Exhibit 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
[October 31], 2007 (the "Agreement Date") by and between 3Q Holdings Limited ACN
089 058 293 ("3Q"), Island Pacific (UK) Limited Company No. 6409686 ("UK Sub")
and Applied Retail Solutions, Inc. ("ARS" and together with 3Q and UK Sub,
"Buyer") on the one hand, and Island Pacific, Inc., a Delaware corporation
("Seller") on the other hand. Buyer and Seller are sometimes referred to
collectively herein as the "Parties" or individually as a "Party". The Parties
agree as follows:
RECITALS
A. Seller owns and operates a portion of its business through a division of
Seller commonly known as the IPMS division (the "Division").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain of the assets used in connection with the Division pursuant to
the terms of this Agreement.
C. The Parties agree to make certain representations, warranties, and
covenants as set forth below.
1. Definitions. As used in this Agreement, the following terms shall
have the meanings indicated below.
"Accounts Receivable" means the trade debts owed to the Seller at
Closing in respect of the Division Business.
"Acquired Assets" means all of the right, title, and interest in and
to all the assets used predominately in connection with the Division including
(a) the Division Software, (b) the Division Documentation, (c) the Division
Intellectual Property Rights, (d) the Accounts Receivable, (e) the Prepaid
Expenses and deposits, (f) the Division Technology Deliverables, (g) the
Division Inventory, (h) the Division Plant and Equipment (i) the Assigned
Agreements, (j) the Business Records, (k) the Governmental Permits, (l) the
Goodwill, (m) each Product Warranty, (n) the Deferred Revenue, (o) all credit
for the UK Employee Advances and rights to recoup from each of the UK Employees
such employees' respective UK Employee Advances, and (p) all other tangible and
intangible assets owned, leased or licensed by the Seller and used predominately
in connection with the Division Business, but does not include the excluded
assets listed on EXHIBIT A as "Excluded Assets" (the "Excluded Assets").
"Affiliate" of a specified Person means a Person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
"Agreed Form" means, in respect of a document, that document in the
form, or substantially in the form, which has been agreed by the Parties and
initialed by them for the purposes of identification.
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"Ancillary Agreements' has the meaning given to it in Subsection
3(a).
"Asset Purchase" means the sale and purchase of the Acquired Assets
and the assumption of the Assumed Liabilities in accordance with this Agreement.
"Assigned Agreements" means: (a) all customer contracts relating
predominantly to the Division Business outstanding as of the Agreement Date
including those listed on EXHIBIT B; (b) all other contracts relating
predominantly to the Division Business outstanding as of the Agreement Date as
listed on EXHIBIT B; (c) all licenses or other agreements for the sale of
product to new or existing customers of the Division Business (to the extent
such licenses and agreements relate predominately to the Division Business)
between the Agreement Date and Closing ("Relevant Post Agreement Date
Contracts"); and (d) such contracts (other than the Relevant Post Agreement Date
Contracts) that Seller enters into between the Agreement Date and Closing
relating predominately to the Division Business, providing such agreements are
on commercially reasonable terms consistent with Seller's past practice,
including for each of clause (a) - (d) above any right to renew such contracts
or solicit a new contract with such third parties after the Closing.
"Balance Sheet Date" means March 31, 2007.
"Benefit Plan" means any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, 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 of its ERISA affiliates for the
benefit of any employee of Seller or with respect to which Seller or any of its
ERISA affiliates have or may have any liability or obligation.
"Business Day" means a day on which banks are open for business in
Irvine, California, other than a Saturday, Sunday or public holiday in Irvine,
California.
"Business Records" means copies of all of Seller's general and
financial records, financial information, correspondence and records relating to
Accounts Receivable, systems and software, marketing and sales information,
pricing, marketing plans, business plans, books of account and accounting
records, financial and business projections, customer and supplier lists,
mailing lists, brochures, advertising materials, customer contracts (in whatever
form), personnel records, test reports, invoices, purchase orders, operating
records and all other files and records (or applicable portions thereof),
pertaining to the Acquired Assets, the Division Business, the Assumed
Liabilities and the Division Employees and Division Contractors, it being
understood that Seller may retain the original copies of such Business Records
for purposes of its internal record-keeping, financial statements and any Tax
related matters.
"Buyer Group" means the Buyer and each of its Affiliates and Buyer
Group Member means any member of the Buyer Group.
"Closing" has the meaning given to it in Subsection 2(e).
"Closing Date" has the meaning given to it in Subsection 2(e).
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"Closing Division Net Tangible Asset Value" means the Division Net
Tangible Asset Value as of the Closing Date as specified in the Division Net
Tangible Assets Certificate.
"Closing Payment" has the meaning given to it in Subsection 2(d)(i).
"Cobra" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the rules and regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
Division Business and affairs of Seller and its Affiliates that is not already
generally available to the public, including but not limited to the Seller's
Confidential Information (as defined in Subsection 5(q)).
"Confidentiality Agreement" means the confidentiality and
non-disclosure agreement between Seller and Buyer dated 3 August 2006.
"contract" means any written or oral legally binding contract
(including active and inactive customers), agreement, instrument, obligation,
commitment or undertaking of any nature (including leases, licenses, loans,
mortgages, notes, guarantees, letters of credit, sublicenses, subcontracts,
covenants not to compete, employment agreements, letters of intent and purchase
orders) as of the Agreement Date or as may hereafter be in effect.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of stock, as an officer, director, trustee or executor, by
contract or otherwise.
"Deferred Revenue" means the obligation to supply goods or provide
maintenance after Closing in respect of which Seller invoiced income in advance
of Closing in relation to the Division Business.
"Disclosure Materials" means the written information provided by the
Seller of any of its agents, advisers or representatives to Buyer or any of its
agents, advisers or representatives in connection with the negotiations for the
Asset Purchase which are referred to in the index of Disclosure Materials in the
Agreed Form (as updated, if applicable, before Closing pursuant to Subsection
5(s)), and includes without limitation the Seller Disclosure Letter.
"Division" has the meaning given to it in Recital A.
"Division Business" means the business carried out by the Division
of developing, selling, implementing and integrating retail technology
solutions.
"Division Domain Names" means the domain names used predominately in
relation to the Division, including the domain name listed in Part 1 of EXHIBIT
O.
"Division Documentation" means, collectively, all programmers' notes
or logs, source code annotations, user guides, manuals, instructions, software
architecture designs, layouts, any know-how, and any other designs, plans,
drawings, documentation or materials that relate to any Division Software or any
Division Intellectual Property Rights, whether in tangible or intangible form.
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"Division Employees and Division Contractors" means all employees
and contractors who provide services to the Division Business including those
employees and contractors listed in Parts A, B, C and D of Exhibit L.
"Division Intellectual Property Rights" means, collectively, all
worldwide Intellectual Property Rights related predominately to: (i) the
Division Software or any aspect or part thereof; (ii) the Division Documentation
or any aspect or part thereof; (iii) the Division Products (iv) the Division
Trade Marks; (v) the Division Domain Names; (vi) the Acquired Assets; (vii) the
Division Registered Intellectual Property; and/or (viii) the Division, including
as set out in Part 1 of EXHIBIT O, but excluding Third Party Intellectual
Property.
"Division Net Tangible Asset Value" has the meaning given to it in
Subsection 2(d)(v).
"Division Net Tangible Assets Certificate" means a certificate
executed by the Chief Executive Officer of Seller which sets out Seller's
calculation of the Closing Division Net Tangible Asset Value.
"Division IP and Technology" has the meaning given to it in
Subsection 2(a)(i).
"Division Plant and Equipment" means all assets (including without
limitation workstations and personal computers and their associated third-party
software programs and licenses thereto, logbooks, notebooks, furniture, file
cabinets, white boards, personal office supplies and equipment and motor
vehicles and including the spare parts and accessories relating to those items)
used predominately in connection with the Division Business including those
items listed in Part 2 of EXHIBIT C.
"Division Products" has the meaning given to it in Subsection
3(k)(vii).
"Division Software" means, collectively, all of the software and any
other systems used predominately in connection with the Division Business
(including all programs, objects, modules, routines, algorithm and code, in both
source code and object code form), and includes, without limitation, (i) the
components of such software and systems; (ii) the development or utilization of
the software and systems described in this paragraph; and (iii) all derivative
works of any of the software and systems described in this paragraph, including
as set out in EXHIBIT O.
"Division Inventory" means any Division Business inventory owned by
Seller as of the close of business on the Closing Date described as inventory on
the Division Net Tangible Assets Certificate, including all merchandise, raw
materials work in progress and in respect of which Seller holds a matching
purchase order and/or components, spare parts, equipment,, documentation,
marketing materials, promotional literature, other sales or marketing-related
materials and other consumables held by the Seller in connection with such
purchase orders;
"Division Technology Deliverables" means all copies in a tangible
medium and other tangible embodiments of (i) the Division Software (in source
code and object code form); (ii) the Division Documentation (iii) the Division
Products, and (iv) any other Intellectual Property Rights related to the
Division
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"Division Trade Marks" means all logos, symbols, get up, trademarks,
trade names, service marks, brand names and similar rights that are used
predominately in the Division Business, whether registered or unregistered, and
all associated goodwill, including the trade marks and registrations or
applications of the trade marks listed in Part 1 of EXHIBIT O.
"Division UK Employees" means those Division Employees and
Contractors who are providing services to the U.K. operations of the Division
Business including those listed in Part A of EXHIBIT L.
"Division US Employees" means those Division Employees and
Contractors who are providing services to the U.S. operations of the Division
Business including those listed in Part B of EXHIBIT L.
"Employee Benefit Plan" means any "employee benefit plan" (as such
term is defined in ERISA Section 3(3)) and any other material employee benefit
plan, program or arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1). "Environmental, Health, and Safety Requirements" means all
federal, state, local, and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, pollution, or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances,
or wastes, as such requirements are enacted and in effect on or prior to the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any person or entity under common control
with Seller within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Escrow Amount" means $1,000,000.
"Exclusivity Deposit" has the meaning given to it in Subsection
2(d)(i).
"GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
"Goodwill" means the goodwill of the Division Business and includes
the exclusive right for the Buyer to represent itself as carrying on the
Division Business as the Seller's successor.
"Governmental Permits" means all licenses, franchises, permits,
agreements, waivers and authorizations issued by governmental authorities in
connection with Seller's conduct of the Division Business (whether foreign,
federal, state or local) held by Seller that are necessary for the past or
present conduct of the Division.
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"Governmental Entity" means any supranational, national, state,
municipal, local or foreign government, any court, tribunal, arbitrator,
administrative agency, commission or other governmental official, authority or
instrumentality, in each case whether domestic or foreign, any stock exchange or
similar self regulatory organization or any quasi governmental or private body
exercising any regulatory, Taxing or other governmental or quasi governmental
authority and any political or other subdivision, department or branch of any of
the foregoing.
"Immediately Available Funds" means cash, bank check or telegraphic
or other electronic means of transfer of immediately available and cleared funds
into a bank account nominated in advance by the payee.
"Intellectual Property Rights" means, collectively, all intellectual
and industrial property rights throughout the world including the following
intangible worldwide legal rights, whether or not filed, perfected, registered
or recorded to the extent used by the Seller predominately (except for the name
"Island Pacific" which is not subject to the predominant limitation) in
connection with the Division Business: (i) patents, patent applications, and
patent rights, including any and all continuations, continuations-in-part,
divisions, reissues, reexaminations or extensions thereof, whether now existing
or hereafter filed, issued or acquired; (ii) rights associated with works of
authorship (including audiovisual works), including copyrights, copyright
applications, and copyright registrations, moral rights, mask work rights, mask
work applications, mask work registrations and circuit layouts; (iii) rights
relating to trade secrets, know-how and confidential information, including the
protection thereof; (iv) design rights and industrial property rights; (v) any
rights analogous to those set forth in the preceding clauses and any other
proprietary rights relating to intangible property including trademarks, service
marks, trademark and service xxxx registrations and applications therefore,
trade names, business names and business name registrations domain names and
websites (including with respect to the Division, the domain
xxx.xxxxxxxxxxxxx.xxx and the related website and including the "Island Pacific"
name and related trademarks, service marks and trade names), rights in trade
dress and packaging and all goodwill associated with the same; (vi) rights in
customer and prospect lists, trade secrets, know-how, inventions, designs, plans
and specifications and rights in the Seller's Confidential Information (as
defined in Subsection 5(o)); and (vii) all rights to xxx for any past, present
or future infringement of any of the foregoing rights and the right to all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing rights, including without limitation damages for
past, present or future infringement thereof.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rulings and regulations promulgated thereunder.
"Invention Assignment Agreements" has the meaning given to it in
Subsection 3(K)(xvi).
"Irvine Lease" means the lease between Seller and Brin-Mar, LLC
dated 29 March 1995, as amended by Amendment No.1 dated 31 January 1998,
Amendment No.2 dated 30 December 1999 and Amendment No.3 dated 10 February 2005
in respect of the property located at Newport Gateway Tower I, Suite 1200, 00000
XxxXxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000.
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"Key Employees" has the meaning given to it in Subsection 2(f)(vii).
"Knowledge" of the Seller in relation to the warranties and
representations given by the Seller under Section 3 of this Agreement and the
Seller Disclosure Letter means, with respect to any fact, circumstance, event or
other matter in question, the actual knowledge of the executive officers of the
Seller who are involved with the conduct of the Division and Seller's directors
on the date the warranty or representation is given, or the knowledge which such
officers and directors of the Seller could be reasonably expected to have on the
date in respect of which the warranty or representation is given as the result
of their specific position and duties with the Seller.
"Leased Real Property" means all leasehold or subleasehold estates
and other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property that is exclusively used in the
Division as listed on part 2 of EXHIBIT C.
"Leases" means all leases, subleases, licenses, concessions and
other agreements (written or oral), including all amendments, extensions,
renewals, guaranties, and other agreements with respect thereto, pursuant to
which Seller holds any Leased Real Property.
"Leave Benefits" means annual leave and leave loading, sick leave
and long service leave.
"Legal Requirement" means any federal, state, foreign, local,
municipal or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity and any orders,
writs, injunctions, awards, judgments and decrees applicable to Seller or to any
of its assets, properties or the Division Business.
"Liabilities" means with respect to any Person, any debts,
liabilities or obligations of such Person, of any kind, character or
description, whether accrued or fixed, absolute or contingent, matured or
unmatured, executory, determined or determinable, known or unknown, asserted or
unasserted, joint or several, vested or unvested, due or to become due,
including those arising under any Legal Requirement, those arising under any
contract or those arising in connection with any product delivered by such
Person or any service performed by such Person.
"Lien" means any mortgage, deed of trust, pledge, lien, encumbrance,
charge, security interest, collateral assignment, claim, charge, adverse claim
of title, restriction or encumbrance of any kind (including any restriction on
(a) the voting of any security or the transfer of any security or other asset,
(b) the receipt of any income derived from any asset, (c) the use of any asset,
or (d) the possession, exercise or transfer of any other attribute of ownership
of any asset).
"Material Adverse Effect" or "Material Adverse Change" means any
effect or change that would be materially adverse to the business, assets,
Liabilities, condition (financial or otherwise), operating results, operations,
public image or business prospects of the Division, or to the ability of any
party to consummate timely the transactions contemplated hereby or any event or
condition which would, with the passage of time, constitute a "Material Adverse
Effect" or "Material Adverse Change."
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"ordinary course of business" means, with respect to the Division,
the ordinary course of business consistent with Seller's past custom and
practice (including with respect to quantity and frequency).
"Pension Scheme" means the group personal pension scheme provided
through Friends Provident which is registered in the United Kingdom under
Chapter 2 Part 4 of the Finance Xxx 0000.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, any other business entity, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Prepaid Expenses" means amounts paid in advance for goods or
services, to be supplied to the Division Business in the ordinary course of
business after Closing, plus the amount of the UK Employee Advances.
"Product Warranty" means a guarantee, warranty, undertaking,
representation or promise made by a third party in connection with the quality ,
performance, promotion, supply or repair of goods included in the Acquired
Assets or affixed to or attached to the Leased Real Property or the provision of
services in respect of those goods.
"Purchase Price" means $16,000,000 as adjusted in accordance with
Section 2.
"Restricted Period" means the date from Closing up to the expiration
of 3 years from the Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Disclosure Letter" means the letter prepared and delivered
by Seller to Buyer as of the date hereof which sets forth the exceptions to the
representations and warranties contained in Section 3 hereof and certain other
information called for by this Agreement.
"Seller Indebtedness" means all debts (i) owing by the Seller and
its Affiliates on the one hand, to the Buyer and its Affiliates on the other
hand, which are set out in Exhibit F and (ii) all amounts of any nature
whatsoever owing by the Seller and its Affiliates on the one hand, to the Buyer
and its Affiliates on the other hand, at Closing, but only to the extent (i) and
(ii) arise from subcontract services for implementation of the planning product
commonly referred to as IP Planning.
"Specified Current Assets" means Accounts Receivable, plus Prepaid
Expenses plus Division Inventory.
"Sub-Lease" means the sub-Lease between the Seller and UK Sub in
respect of the UK Lease in the Agreed Form.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty, or addition thereto, whether disputed or not.
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"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Intellectual Property" means the Intellectual Property
Rights listed in Part 2 of Exhibit O.
"Threatened" means a claim, proceeding, dispute, action, or other
matter will be deemed to have been "threatened" if any demand or statement has
been made (in writing) or any notice has been given (in writing), or if any
other event has occurred or any other circumstances exist, that would lead a
prudent Person to conclude that such a claim, proceeding, dispute, legal action,
or other matter is likely to be asserted, commenced, taken, or otherwise pursued
in the future.
"Transferring Employees" means the US Transferring Employees and the
UK Transferring Employees.
"Unaudited Financial Statements" means the balance sheets and
statement of operations referred to in Subsection 3(n)(i) (Financial Statements
of the Division; Accounts Receivable).
"UK Assets" means those Acquired Assets which are owned, leased, or
licensed by Seller and used predominantly in connection with the Division
Business and which are located in the United Kingdom.
"UK Employee Advances" means the amount of remuneration advanced by
the Seller to the UK Transferring Employees as set forth on Exhibit Q.
"UK Lease" means the lease between Seller and Xxxxxx Properties
Limited in respect of the property located at Xxx Xxxxxxxx Xxxx Xxxxx Xxxx Xxxx
Xxxxxxx Xxxx, Xxxxx.
"UK Transferring Employees" means the Division UK Employees who
continue employment with the Division Business following Closing.
"US Transferring Employees" means the Division US Employees who
accept an offer of employment made by the Buyer under Subsection 5(n)(ii) of
this Agreement.
