Exhibit 99.2
ASSET PURCHASE AGREEMENT
AMONG
DELUXE MEDIA SERVICES, INC.
SONIC FOUNDRY, INC.
SONIC FOUNDRY MEDIA SERVICES, INC.
AND
INTERNATIONAL IMAGE SERVICES INC.
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Dated April 30, 2003
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TABLE OF CONTENTS
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Page
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1. Purchase and Sale of Assets ................................................. 1
1.1 Assets to be Transferred by Seller ................................. 1
1.2 Excluded Assets .................................................... 3
1.3 Assumption of Liabilities .......................................... 3
1.4 Liabilities Not to be Assumed ...................................... 3
1.5 Assets Not Assignable .............................................. 5
2. Purchase Price and Payment .................................................. 6
2.1 Purchase Price ..................................................... 6
2.2 Payment of Purchase Price .......................................... 6
2.3 Working Capital Adjustment ......................................... 6
2.4 Payment ............................................................ 8
3. Representations and Warranties of Seller and Parent ......................... 8
3.1 Corporate .......................................................... 8
3.2 Authority .......................................................... 9
3.3 No Violation ....................................................... 9
3.4 No Default ......................................................... 9
3.5 Financial Statements ............................................... 10
3.6 Compliance with Laws ............................................... 11
3.7 Title to Purchased Assets .......................................... 11
3.8 Intellectual Property .............................................. 11
3.9 Inventory .......................................................... 12
3.10 Brokers and Finders ................................................ 13
3.11 Tax Matters ........................................................ 13
3.12 Liabilities and Obligations ........................................ 13
3.13 Related Party Transactions ......................................... 14
3.14 Contracts .......................................................... 14
3.15 Receivables ........................................................ 15
3.16 Litigation ......................................................... 15
3.17 Insurance .......................................................... 15
3.18 Employment, Labor and Other Relations .............................. 16
3.19 Employee Benefits .................................................. 17
3.20 Environmental Matters .............................................. 18
3.21 Rebate Liability ................................................... 19
3.22 Principal Customers and Suppliers .................................. 19
3.23 Real Estate and Leases ............................................. 19
3.24 Solvency ........................................................... 20
3.25 Disclosure ......................................................... 20
4. Representations and Warranties of Buyer ..................................... 20
4.1 Existence .......................................................... 20
4.2 Authority .......................................................... 20
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4.3 No Violation ................................................... 21
4.4 Brokers and Finders ............................................ 21
4.5 Financing ...................................................... 21
5. Covenants ............................................................. 21
5.1 Conduct of Business Pending Closing ............................ 21
5.2 Non-Compete; Nonsolicitation ................................... 22
5.3 Confidentiality ................................................ 22
5.4 Remedies ....................................................... 23
5.5 Supplements to Disclosure Schedules ............................ 23
5.6 Accounts Receivable ............................................ 23
5.7 Hiring; Release ................................................ 24
5.8 Further Assurances ............................................. 24
6. Employees .............................................................. 24
6.1 Affected Employees ............................................. 24
6.2 Severance ...................................................... 25
6.3 Other Benefits ................................................. 25
7. Closing ................................................................ 25
7.1 Closing Date ................................................... 25
7.2 Conditions Precedent to Obligations of Seller .................. 25
7.3 Conditions Precedent to Obligations of Buyer ................... 26
7.4 Items to be Delivered by Seller ................................ 27
7.5 Items to be Delivered by Buyer ................................. 28
8. Survival of Representations and Warranties and Covenants ............... 28
9. Indemnification ........................................................ 29
9.1 Seller's Indemnity ............................................. 29
9.2 Buyer's Indemnity .............................................. 29
9.3 Procedure for Asserting Indemnification ........................ 30
9.4 Amount Limitation .............................................. 31
9.5 Not Exclusive Remedy ........................................... 31
10. Termination ............................................................ 31
10.1 Right of Termination Without Breach ............................ 31
10.2 Termination for Breach ......................................... 32
10.3 Effect of Termination .......................................... 32
11. Miscellaneous .......................................................... 32
11.1 Expenses Incident to Transaction ............................... 32
11.2 Governing Law .................................................. 32
11.3 Notices ........................................................ 32
11.4 Entire Agreement ............................................... 33
11.5 Modification; Waiver ........................................... 34
11.6 Assignment; Binding Nature ..................................... 34
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11.7 Arbitration ......................................... 34
11.8 Disclosures and Announcements ....................... 34
11.9 Counterparts; Facsimile ............................. 34
11.10 Negotiation ......................................... 35
11.11 Third-Party Beneficiaries ........................... 35
11.12 Bulk Transfer Law ................................... 35
11.13 Knowledge ........................................... 35
11.14 Definitions ......................................... 35
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Exhibits
Exhibit A - Xxxx of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Form of Estoppel Certificate
Exhibit D - Software Support and Transition Services Agreement
Exhibit E - License
Schedules
Schedule 1.1 - Trade Rights, Software, Domain Names
Schedule 1.1(c) - Assumed Contracts
Schedule 1.1(d) - Personal Property
Schedule 1.2 - Excluded Assets
Schedule 1.3 - Assumed Liabilities
Schedule 1.5 - Consents Required for Transfer of Assumed Contracts
Schedule 2.3 - Closing Working Capital Calculation
Schedule 3.1 - Foreign Qualifications
Schedule 3.3 - No Violations
Schedule 3.4 - Defaults
Schedule 3.5 - Financial Statements
Schedule 3.7 - Exceptions to Title; Condition of Assets
Schedule 3.8 - Intellectual Property Exceptions
Schedule 3.9 - Inventory Location
Schedule 3.11 - Taxes
Schedule 3.12 - Liabilities
Schedule 3.13 - Related Party Transactions
Schedule 3.14 - Contracts
Schedule 3.15 - Receivables Aging
Schedule 3.16 - Litigation
Schedule 3.17 - Insurance
Schedule 3.18(a) - Employees
Schedule 3.18(b) - Labor Matters
Schedule 3.19 - Employee Benefits
Schedule 3.20 - Environmental
Schedule 3.21 - Rebates
Schedule 3.22 - Principal Customers and Suppliers
Schedule 3.23 - Real Property
Schedule 7.4 - Required Third Party Consents
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") made as of this 30th day of
April, 2003 by and among DELUXE MEDIA SERVICES, INC., a Delaware corporation
("Buyer"), SONIC FOUNDRY, INC., a Maryland corporation ("Parent"), SONIC FOUNDRY
MEDIA SERVICES, INC., a Maryland corporation ("SFMS") and INTERNATIONAL IMAGE
SERVICES INC., an Ontario Canada corporation ("IIS" and collectively with SFMS,
"Seller").
RECITALS:
1. Seller is engaged in, among other things, the business of media
duplication, standards/format conversion, high definition mastering and
duplication, aspect ratio conversion, program content technical evaluation,
audio layback, digital restoration, digital preparation, MPEG and IP (internet
protocol) encoding services, media asset management, Business to Business web
sites relating to media asset management, vaulting/shipping/fulfillment,
services related to video production and post-production, Digital Rights
Management services, providing services to assist in a customer's licensing and
syndication of its program content, media workflow management, and related
consulting and other services all for the domestic and international television
and motion picture industries (the "Business").
2. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, the Business, including Seller's and Parent's (except as otherwise
provided herein) assets related to the Business.
NOW THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
1.1 Assets to be Transferred by Seller. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 7), Parent
and Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer
shall purchase and accept, all right, title and interest in and to the assets of
Parent and Seller used or held by either of them in the conduct of the Business,
whether tangible or intangible and wherever located (but excluding the Excluded
Assets, as defined below) (the "Purchased Assets"). The Purchased Assets include
the following:
(a) Trade Rights. All interest in the Trade Rights that are used in the
Business. As used herein, the term "Trade Rights" shall mean: (i) all patents,
trademarks, service marks and logos associated with the Business, including all
trademark rights in the marks listed on Schedule 1.1; (ii) all copyrights
associated with the Business (including but not limited to the Software) as
listed on Schedule 1.1; (iii) all inventions, know-how, designs, trade secrets,
technology, processes, shop rights; (iv) all registrations of any of the
foregoing, all applications therefor, all goodwill associated with any of the
foregoing, and all claims for infringement or breach thereof; (v) all contracts
or agreements granting any right, title, license or privilege with respect to
the intellectual property rights of any third party or Seller; (vi) customer and
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prospective customer lists and contact information; (vii) all rights in and to
the Internet domain names used exclusively in the Business, including those
listed on Schedule 1.1 and similar derivatives thereof; and (viii) all other
proprietary intangible property used or held for use in the Business. The Trade
Rights are described in more detail on Schedule 1.1 attached hereto.
(b) Inventory. All inventories including work-in-process, raw materials
and supplies held on the Closing Date and specifically including inventories of
tape and other fixed media (collectively, the "Inventory").
(c) Contracts. All rights and interests in and to the Assumed Contracts.
As used herein, "Assumed Contracts" means the Business' executory contracts,
contractual rights, leases, licenses and other agreements existing as of the
Closing Date, as described on Schedule 1.1(c) attached hereto, and all contracts
and obligations existing as of this date if not required to be specifically
disclosed by Section 3.14(a) of this Agreement, and entered into by Seller
between this date and the Closing Date to the extent that such contracts and
obligations would not constitute a violation of Seller's covenants in Section
5.1(b) and (c) as of the Closing Date or were entered into with the consent of
Buyer.
(d) Personal Property. All equipment, machinery, tools, supplies,
furniture, fixtures, vehicles, hardware and all other personal property owned
and used in connection with the Business on the Closing Date, and except as set
forth on Schedule 1.2 (Excluded Assets), all equipment, machinery, tools,
supplies, furniture, fixtures, vehicles, hardware and all other personal
property located in Seller's facilities in Toronto, Ontario or Santa Monica,
California, including but not limited to those items described on Schedule
1.1(d) attached hereto. All personal property that is subject to a lease that is
included in the Assumed Contracts is also included in the Purchased Assets being
transferred to Buyer.
(e) Software. All software and software systems (including third party
software), databases and database systems used in the Business, as described on
Schedule 1.1, including but not limited to source and object code therefor
including all machine readable code, printed listings of code, and programs
(collectively, the "Software," with Software and Trade Rights being collectively
referred to as "Intellectual Property").
(f) Records. All of Seller's books, records, files, papers and other
information and records relating to the Business.
(g) Goodwill. All of Seller's goodwill related to the Business.
(h) Account Receivable. All of Seller's Accounts Receivable. As used
herein, the term "Accounts Receivable" shall mean all of Seller's accounts
receivable and notes receivable existing as of the Closing Date.
(i) Prepayments for Goods and Services. All rights and interests of
Seller in and to any amounts received by or invoiced or otherwise billed by
Seller to the extent such amounts relate to obligations on the part of Seller to
provide goods, grant licenses or rights, or perform services after Closing, as
the same may exist at the Closing ("Customer Prepayments").
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(j) Other Assets. All other assets employed in the conduct of the
Business, whether real, personal, or tangible, intangible or mixed and whether
or not reflected in the financial statements or on the books or records of
Seller, including all rights under executory contracts and purchase and sale
orders to be assumed by Buyer hereunder, all credits, pre-paid expenses and
advance payments under all leases and other contracts or obligations to be
assumed by Buyer hereunder and any other prepaid expenses to the extent properly
assignable to Buyer and permits and licenses to the extent transferable under
law.
(k) Other. All claims, causes of action and rights of recovery with
respect to any of the foregoing.
1.2 Excluded Assets. Seller shall not sell to Buyer, and Buyer shall not
purchase from Seller, the assets described on Schedule 1.2 of this Agreement
(the "Excluded Assets"). None of the Excluded Assets listed on Schedule 1.2 is
physically located at Seller's facilities in Toronto, Ontario or Santa Monica,
California.
1.3 Assumption of Liabilities. As used in this Agreement, the term
"Liability" shall mean any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
liquidated or unliquidated, secured or unsecured. Subject to the terms and
conditions of this Agreement, on the Closing Date, Buyer shall assume and agree
to perform and discharge the obligations of Seller with respect to periods from
and after the Closing Date under the Assumed Contracts, and the Liabilities of
Seller expressly set forth on Schedule 1.3, all Liabilities specifically
included in the Working Capital Adjustment of Section 2.3 and all Liabilities
arising in the ordinary course of the Business as a result of events occurring
from and after the Closing (collectively, the "Assumed Liabilities").
