ASSET AND STOCK PURCHASE AGREEMENT
by and among
XXXXXX XXX, INC.
EXETER EDUCATIONAL MANAGEMENT SYSTEMS, INC.
XXXXXX MAE SOLUTIONS (INDIA) PRIVATE, LTD.
and
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
January 10, 2002
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS AND CONSTRUCTION......................................................................2
ARTICLE 2 SALE AND PURCHASE OF ASSETS AND STOCK; ADDITIONAL AGREEMENTS.....................................14
2.1. Assets to be Acquired............................................................................14
2.2. Excluded Assets..................................................................................15
2.3. Stock to be Acquired; Escrow of Sub Shares and the Initial Subsequent Purchase Price.............16
2.4. Assumption of Certain Liabilities................................................................16
2.5. Excluded Liabilities.............................................................................16
ARTICLE 3 PURCHASE PRICE...................................................................................17
3.1. Purchase Price...................................................................................17
3.2. Initial Closing Date Purchase Price Adjustment...................................................18
3.3. Post Initial Closing Purchase Price Adjustment...................................................18
3.4. Initial Subsequent Closing Date Purchase Price Adjustment........................................20
3.5. Post Subsequent Closing Purchase Price Adjustment................................................21
3.6. Earnout..........................................................................................23
3.7. Banner Commission Fees...........................................................................25
3.8. Allocation of Purchase Price.....................................................................26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES..................................................27
4.1. Organization and Capitalization..................................................................27
4.2. Corporate Power and Authority; Legal Capacity; Enforceability....................................28
4.3. Non-contravention................................................................................29
4.4. Title; Properties................................................................................29
4.5. Third Party Options..............................................................................30
4.6. Financial Statements.............................................................................30
4.7. Absence of Undisclosed Liabilities...............................................................31
4.8. Litigation; Compliance with Law, Permits and Licenses............................................31
4.9. Environmental Protection.........................................................................32
4.10. Insurance........................................................................................32
4.11. Intellectual Property............................................................................32
4.12. Labor and Employee Matters.......................................................................34
4.13. Employee Benefits................................................................................35
4.14. Contracts, Leases, Etc...........................................................................35
4.15. Other Transactions...............................................................................37
4.16. No Changes.......................................................................................37
4.17. Certain Tax Matters..............................................................................38
4.18. Brokerage........................................................................................39
4.19. Warranties and Liabilities.......................................................................39
4.20. Transactions with Affiliates.....................................................................40
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4.21. Receivables......................................................................................40
4.22. Assumed Contracts; Customer Claims...............................................................40
4.23. Sufficiency of Purchased Assets..................................................................40
4.24. Relationship With Customers......................................................................40
4.25. Corporate Documents..............................................................................41
4.26. Exeter Group.....................................................................................41
4.27. Veracity of Statements...........................................................................41
4.28. Export/Import....................................................................................41
4.29. Time and Materials Contracts.....................................................................42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER..........................................................42
5.1. Organization, Power, Standing and Qualification..................................................42
5.2. Power and Authority..............................................................................42
5.3. Non-Contravention................................................................................42
5.4. Brokerage........................................................................................42
5.5. Litigation.......................................................................................43
5.6. Veracity of Statements...........................................................................43
5.7. Available Funds..................................................................................43
ARTICLE 6 ACTIVITIES OF THE COMPANIES PRIOR TO THE subsequent CLOSING DATE.................................43
6.1. Operation of Business............................................................................43
6.2. Access to Information............................................................................46
6.3. Notice of Change.................................................................................46
6.4. Closing Efforts..................................................................................46
6.5. No Discussions...................................................................................46
6.6. Services Agreement...............................................................................46
6.7. Bonuses..........................................................................................46
6.8. Inter-company Accounts...........................................................................47
ARTICLE 7 ACTIVITIES OF BUYER PRIOR TO THE subsequent CLOSING DATE.........................................47
7.1. Notice of Change.................................................................................47
7.2. Closing Efforts..................................................................................47
7.3. Services Agreement...............................................................................47
ARTICLE 8 CONDITIONS PRECEDENT TO THE INITIAL CLOSING......................................................47
8.1. Obligation of Buyer to Close on the Initial Closing Date.........................................47
8.2. Obligation of Seller to Close on the Initial Closing Date........................................48
ARTICLE 9 CONDITIONS PRECEDENT TO THE SUBSEQUENT CLOSING...................................................49
9.1. Obligation of Buyer to Close on the Subsequent Closing Date......................................49
9.2. Obligation of Seller to Close on the Subsequent Closing Date.....................................50
ARTICLE 10 INDEMNIFICATION..................................................................................51
10.1. By Seller........................................................................................51
10.2. By Buyer.........................................................................................52
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10.3. Notice and Defense; Costs of Defense.............................................................52
10.4. Limitation of Indemnity..........................................................................54
10.5. Characterization of Indemnity Payments...........................................................54
10.6. Seller's Claims against EEMS and SM-India........................................................54
10.7. Limitation of Indemnity in Section 10.1(h).......................................................55
ARTICLE 11 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS............................................56
11.1. Representations and Warranties...................................................................56
11.2. Covenants........................................................................................56
11.3. Extension of Survival............................................................................56
ARTICLE 12 THE INITIAL CLOSING AND THE SUBSEQUENT CLOSING...................................................56
12.1. Time and Place...................................................................................56
12.2. Conduct of Initial Closing.......................................................................57
12.3. Conduct of Subsequent Closing....................................................................57
12.4. No Agreement to Assign...........................................................................58
ARTICLE 13 CONDUCT OF SELLER AND BUYER AFTER Initial CLOSING................................................58
13.1. Power of Attorney................................................................................58
13.2. Cooperation and Further Assurances...............................................................58
13.3. Remittance of Accounts Receivable................................................................58
13.4. Uncollectible Accounts Receivable................................................................58
13.5. Employment of SMS Division Employees.............................................................59
13.6. Maintenance and Support..........................................................................60
13.7. Marketing Agreements.............................................................................61
13.8. Xxxxxxx License..................................................................................62
13.9. Access to Information............................................................................62
13.10. Change Name of SM-India..........................................................................62
ARTICLE 14 NON-COMPETITION AND CONFIDENTIALITY..............................................................63
14.1. Agreement Not to Compete.........................................................................63
14.2. Confidentiality..................................................................................64
14.3. Specific Enforcement; Extension of Period........................................................64
ARTICLE 15 TAXES AND EXPENSES...............................................................................65
15.1. Section 338(h)(10) Election......................................................................65
15.2. Filing Tax Returns...............................................................................66
15.3. Future Tax Contests..............................................................................66
15.4. Allocation of Overlap Period Taxes...............................................................67
15.5. Notice...........................................................................................67
15.6. Amended Tax Returns..............................................................................68
15.7. Tax Sharing Agreements; Powers of Attorney.......................................................68
15.8. FIRPTA Certification.............................................................................68
15.9. Transfer Taxes...................................................................................68
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ARTICLE 16 TERMINATION......................................................................................69
16.1. Termination prior to Subsequent Closing Date.....................................................69
16.2. Survival if No Subsequent Closing................................................................69
ARTICLE 17 GENERAL..........................................................................................69
17.1. Right of Set-off.................................................................................69
17.2. Entire Agreement; Amendments.....................................................................70
17.3. Headings.........................................................................................70
17.4. Gender...........................................................................................70
17.5. Schedules........................................................................................70
17.6. Severability.....................................................................................71
17.7. Notices..........................................................................................71
17.8. Waiver...........................................................................................72
17.9. Assignment.......................................................................................72
17.10. Successors and Assigns...........................................................................72
17.11. Governing Law....................................................................................72
17.12. Dispute Resolution...............................................................................72
17.13. Third Party Beneficiaries........................................................................73
17.14. Publicity........................................................................................73
17.15. Expenses.........................................................................................73
17.16. Counterparts.....................................................................................73
17.17. Facsimile Signatures.............................................................................73
17.18. Waiver of Trial by Jury..........................................................................73
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SCHEDULES
Schedule 1.92 Initial Required Consents
Schedule 1.124 Permitted Liens
Schedule 1.158 Subsequent Required Consents
Schedule 2.1(a) Tangible Personal Property
Schedule 2.1(b) Personal Property Leases
Schedule 2.1(c) Contracts
Schedule 2.1(d) Intangible Property
Schedule 2.1(e) Permits
Schedule 2.1(f) Licenses
Schedule 2.1(h) Software
Schedule 2.1(j) Inventory
Schedule 2.1(k) Receivables
Schedule 2.1(n) Pre-Paid Items
Schedule 2.2 Excluded Assets
Schedule 3.1(b) Sub Milestones
Schedule 3.2(a)-1 Example of Management's Pre-Initial Closing Balance Sheet
Schedule 3.2(a)-2 Example of Initial Estimated Net Worth Schedule
Schedule 3.4(a)-1 Example of Management's Pre-Subsequent Closing Balance Sheet
Schedule 3.4(a)-2 Example of Subsequent Estimated Net Worth Schedule
Schedule 3.7 SMS Referral Customers
Schedule 3.8(a) Allocation of Purchase Price
Schedule 3.8(b) Allocation of Purchase Price - Purchased Assets
Schedule 4.1(a) Foreign Qualification Jurisdictions for Xxxxxx Xxx, Inc.
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Schedule 4.1(b) Foreign Qualification Jurisdictions for EEMS
Schedule 4.1(d) Certificate of Incorporation for EEMS
Schedule 4.1(e) Certificate of Incorporation for SM-India
Schedule 4.3 Non-contravention
Schedule 4.4(b) Sub Assets
Schedule 4.4(d) Real Property Agreements
Schedule 4.4(e) Real Property Leases
Schedule 4.6(a) Financial Statements
Schedule 4.7 Absence of Undisclosed Liabilities
Schedule 4.8 Permits and Licenses
Schedule 4.9 Environmental Permits
Schedule 4.10 Insurance
Schedule 4.11(a) Intellectual Property
Schedule 4.11(b) Intellectual Property Consents, Litigation, Licenses
Schedule 4.12(a) Employees and Labor Matters
Schedule 4.12(b) Independent Contractors
Schedule 4.13 Benefit Plans
Schedule 4.14 Contracts and Leases
Schedule 4.16 Changes Since the Financial Statement Date
Schedule 4.17(c) Audits
Schedule 4.17(o) Arrangements and Agreements Relating to Taxes
Schedule 4.19 Warranties and Liabilities
Schedule 4.20 Transactions with Affiliates
Schedule 4.24 Customers
Schedule 6.1 Operating Budget
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Schedule 10.1(f) Certain Assumed Contracts
Schedule 13.5(a) New Employees
Schedule 13.5(b) SM-India Employees
Schedule 13.5(c) Severance
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EXHIBITS
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Intellectual Property Assignment and Assumption Agreement
Exhibit C - Form of Xxxx of Sale
Exhibit D - Form of Services Agreement
Exhibit E - Form of Opinion of Seller's Counsel - Initial Closing
Exhibit F - Form of Opinion of Seller's Counsel - Subsequent Closing
Exhibit G - Form of FIRPTA Certificate
Exhibit H - Form of Escrow Agreement
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ASSET AND STOCK PURCHASE AGREEMENT
This Asset and Stock Purchase Agreement (the "Agreement") is made this
10th day of January, 2002, by and among XXXXXX MAE, INC., a Delaware corporation
("Seller"), EXETER EDUCATIONAL MANAGEMENT SYSTEMS, INC., a Massachusetts
corporation and wholly-owned subsidiary of Seller ("EEMS"), XXXXXX XXX SOLUTIONS
(INDIA) PRIVATE, LTD., an Indian corporation owned by Seller and EEMS
("SM-India" together with Seller and EEMS, the "Companies"), and SYSTEMS &
COMPUTER TECHNOLOGY CORPORATION, a Delaware corporation ("Buyer").
BACKGROUND
WHEREAS, Seller owns 100% of the outstanding capital stock of EEMS;
WHEREAS, Seller owns approximately 0.01% of the outstanding capital
stock of SM-India and EEMS owns approximately 99.99% of the outstanding capital
stock of SM-India;
WHEREAS, Seller, through Xxxxxx Xxx Solutions, a division of Seller
(the "SMS Division"), EEMS and SM-India, develops, licenses and supports
enterprise software for the higher education market, consisting of the E5
Products, the E5 Product Suite, the Xxxxxxx Loan management servicing software
consisting of Xxxxxxxxx-Xxxxxxx, Bermuda and Campus Loan Manager software, the
Exeter Student Suite for Oracle Product and the Exeter Student Suite for
Microsoft Products (the "Business");
WHEREAS, Seller desires to sell to Buyer all of the assets used by the
SMS Division in connection with the operation of the Business, other than the
Excluded Assets (as defined below), and Buyer desires to purchase from Seller
such assets on the Initial Closing Date (as defined below);
WHEREAS, Seller desires to transfer to Buyer only certain enumerated
liabilities and obligations of Seller, all of which are more particularly
described herein, and Buyer is willing to assume from Seller on the Initial
Closing Date only such enumerated liabilities and obligations, all of which are
more particularly described herein, in each case, upon the terms and subject to
the conditions hereinafter set forth;
WHEREAS, Buyer desires to hire the SMS Employees (as defined below) on
the Initial Closing Date;
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
from Seller, on the Subsequent Closing Date (as defined below), the issued and
outstanding capital stock of EEMS owned by Seller and the issued and outstanding
capital stock of SM-India owned by Seller and EEMS, such shares, including the
issued and outstanding shares of capital stock of SM-India owned by EEMS, being
all of the outstanding capital stock of such entities (the "Sub Shares");
WHEREAS, the Sub Shares shall be placed in escrow by Seller and EEMS on
the Initial Closing Date and such Sub Shares shall be transferred to Buyer in
accordance with the terms of this Agreement and the Escrow Agreement on the
Subsequent Closing Date upon payment of the Initial Subsequent Purchase Price;
WHEREAS, to induce Buyer to enter into this Agreement and to consummate
the Acquisition (as defined below), Seller, EEMS and SM-India are willing to
enter into this Agreement and undertake the obligations as set forth herein; and
WHEREAS, to induce the Companies to enter into this Agreement and to
consummate the Acquisition, Buyer is willing to enter into this Agreement and
undertake its obligations as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, representations, warranties and agreements herein
contained, and intending to be legally bound, Buyer, Seller, EEMS and SM-India
agree as follows:
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
As used herein, the following capitalized terms have the meanings set
forth next to their names:
1.1. "Accounts Receivable" has the meaning set forth in Section 2.1(k).
1.2. "Acquisition" means the acquisition of the Purchased Assets and
the Sub Shares by Buyer and all related transactions completed at the Initial
Closing and the Subsequent Closing, as the case may be, as contemplated by this
Agreement.
1.3. "ADSP" has the meaning set forth in Section 15.1(b).
1.4. "Affiliate" of a Person has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Act of 1934, as amended.
1.5. "Affiliated Company" has the meaning set forth in Section 4.13.
1.6. "Aggregate Products" has the meaning set forth in Section 3.6(a).
1.7. "Agreement" means this Asset and Stock Purchase Agreement, all
Schedules and Exhibits hereto, as the same shall be amended from time to time.
1.8. "Alta License Agreement" has the meaning set forth in Section
13.6(b).
1.9. "Alta Professional Services Agreement" has the meaning set forth
in Section 13.6(b).
1.10. "Annual Earnout Amount" has the meaning set forth in Section
3.6(b).
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1.11. "Annual Earnout Threshold" means Three Million Six Hundred
Thousand Dollars ($3,600,000) for the first Measurement Period, Seven Million
Two Hundred Thousand Dollars ($7,200,000) for the second Measurement Period, Ten
Million Eight Hundred Thousand Dollars ($10,800,000) for the third Measurement
Period and Fourteen Million Four Hundred Thousand Dollars ($14,400,000) for the
last Measurement Period.
1.12. "Assets" means the Purchased Assets and the Sub Assets.
1.13. "Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement in substantially the form attached hereto as Exhibit A.
1.14. "Assignment of Intellectual Property" means the Intellectual
Property Assignment and Assumption Agreement in substantially the form of
Exhibit B attached hereto.
1.15. "Association" has the meaning set forth in Section 17.12.
1.16. "Assumed Contracts" has the meaning set forth in Section 2.1(c).
1.17. "Assumed Liabilities" has the meaning set forth in Section 2.4.
1.18. "Banner Commission Fees" has the meaning set forth in Section
3.7.
1.19. "Banner Commission License Agreement" has the meaning set forth
in Section 3.7.
1.20. "Banner Product Suite" has the meaning set forth in Section 3.7.
1.21. "Benefit Plan" means any pension, retirement, profit-sharing,
stock bonus, deferred compensation, bonus, incentive, performance, stock option,
phantom stock, stock purchase, restricted stock, premium conversion, medical,
hospitalization, vision, dental or other health, life, disability, severance,
termination or other employee benefit plan, program, arrangement, agreement or
policy, whether written or unwritten, to which any of the Companies contribute,
is obligated to contribute to, is a party to or is otherwise bound, or with
respect to which any of the Companies may have any Liability.
1.22. "Xxxx of Sale" means the Xxxx of Sale in substantially the form
attached hereto as Exhibit C.
1.23. "Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business, including without
limitation, financial statements, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, customer lists, computer files and programs, retrieval programs,
operating data and plans and environmental studies and plans.
1.24. "Business" has the meaning set forth in the Background section of
this Agreement.
1.25. "Business Customer Base" has the meaning set forth in Section
4.24.
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1.26. "Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the laws of the Commonwealth of Pennsylvania.
1.27. "Business Intellectual Property" has the meaning set forth in
Section 4.11(a).
1.28. "Business Material Adverse Change" or "Business Material Adverse
Effect" means any event, fact, circumstance or change which results or could
result in a material adverse effect on the properties, assets, liabilities,
business prospects, operations, results of operations or condition (financial or
otherwise) of the Business, including the Assets, SMS Division, EEMS or
SM-India, either individually or taken as a whole.
1.29. "Business Products" has the meaning set forth in Section 14.1(a).
1.30. "Buyer Obligations" has the meaning set forth in Section 17.1.
1.31. "Buyer's Off-Set Claims" has the meaning set forth in Section
17.1.
1.32. "Claim" means any written demand, claim, suit, action, cause of
action, investigation, proceeding or notice by any Person, alleging actual or
potential Liability for any Loss.
1.33. "Claim Notice" means written notification as to which indemnity
for a Claim or Loss under Article 10 is sought by an Indemnified Party,
enclosing a copy of all papers served, if any, and describing in reasonable
detail the nature of and basis for such Claim or Loss, together with the amount
or, if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such Claim or Loss.
1.34. "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder or with respect thereto.
1.35. "Collateral Documents" has the meaning set forth in Section 4.2.
1.36. "Companies" has the meaning set forth in the introduction to this
Agreement.
1.37. "Competitive Business" has the meaning set forth in Section
14.1(a).
1.38. "Confidentiality Agreement" means the Confidentiality Agreement
by and between Seller and Buyer dated July 27, 2001.
1.39. "Contract" means any written or oral contract, agreement,
arrangement, commitment, note, bond, pledge, lease, mortgage, guaranty,
indenture, license, consulting agreement, supply contract, repair contract,
distribution agreement, purchase order, work order, job order, joint venture
agreement, franchise, technology and know-how agreement, employment agreement,
instrument or any other contractual commitment that is binding on any Person or
its property.
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1.40. "Copyrights" means registered copyrights, copyright applications
and unregistered copyrights.
1.41. "Court Order" means any judgment, decree, edict, writ,
injunction, award, order or ruling of any Governmental Entity or of any
arbitration or similar panel.
1.42. "Covenant Period" means the 24-month period commencing on the
Initial Closing Date.
1.42A "Cumulative Threshold Differential" has the meaning set forth in
Section 3.6(b).
1.43. "Current Policies" has the meaning set forth in Section 4.10.
1.44. "Deemed Sales Price Notice" has the meaning set forth in Section
15.1(b).
1.45. "Default" means (a) a violation, breach or default, (b) the
occurrence of an event which, with the passage of time, the giving of notice or
both, would constitute a violation, breach or default, or (c) the occurrence of
an event which, with or without the passage of time, the giving of notice or
both, would give rise to a right of damages, specific performance, termination,
cancellation, renegotiation or acceleration (including, without limitation, the
acceleration of payment).
1.46. "Disagreement Notice" has the meaning set forth in Section
15.1(b).
1.47. "E5 Products" means the Software which comprise the E5 Product
Suite.
1.48. "E5 Product Suite" means the Software identified under the
heading "E5 Product Suite" on Schedule 2.1(h).
1.49. "Earnout License Fee Revenues" has the meaning set forth in
Section 3.6(a).
1.50. "Earnout Objection" has the meaning set forth in Section 3.6(d).
1.51. "Earnout Period" means the period commencing on the Initial
Closing Date and ending on December 31, 2005.
1.52. "Earnout Purchase Price" has the meaning set forth in Section
3.6(a).
1.53. "Earnout Statement" has the meaning set forth in Section 3.6(c).
1.54. "Employees" means the SMS Employees together with the SM-India
Employees, all as listed on Schedule 4.12(a).
1.55. "Environmental Claim" has the meaning set forth in Section
4.9(b).
1.56. "Environmental Laws" means all U.S. or foreign federal, state and
local laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C.A. ss.ss.9601 et seq., the Resource Conversation and
Recovery Act ("RCRA"), 42 U.S.C.A. ss.ss.6901 et seq., the Clean Water Act, 33
U.S.C.A ss.ss.1251 et seq., the Clean Air Act 42 U.S.C.A. ss.ss.7401 et seq.,
the Occupational Safety and Health Act, 29 U.S.C. ss.651 et seq., ("OSHA") the
Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq., and laws and
regulations relating to emissions, spills, leaks, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, possession, distribution, use, treatment, storage, disposal,
presence, transport or handling of Materials of Environmental Concern.
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1.57. "Environmental Loss" means any Loss arising out of, related to or
in connection with the use, treatment, removal, storage, disposal, presence,
migration, transport, handling, manufacture, possession, distribution, or the
actual emission, injection, escape, dumping, spill, leak, discharge or release
of Materials of Environmental Concern, including, without limitation, actual
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries or penalties.
1.58. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder or with
respect thereto.
1.59. "Escrow Agent" has the meaning set forth in the Escrow Agreement.
1.60. "Escrow Agreement" means the Escrow Agreement in substantially
the form attached hereto as Exhibit H.
1.61. "Excluded Assets" has the meaning set forth in Section 2.2.
1.62. "Excluded Liabilities" has the meaning set forth in Section 2.5.
1.63. "Exeter-Oracle Product" means the Software which comprises the
Exeter Student Suite for Oracle Product.
1.64. "Exeter Student Suite for Oracle Product" means the Software
identified under the heading "Exeter Student Suite for Oracle Product" on
Schedule 2.1(h).
1.64A "Exeter Student Suite for Microsoft Products" means the Software
identified under the heading "Exeter Student Suite for Microsoft Products" on
Schedule 3.1(h).
1.65. "Export/Import Claim" has the meaning set forth in Section 4.28.
1.66. "Export/Import Laws" means all U.S. or foreign federal, state and
local laws and regulations relating to the export or import of any items
(commodities, software or technology), and all laws and regulations relating to
customs, export controls, embargoes, quotas, anti-boycott and economic
sanctions, including, without limitation, the International Traffic in Arms
Regulations ("ITAR"), Arms Export Control Act ("AECA"), and Defense Trade
Security Initiatives ("DTSI") administered by the U.S. Department of Defense and
the U.S. Department of State, Office of Defense Trade Controls ("ODTC"); the
Export Administration Regulations ("EAR") (including the anti-boycott laws)
administered by the U.S. Department of Commerce, Bureau of Export Administration
("BXA") and the sanctions and assets control regulations administered by the
U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC").
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1.67. "Extended Payments" has the meaning set forth in Section 3.6(b).
1.68. "Final Initial Closing Date Net Worth Amount" has the meaning set
forth in Section 3.3(e).
1.69. "Final Subsequent Closing Date Net Worth Amount" has the meaning
set forth in Section 3.5(e).
1.70. "Financial Statement Date" means November 30, 2001.
1.71. "Financial Statements" has the meaning set forth in Section 4.6.
1.72. "GAAP" means generally accepted accounting principles
consistently applied, as applied in the United States of America.
1.73. "Goodwill" has the meaning set forth in Section 2.1(o).
1.74. "Governmental Consent" means any and all permits, licenses,
waivers, consents or approvals of or from any Governmental Entity necessary to
consummate the transactions contemplated hereby or by any Exhibit hereto, or
otherwise relating to any Contract with any Governmental Entity or any Permit,
including the transfer thereof in accordance with the terms hereof.
1.75. "Governmental Entity" means any government, or political
subdivision thereof, court, arbitral tribunal, administrative agency, tribunal
or commission or any other governmental or regulatory body, instrumentality or
authority, whether domestic (federal, state or local) or foreign.
1.76. "Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases or (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
1.77. "Indemnifiable Losses" shall mean the Claims, Litigation and
Losses subject to indemnification obligations of Seller or Buyer, as the case
may be, pursuant to Sections 10.1 and 10.2 hereof.
1.78. "Indemnification Cap" has the meaning set forth in Section 10.4.
1.79. "Indemnification Threshold" has the meaning set forth in Section
10.4
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1.80. "Indemnified Party" means any Person seeking indemnification from
another Person under any provision of Article 10.
1.81. "Indemnifying Party" means any Person against whom
indemnification is being sought by another Person under any provision of Article
10.