"Vendor Finance" means the finance which may be made available by
Seller to Buyer as contemplated by the provisions of Section 2(d)(ii).
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Section 1 shall have the meanings assigned to such terms in this
Agreement.
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2. Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement:
(i) Seller agrees to sell, transfer, convey, and
deliver to 3Q and 3Q agrees to purchase all right, title and
interest in and to the Division Software, the Division
Documentation, the Division Intellectual Property Rights (including
Seller's right and interest in all Third Party Intellectual
Property) and the Division Technology Deliverables ("Division IP and
Technology");
(ii) Seller agrees to sell, transfer, convey, and
deliver to ARS, and ARS agrees to purchase the right, title and
interest in and to the Acquired Assets (other than the Division IP
and Technology and the UK Assets); and
(iii) Seller agrees to sell, transfer, convey, and
deliver to UK Sub, and UK Sub agrees to purchase the right, title
and interest in and to the UK Assets (other than the Division IP and
Technology), in each case free and clear of all Liens on and as of
the Closing for the assumption of the Assumed Liabilities and the
payment of the consideration specified below in this Section 2.
(b) Title and Risk. Title and risk in the Acquired Assets passes
to Buyer on Closing.
(c) Assumption and Exclusion of Liabilities.
(i) Assumed Liabilities. Subject to the terms and
conditions of this Agreement, Buyer, upon the successful
consummation of the sale and purchase of the Acquired Assets
pursuant hereto on the Closing Date, will assume and pay, perform
and discharge when due those, and only those, obligations and
liabilities of Seller under and with respect to (A) any Assigned
Agreements, to the extent that such obligations and liabilities
first accrued or arose after the Closing Date for reasons other than
any breach, violation or default by Seller of the terms of the
Assigned Agreements and (B) those liabilities and obligation of
Seller specified on EXHIBIT D, attached hereto ((A) and (B)
together, the "Assumed Liabilities").
(ii) No Other Liabilities Assumed. Notwithstanding
anything else, as a material consideration and inducement to Buyer
to enter into this Agreement, Seller will retain, and will be solely
responsible for paying, performing and discharging when due, and
Buyer will not assume or otherwise have any responsibility or
liability for, any and all Liabilities of Seller (whether now
existing or hereafter arising) other than the Assumed Liabilities
(the "Excluded Liabilities").
(d) Exclusivity Deposit; Purchase Price; Closing Division Net
Tangible Asset Value.
(i) Exclusivity Deposit. Buyer has paid Seller the sum
of $100,000 as a refundable deposit ("Exclusivity Deposit") in
consideration for Seller's Exclusivity Covenant set forth in Section
7(b). On the date on which the parties execute this Agreement, the
amount of the Exclusivity Deposit together with all interest accrued
thereon shall be refunded to Buyer in Immediately Available Funds.
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(ii) Purchase Price. Subject to Seller complying in
full with its obligations under Subsection 2(f), Buyer agrees to pay
to Seller at the Closing an amount (the "Closing Payment") equal to
Sixteen Million dollars ($16,000,000) less (A) any Vendor Finance
and (B) the Escrow Amount, by wire or such other means as the
Buyer's financiers may require of Immediately Available Funds to an
account designated by Seller. At Closing, Buyer agrees to deliver
the Escrow Amount on account of Seller by wire or such other means
the Buyer's financiers may require of Immediately Available Funds to
an account designated by California Bank & Trust, as escrow agent
("Escrow Agent") to be held by Escrow Agent pursuant to an escrow
agreement in substantially the form of EXHIBIT E attached hereto
(the "Escrow Agreement"). Buyer acknowledges that the Escrow Amount
is the property of Seller and will be held by Escrow Agent as a fund
from which Buyer may be reimbursed for breach of Seller's
indemnification obligations as set forth in Section 8 below and for
any Downward Adjustment Amount as set forth in Subsection 2(d)(viii)
below.
(iii) Vendor Finance. Seller agrees to grant Buyer
Vendor Finance up to an amount equal to three million dollars
($3,000,000) should the Buyer require, on such arms length terms and
conditions acceptable to Seller in Seller's sole and absolute
discretion.
(iv) Preparation of the Division Net Tangible Assets
Certificate. The Seller no later than 30 Business Days after the
date of Closing will prepare and deliver the Division Net Tangible
Assets Certificate to Buyer. Seller must provide to Buyer and
Buyer's representatives access to all the information, books,
records and working papers which Buyer may reasonably require and
request from Seller in writing relating to the calculation of the
Specified Current Assets and the preparation of the Division Net
Tangible Assets Certificate.
(v) Closing Division Net Tangible Asset Value
Agreement. The Buyer must complete its examination and review of the
Division Net Tangible Assets Certificate within twenty (20) Business
Days of receiving the Division Net Tangible Assets Certificate
pursuant to Subsection 2(d)(iii), and notify Seller in writing
during this twenty (20) Business Day period if it disagrees in good
faith with the amount of the Closing Division Net Tangible Asset
Value specified in the Division Net Tangible Assets Certificate. If
Buyer does not notify Seller during this twenty (20) Business Day
period that it disagrees with the amount of the Closing Division Net
Tangible Asset Value specified in the Division Net Tangible Assets
Certificate then the Division Net Tangible Asset Certificate will be
deemed to be final and will be conclusive, final and binding on the
parties. For purposes of this Agreement "Division Net Tangible Asset
Value" shall mean the Specified Current Assets as of the Closing and
in accordance with GAAP (excluding cash and cash equivalents) less
the Leave Benefits in respect of the UK Transferring Employees.
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(vi) Closing Division Net Tangible Asset Value
Disputes. If Buyer disagrees with any item within the Division Net
Tangible Assets Certificate, Buyer shall deliver a written notice to
the Seller within twenty (20) Business Days following the Closing
Date pursuant to Subsection 2(d)(iv) disagreeing with such item and
setting forth Buyer's calculation of such item (a "Notice of
Disagreement"). Any such Notice of Disagreement shall, to the extent
reasonably practicable, specify in reasonable detail those items or
amounts as to which Buyer disagrees, and, to the extent practicable,
shall set forth in reasonable detail Buyer's calculation of those
items or amounts, together with an explanation of the disagreement.
If Buyer delivers a Notice of Disagreement pursuant to this
Subsection 2(c)(vi), Buyer and Seller shall, during the 30 days
following such delivery, use reasonable efforts to reach agreement
on the disputed items or amounts (with such agreement, sometimes
referred to herein as the "Closing Division Net Tangible Asset Value
Resolution").
(vii) Independent Accounting. If Buyer and Seller are
unable to reach a Closing Division Net Tangible Asset Value
Resolution during the 30 day period following the delivery of a
Notice of Disagreement pursuant to Subsection 2(d)(iv), Buyer and
Seller shall promptly thereafter cause independent accountants
reasonably satisfactory to Buyer and Seller (the "Independent
Accountants") to review the disputed items or amounts for the sole
purpose of calculating the Closing Division Net Tangible Asset Value
and for the sole purpose of determining whether there should be an
adjustment to the Purchase Price based on the Closing Division Net
Tangible Asset Value (the "Independent Accountants' Closing Division
Net Tangible Asset Value Analysis"). In calculating the Independent
Accountants' Closing Division Net Tangible Asset Value Analysis,
such Independent Accountants shall consider only those items or
amounts in the calculation of Closing Division Net Tangible Asset
Value as to which Buyer and Seller have disagreed. Such Independent
Accountants shall deliver to Buyer and Seller, as promptly as
practicable (and in any event within 30 days following the delivery
of the Notice of Disagreement to Seller), a report that explains any
discrepancies and sets forth the Independent Accountants'
calculation of the Closing Division Net Tangible Asset Value. Such
report and the calculations set forth therein shall be final and
binding upon Buyer, Seller and their respective Affiliates and shall
not be subject to challenge in a court of law or otherwise. The cost
of such review and report shall be borne equally by the Buyer and
the Seller.
(viii) Purchase Price Adjustments. If the Closing
Division Net Tangible Asset Value is less than $800,000 then within
ten (10) days of the date on which the Closing Division Tangible
Asset Value is agreed or determined in accordance with Subsections
2(d)(iv), (v) or (vi) respectively, the Parties shall mutually
instruct the Escrow Agent to distribute from the Escrow Fund to
Buyer an amount equal to the shortfall, as a downwards adjustment to
the Purchase Price ("Downward Adjustment Amount"). To the extent
that the Downward Adjustment Amount exceeds the Escrow Amount,
Seller shall immediately deliver to Buyer in cash the amount by
which the Downward Adjustment Amount exceeds the Escrow Amount.
Conversely, if the Closing Division Net Tangible Asset Value is
greater than $800,000, then Buyer shall deliver in cash to Seller
the amount of any such excess as an upwards adjustment to the
Purchase Price ("Upwards Adjustment") on the later of the date which
is ten (10) days from the date on which the Closing Division Net
Tangible Asset Value is agreed or determined in accordance with
Subsections 2(d)(iv), (v) or (vi) respectively and the date on which
Accounts Receivable to the value of the Upwards Adjustment have been
collected by the Buyer Group. Buyer will use its best efforts
collect each of the Accounts Receivable immediately upon such
Accounts Receivable becoming due, provided that nothing in this
Subsection 2(d)(viii) will oblige the Buyer to institute legal
proceedings.
12
(e) The Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing", with the date upon which the Closing occurs, sometimes referred to
herein as the "Closing Date") shall take place at the offices of Xxxxxxx Xxxx
Seidenwurm & Xxxxx LLP, 000 X Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx,
commencing at 10:00 a.m. local time on the third Business Day following the
satisfaction or waiver of all conditions specified in Section 6 and when each of
the events in Subsections 2(f) and 2(g) must take place or in such other manner,
time and date as the parties may mutually agree in writing.
(f) Certain Closing Deliveries of Seller. At the Closing, (in
addition to Seller's delivery of the items, documents and certificates to be
delivered by Seller at the Closing pursuant to Section 6(b), Seller will deliver
or cause to be delivered to Buyer all of the following items:
(i) counterparts of one or more Xxxx of Sale in
substantially the form of Exhibit G attached hereto (the "Xxxx of
Sale") conveying in the aggregate all of Seller's ownership in
personal property included in the Acquired Assets and executed on
Seller's behalf by a duly authorized officer of Seller;
(ii) counterparts of the assignment and assumption
agreement in substantially the form of Exhibit H attached hereto
(the "Assumption Agreement") with respect to the Assigned Agreements
and executed by a duly authorized officer of Seller;
(iii) a receipt for the Closing Payment, executed by a
duly authorized officer of Seller;
(iv) counterparts of the Escrow Agreement executed by a
duly authorized officer of Seller;
(v) assignments from Seller to Buyer of all registered
and unregistered copyrights, trademarks and service marks included
in the Acquired Assets, duly executed on behalf of Seller by a duly
authorized officer of Seller and notarized, and in a form acceptable
for recording with the United States Copyright Office or the United
States Patent and Trademark Office, as applicable, and in
substantially the form of EXHIBIT J hereto (the "Xxxx Assignment");
(vi) assignment from Seller to Buyer of all Domain
Names and other Intellectual Property Rights (other than those
assigned above) included in the Acquired Assets, duly executed on
behalf of Seller by a duly authorized officer of Seller;
(vii) written evidence that at least 80% of the Division
Employees and Division Contractors, including all of the key
Division Employees and Division Contractors listed in EXHIBIT N and
any other Division Employees and Division Contractors that Buyer
notifies to Seller as being, in its sole and absolute discretion,
"key" employees or contractors ("Key Employees"), in the case of
Division US Employees have accepted the Buyer's offer of employment
made under Subsection 5(n)(ii) or, in the case of Division UK
Employees who transfer pursuant to TUPE have agreed to transfer to
Buyer;
13
(viii) written evidence in the form reasonably
satisfactory to Buyer, of full discharge of all Liens over any of
the Acquired Assets;
(ix) duly executed counterparts of the Sub-Lease;
(x) duly executed counterparts of the Transitional
Services Agreement in substantially the form of Exhibit M attached
hereto; and
(xi) subject to Subsection 5(t), duly executed
counterparts of, a deed of assignment in respect of the Irvine Lease
or a written sublease for the Irvine Lease, in a form mutually
agreeable to the Parties.
(g) Certain Closing Deliveries of Buyer. Subject to Seller
complying with its obligations under Subsection 2(f), in addition to Buyer's
delivery of the items, documents and certificates to be delivered by Buyer
pursuant to Section 6(c)), Buyer will deliver or cause to be delivered to Seller
all of the following items:
(i) the Closing Payment in Immediately Available
Funds;
(ii) counterparts to the Assumption Agreement, executed
on behalf of Buyer by a duly authorized officer of Buyer;
(iii) counterparts of the Sub-Lease and, subject to
Subsection 5(t), duly executed counterparts of, a deed of assignment
in respect of the Irvine Lease or a written sublease for the Irvine
Lease, in a form mutually agreeable to the Parties;
(iv) counterparts of the Escrow Agreement, executed on
Buyer's behalf by a duly authorized representative of Buyer.
(h) Assignment of Division Intellectual Property Rights. With
effect from Closing, the Seller assigns the Division Intellectual Property
Rights to the Buyer.
(i) Closing Simultaneous. Subject to the right of either party to
waive any or all of the actions that the other party is required to perform
under Subsections 2(f) or (g) above (as applicable), the actions to take place
as contemplated by Subsections 2(f) and (g) above are interdependent and must
take place, as nearly as possible, simultaneously. If one action does not take
place, then without prejudice to any rights available to any party as a
consequence: (A) there is no obligation on any party to undertake or perform any
of the other actions; (B) to the extent that such actions have already been
undertaken, the parties must do everything reasonably required to reverse those
actions; and (C) Seller and Buyer must each return to the other all documents
delivered to it under Subsections 2(f) and (g) and must each repay to the other
all payments received by it under Subsections (2)(f) and (g), without prejudice
to any other rights any party may have in respect of that failure.
14
(j) Method of Delivery; Transfer Taxes. At the Closing, Seller
shall deliver or cause to be delivered to Buyer or an Affiliate of Buyer, as
applicable, all of the Acquired Assets, which shall be delivered to 3Q, UK Sub
and ARS in the manner directed by Buyer consistent with Section 2(a)(i), (ii)
and (iii) above in the form and to the location to be determined by Buyer in its
reasonable discretion on or before the Closing Date at Buyer's cost and expense;
provided, however, that to the extent practicable, Seller shall deliver all of
the Acquired Assets through electronic delivery. Buyer will pay all sales,
transfer, bulk sales, stamp, income, capital gains, use or other Taxes
(excepting income taxes) associated with the transactions contemplated by this
Agreement.
3. Seller's Representations and Warranties. The Seller represents and
warrants to Buyer as follows, in each case subject to such exceptions as are set
forth in the Seller Disclosure Letter:
(a) Incorporation and Authority. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all necessary corporate power and authority to own the
Acquired Assets and carry on the Division Business as it is being carried on
prior to Closing, to perform all of its obligations under the Assigned
Agreements and to enter into this Agreement, the Xxxx of Sale, the Assumption
Agreement, the Escrow Agreement, the Sub-Lease, the Invention Assignment
Agreements the Transitional Services Agreement (the Xxxx of Sale, the Escrow
Agreement, the Assumption Agreement, the Sub-Lease, the Invention Assignment
Agreements, the Transitional Services Agreement, together with all other
assignments and documents that Seller is to execute and deliver pursuant to this
Agreement being hereinafter collectively referred to as the "Ancillary
Agreements"), to carry out and perform its obligations hereunder and thereunder
and to consummate all of the transactions contemplated hereby and thereby. The
execution, delivery and performance by Seller of this Agreement and the
Ancillary Agreements, and the sale of the Acquired Assets to Buyer and
consummation of all the transactions contemplated hereby and thereby on the
terms and conditions set forth herein and therein, have been duly and validly
authorized by Seller by all necessary corporate action of Seller's Board of
Directors. No action on the part of Seller's stockholders is necessary to
consummate the transactions contemplated hereby or pursuant to the Ancillary
Agreements. This Agreement has been, and at the Closing the Ancillary Agreements
will be, duly and validly executed and delivered by Seller, and (assuming due
authorization, execution and delivery by Buyer) this Agreement constitutes and,
upon the execution of each of the Ancillary Agreements by the parties thereto,
the Ancillary Agreements will constitute, legal, valid and binding obligations
of Seller enforceable against Seller in accordance with their respective terms,
except to the extent that enforceability may be limited by bankruptcy,
moratorium, and other laws affecting the enforcement of creditors' rights
generally and by principles of equity. Notwithstanding the forgoing, Seller
makes no representation nor warranty regarding Buyer's ability to require Seller
to provide Vendor Finance as set forth in Section 2(d)(iii).
(b) Non-contravention; Consents; and Approvals. Except as set
forth on Schedule 3(b) of the Seller Disclosure Letter, the execution, delivery
and performance of this Agreement and the Ancillary Agreements by Seller, do not
and will not: (i) conflict with or violate the Certificate of Incorporation or
By-laws of Seller; (ii) conflict with or violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
the Acquired Assets or Assumed Liabilities; (iii) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, rescission, amendment, acceleration or cancellation of, any of the
Assigned Agreements or any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument relating to any of the
Acquired Assets to which Seller is a party or is bound or by which any of the
Acquired Assets are bound or affected; or (iv) result in the creation of any
Lien on any of the Acquired Assets. Except as set forth on Schedule 3(b), the
execution and delivery of this Agreement and the Ancillary Agreements by Seller
do not, and the performance of this Agreement and the Ancillary Agreements by
Seller (including Seller's assignment of any Assigned Agreements to Buyer) will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any third party, including but not limited to any
governmental or regulatory authority.
15
(c) Title to and Condition of Acquired Assets. Seller legally and
beneficially owns all the Acquired Assets and Seller has good and marketable
title in and to all the Acquired Assets, and will transfer the Acquired Assets
to Buyer at the Closing free and clear of all Liens whatsoever. Except as set
forth in Schedule 3(c) of the Sellers Disclosure Letter, none of the Acquired
Assets is licensed from any third party and none of the Acquired Assets is
licensed to any third party or the subject of any agreements or arrangements to
dispose or not to dispose or which otherwise restrict their use or disposal.
Except as set forth in Schedule 3(c), the Acquired Assets are sufficient for the
continued conduct of the Division Business after the Closing in substantially
the same manner as conducted prior to the Closing. Seller will not own or have
the right to use any of the Acquired Assets after the Closing. No third party
has claimed to be entitled to a Lien in relation to any of the Acquired Assets.
All of the tangible personal property included in the tangible Acquired Assets
is in good working condition and repair, ordinary wear and tear excepted.