1.4 Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 1.3, Buyer shall not assume, or in any way
become liable for, any Liabilities of Seller, Parent or the Business of any kind
or nature, whether known or unknown, fixed or contingent (collectively, the
"Excluded Liabilities"), which Liabilities, if ever in existence, shall continue
to be Liabilities of Seller or Parent, as the case may be and which Seller and
Parent (as the case may be) agree to perform and discharge from and after the
Closing Date. Specifically, but without limiting the generality of the preceding
sentence, Buyer shall not assume or be liable for the following Excluded
Liabilities:
(a) Violation of Representations, Etc. Liabilities which arise or exist
in violation of any of the representations, warranties, covenants or agreements
of Seller or Parent contained in this Agreement or in any statement or
certificate delivered to Buyer by or on behalf of Seller or Parent on or before
the Closing Date pursuant to this Agreement or in connection with the
transactions contemplated hereby.
(b) Undisclosed Liabilities. Liabilities of any kind or nature, whether
absolute, accrued, contingent or otherwise, required by this Agreement to be
disclosed to Buyer, if not so disclosed in writing and specifically assumed in
writing by Buyer.
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(c) Contingent Liabilities. Contingent Liabilities of Seller or Parent
of any kind arising or existing on or prior to the Closing Date, including, but
not limited to, contingent Liabilities which are currently or hereafter become,
the subject of claims, proceedings, assertions, litigation, causes of action or
arbitration.
(d) Rebates; Customer Credit Memos. Any and all Liabilities of Seller in
respect of (i) rebates and pricing discounts payable to any of Seller's
customers or vendors relating to services rendered before the Closing Date
(except as may be expressly reflected in the Final Closing Statement), and (ii)
credit memos issued by Seller or under which Seller is obligated to issue to
customers related to activity occurring prior to the Closing Date. Credit memos
shall include, but not be limited to, pricing adjustments, credit and rebill
transactions, error corrections, rebates, credits arising from customer
disputes, and any other adjustment to customer receivables or customer invoices
arising from activity occurring prior to the Closing Date.
(e) Taxes Due on Sale. Liabilities of Seller or Parent for Taxes arising
from, based upon or related to the sale, transfer or delivery of the Purchased
Assets pursuant to this Agreement.
(f) Other Taxes. Liabilities of Seller or Parent, whether absolute,
accrued, contingent or otherwise, for: (i) federal and state income taxes; (ii)
all taxes relating to any real property; (iii) all franchise taxes of Seller;
(iv) all personal property, sales, use, information and payroll and related
taxes of Seller; (v) any other Taxes of Seller or Parent; and (vi) all interest
and penalties, if any, on any of the foregoing.
(g) Pension and Other Employee Plans. Liabilities under any pension,
profit sharing, savings, retirement, health, medical, life, disability, dental,
deferred compensation, stock option, bonus, incentive, severance pay (except for
amounts to be paid by Buyer as described in Section 6.2 hereof), group insurance
or other similar Employee Plans or arrangements, or under any policies,
handbooks, or custom or practice, collective bargaining agreement, or any
employment agreements, whether express or implied, applicable to any of Seller's
employees at any time through and including the Closing Date, including those
listed on Schedule 3.19 and any assessments, fines, penalties or monetary
damages arising out of the operation of such plans prior to the Closing Date.
(h) Personal Injury, Products Liability and Recall Claims. Liabilities
of Seller or Parent arising out of any claim for personal injury (including
worker's compensation or otherwise), property damage, product recall, product
liability or strict liability, arising from events (including the assembly or
shipment of goods) occurring on or prior to the Closing Date (whether or not
such claim is then asserted).
(i) Environmental Matters. Any Liabilities arising out of claims
alleging damage to the environment or similar claims arising as a result of the
conduct of the Business or the ownership, lease or operation by Seller or Parent
of real property on or before the Closing Date.
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(j) Infringements. Any Liability of Seller or Parent arising out of
any wrongful or unlawful violation or infringement of any copyright, patent or
other intellectual property right of any person or entity occurring on or prior
to the Closing Date.
(k) Indebtedness. Any Liabilities in respect of the borrowing of
money or issuance of any note, bond, indenture, loan, credit agreement or other
evidence of Indebtedness, whether or not disclosed in this Agreement or
otherwise of Seller or Parent.
(l) Litigation. Liabilities of Seller or Parent arising out of any
claim, action, suit or proceeding pending or threatened as of the Closing Date
or arising out of or relating to matters or events occurring on or prior to the
Closing Date, including all claims, actions, suits or proceedings described in
Schedule 3.16.
(m) Contracts and Leases. Any and all Liabilities of Seller under any
Contracts of Seller not assumed by Buyer hereunder (including any contracts and
agreements included in the Excluded Assets) and any and all Liabilities of
Seller for breaches of any contracts, agreements, leases or other commitments of
Seller arising or occurring on or prior to the Closing (whether or not any such
contract, agreement, lease or other commitment is assumed by Buyer hereunder).
(n) Payments to Affiliates. Any Liabilities due to or payable to any
affiliates of Seller.
(o) Excluded Assets. Any Liabilities arising out of or relating to
the Excluded Assets.
1.5 Assets Not Assignable.
(a) Schedule 1.5 hereto lists all of the Assumed Contracts that
require the consent of a third party in order to be assigned to Buyer. Seller
promptly will give such notices to third parties and use its reasonable best
efforts to obtain the third party consents identified on Schedule 1.5 and such
other third party consents and estoppel certificates as Buyer may in its
reasonable discretion deem necessary or desirable in connection with the
transactions contemplated by this Agreement (the "Consents"). Buyer shall
cooperate and use reasonable efforts to assist Seller in giving such notices and
obtaining such consents and estoppel certificates; provided, however, that Buyer
shall have no obligation to give any guarantee or other consideration of any
nature in connection with any such notice, consent or estoppel certificate or to
consent to any change in the terms of any agreement or arrangement which Buyer
in its reasonable discretion may deem adverse to its interests or the Business.
If any of the Purchased Assets cannot be assigned without the consent, waiver or
authorization of a third person, or if such assignment or attempted assignment
would constitute a breach under any agreement related to any Purchased Asset, or
a violation of any law, statute, regulation or other governmental edict or is
not immediately practicable, this Agreement shall not constitute an assignment
of such interest (such interests being hereinafter collectively referred to as
"Restricted Interests"). If there are any consents that have not yet been
obtained (or otherwise are not in full force and effect) as of the Closing, in
the case of each Contract as to which such consents were not obtained (or
otherwise are not in full force and effect), Buyer may waive any
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closing conditions as to any such Consent and either: (i) elect to have Seller
continue its efforts to obtain the Consents; or (ii) elect to have Seller retain
that Contract and all Liabilities arising therefrom or relating thereto.
(b) Anything in this Agreement to the contrary notwithstanding,
Seller shall not be obligated to transfer to Buyer any Restricted Interests
without Seller first having obtained all consents, waivers and authorizations
necessary for such transfers. In consultation with each other as to the
practicalities of proposed actions, Seller and Buyer shall use all reasonable
efforts to assist each other in obtaining such consents, waivers and
authorizations and to resolve any impracticalities of assignment referred to in
Section 1.5(a) hereof.
(c) If the consents, waivers and authorizations referred to in
Section 1.5(a) hereof are not obtained by Seller, or until the impracticalities
of transfer referred to therein are resolved, Seller shall, at Buyer's expense
(i) provide to Buyer, at Buyer's request, the benefits of any Restricted
Interests as is reasonably practical, (ii) cooperate in reasonable and lawful
arrangements designed to provide such benefits to Buyer, and (iii) enforce, at
Buyer's request and for Buyer's account, any rights of Seller arising from any
Restricted Interests (including the right to elect to terminate in accordance
with the terms thereof upon request from Buyer).
2. Purchase Price and Payment.
2.1 Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price") shall be the sum of Four Million Five Hundred Thousand Dollars
($4,500,000).
2.2 Payment of Purchase Price. The Purchase Price shall be paid to
Seller at Closing by wire transfer to an account designated by Seller in writing
at least two days prior to the Closing.
2.3 Working Capital Adjustment. Buyer shall pay to Seller the amount,
if any, by which the Closing Working Capital is greater than zero (the "Working
Capital Adjustment"). For this purpose, "Closing Working Capital" shall mean the
book value of the current assets included within the Purchased Assets as of the
Closing Date (including any amounts accrued but unbilled for work in process,
inventories of materials at cost and all other current assets, and Accounts
Receivable exclusive of a reasonable reserve for doubtful accounts), less the
current liabilities that are Assumed Liabilities as of the Closing Date, all as
calculated in a manner consistent with Schedule 2.3 hereto, based upon the Final
Closing Statement described in Section 2.3(e) below.
(a) Estimated Closing Statement. On or prior to the fifth day prior
to the Closing, Seller will deliver to Buyer a statement of Closing Working
Capital estimated as of the Closing Date ("Estimated Closing Working Capital").
Any portion of Accounts Receivable that as of the Closing have been outstanding
for in excess of one hundred twenty (120) days shall be excluded from current
assets for purposes of the Estimated Closing Working Capital, and any subsequent
amounts actually received by Buyer on such excluded accounts receivable shall be
paid by Buyer to Seller, without interest, as provided in Section 2.4 below, or
Section 5.6 of this
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Agreement. Buyer will pay to Seller at Closing an amount equal to sixty percent
(60%) of the positive Estimated Closing Working Capital ("Working Capital
Initial Payment").
(b) Final Closing Statement. No sooner than ninety (90) calendar days
and not later than one hundred twenty (120) calendar days after the Closing
Date, Buyer will prepare and deliver to Seller a statement of the Closing
Working Capital (the "Closing Statement"). Upon receipt of the Closing
Statement, Seller and its independent accountants shall be permitted during the
succeeding period of thirty (30) calendar days to examine the books and records
of the Business and the work papers prepared by Buyer and/or Buyer's independent
accountants in preparing the Closing Statement. Current assets determined for
purposes of the Closing Statement shall not include any Accounts Receivable
outstanding and unpaid as of the date of the statement, and any subsequent
amounts actually received by Buyer on such excluded Accounts Receivable shall be
paid by Buyer to Seller, without interest, as provided in Section 5.6 of this
Agreement.
If Seller agrees to the Closing Statement, it shall become the "Final
Closing Statement." If Seller does not agree to the Closing Statement it shall
within thirty (30) calendar days after its receipt of the Closing Statement,
prepare and deliver to Buyer a list of proposed adjustments to the Closing
Statement (the "Proposed Closing Statement Adjustments"), explaining such
adjustments in reasonable detail.
(c) Disputes. Buyer and Seller shall use reasonable efforts to
resolve the Proposed Closing Statement Adjustments. If Buyer and Seller are able
to reach an agreement on the Proposed Closing Statement Adjustments, the Closing
Statement shall be amended to reflect such agreement and shall become the Final
Closing Statement. If Buyer and Seller are unable to reach an agreement on the
Proposed Closing Statement Adjustments within thirty (30) calendar days after
receipt by Buyer of the Proposed Closing Statement Adjustments, then the
Proposed Closing Statement Adjustments shall be submitted by Buyer and Seller to
an Accounting Referee. The parties shall use reasonable efforts to cause the
Accounting Referee to promptly review the Proposed Closing Statement Adjustments
and determine the final value of each of the Proposed Closing Statement
Adjustments within thirty (30) calendar days after the date on which the
Proposed Closing Statement Adjustments are referred to the Accounting Referee.
In making such determination, the Accounting Referee shall consider only the
items or amounts in dispute (and any other items or amounts relating thereto)
and shall not determine any Proposed Closing Statement Adjustment to be outside
the range proposed by Buyer and Seller. Upon the Accounting Referee's
determination of the final value of all of the Proposed Closing Statement
Adjustments, the Closing Statement shall be deemed amended to reflect such
determination and, as amended, shall become the Final Closing Statement.
(d) Accounting Referee. In the event that it becomes necessary for
the parties to select an "Accounting Referee" under this Section 2, Buyer and
Seller shall select a firm of certified public accountants of national or
regional standing mutually acceptable to Seller and Buyer to act as the
accounting referee ("Accounting Referee"). In the event that Seller and Buyer
are unable to agree upon the selection of the Accounting Referee, either party
may provide written notice to the other, in which case the Seller shall select a
firm of certified public accountants of national or regional standing and Buyer
shall select a firm of certified public accountants of national or regional
standing, and the two firms so selected shall select a third
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firm of certified public accountants of national or regional standing which the
parties shall retain to act as the Accounting Referee. The fees, costs and
expenses of the Accounting Referee in assisting with the resolution or in
resolving any Proposed Adjustments shall be shared equally by Buyer and Seller.
