Exhibit 2.1
EXECUTION COPY
CONFIDENTIAL
SHARE PURCHASE AGREEMENT
by and among
NUANCE COMMUNICATIONS, INC.,
XXXXXXX ADVISORS INC.,
FOCUS SOFTEK INDIA (PRIVATE) LIMITED
(solely for purposes of SECTIONS 1.1, 1.3, 1.5(B), 1.10 and the Sections of
ARTICLE IX related thereto),
and
U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent hereunder
DATED AS OF MARCH 13, 2007
TABLE OF CONTENTS
PAGE
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Article I THE ACQUISITION TRANSACTIONS................................... 2
1.1 Certain Definitions............................................ 2
1.2 The Share Purchase and Sale.................................... 5
1.3 IP Quitclaim; Transferred Employees............................ 5
1.4 The Closing.................................................... 6
1.5 Payment of Purchase Price and Quitclaim Price; Instruments
of Sale........................................................ 7
1.6 Purchase Price Adjustments..................................... 8
1.7 Net Working Capital Adjustment................................. 8
1.8 Termination of Convertible and Other Securities................ 9
1.9 Withholding Taxes.............................................. 9
1.10 Taking of Necessary Action; Further Action..................... 9
Article II REPRESENTATIONS AND WARRANTIES OF SELLER...................... 10
2.1 Organization; Power............................................ 10
2.2 Target Capital Structure; Title to Shares...................... 11
2.3 Subsidiaries; Subsidiary Capital Structure..................... 12
2.4 Authority...................................................... 13
2.5 No Conflict.................................................... 13
2.6 Consents....................................................... 14
2.7 Financial Statements; Internal Controls; Accounts Receivable... 14
2.8 No Undisclosed Liabilities..................................... 15
2.9 No Changes..................................................... 15
2.10 Tax Matters.................................................... 15
2.11 Restrictions on Business Activities............................ 18
2.12 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment; Customer Information................... 18
2.13 Intellectual Property.......................................... 19
2.14 Agreements, Contracts and Commitments.......................... 23
2.15 Interested Party Transactions; Intercompany Accounts........... 26
2.16 Governmental Authorization..................................... 26
2.17 Litigation..................................................... 26
2.18 Minute Books................................................... 27
2.19 Environmental Matters.......................................... 27
2.20 Brokers' and Finders' Fees; Third Party Expenses............... 27
2.21 Employee Benefit Plans and Compensation........................ 27
2.22 Insurance...................................................... 33
2.23 Compliance with Laws........................................... 33
2.24 Warranties; Indemnities........................................ 34
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2.25 Bank Accounts, Letters of Credit and Powers of Attorney........ 34
2.26 Entire Business; Sufficiency of Assets......................... 34
2.27 Products....................................................... 34
2.28 Reorganization................................................. 34
2.29 HIPAA Matters.................................................. 35
2.30 Corrupt Practices.............................................. 35
2.31 Complete Copies of Materials................................... 36
2.32 Representations Complete....................................... 36
Article III REPRESENTATIONS AND WARRANTIES OF BUYER...................... 36
3.1 Organization; Power............................................ 36
3.2 Authority...................................................... 36
3.3 Conflicts...................................................... 36
3.4 Consents....................................................... 37
3.5 Capital Resources.............................................. 37
3.6 Broker's and Finders' Fees..................................... 37
3.7 Compliance with Laws........................................... 37
3.8 Litigation..................................................... 37
3.9 Buyer Restricted Stock......................................... 38
Article IV CONDUCT OF BUSINESS PRIOR TO THE CLOSING...................... 38
4.1 Conduct of the Business........................................ 38
4.2 No Solicitation................................................ 41
4.3 Procedures for Requesting Buyer Consent........................ 42
Article V ADDITIONAL AGREEMENTS.......................................... 43
5.1 Non-Competition; Non-Solicitation; No-Hire..................... 43
5.2 Access to Information.......................................... 44
5.3 Confidentiality................................................ 44
5.4 Expenses....................................................... 44
5.5 Public Disclosure and Other Communications..................... 45
5.6 Filings and Consents........................................... 45
5.7 Reasonable Best Efforts........................................ 45
5.8 Notification of Certain Matters................................ 45
5.9 Employment Arrangements; Employee Communications............... 46
5.10 Intercompany Accounts; Related-Party Contracts................. 46
5.11 Tax Matters.................................................... 47
5.12 Audit Opinion.................................................. 48
5.13 Trademarks..................................................... 49
Article VI CONDITIONS TO THE SHARE PURCHASE.............................. 49
6.1 Conditions to Obligations of Each Party to Effect the Share
Purchase....................................................... 49
6.2 Conditions to the Obligations of Buyer......................... 49
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6.3 Conditions to Obligations of Seller............................ 52
Article VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW........... 53
7.1 Survival of Representations, Warranties and Covenants.......... 53
7.2 Indemnification................................................ 53
7.3 Escrow Arrangements; Threshold Amounts and Determination of
Losses; Claims Procedures...................................... 55
7.4 Exclusive Remedy............................................... 62
7.5 Limitation of Liability........................................ 63
7.6 Insurance Claims............................................... 64
Article VIII TERMINATION, AMENDMENT AND WAIVER........................... 64
8.1 Termination.................................................... 64
8.2 Effect of Termination.......................................... 65
8.3 Amendment...................................................... 65
8.4 Extension; Waiver.............................................. 65
Article IX GENERAL PROVISIONS............................................ 65
9.1 Notices........................................................ 65
9.2 Interpretation................................................. 67
9.3 Counterparts................................................... 67
9.4 Entire Agreement; Assignment................................... 67
9.5 Severability................................................... 67
9.6 Other Remedies................................................. 68
9.7 Governing Law.................................................. 68
9.8 Rules of Construction.......................................... 68
9.9 WAIVER OF JURY TRIAL........................................... 68
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INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT DESCRIPTION
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Exhibit A Form of Employment Offer Letter
Exhibit B Guaranty
Exhibit C HRMS License
Exhibit D Form of Resignation Letter
Exhibit E-1 Legal Opinion of BVI Counsel for Seller
Exhibit E-2 Legal Opinion of Indian Counsel for Seller
Exhibit F Certificate of FEL
Exhibit G Money Market Account Terms and Conditions
Exhibit H Customer Identification Program Notice
SCHEDULES DESCRIPTION
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Schedule 1.1(a) Material Adverse Effect Exception
Schedule 1.3(d) Softek Employees
Disclosure Schedule Seller Disclosure Schedule
Schedule 6.2(e) Agreements to be Terminated at Closing
Schedule 6.2(k) BVI Corporate Documents and Instruments
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THIS SHARE PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into as
of March 13, 2007 by and among Nuance Communications, Inc., a Delaware
corporation ("BUYER"), Xxxxxxx Advisors Inc., a company incorporated with
limited liability as a BVI Business Company (BVI Company No. 1005625) under the
laws of the British Virgin Islands ("SELLER"), Focus Softek India (Private)
Limited (solely for purposes of SECTIONS 1.1, 1.3, 1.5(B) and 1.10 hereto and
the Sections of ARTICLE IX related thereto), a limited liability company
incorporated under the laws of India ("FOCUS SOFTEK"), and, U.S. Bank National
Association, as escrow agent hereunder, and as a party to this Agreement solely
with respect to ARTICLE VII herein (the "ESCROW AGENT"). Buyer and Seller are
sometimes referred to herein as the "INTERESTED PARTIES."
RECITALS
A. Seller and Focus Enterprises Limited, a company incorporated with
limited liability and re-registered as a BVI Business Company (BVI Company No.
1052675) ("FEL") have caused the Reorganization (as defined herein) to be
consummated with respect to the Business (as defined herein);
B. The Boards of Directors of each of Buyer, Focus Softek and Seller
believe it is in the best interests of each company and its respective
stockholders or shareholders, as the case may be, that Buyer acquire, pursuant
to the terms and conditions set forth herein, the medical transcription services
business owned and operated by Seller, its Subsidiaries, their Affiliates (each
as defined herein), including all operations and activities of Seller and its
Subsidiaries and Affiliates with respect to the design, manufacture, marketing,
sale, support and maintenance of the Products (the "BUSINESS"), through (i) a
purchase of all of the outstanding shares and other outstanding securities of
Bluestar Resources Ltd. ("TARGET"), a company incorporated with limited
liability as a BVI Business Company (BVI Company No. 1028487) under the laws of
the British Virgin Islands (the "SHARE PURCHASE) concurrently with (ii) the
consummation of the Quitclaim (as defined herein) by Focus Softek to Focus
Infosys (India) Private Limited, a limited liability company incorporated under
the laws of India ("FIIPL")) (the Quitclaim together with the Share Purchase,
(the "ACQUISITION TRANSACTIONS") and, in furtherance thereof, have approved the
Acquisition Transactions, as applicable, along with each such company's
stockholders or shareholders, as the case may be.
C. In connection with the Acquisition Transactions Seller, on the one hand,
and Buyer, on the other hand, desire to make certain representations,
warranties, covenants and other agreements.
D. Concurrently with the execution and delivery of this Agreement, as a
material inducement to Buyer to enter into this Agreement, certain individuals
are entering into offer letters with FIIPL or Focus Enterprises Limited (d/b/a
Focus Infomatics, Inc.), a Delaware corporation ("FII"), each in substantially
the form attached hereto as EXHIBIT A (the "EMPLOYMENT OFFER LETTERS"), setting
forth the principal terms and conditions of their employment.
E. Concurrently with the execution and delivery of this Agreement and as a
material inducement to Buyer to enter into this Agreement, Xx. Xxxxxxx Xxxxxx is
entering into a guaranty (the "GUARANTY") attached hereto as EXHIBIT B.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:
ARTICLE I
THE ACQUISITION TRANSACTIONS
1.1 CERTAIN DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE" means, with respect to any Person, any other Person,
whether or not existing on the date hereof, controlling, controlled by or under
common control with such first Person.
"FINAL NET WORKING CAPITAL" means the Net Working Capital, as finally
determined pursuant to SECTION 1.7.
"GOVERNMENTAL OR REGULATORY BODY" means any court, tribunal,
arbitrator or any government or quasi-governmental entity or municipality or
political or other subdivision thereof, whether federal, state, city, county,
local, provincial, foreign or multinational, or any agency, department, board,
authority, bureau, branch, commission, official or instrumentality of any of the
foregoing.
"INTELLECTUAL PROPERTY" means, collectively, Technology and
Intellectual Property Rights.
"INTELLECTUAL PROPERTY RIGHTS" mean any and all worldwide common law
and statutory rights associated with (i) patents and patent applications, (ii)
copyrights, copyright registrations and copyright applications, "moral" rights
and mask work rights, (iii) the protection of trade and industrial secrets and
confidential information, (iv) other proprietary rights relating to intangible
intellectual property, (v) logos, trademarks, trade names and service marks,
(vi) analogous rights to those set forth above, and (vii) divisions,
continuations, renewals, reissuances and extensions of the foregoing (as
applicable).
"LAW" means any law, statute, rule, regulation, ordinance, directive,
decree, codes, awards, Orders, and other pronouncement having the effect of law
of any country or state, or of any Governmental or Regulatory Body.
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"LIABILITY(IES)" means any direct or indirect liability, indebtedness,
guaranty, claim, loss, damage, deficiency, assessment, obligation or
responsibility, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, known or unknown,
contingent or otherwise.
"LIEN" means any mortgage, lien, pledge, hypothecation, charge,
preference, security interest, attachment, claim, contractual restriction,
including transfer restrictions, put, call, right of first refusal, easement,
servitude, right-of-way, option, warrant, conditional sale or installment
contract or encumbrance of any kind and any financing lease involving
substantially the same effect (including, with regard to any shares, any Liens
that the issuer of such shares may have on such shares).
"MATERIAL ADVERSE EFFECT" means any change, event, circumstance,
condition or effect that, individually or in the aggregate with all other
changes, events, circumstances, conditions or effects, is or could reasonably be
expected to be materially adverse to (i) the assets (tangible or intangible),
financial condition, operating results, or business of the Business or Target
and its Subsidiaries, taken as a whole, (ii) the ability of Buyer to operate the
Business after the Closing Date as it is presently operated, or (iii) the
ability of Seller or any of its Subsidiaries, or Focus Softek or any of its
Subsidiaries, to perform their obligations under this Agreement and the Related
Agreements or to consummate the Acquisition Transactions; provided, however,
that the term "Material Adverse Effect" shall not include: (A) any such effect
to the extent resulting from (1) general economic, regulatory, political or
industry conditions, or (2) acts of terrorism or war, which in each of clauses
(1) and (2), do not have a disproportionate impact on the Business, or (B) any
changes, events, circumstances, conditions or effects, resulting from the
announcement or pendency of this Agreement, or (C) the matter set forth on
Schedule 1.1(a) hereto, including the loss of any customers relating to that
portion of the Business described therein.
"NET WORKING CAPITAL" means the current assets less the current
liabilities (other than Ordinary Course Taxes (as defined herein)) of Target and
its Subsidiaries as of February 28, 2007, determined in accordance with GAAP in
a manner consistent with the Financials (except as specifically provided in this
definition).
"NET WORKING CAPITAL TARGET" shall mean $1,253,000.
"ORDER" means any writ, judgment, decree, award, ruling, injunction or
similar order of any Governmental or Regulatory Body, in each case whether
preliminary or final.
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase shall mean the ordinary course of the business of the Business,
consistent with past practice.
"PERMITTED LIEN" means (i) any Lien for Taxes (as defined in SECTION
2.10) not yet due and payable, (ii) any statutory Lien arising in the Ordinary
Course of Business by operation of
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Law if a reserve shall have been made therefor on the Financials, and (iii) any
minor imperfection of title or similar Lien on the Leased Real Property.
"PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, company, trust,
unincorporated organization, Governmental or Regulatory Body or other entity.
"PRODUCTS" means Seller's and its Subsidiaries' entire lines of
medical transcription Software products, including all versions of such products
and products under development, which products are listed on Schedule 2.13.
"QUITCLAIM IP" means, collectively, all Intellectual Property held by
Focus Softek or any of its Subsidiaries used in the Business, including in the
Products.
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean Intellectual
Property Rights that have been registered, applied for, filed, certified or
otherwise perfected, issued, or recorded with or by any state, government or
other public or quasi-public legal authority.
"SOFTWARE" means any and all computer software and code, including
assemblers, applets, compilers, source code, object code, data (including image
and sound data), design tools, and user interfaces, in any form or format,
however fixed. "Software" specifically includes source code listings and
documentation.
"SUBSIDIARY" means, with respect to any Person, any other Person,
whether or not existing on the date hereof, in which such first Person, directly
or indirectly, beneficially owns at least fifty percent (50%) of either the
equity interest, or voting power of or in such other Person, including for the
avoidance of doubt, with respect to Seller, Target and its Subsidiaries prior to
Closing (as defined in SECTION 1.4 below).
"TARGET INTELLECTUAL PROPERTY" shall mean any and all Intellectual
Property that is owned by or exclusively licensed to Target or any of its
Subsidiaries, and shall be deemed to include the Quitclaim IP.
"TECHNOLOGY" shall mean any or all of the following: (i) works of
authorship including computer programs, source code, and executable code,
whether embodied in Software, firmware or otherwise, architecture,
documentation, designs, files, records, databases, and data, (ii) inventions
(whether or not patentable), discoveries, improvements, and technology, (iii)
proprietary and confidential information, trade secrets and know how, (iv)
databases, data compilations and collections and technical data, (v) domain
names, web addresses and sites, (vi) tools, methods and processes, and (vii) any
and all instantiations or embodiments of the foregoing in any form and embodied
in any media, including the Products.
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"WORKING CAPITAL SCHEDULE" means a statement prepared by Buyer
following the Closing setting forth its calculation of the Net Working Capital
in accordance with SECTION 1.7.
1.2 THE SHARE PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees
to purchase from Seller, all of the issued and outstanding shares, par value
$1.00 each ("Ordinary Shares"), of Target (the "Shares") at the Closing (as
defined in SECTION 1.4 below). Subject to the adjustments provided for in
SECTION 1.6, the purchase price for the Shares (as adjusted, the "Purchase
Price") is $54,227,000 in cash. The Purchase Price shall be paid in cash by wire
transfer of immediately available funds at the Closing to a bank account
designated in writing by Seller at least two (2) Business Days (as defined
below) prior to the Closing Date (as defined in SECTION 1.4 below), subject to
the escrow arrangements contained in SECTION 7.3. Notwithstanding anything to
the contrary contained in this Agreement, to the extent permitted by applicable
Law, any indemnification payment made pursuant to ARTICLE VII hereto shall be
treated as an adjustment to the Purchase Price. For all purposes under this
Agreement, "Business Day(s)" shall mean each day that is not a Saturday, Sunday
or holiday on which banking institutions located in New York, New York, Mumbai,
India or the British Virgin Islands are authorized or obligated by law or
executive order to close.
1.3 IP QUITCLAIM; TRANSFERRED EMPLOYEES.
(a) Concurrently with the Share Purchase and Sale set forth in SECTION
1.2 and without limiting the representations and warranties of Seller under
SECTION 2.13, upon the terms and subject to the conditions of this Agreement, in
consideration of a payment of $250,000 (the "QUITCLAIM PRICE"), which shall be
paid to Focus Softek by Buyer on behalf of FIIPL in cash by wire transfer of
immediately available funds at the Closing to a bank account designated in
writing by Focus Softek at least two (2) Business Days prior to the Closing
Date, and the delivery by FIIPL to Focus Softek of the license agreement set
forth as EXHIBIT C hereto (the "HRMS LICENSE") Seller and Focus Softek shall
(such actions, the "QUITCLAIM"):
(i) sell, transfer, assign, contribute, convey and deliver to
FIIPL, and FIIPL shall purchase, acquire, receive and accept from Focus Softek
and its Subsidiaries, all right, title and interest in, to and under the
Quitclaim IP, free and clear of all Liens other than Permitted Liens, in each
case in accordance with the requirements of applicable Law (it being understood
that Focus Softek and its Subsidiaries shall retain no express or implied
license to such Quitclaim IP, other than the HRMS License); and
(ii) cancel, terminate and extinguish any outstanding rights or
licenses of any Person (other than FIIPL) to market, sell, convey or transfer
any of the Target Intellectual Property or any Intellectual Property Rights
licensed to Target (any such rights, including all rights of Focus Softek under
the Articles of Agreement Focus Infosys (India) Pvt. Ltd. and Focus Softek dated
December 28, 2004.
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(b) From time to time after the date hereof, Seller and Focus Softek
shall, and each of them shall cause, as applicable, its Subsidiaries to, execute
and deliver such other instruments of transfer and documents related thereto and
take such other action as Buyer may reasonably request in order to effect the
Quitclaim and effectively transfer to FIIPL, and to place FIIPL in possession
and control of, the Quitclaim IP, or to enable FIIPL to exercise and enjoy all
rights and benefits with respect thereto.
(c) The Quitclaim shall not include the transfer, or assumption by
FIIPL, of any Liabilities relating to the Quitclaim IP and no such Liabilities
shall be transferred as part of the Quitclaim.
(d) In connection with the Acquisition Transactions, and as a part
thereof, Seller and Focus Softek shall use their respective best efforts to
cause certain engineering employees identified on SCHEDULE 1.3(D) currently
employed by Focus Softek, as identified and instructed by Buyer in writing in
its sole discretion (such employees, the "TRANSFERRED EMPLOYEES"), to be
employed by FIIPL effective as of immediately following the Closing. Such
employment will (i) be in compliance with Buyer's standard human resources
policies and procedures, including requirements for proof evidencing a legal
right to work in the Transferred Employee's country of current employment, as
determined by Buyer; and the execution of an employee proprietary information
agreement, (ii) have terms, including the position and responsibilities of such
Transferred Employee as determined by Buyer in its sole discretion, and the base
salaries of such Transferred Employees shall be no less than the pre-Closing
base salaries of such Employees as employed by Focus Softek and its
Subsidiaries, which base salaries have been provided to Buyer, and (iii)
supersede any prior employment agreements and other arrangements with such
Transferred Employee in effect prior to the Closing Date. Focus Softek hereby
waives any condition or restriction by which it has or may have the contractual
right to impose on the hiring and employment of Transferred Employees by FIIPL.
1.4 THE CLOSING. Unless this Agreement is earlier terminated pursuant to
SECTION 8.1 hereof, the closing of the Share Purchase (the "Closing") will take
subject to the satisfaction or waiver of the conditions set forth in ARTICLE VI
hereof, on March 26, 2007, provided that if the conditions set forth in ARTICLE
VI are not satisfied or waived as of such date, as promptly as practicable after
such date following (in no event later than two business days following), the
satisfaction or waiver of the conditions set forth ARTICLE VI (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions), at the offices of Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, XX 00000 (with a concurrent closing to take place at the offices of
Walkers, 171 Main Street, Road Town, Tortola, British Virgin Islands, VG1110
with respect to those closing deliverables referenced in SCHEDULE 6.2(K) and any
other documents or instruments that need to be delivered or executed in the
British Virgin Islands), unless another time or place is mutually agreed upon in
writing by Buyer and Seller. The date upon which the Closing actually occurs
shall be referred to herein as the "Closing Date."