(d) Division Inventory. The Division Inventory was created in
accordance with the Seller's past practices and consists of items of
merchantable quality and quantity usable or saleable in the ordinary course of
the Division Business, and is saleable in the usual course of business in
accordance with Seller's current price list, and are not obsolete, damaged,
slow-moving or defective and have been regularly and properly serviced and
maintained in a manner that would not void, limit or otherwise adversely affect
the coverage of any warranty thereon.
(e) Plant and equipment. All plant, machinery, vehicles, furniture
and equipment owned or used by Seller in the Division Business and included in
the Acquired Assets: (i) are listed on part 1 of EXHIBIT C, (ii) to Seller's
Knowledge are in good working order subject to ordinary wear and tear and have
been regularly and properly maintained; (iii) are capable of performing the
functions for which they are used; (iv) are properly recorded in the books of
the Division Business in accordance with GAAP; (v) to the Seller's Knowledge
comply and conform in all material respects with all applicable laws and all
standards, and have not been repaired, altered, modified, operated or maintained
in a way that would void, limit or otherwise adversely affect any warranty
provided thereon; and (vi) are not dangerous, inefficient, out-of-date,
unsuitable or in need of renewal or replacement.
(f) Legal Compliance.
(i) Seller has complied in all material respects with
By-laws of Seller and has complied in all material respects with, is
not in material violation of, and has not received any notices of
violation with respect to, any Legal Requirement, with respect to
the Division Business. To Seller's Knowledge, no event has occurred
or circumstance exists that (with or without notice or lapse of
time) (A) may constitute or result in a violation by Seller or a
failure on the part of Seller to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature relating to a Legal Requirement.
Neither Seller nor, to the Knowledge of Seller, any director,
officer, Affiliate or employee of Seller (in their capacities as
such or relating to their employment, services or relationship with
Seller), has given, offered, paid, promised to pay or authorized
payment of any money, any gift or anything of value, with the
purpose of influencing any act or decision of the recipient in his
or her official capacity or inducing the recipient to use his or her
influence to affect an act or decision of a government official or
employee, to any (i) governmental official or employee, (ii)
political party or candidate thereof, or (iii) Person while knowing
that all or a portion of such money or thing of value would be given
or offered to a governmental official or employee or political party
or candidate thereof.
16
(ii) Seller has obtained each federal, state, county,
local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which
Seller currently operates or holds any interest in any of the
Acquired Assets or (ii) that is required for the operation of the
Division Business or the holding of any such interest in the
Acquired Assets (all of the foregoing consents, licenses, permits,
grants, and other authorizations, collectively, the "Seller
Authorizations"), and all of the Seller Authorizations are in full
force and effect (except where a failure would have no Material
Adverse Effect). Seller has not received any written notice from any
Governmental Entity regarding (i) any actual or possible violation
of law or any Seller Authorization or any failure to comply with any
term or requirement of any Seller Authorization, (ii) any actual or
possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Seller Authorization. To Seller's
Knowledge, Seller has materially complied with all of the terms of
the Seller Authorizations. Seller has not undertaken any
investigation of whether any thing would adversely and materially
affect the continuance, renewal or extension of the Seller
Authorizations in favor of Buyer, but has no Knowledge that any
thing would adversely and materially affect the continuance, renewal
or extension of the Seller Authorizations in favor of Buyer.
(g) Full Force and Effect. Each permit, franchise or other
instrument assigned to or assumed by Buyer pursuant to this Agreement or any of
the Ancillary Agreements is in full force and to the Knowledge of Seller is not
subject to any breach or default thereunder by any party thereto.
(h) Litigation. Except as set forth on Schedule 3(h) of the Seller
Disclosure Letter, there is no private or governmental action, suit, proceeding,
claim, arbitration, mediation or investigation pending before any Governmental
Entity, or, to Seller's Knowledge, Threatened against Seller with respect to the
Division or any of the Acquired Assets or to Seller's Knowledge any of Seller's
directors, officers or employees (in their capacities as such or relating to
their employment, services or relationship with the Division) nor has Seller
been involved in any such action or been Threatened with such action in the
preceding 3 years. There is no judgment, decree, injunction, rule or order
against Seller, any of the Acquired Assets or, to Seller's Knowledge, any of
Seller's directors, officers or employees (in their capacities as such or
relating to their employment, services or relationship with the Division). To
Seller's Knowledge, there is no basis for any Person to assert a claim against
Seller or any of the Acquired Assets based upon: (a) Seller entering into this
Agreement or any of the other transactions or agreements contemplated hereby;
(b) any confidentiality or similar agreement entered into by Seller regarding
the Acquired Assets; or (c) any claim that Seller has agreed to sell or dispose
of the Acquired Assets to any party other than Buyer, whether by way of merger,
consolidation, sale of assets or otherwise. Seller has no action, suit,
proceeding, arbitration, mediation or claim pending or Threatened by it against
any other Person relating to the Acquired Assets.
17
(i) Brokers. Except as set forth on Schedule 3(i) of the Seller
Disclosure Letter, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller or its Affiliates.
(j) Real Property. Seller does not own fee title to any real
property used in the Division, nor has Seller ever owned fee title to any real
property used in the Division. Part 2 of EXHIBIT C sets forth the address of
each parcel of Leased Real Property, and a true and complete list of all Leases
for each such parcel of Leased Real Property. Seller has provided Buyer true,
correct and complete copies of all Leases for each Leased Real Property. All
such Leases are currently, and will at the Closing remain, valid and effective
in accordance with their respective terms, and there is not now nor at the
Closing will there be, under any of such Lease agreements, any existing default
or event of default (or event which with notice or lapse of time, or both, would
constitute a default). Seller has not received any written notice of a default,
alleged failure to perform, or any offset or counterclaim with respect to any
such Leases, which has not been fully remedied and withdrawn. Except as
explicitly set forth on Section 3(j)-1 of the Seller Disclosure Letter, (A) the
contracts governing each Leased Real Property permit the Seller to freely enter
into subleases and licenses (subject to any consents or approvals required by
such Leases) with respect to the properties; and (B) the Closing will not affect
the enforceability against any Person of any such Leases or the rights of Seller
to the continued use and possession of any of the Leased Real Property for the
conduct of business as presently conducted, and (C) there are no other Persons
occupying, and Seller has not granted any other Persons a right to occupy any of
the Leased Real Property.
(i) To Seller's Knowledge (A) the Leased Real Property
is in good operating condition and repair and is reasonably
sufficient and otherwise suitable for the conduct of the business as
presently conducted therein, (B) there are no structural,
electrical, mechanical, plumbing, roof, paving or other defects in
any improvements located on the Leased Real Property that could,
either individually or in the aggregate, have an adverse effect on
the use, occupancy or operation thereof as presently contemplated,
(C) there are no Laws, covenants or restrictions, or any change
contemplated therein, or any judicial or administrative action, or
action by adjacent landowners, or natural or artificial conditions
upon any Leased Real Property or any other facts or conditions which
could, in the aggregate, have an adverse effect on the licensing,
subleasing, use, occupancy or operation of any such real property,
(D) all utilities required for the conduct of the business as
presently conducted are installed and legally available for use at
Leased Real Property upon payment at market rate consumption
charges, and (E) Seller has obtained all licenses, permits,
variances, approvals, authorizations, easements and rights of way,
required from all Governmental Entities having jurisdiction over any
of the Leased Real Property, or from private parties, for the
intended use, operation and occupancy of such Leased Real Property.
18
(ii) To Seller's Knowledge there are no circumstances
which would entitle any landlord, licensor or other Person to
currently terminate any such Lease of the Leased Real Property or
would otherwise restrict or terminate the continued possession or
occupation of the Leased Real Property.
(iii) To Seller's Knowledge there are no: (A)
outstanding disputes with, or complaints by, third parties relating
to the Leased Real Property or likely to affect the present or any
other proposed use or enjoyment of the Leased Real Property; or (B)
notices, orders or planning proposals which have been served on the
Seller or otherwise notified by any local or territorial authority
which affects adversely or is likely to affect adversely the Leased
Real Property directly or indirectly; or (C) covenants,
restrictions, stipulations or conditions affecting the Leased Real
Property which are of an unusual or onerous nature or which
adversely affect the value or the present or any other proposed use
of the Leased Real Property; or (D) conditions affecting the Leased
Real Property or the operation of the Seller which might give rise
to any liability or obligation on the part of the Buyer under any
Environmental and Safety Laws. Seller has valid leasehold and
subleasehold estates and license agreements, as applicable, in all
of the Leased Real Property, free and clear of any Liens on account
of Seller, except (E) Liens on account of Seller that will be
removed at or prior to Closing, (F) Liens on account of Seller for
Taxes not yet due and payable, and (G) such imperfections of title
and encumbrances on account of Seller, if any, which do not detract
from the value or interfere with the present access to and use of
the property subject thereto or affected thereby.
(k) Intellectual Property.
(i) Seller has fully disclosed in the Disclosure
Materials all Division Intellectual Property Rights and all
arrangements relating to any Third Party Intellectual Property
owned, licensed or used by Seller in connection with the Division
Business.
(ii) The Acquired Assets include all Intellectual
Property Rights necessary to enable Buyer to conduct the Division
Business in the manner in which such business has been and is
currently conducted without the need for any license from any Person
(other than for Third Party Intellectual Property or permits which
Buyer may need to operate under applicable law).
(iii) Seller has an enforceable right to use all Third
Party Intellectual Property and these rights are comprised in the
Assigned Agreements. Upon consummation of the Asset Purchase, except
as set forth in the Disclosure Letter, Buyer will be entitled to use
all Third Party Intellectual Property on terms no less favorable
than those which applied to Seller immediately prior to the Closing.
The Acquired Assets and the conduct of the Division Business, as
currently conducted, do not infringe upon any Intellectual Property
Rights of any third party to Seller's Knowledge and no third party
has asserted or Threatened to assert against Seller any claim of
infringement of Intellectual Property Rights. Seller has not
received any opinion of counsel that any Division Products (as
defined below) or the operation of the Division Business infringes
or misappropriates any Intellectual Property Rights of any third
party.
19
(iv) To Seller's Knowledge, there is no unauthorized
use, unauthorized disclosure, infringement or misappropriation of
any Intellectual Property Rights included in the Acquired Assets, by
any employee of Seller or to Seller's Knowledge by any former
employee of Seller or by any other third party. Seller has not
brought any action, suit or proceeding for infringement or
misappropriation of any Intellectual Property Rights included in the
Acquired Assets.
(v) Seller is sole legal and beneficial owner of,
possesses, has the exclusive right to make, use, sell, license, has
the right to bring actions for the infringement of, and where it has
deemed necessary, has made timely and proper applications for, the
Intellectual Property Rights that are included in the Acquired
Assets, free and clear of all Liens and third party interests.
(vi) Except as set forth in Section 3(k)(vi) of the
Seller Disclosure Letter, Seller has not granted any third party any
licenses or other rights to any of the Acquired Assets.
(vii) EXHIBIT P lists all products and services
produced, marketed, licensed, sold, distributed or performed by or
on behalf of the Division and all products and services currently
under development by the Division by name, and if applicable, by
version number (collectively, the "Division Products") and each
Division Product performs its intended functions (as set out in
Exhibit P), and is designed and manufactured in accordance with the
Seller's standard procedure.
(viii) Part 1(C) of EXHIBIT O lists all Division
Registered Intellectual Property (as defined below) including the
jurisdictions in which each such item of Division Registered
Intellectual Property has been issued or registered or in which any
application for such issuance and registration has been filed, or in
which any other filing or recordation has been made. For purposes
hereof "Division Registered Intellectual Property" means all United
States, international and foreign: (A) patents and patent
applications (including provisional applications); (B) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to
trademarks; (C) registered Internet domain names including
xxx.xxxxxxxxxxxxx.xxx and any other domain names used by the
Division; (D) registered copyrights and applications for copyright
registration; and (E) any other Intellectual Property Right that is
the subject of an application, certificate, filing, registration or
other document issued, filed with, or recorded by any Governmental
Entity owned by, registered or filed in the name of, Seller (or any
Affiliate of Seller) and that is part of the Acquired Assets.
(ix) Each item of Division Registered Intellectual
Property is valid (or in the case of applications, applied for), all
registration, maintenance and renewal fees currently due in
connection with such Division Registered Intellectual Property have
been paid and all documents, recordations and certificates in
connection with such Division Registered Intellectual Property
currently required to be filed have been filed with the relevant
patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the
purposes of prosecuting, maintaining and perfecting such Division
Registered Intellectual Property and recording Sellers's ownership
interests therein, except where a failure to do so would not have a
Material Adverse Effect.
20
(x) Seller has not transferred ownership of any
Intellectual Property Right that is included in the Acquired Assets
to any third party, or permitted Seller's rights in any such
Intellectual Property Right that is included in the Acquired Assets
to enter the public domain.
(xi) Seller has held the source code for the Division
Software and Division Products as confidential and except as
disclosed in Section 3(k)(xi) of the Seller's Disclosure Letter, has
not given any third party access to or a copy of any source code for
any part of the Division Products or Division Software.
(xii) The source code and documentation for the Division
Software and Division Products is: (A) in the possession of Seller
and all versions thereof (including the latest version) will be
delivered to Buyer pursuant to this Agreement; and (B) will be
sufficient to enable Buyer to use, modify and develop the Division
Software and Division Products in a manner consistent with the
Seller's past use, modification, and development.
(xiii) None of the Acquired Assets is held or used
pursuant to a license or similar grant of rights from any third
party other than "off-the-shelf" software.
(xiv) No agreement or contract with respect to any of
the Acquired Assets grants any third party rights to or under any
Intellectual Property Right included in the Acquired Assets (other
than the sale or nonexclusive license of products to Division
customers in the ordinary course of business) or grants any third
party the right to sublicense any Intellectual Property Right
included in the Acquired Assets.
(xv) Neither Seller nor any of its Affiliates is liable
for, nor has made any contract or arrangement whereby it may become
liable to, any Person for any royalty, fee or other compensation for
the ownership, use, license, lease, sale, distribution, manufacture,
reproduction or disposition of any Acquired Asset.
(xvi) All employees and consultants of Seller, and any
other third parties who have been involved in the product
development of the Division or Division Software or who were
otherwise involved in the creation and/or development of any
Division Software, the Division Documentation, the Division
Intellectual Property Rights and/or the Division Technology
Deliverables, have executed (or will execute prior to the Closing)
Seller's standard form invention assignment agreements (the
"Invention Assignment Agreements") or other agreement addressing
such matter, all of which have been delivered to Buyer's counsel
prior to Closing and all employees and consultants of Seller who
have access to confidential information or trade secrets of the
Division and/or which relate to Acquired Assets or the Seller's
Confidential Information have executed appropriate nondisclosure
agreements which have been delivered to Buyer's counsel prior to
Closing.
21
(xvii) Part 2(A) of Exhibit O lists all software or
other material that is distributed as "free software", "open source
software" or under similar licensing or distribution terms
(including but not limited to the GNU General Public License (GPL),
GNU Lesser General Public License (LGPL), Mozilla Public License
(MPL), BSD licenses, the Artistic License, the Netscape Public
License, the Sun Community Source License (SCSL) the Sun Industry
Standards License (SISL) and the Apache License) ("Open Source
Materials") used by Seller in the Division in any way, and describes
the manner in which such Open Source Materials were used (such
description shall include whether (and, if so, how) the Open Source
Materials were modified and/or distributed by Seller). Seller is in
compliance with the terms and conditions of all licenses for the
Open Source Materials.
(xviii) Seller has not (i) incorporated Open Source
Materials into, or combined Open Source Materials with, the Division
Intellectual Property Rights or any of the Division Products; (ii)
distributed Open Source Materials in conjunction with any Division
Intellectual Property Rights or any of the Division Products; or
(iii) used Open Source Materials, in such a way that, with respect
to (i), (ii), or (iii), creates, or purports to create obligations
for Seller with respect to any Division Intellectual Property Rights
or grant, or purport to grant, to any third party, any rights or
immunities under any Division Intellectual Property Rights
(including using any Open Source Materials that require, as a
condition of use, modification and/or distribution of such Open
Source Materials that other software incorporated into, derived from
or distributed with such Open Source Materials be (A) disclosed or
distributed in source code form, (B) be licensed for the purpose of
making derivative works, or (C) be redistributable at no charge).
(xix) Seller has not entered into any settlement,
release, co-existence or other agreement, and to Seller's Knowledge
there are no other circumstances that would adversely affect the
Seller's right to use, enforce or assign any of the Division IP and
Technology or Third Party Intellectual Property.
(xx) To Seller's Knowledge no trade secret or other
confidential information included in the Division IP and Technology
has been disclosed or made available to any third party or Seller's
Affiliate except in the ordinary course of business and subject to a
binding obligation of confidentiality on the part of the recipient.
(xxi) Seller does not carry on the Division Business
under any name other than its corporate name or the business names
listed in Part 1 of Exhibit O. Seller is validly licensed to use
each of the domain names which are the subject of the Division
Domain Names. The Division Domain Names are freely transferable to
Buyer and are in good standing. All domain names used in the
Business are listed in Part 1 of Exhibit O.
22
(l) Information Technology.
(i) Seller owns or is licensed to use all the
information technology and telecommunications systems, hardware and
Division Software used in or reasonably necessary for the conduct of
the Division Business as conducted prior to and at Closing.
(ii) All Division Software used by Seller is not wholly
or partly dependent on any facilities that are not under the
ownership, operation and control of Seller.
(iii) Seller creates and maintains accurate back-ups of
all data stored on or processed by the Division Software used by
Seller at least as frequently as every 24 hours.
(iv) Seller has up to date disaster recovery plans for
the Division Software which are designed to minimise the impact of
any loss of, damage to or material interruption in use of any
Division Software on the conduct of the Division Business and which
comply with best information technology industry practice.
(m) Product Warranties; Defects. Each Division Product has been in
substantial conformity with all applicable contractual commitments and all
express warranties made by the Seller and there is, to Seller's Knowledge, no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any such contractual
commitments or express warranties for replacement or repair thereof or other
damages in connection therewith. No Division Product is subject to any guaranty,
warranty, or other indemnity beyond the Seller's applicable standard terms and
conditions of sale, lease or licensing (as set forth in written agreements that
Seller has delivered to Buyer) or beyond that imposed by applicable law.
(n) Financial Statements of the Division; Accounts Receivable.
(i) Seller has delivered to Buyer unaudited balance
sheets of the Division as of March 31, 2007 and as of August 31,
2007 (the "Unaudited Balance Sheet") and an unaudited statement of
operations of the Division for the fiscal years ended March 31,
2005, March 31, 2006, March 31, 2007 and in respect of the period
from March 31, 2007 to the last day of August, 2007 (collectively,
the "Unaudited Financial Statements"), a copy of each of which is
included in Section 3(n)(i)-1 of the Seller Disclosure Letter.