(e) Final Closing Statement. The Final Closing Statement shall be
deemed to be and shall be conclusive and binding on the parties to this
Agreement for purposes of determining the Closing Working Capital pursuant to
this Section 2.3. The parties agree that the amounts set forth in the Final
Closing Statement arrived at as a result of the above process shall be deemed to
have been arrived at in an arbitration proceeding and that a judgment may be
entered by a court of competent jurisdiction enforcing the Final Closing
Statement as so determined.
2.4 Payment. The Closing Statement sent by Buyer pursuant to Section
2.3(b) shall be accompanied by a check in the amount by which the Closing
Working Capital as set forth in such statement exceeds the amount of the Working
Capital Initial Payment paid by Buyer pursuant to Section 2.3(a) ("Interim
Working Capital Payment"). Within five (5) days following the agreement on the
Final Closing Balance Sheet and the final determination of Closing Working
Capital, Buyer shall pay to Seller in cash the amount by which the Closing
Working Capital set forth in the Final Closing Statement exceeds the sum of the
Working Capital Initial Payment plus the Interim Working Capital Payment. In the
event the sum of Working Capital Initial Payment plus the Interim Working
Capital Payment exceeds the Closing Working Capital set forth on the Final
Closing Statement, Seller shall, within such five (5) day period, repay the
amount of such excess in cash to Buyer.
3. Representations and Warranties of Seller and Parent. Seller and Parent
jointly and severally represent and warrant to Buyer as follows:
3.1 Corporate. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, with all
requisite power and authority to own and lease its properties to and operate its
business as and where it is now being conducted and to enter into this Agreement
and perform its obligation hereunder. SFMS and IIS are corporations duly
organized, validly existing and in good standing under the laws of the State of
Maryland and the Province of Ontario respectively, with all requisite power and
authority to own and lease their properties and to operate their respective
business as and where they are now being conducted and to enter into this
Agreement and perform the transactions contemplated hereby, including without
limitation full legal right, power and authority to transfer the Purchased
Assets to Buyer. Seller is qualified or licensed to do business and in good
standing in each jurisdiction in which such qualification or licensing is
necessary, except for where failure to be so qualified or to be in good standing
could not reasonably be expected to have a Material Adverse Effect. Schedule 3.1
lists each state where either Seller is qualified to do business as a foreign
corporation. For purposes of this Agreement, "Material Adverse Effect" means an
adverse change in the ability of Parent and Seller or Buyer, as the case may be,
to perform its obligations under this Agreement or an adverse change in the
business, financial condition, results of operations or prospects of the
Business or Buyer, as the case may be, which is material to the Business or
Buyer, as the case may be, except for (i) any adverse change resulting from
general economic, financial or market conditions that does not
disproportionately affect the
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Business, (ii) any adverse change resulting from conditions or circumstances
generally affecting the industry in which the Business or Buyer's business
operates, as the case may be, and (iii) any adverse change resulting from the
announcement or pendency of this Agreement or the transactions contemplated
thereby; provided that a decision by MGM to accept a proposal to purchase future
services of the type currently purchased from Seller from another vendor, which
decision is not based upon a breach by Seller of its prior or existing service
obligations to MGM, shall not alone be deemed to be a Material Adverse Effect.
3.2 Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Parent and
Seller pursuant hereto and the consummation of the transactions contemplated
hereby and thereby will at Closing have been duly authorized by Seller's Board
of Directors and by Parent's Board of Directors. No shareholder approval or
other corporate act or proceeding on the part of Seller or Parent is necessary
to authorize this Agreement or the other documents and instruments to be
executed and delivered by Seller or Parent pursuant hereto or the consummation
of the transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed, delivered and approved by the Board of Directors of Seller
and Parent, the other documents and instruments to be executed and delivered by
Seller or Parent pursuant hereto will constitute, valid and binding agreements
of Seller and Parent, respectively, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization and other
laws affecting creditors' rights generally and by general principles of equity
(whether in a proceeding at law or in equity).
3.3 No Violation. Except as set forth in Schedule 3.3, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by Seller or Parent pursuant hereto, nor the
consummation by such parties of the transactions contemplated hereby and
thereby, will: (a) violate any statute or law, or any rule, regulation or decree
of any court or governmental authority; (b) require any authorization, consent,
approval, exemption or other action by or notice to any court, administrative or
governmental agency; or (c) violate or conflict with or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or will result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the Purchased Assets, any term or
provision of Parent's or Seller's Articles or Certificate of Incorporation or
Bylaws or of any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Seller or Parent is a party or by
which Seller or Parent or any of their assets or properties may be bound or
affected, except, in the case of items (a) and (b), such violation, default,
conflict or failure to obtain any authorization, consent or approval could not
reasonably be expected to have a Material Adverse Effect.
3.4 No Default. Except as set forth in Schedule 3.4, Seller is not in
material default under, or alleged to be in material default under, any Assumed
Contract, nor has any event or omission occurred which through the passage of
time or the giving of notice, or both, could constitute a material default
thereunder or cause the acceleration of any of Seller's obligations or result in
the creation of any material lien on any of the Purchased Assets. To Seller's
knowledge, no third party is in material default under any Assumed Contract, nor
has any event or omission occurred that, through the passage of time or the
giving of notice, or both,
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could constitute a material default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof.
3.5 Financial Statements. Schedule 3.5 contains correct and complete
copies of income statements of the Business for the fiscal years ended September
30, 2001 and September 30, 2002, the fiscal quarters ended December 31, 2001 and
2002, a balance sheet as of the last day of each such period and the
consolidating statements of income for the fiscal year ended September 30, 2002
and the fiscal quarter ended December 31, 2002 (collectively, the "Financial
Statements"). The Financial Statements are complete and accurate in all material
respects and fairly presents the assets, liabilities and financial position, and
the results of operations of the Business as of the dates indicated, in
accordance with generally accepted accounting principles, consistently applied,
except for the absence of footnotes, cash flow statements and statements of
changes in stockholders' equity.
Since the date of the Financial Statements, except as set forth in
Schedule 3.5, there has been no material adverse change in the financial
condition, assets, liabilities, prospects business or operations of the
Business, and Seller has not taken any action outside the ordinary course of
business. Without limiting the generality of the foregoing, there has not been:
(a) any material adverse change in the condition (financial or otherwise) of the
properties, assets, Liabilities, results of operation or business prospects of
Seller or any event, occurrence, development, state of circumstances or facts
that could reasonably be expected to result in a material adverse change; (b)
any damage, destruction or loss (whether or not covered by insurance) materially
and adversely affecting the properties, assets, Liabilities, financial
condition, results of operations or business prospects of Seller; (c) any
increase in the compensation, commissions or perquisites payable or to become
payable by Seller to any director, officer, employee, or agent of Seller or any
payment of any bonus, profit sharing or other extraordinary compensation to any
employee of Seller (other than any such increase or payment to persons that is
paid or become payable in the ordinary course of business consistent with past
practices); (d) any change in the accounting methods or practices followed by
Seller or any change in depreciation or amortization policies or rates
theretofore adopted; (e) any cancellation of any Liabilities owed to or claims
held by Seller or the incurrence of any Liabilities other than in the ordinary
course; (f) any sale, lease, abandonment or other disposition by Seller, other
than in the ordinary course of business, of any machinery, equipment or other
operating properties, or any intangible assets utilized in the business of
Seller; (g) any termination other than in the ordinary course of any Contract
material to the Business; (h) any agreement or commitment by Seller to incur
capital expenditures in excess of $50,000 per item or $100,000 in the aggregate;
(i) any material change in the customary methods of operations of Seller,
including practices and policies relating to manufacturing, purchasing,
inventories, marketing, selling and pricing; (j) any issuance of shares of stock
or the granting, issuance or exercise of any right, warrant, option or similar
commitment relating to the capital stock of Seller or any other equity interest
in Seller; (k) any adoption of, amendment to or increase in the payments or
benefits under any Employee Plan, including any a severance or termination pay
plan or agreement for any director, officer or employee of Seller; (l) any
write-up or write-down of the value of or other revaluation of any of the
Purchased Assets, other than in the ordinary course of business consistent with
past practices and in accordance with generally accepted accounting principles;
(m) any incurrence, assumption or guarantee by Seller of any indebtedness, or
(n) any labor dispute, other than routine individual grievances, or any activity
or
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proceeding by a labor union or representative thereof to organize any employees
of Seller, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees.
3.6 Compliance with Laws.
(a) Compliance. Seller is in compliance in all material respects with
all applicable Laws. "Laws" shall mean any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order, other requirement or
rule of law, now or hereafter in effect and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment. Neither Parent as it relates to the Business
or Seller has received any notice of any violation or alleged violation of any
Laws.
(b) Licenses and Permits. Seller has all licenses, permits,
approvals, authorizations or qualifications required for the conduct of the
Business (as presently conducted by Seller), and all such licenses, permits,
approvals, authorizations or qualifications are valid and in full force and
effect.
3.7 Title to Purchased Assets.
(a) Except as set forth in Schedule 3.7, Seller has good and
marketable title to the Purchased Assets, and the Purchased Assets are free and
clear of all liens, claims, security interest and other encumbrances. The
Purchased Assets comprise all assets required for the conduct of the Business.
Except as set forth in Schedule 3.7, the Purchased Assets include all assets of
Parent and Seller utilized in the conduct of Seller's Business.
(b) Except as disclosed in Schedule 3.7, the properties and assets of
Seller that are utilized in the operation of the Business as presently conducted
are in good operating condition and repair, ordinary wear and tear excepted, are
usable in the ordinary course of business and conform in all respects to all
applicable Laws relating to their construction, use and operation.
3.8 Intellectual Property.
(a) Schedule 1.1 sets forth a complete and accurate list of the
Intellectual Property owned or used by Seller or in which Seller has an
interest, in each case specifying whether any Intellectual Property is owned or
licensed, the jurisdiction in which any patent, registration or pending
application has been filed, and, where applicable, the patent, registration or
application number therefor. Seller either owns or has all necessary licenses to
use the Intellectual Property currently being used in the operation of the
Business, and except as set forth on Schedule 1.2 or Schedule 3.8(a), all such
licenses are transferable to the Buyer. Except as set forth in Schedule 3.8(a),
Seller is the sole and exclusive owner of the Intellectual Property, free and
clear of all claims, liens, and encumbrances, and has the sole and exclusive
valid right to use such Intellectual Property. All Intellectual Property shown
as registered in Schedule 1.1 have been properly registered and maintained, all
pending registrations and applications have been properly made and filed, all
annuity, maintenance, renewal and other fees relating to registrations or
applications are current and none of such Intellectual Property has lapsed,
expired or been abandoned, and no such Intellectual Property is the subject of
any opposition, cancellation,
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proceeding or other legal or governmental proceeding before any governmental
authority. Except as set forth on Schedule 3.8(a), Seller has not granted any
license or made any assignment of any Intellectual Property and no other person
has any right to use any Intellectual Property owned or held by Seller. Except
as set forth on Schedule 3.8(a), Seller does not pay any royalties or other
consideration for the right to use any Intellectual Property of others. Except
as set forth on Schedule 3.8(a), there are no claims asserted or threatened and
no litigation pending or threatened to challenge Seller's right, title and
interest with respect to its continued use of, and right to preclude others from
using, any Intellectual Property of Seller, and to the knowledge of Seller,
there is no basis for any of the foregoing. Except as set forth on Schedule
3.8(a), to Seller's knowledge, none of the Intellectual Property infringe any
patent, trademark, trade secret rights, copyrights or other intellectual
property rights of any third party.
(b) Except as set forth on Schedule 3.8(b), (i) all current and
former (former being defined as those employees who worked for Seller as of, or
after, August 20, 2000) employees of Seller or any Affiliate involved in the
development of Intellectual Property have executed written agreements assigning
to Seller all right, title and interest in Intellectual Property developed by
such employee as part of their employment activities; and (ii) all third parties
involved in the development of Intellectual Property have executed written
agreements assigning to Seller or otherwise acknowledging Seller's exclusive
ownership of all rights in such Intellectual Property. Except as described on
Schedule 3.8(b), neither Seller nor Parent has any knowledge that any former
employee has claimed any interest in any of the Intellectual Property utilized
in the operation of the Business.
(c) The consummation of the transactions contemplated by this
Agreement will not alter or impair any of the rights of Seller in any
Intellectual Property.