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1.5 PAYMENT OF PURCHASE PRICE AND QUITCLAIM PRICE; INSTRUMENTS OF SALE.
(a) At the Closing, Buyer shall deliver to Seller the Purchase Price
as provided in SECTION 1.2 and shall deliver to Focus Softek the Quitclaim Price
as provided in SECTION 1.3, and Buyer shall execute and deliver to Seller:
(i) any Related Agreements (as defined in SECTION 1.5(B)) to
which Buyer is a party; and
(ii) such other instruments, documents and directors, members,
officer's and secretary's certificates (including the Buyer's Officer's
Certificate) referred to in SECTION 6.3.
(b) At the Closing, Seller shall deliver to Buyer the Shares as
provided in SECTION 1.2, and Seller or its Subsidiaries, as applicable, and
Focus Softek and its Subsidiaries, as applicable, shall execute and Seller shall
deliver to Buyer:
(i) a deed of conveyance or transfer, or instrument of transfer
or equivalent instrument, and all other related documents and agreements
(including Target's original Register of Members as updated to reflect the
transfer to Buyer (or Buyer's permitted assignees) of the Shares), in each case
that are required under applicable Law, to effect the transfer to Buyer (or
Buyer's permitted assignees) of the Shares free and clear of all Liens
(collectively, the "DEED OF TRANSFER"; and, together with the Employment Offer
Letters and the Guaranty, collectively, the "RELATED AGREEMENTS");
(ii) any other Related Agreements to which Seller, Focus Softek,
or any of their respective Subsidiaries or Affiliates is a party;
(iii) share certificates or other instruments evidencing Buyer's
(or Buyer's permitted assignees') ownership of the Shares, duly and validly
executed and endorsed by Seller in favor of Buyer (or Buyer's permitted
assignees) and otherwise sufficient under all applicable Laws to represent and
vest in Buyer (or Buyer's permitted assignees) bona fide ownership of the Shares
(including instruments of transfer duly endorsed in favor of Buyer, or Buyer's
designated assignees), free and clean of all Liens;
(iv) the resignation letters of all the members of the board of
directors or other managing body, all officers (other than officers who are not
to resign as directed by Buyer) and, if applicable, of the other controlling
body of each of the Target and its Subsidiaries, whereby the directors and such
officers irrevocably resign from their office and waive, among other things, any
right to compensation they might have in connection therewith, in accordance
with the text of the resignation letters attached hereto as EXHIBIT D, together
with any documents evidencing the registration thereof with the appropriate
Governmental or Regulatory Body (collectively, the "RESIGNATION LETTERS");
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(v) an invoice from Avendus Advisors Private Limited setting
forth in reasonable detail all fees, expenses and any other amounts owed to it
and which may be owed to it in the future (denominated in U.S. dollars based on
then prevailing foreign currency exchange rates) by Seller and its Subsidiaries
for its services to Seller and its Subsidiaries in the transactions contemplated
hereby, which amounts shall represent payment in full for all such services (the
"AVENDUS FEES"); and
(vi) such other instruments, documents and directors, members,
officer's and secretary's certificates (including the Seller's Officer's
Certificate and the Seller's Secretary's Certificate) referred to in SECTION
6.2.
(c) In addition, Seller shall cause the new members of the board of
directors, officers or other managing body of each of Target and each of its
Subsidiaries, as designated by Buyer, to be appointed effective as of Closing in
replacement of the board of directors, officers and other managing body in
office immediately prior to the Closing and for the Registers of Directors and
Officers to be updated accordingly as of the Closing. Buyer shall communicate in
writing to Seller, at least two (2) Business Days prior to the Closing Date, the
names of the Persons to be appointed as members of the board of directors,
officers or other managing body or other controlling body of each of the Target
and each of its Subsidiaries.
1.6 PURCHASE PRICE ADJUSTMENTS. The Purchase Price shall be reduced by the
Avendus Fees.
1.7 NET WORKING CAPITAL ADJUSTMENT.
(a) If the Buyer believes that the Net Working Capital is less than
the Net Working Capital Target, within 60 days following the Closing Date, the
Buyer shall prepare and deliver to the Seller the Working Capital Schedule and
its calculation of the Net Working Capital, together with such working papers
used in connection with the preparation thereof. The Working Capital Schedule
shall be prepared in accordance with GAAP in a manner consistent with the
Audited Financials (as defined below).
(b) The Seller shall have 45 days following receipt of the Working
Capital Schedule delivered pursuant to SECTION 1.7(A) during which to notify the
Buyer of any dispute of any item contained therein, which notice shall set forth
in detail the basis for such dispute. The Buyer and the Seller shall cooperate
in good faith to resolve any such dispute as promptly as possible, and upon such
resolution, the Working Capital Schedule shall be prepared in accordance with
the agreement of the Buyer and the Seller. In the event the Seller does not
notify the Buyer of any such dispute within such 45-day period or notifies the
Buyer within such period that it does not dispute any item contained therein,
the Working Capital Schedule delivered pursuant to SECTION 1.7(A) and the
Buyer's calculation of the Net Working Capital shall be final and binding upon
the Buyer and Seller.
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(c) In the event the Buyer and the Seller are unable to resolve any
dispute regarding the Working Capital Schedule delivered pursuant to SECTION
1.7(A) within 15 days following the Buyer's receipt of notice of such dispute,
such dispute shall be submitted to, and all issues having a bearing on such
dispute shall be resolved by, an independent nationally recognized accounting
firm in the United States jointly selected by the Buyer and Seller (the
"ACCOUNTING REFEREE"). In resolving any such dispute, the Accounting Referee
shall consider only those items or amounts in the Working Capital Schedule as to
which the Seller has disagreed and shall apply the same accounting bases and
policies as is applied to the Audited Financials. The Accounting Referee's
determination of the Net Working Capital shall be final and binding on the
Parties. The Accounting Referee shall use commercially reasonable efforts to
complete its work within 30 days following its engagement. The expenses of the
Accounting Referee shall be shared equally by the Seller on the one hand and the
Buyer on the other hand.
(d) If the Final Net Working Capital is less than the Net Working
Capital Target, Seller shall remit within three (3) Business Days of the
determination of the Final Net Working Capital the amount of such shortfall by
wire transfer of immediately available funds to an account designated in writing
by Buyer to Seller; provided, however, that if such amount is $250,000 or less,
then Buyer must make a claim against the Escrow Fund for the recovery of such
shortfall (the "NET WORKING CAPITAL SHORTFALL").
1.8 TERMINATION OF CONVERTIBLE AND OTHER SECURITIES. Seller shall take, and
shall cause to be taken, all actions necessary or appropriate in accordance with
applicable Law so that, as of the Closing, no options, warrants or other rights
to acquire any Ordinary Shares or any other shares or securities of Target (such
shares and securities, including Ordinary Shares, the "TARGET SECURITIES"), or
shares or any other shares or securities of any of Target's Subsidiaries (such
shares and other securities, the "SUBSIDIARY SECURITIES"), or other rights
convertible into or exchangeable or exercisable for Target Securities or
Subsidiary Securities, are outstanding as of the Closing Date. For the avoidance
of doubt, notwithstanding anything to the contrary contained in this Agreement,
the Purchase Price shall be for all of the outstanding Target Securities and
Subsidiary Securities and all rights convertible into or exchangeable for same.
1.9 WITHHOLDING TAXES. Notwithstanding any other provision in this
Agreement, Buyer shall have the right to deduct and withhold Taxes (as defined
in SECTION 2.10) from any payments to be made hereunder (including with respect
to the Escrow Amount (as defined in SECTION 7.3(A)) if such withholding is
required by applicable Law and to request any necessary Tax forms or any similar
information, from any Person receiving such payment. To the extent that amounts
are so withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been delivered and paid to such Person in respect of which
such deduction and withholding was made.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement and the Related Agreements and to vest Buyer or its permitted
assignees with full right, title and possession to all
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assets, property, rights, privileges, powers and franchises of Target, its
Subsidiaries and the Business, Buyer, Seller and Focus Softek and their officers
and directors are fully authorized in the name of their respective corporations
or companies, as the case may be, or otherwise to take, and will take, all such
necessary or desirable action in accordance with all applicable Laws including
executing and delivering such other agreements and instruments as may be
necessary or desirable in connection with the foregoing. Prior to the Closing,
Seller may deliver to Buyer all reasonable documentation deemed necessary or
appropriate to relieve the guarantors of any guarantees made with respect to
outstanding debt of Target or its Subsidiaries (pursuant to such agreements and
in such amounts as were delivered to Buyer prior to the date of this Agreement),
and following the Closing Buyer shall take such commercially reasonable actions
to relieve such guarantors of any obligations relating to such guarantees within
30 days following the Closing Date. If the Products identified on Schedule
1.1(a)(ii) do not constitute all of the medical transcription software products
(including products under development) owned by or exclusively licensed to
Seller, Focus Softek or any of their respective Subsidiaries or Affiliates that
are or have been used in or held for use in the Business, then, at the request
of Buyer, Seller and/or Focus Softek shall, or shall cause their respective
Subsidiaries and/or Affiliates to, transfer such products (including products
under development) and any Target Intellectual Property to Buyer or one of its
designees, without cost, in addition to, and without limitation to, any other
remedies available to Buyer under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, subject to such matters,
exceptions and/or qualifications as are disclosed in the disclosure schedule
(referencing the appropriate section and paragraph numbers) supplied by Seller
to Buyer (the "DISCLOSURE SCHEDULE") and dated as of the date hereof, as
follows:
2.1 ORGANIZATION; POWER. Each of Seller, Target and Bluestar Options Inc.,
a company incorporated with limited liability as a BVI Business Company (BVI
Company No. 1028488) under the laws of the British Virgin Islands ("BLUESTAR
OPTIONS"), is a company with limited liability duly incorporated, validly
existing and in good standing under the laws of the British Virgin Islands. Each
of Focus Softek and FIIPL is a limited liability company duly organized and
validly existing under the laws of India. FII is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Seller and each Subsidiary of Seller (including Target and its
Subsidiaries), and Focus Softek and each Subsidiary of Focus Softek, has all
requisite corporate power to own its properties and to carry on its business
(including the Business) as currently conducted. Each of Seller and Focus Softek
is duly qualified or licensed to do business and Seller is in good standing as a
company, or as the case may be, a foreign corporation in each jurisdiction in
which it conducts business. Seller has delivered a true and correct copy of the
certificate of incorporation and bylaws, memorandum and articles of association,
or equivalent organizational documents of each of Seller, Focus Softek, Target,
Bluestar Options, FII and FIIPL, each as
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amended to date and in full force and effect on the date hereof (collectively,
the "CHARTER DOCUMENTS"), to Buyer. SECTION 2.1 of the Disclosure Schedule lists
the directors and officers of Target and each of its Subsidiaries as of the date
hereof. SECTION 2.1 of the Disclosure Schedule also lists (i) each jurisdiction
in which each of Target, its Subsidiaries and Focus Softek is qualified or
licensed to do business with respect to the Business, and (ii) every state or
foreign jurisdiction in which Target, its Subsidiaries and Focus Softek has
employees or facilities or otherwise carries on the Business.
2.2 TARGET CAPITAL STRUCTURE; TITLE TO SHARES.
(a) The maximum number of shares Target is authorized to issue is
10,000 Ordinary Shares, of which 10,000 shares are issued and outstanding and
held of record (in the Register of Members of Target) by Seller free and clear
of all Liens. Target has no authorized, issued or outstanding Target Securities
other than the Ordinary Shares. All outstanding Ordinary Shares are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Charter Documents of Target, or any
agreement to which Target is a party or by which it is bound, and have been
issued in compliance with all applicable Laws and no calls or other amounts can
be made, or other Liabilities become due, in respect of the Shares. Target has
not, and will not have, suffered or incurred any Liability relating to or
arising out of the issuance, repurchase or redemption of any Ordinary Shares or
other Target Securities, or out of any agreements, commitments or arrangements
relating thereto (including any amendment of the terms of any such agreement or
arrangement). There are no declared or accrued but unpaid dividends with respect
to any Ordinary Shares or other Target Securities.
(b) Target has never adopted, sponsored or maintained any stock option
plan or any other plan or agreement providing for equity compensation to any
Person. There are no options, warrants, calls, rights, convertible securities,
commitments or agreements of any character, written or oral, to which Target is
a party or by which Target is bound obligating Target to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any Ordinary Shares or other Target Securities or obligating Target to
grant, extend, accelerate the vesting of, change the price of, otherwise amend
or enter into any such option, warrant, call, right, commitment or agreement.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to Target. Except as
contemplated hereby, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of Target. There are no
agreements to which Seller, Target or any of their respective Subsidiaries is a
party relating to the registration, sale or transfer (including agreements
relating to rights of first refusal, co-sale rights or "drag-along" rights) of
any Ordinary Shares or other Target Securities. As a result of the Share
Purchase, Buyer and/or a permitted assignee of Buyer will be the sole record,
legal and beneficial holder of all the Shares and all rights to acquire or
receive any Ordinary Shares, whether or not such Ordinary Shares are
outstanding.
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(c) Seller will have been the record and beneficial owner and holder
of all of the Shares at all times prior to Closing and upon the Closing, Buyer
or Buyer's permitted assignees will be the record and beneficial owner and
holder of all of the Shares (as registered in the Register of Members of
Target), in both cases, free and clear of any Lien, and no legend or other
reference to any purported Lien will appear upon any certificate representing
the Shares.
2.3 SUBSIDIARIES; SUBSIDIARY CAPITAL STRUCTURE.
(a) Other than Bluestar Options, FII and FIIPL, Target does not have
and has never had any Subsidiaries and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, limited liability company,
partnership, association, joint venture or other business entity. Focus Softek
does not have any Subsidiaries.
(b) The maximum number of shares (i) Bluestar Options is authorized to
issue is 2,000,000 ordinary shares, par value $1.00 each, all of which are
issued and outstanding and held by Target free and clear of any Liens (and each
of the prior existing 650,000 preferred shares, par value $1.00 each, of
Bluestar Options have been purchased by Bluestar Options and canceled and,
following an amendment to the Bluestar Options memorandum and articles of
association, are no longer available for issue), (ii) FII is authorized to issue
is 1,500 shares of common stock, no par value per share, all of which are issued
and outstanding, and held by Bluestar Options, free and clear of any Liens, and
(iii) FIIPL is authorized to issue 500,000 ordinary shares, nominal value Rs.
10, all of which are issued and outstanding and held by Bluestar Options, free
and clear of any Liens. Other than as set forth in the immediately preceding
sentences, none of Bluestar Options, FII and FIIPL has any Subsidiary Securities
authorized, issued or outstanding. All outstanding Subsidiary Securities
referenced in the first sentence of this SECTION 2.3(B) are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Charter Documents of each such Subsidiary of
Target, or any agreement to which any such Subsidiary is a party or by which it
is bound, and have been issued in compliance with all applicable Laws and no
call or other amounts can be made, or other Liabilities become due, in respect
of such Subsidiary Securities. No Subsidiary of Target has, and no such
Subsidiary will have, suffered or incurred any Liability relating to or arising
out of the issuance, repurchase or redemption of any Subsidiary Securities, or
out of any agreements or arrangements relating thereto (including any amendment
of the terms of any such agreement or arrangement). There are no declared or
accrued but unpaid dividends with respect to any Subsidiary Securities.
(c) No Subsidiary of Target has ever adopted, sponsored or maintained
any stock option plan or any other plan or agreement providing for equity
compensation to any Person. There are no options, warrants, calls, rights,
convertible securities, commitments or agreements of any character, written or
oral, to which any such Subsidiary is a party or by which any such Subsidiary is
bound obligating any such Subsidiary to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
Subsidiary Securities or obligating any such
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Subsidiary to extend, accelerate the vesting of, change the price of, otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to any such
Subsidiary. Except as contemplated hereby, there are no voting trusts, proxies,
or other agreements or understandings with respect to the voting stock of any of
Target's Subsidiaries. There are no agreements to which Seller, Target or any of
their respective Subsidiaries is a party relating to the registration, sale or
transfer (including agreements relating to rights of first refusal, co-sale
rights or "drag-along" rights) of any Subsidiary Securities.
2.4 AUTHORITY. Each of Seller and Focus Softek has all requisite power,
legal right, capacity and authority to enter into this Agreement and any Related
Agreements to which it is a party and to consummate the Acquisition Transactions
and the other transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and any Related Agreements to which Seller or Focus
Softek is a party and the consummation of the Acquisition Transactions and the
other transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate and shareholder action on the part of Seller and Focus
Softek and no further action is required on the part of Seller or Focus Softek
to authorize this Agreement and any Related Agreements to which it is a party
and the Acquisition Transactions and the other transactions contemplated hereby
and thereby. This Agreement, the Acquisition Transactions and the other
transactions contemplated hereby have been unanimously approved by the Board of
Directors and respective shareholders of Seller and Focus Softek. This Agreement
and each of the Related Agreements to which Seller or Focus Softek is a party
has been duly executed and delivered by Seller and Focus Softek, as applicable,
and assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of Seller and
Focus Softek, as applicable, enforceable against it in accordance with their
respective terms.
2.5 NO CONFLICT. The execution and delivery by Seller and Focus Softek of
this Agreement and any Related Agreement to which Seller or Focus Softek is a
party, and the consummation of the Acquisition Transactions and the other
transactions contemplated hereby and thereby, will not (A) conflict with or
result in any violation of or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "CONFLICT"), (i) any provision of any of the Charter Documents,
(ii) any mortgage, hypothec, indenture, lease, contract, covenant,
understanding, power of attorney or other agreement, instrument or commitment,
permit, concession, franchise or license (each a "CONTRACT") binding upon
Seller, any of its Subsidiaries, Focus Softek, or any of their respective assets
(whether tangible or intangible) or properties (including the Business) or the
Shares, or (iii) any Law or Order applicable to Seller, its Subsidiaries, Focus
Softek, or any of their respective properties (whether tangible or intangible)
or assets (including the Business), or the Shares other than, in the case of
clause (iii), Conflicts which do not have and would not reasonably be expected
have, individually or in the aggregate, a Material Adverse Effect, or (B) result
in the imposition of any Lien (other than Permitted Liens) upon any of the
Shares or Target's or its Subsidiaries' assets (whether tangible or intangible)
or properties
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(including the Business). For all purposes under this Agreement, "KNOWLEDGE" or
"KNOWN" shall mean, with respect to Seller, the knowledge of Xxxxxxx Xxxxxx,
Xxxxxx Xxxxx and Xxxxxxx Xxxx following due and diligent inquiry of those
officers, employees and other service providers of Seller and its Subsidiaries
who would reasonably be expected to have actual knowledge of the matters
represented.
2.6 CONSENTS. No consent, notice, waiver, approval, order or authorization
of, or registration, declaration or filing with any Governmental or Regulatory
Body (including the Indian Foreign Investment Promotion Board, the Reserve Bank
of India and the Indian Ministry of Finance) or any other Person is required by,
or with respect to, Seller, its Subsidiaries or Focus Softek in connection with
the execution and delivery of this Agreement and any Related Agreement to which
such Person is a party or the consummation of the Acquisition Transactions and
the other transactions contemplated hereby and thereby, except for those listed
in SECTION 2.6 of the Disclosure Schedule.
2.7 FINANCIAL STATEMENTS; INTERNAL CONTROLS; ACCOUNTS RECEIVABLE.
(a) SECTION 2.7(A) of the Disclosure Schedule sets forth the unaudited
combined balance sheet of Target as of December 31, 2006 and the audited
(subject to qualification) balance sheet of Target as of December 31, 2005 and
the related unaudited combined statements of income and retained earnings,
comprehensive income and cash flows of Target for the twelve (12)-month period
end December 31, 2006 and the audited (subject to qualification) combined
statements of income and retained earnings, comprehensive income and cash flows
and for the 12-month periods ended December 31, 2005 and December 31, 2004 (the
"FINANCIALS"). The Financials are true and correct in all material respects and
have been prepared in accordance with United States generally accepted
accounting principles consistently applied ("GAAP") throughout the periods
indicated and consistent with each other. The Financials present fairly the
financial condition, operating results and cash flows of the Business and Target
and its Subsidiaries, taken as a whole, as of the dates and during the periods
indicated therein. Included in SECTION 2.7(A) of the Disclosure Schedule are
projections for Target's fiscal years ending December 31, 2007 and 2008, which
represent management's good faith estimates of the future financial performance
of the Business and Target and its Subsidiaries, taken as a whole, based upon
assumptions which management in good faith believes were reasonable when made
and continues to believe to be reasonable as of the date hereof; provided,
however, no representation or warranty is being made as to whether the results
projected therein will actually be achieved. The unaudited combined balance
sheet of Target as of December 31, 2006 (the "BALANCE SHEET DATE") is referred
to hereinafter as the "CURRENT BALANCE SHEET."