(ii) The Financial Statements: The Unaudited Financial
Statements (A) are derived from and in accordance with the books and
records of the Division, (B) comply in all material respects with
applicable accounting requirements with respect thereto as of their
respective dates, (C) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated and
consistent with each other, and (D) give a true and fair view of the
financial condition of the Division at the dates therein indicated
and the results of operations of the Division for the periods
therein specified, including and as adjusted for all costs that
would be incurred as if the Division would have operated independent
of the Seller and all appropriate adjusted allocations for all costs
and obligations shared or conducted jointly with the Seller and its
other businesses and the Division. Seller does not have any
obligations or Liabilities with respect to the Division of any
nature other than (i) those set forth or adequately provided for in
the Unaudited Financial Statements, and (ii) those incurred in the
conduct of Seller's operation of the Division since the Balance
Sheet Date in the ordinary course of business, which are of the type
that ordinarily recur and, individually or in the aggregate, are not
material in nature or amount. Seller has delivered to Buyer and has
included as Schedule 3(n) of the Seller Disclosure Letter a detailed
list (the "Liabilities List") of (i) Seller's outstanding
Liabilities with respect to the Division as of the Agreement Date
and (ii) Seller's best good faith estimate of its Liabilities with
respect to the Division as of, and giving effect to, the Closing.
Seller has no Liabilities that are, individually or in the
aggregate, material to the Division, the Acquired Assets, or the
results of operations of Seller or the financial condition of
Seller, except for Liabilities set forth on the Liabilities List.
23
(1) The earnings of the Division as shown in the
Unaudited Financial Statements: (A) were generated in the ordinary course of
carrying on the Division Business; and (B) do not contain any exceptional or
extraordinary items or items of which the Seller is aware is of a one-off
nature.
(2) In the Unaudited Financial Statements, Division
Inventory was valued on a consistent basis with the two (2) preceding financial
years and on the basis of the lower of cost and net realizable value and all
redundant and obsolete stock was written off or written down as appropriate and
full provision was made for all slow-moving and damaged stock.
(3) The rate of depreciation applied in the Unaudited
Financial Statements for each fixed asset has been consistently applied over the
preceding 5 financial years of the Division Business and is adequate to write
down the value of each fixed asset to its net realizable value at the end of its
useful working life.
(4) All of the fixed assets of the Seller as shown in
the Unaudited Financial Statements are valued at cost less depreciation deducted
from time to time in a consistent manner and there has been no revaluation of
those fixed assets since their acquisition. The Accounts Receivable shown on the
Division Net Tangible Assets Certificate arose in the ordinary course of
business, consistent with past practice, and have been collected or are
collectible in the book amounts thereof, less an amount not in excess of the
allowance for doubtful accounts provided for on the Division Net Tangible Assets
Certificate. Allowances for doubtful accounts and warranty returns are adequate
and have been prepared in accordance with GAAP consistently applied and in
accordance with Seller's past practices. The Accounts Receivable of the Division
arising after the Balance Sheet Date and before the Closing Date arose or will
arise in the ordinary course of business, consistent with past practice, and
have been collected or are collectible in the book amounts thereof, less
allowances for doubtful accounts and warranty returns determined in accordance
with GAAP consistently applied and in accordance with Seller's past practices.
None of the accounts receivable of the Division is subject to any material claim
of offset, recoupment, setoff or counterclaim, and Seller has no Knowledge of
any specific facts or circumstances (whether asserted or unasserted) that could
give rise to any such claim. The Accounts Receivable of the Division are not
contingent upon the performance by Seller or Buyer of any obligation or contract
other than normal warranty repair and replacement. Except as set forth on
Schedule 3(n)(iii) of the Seller Disclosure Letter, no Person has any Lien on
any of such Accounts Receivable, and no agreement for deduction or discount has
been made with respect to any of such accounts receivable. Schedule 3(n) of the
Seller Disclosure Letter sets forth the amounts of Accounts Receivable of the
Division which are subject to asserted warranty claims by customers and
reasonably detailed information regarding asserted warranty claims made during
the twelve (12) months preceding the Agreement Date, including the type and
amounts of such claims. No Accounts Receivable has been factored, sold or agreed
to be sold by Seller to anyone other than Buyer.
24
(o) No Undisclosed Liabilities. Except as set forth in the
Unaudited Financial Statements or on Schedule 3(o) of the Seller Disclosure
Letter, the Company (with respect to the Division) has no liabilities or
obligations (i) of any nature which are required to be disclosed on the
Unaudited Financial Statements prepared in accordance with GAAP, and (ii) except
for liabilities or obligations reflected or reserved against in the Unaudited
Balance Sheet and current liabilities incurred in the ordinary course of
business since the date thereof. (p) Employees and Contractors.
(i) Part C of EXHIBIT L contains a complete and
accurate list of the current employees and contractors of Seller who
are providing services exclusively to the Division and Part D of
EXHIBIT L contains a complete and accurate list of the current
employees and contractors of Seller who are providing services
non-exclusively to the Division as of Agreement Date, along with
their status as either an employee or contractor and no other
individual is providing services to the Division as of the Agreement
Date. As to all such Division Employees, Seller has provided Buyer
with a written list contained in the Disclosure Materials setting
forth the locations at which such employees are working as of the
Agreement Date, their date of hire, location where employed, years
of employment, and in the case of the Division US Employees status
as exempt or non-exempt, and remuneration package (including base
salary, bonuses, profit share and employee share plan entitlements)
current base salary together with a complete and accurate list of
all written employment contracts (if any) related to any of such
employees. As to all such Division Contractors, Seller has provided
Buyer with a writing setting forth the locations at which such
contractors are working as of the Agreement Date, their date of
engagement, location from where services are provided, years of
providing services to the Seller and current fees together with a
complete and accurate list of all written contracts (if any) related
to any of such contractors.
(ii) Seller has not made any offer of work or any
appointment of an individual (or any company controlled by an
individual as a senior executive, or as an independent contractor)
that remains capable of acceptance or that cannot be terminated
without penalty on less than three (3) months' notice.
(iii) Each Transferring Employee is employed in the
Division Business and on a full time basis.
(iv) No Key Employee has ceased employment with the
Division Business or given written notice of his or her intention to
cease employment with the Division Business.
25
(v) Seller has paid all amounts due to the
Transferring Employees and all amounts due and payable by the
Sellers to any third party for or in respect of the Transferring
Employees.
(vi) Seller has not given any commitment (whether
legally binding or not) to increase or supplement the wages,
salaries, vacation accrual, paid time off accrual, annual leave and
leave loading, long service leave, sick leave or any other
remuneration, compensation or benefits of any Transferring Employee
beyond the amounts and entitlements listed in the Seller Disclosure
Letter.
(vii) The employment of each Transferring Employee who
is a Division US Employee can be lawfully terminated at-will, with
or without cause or advance notice without payment of any damages or
compensation, including any severance or redundancy payments.
(viii) Except as set forth in the Seller Disclosure
Letter, Seller has not agreed to any stock incentive scheme, stock
option scheme, bonus scheme, profit-sharing scheme or other employee
incentive scheme in respect of the Division Business or with any
Transferring Employee.
(ix) Seller is not a party to any written employment or
service agreement with any Transferring Employee other than those
agreements identified in the Disclosure Letter.
(x) Except as set forth in the Seller Disclosure
Letter, Seller does not have any agreement, arrangement or
understanding with any person for the provision of consulting or
management services in respect of the Division Business.
(xi) Seller has disclosed in writing to the Buyer
before the Agreement Date in the Disclosure Materials all the terms
of employment, codes of conduct, human resources policies and
practices, handbooks and job descriptions that apply to the
Transferring Employees.
(xii) To the extent permitted by applicable law, full
details of all health and safety policies and procedures, health and
safety committees, health and safety representatives, workers'
compensation claims, and any complaints, recommendations,
investigations or claims relating to health and safety or workers'
compensation claims issues made or carried out in the last three (3)
years and affecting the Transferring Employees have been disclosed
in the Disclosure Materials.
(xiii) Full details of all employment-related claims,
including but not limited to discrimination claims, retaliation
claims, wage claims, contract claims, and tort claims and any
litigation, potential litigation, administrative proceedings,
investigations or recommendations relating to such claims made or
carried out in the last 5 years and affecting the Transferring
Employees have been disclosed in the Disclosure Materials.
(xiv) Seller is in compliance with all legally required
employment-related employee trainings regarding the Transferring
Employees.
26
(xv) Seller is not involved in any dispute, claim,
enquiry or investigation with any of the UK Transferring Employees
and there are no present circumstances (including Closing) which are
likely to give rise to such dispute.
(xvi) There is no existing, pending or threatened
dispute between the Seller and any material number of the UK
Transferring Employees or any trade union or other employee
representative body or organization formed for a similar purpose and
there are no circumstances (including Closing) which are likely to
give rise to any such dispute and nor has there been any such
dispute in the last three (3) years.
(q) Employee Benefits.
(i) Part E of EXHIBIT L lists each (A) Employee
Benefit Plan that Seller maintains or to which Seller contributes
for the benefit of Division Employees, (B) all bonus, pension,
profit sharing, savings, severance, retirement, deferred
compensation or incentive plans, programs or arrangements for the
benefit of Division Employees, (C) all other fringe or employee
benefit plans, programs or arrangements that apply to any of the
Division Employees and that do not generally apply to all Division
Employees and (D) all employment or executive compensation or
severance agreements, written or otherwise, as to which unsatisfied
obligations of Seller remain for the benefit of, or relating to, any
Division Employee.
(ii) With respect to the Division Employees: (A) Seller
is in compliance in all respects with all currently applicable Legal
Requirements respecting employment, terms and conditions of
employment, employment standards (including wages, hours, vacation
and overtime), labor relations and worker classification (including
the proper classification of workers as independent contractors and
consultants, and as employees and managers); (B) Seller 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 Legal
Requirements; (C) Seller is not liable for any material payment to
any trust or other fund or to any Governmental Entity with respect
to employment insurance, workplace safety and insurance, employment
standards or other benefits or obligations for any of its employees
(other than routine payments to be made in the ordinary course of
business and consistent with its past practice); and (D) no labor
organization or group of employees of Seller has made a demand for
recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation
proceeding presently pending or, to the Knowledge of Seller,
threatened to be brought or filed, with the National Labor Relations
Board or any other labor relations tribunal or authority. To the
Knowledge of Seller, there are no organizing activities, strikes,
work stoppages, slowdowns, lockouts, arbitrations or material
grievances, or other labor disputes pending or threatened against or
involving Seller involving or affecting any of the Division
Employees.
(iii) The Acquired Assets are not now nor will they
after the passage of time be subject to any Lien imposed under Code
Section 412(n) by reason of the failure of Seller or any ERISA
Affiliates of Seller to make timely installments or other payments
required by Code Section 412.
27
(iv) All contributions (including all employer
contributions and employee salary reduction contributions) that are
due have been made to each such Employee Benefit Plan that is an
Employee Pension Benefit Plan. All premiums or other payments that
are due have been paid with respect to each such Employee Benefit
Plan that is an Employee Welfare Benefit Plan.
(v) With respect to the Division US Employees, each
such Employee Benefit Plan that is intended to meet the requirements
of a "qualified plan" under Code Section 401(a) has received a
determination letter from the Internal Revenue Service to the effect
that it meets the requirements of Code Section 401(a) and no event
has occurred that would affect such qualified status.
(vi) With respect to the Division US Employees, each
Benefit Plan under which any Division Employees participate is now
and always has been operated in all material respects in accordance
with its terms and is current with the requirements of all
applicable Legal Requirements, including ERISA and the Code.
(vii) With respect to the Division US Employees, there
are no pending or threatened claims (other than normal benefit
claims) against Seller or any of the ERISA Plans.
(viii) With respect to the Division US Employees, Seller
does not maintain, sponsor or contribute to any Employee Pension
Benefit Plan that is a "defined benefit plan" (as defined in ERISA
Section (35).
(ix) With respect to the Division US Employees, Seller
does not provide postretirement medical or other benefits to any
Division Employees or former Division Employees, or to their
survivors, dependents, or beneficiaries.
(x) With respect to the Division US Employees, none of
Seller, any ERISA Affiliate, any trustee or administrator thereof
has engaged in a transaction or has taken or failed to take any
action in connection with the ERISA Plans that could be subject to
any material liability for either a civil penalty imposed pursuant
to Section 409, 502(i) or 502(l) of ERISA, or a tax imposed pursuant
to Section 4975 (A) or (b), 4976 or 4980B of the Code.
(xi) With respect to the Division US Employees, Seller=
shall provide healthcare continuation coverage under COBRA, or
similar state statute, to all current and former employees who are
or become qualified beneficiaries (as defined in Section 4980B(g)(1)
of the Code) with respect to Seller Plans. Seller shall be
responsible for providing such continuation coverage as required
under COBRA with respect to any employee employed by Buyer who
incurs a qualifying event after the Closing.
28
(xii) Following the Closing, Seller will have no
Liability to any of the Division Employees who become employees of
Buyer or its Affiliates for any accrued and unpaid wages, salaries,
paid time off or severance payments relating to such employee's
employment with Seller prior to Closing.
(xiii) The Pension Scheme is the only arrangements under
which the Seller or any of its Affiliates has or may have any
obligation (whether or not legally binding) to provide or contribute
towards pension, lump sum, death, ill-health, disability or accident
benefits in respect of its past or present officers and employees
and no proposal or announcement has been made to any UK Transferring
Employee or officer of the Seller or any of its Affiliates about the
introduction, continuance, increase or improvement of, or the
payment of a contribution towards, any other pension, lump sum,
death, ill-health, disability or accident benefit.
(r) Environmental, Health, and Safety Matters.
(i) As used in this Agreement, the following terms
shall have the meanings indicated below:
(A) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are intended
to assure the safety of employees, workers or other Persons, including the
public.
(B) "Hazardous Materials" shall mean (1) any material or
substance that at the time of Closing is prohibited or regulated by any Law or
that is now designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment, (2)
any substance or material that is included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances," "pollutant,"
"contaminant," "hazardous waste," or "solid waste" in any Environmental and
Safety Laws; (3) petroleum or petroleum derivatives, including crude oil or any
fraction thereof, all forms of natural gas, and petroleum products or
by-products or waste; (4) polychlorinated biphenyls (PCB's); (5) asbestos and
asbestos containing materials (whether friable or non-friable); (6) lead and
lead based paint or other lead containing materials (whether friable or
non-friable); (7) urea formaldehyde; (8) batteries or liquid solvents or similar
chemicals; (9) radon gas; and (10) mildew, fungus, mold, bacteria and/or other
organic spore material..
(C) "Facilities" shall mean all buildings and improvements
on the Property.
(D) "Property" shall mean all real property leased, licensed
or owned by the Seller (including, without limitation, the Leased Real Property)
either currently or in the past that is or was used in the Division Business.
29
(ii) (A) Hazardous Materials and wastes of the Seller
have been disposed of in accordance with all Environmental and
Safety Laws; (B) the Seller has not received any written notice of
any noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (C) to the Knowledge
of Seller, no notices, administrative actions or suits are pending
or threatened relating to an actual or alleged violation of any
applicable Environmental and Safety Laws by the Seller; or otherwise
with respect to any Property (D) to Seller's Knowledge, the Seller
is not a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, or any analogous state, local or foreign
laws arising out of events occurring prior to the Closing Date; (E)
to the Seller's Knowledge, there have not been in the past, and are
not now, any Hazardous Materials on, under or migrating to or from
any of the Facilities or any Property; (F) to the Seller's
Knowledge, there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under any
Property, including treatment or storage tanks, sumps, or water, gas
or oil xxxxx; (G) Seller has at all times complied with all
Environmental and Safety Laws; (H) Seller has obtained all
environmental, health and safety Governmental Permits necessary for
its operations or required by any Environmental Safety Laws, all
such Governmental Permits are in good standing, and Seller is in
substantial compliance with all terms and conditions of such
Governmental Permits; (I) Seller has not filed in the past, is not
in the process of filing, has no filing pending, and does not intend
to file, any notice or report under any Environmental and Safety Law
reporting a violation of any Environmental and Safety Law; (J)
Seller has not received any notice of claim to the effect that it is
or may be liable to any person as a result of the release, emission,
or threatened release or emission of a Hazardous Material into the
environment from or on any Real Property; (K) any asbestos
containing material which is on or part of any Leased Real Property
is in good repair according to the current standards and practices
governing such material, and its presence or condition does not
violate any currently applicable Environmental and Safety Law; and
(L) Seller has complied with any and all environmental disclosure
obligations imposed upon Seller with respect to the transactions
contemplated by this Agreement..
(s) Export Control Laws. Seller has conducted its export
transactions with respect to the Division in accordance in all material respects
with applicable provisions of United States export control laws and regulations,
including but not limited to the Export Administration Act and implementing
Export Administration Regulations, except where a failure to do so would not
have a Material Adverse Effect. Without limiting the foregoing, with respect to
the Division:
(i) Seller has obtained all export licenses, approvals
and agreements required including assurances from customers
regarding further export) for its exports of products, software and
technologies (including the Division Products and Division
Intellectual Property Rights) outside the United States and
importing its products, software and technologies (including
Division Products and Division Intellectual Property Rights) into
any country in which they are or have been disclosed, sold or
licensed for use, and all such export and import approvals in the
United States and throughout the world are valid, current,
outstanding and in full force and effect;
30
(ii) Seller is in substantial compliance with the terms
of all applicable export licenses or other approvals;
(iii) there are no pending or Threatened claims against
Seller with respect to such export licenses or other approvals;
(iv) to Seller's Knowledge, there are no actions,
conditions or circumstances pertaining to the Seller's export
transactions that would reasonably be expected to give rise to any
future claims; and
(v) no consents or approvals for the transfer of
export licenses to Buyer are required, except for such consents and
approvals that can be obtained expeditiously without material cost
and are listed on Section 3(s)(v) of the Seller Disclosure Letter.
(t) Books and Records. Seller has provided, or will promptly
provide Buyer or its counsel true, correct and complete copies of each document
that has been requested by Buyer or its counsel (unless such request has been
waived by Buyer) in connection with Buyer's legal, financial and technical
review of Seller, the Acquired Assets and the Division. Without limiting the
foregoing, Seller has provided to Buyer or its counsel complete and correct
copies of all documents identified on the Seller Disclosure Letter. The books,
records and accounts of the Division (i) are true, correct and complete in all
material respects, (ii) have been maintained in accordance with reasonable
business practices on a basis consistent with prior years, (iii) are stated in
reasonable detail and accurately and fairly reflect the transactions and
dispositions of the assets and properties of Seller with respect to the
Division, and (iv) in respect of the Division Employees, contain adequate and
suitable records regarding the service of each Division Employee.
