent (it being understood that Xx Xxxxx and Xxxxx Xxxxxx are
acceptable candidates) for so long as Seller is a stockholder of Parent and
owns greater than five percent (5%) of the issued and outstanding Common
Stock of Parent.
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ARTICLE VIII
OTHER COVENANTS
8.1. CONFIDENTIALITY. In addition to its obligations under the
Confidentiality Agreement dated April 23, 1999 (the "CONFIDENTIALITY
AGREEMENT"), each of Parent and Purchaser, on the one hand, and Seller (on
its own behalf and on behalf of Xxxxx Limited), on the other hand, agrees
that it will not disclose, nor will it permit any of its employees, agents or
representatives to disclose, to any third party any confidential information
obtained regarding Seller or Xxxxx Limited, on the one hand, or Purchaser or
Parent, on the other hand, in connection with this Agreement, including any
information provided pursuant to Section 6.2 or Section 7.2, as the case may
be. If this Agreement is terminated without consummation of the transactions
contemplated hereby, promptly after termination, Parent and Purchaser, on the
one hand, and Seller, on the other hand, shall destroy or return to the other
party all such confidential information, including any copies, extracts or
other reproductions in whole or in part. Such return or destruction shall be
certified in writing by an authorized officer of Parent and Purchaser or
Seller, as the case may be. The provisions of this Section 8.1 shall survive
any termination of this Agreement.
8.2. PARENT COMMON STOCK.
(a) Parent covenants and agrees that so long as the Convertible
Note and/or the Additional Note and the indebtedness evidenced thereby shall
be unpaid (in whole or in part) Parent will at all times have authorized, and
in reserve, a sufficient number of shares of Common Stock to provide for the
exercise of the conversion rights under the Convertible Note and Additional
Note (assuming full conversion at the Conversion Price (as defined therein))
from time to time in effect.
(b) During the 30-trading day periods of time that the Average
Closing Price and the Subsequent Average Price are calculated, the Seller,
Xxxxx Limited, the Parent Entities and their respective Affiliates agree not
to, directly or indirectly, or cause or direct any third party to, purchase,
issue or sell any shares of Common Stock on the Nasdaq Stock Market or any
other exchange or market (including the OTC Bulletin Board) on which the
Common Stock so trades. Parent and Purchaser, on the one hand, and Seller
(on its own behalf and on behalf of Xxxxx Limited) on the other hand,
represent that no such activities have taken place in the 30-trading days
prior hereto. Notwithstanding the foregoing, Parent will be entitled to honor
conversion requests or option exercises.
8.3. COOPERATION AND RECORDS RETENTION WITH RESPECT TO TAXES. Seller and
Purchaser shall (i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the preparation of any
Tax Return, audit or other examination by any taxing authority or 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 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. Without limiting the
generality of the foregoing, Purchaser shall retain and Seller shall retain,
until the
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applicable statutes of limitations (including any extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records or
information which may be relevant to such returns for all tax periods or
portions thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same.
8.4. PATENT INFRINGEMENT CLAIMS.
(a) Effective at Closing, Purchaser shall assign to Seller
and/or Xxxxx Limited the sole and exclusive right in the United States and in
Canada to commence and prosecute Patent Infringement Claims against one or
more of the parties described in Section 1.3(e) for infringement of the
Patents, at Seller's own expense, and to collect damages for past, present
and if any such infringement exists before Closing, future infringement of
the Patents, including collecting any royalty or license fees for future
periods and to obtain any other relief that is necessary or feasible,
including the right to enjoin such parties from practicing the invention
claimed in the Patents, to collect enhanced damages and/or attorneys fees for
willful infringement thereof, and without limitation to secure any other
relief possible. Purchaser agrees to join with Seller and/or Xxxxx Limited
as a necessary party to any such litigation and agrees that Seller shall
control the litigation with respect to claims for infringement. With respect
to invalidity defenses and counterclaims made during the litigation,
Purchaser shall control the defense of such invalidity defenses and
counterclaims and shall consult with Seller with respect thereto.
(b) Purchaser agrees to cooperate with Seller and/or Xxxxx
Limited in prosecuting the Patent Infringement Claims and to permit Seller to
settle or compromise the Patent Infringement Claims on terms which are
reasonable, provided, however, that Seller shall not have the right to grant
any licenses or other rights under the Patents pursuant to such settlement or
compromise. Purchaser agrees that it will consent to and grant a license on
terms provided by Seller in an agreement to settle the Patent Infringement
Claims subject to Purchaser's approval, not to be unreasonably withheld. Any
license, royalty or other fees received by Purchaser in connection with such
license or otherwise resulting from the Patent Infringement Claims shall be
subject to Section 8.4(d) below.
(c) The assignment in (a) shall cease to be effective on the
second anniversary of the Closing, except as to the "COMMENCED CLAIMS."
COMMENCED CLAIMS shall be those claims as to which Seller or Xxxxx Limited
has either (i) commenced litigation or other dispute resolution procedures,
or (ii) commenced substantive settlement discussions. During the two years
following Closing, Purchaser shall not grant any licenses under the Patents
to the parties listed in SCHEDULE 1.3(e) or their Affiliates, without the
consent of Seller, not to be unreasonably withheld, and thereafter, Purchaser
shall not grant any licenses under the Patents to any parties to Commenced
Claims, except as provided in (b). In no event shall Seller or Xxxxx Limited
assign to any third party (other than Affiliates) any rights granted to
Seller and/or Xxxxx Limited in this Section 8.4. Notwithstanding anything
contained herein to the contrary, Purchaser shall not be precluded from
asserting a Patent Infringement Claim as a counterclaim against a party on
SCHEDULE 1.3(e) which first commences litigation against Purchaser or its
Affiliates and as to which the Patent Infringement Claim is a rationally
related defense or counterclaim, unless prior thereto Seller or Xxxxx Limited
has commenced litigation against such party on the same Patent Infringement
Claim.