(b) Each of Target and its Subsidiaries maintains accurate books and
records reflecting its assets and liabilities and maintains proper and adequate
internal accounting controls which provide reasonable assurance that (i)
transactions, receipts and expenditures of Target and its Subsidiaries are
executed with appropriate authorizations of management and (ii) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of Target in
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accordance with GAAP and to maintain accountability for Target's consolidated
assets. There has been no fraud, whether or not material, that involved
management or other employees of Target or any of its Subsidiaries who have a
significant role in Target's internal controls.
(c) SECTION 2.7(C) of the Disclosure Schedule sets forth a true,
correct and complete itemization of the accounts receivable (including aging) of
the Business (the "ACCOUNTS RECEIVABLE") as of the Balance Sheet Date. The
Accounts Receivable existing as of the date hereof represent, and the Accounts
Receivable existing as of the Closing Date will represent, bona fide claims
against debtors for sales, services performed or other charges arising on or
before the respective dates of recording thereof, and all of the goods delivered
and services performed which gave rise to such Accounts Receivable were
delivered or performed in accordance with applicable orders, Contracts or
customer requirements.
2.8 NO UNDISCLOSED LIABILITIES. Neither Target nor any of its Subsidiaries,
nor the Business, has any Liability of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in the Financials in accordance with GAAP), which individually or in the
aggregate (i) has not been reflected or reserved against in the Current Balance
Sheet, or (ii) has not arisen in the Ordinary Course of Business since the
Balance Sheet Date; provided that, for the avoidance of doubt, for purposes of
this clause (ii), any such Liabilities owed to Seller, Xxxxxxx Xxxxxx or any of
their respective Affiliates or family members (other than Target and its
Subsidiaries) shall not be deemed to be Liabilities incurred in the Ordinary
Course of Business.
2.9 NO CHANGES. Since the Balance Sheet Date, the Business has been
conducted only in the Ordinary Course of Business and there has not been (a) a
Material Adverse Effect, (b) any action that, if taken during the period from
the date of this Agreement through the Closing Date, would constitute a breach
of SECTION 4.1, or (c) any agreement by the Seller or its Subsidiaries to take
any action, the consummation of which would constitute or could reasonably be
expected to constitute, a breach of the foregoing.
2.10 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, the term
"TAX" or, collectively, "TAXES" shall mean (i) any and all U.S. federal, state,
local and non-U.S. taxes, assessments and other governmental charges, duties,
impositions and Liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise, service, fringe benefit and property taxes as well as public imposts,
fees and social security charges (including but not limited to health,
unemployment and pension insurance), together with all interest, penalties and
additions imposed with respect to such amounts, (ii) any Liability for the
payment of any amounts of the type described in clause (i) of this SECTION
2.10(A) as a result of being a member of an affiliated, consolidated, combined
or unitary group for any period (including any arrangement for group or
consortium relief or similar arrangement), and (iii) any Liability for the
payment of any
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amounts of the type described in clauses (i) or (ii) of this SECTION 2.10(A) as
a result of any express or implied obligation to indemnify any other Person or
as a result of any obligation under any agreement or arrangement with any other
Person with respect to such amounts and including any Liability for Taxes of a
transferor or predecessor.
(b) TAX RETURNS AND AUDITS.
(i) All required U.S. federal, state, local and non-U.S. returns,
estimates, information statements and reports ("RETURNS") relating to any and
all Taxes concerning or attributable to Target, any of its Subsidiaries, their
respective operations or the Business have been prepared and timely filed and
such Returns are true and correct and have been completed in accordance with
applicable Law, and all Taxes required to be paid by or with respect to Target,
any of its Subsidiaries, their respective operations or the Business have been
timely paid.
(ii) All Taxes required to be paid or withheld by or with respect
to Target, any of its Subsidiaries, their respective operations or the Business
have been timely paid or withheld, and any such withheld Taxes have been timely
paid over to the appropriate Governmental or Regulatory Body.
(iii) There has been no delinquency in the payment of any Tax of
or with respect to Target, any of its Subsidiaries, their respective operations
or the Business, nor is there any Tax deficiency outstanding, assessed or
proposed in writing against or with respect to any of them, nor has any of them
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of or with
respect to Target, any of its Subsidiaries, their respective operations or the
Business is presently in progress, nor has there been any request for such an
audit or other examination. No adjustment relating to any Return filed by or
with respect to Target, any of its Subsidiaries, their respective operations or
the Business has been proposed in writing by any Tax authority. No claim has
ever been made by an authority in a jurisdiction where Tax Returns are not filed
by or with respect to Target, any of its Subsidiaries, their respective
operations or the Business that any of them is or may be subject to taxation by
that jurisdiction.
(v) As of the Balance Sheet Date, there were no Liabilities for
unpaid Taxes of or with respect to Target, any of its Subsidiaries, their
respective operations or the Business which had not been accrued or reserved on
the Current Balance Sheet, whether asserted or unasserted, contingent or
otherwise, and no Liability for Taxes has been incurred since the Balance Sheet
Date other than in the Ordinary Course of Business.
(vi) Seller has made available to Buyer or its legal counsel,
copies of all Tax Returns of or with respect to Target, any of its Subsidiaries,
their respective operations or the Business filed for all periods since
inception.
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(vii) There are no Liens on the assets of Target, any of its
Subsidiaries or the Business relating or attributable to Taxes, other than Liens
for Taxes not yet due and payable. To the Knowledge of the Seller, there is no
basis for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on such assets.
(viii) Neither Target nor any of its Subsidiaries has (a) ever
been a member of an affiliated group (within the meaning of Section 1504(a) of
the U.S. Internal Revenue Code of 1986, as amended (the "CODE")) filing a
consolidated federal income Tax Return, (b) ever been a party to any Tax
sharing, indemnification, allocation or similar agreement, (c) any Liability for
the Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law (including any arrangement for
group or consortium relief or similar arrangement)), as a transferee or
successor, by contract or agreement, or otherwise and (d) ever been a party to
any joint venture, partnership or, to the Knowledge of the Seller, other
arrangement that could be treated as a partnership for Tax purposes.
(ix) Neither Target nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code.
(x) Neither Target nor any of its Subsidiaries has engaged in a
reportable transaction under Treas. Reg. Section 1.6011-4(b).
(xi) SECTION 2.10(B)(XI) of the Disclosure Schedule sets forth
the following information with respect to Target and each of its Subsidiaries:
(a) its basis in its assets as of December 31, 2006; and (b) the amount of any
net operating loss, net capital loss, unused investment, foreign, or other Tax
credit and the amount of any limitation upon any of the foregoing.
(xii) Neither Target nor any of its Subsidiaries will be required
to include any income or gain or exclude any deduction or loss from Taxable
income as a result of (a) any change in method of Tax accounting, (b) agreement
with a Governmental or Regulatory Body with respect to Taxes, (c) installment
sale or open transaction disposition or (d) prepaid amount.
(xiii) Each of the Target and its Subsidiaries is in full
compliance with all terms and conditions of any Tax exemption, Tax holiday or
other Tax reduction agreement or order ("TAX INCENTIVE") and the consummation of
the transactions contemplated by this Agreement will not have any adverse effect
on the continued validity and effectiveness of any such Tax Incentive.
(xiv) Neither the Target nor any of its Subsidiaries is subject
to Tax in any country other than its country of incorporation or formation by
virtue of having a permanent establishment or other place of business in that
country.
(xv) To Seller's Knowledge, the prices for any property or
services (or for the use of any property) provided by or to the Target or any of
its Subsidiaries are arm's length
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prices for purposes of the relevant transfer pricing laws, including Treasury
Regulations promulgated under Section 482 of the Code.
(c) FIIPL will not, as a result of the transactions contemplated by
this Agreement, lose its current tax treatment as a "Software Technology Park of
India" registrant, nor lose the income-Tax benefits currently available to it
under Section 10A of the Indian Income-Tax Act, 1961, as amended.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no Contract or Order to
which Target or any of its Subsidiaries is a party or otherwise binding upon
Target or any of its Subsidiaries which has or may reasonably be expected to
have the effect of prohibiting or impairing any business practice of Target, any
of its Subsidiaries or the Business, any acquisition of assets (tangible or
intangible) or property by Target or any of its Subsidiaries, the conduct of
business by Target or any of its Subsidiaries, or otherwise limiting the freedom
of Target or any of its Subsidiaries to engage in any line of business or to
compete with any Person. Without limiting the generality of the foregoing,
neither Target nor any of its Subsidiaries has entered into any agreement under
which Target or any of its Subsidiaries or the Business is restricted from
selling, licensing, manufacturing, providing or otherwise distributing any of
its technology or products or from providing its services to customers or
potential customers or any class of customers, in any geographic area, during
any period of time, or in any segment of the market.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT; CUSTOMER INFORMATION.
(a) Neither Target nor any Subsidiary of Target owns any real
property, nor has Target or any of its Subsidiaries ever owned any real
property. SECTION 2.12(A)(I) of the Disclosure Schedule sets forth a list of all
real property currently leased, subleased or licensed by or from Target or any
of its Subsidiaries, or otherwise used or occupied by Target or any of its
Subsidiaries, for the operation of the Business (the "LEASED REAL PROPERTY"),
the name of the lessor, licensor, sublessor, master lessor and/or lessee, the
date and term of the lease, license, sublease or other occupancy right and each
amendment thereto (the "LEASE AGREEMENTS") and, with respect to any current
lease, license, sublease or other occupancy right the aggregate annual rental
payable thereunder. All such Lease Agreements are valid and effective in
accordance with their respective terms, and there is not, under any of such
Lease Agreements, any existing default, no rentals are past due, or event of
default (or event which with notice or lapse of time, or both, would constitute
a default). Neither Seller, Target, Focus Softek nor any of their respective
Subsidiaries has received any notice of a default, alleged failure to perform,
or any offset or counterclaim with respect to any such Lease Agreement, which
has not been fully remedied and withdrawn. The Closing will not affect the
enforceability against any Person of any such Lease Agreement or the rights of
Target and its Subsidiaries to the continued use and possession of the Leased
Real Property occupied by Target and its Subsidiaries for the conduct of
Business as presently conducted. There are no other parties occupying, or with a
right to occupy, any portion of the Leased Real Property. Neither the Target nor
any of its
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Subsidiaries owe brokerage commissions or finders fees with respect to any
Leased Real Property, nor would it owe any such fees if any existing Lease
Agreement were renewed pursuant to any renewal options contained in such Lease
Agreement. The Lease Agreements for space in India are appropriately registered
and all fees or duties associated with such registration have been paid in full.
(b) To the Knowledge of the Seller, the Leased Real Property is in
good operating condition and repair, subject to normal wear and tear. The Seller
has received no notice that the operations of the Business on the Leased Real
Property or the improvements comprising the Leased Real Property are in
violation in any material respect of any applicable building code, zoning
requirement or statute, or other similar Law, relating to such property or
operations thereon.
(c) Target and its Subsidiaries have good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used or held for
use in the Business, free and clear of any Liens (other than Permitted Liens).
(d) There are no Laws or Orders now in existence or under active
consideration by any Governmental or Regulatory Body which could require Target
or any of its Subsidiaries, as a tenant of any Leased Real Property, to make any
expenditure in excess of $25,000 to modify or improve such Leased Real Property
to bring it into compliance therewith. Neither Target nor any of its
Subsidiaries shall be required to expend more than $75,000 in the aggregate
under all Lease Agreements to restore the Leased Real Property at the end of the
term of the applicable Lease Agreement to the condition required under the Lease
Agreement (assuming the conditions existing in such Leased Real Property as of
the date hereof and as of the Closing).
(e) SECTION 2.12(E) of the Disclosure Schedule lists all material
items of equipment (the "EQUIPMENT") owned or leased by Target or its
Subsidiaries, and such Equipment is (i) adequate for the conduct of the Business
as currently conducted, and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
(f) Target and each of its Subsidiaries has sole and exclusive
ownership, free and clear of any Liens (other than Permitted Liens), of all
customer lists, customer contact information, customer correspondence and
customer licensing and purchasing histories relating to its current and former
customers (the "CUSTOMER INFORMATION"). No person other than Target or its
Subsidiaries possesses any claims or rights with respect to use of the Customer
Information.
2.13 INTELLECTUAL PROPERTY.
(a) SECTION 2.13(A) of the Disclosure Schedule lists all material
Target Intellectual Property. There are no Registered Intellectual Property
Rights within the Target Intellectual Property.
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(b) In each case in which Target or any of its Subsidiaries has
acquired or purports to have acquired ownership of any Intellectual Property
from any Person, Target or the Subsidiary (as applicable) has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in the
Intellectual Property (including the right to seek past and future damages with
respect thereto) acquired from such Person to Target and its Subsidiaries.
(c) All Target Intellectual Property will be fully transferable and
licensable by Target and/or Buyer without restriction and without payment of any
kind to any third party; provided, however, that the representations made in
this SECTION 2.13(C) will not be deemed breached as a result of the operation of
provisions contained in any contract, license, agreement or arrangement to which
Buyer is a party (but to which the Target or any of its Subsidiaries is not).
(d) Each item of Target Intellectual Property and all Intellectual
Property licensed to Target is free and clear of any Liens. Target or a
Subsidiary of Target is the exclusive owner of all Target Intellectual Property,
other than such Target Intellectual Property that is licensed pursuant to the
licenses set forth on SECTION 2.13(I) of the Disclosure Schedule (for which
Target or a Subsidiary of Target is the exclusive licensee).
(e) To the extent that any Intellectual Property has been developed or
created independently or jointly by any Person other than Target and it
Subsidiaries for which Target or any of its Subsidiaries has, directly or
indirectly, provided consideration for such development or creation, Target or a
Subsidiary of Target has a written agreement with such Person with respect
thereto, and Target or a Subsidiary of Target thereby has obtained ownership of,
and is the exclusive owner of, all such Intellectual Property by operation of
Law or by valid assignment, and has required the waiver of all non-assignable
rights.
(f) Neither Target, Focus Softek nor any of their respective
Subsidiaries has (i) transferred ownership of, or granted any exclusive license
of or exclusive right to use, or authorized the retention of any exclusive
rights to use or joint ownership of, any Intellectual Property that is or was
Target Intellectual Property, to any other Person or (ii) permitted their rights
in any Target Intellectual Property to enter into the public domain.
(g) None of the Quitclaim IP has been licensed by Focus Softek to any
third party.
(h) All Technology used in or necessary to the conduct of the Business
as presently conducted or currently contemplated to be conducted was written and
created solely by either (i) Employees of Target or its Subsidiaries acting
within the scope of their employment who have validly and irrevocably assigned
all of their rights, including all Intellectual Property Rights therein, to
Target or its Subsidiaries, (ii) Employees of Focus Softek or its Subsidiaries
acting within the scope of their employment who have validly and irrevocably
assigned all of their rights, including all Intellectual Property Rights
therein, to Focus Softek or its Subsidiaries, all such rights of which are being
assigned to Target or its Subsidiaries by means of the Quitclaim, (iii) by third
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parties who have validly and irrevocably assigned all of their rights, including
all Intellectual Property Rights therein, to Target or its Subsidiaries, or (iv)
by third parties who have validly and irrevocably assigned all of their rights,
including all Intellectual Property Rights therein, to Focus Softek or its
Subsidiaries, all such rights of which are being assigned to Target and its
Subsidiaries by means of the Quitclaim, and no third party owns or has any
rights to any of Target Intellectual Property.
(i) Other than the licenses set forth on SECTION 2.13(I) of the
Disclosure Schedule, the Target Intellectual Property constitutes all of the
Intellectual Property used in the conduct of the Business as it currently is
conducted.
(j) SECTION 2.13(J) of the Disclosure Schedule lists all Contracts
with respect to any Intellectual Property.
(k) No third party that has licensed Intellectual Property to Target
(including eScription) or any of its Subsidiaries, or the Business, (i) has
ownership rights or license rights to improvements or derivative works made by
Target or any of its Subsidiaries in such Intellectual Property that has been
licensed to Target or any of its Subsidiaries, or the Business, and (ii) will
have any right of termination, cancellation or modification under any such
license as a result of this Agreement or the transactions contemplated hereby.
(l) SECTION 2.13(L) of the Disclosure Schedule lists all contracts,
licenses and agreements between Target, Focus Softek or any of their respective
Subsidiaries, on the one hand, and any other Person, on the other hand, wherein
or whereby such first parties have agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or misappropriation by such first parties, or such other
Person of the Intellectual Property Rights of any such Person.
(m) There are no contracts, licenses or agreements between Target,
Focus Softek or any of their respective Subsidiaries, on the one hand, and any
other Person, on the other hand, with respect to Target Intellectual Property or
other Intellectual Property used in and/or necessary to the conduct of the
Business as it is currently conducted or planned to be conducted under which
there is any dispute regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or received by
Target, Focus Softek or any of their respective Subsidiaries thereunder.
(n) The operation of the Business as it is currently conducted and is
contemplated to be conducted, including but not limited to the design,
development, use, import, branding, advertising, promotion, marketing,
distribution, manufacture and sale of any product, technology or service
(including products, technology or services currently under development) of
Target, Focus Softek or any of their respective Subsidiaries has not infringed
or misappropriated, does not infringe or misappropriate, and will not infringe
or misappropriate when conducted by Buyer following the
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Closing (excluding any changes to such product, technology or service made by
Buyer following the Closing), any Intellectual Property Rights of any Person,
violate any right of any Person (including any right to privacy or publicity),
or constitute unfair competition or trade practices under the laws of any
jurisdiction. Neither Target, Focus Softek or nor any of their respective
Subsidiaries has received notice from any Person claiming that such operation or
any act, any product, technology or service (including products, technology or
services currently under development) or Technology of Target, Focus Softek or
any of their respective Subsidiaries infringes or misappropriates any
Intellectual Property Rights of any Person or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor does Seller have
Knowledge of any basis therefor).
(o) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Buyer by operation of Law or otherwise of
any Contracts, will result in: (i) Buyer granting to any third party any right
to or with respect to any Intellectual Property Rights owned by, or licensed to,
any of it, (ii) Buyer, being bound by or subject to, any exclusivity
obligations, non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) Buyer being obligated to pay any royalties or
other material amounts to any third party in excess of those payable by any of
them, respectively, in the absence of this Agreement or the transactions
contemplated hereby.
(p) To the Knowledge of Seller, no Person has infringed or
misappropriated or is infringing or misappropriating any Target Intellectual
Property.
(q) Seller has taken reasonable steps to protect Target's, Focus
Softek's and their respective Subsidiaries rights in such Persons' confidential
information and trade secrets or provided by any other Person to such Persons.
Without limiting the foregoing, each of Target, Focus Softek and their
respective Subsidiaries has and enforces a policy requiring each Employee,
consultant, and contractor to execute proprietary information, confidentiality
and assignment agreements substantially in standard forms provided to Buyer
prior to the date hereof, and all current and former Employees, consultants and
contractors of Target, Focus Softek and their respective Subsidiaries have
executed such an agreement in substantially such standard form.
(r) No Target Intellectual Property, Intellectual Property Rights,
product, technology, or service of Target, Focus Softek or any of their
respective Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment or settlement agreement or stipulation that restricts in any
manner the use, transfer or licensing thereof by the Business or may affect the
validity, use or enforceability of such Target Intellectual Property.
(s) No government funding, facilities or resources of a university,
college or other educational institution or research center or funding from
third parties was used in the development of the Target Intellectual Property
and no Regulatory or Governmental Body, university, college, other educational
institution or research center has any claim, or given notice or proceeded
against the Target or any of its Subsidiaries, in respect of any claim or right
in or to Target Intellectual Property. To the Knowledge of the Seller, no
current or former Employee, consultant or
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independent contractor of Seller who was involved in, or who contributed to, the
creation or development of any Target Intellectual Property, has performed
services for the government, a university, college or other educational
institution, or a research center, during a period of time during which such
Employee, consultant or independent contractor was also performing services for
Target, Focus Softek, their respective Subsidiaries or the Business.
(t) Seller has complied in all material respects with all applicable
Laws and its internal privacy policies relating to the privacy of users of its
products, services, and Web sites, and also the collection, storage, and
transfer of any personally identifiable information collected by or on behalf of
Seller, Focus Softek or any of their respective Subsidiaries.