1.82. "Independent Accountant" has the meaning set forth in Section
3.3(d).
1.83. "Independent Contractors" has the meaning set forth in Section
4.12(b).
1.84. "Initial Closing" has the meaning set forth in Section 12.1.
1.85. "Initial Closing Date" has the meaning set forth in Section 12.1.
1.86. "Initial Closing Date Balance Sheet" has the meaning set forth in
Section 3.3(a).
1.87. "Initial Closing Date Net Worth Amount" has the meaning set forth
in Section 3.3(a).
1.88. "Initial Closing Date Net Worth Schedule" has the meaning set
forth in Section 3.3(a).
1.89. "Initial Estimated Net Worth Amount" has the meaning set forth in
Section 3.2(e).
1.90. "Initial Estimated Net Worth Schedule" has the meaning set forth
in Section 3.2(a).
1.91. "Initial Purchase Price" has the meaning set forth in Section 3.1
(a).
1.92. "Initial Required Consents" means any and all Governmental
Consents, and any and all other Permits, Licenses, waivers, consents or
approvals from other parties to Contracts, Licenses, Permits and other
instruments necessary to consummate transactions contemplated for the Initial
Closing that are listed on Schedule 1.92.
1.93. "Initial Subsequent Purchase Price" has the meaning set forth in
Section 3.1(b).
1.94. "Intellectual Property" means collectively, (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all Patents; (b) all Trademarks, trade dress, logos,
trade names, fictitious names, brand names, brand marks, domain names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith; (c) all
copyrightable works, all Copyrights and all applications, registrations and
renewals in connection therewith; (d) all mask works and all applications,
registrations, and renewals in connection therewith; (e) all trade secrets and
confidential business information (including, without limitation, ideas,
research and development, know-how, formulae, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals); (f) all computer software
(including, without limitation, data, source codes, object codes, objects,
specifications and related documentation); (g) all other proprietary rights; and
(h) all copies and tangible embodiments thereof (in whatever form or medium).
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1.95. "Interim Period" has the meaning set forth in Section 6.6.
1.96. "Inventory" has the meaning set forth in Section 2.1(j).
1.97. "IRS" means the Internal Revenue Service.
1.98. "Known" or "Knowledge" means with respect to either Buyer,
Seller, EEMS or SM-India the knowledge of any executive officer or director of
such Person, or any senior manager of such Person and the knowledge that such
executive officer, director or senior manager would have if he or she had
performed his or her services and duties on behalf of such Person in the
ordinary course in a reasonably diligent manner.
1.98A "Last Applicable Measurement Period" has the meaning set forth in
Section 3.6 hereof.
1.99. "Laws" means all laws, statutes, ordinances, governmental
regulations, orders, decrees, edicts, rules or other requirements of any
Governmental Entity.
1.100. "Liabilities" means all Indebtedness, obligations and other
liabilities, whether direct or indirect, and any loss, damage, cost, contingent
liability, loss contingency, unpaid expense, claim, deficiency, guaranty or
endorsement of or by any Person whether or not ascertainable.
1.101. "License Commission Fees" has the meaning set forth in Section
3.7.
1.102. "Licenses" means all licenses, permits, authorizations,
approvals, franchises, rights, orders, variances, easements, rights of way, and
similar consents or certificates granted or issued by any Person other than a
Governmental Entity and relating to the Business or the Assets.
1.103. "Lien" means any mortgage, lien (including federal, state and
local tax liens), security interest, pledge, negative pledge, encumbrance,
assessment, title retention agreement, restriction or restraint on transfer,
defect of title, charge in the nature of a lien or security interest, or option
(whether consensual, statutory or otherwise) or any conditional sale contract,
title retention contract or other contract to give any of the foregoing.
1.104. "Litigation" means (i) any action, lawsuit, arbitration,
mediation, criminal prosecution, Tax audit, administrative or other proceeding
by, before or on behalf of any Person, including any Governmental Entity, or
(ii) any investigation or inquiry asserting a violation of any Law by, before or
on behalf of any Governmental Entity.
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1.105. "Loss" means any and all damages (including direct, incidental,
consequential and special damages), losses, obligations, deficiencies,
Liabilities, Liens, penalties, fines, interest, costs and expenses (including,
without limitation, court costs, fees and disbursements of attorneys,
accountants, consultants and other experts, or other expenses of investigating,
prosecuting or defending any Litigation, Claim or Default).
1.106. "Management's Pre-Initial Closing Balance Sheet" has the meaning
set forth in Section 3.2(a).
1.107. "Management's Pre-Subsequent Closing Balance Sheet" has the
meaning set forth in Section 3.4(a).
1.108. "Marketing Agreements" means, collectively, the Xxx.Xxx
Marketing Agreement and the Product Integration Agreement.
1.109. "Materials of Environmental Concern" means any toxic, reactive,
corrosive, carcinogenic, flammable or hazardous pollutant or other substance
that is the subject of regulation under Environmental Laws, including, but not
limited to, any "hazardous substance," or "hazardous waste," as defined in
Environmental Laws, petroleum and petroleum products, natural gas or synthetic
gas, material that is a source, special nuclear or by-product material, as
defined by the Atomic Energy Act of 1954, 42 U.S.C.A. ss.ss.3011 et seq., and
the regulations promulgated thereto and "hazardous chemical," as defined in 29
C.F.R. Part 1910.
1.110. "Measurement Period" has the meaning set forth in Section
3.6(b).
1.111. "Milestones" has the meaning set forth in Section 3.1(b).
1.112. "Xxx.Xxx Marketing Agreement" means the Xxx.Xxx Marketing
Agreement to be negotiated by Seller and Buyer in accordance with Section 13.7
hereof.
1.113. "Net Uncollectible Receivables Amount" has the meaning set forth
in Section 13.4.
1.114. "New Employees" has the meaning set forth in Section 13.5.
1.115. "Operating Budget" has the meaning set forth in Section 6.1.
1.116. "Overlap Period" has the meaning set forth in Section 15.4.
1.117. "Overpayment Amount" has the meaning set forth in Section
3.6(b).
1.118. "Payment Date" has the meaning set forth in Section 13.4.
1.119. "Partial Payment" and "Partial Payments" have the meaning set
forth in Section 3.6(b).
1.120. "Patents" means all patents and pending applications for patents
of the United States and all countries foreign thereto, including regional
patents, certificates of invention and utility models, rights of license or
otherwise to or under letters patent, certificates of intention and utility
models which have been opened for public inspection and all reissues, divisions,
continuations and extensions thereof.
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1.121. "Xxxxxxx License" has the meaning set forth in Section 13.8.
1.122. "Xxxxxxx Software" has the meaning set forth in Section 13.8
1.123. "Permits" means any and all licenses, franchises, permits,
registrations, certificates of authority, easements and rights of way, variances
(including zoning variances), rights, consents, orders, approvals, certificates
and other authorizations of or issued by any Governmental Entity and relating to
the Business or the Assets.
1.124. "Permitted Liens" means Liens listed on Schedule 1.124, none of
which, individually or in the aggregate, has a Business Material Adverse Effect
or will detract from, interferes with or will interfere with any of the
Companies' or Buyer's right to dispose of any property or the use of such
property.
1.125. "Person" means any natural person, a sole proprietorship, a
corporation, a partnership, a joint venture, a limited liability company, a
limited liability partnership, an association, a trust, or any other entity or
organization, including a Governmental Entity.
1.126. "Plans" has the meaning set forth in Section 4.13.
1.127. "Prepaid Items" has the meaning set forth in Section 2.1(n).
1.128. "Product Integration Agreement" means the Product Integration
Agreement to be negotiated by Seller and Buyer in accordance with Section 13.7
hereof.
1.129. "Proposed Adjustment" has the meaning set forth in Section 15.3.
1.130. "Post Earnout Accounts Receivable" has the meaning set forth in
Section 3.6(b).
1.131. "Post Earnout Period" means the period beginning on the day
after the last day in the Earnout Period and ending on the one hundred eightieth
(180th) day thereafter.
1.132. "Purchase Price" has the meaning set forth in Section 3.1.
1.133. "Purchased Assets" has the meaning set forth in Section 2.1.
1.134. "Real Property" has the meaning set forth in Section 4.4(e).
1.135. "Real Property Leases" has the meaning set forth in Section
4.4(d).
1.136. "Schedules" means the Schedules to this Agreement.
1.137. "Section 338(h)(10) Election" has the meaning set forth in
Section 15.1(a).
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1.138. "Seller CTR" has the meaning set forth in Section 15.2(a).
1.139. "Seller's Initial Closing Report" has the meaning set forth in
Section 3.3(b).
1.140. "Seller's Subsequent Closing Report" has the meaning set forth
in Section 3.5(b).
1.141. "Service Commission Fees" has the meaning set forth in Section
3.7.
1.142. "Services Agreement" means that certain Services Agreement to be
executed by Buyer and each of the Companies at the Initial Closing substantially
in the form attached herein as Exhibit D.
1.143. "SM-India Employees" has the meaning set forth in Section 13.5.
1.144. "SMS Division" has the meaning set forth in the Background
section of this Agreement.
1.145. "SMS Employees" means all employees of Seller working in the SMS
Division and for EEMS, including employees who are on paid leave of absence or
disability leave, as of the date of this Agreement. SMS Employees does not
include employees of SM-India.
1.146. "SMS Referral Customers" has the meaning set forth in Section
3.7.
1.147. "Software" means all computer software programs and related
objects, object codes and source codes owned, marketed, licensed or under
development by the Companies, as the case may be, in connection with the
Business, or for which the Companies have the right and license to copy,
distribute, prepare derivative works of, display and perform publicly, modify,
use or market in connection with the Business, and any enhancements,
improvements or modifications thereto owned or under development by the
Companies in connection with the Business. All documentation and specifications
used in connection with and related to the Software shall be included in the
definition of Software.
1.148. "Sub Assets" means all assets of, whether real, personal or
mixed, and whether tangible or intangible, rights, properties, Claims and
Contracts used by, each of EEMS and SM-India other than the Purchased Assets.
1.149. "Subs" means EEMS together with SM-India.
1.150. "Subsequent Closing" has the meaning set forth in Section 12.1.
1.151. "Subsequent Closing Date" has the meaning set forth in Section
12.1.
1.152. "Subsequent Closing Date Balance Sheet" has the meaning set
forth in Section 3.5(a).
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1.153. "Subsequent Closing Date Net Worth Amount" has the meaning set
forth in Section 3.5(a).
1.154. "Subsequent Closing Date Net Worth Schedule" has the meaning set
forth in Section 3.5(a).
1.155. "Subsequent Estimated Net Worth Amount" has the meaning set
forth in Section 3.4(e).
1.156. "Subsequent Estimated Net Worth Schedule" has the meaning set
forth in Section 3.4(a).
1.157. "Subsequent Purchase Price" has the meaning set forth in Section
3.1(c).
1.158. "Subsequent Required Consents" means any and all Governmental
Consents, and any and all other Permits, Licenses, waivers, consents or
approvals from other parties to Contracts, Licenses, Permits and other
instruments necessary to consummate transactions contemplated for the Subsequent
Closing that are listed on Schedule 1.158.
1.159. "Sub Shares" has the meaning set forth in the Background section
of this Agreement.
1.160. "Tangible Personal Property" has the meaning set forth in
Section 2.1(a).
1.161. "Taxes" means (a) all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, including but not limited to all
income, gross receipts, sales, use, value added, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, social security,
unemployment, excise, estimated, stamp, occupation, property or other taxes,
customs duties, fees, assessments or charges of any kind whatsoever, including
all interest and penalties thereon, and additions to tax or additional amounts
in each case imposed by any taxing authority, domestic or foreign upon a Person
or any of its properties and (b) any amount for which liability arises under
U.S. Treasury Regulation Section 1.1502-6 or any similar state, local or foreign
Law; "Tax" shall mean any of the Taxes.
1.162. "Tax Records" means, with respect to each of the Companies, any
and all books and records which in any way relate to Taxes for periods prior to
or including the Initial Closing Date, including without limitation all Tax
Returns and all computerized books and records of each of the Companies.
1.163. "Tax Returns" means all returns, declarations, reports,
estimates and information returns and statements required by applicable law to
be filed with respect to Taxes.
1.164. "Territory" means the entire world.
1.165. "Trademarks" means registered trademarks, registered service
marks, trademark and service xxxx applications and unregistered trademarks and
service marks.
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1.166. "Transfer" means the sale, assignment, hypothecation,
conveyance, delivery, transfer or disposition of any kind.
1.167. "University Licensee" has the meaning set forth in Section 13.8.
Unless the context of this Agreement otherwise requires, (a) words of
any gender include each other gender; (b) words using the singular or plural
number also include the plural or singular number, respectively, (c) the terms
"hereof," "herein," "hereby", "hereto" and derivative or similar words refer to
this entire Agreement; and (d) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement. Whenever this Agreement refers
to a number of days, such number shall refer to calendar days unless Business
Days are specified.
ARTICLE 2
SALE AND PURCHASE OF ASSETS AND STOCK; ADDITIONAL AGREEMENTS
2.1. Assets to be Acquired. Subject to the terms and conditions
contained herein, on the Initial Closing Date, Seller shall sell, assign,
transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller,
free and clear of all Liens, other than Permitted Liens and Assumed Liabilities,
all right, title and interest in and to the following assets of Seller (other
than the Sub Shares and the Sub Assets, which shall be transferred pursuant to
the stock purchase set forth in Section 2.3 hereof on the Subsequent Closing
Date) used by the SMS Division in connection with the Business, whether real,
personal or mixed, and whether tangible or intangible, used, intended for use or
required to be used, other than the Excluded Assets (the "Purchased Assets"):
(a) Tangible Personal Property. All furniture, fixtures,
machinery, and related equipment, spare parts, office equipment and other
tangible personal property of Seller located at, or used, in connection with the
operation of the Business, including any items purchased subject to any
conditional sales or title retention agreement in favor of any other Person,
including all tangible personal property set forth on Schedule 2.1(a) attached
hereto (the "Tangible Personal Property");
(b) Personal Property Leases. All of Seller's leases of
Tangible Personal Property, together with any options to purchase the underlying
property, in each case used in connection with the operation of the Business,
including those leases and options to purchase set forth on Schedule 2.1(b)
attached hereto;
(c) Contracts. Those Contracts to which Seller is a party
relating to the Business, otherwise applicable to Seller's facilities or used in
connection with the operation of the Business, and that are specifically set
forth on Schedule 2.1(c) attached hereto (the "Assumed Contracts");
(d) Intangible Property. The Intellectual Property owned or
licensed by Seller, and other intangible property used in connection with the
operation of the Business, other than Software, including the Intellectual
Property and other intangible property set forth on Schedule 2.1(d) attached
hereto;
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(e) Permits. All of Seller's Permits used in connection with
the operation of the Business, including the Permits set forth on Schedule
2.1(e) attached hereto, to the extent transferable to Buyer;
(f) Licenses. All of Seller's Licenses used in connection with
the operation of the Business, including the Licenses set forth on Schedule
2.1(f) attached hereto;
(g) Intentionally Deleted.
(h) Software. All Software of Seller used in connection with
the operation of the Business, including the Software set forth on Schedule
2.l(h) attached hereto;
(i) Choses in Action. All of Seller's Claims or right to
Claims whether or not pending, threatened or presently contemplated, by Seller
relating to, arising out of or in connection with the Business of the SMS
Division as of the Initial Closing Date;
(j) Inventory. All supplies, marketing and promotional
materials and supplies, packaging materials, artwork for packaging and marketing
and promotional materials Seller used in the operation of the Business,
including those items set forth on Schedule 2.1(j) attached hereto (the
"Inventory"); provided however, that the parties hereto acknowledge that only
one set of marketing materials need be delivered to Buyer hereunder and such
remaining materials shall be disposed of by Seller;
(k) Receivables. All accounts and notes receivable of Seller
in existence on the Initial Closing Date relating to the Business, including the
accounts and notes receivable listed on Schedule 2.1(k) attached hereto, but not
including those accounts and notes receivables which are Excluded Assets (the
"Accounts Receivable");
(l) Warranties. To the extent transferable, all guarantees,
warranties, indemnities and similar rights in favor of Seller with respect to
any Purchased Assets;
(m) Books and Records. All of Seller's Books and Records
relating to the Business;
(n) Prepaid Items. All of Seller's prepaid expenses, advances
and deposits including those listed on Schedule 2.1(n) attached hereto (the
"Prepaid Items"); and
(o) Goodwill. All of Seller's rights in and to the goodwill of
the Business (the "Goodwill").
2.2. Excluded Assets. The assets listed on Schedule 2.2 are
specifically excluded from the Purchased Assets (the "Excluded Assets"). Title
to the Excluded Assets is not being transferred to Buyer pursuant to this
Agreement or otherwise.
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2.3. Stock to be Acquired; Escrow of Sub Shares and the Initial
Subsequent Purchase Price.
(a) Seller, upon the terms and conditions hereinafter set
forth, shall sell, assign, convey, transfer and deliver to Buyer, and Buyer
shall pay for, on the Subsequent Closing Date, free and clear of all Liens, the
Sub Shares, consisting of the following number of shares, to be adjusted as
permitted by Section 6.1 hereof, (i) 538 shares of the common stock of EEMS, and
(ii) 3,722,100 shares of the common stock of SM-India, one of which is owned by
Seller and 3,722,099 of which are owned by EEMS.
(b) Seller shall deliver the Sub Shares to the Escrow Agent
(as defined in the Escrow Agreement attached as Exhibit H) on the Initial
Closing Date to be held in escrow by the Escrow Agent pursuant to the Escrow
Agreement. On the Subsequent Closing Date, in order to effect the Transfer of
the Sub Shares to Buyer contemplated hereby, the Escrow Agent shall Transfer the
Sub Shares to Buyer. If a dispute arises between Seller and Buyer as to the
amount of the Initial Subsequent Purchase Price, such dispute shall be resolved
in accordance with Section 17.12 (Dispute Resolution) and Section 17.18 (Waiver
of Trial by Jury) and shall not delay or otherwise negatively impact or affect
in any way the Transfer of the Sub Shares to the Buyer on the Subsequent Closing
Date.
2.4. Assumption of Certain Liabilities. Buyer will not assume any
Claims, Liabilities or obligations of Seller, whether Known, unknown, absolute,
contingent, accrued or otherwise, and whether or not related to the Purchased
Assets or the Business, except as expressly provided in this Section 2.4. Buyer
hereby assumes and agrees to pay, perform and discharge in accordance with their
respective terms, only the following specified Liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"):
(a) All obligations of Seller under the Assumed Contracts to
the extent such obligations continue or arise after Initial Closing (except that
Buyer will not assume any liability or obligation of Seller or any of Seller's
Affiliates relating solely to or arising solely out of the Default under or
failure to comply with, at any time on or prior to the Initial Closing Date, any
Assumed Contract); and
(b) All Liabilities relating to the Business existing on the
Initial Closing Date set forth on the Financial Statement Date Balance Sheet
which is a part of the Financial Statements and as to the period from the
Financial Statement Date to the Initial Closing Date, those Liabilities set
forth on the Closing Date Balance Sheet, other than those Liabilities relating
to or arising from Excluded Assets.
2.5. Excluded Liabilities. Except for the Assumed Liabilities, Buyer
does not acquire, discharge, assume, or become responsible for any Liabilities
of Seller (the "Excluded Liabilities") and does not hereby become, and shall not
in any way be, obligated to pay, perform, satisfy or discharge any Liabilities
of Seller. Seller agrees to pay and satisfy when due all Excluded Liabilities.
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ARTICLE 3
PURCHASE PRICE
The Purchase Price shall be determined and payable in accordance with
this Article 3.
3.1. Purchase Price.
(a) On the Initial Closing Date, Buyer shall pay by wire
transfer of immediately available funds to such accounts as shall be designated
by Seller, Fifteen Million One Hundred Thousand Dollars ($15,100,000), as
further increased or decreased pursuant to Section 3.2 (the "Initial Purchase
Price"). At least three (3) Business Days prior to the Initial Closing, Seller
shall deliver wire transfer instructions to Buyer. The Initial Purchase Price
shall be adjusted after the Initial Closing pursuant to Section 3.3 hereof.
(b) On the Subsequent Closing Date, Buyer shall pay by wire
transfer of immediately available funds to such accounts, as shall be designated
by Seller, the Initial Subsequent Purchase Price. The "Initial Subsequent
Purchase Price" shall be (x) Two Million Dollars ($2,000,000) if the Subs meet
all of the milestones described on Schedule 3.1(b) (the "Milestones") as
reasonably determined by Buyer or One Dollar ($1.00) if the Subs fail to meet
all of the Milestones as reasonably determined by Buyer, in each case as further
increased or decreased pursuant to Section 3.4 hereof, plus (y) the amount of
the expenses of the Subs, if any, which exceed the total amount of expenses set
forth in the Operating Budget if Buyer has specifically agreed in writing to
assume such expenses. At least three (3) Business Days prior to the Subsequent
Closing, Seller and the Escrow Agent shall deliver wire transfer instructions to
Buyer. On the Subsequent Closing Date, Buyer shall deliver to Seller a written
notice stating its determination of the Initial Subsequent Purchase Price and
the basis for such determination. If Buyer has determined that the Initial
Subsequent Purchase Price shall be One Dollar ($1.00) and Seller in good faith
disagrees with such determination (i) Seller shall notify Buyer immediately of
such good faith dispute, (ii) the sale, transfer and conveyance of the Sub
Shares shall nonetheless be consummated on the Subsequent Closing Date, (iii)
Seller and Buyer shall resolve such dispute after the Subsequent Closing
pursuant to Section 17.12 (Dispute Resolution) and Section 17.18 (Waiver of
Trial by Jury) hereof and (iv) in addition to paying Seller the Initial
Subsequent Purchase Price as set forth in the first sentence of this Section
3.1(b), Buyer shall pay to the Escrow Agent, by wire transfer of immediately
available funds to such account as shall be designated by the Escrow Agent, Two
Million Dollars ($2,000,000) which shall be held in escrow by the Escrow Agent
in accordance with the Escrow Agreement until the dispute concerning the amount
of the Initial Subsequent Purchase Price has been resolved, at which time Buyer
and Seller agree to instruct the Escrow Agent to release such amount plus any
interest earned thereon to either Buyer or Seller, as the case may be, in
accordance with the final resolution of such dispute.
(c) The Initial Purchase Price as adjusted pursuant to Section
3.2 and Section 3.3, plus any Initial Subsequent Purchase Price as adjusted
pursuant to Section 3.4 and Section 3.5 (the "Subsequent Purchase Price") and
any Earnout Purchase Price shall be the final purchase price (the "Purchase
Price").
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3.2. Initial Closing Date Purchase Price Adjustment.
(a) At least two (2) Business Days prior to the Initial
Closing Date, Seller shall provide Buyer with an estimated consolidated balance
sheet of the SMS Division as of the Initial Closing Date ("Management's
Pre-Initial Closing Balance Sheet"), an example of which is attached hereto as
Schedule 3.2(a)-1, together with a schedule setting forth a calculation of the
Initial Estimated Net Worth Amount (as defined below) as of the Initial Closing
Date, an example of which is attached hereto as Schedule 3.2(a)-2 (the "Initial
Estimated Net Worth Schedule"). Management's Pre-Initial Closing Balance Sheet
shall be prepared on a basis consistent with the Financial Statements, except
for year-end adjustments. If Buyer does not agree that the Initial Estimated Net
Worth Amount accurately reflects the net worth of the SMS Division, then Seller
and Buyer shall negotiate in good faith concerning any adjustments required to
be made in order to accurately reflect the Initial Estimated Net Worth Amount.
In the event that Seller and Buyer are unable to agree on the Initial Estimated
Net Worth Amount prior to the Initial Closing, then the Initial Estimated Net
Worth Amount shall be equal to the average of such amount as estimated in good
faith by Seller, on the one hand, and Buyer, on the other hand.
(b) The officers of the Companies as in effect immediately
prior to the Initial Closing will cooperate with Buyer's accountants in
connection with the determination of the Initial Estimated Net Worth Amount
discussed in paragraph (a) above.
(c) The Initial Purchase Price shall be increased at the
Initial Closing by the amount by which the Initial Estimated Net Worth Amount as
shown on the Initial Estimated Net Worth Schedule exceeds Five Hundred Thousand
Dollars ($500,000).
(d) To the extent the Initial Estimated Net Worth Amount as
shown on the Initial Estimated Net Worth Schedule is less than Five Hundred
Thousand Dollars ($500,000), the Initial Purchase Price shall be reduced at the
Initial Closing by such deficiency and to the extent that as a result of such
reduction the Initial Purchase Price is less than Zero Dollars ($0.00), such
amount which is less than Zero Dollars ($0.00) shall be paid to Buyer by Seller
by wire transfer of immediately available funds on the Initial Closing Date.
(e) For the purposes of this Agreement, the "Initial Estimated
Net Worth Amount" shall mean Seller's reasonable good faith estimate (prepared
from Management's Pre-Initial Closing Balance Sheet) of the consolidated net
worth of the SMS Division, such calculation to be consistent with the
calculations set forth on Schedule 3.2(a)-2 attached hereto and as finally
agreed upon pursuant to the terms set forth in Section 3.2(a) hereof.