(u) Contracts. Schedules 3(u)(i) through 3(u)(xx) of the Seller
Disclosure Letter set forth a list of each of the following contracts,
assignments, obligations or other instruments to which Seller is a party and
which relate predominately to the Division or any of the Acquired Assets:
(i) any contract for the licensing, marketing,
distribution or provision of any of the Acquired Assets or Division
Products, including any license, sublicense or other contract to
which Seller is a party and pursuant to which any Person is
authorized to use any Acquired Assets or Division Product;
(ii) any contract providing for payments (whether
fixed, contingent or otherwise) by or to Seller in an aggregate
amount of $50,000 or more;
(iii) any contract providing for the development of any
software, content (including textual content and visual,
photographic or graphics content), technology or intellectual
property, independently or jointly by or for (or for the benefit or
use of) Seller;
(iv) any joint venture contract, any contract that
involves a sharing of revenues, profits, cash flows, expenses or
losses with other Persons or any contract that involves the payment
of royalties to any other Person;
31
(v) any contract for the employment of any director,
officer, employee or consultant of Seller or any other type of
contract with any director, officer, employee or consultant of
Seller, including any contract requiring it to make a payment to any
director, officer, employee or consultant on account of the Asset
Purchase, any transaction contemplated by this Agreement or any
contract that is entered into in connection with this Agreement;
(vi) with respect to the Division Business, any
contract limiting the freedom of Seller to engage or participate, or
compete with any other Person, in any line of business, market or
geographic area, or to make use of any Intellectual Property Rights,
or any contract granting most favored nation pricing, exclusive
sales, distribution, marketing or other exclusive rights, rights of
refusal, rights of first negotiation or similar rights and/or terms
to any Person, or any contract otherwise limiting the right of
Seller to sell, distribute or manufacture any products or services
or to purchase or otherwise obtain any software, components, parts,
subassemblies or services;
(vii) other than "shrink wrap" and similar generally
available commercial end-user licenses that have an individual
license cost of $5,000 or less, all licenses, sublicenses and other
contracts to which Seller is a party and pursuant to which Seller
acquired or is authorized to use any third party Intellectual
Property Rights in the conduct of the Division Business;
(viii) any license, sublicense or other contract to
which Seller is a party and pursuant to which any Person is
authorized to use any Division Intellectual Property Rights;
(ix) any license, sublicense or other contract pursuant
to which Seller has agreed to any restriction on the right of Seller
to use or enforce any Division Intellectual Property Rights or
pursuant to which Seller agrees to encumber, transfer or sell rights
in or with respect to any Division Intellectual Property Rights with
respect to the Division Business;
(x) any contract to license or authorize any third
party to manufacture or reproduce any of the Division Products;
(xi) any agreement of indemnification or warranty or
any contract containing any support, maintenance or service
obligation or cost on the part of Seller, with respect to the
Division Business;
(xii) any contract with any labor union or any
collective bargaining agreement or similar contract with Division
Employees;
(xiii) any contract with respect to the Division
pursuant to which Seller has acquired a business or entity, or
assets of a business or entity, whether by way of merger,
consolidation, purchase of stock, purchase of assets, license or
otherwise, or any contract pursuant to which it has any material
ownership interest in any other Person;
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(xiv) any settlement agreement;
(xv) any contract with respect to the Division pursuant
to which rights of any third party are triggered or become
exercisable, or under which any other consequence, result or effect
arises, in connection with or as a result of the execution of this
Agreement or the consummation of the Asset Purchase or other
transactions contemplated hereunder, either alone or in combination
with any other event;
(xvi) any contract with any Governmental Entity with
respect to the Division Business;
(xvii) any confidentiality, secrecy or non-disclosure
contract other than any such contract entered into with customers
and distributors of the Division Business in the ordinary course of
business;
(xviii) any contract that was not entered into in the
ordinary course of business of the Division Business;
(xix) any xxxx or sale or any hiring or leasing
agreement, hire purchase agreement, credit or conditional sale
agreement, agreement for payment on deferred terms or any other
similar agreement used in or relating to the Division Business;
(xx) any other oral or written contract or obligation
not listed in clauses (i) through (xix) that is material to the
Division or Acquired Assets; and
(xxi) a true and complete copy of each agreement or=
document required by these subsections (i) through (xx) of this
Section 3(u) (the "Material Contracts") has been delivered to Buyer
or Buyer's counsel.
(xxii) Except as set forth on Schedule 3(u)(xxii),
Seller has no oral contracts or agreements nor any oral or written
side letters, to which Seller is a party or by which Seller is bound
and which relate to the Division or any of the Acquired Assets.
(xxiii) Seller is a party to all of the Assigned
Agreements.
(v) No Default. All Material Contracts are in written form. Seller
has performed in all material respects all of the obligations required to be
performed by it in accordance with the terms thereof and is entitled to all
benefits under, is not alleged to be in default in respect of, any Material
Contract or any Assigned Agreement. To Seller's Knowledge, each of the Material
Contracts and the Assigned Agreements is in full force and effect, subject only
to the effect, if any, of applicable bankruptcy and other similar laws affecting
the rights of creditors generally and rules of law governing specific
performance, injunctive relief and other equitable remedies. There exists no
default or event of default or event, occurrence, condition or act, with respect
to Seller or to Seller's Knowledge, with respect to any other contracting party,
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would reasonably be expected to (i) become a default
or event of default under any Material Contract or any Assigned Agreement or
(ii) give any third party (A) the right to declare a default or exercise any
remedy under any Material Contract or any Assigned Agreement, (B) the right to a
rebate, chargeback, refund, credit, penalty or change in delivery schedule under
any Material Contract or any Assigned Agreement, (C) the right to accelerate the
maturity or performance of any obligation of Seller under any Material Contract
or any Assigned Agreement, or (D) the right to cancel, terminate or modify any
Material Contract or any Assigned Agreement. Seller has not received any written
notice or other communication regarding any actual or possible violation or
breach of, default under, or intention to cancel or modify any Material Contract
or any Assigned Agreement. True, correct and complete copies of all Material
Contracts and all Assigned Agreements entered into prior to the Agreement Date
have been provided to Buyer prior to the Agreement Date. True, correct and
complete copies of all Material Contracts and all Assigned Agreements entered
into on or after the Agreement Date shall have been provided to Buyer prior to
the Closing Date. All licenses, sublicenses and other contracts to which Seller
is a party and pursuant to which Seller acquired or is authorized to use any
third party Intellectual Property Rights are fully paid and there are no amounts
outstanding in respect of such licenses, sublicenses or contracts.
33
(w) No Offers. No outstanding offer, tender or quotation has been
given or made by Seller in relation to the Division Business that is capable of
giving rise to a contract merely by any unilateral act of a third party other
than in the ordinary course of the Division Business.
(x) Standard terms and conditions. A copy of the standard terms
and conditions of the Division Business are contained in the Disclosure
Materials and the Seller has not entered into an agreement or arrangement with a
customer or supplier different from these.
(y) Liabilities; Solvency. Seller is not now insolvent nor will it
be rendered insolvent by the transactions contemplated hereby. As used in this
Section 3(y), "insolvent" means that the sum of the present fair saleable value
of the assets of an entity do and will exceed its debts and Liabilities. The
Purchase Price constitutes reasonably equivalent value for the Acquired Assets,
and the consummation of the transactions contemplated hereby shall not
constitute a fraudulent transfer under applicable laws relating to bankruptcy
and insolvency. Seller has not, at any time, (i) made a general assignment for
the benefit of creditors, (ii) filed, or had filed against it, any bankruptcy
petition or similar filing, (iii) admitted in writing its inability to pay its
debts as they become due, (iv) been convicted of, or pleaded guilty or no
contest to, any felony, or (v) taken or been the subject of any action that
could reasonably be expected to have an adverse effect on its ability to comply
with or perform any of its covenants or obligations under this Agreement or any
of the Ancillary Agreements.
(z) Insurance. Each policy of insurance and bonds with respect to
the Acquired Assets (each, an "Insurance Policy") now held by Seller is set
forth in Schedule 3(z) of the Seller Disclosure Letter, together with the name
of the insurer, the type of policy or bond, the coverage amount and any
applicable deductible, and other applicable provisions of such Insurance Policy.
To the Knowledge of Seller, there is no claim pending under any of such
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such Insurance Policies, and to Seller's Knowledge, all
such Insurance Policies are in full force and effect. All premiums due and
payable under all such Insurance Policies have been timely paid, and Seller is
otherwise in material compliance with the terms of such Insurance Policies. To
Seller's Knowledge, Seller has effected all insurances required by law to be
effected by it in respect of the Division Business, subject to deductibles.
Seller has not been notified by any insurer in writing that it is required or it
is advisable for it to carry out any maintenance, repairs or other works in
relation to any of the Acquired Assets. Each insurable Acquired Asset has at all
material times been and is at the Agreement Date and will be at Closing insured
to its full replacement value (with no provision for deduction or excess)
against each risk normally insured against by a prudent person operating the
types of business similar to the Division Business. To the Knowledge of the
Seller the professional indemnity and product liability Insurance effected by
the Seller in respect of the Division Business is sufficient to cover all such
risks or liabilities in respect of the Division Business prior to Closing,
except where a failure to do so will not have a Material Adverse Effect.
34
(aa) Absence of Certain Changes. Since the Balance Sheet Date,
Seller has conducted the Division Business only in the ordinary course,
consistent with its past practice, and except as set forth in Section 3(aa) of
the Seller Disclosure Letter since the Balance Sheet Date there has not been
with respect to the Division or the Acquired Assets any: (A) change which has
had a Material Adverse Effect; (B) Seller has not made or entered into any
contract with respect to any acquisition, sale or transfer of any asset of the
Division (other than the sale or nonexclusive license of products to Division
customers in the ordinary course of business); (C) any revaluation by Seller of
any of the Acquired Assets; (D) there has not occurred any material increase in
or modification of the compensation or benefits payable or to become payable to
the Division Employees or Division Contractors; (E) no Assigned Agreement has
been amended or terminated and there has not occurred any material default by
Seller or, to Seller's Knowledge, a third party under any Assigned Agreement;
(F) Seller has not created or assumed any Liens on any of the Acquired Assets,
any liability, or any obligation for borrowed money or any liability or
obligation as guaranty or surety with respect to the obligations of any other
Person; (G) Seller has not paid or discharged any Lien or Liability which was
not shown on the Unaudited Financial Statements or incurred in the ordinary
course of business; (H) Seller has not made any deferral of the payment of any
accounts payable other than in the ordinary course of business, or in an amount
in excess of $50,000, or given any discount, accommodation or other concession
other than in the ordinary course of business, in order to accelerate or induce
the collection of any receivable; (I) Seller has not made any material change in
the manner in which it extends discounts, credits or warranties to customers or
otherwise deals with its customers; (J) there has been no material damage,
destruction or loss, whether or not covered by insurance, affecting the Acquired
Assets or the Division; (K) Seller has not, in respect of the Division, entered
into any contract or commitment requiring the payment of more than $50,000 in
aggregate; and (L) there has not occurred any announcement of, any negotiation
by or any entry into any contract by Seller or any Affiliate of Seller to do any
of the things described in the preceding clauses (A) through (K) (other than
negotiations and agreements with Buyer and its representatives regarding the
transactions contemplated by this Agreement).
(bb) Taxes. Seller has properly completed and timely filed all Tax
Returns required to be filed by it prior to the Closing Date, has timely paid
all Taxes required to be paid by it for which payment is or was due, has made
all required estimated Tax payments and has no liability for Taxes in excess of
the amount so paid. There is (i) no audit or, to the Knowledge of Seller,
pending audit of, or Tax controversy associated with, any Tax Return of Seller
being conducted by a Tax authority, (ii) no agreement to any extension of time
for filing any Tax Return which has not been filed, and (iii) no waiver of the
statute of limitations with respect to any Taxes or Tax Return. All Taxes
required to be withheld or paid by Seller in connection with amounts paid or
owing to any Division Employee have been duly and timely withheld or paid, and
any such withheld Taxes have been either duly and timely paid to the proper Tax
authority or properly set aside in accounts for such purpose and will be duly
and timely paid to the proper Tax authority. Seller has no Knowledge of any
reasonable basis for the assertion of any claim for any liabilities for unpaid
pre-Closing Taxes for which Buyer would become liable as a result of the
transactions contemplated by this Agreement or that would result in any Lien on
any of the Acquired Assets. There is no agreement, plan, arrangement or other
contract covering any current or former employee or other service provider of
Seller or any ERISA Affiliate of Seller to which Seller is a party or by which
Seller is bound that, considered individually or considered collectively with
any other such agreements, plans, arrangements or other contracts, will, or
could reasonably be expected to, as a result of the transactions contemplated
hereby (whether alone or upon the occurrence of any additional or subsequent
events), give rise directly or indirectly to the payment of any amount that
could reasonably be expected to be characterized as a "parachute payment" within
the meaning of Section 280G of the Code (or any corresponding or similar
provision of state, local or foreign Tax law).
35
(cc) Interested Party Transactions. With respect to the Division at
the Agreement Date, immediately after the Closing and during the three (3) years
before the Agreement Date: (i) None of the officers and directors of Seller and,
to the Knowledge of Seller, none of the employees or stockholders of Seller nor
any immediate family member of an officer, director, employee or stockholder of
Seller, has any direct or indirect ownership, participation, royalty or other
interest in, or is an officer, director, employee of or consultant or contractor
for any firm, partnership, entity or corporation that competes with, or does
business with, or has any contractual arrangement with, Seller (except with
respect to any interest in less than 5% of the stock of any corporation whose
stock is publicly traded); (ii) none of such officers, directors, employees,
stockholders who are Affiliates of Seller or, to the Knowledge of Seller,
stockholders who are not Affiliates of Seller or any member of their immediate
families, is a party to, or to Seller's Knowledge otherwise directly or
indirectly interested in, any contract to which Seller is a party or by which
Seller or any of its assets or properties may be bound or affected, except for
normal compensation for services as an officer, director or employee thereof;
and (iii) To the Knowledge of Seller, none of said officers, directors,
employees, stockholders or immediate family members has any interest in any
property, real or personal, tangible or intangible (including any Intellectual
Property) that is used in the Division or will be included in the Acquired
Assets, except for the rights of stockholders under applicable Legal
Requirements.
(dd) Customers and Suppliers. Schedule 3(dd)-1 of the Seller
Disclosure Letter sets forth a true and complete list of the top twenty
customers of the Division, based on the revenue from such customer during the
12-month period ended March 31, 2007. Schedule 3(dd)-2 of the Seller Disclosure
Letter sets forth a true and complete list of the top twenty suppliers of the
Division, based on the purchases from such supplier during the 12-month period
ended March 31, 2007. As of the Agreement Date, none of the customers or
suppliers listed in Schedule 3(dd)-1 of the Seller Disclosure Letter (i) has
cancelled or otherwise terminated any contract with the Seller prior to the
expiration of the contract term, or (ii) has Threatened, or indicated its
intention, to cancel or otherwise terminate its relationship with the Seller or
to reduce substantially its purchase from or sale to the Seller (as applicable)
of any products, equipment, goods or services.
(ee) Sufficiency of Assets. Except as set forth in Schedule 3(ee),
the Acquired Assets constitute all assets, properties, rights and Intellectual
Property Rights that are necessary to enable Buyer, following the Closing, to
own, conduct, operate and continue the Division Business, as conducted by Seller
prior to Closing.
36
(ff) Accuracy of Representations. The historical and factual
information concerning the Division Business prepared by or on behalf of Seller
and contained in the Disclosure Materials is accurate in all material respects.
(gg) Advisory Fees. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Seller, who might be entitled to any fee, commission or
reimbursement of expenses from Seller or its Affiliates, upon consummation of
the transactions contemplated by this Agreement, except as set forth in Schedule
3(gg).
(hh) Bulk Sales. The Bulk Sales laws of California do not apply to
the sale and purchase of the Acquired Assets in accordance with this Agreement
and to Seller's Knowledge, the Bulk Sales laws of no state are applicable to the
sale and purchase of the Acquired Assets in accordance with this Agreement.
DISCLAIMER OF WARRANTIES. EXCEPT WITH RESPECT TO THE WARRANTIES AND
REPRESENTATIONS SPECIFICALLY SET FORTH IN THIS AGREEMENT (INCLUDING THE SELLER
DISCLOSURE LETTER) (WHICH MAY BE RELIED UPON BY BUYER), ALL OF THE ACQUIRED
ASSETS ARE BEING SOLD "AS IS, WHERE IS," AND SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY, SUITABILITY,
NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY AS TO THE
ACQUIRED ASSETS OR ANY PART OR ITEM THEREOF, OR AS TO THE CONDITION, DESIGN,
OBSOLESCENCE, WORKING ORDER OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR OTHERWISE AND BUYER HAS RELIED EXCLUSIVELY ON
ITS OWN EXAMINATION THEREOF IN ELECTING TO ACQUIRE THE TRANSFERRED ASSETS ON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS AGREEMENT.
4. Buyer's Representations and Warranties. Buyer represents and
warrants to Seller as follows.
(a) Organization of Buyer. 3Q is a corporation duly organized,
validly existing and in good standing under the laws of Australia, and ARS is a
corporation duly organized, validly existing and in good standing under the laws
of California.
(b) Authorization of Transaction. Subject to obtaining any
approvals referred to in Subsection 6(b)(x), Buyer has the corporate power and
corporate authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by Buyer
and no other corporate or other proceeding on the part of Buyer is necessary or
advisable to authorize the execution, delivery and performance of this Agreement
or the Ancillary Agreements of the consummation of the transaction contemplated
by this Agreement. This Agreement has been, and the Ancillary Agreements will
be, duly executed and delivered by Buyer and, assuming the valid execution and
delivery by all parties thereto, will constitute, a valid and binding agreement
of Buyer, enforceable against Buyer in accordance with their terms, except to
the extent that enforceability may be limited by bankruptcy, moratorium,
reorganization and other laws affecting the enforcement of creditors' rights
generally and by general principals of equity.
37
(c) Non-contravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) conflict with or result in any breach or violation of any provision of the
certificate of formation or partnership agreement of Buyer, (ii) except as would
not result in a Material Adverse Effect on Buyer, conflict with or violate any
Legal Requirements applicable to Buyer or by which any material property or
asset of Buyer is bound or affected, or (iii) except as would not result in a
Material Adverse Effect on Buyer, result in any breach of or constitute a
default (or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
material property or asset of Buyer pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer is a party or by which Buyer or
any material property or asset of Buyer is bound or affected.
