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ASSET PURCHASE AGREEMENT
BY AND AMONG
OPTIO SOFTWARE, INC.,
TRANSLINK SOLUTIONS CORPORATION,
SHAREHOLDERS OF TRANSLINK SOLUTIONS CORPORATION,
XXXXXXX X. XXXXXXX
AND
XXXXXXXX XXXXXXX
DATED AS OF MARCH 27, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE TRANSACTION ................................................. 1
1.1 SALE OF ASSETS ................................................... 1
1.2 NO ASSUMPTION OF LIABILITIES ..................................... 2
1.3 PURCHASE PRICE ................................................... 2
1.4 CLOSING .......................................................... 2
1.5 ALLOCATION OF PURCHASE PRICE ..................................... 3
1.6 PRORATIONS ....................................................... 3
1.7 TAKING OF NECESSARY ACTION; FURTHER ACTION ....................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND AFFILIATES......... 3
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES ..................... 3
2.2 ARTICLES OF INCORPORATION AND BYLAWS ............................. 4
2.3 ASSETS ........................................................... 4
2.4 CAPITALIZATION ................................................... 4
2.5 SELLER'S AUTHORITY RELATIVE TO THIS AGREEMENT .................... 5
2.6 AFFILIATES' AUTHORITY RELATIVE TO THIS AGREEMENT ................. 5
2.7 NO CONFLICT; REQUIRED FILINGS AND CONSENTS ....................... 5
2.8 COMPLIANCE; PERMITS .............................................. 6
2.9 FINANCIAL STATEMENTS ............................................. 6
2.10 NO UNDISCLOSED LIABILITIES ....................................... 7
2.11 ABSENCE OF CERTAIN CHANGES OR EVENTS ............................. 7
2.12 ABSENCE OF LITIGATION ............................................ 10
2.13 EMPLOYEE BENEFIT PLANS ........................................... 10
2.14 LABOR MATTERS .................................................... 13
2.15 RESTRICTIONS ON BUSINESS ACTIVITIES .............................. 14
2.16 REAL PROPERTY LEASES ............................................. 14
2.17 TAXES ............................................................ 15
2.18 ENVIRONMENTAL MATTERS ............................................ 17
2.19 BROKERS .......................................................... 18
2.20 INTELLECTUAL PROPERTY ............................................ 18
2.21 AGREEMENTS, CONTRACTS AND COMMITMENTS ............................ 22
2.22 INSURANCE ........................................................ 24
2.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER ................... 25
2.24 EMPLOYEES AND CONSULTANTS ........................................ 25
2.25 NOTES AND ACCOUNTS RECEIVABLE .................................... 25
2.26 PRODUCT WARRANTY ................................................. 25
2.27 SELLER APPROVAL .................................................. 25
2.28 VOTE REQUIRED .................................................... 26
2.29 COMPLETE COPIES OF MATERIALS ..................................... 26
2.30 XXXX-XXXXX-XXXXXX REPRESENTATIONS ................................ 26
2.31 BANK ACCOUNTS .................................................... 26
2.32 AMOUNTS OWING .................................................... 26
2.33 REPRESENTATIONS COMPLETE ......................................... 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER ....................... 27
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES ..................... 27
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT ............................. 27
3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS ....................... 27
3.4 BROKERS .......................................................... 28
3.5 BOARD APPROVAL ................................................... 28
3.6 ABSENCE OF LITIGATION ............................................ 28
ARTICLE IV ADDITIONAL AGREEMENTS .......................................... 29
4.1 NET BOOK VALUE DETERMINATION ..................................... 29
4.2 CONFIDENTIALITY; ACCESS TO INFORMATION ........................... 29
4.3 PUBLIC DISCLOSURE ................................................ 30
4.4 REASONABLE EFFORTS; NOTIFICATION ................................. 30
4.5 POST CLOSING COVENANTS ........................................... 30
4.6 LITIGATION SUPPORT ............................................... 31
ARTICLE V CONDITIONS TO THE TRANSACTION ................................... 31
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE TRANSACTION. 31
5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER AND AFFILIATES .... 31
5.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER ................ 32
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SETOFF ............. 34
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS ............ 34
6.2 SELLER INDEMNIFICATION ........................................... 34
6.3 BUYER INDEMNIFICATION ............................................ 36
ARTICLE VII FEES, AMENDMENT AND WAIVER .................................... 38
7.1 FEES AND EXPENSES ................................................ 38
7.2 AMENDMENT ........................................................ 38
ARTICLE VIII GENERAL PROVISIONS ........................................... 38
8.1 NOTICES .......................................................... 38
8.2 INTERPRETATION; DEFINITIONS ...................................... 40
8.3 TAX PAYMENTS ..................................................... 41
8.4 COUNTERPARTS ..................................................... 41
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES ...................... 42
8.6 SEVERABILITY ..................................................... 42
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE ............................. 42
8.8 GOVERNING LAW; BINDING ARBITRATION ............................... 42
8.9 RULES OF CONSTRUCTION ............................................ 43
8.10 ASSIGNMENT ....................................................... 43
INDEX OF EXHIBITS
Exhibit A Form of Seller Legal Opinion
Exhibit B Form of Assumption Agreement
Exhibit C Form of Buyer Legal Opinion
Exhibit D Form of Noncompetition Agreement
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and entered
into as of March 27, 2000, by and among Optio Software, Inc., a Georgia
corporation ("BUYER"), Translink Solutions Corporation, a Florida corporation
("SELLER"), the Xxxxxxx X. Xxxxxxx Family Trust, of which X. Xxxxxxx (as defined
below) is the trustee (the "X. XXXXXXX TRUST"), the Xxxxxxxx X. Xxxxxxx Family
Trust of which X. Xxxxxxx (as defined below) is the trustee (the "X. XXXXXXX
TRUST"), and Xxxxx Xxxxxx ("XXXXXX") (each of X. Xxxxxxx Trust, X. Xxxxxxx Trust
and Xxxxxx are separately referred to herein as a "SHAREHOLDER" and collectively
as the "SHAREHOLDERS"), Xxxxxxx X. Xxxxxxx ("X. XXXXXXX"), and Xxxxxxxx Xxxxxxx
("X. XXXXXXX") (each of X. Xxxxxxx and X. Xxxxxxx are separately referred to
herein as a "PRINCIPAL" and collectively as the "PRINCIPALS") (the Shareholders
and the Principals shall collectively be referred to herein as "AFFILIATES").
Buyer, Seller, each Shareholder and each Principal are sometimes referred to
herein individually as a "PARTY" and collectively as the "PARTIES".
RECITALS
WHEREAS, prior to this Agreement, but not in connection with the
transactions contemplated herein, X. Xxxxxxx and X. Xxxxxxx, as former
shareholders of the Seller, transferred all of their ownership
interests in the Seller to certain family trusts of which they are the
trustees and over which they maintain control.
WHEREAS, Seller desires to sell, transfer and assign to Buyer and
Buyer desires to purchase and acquire from Seller certain assets of
Seller relating to Seller's application servicing business, upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1 SALE OF ASSETS.
(a) Upon the terms and conditions set forth herein, Seller
shall sell, assign, convey, transfer and deliver to Buyer, and Buyer shall
purchase and acquire from Seller (the "TRANSACTION"), all of Seller's properties
and assets of every kind and nature wherever situated (collectively, the
"ASSETS") (other than the Excluded Assets, as defined below), including, but not
limited to: (i) fixed assets, furniture, fixtures and equipment; (ii) permits,
certificates and licenses; (iii) finished goods and inventory; (iv) cash, cash
equivalents, accounts receivable, contract rights, instruments and chattels;
(iv) supply information, customer lists, customer files, ledger sheets and
books, records and other information; (vi) deferred charges, refunds, claims for
refunds, causes of action, advance payments, prepaid items, rights of offset and
credits, security deposits, of all kinds; (vii) intangible assets, good will,
and Seller Intellectual Property (as defined below); (viii) leases, leasehold
interests, agreements and contracts listed on
Schedule 1.1(a) attached hereto; (ix) the exclusive right to use the name
"Translink" or any variations or deviations thereof; (x) all assets listed on
the Financial Statements (as defined herein below) or subsequently acquired; and
(xi) all records relating to the Assets and the business of the Seller.
(b) The Assets shall not include and Seller shall not sell,
assign, convey, deliver or transfer to Buyer the assets listed on Schedule
1.1(b) (the "EXCLUDED ASSETS").
1.2 NO ASSUMPTION OF LIABILITIES.
(a) The liabilities listed on Schedule 1.2(a) shall be
referred to collectively herein as the "ASSUMED LIABILITIES." From and after the
Closing Date, Buyer shall only assume responsibility for the Assumed
Liabilities. Buyer shall not assume or be obligated to pay or discharge any
liabilities, debts or obligations of Seller other than the Assumed Liabilities,
including, but not limited to, payroll, employee compensation, benefit plan
obligations, vacation or severance pay for employees, or any type of taxes due
from Seller, other than those liabilities, debts and obligations listed on
Schedule 1.2(a). In addition, Buyer shall not assume or be obligated to pay or
discharge Seller's obligations under any contracts, leases or obligations, other
than those, if any, set forth on Schedule 1.2(a). All liabilities not expressly
assumed by Buyer shall be the sole responsibility of Seller.