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(d) Seller and Xxxxx Limited agree to share equally with
Purchaser the proceeds of any Patent Infringement Claim brought by Seller and
Xxxxx Limited, including any royalty or licenses fees, after deduction of
costs and expenses related to the enforcement of the Patent Infringement
Claim and any and all related costs thereof. Expenses shall include costs
attributable to in house personnel as well as retained counsel and related
fees and expenses. Seller, within sixty (60) days of receiving the proceeds,
shall provide the Purchaser with an accounting of its costs and expenses as
well as its proportionate share of such recovery.
(e) To the extent the Canadian assignee is an assignee of
Patents, it shall be subject to the above provisions.
8.5. COOPERATION.
(a) With respect to any Litigation Matter or Patent Infringement
Claim, Purchaser and Parent will cooperate with Seller in defending or
prosecuting such Litigation Matter or Patent Infringement Claim, including,
without limitation, making available its employees and personnel and relevant
records and documents. Seller shall reimburse Purchaser and Parent for any
reasonable out-of-pocket expenses incurred by them in cooperating with Seller
in asserting the Patent Infringement Claims pursuant to this Section 8.5(a).
(b) In addition, if, as a result of any resolution, settlement
or judgement of a Litigation Matter, the products or services of the Business
are required to satisfy such resolution, settlement or judgment, Purchaser
and Parent agree to provide such products and services and Seller agrees to
pay or cause to be paid the price for such products and services, which price
should be no less favorable then the price paid by the other customers of the
Business.
8.6. TAX ELECTION. Seller and Purchaser agree that Purchaser or
Canadian assignee and Xxxxx Limited will file such elections under subsection
20(24) of the Income Tax Act (Canada) and any corresponding provincial income
tax legislation as are agreed upon by Purchaser or Canadian assignee and
Xxxxx Limited.
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
9.1. CONTINUED ASSOCIATION WITH BUSINESS. On or before the Closing
Date, Purchaser shall offer employment to all of the employees of the
Business (the "TRANSFERRED EMPLOYEES"). Terms of employment for the employees
of the Business shall be offered (i) at the same or greater cash
compensation, (ii) with benefits generally comparable in value in the
aggregate to those currently provided by the Business to its similarly
situated employees, (iii) with respect to Canadian employees, with pension
benefits as described in Section 9.4, and (iv) otherwise on terms and
conditions at least as favorable as those existing at Closing. The Purchaser
shall not require relocation of the employee and shall provide credit for
years of service with Seller and any predecessors for purposes of
eligibility, participation, vesting, entitlement, severance and all other
relevant purposes. Purchaser shall give all such employees credit for
vacation, sick pay and similar items (i) to the extent accrued on the 1998
Financial Statement (if required to be accrued in accordance with GAAP), or
(ii) arising after the date thereof. Purchaser will not terminate any
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of such employees (other than for documented material performance
deficiencies which remain uncorrected after reasonable warning) or otherwise
alter their terms of employment during the first year after Closing without
complying, as to U .S. employees, with the severance policies attached hereto
as SCHEDULE 9.1.
9.2. PAYROLL RECORDS. Seller and Purchaser agree that Purchaser has
purchased substantially all of the property used in the Business and that in
connection therewith Purchaser will employ individuals who immediately before
the Closing Date were employed in such trade or business by Seller.
Accordingly, pursuant to Rev. Proc. 84-77, 1984-2 C.B. 753, provided that
Seller makes available to Purchaser all necessary payroll records for the
calendar year that includes the Closing Date, Purchaser will furnish a Form
W-2 to each U.S. employee employed by Purchaser who had been employed by
Seller, disclosing all wages and other compensation paid for such calendar
year, and Taxes withheld therefrom, and Seller will be relieved of the
responsibility to do so.
9.3. WARN ACT COMPLIANCE. Purchaser shall retain full responsibility
for compliance with the Worker's Adjustment and Retraining Notification Act
of 1988, as amended, and any other similar Canadian law, and be solely
responsible for furnishing any required notice of any "PLANT CLOSING" or
"MASS LAYOFF", as applicable and shall indemnify Seller for any liability,
expense and cost related thereto, including reasonable attorneys' fees
related thereto.
9.4. CANADIAN PERSONNEL MATTERS.
(a) As soon as practicable after the Closing Date, and in no
event more than 180 days after such date, Purchaser shall provide or
establish, and apply for registration under the INCOME TAX ACT (Canada) and
PENSION BENEFITS ACT (Ontario) of a pension plan (the "PURCHASER'S PENSION
PLAN") that provides the Transferred Employees who, as at the Closing Date,
are participants in, or are eligible (including subject to minimum service
conditions) to participate in, the Retirement Income Plan of Xxxxx
Corporation Limited (the "PLAN") (the "PENSION EMPLOYEES"), with rights and
benefits (excluding any rights to surplus) which in the aggregate for each
employee have the same economic value in respect of service with the Business
after the Closing Date as that provided to them under the Plan as at the
Closing Date. Purchaser shall provide such level of rights and benefits for
each of the Pension Employees for at least two (2) years after the Closing
Date. Purchaser shall not be responsible for pension and ancillary benefits
accrued based on service and earnings with the Business as at or before the
Closing Date.