(u) Neither Seller, Focus Softek, their respective Subsidiaries, nor
any Person acting on their behalf has disclosed, delivered or licensed to any
Person, agreed to disclose, deliver or license to any Person, or permitted the
disclosure or delivery to any escrow agent or other Person of any source code
owned by Target, Focus Softek or any of their respective Subsidiaries or used in
the Business ("BUSINESS SOURCE CODE"). No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time
or both) will, or would reasonably be expected to, result in the disclosure or
delivery by or on behalf of Seller of any Business Source Code. Business Source
Code means any software source code or related proprietary or confidential
information or algorithms of any Target Intellectual Property.
(v) SECTION 2.13(V) of the Disclosure Schedule lists all software or
other material that is distributed as "freeware," "free software," "open source
software" or under a similar licensing or distribution model (including but not
limited to the GNU General Public License) that is used or licensed in
connection with the Business, and identifies that which is incorporated into,
combined with, or distributed in conjunction with any products or services of
the Business ("INCORPORATED OPEN SOURCE SOFTWARE") and identifies the type of
license or distribution model governing its use. The use and/or distribution of
each component of Incorporated Open Source Software complies with all material
provisions of the applicable license agreement, and in no case does such use or
distribution give rise under such license agreement to any rights in any third
parties under any Target Intellectual Property or obligations for the Business
with respect to any Target Intellectual Property, including any obligation to
disclose or distribute any such Intellectual Property in source code form, to
license any such Intellectual Property for the purpose of making derivative
works, or to distribute any such Intellectual Property without charge.
2.14 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Neither Target nor any of its Subsidiaries, nor the Business, is a
party to, nor is it bound by, any of the following (together with each Contract
listed in SECTION 2.13(J) of the Disclosure Schedule, each a "MATERIAL
CONTRACT"):
(i) any employment, independent contractor or consulting
agreement, contract or commitment with an employee, independent contractor,
individual consultant or
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salesperson, or consulting or sales agreement, contract, or commitment with a
firm or other organization, including any agreement, contract or commitment
which relate to the indemnification of any director, officer or employee, in
each case, of Target or any Subsidiary of Target (other than, in each case, for
such agreements that are pursuant to standard form agreements which have been
attached to the Disclosure Schedule);
(ii) any Contract, agreement or plan, including any stock option
plan, stock appreciation rights plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement (either alone or upon the occurrence of any additional subsequent
events) or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having a value in excess of
$50,000 individually or $100,000 in the aggregate;
(v) any agreement of indemnification or guaranty;
(vi) any Contract relating to capital expenditures and involving
future payments in excess of $50,000 individually or $100,000 in the aggregate,
or any agreement that is royalty bearing;
(vii) any Contract relating to the disposition or acquisition of
assets (tangible or intangible) or properties, or any interest in any Person, in
each case, outside the Ordinary Course of Business;
(viii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts relating to the borrowing of
money, the extension of credit or the continuing or future grant of any Lien;
(ix) any purchase order or Contract for the purchase of materials
or services involving in excess of $50,000 individually or $100,000 in the
aggregate;
(x) any Contract containing covenants or other obligations
granting or containing any current or future commitments regarding exclusive
rights, non-competition, "most favored nations," restriction on the operation or
scope of its businesses or operations, or similar terms;
(xi) any dealer, distribution, marketing, development or joint
venture agreement;
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(xii) any sales representative, value added, marketing,
remarketer, reseller, or independent software vendor, distribution or other
agreement for the use or distribution of the products, technology or services of
the Business;
(xiii) any Contract with any customer of the Business which, if
fulfilled, would result in revenues to the Business of in excess of $50,000
annually or $100,000 in the aggregate;
(xiv) any Contract between or among Target or any of its
Subsidiaries, on the one hand, and Seller, Xxxxxxx Xxxxxx, or any of their
respective Affiliates (other than Target and its Subsidiaries) or family
members, on the other hand;
(xv) any Contract regarding transfer pricing among or between any
of Target and its Subsidiaries; or
(xvi) any other Contract that involves amounts in excess of
$50,000 individually or $100,000 in the aggregate and is not cancelable without
penalty within thirty (30) days.
(b) Seller has provided to Buyer true, correct and complete copies of
all Material Contracts. With respect to each Material Contract, (i) such
Material Contract is valid, legally binding, enforceable, and in full force and
effect, and will continue to be in full force and effect following the Closing,
(ii) none of Target, its Subsidiaries or Focus Softek is in breach or default
under any Material Contract and, to the Knowledge of Seller, no other party to
any Material Contract is in breach or default thereof, and none of Seller, its
Subsidiaries or Focus Softek, has given to or received from any other Person any
written notice or other written communication or, to the Knowledge of Seller,
any oral notice or other oral communication regarding any actual, alleged,
possible or potential breach of, or default under, any Material Contract, (iii)
to the Knowledge of Seller, no event has occurred or circumstance exists that
with notice or lapse of time or both would result in a breach or default or
permit termination, modification, or acceleration under such Material Contract,
(iv) no party has repudiated any provision of such Material Contract, (v) such
Material Contract has been entered into on arm's length terms and at fair market
value, and (vi) as of the date of this Agreement, there are no outstanding
renegotiations of, or outstanding rights to renegotiate, any amounts paid or
payable under any Material Contract with any Person having the contractual or
statutory right to demand or require such renegotiation.
(c) SECTION 2.14(C) of the Disclosure Schedule sets forth all
necessary consents, waivers and approvals of parties to any Contracts as are
required thereunder in connection with the Acquisition Transactions or the other
transactions contemplated by this Agreement or any Related Agreement, or for any
such Contract to remain in full force and effect without limitation,
modification or alteration after the Closing so as to preserve all rights of,
and benefits to, Target and its Subsidiaries under such Contracts from and after
the Closing.
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2.15 INTERESTED PARTY TRANSACTIONS; INTERCOMPANY ACCOUNTS.
(a) No officer, director, stockholder or member of Seller (nor any
ancestor, sibling, descendant or spouse of any of such Persons, or any trust,
partnership or corporation in which any of such Persons has or has had an
interest), or any of its Subsidiaries has or has had, directly or indirectly,
(i) an interest in any entity which furnished or sold or licensed, or furnishes
or sells or licenses, services, products, technology or Target Intellectual
Property that is furnished or sold, or proposed to be furnished or sold, by the
Business, (ii) any interest in any entity that purchases from or sells or
furnishes to the Business, any goods or services, or (iii) a beneficial interest
in any Material Contract; provided, however, that ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation
shall not be deemed to be an "interest in any entity" for purposes of this
SECTION 2.15(A).
(b) SECTION 2.15(B)(I) of the Disclosure Schedule contains a complete
and accurate list of all intercompany balances and accounts between or among
Seller, Xxxxxxx Xxxxxx or any of their respective Affiliates (other than Target
and its Subsidiaries) or family members, on the one hand, and Target and its
Subsidiaries, on the other hand (all such balances and accounts, "INTERCOMPANY
ACCOUNTS"), as of the Balance Sheet Date. Except as set forth in SECTION
2.15(B)(II) of the Disclosure Schedule, since the Balance Sheet Date, there has
not been any accrual of Liability by, or any other transaction (including the
establishment of any Intercompany Accounts) between or among Seller, Xxxxxxx
Xxxxxx or any of their respective Affiliates (other than Target and its
Subsidiaries) or family members, on the one hand, and Target and/or any of its
Subsidiaries, on the other hand.
2.16 GOVERNMENTAL AUTHORIZATION. Each consent, license, permit, grant or
other authorization (i) pursuant to which Target or any of its Subsidiaries
currently operates or holds any interest in any of its assets (whether tangible
or intangible) or properties, or (ii) which is required for the operation of the
Business as currently conducted or the holding of any such interest
(collectively, "BUSINESS AUTHORIZATIONS") has been issued or granted to, or will
be at the Closing issued or granted to, Target or a Subsidiary of Target, as the
case may be, except where the failure to be issued or granted to Target or a
Subsidiary of Target would not be material to Target and its Subsidiaries, taken
as a whole. All material Business Authorizations are in full force and effect
and constitute all the Business Authorizations required to operate or conduct
the Business or for Target and its Subsidiaries to hold any interest in their
properties or assets.
2.17 LITIGATION. There is no action, suit, claim or proceeding of any
nature pending, or to the Knowledge of Seller, threatened, against Seller,
Target, Focus Softek or their respective Subsidiaries, assets (tangible or
intangible) or properties, or any of their respective officers or directors, or
the Business, nor to the Knowledge of Seller is there any reasonable basis
therefor. There is no investigation or other proceeding pending or, to the
Knowledge of Seller, threatened, against Seller, Target, Focus Softek or their
respective Subsidiaries, assets (tangible or intangible) or properties, or any
of their respective officers or directors, or the Business by or before any
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Governmental or Regulatory Body, nor to the Knowledge of Seller is there any
reasonable basis therefor. No Governmental or Regulatory Body has at any time
challenged or questioned the legal right of Seller, Target, Focus Softek or
their respective Subsidiaries to conduct their operations and the Business as
presently or previously conducted.
2.18 MINUTE BOOKS. The minutes and actions by written consent of Seller,
its Subsidiaries and Focus Softek made available to counsel for Buyer prior to
the date hereof contain complete and accurate records of all actions taken, and
summaries of all meetings held, by the members, stockholders and the Board of
Directors or similar bodies (and any committees thereof) of Seller, each of its
Subsidiaries and Focus Softek since the time of incorporation or organization of
Seller, its Subsidiaries or Focus Softek, as the case may be.
2.19 ENVIRONMENTAL MATTERS. Target and its Subsidiaries have complied in
all material respects with all applicable Laws and Orders enacted (i) for the
protection of the environment (including air, water vapor, surface water,
groundwater and soils) against contamination with hazardous substances or wastes
and (ii) with respect to Hazardous Materials (as defined below) (including
exposure to Hazardous Materials, recycling, product content and product take
back requirements), pollution and worker safety (subsections (i) and (ii)
collectively, "ENVIRONMENTAL LAWS"). There is no environmental suit, action,
claim or proceeding pending, or to the Knowledge of Seller, threatened, naming
Target or any of its Subsidiaries as party thereto. Except as could not
reasonably be expected to subject the Target or any of its Subsidiaries to
Liability, no Hazardous Materials are present on any Leased Real Property or
were present on any other real property occupied by Target or its Subsidiaries
at the time it ceased to be operated, occupied, controlled or leased by such
parties. Neither Target nor any of its Subsidiaries have entered into any
agreement that may require it to guarantee, reimburse, pledge, defend, hold
harmless or indemnify any other party with respect to Liabilities arising out of
Environmental Laws or with respect to Hazardous Materials. For purposes of this
Agreement, "HAZARDOUS MATERIAL" means any substance or material that is
prohibited, controlled or regulated by any Governmental or Regulatory Body
pursuant to Environmental Laws, including pollutants, contaminants, dangerous
goods or substances, toxic, deleterious or hazardous substances or materials,
wastes (including solid non hazardous wastes and subject wastes), petroleum and
its derivatives and by products and other hydrocarbons, all as regulated under,
governed by or defined in or pursuant to any Environmental Law.
2.20 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Neither Seller nor
any of its Subsidiaries has incurred, or will incur, directly or indirectly, any
Liability for brokerage or finders' fees or agents' commissions, fees related to
investment banking or similar advisory services or any similar charges in
connection with this Agreement, the Related Agreements, the Acquisition
Transactions or any other transaction contemplated hereby and thereby for which
Buyer, Target or any of their respective Subsidiaries is or could be liable.
2.21 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
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(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"COBRA" shall mean the U.S. Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
"DOL" shall mean the United States Department of Labor.
"EMPLOYEE" shall mean any current or former employee, independent
contractor, consultant or director of Target or any ERISA Affiliate (including,
for the avoidance of doubt, any such home-based employees).
"EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visa, work permit
or other agreement, or contract (including any other agreement providing for
compensation or benefits) between Seller or any ERISA Affiliate and any
Employee.
"ERISA" shall mean the U.S. Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall mean any other Person under common
control with Target within the meaning of Section 414(b), (c), (m) or (o) of the
Code, and the regulations issued thereunder.
"FMLA" shall mean the U.S. Family Medical Leave Act of 1993, as
amended.
"HIPAA" shall mean the U.S. Health Insurance Portability and
Accountability Act of 1996, as amended.
"INTERNATIONAL EMPLOYEE PLAN" shall mean each Target Employee
Plan or Employee Agreement that has been adopted or maintained by Seller or any
ERISA Affiliate, whether formally or informally or with respect to which Seller
or any ERISA Affiliate will or may have any Liability with respect to Employees
who perform services outside the United States.
"IRS" shall mean the United States Internal Revenue Service.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation.
"PENSION PLAN" shall mean each Target Employee Plan that is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
"TARGET EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay,
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deferred compensation, retirement benefits, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by Seller or any ERISA Affiliate for the benefit of any
Employee, or with respect to which Seller or any ERISA Affiliate has or may have
any Liability or obligation.
(b) SCHEDULE. SECTION 2.21(B) of the Disclosure Schedule contains an
accurate and complete list of each Target Employee Plan and each Employee
Agreement. Seller has not made any plan or commitment to establish any new
Target Employee Plan or Employee Agreement, to modify any Target Employee Plan
or Employee Agreement (except to the extent required by Law or to conform any
such Target Employee Plan or Employee Agreement to the requirements of any
applicable Law, in each case as previously disclosed to Buyer in writing, or as
required by this Agreement), or to enter into any Target Employee Plan or
Employee Agreement, other than in connection with Employment Agreements which
the Subsidiaries may enter into with new employees in the Ordinary Course of
Business.
(c) DOCUMENTS. Seller has provided to Buyer (i) correct and complete
copies of all documents embodying each Target Employee Plan and each Employee
Agreement including all amendments thereto and all related trust documents, (ii)
the three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Target Employee Plan, (iii) if Seller Employee Plan is
funded, the most recent annual and periodic accounting of Target Employee Plan
assets, (iv) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Target Employee Plan, (v) all material written agreements
and contracts relating to each Target Employee Plan, including administrative
service agreements and group insurance contracts, (vi) all communications
material to any Employee or Employees relating to any Target Employee Plan and
any proposed Target Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material Liability to Seller, (vii) all correspondence to or from any
governmental agency relating to any Target Employee Plan, (viii) all COBRA forms
and related notices, (ix) all policies pertaining to fiduciary Liability
insurance covering the fiduciaries for each Target Employee Plan, (x) all
discrimination tests for each Target Employee Plan for the three (3) most recent
plan years, and (xi) the most recent IRS determination or opinion letter issued
with respect to each Target Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Seller has performed all obligations
required to be performed by it under each Target Employee Plan, is not in
default or violation of, and has no Knowledge of any default or violation by any
other party to each Target Employee Plan, and each Target Employee Plan has been
established and maintained in accordance with its terms and in compliance with
all applicable Laws and Orders, including ERISA, the Code and all Indian
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Employee and Labor Laws (as defined below). Any Target Employee Plan intended to
be qualified under Section 401(a) of the Code has obtained a favorable
determination letter (or opinion letter valid as to Seller, if applicable) with
respect to all tax Law changes prior to the Economic Growth and Tax Relief
Reconciliation Act of 2001 as to its qualified status under the Code. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA, has occurred with respect to any Target
Employee Plan. There are no actions, suits or claims pending or, to the
Knowledge of Seller, threatened or reasonably anticipated (other than routine
claims for benefits) against any Target Employee Plan or against the assets of
any Target Employee Plan. Each Target Employee Plan can be amended, terminated
or otherwise discontinued after Closing in accordance with its terms without
advance notice, without Liability to Buyer, Seller or any ERISA Affiliate (other
than ordinary administration expenses). There are no audits, inquiries or
proceedings pending or to the Knowledge of Seller or any ERISA Affiliates,
threatened by the IRS, DOL, or any other Governmental or Regulatory Body with
respect to any Target Employee Plan. Neither Seller nor any ERISA Affiliate is
subject to any penalty or tax with respect to any Target Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. Seller has
timely made all contributions and other payments required by and due under the
terms of each Target Employee Plan. For purposes of this SECTION 2.21(D),
"INDIAN EMPLOYEE AND LABOR LAWS" means all of the following Laws of India, as
amended, and all Orders relating thereto applicable to Target, its Subsidiaries
or the Business: the Contract Labour (Regulation and Abolition) Act, 1970; the
Employees Provident Funds and Miscellaneous Provisions Act, 1952; the Employees
State Insurance Act, 1948; the Minimum Wages Acts, 1948; the Payment of Xxxxx
Xxx, 0000; the Payment of Xxxxxxxx Xxx, 0000; the Industrial Xxxxxxx Xxx, 0000;
the Industrial Employment Standing Orders Act, 1946; the Minimum Wages Act,
1948; and the Trade Unions Act, 1926.
(e) NO 401(K) PLANS. Neither Seller nor any current or past ERISA
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any employee plan intended to include a Code Section 401(k)
arrangement.
(f) NO PENSION PLANS. Neither Seller nor any current or past ERISA
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any Pension Plans subject to Title IV of ERISA or Section 412 of
the Code.
(g) NO SELF-INSURED PLANS. Neither Seller nor any ERISA Affiliate has
ever maintained, established sponsored, participated in or contributed to any
self-insured plan that provides benefits to Employees (including any such plan
pursuant to which a stop-loss policy or contract applies).
(h) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE-EMPLOYER PLANS.
At no time has Seller or any current or past ERISA Affiliate contributed to or
been obligated to contribute to any Pension Plan, which is a "Multiemployer
Plan," as defined in Section 3(37) of ERISA. Neither Seller nor any ERISA
Affiliate has at any time ever maintained, established, sponsored,
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participated in or contributed to any multiple employer plan or to any plan
described in Section 413 of the Code.
(i) NO POST-EMPLOYMENT OBLIGATIONS. No Target Employee Plan or
Employee Agreement provides, or reflects or represents any Liability to provide,
retiree life insurance, retiree health or other retiree employee welfare
benefits to any Person for any reason, except as may be required by COBRA or
other applicable statute, and Seller has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other Person that such
Employee(s) or other Person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefits, except to the extent
required by statute.
(j) COBRA; FMLA; CRFA; HIPAA. Seller and each ERISA Affiliate has,
prior to the Closing, complied with COBRA, FMLA, HIPAA, and any similar
provisions of state Law applicable to its Employees. Seller does not have
unsatisfied obligations to any Employees or qualified beneficiaries pursuant to
COBRA, HIPAA or any state Law governing health care coverage or extension.
(k) EFFECT OF TRANSACTION. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Target Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(l) SECTION 280G; 409A.
(i) No payment or benefit which has been, will be or may be made
by Seller or any ERISA Affiliates with respect to any Employee will, or could
reasonably be expected to, be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code as a result of the transactions
contemplated by this Agreement. There is no contract, agreement, plan or
arrangement to which Seller or any ERISA Affiliate is a party or by which it is
bound to compensate any Employee for excise taxes paid pursuant to Section 4999
of the Code. SECTION 2.21(L) of the Disclosure Schedule lists all Persons who
are "disqualified individuals" (within the meaning of Section 280G of the Code
and the regulations promulgated thereunder) as determined as of the date hereof.
(ii) Except as set forth on SECTION 2.21(L) of the Disclosure
Schedule, Seller is not party to any contract, agreement or arrangement that is
a "nonqualified deferred compensation plan" such to Section 409A of the Code.
Each such nonqualified deferred compensation plan has been operated since
January 1, 2005 in good faith compliance with Section 409A of the Code and IRS
Notice 2005-1. No nonqualified deferred compensation plan has
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been "materially modified" (within the meaning of IRS Notice 2005-1) at any time
after October 3, 2004.
(m) EMPLOYMENT MATTERS. Target and its Subsidiaries, their respective
operations and the Business is in compliance with all applicable Laws respecting
employment, employment practices, terms and conditions of employment, employee
safety and wages and hours, and in each case, with respect to Employees: (i) has
withheld and reported all amounts required by Law or by agreement to be withheld
and reported with respect to wages, salaries and other payments to Employees,
(ii) is not liable for any arrears of wages, severance pay or any Taxes or any
penalty for failure to comply with any of the foregoing, and (iii) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any Governmental or Regulatory Body, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the Ordinary Course of
Business). There are no action, suits, claims or administrative matters pending,
threatened or reasonably anticipated against Target, its Subsidiaries, the
Business or any of the Employees relating to any Employee, Employee Agreement or
Target Employee Plan. There are no pending or, to Seller's Knowledge,
threatened, or reasonably anticipated claims or actions against Target, its
Subsidiaries, the Business or any trustee of such Person under any worker's
compensation policy. The services provided by each Employee is terminable at the
will of Target and its ERISA Affiliates and any such termination would result in
no Liability to Target or any ERISA Affiliate. Except as disclosed in SECTION
2.21(M) of the Disclosure Schedule, neither Target nor any ERISA Affiliate has
direct or indirect Liability with respect to any misclassification of any Person
as an independent contractor rather than as an employee, or with respect to any
employee leased from another employer. Seller has provided Buyer with all
information regarding the status of any Employee that is an independent
contractor (including any reports prepared by any consultant or advisor to
Seller, Target, their respective Subsidiaries or the Business relating thereto)
and, to the Knowledge of Seller, there have been no inquiries or concerns
expressed by any Employee or any Governmental or Regulatory Body regarding the
classification or misclassification of any Person as an independent contractor
rather than as an employee.