(b) By virtue of the Closing (as defined below), none of the
Assumed Liabilities shall be deemed expanded, increased, broadened or enlarged
with respect to the rights or remedies of third parties against Buyer as
compared to the rights or remedies which such third parties would have had
against Seller had the Closing not taken place. Nothing contained herein shall
be deemed to foreclose or prevent Buyer from contesting in good faith any of
Seller's or Buyer's duties and liabilities to third parties; provided that the
Buyer shall at all times comply with the indemnification obligations set forth
in Section 6.2.
1.3 PURCHASE PRICE Subject to Section 4.1 hereof, the purchase price for
the Assets (the "PURCHASE PRICE") to be paid to Seller shall be five million
dollars ($5,000,000) in cash, payable at Closing by wire transfer or certified
check.
1.4 CLOSING.
(a) The closing (the "CLOSING") of the purchase and sale
contemplated by this Agreement shall take place at the offices of Xxxxxx,
Xxxxxxx & Xxxxxx, L.L.P., 1600 Atlanta Financial Center, 0000 Xxxxxxxxx Xxxx,
X.X., Xxxxxxx, Xxxxxxx on March 27, 2000 (the "CLOSING DATE").
(b) At the Closing, Seller shall deliver to Buyer such bills
of sale, endorsements, certificates of title, assignments and other good and
sufficient instruments of transfer and conveyance as may be required to
effectively vest in Buyer good and marketable title to the Assets, free and
clear of all liens and encumbrances.
(c) Buyer shall pay all transfer, stamp and documentary taxes
(if any) and any and all other taxes relating to the consummation of the
transactions set forth herein.
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1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price will be allocated to
the various Assets (for all purposes, including financial accounting and Tax (as
defined in Section 2.17) reporting purposes) as mutually agreed upon by the
parties according to the Closing Balance Sheet (as defined below) within thirty
(30) days of the Closing and as shall be set forth on Schedule 1.5 attached
hereto.
1.6 PRORATIONS. All rents, charges, Taxes (as defined in Section 2.17),
fees and expenses relating to the Assets (other than the Assumed Liabilities)
shall be prorated as of the Closing Date, with all such expenses (other than the
Assumed Liabilities) for the period of time prior to the Closing Date to be paid
by Seller. Any and all payments received by Seller relating to the accounts
receivable of Seller after the Closing Date shall promptly be delivered, in
full, to Buyer.
1.7 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Buyer with full right, title and
possession to the Assets, the Buyer will take all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND AFFILIATES
As of the date hereof and as of the Closing Date, each of Seller and
each Affiliate, jointly and severally, hereby represents and warrants to Buyer,
subject to such exceptions as are specifically disclosed in writing in the
Schedule attached hereto (the "SELLER SCHEDULES"), as follows (nothing in any
schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless such schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail such that the facts, information or events disclosed can be readily
verified or ascertained from the books records, and files of the Seller or the
Affiliates. Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself)):
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
Seller is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders ("APPROVALS")
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to have such Approvals would not, individually or in the aggregate,
be material to the Seller. Seller is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so
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duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, be material to the Seller.
(b) Seller has no subsidiaries. Seller has not agreed nor is
obligated to make nor is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan,
commitment or undertaking of any nature, as of the date hereof or as may
hereafter be in effect (a "CONTRACT") under which it may become obligated to
make, any future investment in or capital contribution to any other entity.
Seller does not directly or indirectly own any equity or similar interest in or
any interest convertible, exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business,
association or entity.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. Seller has previously furnished
to Buyer a complete and correct copy of its Articles of Incorporation and Bylaws
as amended to date (together, the "SELLER CHARTER DOCUMENTS"). Such Seller
Charter Documents are in full force and effect. Seller is not in violation of
any of the provisions of the Seller Charter Documents.
2.3 ASSETS. Schedule 2.3 contains a true and correct list and a description
of all assets of the Seller, including, but not limited to, vehicles, equipment,
furniture, and fixtures and all other items of personal property of Seller
indicating, with respect to each, those which are owned by Seller and those
which are leased by Seller. Seller has (a) with respect to those assets listed
on Schedule 2.3 as "owned," good and merchantable title to all such assets,
including, but not limited to, furniture, fixtures, equipment, vehicles, and
other items of personal property (whether or not disclosed in Schedule 2.3),
free and clear of all liens, claims, charges, security interests, and other
encumbrances of any kind and of any nature, except as disclosed on Schedule 2.3,
which with regard to Assets other than Excluded Assets shall either be canceled,
released or terminated on the Closing Date, and (b) with respect to assets
listed on Schedule 2.3, as "leased," a valid, and enforceable leasehold
interest. All of the Seller's assets are in good operating condition (normal
wear and tear excepted), are reasonably fit for the purposes for which such
properties are presently used, are adequate and usable for the continued
operation of the Seller as the same is presently conducted, and none of such
properties are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially from
historic patterns.
2.4 CAPITALIZATION. The authorized capital stock of Seller consists of
ten thousand (10,000) shares of Seller Common Stock, $1.00 par value per share.
As of the Closing Date, three hundred (300) shares of Seller Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable and no shares of Seller Common Stock were held in treasury by
Seller. All shares of Seller Common Stock are owned of record and beneficially
by the Shareholders free and clear of all liens, claims, encumbrances, options
or other restrictions, and in the amounts set forth on Schedule 2.4. All
outstanding shares of Seller Common Stock have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements (as defined below) and (ii) all requirements set forth in
applicable Contracts. For the purposes of this Agreement, "LEGAL REQUIREMENTS"
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution,
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ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity (as defined below) and (ii) all
requirements set forth in applicable contracts, agreements, and instruments.
2.5 SELLER'S AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Seller and no other proceedings on the part of
Seller is necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Seller and, assuming the due authorization, execution and
delivery by Buyer, constitute legal and binding obligations of Seller,
enforceable against Seller in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditor rights generally and (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
2.6 AFFILIATES' AUTHORITY RELATIVE TO THIS AGREEMENT. The Affiliates have
all necessary power and authority to execute and deliver this Agreement and to
perform their obligations hereunder. The execution and delivery of this
Agreement by the Affiliates and the consummation by the Affiliates of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Affiliates and no other proceedings on the
part of the Affiliates are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by the Affiliates and, assuming the due
authorization, execution and delivery by Buyer, constitutes legal and binding
obligation of the Affiliates, enforceable against the Affiliates in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
2.7 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller and
the Affiliates does not, and the performance of this Agreement by Seller and the
Affiliates shall not, (i) conflict with or violate the Seller Charter Documents,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Seller or the Affiliates or by which its or any of their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Seller's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Seller
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Seller is a party or by which Seller or its properties are bound or affected.
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(b) The execution and delivery of this Agreement by Seller and
the Affiliates does not, and the performance of this Agreement by Seller and the
Affiliates shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a "GOVERNMENTAL
ENTITY"), except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
be material to the Seller or Buyer or have a Material Adverse Effect on the
parties hereto, prevent consummation of the Transaction or otherwise prevent the
parties hereto from performing their obligations under this Agreement. The Bulk
Transfer Laws of the State of Florida do not apply to this transaction.
2.8 COMPLIANCE; PERMITS.
(a) Seller is not in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to
Seller or by which its properties are bound or affected, or (ii) any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Seller is a party or by
which Seller or its properties are bound or affected, except for any conflicts,
defaults or violations that (individually or in the aggregate) would not cause
the Seller to lose any material benefit or incur any material liability. No
investigation or review by any governmental or regulatory body or authority is
pending or, to the knowledge of Seller or the Affiliates, threatened against
Seller, nor has any governmental or regulatory body or authority indicated an
intention to conduct the same, other than, in each such case, those the outcome
of which could not, individually or in the aggregate, reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
the Seller, any acquisition of material property by the Seller or the conduct of
business by the Seller.
(b) Seller holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to
operation of the business of Seller (collectively, the "SELLER PERMITS"). Seller
is in compliance in all material respects with the terms of the Seller Permits.
2.9 FINANCIAL STATEMENTS.
(a) The Seller has provided to Buyer its reviewed balance
sheets as of December 31, 1997, 1998 and 1999 and its reviewed statements of
operations, statements of shareholders' equity and statements of cash flows for
the twelve (12) month periods ended December 31, 1997, 1998 and 1999
collectively, the "YEARLY FINANCIAL STATEMENTS"). The Seller has also provided
to Buyer its unaudited balance sheet as of February 29, 2000 (the "MOST RECENT
BALANCE SHEET") and its unaudited statement of operations for the approximately
51 week period ended March 24, 2000 (the "MOST RECENT INCOME STATEMENT",
together with the Most Recent Balance Sheet and the Yearly Financial Statements,
collectively, the "FINANCIAL STATEMENTS"). Each of the Financial Statements was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto and, in the case of unaudited statements, they do
not contain footnotes and the Seller has accrued all expenses through March 24,
2000 as discussed with Buyer and the Seller adjusted its accounts receivable to
reflect a reserve of $0 for
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doubtful accounts) and each fairly presents the consolidated financial position
of Seller at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal adjustments which
were not or are not expected to be, individually or in the aggregate, material
in amount.
(b) From December 31, 1999 to the Closing Date, the Affiliates
have not withdrawn and will not withdraw, in excess of $0 in the aggregate,
as dividends, shareholders distributions or as compensation. There are no
reserved and unpaid dividends or other distributions, not any obligations of
Seller to pay any dividends or distributions to the Affiliates. For Seller's
fiscal year ended December 31, 1999, total dividends and compensation paid to
the Affiliates was $0, in the aggregate.