(d) At or prior to Closing, Seller shall have delivered to Buyer a
true, accurate and complete copy of the source and object code for the Software
included in the Purchased Assets, excluding Media QC for which Seller will
deliver the object code and all source code except for that portion of the
source code and object code which is used for video conversion, and excluding
any third party Software for which Seller does not possess the source code. The
Intellectual Property, including all Software, are operating in accordance with
the specifications therefor. Except as disclosed in Schedule 3.8(c), Seller has
not disclosed or made available the source code for any part of the Software to
any person other than affiliates of Seller. Schedule 3.8(c) lists all instances
since January 1, 2002 in which (i) failures in the Software or the hardware that
supports it has rendered such Software unavailable to the customers of the
Business, or (ii) failures in the Software or the hardware that supports any of
these have caused Seller to fail to deliver the associated services to the
customers of the Business.
3.9 Inventory. All inventory of Seller reflected on the Financial
Statements and the inventory acquired since then consists of a quality and
quantity usable and saleable in the ordinary course of business, and is valued
in accordance with generally accepted accounting principles at the lower of cost
(on a FIFO basis) or market. Except as set forth in Schedule 3.9, all inventory
items of Seller are located at Seller's premises leased pursuant to the Toronto
Lease and the California Lease described in Section 3.23 of this Agreement.
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3.10 Brokers and Finders. Except for Silverwood Partners, neither
Seller nor Parent has retained, employed or used any broker, finder or financial
consultant in connection with this Agreement or the negotiation thereof; nor
have they agreed to allow any such party to share or participate in any way in
the payment of any commission, finder's fee or other, similar, compensation in
connection therewith. Parent shall be solely responsible for any fee or
commission due Silverwood Partners related to the sale of the Purchased Assets.
3.11 Tax Matters.
(a) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to the Employees or
other parties. As used herein, "Tax" means any federal, state, local or foreign
income, payroll, employment, severance, withholding, social security,
unemployment, disability excise, property, sales, use, franchise, gross
receipts, license, occupation, customs and other taxes of whatever nature,
including any interest, penalty or addition thereto, whether disputed or not.
(b) All Tax Returns required to be filed by Seller or Parent through
the date hereof have been filed, and as to Tax Returns required to be filed
through the Closing Date will be, timely filed with the appropriate governmental
authorities in all jurisdictions in which such Tax Returns are required to be
filed, and all such Tax Returns are or will be true and correct and prepared in
accordance with applicable Law and properly reflect, or will properly reflect,
the Taxes of Seller for the periods covered thereby. As used herein, "Tax
Return" shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any such document
prepared on a consolidated, combined or unitary basis and also including any
Schedule or attachment thereto, and including any amendment thereof.
(c) Except as set forth on Schedule 3.11, there will not be any
unpaid Taxes due with respect to any period through the Closing Date, which are
or could become a lien on the properties and assets of Seller or the Purchased
Assets, except for current Taxes not yet due and payable. Neither Parent nor
Seller has received any notice of assessment or proposed assessment by the
Internal Revenue Service or any other governmental authority in connection with
any Tax Returns and there are no pending tax examinations of or tax claims
asserted against Seller or its properties, except as disclosed in Schedule 3.11.
(d) Except as disclosed in Schedule 3.11, there are no Tax liens on
any of the properties or assets of Seller except for liens for current taxes not
yet due and payable and there is no basis for any additional assessment of any
Taxes with respect to Seller. Seller has not waived any Law fixing, or consented
to the extension of, any period of time for assessment of any Taxes which waiver
or consent is currently in effect.
(e) Seller has no Liability for the Taxes of any Person under Treas.
Reg. Section 1.1502-6 (or any similar provision of any state, local, or foreign
Law), as a transferee or successor, by contract, or otherwise. Schedule 3.11
discloses the nature and amount of all deferred intercompany transactions as
defined in Treasury Regulations 1.1502-13(a)(2).
3.12 Liabilities and Obligations. Seller does not have any Liabilities
(whether direct or indirect, absolute, matured, contingent or unmatured) of any
nature whatsoever, whether
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arising out of contract, tort, statute or otherwise, which are not reflected,
reserved against or given effect to in the balance sheet contained in the
Financial Statements, except: (a) Liabilities that are specifically disclosed in
Schedule 3.12; or (b) Liabilities incurred in the ordinary course of business
since the date of such Financial Statements, and which are of the same nature as
those set forth on such financial statements, and which are not, individually or
in the aggregate, material to Seller. To the knowledge of Seller, there is no
basis for assertion against Seller of any Liabilities not adequately reflected,
reserved against or given effect to in the financial statements or in Schedule
3.12 except for Liabilities described in clause (b) of this Section 3.12.
3.13 Related Party Transactions. Except as respects Purchased
Assets owned by Parent and as set forth on Schedule 3.13, neither Seller,
Parent, nor any of their affiliates or any officer or executive employee of any
of them, directly or indirectly, has (i) any ownership interest in any assets or
properties used in the Business, (ii) any financial, business or contractual
relationship or arrangement with or loans outstanding to or from Seller, or
(iii) any ownership or financial interest in or contractual relationship with,
or serves as an officer or director of, any customer, competitor, or supplier of
Seller (excluding ownership of less than two percent (2%) of the outstanding
stock of a publicly traded company). Except as set forth on Schedule 3.13, there
are no material services provided by Parent to Seller.
3.14 Contracts.
(a) Except as set forth in Schedule 3.14, Seller is not a party
to, or bound by, any oral or written contract, license, lease, agreement,
indenture, arrangement, commitment or understanding (including purchase orders,
sales orders and supply contracts) ("Contracts"): (i) pursuant to which Seller
provides services to any customer ("Customer Contracts"); (ii) relating to the
ownership, use or licensing of the Intellectual Property; (iii) for leasing any
personal property (including leases for machinery and office equipment,
furniture, fixtures, vehicles, tools and dies) which require an annual payment
in excess of $5,000 or the unexpired term of which exceeds two (2) years and
requires a payment in excess of $10,000 in the aggregate; (iv) for the
employment of any person; (v) for the purchase or sale of membership interests,
capital stock or interests in or convertible to membership interests, capital
stock or any other form of equity interest; (vi) under which any indebtedness
has been created, incurred, assumed or guaranteed; (vii) involving the payment
or receipt of in excess of $5,000 per annum by Seller or the unexpired term of
which exceeds two (2) years (including vendor supply contracts or "blanket"
purchase orders); (viii) providing for the services of independent contractors,
dealers, distributors, sales representatives, transportation agents or similar
representatives involving the payment or receipt of in excess of $5,000 per
annum by Seller; (ix) relating to oral or written and currently effective
warranties or representations expressly or impliedly made by Seller in respect
of any services rendered by Seller and any other Liability to service, repair,
maintain, take back or otherwise do or not do anything in respect to any
services that have been rendered by Seller; (x) constituting a partnership or
joint venture or other partnering agreement or arrangement, (xi) between Seller
and any governmental authority, (xii) leases for real property, or (xiii)
constituting any other Contract that is material to the Business (including
non-competition agreements, agreements to acquire or dispose of assets other
than in the ordinary course of business and agreements restricting Seller from
doing business in any manner).
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(b) All of the Contracts constitute legal, valid and binding
obligations of the respective parties thereto in accordance with their terms,
are in full force and effect, and neither Seller nor, to the knowledge of the
Seller, any other party thereto has violated any provision of, or committed or
failed to perform any act which with notice, lapse of time or both would
constitute a default under or cause the acceleration of Seller's obligations
under the provision of (i) any Customer Contract, or (ii) any other Contract,
the termination of which could have a material adverse effect upon the
properties, assets, Liabilities, financial condition, results of operations or
business prospects of Seller or the Business. Seller has delivered to Buyer
correct, accurate and complete copies of all written Contracts disclosed on
Schedule 3.14, including all amendments thereto, and correct, accurate and
complete description of the material terms of all oral Contracts (including,
with respect to oral Customer Contracts, the pricing, billing and termination
terms) disclosed on Schedule 3.14 is set forth on Schedule 3.14. Seller has not
granted any collateral assignment, hypothecation or pledge of its interests
under any Contract.
(c) Each of the purchase orders included in the Assumed
Contracts reflects the pricing and terms set forth in the standard or custom
rate cards (as applicable) previously provided to Buyer.
3.15 Receivables. All Accounts Receivable arose from services
actually performed by Seller in the ordinary course of the Business. An aged
list of all Accounts Receivable outstanding as of the most recent practicable
date is included in Schedule 3.15. All Accounts Receivables are valid
receivables subject to no set offs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts.
3.16 Litigation. Except as disclosed in Schedule 3.16: (i) there
are no lawsuits, proceedings, claims or governmental investigations pending, or
settled or adjudicated since January 1, 2001, or, to the knowledge of Seller,
threatened against or involving, Seller or against or involving any of its
properties or business, or against or involving any officers or directors of
Seller and relating to the Business; (ii) none of such actions will have and, to
the knowledge of Seller, there is no basis for any such action which could have,
a Material Adverse Effect upon the properties, assets, Liabilities, financial
condition, results of operations or business prospects of Seller or its right to
conduct the Business as presently conducted; and (iii) there are no judgments,
consents, decrees, injunctions, or any other judicial or administrative mandates
outstanding against the Parent or Seller that materially and adversely could
affect the properties, assets, Liabilities, financial condition, results of
operations or business prospects of Seller or its right to conduct the Business
as presently conducted.
3.17 Insurance. Schedule 3.17 contains a list of all insurance
policies specifying (a) the insurer, (b) the amount of the coverage, (c) the
type of insurance, (d) the policy number and (e) any currently pending claims
thereunder or any claims asserted thereunder or under similar policies since
December 31, 2000 and relating to the Business), maintained by or on behalf of
Seller or Parent on the properties, assets, business or personnel of Seller. All
such policies are (and pending Closing will continue to be) in full force and
effect, and Seller or Parent is not in default in any material respect with
respect to any provision contained in any insurance policies, nor has Seller or
Parent failed to give any notice or present any claim thereunder in due and
timely fashion. All such insurance is in amounts and against such risks as are
usual and customary and adequate in the reasonable opinion of Seller to protect
the Business
-15-
and to comply with Seller's obligations to provide insurance under any of the
Contracts or leases to which Seller is a party that contain a requirement that
Seller maintain specified amounts of insurance and that are included in the
Assumed Liabilities. Except as described in Schedule 3.17, the insurance
coverage provided by the policies therein will not terminate or lapse or
otherwise be affected by the transactions contemplated by this Agreement. At no
time has Seller been denied any insurance or indemnity bond coverage that it has
requested, or received any written notice from or on behalf of any insurance
carrier presently providing insurance relating to them (i) that insurance rates
may or will be substantially increased, (ii) that there will be no renewal of
policies presently in effect, or (iii) that material alterations to any of the
properties or business operations of Seller are necessary or required by such
carrier, except for any such denials or notices as a result of a carrier's
decision to exit the applicable line of coverage, and except for rate increases
or policy modifications that, to the knowledge of Seller, are the result of
conditions applicable to that line of coverage generally. None of such insurance
policies are subject to retroactive premium adjustment in respect of prior
periods.
3.18 Employment, Labor and Other Relations.
(a) Schedule 3.18(a) hereof contains a list of the names of
each employee of Seller (including each employee on approved leave)
("Employee"). Seller previously has delivered to Buyer a list containing current
(i.e., 2003) annual salary or wages and any accrued bonus, total compensation
for the 2000, 2001 and 2002 calendar years, job title, location and any accrued
vacation and/or sick days for such Employees. Schedule 3.18(a) also lists the
name of any employee of Parent or its affiliates who provides services to the
Seller or the Business, but who is not included in the definition of "Employee."
(b) Except as disclosed in Schedule 3.18(b), Seller is not a
party to and is not otherwise bound by any Contract (including any collective
bargaining agreement) with any labor union or organization or other commitment
respecting employment or compensation of any of Seller's officers, directors,
agents or employees. Except as set forth in Schedule 3.18(b), neither Seller nor
Parent has received notice of any charges or complaints involving any federal,
state, local civil or foreign rights enforcement agency or court; complaints or
citations under the Occupational Safety and Health Act or any similar foreign,
state or local occupational safety act or regulation; unfair labor practice
charges or complaints with the National Labor Relations Board; or other claims,
charges, actions or controversies pending, threatened or proposed, involving
Seller and any employee, former employee or any labor union or other
organization representing or claiming to represent such employees' interests,
except for immaterial charges arising in the ordinary course of business. Seller
is and has heretofore been in compliance in all material respects with all Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, the sponsorship, maintenance, administration and
operation of (or the participation of its employees in) Employee Plans and
arrangements and occupational safety and health programs, and Seller is not
engaged in any violation of any Law related to employment, including unfair
labor practices or acts of employment discrimination. Except as disclosed in
Schedule 3.18(b), no employees of Seller are represented by any labor union or
organization. Except as disclosed in Schedule 3.18(b), there is no existing or,
to the knowledge of Seller, threatened labor disturbance by Seller's employees.