(b) Purchaser and Seller agree to cooperate fully to ensure
proper administration of the pension benefits payable to Pension Employees
under the Plan or Purchaser's Pension Plan, as the case may be. The
Purchaser's Pension Plan shall recognize the period of employment of Pension
Employees with the Business before the Closing Date for the purposes of
determining eligibility for membership in, and vesting of pensions (including
early retirement benefits) under, the Purchaser's Pension Plan but not for
the purpose of benefits accruals. The Plan shall recognize the period of
employment of Pension Employees with the Business on or after the Closing
Date for the purpose of determining vesting of pensions (including early
retirement benefits) under the Plan but not for the purpose of benefit
accruals.
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9.5. CANADIAN EMPLOYEES. In addition to and not in limitation of the
above provisions, Purchaser acknowledges that it, or the transferees of the
Canadian Purchased Assets, shall be a successor to and bound by the existing
collective bargaining agreements with the Canadian Transferred Employees.
Purchaser and Parent shall indemnify Seller and Xxxxx Limited for any
liability, expense and cost with respect to wages, severance and termination
pay and other termination costs relating to all service with the Business,
and any other matters arising after the Closing Date respecting Canadian
Transferred Employees.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT
The obligation of Purchaser and Parent to consummate the transactions
contemplated by this Agreement is subject to fulfillment prior to or at the
Closing of the following conditions (unless waived in writing in the sole
discretion of Purchaser):
10.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Seller contained herein shall be accurate
in all material respects when made and as of the Closing Date, except as to
matters arising from the date of this Agreement through the Closing in the
ordinary course of business (and not in violation of any covenant contained
herein) or otherwise contemplated by this Agreement and except for such
instances which in the aggregate could not reasonably be expected to result
in a Material Adverse Effect. Seller shall have performed, in all material
respects, all obligations and complied with each and all of the covenants,
agreements and conditions required to be performed or complied with on or
prior to the Closing except for such instances which in the aggregate could
not reasonably be expected to result in a Material Adverse Effect. Seller
shall have delivered an officer's certificate confirming the matters in each
of the foregoing sentences; provided, however, that such certificate may
disclose any facts or circumstances arising or coming to the attention of
Seller after the date hereof which would cause any representations and
warranties to be incorrect or agreements or covenants to be unfulfilled; and
(i) if Purchaser and Parent nevertheless decide to consummate the
transactions contemplated hereby, the breach or failure shall be deemed cured
and may not be relied upon by Purchaser or Parent to avoid any of its
obligations hereunder, impose any liabilities or obligations upon Seller or
otherwise recover from Seller with respect thereto, or (ii) if Purchaser and
Parent decide not to consummate the transactions contemplated hereby, this
Agreement and the proposed transactions contemplated hereunder shall
terminate (except as provided in Section 13.2(a)), each party hereto shall
thereafter have no obligation or liability hereunder, Seller shall return the
Signing Payment to Parent and the Test Marketing Agreement shall terminate.
Purchaser's and Parent's sole and exclusive remedy, in law or in equity, for
any claim related to or arising out of a failure of a condition or breach,
whether in contract, tort or otherwise, identified on or prior to Closing,
shall be to refuse to complete the Closing under this Agreement.
10.2. NO PENDING ACTION. No action, suit, proceeding or investigation
before any court, administrative agency or other governmental authority shall
be pending wherein an unfavorable judgment, decree or order would prevent the
carrying out of this Agreement or any of the
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transactions contemplated hereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded.
10.3. CONDITION OF PURCHASED ASSETS. The tangible Purchased Assets in
the aggregate shall not have been adversely affected in any way by any act of
God, flood, fire, accident, war or other event, which could reasonably be
expected to result in a Material Adverse Effect, after giving due
consideration to the application of any insurance proceeds.
10.4. XXXX-XXXXX-XXXXXX. The waiting period under the HSR Act required
to permit the consummation of the transactions provided for herein shall have
expired or early termination shall have been granted.
10.5. ICA. Industry Canada shall have advised that the investment is
not reviewable under the ICA or, the time periods specified in the ICA for
notification of review shall have elapsed without notice from Industry Canada.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to fulfillment prior to or at the Closing of the
following conditions (unless waived in writing in the sole discretion of
Seller):
11.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Purchaser and Parent contained herein shall
be accurate in all material respects when made and as of the Closing Date,
except as to matters arising from the date of this Agreement through the
Closing in the ordinary course of business (and not in violation of any
covenant contained herein) or otherwise contemplated by this Agreement and
except for such instances which in the aggregate could not reasonably be
expected to result in a Parent Material Adverse Effect. Purchaser and Parent
shall have performed all obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied
with on or prior to the Closing. Purchaser or Parent shall have delivered an
officer's certificate confirming the matters in each of the foregoing
sentences; provided, however, that such certificate may disclose any facts or
circumstances arising or coming to the attention of Purchaser or Parent after
the date hereof which would cause any representations and warranties to be
incorrect or agreements or covenants to be unfulfilled; and (i) if Seller
nevertheless decides to consummate the transactions contemplated hereby, the
breach or failure shall be deemed cured and may not be relied upon by Seller
to avoid any of its obligations hereunder, impose any liabilities or
obligations upon Purchaser or Parent or otherwise recover from Purchaser or
Parent with respect thereto except with respect to the Signing Payment, or
(ii) if Seller decides not to consummate the transactions contemplated
hereby, this Agreement and the proposed transactions contemplated hereunder
shall terminate (except as provided in Section 13.2(a)), each party hereto
shall thereafter have no obligation or liability hereunder, other than with
respect to the Signing Payment (which Seller shall keep) and the surviving
provisions in Section 13.2(a), and the Test Marketing Agreement shall
terminate. Except with respect to the Signing Payment and such surviving
provisions, Seller's sole and exclusive remedy, in law or in equity, for any
claim
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related to or arising out of a failure of a condition or breach, whether in
contract, tort or otherwise, identified on or prior to Closing, shall be to
refuse to complete the Closing under this Agreement.