3.3. Post Initial Closing Purchase Price Adjustment.
(a) Buyer shall prepare and deliver to Seller, as soon as
available following the Initial Closing Date, but no longer than sixty (60) days
after the Initial Closing, a consolidated balance sheet of the SMS Division, as
of the close of business on the Initial Closing Date (the "Initial Closing Date
Balance Sheet") prepared consistent with Management's Pre-Initial Closing
Balance Sheet, together with a schedule setting forth a
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calculation of the Initial Closing Date Net Worth Amount (as defined below) as
of the close of business on the Initial Closing Date (the "Initial Closing Date
Net Worth Schedule") which Initial Closing Date Net Worth Schedule shall have
been audited by Buyer's independent auditor, in accordance with GAAP (except for
year-end adjustments). If Buyer determines that a change in accounting
principles and/or reserve is required on the Initial Closing Date Net Worth
Schedule from that used in the preparation of the Initial Estimated Net Worth
Schedule in order to comply with GAAP, then Buyer shall also calculate the
change that such accounting principle and/or reserve would have had on the
Initial Estimated Net Worth Schedule had such been consistently applied on both
schedules; provided that, in no event shall any such change in reserves be
applied on a consistent basis to the extent that such change was the result of
(i) Seller's mathematical error, (ii) Seller's failure to provide for a
reasonably adequate reserve, or (iii) other than Buyer's determination that the
methodology utilized to determine such reserve must change in order to deliver
an Initial Closing Date Balance Sheet in accordance with GAAP. For purposes of
this Section 3.3, "Initial Closing Date Net Worth Amount" shall mean (i) the
consolidated net worth of the SMS Division as calculated consistent with
Schedule 3.2(a)-2, with such modifications contemplated in this clause (a).
(b) The Initial Closing Date Net Worth Schedule prepared by
Buyer shall be deemed accepted by Seller unless within forty-five (45) days
after Seller's receipt of the Initial Closing Date Net Worth Schedule, Seller
delivers to Buyer a written report ("Seller's Initial Closing Report") setting
forth, in reasonable detail and with reasonable specificity as to each disputed
item, any disputed amounts comprising the Initial Closing Date Net Worth Amount
as reflected on the Initial Closing Date Net Worth Schedule and Seller's
proposed alternative thereto.
(c) Buyer and Seller shall permit the other and the other's
representatives, during normal business hours, to have (i) reasonable access to
those employees reasonably necessary to prepare and/or review the Initial
Closing Date Net Worth Schedule and (ii) full and complete access to, and to
examine, all books, records and work papers of or relating to the Business for
the periods prior to the Initial Closing which are in its possession, and which
work papers and schedules are necessary or appropriate to prepare and/or review
the Initial Closing Date Net Worth Schedule. The officers of Seller will
cooperate with Buyer's representatives in connection with the audit of the
Initial Closing Date Net Worth Schedule and will execute and deliver to Buyer's
accountants representation letters in customary form and substance as may be
reasonably required by Buyer's accountants in connection with such audit. Such
officers will deliver to Buyer at the Initial Closing a written commitment to
comply with their obligations as set forth in the preceding sentence. Buyer
shall bear all costs of its representatives in connection with this Section 3.3,
and Seller shall bear all costs of its representatives in connection with this
Section 3.3.
(d) If Seller disagrees with the Initial Closing Date Net
Worth Amount as shown on the Initial Closing Date Net Worth Schedule and has
timely delivered Seller's Initial Closing Report, Buyer and Seller shall
negotiate in good faith to resolve such disputes. If such disagreement cannot be
resolved by Buyer and Seller within thirty (30) days after Buyer's receipt of
Seller's Initial Closing Report, such disagreement shall be tendered to by a
firm of independent certified public accountants of recognized national standing
("Independent Accountant") which does not at the time of retention provide and
has not in the prior three (3)
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years provided auditing services to Buyer or Seller (or to their Affiliates) to
make a determination as to the subject matter of such disagreement, which
determination shall be final and binding on the parties hereto for the purpose
of this Agreement. All fees and expenses charged by the Independent Accountant
under this Section 3.3(d) shall be shared equally by Seller and Buyer. If Buyer
and Seller are unable to agree on the Independent Accountant, Buyer and Seller
will submit the name of one accounting firm that satisfies the criteria of this
Section 3.3(d) and the Independent Accountant will be randomly selected by lot
from those two accounting firms. The Independent Accountant shall be instructed
to use every reasonable effort to perform its function within thirty (30) days
following submission of the matter to it and, in any case, as soon as
practicable after such submission to it. The Independent Accountant shall be
limited to deciding each such disagreement in an amount which shall be equal to
or in between the amounts proposed by Seller and Buyer, and no more and no less.
(e) Once the Initial Closing Date Net Worth Amount ("Final
Initial Closing Date Net Worth Amount") is finally determined as provided above,
the Final Initial Closing Date Net Worth Amount shall be compared to the Initial
Estimated Net Worth Amount shown on the Estimated Initial Closing Date Net Worth
Schedule, and the following payments, if any, will be made:
(i) To the extent the Final Initial Closing Date Net Worth
Amount exceeds the Estimated Initial Closing Date Net Worth Amount, the excess
shall be paid to Seller by Buyer as additional Purchase Price by wire transfer
of immediately available funds within ten (10) days following the determination
thereof; or
(ii) To the extent the Final Initial Closing Date Net Worth
Amount is less than the Estimated Initial Closing Date Net Worth Amount, such
deficiency shall be paid to Buyer by Seller by wire transfer of immediately
available funds within ten (10) days following such determination as a reduction
of the Purchase Price.
3.4. Initial Subsequent Closing Date Purchase Price Adjustment.
(a) At least two (2) Business Days prior to the Subsequent
Closing Date, Seller shall provide Buyer with an estimated consolidated balance
sheet of the Subs as of the Subsequent Closing Date ("Management's
Pre-Subsequent Closing Balance Sheet"), an example of which is attached hereto
as Schedule 3.4(a)-1, together with a schedule setting forth a calculation of
the Subsequent Estimated Net Worth Amount (as defined below) as of the
Subsequent Closing Date, an example of which is attached hereto as Schedule
3.4(a)-2 (the "Subsequent Estimated Net Worth Schedule"). Management's
Pre-Subsequent Closing Balance Sheet shall be prepared on a basis consistent
with the Financial Statements, except for year-end adjustments. If Buyer does
not agree that the Subsequent Estimated Net Worth Amount accurately reflects the
net worth of the Subs, then Seller and Buyer shall negotiate in good faith
concerning any adjustments required to be made in order to accurately reflect
the Subsequent Estimated Net Worth Amount. In the event that Seller and Buyer
are unable to agree on the Subsequent Estimated Net Worth Amount prior to the
Subsequent Closing, then the Subsequent Estimated Net Worth Amount shall be
equal to the average of such amount as estimated in good faith by Seller, on the
one hand, and Buyer, on the other hand.
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(b) The officers of the Subs as in effect immediately prior to
the Subsequent Closing will cooperate with Buyer's accountants in connection
with the determination of the Subsequent Estimated Net Worth Amount discussed in
paragraph (a) above.
(c) The Subsequent Purchase Price shall be increased at the
Subsequent Closing by the amount by which the Subsequent Estimated Net Worth
Amount as shown on the Subsequent Estimated Net Worth Schedule exceeds Zero
Dollars ($0.00).
(d) To the extent the Subsequent Estimated Net Worth Amount as
shown on the Subsequent Estimated Net Worth Schedule is less than Zero Dollars
($0.00), the Subsequent Purchase Price shall be reduced at the Subsequent
Closing by such deficiency and to the extent that as a result of such reduction
the Subsequent Purchase Price is less than Zero Dollars ($0.00), such amount
which is less than Zero Dollars ($0.00) shall be paid to Buyer by Seller by wire
transfer of immediately available funds on the Subsequent Closing Date.
(e) For the purposes of this Agreement, the "Subsequent
Estimated Net Worth Amount" shall mean Seller's reasonable good faith estimate
(prepared from Management's Pre-Subsequent Closing Balance Sheet) of the
consolidated net worth of the Subs, such calculation to be consistent with the
calculations set forth on Schedule 3.4(a)-2 attached hereto and as finally
agreed upon pursuant to the terms set forth in Section 3.4(a) hereof.
3.5. Post Subsequent Closing Purchase Price Adjustment.
(a) Buyer shall prepare and deliver to Seller, as soon as
available following the Subsequent Closing Date, but no longer than sixty (60)
days after the Subsequent Closing, a consolidated balance sheet of the Subs, as
of the close of business on the Subsequent Closing Date (the "Subsequent Closing
Date Balance Sheet") prepared consistent with Management's Pre-Subsequent
Closing Balance Sheet, together with a schedule setting forth a calculation of
the Subsequent Closing Date Net Worth Amount (as defined below) as of the close
of business on the Subsequent Closing Date (the "Subsequent Closing Date Net
Worth Schedule") which Subsequent Closing Date Net Worth Schedule shall have
been audited by Buyer's independent auditor, in accordance with GAAP (except for
year-end adjustments). If Buyer determines that a change in accounting
principles and/or reserve is required on the Subsequent Closing Date Net Worth
Schedule from that used in the preparation of the Subsequent Estimated Net Worth
Schedule, then Buyer shall also calculate the change that such accounting
principle and/or reserve would have had on the Subsequent Estimated Net Worth
Schedule had such been consistently applied on both schedules; provided that, in
no event shall any such change in reserves be applied on a consistent basis to
the extent that such change was the result of (i) Seller's mathematical error,
(ii) Seller's failure to provide for a reasonably adequate reserve, or (iii)
other than Buyer's determination that the methodology utilized to determine such
reserve must change in order to deliver a Subsequent Closing Date Balance sheet
in accordance with GAAP. For purposes of this Section 3.5, "Subsequent Closing
Date Net Worth Amount" shall mean (i) the consolidated net worth of the Subs as
calculated consistent with Schedule 3.4(a)-2, with such modifications
contemplated in this clause (a).
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(b) The Subsequent Closing Date Net Worth Schedule prepared by
Buyer shall be deemed accepted by Seller unless within forty-five (45) days
after Seller's receipt of the Subsequent Closing Date Net Worth Schedule, Seller
delivers to Buyer a written report ("Seller's Subsequent Closing Report")
setting forth, in reasonable detail and with reasonable specificity as to each
disputed item, any disputed amounts comprising the Subsequent Closing Date Net
Worth Amount as reflected on the Subsequent Closing Date Net Worth Schedule and
Seller's proposed alternative thereto.
(c) Buyer and Seller shall permit the other and the other's
representatives, during normal business hours, to have (i) reasonable access to
those employees reasonably necessary to prepare and/or review the Subsequent
Closing Date Net Worth Schedule and (ii) full and complete access to, and to
examine, all books, records and work papers of or relating to the Subs for the
periods prior to the Subsequent Closing which are in its possession, and which
work papers and schedules are necessary or appropriate to prepare and/or review
the Subsequent Closing Date Net Worth Schedule. The officers of the Subs will
cooperate with Buyer's representatives in connection with the audit of the
Subsequent Closing Date Net Worth Schedule and will execute and deliver to
Buyer's accountants representation letters in customary form and substance as
may be reasonably required by Buyer's accountants in connection with such audit.
Such officers will deliver to Buyer at the Subsequent Closing a written
commitment to comply with their obligations as set forth in the preceding
sentence. Buyer shall bear all costs of its representatives in connection with
this Section 3.5, and Seller shall bear all costs of its representatives in
connection with this Section 3.5.
(d) If Seller disagrees with the Subsequent Closing Date Net
Worth Amount as shown on the Subsequent Closing Date Net Worth Schedule and has
timely delivered Seller's Subsequent Closing Report, Buyer and Seller shall
negotiate in good faith to resolve such disputes. If such disagreement cannot be
resolved by Buyer and Seller within thirty (30) days after Buyer's receipt of
Seller's Subsequent Closing Report, such disagreement shall be tendered to and
resolved by the Independent Accountant to make a determination as to the subject
matter of such disagreement, which determination shall be final and binding on
the parties hereto for the purpose of this Agreement. All fees and expenses
charged by the Independent Accountant under this Section 3.5(d) shall be shared
equally by Seller and Buyer. The Independent Accountant shall be instructed to
use every reasonable effort to perform its function within thirty (30) days
following submission of the matter to it and, in any case, as soon as
practicable after such submission to it. The Independent Accountant shall be
limited to deciding each such disagreement in an amount which shall be equal to
or in between the amounts proposed by Seller and Buyer, and no more and no less.
(e) Once the Subsequent Closing Date Net Worth Amount ("Final
Subsequent Closing Date Net Worth Amount") is finally determined as provided
above, the Final Subsequent Closing Date Net Worth Amount shall be compared to
the Subsequent Estimated Net Worth Amount shown on the Estimated Subsequent
Closing Date Net Worth Schedule, and the following payments, if any, will be
made:
(i) To the extent the Final Subsequent Closing Date Net
Worth Amount exceeds the Estimated Subsequent Closing Date Net Worth Amount, the
excess shall be paid to Seller by Buyer as additional Purchase Price by wire
transfer of immediately available funds within ten (10) days following the
determination thereof; or
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(ii) To the extent the Final Subsequent Closing Date Net
Worth Amount is less than the Estimated Subsequent Closing Date Net Worth
Amount, such deficiency shall be paid to Buyer by Seller by wire transfer of
immediately available funds within ten (10) days following such determination as
a reduction of the Purchase Price.
3.6. Earnout. As additional consideration and as part of the Purchase
Price, Seller shall be entitled to a payment of the Earnout Purchase Price from
Buyer as set forth below:
(a) For the purposes of this Agreement, "Earnout Purchase
Price" shall mean the amount equal to Thirty Percent (30%) of the aggregate
Earnout License Fee Revenues (as defined below in this Section) in excess of
Fourteen Million Four Hundred Thousand Dollars ($14,400,000) during the Earnout
Period; provided, however that the aggregate Earnout Purchase Price shall not
exceed Five Million Two Hundred Eighty Thousand Dollars ($5,280,000). Except as
set forth below, the term "Earnout License Fee Revenues" shall mean any and all
license revenues, to the extent such revenue has been recognized by Buyer,
resulting from any license or sublicense by Buyer and any of its Affiliates to
any third party of any E5 Product or any Exeter-Oracle Product for which Buyer
or any of its Affiliates charges a separate license fee. Notwithstanding the
foregoing, (i) the term "Earnout License Fee Revenues" shall be decreased by any
amount paid by Buyer and its Affiliates for the right to license third party
software included in the E5 Product Suite or the Exeter Student Suite for Oracle
Product and (ii) where any E5 Product or the Exeter-Oracle Product is packaged
together with Buyer's other products (together, the "Aggregate Products") and
sold at a discount to Buyer's customary fees in effect at such time, the
discount on that portion of the revenues attributable to the E5 Product Suite or
the Exeter Student Suite for Oracle Product for purposes of calculating Earnout
License Fee Revenues shall not exceed a pro-rata discount based on the discount
on the Aggregate Products. Notwithstanding anything contained herein to the
contrary, Earnout License Fee Revenues shall not include any revenue derived
from consulting services, modification services, installation or implementation
services, maintenance services, or other support services.
(b) The Earnout License Fee Revenues shall be measured at the
end of each calendar year period in the Earnout Period (each such calendar year
period, a "Measurement Period"). At the end of each Measurement Period, to the
extent that Buyer has cumulative aggregate Earnout License Fee Revenues during
the just ended and all previous Measurement Periods in excess of the applicable
Annual Earnout Threshold for such just ended Measurement Period, other than the
first Measurement Period, and the Cumulative Threshold Differential for such
just ended Measurement Period is greater than the Cumulative Threshold
Differential for the last preceding Measurement Period for which there was an
Annual Earnout Amount greater than zero (the "Last Applicable Measurement
Period"), Seller shall be entitled to a payment of a portion of the Earnout
Purchase Price (each a "Partial Payment" and collectively the "Partial
Payments") in the amount calculated as follows: thirty percent (30%) of the
amount by which the Cumulative Threshold Differential at the end of such just
ended Measurement Period exceeds the Cumulative Threshold Differential at the
end of the Last Applicable Measurement Period (the "Annual Earnout Amount"),
multiplied by eighty percent (80%);
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provided that the remaining twenty percent (20%) of the Annual Earnout Amount
earned by Seller during the just ended Measurement Period shall be paid to
Seller (x) at the end of the next Measurement Period in which the aggregate
Earnout License Fee Revenue during all previous Measurement Periods exceeds the
applicable Annual Earnout Threshold for such Measurement Period, if any or (y)
as to the final Measurement Period, together with the final Partial Payment in
accordance with this Section 3.6. For purposes of the foregoing, "Cumulative
Threshold Differential" shall mean the amount by which the aggregate Earnout
License Fee Revenues for which Buyer has received cash during all previous
Measurement Periods exceeds the Annual Earnout Threshold. In the event that (i)
the aggregate Earnout License Fee Revenues received by Buyer in cash during the
Earnout Period plus (ii) the cash payments received by Buyer in the Post Earnout
Period on account of accounts receivable relating to Earnout License Fee
Revenues created during the Earnout Period but collected by Buyer during the
Post Earnout Period (the "Post Earnout Accounts Receivable") plus (iii) the
Extended Payments (as defined below) are greater than Fourteen Million Four
Hundred Thousand Dollars ($14,400,000) then, at the expiration of the Post
Earnout Period, Buyer shall pay Seller, as a portion of the Earnout Purchase
Price, a payment equal to thirty percent (30%) of all Post Earnout Accounts
Receivable. Notwithstanding the foregoing, the sum of all of the payments made
pursuant to this Section 3.6(b) shall not exceed Five Million Two Hundred Eighty
Thousand Dollars ($5,280,000). If upon the expiration of the Post Earnout
Period, the sum of all the Partial Payments and the payment for the Post Earnout
Accounts Receivable received by Seller pursuant to this Section 3.6(b) is
greater than the Earnout Purchase Price as calculated pursuant to Section
3.6(a), Seller shall pay, in accordance with the provisions set forth below, to
Buyer by wire transfer in immediately available federal funds the difference
between (x) the Earnout Purchase Price and (y) the sum of all the Partial
Payments, and the payment relating to the Post Earnout Accounts Receivable (the
"Overpayment Amount"). Seller shall pay Buyer the Overpayment Amount within
thirty (30) days after Seller receives the Earnout Statement for the Post
Earnout Period unless Seller provides an Earnout Objection pursuant to Section
3.6(d), in which case, such Overpayment Amount shall be paid within ten (10)
days after either (i) such Earnout Statement, as modified, if applicable,
becomes final, binding and conclusive, in accordance with Section 3.6(d), (ii)
Seller and Buyer agree on an Overpayment Amount, or (iii) the matter is resolved
in accordance with Section 3.3(d). If Buyer has agreed with a customer to vary
Buyer's customary and standard payment terms with respect to payments due to
Buyer from such customer that would otherwise have been Earnout License Fee
Revenues (the "Extended Payments"), then all such amounts shall be deemed
Earnout License Fee Revenues for the Measurement Period in which such amounts
were contracted for the purposes of determining if the Annual Earnout Threshold
was met; provided however, such amounts shall be deemed Earnout License Fee
Revenues for purposes of calculating the Partial Payment only to the extent cash
has been received by Buyer. Notwithstanding the foregoing, if the Buyer extends
the payment terms for such customer beyond the Earnout Period, notwithstanding
that Buyer has not received cash or recognized the revenue prior to the
termination of the Earnout Period, such amounts owed to Buyer beyond such
Earnout Period shall be treated as Earnout License Fee Revenues for purposes of
calculating the Partial Payment due to Seller during the final Measurement
Period.
(c) Within forty-five (45) days after the end of each
Measurement Period and at the expiration of the Post Earnout Period, Buyer shall
deliver (x) an Earnout Statement, (y) a check (or simultaneous wire transfer)
payable to Seller in the amount of
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the Partial Payment, or in the case of the Post Earnout Period, the payment
relating to the Post Earnout Accounts Receivable, as calculated in the Earnout
Statement and (z) a certificate signed by an executive officer of Buyer to the
effect that the Earnout Statement is true and correct in all material respects.
The term "Earnout Statement" means a written statement which shall include (i)
the calculation of the Partial Payment, if any, to which Seller is entitled for
the immediately preceding Measurement Period or the payment relating to the Post
Earnout Accounts Receivable, if any, as the case may be, (ii) the Earnout
License Fee Revenues with respect to such Measurement Period or the list of the
Post Earnout Accounts Receivable, as the case may be, and (iii) names of the
licensees to which applicable Software products were licensed. With respect to
the Post Earnout Period, the Earnout Statement shall also include a calculation
of the Earnout Purchase Price and the Overpayment Amount.
(d) Within thirty (30) days after receipt of any Earnout
Statement, Seller shall communicate in writing to Buyer any objection or
disagreement that it may have to such Earnout Statement which communication
shall state with reasonable specificity the basis for such objection or
disagreement (an "Earnout Objection"). Buyer shall have fifteen (15) days from
receipt of an Earnout Objection to respond in writing to such Earnout Objection.
If, after ten (10) days following such fifteen (15) day period, Buyer and Seller
have not resolved the matter in dispute, such matter shall be resolved in
accordance with Section 3.3(d). If Seller shall fail to give an Earnout
Objection to Buyer within the thirty (30) day time period, then Seller shall
have no further right to challenge such Earnout Statement and such Earnout
Statement shall be final, binding and conclusive. If Buyer fails to respond in
writing to the Earnout Objection within the period required, then Buyer shall
have no further right to challenge such Earnout Objection and such Earnout
Statement as modified by the Earnout Objection shall be final, binding and
conclusive. Within five (5) days from the date on which either (i) the Earnout
Statement, as modified if applicable, becomes final, binding and conclusive,
(ii) Seller and Buyer agree on an adjusted Earnout Statement, or (iii) the
matter is resolved in accordance with Section 3.3(d), Buyer shall pay to Seller
by wire transfer in immediately available federal funds, the amount by which the
Partial Payment, as paid to Seller upon the initial delivery by Buyer of the
Earnout Statement in accordance with Section 3.6(c), differs from the Partial
Payment, as calculated in the Earnout Statement as finalized in accordance with
this Section 3.6(d).
3.7. Banner Commission Fees. In addition to the Purchase Price, Seller
shall be entitled to a commission of ten percent (10%) of the gross software
license fees (excluding any third-party gross software related fees) (the
"License Commission Fees") and five percent (5%) of all related services fees
including, without limitation, consulting, installation, implementation, and
user and technical training services, but excluding maintenance fees (the
"Service Commission Fees," together with License Commission Fees, the "Banner
Commission Fees") contracted for within thirty (30) days from the effective date
of the license agreement giving rise to such Banner Commission Fees (each a
"Banner Commission License Agreement") for any product within Buyer's Banner
suite of (i) Alumni, (ii) Student, (iii) Finance, (iv) Financial Aid and (v)
Human Resources software products (collectively, the "Banner Product Suite"),
that is licensed within nine (9) months after the Initial Closing Date to any of
higher education entities listed on Schedule 3.7 (the "SMS Referral Customers").
Buyer shall pay Seller the License Commission Fees within ten (10) days of
execution of each Banner Commissions License Agreement and Buyer shall pay
Seller the Service Commission Fees on a quarterly basis within sixty (60) days
after the end of each quarter in which the services are
-25-
performed. Any payment by Buyer of Banner Commission Fees shall be by wire
transfer in immediately available federal funds to the account designated by
Seller with two (2) business days prior to the payment date. Within thirty (30)
days after receipt of any of the Banner Commission Fees, Seller shall
communicate in writing to Buyer any objection or disagreement that it may have
to such Banner Commission Fees paid for such quarter. If, after ten (10) days
following the date of the notice, Buyer and Seller have not resolved the matter
in dispute, such matter shall be resolved in accordance with Section 3.3(d).
3.8. Allocation of Purchase Price.
(a) Within sixty (60) days after the Final Initial Closing
Date Net Worth Amount is finally determined pursuant to Section 3.3, Buyer shall
provide Seller with a schedule containing an allocation, subject to adjustment
pursuant to the penultimate sentence of this Section 3.8(a) and Section 3.8(b),
of each of (i) the sum of the Initial Purchase Price, as adjusted pursuant to
Section 3.2 and Section 3.3, and the Assumed Liabilities among the Purchased
Assets and the Sub Shares, and (ii) such portion thereof as Buyer has allocated
to the Purchased Assets among the Purchased Assets. Such allocation schedule
shall be deemed to be accepted by Seller, and shall be final and binding on
Seller and Buyer, unless Seller provides written notice to Buyer of any
reasonable objections thereto within five (5) business days after receipt of
such allocation schedule. If Seller timely provides such written notice, Seller
and Buyer shall negotiate in good faith to resolve Seller's objections and to
agree on a mutually acceptable allocation schedule. If Seller and Buyer are able
to agree on a mutually acceptable allocation schedule within (10) days after
Buyer's receipt of Seller's written notice of objection, then such allocation
schedule shall be final and binding on Seller and Buyer. If Seller and Buyer are
unable to agree to a mutually acceptable allocation schedule within such period,
then they shall engage the Independent Accountant to determine the allocation
schedule. The fees and expenses of the Independent Accountant relating to such
determination shall be borne and paid 50%/50% by each of Seller and Buyer. The
Independent Accountant's determination of an allocation schedule shall be final
and binding on Seller and Buyer. Any Earnout Purchase Price determined pursuant
to Section 3.6 shall be allocated among the Purchased Assets and the Sub Shares
in the same proportion as provided in the allocation schedule that is final and
binding on Seller and Buyer pursuant to this Section 3.8(a), and any amount so
allocated to the Purchased Assets shall be allocated among the Purchased Assets
in accordance with procedures similar to those described above relating to the
allocation of the Initial Purchase Price, as adjusted pursuant to Section 3.2
and Section 3.3, and the Assumed Liabilities.