-16-
3.19 Employee Benefits.
(a) There are no Employee Plans or any Employees entitled to
retiree benefits under any Welfare Plans except as disclosed in Schedule 3.19,
and true and correct copies of the Employee Plans have been furnished to Buyer.
True and correct copies of all employee manuals or written statements of policy
relating to the employment of Employees of Seller have been furnished to Buyer.
(b) Seller has not received any notice to correct any material
violation of any Law relating to any Employee Plans or the manner in which they
are administered, with which it has not complied; and the provisions and
operations of all such plans, programs and policies are in substantial
compliance with applicable Law.
(c) Seller does not maintain or contribute to, nor has Seller
at any time since August 1, 2000, and before that date to its knowledge,
maintained or contributed to, a "defined benefit plan" within the meaning of
Section 3(35) of ERISA. Seller does not maintain and has not had an obligation
to contribute to any multiemployer plan (within the meaning of Section 3(37) of
ERISA). Seller does not maintain any employee welfare benefit plan (as described
in Section 3(1) of ERISA) except as set forth in Schedule 3.19. Each employee
benefit plan (within the meaning of Section 3(3) of ERISA) maintained by, or
contributed to, by Seller has been administered in compliance with its terms and
with all filings, reporting, disclosure and other requirements of ERISA and, to
the extent applicable, the Internal Revenue Code, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect on
Seller or such plan. Except as set forth on Schedule 3.19, Seller does not
sponsor or maintain and has not at any time sponsored or maintained any
qualified or nonqualified Pension Plan. Each of the Pension Plans set forth on
Schedule 3.19 which is intended to be qualified under Sections 401(a) and 501(a)
of the Code has been determined by the Internal Revenue Service to be
"qualified" within the meaning of Sections 401(a) and 501(a) of the Code. Since
August 1, 2000, neither Seller nor any of its officers or directors has engaged
in any transaction in violation of the prohibited transactions provisions set
forth in Section 5975 of the Code or Section 506 of ERISA, which would be
reasonably likely to result in material Liability, and to the knowledge of
Seller, none of Seller's officers or directors had engaged in any such
transaction before such date.
(d) All required reports and descriptions (including Form 5500
annual reports, summary annual reports, and summary plan descriptions) have been
timely filed or distributed appropriately with respect to each Employee Plan.
The requirements of COBRA (as set forth in Section 4980B of the Code and Section
601-609 of ERISA) have been met with respect to each Welfare Plan. Seller's or
Parent's Employee Plans shall be responsible for all COBRA obligations with
respect to Employees terminated prior to or in connection with the transaction
contemplated by this Agreement.
(e) All contributions (including employer contributions and
employee salary reduction contributions) which are due have been paid to each
Pension Plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each Pension Plan. All
premiums or other payments for all periods ending on or before the Closing Date
have been paid with respect to each Welfare Plan.
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(f) There is no Employee Plan that is a Welfare Plan, the
benefits under which are not provided exclusively from the assets of Seller or
through insurance contracts.
(g) Except as disclosed in Schedule 3.19, since August 1, 2000,
and before that date, to the knowledge of Seller, Seller has not incurred, nor
has Seller taken actions that would cause it to incur, a "complete withdrawal"
or "partial withdrawal", as defined in Sections 4203(a) and 4205(a),
respectively, of ERISA, from any multiemployer pension plan as to which Seller
contributes, has contributed or has or had an obligation to contribute. Except
as disclosed in Schedule 3.19, Seller has not received from the sponsor of a
multiemployer pension plan any notice of, or any notice relating to, withdrawal
Liability under Part 1 of Subtitle E of Title IV of ERISA relating to such plan.
(h) The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of or accrued on behalf of any
current or former director, officer or employee of Seller or entitle any such
director, officer or employee to any severance or similar compensation or
benefits, except as described in Section 6.2, nor shall it result in any breach
or violation of, or a default under, any plan, contract or any other agreement.
3.20 Environmental Matters.
(a) Except as disclosed in Schedule 3.20, to the knowledge of
Seller, all facilities leased, used or operated by Seller have been, and
continue to be, leased, used or operated in compliance in all material respects
with all applicable Environmental Laws.
(b) Except as disclosed in Schedule 3.20, Seller is not named
as a potentially responsible party, and, to the knowledge of Seller, is not
otherwise responsible for any corrective action at, any location, pursuant to
any Environmental Law, nor does Seller have knowledge that it may be named as
potentially responsible party or otherwise be responsible for any corrective
action at any location.
(c) Seller has not used or operated any underground or
aboveground storage tanks or other containers or any surface impoundments,
septic tanks, pits, swamps or lagoons in which Hazardous Substances are being or
have been treated, stored or disposed on any of facilities leased, used or
operated by Seller or, to the knowledge of Seller, on any property formerly
owned, leased or occupied by, or on behalf of Seller, and Seller has never
operated or removed any such tanks.
(d) To the knowledge of Seller, there are no polychlorinated
biphenyls, asbestos, asbestos-containing materials or urea formaldehyde in or at
any facilities leased, used or operated by Seller.
(e) There are no Environmental Claims pending or threatened
against Seller and, to Seller's knowledge, there are no circumstances that can
reasonably be expected to form the basis of any such Environmental Claim,
including with respect to any off-site disposal location currently or formerly
used by, or on behalf of, Seller or any of its predecessors or with respect to
any facilities owned, leased, used or operated by Seller.
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3.21 Rebate Liability. Set forth on Schedule 3.21 is a list and
brief description of all customer or supplier arrangements pursuant to which
Seller has any obligation to give rebates, credits or other pricing adjustments.
3.22 Principal Customers and Suppliers. Schedule 3.22 sets forth
a separate list of the ten largest customers of Seller in terms of sales during
the fiscal year ended September 30, 2002, and the three (3) largest suppliers of
Seller in terms of purchases by Seller, during the fiscal year ended September
30, 2002, showing in each case the approximate total sales and purchases by or
from each such customer or supplier during such period; and comparable
information for the twelve (12) months ended September 30, 2001. There are no
other customers or suppliers, respectively, who accounted for more than five
percent (5%) of Seller's sales or purchases, respectively, during such periods.
Except as set forth on Schedule 3.22, no customer has disputed any
payments paid to Seller since September 30, 2002 or currently due to Seller,
and, to the knowledge of Seller, there is no basis for any such dispute.
Except as described on Schedule 3.22, there has not been any
material adverse change in the business relationship of Seller with any such
named customer or supplier, or any other customer or supplier that is material
to Seller. To the knowledge of Seller, (i) no customer listed on Schedule 3.22
intends to cease purchasing from or dealing with Buyer after the Closing nor
intends to alter in any material respect the amount of such purchases or the
extent of dealings with Buyer after the Closing and (ii) since December 31,
2002, has there been no material change in the business of any customer listed
on Schedule 3.22 that would cause such customer to cease purchasing from or
dealing with Buyer after the Closing or otherwise alter in any material respect
the amount of such purchases or the extent of dealings with Buyer after the
Closing.
3.23 Real Estate and Leases. Seller does not now own and since
August 1, 2000 has not owned, and to the knowledge of Seller, never has owned
any real property. IIS as successor in interest to International Image
Conversions, Inc. is a party to that certain Indenture dated January 15, 1990,
as amended, for the premises located at 00 Xxxxxx Xxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxx (the "Toronto Lease") and SFMS as successor in interest to International
Image Services, L.L.C. is a party to that certain Commercial Lease dated August
10, 1995, as amended, for the premises located at 1703 and 0000 Xxxxxxx Xxxxxx,
Xxxxx Xxxxxx, Xxxxxxxxxx (the "California Lease"). Seller has delivered to Buyer
a correct, accurate and complete copy of such leases, including all schedules,
amendments, supplements and other modifications thereto or imposing any
obligations on Seller as respects such leases, and such leases reflect the
complete understanding among the parties thereto as to the subject premises.
Except as disclosed in Schedule 3.23 and except for the Toronto and California
facilities disclosed above, Seller does not occupy any real property and, except
for the Toronto Lease and California Lease, Seller is not a party to any
Contract under which it is a lessee, sublessee or sublessor of, or holds or
operates, any real property. Each of the Toronto Lease and the California Lease
is in full force and effect and constitutes a legal, valid and binding
obligation of the respective parties thereto. Neither Seller nor, to the
knowledge of Seller, any other party thereto is in default in any material
respect under the leases nor has any event occurred which with the passage of
time or giving of notice or both would constitute such a default. Except as
disclosed on Schedule 3.23,
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to the knowledge of Seller the real property and the buildings thereon utilized
by Seller in the conduct of the Business do not violate any building, zoning or
other Laws, or any Contracts, applicable thereto. No notice of any such
violation or claimed violation has been received by Seller or Parent. Seller has
not granted any collateral assignment, hypothecation or pledge of its interests
under the Toronto Lease or California Lease.
3.24 Solvency. Seller is neither insolvent nor will it be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. In addition, immediately after giving effect to the consummation of
the transactions contemplated by this Agreement, (a) Seller will be able to pay
its debts and Liabilities as they become due, and (b) the property of Seller
will not constitute unreasonably small capital, and Seller will not have
unreasonably small capital or insufficient capital with which to conduct its
present or proposed business. As used herein, the term "insolvent" means, for
any Person, that the sum of the present fair salable value of its assets does
not and will not exceed its debts and other probable Liabilities.
3.25 Disclosure. No representation or warranty of Parent or
Seller made in this Agreement or in the Schedules, the Exhibits or in any
agreement to be delivered by or on behalf of Parent or Seller hereunder contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. Copies of all documents referred to herein or in the Schedules have
been delivered or made available to Buyer, are true, correct and complete copies
thereof, and include all amendments, supplements or modifications thereto or
waivers thereunder.
4. Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Seller as follows:
4.1 Existence. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
requisite power and authority to own and lease its properties and to operate its
business as and where it is now being conducted and to enter into this Agreement
and perform the transactions contemplated hereby, including without limitation
full legal right, power and authority to purchase and accept the Purchased
Assets from Seller. Buyer is qualified or licensed to do business and in good
standing in each jurisdiction in which such qualification or licensing is
necessary, except for where failure to be so qualified or to be in good standing
could not reasonably be expected to have a Material Adverse Effect.
4.2 Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated hereby
will at Closing have been duly authorized by the Board of Directors of Buyer. At
Closing, no other act or proceeding on the part of Buyer shall be necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto, or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered and approved by the Boards of Directors of Buyer, the Agreement
and the other documents and instruments to be executed by Buyer pursuant hereto
will constitute, valid and binding agreements of Buyer, enforceable in
accordance with their respective terms, subject to
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bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally and by general principles of equity (whether in a proceeding at
law or in equity).
4.3 No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and delivered by
Buyer pursuant hereto, nor the consummation by Buyer of the transactions
contemplated hereby and thereby, will: (a) violate any statute or law or any
rule, regulation, order, or decree of any court or governmental authority; (b)
require any authorization, notice to any court, administrative or governmental
agency; or (c) violate or conflict with or constitute a default (or an event
which, with notice of lapse of time, or both, would constitute a default) under
any term or provision of Buyer's Certificate of Incorporation or Bylaws or of
any contract, commitment, understanding, arrangement, agreement or restriction
of any kind or character to which Buyer is a party or which Buyer's assets or
properties may be bound or affected, except, in the case of items (a), (b) and
(c), such violation, default, conflict or failure to obtain any authorization,
consent or approval would not reasonably be expected to have a Material Adverse
Effect.
4.4 Brokers and Finders. Buyer has not retained, employed or
used any broker, finder or financial consultant in connection with this
Agreement or the negotiation thereof; nor have they agreed to share or
participate in any way in the payment of any commission, finder's fee or other
compensation to such a party.
4.5 Financing. Buyer has available sufficient immediately
available funds necessary to consummate the transaction contemplated by this
Agreement on a timely basis.
5. Covenants.
5.1 Conduct of Business Pending Closing. From and after the
date of this Agreement and until the Closing:
(a) Full Access. Buyer and its authorized representatives and
agents shall have reasonable access during normal business hours to the books,
records, contracts and documents of Seller pertaining to the Business and the
Purchased Assets, and Seller shall furnish or cause to be furnished to Buyer and
its authorized representatives and agents all information with respect to the
Business and the Purchased Assets as Buyer or its authorized representatives and
agents may reasonably request.