11.2. NO PENDING ACTION. No action, suit, proceeding or investigation
before any court, administrative agency or other governmental authority shall
be pending wherein an unfavorable judgment, decree or order would prevent the
carrying out of this Agreement or any of the transactions contemplated
hereby, declare unlawful the transactions contemplated hereby or cause such
transactions to be rescinded.
11.3. CONDITION OF ASSETS. The tangible assets of the Parent Entities
in the aggregate shall not have been adversely affected in any material way
by any act of God, flood, fire, accident, war or other event, which could
reasonably be expected to result in a Parent Material Adverse Effect, after
giving due consideration to the application of any insurance proceeds.
11.4. XXXX-XXXXX-XXXXXX. The waiting period under the HSR Act required
to permit the consummation of the transactions provided for herein shall have
expired or early termination shall have been granted.
11.5. ICA. Industry Canada shall have advised that the investment is
not reviewable under the ICA or, the time periods specified in the ICA for
notification of review shall have elapsed without notice from Industry Canada.
11.6. DIRECTOR. Consistent with Section 7.8 hereof, at least one
designee of Seller shall have been duly elected to the Board of Directors of
Parent, with evidence of such action reasonably satisfactory to Seller having
been provided to Seller.
11.7. IBJ. IBJ Whitehall Bank & Trust Company and/or any other lender
to Purchaser shall have provided all consents, if any, necessary for the
consummation by Parent, the Purchaser and their affiliates of the
transactions contemplated by this Agreement including without limitation, the
acquisition of the Purchased Assets by the Purchaser, the execution and
delivery of the Convertible Note, the Additional Note and the "Security
Documents" (as defined in the Convertible Note) (the "LENDER CONSENT").
11.8. OTHER CONSENTS AND APPROVALS. The consents and approvals
described on SCHEDULE 5.2 shall be obtained in form and substance reasonably
satisfactory to Seller.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1. SURVIVAL. Other than Section 5.4, the first sentence of Section
4.8 and the second sentence of Section 4.9 (each of which shall expire upon
the earlier to occur of the expiration of the applicable statute of
limitations and five (5) years from the Closing Date), all representations
and warranties contained in this Agreement or in any agreement or other
document delivered pursuant hereto shall survive the Closing until June 30,
2000, and thereafter shall expire and be of no force or effect; provided that
any claim for indemnification that is asserted by written
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notice as provided in Section 12.3 within the survival period shall survive
until resolved pursuant to a final non-appealable judicial determination or
otherwise.
12.2. INDEMNIFICATION.
(a) Purchaser and Parent, jointly and severally, shall indemnify
and hold harmless Seller and Xxxxx Limited from and against any and all loss,
damage, cost or expense (including reasonable attorneys' fees and expenses),
judgments and fines (collectively, "DAMAGES") (i) caused by any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of Purchaser and/or Parent contained herein or in any other
agreement or document delivered pursuant hereto, (ii) arising from the
Assumed Liabilities, (iii) arising from any action or inaction of Purchaser
and/or Parent or their Affiliates after the Closing, other than in accordance
with the terms hereof or (iv) arising as a result of, in connection with, or
related to the operation of the Business and the Purchased Assets following
Closing.
(b) Seller shall indemnify and hold harmless Purchaser from and
against any Damages (i) caused by any misrepresentation, breach of warranty
or failure to fulfill any covenant or agreement of Seller contained herein or
in any other agreement or document delivered pursuant hereto, or (ii) arising
from the Excluded Liabilities.
12.3. GENERAL PROVISIONS RELATING TO INDEMNIFICATION.
(a) Seller shall not be required to make any payments pursuant
to this Article XII, unless and until the aggregate amount of all claims
pursuant to this Article XII shall exceed an amount equal to $500,000 (the
"THRESHOLD AMOUNT"), as to which Seller shall be responsible only for the
excess over the Threshold Amount. The maximum aggregate amount recoverable
from Seller with respect to any and all claims relating to this Agreement or
the transactions contemplated hereby shall not exceed an amount equal to Ten
Million Dollars ($10,000,000) (the "MAXIMUM AMOUNT"). The Maximum Amount
shall be reduced by fifty percent (50%) of all Damages incurred by Seller and
its Affiliates arising from the Litigation Matters; provided that in no event
shall the Maximum Amount be reduced below Nine Million Five Hundred Thousand
Dollars ($9,500,000) with respect to the Damages incurred by Seller and its
Affiliates arising from the Litigation Matters.
(b) The party seeking indemnification shall give written notice
to the indemnifying party of the facts and circumstances giving rise to any
claim for indemnification as soon as reasonably possible but in any event
within thirty (30) days after it obtains knowledge of the basis for a claim
for indemnification hereunder. The failure to provide such notice shall not
affect the claim except to the extent the Indemnifying Party is prejudiced by
the delay.