(n) LABOR. No work stoppage or labor strike against Target, its
Subsidiaries, or the Business is pending, or to the Knowledge of Seller,
threatened, or reasonably anticipated. Seller does not know of any activities or
proceedings of any labor union to organize any Employees, or any activities or
proceedings of any Employees to organize into a union. There are no actions,
suits, claims, labor disputes or grievances pending or, to Seller's Knowledge,
threatened, or reasonably anticipated relating to any labor matters involving
any Employee, including charges of unfair labor practices. Neither Target, its
Subsidiaries, nor the Business has engaged in any unfair labor practices within
the meaning of the National Labor Relations Act. None of Target, its
Subsidiaries or the Business is presently, nor have they been in the past, been
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by Target, its Subsidiaries or the Business.
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(o) NO INTERFERENCE OR CONFLICT. To the Knowledge of Seller, no
stockholder or Employee of Target or any of its Subsidiaries, nor any
Transferred Employee, is obligated under any contract or agreement or subject to
any Order that would interfere with such Person's efforts to promote the
interests of the Business or that would interfere with the Business.
(p) INTERNATIONAL EMPLOYEE PLAN. Neither Seller nor any ERISA
Affiliate currently or has it ever had the obligation to maintain, establish,
sponsor, participate in, be bound by or contribute to any International Employee
Plan.
(q) EMPLOYEE SCHEDULE. SECTION 2.21(Q) of the Disclosure Schedule sets
forth, (A) as of the date hereof, (i) the number of transcription Employees
located in the United States who are not independent contractors ("US
TRANSCRIPTIONISTS"), (ii) the number of transcription Employees located in the
United States who are independent contractors ("US INDEPENDENT CONTRACTORS"),
(iii) the number of transcription Employees located in India who are not
independent contractors ("INDIAN TRANSCRIPTIONISTS") and (iv) the number of
Employees located in India who are independent contractors ("INDIAN INDEPENDENT
CONTRACTORS"), and (B) the name and salary, city, state and country of residence
and remuneration of each such Employee.
2.22 INSURANCE. SECTION 2.22 of the Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, Employees, officers and directors of Target and its
Subsidiaries and the Business, including the type of coverage, the carrier, the
amount of coverage, the term and the annual premiums of such policies. There is
no claim by Target or any of its Subsidiaries, or of Focus Softek, pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed or that Seller Knows of or has a reason to believe will be denied or
disputed by the underwriters of such policies or bonds. In addition, there is no
pending claim of which its total value (inclusive of defense expenses) will
exceed the policy limits. All premiums due and payable under all such policies
and bonds have been paid (or if installment payments are due, will be paid if
incurred prior to the Closing Date) and Target and its Subsidiaries, and Focus
Softek (if applicable), are otherwise in compliance in all material respects
with the terms of such policies and bonds. Such policies and bonds are in full
force and effect. Seller has no Knowledge of a threatened termination of any of
such policies. Seller has never, with respect to the Business, maintained,
established, sponsored, participated in or contributed to any self-insurance
plan.
2.23 COMPLIANCE WITH LAWS. Seller and its Subsidiaries, and Focus Softek,
are and have been in compliance in all material respects with all Laws and
Orders to which Target, its Subsidiaries, the Shares or the Business are
subject. None of Seller, its Subsidiaries, or Focus Softek has received notice
and, to the Knowledge of Seller, there are no threatened or alleged claims of
material violation, Liability or potential responsibility under any Law or Order
to which Target, its Subsidiaries, the Shares or the Business are subject. None
of Seller, its Subsidiaries or Focus Softek has ever conducted any internal
investigation with respect to any actual, potential or alleged material
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violation of any Law or Order by any of its directors, officers or Employees in
connection with the Business.
2.24 WARRANTIES; INDEMNITIES. Except for the warranties and indemnities
contained in those Contracts identified in SECTION 2.13(L) of the Disclosure
Schedule, warranties implied by Law and those representations and warranties
made in this ARTICLE II or otherwise made in the Ordinary Course of Business,
the terms of which have been delivered to Buyer prior to the date of this
Agreement, none of Seller, its Subsidiaries or Focus Softek has given any
warranties or indemnities relating to products or technology sold or services
rendered by such Persons or the Business.
2.25 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY. SECTION 2.25
of the Disclosure Schedule lists (a) all bank accounts, lock boxes and safe
deposit boxes relating to Target, its Subsidiaries or the Business (including
the name of the bank or other institution where such account or box is located
and the name of each authorized signatory thereto), (b) all outstanding letters
of credit issued by financial institutions for the account of Target or any of
its Subsidiaries (setting forth, in each case, the financial institution issuing
such letter of credit, the maximum amount available under such letter of credit,
the terms (including the expiration date) of such letter of credit and the party
or parties in whose favor such letter of credit was issued), and (c) the name
and address of each Person who has a power of attorney to act on behalf of
Target, its Subsidiaries or the Business. Seller has heretofore delivered to
Buyer true, correct and complete copies of each letter of credit and each power
of attorney described in SECTION 2.25 of the Disclosure Schedule.
2.26 ENTIRE BUSINESS; SUFFICIENCY OF ASSETS. Seller, its Subsidiaries and
Focus Softek have good, valid, insurable and marketable title to, a valid
leasehold interest in, or a valid license or right to use, all of the assets
(tangible or intangible), properties and rights of any kind, necessary for the
conduct of, or used or held for use in connection with, the Business (including
the Target Intellectual Property and the Quitclaim IP) (collectively, the
"BUSINESS ASSETS"), free and clear of all Liens, except for Permitted Liens.
Upon Closing, Target and its Subsidiaries will have good, valid, insurable and
marketable title to, a valid leasehold interest in, or a valid license or right
to use, the Business Assets, free and clear of all Liens, except for Permitted
Liens. The Business Assets constitute all of the assets (tangible or
intangible), properties and rights of any kind, and to Seller's Knowledge,
necessary for the conduct of the Business after the Closing in substantially the
same manner in which it is conducted by Seller, Focus Softek and their
respective Subsidiaries on and prior to the Closing Date.
2.27 PRODUCTS. The Products constitute all of the medical transcription
software products (including products under development) owned by or exclusively
licensed to Seller, its Subsidiaries, Focus Softek or any of their respective
Affiliates that are or have been used in or held for use in the Business.
2.28 REORGANIZATION. (i) The Reorganization (as defined in SECTION 2.28(A)
of the Disclosure Schedule) has been duly and properly consummated in accordance
with all applicable Laws and Orders and the organizational documents of the
constituent parties (ii) all such actions
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constituting the Reorganization are legally binding on Bluestar Options, and to
Seller's Knowledge, FEL, and enforceable against Seller, and, based on facts and
circumstances of which Seller has Knowledge concerning FEL, FEL, in accordance
with its terms and (iii) no part of the Reorganization will be set aside or
otherwise avoided in any matter pursuant to any Laws or Orders, including
without limitation in connection with an insolvency, liquidation, administration
or reorganization affecting FEL or Bluestar Options. No Liabilities arising out
of, relating to or resulting from the Reorganization (any such Liabilities,
"REORGANIZATION LIABILITIES") that have not been repaid, settled, waived,
terminated or otherwise extinguished prior to Closing will attach to or become a
Liability of Target or any of its Subsidiaries after Closing. Prior to the date
hereof, Seller has furnished to Buyer true, correct and complete copies of all
other related agreements, instruments, certificates, registrations and other
documents to effect all of the Reorganization (collectively, the "REORGANIZATION
DOCUMENTS"). In connection with the Reorganization, Seller agrees to use its
commercially reasonable efforts to take the actions specified in SECTION 2.28(B)
of the Disclosure Schedule. The Deed of Demerger constitutes the legal, valid
and binding obligation of Bluestar Options enforceable against Bluestar Options
and, based on facts and circumstances of which Seller has Knowledge concerning
FEL, FEL, in accordance with its terms and the Deed of Demerger took full effect
to irrevocably and unconditionally transfer to, and vest in, Bluestar Options
all the Relevant Business without any further act or deed. For the purposes of
this Agreement, the expression the "RELEVANT BUSINESS" means collectively (i)
the "Medical Transcription Business" (as that expression is defined in the Deed
of Demerger) carried on by FEL through "Focus India" and "Focus US" (as the
terms "Focus India" and "Focus US" are defined in the Deed of Demerger) and (ii)
the "Undertaking" (as that term is defined in the Deed of Demerger, which
"Undertaking" includes, for the avoidance of doubt, the Subsidiaries Shares).
2.29 HIPAA MATTERS. To the Knowledge of Seller, none of Seller, Focus
Softek, Target or any of their respective Subsidiaries, directors, officers,
Employees or agents, nor the Business, has been convicted of any crime or
engaged in any conduct that would reasonably be expected to result in exclusion
of Target or any of its Subsidiaries, or the Business, under 42 U.S.C. 1320a-7
or any similar state Law, to the extent that it is subject thereto. None of
Seller, Focus Softek, Target or any of their respective Subsidiaries, nor the
Business, is in material breach, violation of or default under any Contract,
including any business associate arrangement, that requires compliance with
HIPAA, to the extent that it is subject thereto. Each of Target and its
Subsidiaries, and the Business, have implemented appropriate internal policies
and procedures to maintain HIPAA-mandated levels of privacy and security of
protected health information in each case in accordance with HIPAA, to the
extent that it is subject thereto.
2.30 CORRUPT PRACTICES. None of Target, its Subsidiaries or Focus Softek,
nor any of their officers, directors, employees, independent contractors,
stockholders, agents or representatives, or any Person associated with or acting
for or on behalf of any of them, have directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of what form, whether in
money, property, or services (i) to obtain favorable treatment for business or
Contracts secured, (ii) to pay for favorable treatment for
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business or Contracts secured, (iii) to obtain special concessions or for
special concessions already obtained, or (iv) in violation of any legal
requirement, or (b) established or maintained any fund or asset that has not
been recorded in the books or records of the Business.
2.31 COMPLETE COPIES OF MATERIALS. Seller has delivered or made available
true and complete copies of each document to the extent such document exists (or
summaries of same) that has been requested by Buyer or its counsel in writing
(including for this purpose by email), including all Contracts and other
documents listed in the Disclosure Schedule.
2.32 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Seller (as modified by the Disclosure Schedule) in this Agreement, and
none of the statements made in any exhibit, schedule or certificate furnished by
Seller pursuant to this Agreement contains, or will contain, any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION; POWER. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Buyer has
the corporate power to own its properties and to carry on its business as now
being conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a material adverse effect on Buyer.
3.2 AUTHORITY. Buyer has all requisite corporate power and authority to
enter into this Agreement and any Related Agreements to which it is a party and
to consummate the Acquisition Transactions and the other transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and any Related Agreements to which it is a party and the consummation of the
Acquisition Transactions and the other transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement and any Related Agreements to which Buyer is a party
have been duly executed and delivered by Buyer and constitute the valid and
binding obligations of Buyer, enforceable against each of Buyer in accordance
with their terms.
3.3 CONFLICTS. The execution, delivery and performance of this Agreement
and any Related Agreements will not:
(a) violate, conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration,
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modification, termination or cancellation or a loss of rights, or result in
encumbrance of any nature whatsoever upon any of the assets of Buyer under (1)
the Certificate of Incorporation or Bylaws of Buyer, (2) any agreement to which
Buyer is a party that it has filed or is required to be filed with the
Securities and Exchange Commission (except an agreement with a provider of a
line of credit whose approval Buyer will either obtain prior to the Closing Date
or which agreement will be terminated prior to the Closing Date), (3) any Order
to which Buyer is a party or by which Buyer is bound or (4) any Laws affecting
Buyer, except such violations, conflicts, breaches or defaults that would not
result in a material adverse effect; or
(b) assuming the truth and accuracy of the representations and
warranties made by Seller, require the approval, consent, authorization or act
of, or the making by Buyer of any declaration, filing or registration with, any
Governmental Body, except for such approvals, consents, authorizations,
declarations, filings or registrations, the failure of which to be obtained or
made would not materially impair the ability of Buyer to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereunder.
3.4 CONSENTS. Assuming the truth and accuracy of the representation and
warranty contained in SECTION 2.6, no consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
or Regulatory Body, is required by or with respect to Buyer in connection with
the execution and delivery of this Agreement and any Related Agreements to which
Buyer is a party or the consummation of the Acquisition Transactions and the
other transactions contemplated hereby and thereby, except for (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities Laws,
and (ii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not have a material adverse effect on Buyer.
3.5 CAPITAL RESOURCES. Buyer has, or will have at Closing, sufficient
capital resources to pay the Purchase Price.
3.6 BROKER'S AND FINDERS' FEES. Buyer has not incurred, nor will it incur,
directly or indirectly, any Liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, the
Related Agreement, the Acquisition Transactions or any other transaction
contemplated hereby and thereby for which Seller could become liable.
3.7 COMPLIANCE WITH LAWS. Buyer has complied in all material respects with,
is not in violation in any material respect of, and has not received any notices
of violation with respect to, any applicable with respect to the conduct of its
business, or the ownership or operation of its business, assets or properties,
except where noncompliance would not, either individually or in the aggregate,
be material to Buyer.
3.8 LITIGATION. There is no private or governmental action, suit
proceeding, arbitration claim or, to the Knowledge of Buyer, investigation
pending before any agency, court or tribunal,
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foreign or domestic, or, to the Knowledge of Buyer, threatened against Buyer or
its properties or any of its respective officers or directors (in their capacity
as such) or, any basis therefor, that could prevent, enjoin, or materially alter
or delay any of the transactions contemplated by this Agreement and any Related
Agreements, or that could reasonably be expected to be either individually or in
the aggregate, material to Buyer. There is no judgment, decree or order against
Buyer or any of its respective directors or officers (in their capacities as
such), or any basis therefor, that could prevent, enjoin, or materially alter or
delay any of the transactions contemplated by this Agreement and any Related
Agreements, or that could reasonably be expected to be either individually or in
the aggregate, material to Buyer.
3.9 BUYER RESTRICTED STOCK. The shares of common stock of Buyer designated
as restricted stock to be issued pursuant to the terms and conditions of the
employment agreements to be entered into pursuant to the Employment Offer
Letters (the "BUYER RESTRICTED STOCK") have been duly authorized, and upon
issuance of such Buyer Restricted Stock pursuant to the terms of such employment
agreements, will be validly issued, fully paid and nonassessable.
ARTICLE IV
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
4.1 CONDUCT OF THE BUSINESS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, Seller agrees, and agrees to cause its Subsidiaries and
Affiliates, to (i) conduct the Business, except to the extent that Buyer shall
otherwise consent in writing, in the Ordinary Course of Business, (ii) pay the
debts (including any annual fees payable to the Registrar of Corporate Affairs
in the British Virgin Islands) and Taxes of Target, its Subsidiaries and the
Business when due (subject to SECTION 4.1(E) below), (iii) pay or perform other
obligations of Target, its Subsidiaries and the Business when due, and (iv)
preserve intact the present business organizations of Target, its Subsidiaries
and the Business, use its reasonable best efforts to keep available the services
of the present officers and Employees of Target, its Subsidiaries and the
Business, and use its reasonable best efforts to preserve the relationships of
Target, its Subsidiaries and the Business with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
them, all with the goal of preserving unimpaired the goodwill and ongoing
businesses of the Business at the Closing. Seller shall promptly notify Buyer of
any event or occurrence or emergency not in the Ordinary Course of Business and
any material event involving Target, its Subsidiaries or the Business that
arises during the period from the date of this Agreement and continuing until
the earlier of the termination date of this Agreement or the Closing. In
addition to the foregoing, except as expressly contemplated by this Agreement
and except as expressly set forth in SECTION 4.1 of the Disclosure Schedule,
Seller shall not, and shall cause its Subsidiaries and Affiliates not to,
without the prior written consent of Buyer, from and after the date of this
Agreement:
(a) cause or permit any amendments to the Charter Documents;
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(b) make any expenditures or enter into any commitment or transaction
by Target or its Subsidiaries, or with respect to the Business, exceeding
$100,000 individually or $250,000 in the aggregate, or enter into any commitment
or transaction of the type described in SECTION 2.9 hereof;
(c) other than as specifically contemplated by this Agreement, pay,
discharge, waive or satisfy, in an amount in excess of $50,000 in any one case,
or $100,000 in the aggregate, any Liability of Target, any of its Subsidiaries
or of the Business, other than payments, discharges or satisfactions in the
Ordinary Course of Business of Liabilities reflected or reserved against in the
Current Balance Sheet;
(d) (i) adopt or change accounting methods, policies or practices
(including any change in depreciation or amortization policies) of the Business,
other than as required by GAAP, or (ii) revalue any of the assets (whether
tangible or intangible) or properties of Target or its Subsidiaries, or of the
Business, including writing down the value of inventory or writing off notes or
accounts receivable, other than in the Ordinary Course of Business;
(e) make or change any material Tax election, adopt or change any Tax
accounting method, enter into any closing agreement, settle any Tax claim or
assessment, consent to any extension or waiver of the limitation period
applicable to any claim or assessment or file any amended Tax Return or other
material Tax Return unless a copy of such Tax Return has been delivered to Buyer
for review a reasonable time prior to the due date for filing and Buyer has
approved such Tax Return, in each case, with respect to Taxes of Target, any of
its Subsidiaries or to the Business;
(f) create or permit the creation of any Lien (other than Permitted
Liens) on any material asset (whether tangible or intangible) or property of
Target, its Subsidiaries or the Business, or the Shares;
(g) (i) issue, grant, deliver or sell or authorize or propose, or
enter into any Contract regarding, the issuance, grant, delivery or sale of, or
purchase or propose the purchase of, any Target Securities or Subsidiary
Securities, or any securities convertible into, exercisable or exchangeable
therefor, (ii) pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any Target Securities or Subsidiary
Securities, (iii) split, combine or reclassify any Target Securities or
Subsidiary Securities, or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for Target Securities or
Subsidiary Securities, or (iv) repurchase, redeem or otherwise acquire, directly
or indirectly, any Target Securities or Subsidiary Securities, or any securities
convertible into, exercisable or exchangeable therefor;
(h) increase the salary or other compensation payable or to become
payable in excess of $10,000 in the aggregate by (i) Target or any of its
Subsidiaries to any of their respective officers, directors, Employees,
independent contractors or advisors (or change the material terms of
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employment or engagement of such Persons), or (ii) Focus Softek to any of their
respective Employees or independent contractors who are employed or retained in
connection with the Business (or change the material terms of employment or
engagement of such Persons); or make any declaration, payment or commitment or
obligation of any kind for the payment (whether in cash or equity) by Target or
any of its Subsidiaries of a severance payment, termination payment, bonus or
other additional salary or compensation to any such Person, except payments made
pursuant to written agreements outstanding on the date hereof and disclosed in
the Disclosure Schedule;
(i) sell, lease, license or otherwise dispose of or grant any security
interest in any of its properties or assets (whether tangible or intangible) of
Target or any of its Subsidiaries, or of the Business, including the sale of any
accounts receivable of the Business, in each case, except in the Ordinary Course
of Business;
(j) make any loan by Target or any of its Subsidiaries to any Person
(including the creation of any Intercompany Accounts) or purchase by Target or
any of its Subsidiaries of any debt securities of any Person;
(k) (i) incur on behalf of Target or any of its Subsidiaries, or on
behalf of the Business, any indebtedness, except for advances to Employees for
travel and business expenses in the Ordinary Course of Business, (ii) amend the
terms of any outstanding loan agreement of Target or any of its Subsidiaries, or
(iii) guarantee by Target or any of its Subsidiaries, or on behalf of the
Business, any indebtedness of any other Person;
(l) waive or release any right or claim of Target, any of its
Subsidiaries or the Business, including any write-off or other compromise of any
account receivable of the Business;
(m) commence or settle any lawsuit, threat of any lawsuit or
proceeding or other investigation against Target or any of its Subsidiaries or
the Business involving a sum exceeding $50,000;
(n) (i) sell, lease, license or transfer to any Person any rights to
any Target Intellectual Property or enter into any agreement or modify any
existing agreement with respect to any Target Intellectual Property with any
Person or with respect to any Intellectual Property of any Person, (ii) purchase
or license any Intellectual Property or enter into any agreement or modify any
existing agreement with respect to the Intellectual Property of any Person,
(iii) enter into any agreement or modify any existing agreement with respect to
the development of any Intellectual Property with a third party, or (iv) change
royalties or, other than in the Ordinary Course of Business, pricing, set or
charged by Target, any of its Subsidiaries or the Business to its customers or
licensees, or the pricing or royalties set or charged by Persons who have
licensed Intellectual Property to Target or any of its Subsidiaries;
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(o) enter into, amend or otherwise modify, or violate the terms of,
any Material Contract, other than the entry into, in the Ordinary Course of
Business, of new Material Contracts with customers of the Business for the
provision of transcription services;
(p) enter into any agreement to purchase or sell any interest in real
property, grant any security interest in any real property, or, other than in
the Ordinary Course of Business, enter into any lease, sublease, license or
other occupancy agreement with respect to any real property or alter, amend,
modify or terminate any of the terms of any Lease Agreements;
(q) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Business;
(r) adopt or amend any Target Employee Plan, enter into any employment
contract, pay or agree to pay any bonus or special remuneration to any director
or Employee, or increase or modify the salaries, wage rates, or other
compensation (including any equity-based compensation) of its Employees except
payments made pursuant to written agreements outstanding on the date hereof and
disclosed in SECTION 4.1(R) of the Disclosure Schedule, other than in the
Ordinary Course of Business (provided, that any increase or modification in the
salaries, wage rates or other compensation shall not exceed $10,000 in the
aggregate);
(s) hire, promote, demote or terminate any Employees, or encourage any
Employees to resign from Seller, other than the hiring of "at will" Employees in
the Ordinary Course of Business;
(t) cancel, amend or renew any insurance policy; or
(u) take, or agree in writing or otherwise commit to take, on behalf
of Target or any of its Subsidiaries, or on behalf of the Business, any of the
actions described in SECTIONS 4.1(A) through 4.1(T) hereof, or any other action
that would (i) prevent Seller from performing, or cause Seller not to perform,
their respective covenants hereunder or (ii) cause or result in any of its
representations and warranties of Seller contained herein to be untrue or
incorrect.