(b) Carry on Regular Course. Except as otherwise set forth in
this Agreement, Seller shall carry on the Business substantially in the manner
as heretofore conducted and shall not enter into any transaction outside the
ordinary course of business related to the Business. Without limiting the
generality of the foregoing, Seller will: (i) continue its advertising and
promotional activities, and pricing and purchasing policies, in accordance with
past practice; (ii) continue in full force and effect without material
modification all existing policies or binders of insurance currently maintained
by Seller; (iii) comply with all Laws and contractual obligations applicable to
Seller or the Business; (iv) not enter into any Contract which, if entered into
prior to the date hereof, would have been required to be disclosed to Buyer
pursuant to this Agreement, without Buyer's prior written consent; (v) refrain
from taking any of the actions
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described in Section 3.5(c) - (m); and (vi) without limitation to the foregoing,
confer with Buyer prior to implementing operational decisions of a material
nature.
(c) Preservation of Business. From the date hereof until the
Closing Date, Seller shall carry on the Business diligently and shall use all
reasonable efforts to keep the Business intact, including its present
relationships with employees and customers and others having business relations
with it.
5.2 Non-Compete; Nonsolicitation.
(a) In consideration of the benefits to be obtained by Seller
and Parent as a result of the acquisition by Buyer of the Business and the
Purchased Assets, and in order that Buyer may have and enjoy the full benefit of
its acquisition of the Business and the Purchased Assets, for a period ending
three (3) years after the Closing Date, neither Seller nor Parent shall,
directly or indirectly, or as a stockholder, investor, owner, consultant,
manager, member, partner, agent, through any of their respective affiliates or
otherwise, or by means of any corporate or other device, engage in, or permit
any of their names to be used in, any business that competes with the Business
as presently conducted by Seller anywhere in the world; nor shall Seller or
Parent by or for themselves or through their respective affiliates for such
period solicit business, directly or indirectly, from any person who was a
customer of Seller in the operation of the Business to provide services
substantially similar to those provided by Seller in the operation of the
Business, as a stockholder, investor, owner, consultant, manager, member,
partner, agent or otherwise, or by means of any corporate or other device. Buyer
acknowledges that the sale by Parent of Parent's current Mediasite Live, Vegas
Video, Sound Forge, Sound Forge Studio, ACID Pro, ACID Music, Batch Converter,
Mediasite Publisher, Noise Reduction, CD Architect and DVD Architect products
(the "Sonic Products"), as such products have been described to Buyer by Seller,
would not violate the provisions of this Section 5.2(a); provided that
notwithstanding the forgoing, neither Seller, Parent nor any of their affiliates
may use any of such Sonic Products or provide services in connection with those
products in a manner that violates this Section. Seller and Parent represent
that none of the Sonic Products includes components that are part of the
Purchased Assets. For a period of one year following the Closing Date, neither
Seller nor Parent nor any of their affiliates shall employ any of the Affected
Employees; nor shall any of Seller or Parent for the two year period following
the Closing Date solicit for employment by or for themselves or through their
respective affiliates any employee of Seller who was offered employment with
Buyer or its affiliates after the Closing Date (provided, however, that Seller
or Parent may employ in a business that does not compete with the Business any
Continuing Employee whose employment by Buyer following the Closing is
terminated by Buyer, so long as any such individual would not then be in
violation of any non-competition obligation of such individual to Buyer).
(b) The restrictions in this Section 5.2 shall apply to Seller,
Parent and each of their affiliates following any acquisition (whether by
merger, stock purchase, asset purchase or other form of business combination) of
any of the Seller, Parent or its affiliates by any person on or after the date
hereof.
5.3 Confidentiality. Seller and Parent acknowledge that they
have had access to confidential information of the Business. Seller and Parent
covenant and agree that they shall
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not, and shall cause their affiliates not to, use for their own behalf or
divulge to any third party any confidential information or trade secrets of the
Business; provided, however, that the foregoing shall not be interpreted to
prohibit Seller or Parent from using their general business knowledge (so long
as such knowledge does not constitute confidential information or trade secrets
of the Business) in any manner that would not constitute a violation of Section
5.2. As used herein, confidential information shall consist of all information,
knowledge or data relating to the Business (including all information relating
to inventions, production methods, customer and prospective customer lists,
prices, trade practices and transportation agent lists and agreements) which is
not in the public domain or otherwise published or publicly available. Seller
and Parent represent and warrant that all such confidential information is
included in the Purchased Assets and neither Seller nor Parent nor any of their
affiliates has retained any copies of such confidential information.
5.4 Remedies. Seller and Parent acknowledge that the restrictions
contained in Sections 5.2 and 5.3 are reasonable and necessary to protect the
legitimate interests of Buyer, do not cause Seller or Parent undue hardship, and
that any violations of any provision of such provisions will result in
irreparable injury to Buyer and that, therefore, Buyer shall be entitled to
preliminary and permanent injunctive relief in any court of competent
jurisdiction and to an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which Buyer may be entitled. The
parties hereto agree that, if any provision of Section 5.2 is determined by a
court of competent jurisdiction to be void or unenforceable, the court making
such determination is hereby authorized and requested by the parties to adjudge
the provision in question to be valid and enforceable to the maximum extent
permissible under applicable law.
5.5 Supplements to Disclosure Schedules. Each party hereto shall
promptly (after obtaining knowledge thereof) inform the other party in writing
of (i) any known variances from the representations and warranties made by such
party in this Agreement which arise as a result of the occurrence of events
between the date hereof and the Closing Date, and as a result of which if such
representations and warranties were restated on the Closing Date, such
representations and warranties would not be true and correct in any material
respect, and (ii) any breach of any representation, warranty or covenant
hereunder by such party; provided, however, that for purposes of determining the
rights and obligations of the parties under this Agreement, any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date hereof, to constitute a part of, or an amendment or supplement to,
such party's Schedules, or to cure any breach or inaccuracy of a representation
or warranty, unless so agreed to in writing by the other party; and provided,
further, that such supplemental or amended disclosures by such party shall not
entitle the other party to refuse to consummate the transactions contemplated
hereby unless such supplemental or amended disclosures, individually or in the
aggregate, disclose a failure to satisfy the conditions to Closing specified in
Section 7.2(a) or 7.3(a), as applicable. Without limiting the generality of the
foregoing provision, prior to the Closing, Seller promptly shall notify Buyer in
writing of all material developments affecting assets, liabilities, financial
condition, operations, results of operations, customer or supplier relations,
employee relations, or future prospects of the Business.
5.6 Accounts Receivable. During the six (6) month period following
the Closing, Buyer agrees to use reasonable efforts to collect any portion of
the Accounts Receivable
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that were excluded from the Closing Statement pursuant to Section 2.3(a) or
2.3(b) hereof and were not included in the determination of the Working Capital
Adjustment payment made by Buyer to Seller pursuant to Section 2.3(f) hereof
(the "Unpaid Receivables"), in the same manner and with the same diligence that
Buyer uses to collect their own accounts receivable. Buyer shall apply all money
received from any party first to that party's oldest accounts, unless the payor
objects or otherwise directs. Within ten (10) days following the end of such six
(6) month period, Buyer shall pay to Seller any portion of such Unpaid
Receivables for which Buyer has received actual payment. Buyer shall have no
other obligations to Seller as respects such Unpaid Receivables, and no further
payments in respect of such Unpaid Receivables shall thereafter be made by Buyer
to Seller.
5.7 Hiring; Release. Seller and Parent acknowledge that prior to the
date of this Agreement Buyer has hired, and pursuant to this Agreement Buyer has
the right to hire, persons who previously were employed by Seller or its
affiliates. Seller and Parent hereby consent to such employment by Buyer and
further represent and agree that all agreements, if any, with Seller or its
affiliates that restrict in any manner the ability of such employees to perform
services for Buyer hereby are cancelled. Seller and Parent hereby release and
forever discharge Buyer and its affiliates, and each of them, from and against
any charges, actions, causes of action, claims, grievances, damages,
obligations, suits, agreements, costs or expenses arising out of or relating in
any way, directly or indirectly, to any event, fact, transaction, omission or
act, known or unknown, that arises out of or relates to such employment. Seller
and Parent, on behalf of themselves and their affiliates, hereby covenant that
none of them will pursue any claims or causes of action or xxx any of Buyer or
their affiliates on the basis of any causes of action, claims, grievances,
damages, obligations, costs or expenses, known or unknown, arising out of or
relating in any way, directly or indirectly, to the matters described in this
Section or the conduct by Buyer of its business prior to the date of this
Agreement or the Closing.
5.8 Further Assurances. If at any time after the Closing Date, Buyer
or Seller shall consider or be advised that any further deeds, assignments or
assurances in law or any other acts are necessary, desirable or proper (i) to
vest, perfect or confirm, of record or otherwise, in Buyer, the title to the
Purchased Assets, or (ii) otherwise carry out the purposes of this Agreement,
Buyer, Seller and Parent agree that each of them shall execute and deliver all
such deeds, assignments and assurances in law and do all acts reasonably
necessary, desirable or proper to vest, perfect and confirm title to such
Purchased Assets in Buyer, and otherwise to carry out the purposes of this
Agreement.
6. Employees.
6.1 Affected Employees. On or prior to the Closing Date, Buyer shall
make offers of employment to certain Employees designated by Buyer (the
"Affected Employees"). All offers of employment made by Buyer to any of the
employees of Seller based in Canada pursuant to this Agreement will be for the
same or comparable positions as such Employees had with Seller, at the same base
salary as now provided by Seller (with such position and salary based on the
information provided to Buyer by Seller), and with generally the same or
comparable benefits as are provided by Buyer to similarly-situated employees of
Buyer. Buyer will recognize the past service of such employees with Seller and
its predecessors for all purposes including severance. All offers of employment
to employees of IIS shall be made in
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accordance with the Employment Standards Act of Ontario, Canada. All employees
accepting offers of employment from Buyer shall be "Continuing Employees."
Nothing express or implied in this Agreement shall obligate Buyer to provide
employment to any Continuing Employee for any specific period of time.
6.2 Severance. Buyer agrees to reimburse Seller for 50% of all
severance payments made by Seller to Canadian-based employees of IIS who do not
become Continuing Employees as and to the extent required under applicable
Canadian common law or under the Employment Standards Act of Ontario, Canada;
provided that in no event shall such reimbursement by Buyer exceed Fifteen
Thousand Five Hundred Seventy Three U.S. Dollars ($15,573).
6.3 Other Benefits. Except as specifically set forth in Section 6.2,
Seller shall be responsible for and shall pay or otherwise satisfy all benefits,
liabilities and obligations to employees of Seller (and their beneficiaries and
dependents), including but not limited to salaries, wages, benefits, severance,
bonuses, worker's compensation, accrued but unpaid liabilities for vacation or
sick pay, and other employment obligations attributable to periods prior to
Closing or payable as a result of the Closing or Seller's termination of the
employees.
7. Closing.
7.1 Closing Date. The closing of this transaction (the "Closing")
shall take place at the offices of Lord, Bissell & Brook, 000 Xxxxx XxXxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, at 11:30 a.m. on the second business day (the
"Closing Date") after the satisfaction or waiver of the last of the conditions
set forth in Sections 7.2 and 7.3, which is anticipated to be on or about the
date that is two weeks from the date of this Agreement, or at such other time
and place mutually acceptable to the parties.
7.2 Conditions Precedent to Obligations of Seller. Each and every
obligation of Seller under this Agreement to be performed at the Closing shall
be subject to the fulfillment by Buyer, prior to or at the Closing, of each of
the following conditions unless waived in writing by Seller:
(a) Representations and Warranties. Each representation and warranty
made by Buyer in this Agreement or any Exhibit hereto shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though each such representation and warranty has been made or given as of the
Closing Date (except that in the case of representations and warranties already
qualified by a materiality or Material Adverse Effect qualifier, such
representations and warranties shall be true and correct in all respects as so
written);
(b) Covenants. Buyer shall have performed and complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it prior to or at the Closing Date;
(c) Documents. Buyer shall have executed and delivered to Seller each
of the documents described in Section 7.5;
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(d) No Investigation. No investigation, suit, action or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby; and
(e) Approvals. All necessary approvals from any governmental entity
that are applicable to the sale of the Purchased Assets pursuant to this
Agreement shall have been obtained, except for such approvals the failure of
which to obtain could not reasonably be expected to have a Material Adverse
Effect.