(c) With respect to each claim by a third party which could give
rise to an indemnification obligation under this Article XII (a "THIRD PARTY
CLAIM"), the party seeking indemnification (the "INDEMNIFIED PARTY") must
give prompt notice to the indemnifying party (the "INDEMNIFYING PARTY") of
the Third Party Claim. The Indemnifying Party may, at its sole cost and
expense, upon notice to the Indemnified Party within thirty (30) days after
the Indemnifying Party receives notice of the Third Party Claim, assume the
defense of the Third Party Claim, with counsel of its choice. The
Indemnifying Party shall not consent to a settlement
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of, or the entry of any judgment arising from, any Third Party Claim, unless
(i) the settlement or judgment is solely for money damages, or (ii) the
Indemnified Party consents thereto, which consent shall not be unreasonably
withheld. The Indemnifying Party shall provide the Indemnified Party with
fifteen (15) days prior notice before it consents to a settlement of, or the
entry of a judgment arising from, any Third Party Claim. The Indemnified
Party shall be entitled to participate in the defense of (but not control)
any Third Party Claim, the defense of which is assumed by the Indemnifying
Party, with its own counsel and at its own expense. The parties shall
cooperate in the defense of any Third Party Claim and the relevant records of
each party shall be made available on a timely basis. If the Indemnifying
Party does not assume the defense of any such claim or proceeding resulting
therefrom in accordance with the terms hereof, the Indemnified Party may
defend such claim or proceeding in a reasonable manner, including settling
such claim or proceeding on such terms as the Indemnified Party may deem
appropriate after giving fifteen (15) days' notice of the same to the
Indemnifying Party and obtaining the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. To the extent
applicable, the Indemnified Party shall keep the Indemnifying Party
reasonably informed, in writing, as to the defense of any such matter
hereunder.
(d) No party shall have an obligation to indemnify the other or
otherwise have liability to the other party for consequential damages,
special damages, incidental damages, indirect damages or similar items.
(e) Seller shall have no liability to third parties pursuant to
this Article XII to the extent arising from actions taken or not taken by
Purchaser, Parent or their Affiliates after the Closing Date.
(f) The party entitled to indemnification shall take all
reasonable steps to mitigate all indemnifiable liabilities and Damages upon
and after becoming aware of any event which could reasonably be expected to
give rise to any liabilities and Damages that are indemnifiable hereunder.
(g) No party shall be entitled to indemnification to the extent
of any tax or other benefits resulting from or which may be legally claimed
as a result of the facts and circumstances relating to any indemnifiable
claim.
(h) If any Damages are covered by third party insurance or
subject to other third party recoveries (collectively, "THIRD PARTY RIGHTS"),
Purchaser and Parent shall use commercially reasonable efforts to recover the
amount of coverage or claim from the insurer or such third party, which
recovery (after deduction of costs of collection) shall reduce Damages
hereunder. Each of Purchaser and Parent agrees to assign all Third Party
Rights to Seller and to appoint Seller as its limited agent and
attorney-in-fact for seeking such recovery to the extent Purchaser and
Parent fail to recover. Each of Purchaser and Parent also agree to cooperate
with Seller and Seller agrees to cooperate with Purchaser and Parent in the
collection thereof. Such appointment as limited agent and attorney-in-fact
and is coupled with an interest and is irrevocable.
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(i) To the extent that an Indemnifying Party discharges any
claim for indemnification hereunder, the Indemnifying Party shall be
subrogated to all rights of the Indemnified Party against third parties.
(j) Since Seller is making certain representations and covenants
as to certain matters of the Business operated by Xxxxx Limited, in no event
shall Xxxxx Limited have any liability in connection with the matters
contemplated by this Agreement; provided, however, that Xxxxx Limited shall
be a third party beneficiary of this Agreement.
(k) After the Closing, the indemnification rights provided
hereunder shall be the exclusive remedy of Seller and Parent, Purchaser and
each of their respective Affiliates and their officers, directors, employees,
stockholders, Affiliates, agents or representatives with respect to any
breach contained herein, except for non-monetary remedies being sought with
respect to the breach of any agreement or covenant contained herein. No
party shall have any right to set-off any claims hereunder against any
payments to be made by such party to another party pursuant to this Agreement
or otherwise, except in the case of a final judgment for a fixed amount not
subject to further appeal.
ARTICLE XIII
TERMINATION
13.1. TERMINATION OR ABANDONMENT. Notwithstanding anything contained
in this Agreement to the contrary, this Agreement may be terminated and
abandoned at any time prior to the Closing:
(a) subject to Section 6.5 and Section 7.4, by Seller on the
one hand, and Purchaser and Parent on the other, if any court of
competent jurisdiction or governmental body, authority or agency
having jurisdiction shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
nonappealable;
(b) by Purchaser and Parent, if one or more of the conditions
to the obligations of Purchaser and Parent to Close have not been
fulfilled by September 30, 1999;
(c) by Seller, if one or more of the conditions to the
obligation of Seller to Close has not been fulfilled by September 30,
1999; and
(d) by Seller, if the Average Closing Price, as determined
pursuant to Section 2.2(c) (without regard to the $10.00-$14.00
collar), is less than $7.48.