(b) Within forty-five (45) days after the Final Subsequent
Closing Date Net Worth Amount is finally determined pursuant to Section 3.5,
Buyer shall provide Seller with a schedule containing an allocation, determined
in Buyer's sole and reasonable discretion, of (i) the Subsequent Purchase Price
among the Purchased Assets and the Sub Shares and (ii) such portion of the
Subsequent Purchase Price as Buyer has allocated to the Purchased Assets, if
any, among the Purchased Assets. Such allocation shall be final and binding on
the parties.
(c) The allocations provided for in this Section 3.8 shall be
prepared in accordance with Section 1060 of the Code, and each party shall
report the Tax consequences of the purchase and sale contemplated hereby
(including the filing of Internal Revenue Service Form 8594 in respect of the
Purchased Assets) in a manner consistent with such allocations. Buyer and Seller
agree to file their Tax Returns and IRS Form 8594 consistent with such
allocations. If any such Tax Return filed by Buyer, Seller, EEMS or SM-India is
challenged by a Tax authority the filing party shall assert in good faith the
validity and correctness of such allocation and such party shall not agree to
any adjustment to such allocations without obtaining the prior written consent
of the other party (which consent shall not be unreasonably withheld or
delayed). If any such Tax Return is challenged as herein described, the party
filing such Tax Return shall keep the other party apprised of its decisions and
the current status and progress of all administrative and judicial proceedings,
if any, that are undertaken at the election of such party with respect thereto.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller, EEMS and SM-India,
jointly and severally represent and warrant to Buyer as follows:
4.1. Organization and Capitalization.
(a) Seller is a corporation duly organized, validly existing,
and in good standing under the Laws of its jurisdiction of incorporation, has
full corporate power and authority to carry on its business as it is now being
conducted and to own and operate the properties and assets now owned and
operated by it. Attached hereto as Schedule 4.1(a) is a list of each and every
jurisdiction in which Seller is qualified to transact the Business as a foreign
corporation. Seller is and has been at all times it was required to be, duly
qualified to transact business as a foreign corporation, and is and has been at
all times in good standing, in each and every jurisdiction where the ownership
or leasing of its properties and assets and the operation of the Business
requires such qualification except where failure to do so does not have a
Business Material Adverse Effect. True and complete copies of Seller's charter
and bylaws have been delivered to Buyer prior to the date of this Agreement.
(b) EEMS is a corporation duly organized, validly existing,
and in good standing under the Laws of its jurisdiction of incorporation, has
full corporate power and authority to carry on its business as it is now being
conducted and to own and operate the properties and assets now owned and
operated by it. Attached hereto as Schedule 4.1(b) is a list of each and every
jurisdiction in which EEMS is qualified to transact business as a foreign
corporation. EEMS is and has been at all times it was required to be, duly
qualified to transact business as a foreign corporation, and is and has been at
all times in good standing, in each and every jurisdiction where the ownership
or leasing of its properties and assets and the operation of the Business
requires such qualification except where failure to do so does not have a
Business Material Adverse Effect. True and complete copies of EEMS' charter and
bylaws have been delivered to Buyer prior to the date of this Agreement.
(c) SM-India is a corporation duly organized, validly
existing, and in good standing under the Laws of India, has full corporate power
and authority to carry on its business as it is now being conducted and to own
and operate the properties and assets now owned and operated by it. True and
complete copies of SM-India's Memorandum of Association has been delivered to
Buyer prior to the date of this Agreement.
-27-
(d) The authorized capital stock of EEMS consists of 200,000
shares of common stock, of which 535 shares have been validly issued and are
outstanding as fully paid and non-assessable, all of which are beneficially
owned by and registered in the name of Seller. The rights, privileges,
restrictions and conditions of such common stock are set forth in the
Certificate of Incorporation or other similar documents of EEMS attached hereto
as Schedule 4.1(d). There are no outstanding options, warrants, convertible or
exchangeable securities or other rights to (i) purchase shares of capital stock
of EEMS, or (ii) require EEMS to allot or issue any of its capital stock.
(e) The authorized capital stock of SM-India consists of
4,000,000 shares of common stock, of which 3,722,100 shares have been validly
issued and are outstanding as fully paid and non-assessable, one of which is
beneficially owned by and registered in the name of Seller and 3,722,099 of
which are beneficially owned by and registered in the name of EEMS. The rights,
privileges, restrictions and conditions of such common stock are set forth in
the Memorandum of Association or other similar documents of SM-India attached
hereto as Schedule 4.1(e). There are no outstanding options, warrants,
convertible or exchangeable securities or other rights to (i) purchase shares of
capital stock of SM-India, or (ii) require SM-India to allot or issue any of its
capital stock.
(f) There is no Contract, option, or any other right of
another binding upon or which at any time in the future may become binding upon
Seller to sell, transfer, assign, pledge, charge, mortgage or any other way to
dispose of or encumber any of the Sub Shares other than pursuant to the
provisions of this Agreement.
(g) Seller has good and valid title to the Sub Shares owned by
it, and EEMS has good and valid title to the Sub Shares owned by it, free and
clear of all Liens. Upon delivery of the Sub Shares to Buyer pursuant to this
Agreement, good and valid title to the Sub Shares, free and clear of all Liens
will pass to Buyer.
4.2. Corporate Power and Authority; Legal Capacity; Enforceability.
Each of the Companies has the requisite power and authority to execute, deliver
and perform this Agreement and each of the documents, agreements and instruments
to be executed, delivered and performed by it in connection with this Agreement
(collectively the "Collateral Documents"), and Seller has all requisite power
and authority to transfer the Purchased Assets and the Sub Shares to Buyer. The
execution, delivery and performance of this Agreement and each of the Collateral
Documents to which any of the Companies is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action (corporate or otherwise) on the part of the Companies,
including, without limitation, the approval thereof by the shareholders of
Seller, if required, the shareholders of EEMS and the shareholders of SM-India
and requires no further authorization or consent by any of the Companies. This
Agreement and the Collateral Documents to be executed and delivered by each of
the Companies have been duly and validly executed and delivered by each of the
Companies and constitute the legal, valid and binding obligation of each of the
Companies, enforceable against each of them in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar Laws affecting the enforcement of creditors'
rights generally.
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4.3. Non-contravention. The execution, delivery and performance of this
Agreement and each of the Collateral Documents to which any of the Companies is
a party, and the consummation of the transactions contemplated hereby and
thereby, do not and will not (a) violate, breach or contravene any of the terms,
conditions or provisions of the charter or bylaws of any of the Companies; or
(b) except as set forth on Schedule 4.3 attached hereto, (i) conflict with,
constitute a Default under or otherwise impair the good standing, validity or
effectiveness of any Contract by which any of the Companies, or their property,
is bound, (ii) subject any of the Assets or any of the Sub Shares to any
Contract, other than this Agreement, to which any of the Companies is a party,
or by which any of the Companies or any of the Assets or Sub Shares are bound,
(iii) violate any provision of Law, Permit or License applicable to any of the
Companies, or any of the Assets, (iv) require any Required Consent to be
obtained by any of the Companies, (v) result in the creation or imposition of
any Lien, other than Permitted Liens, upon any of the Companies, any of the
Assets, the Sub Shares or the Business, or (vi) otherwise adversely affect the
good standing, validity or effectiveness of any Contract to which any of the
Companies is a party, or which is applicable to the Business or any of the
Assets. There are no restrictions of any kind which could affect any of the
Companies' ability to enter into this Agreement or any of the Collateral
Documents to which any of them is a party, to perform its obligations
thereunder, or to consummate the transactions contemplated hereby or thereby.
4.4. Title; Properties.
(a) Seller has good and marketable title to the Purchased
Assets, including, without limitation, all Intellectual Property free and clear
of all Liens and no other Person has or will have on the Initial Closing Date
any interest whatsoever in any of the Purchased Assets. The Purchased Assets are
in good working order and fit for their intended use. There are no loans, leases
or other financing to which such Purchased Assets are or will be subject on the
Initial Closing Date.
(b) Schedule 4.4(b) is a complete and accurate list of all of
the Sub Assets. Except as set forth in Schedule 4.4(b), each of EEMS and
SM-India is the sole and exclusive owner of, and has good and marketable title
to, its respective Sub Assets; and no other Person has or will have on the
Initial Closing Date or the Subsequent Closing Date any interest whatsoever in
any of the Sub Assets. The Sub Assets are in good working order and fit for
their intended use. There are no loans, leases or other financing to which such
Sub Assets are or will be subject on the Initial Closing Date or the Subsequent
Closing Date.
(c) None of the Companies own any real property or interest
therein and the Purchased Assets do not include any real property.
(d) Schedule 4.4(d) hereto is a true, complete, correct and
current list, by address, owner and usage, of all real property agreements
(including all amendments and supplements thereto) pursuant to which Seller,
EEMS or SM-India (as the case may be) leases, subleases or otherwise occupies
any real property (each a "Real Property Lease" and collectively the "Real
Property Leases"), copies of which have been furnished to Buyer.
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Pursuant to the Real Property Leases, Seller, EEMS or SM-India (as the case may
be) has validly existing and enforceable leasehold, sublease hold or occupancy
interests in the real property leased thereunder, in each case free and clear of
all Liens and free from Defaults (i) by Seller, EEMS or SM-India and (ii) to
Seller's Knowledge, by the other party or parties to such Real Property Leases.
Except for the Real Property Leases, if any, described in Schedule 4.4(d), the
consummation of the transactions contemplated by this Agreement will not require
any consent or approval of any landlord or sublandlord under any such Real
Property Lease, result in any increase in rent or penalty to the party which is
a tenant or subtenant thereunder or result in the early termination of any Real
Property Lease. None of the Companies has transferred, assigned, hypothecated,
pledged or encumbered any of its rights or interest under any Real Property
Lease. None of the Companies has received any notice from any landlord or
sublandlord or any other party of any Default under, or the termination of, any
Real Property Lease.
(e) The real property leased to Seller, EEMS or SM-India, as
the case may be, pursuant to the Real Property Leases, if any, constitutes all
real property used or occupied by Seller, EEMS or SM-India in connection with
the Business (the "Real Property"). To Seller's Knowledge, except as set forth
on Schedule 4.4(e): (i) no portion thereof is subject to any pending
condemnation proceeding or proceeding by any Governmental Entity and there is no
threatened condemnation or proceeding with respect thereto; (ii) the physical
condition of such Real Property is sufficient to permit the continued conduct of
the Business as presently conducted, subject to the provision of usual and
customary maintenance and repair performed in the ordinary course; (iii) there
are no Contracts, written or oral, to which Seller, EEMS or SM-India is a party,
granting to any party or parties the right of use or occupancy of any portion of
the Real Property; (iv) there are no parties (other than Seller, EEMS or
SM-India, as the case may be) in possession of any such Real Property and (v) no
notice of any increase in the assessed valuation of any such Real Property and
no notice of any contemplated special assessment has been received by the
Companies, and to Seller's Knowledge, there is no threatened increase in
assessed valuation or threatened special assessment pertaining to any of the
Real Property.
(f) As may be required by Law, to Seller's Knowledge, each of
Seller, EEMS and SM-India has all permits and certificates of occupancy
necessary to the use and possession of the Real Property as such is currently
being used and possessed, and no such permits or certificates will be required,
as a result of the consummation of the transactions contemplated by this
Agreement, to be issued, modified or supplemented after the Initial Closing or
the Subsequent Closing Date in order to permit Buyer or the Companies (as the
case may be) following the consummation of the transactions contemplated by this
Agreement to lease or operate the Real Property as such is currently being
leased and used.
4.5. Third Party Options. There are no Contracts or rights of any kind
with, to, of or in any third party to acquire any of the Assets, any portion of
the Business or any shares of capital stock of EEMS or SM-India.
4.6. Financial Statements. Set forth on Schedule 4.6(a) hereto are true
and correct copies of the following financial statements relating to the
Business (collectively, the "Financial Statements"): (i) consolidated balance
sheet of the SMS Division, EEMS and SM-India as of the Financial Statement Date;
and (ii) consolidated statement of operations of the SMS Division, EEMS and
SM-India as of the Financial Statement Date and for the prior year
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then ended. The Financial Statements are true and correct and have been prepared
in accordance with the applicable Books and Records of Seller (which Books and
Records are true and complete) and have been prepared in accordance with GAAP,
consistently applied during the relevant periods except that no corresponding
notes to the Financial Statements have been prepared. The Financial Statements
present fairly the financial condition and the results of operations of the
Business, as at and for the respective periods ended on such dates. None of the
Companies Knows or has any reason to Know of any liability or any basis for the
assertion against any of the Companies of any liability required to be reflected
or reserved against in the Financial Statements according to GAAP, and not so
reflected or reserved.
4.7. Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4.7, on the Initial Closing Date or the Subsequent Closing Date, as the
case may be, none of the Companies or the Business will have any Liabilities
relating to the Assets, the Employees, the Sub Shares or the Business (except
for (i) those Liabilities set forth in the Financial Statements and (ii) those
Liabilities which arose after the Financial Statement Date and were incurred in
the ordinary course of business, consistent with past practices and in
compliance with the covenants and agreements of Seller herein contained and are
set forth on the Initial Closing Date Balance Sheet or the Subsequent Closing
Date Balance Sheet, as the case may be). None of the Companies Knows or has
reasonable grounds to Know of any basis for the assertion against any of the
Companies, or against the Assets, of any Liability, other than those set forth
in the foregoing clauses (i) and (ii).
4.8. Litigation; Compliance with Law, Permits and Licenses.
(a) Each of the Companies has complied with each, and is not
in violation of any Law or Court Order to which such Company is subject and has
not failed to obtain, or to adhere to the requirements of, any License, Permit
or authorization necessary to the ownership of the Assets, the employment of the
Employees or the operation of the Business. Without limiting the generality of
the foregoing, none of the Companies has made any offer, payment, promise to pay
or authorization for the payment of money or an offer, gift, promise to give, or
authorization for the giving of anything of value to any Person in violation of
the Foreign Corrupt Practices Act of 1977.
(b) No Litigation is pending or, to the Knowledge of any of
the Companies, threatened against any of the Companies in respect of the Assets,
the Employees, the Sub Shares or the transactions contemplated by this
Agreement, and none of the Companies has Knowledge of any basis for any such
Litigation. None of the Companies is a party to or subject to the provisions of
any Court Order which provides limitations or instructions upon the ability to
operate the Business.
(c) The Companies have obtained all Permits and Licenses for
the operation of the Business, or as needed in connection with the Assets, the
Employees or the Business. Schedule 4.8 contains a true and correct description
of all Licenses and Permits issued in favor of each of the Companies relating to
the Purchased Assets, the Employees or the Business, all of which are in full
force and effect, and each Company currently operates in compliance with the
terms of each of the foregoing. Buyer will not be required, prior to or
following the Initial Closing or the Subsequent Closing, as the case may be, to
file, apply for or obtain any Permit or License in order to purchase the
Purchased Assets or the Sub Shares, employ the Employees or operate the Business
pursuant to this Agreement.
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4.9. Environmental Protection.
(a) Each of the Companies is in compliance with all
Environmental Laws and has no Knowledge of any facts or circumstances, and none
of the Companies has received any Claim from any Governmental Entity, citizens
group, Employee or other Person, indicating that it is not in compliance with
any Environmental Law or the terms or conditions of any Permit relating to
Materials of Environmental Concern or Environmental Laws. All Permits relating
to Materials of Environmental Concern or Environmental Laws currently held by
Seller are identified on Schedule 4.9 attached hereto.
(b) There has not been to the Companies' Knowledge, and none
of the Companies has received, any Claim from any Governmental Entity, citizens
group, Employee or other Person that there has been any past or present actions,
activities, circumstances, conditions, events or incidents, involving the
release, spill, leak, emission, injection, escape, dumping, discharge or
disposal of any Materials of Environmental Concern, that form or could form the
basis of any Claim against any of the Companies, the Assets, or any Person whose
liability for any such Claim has or may have retained or assumed either
contractually or by operation of Law (an "Environmental Claim").
(c) There is no asbestos or urea formaldehyde foam insulation
contained in or forming part of any building, building component, structure or
office space located on or in the Real Property. No polychlorinated byphenyls
(PCBs) are present, in use or stored at the Real Property and no hydraulic fluid
containing PCBs has been utilized at the Real Property.
4.10. Insurance. All of the Assets owned or leased by any of the
Companies are insured against fire and casualty under the policies and in the
amounts and types of coverage set forth in Schedule 4.10 attached hereto, and
each of the Companies are insured under liability insurance policies in the
amounts set forth in Schedule 4.10 attached hereto (the "Current Policies"). The
Current Policies are in force and the premiums thereon paid. All such insurance
policies are valid, binding and enforceable in accordance with their terms
against the respective insurers, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditor's rights generally. To the Knowledge of any of the Companies,
no insurer of any of the Companies is the subject of pending or threatened
insolvency proceedings. Each of the Companies has notified each of their
respective insurance carriers of all Known Litigation, Known Claims, and Known
facts and circumstances which could reasonably give rise to a Claim. None of the
Companies has received any notice from its respective insurance carrier
disclaiming coverage or defending a reservation of rights clause as to any of
such notifications.
4.11. Intellectual Property.
(a) The Companies own, and will own and lawfully use as of the
Initial Closing, and in respect of the Subs, the Subsequent Closing, all
Intellectual Property
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necessary or appropriate for the operation of the Business or ownership or use
of the Assets, free and clear of all Liens, all of which Intellectual Property
is set forth on Schedule 4.11(a) hereto (the "Business Intellectual Property").
All of the Business Intellectual Property, including the Software listed on
Schedule 2.1(h), functions in all material respects in accordance with the
currently published documentation and specifications therefor. Each of the
Companies has adequately protected the status of the Business Intellectual
Property as the Intellectual Property of Seller, EEMS or SM-India, as the case
may be. Except as set forth on Schedule 4.11(a), all of such Software is
available in "general release" form (as opposed to only "alpha," "beta" or
"early release" forms). With respect to any applications to register or
registrations of the Business Intellectual Property owned by each of the
Companies, Schedule 4.11(a) also sets forth, as to each such item of the
Business Intellectual Property, the (i) relevant application of registration
number, (ii) relevant filing, registration, issue or application date, (iii)
record owner, (iv) jurisdiction, (v) title or description and (vi) remaining
life thereof. In addition, Schedule 4.11(a) identifies whether each item of the
Business Intellectual Property is owned by each of the Companies or is possessed
and used by each of the Companies under any license, Contract, agreement or
other commitment, and if under any such commitment, the identity of the parties
thereto, the term thereof and all amounts payable thereunder together with the
payment terms therefor, and all such licenses, Contracts, agreements or other
commitments are renewable by their terms in the ordinary course of business.
(b) Each item of the Business Intellectual Property owned by
Seller, EEMS or SM-India constitutes a valid and enforceable right of Seller,
EEMS or SM-India, as the case may be, and does not infringe or conflict with the
rights of any Person. Except as otherwise provided in Schedule 4.11(b), none of
the Companies has or will have an obligation to compensate, or to obtain the
consent of, any third party for the use of any item of the Business Intellectual
Property. There is neither pending nor, to the Knowledge of any of the
Companies, threatened, except as disclosed on Schedule 4.11(b), any Claim,
grievance or Litigation against any of the Companies or their respective
licensors contesting the validity of, or any of the Companies' right to use, any
of the Business Intellectual Property. Except as otherwise provided on Schedule
4.11(b), none of the Companies has granted a license or other right to use, in
any manner, any item of the Business Intellectual Property (including, but not
limited to, source code for any of the Software listed on Schedule 2.1(h)),
whether or not requiring the payment of royalties, and no third party has any
right to use any of the Business Intellectual Property.
(c) None of the Companies has received any written notice that
any third party is (i) infringing all or any portion of the Business
Intellectual Property, or (ii) using all or any portion of the Business
Intellectual Property in derogation of any rights to be granted to Buyer under
this Agreement.
(d) There is no interference action or other Litigation
pending or, to the Knowledge of any of the Companies, threatened before any
Governmental Entity (including, without limitation, the United States Patent and
Trademark Office or corresponding Governmental Entities in foreign
jurisdictions) in regard to any of the Business Intellectual Property.
(e) The modification, use, promotion, distribution and/or sale
of the Business Intellectual Property has not infringed and does not infringe
any Intellectual Property right of any Person. None of the Companies has
received notice of infringement upon, misappropriation of or conflict with any
asserted right of any Person, and to the Knowledge of each of the Companies,
there is no basis for any such notice.
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(f) The inception, development and reduction to practice of
the Business Intellectual Property have not constituted or involved, and do not
constitute or involve, the misappropriation of trade secrets, other Intellectual
Property or other rights of any other Person (including, without limitation, any
Governmental Entity).
(g) The Software listed on Schedule 2.1(h) is capable of
accurately processing, calculating, manipulating, storing and exchanging
date/time data from, into, and between the twentieth and twenty-first centuries,
including, without limitation, the years 1999 and 2000 and any leap year
calculations, provided that all other information technology used in combination
with such Software properly exchanges date/time data with such Software.
4.12. Labor and Employee Matters.
(a) Schedule 4.12(a) lists each of the Employees and his/her
(i) base salary and (ii) bonus arrangements, if any, each for fiscal year 2000
and as of the date hereof, and the date on which the most recent salary increase
went into effect for each of the Employees and the amount of each such increase.
EEMS does not have any employees or independent contractors. There are no
agreements, Contracts or collective bargaining agreements covering or applicable
to any of the Employees, except as set forth on Schedule 4.12(a). There are no
pension plans or profit sharing plans, commission agreements, bonus, stock
options, other plans, agreements or arrangements providing for any of Employees
to receive any remuneration or other benefit, except as set forth on Schedule
4.12(a). There is not pending or, to the Knowledge of any of the Companies,
threatened any labor dispute or work stoppage involving any employee or
independent contractor of, or labor dispute or work stoppage involving any
employee or independent contractor of, or affecting, the Companies or the
Business, or any obligation to continue the employment or engagement of any of
the Employees, except as set forth on Schedule 4.12(a). Except as disclosed on
Schedule 4.12(a), Seller has not agreed to increase the compensation level of
any of the Employees or has any understanding respecting such an increase. There
are no workers' compensation penalties or assessments pending. There are no
pending or threatened Claims during the last three (3) years of past or present
employees of SM-India for compensation for any injury, disability or illness
arising out of their employment by SM-India (b) any accident that occurred
within the past three (3) years in which any employee of SM-India was injured.
SM-India has been in complete compliance with the contractual obligations in
relation to independent contracts and the provisions of applicable Indian laws
including the Contract Labor (Regulation and Abolition) Act.
(b) Schedule 4.12(b) contains a list of the names of each
current independent contractor retained by Seller who performs services
primarily for the SMS Division or retained by either of EEMS or SM-India
("Independent Contractors") and the rate of compensation paid to each such
Independent Contractor as of such date. Schedule 4.12(b) specifies the site at
which each such Independent Contractor performs services for the Companies.
There has been no determination by any Governmental Entity, or by any tribunal
or commission that any Independent Contractor constitutes an employee of Seller,
EEMS or SM-India. There has been no investigation or Claim made by or threatened
by any Person or Governmental Entity that any Independent Contractor constitutes
an employee of Seller, EEMS or SM-India.
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4.13. Employee Benefits. Schedule 4.13 lists all plans, policies,
arrangements or understandings to which any of the Companies is a party which
provide any Employee (or any dependent or beneficiary of any such Employee) with
(i) retirement benefits or deferred compensation; (ii) vacation, sick leave or
severance benefits; (iii) incentive, performance, stock, share appreciation or
bonus awards; (iv) health care benefits; (v) disability income; (vi) life
insurance or survivor's benefits; or (vii) any other type of employee benefit
offered under any arrangement, whether or not subject to characterization as an
"employee benefit plan" within the meaning of Section 3(3) of ERISA ("Plans").
None of the Assets are subject to any lien under Section 401(a)(29) or 412(n) of
the Code, Section 302(f) or 4068 of ERISA or arising out of any action filed
under Section 4301(b) of ERISA. None of the Companies and no Affiliated Company
(as defined below) has incurred any Liability which could subject Buyer or any
Asset to Liability under Sections 4062, 4063, 4064 or 4069 or under any
provisions of Title IV of ERISA. For purposes of this Section 4.13 only,
"Affiliated Company" means (x) a member of any "controlled group" (as defined in
Section 414(b) of the Code) of which any of the Companies is a member, (y) a
trade or business, whether or not incorporated, under common control (within the
meaning of Section 414(c) of the Code) with any of the Companies, or a member of
any affiliated service group (within the meaning of Section 414(m) of the Code)
of which any of the Companies is a member. The Companies and any Affiliated
Company do not sponsor or contribute to, and have not in the past sponsored or
contributed to, and have no Liabilities with respect to, any defined benefit
plan subject to Title IV of ERISA or any "multi-employer plan" (as defined in
Section 3(37) of ERISA). Seller has delivered to Buyer a complete copy of the
Summary Plan Descriptions of its Plans, including any related trust agreement,
and all amendments to its Plans or such trust agreement, and such summaries are
true and correct and adequately summarize such Plans. SM-India and EEMS have
delivered to Buyer a complete copy of their Plans, including any related trust
agreement, and all amendments to such Plans or such trust agreement.