7.3 Conditions Precedent to Obligations of Buyer. Each and every
obligation of Buyer under this Agreement to be performed at the Closing shall be
subject to the fulfillment by Seller, prior to or at the Closing, of each of the
following conditions unless waived in writing by Buyer:
(a) Representations and Warranties. Each representation and warranty
made by Seller or Parent in this Agreement or any Exhibit hereto shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though each such representation and warranty had been made or given as
of the Closing Date (except that in the case of representations and warranties
already qualified by a materiality or Material Adverse Effect qualifier, such
representations and warranties shall be true and correct in all respects as so
written);
(b) Covenants. Seller shall have performed and complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it before or at the Closing Date;
(c) Documents. Seller shall have executed and delivered to Buyer each
of the documents described in Section 7.4;
(d) Consents. Seller shall have obtained all necessary consents,
approvals, certifications, licenses and permits with respect to the transaction
contemplated hereby, including, without limitation, the transfer of the
Purchased Assets to Buyer on terms and conditions reasonably acceptable to
Buyer, the absence of which would have a material adverse effect on Buyer's
rights under this Agreement, or which would constitute a breach pursuant to the
provisions of, or which would result in the termination or loss of any material
right associated with or under any Assumed Contract, permit, or other
obligation, or without which Buyer would be precluded or materially impeded from
conducting the business or obtaining the benefit of the Purchased Assets.
Without limiting the generality of the foregoing, consents to the transaction
described in this Agreement shall have been obtained from each of the persons
listed on Schedule 7.4.
(e) No Investigation. No investigation, suit, action or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby;
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(f) Employment. At least fifty percent (50%) of the Affected
Employees shall have agreed to become employees of Buyer;
(g) Estoppel Certificates. Buyer shall have received Estoppel
Certificates substantially in the form of Exhibit C hereto executed by each of
the lessors of the real property leased by Seller;
(h) Due Diligence. Buyer shall be satisfied in its sole discretion
with the results of its due diligence investigation of Seller and the Business;
(i) Approvals. All necessary approvals from any governmental entity
that are applicable to the sale of the Purchased Assets pursuant to this
Agreement shall have been obtained on terms and conditions reasonably acceptable
to Buyer, except for such approvals the failure of which to obtain could not
reasonably be expected to have a Material Adverse Effect.
7.4 Items to be Delivered by Seller. At the Closing, Seller shall
deliver to Buyer the following documents, all duly executed by Seller:
(a) Xxxx of Sale. The Xxxx of Sale Agreement evidencing the transfer
of title to the Purchased Assets from Seller to Buyer as of the Closing Date,
substantially in the form attached hereto as Exhibit A, and such other
instruments of sale, conveyance, transfer or assignment as may be reasonably
requested by Buyer to carry out the purposes of this Agreement.
(b) Certificate. A certificate signed by the President of Seller that
each of the representations and warranties made by Seller in this Agreement is
true and correct in all material respects on and as of the Closing Date (except
that in the case of representations and warranties already qualified by a
materiality or Material Adverse Effect qualifier, such representations and
warranties shall be true and correct in all respects as so written) with the
same effect as though such representations and warranties had been made or given
on and as of the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Buyer), and that Seller has
performed and complied with all of Seller's obligations under this Agreement
which are to be performed or complied with by it on or prior to the Closing
Date.
(c) Resolutions. Certified resolutions of Seller's and Parent's Board
of Directors approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
(d) Assignment Documents. Assignment documents in form and substance
reasonably satisfactory to Buyer, transferring to Buyer all of Seller's rights
and interest under the Trade Rights and the Assumed Contracts.
(e) Software Support and Transition Services Agreement. A Software
Support and Transition Services Agreement in form and substance mutually
acceptable to the parties, whereby certain employees of Parent in Madison,
Wisconsin will provide certain Software maintenance and support and other
transition services for a period of up to six (6) months (including hosting web
applications, programming support, and items such as phones, T1
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lines, etc.), and for which Buyer shall pay to Parent $100/hour for application
development and $125/hour for project management (with such hourly rates being
increased by $25 for hours required in excess of a total of 30 hours), in each
case in connection with the ongoing development of MediaWorks and Media Taxi
applications.
(f) License. A perpetual, royalty-free, assignable license in
substantially the form attached hereto as Exhibit E permitting Buyer full use of
the portion of the object code and source code for MediaQC that is not being
transferred to Buyer hereunder (i.e., the portion of video conversion).
(g) Other Documents. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to this
Agreement, and such other certificates of authority and documents as Buyer may
reasonably request.
7.5 Items to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Seller the following documents, all duly executed by Buyer.
(a) Assumption Agreement. An Assumption Agreement, substantially in
the form attached hereto as Exhibit B, evidencing the Buyer's assumption of the
Assumed Liabilities.
(b) Payment. The Closing Payment as described in Section 2.2 hereof.
(c) Resolutions. Certified resolutions of Buyer's Board of Directors
approving this Agreement and the consummation of the transactions contemplated
by this Agreement.
(d) Certificate. A certificate signed by the President of Buyer that
each of the representations and warranties made by Buyer in this Agreement is
true and correct in all material respects on and as of the Closing Date (except
that in the case of representations and warranties already qualified by a
materiality or Material Adverse Effect qualifier, such representations and
warranties shall be true and correct in all respects as so written) with the
same effect as though such representations and warranties had been made or given
on and as of the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Seller), and that Buyer has
performed and complied with all of Buyer's obligations under this Agreement
which are to be performed or complied with by it on or prior to the Closing
Date.
(e) Other Documents. All other documents, instruments or writings
required to be delivered to Seller at or prior to the Closing pursuant to this
Agreement, and such other certificates of authority and documents as Seller may
reasonably request.
8. Survival of Representations and Warranties and Covenants.
(a) In the absence of fraud or willful misrepresentation, the
representations and warranties in this Agreement shall survive for two (2) years
following the Closing, except for: (a) the representations set forth in Section
3.2 (Authority) and Section 3.7(a) (Title to Assets) which shall survive for
four (4) years following the Closing; and (b) the representations
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set forth in Section 3.11 (Taxes) and Section 3.20 (Environmental) which shall
survive until 30 days after the expiration of the applicable statute of
limitations. All covenants and agreements in this Agreement shall survive the
Closing indefinitely.
(b) All statements made by or on behalf of Parent and Seller herein
or in the Schedules, Exhibits or in any of the ancillary agreements delivered to
Buyer hereunder shall be deemed representations and warranties of Parent and
Seller relied upon by Buyer. The right to indemnification, reimbursement or
other remedy based upon such representations, warranties, covenants and
obligations shall not be affected by any investigation (including any
environmental investigation or assessment) conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with any such
representation, warranty, covenant or obligation.
9. Indemnification.
9.1 Seller's Indemnity. Seller and Parent shall jointly and severally
indemnify, defend and hold Buyer and its respective affiliates and each of their
officers, directors, stockholders, employees, successors and assigns harmless at
any time and from time to time against any and all losses, liabilities, costs,
claims, actions, damages and expenses, including, without limitation, reasonable
attorneys' fees and disbursements (collectively "Damages"), resulting from,
arising out of, or incurred with respect to:
(a) the breach of any representation or warranty made by Seller or
Parent in this Agreement or in any document or instrument referred to in this
Agreement or delivered by Seller at Closing;
(b) the falsity or breach of any covenant or agreement of Seller or
Parent in this Agreement or in any document or instrument referred to in this
Agreement or delivered by Seller at the Closing;
(c) any Damages resulting from any event or occurrence, act or
failure to act or the ownership and conduct of the Business at any time before
and through the Closing Date, other than the Assumed Liabilities;
(d) the Excluded Liabilities;
9.2 Buyer's Indemnity. Buyer shall indemnify, defend and hold Seller
and Parent and its affiliates and each of their officers, directors,
stockholders, employees, successors and assigns harmless at any time and from
time to time against any and all of Seller's and Parent's Damages resulting
from, arising out of or incurred with respect to:
(a) the breach of any representation or warranty made by Buyer in
this Agreement or in any document or instrument referred to in this Agreement or
delivered by Buyer at Closing;
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(b) the falsity or material breach of any covenant or agreement of
Buyer in this Agreement or in any document or instrument referred to in this
Agreement or delivered by Buyer at the Closing;
(c) any Damages resulting from any event or occurrence, act or
failure to act or the ownership and conduct of the Business at any time after
the Closing Date; and
(d) any Assumed Liabilities.
9.3 Procedure for Asserting Indemnification.
(a) The party seeking indemnification (the "Indemnitee") shall give
the party from whom it is seeking indemnification (the "Indemnitor") written
notice of any matter with respect to which it seeks to be indemnified (the
"Claim") within a reasonable time after Indemnitee has knowledge of acts forming
a sufficient basis for the Claim; provided, however, that no delay on the part
of the Indemnitee in notifying the Indemnitor shall relieve the Indemnitor from
any obligation hereunder unless (and then solely to the extent) the Indemnitor
thereby is prejudiced. The Indemnitor will have the right to defend the
Indemnitee against a Claim with counsel of Indemnitor's choice reasonably
satisfactory to the Indemnitee so long as (a) the Indemnitor notifies the
Indemnitee in writing within fifteen (15) days after the Indemnitee has given
notice of the Claim to the Indemnitor that the Indemnitor will indemnify the
Indemnitee in accordance with this Article 9, (b) the Claim involves primarily
money damages and does not seek an injunction or other equitable relief which
could have a materially adverse effect on Buyer or the Business and (c) the
Indemnitor conducts the defense of the Claim actively and diligently. In such
event, the Indemnitee shall have the right at its expense to employ counsel to
participate in the defense of such Claim. If any of the conditions set forth in
(a) - (c) above are not fulfilled, Indemnitee shall have the right to assume the
defense of the Claim, at the expense of Indemnitor, in such manner as it deems
appropriate.
(b) So long as the Indemnitor is defending or contesting any such
Claim in accordance with the provisions set forth above actively and in good
faith, the Indemnitee shall not settle such Claim. The Indemnitor shall obtain
the prior written consent of the Indemnitee before entering into any settlement
of a Claim or ceasing to defend such claim, if pursuant to or as a result of
such settlement or cessation, injunctive or other equitable relief shall be
imposed against the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and obligations with
respect to such claim and all matters that could have been asserted in
connection with such claim, with prejudice. The Indemnitee shall make reasonably
available to the Indemnitor or its representatives all records and other
materials required by them and in the possession or under the control of the
Indemnitee, for the use of the Indemnitor and its representatives in defending
any such Claim, and shall in other respects give reasonable cooperation in such
defense, and any related costs thereof shall be paid by Indemnitor.
(c) Except for the Claim of a third party as to which Indemnitor has
properly exercised its right to defend in accordance with Section 9.3(a) above,
unless Indemnitor objects to the determination or computation of the total
amount of the indemnification shown in the written notice specified in
Subsection 9.3(a), such amount shall be promptly paid to Indemnitee.
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If Indemnitor objects to such determination or computation, Indemnitor shall
promptly pay to Indemnitee any amounts not so disputed and each party will have
all remedies available at law or in equity.
9.4 Amount Limitation. An Indemnitee shall not be entitled to
indemnification under Sections 9.1(a) and 9.2(a) of this Agreement unless and
until the aggregate of the Indemnitor's indemnification obligations to the
Indemnitee pursuant to this Agreement exceeds Two Hundred Thousand Dollars
($200,000) (the "Threshold"); in such event, the Indemnitee will be entitled to
indemnification for all breaches of representations and/or warranties in the
Threshold amount plus any amounts in excess of such Threshold amount from dollar
one and up to a total aggregate maximum amount equal to the Purchase Price;
provided, however, that the limitations in this Section 9.4 shall not be
applicable: (x) to any intentional breach of, or willful misrepresentation with
respect to, any representation or warranty; or (y) to breaches of the
representations and warranties in Section 3.2 (Authority), Section 3.7(a) (Title
to Assets), Section 3.10 (Brokers), Section 3.20 (Environmental) and Section 4.4
(Brokers). Provided, further, that for purposes of identifying breaches of
representations and warranties that give rise to Damages subject to the
Threshold, any materiality or Material Adverse Effect qualification to such
representations or warranties shall be ignored.
9.5 Not Exclusive Remedy. Buyer, Parent and Seller acknowledge and
agree that the foregoing indemnification provision of this Section 9 shall not
be the exclusive remedy of each of them with respect to the transactions
contemplated by this Agreement, and each of the parties to this Agreement shall
have all rights and remedies available to them in law or in equity by reason of
any breach of this Agreement by any other parties hereto.
10. Termination.
10.1 Right of Termination Without Breach.
(a) Termination Upon Mutual Consent. This Agreement may be terminated
without further liability of any party at any time prior to the Closing by
mutual written agreement of Buyer and Seller.