2.10 NO UNDISCLOSED LIABILITIES. Seller has no liabilities (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of
Seller, except (i) liabilities provided for in Seller's balance sheet as of
December 31, 1999 or (ii) liabilities incurred since December 31, 1999 in the
Ordinary Course of Business, none of which is individually or in the aggregate
are material to the business, results of operations, financial condition or
prospects of Seller.
2.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999:
(a) there has not been any Material Adverse Effect on Seller;
(b) there has not been any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Seller's capital stock, or any purchase,
redemption or other acquisition by Seller of any of Seller's capital stock or
any other securities of Seller or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements;
(c) there has not been any granting by Seller of any increase
in compensation or fringe benefits, except for normal increases of cash
compensation to non-officer employees in the Ordinary Course of Business
consistent with past practice, or any payment by Seller of any bonus, except for
bonuses made to non-officer employees in the Ordinary Course of Business
consistent with past practice, or any granting by Seller of any increase in
severance or termination pay or any entry by Seller into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving Seller of the nature
contemplated hereby;
(d) the Seller has not entered into any licensing or other
agreement with regard to the acquisition or disposition of any Intellectual
Property (as defined in Section 2.20);
(e) there has not been any material change by Seller in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP;
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(f) there has not been any revaluation by Seller of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets of
the Seller other than in the Ordinary Course of Business;
(g) the Seller has not sold, leased, transferred, or assigned
any assets or properties, tangible or intangible, outside the Ordinary Course of
Business (as defined below);
(h) the Seller has not acquired or agreed to acquire by
merging or consolidating with, or by purchasing any equity interest in or a
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets or enter into any
joint ventures, strategic partnerships or alliances;
(i) Seller has not entered into, assumed or become bound under
or obligated by any agreement, contract, lease or commitment (collectively a
"SELLER AGREEMENT") or extended or modified the terms of any Seller Agreement
which (i) involves the payment of greater than $10,000 per annum, (ii) involves
any payment or obligation to any affiliate of the Seller other than in the
Ordinary Course of Business, (iii) involves the sale of any material assets, or
(iv) involves any license of any Seller Intellectual Property;
(j) no party (including the Seller) has accelerated,
terminated, made modifications to, or canceled any agreement, contract, lease,
or license to which the Seller is a party or by which it is bound and the Seller
has not modified, canceled or waived or settled any debts or claims held by it,
outside the Ordinary Course of Business, or waived or settled any rights or
claims of a substantial value, whether or not in the Ordinary Course of
Business;
(k) none of the assets of the Seller, tangible or intangible,
has become subject to any Lien (other than assets acquired in the Ordinary
Course of Business which became subject to a bank lien under an after-acquired
property clause);
(l) the Seller has not made any capital expenditures except in
the Ordinary Course of Business and not exceeding $50,000 in the aggregate of
all such capital expenditures;
(m) the Seller has not made any capital investment in, or any
loan to, any other person;
(n) the Seller has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness (other than
advances under a pre-existing line of credit);
(o) Other than in the Ordinary Course of Business to Customers
pursuant to valid License Agreements disclosed in the Schedules hereto, Seller
has not granted any license or sublicense of any rights under or with respect to
any Seller Intellectual Property (as defined below);
-8-
(p) there has not been (i) any purchase, redemption,
retirement, or other acquisition by the Seller of any shares of any such capital
stock or (ii) any declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(q) Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property in excess of $10,000
in the aggregate of all such damage, destruction and losses;
(r) the Seller has not suffered any repeated, recurring or
prolonged shortage, cessation or interruption of communications, customer
access, supplies or utility services;
(s) Seller has not made any loan to, or entered into any other
transaction with, or paid any bonuses in excess of an aggregate of $10,000 to,
any of its affiliates, directors, officers, or employees or their affiliates,
and, in any event, any such transaction was on fair and reasonable terms no less
favorable to the Seller than would be obtained in a comparable arm's length
transaction with a Person which is not such a director, officer or employee or
affiliate thereof;
(t) Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(u) the Seller has not granted any increase in the
compensation or fringe benefits of any of its directors or officers, or, except
in the Ordinary Course of Business, any of its employees;
(v) the Seller has not adopted, amended, modified, or
terminated any bonus, profit sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, or
employees (or taken any such action with respect to any other Plan (as defined
below));
(w) the Seller has not made any other change in employment
terms for any of its directors or officers, and the Seller has not made any
other change in employment terms for any other employees outside the Ordinary
Course of Business;
(x) the Seller has not suffered any adverse change or any
threat of any adverse change in its relations with, or any loss or threat of
loss of, any of its major customers, distributors or partners;
(y) the Seller has not suffered any adverse change or any
threat of any adverse change in its relations with, or any loss or threat of
loss of, any of it major suppliers;
(z) neither the Seller nor the Affiliates have received notice
and have no knowledge of any actual or threatened labor trouble or strike, or
any other occurrence, event or condition of a similar character;
-9-
(aa) the Seller has not changed any of the accounting
principles followed by it or the method of applying such principles;
(bb) Seller has not entered into any transaction other than in
the Ordinary Course of Business, except as otherwise disclosed in the Schedules
to this Section 2.10; or
(cc) Seller has not become obligated to do any of the
foregoing.
2.12 ABSENCE OF LITIGATION.
(a) There are (and since the Seller's inception there have
been) no claims, actions, suits or proceedings pending or, to the knowledge of
Seller or the Affiliates, threatened (or, to the knowledge of Seller or the
Affiliates, any governmental or regulatory investigation pending or threatened)
against Seller or any properties or rights of Seller, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign. None of the Seller or any of its properties or rights are
subject to any outstanding injunction, order, decree, ruling or charge.
(b) There are no claims, actions, suits or proceedings pending
or, to the knowledge of the Affiliates, threatened (or, to the knowledge of the
Affiliates, any governmental or regulatory investigation pending or threatened)
against the Affiliates or any properties or rights of the Affiliates, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign. None of the Affiliates or any of their properties or
rights are subject to any outstanding injunction, order, decree, ruling or
charge.
2.13 EMPLOYEE BENEFIT PLANS.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements (whether or not set
forth in a written document and including, without limitation, all "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) covering (at any time within
the last seven years) any current or former employee, director or consultant of
Seller, any trade or business (whether or not incorporated) which is a member of
a controlled group or which is under common control with Seller within the
meaning of Section 414 of the Code (for purposes of Section 2.13 and Section
2.14, an "ERISA AFFILIATE") or any spouse, child or other dependent of such
current or former employee, director or consultant, or with respect to which
Seller has or may in the future have liability, are listed on Schedule 2.12(a)
(the "PLANS"). Seller has provided to Buyer: (i) correct and complete copies of
all documents embodying each existing Plan of the Seller including (without
limitation) all amendments thereto, all related trust documents, and all written
agreements and contracts relating to each such Plan; (ii) the three (3) most
recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Plan; (iii) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Plan; (iv) all IRS or DOL
determination, opinion, notification and advisory letters; (v) all
correspondence to or from any governmental agency relating to any Plan; (vi) all
COBRA forms and related notices; (vii) all
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discrimination tests for each Plan for the most recent three (3) plan years;
(viii) the most recent annual actuarial valuations, if any, prepared for each
Plan; (ix) if the Plan is funded, the most recent annual and periodic accounting
of Plan assets; (x) all written agreements and contracts relating to each Plan,
including, but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; (xi) all communications to employees or
former employees, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any liability under any Plan or
proposed Plan; (xii) all policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Plan or pertaining to bonding of fiduciaries
in accordance with Section 412 of ERISA; (xiii) all insurance contracts,
administrative services agreements or contracts relating to any Plan, and (xiv)
all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with any Plan.
(b) Each Plan has been operated, maintained and administered
in all respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (foreign or
domestic), including but not limited to ERISA and the Code, which are applicable
to such Plans. No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) has been brought,
or to the knowledge of Seller or the Affiliates is threatened, against or with
respect to any such Plan. There are no audits, inquiries, investigations or
other proceedings pending or, to the knowledge of Seller or the Affiliates,
threatened by the Internal Revenue Service (the "IRS"), the Department of Labor
(the "DOL"), or any other governmental agency with respect to any Plans. All
contributions, reserves or premium payments required to be made or accrued as of
the Closing Date to the Plans have been timely made or accrued or will be timely
made or accrued. Each Plan shall be fully funded as of the Closing Date in an
amount sufficient to pay all liabilities (whether or not vested) accrued
(including liabilities and obligations for health care, life insurance and other
benefits after termination of employment) and claims incurred to the Closing
Date, or adequate reserves will be set up on the books and records of Seller as
of the Closing Date for all such liabilities, or paid-up insurance shall be
effective to fund all such liabilities. Any Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code (i) has either obtained a favorable determination,
notification, advisory and/or opinion letter, as applicable, as to its qualified
status from the IRS or still has a remaining period of time under applicable
Treasury Regulations or IRS pronouncements in which to apply for such letter and
to make any amendments necessary to obtain a favorable determination, and (ii)
incorporates or has been amended to incorporate all provisions required to
comply with the Tax Reform Act of 1986 and subsequent legislation. Seller does
not have any plan or commitment to establish any new Plan, to modify any Plan
(except to the extent required by law or to conform any such Plan to the
requirements of any applicable law, in each case as previously disclosed to
Buyer in writing, or as required by this Agreement), or to enter into any new
Plan. Each Plan can be amended, terminated or otherwise discontinued after the
Closing Date in accordance with its terms, without liability to Buyer, Seller or
any of its ERISA Affiliates (other than ordinary administration expenses), and
each Plan contains provisions which allow additional and/or future benefits
under the Plan to be discontinued at any time and for any reason, and which
allow the Plan to be terminated by Seller at any time and for any reason, and if
such Plan were terminated on or prior to the Closing Date, no additional
liability would be incurred by Seller by such action.