Notwithstanding anything contained herein to the contrary, if the
Closing has not been consummated by September 30, 1999 and the sole cause of
such failure to close is the lack of expiration or termination of the waiting
period under the HSR Act, then the September 30, 1999 date referred to above
shall be extended to the earlier of (x)
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five days after expiration or termination of the HSR waiting period, and (y)
October 31, 1999. If this Agreement is terminated because the waiting period
under the HSR Act has not expired or been terminated by October 31, 1999, and
Purchaser and Parent have complied with all of their obligations under
Section 7.3 and Section 7.4, such termination shall be treated as a
termination pursuant to Section 13.1(a).
13.2. EFFECT OF TERMINATION.
(a) If any party terminates this Agreement pursuant to Section
13.1 above, all obligations of the parties hereunder shall terminate without
any liability of any party to any other party; provided, however, that the
provisions of Section 2.6, Section 7.8, Section 8.1, Article XII, Section
13.1, this Section 13.2 and the applicable Sections of Article XIV, as well
as the Registration Rights Agreement, shall survive termination of this
Agreement, unless the Signing Payment is required to be returned to Parent
pursuant to Section 2.6, in which case only Section 8.1 and Article XIV shall
survive.
(b) [Intentionally left blank.]
ARTICLE XIV
GENERAL PROVISIONS
14.1. AMENDMENTS AND WAIVER. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and
then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
14.2. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be, personally delivered or sent by
facsimile transmission with confirming copy sent by overnight courier (such
as Express Mail, Federal Express, etc.) and a delivery receipt obtained and
addressed to the intended recipient as follows:
(a) If to Seller:
Xxxxx North America, Inc.
000 X. Xxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Senior Vice President Business Development
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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With copies to:
Xxxxx North America, Inc.
000 X. Xxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Vice President and General Counsel
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, P.C.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) If to Purchaser or Parent:
VISTA Information Solutions, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX
Attention: Xxx X. Xxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With copies to:
Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any party may change its address or add or change parties for receiving
notice by written notice given to the others named above. Notices shall be
deemed given as of the date of receipt.
14.3. EXPENSES; TAXES. Except as otherwise expressly provided herein,
each party to this Agreement shall pay its own costs and expenses in
connection with the transactions contemplated hereby; provided that any
sales, transfer or similar taxes payable in connection with the sale of the
Purchased Assets and the transactions contemplated hereby shall be paid (a)
by the party which customarily pays such taxes in the applicable jurisdiction
and (b) in the absence of any customary practice, one-half by Seller and
one-half by Purchaser. Purchaser shall pay and
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Seller or Xxxxx Limited shall collect any tax that is payable under part IX
of the Excise Tax Act (Canada) and the Quebec Sales Tax Act.
14.4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
14.5. SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement shall bind
and inure to the benefit of the parties named herein and their respective
successors and assigns. No party may assign any rights, benefits, duties or
obligations under this Agreement without the prior written consent of the
other party. Except as expressly provided herein, no third party shall be
entitled to enforce any provision hereof; and no third party is intended to
benefit from this Agreement.
14.6. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement
and the documents referred to herein contain the entire agreement and
understanding among the parties with respect to the transactions contemplated
hereby and supersede all other agreements, understandings and undertakings
among the parties on the subject matter hereof.
14.7. ANNOUNCEMENTS. No announcement of the terms of this Agreement
shall be made by any party without the written approval of the other party
(which approval shall not be unreasonably withheld), except for filings
required under the HSR Act and the ICA and as otherwise required by
applicable law or stock exchange regulations.
14.8. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court or competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
14.9. GOVERNING LAW; JURISDICTION. This Agreement shall be interpreted
in accordance with the substantive laws of the State of Delaware applicable
to contracts made and to be performed wholly within said State. All
disputes, legal actions, suits and proceedings arising out of or relating to
this Agreement shall be brought in an Applicable Forum. The term "APPLICABLE
FORUM" (i) with respect to actions brought by Purchaser or Parent, shall mean
a federal district or state court located in Chicago, Illinois, and (ii) with
respect to actions brought by Seller, shall mean a federal district or state
court located in San Diego, California; provided that if Seller is permitted
by the terms of another document contemplated by this Agreement to bring an
action in a court other than one located in San Diego, California, and an
action is filed in such other court with respect to a dispute under such
other document (an "ANCILLARY ACTION"), actions under this Agreement may also
be brought in such other court in connection with the Ancillary Action. Each
party hereby consents to the exclusive jurisdiction of the Applicable Forum.
Each party hereby irrevocably waives all claims of immunity from jurisdiction
and any right to object on the basis that any dispute, action, suit or
proceeding brought in an Applicable Forum has been brought in an improper or
inconvenient venue or forum.
14.10. OTHER RULES OF CONSTRUCTION. References in this Agreement to
sections, schedules, attachments and exhibits are to sections of, and
schedules, attachments and exhibits to, this Agreement unless otherwise
indicated. Words in the singular include the plural and in the plural
include the singular. The Section and other headings contained in this
Agreement are for
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reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.11. AUTHORSHIP. The parties hereto agree that the terms and language
of this Agreement and all agreements contemplated hereby were the result of
negotiations between the parties and, as a result, there shall be no
presumption that any ambiguities in this Agreement shall be resolved against
either party. Any controversy over construction of this Agreement and all
agreements contemplated hereby shall be decided without regard to events of
authorship or negotiation.
14.12. SPECIFIC PERFORMANCE. Parent, Purchaser and Seller recognize
that any breach of the terms of this Agreement may give rise to irreparable
harm to Parent, Purchaser or Seller for which money damages would not be an
adequate remedy, and accordingly agree that, in addition to other remedies,
the non-breaching party shall be entitled to enforce the terms of this
Agreement by a decree of specific performance without the necessity of
proving the inadequacy of a remedy of money damages.