(b) Termination by Buyer. This Agreement may be terminated without
further liability of Buyer at any time after the date that is three weeks from
the date of this Agreement ("Termination Date"), and prior to the Closing by
giving written notice to Seller if all of the conditions specified in Section
7.2 shall not have been satisfied (except to the extent the satisfaction of any
such condition shall have been waived by Seller).
(c) Termination by Seller. This Agreement may be terminated without
further liability of Seller at any time after the Termination Date and prior to
the Closing by giving written notice to Buyer if all of the conditions specified
in Sections 7.2(e) or 7.3 shall not have been satisfied (except to the extent
the satisfaction of any such condition shall have been waived by Buyer).
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10.2 Termination for Breach.
(a) Termination by Buyer. If there has been a material violation or
breach by Seller of any of the agreements, representation or warranties
contained in this Agreement that has not been cured by Seller within five (5)
days of Buyer notifying Seller in writing of such breach or waived in writing by
Buyer.
(b) Termination by Seller. If there has been a material violation or
breach by Buyer of any of the agreements, representation or warranties contained
in this Agreement which has not been cured by Buyer within five (5) days of
Seller notifying Buyer in writing of such breach or waived in writing by Seller.
10.3 Effect of Termination. If any party terminates this Agreement
pursuant to Section 10, all rights and obligations of the parties hereunder
shall terminate without any liability of either party to the other party (except
for any liability of any party then in breach).
11. Miscellaneous.
11.1 Expenses Incident to Transaction. Each party shall pay its own
expenses and costs relating to the negotiation, execution and performance of
this Agreement, and Parent and Seller agree that none of such costs or expenses
shall be charged against the Purchased Assets.
11.2 Governing Law. This Agreement shall be construed and interpreted
according to the internal laws and decisions of the State of Illinois.
11.3 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to be duly given when personally delivered or when
mailed, certified mail, with postage prepaid, or if by fax, when sent, if
followed up with a hard copy, and
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(a) If to Buyer, to:
Deluxe Media Services, Inc.
000 Xxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: President
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
in each case, with a copy to:
Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
(or at such other address or with a copy to such other
person or address as may have been designated from
time to time by notice in writing); and
(b) If to Seller to:
Sonic Foundry Media Services, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Chief Financial Officer
Attention: General Counsel
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
with a copy to:
XxXxxxx & Xxxxx
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
(or at such other address or with a copy to such other
person or address as may have been designated from
time to time by notice in writing).
11.4 Entire Agreement. This instrument including the documents
referred to herein and the confidentiality agreement entered into between Buyer
and Seller replaces all prior
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agreements among Seller and Buyer and embodies the entire agreement among the
parties hereto with respect to the subject matter hereof, and supersedes any and
all prior agreements, discussions and warranties.
11.5 Modification; Waiver. No modification or waiver of any provisions
of this Agreement or consent to any departure therefrom shall be effective
unless in writing and signed by the party against whom it is sought to be
enforced.
11.6 Assignment; Binding Nature. Except as specifically set forth
herein, this Agreement shall not be assignable by any party without the express
written consent of the other parties, which consent shall not be unreasonably
withheld; provided, however, that Buyer may assign all or any part of its rights
under this Agreement to any entity that directly or indirectly controls, is
controlled by, or is under common control with Buyer; provided further, that if
Buyer assigns all or any part of its rights under this Agreement, Buyer shall
remain obligated to all of the covenants and obligations of Buyer contained in
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns.
11.7 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach hereof shall be settled by a single arbitrator
in an arbitration conducted in Chicago, Illinois in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and with
the express power to subpoena witnesses and records. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator's decision shall be final and nonappealable. The
arbitrator shall have the authority to settle such controversy or claim by
finding that a party should be enjoined from certain actions or be compelled to
undertake certain actions, and in such event said court may enter an order
enjoining and/or compelling such actions as found by the arbitrator. The parties
expressly agree that a court of competent jurisdiction may enter a temporary
restraining order or an order enjoining a breach of this Agreement pending a
final award or further order by the arbitrator. Such remedy, however, shall be
cumulative and nonexclusive, and shall be in addition to any other remedy to
which the parties may be entitled.
11.8 Disclosures and Announcements. Both the timing and the content of
all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Seller or Buyer shall be
subject to the approval of the other in all essential respects, except that a
party's approval shall not be required as to any statements and other
information which the other party is required to submit to the Securities and
Exchange Commission, the NASDAQ, New York Stock Exchange or otherwise as
required by law, in which event the disclosing party will use its best efforts
to advise the other party prior to making the disclosure.
11.9 Counterparts; Facsimile. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument, provided that all such counterparts, in the aggregate, shall contain
the signatures of all parties hereto. Signatures made by facsimile shall be
deemed original signatures
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11.10 Negotiation. The parties have participated jointly in
negotiating and drafting this Agreement. If an ambiguity or question of intent
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
11.11 Third-Party Beneficiaries. No third-party beneficiary rights
shall be implied from anything contained in this Agreement.
11.12 Bulk Transfer Law. Buyer and Seller waive compliance with any
"bulk sales" law under the Wisconsin Uniform Commercial Code or any other bulk
sales or bulk transfer laws.
11.13 Knowledge. The phrase "to Seller's knowledge" or similar phrases
means those facts and circumstances that any director or officer of Seller or
Parent, knows or reasonably should know after due inquiry by such persons
directed to such officers, directors or employees of Seller or such person as
would be reasonably likely to have information relating to the facts or
circumstances in question.
11.14 Definitions. Capitalized terms used but not defined in this
Agreement shall have the respective meanings set forth in the Appendix of
Definitions attached hereto and hereby made a part hereof. The meaning assigned
to each term defined herein or therein shall be equally applicable to both the
singular and the plural forms of such term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein or therein, each
of its other grammatical forms shall have a corresponding meaning.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
or caused it to be duly executed, as of the date first set forth above.
BUYER: SELLER:
DELUXE MEDIA SERVICES, INC. SONIC FOUNDRY, INC.
By: _____________________________ By: ______________________________
Name: _____________________________ Name: ______________________________
Title: _____________________________ Title ______________________________
SONIC FOUNDRY MEDIA SERVICES, INC.
By: ______________________________
Name: ______________________________
Title ______________________________
INTERNATIONAL IMAGE SERVICES INC.
By: ______________________________
Name: ______________________________
Title ______________________________
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APPENDIX OF DEFINITIONS
The following definitions shall be applicable for purposes of this Agreement
except as otherwise specifically provided to the contrary in the text of the
Agreement.
"Accounting Referee" shall have the meaning set forth in Section 2.3 of this
Agreement.
"Accounts Receivable" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Affected Employees" shall have the meaning set forth in Section 6.1 of this
Agreement.
"Agreement" shall have the meaning set forth in the first paragraph of this
Agreement.
"Assumed Contracts" shall have the meaning set forth in Section 1.1(c) of this
Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 1.4 of this
Agreement.
"Business" shall have the meaning set forth in the recitals to this Agreement.
"Buyer" shall have the meaning set forth in the first paragraph of this
Agreement.
"California Lease" shall have the meaning set forth in Section 3.23 of this
Agreement.
"Claim" shall have the meaning set forth in Section 9.3 of this Agreement.
"Closing" shall have the meaning set forth in Section 7.1 of this Agreement.
"Closing Date" shall have the meaning set forth in Section 7.1 of this
Agreement.
"Closing Payment" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Closing Statement" shall have the meaning set forth in Section 2.3(b) of this
Agreement.
"Closing Working Capital" shall have the meaning set forth in Section 2.3 of
this Agreement.
"Consent" shall have the meaning set forth in Section 1.5 of this Agreement.
"Continuing Employees" shall have the meaning set forth in Section 6.1 of this
Agreement.
"Contract" shall have the meaning set forth in Section 3.14 of this Agreement.
"Customer Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Customer Prepayments" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this Agreement.
"Employee" shall have the meaning set forth in Section 3.18(a) of this
Agreement.
A-1
"Employee Plan" includes any pension, retirement, savings, disability, medical,
dental, health, life (including any individual life insurance policy to which
Seller makes premium payments, whether or not such party is the owner,
beneficiary or both of such policy), death benefit, group insurance, profit
sharing, deferred compensation, stock option, bonus, incentive, vacation pay,
severance pay, or other employee benefit plan, trust, Contract, policy or
commitment (including any Pension Plan or Welfare Plan) whether any of the
foregoing is funded, insured or self-funded, written or oral, (a) to which
Seller is a party or by which Seller (or any of its rights, properties or
assets) is bound, or (b) with respect to which Seller has made any payments,
contributions or commitments since January 1, 1995, or may otherwise have any
Liability (whether or not any such party still maintains such plan, trust,
Contract, policy or commitment).
"Environment" means surface waters, groundwaters, surface water sediment, soil,
subsurface strata, ambient air and other environmental medium.
"Environmental Law" means any Law relating to pollution, protection or
preservation of the Environment, human health or safety or natural resources,
relating to Releases or threatened Releases of Hazardous Substances, or
otherwise relating to the manufacturing, processing, distribution, use,
treatment, generation, storage, containment (whether above ground or
underground), disposal, transport or handling of Hazardous Substances, or the
preservation of the Environment or mitigation of adverse effects thereon and
each Law with regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Closing Working Capital" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"Excluded Assets" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Excluded Liabilities" shall have the meaning set forth in Section 1.4 of this
Agreement.
"Final Closing Statement" shall have the meaning set forth in Section 2.3(b) of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section 3.5 of this
Agreement.
"Hazardous Substances" means any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive, dangerous or toxic or a pollutant or a contaminant or otherwise
regulated under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefore, radioactive materials, asbestos or
asbestos-containing materials, polychlorinated biphenyls, material arid wastes,
lead and lead-based paints and materials, and radon.
"IIS" shall have the meaning set forth in the first paragraph of this Agreement.
"Indemnitee" shall have the meaning set forth in Section 9.3 of this Agreement.
"Indemnitor" shall have the meaning set forth in Section 9.3 of this Agreement.
A-2
"Intellectual Property" shall have the meaning set forth in Section 1.1(e) of
this Agreement.
"Interim Working Capital Payment" shall have the meaning set forth in Section
2.4 of this Agreement.
"Inventory" shall have the meaning set forth in Section 1.1 of this Agreement.
"Laws" shall have the meaning set forth in Section 3.6 of this Agreement.
"Material Adverse Effect" shall have the meaning set forth in Section 3.1 of
this Agreement.
"Parent" shall have the meaning set forth in the first paragraph of this
Agreement.
"Pension Plan" shall mean any pension plan, fund or program within the meaning
of Section 3(2) of ERISA (a) to which Seller is a party or by which Seller (or
any of its rights, properties or assets) is bound, or (b) with respect to which
such Person has made any payments, contributions or commitments since January 1,
1995, or may otherwise have any Liability (whether or not any such party still
maintains such plan, trust, Contract, policy or commitment).
"Proposed Closing Statement Adjustments" shall have the meaning set forth in
Section 2.3(b) of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Purchased Assets" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Release" means disposing, discharging, injecting, spilling, leaking, leaching,
dumping, emitting, escaping, emptying, seeping, placing, and the like into or
upon any land or water or air or otherwise into the Environment.
"Restricted Interests" shall have the meaning set forth in Section 1.5 of this
Agreement.
"Seller" shall have the meaning set forth in the first paragraph of this
Agreement.
"SFMS" shall have the meaning set forth in the first paragraph of this
Agreement.
"Software" shall have the meaning set forth in Section 1.1 of this Agreement.
"Sonic Products" shall have the meaning set forth in Section 5.2(a) of this
Agreement.
"Tax" shall have the meaning set forth in Section 3.11 of this Agreement.
"Tax Return" shall have the meaning set forth in Section 3.11 of this Agreement.
"Threshold" shall have the meaning set forth in Section 9.4 of this Agreement.
"Toronto Lease" shall have the meaning set forth in Section 3.23 of this
Agreement.
"Trade Rights" shall have the meaning set forth in Section 1.1 of this
Agreement.
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"Welfare Plan" shall mean any welfare plan, fund or program within the meaning
of Section 3(1) of ERISA (a) to which Seller is a party or by which Seller (or
any of its rights, properties or assets) is bound, or (b) with respect to which
such Person has made any payments, contributions or commitments since January 1,
1995, or may otherwise have any Liability (whether or not any such party still
maintains such plan, trust, Contract, policy or commitment).
"Working Capital Adjustment" shall have the meaning set forth in Section 2.3 of
this Agreement.
"Working Capital Initial Payment" shall have the meaning set forth in Section
2.3(a) of this Agreement.
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