-11-
(c) Neither Seller, nor any of its ERISA Affiliates has at any
time ever maintained, established, sponsored, participated in, or contributed
to, or has or could have any liability because of (i) any plan subject to Title
IV of ERISA, (ii) any plan subject to Section 412 of the Code, (iii) any
"multiemployer plan," as such term is defined in Sections 3(37) or 4001(a)(3) of
ERISA, (iv) any "defined benefit plan" as defined in Section 3(35) of ERISA, or
(v) any plan described in Section 413(c) of the Code in existence on or prior to
the Closing Date. Neither Seller, nor any of its ERISA Affiliates, nor any
officer or director of Seller or its ERISA Affiliates is subject to any
liability or penalty under Section 4975 through 4980B of the Code or Title I of
ERISA. There are no audits, inquiries or proceedings pending or, to the
knowledge of Seller or Affiliates, its ERISA Affiliates, threatened by the IRS
or DOL with respect to any Plan. No "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Plan. No
person who would be a fiduciary of any Plan has, on or prior to the Closing
Date, breached any responsibility or obligation imposed by law which would
subject Seller or any ERISA Affiliate, or any person whom Seller or any ERISA
Affiliate has an obligation to indemnify, to any liability. All communications
with respect to each Plan by Seller or any ERISA Affiliate on or prior to the
Closing Date have reflected accurately the documents and operations of such
Plan, and there are no communications or failures to communicate with respect to
any Plan which could subject Seller or any ERISA Affiliate to any liability.
(d) Neither Seller, nor any of its ERISA Affiliates, nor any
of their agents, employees servants, independent contractors, attorneys,
representatives, actuaries, accountants, officers, or directors, has, prior to
the Closing Date, violated any of the health continuation requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
the requirements of the Family Medical Leave Act of 1993, as amended, the
requirements of the Women's Health and Cancer Rights Act, as amended, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, as
amended, the requirements of Title VII of the Civil Rights Act of 1964 and/or
the Civil Rights Act of 1991 and/or 42 U.S.C. Section 1981, all as amended, the
requirements of the Age Discrimination in Employment Act of 1967, the Age
Discrimination Claims Assistance Act of 1988, and the Older Workers' Benefit
Protection Act, all as amended, the requirements of the Americans with
Disabilities Act, as as amended, the requirements of the Employee Retirement
Income Security Act of 1974, as amended, or any similar provisions of state law
applicable to employees of Seller which could result in liability for Seller.
None of the Plans promises or provides retiree medical or other retiree welfare
benefits to any person except as required by applicable law, and Seller has
represented, promised or contracted (whether in oral or written form) to provide
such retiree benefits to any employee, former employee, director, consultant or
other person, except to the extent required by statute.
(e) Seller is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. No employee of Seller is represented by any labor union or
covered by any collective bargaining agreement and, to the knowledge of Seller
or the Affiliates, no campaign to establish such representation is in progress.
There is no pending or, to the knowledge of Seller or the Affiliates, threatened
labor dispute involving Seller and any group of its employees nor has Seller
experienced any labor
-12-
interruptions over the past three (3) years, and Seller consider its
relationship with its employees to be good.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any shareholder, director or employee of Seller
under any Plan or otherwise, (ii) increase any benefits otherwise payable under
any Plan, or (iii) result in the acceleration of the time of payment or vesting
of any such benefits. No payment or benefit which will or may be made by Seller
or its ERISA Affiliates with respect to any current or former employee,
consultant or director will be characterized as a "parachute payment," within
the meaning of Section 280G(b)(2) of the Code.
(g) Seller: (i) is in compliance in all respects with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment,
immigration, and wages and hours, in each case, with respect to current and
former employees, consultants and directors; (ii) has withheld and reported all
amounts required by law or by agreement to be withheld and reported with respect
to wages, salaries and other payments to current and former employees,
consultants and directors; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for current and former employees, consultants and directors (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against Seller under any worker's compensation policy or
long-term disability policy.
2.14 LABOR MATTERS. Seller has no leased employees. (i) There are no
controversies pending or, to the knowledge of Seller or the Affiliates,
threatened, between Seller and any of their respective employees; (ii) Seller is
not (nor ever has been) a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Seller nor does Seller or
its ERISA Affiliates know of any activities or proceedings of any labor union to
organize any such employees; and (iii) none of Seller or its ERISA Affiliates
have knowledge of any strikes, slowdowns, work stoppages or lockouts, or threats
thereof, by or with respect to any employees of Seller.
2.15 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Seller or to
which the Seller is a party which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of
Seller, any acquisition of property by Seller or the conduct of business by
Seller as currently conducted.
-13-
2.16 REAL PROPERTY LEASES.
(a) The Seller does not hold any interest in real property
(including, but not limited to, any interest as a fee owner or any interest as
lessor, lessee, sublessor, sublessee, assignor, assignee or guarantor or other
surety) except for the leasehold interests described on Schedule 2.16, and such
Schedule specifies in the case of each lease the name of the lessor, sublessor,
lessee or sublessee thereunder, the lease term and the basic annual rental and
other items paid or payable with respect thereto.
(b) The Seller has valid, binding and enforceable leases and
subleases with respect to all real property, as leased or subleased by it free
and clear of all liens, claims and encumbrances of any kind, except that the
enforceability of the leases and subleases may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance). To
the knowledge of the Seller or the Affiliates, there is no development affecting
any such properties pending or that might curtail in any material respect the
present or future use of such property for the purpose for which it is used.
Neither the Seller nor, to the knowledge of the Seller or the Affiliates, any
other party to any such lease has breached any material provision of, or is in
default in any material respect under, the terms of such lease, nor, to the
knowledge of the Seller or the Affiliates, does there exist any event which with
notice or the lapse of time or both would constitute a material breach or cause
a default in any material respect under the terms of any such lease. The
transactions contemplated by this Agreement do not require the consent of any
lessor under, and will not result in the termination of, any such lease.
(c) The copies of the leases heretofore provided by the Seller
to Buyer are true, correct and complete copies of such leases. The leases have
not been modified or amended since the commencement of the terms specified in
the respective leases, except as disclosed in the copies made available to
Buyer, and each lease continues to be valid, binding and enforceable in
accordance with its terms, except that the enforceability of the leases may be
limited by (iii) applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and (iv) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance).
2.17 TAXES.
(a) For the purposes of this Agreement, "TAX" or "TAXES"
refers to (i) any and all federal, territorial, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes and escheatment payments, together with all interest, penalties
and additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity; (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being or ceasing to be a member of an affiliated, consolidated,
combined or unitary group for any period
-14-
(including, without limitation, any liability under Treas. Reg. Section 1.1502-6
or any comparable provision of foreign, state or local law); and (iii) any
liability for the payment of any amounts of the type described in clause (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) (i) The Seller has timely filed all federal, territorial,
state, local and foreign returns, estimates, information statements and reports
("RETURNS") relating to Taxes required to be filed by the Seller with any Tax
authority. All such Returns are correct and complete in all respects. The Seller
has paid all Taxes shown to be due on such Returns. The Seller is not currently
the beneficiary of any extensions of time within which to file any Returns.
(ii) The Seller, as of the Closing Date, will have withheld
and paid to the proper authority all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(iii) The Seller has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Seller, nor has the Seller executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) There is no dispute, claim, or proposed adjustment
concerning any Tax liability of the Seller either (A) claimed or raised by any
authority in writing or (B) based upon personal contact with any agent of such
authority. Seller is not a party to nor has it been notified that it is the
subject of any pending, proposed, or threatened action, investigation,
proceeding, audit, claim or assessment by or before the Internal Revenue Service
or any other governmental authority; and there is no claim for assessment,
deficiency or collection of Taxes, or proposed assessment, deficiency, or
collection from the Internal Revenue Service or any other governmental authority
against the Seller which has not been satisfied, nor does the Seller have any
reason to believe that any such notice will be received in the future. The
Internal Revenue Service has never audited any federal income tax return of the
Seller. Seller has not filed any requests for rulings with the Internal Revenue
Service. No power of attorney has been granted by the Seller or affiliates with
respect to any matter relating to Taxes of the Seller. There are no tax liens of
any kind upon any property or assets of the Seller, except for inchoate liens
for taxes not yet due and payable.
(v) Seller has no liability for any unpaid Taxes which have
not been accrued for or reserved on the Seller Most Recent Balance Sheet in
accordance with GAAP, whether asserted or unasserted, contingent or otherwise.
(vi) There is no contract, agreement, plan or arrangement to
which the Seller is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of the Seller that, individually or collectively, would reasonably be
expected to give rise to the payment of any amount that would
-15-
not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code. There is
no contract, agreement, plan or arrangement to which the Seller is a party or by
which it is bound to compensate any individual for excise taxes paid pursuant to
Section 4999 of the Code.
(vii) Seller has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Seller.
(viii) Seller is not a party to or has any obligation under
any tax-sharing, tax indemnity or tax allocation agreement or arrangement.
(ix) None of the Seller's assets are tax exempt use property
within the meaning of Section 168(h) of the Code.