4.14. Contracts, Leases, Etc. Except as listed and described on
Schedule 4.14 attached hereto, none of the Companies is a party to any Contract
of the type described below which relates to the Business, the Assets, EEMS,
SM-India or the Employees:
(a) agreement or commitment with any current or former
shareholder, director, or officer, or any of their Affiliates;
(b) agreement, commitment or arrangement with any labor union
or other representative of the Employees;
(c) written employment agreement or severance agreement with
any Employee;
(d) agreement or commitment for the performance of services or
the supply of products by a third party which involves in any one case in any
calendar year Fifty Thousand Dollars ($50,000) and is not cancelable on thirty
(30) days notice or less without penalty. Schedule 4.14 also contains a list of
the twenty (20) largest (in terms of dollar amount) active customer Contracts as
of October 31, 2001;
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(e) agreement or commitment to sell or supply products or to
perform services which obligates the SMS Division, EEMS or SM-India to sell
products or perform services which involves in any one case in any calendar year
Fifty Thousand Dollars ($50,000) which is not cancelable on thirty (30) days
notice or less without penalty;
(f) outstanding proposal to sell or supply products or to
perform services which, upon acceptance of such proposal, would obligate the SMS
Division, EEMS or SM-India to sell products or perform services which involves
in any one case in any calendar year Fifty Thousand Dollars ($50,000) which is
not cancelable by the SMS Division, EEMS or SM-India on thirty (30) days notice
or less without penalty;
(g) distribution agreement where Seller (on behalf of the SMS
Division), EEMS or SM-India is acting as supplier or distributor or any agency
agreement where Seller (on behalf of the SMS Division), EEMS or SM-India is
acting as principal or agent;
(h) lease under which Seller (on behalf of the SMS division),
EEMS or SM-India is either lessor or lessee of personal property requiring
annual lease payments (including rent and any other charges) in excess of Fifty
Thousand Dollars ($50,000), in any calendar year, and any lease under which
Seller (on behalf of the SMS Division), EEMS or SM-India is the lessor of real
property;
(i) evidence of Indebtedness, including capital leases or
providing for any Lien on any of the Assets;
(j) agreement, Contract or commitment for any charitable or
political contribution;
(k) agreement, Contract or commitment for any capital
expenditure in excess of Fifty Thousand Dollars ($50,000);
(l) agreement, Contract or commitment limiting or restraining
it from engaging or competing in any lines of business with any Persons;
(m) license, franchise, distributorship, joint venture,
royalty or other similar agreement, including, without limitation, those which
relate in whole or in part to any Asset, any patent, trademark, trade name,
service xxxx or copyright or to any ideas, technical assistance or other
know-how of or used by the SMS Division, EEMS or SM-India in the operation of
the Business;
(n) agreement with any Governmental Entity;
(o) power of attorney granted by Seller with respect to the
SMS Division, by EEMS or by SM-India in favor of any Person;
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(p) other agreement requiring payments or other consideration
by or from any of the Companies in excess of Fifty Thousand Dollars ($50,000)
during the remainder of its term;
(q) agreement or Contract which involves an obligation to
indemnify, defend or hold harmless any other Person; or
(r) other material agreement, Contract or commitment not made
in the ordinary course of business.
4.15. Other Transactions. Since the Financial Statement Date, each of
the Companies has not (a) operated the Business except in the ordinary course
consistent with past practice, (b) incurred any Liabilities, (c) mortgaged,
pledged or subjected to Liens, or suffered to exist any Lien on, any Asset,
tangible or intangible, (d) discharged or satisfied any Liens, or paid any
Liabilities, or (e) sold or transferred any of its Assets or canceled any
Indebtedness or other Liabilities of any other Person, or waived any Claims or
rights of substantial value against any other Person, except, in each case, in
the ordinary course of business consistent with past practice.
4.16. No Changes. Since the Financial Statement Date, except as set
forth on Schedule 4.16, there has not been:
(a) any Business Material Adverse Change;
(b) any damage, destruction or Loss (whether or not covered by
insurance) or any condemnation by any Governmental Entity which has had or may
have a Business Material Adverse Effect;
(c) any strike, lockout, labor trouble or any event or
condition of any character having a Business Material Adverse Effect;
(d) any declaration, setting aside or payment of any dividend
or other distribution in respect of any of the Sub Shares, or any direct or
indirect redemption, purchase or other acquisition of any of the Sub Shares;
(e) any increase in the compensation payable or to become
payable by any of the Companies to any of the officers in the SMS Division or of
EEMS or SM-India, Employees or agents, or any Known payment or arrangement made
to or with any thereof, other than normal increases in compensation to Employees
(other than employees who are officers of in the SMS Division or EEMS or
SM-India or with respect to any acceleration of existing options) consistent
with past practices;
(f) any amendments to the charter or bylaws of any of the
Companies; or
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(g) written down or written off as uncollectible any notes or
accounts receivable of the SMS Division or of EEMS or SM-India.
None of the Companies has taken or agreed to take, whether in writing
or otherwise, either (i) any action described in this Section 4.16 or in Section
4.14 (Contracts, Leases, Etc.) or (ii) any action which would result in the
occurrence of any of the events described in this Section 4.16 or in Section
4.14. None of the Companies has omitted to take any action where the omission
could reasonably be expected to result in or lead to the occurrence of any of
the events described in this Section 4.16 or in Section 4.14.
4.17. Certain Tax Matters.
(a) Each of the Companies has duly and timely filed with the
appropriate taxing authority, body or agency all Tax Returns required to be
filed, and all such Tax Returns are true, correct and complete, and each of the
Companies has timely paid all Taxes to the extent due and payable, whether or
not shown as due on any Tax Return. All Taxes not yet due and payable have been
withheld or adequately reserved for or, to the extent that they relate to
periods on or prior to the date of the Financial Statements, are reflected as a
liability on the Financial Statements.
(b) Each of the Companies has properly deducted or withheld
all amounts required by Law to be deducted or withheld for Taxes, including
without limitation with respect to social security and unemployment compensation
relating to its employees, and has timely remitted all such amounts required to
be remitted to the appropriate taxing authority, agency or body.
(c) Except as set forth on Schedule 4.17(c), the Tax Returns
filed by EEMS and SM-India have not been audited by any federal, state, local or
foreign taxing authority, agency or body.
(d) No deficiency for any Taxes has been proposed, asserted or
assessed against EEMS or SM-India, which has not been resolved and paid in full
or fully reserved for in the Financial Statements. Neither EEMS nor SM-India has
received any outstanding and unresolved notices from the Internal Revenue
Service or other state, local or foreign taxing authority, agency or body of any
proposed examination or of any proposed change in reported information relating
to EEMS or SM-India. No federal, state, local or foreign Claim, inquiry, audit
or other administrative or court proceeding is pending with regard to any Taxes
or Tax Returns.
(e) No waiver or comparable consent regarding the application
of the statute of limitations with respect to any Taxes or Tax Returns relating
to EEMS or SM-India has been requested or is pending, nor, to the Knowledge of
each of the Companies, has any request for any such waiver or consent been
proposed or threatened. Neither EEMS nor SM-India has requested any extension of
time within which to file any Tax Return relating to the EEMS or SM-India, which
Tax Return has not since been filed.
(f) There are no liens for Taxes upon any of the Sub Shares or
the Assets.
(g) Neither EEMS nor SM-India is a party to any agreement
providing for the allocation or sharing of Taxes relating to EEMS or SM-India.
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(h) Neither EEMS nor SM-India has agreed to make, nor is
required to make, any adjustment under Section 481(a) of the Code for any period
ending after the Initial Closing Date or the Subsequent Closing Date by reason
of a change in accounting method or otherwise.
(i) None of the Companies has failed to make any appropriate
filings regarding the transactions contemplated by this Agreement pursuant to
the bulk sales tax provisions of any state in which it is subject to taxation.
(j) No election has been made to treat SM-India as a
partnership for U.S. Tax purposes.
(k) There is no basis for any taxing jurisdiction in which
EEMS or SM-India has not filed a Tax Return to claim that Tax Returns should
have been filed by such Company.
(l) All Internal Revenue Service Forms 5471 relevant to
SM-India have been filed with Tax Returns filed by Seller and are true, correct
and complete.
(m) SM-India does not have, and never has had any investments
in U.S. property, as defined in Section 956 of the Code.
(n) All transactions between any of Seller, EEMS and SM-India
have complied with the transfer pricing requirements of Section 482 of the Code
and there are no material adjustments that could be required by a taxing
authority.
(o) All arrangements and agreements relating to Taxes or
rights to reduction of Taxes relating to SM-India are disclosed on Schedule
4.17(o).
(p) EEMS is a member of the affiliated group of which Seller
is the common parent, as defined in Section 1502 of the Code, and the tax year
for that group is December 31.
4.18. Brokerage. None of the Companies or any of their respective
officers, directors or employees, has employed or retained, or will have
employed or retained on the Initial Closing Date or the Subsequent Closing Date,
any broker, agent, finder or consultant or has incurred, or will have incurred,
any liability for any brokerage fees, commissions, finders' fees or other fees
in connection with the negotiation or consummation of the transactions
contemplated by this Agreement.
4.19. Warranties and Liabilities. No Claims under product or service
warranties or guarantees made to customers relating to the Assets or the
Business have been received by any of the Companies except as set forth on
Schedule 4.19. The Claims set forth on Schedule 4.19 are, or will be, satisfied
by the performance of the obligations of Companies pursuant to maintenance
agreements entered into in the ordinary course of business. Other than the
warranties set forth in the Contracts with customers, and any warranties
provided by Law, none of the Companies has given or made any warranties to third
parties with respect to any products sold or services performed by it relating
to the Assets or the Employees.
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4.20. Transactions with Affiliates. There are no Contracts, obligations
or arrangements between any of the Companies and any current or former director,
officer, shareholder, or employee of any of the Companies or any Affiliate of
any such person relating to the Assets or the Employees, except for those
identified on Schedule 4.20, a complete copy of which (including all amendments)
has been delivered to Buyer.
4.21. Receivables. The Accounts Receivable constitute valid receivables
that arose from bona fide transactions in the ordinary course of business,
consistent with past practices. Other than ordinary course adjustments not
material in the aggregate and matters listed in Schedule 2.1(k), (i) no
counterclaims or offsetting claims with respect to presently outstanding
Accounts Receivable are pending or, to the Knowledge of Seller, threatened and
(ii) subject to such amounts as are reserved for bad debts on the Initial
Closing Date Balance Sheet, such Accounts Receivables are fully collectible in
their stated amount and each has been or is collectible on or before the one
hundred eightieth (180th) day following the date such Accounts Receivable was
created. Except for annual software license maintenance fees that are billed by
Seller in advance, no part of the Accounts Receivable is contingent upon
performance by Seller or any other party of any obligation, and no agreements
for deductions or discounts have been made with respect to any part of such
Accounts Receivable.
4.22. Assumed Contracts; Customer Claims. Each of the Assumed Contracts
and the Contracts of EEMS and SM-India is a valid and existing Contract in full
force and effect, enforceable against the parties thereto, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar Laws affecting the enforcement of
creditors rights generally and subject to general principles of equity. Seller
has made available to Buyer true and complete copies of such Contracts. There
are no existing material Defaults of Seller under any such Contracts or, to the
Knowledge of Seller, any other parties thereto. No state of facts exists which
would constitute valid grounds for a Claim against Seller, EEMS or SM-India by
any customer or former customer of Seller, EEMS or SM-India relating to the
Business for fraud.
4.23. Sufficiency of Purchased Assets. All of the Assets are used in
the operation of the Business. Except for the Excluded Assets, there are no
assets currently used in the conduct of the Business, other than the Assets.
4.24. Relationship With Customers. The Companies have used their
commercially reasonable efforts to maintain good working relationships with all
of their customers. The Companies' Contracts with their customers and customer
relationships which have been terminated or cancelled during the past year are
set forth and described on Schedule 4.24. Schedule 4.24 also contains a list of
the names of each of the current customers of the SMS Division, EEMS or SM-India
(the "Business Customer Base"), indicating the dollar amount of sales to each
such customer for the period beginning January 1, 2001 and ending as of the date
hereof. Except as set forth on Schedule 4.24, none of the customers listed on
Schedule 4.24 has terminated or, to any of the Companies' Knowledge, given
written notice to any of the Companies prior to the date of this Agreement or
any notice (whether written or otherwise) to any of the Companies from the date
of this Agreement to the Initial Closing Date of an intention or plan to
terminate any Assumed Contract or any Contract of EEMS or SM-India, and to the
Companies' Knowledge none of such customers may terminate any Contract with
Seller, EEMS or SM-India or all or a material part of such purchases, whether by
reason of the acquisition of the Purchased Assets and the Sub Shares by Buyer or
for any other reason other than by mutual consent. To the Knowledge of the
Companies, except as set forth on Schedule 4.24, none of the Employees or
Independent Contractors primarily responsible for servicing customers listed
thereon has indicated in writing an intention or plan to terminate his or her
employment or relationship, as the case may be, with Seller, EEMS or SM-India.
Except as set forth on Schedule 4.24, none of the Companies has received notice
of, and none have Knowledge of any basis for, any material complaint by any of
customers of the Business.
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4.25. Corporate Documents. Seller has furnished to Buyer for its
examination true and correct copies of the following:
(a) the articles of incorporation and bylaws (or similar
charter documents) of EEMS and SM-India; and
(b) the minute books and stock books of each of EEMS and
SM-India, to the extent they exist, from the inception of each such Company,
containing all proceedings, consents, actions and meetings of shareholders and
the board of directors (including committee meetings) of each of the Companies.
4.26. Exeter Group. All of the services required or anticipated to be
provided to Seller by Exeter Group pursuant to or in connection with any Assumed
Contract is evidenced by or, subject to or provided for in, either an accurate,
complete and binding written work order between Exeter Group and Seller or the
Agreement between Exeter Group and Seller dated June 7, 2001.
4.27. Veracity of Statements. No representation or warranty by any of
the Companies contained in this Agreement, and no statement contained in any
certificate, Schedule or other document or instrument furnished by or on behalf
of any of the Companies to Buyer pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make it not misleading.
4.28. Export/Import.
(a) Each of the Companies is in compliance with all
Export/Import Laws and has no Knowledge of any facts or circumstances, and none
of the Companies has received any Claim from any Governmental Entity, Employee
or other Person, indicating that it is not in compliance with any Export/Import
Laws or the terms or conditions of any Permits relating to the export or import
of any items (commodities, Software or technology).
(b) There has not been to the Companies' Knowledge, and none
of the Companies has received, any Claim from any Governmental Entity, Employee
or other Person that there has been any past or present actions, activities,
circumstances, conditions, events or incidents involving any unlawful export or
import of any items (commodities, software or technology) that form or could
form the basis of any Claim against any of the Companies, the Assets or any
Person, the liability for which has or may have been retained or assumed either
contractually or by operation of law (an "Export/Import Claim").
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4.29. Time and Materials Contracts. Each professional services job
order under which Seller is providing services or is obligated to provide
services constitutes a "time and materials" Contract; that is, the applicable
client is obligated to pay Seller for services rendered on an hourly or other
ratable basis, based upon the number of hours (or other time unit measurement)
of services rendered by Seller, and the client is additionally obligated to
reimburse Seller for travel and living expenses that Seller actually incurs in
rendering such services, all without any not-to-exceed or fixed-fee limitations.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Companies to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer hereby
represents and warrants to each of the Companies as follows:
5.1. Organization, Power, Standing and Qualification. Buyer has been
duly organized, and is validly existing and in good standing under the Laws of
the state of its incorporation, and it has the full power and authority
(corporate or otherwise) to carry on its business as it is now being conducted
and to own and operate the properties and assets owned and operated by it.
5.2. Power and Authority. Buyer has the requisite power and authority
to execute, deliver and perform this Agreement and the Collateral Documents to
which it is a party and to purchase the Purchased Assets and Sub Shares from
Seller. The execution, delivery and performance of this Agreement and each of
the Collateral Documents to which Buyer is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action (corporate or otherwise) on the part of Buyer and requires no
further authorization or consent by Buyer. This Agreement and the Collateral
Documents, to be executed and delivered by Buyer, have been duly and validly
executed and delivered, and constitute the legal, valid and binding obligations
of Buyer, as applicable, enforceable in accordance with their terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency, moratorium
or similar Laws affecting the enforcement of creditors' rights generally.
5.3. Non-Contravention. The execution, delivery and performance of this
Agreement and each of the Collateral Documents to which Buyer is a party, and
the consummation of the transactions contemplated hereby and thereby, do not and
will not: (a) violate, breach or contravene any provision of the respective
organizational documents of Buyer; (b) violate any provision of Law, Permit or
License applicable to Buyer or to its properties or assets; or (c) require any
consent to be obtained by Buyer except as has been made or waived.
5.4. Brokerage. Other than retaining Think Equity to assist Buyer with
the acquisition, neither Buyer nor any of its officers, directors or employees
has employed or retained, or will have employed or retained on the Initial
Closing Date or the Subsequent Closing Date, any broker, agent, finder or
consultant, or has incurred or will have incurred, other than the fee owed to
Think Equity, any liability for any brokerage fees, commissions, finders' fees,
or other fees in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
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5.5. Litigation. There is no Litigation pending or, to Buyer's
Knowledge threatened, against or related to Buyer, which seeks to prohibit or
delay the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
5.6. Veracity of Statements. No representation or warranty by Buyer
contained in this Agreement, and no statement contained in any certificate,
Schedule or other document or instrument furnished by or on behalf of Buyer to
Seller or any of the Companies pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
or a material fact or omits or will omit to state a material fact necessary to
make it not misleading.
5.7. Available Funds. Buyer has available at the Initial Closing, the
funds to pay the Initial Purchase Price to Seller. Buyer will have available at
the Subsequent Closing, the funds to pay the Initial Subsequent Purchase Price
to Seller.
ARTICLE 6
ACTIVITIES OF THE COMPANIES PRIOR TO THE subsequent CLOSING DATE
6.1. Operation of Business. Each of the Subs agrees that it shall, and
the Seller agrees to cause the Subs to, except as otherwise contemplated by this
Agreement or unless otherwise agreed to in writing by Buyer or required by a
court of competent jurisdiction or an order of a Governmental Entity, from and
after the Initial Closing Date until the Subsequent Closing Date, conduct the
Business solely in the ordinary course consistent with past practices. Without
limiting the generality of the foregoing, each of the Subs agree that it will,
and Seller agrees that it shall cause each Sub to:
(a) Organizational Documents. Not amend its charter or bylaws,
except as may be necessary to carry out this Agreement or as required by
applicable Law or for the purpose of changing the name of SM-India to eliminate
any reference to "Xxxxxx Xxx" or "SM";
(b) Compensation and Benefits. Not pay or agree to pay to any
SM-India Employee, independent contractor, officer or director compensation that
is in excess of the current compensation level of such employees, independent
contractor, officer or director, except for normal compensation increases to
such individuals which are made in the ordinary course of the business
consistent with past practices; or not grant any severance or termination pay
to, or enter into any employment, severance, termination, stay-bonus or similar
agreement with any director, officer, independent contractor or employee of any
of the Subs, or establish, adopt, enter into, amend or terminate any bonus,
profit sharing, thrift, compensation, restricted stock pension, retirement,
deferred compensation, employment termination severance, health care, life
and/or disability insurance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer, independent contractor or
employee of any of the Subs; except that (i) the Subs may do any of the
foregoing to the extent set forth in the Interim Period Operating Budget set
forth on Schedule 6.1 hereto (the "Operating Budget") or (ii) the Subs may grant
stay-bonuses or other incentive compensation to the extent that such action does
not impose any additional Liability or obligation on Buyer not in effect on the
Initial Closing Date or change any existing obligation of the Subs on the
Initial Closing Date that will be assumed by Buyer as a result of the Subsequent
Closing;
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(c) Management. Not make any changes in management and use its
commercially reasonable efforts to retain all SM-India Employees, Independent
Contractors of SM-India and other of the current management employees of the
Subs, except as may be provided in the Services Agreement;
(d) Mergers, Etc. Not merge or consolidate with any other
Person or agree to acquire or be acquired by any other Person;
(e) Disposition of Assets. Not sell, transfer, or otherwise
dispose of any Sub Assets, except in the ordinary course of business consistent
with past practices;
(f) Indebtedness. Not (i) create, incur, assume, or guarantee
any Indebtedness except in the ordinary course of the Business consistent with
past practices but in no instance greater than $15,000 or in the aggregate
$100,000, (ii) create or suffer to exist any Lien, on any of the Sub Assets,
except those in existence on the date hereof and acceptable to Buyer (as
evidenced by written consent), or (iii) increase the amount of any Indebtedness
outstanding under any Contract of SM-India or EEMS or other borrowing
arrangement in existence on the date hereof, except in the ordinary course of
the Business consistent with past practices but in no instance greater than
$15,000;
(g) Payables and Liabilities. Not incur any accounts payable,
including trade payables, or other Liabilities, except in the ordinary course of
the Business consistent with past practices and consistent with the Operating
Budget;
(h) Maintenance of Assets. Maintain the Sub Assets in good
operating repair, order and condition, reasonable wear and tear excepted, and
notify Buyer immediately upon any loss of, damage to, or destruction of any of
the Sub Assets (whether or not covered by insurance);
(i) Insurance. Maintain in full force and effect insurance
coverage with respect to the Subs of the types and in the amounts set forth in
Schedule 4.10 attached hereto, apply the proceeds received under any insurance
policy or as the result of any loss or destruction of or damage to any Sub
Assets to the repair or replacement of such Sub Assets, and cause to be amended
each Current Policy relating to the Subs to identify properly the named insureds
under each such policy in a manner acceptable to Buyer;
(j) Contracts and Permits. Except as Buyer shall otherwise
consent to in writing, (i) maintain in full force and effect all the Contracts,
Permits and Licenses necessary for or related to the operation of the Business
as such Business is now conducted or as anticipated to be conducted in the
Operating Budget, (ii) except as limited by subclauses (iv), (v) or (vi) of this
Section 6.1(j), renew any Contracts as the same shall become subject to renewal,
(iii) renew or revalidate Permits and Licenses which may become void, expired,
terminated, canceled or withdrawn between the date hereof and the Subsequent
Closing Date, (iv) not enter into, amend, renew or extend any Contract with any
Affiliate, (v) not amend, change or permit any change in any Contract regarding
the amount of payments to be made by or to the Companies or the terms of such
payments if such payments are in excess of $15,000 and (vi) not enter into any
Contract for, commit to or otherwise provide, any services to any Person other
than Buyer;
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(k) Required Consents. Use its commercially reasonable efforts
to obtain all of the Subsequent Required Consents;
(l) Goodwill. Use its commercially reasonable efforts to
preserve its business organization intact, to keep available the services of the
SM-India Employees and to preserve the goodwill of its customers, and others
having business relations with it;
(m) Litigation, Claims, etc. Promptly give notice to Buyer
after receipt of service of the commencement of, and of any Known threat to
commence, any Litigation against any of the Companies related to the Business,
the Subs or the Sub Assets;
(n) Monthly Reports and Quarterly Financial Statements.
Deliver to Buyer as soon as available (i) reports of the actual expenses of the
Subs as compared to the budgeted expenses set forth on the Operating Budget
beginning with the month of January 2002 and for each calendar month thereafter
prior to the Subsequent Closing Date and (ii) consolidated quarterly financial
statements including at least a balance sheet and a statement of income of EEMS
and SM-India commencing with the first calendar quarter in 2002 and for each
quarter thereafter prior to the Subsequent Closing Date;
(o) Proprietary Information. Comply with all the terms and
conditions of the Confidentiality Agreement;
(p) Dividends or Other Distributions. Not declare, set aside
or pay any dividend or other distribution in respect of EEMS or SM-India shares
of capital stock or redeem, purchase or otherwise acquire any such shares of
capital stock;
(q) Capital Stock. Not reclassify, combine, split, subdivide
or redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of EEMS or SM-India, or (ii) not issue sell, pledge, dispose of,
grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of any shares of capital stock of EEMS or SM-India, or any options,
warrants, convertible securities or other rights of any kind to acquire any such
capital stock, or other rights of any kind to acquire any shares of such capital
stock, or any other ownership interest in EEMS or SM-India;
(r) Capital Expenditure. Not authorize any capital
expenditures in the aggregate that exceed by more than twenty (20) percent the
aggregate capital expenditure line items entitled "Hardware and Software" and
"Other Equipment" in the "Expense Summary" section of the Operating Budget;
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(s) Taxes. Not (i) make or change any Tax election; (ii)
settle or compromise any material federal, local or foreign income Tax
Liability; (iii) enter into any Tax Sharing, allocation, compensation or like
agreements or arrangements; (iv) request any Tax ruling; or (v) change any
accounting method or period;
(t) Commitments. Not commit or agree (in writing or otherwise)
to take any of the foregoing actions or any action that would make any
representation or warranty in this Agreement untrue or incorrect, or omit to
take any action which would result in the occurrence of one of the foregoing
actions or any inaccuracy in the representations or warranties set forth in
Articles 4 or 5 of this Agreement.
6.2. Access to Information. Prior to the Subsequent Closing, each of
the Companies will cooperate fully with Buyer and shall provide Buyer and its
accountants, counsel, and other representatives (including without limitation,
its bankers and other lending sources, auditors and engineers), partners,
investors and investment bankers, during normal business hours, full access to
any Books and Records and Contracts relating to the Business, full opportunity
to discuss the Business and its affairs with the officers, management Employees,
attorneys and accountants of each of the Companies, and furnish to Buyer and its
representatives copies of such documents, records, and information with respect
to the affairs as Buyer or its representatives may reasonably request.