14.13. JOINT AND SEVERAL OBLIGATIONS. Even if not expressly stated in
the particular instance, each of Parent and Purchaser are jointly and
severally liable for all of the obligations of the other provided for or
referred to herein, including in agreements contemplated hereby.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the date first
written above.
VISTA DMS, INC. XXXXX NORTH AMERICA, INC.
By: By:
----------------------------- --------------------------------
Its: Its:
----------------------------- --------------------------------
VISTA INFORMATION SOLUTIONS, INC.
By:
-----------------------------
Its:
-----------------------------
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AMENDMENT
TO THE
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AMENDMENT to the Agreement for Purchase and Sale of Assets by and
among Xxxxx North America, Inc. ("Seller"),VISTA DMS, Inc. ("Purchaser") and
VISTA Information Solutions, Inc. ("Parent") dated July 28, 1999, as amended
(the "ASSET PURCHASE AGREEMENT"), is made and entered into this 17th day of
December, 1999.
WHEREAS, Seller, Purchaser and Parent have agreed to amend certain
terms of the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller, Purchaser and Parent agree as follows:
1. AMENDMENT TO SECTION 1.2. Section 1.2(a) of the Asset Purchase
Agreement is amended to delete the reference to "Section 1.3(i)" and replace it
with a reference to "Section 1.3."
2. AMENDMENT TO SECTION 1.3.
(a) Section 1.3(a) and 1.3(h) of the Asset Purchase Agreement is
amended and restated as follows:
(a) all cash and cash equivalents, including cash on hand and
cash in transit (i.e., bank deposits being made by Seller), deposits
and prepaids;
(h) all rights to indemnification for, or claims against third
parties related to the Litigation Matters (as defined below), including
the indemnification provisions of the September 24, 1996 Agreement with
Geo Systems Global Corporation and any successor agreements thereto, as
such provisions relate to acts or omissions of Seller and its
Affiliates through Closing;
(b) Section 1.3 of the Asset Purchase Agreement is amended by adding
the following:
(k) all trade accounts receivables and lease receivables from
U.S. obligors (collectively, the "RETAINED RECEIVABLES").
3. AMENDMENT TO SECTION 2.2. Section 2.2 of the Asset Purchase
Agreement is amended and restated in its entirety as follows:
2.2 PAYMENT OF CONSIDERATION. At Closing, Purchaser shall:
(a) pay to Seller and Xxxxx Limited, as provided in Section
2.5 below, Three Million Seven Hundred Thousand Dollars ($3,700,000)
and Sixteen Million Three Hundred Thousand Dollars ($16,300,000),
respectively, for a total
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of Twenty Million Dollars ($20,000,000) (the cash payment being
referred to as the "CASH CONSIDERATION");
(b) deliver to Seller Parent's and Purchaser's convertible
promissory note in the original aggregate principal amount of Eighteen
Million Seven Hundred Thousand Dollars ($18,700,000), in the form
attached hereto as Exhibit A (the "CONVERTIBLE NOTE"); and
(c) deliver to Seller 198,495 shares of Common Stock, in
addition to the 751,505 shares of Common Stock previously delivered to
Seller.
Seller shall provide wire transfer instructions to Purchaser not less
than twenty-four (24) hours prior to the Closing. All payments hereunder shall
be made in U.S. dollars by wire transfer or other immediately available funds,
and all currency amounts referred to throughout this Agreement are to U.S.
dollars.
4. AMENDMENT TO SECTIONS 2.3 AND 2.4. Sections 2.3 and 2.4 of the Asset
Purchase Agreement are hereby deleted.
5. AMENDMENT TO SECTION 2.6(a). The second sentence of Section 2.6(a)
of the Asset Purchase Agreement is amended and restated in its entirety as
follows:
Notwithstanding anything contained herein to the contrary, if
this Agreement is terminated for any reason, regardless of which party
terminates or the grounds for such termination, Seller is
unconditionally entitled to retain the Signing Payment.
6. AMENDMENT TO SECTION 3.2. Section 3.2 of the Asset Purchase
Agreement is amended by adding the following:
(h) a promissory note in the aggregate principal amount of Seven
Million Five Hundred Thousand Dollars ($7,500,000), in substantially the form
attached hereto as EXHIBIT A-1 (the "WORKING CAPITAL NOTE") and the related Lock
Box Agreement in substantially the form attached hereto as EXHIBIT A-2 (the
"Lock Box Agreement").
7. AMENDMENT TO SECTION 3.4. Section 3.4 of the Asset Purchase
Agreement is amended by adding the following:
(j) an Employee Leasing Agreement in substantially the form attached
hereto as EXHIBIT P.
8. AMENDMENT TO SECTION 6.9. Section 6.9 is amended by adding the
following provision at the end thereof:
Further, within thirty (30) days of Closing, Seller shall
deliver balance sheets and statements of operations as of and for the periods
ended September 30, 1999 and 1998 which, to the knowledge of Seller, shall be
prepared on a basis consistent, in all material respects, to the
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June 30,1999 financial statements previously delivered. Purchaser and Parent
shall provide all files and records and shall provide at their cost, all
personnel necessary for such preparation.
9. ICA AMENDMENT.
(a) Section 7.7 of the Asset Purchase Agreement is amended to
delete the phrase "but in any event not later than ten (10) days after
this date" and replace it with the following phrase: "but in any event
within the required time frame".