(x) The Seller has not been a United States real property
holding corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Seller (A) has
not been a member of any affiliated group within the meaning of Code Sec. 1504
or any similar group defined under a similar provision of territorial, state,
local, or foreign law (an "AFFILIATED GROUP") filing a consolidated federal
income Tax Return (other than a group the common parent of which was the Seller)
and (B) has no liability for the taxes of any Person (other than the Seller)
under Treas. Reg. Section 1.1502-6 (or any similar provision of territorial,
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise. The Seller has not requested or received a ruling from any taxing
authority or signed a closing agreement with any taxing authority. No claim has
ever been made by a taxing authority in a jurisdiction where the Seller does not
file Tax returns that the Seller is or may be subject to taxation by such
jurisdiction. Seller has not been a "distributing corporation" (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the three-year period ending as of
the date of this Agreement. Seller has not received a Tax opinion with respect
to any transaction relating to Seller other than a transaction in the ordinary
course of business. Seller is not the direct or indirect beneficiary of a
guarantee of Tax benefits or any other arrangement that has the same economic
effect with respect to any transaction or Tax opinion relating to Seller. Seller
is not a party to an understanding or arrangement described in Section 6111(d)
or Section 6662(d)(2)(c)(iii) of the Code. Seller is not a party to a lease
arrangement involving a defeasance of rent, interest, or principal.
2.18 ENVIRONMENTAL MATTERS. Seller (i) has obtained all applicable
permits, licenses and other authorizations that are required under Environmental
Laws the absence of which would have a Material Adverse Effect on Seller; (ii)
is in compliance (and has complied) in all material respects with all material
terms and conditions of such required permits, licenses and authorizations, and
also is in compliance in all material respects with all other material
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) has no knowledge of and has
not received notice of any event, condition, circumstance, activity, practice,
incident, action or plan that is reasonably likely to interfere with or prevent
continued
-16-
compliance or that would give rise to any common law or statutory liability, or
otherwise form the basis of any Environmental Claim with respect to Seller or
any person or entity whose liability for any Environmental Claim Seller has
retained or assumed either contractually or by operation of law; (iv) has not
disposed of, released, discharged or emitted any Hazardous Materials into the
soil or groundwater at any properties owned or leased at any time by Seller, or
at any other property, or exposed any employee or other individual to any
Hazardous Materials or condition in such a manner as would result in any
liability or result in any corrective or remedial action obligation; and (v) has
taken all actions necessary under Environmental Laws to register any products or
materials required to be registered by Seller (or any of its agents) thereunder.
No Hazardous Materials are present in, on or under any properties owned, leased
or used at any time (including both land and improvements thereon) by Seller,
and no reasonable likelihood exists that any Hazardous Materials will come to be
present in, on or under any properties owned, leased or used at any time
(including both land and improvements thereon) by Seller, so as to give rise to
any liability or corrective or remedial obligation under any Environmental Laws.
For the purposes of this Section 2.18, "ENVIRONMENTAL CLAIM" means any notice,
claim, act, cause of action or investigation by any person alleging potential
liability (including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, or release into the environment, of any Hazardous Materials or
(ii) any violation, or alleged violation, of any Environmental Laws.
"ENVIRONMENTAL LAWS" means all Federal, state, local and foreign laws and
regulations relating to pollution of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials. "HAZARDOUS MATERIALS" means chemicals,
pollutants, contaminants, wastes, toxic substances, radioactive and biological
materials, asbestos- containing materials, hazardous substances, petroleum and
petroleum products or any fraction thereof, excluding, however, Hazardous
Materials contained in products typically used for office and janitorial
purposes properly and safely maintained in accordance with Environmental Laws.
2.19 BROKERS. Other than with respect to Geneva Corporate Finance, which
Shareholders will pay, Seller has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.20 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof ("PATENTS"); (ii) all inventions
(whether patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, proprietary processes or formulae,
franchises, licenses, know how,
-17-
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all rights to all
mask works and reticles, mask work registrations and applications
therefor; (v) all industrial designs and any registrations and
applications therefor throughout the world; (vi) all trade names,
logos, domain names, UR s, common law trademarks and service marks;
trademark and service xxxx registrations and applications therefor and
all goodwill associated therewith throughout the world; (vii) all
databases and data collections and all rights therein throughout the
world; (viii) all computer software including all source code, object
code, algorithms, display screens, layouts, firmware, development
tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names; (ix)
any similar, corresponding or equivalent rights to any of the
foregoing; and (x) all documentation related to any of the foregoing.
"SELLER INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by or licensed to the Seller or any of its
affiliates. Without in any way limiting the generality of the
foregoing, Seller Intellectual Property includes all Intellectual
Property owned or licensed by the Seller related to the Seller's
products, including without limitation all rights in any design code,
documentation, and tooling for packaging of semiconductors in
connection with all current products and products in design and
development.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other
registrations or applications related to trademarks; (iii) registered
copyrights and applications for copyright registration; (iv) any mask
work registrations and applications to register mask works; and (v)
any other Seller Intellectual Property that is the subject of an
application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other
public legal authority.
"SELLER REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of,
the Seller or any of its affiliates.
(a) Schedule 2.20(a) is a complete and accurate list of all
Seller Registered Intellectual Property and specifies, where applicable, the
jurisdictions in which each such item of Seller Registered Intellectual Property
has been issued or registered and lists any proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office (the
"PTO") or equivalent authority anywhere in the world) related to any of the
Seller Registered Intellectual Property.
(b) Schedule 2.20(b) is a complete and accurate list (by name
and version number) of all software products or service offerings of the Seller
("SELLER PRODUCTS") that have been distributed or provided in the ten (10)-year
period preceding the date hereof or which the
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Seller intends to distribute or provide in the future, including any products or
service offerings under development.
(c) No Seller Intellectual Property or Seller Product is
subject to any proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Seller, or which may affect the validity, use or
enforceability of such Seller Intellectual Property or Seller Product.
(d) Each material item of Seller Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees currently due in connection with such Seller Registered
Intellectual Property have been made and all necessary documents, recordations
and certificates in connection with such Seller Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such material items of Seller Registered
Intellectual Property. There are no actions that must be taken by the Seller
within one hundred and twenty (120) days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any material items of Seller Registered
Intellectual Property. In each case in which the Seller has acquired any
Intellectual Property rights from any person, the Seller has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property (including the right to seek past and future damages with
respect to such Intellectual Property) to the Seller and, to the maximum extent
provided for by, and in accordance with, applicable laws and regulations, the
Seller has recorded each such assignment with the relevant governmental
authorities, including the PTO, the U.S. Copyright Office, or their respective
equivalents in any relevant foreign jurisdiction, as the case may be.
(e) The Seller Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the business of
the Seller as it currently is conducted or is reasonably contemplated to be
conducted, including, without limitation, the design, development, manufacture,
use, import and sale of Seller Products. Seller owns and has good and exclusive
title to, each material item of Seller Intellectual Property free and clear of
any lien or encumbrance (excluding non-exclusive licenses and related
restrictions granted in the ordinary course). Without limiting the foregoing:
(i) Seller is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of Seller, including
the sale, distribution or provision of any Seller Products by Seller; (ii)
Seller owns exclusively, and has good title to, all copyrighted works that are
Seller Products or which Seller otherwise purports to own; and (iii) to the
extent that any Patents would be infringed by any Seller Products, Seller is the
exclusive owner of such Patents.
(f) To the extent that any technology, software or material
Intellectual Property has been developed or created independently or jointly by
a third party for Seller or is incorporated into any of the Seller Products,
Seller has a written agreement with such third party with respect thereto and
Seller thereby either (i) has obtained ownership of, and is the exclusive owner
of, or (ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party's
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Intellectual Property in such work, material or invention by operation of law or
by valid assignment, to the fullest extent it is legally possible.
(g) Seller has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was
material Seller Intellectual Property, to any third party, or permitted Seller's
rights in such material Seller Intellectual Property to lapse or enter the
public domain.
(h) Schedule 2.20(h) lists all contracts, licenses and
agreements to which Seller is a party: (i) with respect to Seller Intellectual
Property licensed or transferred to any third party (other than end-user
licenses in the ordinary course); or (ii) pursuant to which a third party has
licensed or transferred any material Intellectual Property to Seller.
(i) All contracts, licenses and agreements relating to either
(i) Seller Intellectual Property or (ii) Intellectual Property of a third party
licensed to Seller are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements or cause the forfeiture, modification or
termination or give right of forfeiture, modification or termination of any
Seller Intellectual Property or in any way impair the right of the Seller to
use, sell, license or dispose of or to bring any action for the infringement of
any Seller Intellectual Property or portion thereof. Seller is in material
compliance with, and has not materially breached any term of any such contracts,
licenses and agreements and, to the knowledge of Seller or the Affiliates, all
other parties to such contracts, licenses and agreements are in compliance with,
and have not materially breached any term of, such contracts, licenses and
agreements. Following the Closing Date, Buyer will be permitted to exercise all
of Seller's rights under such contracts, licenses and agreements to the same
extent Seller would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which Seller would
otherwise be required to pay. Neither this Agreement nor the transactions
contemplated by this Agreement, including the assignment to Buyer by operation
of law or otherwise of any contracts or agreements to which the Seller is a
party, will result in (i) the Buyer's granting to any third party any right to
or with respect to any Intellectual Property right owned by, or licensed to, it,
(ii) the Buyer's being bound by, or subject to, any non-compete or other
restriction on the operation or scope of its business, or (iii) the Buyer's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by Buyer prior to the Closing.
(j) The operation of the business of the Seller as such
business currently is conducted or is reasonably contemplated to be conducted,
including (i) Seller's design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of Seller (including
Seller Products) and (ii) the Seller's use of any product, device or process,
has not, does not and will not infringe or misappropriate the Intellectual
Property of any third party, constitute unfair competition or trade practices
under the laws of any jurisdiction or violate any license or agreement between
the Seller and any person.