6.3. Notice of Change. The Companies will promptly notify Buyer of the
existence or happening of any fact, event or occurrence prior to the Subsequent
Closing Date and of which any of the Companies has Knowledge which may
materially alter the accuracy or completeness of any representation or warranty
contained in Article 4 of this Agreement.
6.4. Closing Efforts. Subject to the other provisions of this
Agreement, each of the Companies will use commercially reasonable efforts to
cause the conditions listed in Section 9.1 hereof to be satisfied on the
Subsequent Closing Date.
6.5. No Discussions. The parties hereto agree that from the Initial
Closing Date to the Subsequent Closing Date (the "Interim Period"), none of the
Companies, nor any of their respective Affiliates, officers, directors,
employees, representatives or agents (including, without limitation, investment
bankers, attorneys, shareholders and accountants), will directly or indirectly
solicit or initiate any discussions or negotiations with, encourage any
inquiries or proposals by, participate in any negotiations with, provide any
information to, enter into any agreements or understandings of any kind, or
otherwise cooperate in any other way with any Person or group, other than Buyer
and its representatives, employees and agents, concerning any sale of all or a
portion of the Sub Assets or the Sub Shares or any merger, consolidation,
liquidation, dissolution or similar transaction in which either or both of the
Subs is a party.
6.6. Services Agreement. The parties hereto agree that during the
Interim Period, none of the Companies shall breach, directly or indirectly, the
Services Agreement.
6.7. Bonuses. Seller shall pay its Employees all accrued but unpaid
bonuses and sales commissions as of the Initial Closing Date on or prior to
February 15, 2002.
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6.8. Inter-company Accounts. All accounts receivable and accounts
payable between Seller and either of the Subs or between the Subs shall be paid
in full on or prior to the Initial Closing Date as to the Purchased Assets and
the Subsequent Closing Date as to the Subs.
ARTICLE 7
ACTIVITIES OF BUYER PRIOR TO THE subsequent CLOSING DATE
7.1. Notice of Change. Buyer will promptly notify Seller of the
existence or happening of any fact, event or occurrence prior to the Subsequent
Closing Date and of which Buyer or any of Buyer's representatives has Knowledge
which may alter the accuracy or completeness of any representation or warranty
contained in Article 5 of this Agreement.
7.2. Closing Efforts. Subject to the other conditions of this
Agreement, Buyer will use commercially reasonable efforts to cause the
conditions listed in Section 9.2 to be satisfied on the Subsequent Closing Date.
7.3. Services Agreement. The parties hereto agree that during the
Interim Period, Buyer shall not breach, directly or indirectly, the Services
Agreement.
ARTICLE 8
CONDITIONS PRECEDENT TO THE INITIAL CLOSING
8.1. Obligation of Buyer to Close on the Initial Closing Date. The
obligation of Buyer to consummate the purchase of the Purchased Assets and the
assumption of the Assumed Liabilities on the Initial Closing Date shall be
subject to the satisfaction or the waiver by Buyer, of the following conditions
on or prior to the Initial Closing Date:
(a) Representations and Warranties, Compliance with Agreement.
The representations and warranties of each of the Companies set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Initial Closing Date as though made on and as of the Initial Closing Date;
each of the Companies shall have performed all covenants and agreements to be
performed by it under this Agreement on or prior to the Initial Closing Date;
and each of the Companies shall have delivered to Buyer a certificate to such
effect, dated the Initial Closing Date and signed by an executive officer, which
certificate shall be in form and substance reasonably satisfactory to Buyer and
its counsel.
(b) Initial Closing Certificate. Each of the Companies shall
have delivered to Buyer a certificate or certificates, in form and substance
satisfactory to Buyer and its counsel, dated the Initial Closing Date and signed
on its behalf by its Secretary or by an Assistant Secretary to the effect that
(i)(A) the copy of its charter, or in the case of SM-India, its Memorandum of
Association, attached to the certificate is true, correct and complete, (B) no
amendment to its charter or Memorandum of Association, as the case may be, has
occurred since the date of the last amendment annexed (such date to be specified
and a copy of such charter or Memorandum of Association, as amended, to be
annexed to such certificate), (C) a true and correct copy of its bylaws as in
effect on the date thereof and at all times since the adoption of the
resolutions referred to in clause (D) below is annexed to such certificate, (D)
the resolutions by its Board of Directors and shareholders, if required,
authorizing the actions taken in connection with the sale of the Purchased
Assets, the Sub Shares and the Business, including the execution, delivery and
performance of this Agreement, were duly adopted and continue in force and
effect (a copy of such resolutions to be annexed to such certificate); (ii) its
officers executing this Agreement and the documents executed and delivered
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pursuant to or in connection with this Agreement are incumbent officers, and
that the signatures on this Agreement and such other documents are their genuine
signatures; and (iii) it is in good standing in its jurisdiction of
incorporation and in all other jurisdictions in which it is required to be
qualified to transact business as a foreign corporation. The certificates
referred to in (iii) above shall attach, with respect to its jurisdiction of
incorporation and all other jurisdictions in which it is required to be
qualified to transact business as a foreign corporation, (x) certificates of
good standing certified by the Secretaries of State or other appropriate
officials of such states, dated as of a date not more than five (5) days prior
to the Initial Closing Date, and (y) certificates of no Tax Liens with respect
to the property of the SMS Division, EEMS or SM-India in such states.
(c) Opinion of Counsel of Seller. Xxxxx Xxxxxxx Xxxxxxx and
Xxxxx LLP, counsel for Seller, shall have delivered to Buyer their favorable
opinion, dated the Initial Closing Date and in substantially the form attached
hereto as Exhibit E.
(d) Litigation Affecting Initial Closing. On the Initial
Closing Date, no Claim or Litigation shall be pending or threatened which seeks
to restrain or prohibit, or to obtain damages or other relief in connection
with, this Agreement or the consummation of the transactions contemplated
hereby, and no investigation that might result in any such suit, action or
proceeding shall be pending or threatened.
(e) Mandatory Consents. All of the Initial Required Consents
shall have been granted, obtained or received, and all shall be in full force
and effect as of the Initial Closing.
(f) No Liens. The Assets shall not be subject to any Liens,
other than Permitted Liens. Buyer shall have been provided with evidence
reasonably satisfactory to them that all Indebtedness relating to or binding the
SMS Division, EEMS or SM-India secured on or prior to Initial Closing by the
Assets shall have been satisfied in full.
(g) 338(h)(10) Election. Seller shall have provided Buyer with
two (2) original IRS Forms 8023 in respect of the sale and purchase of the stock
of EEMS (together will all required attachments thereto) pursuant to Section
15.1, each executed by Seller.
8.2. Obligation of Seller to Close on the Initial Closing Date. The
obligation of Seller to consummate the sale to Buyer of the Purchased Assets on
the Initial Closing Date shall be subject to the satisfaction or waiver by
Seller of the following conditions on or prior to the Initial Closing Date:
(a) Representations and Warranties, Compliance with Agreement.
The representations and warranties of Buyer set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Initial Closing
Date as though made on and as of the Initial Closing Date; Buyer shall have
performed all covenants and agreements to be performed by it under this
Agreement on or prior to the Initial Closing Date; and Buyer shall have
delivered to Seller a certificate to such effect, dated the Initial Closing Date
and signed by its President or by an Executive Vice-President or a Senior
Vice-President, which certificate shall be in form and substance reasonably
satisfactory to Seller and its counsel.
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(b) Litigation Affecting Initial Closing. On the Initial
Closing Date, no Claim or Litigation shall be pending or threatened which seeks
to restrain or prohibit or to obtain damages or other relief in connection with,
this Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action or proceeding shall
be pending or threatened.
ARTICLE 9
CONDITIONS PRECEDENT TO THE SUBSEQUENT CLOSING
9.1. Obligation of Buyer to Close on the Subsequent Closing Date. The
obligation of Buyer to consummate the purchase of the Sub Shares on the
Subsequent Closing Date shall be subject to the satisfaction of or the waiver by
Buyer, of the following conditions on or prior to the Subsequent Closing Date:
(a) Representations and Warranties, Compliance with Agreement.
The representations and warranties relating to the Subs and the Sub Shares set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Subsequent Closing Date as though made on and as of the
Subsequent Closing Date and as though in every representation and warranty in
which the "Initial Closing Date" or the "Initial Closing", as the case may be,
are referenced, such terms mean the "Subsequent Closing Date" and the
"Subsequent Closing", as the case may be; each of the Companies shall have
performed all covenants and agreements to be performed by it under this
Agreement on or prior to the Subsequent Closing Date; and each of the Companies
shall have delivered to Buyer a certificate to such effect, dated the Subsequent
Closing Date and signed by an executive officer, which certificate shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
(b) Subsequent Closing Certificate. Each of the Subs shall
have delivered to Buyer a certificate or certificates, in form and substance
satisfactory to Buyer and its counsel, dated the Subsequent Closing Date and
signed on its behalf by its Secretary or by an Assistant Secretary to the effect
that (i)(A) the copy of its charter, or in the case of SM-India, its Memorandum
of Association, attached to the certificate is true, correct and complete, (B)
no amendment to its charter or Memorandum of Association, as the case may be,
has occurred since the date of the last amendment annexed (such date to be
specified and a copy of such charter or Memorandum of Association, as amended,
to be annexed to such certificate), (C) a true and correct copy of its bylaws as
in effect on the date thereof and at all times since the adoption of the
resolutions referred to in clause (D) below is annexed to such certificate, (D)
the resolutions by its Board of Directors and shareholders, if required,
authorizing the actions taken in connection with the sale of the Sub Shares,
including the execution, delivery and performance of this Agreement, were duly
adopted and continue in force and effect (a copy of such resolutions to be
annexed to such certificate); (ii) its officers executing this Agreement and the
documents executed and delivered pursuant to or in connection with this
Agreement are incumbent officers, and that the signatures on this Agreement and
such other documents are their genuine signatures; and (iii) it is in good
standing in its jurisdiction of incorporation and in all other jurisdictions in
which it is required to be qualified to transact business as a foreign
corporation. The certificates referred to in (iii) above shall attach, with
respect to its jurisdiction of incorporation and all other jurisdictions in
which it is required to be qualified to transact business as a foreign
corporation, (x) certificates of good standing certified by the Secretaries of
State or other appropriate officials of such states, dated as of a date not more
than five (5) days prior to the Subsequent Closing Date, and (y) certificates of
no Tax Liens with respect to the property of EEMS or SM-India in such states.
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(c) Opinion of Counsel of Seller. Xxxxx Xxxxxxx Xxxxxxx and
Xxxxx LLP, counsel for Seller, Seller's general or deputy counsel and/or
Trilegal Services (India) shall have delivered to Buyer their favorable opinion,
dated the Subsequent Closing Date and in substantially the form attached hereto
as Exhibit F.
(d) Litigation Affecting the Subsequent Closing. On the
Subsequent Closing Date, no Claim or Litigation shall be pending or threatened
which seeks to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any such suit,
action or proceeding shall be pending or threatened.
(e) Mandatory Consents. All of the Subsequent Required
Consents shall have been granted, obtained or received, and all shall be in full
force and effect as of the Subsequent Closing.
(f) No Liens. The Sub Assets shall not be subject to any
Liens, other than Permitted Liens. Buyer shall have been provided with evidence
reasonably satisfactory to them that all Indebtedness relating to or binding the
EEMS or SM-India secured on or prior to Subsequent Closing by the Sub Assets
shall have been satisfied in full.
9.2. Obligation of Seller to Close on the Subsequent Closing Date. The
obligation of Seller to consummate the sale to Buyer of the Sub Shares on the
Subsequent Closing Date shall be subject to the satisfaction of or waiver by
Seller of the following conditions on or prior to the Subsequent Closing Date:
(a) Representations and Warranties, Compliance with Agreement.
The representations and warranties of Buyer set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Subsequent
Closing Date as though made on and as of the Subsequent Closing Date and as
though in every representation and warranty in which the Initial Closing Date or
the Initial Closing, as the case may be, are referenced such terms mean the
Subsequent Closing Date and the Subsequent Closing, as the case may be; Buyer
shall have performed all covenants and agreements to be performed by it under
this Agreement on or prior to the Subsequent Closing Date; and Buyer shall have
delivered to Seller a certificate to such effect, dated the Subsequent Closing
Date and signed by its President or by an Executive Vice-President or a Senior
Vice-President, which certificate shall be in form and substance reasonably
satisfactory to Seller and its counsel.
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(b) Litigation Affecting Subsequent Closing. On the Subsequent
Closing Date, no Claim or Litigation shall be pending or threatened which seeks
to restrain or prohibit, or to obtain damages or other relief in connection
with, this Agreement or the consummation of the transactions contemplated
hereby, and no investigation that might result in any such suit, action or
proceeding shall be pending or threatened.
ARTICLE 10
INDEMNIFICATION
10.1. By Seller. Regardless of any investigation undertaken or made by
Buyer or any of its advisors prior to the Initial Closing Date or the Subsequent
Closing Date, Seller shall indemnify, defend and hold harmless Buyer and its
Affiliates, officers, directors, agents and employees (collectively, the "Buyer
Indemnified Parties" and, individually, each a "Buyer Indemnified Party"), from
and against any and all Claims, Litigation and/or Losses, which a Buyer
Indemnified Party may sustain, suffer or incur, resulting from, related to, or
arising out of:
(a) any misstatement of or omission from any representation
of, or any breach of warranty by any of the Companies contained in this
Agreement or any of the Collateral Documents;
(b) any breach of any covenant, agreement or undertaking by
any of the Companies contained in this Agreement or any of the Collateral
Documents;
(c) any Liabilities of Seller other than the Assumed
Liabilities;
(d) any non-compliance with applicable Law relating to bulk
sales, bulk transfers and the like or to fraudulent conveyances, fraudulent
transfers, preferential transfers and the like by the Seller;
(e) any Liability or Claim for (i) Taxes of any of the
Companies or their Affiliates that accrued or that relate to a period of time
ending on or prior to the Initial Closing Date, in respect of Seller, or the
Subsequent Closing Date, in respect of the Subs, including but not limited to
any Liability (A) for Taxes imposed on EEMS as a result, directly or indirectly,
of any transfer of assets to any Affiliate at any time on or before the
Subsequent Closing Date, (B) of any of the Companies or any of their affiliates
under any Tax allocation, sharing or similar agreement, whether or not written,
(C) resulting from the termination of EEMS or SM-India as a member of any
consolidated, affiliated, combined, unitary or other similar Tax group, or (D)
for Taxes arising as a result of any election described in Section 15.2 and (ii)
Taxes imposed on EEMS or SM-India or any of their affiliates under Treasury
Regulation Section 1.1502-6 or any analogous state, local or foreign Tax
provision, as a result of being a member of a consolidated, affiliated,
combined, unitary or other similar group for any taxable period commencing
before the Subsequent Closing Date (in each case without regard to any
information provided on the Schedules hereto or otherwise disclosed to or Known
by any Buyer Indemnified Party);
(f) any breach of any third party's Intellectual Property
rights (including, but not limited to, a Claim of breach of License in
connection with the development, manufacture and/or support of any Software
licensed or distributed by or for the Business, license infringement, failure to
pay royalties, Claims for royalties in connection with the Software, Claims of
ownership of the Software or any similar Claim) in connection with the Assumed
Contracts set forth on Schedule 10.1(f) hereto;
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(g) the breach of any Contract pursuant to which an Initial
Required Consent or Subsequent Required Consent is required as a result of or
arising out of not obtaining such consent; and
(h) any written agreement, job order, operating plan,
arrangement and/or any other commitment whatsoever by and between any of the
Companies and the Arizona Board of Regents (including, but not limited to, the
License Agreement dated March 9, 2000 between the Arizona Board of Regents,
acting for and on behalf of the University of Arizona ("UA") and EEMS (the
"Arizona License Agreement"), that certain Project Implementation Agreement
dated March 9, 2000 between UA and EEMS ("Arizona Implementation Agreement"),
and all other Contracts listed under the heading "Arizona Board of Regents
(University of Arizona)" set forth on Schedule 2.1(c) hereto) (collectively, the
"Arizona Agreements"), including, without limitation, any Claim that Buyer or
any of the Companies failed or is failing to fulfill any obligations that
existed or are alleged to have existed under or in connection with any of the
Arizona Agreements as of the Initial Closing Date, and including any Claim for
declaratory and/or injunctive relief and or/ anticipatory repudiation or breach,
whether or not such Claim, Litigation and/or Loss arises from actions of Buyer
or the Companies prior to, on or after the Initial Closing and even though such
Claim, Litigation and/or Loss may not be filed, become final or come to light
until after the Initial Closing. Notwithstanding the above, Seller shall have no
indemnification obligations under this Section 10.1(h) to the extent such Buyer
Loss arises out of or results from Buyer's gross negligence, bad faith or
willful misconduct.
10.2. By Buyer. Buyer shall indemnify, defend and hold harmless Seller,
its Affiliates, officers, directors, agents and employees (collectively, the
"Seller Indemnified Parties" and, individually, a "Seller Indemnified Party")
from and against any and all Claims, Litigation and/or Losses, which a Seller
Indemnified Party may sustain, suffer or incur, resulting from, related to, or
arising out of:
(a) any misstatement of or omission from any representation
of, or any breach of warranty by, Buyer contained in this Agreement or any of
the Collateral Documents;
(b) any breach of any covenant, agreement or undertaking by
Buyer contained in this Agreement or any of the Collateral Documents; and
(c) any of the Assumed Liabilities.
10.3. Notice and Defense; Costs of Defense.
(a) Promptly after acquiring Knowledge of any Litigation,
Claim or Loss against which a Buyer Indemnified Party or Seller Indemnified
Party is or may be entitled to indemnification hereunder, Seller or Buyer, as
applicable, shall send a Claim Notice to the Indemnifying Party, but any failure
to so provide the Claim Notice to the Indemnifying Party shall not relieve it
from any liability that it may have to the Indemnified Party under this Section
10.3 except to the extent that the Indemnifying Party's ability to defend or
mitigate such Claim, Litigation or Loss, is materially prejudiced by the failure
to give the Claim Notice and only to extent thereof. The Indemnifying Party
shall be entitled to participate in the defense of such action and to assume
control of such defense; provided, however, that:
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(i) the Indemnified Party shall be entitled to
participate in the defense of such Claim, Litigation or Loss, and to employ
counsel at its own expense to assist in the handling of such Claim, Litigation
or Loss;
(ii) the Indemnifying Party shall obtain the prior
written approval of the Indemnified Party (such approval shall not be
unreasonably withheld) before entering into any settlement of such Claim,
Litigation or Loss or ceasing to defend against such Claim, Litigation or Loss,
if, pursuant to or as a result of such settlement or cessation, injunctive or
other equitable relief would be imposed against the Indemnified Party;
(iii) the Indemnifying Party shall not consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
Indemnified Party of a release of each such Indemnified Party from liability in
respect of such Claim, Litigation or Loss; and
(iv) except in the case of Section 10.1(h), the
Indemnifying Party shall not be entitled to control but shall be entitled to
participate at its own expense in the defense of, and the Indemnified Party
shall be entitled to have sole control at its own expense over, the defense or
settlement of any Claim, Litigation or Loss to the extent the Claim, Litigation
or Loss seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition or prospects of the Indemnified Party.
In such case, the Indemnified Party shall obtain the prior written approval of
the Indemnifying Party (such approval shall not be unreasonably withheld) before
entering into any settlement of such Claim, Litigation or Loss or ceasing to
defend against such Claim, Litigation or Loss, if, pursuant to or a result of
such settlement or cessation, injunctive or other equitable relief would be
imposed against the Indemnified Party.
(b) After written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any such
Claim (other than under Section 10.3(a)(iv) hereof), Litigation or Loss, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder for
any legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. If the Indemnifying Party does not assume control of
the defense of such Claim, Litigation or Loss as provided in this Section 10.3,
the Indemnified Party shall have the right to defend such Claim in such manner
as it may deem appropriate at the cost and expense of the Indemnifying Party,
and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 10.3. The reimbursement of fees, costs
and expenses required by this Section 10.3 shall be made by periodic payments
during the course of the investigation or defense, as and when bills are
received or expenses incurred.
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(c) In the event that Seller is required to pay Buyer for any
Indemnifiable Losses under this Section 10.3, such amount may be deducted from
or offset against the Earnout Purchase Price.
(d) In calculating any amount of damages to be paid by Seller
pursuant to this Agreement, the amount of such damages will be reduced by all
reimbursements credited to or received by the other party, relating to such
damages, and will be net of any Tax benefits and insurance proceeds received by
the other party with respect to the matter for which indemnification is claimed.
10.4. Limitation of Indemnity. Neither Seller nor Buyer shall make a
Claim for Indemnifiable Losses pursuant to Sections 10.1(a) or (b) or Sections
10.2(a) or (b), as the case may be, unless the aggregate amount of such
Indemnifiable Losses for either Seller or Buyer, as the case may be, exceeds One
Hundred Fifty Thousand ($150,000) (the "Indemnification Threshold") at which
point the Indemnified Party shall be entitled to indemnification only for the
amount by which such claims, in the aggregate, exceed the Indemnification
Threshold. Notwithstanding the foregoing, the Indemnification Threshold shall
not apply to breaches or inaccuracies of any representations and warranties
contained in Section 4.4(a) and (b) (Title) and Section 4.17 (Certain Tax
Matters). Notwithstanding anything contained in this Article 10 to the contrary,
the aggregate maximum monetary liability of Seller or Buyer for Indemnifiable
Losses under Sections 10.1(a), (b) and (g) and Sections 10.2(a) and (b),
respectively, shall not exceed an amount equal to Six Million Five Hundred
Thousand Dollars ($6,500,000) (the "Indemnification Cap"); provided, however,
that the Indemnification Cap shall not apply to breaches or inaccuracies of any
representations or warranties contained in Sections 4.4(a) and (b) (Title) and
Section 4.17 (Certain Tax Matters); and; provided, further, that the
Indemnification Cap shall not apply to breaches or inaccuracies of any
representation or warranties contained in Section 4.11 (Intellectual Property)
which shall be subject to a liability limitation equal to the Purchase Price.
Notwithstanding the foregoing, Buyer shall be entitled to indemnification for
all Indemnifiable Losses under Sections 10.1(c) through (f) and Section 10.1(h)
and Seller shall be entitled to indemnification for all Indemnifiable Losses
under Sections 10.2(c) and (d); provided, however, that the maximum monetary
liability of Seller for Indemnifiable Losses under Sections 10.1(f) and 10.1(h)
shall not exceed the Purchase Price. For purposes of calculating the amount of
Buyer's Indemnifiable Losses incurred by Buyer arising out of or resulting from
any breach of a representation, covenant or agreement by Seller, the references
to a "Business Material Adverse Effect" or materiality (or other correlative
terms) shall be disregarded. The limitations on the assertion of claims for
indemnification (i.e., the Indemnification Threshold and the Indemnification
Cap) contained in this Section 10.4 shall not apply to, and shall not in any way
limit the right of the Buyer to pursue, any rights, remedies or Claims based on
fraud.
10.5. Characterization of Indemnity Payments. Except as otherwise
required by applicable Law, any payment made pursuant to this Article 10 shall
be treated, for Tax purposes, as an adjustment to the Purchase Price.
10.6. Seller's Claims against EEMS and SM-India. Seller agrees that it
will not seek, nor will it be entitled to, contribution from, or indemnification
by, EEMS or SM-India under their respective bylaws, this Agreement, applicable
corporate Laws or other Laws or otherwise, in respect of amounts due from Seller
to Buyer under this Article 10 or otherwise under this Agreement, and Seller
will hold each of EEMS, SM-India and Buyer harmless in respect of all such
amounts and shall not seek to join EEMS or SM-India in connection with any suit
arising under this Agreement. Seller also agrees that it will not make a Claim
against any directors and officers insurance policy maintained or to be
maintained by the Companies in respect of amounts due by Seller to Buyer under
this Article 10 or otherwise under this Agreement, if the carrier of such
insurance policy would have any right of subrogation against either EEMS or
SM-India in respect of such Claim and shall indemnify and hold harmless Buyer
from any such action.
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10.7. Limitation of Indemnity in Section 10.1(h). The obligations of
the Seller to indemnify Buyer pursuant to Section 10.1(h) hereof shall be
subject to and conditioned upon the Buyer doing the following:
(i) in connection with the Arizona License Agreement,
through the period ending March 9, 2003, providing maintenance to UA for the
then-current general release version of the EEMS Software (as that term is
defined in the Arizona License Agreement), to the same extent that Buyer is then
generally providing such maintenance to other licensees of the then-current
general release version of the EEMS Software; and
(ii) in connection with the Arizona License
Agreement, making available to UA additional functionality and/or enhancements
for the then-current general release version of the EEMS Software, to the same
extent (if any) and for the same fees that Buyer is then generally providing
such additional functionality and/or enhancements to other licensees of the
then-current general release version of the EEMS Software; and
(iii) in connection with the Arizona Implementation
Agreement, providing to UA those services which Buyer, in good faith, determines
it is required to deliver pursuant to each of the job orders identified in
Schedule 2.1(c) under the heading "Arizona Board of Regents (University of
Arizona)," as well as services under additional job orders that may be executed
by UA and Buyer; and
(iv) developing the E5 Products in accordance with
the Milestones and, thereafter, through the period ending on January 10, 2004,
continue to make available to UA additional functionality and/or enhancements
for the then-current general release version of the E5 Products, to the same
extent (if any) and for the same fees that Buyer is then generally providing
such additional functionality and/or enhancements to other licensees of the
then-current general release version of the E5 Products.