4.2 NO SOLICITATION. Until the earlier of (i) the Closing, or (ii) the date
of termination of this Agreement pursuant to the provisions of SECTION 8.1
hereof, Seller shall not (nor shall Seller permit, as applicable, any of their
respective Subsidiaries or Affiliates or any officers, directors, Employees,
stockholders, agents or representatives of any of the foregoing to), directly or
indirectly, take any of the following actions with any party other than Buyer
and its representatives, advisors and designees: (a) solicit, encourage, seek,
entertain, support, assist, initiate or participate in any inquiry, negotiations
or discussions, or enter into any agreement, with respect to any offer or
proposal to acquire all or any material part of the Business, the assets
(tangible or intangible), properties or technologies (including the Quitclaim
IP) of Target, its Subsidiaries or the Business, or
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any amount of Shares or other Ordinary Shares (whether or not outstanding),
whether by merger, consolidation, purchase of shares or assets, tender offer,
other business combination, license or otherwise, or effect any such
transaction, (b) disclose any information not customarily disclosed to any
Person concerning the Business, the assets (tangible or intangible), properties
or technologies (including the Quitclaim IP) of Target, its Subsidiaries or the
Business, or afford to any Person access to the properties, technologies, books
or records of same, not customarily afforded such access, (c) assist, facilitate
or cooperate with any Person to make any proposal regarding the transactions
referenced in clause (a), or (d) enter into any agreement with any Person
relating to any of the foregoing. Seller shall immediately cease and cause to be
terminated any such negotiations, discussions, grants of access, sharing of
information or agreements (other than with Buyer) that are the subject matter of
clause (a), (b), (c) or (d) above. In the event that Seller, Xxxxxxx Xxxxxx or
any of their respective Affiliates shall receive, prior to the Closing or the
termination of this Agreement in accordance with SECTION 8.1 hereof, any offer,
proposal, or request, directly or indirectly, of the type referenced in clause
(a), (c), or (d) above, or any request for disclosure or access as referenced in
clause (b) above, Seller shall immediately (x) suspend any discussions with such
offeror or party with regard to such offers, proposals, or requests and (y)
notify Buyer thereof in writing promptly (but in any event within two (2)
Business Days of receipt of same), which notice shall include information as to
the identity of the offeror or the party making any such offer or proposal and
the specific terms of such offer or proposal, as the case may be, and such other
information related thereto as Buyer may reasonably request. The parties hereto
agree that irreparable damage would occur in the event that the provisions of
this SECTION 4.2 were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed by the parties hereto that
Buyer shall be entitled to an immediate injunction or injunctions, without the
necessity of proving the inadequacy of money damages as a remedy and without the
necessity of posting any bond or other security, to prevent breaches of the
provisions of this SECTION 4.2 and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof or any
foreign court having jurisdiction, this being in addition to any other remedy to
which Buyer may be entitled at law or in equity. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth above by any
officer, director, agent, employee, independent contractor, member, stockholder,
agent, representative, Subsidiary or Affiliate of Seller shall be deemed to be a
breach of this Agreement by Seller.
4.3 PROCEDURES FOR REQUESTING BUYER CONSENT. If Seller of any of its
Subsidiaries or Affiliates desires to take an action which would be prohibited
pursuant to SECTION 4.1 of this Agreement without the written consent of Buyer,
prior to taking such action Seller may request such written consent by sending
an e-mail or facsimile to both of the following individuals:
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(a) Senior Vice President Corporate Development
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: Xxxxxxx.Xxxxxx@xxxxxx.xxx
(b) General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail address: Xx-Xxxx.Xxxxxxxx@xxxxxx.xxx
In the event that no consent or response is received within five (5)
Business Days of receipt of a request from Seller, the Buyer shall have deemed
to have granted consent to the request by the Seller.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 NON-COMPETITION; NON-SOLICITATION; NO-HIRE.
(a) From and after the Closing Date until the fifth (5th) anniversary
thereof, Seller shall not, and it shall not permit any of their respective
Subsidiaries or Affiliates to, directly or indirectly, engage anywhere in the
world in any business or activity that competes, directly or indirectly, with
the Business (including, for the avoidance of doubt, each of (i) the provision
of medical transcription services and (ii) the provision of any product,
platform or technology that competes with the Products) (any such business or
activity, a "COMPETING BUSINESS"); provided that nothing herein shall prohibit
the acquisition by Seller or any of Seller's Subsidiaries or Affiliates of any
interest in any publicly listed company that owns a Competing Business as long
as such interest does not exceed one percent (1%) of the issued and outstanding
capital stock of such company.
(b) From and after the Closing Date until the fifth (5th) anniversary
of thereof, Seller shall not, and they shall not permit any of their respective
Subsidiaries or Affiliates to, directly or indirectly, (i) solicit, encourage or
induce any Person employed or engaged (as an employee, independent contractor or
otherwise) by Buyer or any of its Subsidiaries to leave the employment or
engagement of Buyer or any of its Subsidiaries, (ii) hire, employ or engage (as
an employee, independent contractor or otherwise) any Person that has, in the
eighteen (18) months preceding any such intended hiring, engagement or
employment, been employed or engaged by Buyer or any of its Subsidiaries, or
(ii) solicit, encourage or induce any existing or future customer of Buyer or
any of its Subsidiaries or the Business to cease doing business with Buyer or
any of its Subsidiaries or the Business.
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(c) Notwithstanding any other provision of this Agreement, it is
understood and agreed that remedies at law would by themselves be inadequate in
the case of any breach of the covenants contained in this SECTION 5.1, and Buyer
shall be entitled to equitable relief in respect thereof, including the remedy
of specific performance or injunctive relief, with respect to any breach of such
covenants, without the need to show any proof of damages or the posting of any
bond.
5.2 ACCESS TO INFORMATION. Seller shall, and shall cause its Subsidiaries
and Affiliates to, afford Buyer and its accountants, counsel and other
representatives and agents, reasonable access upon reasonable notice during the
period from the date hereof and prior to the Closing to (i) all of the
properties (excluding source code), books, contracts, commitments and records of
Seller and its Subsidiaries and Affiliates, (ii) all other information
concerning the business, assets, properties and personnel (subject to
restrictions imposed by applicable Law) of Target, its Subsidiaries and the
Business as Buyer may reasonably request, and (iii) all Employees of the
Business as identified by Buyer. Seller agrees to provide to Buyer and its
accountants, counsel and other representatives copies of internal financial
statements (including Tax Returns and supporting documentation) relating to
Target, its Subsidiaries or the Business promptly upon request. No information
or knowledge obtained in any investigation pursuant to this SECTION 5.2 or
otherwise shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Acquisition Transactions in accordance with the terms and
provisions hereof.
5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to SECTION 5.2 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidentiality Agreement effective as of November 7, 2006 (the "CONFIDENTIALITY
AGREEMENT"), between FII and Buyer, which shall bind each of the other parties
hereto as if they were a party to such Confidentiality Agreement. In this
regard, Seller acknowledge that Buyer's common stock is publicly traded and that
any information obtained by Seller regarding Buyer, including information
regarding this Agreement and the transaction contemplated hereby, could be
considered to be material non-public information within the meaning of US
federal and state securities Laws. Accordingly, Seller acknowledges and agree
not to engage in any transactions in the Buyer's common stock in violation of
applicable xxxxxxx xxxxxxx Laws.
5.4 EXPENSES. Whether or not the Acquisition Transactions are consummated,
all fees and expenses incurred in connection with the Acquisition Transactions
including all financial advisory, consulting, and all other fees and expenses of
third parties (including any costs incurred to obtain consents, waivers or
approvals as a result of the compliance with SECTION 5.6 hereof) incurred by a
party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby ("THIRD
PARTY EXPENSES"), shall be the obligation of the respective party incurring such
fees and expenses. Third Party Expenses shall also include any bonuses or
severance paid or to be paid to Employees in connection with the Acquisition
Transactions.
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5.5 PUBLIC DISCLOSURE AND OTHER COMMUNICATIONS. None of Seller, Target or
their respective Subsidiaries, nor any officer, director, employee, independent
contractor or representative of the foregoing shall issue any statement or make
any communication to any third party (other than their respective agents that
are bound by confidentiality restrictions), including any vendor or supplier to,
or any customer of, the Business, regarding the subject matter of this Agreement
or the transactions contemplated hereby (including any proposed plans of Buyer
for the Business or the operation thereof and, if applicable, the termination of
this Agreement and the reasons therefor) without the consent of Buyer. Neither
Buyer nor any of its Subsidiaries, nor any officer, director, employee,
independent contractor or representative of the foregoing, shall issue any press
release or any other public statement regarding the subject matter of this
Agreement or the transactions contemplated hereby (including, if applicable, the
termination of this Agreement and the reasons therefor) without the consent of
Seller (on behalf of itself and Focus Softek), except that this restriction
shall be subject to Buyer's obligation to comply with applicable securities Laws
and the rules of the Nasdaq Stock Market.
5.6 FILINGS AND CONSENTS. Seller shall ensure that: (i) Seller and its
advisors and representatives cooperate with Buyer and Buyer's advisors and
representatives, and comply with the reasonable requests of Buyer with respect
to, and make, give and obtain on a timely basis, all filings, notices and
consents required to be made, given and obtained in order to consummate the
transactions contemplated by this Agreement and the Related Agreements; and (ii)
at all times after the execution of this Agreement and prior to the Closing,
Seller and its advisors and representatives cooperate with Buyer and with
Buyer's advisors and representatives, and prepare and make available such
documents and take such other actions as Buyer may reasonably request, in
connection with any filing, notice or consent that Buyer is required or elects
to make, give or obtain.
5.7 REASONABLE BEST EFFORTS. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable best
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
Laws to consummate and make effective the Acquisition Transactions and the other
transactions contemplated hereby and by the Related Agreements, to satisfy the
conditions to the obligations to consummate the Share Purchase, to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
Acquisition Transactions and the other transactions contemplated by this
Agreement and by the Related Agreements for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
5.8 NOTIFICATION OF CERTAIN MATTERS.
(a) Seller shall give prompt notice to Buyer of: (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of Seller contained in this Agreement to
be untrue or inaccurate at or prior
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to the Closing, (ii) any failure of Seller or Focus Softek to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, (iii) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or the Related Agreements, or (iv)
any notice or other communication from any Governmental or Regulatory Body, or
notice of any claim, action, investigation or proceeding, in connection with the
transactions contemplated by this Agreement; provided, however, that the
delivery of any notice pursuant to this SECTION 5.8 shall not (a) limit or
otherwise affect any remedies available to the party receiving such notice or
(b) constitute an acknowledgment or admission of a breach of this Agreement.
(b) Buyer shall give prompt written notice to Seller of: (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of Buyer contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing, (ii) any failure of Buyer to comply with or satisfy in all material
respects any covenant, condition or agreement to be complied with or satisfied
by it hereunder, (iii) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement or the Related Agreements,
or (iv) any notice or other communication from any Governmental or Regulatory
Body, or notice of any claim, action, investigation or proceeding, in connection
with the transactions contemplated by this Agreement; provided, however, that
the delivery of any notice pursuant to this SECTION 5.8(B) shall not (a) limit
or otherwise affect any remedies available to Seller or (b) constitute an
acknowledgment or admission of a breach of this Agreement.
5.9 EMPLOYMENT ARRANGEMENTS; EMPLOYEE COMMUNICATIONS.
(a) Each employee of Seller who remains an employee of Buyer or a
Subsidiary of Buyer after the Closing Date shall be referred to hereafter as a
"CONTINUING EMPLOYEE." Continuing Employees shall be eligible to receive
benefits consistent with the applicable human resources policies of Seller or
its Subsidiaries in existence prior to the Closing.
(b) None of Seller, Target or their respective Subsidiaries, nor any
officer, director, Employee or representative of the foregoing shall (i) send
any written communications (including electronic communications) or make any
verbal commitment or promise to any Employees regarding this Agreement or the
transactions contemplated hereby (including as to their continued employment or
with respect to their compensation or benefits), or (ii) make any oral
communications to Employees that are inconsistent with this Agreement or the
transactions contemplated hereby, in each case, without the prior written
consent of Buyer, which shall not be unreasonably withheld.
5.10 INTERCOMPANY ACCOUNTS; RELATED-PARTY CONTRACTS(a) . On or prior to the
Closing, Seller shall, and shall cause its Affiliates to, (i) forgive,
terminate, waive, repay or otherwise settle (or cause to be forgiven,
terminated, waived or otherwise settled) in full all Intercompany Accounts
existing as of the Closing Date, (ii) terminate or cancel each Contract required
to be disclosed
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pursuant to SECTION 2.14(A)(XIV), unless otherwise directed in writing by Buyer,
and (iii) be paid to FIIPL all amounts owing to it by Focus Tele Call Private
Limited, a limited liability company incorporated under the laws of India
("FTCPL"), pursuant to that certain Share Sale Agreement dated as of March 30,
2006 among FIIPL, FTCPL and Focus Softek. If Buyer believes that the
Intercompany Accounts existing since January 31, 2007 exceeds $1,013,000 (such
excess amount, an "INTERCOMPANY EXCESS"), within 60 days following the Closing
Date, Buyer shall prepare and deliver to Seller documentation set forth
substantiation of such excess (the "INTERCOMPANY EXCESS SCHEDULE"). If Seller
disagrees with such calculation, Seller shall follow the procedure set forth in
Section 1.7(b) and (c) substituting "Intercompany Excess Schedule" for "Working
Capital Schedule" and "Intercompany Excess" for "Net Working Capital." If there
is finally determined to be an Intercompany Excess in accordance with the
foregoing procedures, Seller shall remit within three (3) Business Days of such
determination, Seller shall promptly deliver to Buyer the Intercompany Excess by
wire transfer of immediately available funds to an account designated in writing
by Buyer to Seller; provided, however, that if such amount is $250,000 or less,
then Buyer must make a claim against the Escrow Fund for the recovery of such
excess.
5.11 TAX MATTERS.
(a) TRANSFER TAXES AND RELATED EXPENSES. Notwithstanding anything to
the contrary contained in this Agreement, Seller shall be responsible for, and
to the extent permitted by Law shall pay, any and all value-added, sales, use,
transfer (including real property gains or transfer), documentary, stamp duty,
stamp, goods and services, excise, recording and similar Taxes incurred in
connection with the Acquisition Transactions, as well as any notarial or other
similar fees incurred by Seller or Buyer in connection with this Agreement and
the Acquisition Transactions (including those in connection with the preparation
of the Deed of Transfer) ("TRANSFER TAXES"), and Seller shall reimburse Buyer
for any Transfer Taxes paid by Buyer within ten (10) Business Days of Buyer's
written request for same.
(b) TAX RETURNS; RESPONSIBILITY FOR TAXES. Seller shall prepare and
timely file, or cause to be prepared and timely filed, all Tax Returns of or
with respect to Target, any of its Subsidiaries, their respective operations or
the Business required to be filed on or prior to the Closing Date. Any such Tax
Return shall be prepared in accordance with applicable Law and consistent with
past practices. Seller shall deliver a copy of any such Tax Return to Buyer for
review and approval a reasonable time prior to the due date for filing. Buyer
shall prepare and timely file, or cause to be prepared and timely filed, all
other Tax Returns of or with respect to Target, any of its Subsidiaries, their
respective operations or the Business. Buyer shall be responsible for and shall
timely pay or cause to be paid any and all Taxes imposed on or with respect to
Target, any of its Subsidiaries, their respective operations or the Business (i)
that are not yet due and payable as of the Closing Date and were incurred in the
Ordinary Course of Business (the "ORDINARY COURSE TAXES") during any taxable
period or portion thereof ending on or prior to the Closing Date (each, a
"PRE-CLOSING TAX PERIOD"), or (ii) arising during and attributable to any
taxable period or portion thereof beginning on the day after the Closing Date.
Notwithstanding
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anything to the contrary in this Agreement, Seller shall be solely responsible
for and shall timely pay or cause to be paid (A) any and all Taxes of Seller for
any taxable period, or portion thereof, and (B) any and all Taxes (other than
those Taxes specified in clause (i) above) imposed on or with respect to Target,
any of its Subsidiaries, their respective operations or the Business for any
Pre-Closing Tax Period (such Taxes for which the Seller is responsible pursuant
to this sentence, the "PRE-CLOSING TAXES"). Pre-Closing Taxes shall also
include, whether or not any such Taxes would otherwise be included in clause (i)
above, any and all Taxes incurred in connection with the Reorganization, the
Quitclaim, the transactions contemplated by SECTIONS 1.8 and 5.10 and any Taxes
associated with dividends or other distributions declared or paid by Target or
any of its Subsidiaries on or prior to the Closing Date. With respect to any
taxable period that includes, but does not end on, the Closing Date (each, a
"STRADDLE PERIOD") (i) the portion of any real, personal and intangible property
or ad valorem Taxes ("PROPERTY TAXES") allocable to the Pre-Closing Tax Period
shall be equal to the amount of such Property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the number of days in the Straddle Period; and (ii) the
portion of any Taxes other than Property Taxes allocable to the Pre-Closing Tax
Period shall be computed as if such Straddle Period ended on the Closing Date,
provided that exemptions, allowances or deductions that are calculated on an
annual basis (including depreciation and amortization deductions), other than
with respect to property placed in service after the Closing, shall be allocated
between the period ending on the Closing Date and the period after the Closing
Date in proportion to the number of days in each period. To the extent that
Buyer is required to remit any such Taxes payable by Seller pursuant to this
SECTION 5.11(B), Seller shall pay to Buyer any such Taxes at least ten (10)
Business Days prior to the due date for payment.
(c) U.S. TAX ELECTIONS. Buyer, in its sole discretion, may make an
election under Section 338 of the Code with respect to Target, Bluestar and
FIIPL.
(d) COOPERATION. Buyer and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this SECTION 5.11, and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and provision of records and information that are reasonably relevant to any
such audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any materials provided hereunder.
5.12 AUDIT OPINION. Seller shall use all reasonable efforts to obtain an
unqualified audit opinion with respect to the Financials from the auditors of
Target (the "AUDIT OPINION"), including for this purpose making such changes to
the Financials as are reasonably necessary to obtain such opinion, such opinion
to be in such form as Target's auditors will be able to confirm to Parent that
they know of no reason they would be unwilling, upon request, to provide such
consent as may be required in order to include the Audited Financials in a
current report under Item 2.01 on Form 8-K or a registration statement Parent
may wish to file with the SEC after the Closing.