(d) Government Authorization. The execution, delivery and
performance by Buyer of this Agreement and the Ancillary Agreements, and the
consummation by it of the transactions contemplated by this Agreement and the
Ancillary Agreements, require no government approval from any Governmental
Entity.
(e) Litigation. There is no lawsuit, claim, arbitration or other
legal action pending or, to Buyer's knowledge, Threatened: (a) against Buyer,
its activities, properties or assets that would reasonably be expected to have a
material adverse effect on Buyer or the transactions contemplated by this
Agreement, or (b) that seek to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement or any of the Ancillary Agreements.
(f) Compliance with Applicable Law. To Buyer's knowledge, it has
complied in all material respects with all applicable laws relating to its
business and properties, except where the failure to comply would not, singly or
in the aggregate, have a material adverse effect on Buyer or the transactions
contemplated by this Agreement.
(g) Advisory Fees. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of Buyer, who might be entitled to any fee, commission or
reimbursement of expenses from Buyer or its Affiliates, upon consummation of the
transactions contemplated by this Agreement.
(h) Investigation and Reliance. Buyer has conducted investigations
and inspections of the Acquired Assets, the Assumed Liabilities, the Division
Business and the Division Products as Buyer deemed necessary or appropriate for
the purpose of entering into this Agreement and consummating the transactions
contemplated by this Agreement. Buyer acknowledges that the representations and
warranties of Seller contained in this Agreement (including the Seller
Disclosure Letter) constitute the sole and exclusive representations and
warranties of Seller to Buyer in connection with this Agreement and the
transactions contemplated by this Agreement and that all other representations
and warranties are specifically disclaimed and may not be relied upon or serve
as a basis for a claim against Seller. BUYER ACKNOWLEDGES THAT SELLER DISCLAIMS
ALL WARRANTIES OTHER THAN THOSE EXPRESSLY CONTAINED IN THIS AGREEMENT (INCLUDING
THE SELLER DISCLOSURE LETTER) AS TO THE ACQUIRED ASSETS AND THE DIVISION
BUSINESS, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY
OR WARRANTY FOR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS SET FORTH HEREIN,
BUYER IS ACQUIRING THE PURCHASED ASSETS ON AN "AS IS, WHERE IS" BASIS.
38
5. Additional Covenants.
(a) General. Each of the Parties will use its commercially
reasonable efforts to take all actions and to do all things necessary, proper,
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
Closing conditions set forth in Section 6 below).
(b) Audit/targeted review. Sellers agree to cooperate with
auditors nominated by Buyer to complete an audit/targeted review in relation to
the assets, liabilities, financial position and performance of the Division
Business, at the sole cost and discretion of Buyer, but only if and to the
extent required by Buyer's financier.
(c) Notices and Consents. Seller shall give any notices to third
parties, and Seller shall use its commercially reasonable efforts to obtain any
third party consents, referred to in Section 3(b) above and will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(b) above.
(d) Relevant Post Agreement Date Contracts. Seller agrees to pay
to the Escrow Agent to be held in a separate account, all proceeds received
after the Agreement Date arising from the Relevant Post Agreement Date
Contracts, to be held by the Escrow Agent on the basis that: (i) at Closing such
funds (together with any interest accrued thereon) are to be paid to Buyer in
immediately available funds; or (ii) if Closing does not occur by the
Termination Date (or such other date as the parties may agree in writing to be
the Termination Date), such funds (together with any interest accrued thereon)
are to be paid to Seller in immediately available funds.
(e) Operation of Division. Seller covenants and agrees that,
between the Agreement Date and the Closing Date with respect to the Division
Business, it will (except (i) with the prior written consent of Buyer, which
shall not be unreasonably withheld, delayed, or conditioned, or (ii) as
specifically contemplated by this Agreement):
(i) not sell, transfer, assign, convey, license,
sublease, move, relocate or otherwise dispose of any of the Acquired
Assets or agree to do any of these things in respect of the Acquired
Assets other than sales in the ordinary course of business;
(ii) conduct the Division Business in the ordinary
course of business;
(iii) not conduct the Division Business in such a manner
that materially changes the nature of the Division Business;
(iv) consult with Buyer in relation to all contracts to
be entered into relating to the Division Business and not enter into
any contract or contracts relating to the Division Business
requiring it to pay more than $50,000 in the aggregate without the
prior written consent of Buyer;
39
(v) inform Buyer of, and consult with Buyer in
relation to, any significant customer of the Division Business who,
ceases, or expresses or has expressed at any time prior to Closing,
an intention to cease, being a customer of the Division.
(vi) not acquire any Acquired Assets (other than the
purchase of inventory and supplies in the ordinary course of
business);
(vii) pay, perform or discharge any and all liabilities
relating to the Division Business as they fall due, other than in
the ordinary course of business;
(viii) not make any change to its policy or manner of
collection of the Accounts Receivables;
(ix) not change any account method, practice or
principle used by it;
(x) fully comply in all material respects with all
laws and administrative requirements that are, to its Knowledge,
binding on it or affecting the Acquired Assets including the
requirements of each Seller Authorization;
(xi) maintain and protect the Acquired Assets,
including fully and punctually complying with all applicable
requirements and orders of any Governmental Entity where
non-compliance would or might impose a Lien or other liability,
restriction or disability on the Acquired Assets, all in accordance
with its past practice;
(xii) keep and maintain proper records, make true and
complete entries of all its dealings and transactions relating to
the Division Business and not destroy any records maintained for the
Division Business, all in accordance with its past practice;
(xiii) not do or permit anything that would reasonably
be expected to materially adversely affect the Goodwill or the
Seller's relationship with the Division Employees or Division
Contractors or the Division's customers and suppliers ;
(xiv) consult and keep Buyer informed in relation to
material decisions affecting the Division Business and its
management, including any material contract to be entered into in
relation to the Division Business;
(xv) obtain and maintain in full force all Seller's
Authorizations required for or in connection with the Acquired
Assets;
40
(xvi) not vary, terminate or fail to renew any of the
Assigned Agreements, Seller's Authorizations or commitments in
relation to the Division Business, other than in the ordinary course
of business consistent with past practice;
(xvii) not create, or agree to create, any Lien over any
Acquired Asset;
(xviii) not cancel any existing insurance policy in
relation to the Division Business unless a replacement policy (on
terms no less favorable to Seller, if available in the market place)
has been put in place;
(xix) not do or omit to do anything that would make any
policy of insurance relating to the Division Business void or
voidable or would reasonably be expected to result in an increase in
the premium payable under insurance policy or adversely affect the
Buyer's ability to procure equivalent insurance in the future;
(xx) not enter into a long-term, or unusual agreement,
arrangement or obligation relating to the Division Business;
(xxi) purchase or lease, or enter into any agreement,
arrangement or obligation to purchase or lease, any motor vehicle,
other plant and equipment or any freehold or leasehold property;
(xxii) pay the accounts payable in a manner that is
consistent with past practice and in accordance with the usual
trading terms of the Seller;
(xxiii) not make any decisions regarding a material
matter affecting the Division Business without first obtaining the
consent of Buyer, such consent not to be unreasonably withheld.
(xxiv) engage any new permanent employee in the Division
Business who cannot be terminated at will by Seller.
(xxv) not transfer any Division Employees or Contractors
to any other division or position of employment or consulting within
Seller or any of Seller's Affiliates, nor transfer any employee or
contractor of or within Seller or any of the Seller's Affiliates to
the Division;
(xxvi) not terminate or encourage the resignation of the
employment of any Division Employee (except for good cause relating
to job performance or material misconduct) or terminate or encourage
the termination of the contractual relationship with any Division
Contractor except for good cause relating to performance or material
misconduct;
(xxvii) not encourage or otherwise act to cause any
Division Employee or Contractor not to accept an offer of employment
by Buyer;
41
(xxviii) not change the terms of employment, (including
the remuneration or other benefits) of any Division Employee, or
otherwise change the compensation currently being paid to any
Division Contractor without the prior written consent of Buyer other
than periodic and ordinary raises, if any, in accordance with past
practice;
(xxix) not provide, or agree to provide, a gratuitous
payment or benefit to any Division Employee or any of his or her
dependants;
(xxx) use commercially reasonable efforts to retain key
employees and senior management of the Division Business;
(xxxi) not alter, amend, modify or terminate any of the
terms of either the Irvine Lease or the UK Lease; and
(xxxii) promptly notify the Buyer of any abnormal or
unusual events with respect to the Division Business or the
occurrence of any event outside the ordinary course of business and
promptly notify Buyer if there is a breach or potential breach of
Subsections 5(d)(i) to (xxxi) above.
(f) Full Access. Notwithstanding any provision in the
Confidentiality Agreement, Seller will permit representatives of Buyer
(including legal counsel and accountants) who have executed a confidentiality
agreement in a form reasonably acceptable to Seller to have reasonable access at
all reasonable times with prior notice, and in a manner so as not to interfere
with the normal business operations of Seller and the Division Business, to all
premises, properties, personnel, books, records (including tax records),
contracts, websites, customer and supplier information, customers and documents
of or pertaining to the Division. Buyer will treat and hold as such any
Confidential Information it receives from Seller in the course of the reviews
contemplated by this Section 5(e), will not, prior to the Closing, use any of
the Confidential Information except in connection with this Agreement and the
transactions contemplated hereby, and, if this Agreement is terminated for any
reason whatsoever, will destroy or return to Seller all tangible embodiments
(and all copies) of the Confidential Information that are in its possession.
(g) Notice of Potential Breach. Each Party will give prompt
written notice to the other Party of any material adverse development (including
details of such development) which may reasonably be expected to cause or has
caused a breach of its own representations and warranties in Section 3 and
Section 4 above.
(h) Further Actions. From and after the Closing, each of the
Parties will execute and deliver such documents and other papers and take such
further actions as may be reasonably required to carry out the provisions of
this Agreement, the Ancillary Agreements and any other agreements required to be
entered into by such party pursuant to this Agreement or the Ancillary
Agreements and give effect to the transactions contemplated by this Agreement,
the Ancillary Agreements and such other agreements.
(i) Payment of Taxes. Seller shall, to the extent that failure to
do so could adversely affect or result in any Lien on the Acquired Assets or
otherwise result in Buyer or its Affiliates having any liability for payment of
any amount, (i) continue to file all Tax Returns within the time period for
filing, and such Tax Returns shall be true, correct and complete in all
respects, and (ii) pay when due any and all Taxes attributable to or levied or
imposed upon the Acquired Assets for periods (or portions thereof) through and
including the Closing Date whether or not such payment is required to be paid
after the Closing Date.
42
(j) Accounts Receivable, Prepaid Expenses. After the Closing,
Seller will promptly deliver to Buyer any payments received from third parties
in connection with the Accounts Receivable or Prepaid Expenses. During the first
twelve (12) months after the Closing, Seller will cooperate with Buyer, upon
Buyer's reasonable request, in connection with Buyer's efforts to collect
payments due on any of the Accounts Receivable or Prepaid Expenses and with any
transition issues that arise regarding customers of the Division Business.
(k) Uncollected Accounts Receivable. In the event that
notwithstanding Buyer's best efforts to collect the Accounts Receivable any
Accounts Receivable included in the Division Net Tangible Assets Certificate has
not been recovered in full within 60 days of the Closing Date, Seller must
purchase such Accounts Receivable by paying in immediately available funds to
the Buyer an amount equal to the full face value of such Accounts Receivable in
exchange for an assignment of all of Buyer's right, title and interest in such
Accounts Receivable to Seller. Upon receipt of such payment, ARS or UK Sub (as
the case may be) will assign the relevant outstanding Accounts Receivable to
Seller. Any payment by Seller to Buyer pursuant to this Subsection 5(k) will
operate as a discharge of the liability of the Seller in respect of any breach
of a warranty given by Seller under this Agreement arising by reason of the
non-payment of such Accounts Receivable. Seller must bear all costs of any
assignment required to be made pursuant to this Subsection 5(k) including any
Taxes and must reimburse Buyer for any transfer duty paid on the original
assignment. If Buyer receives any payment from a customer or other third party
on account of any Accounts Receivable purchased by Seller, Buyer will
immediately (i) notify Seller in writing and (ii) pay such payment directly to
Seller.
(l) Conferences. Seller undertakes to Buyer that in the event of
any user-group conferences which occur between the Agreement Date and Closing or
the Termination Date (whichever occurs first) (including the Newport users-group
conference), Seller will procure that such conferences will be conducted in
accordance with the reasonable instructions of Buyer.
(m) Contracts.
(i) The Seller must, at the Seller's cost, in respect
of the Assigned Agreements, use all reasonable endeavours to assign
the benefit of those Assigned Agreements to Buyer and to the extent
it lawfully can, Seller must permit Buyer to have the benefit of and
exercise any of Seller's (or Seller's Affiliates as the case may be)
rights under the Assigned Agreements from Closing.
(ii) If Buyer cannot lawfully perform an obligation or
exercise the rights of Seller (or Seller's Affiliate) under the
Assigned Agreements, the Seller must or must procure that its
Affiliate performs that obligation and exercise that right on, and
in accordance with, any request by Buyer.
43
(iii) Within 5 Business Days of receipt, Seller must pay
(or procure that its Affiliate pays) to Buyer any amount, or account
to Buyer, for the value of any benefit Seller (or its Affiliate)
receives after Closing in respect of an Assigned Agreement and the
Seller must give all reasonable assistance to Buyer to enable it to
enforce the rights of Seller (or its Affiliates) under the Assigned
Agreements and will at all times act with regard to the Assigned
Agreements in accordance with Buyer's reasonable instructions from
time to time. Seller (or Seller's Affiliates) must not take any
action in respect of the Assigned Agreements (other than seeking,
negotiating, and obtaining consents to assignment) without the prior
written approval of Buyer.
(iv) Nothing in this Agreement is to be construed as an
attempt to assign the benefit of any Contract that by its terms or
by law is not assignable without a third party consent, unless such
consent has been given.
(v) Delivery of documents. As soon as practicable
after Closing Seller must give to Buyer any assignments or consents
to assignment of the Assigned Agreements obtained by Seller.
(n) Employee Matters.
(i) Division Employees. EXHIBIT L attached hereto
contains a current list of each Division Employee and each Division
Contractor. Within not more than ten (10) days and not less than
three (3) days prior to the Closing Date, Seller will update the
list of Division Employees and Division Contractors on EXHIBIT L to
include and identify those Division Employees and Division
Contractors as of such date.
(ii) Offers of Employment. On or prior to the Closing
Date, Buyer will make offers to employ those Division Employees and
Division Contractors selected by Buyer in its sole discretion, on an
"at-will" basis.
(iii) Liabilities Retained by Seller and Not Assumed.
Seller will retain, and Buyer will not assume, any employer or
employment-related obligations of Seller to the Division Employees
or any other liability related to any Division Employee or Division
Contractor that arises or accrues on or before the Closing Date,
including, without limitation: (i) accrued and unpaid wages,
salaries and personal time off (including vacation time and sick
leave) and severance payments relating to any employee's employment
with Seller; (ii) any obligation to provide health, medical,
disability, life or other insurance benefits or any stock, stock
option rights, or pension savings plan or similar benefits pursuant
to any Seller employee benefit plan, other plan (including 401(k)
plans), agreement or arrangement; (iii) any government-mandated
employee or employment-related payments; (iv) workers' compensation
and disability insurance premiums (if any) paid or payable by Seller
on behalf of Division Employees who are on workers' compensation or
disability leave as of the Closing Date; or (v) any bonuses accrued
or earned by any of the Division Employees or Division Contractors
on or prior to the Closing Date. On or before the Closing Date,
after providing written notice to Seller, Buyer will notify in
writing each Division Employee and Division Contractor to whom Buyer
elects to offer employment or a contracting agreement.
44
(iv) Termination of Employment. Seller agrees to comply
with the provisions of WARN and any other federal, state or local
statute or regulation regarding termination of employment and to
perform all obligations that might otherwise be required by Seller
with respect to the cessation of any operations of the Division
Business or the termination of any Division Employee on or after the
Closing Date.
(v) General Matters. Seller and Buyer agree to
cooperate fully with respect to the actions which are necessary or
reasonably desirable to accomplish the transactions contemplated
hereunder, including, without limitation, the provision of records
and information as each may reasonably request and the making of all
appropriate filings under ERISA and the Internal Revenue Code.
(vi) Transfer of Employment in the UK
(1) Seller and Buyer agree that Sections 5(n) (ii) to (v)
shall not apply to the UK Transferring Employees and that instead this Section
5(n)(vi) shall apply to those employees.
(2) Each of the Seller and the Buyer considers the sale of
the UK Assets to UK Sub under this Agreement to constitute the transfer of an
undertaking in the UK for the purposes of the UK Transfer of Undertakings
(Protection of Employment) Regulations 2006 ("TUPE").
(3) The Seller shall pay to each of the UK Transferring
Employees on or before the Closing Date all remuneration (including all
emoluments, benefits, benefits in kind, bonuses, contributions and incentive
payments if any) due or accrued at the Closing Date.
(4) The Seller shall indemnify the Buyer against all
liabilities, losses, actions, proceedings, damages, costs, claims, demands and
expenses brought or made against or suffered or incurred by the Buyer which are
attributable to any act, omission, breach or default of the Seller on or before
the Closing Date in respect of any of its obligations or duties to or in
relation to any of the UK Transferring Employees, including any claim to Tax and
any claim by any person arising wholly or partly from any act or omission of any
of the UK Transferring Employees on or before the Closing Date.
(5) The Seller warrants and represents to the Buyer that
only the UK Transferring Employees are employed in the Division in the UK. If,
however, by operation of law the contract of employment of any employee of the
Seller other than the UK Transferring Employees takes effect as if originally
made with the Buyer, the Seller shall indemnify the Buyer against all
liabilities, losses, actions, proceedings, damages, costs, claims, demands and
expenses of the Buyer to or in respect of such employee.
(6) The Buyer shall indemnify the Seller against all
liabilities, losses, actions, proceedings, damages, costs, claims, demands and
expenses brought or made against or incurred or suffered by the Seller arising
out of or in connection with the employment of any of the UK Transferring
Employees as a result of any act, omission, breach or default of the Buyer after
the Closing Date.
45
(7) The Seller shall be liable for any failure on its part
to inform and consult with the UK Transferring Employees and/or their
representatives pursuant to its obligations under regulations 13 and 14 of TUPE
prior to the Closing Date and shall indemnify the Buyer in respect of such
failure except when such failure arises out of the Buyer's failure to comply
with its obligations under regulation 13(4) of TUPE in which case the Buyer
shall be so liable and shall indemnify the Seller in respect of such failure.