Notwithstanding the foregoing, the limitations to the Seller's indemnification
obligations set forth in this Section 10.7 shall be conditioned upon Seller
assigning its rights under the License Agreement and the Implementation
Agreement, and on the Companies performing their obligations under and in
accordance with the terms and conditions of the Services Agreement. In addition,
Buyer shall have the right to terminate the License Agreement and/or the
Implementation Agreement upon breach by UA, whereupon the limitations to the
Seller's indemnification obligations set forth in the Section 10.7 shall no
longer apply.
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ARTICLE 11
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1. Representations and Warranties. Notwithstanding anything to the
contrary herein or any investigation made by or on behalf of Seller or Buyer
prior to the Initial Closing Date or the Subsequent Closing Date, respectively,
all representations and warranties made hereunder by any party on the Initial
Closing Date or the Subsequent Closing Date, respectively, shall survive the
Initial Closing Date and the Subsequent Closing Date, respectively, and shall
end upon the expiration of the Covenant Period, except that the representations
and warranties made in Sections 4.1 (Organization and Capitalization), 4.4(a)
and (b) (Title), 4.9 (Environmental Protection), 4.11 (Intellectual Property),
4.13 (Employee Benefits) and 4.17 (Certain Tax Matters) shall survive for the
applicable statute of limitations.
11.2. Covenants. All covenants, other than the covenants which by their
terms end earlier, shall survive the Initial Closing Date and the Subsequent
Closing Date and shall end upon the expiration of the applicable statute of
limitations.
11.3. Extension of Survival. Any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with this Section will
continue to survive if notice of such Claim has been timely given prior to the
expiration of the applicable survival period, until the related Claim for
indemnification has been satisfied or otherwise resolved as provided in herein.
Notwithstanding anything herein, any breach of representation or warranty
contained in this Agreement made by any party or any written information
furnished by any party as of the Initial Closing Date or the Subsequent Closing
Date, respectively, that was made by such party fraudulently or with intent to
defraud or mislead shall survive for the applicable statute of limitations after
the Initial Closing or the Subsequent Closing, respectively.
ARTICLE 12
THE INITIAL CLOSING AND THE SUBSEQUENT CLOSING
12.1. Time and Place.(a) The closing of the transactions relating to
the sale and purchase of the Purchased Assets (the "Initial Closing")
contemplated hereby shall be held at 10:00 A.M. on the third (3rd) business day
after the satisfaction or waiver of all of the conditions precedent set forth in
Article 8 hereof, or at such other time and on such other date as the parties
may mutually agree to in writing (the "Initial Closing Date"). The Initial
Closing shall be held at the offices of Xxxxxx Xxxxxxxx LLP at 3000 Two Xxxxx
Square, 18th & Arch Streets, Philadelphia, Pennsylvania, or at such other time
and on such other date as the parties may mutually agree to in writing.
(b) The closing of the transactions relating to the sale and
purchase of the Sub Shares (the "Subsequent Closing") contemplated hereby shall
be held at 10:00 A.M. on September 30, 2002 after the satisfaction or waiver of
all of the conditions precedent set forth in Article 9 hereof, or at such other
time and on such other date as the parties may mutually agree to in writing. The
Subsequent Closing shall be held at the offices of Xxxxxx Xxxxxxxx LLP at 3000
Two Xxxxx Square, 18th & Arch Streets, Philadelphia, Pennsylvania or at such
other place as the parties may mutually agree to in writing.
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12.2. Conduct of Initial Closing. Subject to the fulfillment of all of
the conditions set forth in Article 8, and the delivery of all documents,
agreements, instruments, certificates and opinions required thereby (except such
conditions as may be waived by the parties), on the Initial Closing Date, and as
a condition to Initial Closing, the following additional documents, agreements,
certificates and instruments shall be duly delivered:
(a) evidence of the wire transfers provided for in Section
3.1(a) to be paid on the Initial Closing Date;
(b) a duly executed Xxxx of Sale by Seller;
(c) a duly executed Assignment and Assumption Agreement by
Buyer and Seller;
(d) a duly executed Assignment of Intellectual Property by
Seller;
(e) evidence that the Initial Required Consents have been
obtained and are in full force and effect;
(f) any required UCC-3 termination statements;
(g) a duly executed Services Agreement;
(h) a duly executed Escrow Agreement;
(i) evidence that the certificates representing the Sub Shares
have been transferred to the Escrow Agent;
(j) FIRPTA Certificate; and
(k) Two originally executed Internal Revenue Service Forms
8023 for 338(h)(10) election.
12.3. Conduct of Subsequent Closing. Subject to the fulfillment of all
of the conditions set forth in Article 9, and the delivery of all documents,
agreements, instruments, certificates and opinions required thereby (except such
conditions as may be waived by the parties), on the Subsequent Closing Date, and
as a condition to Subsequent Closing, the following additional documents,
agreements, certificates and instruments shall be duly delivered:
(a) evidence of the wire transfers provided for in Section
3.1(b), if any, to be paid on the Subsequent Closing Date;
(b) evidence that the Subsequent Required Consents have been
obtained and are in full force and effect; and
(c) certificates representing the Sub Shares, together with
stock powers duly executed in blank.
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12.4. No Agreement to Assign. This Agreement will not constitute an
agreement to assign any Assumed Contract if an attempted assignment thereof,
without the consent of a third party, would constitute a breach thereof or in
any way materially adversely affect the respective rights of Buyer or Seller
thereunder. If Seller has not obtained a consent or approval necessary for the
assignment of any Assumed Contract, then Seller will use its commercially
reasonable efforts to obtain that consent or approval after the Initial Closing,
and, at Buyer's request, will cooperate in any reasonable arrangements requested
by Buyer to provide Buyer the benefits of that Assumed Contract, subject to
Buyer's performance of any obligations arising under that Assumed Contract.
Nothing in this Section will require Buyer to enter into, or to accept as a
substitute for performance by Seller under this Agreement, any arrangement that
would impose any significant additional cost, expense or liability on Buyer, or
that would deprive Buyer of any material benefits contemplated by this
Agreement.
ARTICLE 13
CONDUCT OF SELLER AND BUYER AFTER Initial CLOSING
13.1. Power of Attorney. Seller hereby appoints Buyer, for and on
behalf of Seller, and in its name and stead, after the Initial Closing Date
(which shall continue after the Subsequent Closing Date), to act for Seller in a
manner which is, and to take such actions as may be, reasonable and appropriate
to effectuate the transactions contemplated by this Agreement in accordance with
the terms and conditions of this Agreement.
13.2. Cooperation and Further Assurances. Buyer and Seller will
cooperate upon and after the Initial Closing Date in effecting the orderly
transfer of the Purchased Assets and the Business to Buyer. Seller agrees to use
its commercially reasonable efforts, at its own expense, to obtain any UCC-3
termination statements relating to any Indebtedness. In addition, after the
Initial Closing Date, at the request of either party and at the requesting
party's expense, but without additional consideration, the other party shall
execute and deliver from time to time such further instruments of assignment,
conveyance and transfer, (including, without limitation any documents necessary
to record the assignment transferring ownership of the Business Intellectual
Property to Buyer with the United States Patent and Trademark Office, the U.S.
Copyright Office and their respective equivalents in any foreign jurisdiction),
shall cooperate in the conduct of Litigation and the processing and collection
of insurance Claims, and shall take such other actions as may reasonably be
required to accomplish the orderly transfer to Buyer of the Purchased Assets and
the Business as contemplated by this Agreement in accordance with the terms and
conditions of this Agreement. Buyer and Seller will cooperate during the Interim
Period in effecting the orderly operation of the Subs and the implementation of
the Services Agreement.
13.3. Remittance of Accounts Receivable. All obligors under the
Accounts Receivable shall be instructed by Seller and Buyer to make all payments
due under the Accounts Receivable directly to Buyer. Any amounts received by
Seller after the Initial Closing Date in respect of any of the Accounts
Receivable shall be paid over by Seller to Buyer (without deduction of any
nature for any purpose) within fourteen (14) days of receipt thereof by Seller
together with a statement identifying the obligor and the amount of the account
so paid.
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13.4. Uncollectible Accounts Receivable.
(a) Buyer will make commercially reasonable efforts, excluding
the expenditure of any monies, to collect the full amount of (i) the Accounts
Receivable within the first one hundred eighty (180) days following the creation
of the Accounts Receivable. All amounts received by Buyer with respect to the
Accounts Receivable from a particular customer shall be credited against the
applicable open invoice of such customer. If any of the Accounts Receivable are
not paid in full by the end of such one hundred eighty (180) days (the "Payment
Date"), within fourteen (14) days of the Payment Date Buyer shall assign and
otherwise transfer such Accounts Receivable to the Seller, and at Buyer's option
(i) Seller shall pay to Buyer cash in an amount (the "Net Uncollectible
Receivables Amount") equal to the total uncollected amount of such Accounts
Receivable, or (ii) Buyer shall deduct the Net Uncollectible Receivables Amount
from any amounts which may become due and owing to Seller by Buyer under this
Agreement as set forth in Section 17.1 hereof. If Buyer fails to assign or
otherwise transfer such Accounts Receivable to Seller within such fourteen (14)
day period, Buyer shall be deemed to have been retained such Accounts Receivable
and Seller shall have no further obligation or liability (either directly or
pursuant to its indemnification obligations hereunder) in respect of such
Accounts Receivable. If any amounts under the Accounts Receivable are paid to
Buyer after Buyer has already received a payment from Seller (or deducted
amounts otherwise due and owing Seller) pursuant to this Section 13.4 with
respect to such Accounts Receivable, Buyer shall thereafter remit to Seller the
amount of such Accounts Receivable paid to Buyer within fourteen (14) days of
receipt thereof or, if applicable, reduce the amount of any amounts which are
due and owing to Seller by Buyer under this Agreement as set forth in Section
17.1 hereof. In order to facilitate the obligations of the parties pursuant to
this Section 13.4, after the Initial Closing until such time as the Accounts
Receivable have been paid in full, retained by Buyer pursuant to this Section
13.4 or assigned to Seller pursuant to this Section 13.4, Buyer shall provide to
Seller an aging report as to the Accounts Receivable that are not yet one
hundred eighty (180) days from the date of their creation, such report to be
delivered within three (3) Business Days after the end of each calendar month or
within three (3) Business Days after Seller's reasonable request.
(b) Any payments that Buyer receives during the Covenant
Period for Accounts Receivable that are reserved on the Initial Closing Date
Balance Sheet as "Bad Debt" shall be returned by Buyer to Seller within fourteen
(14) days of Buyer's receipt of such payments; provided however, that if Buyer
has a Buyer Off-Set Claim, the aggregate amount of such Accounts Receivable paid
to Buyer shall be applied by Buyer to off-set against the amount due to Seller
pursuant to this Section 13.4(b) or if such Buyer Off-Set Claim is pending
subject to resolution pursuant to this Agreement, the aggregate amount of such
Accounts Receivable paid to Buyer shall be retained by Buyer until final
resolution of such Buyer Off-Set Claim and then such amount shall either be paid
to Seller or off-set as set forth above.
(c) In the event that Buyer assigns an Accounts Receivable to
Seller pursuant to Section 13.4(a) hereof, Buyer shall maintain copies of the
Books and Records directly related to such Accounts Receivable, promptly
transfer the original Books and Records directly related to such Accounts
Receivable to Seller and provide reasonable access to Buyer personnel with
knowledge concerning such Accounts Receivable.
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13.5. Employment of SMS Division Employees. Buyer will offer employment
to the SMS Employees listed on Schedule 13.5(a) attached hereto to be effective
upon the Initial Closing (the "New Employees") and after the Subsequent Closing
Date will continue to employ the employees of SM-India listed on Schedule
13.5(b) as adjusted to reflect the employees of SM-India at the Subsequent
Closing Date (the "SM-India Employees"). Any offer of employment to a New
Employee and continuation of employment of an SM-India Employee shall be (i) for
a position with substantially equivalent job skills and responsibilities as that
which he or she held with Seller as immediately prior to the Initial Closing or
in the case of SM-India, as immediately prior to the Subsequent Closing, (ii)
for a position located at the same work location as that which he or she held
with Seller or SM-India, as the case may be, immediately prior to the Initial
Closing for New Employees and the Subsequent Closing for SM-India Employees,
which location may be moved by Buyer commencing on the three (3) month
anniversary of the Initial Closing Date for New Employees and of the Subsequent
Closing Date for SM-India Employees, and (iii) at the same rate of base
compensation as paid by Seller to such New Employees immediately prior to the
Initial Closing and to SM-India Employees immediately prior to the Subsequent
Closing, although New Employees and SM-India Employees will be provided the
opportunity to participate in Buyer employee benefit plans to the extent
provided in such plans, except that service that is taken into account for SMS
Employees under Seller's benefit plans shall be taken into account under all of
Buyer's benefit plans for purposes of eligibility, vesting and vacation and sick
leave accrual rates. All such actual employment of any New Employee or SM-India
Employees shall be subject to Buyer's right, in its sole discretion, to
establish and modify from time to time the terms and conditions of its
employees' employment and to terminate such employment at any time; provided,
however, only with respect to a New Employee, if the New Employee is terminated
due to a Buyer reduction in work force, Buyer shall pay such New Employee
severance in an amount set forth on Schedule 13.5(c). Except as otherwise
specifically provided in this Section 13.5, any New Employee hired by Buyer will
be treated as a new, at-will employee of Buyer and Buyer shall not be
responsible for any costs, direct or indirect, in connection with the
termination of employment of the New Employee as a result of the transactions
contemplated to take place at the Initial Closing.
13.6. Maintenance and Support.
(a) In the event that Buyer does not maintain and support the
products of the Business in the ordinary course of Buyer's business similar to
the manner in which Buyer supports its other products, Buyer shall provide a
migration plan to transition customers to a suitable alternative product of
Buyer. Any license required to be purchased by such customers in connection with
such migration shall be on a discounted basis, such discount to be determined by
Buyer in its sole discretion. In the event that Buyer ceases such maintenance
and support and does not provide a migration plan reasonably acceptable to
customer, then Buyer shall provide the source code for the applicable product to
such customer and allow such customer to maintain and support the product.
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(b) On or before the Initial Closing, Seller, in accordance
with the terms and conditions of that certain Application Service Provider
Agreement by and between Seller and Alta Colleges dated May 30, 2001 (the "Alta
License Agreement"), including, without limitation, section 14(d) (Termination
for Convenience by Xxxxxx Xxx), Seller shall give Alta Colleges notice of its
intent to terminate the Alta License Agreement for convenience and, provided
that Alta Colleges is not in material breach of the Alta License Agreement,
shall xxxxx Xxxx Colleges a fully paid license to use the Applications (as such
term is defined in Schedule A of the Alta License Agreement) for Alta Colleges'
own, internal data processing operations, all as otherwise provided for and as
limited by the terms and conditions of the Alta License Agreement and all at
Seller's sole expense. Buyer agrees that if Alta Colleges requests maintenance
and support in connection with the Exeter Student Suite for Oracle Product
licensed pursuant to the Alta License Agreement, Buyer will enter into a written
agreement containing Buyer's then current, customary terms and conditions (as
the same may be modified through negotiation of the parties) to provide Alta
Colleges with maintenance and support for which Buyer will not, for a period not
to exceed one (1) year, charge a service fee; provided however, that Buyer and
Alta Colleges enter into such agreement within ninety (90) days after the
Initial Closing Date. In addition, and in any event, Buyer, as Seller's
subcontractor therefor, will provide thirty (30) days of consulting services,
training and/or data-base management services, on a fee-waived basis, to assist
Seller in facilitating the transition of Alta Colleges' Exeter Student Suite for
Oracle Product data processing operations to an in-house or alternate remote
hosting service. Further, and without limitation, Buyer agrees that if Alta
Colleges requests additional consulting services, training and/or data-base
management services in connection with the Exeter Student Suite for Oracle
Product, Buyer will enter into a written agreement containing Buyer's then
current, customary terms and conditions (as the same may be modified through
negotiation of the parties) to provide Alta Colleges with such additional
consulting services, training and/or data-base management services (exclusive of
travel, living and related expenses that Buyer may incur in providing such
services, which expense amounts would be payable in addition to the fees for
services rendered) as to which Buyer and Alta Colleges may agree in any
instance, at the service rates provided for in that certain Professional
Services Agreement by and between Seller and Alta Colleges dated May 7, 2001
(the "Alta Professional Services Agreement"), and for a term of not less than
one (1) year; provided however, that Buyer and Alta Colleges enter into such
agreement within one hundred twenty (120) days after the Initial Closing Date.
The parties hereto acknowledge and agree that none of the Alta License
Agreement, the Alta Professional Services Agreement or any other agreement
between Seller or Alta Colleges, are Assumed Contracts hereunder.
13.7. Marketing Agreements. Seller and Buyer shall use good faith
efforts to negotiate customary and commercially reasonable terms and conditions
of and to execute, by not later than sixty (60) days following the Initial
Closing Date, both: (a) a Xxx.Xxx Marketing Agreement pursuant to which Buyer
will obtain the right to market and sublicense Seller's Xxx.Xxx xxxx provider
Software products for a term of not less than one (1) year; and (b) a Product
Integration Agreement pursuant to which the parties will (i) undertake efforts
to enable integration capability between Seller's Open Net and Your Awards
Software products, respectively, on the one hand, and Buyer's Banner Product
Suite and E5 Product Suite, respectively, on the other hand, initial drafts of
such agreements which Buyer shall use good faith attempts to deliver to Seller
not fewer than thirty (30) days following the Initial Closing Date; and (ii)
establish processes for periodic, tandem review of the then-current
specifications for other loan delivery Software products of Seller, and the
specifications for Buyer's Banner Suite in order to ascertain the integration
capability and/or interfacing capability of such respective software products,
for a term of not less than one (1) year. The failure to reach agreement on the
terms of either or both of the foregoing Marketing Agreements within such
sixty-day period, shall not be a breach of this Agreement nor shall it give rise
to any Claims, including any Claims under this Agreement.
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13.8. Xxxxxxx License. As of the Initial Closing Date, Buyer shall
grant Seller a royalty-free, non-exclusive, non-transferable, perpetual
license("Xxxxxxx License") for the Xxxxxxx-Bermuda student loan servicing
software and source code (the "Xxxxxxx Software"), for the sole and limited
purpose to enable Seller to provide student loan servicing services, consistent
with the services being provided by Seller as of the Initial Closing Date and in
accordance with the terms of the Contracts relating thereto as of the Initial
Closing Date, to the following licensees: (i) Delta Junior College and Louisiana
Art Institute, (ii) St. Xxxxxxxx University, (iii) Golden Gate University and
(iv) the School of Visual Arts (each a "University Licensee"). Both the Xxxxxxx
License and the Xxxxxxx Software are provided to Seller on an "as is" basis.
BUYER EXPRESSLY DISCLAIMS ALL WARRANTIES EXPRESS, IMPLIED OR STATUTORY,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, AND NONINFRINGEMENT OF THIRD PARTY RIGHTS. IN NO EVENT WILL BUYER BE
LIABLE TO SELLER AND/OR TO ANY UNIVERSITY LICENSEE FOR ANY CONSEQUENTIAL,
INDIRECT, EXEMPLARY, SPECIAL OR INCIDENTAL DAMAGES, INCLUDING ANY LOST DATA OR
LOST PROFITS ARISING FROM OR RELATING TO THE XXXXXXX SOFTWARE AND/OR THE XXXXXXX
LICENSE, IN WHOLE OR IN PART. FURTHER, THE PARTIES AGREE THAT, EXCEPT TO THE
EXTENT EXPRESSLY PROHIBITED BY LAW, THIS SECTION 13.8 AND THE XXXXXXX LICENSE
GRANTED HEREUNDER SHALL NOT BE GOVERNED BY THE UNIFORM COMPUTER INFORMATION
TRANSACTIONS ACT ("UCITA"). IN THIS REGARD, THE PARTIES EXPRESSLY WAIVE THE
APPLICATION OF ALL PROVISIONS OF UCITA TO THIS SECTION 13.8 OF THIS AGREEMENT.
13.9. Access to Information.
(a) Seller covenants that after the Initial Closing and the
Subsequent Closing, upon reasonable request and notice and at reasonable times,
the Companies will and will cause its respective officers, employees and other
representatives to provide Buyer with access to (i) the Companies' accounting
and Tax records of the Business and (ii) any and all Books and Records, sales
files and information of the Business, as may be reasonably necessary for
Buyer's performance of its obligations and enforcement of its rights hereunder,
to comply with federal, state and local Laws and to reply to inquiries by
federal, state, local and other Governmental Entities.
(b) Buyer covenants that after the Initial Closing and the
Subsequent Closing, upon reasonable request and notice and at reasonable times,
Buyer will and will cause its officers, employees and other representatives to
provide Seller with access to Buyer's Books and Records of the Business as may
be reasonably necessary for Seller's performance of its obligations and
enforcement of its rights hereunder, to comply with federal, state and local
Laws and to reply to inquiries by federal, state, local and other Governmental
Entities.
13.10. Change Name of SM-India.Within thirty (30) days after the
Subsequent Closing Date, Buyer shall cause SM-India to, and SM-India shall, make
all of the appropriate filings necessary to change SM-India's name to eliminate
any reference to "Xxxxxx Xxx" or "SM".
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ARTICLE 14
NON-COMPETITION AND CONFIDENTIALITY
14.1. Agreement Not to Compete.
(a) During the Covenant Period neither Seller nor any of its
Affiliates will, anywhere in the Territory, do any of the following, directly or
indirectly, individually or through one or more intermediaries, without prior
written consent of Buyer:
(i) develop, host, market, license, sublicense, sell
or otherwise provide to any Person, including without limitation to any higher
education institutions, any products, services and/or other offerings that
compete with or include core functionality substantially similar to the
functionality provided by: (A) the Software developed and licensed by the
Business ("Business Products"); and/or (B) any replacement for the Business
Products, all in any form or delivery format whatsoever. Buyer agrees that
nothing in this Section 14.1(a)(i) shall preclude or prohibit Seller or Seller's
Affiliates in any way from developing and marketing those products and services:
(C) offered by Xxxx Xxxxxx as of the Initial Closing Date; and (D) as the same
would be conducted thereafter, as contemplated by and as evidenced in the
written summary of potential business strategies, a copy which has been made
available to Buyer prior to the Initial Closing Date and shall be retained by
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP at its offices) of Xxxx Xxxxxx in existence as
of the Initial Closing Date; or
(ii) purchase or otherwise obtain an equity ownership
of more than five percent (5%) in, or purchase or otherwise obtain any other
right that would give Seller or any of its Affiliates control over more than
five percent (5%) of the voting power of any Person in the Territory whose
primary business is competitive with the Business (a "Competitive Business").
For purpose of this Section 14.1(a)(ii), "voting power": shall refer to the
total voting control of all securities held by Seller and/or its Affiliates,
based on the aggregate number of votes eligible to be cast for matters presented
to the security holders of such Person engaged in the Competitive Business
compared to the total number of votes eligible to be cast for all securities of
such Person engaged in the Competitive Business then outstanding on such
matters; or during the Covenant Period, neither Seller nor any of its Affiliates
will do any of the following, directly or indirectly, individually or through
one or more intermediaries or Affiliates, without the prior written consent of
Buyer;
(iii) except as provided in Section 13.4 (Accounts
Receivable), or as may be necessary to defend an indemnification Claim,
Litigation and for Loss pursuant to Article 10 hereof, and pursuant to the
Marketing Agreements and the Service Agreement, solicit or call on, for a
purpose related to the Business, any (A) customer with whom Buyer, the SMS
Division, EEMS or SM-India shall have dealt at any time during the two (2) year
period prior to the Initial Closing Date or during the Covenant Period, or (B)
supplier with whom Buyer, the SMS Division, EEMS or SM-India shall have dealt at
any time during the (2) year period prior to the Initial Closing Date or during
the Covenant Period;
(iv) influence or attempt to influence any supplier,
customer or prospect of Buyer to terminate, modify or not enter into any written
or oral agreement or course of dealing with Buyer; or
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(v) (A) influence or attempt to influence any Person
to terminate or modify an employment, consulting, agency, distributorship or
other arrangement with Buyer, or (B) employ or retain, or influence, attempt to
influence or arrange to have any Person employ or retain, any Person who has
been employed or retained by Buyer after the Initial Closing Date or the SMS
Division, EEMS or SM-India between November 30, 2001 and the Subsequent Closing
Date. With respect to this subclause (v) only, notwithstanding anything
contained in this Section 14.1 to the contrary, Buyer shall not unreasonably
withhold consent to the employment by Seller of any of the foregoing Persons
described in this subclause (v) to the extent that Seller or its Affiliates
solicited the employment or retention of such Person solely by placing
advertisements generally soliciting new employees in newspapers, magazines and
other periodicals of general circulation, in trade publications or over the
internet.
(b) Seller agrees that it shall use its best efforts,
including, without limitation, seeking injunctive relief, to enforce the
Employment Agreement by and between Seller and Xxxx Xxxxxx dated June 7, 2001,
the Employment Agreement between Seller and Xxxx Xxxxxxxx dated June 7, 2001,
the Non-Competition and Non-Solicitation Agreement between Xxxxxx Xxxxx and USA
Education and Affiliates dated June 25, 2001, the Agreement regarding
Confidentiality and Proprietary Information between Xxxx Xxxxx, USA Education
and Affiliates dated March 12, 2001, and the Separation Agreement between Seller
and Xxxx Xxxxx dated April 30, 2001.