(b) Sections 10.5 and 11.5 of the Asset Purchase Agreement are
deleted.
10. AMENDMENT TO SECTION 7.8. Section 7.8(d) of the Asset Purchase
Agreement is hereby amended and restated in its entirety as follows:
(d) At Closing, Parent shall deliver to Seller a Secretary's
certificate certifying as to the adoption and effectiveness of
resolutions of the Board of Directors of Parent electing the Designee
and Additional Designee to the Board of Directors.
11. AMENDMENT TO ARTICLE VII. Article VII of the Asset Purchase
Agreement is amended by adding the following:
Section 7.9 NASD LISTING. Parent has filed or shall file an application
with the NASD for listing of all shares of common stock acquired hereunder or
issuable upon conversion of the Convertible Note as soon as required under the
NASD rules and use its best efforts for such application to be approved.
12. AMENDMENT TO SECTION 8.2.
(a) Section 8.2(a) of the Asset Purchase Agreement is amended to delete
all references to the Additional Note.
(b) Section 8.2(b) of the Asset Purchase Agreement is deleted.
13. AMENDMENT TO ARTICLE VIII. Article 8 of the Asset Purchase
Agreement is amended by adding the following:
Section 8.1 RETAINED RECEIVABLES. On April 17, 2000, Parent and
Purchaser agree to purchase all of the Retained Receivables which have not been
fully collected by Seller for a purchase price of (i) $7,500,000, less (ii) all
amounts (excluding interest, penalties, costs of collection and the like)
collected by Seller with respect to the Retained Receivables ("Collections"),
plus (iii) all costs of collection incurred by Seller ("Costs"). If all of the
Retained Receivables have been fully collected (x) but the Collections, less the
Costs, are less than $7,500,000, Parent and Purchaser shall pay the deficiency
to Seller on April 17, 2000, or (y) if the Collections less the Costs are in
excess of $7,500,000, Seller shall pay such excess to Parent.
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14. AMENDMENT TO SECTION 11.7. Section 11.7 of the Asset Purchase
Agreement is amended and restated in its entirety as follows:
IBJ Whitehall Bank & Trust Company shall have (i) been paid in
full all amounts owing by the Parent and its Affiliate, (ii) delivered evidence
thereof to Parent in a form reasonably satisfactory to Seller, and (iii)
released its security interest in all assets of Parent and its Affiliates, in a
form reasonably satisfactory to Seller.
15. AMENDMENTS TO SECTIONS 3.1 AND 13.1.
(a) Section 3.1 and Sections 13.1(b) and (c) of the Asset Purchase
Agreement are amended by replacing the date contained therein with December 17,
1999.
(b) Section 13.1(d) and the last paragraph of Section 13 are deleted in
their entirety.
16. AMENDMENT TO SECTION 14.6. Section 14.6 of the Asset Purchase
Agreement is hereby amended and restated in its entirety as follows:
Section 14.6 ENTIRE AGREEMENT. This Agreement and the
documents referred to herein, the Confidentiality Agreement and the
Amendment to this Agreement dated December 17, 1999 contain the entire
agreement and understanding among the parties with respect to the
transactions contemplated hereby and supercede all other agreements,
understandings and undertakings among the parties on the subject matter
hereof.
17. AMENDMENT TO SECTION 14.13. Section 14.13 of the Asset Purchase
Agreement is amended and restated in its entirety as follows:
Section 14.13 JOINT AND SEVERAL OBLIGATIONS AND GUARANTY. (a)
Even if not expressly stated in the particular instance, each of Parent
and Purchaser are jointly and severally liable for all of the
obligations of the other and their Affiliates provided for or referred
to herein, including any and all agreements contemplated hereby,
delivered on or prior to the Closing Date or subsequent to the Closing
Date and related to the transactions contemplated hereby, and any
amendments thereto (the "TRANSACTION AGREEMENTS").
(b) In addition, Purchaser unconditionally and irrevocably
guarantees to Seller the due and punctual fulfillment of any and all
obligations of its Affiliates under the Transaction Agreements. This is
a continuing guaranty of performance and payment (and not merely a
guaranty of collection), and Purchaser undertakes to perform all
obligations under the Transaction Agreements, regardless of whether or
not Seller, or anyone on behalf of Seller shall have instituted any
suit, action or proceeding or exhausted its remedies or taken any steps
to collect any amount or enforce any right, at law or in equity.
Purchaser hereby unconditionally: (i) waives any requirement that
Seller, in the event of any default by an Affiliate, first makes demand
upon, or seeks to enforce remedies against the Affiliate before
demanding payment or other performance under or seeking to enforce this
guaranty; (ii) covenants that this guaranty shall not be discharged
except by the performance of all obligations due under the Transaction
Agreements; and (iii) waives diligence, presentment and protest with
respect to, and any
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notice of default in the payment of any amount or performance of any
obligation at any time due under the Transaction Agreements.
18. NO OTHER AMENDMENT; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Asset Purchase Agreement
are and shall remain in full force and effect.
19. COUNTERPARTS. This amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. GOVERNING LAW. This amendment shall be interpreted in accordance
with the substantive laws of the State of Delaware applicable to contracts made
and to be performed wholly within said state.
21. DEFINITIONS. All capitalized terms not defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
XXXXX NORTH AMERICA, INC.
By: ________________________________
Its:________________________________
VISTA INFORMATION SOLUTIONS, INC.
By: ________________________________
Its:________________________________
VISTA DMS, INC.
By: ________________________________
Its:________________________________
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