(8) The Seller and the Buyer shall give each other such
assistance as either may reasonably require to comply with TUPE in relation to
the UK Transferring Employees and in contesting any claim by any person employed
in the Division Business at or before the Closing Date resulting from or in
connection with the transaction contemplated by this Agreement, including their
respective obligations to inform and consult with the UK Transferring Employees
and their representatives pursuant to TUPE.
(o) Tax Matters.
(i) Transaction Taxes. Buyer shall be responsible for,
and shall pay all excise, value added, registration, stamp,
property, documentary, transfer, sales, use and similar Taxes,
levies, charges and fees incurred, or that may be payable to any
taxing authority, in connection with the transactions (including
without limitation the sale, transfer, and delivery of the Acquired
Assets) contemplated by this Agreement (collectively, "Transaction
Taxes"). Seller shall be responsible for preparing and filing any
tax return relating to such Transaction Taxes and shall provide a
copy of such return to Buyer. Buyer and Seller agree to cooperate in
the filing of all necessary documentation and all Tax Returns,
reports and forms with respect to all such Transaction Taxes,
including any available pre-Closing filing procedures.
(ii) Straddle Periods. All property taxes, personal
property taxes and similar ad valorem obligations in respect of the
Acquired Assets that relate to periods beginning prior to the
Closing Date and ending after the Closing Date ("Straddle Periods")
shall be prorated in accordance with the rules provided in Section
164(d) of the Internal Revenue Code. Seller shall prepare and file,
or shall cause to be prepared and filed, on a timely basis, all
Straddle Period tax returns. Seller shall provide each Straddle
Period tax return to Buyer for review not less than ten (10)
Business Days in advance of the due date thereof, and Buyer shall
pay to Seller its prorated portion of the tax shown to be due on
each such return not less than five (5) Business Days before the due
date of such payment.
(iii) Other Taxes. Except as provided in Subsections
5(k)(i) and (ii) above, (i) Seller shall be responsible for and
shall pay any and all Taxes with respect to the Acquired Assets
relating to all periods (or portions thereof) ending on or prior to
the Closing Date, and (ii) Buyer shall be responsible for and shall
pay any and all Taxes with respect to the Acquired Assets relating
to all periods (or portions thereof) ending after the Closing Date.
46
(iv) Treatment of Indemnity Payments. All payments (a)
made by Seller pursuant to Subsections 5(k)(i) above, or (b) made by
Seller or Buyer, as the case may be, to or for the benefit of the
other party pursuant to any indemnification obligations under this
Agreement, will be treated as adjustments to the Purchase Price for
Tax purposes and such agreed treatment will govern for purposes of
this Agreement, unless otherwise required by law.
(p) Transition Services. Buyer and Seller shall enter into a
Transitional Services Agreement in the form attached hereto as Exhibit M
attached hereto pursuant to which (i) Buyer may utilize Seller's accounting,
human resources and information technology systems for a period of 180 days
after the Closing Date without payment of any fees or costs, and (ii) Buyer
shall provide Seller with transition office space for certain Seller employees
(who are not employees of the Division), at the locations and for the amounts
and time periods set forth in the Transitional Services Agreement.
(q) Seller's Confidential Information. All copies of financial
information, marketing and sales information, pricing, marketing plans, business
plans, financial and business projections, customer lists, methodologies,
inventions, software, know-how, product designs, product specifications and
drawings, and other confidential and/or proprietary information of the Seller
related to the Division or any of the Acquired Assets, including but not limited
to the Division Software, the Division Documentation and the Division Technology
Deliverables (collectively, "Seller's Confidential Information") will, be held
by Seller in strict confidence and, at all times following the Agreement Date
and following the Closing, will not be used or disclosed by Seller to any third
party and, upon Buyer's request, will be promptly destroyed by the Seller or
delivered to Buyer; except that the Seller may use one internal copy of Business
Records that it is entitled to retain for purposes of its internal
record-keeping, financial statements and any Tax related matters. Buyer must (i)
at all times keep secret and confidential all of Seller's Confidential
Information, (ii) not use, divulge or disclose any of Seller's Confidential
Information other than in connection with the transactions contemplated by this
Agreement, and (iii) if for any reason the Closing does not occur, immediately
return to Seller all originals and copies, in any form whatsoever, of all of
Seller's Confidential Information.
(r) Buyer's Confidential Information. Seller must at all times
keep secret and confidential, and must not use, divulge or disclose any
information relating to Buyer or its business (which is disclosed to the
recipient by Buyer, its representatives or advisers), this Agreement or any
Ancillary Agreement or the terms of the transaction other than to the extent
that: (i) Seller is required to disclose the information by applicable law or
the rules of any recognized stock exchange on which its shares or the shares of
any of its Affiliates are listed, provided that the Seller has consulted with
Buyer as to the form and content of the disclosure; (ii) the disclosure is made
by Seller to its financiers or lawyers, accountants, investment bankers,
consultants or other professional advisers only to the extent necessary to
enable Seller to properly perform its obligations under this Agreement or to
conduct its business generally, in which case Seller must ensure that such
persons keep the information secret and confidential and do not divulge or
disclose the information to any other person; or (iii) the disclosure is
required for use in legal proceedings regarding this Agreement or the Asset
Purchase.
(s) Notification; Amendments to Seller Disclosure Letter. If on
any date on or prior to October 30, 2007, any of the information in any of the
Seller Disclosure Letter or other Disclosure Materials is not true, accurate and
complete in all material respects on and as of such date, Seller shall be
entitled to amend the Seller Disclosure Letter or other Disclosure Materials to
make additions to or modifications necessary to make the information set forth
therein true, accurate and complete in all material respects, and the Disclosure
Letter or other Disclosure Materials shall then be deemed amended to reflect
such additions and modifications for all purposes (such additions or
modifications, the "Schedule Additions or Modifications"). In respect of any
such Schedule Addition or Modifications: (i) which the Buyer in its sole and
absolute discretion considers to be a matter which has a Material Adverse Effect
on the Division, Buyer may immediately terminate this Agreement without any
liability whatsoever; and (ii) Buyer will be entitled to indemnification
pursuant to the provisions set forth in Section 8 below.
47
(t) Irvine Lease. Prior to Closing, the Parties will use their
best endeavours to assign the Irvine Lease to Buyer on comparable terms to the
existing Irvine Lease provided that nothing contained in this Agreement will
require Buyer or any director of Buyer to provide any undertaking, guarantee or
security to the relevant landlord other than as contemplated by the Irvine
Lease, failing which the Parties will enter into a written sub-lease in respect
of the Irvine Lease in a form mutually agreeable to the Parties.
6. Conditions to Obligation to Close.
(a) Conditions to Obligations of Each Party. The respective
obligations of each Party to consummate the transactions to be performed by it
in connection with the Closing are subject to satisfaction of the following
conditions (it being understood that each such condition is solely for the
benefit of the Parties and may be waived in writing by their mutual agreement,
without notice, liability or obligation to any Person):
i) No federal or state governmental authority or
other agency or commission or federal or state court of competent jurisdiction
will have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions; provided, however, that the Parties will use
their reasonable best efforts to have any such order or injunction vacated on or
before the Termination Date.
ii) No suit, claim, cause of action, arbitration,
investigation or other proceeding contesting, challenging, or seeking to alter
or enjoin or adversely affect the sale and purchase of the Acquired Assets or
any other transaction contemplated by this Agreement will be threatened or
pending.
(b) Conditions to Buyer's Closing. Buyer's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions (it being understood that
each such condition is solely for the benefit of Buyer and may be waived in
writing by Buyer, without notice, liability or obligation to any Person):
(i) The representations and warranties of Seller set
forth in Section 3 above, and each of these representations and
warranties (considered individually), were true and correct in all
material respects as of the Agreement Date and shall be true and
correct in all material respects as of the Closing Date, except in
the case of such representations and warranties which by their terms
speak only as of a specific date or dates, which representations and
warranties shall be true and correct as of such date;
48
(ii) Seller shall have duly performed and complied with
all of its covenants and obligations hereunder and in the Ancillary
Agreements required to be performed on or prior to Closing in all
material respects;
(iii) Seller shall have delivered to Buyer a certificate
to the effect that each of the conditions specified above in
Sections 6(b)(i)-(ii) is satisfied in all respects;
(iv) Buyer shall have received each of the closing
deliveries of Seller set forth in Section 2(e), executed on behalf
of Seller by a duly authorized officer of Seller;
(v) Customers of the Division Business representing at
least ninety-five (95%) of the revenue of the Division Business in
the two (2) year period preceding the Agreement Date (who remain
customers of the Division Business) and customers constituting
ninety-five (95%) in number of the customers of the Division
Business as of the Agreement Date have consented to the assignment
or transfer of their contract to Buyer (except to the extent such
contract is assignable or transferable without consent);
(vi) Seller will have obtained and delivered to Buyer
all consents, waivers and approvals from governmental entities and
third parties necessary on the part of the Seller to effect the
assignment and transfer to Buyer of the Acquired Assets free and
clear of all Liens, to effect the Subleases and to effect the
assignment to Buyer of the Assigned Agreements;
(vii) Seller shall have conducted the Division Business
after the Agreement Date in the ordinary course of business, except
for actions expressly permitted by this Agreement or such further
matters as may be consented to in writing by Buyer;
(viii) At least eighty percent (80%) of the Division
Employees and Division Contractors and each of the Key Employees,
(A) in the case of the Division US Employees, who are offered
employment on terms providing for an annual total compensation
package at least equal to the current annual total target
compensation package provided by the Seller (exclusive of the value
of any options that may have been granted to any such Division
Employees) shall have accepted Buyer's offers of employment in a
writing signed by them; or (B) in the case of the Division UK
Employees who transfer pursuant to TUPE, shall have agreed in
writing to transfer to Buyer;
49
(ix) Buyer's financier is satisfied with the outcome
following completion of the audit/targeted review (as the case may
be) as referred to in Subsection 5(b);
(x) No suit, claim, cause of action, arbitration,
investigation or other proceeding contesting, challenging or seeking
to alter or enjoin or adversely affect the sale and purchase of the
Acquired Assets or any other transaction contemplated hereby will be
pending or threatened;
(xi) Buyer has obtained all necessary approvals in
relation to all transactions contemplated by this Agreement or any
document required to be executed under this Agreement, including the
passing, if applicable, at a general meeting of the Buyer all
necessary resolutions required by the Xxxxxxxxxx Xxxxxxxxxxxx Xxx
0000 (Cth), the ASX Listing Rules or the constitution of the Buyer,
provided Buyer has used its best efforts to obtain such approvals
and the necessary resolutions;
(xii) Buyer's financiers agreeing in writing on terms
acceptable to the Buyer in its sole discretion, to provide the funds
required by Buyer to enable Buyer to complete this Agreement
(provided Buyer has used its best efforts to obtain the funds on
terms acceptable to Buyer) and the Asset Purchase and any conditions
to finance being satisfied to the satisfaction of the Buyer's
financiers; and
(xiii) Seller shall have discharged the Seller
Indebtedness to the Buyer in full in Immediately Available Funds.
(c) Conditions to Seller's Closing. Seller's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions (it being understood that
each such condition is solely for the benefit of Seller and may be waived in
writing by Seller, without notice, liability or obligation to any Person):
(i) The representations and warranties of Buyer set
forth in Section 4 above, and each of these representations and
warranties (considered individually), were true and correct in all
material respects as of the Agreement Date and shall be true and
correct in all material respects as of the Closing Date as if made
on the Closing Date, except in the case of such representations and
warranties which by their terms speak only as of a specific date or
dates, which representations and warranties shall be true and
correct as of such date; (ii) Buyer shall have duly performed and
complied with all of its covenants and obligations hereunder and in
the Ancillary Agreements in all material respects required to be
performed prior to the Closing; and
(iii) Buyer shall have delivered to Seller a certificate
to the effect that each of the conditions specified above in Section
6(c)(i)-(ii) is satisfied in all respects.
50
(d) Reasonable Endeavors.
(i) The Buyer must use all reasonable endeavors to
ensure that the conditions in Subsections 6(b)(xi) and (xii) and
Subsection 6(c) are satisfied as expeditiously as possible and in
any event on or before 5pm on the date which is three days before
the Termination Date.
(ii) The Seller must use all reasonable endeavors to
ensure that the conditions in Subsections 6(b)(i) to (viii) are
satisfied as expeditiously as possible and in any event on or before
5pm on the date which is three days before the Termination Date.
(iii) Each party must keep the other party informed of
the progress towards satisfaction of its obligations under
Subsections 6(d)(i) and (ii) (as applicable).
(iv) Each party must provide all reasonable assistance
to the other as is necessary to satisfy the conditions in Section 6.
7. Termination, Amendment and Waiver.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) Buyer and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Seller or Buyer may terminate this Agreement if
the Closing will not have occurred on or prior to [DECEMBER 24,
2007] (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 7(a)(ii) will not be
available to any Party whose failure to fulfill any obligation under
this Agreement will have been the primary cause of, or will have
resulted in, the failure of the Closing to occur prior to such date;
(iii) Buyer may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing if (A)
Seller has breached any material representation, warranty, or
covenant contained in this Agreement, (B) Buyer has notified Seller
of the breach and the breach has continued without cure for a period
of ten (10) days after the notice of breach (provided, however, that
no such cure period shall be available or applicable to any such
breach which by its nature cannot be cured) and (C) if not cured
within the timeframe in sub-clause (B) above and at or prior to the
Closing, such breach would result in the failure of any of the
conditions set forth in Subsections 6(a) or 6(b) to be satisfied
(provided, however, that the right of Buyer to terminate this
Agreement under this clause shall not be available to Buyer if Buyer
is at that time in material breach of this Agreement);
(iv) Seller may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing if (A)
Buyer has materially breached any representation, warranty, or
covenant contained in this Agreement, (B) Seller has notified Buyer
of the breach, and the breach has continued without cure for a
period of ten (10) days after the notice of breach (provided,
however, that no such cure period shall be available or applicable
to any such breach which by its nature cannot be cured) and (C) if
not cured within the timeframe in sub-clause (B) above and at or
prior to the Closing, such breach would result in the failure of any
of the conditions set forth in Sections 6(a) or 6(c) to be satisfied
(provided, however, that the right of Seller to terminate this
Agreement under this clause shall not be available to Seller if
Seller is at that time in material breach of this Agreement);
51
(v) Buyer may terminate this Agreement in accordance
with Subsection 5(s)(i).
(vi) Buyer may terminate this Agreement if any of the
conditions in Subsection 6(a) or 6(b) has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; and
(vii) Seller may terminate this Agreement if any of the
conditions in Subsection 6(a) or 6(c) has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to
comply with its obligations under this Agreement) and Seller has not
waived such condition on or before the Closing Date.
(b) Exclusivity Deposit. In consideration of Seller's agreement to
not market the Division Business during the negotiation of this Agreement
("Exclusivity Covenant") Buyer has paid Seller the refundable Exclusivity
Deposit which is to be kept in an interest bearing account by Seller. All
interest accruing on the Exclusivity Deposit accrues to the benefit, and for the
account, of (A) Buyer if the Closing occurs, or (B) Seller if the Agreement is
terminated pursuant to Subsections 7(a)(iv) or (vii). In the event of the
parties executing this Agreement Seller shall immediately reimburse to Buyer in
full the Exclusivity Deposit, together with the amount of any interest accrued
thereon in immediately available funds The Buyer's right to reimbursement of the
Exclusivity Deposit (plus interest accrued thereon) pursuant to this Subsection
7(b) does not limit or prejudice any other rights or remedies the Buyer may have
against the Seller.
(c) Effect of Termination. If any Party terminates this Agreement
pursuant to Subsection 7(a) or 7(b) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach or for
reimbursement of the Exclusivity Deposit to Buyer under Section 7(b) above);
provided, however, that (A) the confidentiality provisions contained in Section
5(d) and 5(n) and the General Provisions contained in Section 11 shall survive
termination and (B) nothing herein shall relieve any Party from liability in
connection with any willful breach of such Party's representations, warranties
or covenants contained herein.
(d) Amendment. The Parties may amend this Agreement, whether
before or after the Closing, by authorized action at any time pursuant to an
instrument in writing signed on behalf of each of the Parties.
(e) Extension; Waiver. At any time at, prior to, or following the
Closing, either Party may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other Party
hereto, (b) waive any inaccuracies in the representations and warranties made to
such Party contained herein or in any document delivered pursuant hereto, and
(c) waive compliance by the other Party with any of its agreements and waive any
conditions for the benefit of such Party contained herein. Any agreement on the
part of a Party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such Party. Without limiting the
generality or effect of the preceding sentence, no delay in exercising any right
under this Agreement shall constitute a waiver of such right, and no waiver of
any breach or default shall be deemed a waiver of any other breach or default of
the same or any other provision in this Agreement.
52
8. Indemnification.
(a) Escrow. The Escrow Amount shall be available to compensate
Buyer (on behalf of itself or any other Indemnified Person (as such term is
defined in Section 8(b) below)) for Indemnifiable Damages (as such term is
defined in Section 8(b) below) pursuant to the indemnification obligations of
Seller, such deposit to be governed by the provisions set forth herein and in
the Escrow Agreement.
(b) Indemnification. Subject to the limitations set forth in this
Section, Seller shall indemnify, defend and hold harmless Buyer and its
Affiliates, directors, officers, agents and employees (each of the foregoing
being referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against any and all losses, Liabilities,
damages, reductions in value, costs and expenses, including costs of
investigation and defense and reasonable fees and expenses of lawyers, experts
and other professionals (collectively, "Indemnifiable Damages") whether or not
due to any third-party claim, directly or indirectly arising out of or resulting
from, or in connection with (i) any failure of any representation or warranty
made by Seller in this Agreement or the Seller Disclosure Letter (including any
exhibit or schedule to the Seller Disclosure Letter) to be true and correct as
of the Agreement Date and on each day between the Agreement Date and the Closing
Date and the Closing Date (except in the case of representations and warranties
which by their terms speak only as of a specific date or dates, which
representations and warranties shall be true and correct as of such date), (ii)
any failure of any certification, representation or warranty made by Seller in
any certificate (other than the Division Net Tangible Assets Certificate)
delivered to Buyer pursuant to any provision of this Agreement to be true and
correct as of the date such certificate is delivered to Buyer, (iii) any breach
of or default in connection with any of the covenants or agreements made by
Seller in this Agreement which is not waived by Buyer in writing, (iv) any
matter set forth on Schedule 3(h) to the Seller Disclosure Letter or that is or
would be an exception to the representations and warranties made on each date in
Section 3(h) (Litigation), (v) any and all Liabilities of Seller now or
hereafter arising relating to claims for wrongful discharge, employment
discrimination, or under Cobra, Cal-Cobra, severance and other obligations to
Seller employees, (vii) any and all Excluded Liabilities, and (viii) any
inaccuracies in the Division Net Tangible Assets Certificate, if such
inaccuracies resulted in an increase to the Purchase Price. NOTWITHSTANDING
ANYTHING TO THE CONTRARY, SELLER SHALL NOT BE LIABLE FOR AND BUYER SHALL NOT BE
ENTITLED TO RECEIVE ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT (EXCEPT FOR ANY THIRD PARTY CLAIMS,
INCLUDING ANY ACTION, SUIT, PROCEEDING, CLAIM OR INVESTIGATION BY OR BEFORE ANY
GOVERNMENTAL ENTITY), EVEN IF SELLER IS ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
53
(c) Limitations.