(c) Seller acknowledges that (i) it has carefully read and
considered the provisions of this Section 14.1, (ii) it has obtained legal
counsel in determining whether to enter into this Agreement, (iii) up to the
Initial Closing, it has been engaged in the Business, the market for which
includes the Territory and (iv) Buyer would not enter into this Agreement or
consummate the transactions contemplated hereby except for the expansion
opportunities relating to the Business and the agreement of Seller contained
herein as it relates to the Territory.
(d) The terms of the covenants contained in this Section 14.1
shall be construed as separable and shall be independent and shall be
interpreted and applied consistently with the requirements of reasonableness and
equity.
14.2. Confidentiality. The Confidentiality Agreement shall remain in
effect in accordance with its terms after the Initial Closing.
14.3. Specific Enforcement; Extension of Period.
(a) Seller acknowledges that the restrictions contained in
Section 14.1 hereof and the Confidentiality Agreement are reasonable and
necessary to protect the legitimate interests of Buyer and that Buyer would not
have entered into this Agreement in the absence of such restrictions. Seller
also acknowledges that any breach of Section 14.1 hereof or the Confidentiality
Agreement will cause continuing and irreparable injury to Buyer for which
monetary damages would not be an adequate remedy. Seller agrees that it shall
not, in any action or proceeding to enforce any of the provisions of this
Section 14.1 or the Confidentiality Agreement, assert the Claim or defense that
an adequate remedy at law exists. In the event of such breach by Seller, Buyer
shall have the right to enforce the provisions of Sections 14.1 hereof and of
the Confidentiality Agreement by seeking injunctive or other relief in any
court, without a requirement that a bond be posted, and this Section 14.3 shall
not in any way limit remedies of Law or in equity otherwise available to Buyer.
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(b) In the event that Seller breaches any of the covenants set
forth in Section 14.1, the Covenant Period shall be suspended for the time
required for Litigation to enforce the relevant covenants; provided, that Buyer
is successful on the merits in any such Litigation, provides notice of such
claim to Seller in writing within fifteen (15) days of the expiration of the
Covenant Period and commences such Litigation within twelve (12) months after
Buyer has Knowledge of such breach. The "time required for Litigation" is herein
defined to mean the period of time from the earlier of such party's first breach
of such covenants or service of process upon such party through the expiration
of all appeals related to such Litigation.
ARTICLE 15
TAXES AND EXPENSES
15.1. Section 338(h)(10) Election.
(a) Buyer and Seller agree that Buyer and Seller shall jointly
make an election under Section 338(h)(10) of the Code and any similar elections
under applicable state or local law, with respect to Buyer's acquisition of the
stock of EEMS (each, a "Section 338(h)(10) Election"). Seller shall execute and
deliver to Buyer two (2) original IRS Forms 8023 prior to or at the Initial
Closing. Buyer shall retain custody of the executed Forms 8023, which shall be
completed in accordance with the provisions of Section 338(h)(10) of the Code
and the regulations thereunder, and shall execute and, following each of the
Initial Closing and the Subsequent Closing, timely file one (1) of the forms
with the Internal Revenue Service, treating each of the Initial Closing Date and
the Subsequent Closing Date as though a "qualified stock purchase" within the
meaning of Section 338(d)(3) of the Code in respect of the stock of EEMS had
occurred on such date. Promptly after each such filing, Buyer shall notify
Seller that it has made such filing and provide to Seller a photocopy of the
executed Form 8023 as filed. Seller shall provide such cooperation and
assistance as Buyer shall reasonably request in completing and filing any
Section 338(h)(10) Election.
(b) Seller and Buyer shall cooperate as provided herein to
determine the aggregate deemed sales price as defined under Treasury Regulation
Section 1.338-4 ("ADSP") and the allocation of the ADSP among the assets for
purposes of calculation of the deemed sales price of each asset under Treasury
Regulation Section 1.338-6 and -7. In preparing the ADSP, Buyer will not take a
position that is inconsistent with the allocations pursuant to Sections 3.8(b)
and 3.8(c). Buyer shall, on or before 60 (sixty) days after the final
determination of the Final Subsequent Closing Date Net Worth Amount pursuant to
Section 3.5, determine and send to Seller notice of (a) the ADSP and (b) the
allocation of the ADSP among the assets (the "Deemed Sales Price Notice").
Seller shall be deemed to have accepted such allocation and the determination of
the ADSP unless within fifteen (15) business days of Seller's receipt of the
Deemed Sales Price Notice, Seller notifies Buyer in writing of each allocation
with which Seller disagrees and any disagreement regarding the calculation of
the ADSP (the "Disagreement Notice"). If Seller provides such notice to Buyer,
the parties shall proceed in good faith to mutually determine the ADSP and
allocations in dispute. If within twenty (20) business days after Buyer receives
Seller's Disagreement Notice, Buyer and Seller have not reached agreement, the
Disagreement Notice shall be submitted for resolution to the Independent
Accountant. If the Independent Accountant, or its replacement, disagrees
materially with Buyer's Deemed Sales Price Notice, Buyer shall pay the fees of
the Independent Accountant. In other cases, Seller shall pay the fees of the
Independent Accountant, or its replacement.
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15.2. Filing Tax Returns.
(a) The parties agree that EEMS shall be included in the
consolidated federal income Tax Return in which Seller is the common parent for
the period that ends on the Subsequent Closing Date (the "Seller CTR"). Seller
shall, to the extent it relates to EEMS, prepare the Seller CTR in a manner
consistent with prior Tax Returns. Seller shall (A) timely prepare and file all
such Tax Returns and timely pay when due all Taxes relating to such Tax Returns
and (B) timely prepare and file, or cause to be prepared and filed, all other
Tax Returns of EEMS and SM-India and their respective subsidiaries for all
taxable periods ending on or prior to the Subsequent Closing Date and timely
pay, or cause to be paid, when due all Taxes relating to such Tax Returns. At
least fifteen (15) days before the due date for the filing of any Tax Return
described in the preceding sentence that was not filed before the Subsequent
Closing Date, Seller shall provide Buyer with a substantially final draft of
such Tax Return (or, with respect to Tax Returns described in clause (A) above,
the portion of such draft Tax Return that relates to EEMS or any subsidiary
thereof), and Buyer shall have the right to review such Tax Return prior to its
filing. Buyer shall notify Seller of any reasonable objections Buyer may have to
any items set forth in such draft Tax Returns, and Buyer and Seller agree to
consult and resolve in good faith any such objection and to mutually consent to
the filing of any such Tax Return. Such Tax Returns shall be prepared or
completed in a manner consistent with prior practice of Seller, EEMS, SM-India
and their respective subsidiaries with respect to Tax Returns concerning the
income, properties or operations of EEMS, SM-India and their respective
subsidiaries (including elections and accounting methods and conventions),
except as otherwise required by Law or otherwise agreed to by Buyer in writing
prior to the filing thereof.
(b) Seller shall prepare all relevant Tax Returns consistent
with the Deemed Sales Price Notice determined under Section 15.1, and shall file
Form 8023 as part of the Seller CTR. Seller shall file an amended Seller CTR to
reflect the Section 338(h)(10) Election if it has previously filed a Seller CTR
that did not reflect the Section 338(h)(10) Election.
(c) Seller shall prepare all state and local Tax Returns in a
manner consistent with the 338(h)(10) Election, to the extent applicable under
state or local Law.
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15.3. Future Tax Contests.
(a) If Seller receives notice of an intention by a taxing
authority to audit any Tax Return of Seller which includes any item of income,
gain, deduction, loss or credit reported by EEMS or SM-India or, after the
Subsequent Closing Date, any Tax Return of EEMS or SM-India, Seller shall inform
Buyer, in writing, of the intended audit within fifteen (15) days after receipt
of such notice and shall, at Buyer's request, keep Buyer informed concerning and
consult with Buyer on any aspects of the audit which could result in a Claim by
Seller under this Agreement. If Seller receives notice from a taxing authority
of any proposed adjustment ("Proposed Adjustment"), Seller shall give notice to
Buyer of the proposed adjustment within fifteen (15) days after receipt of a
notice of Proposed Adjustment from a taxing authority. A failure on the part of
Seller to provide such notice to Buyer on a timely basis shall not relieve
Seller of any obligation of indemnification under this Agreement. Buyer may,
upon giving written notice to Seller, request that Seller contest such Proposed
Adjustment. If Buyer shall request that a Proposed Adjustment be contested, then
Seller shall contest (or engage representatives to contest) the Proposed
Adjustment and allow Buyer and its representatives, at Buyer's expense, to
participate therein or shall permit Buyer and its representatives, at Buyer's
expense to contest the Proposed Adjustment (including pursuing all
administrative and judicial appeals and processes). Seller shall not make,
accept or enter into a settlement or other compromise with respect to any Taxes
that are the subject to indemnification under this Agreement, or forego or
terminate any proceeding relating to a Proposed Adjustment without the consent
of Buyer, which shall not be unreasonably withheld or delayed.
(b) Until the fifth (5th) anniversary of the Subsequent
Closing Date, or such longer period as may be required by Law, Buyer will cause
EEMS and SM-India to retain all Books and Records which in any way relate to
Taxes, including without limitation all Tax Returns and all Books and Records of
EEMS and SM-India. After such time, Buyer will cause EEMS and SM-India to give
Seller reasonable written notice prior to discarding or destroying any such
Books and Records. If Seller so requests within forty (40) days after receipt of
such notice, the retaining party shall provide Seller with possession of such
Books and Records, at Seller's sole cost and expense.
15.4. Allocation of Overlap Period Taxes. Any Taxes with respect to
EEMS or SM-India or their respective subsidiaries that relate to a tax period
beginning before the Subsequent Closing Date and ending after the Subsequent
Closing Date (an "Overlap Period") shall be apportioned between Seller and
Buyer, (i) in the case of real and personal property Taxes (and any other Taxes
not measured or measurable, in whole or in part, by net or gross income or
receipts), on a per diem basis and, (ii) in the case of other Taxes, as
determined from the books and records of the relevant Company or subsidiary
during the portion of such period ending on the Subsequent Closing Date and the
portion of such period beginning on the day following the Subsequent Closing
Date consistent with the past practices of the Companies and their subsidiaries.
Buyer shall, or shall cause EEMS and SM-India to, file any Tax Returns for any
Overlap Period, and Buyer shall pay, or cause to be paid, all state, local or
foreign Taxes shown as due on any such Tax Returns. Seller shall pay Buyer its
share of any such Taxes (to the extent Seller is liable therefor in accordance
with this Section 15.4 and to the extent not already paid by Seller, EEMS,
SM-India or any of their respective subsidiaries) due pursuant to the filing of
any such Tax Returns under the provisions of this Section 15.4 within five (5)
business days of receipt of notice of such filing, which notice shall set forth
in reasonable detail the calculations regarding Seller's share of such Taxes.
15.5. Notice. Buyer shall promptly notify Seller in writing upon
receipt after the Subsequent Closing Date by Buyer, any affiliate of Buyer,
EEMS, SM-India or any of their respective subsidiaries of notice of any pending
or threatened Tax audits or assessments relating to the income, properties or
operations of EEMS, SM-India or any of their respective subsidiaries, in each
case for periods ending on or before the Subsequent Closing Date only, so long
as such periods remain open; provided, however, that failure by Buyer to comply
with this Section 15.5 shall not affect Buyer's right to indemnification
relating to Taxes if such failure does not prejudice the rights of Seller.
Seller shall promptly notify Buyer in writing upon receipt after the Initial
Closing Date by Seller or any affiliate of Seller of notice of any pending or
threatened Tax audits or assessments relating to the income, properties or
operations of EEMS, SM-India or any of their respective subsidiaries.
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15.6. Amended Tax Returns. Neither Seller nor any affiliate of Seller
shall, without the prior written consent of Buyer, file, or cause to be filed,
any amended Tax Return or claim for Tax refund, with respect to EEMS or SM-India
or their respective subsidiaries any period ending on or before the Initial
Closing Date, to the extent that any such filing may affect the Tax Liability of
Buyer, any of its affiliates, EEMS, SM-India or any of their respective
subsidiaries for any period ending after the Subsequent Closing Date (including,
but not limited to, the imposition of Tax deficiencies, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the reduction
of loss or credit carryforwards).
15.7. Tax Sharing Agreements; Powers of Attorney. Any and all existing
Tax sharing, allocation, compensation or like agreements or arrangements,
whether or not written, that include EEMS, SM-India or any of their respective
subsidiaries, including without limitation any arrangement by which any such
company makes compensating payments to any other such company or any other
member of any affiliated, consolidated, combined, unitary or other similar Tax
group for the use of certain Tax attributes, shall be terminated as of the day
before the Initial Closing Date (pursuant to a writing executed on or before the
Initial Closing Date by all parties concerned) and shall have no further force
or effect. All liabilities of EEMS, SM-India and any of their respective
subsidiaries to any other Person, including Seller or any affiliate of Seller
(for Taxes or otherwise pursuant to such agreements or arrangements), shall be
canceled on or prior to the Initial Closing Date. Any and all powers of attorney
relating to Tax matters concerning EEMS, SM-India and their respective
subsidiaries shall be terminated as to EEMS, SM-India and their respective
subsidiaries on or prior to the Subsequent Closing Date and shall have no
further force or effect.
15.8. FIRPTA Certification. Seller shall deliver to Buyer, on or before
the Initial Closing Date, a certification in the form of Exhibit G that Seller
is not a "foreign person" within the meaning of Code Section 1445. If, on or
before the Initial Closing Date, Buyer shall not have received such
certification, Buyer may withhold from the Initial Purchase Price payable at the
Initial Closing to Seller pursuant hereto, or from the Initial Subsequent
Purchase Price, as the case may be, such sums as are required to be withheld
therefrom under Section 1445 of the Code.
15.9. Transfer Taxes. Seller shall be liable for, and shall pay when
due, any transfer, gains, documentary, sales, use, registration, stamp, value
added or other similar Taxes payable by reason of the transactions contemplated
by this Agreement or attributable to the sale, transfer or delivery of the
Purchased Assets or the Sub Shares hereunder, and Seller shall, at its own
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes.
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ARTICLE 16
TERMINATION
16.1. Termination prior to Subsequent Closing Date. This Agreement may
be terminated with respect to the sale and purchase of the Sub Shares only (and
not with respect to any of the provisions relating to the sale and purchase of
the Purchased Assets (including, without limitation, Article 10
(Indemnification), Section 17.1 (Right of Set-Off) and Section 17.12 (Dispute
Resolution)) prior to the Subsequent Closing as follows:
(a) at the election of Buyer, if any one or more of the
conditions set forth in Article 9 to its obligation to proceed with the
Subsequent Closing has not been fulfilled on the Subsequent Closing Date;
(b) at the election of Seller, if any one or more of the
conditions set forth in Article 9 to its obligation to proceed with the
Subsequent Closing has not been fulfilled on the Subsequent Closing Date;
(c) at the election of Buyer, if Seller has materially
breached any representation, warranty, covenant or agreement contained in this
Agreement, which breach cannot be or is not cured by the Subsequent Closing
Date;
(d) at the election of Seller, if Buyer has materially
breached any representation, warranty, covenant or agreement contained in this
Agreement, which breach cannot be or is not cured by the Subsequent Closing
Date;
(e) at any time on or prior to the Subsequent Closing Date, by
mutual written consent of Buyer and Seller.
16.2. Survival if No Subsequent Closing. If this Agreement as it
relates to the sale and purchase of the Sub Shares is validly terminated
pursuant to Section 16.1 and the transactions contemplated hereby are not
consummated as described above, this Agreement as it relates to the sale and
purchase of the Sub Shares shall become void and of no further force and effect;
provided nevertheless that the provisions of the Confidentiality Agreement and
any provisions of this Agreement relating to anything other than the sale and
purchase of the Sub Shares shall survive such termination; and further provided
nevertheless that, if Seller shall have the right to terminate this Agreement as
it relates to the sale and purchase of the Sub Shares pursuant to Section
16.1(d), or if Buyer shall have the right to terminate this Agreement as it
relates to the sale and purchase of the Sub Shares pursuant to Section 16.1(c),
the terminating party's right to pursue all legal remedies for breach of
contract and damages shall survive such termination unimpaired subject to the
limitations set forth in Section 10.4 hereof.
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ARTICLE 17
GENERAL
17.1. Right of Set-off. Notwithstanding anything contained in this
Agreement to the contrary, in the event and to the extent that Buyer is entitled
to any payments from Seller pursuant to this Agreement (whether on account of
indemnification, an Overpayment Amount, a Net Uncollectible Receivables Amount
or otherwise) (collectively, the "Buyer's Off-Set Claims"), any amounts payable
as Earnout Purchase Price or Banner Commission Fees (the "Buyer Obligations")
may be applied by Buyer to off-set against and to discharge said obligations and
Buyer shall be entitled to a credit for any such amounts so applied by Buyer in
respect of any such amounts due and owing to Seller in respect of the Buyer
Obligations; provided however, that as a condition to the exercise by Buyer of
its right of set-off hereunder, Buyer shall have given Seller written notice of
its intention to off-set any such amounts, which notice shall include in
reasonable detail the facts supporting Buyer's Off-Set Claim, at least ten (10)
days prior to the date on which such Buyer Obligations are due, unless the
conditions allowing such set-off are discovered within such ten-day period, then
as promptly as practical after discovery thereof, in which event the applicable
payment date of the Buyer Obligations with respect to which Buyer intends to
exercise its set-off rights shall be automatically extended until the earlier of
ten (10) days after such notice is given to Seller or the date on which a notice
of a good faith dispute is given by Seller with respect to such notice from
Buyer of a Buyer Off-Set Claim, but in no event earlier than the date such
amounts are due. If Seller, within such applicable ten-day period, provides
written notice to Buyer that it in good faith disputes Buyer's Off-Set Claim,
any Buyer Obligation due and payable, up to the amount of such disputed off-set
and payable at any time before resolution of the good faith dispute, shall be
paid when due (as the applicable payment date may be extended as aforesaid) to
an eligible escrow agent (as defined below) to hold in escrow in an interest
bearing account until resolution of the dispute in accordance with the terms of
this Agreement. If Seller does not give notice disputing Buyer's Off-Set Claim,
Seller shall be deemed to have consented to such claim and the amount so set-off
shall be credited against the Buyer Obligations as provided above. The term
"eligible escrow agent" shall mean either an attorney licensed to practice law
in the Commonwealth of Pennsylvania who is independent of Buyer and Seller and
their respective Affiliates or a bank or trust company doing business in the
Commonwealth of Pennsylvania. Such amount and any interest earned thereon shall
be held by such escrow agent until receipt of a joint direction from Buyer and
Seller to disperse any funds or an order from a court of competent jurisdiction
directing the escrow agent to disperse such funds. The fees of the escrow agent
shall be paid one-half by the Buyer and one-half by the Seller.
17.2. Entire Agreement; Amendments. This Agreement, the Confidentiality
Agreement, the Escrow Agreement and the Services Agreement (and all of the
schedules and exhibits, hereto or thereto and the Collateral Documents)
constitute the entire understanding among the parties with respect to the
subject matter contained herein and supersedes any prior understandings and
agreements among them respecting such subject matter. This Agreement may be
amended and supplemented only by a written instrument duly executed by all the
parties.
17.3. Headings. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.
17.4. Gender. Words of gender may be read as masculine, feminine, or
neuter, as required by context.
17.5. Schedules. Each Schedule referred to herein is incorporated into
this Agreement by such reference.
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17.6. Severability. If any provision of this Agreement (including,
without limitation, Article 11 hereof) is held illegal, invalid, or
unenforceable, such illegality, invalidity, or unenforceability will not affect
any other provision hereof. The parties hereto authorize that the provisions of
this Agreement may, in such circumstances, be modified to the extent necessary
to render enforceable the provisions hereof.
17.7. Notices. All notices and other communications hereunder shall be
in writing and shall be given to the Person either personally or by United
States overnight express mail, postage prepaid, or by nationally-recognized
courier service guaranteeing next Business Day delivery, charges prepaid, or by
telecopier, to such party's address (or to such party's telecopier number). All
notices shall be deemed received on the date when dispatched in accordance the
foregoing sentence.
If to Buyer, to:
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
0 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Attn: President, Global Education Division
Fax No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxx, Esquire
Fax No.: 000-000-0000
If to Seller:
Xxxxxx Mae, Inc.
00000 Xxxxxx Xxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Autor
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
with a copy to:
Xxxxxx Xxx, Inc.
00000 Xxxxxx Xxx Xxxxx
Xxxxxx, XX 00000
Attention: Deputy General Counsel
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esquire
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
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Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
17.8. Waiver. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
17.9. Assignment. No party may assign any of its rights or delegate any
of its obligations hereunder without the prior written consent of the other
parties, except that, (a) prior to the Subsequent Closing, Buyer may assign all
of its rights and delegate all of its obligations to an Affiliate of Buyer
without the consent of Seller; provided, however, no such assignment or
delegation shall relieve Buyer of the obligation to perform hereunder; and (b)
after the Subsequent Closing shall have occurred, no consent to an assignment of
this Agreement shall be required in the event of Buyer's transfer of all or
substantially all of the assets of the Business whether by sale, merger,
consolidation, or otherwise.
17.10. Successors and Assigns. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and permitted assigns of the
parties, and does not confer any rights on any other Persons.
17.11. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
the conflict-of-laws provisions thereof.
17.12. Dispute Resolution.
Except as otherwise set forth in this Agreement, if any dispute arises under
this Agreement that is not settled promptly in the ordinary course of business,
the parties shall seek to resolve such dispute between them, first, by
negotiating promptly with each other in good faith in face-to-face negotiations.
These face-to-face negotiations shall be conducted, first, by the respective
designated senior executive of each of the parties hereto (or in the case of a
limited partnership, the chief operating officer of the general partner). If
such individuals are unable to resolve such dispute within ten (10) Business
Days of the date they first commence negotiations, then an executive vice
president or higher level executive of each of the parties hereto shall seek to
resolve such dispute promptly in good faith face-to-face negotiations. If the
parties are unable to resolve such dispute between them within ten (10) Business
Days thereafter (or such period as the parties shall otherwise agree) through
these face-to-face negotiations, then any such dispute shall be submitted to
non-binding mediation conducted on a confidential basis under the then current
Commercial Arbitration Rules of the American Arbitration Association (the
"Association") strictly in accordance with the terms of this Agreement and the
substantive Law of the Commonwealth of Pennsylvania. The mediation shall be
conducted at the Association's regional office located in Philadelphia,
Pennsylvania, by an attorney who shall be experienced in the Business. If the
parties are unable to resolve such dispute by mediation within sixty (60)
business days after submission of the dispute to mediation (or such period as
the parties shall otherwise agree) such dispute shall be resolved in a court of
competent jurisdiction.
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17.13. Third Party Beneficiaries. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their successors and assigns, and they shall not be
construed as conferring and are not intended to confer any rights on any other
Persons.
17.14. Publicity. Prior to the Initial Closing Date, all notices to
third parties (except in relation with obtaining the Subsequent Required
Consents) and all other publicity relating to the transactions contemplated by
this Agreement shall be jointly planned, coordinated and agreed to by all
parties hereto and none of the parties hereto shall act unilaterally in this
regard without the prior approval of the other party; provided, however, that
(a) such approval shall not be unreasonably withheld; and (b) (i) that Seller
acknowledges that Buyer has certain disclosure obligations under the Law, and
the rules and regulations of the Nasdaq Stock Market and to the extent such
disclosure is in connection with such rules or Laws, then Buyer need not obtain
the approval of Seller prior to such publicity and (ii) that Buyer acknowledges
that Seller is a wholly-owned subsidiary of USA Education, Inc. which has
certain disclosure obligations under the Law, and the rules and regulations of
the New York Stock Exchange and to the extent such disclosure is in connection
with such rules or Laws, then Seller need not obtain the approval of Buyer prior
to such publicity.
17.15. Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by Buyer if incurred by Buyer or by Seller if
incurred by Seller, EEMS or SM-India.
17.16. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
17.17. Facsimile Signatures. This Agreement may be executed by
facsimile signature which shall be deemed to be an original for all purposes.
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17.18. Waiver of Trial by Jury. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE COLLATERAL DOCUMENTS DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS; (iii) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (iv) IT HAS NOT BEEN INDUCED TO ENTER INTO CERTIFICATIONS IN
THIS SECTION 17.18.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
XXXXXX XXX, INC.
By: /s/ Xxxxxx Autor
--------------------------------------------------
Name: Xxxxxx Autor
Title: Senior Vice President
EXETER EDUCATIONAL MANAGEMENT
SYSTEMS, INC.
By: /s/ Xxxxxx Autor
--------------------------------------------------
Name: Xxxxxx Autor
Title: President and Chief Executive Officer
XXXXXX MAE SOLUTIONS (INDIA) PRIVATE,
LTD.
By: /s/ Xxxxxx Autor
--------------------------------------------------
Name: Xxxxxx Autor
Title: Director
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ Xxxx Xxxxxxx
-------------------------------------------------
Name: Xxxx Xxxxxxx
Title: Senior Vice President and Chief Financial
Officer
The undersigned USA Education, Inc., the sole owner of all of the issued and
outstanding capital stock of Xxxxxx Xxx, Inc., hereby repeat, by way of
reference, all of the representations, warranties and covenants of the Companies
set forth in this Agreement and hereby guaranty the performance of all covenants
of the Companies set forth in this Agreement as if it were a party to the above
Agreement.
USA EDUCATION, INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President and
Deputy General Counsel