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5.13 TRADEMARKS. Seller shall use commercially reasonable efforts to
promptly change the company names of all Seller-related entities (other than
Focus Care Inc. and Focus Clinicare Private Limited) to not include the element
"Focus" or any confusingly similar element or name. Focus Care Inc. and Focus
Clinicare Private Limited shall be allowed to continue to use the FOCUS CARE and
FOCUS CLINICARE trade names so long as not used in connection with medical
transcription services or related products or services. Seller, on behalf of
itself and its Affiliates, represents, warrants and covenants that, except for
Focus Care Inc.'s and Focus Clinicare Private Limited's limited use in
accordance with this Section 5.13, (i) any and all right, title and interest in,
to and under the Focus and Focus-formative trademark and trade names, including
all goodwill of the businesses symbolized by and appurtenant to such trademarks
and trade names, has been assigned to Buyer; and (ii) neither Seller nor its
related persons or entities will, directly or indirectly, adopt, use or assist
any third party to use any trademark or trade name that incorporates the element
"Focus" or any trademarks or trade names that are likely to be confused with the
"Focus" trademark or trade name.
ARTICLE VI
CONDITIONS TO THE SHARE PURCHASE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE SHARE PURCHASE.
The respective obligations of Seller and Buyer to effect the Share Purchase
shall be subject to the satisfaction or waiver (as applicable), at or prior to
the Closing, of the following conditions:
(a) NO ORDER; ILLEGALITY. No Governmental or Regulatory Body shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is in effect and which has the effect
of making the Acquisition Transactions (taken as a whole) or the Share Purchase
illegal or otherwise prohibiting consummation of the Acquisition Transactions
(taken as a whole) or the Share Purchase.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Acquisition Transactions (taken as a whole) or the Share
Purchase shall be in effect, nor shall any proceeding, action, suit, claim or
injunction brought by any Governmental or Regulatory Body seeking any of the
foregoing be threatened or pending.
6.2 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate and effect the Share Purchase shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any of which may be
waived, in writing, by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of Seller made in this Agreement and the Related Agreements that
are qualified as to
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materiality or Material Adverse Effect shall be true, correct and complete as of
the date hereof, except for those representations and warranties that refer to
facts existing at a specific date, which shall be true, correct and complete as
of such date; (ii) the representations and warranties of Seller made in this
Agreement and the Related Agreements that are not qualified as to materiality or
Material Adverse Effect shall be true and correct in all material respects as of
the date hereof, except for those representations and warranties that refer to
facts existing at a specific date, which shall be true, correct and complete in
all material respects as of such date; and (iii) Seller, its Subsidiaries and
Focus Softek shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement and the Related Agreements
to be performed or complied with by such Persons at or prior to the Closing.
Seller shall have delivered to Buyer a certificate, dated the Closing Date, and
each signed by an authorized director of Seller, confirming the matters set
forth in the foregoing (such certificate, the "SELLER'S DIRECTOR'S
CERTIFICATE").
(b) GOVERNMENTAL APPROVAL. Approvals from any Governmental or
Regulatory Body deemed appropriate or necessary by Buyer, in consultation with
its legal counsel, in connection with the Acquisition Transactions and the other
transactions contemplated by this Agreement shall have been timely obtained.
(c) ABSENCE OF MATERIAL LITIGATION. Except for the matter set forth on
Schedule 1.1(a)(i), there shall be no action, suit, claim, order, injunction or
proceeding of any nature by any Person (other than a Governmental or Regulatory
Body) pending, or overtly threatened, against Buyer, Target or any of its
Subsidiaries, or any of their respective properties, officers or directors
arising out of, or in any way connected with, the Acquisition Transactions that
seeks to prohibit, materially alter or materially delay the Acquisition
Transactions (taken as a whole) or the Share Purchase.
(d) EMPLOYEES AND INDEPENDENT CONTRACTORS.
(i) The number of US Transcriptionists, US Independent
Contractors, Indian Transcriptionists and Indian Independent Contractors
employed or engaged as of the Closing Date shall be no less than 85% of the
number of US Transcriptionists, US Independent Contractors, Indian
Transcriptionists and Indian Independent Contractors employed or engaged as of
the date of this Agreement, as set forth on SECTION 2.21(Q) of the Disclosure
Schedule.
(ii) No less than 80% of the Transferred Employees shall have
agreed to be employed by one or any of the Transferred Entities following the
Closing and such Transferred Employees shall have terminated their employment or
consulting arrangements with Focus Softek.
(e) TERMINATION OF AGREEMENTS. Seller shall have terminated each of
those agreements listed on SCHEDULE 6.2(E) to this Agreement and each such
agreement shall be of no further force or effect.
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(f) ELIMINATION OF INTERCOMPANY ACCOUNTS. All Intercompany Accounts
shall have been forgiven, terminated, waived or settled in accordance with the
provisions of SECTION 5.10 and Buyer shall have received evidence of same
reasonably requested and reasonably satisfactory to it.
(g) NO MATERIAL ADVERSE EFFECT. There shall not have occurred or be
continuing any event or condition of any character that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(h) RESIGNATION LETTERS. Buyer shall have received the Resignation
Letters effective as of the Closing Date.
(i) LEGAL OPINION. Buyer shall have received legal opinions from
British Virgin Islands legal counsel (together with the documents appended,
scheduled or otherwise attached thereto) and Indian legal counsel to Seller,
substantially in the forms attached hereto as EXHIBIT E-1 and EXHIBIT E-2,
respectively.
(j) UNANIMOUS BOARD AND SHAREHOLDER APPROVALS. This Agreement, the
Acquisition Transactions and the other transactions contemplated hereby shall
have been unanimously approved by (i) the Board of Directors and the members of
Seller, which unanimous approvals shall be in form and substance reasonably
satisfactory to Buyer, and (ii) the Board of Directors of Target in form and
substance reasonably satisfactory to Buyer, and, in each case, such unanimous
approvals shall not have been modified or revoked.
(k) BVI CORPORATE DOCUMENTS AND INSTRUMENTS. Seller shall have
delivered to Buyer original (or, as specified, a copy of) the documents and
instruments with respect to Target as set forth on SCHEDULE 6.2(K).
(l) DELIVERY OF ADDITIONAL FINANCIAL STATEMENTS. Buyer shall have
received for the Business unaudited statements of income and retained earnings
and comprehensive income for the three months ended December 31, 2005 and 2006
prepared in accordance with GAAP.
(m) CERTIFICATE OF SECRETARY OF SELLER. Buyer shall have received a
certificate, validly executed by the Secretary of Seller, certifying as to (i)
the terms and effectiveness of the Charter Documents, and (ii) the valid
adoption of the resolutions of the Board of Directors and the members of Seller
(whereby the Acquisition Transactions and the other transactions contemplated
hereunder were unanimously approved by the Board of Directors and members) (such
certificate, the "SELLER'S SECRETARY'S CERTIFICATE").
(n) EQUITY SECURITIES. All of the issued and outstanding equity
securities of Bluestar Options, FII and FIIPL shall be owned of record and
beneficially by Target and/or its Subsidiaries, and Seller shall have provided
Buyer with evidence reasonably satisfactory to Buyer that all such equity
securities are owned of record and beneficially by Target and/or its
Subsidiaries.
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(o) AVENDUS FEES; DEED OF TRANSFER. Seller shall have delivered to
Buyer an invoice setting forth the Avendus Fees and the Deed of Transfer.
(p) FEL CERTIFICATE. Buyer shall have received a certificate validly
executed by a director of FEL in the form as attached hereto as EXHIBIT F.
(q) OTHER DOCUMENTS. Buyer shall have received all other documents and
instruments reasonably requested by Buyer with respect to the existence of
Seller, Target, Focus Softek and their respective Subsidiaries, the authority of
Seller and Focus Softek to enter into this Agreement and the Related Agreements,
and the compliance by Seller, Focus Softek and their respective Subsidiaries
with the requirements of applicable Law in connection with the consummation of
the Acquisition Transactions.
(r) AUDIT OPINION. (i) Seller shall have obtained the Audit Opinion, a
copy of which shall have been delivered to Buyer, with respect to the
Financials, together with a copy of the Financials, as revised, if applicable,
and in final form that are the subject of the audit (the "AUDITED FINANCIALS"),
(ii) the draft audited financials provided to Buyer on March 13, 2007 shall not
have been modified in any material and adverse respect in order to obtain the
Audit Opinion (provided that, for purpose of this Section 6.2(r) only, a change
in revenue of less than 5 percent and/or a change in operating income of less
than 10% shall not be deemed "material"), and (iii) Target's auditors shall have
confirmed to Parent that they know of no reason they would be unwilling, upon
request, to provide such consent as may be required in order to include the
Audited Financials in a current report under Item 2.01 on Form 8-K or a
registration statement Parent may wish to file with the SEC after the Closing.
6.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate and effect the Share Purchase shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by Seller:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of Buyer made in this Agreement and the Related Agreements that
are qualified as to materiality shall be true, correct and complete as of the
date, except for those representations and warranties that refer to facts
existing at a specific date, which shall be true, correct and complete as of
such date; (ii) the representations and warranties of Buyer made in this
Agreement and the Related Agreements that are not qualified as to materiality
shall be true and correct in all material respects as of the date hereof, except
for those representations and warranties that refer to facts existing at a
specific date, which shall be true, correct and complete in all material
respects as of such date; and (iii) Buyer shall have performed or complied in
all material respects with all obligations and covenants required by this
Agreement and the Related Agreements to be performed or complied with by Buyer
at or prior to the Closing. Buyer shall have delivered to Seller a certificate,
dated the Closing Date, and signed by a Vice President of Buyer confirming the
matters set forth in the foregoing (such certificate, "BUYER'S OFFICER'S
CERTIFICATE").
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(b) OTHER DOCUMENTS. Seller shall have received all other documents
and instruments reasonably requested by Seller with respect to the existence of
Buyer, the authority of Buyer to enter into this Agreement and the Related
Agreements, and the compliance by Buyer with the requirements of applicable Law
in connection with the consummation of the Acquisition Transactions.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Seller in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive the Closing for a period ending at 5:00 p.m. Indian time on the first
Business Day immediately following the first anniversary of the Closing Date;
provided that, notwithstanding the foregoing, (i) those representations and
warranties contained in SECTIONS 2.1, 2.2, 2.3 and 2.4 shall survive
indefinitely, and (ii) those representations and warranties contained in SECTION
2.28 will survive until 5:00 p.m. Indian time on the first Business Day
immediately following the fifth anniversary of the Closing Date. The
representations and warranties of Buyer contained in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive the Closing for a period ending at 5:00 p.m. Indian time on the first
Business Day immediately following the first anniversary of the Closing Date;
provided that, notwithstanding the foregoing, those representations and
warranties of Buyer contained in SECTIONS 3.1, 3.2 and 3.5 shall survive
indefinitely. The covenants and agreements of each of the parties hereto
contained in this Agreement shall survive the Closing indefinitely or for the
shorter period explicitly specified therein, except that for such covenants and
agreements that survive for such shorter period, breaches thereof shall survive
indefinitely or until the latest date permitted by applicable Law. The
expiration of the periods referenced to in this SECTION 7.1 shall be referred to
in this Agreement as the "SURVIVAL DATE".
7.2 INDEMNIFICATION.
(a) Seller agrees to indemnify and hold Buyer, its Affiliates
(including, on and after the Closing, Target and its Subsidiaries) and their
respective officers, directors, and successors (the "BUYER INDEMNIFIED
PARTIES"), harmless against any and all claims, losses, Liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation and defense, and diminution in value (hereinafter,
individually, a "LOSS"; and, collectively, "LOSSES") incurred or sustained by
the Buyer Indemnified Parties, or any of them, directly or indirectly, as a
result of or arising in connection with the following:
(i) (A) any breach or inaccuracy of any representation or
warranty of Seller or Focus Softek contained in this Agreement as of the date of
hereof and as of the Closing Date as if such representation or warranty were
made as of the Closing Date (except for
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representations and warranties that refer to facts existing as of a specific
date, which shall be true and correct as of such date) or (B) any breach or
inaccuracy of any representation, warranty, certification, confirmation or other
statement in any certificate or other instruments delivered by or on behalf of
Seller, its Subsidiaries, FEL or Focus Softek pursuant to this Agreement;
(ii) any failure by Seller, its Subsidiaries or Focus Softek to
perform or comply with any covenant applicable to any of them contained in this
Agreement (including any failure of the Quitclaim to be consummated in
accordance with SECTION 1.3);
(iii) except to the extent reflected in or reserved against in
the Current Balance Sheet, the operation of the Business by Seller and its
Subsidiaries and Affiliates prior to Closing;
(iv) except to the extent reflected in or reserved against in the
Current Balance Sheet, any Liabilities relating to or arising out of the
Restructuring (other than such Liabilities directly resulting from actions taken
by Buyer after Closing);
(v) except to the extent reflected in or reserved against in the
Current Balance Sheet, any Liabilities relating to or arising out of the
ownership or use of the Quitclaim IP (including the transfer thereof pursuant to
the Quitclaim) prior to Closing; and
(vi) any Liabilities for Pre-Closing Taxes and Transfer Taxes.
Seller shall not have any right of contribution from Target or Buyer with
respect to any Loss claimed by a Buyer Indemnified Party. Notwithstanding
anything to the contrary herein, Buyer shall have no right of indemnification
for Liabilities arising out of the matters set forth in Schedule 1.1(a).
(b) Buyer agrees to indemnify and hold Seller, its Affiliates and each
of their respective officers, directors, and successors (the "SELLER INDEMNIFIED
PARTIES"; and, together with the Buyer Indemnified Parties, the "INDEMNIFIED
PARTIES"), harmless against any and all Losses incurred or sustained by Seller
Indemnified Parties, or any of them, directly or indirectly, as a result of or
arising in connection with the following:
(i) any breach or inaccuracy of a representation or warranty of
Buyer contained in this Agreement as of the date of hereof and as of the Closing
Date as if such representation or warranty were made as of the Closing Date
(except for representations and warranties that refer to facts existing as of a
specific date, which shall be true and correct as of such date) or in any
certificate or other instruments delivered by or on behalf of Buyer pursuant to
this Agreement;
(ii) any failure by Buyer to perform or comply with any covenant
applicable to it contained in this Agreement;
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(iii) the operation of the Business by Buyer after Closing;
(iv) any Liability arising out of the matters described on
Schedule 1.1(a); and
(v) any Liabilities for Taxes of the Target, any of its
Subsidiaries, their respective operations or the Business arising in any taxable
period or portion thereof beginning after the Closing Date, except to the extent
attributable to a breach of SECTION 2.10.
(c) Except as provided for in SECTION 7.4, the aggregate liability of
the Seller Indemnified Parties, on the one hand, and the Buyer Indemnified
Parties, on the other hand, in respect of claims for indemnification made
hereunder pursuant to SECTION 7.2(A) and SECTION 7.2(B) shall be limited in the
aggregate to 20% of the Purchase Price (the "CAP"); provided, however, that
claims for indemnification made hereunder pursuant to (i) SECTIONS 7.2(A)(I)
(with respect to breaches or inaccuracies of representations and warranties
contained in SECTIONS 2.1, 2.2, 2.3, 2.4, and 2.28 only) 7.2(A)(II), 7.2(A)(IV),
7.2(A)(V) and 7.2(B)(V) shall not be limited to the Cap but instead shall be
limited in the aggregate to the amount of the Purchase Price.
7.3 ESCROW ARRANGEMENTS; THRESHOLD AMOUNTS AND DETERMINATION OF LOSSES;
CLAIMS PROCEDURES.
(a) ESCROW FUND. By virtue of this Agreement and as security for the
indemnity obligations provided for in SECTION 7.2(A) hereof, at the Closing,
Seller will be deemed to have received and deposited with the Escrow Agent an
amount in cash equal to $5,800,000 (such amount, the "ESCROW AMOUNT") without
any act of Seller. The Escrow Amount shall be available to compensate the Buyer
Indemnified Parties, or any of them, for any claims by any such party for any
Losses suffered or incurred by it and for which it is entitled to recovery under
this ARTICLE VII; provided, however, that notwithstanding anything to the
contrary contained herein, in no event shall any Indemnified Party's right to or
claim of indemnification hereunder be limited by the Escrow Amount or shall the
Escrow Fund (as defined below) be such Indemnified Party's only recourse for any
such claim for indemnification hereunder. Prior to making any indemnification
claim against Seller directly, a Buyer Indemnified Party shall first make a
claim against the Escrow Fund to the extent that the amounts in the Escrow Fund
are sufficient to satisfy all Losses reflected in Officers' Certificate(s) in
full; provided, however, that a Buyer Indemnified Party may make an
indemnification claim against Seller directly without having to first make a
claim against the Escrow Fund to the extent that all Losses identified in
Officers' Certificates relating to SECTION 7.2(A)(VI), or for a Net Working
Capital Shortfall, exceed $250,000. Promptly after the Closing, the Escrow
Amount, without any act of Seller, will be deposited with the Escrow Agent, such
deposit of the Escrow Amount to constitute an escrow fund (the "ESCROW FUND") to
be governed by the terms set forth herein. The Escrow Agent may execute this
Agreement following the date hereof and prior to the Closing, and such later
execution, if so executed after the date hereof, shall not affect the binding
nature of this Agreement as of the date hereof between the other signatories
hereto.
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(b) THRESHOLD AMOUNT; DETERMINATION OF LOSSES. Notwithstanding any
provision of this Agreement to the contrary, an Indemnified Party may not
recover any Losses under SECTION 7.2(A)(I) or SECTION 7.2(B)(I) unless and until
one or more Officer's Certificates (as defined below) identifying such Losses
under SECTION 7.2(A)(I) or SECTION 7.2(B)(I) in excess of $580,000 in the
aggregate (the "THRESHOLD AMOUNT") has or have been delivered to Seller or
Buyer, as the case may be, as provided in SECTION 7.3(F) hereof (and, in the
case of a delivery to Seller prior to the end of the Escrow Period (as defined
in SECTION 7.3(C)), a copy of such Offer's Certificate shall also be delivered
to the Escrow Agent), in which case such Indemnified Party shall be entitled to
recover all Losses so identified including the Threshold Amount. In addition, in
determining the amount of any Losses suffered by any Indemnified Party hereunder
resulting from any breach or inaccuracy of a representation or warranty and
whether the Threshold Amount is exceeded, such representation or warranty (other
than the representations and warranties contained in SECTION 2.32) shall be read
and the amount of any such Losses determined without regard to any qualification
or exception relating to materiality or Material Adverse Effect or any similar
qualification or standard contained in such representation or warranty. For the
purposes hereof, "OFFICER'S CERTIFICATE" shall mean a certificate signed by any
officer of an Indemnified Party: (1) stating that such Indemnified Party has
paid, sustained, incurred, or accrued, or reasonably anticipates that it will
have to pay, sustain, incur, or accrue Losses, and (2) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the date
each such item was paid, sustained, incurred, or accrued, or the basis for such
anticipated Liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related.
(c) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW PERIODS.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Closing and shall terminate at 5:00 p.m. Indian time
on the Business Day immediately following the first anniversary of the Closing
Date (the "ESCROW PERIOD"); provided, however, that the Escrow Period shall not
terminate with respect to any amount which, in the reasonable judgment of Buyer,
is necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate delivered to the Seller and the Escrow Agent prior to the end of the
Escrow Period with respect to facts and circumstances existing prior such time.
As soon as all such claims have been resolved, the Escrow Agent shall deliver to
Seller the remaining portion of the Escrow Fund, if any, not required to satisfy
such claims.
(d) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund in accordance with the terms of
this Agreement and not as the property of Buyer and shall hold and dispose of
the Escrow Fund only in accordance with the terms of this ARTICLE VII.
(ii) If the Escrow Agent shall have received specific written
investment instruction from Buyer (which shall include instruction as to term to
maturity, if applicable), on a
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timely basis, the Escrow Agent shall invest the Escrow Fund in Eligible
Investments, pursuant to and as directed in such instruction. "ELIGIBLE
INVESTMENTS" shall mean (A) obligations issued or guaranteed by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof); (B)
obligations (including certificates of deposit and banker's acceptances) of any
domestic commercial bank having capital and surplus in excess of $500,000,000;
(C) repurchase obligations for underlying securities of the type described in
clause (A); (D) investment in money market mutual funds investing solely in the
securities described in (A) and (C) above, and (E) investment in the Escrow
Agent's "Insured Money Market Account" ("IMMA"), as described in EXHIBIT G
hereto. If otherwise qualified, obligations of the Escrow Agent or any of its
affiliates shall qualify as Eligible Investments. Notwithstanding the foregoing,
Eligible Investments shall be limited to those instruments readily obtainable
and routinely offered by the Escrow Agent's Corporate Trust Services.
(iii) Absent its timely receipt of such specific written
investment instruction from Buyer, the Escrow Agent shall have no obligation or
duty to invest (or otherwise pay interest on) the Escrow Fund; provided,
however, that in the event the Escrow Agent shall not have received such written
investment instruction, the Escrow Agent shall be authorized to invest any of
the Escrow Fund in the Escrow Agent's IMMA until such investment instruction is
received. All earnings received from the investment of the Escrow Fund shall be
credited to, and shall become a part of, the Escrow Fund (and any losses on such
investments shall be debited to the Escrow Fund). The Escrow Agent shall have no
liability for any investment losses, including without limitation any market
loss on any investment liquidated prior to maturity in order to make a payment
required hereunder.