(i) Notwithstanding anything contained herein to the
contrary, no Indemnified Person may make a claim for any cash from
the Escrow Amount for indemnification pursuant to clauses (i)-(ii)
of the first sentence of Section 8(b) (and that does not involve
fraud, willful breach or intentional misrepresentation by Seller or
the Indemnifying Persons or any inaccuracy or breach of any of the
representations and warranties in Section 3(w) (Taxes)), unless and
until an Officer's Certificate (as defined below in Section 8(e)(i))
describing Indemnifiable Damages in an aggregate amount greater than
$30,000 (the "Threshold") has been delivered, in which case the
Indemnified Person may make claims for indemnification and may
receive cash from the Escrow Amount for all Indemnifiable Damages
including the Threshold.
(ii) Any Indemnifiable Damages paid by Seller shall be
paid first from the Escrow Amount as set forth in the Escrow
Agreement; provided, however, that the rights of Buyer to seek
indemnification for Indemnifiable Damages shall not be limited to
the Escrow Amount or in any other respect. Neither the exercise of,
nor the failure to exercise, Buyer's rights under this Section 8
will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it
hereunder. After Indemnified Persons have exhausted or made claims
upon the entire Escrow Amount (after taking into account all other
claims for indemnification from the Escrow Amount made by
Indemnified Persons), Seller shall be liable for the amount of any
Indemnifiable Damages in excess of the Escrow Amount; provided,
however, that notwithstanding anything to the contrary such
liability shall be limited to and shall not exceed Seven Million
Five Hundred Thousand dollars ($7,500,000).
(d) Period for Claims. Except as set forth below, the period
during which claims for Indemnifiable Damages may be made for Indemnifiable
Damages arising from or in connection with the matters listed in clauses (i) and
(ii) of the first sentence of Section 8(b) shall commence at the Closing and
terminate the day after the date that is 18 months following the Closing Date
(the "Claims Period"); provided, however, the period during which claims for
Indemnifiable Damages may be made for Indemnifiable Damages arising from or in
connection with the matters listed in clauses (iii) to (viii) of the first
sentence of Section 8(b)("Other Matters"), shall commence at the Closing and
terminate upon the expiration of the applicable statute of limitations (the
"Subsequent Claims Period"). So long as there are not claims then pending in
excess of the then remaining Escrow Fund, the sum of $250,000 shall be released
from the Escrow Fund to Seller each calendar quarter commencing three months
following the Closing. Notwithstanding anything contained herein to the
contrary, such portion of the Escrow Fund at the conclusion of the Claims Period
as in the reasonable judgment of Buyer may be necessary to satisfy any
unresolved or unsatisfied claims for Indemnifiable Damages specified in any
Officer's Certificate delivered to Seller prior to expiration of the Claims
Period ("Unresolved Claims") shall remain in the Escrow Fund until such claims
for Indemnifiable Damages have been resolved or satisfied. The remainder of the
Escrow Fund, if any, shall be paid to the Seller promptly (and in any event
within 10 Business Days) after the expiration of the Claims Period; provided,
further, any amounts remaining in the Escrow Fund, if any, after the resolution
of the Unresolved Claims, shall be paid to the Seller promptly (and in any event
within 10 Business Days) after the resolution of such Unresolved Claims.
54
(e) Claims.
(i) On or before the first anniversary of the Closing
Date, Buyer may deliver to the Escrow Agent and after the first
anniversary of the Closing Date, may deliver to the Seller, a
certificate signed by any officer of Buyer (an "Officer's
Certificate"):
(A) stating that an Indemnified Person has incurred, paid,
reserved or accrued, or reasonably anticipates that it may incur, pay, reserve
or accrue, Indemnifiable Damages;
(B) stating the amount of such Indemnifiable Damages (which,
in the case of Indemnifiable Damages not yet incurred, paid, reserved or
accrued, may be the maximum amount reasonably anticipated by Buyer to be
incurred, paid, reserved or accrued); and
(C) specifying in reasonable detail (based upon the
information then possessed by Buyer) the individual items of such Indemnifiable
Damages included in the amount so stated and the nature of the claim to which
such Indemnifiable Damages are related.
(ii) Third-Party Claims. In the event Buyer becomes
aware of a third-party claim which Buyer believes may result in a
claim for Indemnifiable Damages by or on behalf of an Indemnified
Person during the periods set forth in Section 8(d), Buyer shall
promptly notify the Seller of such third-party claim. Subject to
Seller providing Buyer with an indemnity, to Buyer's reasonable
satisfaction, against all losses, liabilities, damages, costs,
charges and expenses which may be incurred in connection with such
action, together with such security to support the indemnity as
Buyer may reasonably request, upon prompt written notice to Buyer
(in any event no later than 10 days after receiving notice from
Buyer of such third-party claim), Seller shall have the right in its
sole discretion to conduct the defense of and to settle or resolve
any such claim; provided that Buyer provides its prior written
consent to any settlement or resolution to be entered into by
Seller, such consent not to be unreasonably withheld or delayed.
Alternatively, if Seller does not provide such notice to Buyer
pursuant to the prior sentence, then Buyer may conduct the defense
and settle or resolve any such claim and Seller hereby indemnifies
Buyer against all costs and expenses incurred by Buyer in connection
with such defense, settlement or resolution (including reasonable
attorneys' fees, other professionals' and experts' fees and court or
arbitration costs). Should Seller conduct the defense or resolution
of third party claims, Seller must act in good faith, liaise with
Buyer in relation to such defense, provide Buyer with reasonable
access to a copy of any notice, correspondence or other document
relating to the third-party claim and act reasonably in all
circumstances (including having regard to the likelihood of success
and the effect of the proceedings or actions on the goodwill or
reputation of the Division Business and Buyer), and Buyer shall have
the right to receive copies of all pleadings, notices and
communications with respect to the third-party claim to the extent
that receipt of such documents does not affect any privilege
relating to any Indemnified Person and shall be entitled, at its
expense, to participate in, but not to determine or conduct, any
defense of the third-party claim or settlement negotiations with
respect to the third-party claim.
55
9. Period After Closing.
(a) Notice to customers, etc. As soon as reasonably practicable
after Closing the Seller must send out a notice of the Buyer's acquisition of
the Division in a form to be agreed between Seller and the Buyer to all the
customers, clients or suppliers of the Division Business and their respective
other business contacts.
(b) Carrying on of Division Business. For the 6 month period
following the Closing Date, Seller must (at the request of Buyer and at Buyer's
cost) provide to Buyer the information reasonably necessary to help acquaint
Buyer with the manner in which the Division Business was conducted in the 12
months preceding the Closing Date.
(c) Trade connections. For the 6 month period from the Closing
Date, Seller must introduce representatives of Buyer to suppliers and customers
of the Division Business and use its commercially reasonable endeavors to
encourage them to maintain with Buyer after Closing the level of trade they had
with Seller in relation to Division Business in the 6 months preceding the
Closing Date.
(d) Documents to be available after Closing. As soon as possible
after the Closing, Seller must give Buyer all documents and information relating
to the Division Business that the Buyer reasonably requests or will reasonably
need to carry on the Division Business or to comply with its obligations under
this Agreement, including the Business Records, to the extent not delivered to
the Buyer at the Closing.
(e) Change of company name. Immediately following Closing (but in
no event more than ten (10) business days following Closing), Seller must
commence proceeding to change its name and Seller must procure that any relevant
Affiliate of Seller changes its name to a name that does not include, any of the
words comprised in the Division Trade Marks or in the names comprised in the
Division Domain Names or any word or name that is similar to or likely to be
mistaken for or confused with any Division Trade Xxxx or such name. Seller may
retain but not use the name "Island Pacific" in commerce pending such name
change.
(f) Change of business name. Immediately following Closing (and in
no event more than ten (10) business days following the Closing), Seller must,
and must procure that any Affiliate of the Seller that has registered a business
name that uses or includes any of the words comprised in the Division Trade
Marks or any names comprised in the Division Domain Names, execute a cessation
of business form or a change in particulars form to change the business name
that does not include any such name, for each such business name registration.
(g) Restriction on use of names etc by Seller. From Closing and
thereafter, Seller may not use the Division Trade Marks or the names comprised
in the domain name licences forming part of the Division Intellectual Property
Rights or any word, name, sign or logo that is substantially identical or
deceptively similar to or likely to be mistaken for or confused with the trade
marks or the names comprised in the domain name licences and Seller must cease
to use any words, logos, marks or names in its business resembling or likely to
be mistaken for or confused with the trade marks forming part of the Division
Intellectual Property Rights.
(h) Other Intellectual Property. If any applications or
registrations for any Division Intellectual Property Rights in the name of
Seller other than those set out in Exhibit O, are identified, the identifying
party must promptly notify the other parties and Seller must promptly execute
any documents reasonably requested by Buyer to enable Buyer to record the
assignment or transfer of those applications and registrations. If any Division
Intellectual Property Rights created in the course of providing services to
Seller in connection with the Division Business at any time before the Closing
Date are identified, Seller must, whether before or after the Closing Date,
immediately procure that the third party assigns such Division Intellectual
Property Rights to Buyer for the consideration of $10 in the aggregate.
56
(i) Buyer's Indemnity. Buyer will indemnify, defend, and hold
harmless Seller, its Affiliates, officers, directors, employees, and agents from
and against all claims, demands, actions, causes of action, costs, and
liabilities relating to or arising from (i) any material failure of any
representation or warranty made by Buyer in this Agreement to be true and
correct as of the Agreement Date and on each day between the Agreement Date and
the Closing Date and the Closing Date (except in the case of representations and
warranties which by their terms speak only as of a specific date or dates, which
representations and warranties shall be true and correct as of such date), or
(ii) any material breach of or default in connection with any of Buyer's
covenants in this Agreement which is not waived by Seller in writing. .
NOTWITHSTANDING ANYTHING TO THE CONTRARY, BUYER SHALL NOT BE LIABLE FOR AND
SELLER SHALL NOT BE ENTITLED TO RECEIVE ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE
DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT (EXCEPT FOR ANY
THIRD PARTY CLAIMS, INCLUDING ANY ACTION, SUIT, PROCEEDING, CLAIM OR
INVESTIGATION BY OR BEFORE ANY GOVERNMENTAL ENTITY), EVEN IF BUYER IS ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
(j) Remedial work. Seller is liable and undertakes to reimburse
Buyer immediately on demand from the Escrow Fund, in respect of any remedial
work to be carried out by Buyer in respect of the Assigned Agreements following
Closing on the basis of the applicable standard rates from time to time of each
employee of Buyer who carries out such remedial works.
10. Protection of Division Business.
(a) No solicitation of customers. During the Restricted Period,
Seller must not approach, and must procure that no Seller's Affiliate
approaches, (either solely or jointly with any other person and in any capacity
whatsoever) any person whom Seller or any Affiliate of Seller is aware is a
customer of or client of the Division Business whether or not for the purpose of
persuading that person to cease doing business with Buyer approaching such
customer or client would reasonable be expected to reduce the amount of business
that the customer or client would normally do with Buyer (provided, however,
that Seller may continue conducting business with its customers in the ordinary
course of business).
(b) No solicitation of Transferring Employees. During the
Restricted Period, Seller must not approach or solicit, and must procure that no
Seller's Affiliate approaches or solicits, any Transferring Employee of the
Division or any Division Contractor who is retained by the Buyer for the purpose
of recruiting or hiring that person or engaging that contractor. This
restriction does not apply where a person (including a contractor) responds to
an advertisement published by a Seller or Seller's Affiliate that is targeted to
a wide audience of potential applicants.
(c) Severability. If any part of an undertaking in this Section 10
is unenforceable it may be severed without affecting the remaining
enforceability of that or the other undertakings.
57
11. General Provisions.
(a) No Merger. The Seller's warranties and representations given
under this Agreement, the Buyer's warranties and representations given under
this Agreement and the undertakings and indemnities in this Agreement will not
merge on Closing.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it reasonably
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure); provided, further, after the Closing, Buyer may
issue such press releases or make such other public statements regarding this
Agreement or the transactions contemplated hereby as Buyer may, in its
reasonable discretion, determine.
(c) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, their respective
successors and permitted assigns and the Indemnified Persons.
(d) Joint and Several Obligations. The obligations of each of 3Q,
UK Sub and ARS under this Agreement shall be joint and several obligations of
3Q, UK Sub and ARS.
(e) Entire Agreement. This Agreement, the Ancillary Agreements and
the Confidentiality Agreement constitute the entire agreement between the
Parties and supersede any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they relate in any way
to the subject matter hereof.
(f) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(g) Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) 1 Business Day after being sent to
the recipient by reputable overnight courier service (charges prepaid), (iii) if
sent by facsimile transmission, when a facsimile confirmation receipt is
received indicating successful delivery, or (iv) if sent by electronic mail,
when a delivery confirmation report is received by the sender which records the
time that the email was delivered to the addressee's email address (unless the
sender receives a delivery failure notification indicating that the email has
not been delivered to the addressee), or (iv) 5 Business Days after being mailed
to the recipient by certified or registered mail, return receipt requested and
postage prepaid, (however, in all cases if the delivery or receipt is on a day
that is not a Business Day (in addressee's jurisdiction) or is after 5.00pm
(addressee's time) it is regarded as received at 9.00am on the following
Business Day) and addressed to the intended recipient as set forth below:
58
If to Seller: Island Pacific, Inc.
00000 XxxXxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx, CEO
Facsimile: (000) 000-0000
Email: XxxxxX@xxxxxxxxxxxxx.xxx
Copy to not constituting notice to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxx Seidenwurm & Xxxxx
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
If to Buyer: 3Q Holdings Limited
Ground Floor, 00 Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx XXX 0000
Xxxxxxxxx
Attn: Xxxx Xxxxxxxx
Facsimile: x00 0 0000 0000
Email: xxxx@xxxxxx.xxx.xx
Copy to not constituting notice to:
Xxxxxx Xxxxxxxxxxx
Freehills
00-00 Xxxxxx Xxxxx
Xxxxxx XXX 0000
Xxxxxxxxx
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
Any notice or communication given in accordance with the above requirements can
be relied on by the addressee and the addressee is not liable to any other
person for any consequences of that reliance if the addressee believes it to be
genuine, correct and authorized by the sender.
59
(i) Governing Law, Venue(j) . This Agreement is governed by and
construed in accordance with the laws of the State of California. The Parties
hereby irrevocably submit to the exclusive jurisdiction of the state and federal
courts located in the City of San Diego, California in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby and thereby, and hereby waive, and agree not to assert as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or thereof, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the Parties irrevocably agree that
all claims with respect to such action or proceeding shall be heard and
determined in such courts located in the City of San Diego, California. The
Parties hereby consent to and grant any such court jurisdiction over the person
of such Parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 11(g) or in such other manner as
may be permitted by applicable Legal Requirements, shall be valid and sufficient
service thereof.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction, and accordingly shall be read down for
the purpose of that jurisdiction, if possible, so as to be valid and
enforceable, and otherwise shall be severed to the extent of the invalidity or
unenforceability, without affecting the remaining provisions of this agreement
or affecting the validity or enforceability of that provision in any other
jurisdiction..
(l) Expenses. Each of Buyer and Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction; Interpretation. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. A reference to this
Agreement or another instrument includes any variation or replacement of any of
them. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder and consolidations, amendments, re-enactments or replacements of any
of them, unless the context requires otherwise. When a reference is made in this
Agreement to Articles, Sections or Exhibits, such reference shall be to an
Article or Section of, or an Exhibit to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement unless the contrary intention appears. The words "include," "includes"
"including", "for example" or similar expressions when used herein shall be
deemed in each case to be followed by the words "without limitation", unless
there is express wording to the contrary The phrases "provided to," "furnished
to," and phrases of similar import when used herein, unless the context
otherwise requires, shall mean that a true, correct and complete paper copy of
the information or material referred to has been provided to the Party to whom
such information or material is to be provided. Unless the context of this
Agreement otherwise requires: (i) words of any gender include each other gender;
(ii) words using the singular or plural number also include the plural or
singular number, respectively; and (iii) the terms "hereof," "herein,"
"hereunder" and derivative or similar words refer to this entire Agreement. A
reference in this Agreement to $ is to United States currency unless denominated
otherwise. If a period of time is specified and dates from a given day or the
day of an act or event, it is to be calculated exclusive of that day. If an
event must occur on a stipulated day that is not a Business Day then the
stipulated day will be taken to be the next Business Day. A reference to any
thing (including any amount) is a reference to the whole and each part of it and
a reference to a group of persons is a reference to any one or more of them. Any
covenant, representation, warranty, indemnity or undertaking given on the part
of two or more persons is given/binds them jointly and severally.
60
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[SIGNATURES ON FOLLOWING PAGE]
61
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first written above.
3Q Holdings Limited
By:______________________________
Title: Director/Secretary [Must be an officer]
Applied Retail Solutions, Inc.
By:______________________________
Title:___________________________ [Must be an officer]
Island Pacific (UK) Limited Company No. 6409686
By:______________________________
Title:___________________________ [Must be an officer]
Island Pacific, Inc
By:______________________________
Title:___________________________
62
EXHIBITS
Exhibit A - Excluded Assets
Exhibit B - Assigned Agreements
Exhibit C - Division Plant and Equipment and Leased Real Property
Exhibit D - Scheduled Assumed Liabilities
Exhibit E - Form of Escrow Agreement
Exhibit F - Seller Indebtedness
Exhibit G - Form of Xxxx of Sale
Exhibit H - Form of Assumption Agreement
Exhibit I - Deliberately Blank
Exhibit J - Form of Xxxx Assignment
Exhibit K - Deliberately Blank
Exhibit L - Division Employees and Division Contractors
Exhibit M - Form of Transitional Services Agreement
Exhibit N - Key Division Employees and Division Contractors for Employee
Retention Closing Conditions
Exhibit O Intellectual Property
Exhibit P Division Products
Exhibit Q UK Employee Advances
[Schedules and Exhibits Attached]
63