(iv) The Interested Parties agree that, for Tax reporting
purposes, all interest and other income earned from the investment of the Escrow
Fund in any Tax year shall, (A) to the extent such interest or other income is
distributed by the Escrow Agent to any person or entity pursuant to the terms of
this Agreement during such tax year, be reported as allocated to such person or
entity and, (B) otherwise, be reported as allocated to Seller.
(e) CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER. Each of the
Interested Parties hereto agrees to provide the Escrow Agent with a certified
tax identification number by signing and returning a Form W-9 (or Form W-8 BEN,
in case of non-U.S. persons) to the Escrow Agent upon the execution and delivery
of this Agreement. The Interested Parties understand that, in the event their
tax identification numbers are not certified to the Escrow Agent, the Internal
Revenue Code, as amended from time to time, may require withholding of a portion
of any interest or other income earned on the investment of the Escrow Property.
Each of the Interested Parties agrees to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
taxes, assessments or other governmental charges, and to instruct the Escrow
Agent with respect to any certifications and governmental reporting that may be
required under any laws or regulations that may be applicable in connection with
its acting as Escrow Agent under this Agreement.
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(f) CLAIMS FOR INDEMNIFICATION. In order to seek indemnification under
SECTION 7.2, an Indemnified Party shall deliver an Officer's Certificate to
Seller or Buyer, as the case may be, (and, in the case of a delivery to Seller
prior to the end of the Escrow Period, a copy of such Offer's Certificate shall
also be delivered to the Escrow Agent) at any time on or before (i) the last day
of the Escrow Period (in the case of a claim against the Escrow Fund) or (ii)
the applicable Survival Date. In the case of a claim against the Escrow Fund,
unless the Escrow Agent shall have received an Objection Notice from Seller
pursuant to SECTION 7.3(G) below, the Escrow Agent shall promptly, and in no
event later than the third Business Day after the end of the thirtieth (30th)
day after its receipt of the Officer's Certificate relating thereto, deliver to
the Indemnified Party from the Escrow Fund an amount equal to the Loss set forth
in such Officer's Certificate. Any payment from the Escrow Fund to Indemnified
Parties shall be made in cash in immediately available funds. In all cases, if
Seller or Buyer, as applicable, does not to object in writing pursuant to
SECTION 7.3(G) below within the thirty (30)-day period after delivery by an
Indemnified Party of an Officer's Certificate, such failure to so object shall
be an irrevocable acknowledgment by such party that the Indemnified Party is
entitled to the full amount of the claim for Losses set forth in such Officer's
Certificate.
(g) OBJECTIONS TO CLAIMS FOR INDEMNIFICATION. If an Officer's
Certificate is delivered to Buyer or Seller, Seller or Buyer, as applicable,
shall have a period of thirty (30) days thereafter to object in a written
statement to the claim made in the Officer's Certificate (an "OBJECTION
NOTICE"), which shall be delivered to Buyer or Seller, as the case may be prior
to the end of such thirty (30)-day period (and, in the case of a delivery to
Buyer, a copy of such Objection Notice shall also be delivered to the Escrow
Agent). In the case of a claim against the Escrow Fund, at the time of delivery
of any Officer's Certificate to the Escrow Agent, the Escrow Agent shall make no
delivery to Buyer of any Escrow Amount pursuant to SECTION 7.3(F) (other than
Agreed-Upon Losses as described below) for a period of thirty (30) days after
such delivery, unless the Escrow Agent shall have received written authorization
from Seller to make such delivery. After the expiration of such thirty (30)-day
period, the Escrow Agent shall make delivery of an amount from the Escrow Fund
in accordance with SECTION 7.3(F) equal to the amount of Losses claimed in the
Officer's Certificate, provided that no such payment or delivery may be made if
Seller shall have delivered to Buyer and the Escrow Agent an Objection Notice as
contemplated and within the time period specified by this SECTION 7.3(G).
(h) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case of a delivery of an Objection Notice in accordance
with SECTION 7.3(G) hereof (other than Agreed-Upon Losses as defined in SECTION
7.3(H)(V) hereof), Seller and Buyer shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If
Seller and Buyer should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and, in the case of a claim against
the Escrow Fund, shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and make distributions from the
Escrow Fund in accordance with the terms thereof.
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(ii) If no such agreement can be reached after good faith
negotiation and prior to thirty (30) days after delivery of an Objection Notice,
either Buyer or Seller may demand arbitration of the matter unless the amount of
the Loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration, and in either such event the matter shall be
settled by arbitration conducted by one arbitrator mutually agreeable to Buyer
and Seller. In the event that, within thirty (30) days after submission of any
dispute to arbitration, Buyer and Seller cannot mutually agree on one
arbitrator, then, within fifteen (15) days after the end of such thirty (30) day
period, Buyer and Seller shall each select one arbitrator. The two arbitrators
so selected shall select a third arbitrator. If Seller fails to select an
arbitrator during this fifteen (15) day period, then the parties agree that the
arbitration will be conducted by one arbitrator selected by Buyer.
(iii) Any such arbitration shall be held in New York, New York,
under the rules then in effect of the American Arbitration Association. All
expenses relating to the arbitration (but excluding each parties' own expenses)
shall be paid, including without limitation, the fees of each arbitrator and the
administrative fee of the American Arbitration Association shall be paid as
follows: fifty percent (50%) by Buyer and fifty percent (50%) by Seller;
provided, however, that each party shall bear its own respective expenses
relating to the arbitration, including without limitation, legal and expert
witness fees. The arbitrator or arbitrators, as the case may be, shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator or majority of the three arbitrators, as the
case may be, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrator, or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the same extent as a competent court of law or equity, should
the arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of the arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any claim in such Officer's Certificate
shall be final, binding, and conclusive upon the parties to this Agreement. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator(s), and the Escrow Agent shall be entitled to rely on, and
make distributions from the Escrow Fund in accordance with, the terms of such
award, judgment, decree or order as applicable. Within ten (10) days of a
decision of the arbitrator(s) requiring payment by one party to another, such
party shall make the payment to such other party.
(iv) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. The forgoing arbitration provision
shall apply to any dispute among the Buyer or Seller, on the one hand, and any
Indemnified Party, on the other hand, under this ARTICLE VII hereof, whether
relating to claims upon the Escrow Fund or to the other indemnification
obligations set forth in this ARTICLE VII.
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(v) This SECTION 7.3(H) shall not apply to claims against the
Escrow Fund made in respect of any Agent Interpleader Expenses or Agent
Indemnification Expenses pursuant to clauses (vi) and (vii) of SECTION 7.3(J)
hereof (each, an "AGREED-UPON LOSS"). Claims against the Escrow Fund made in
respect of any Agreed-Upon Loss shall be resolved in the manner described in
SECTION 7.3(F) above.
(i) THIRD-PARTY CLAIMS. In the event Buyer or Seller, as the case
may be, becomes aware of a third party claim (other than a claim that is the
subject of an Agreed-Upon Loss) (a "THIRD PARTY CLAIM"), such party shall notify
the other of such claim, and to the extent that such Third-Party Claim is
reasonably believed by Seller to result in a demand against the Escrow Fund,
Seller shall be entitled, at its expense, to participate in, but not to
determine or conduct, the defense of such Third Party Claim. Buyer shall have
the right in its sole discretion to conduct the defense of, and to settle, any
such claim; provided, however, that except with the consent of Seller, no
settlement of any such Third Party Claim with third party claimants shall be
determinative of the amount of Losses relating to such matter. If there is a
third-party claim that, if adversely determined would give rise to a right of
recovery for Losses hereunder, then any amounts incurred or accrued in defense
of such third-party claim, regardless of the outcome of such claim, shall be
deemed Losses hereunder. Notwithstanding anything in this Agreement to the
contrary, this SECTION 7.3(I) shall not apply to any third party claim that is
the subject of an Agreed-Upon Loss. Claims against the Escrow Fund made in
respect of any Agreed-Upon Loss shall be resolved in the manner described in
SECTION 7.3(H)(V) above.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Buyer and Seller
and agreed to by the Escrow Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent's duties hereunder are ministerial in nature and shall not be
deemed fiduciary. The Escrow Agent shall not be liable for any act done or
omitted hereunder as Escrow Agent while acting in good faith and in the exercise
of reasonable judgment, and any act done or omitted pursuant to the advice of
legal counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other Person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey any applicable Orders. In case the Escrow
Agent obeys or complies with any such order, judgment or decree of any court,
the Escrow Agent shall not be liable to any of the parties hereto or to any
other Person by reason of such compliance, notwithstanding any such Order being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
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(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under this Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
those resulting from the gross negligence or willful misconduct of the Escrow
Agent. The Escrow Agent shall not incur any such Liability for (A) any act or
failure to act made or omitted in good faith or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with its own legal counsel in
connection with performing the Escrow Agent's duties under this Agreement and
shall be fully protected in any act taken, suffered, or permitted by him/her in
good faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any Person acting or
purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and the amounts in the Escrow Fund and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, may be required, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for damages. Furthermore, the Escrow Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court all documents and the amounts in the Escrow Fund
held in escrow, except all costs, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action (the "AGENT
INTERPLEADER EXPENSES") and which the parties agree to pay as follows: fifty
percent (50%) to be paid by Buyer, fifty percent (50%) to be paid by Seller.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, Liabilities, and expenses, including
reasonable costs of investigation, counsel fees, including allocated costs of
in-house counsel and disbursements that may be imposed on Escrow Agent or
incurred by Escrow Agent in connection with the performance of his/her duties
under this Agreement, including but not limited to any litigation arising from
this Agreement or involving its subject matter, other than those arising out of
the gross negligence or willful misconduct of the
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Escrow Agent (the "AGENT INDEMNIFICATION EXPENSES") as follows: fifty percent
(50%) to be paid by Buyer, fifty percent (50%) to be paid by Seller.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the Buyer and Seller; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: Buyer and
Seller shall use their best efforts to mutually agree on a successor escrow
agent within thirty (30) days after receiving such notice. If the parties fail
to agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of New York. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and Liability under this Agreement.
(k) FEES. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Buyer in accordance with the standard fee schedule of
the Escrow Agent. It is understood that the fees and usual charges agreed upon
for services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Escrow Agent renders any
service not provided for in this Agreement but that has been requested by an
officer of Buyer, or if the parties request a substantial modification of the
terms of the Agreement, or if any controversy arises, or if the Escrow Agent is
made a party to, or intervenes in, any litigation pertaining to the Escrow Fund
or its subject matter, the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs, attorney's fees, including
allocated costs of in-house counsel, and expenses occasioned by such default,
delay, controversy or litigation.
(l) CUSTOMER IDENTIFICATION PROGRAM. Each of the signing parties to
this Agreement acknowledge receipt of the notice set forth on EXHIBIT H attached
hereto and made part hereof and that information may be requested to verify
their identities.
(m) SUCCESSOR ESCROW AGENTS. Any corporation into which the Escrow
Agent in its individual capacity may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
7.4 EXCLUSIVE REMEDY. Except (i) for intentional misrepresentation or fraud
and (ii) as provided for in SECTIONS 2.27 and 5.1(C), indemnification pursuant
to the provisions of this ARTICLE VII shall be the sole and exclusive remedy of
the parties relating to the Agreement and the transactions contemplated hereby.
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7.5 LIMITATION OF LIABILITY. Nothing herein shall limit the Liability of
Buyer or Seller for any willful breach of any representation or warranty
contained in this Agreement or any Related Agreement or any covenant contained
in Section 4.1 (introductory paragraph), 4.1(a), 4.1(b), 4.1(g), 4.1(k), 4.1(q),
4.1(u) (Section 4.1(u) solely to the extent relating to the foregoing Sections),
Section 4.2 and Section 5.12 or for fraud if the Acquisition Transactions are
not consummated; provided, however, that in no event shall such Liability exceed
the amount of the Purchase Price if the Acquisition Transactions are not
consummated. Notwithstanding anything to the contrary contained herein, the
Seller shall not be liable under this Agreement for any of the following and the
Buyer Indemnified Parties shall not be entitled to indemnification:
(a) in respect of any liability which is contingent unless and until
such contingent liability becomes an actual liability and is due and payable or
is accrued for by Buyer or a subsidiary of Buyer;
(b) in respect of any matter, act, omission or circumstances (or any
combination thereof) (including, for the avoidance of doubt, the aggravation of
a matter or circumstance) to the extent that the same would not have occurred
but for:
(i) any deliberate or wilful act, omission or transaction of the
Buyer or its directors, employees or agents or successors in title or on and
from the Closing Date that is done or omitted to be other than in the ordinary
course or without the consent of the Seller;
(ii) the passing of, or any change in, or change in
interpretation of, after the date of this Agreement, any law, rule, regulation,
policy or administrative practice of any government, governmental department,
agency or regulatory body including (without prejudice to the generality of the
foregoing) any increase in the rates of taxes or any imposition of taxes or any
withdrawal of relief from taxes not actually (or prospectively) in effect at the
date of this Agreement; except that the Seller shall be liable to the extent of
any breach of SECTION 2.10;
(iii) any change in accounting or tax policy, bases or practice
of the Target or its Subsidiaries introduced or having effect after Closing Date
which have or should have been made for any pre-Closing period, pursuant to the
generally accepted accounting principles as per the applicable law; except that
the Seller shall be liable to the extent of any breach of SECTION 2.10;
(c) in respect of any liability to the extent that provision,
allowance or reserve in respect thereof has been expressly and adequately made
in the Current Balance Sheet; or
(d) except as otherwise specifically provided for in this Agreement,
for any special, indirect or consequential damages or losses of any kind
(including but not limited to loss of profits, loss of revenue, loss of use,
loss of production, costs of capital or costs connected with the interruption of
operation), regardless of the legal theory on which the claim is based, shall be
recoverable hereunder.
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If any third party claim is made against Buyer and by reason of or in
consequence of which Seller shall be liable for indemnification hereunder
relating to a breach or inaccuracy in a representation or warranty of Seller,
the Buyer shall as soon as reasonably practicable and in any event within 15
calendar days gives written notice thereof to Seller and if a breach is capable
of being remedied, the Buyer shall not be entitled to indemnification or
compensation for any breach unless the Seller is given written notice of such
failure and fails to fully remediate such breach (such that none of the Buyer
Indemnified Parties shall suffer any Losses with respect to such breach or
inaccuracy) within 30 calendar days of such notice.
7.6 INSURANCE CLAIMS. The Buyer shall not be entitled to recover from the
Seller under this Agreement more than once in respect of the same losses
suffered and, without prejudice to the generality of the foregoing, the Seller
shall not be liable in respect of any breach of the Agreement if and to the
extent that the losses resulting from or connected with such breach are or have
been included in a claim which has been already been fully satisfied by the
Seller. To the extent that a Loss is covered by insurance, in order for any
Buyer Indemnified Party to be entitled to recover for such Loss from Seller, the
Buyer shall be obligated to make a claim from the insurance carrier with respect
to such Loss to the maximum extent permitted under the policy; provided,
however, that notwithstanding anything contained herein to the contrary, the
Survival Date and the Escrow Period shall be tolled and extended with respect to
any claim made by a Buyer Indemnified Party with respect to a Loss for which the
Buyer seeks to obtain insurance proceeds until the date that is five (5)
Business Days following the date such proceeds are remitted to Buyer or the
claim is denied by the insurance carrier.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in SECTION 8.1 hereof, this Agreement
may be terminated and the Share Purchase abandoned at any time prior to the
Closing:
(a) by unanimous agreement of Seller and Buyer;
(b) by Buyer or Seller if the Closing Date shall not have occurred by
May 1, 2007; provided, however, that the right to terminate this Agreement under
this SECTION 8.1(B) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Share
Purchase to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement;
(c) by Buyer or Seller if: (i) there shall be a final non-appealable
Order in effect preventing consummation of Acquisition Transactions, or (ii)
there shall be any Law or Order enacted, promulgated or issued or deemed
applicable to the Closing by any Governmental or Regulatory Body that would make
consummation of the Closing illegal;
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(d) by Buyer if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement of Seller or Focus Softek contained in this Agreement such
that the conditions set forth in SECTION 6.2(A) hereof would not be satisfied
and such breach has not been cured within ten (10) calendar days after written
notice thereof to Seller or Focus Softek, as applicable; provided, however, that
no cure period shall be required for a breach which by its nature cannot be
cured; or
(e) by Seller if neither Seller nor Focus Softek is in material breach
of their respective obligations under this Agreement and there has been a breach
of any representation, warranty, covenant or agreement of Buyer contained in
this Agreement such that the conditions set forth in SECTION 6.3(A) hereof would
not be satisfied and such breach has not been cured within ten (10) calendar
days after written notice thereof to Buyer; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement as
provided in SECTION 8.1 hereof, this Agreement shall forthwith become void and
there shall be no Liability or obligation on the part of Buyer, Seller, its
Subsidiaries, or Focus Softek, or their respective officers, directors or
stockholders, if applicable; provided, however, that each party hereto shall
remain liable for breaches of this Agreement prior to its termination in
accordance with SECTION 7.5; and provided, further, that the provisions of
SECTIONS 5.3, 5.4 and 5.5 hereof, ARTICLE IX hereof and this SECTION 8.2 shall
remain in full force and effect and survive any termination of this Agreement
pursuant to the terms of this ARTICLE VIII.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of the party
against whom enforcement is sought.
8.4 EXTENSION; WAIVER. At any time prior to the Closing, Buyer, on the one
hand, and Seller, on the other hand, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the covenants, agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with
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acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice); provided, however, that notices sent by mail will not be deemed given
until received:
(a) if to Buyer, to:
Nuance Communications, Inc.
Xxx Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy (which shall not be deemed notice) to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to Seller or Focus Softek, to:
Xxxxxxx Advisors Inc.
c/o Sears Xxxxxxxxxx Hugelshofer
Xxxxxxxxxxxxxx 00
(Entrance Augustinergasse from the back alley)
0000 Xxxxxx
Xxxxxxxxxxx
Attention: Xx Xxxxxx Xxxxxxxxxxx
Facsimile No.: x00 (0)00 000 00 00
with a copy (which shall not be deemed notice) to:
Xxxxxxx & Co.
Xxxxx Xxxxxxxx
4th and 5th Floors, R K Xxxx
Xxxxxxx Estate
Mumbai, 400 038, India
Attention: Xxxxxxxx Xxxxxxx
Facsimile No.: 011-91-22-6636-5007
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and (which shall not be deemed notice) to:
Xxxxxxx Procter LLP
000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: X. Xxxxx Xxxx, Esq.
Facsimile No.: (000) 000-0000
(c) if to Escrow Agent, to:
U.S. Bank National Association
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
9.2 INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "share" or "stock" shall be used interchangeably and shall
mean either one as the context may require. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. The symbol "$" shall
refer to U.S. dollars and where limitations on conduct are imposed in SECTION
4.1, or thresholds are established in ARTICLE II or ARTICLE VII, such U.S.
dollar amounts shall include foreign currency equivalents of such U.S. dollar
amounts at then prevailing foreign currency exchange rates.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Exhibits hereto, and
the Disclosure Schedule, and the documents and instruments, the Related
Agreements and the other agreements among the parties hereto referenced herein:
(i) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings both
written and oral, among the parties with respect to the subject matter hereof,
including, for the avoidance of doubt, that certain Memorandum of Understanding
sent to Seller by Buyer on November 25, 2006, (ii) are not intended to confer
upon any other Person any rights or remedies hereunder, and (iii) shall not be
assigned by operation of Law or otherwise, except that Buyer may assign its
rights and delegate its obligations hereunder to any of its Subsidiaries or
Affiliates as long as Buyer remains ultimately liable for all of Buyer's
obligations hereunder.
9.5 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or
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unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other Persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.6 OTHER REMEDIES. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by Law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within New York County, State of New York, in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of New York for such Persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction, venue and such process.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ALL RIGHT TO TRIAL
BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Buyer, Seller, FIIPL, Focus Softek and the Escrow Agent
have caused this Agreement to be signed, all as of the date first written above.
NUANCE COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
Title: Chairman and Chief Executive
Officer
XXXXXXX ADVISORS INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Authorized Person
FOCUS SOFTEK INDIA (PRIVATE) LIMITED
(solely with respect to SECTIONS 1.1,
1.3, 1.5(B), 1.10 and the Sections of
ARTICLE IX related thereto)
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Director
U.S. BANK NATIONAL ASSOCIATION,
as Escrow Agent
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT