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(k) Seller has not received notice from any third party that
the operation of the business of Seller or any act, product or service of
Seller, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(l) Neither the development, manufacture, marketing, license,
sale nor use of any product, technology or service currently licensed, sold or
used by the Seller or currently under development violates or will violate any
license or agreement with any third party or infringes or will infringe any
Intellectual Property of any other person which would have a Material Adverse
Effect; there is no pending or, to the Seller's or the Affiliates' knowledge,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Seller Intellectual Property nor, to the
Seller's or the Affiliates' knowledge, is there any basis for any such claim,
nor has the Seller received any notice asserting that any Seller Intellectual
Property or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other person, nor is there any basis for
any such assertion.
(m) To the knowledge of Seller or the Affiliates, no person
has or is infringing or misappropriating any Seller Intellectual Property.
(n) Seller has taken reasonable steps to protect its rights in
its confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to Seller,
and, without limiting the foregoing, Seller has and enforces a policy requiring
each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Buyer and all current and former employees and contractors of Seller have
executed such an agreement, except where the failure to do so is not reasonably
expected to be material to Seller.
(o) Schedule 2.20(o) lists all information concerning users of
Seller Products (and all information about their use of Seller Products) that is
captured or collected by Seller Products or otherwise collected by the Seller
(the "CAPTURED USER DATA"). The Captured User Data does not include unique
identifier information. The Seller has not disclosed Captured User Data which
includes unique identifier information to any third parties without the prior
consent of the users to which such information pertains.
(p) All of the Seller Products (i) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "YEAR 2000 COMPLIANT"), (ii) will lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000, and (iii) will be interoperable with other products used and
distributed by Buyer that may reasonably deliver records to the Seller's
products or receive records from the Seller's products, or interact with the
Seller's products. All of the Seller's Information Technology (as defined below)
is Year 2000 Compliant, and will not cause an interruption in the ongoing
operations of the Seller's business on or after January 1, 2000. For
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purposes of the foregoing, the term "INFORMATION TECHNOLOGY" shall mean and
include all software, hardware, firmware, telecommunications systems, network
systems, embedded systems and other systems, components and/or services (other
than general utility services including gas, electric, telephone and postal)
that are owned or used by the Seller in the conduct of its business, or
purchased by the Seller from third-party suppliers.
2.21 AGREEMENTS, CONTRACTS AND COMMITMENTS. Seller is not a party to or is
bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
Seller's Board of Directors, other than those that are terminable by Seller on
no more than thirty (30) days' notice without liability or financial obligation
to the Seller;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification or any guaranty other
than any agreement of indemnification entered into in connection with the sale
or license of software products in the Ordinary Course of Business;
(d) any agreement, contract or commitment containing any
covenant limiting in any respect the right of Seller to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Seller after the date of this
Agreement of a material amount of assets not in the Ordinary Course of Business
or pursuant to which Seller has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(f) any dealer, distributor, joint marketing or development
agreement currently in force under which Seller has continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of ninety (90) days or less, or any
material agreement pursuant to which Seller has continuing material obligations
to jointly develop any intellectual property that will not be owned, in whole or
in part, by Seller and which may not be canceled without penalty upon notice of
ninety (90) days or less;
(g) any agreement, contract or commitment currently in force
to provide source code to any third party for any product or technology that is
material to Seller;
(h) any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any Seller product,
service or technology or any agreement, contract or commitment currently in
force to sell or distribute any Seller products, service or technology except
agreements with distributors or sales representative in the normal
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course of business cancelable without penalty upon notice of ninety (90) days or
less and substantially in the form previously provided to Buyer;
(i) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit or granting any Lien on any assets
or properties of the Seller;
(j) any settlement agreement entered into within five (5)
years prior to the date of this Agreement;
(k) any other agreement, contract or commitment that has a
value of $50,000 or more individually;
(l) any agreement (or group of related agreements) for the
lease of personal property to or from any person that involves aggregate annual
payments of more than $20,000;
(m) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Seller;
(n) any agreement (or group of related agreements) for the
purchase or sale of commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which will
extend over a period of more than one year or involve consideration in excess of
$20,000;
(o) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors that involves aggregate annual payments of more than $20,000;
(p) any agreement concerning a partnership or joint venture;
(q) any agreement with any Seller stockholder or any of such
Seller stockholder's affiliates (other than the Seller) or with any affiliate of
the Seller;
(r) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees;
(s) any collective bargaining agreement;
(t) any executory agreement under which the Seller has
advanced or loaned any amount to any of its directors, officers, and employees;
(u) any advertising services, e-commerce or other agreement
involving the promotion of products and services of third parties by the Seller;
(v) any executory agreement pursuant to which the Seller is
obligated to provide maintenance, support or training for its services or
products;
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(w) any revenue or profit participation agreement which
involves aggregate annual payments of more than $20,000; and
(x) any license, agreement or other permission which the
Seller or any affiliate of the Seller has granted to any third party with
respect to any of the Intellectual Property used in the Seller's business.
Neither Seller, and to Seller's or the Affiliates' knowledge,
nor any other party to a Seller Contract (as defined below), is in breach,
violation or default under, and Seller has not received written notice that it
has breached, violated or defaulted under, any of the material terms or
conditions of any of the agreements, contracts or commitments to which Seller is
a party or by which it is bound that are required to be disclosed in the Seller
Schedule (any such agreement, contract or commitment, a "SELLER CONTRACT") in
such a manner as would permit any other party to cancel or terminate any such
Seller Contract, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
2.22 INSURANCE. Seller maintains insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Seller (collectively, the "INSURANCE POLICIES") which
are of the type and in amounts customarily carried by persons conducting
businesses similar to those of Seller. With respect to each such insurance
policy: (A) the policy is legal, valid, binding, enforceable, and in full force
and effect (and there has been no notice of cancellation or nonrenewal of the
policy received); (B) neither the Seller nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (C) no party to the policy has
repudiated any provision thereof; and (D) there has been no failure to give any
notice or present any claim under the policy in due and timely fashion. There is
no material claim by Seller pending under any of the material Insurance Policies
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds.
2.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER. To the Seller's or
the Affiliates' knowledge, neither the Seller's Shareholders nor any director or
officer of the Seller, nor any member of their immediate families, nor any
affiliate of any of the foregoing, owns, directly or indirectly, or has an
ownership interest in or is employed by (a) any business (corporate or
otherwise) which is a party to, or in any property which is the subject of, any
business arrangement or relationship of any kind with the Seller, or (b) any
business (corporate or otherwise) which conducts the same business as, or a
business similar to, that conducted by the Seller.
2.24 EMPLOYEES AND CONSULTANTS. Schedule 2.24 lists all of the Seller's
officers, directors, employees (also stating their position) and consultants,
and any and all compensation, pension or benefit arrangements, whether written
or oral, between the Seller and said officers, directors, employees and
consultants as of the date of this Agreement. As used in this Section 2.24, the
term "compensation" means current annual compensation including bonuses and all
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other taxable income. None of such officers, directors, employees and
consultants has informed the Seller nor do the Seller or the Affiliates have
reason to believe that he or she intends to terminate his or her employment or
relationship with the Seller during the next 12 months.
2.25 NOTES AND ACCOUNTS RECEIVABLE. The accounts receivable have not been
recorded in excess of their net realizable value on the Financial Statements.
Attached hereto as Schedule 2.25 is a list and aging of all accounts receivables
and notes of the Seller. All accounts receivable set forth on the Financial
Statements or incurred thereafter, up to the Closing Date, (i) to the knowledge
of Seller or the Affiliates, are and shall be valid obligations of the
respective makers thereof, (ii) have and shall have arisen in the Ordinary
Course of Business, (iii) to the knowledge of Seller or the Affiliates, are and
shall be fully collectible in the ordinary course of the Seller's business,
subject to the reserve for doubtful accounts, and need not be written off as
uncollectible.
2.26 PRODUCT WARRANTY. The technologies or products licensed, sold,
leased, and delivered and all services provided by the Seller have conformed in
all material respects with all applicable contractual commitments and all
express and implied warranties, and the Seller has no liability (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) for replacement or modification thereof or other damages
in connection therewith, other than in the Ordinary Course of Business in an
aggregate amount not exceeding $20,000.
2.27 SELLER APPROVAL. The Board of Directors of Seller determined to
recommended that the shareholders of Seller adopt and approve this Agreement and
approve the Transaction; and the Board of Directors and the Shareholders have,
as of the date of this Agreement, unanimously (i) approved this Agreement, the
Transaction and the other transactions contemplated hereby, and (ii) determined
that the Transaction is consistent with and in furtherance of the long-term
business strategy of Seller and fair to, and in the best interests of, Seller
and its shareholders.
2.28 VOTE REQUIRED. The affirmative vote of a majority of the votes
that holders of the outstanding shares of Seller Common Stock are entitled to
vote with respect to the Transaction is the only vote of the holders of any
class or series of Seller's capital stock necessary to approve this Agreement
and the transactions contemplated hereby.
2.29 COMPLETE COPIES OF MATERIALS. Seller has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Buyer or its counsel.
2.30 XXXX-XXXXX-XXXXXX REPRESENTATIONS. The Shareholders, defined for
purposes of this section to include their spouses and any minor children, are
the only persons who could be considered an Ultimate Parent Entity of the Seller
as defined under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"). Each of the Shareholders, individually, are not $10
million persons as defined under the HSR Act: none of the Shareholders,
individually, have investment assets, voting securities and/or income-producing
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property, including all of the total assets of the Seller and any other entity a
Shareholder controls, that total $10 million or more in value; nor does each of
the Shareholders, individually, control entities, including by not limited to
the Seller, that generated total revenue of $10 million or more in the last
year.
No other shareholder of the Seller is required to file a
Notification and Report Form under Section 801.2(e) of the HSR Act concerning
its receipt of a portion of the Purchase Price as consideration to be received
in the Transaction.
2.31 BANK ACCOUNTS. Schedule 2.31 attached lists all of the (a) names
of each bank, savings and loan, or other financial institution in which the
Seller has an account, including cash contribution accounts, and the account
numbers and names of all persons authorized to draw thereon or having access
thereto, (b) locations of all lock boxes and safe deposit boxes of the Seller
and the names of all persons authorized to draw thereon or having access
thereto.
2.32 AMOUNTS OWING. On or prior to the Closing Date, the Seller has
collected or cancelled any amounts loaned or advanced to or receivable from its
directors, officers, the Affiliates or affiliates of the Seller, all of which
are listed on Schedule 2.32.
2.33 REPRESENTATIONS COMPLETE. Neither any of the representations or
warranties made by Seller in this Agreement, nor any statements made in any
exhibit, schedule or certificate furnished by Seller pursuant to this Agreement
contains or will contain at the Closing Date, any untrue statement of a material
fact, or omits or will omit at the Closing Date to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading. The information
furnished on or in any documents mailed, delivered or otherwise furnished to
shareholders in connection with the solicitation of their consent to this
Agreement and the Transaction, will not contain, at or prior to the Closing
Date, any untrue statement of a material fact and will not omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, subject to such exceptions as
are specifically disclosed in writing in the disclosure letter and referencing a
specific representation supplied by Buyer to Seller dated as of the date hereof
and certified by a duly authorized officer of Buyer (the "BUYER SCHEDULE"), as
follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted,
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except where the failure to do so would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer. Buyer is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to have such Approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer. Buyer is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Buyer.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has all necessary
corporate power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer and
the consummation by Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Buyer,
and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement, or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery by Seller, constitute
legal and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer do
not, and the performance of this Agreement by Buyer shall not, (i) conflict with
or violate the Articles of Incorporation, Bylaws or equivalent organizational
documents of Buyer or any of its subsidiaries, (ii) subject to compliance with
the requirements set forth in Section 3.5(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Buyer or any of
its subsidiaries or by which it or their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Buyer's or any such subsidiary's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Buyer or
any of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Buyer or any of its subsidiaries is a party or
by which Buyer or any of its subsidiaries or its or any of their respective
properties are bound or affected, except to the extent such conflict, violation,
breach, default, impairment or other effect could not in the case of clauses
(ii) or (iii) individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Buyer.
(b) The execution and delivery of this Agreement by Buyer do
not, and the performance of this Agreement by Buyer shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, the rules and regulations
of Nasdaq and (ii) where the failure to obtain such consents, approvals,
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authorizations or permits, or to make such filings or notifications, (x) would
not prevent consummation of the Transaction or otherwise prevent Buyer from
performing their respective obligations under this Agreement or (y) could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Buyer.
3.4 BROKERS. Buyer has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.5 BOARD APPROVAL. The Board of Directors of Buyer has, as of the
date of this Agreement, approved this Agreement, the Transaction and the other
transactions contemplated by this Agreement.
3.6 ABSENCE OF LITIGATION. Except as disclosed in the most recent
documents required to be filed by Buyer with the SEC, there are no claims,
actions, suits or proceedings pending or, to the knowledge of Buyer, threatened
(or, to the knowledge of Buyer, any governmental or regulatory investigation
pending or threatened) against Buyer or any of its subsidiaries or any
properties or rights of Buyer or any of its subsidiaries, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, which if determined against Buyer would have a Material
Adverse Effect on Buyer.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 NET BOOK VALUE DETERMINATION.
(a) Within 90 days following the Closing Date, Buyer shall
prepare, at its sole expense, a balance sheet of the Seller as of the Closing
Date (the "CLOSING BALANCE SHEET"), and related statements of income for the
period then ended. The completion of the Closing Balance Sheet shall be
conducted in accordance with generally accepted accounting principles. The
Closing Balance Sheet shall be used to determine the Net Book Value of Seller as
of the Closing Date. The Purchase Price shall be adjusted downward, on a
dollar-for-dollar basis, to the extent that the Net Book Value of Seller on the
Closing Date is less than $50,000. For purposes of this Agreement, "NET BOOK
VALUE" shall mean the total assets of Seller, including capitalized software,
minus, without duplication, (i) the sums attributable to (a) goodwill, (b)
intangible items such as unamoritzed debt discount and expense, patents, trade
and service marks, copyrights, and research and development expenses, and (c)
all reserves not already deducted from assets, and (ii) total liabilities (total
liabilities shall include the amount of all obligations that should in
accordance with generally accepted accounting principles be classified as
liabilities on the balance sheet of Seller, including in any event, all
indebtedness, contingent or otherwise). Promptly upon completion, Buyer shall
deliver the Closing Balance Sheet to the Shareholders together with working
papers. In the event that the Buyer and the Shareholders agree in writing as to
the Closing Balance Sheet (after any mutually agreed modifications thereto are
made), then such Closing Balance Sheet shall be final and binding upon the
parties hereto; PROVIDED, HOWEVER, that the determination of whether the Buyer
and the Shareholders agree as to the Closing Balance Sheet shall be made no
later than 30 days following the Shareholders' receipt of the Closing Balance
Sheet. In the event that the Shareholders and Buyer cannot so agree in writing
within 30 days following the Shareholders' receipt of
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the Closing Balance Sheet, then any items or issues in dispute shall be resolved
in accordance with Section 8.8 below or by an accounting firm mutually agreed
upon by the Parties. At the sole discretion of Buyer, any amounts owed hereunder
may be offset against the Promissory Notes (as defined in the Stock Purchase
Agreement (as defined herein below)).
(b) In addition to, but not in duplication of, the Purchase
Price adjustment for the Net Book Value determination, the Purchase Price shall
also be adjusted downward (the "ACCOUNTS RECEIVABLE ADJUSTMENT"),
dollar-for-dollar to the extent that any accounts receivable of Xxxxxxx on the
Closing Date are not fully collected within six (6) months after the Closing
Date. At the sole discretion of Optio, any amounts owed hereunder may be offset
against the Promissory Notes.
4.2 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that Seller and Buyer have
previously executed a letter agreement, dated as of February 17, 2000, and a
Confidentiality Agreement, dated February 23, 1999 (collectively, the
"CONFIDENTIALITY AGREEMENTS"), the confidentially provisions of which will
continue in full force and effect in accordance with their terms.
(b) Seller will afford Buyer and Buyer accountants, counsel
and other representatives reasonable access to its properties, books, records
and personnel during the period prior to the Closing Date to obtain all
information concerning its business as Buyer may reasonably request. No
information or knowledge obtained in any investigation pursuant to this Section
4.2 will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of Buyer to consummate the
Transaction.
4.3 PUBLIC DISCLOSURE. Buyer and Seller will consult with each other
and agree before issuing any press release or otherwise making any public
statement with respect to the Transaction, or this Agreement or an Acquisition
Proposal and will not issue any such press release or make any such public
statement prior to such agreement, except as may be required by law or any
listing agreement with a national securities exchange, in which case reasonable
efforts to consult with the other party will be made prior to any such release
or public statement. The parties have agreed to the text of the joint press
release announcing the signing of this Agreement.
4.4 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Transaction and the other transactions contemplated by
this Agreement, including using reasonable efforts to accomplish the following:
(i) the taking of all reasonable acts necessary to cause the conditions
precedent set forth in Article V to be satisfied, (ii) the
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obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iv) the
defending of any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Notwithstanding anything herein
to the contrary, nothing in this Agreement shall be deemed to require Buyer or
Seller or affiliate thereof to agree to any divestiture by itself or any of its
affiliates of shares of capital stock or of any business, assets or property, or
the imposition of any material limitation on the ability of any of them to
conduct their business or to own or exercise control of such assets, properties
and stock.
4.5 POST CLOSING COVENANTS; GENERAL. In case at any time after the
Closing any further action is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Article VI below).
4.6 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing involving the Seller, each of the other Parties will cooperate
with the Party and its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be reasonably necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article VI below).
ARTICLE V
CONDITIONS TO THE TRANSACTION
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE TRANSACTION.
The respective obligations of each party to this Agreement to effect the
Transaction shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions:
(a) NO LITIGATION. There shall be no action, suit, proceeding,
inquiry, investigation, or litigation pending, or threat thereof, against the
Seller or Buyer by reason of the proposed activities of the Seller or Buyer,
negotiations by the parties or as a result of the Seller's or Buyer's
consummation or proposed consummation of this Agreement and the transactions
contemplated hereby.
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5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER AND AFFILIATES. The
obligation of Seller to consummate and effect the Transaction shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Seller and
Affiliates:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Buyer contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date except (A) for such failures to be true and correct that do not in
the aggregate constitute (and are not reasonably likely to have) a Material
Adverse Effect on the Seller and (B) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications set forth in the
preceding clause (A)) as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded). Seller shall have received a certificate with
respect to the foregoing signed on behalf of Buyer by an authorized officer of
Buyer.
(b) LEGAL OPINION. Seller shall have received a legal opinion
from Xxxxxx, Xxxxxxx & Xxxxxx, LLP, legal counsel to Buyer in the form of
EXHIBIT A attached hereto.
(c) AGREEMENTS AND COVENANTS. Buyer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Seller and the Affiliates shall have received a certificate to
such effect signed on behalf of Buyer by an authorized officer of Buyer.
(d) ASSUMPTION AGREEMENT. Buyer shall have executed and
delivered an assumption agreement relating to the Assumed Liabilities in
substantially the form attached hereto as EXHIBIT B.
(e) XXXXXXX STOCK PURCHASE. On or before the Closing Date, the
Buyer shall have consummated the negotiation of all the capital stock of Xxxxxxx
Corporation in accordance with the terms of the Stock Purchase Agreement, as
defined below.
5.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations
of Buyer to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Buyer:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Seller and each Affiliate contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on and as of the Closing Date except (A) for such failures to be true and
correct that do not in the aggregate constitute a Material Adverse Effect on the
Seller provided, however, such Material Adverse Effect qualifier shall be
inapplicable with respect to
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representations and warranties and (B) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications set forth in the
preceding clause (A)) as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded). Buyer shall have received a certificate with
respect to the foregoing signed on behalf of Seller by an authorized officer of
Seller.
(b) AGREEMENTS AND COVENANTS. Seller and the Affiliates shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them at
or prior to the Closing Date, and Buyer shall have received a certificate to
such effect signed on behalf of Seller and the Affiliates by the Chief Executive
Officer and the Chief Financial Officer of Seller.
(c) XXXXXXX STOCK PURCHASE AGREEMENT. On or before the Closing
Date, the Buyer shall have consummated the acquisition of the capital stock of
Xxxxxxx Corporation pursuant to the terms of the Stock Purchase Agreement by and
among the Buyer, Xxxxxxx Corporation and the Affiliates (the "STOCK PURCHASE
AGREEMENT").
(d) CONSENTS. Seller shall have obtained all consents, waivers
and approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on Schedule 5.3(d).
(e) TAX CLEARANCE CERTIFICATES. The Seller shall have
obtained, and provide to Buyer, a "Tax Clearance Certificate" or a substantially
similar certificate from the State of Florida and dated within ten (10) days of
the Closing indicating that Seller has no unpaid liability for sales and use,
employment, or other taxes in the State of Florida.
(f) LEGAL OPINION. Buyer shall have received a legal opinion
from Xxxxxxxx Xxxx & Xxxxxxxx, LLP, legal counsel to the Seller, substantially
in the form attached hereto as EXHIBIT C.
(g) SECRETARY'S CERTIFICATE. Seller shall have delivered
recently issued good standing certificates from the State of Florida and those
states in which the Seller is qualified to do business as a foreign corporation,
copies of the Articles of Incorporation of the Seller and any amendments thereto
certified by the office of the Secretary of State of Florida and the Bylaws of
the Seller. In addition, the Seller shall have delivered to the Buyer and its
legal counsel a certificate of the Seller's Secretary relating to (i) the
Seller's Articles of Incorporation, stating that such articles have not been
amended since the date of certification by the Florida Secretary of State, (ii)
the Seller's Bylaws, stating that such Bylaws have not been amended from the
form presented, (iii) resolutions adopted by the Seller's Board of Directors
authorizing and directing the execution and delivery of this Agreement (and the
document related hereto) by the Seller, and (iv) the incumbency and genuiness of
the signature of each officer of the Seller executing this Agreement and the
Documents related hereto.
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(h) NONCOMPETITION AGREEMENTS. The persons set forth on
EXHIBIT D-1 hereto shall have entered into Noncompetition Agreements
substantially in the form attached hereto as EXHIBIT D-2 and such agreements
shall be in full force and effect.
(i) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any event or condition of any character that has had or is reasonably likely to
have a Material Adverse Effect on Seller since the date of this Agreement.
(j) SHAREHOLDER APPROVAL. Seller's shareholders shall have
approved by the requisite vote any payments of cash or stock contemplated by
this Agreement that may be deemed to constitute "parachute payments" pursuant to
Section 280G of the Code, such that all such payments, sales and purchases
resulting from the transactions contemplated hereby shall not be deemed to be
"parachute payments" pursuant to Section 280G of the Code or shall be exempt
from such treatment under such Section 280G.
(k) TITLE TRANSFER DOCUMENTS. Seller shall have executed and
delivered such bills of sale, assignment agreements and other transfer documents
necessary to consummate the transactions set forth herein.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SETOFF
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Seller and the Affiliates contained in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall terminate on June 30, 2002; provided, however, that the
representations and warranties of Seller contained in Section 2.18 and Section
2.20 hereof shall survive for five (5) years from the Closing Date, and those
contained in Section 2.4, Section 2.13 and Section 2.17 hereof shall survive
until the expiration of the applicable statute of limitations and any extensions
thereof. the representations and warranties of Buyer contained in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall terminate on June 30, 2002.
6.2 SELLER INDEMNIFICATION.
(a) The Affiliates jointly and severally agree to indemnify
and hold Buyer and its officers, directors and affiliates (the "AFFILIATE
INDEMNIFIED PARTIES"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense relating to such claim, loss,
liability, damage, deficiency, cost or expense (hereinafter individually a
"LOSS" and collectively "LOSSES") incurred or suffered by the Affiliate
Indemnified Parties, or any of them, directly or indirectly, as a result of (i)
any breach or inaccuracy of a representation or warranty of Seller or the
Affiliates contained in this Agreement, (ii) any failure by Seller or the
Affiliates to perform or comply with any covenant applicable to them contained
in this Agreement, (iii) any adjustment to the Purchase Price pursuant to
Section 4.1 hereof in connection with the Net Book Value determination or the
Accounts Receivable Adjustment, or (iv) the incurrence by Seller or Affiliates
of third party expenses, including without limitation legal and accounting fees
incurred
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by Seller and/or Affiliates in connection with this Agreement and the
Transaction. The aggregate indemnification obligation of the Affiliates shall be
limited to the Purchase Price, plus the purchase price received by the
Shareholders pursuant to the terms of the Stock Purchase Agreement
("INDEMNIFICATION FUND"). In addition, no Affiliate will be obligated to remit
to Buyer more than the amount of the Indemnification Fund received by such
Affiliate as set forth on Schedule 1.5 hereof and Schedule 1.2(a) to the Stock
Purchase Agreement (for the purposes of these provisions, the PRO RATA portion
for (i) X. Xxxxxxx shall include amounts paid to X. Xxxxxxx Trust and (ii) X.
Xxxxxxx shall include amounts paid to X. Xxxxxxx Trust [for purposes of
clarification, Optio may not collect the same amount twice for the same loss
from the Shareholder and the Principal thereof]). The Affiliates shall not have
any right of contribution from Seller with respect to any Loss claimed by an
Affiliate Indemnified Party.
(b) INDEMNIFICATION PROCEDURE.
(i) Promptly after receipt by a Affiliate Indemnified Party of
notice by a third party of any complaint or the commencement of any action or
proceeding with respect to which indemnification is being sought under this
Agreement, such Affiliate Indemnified Party shall notify the Shareholders of
such complaint or of the commencement of such action or proceeding; PROVIDED,
HOWEVER, that failure to so notify the Shareholders shall not relieve the
Shareholders from liability for such claims except and only to the extent that
such failure to notify the Shareholders results in the forfeiture of, or
otherwise prejudices the Shareholder's ability to establish, rights and defenses
otherwise available to the Shareholders with respect to such claim. The
Shareholders shall have the right, upon written notice to the Affiliate
Indemnified Party, to assume the defense of such action or proceeding, including
the employment of counsel reasonably satisfactory to the Affiliate Indemnified
Party and the payment of the fees and disbursements of such counsel as incurred.
If the Shareholders do not elect to assume control of the defense of any such
claims, the Shareholders shall be bound by the results otherwise obtained with
respect to such claim. In the event, however, that the Shareholders decline or
fail to assume the defense of the action or proceeding or to employ counsel
reasonably satisfactory to such Affiliate Indemnified Party, in either case in a
timely manner, then such Affiliate Indemnified Party may employ counsel to
represent or defend it in any such action or proceeding and the Shareholders
shall pay the reasonable fees and disbursements of such counsel upon receipt of
an invoice; PROVIDED, HOWEVER, that the Shareholders shall not be required to
pay the fees and disbursements of more than one counsel for all Affiliate
Indemnified Parties in any jurisdiction in any single action or proceeding.
However, in the event, that an action or proceeding relating to the Seller
Intellectual Property arises after March 31, 2001 in which the Shareholders
decline or fail to assume the defense of the action or proceeding or to employ
counsel reasonably satisfactory to such Affiliate Indemnified Party in such
action or proceeding, in either case in a timely manner, then such Affiliate
Indemnified Party may employ counsel to represent or defend it, the Seller or
Affiliates in any such action or proceeding relating to the Seller Intellectual
Property and Optio shall pay the fees and disbursements of such counsel if it is
determined that there is no liability by Buyer, Seller or the Affiliates to such
third party. In any action or proceeding with respect to which indemnification
is being sought under this Agreement, the Affiliate Indemnified Parties or the
Shareholders, whichever is not assuming the defense of such action, shall have
the right to participate in such litigation and to retain its own counsel at
such party's own expense. The Affiliate Indemnified Parties or the Shareholders,
as the case may be, shall at all times use reasonable efforts to keep the
Shareholders or the Affiliate Indemnified Parties, as
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the case may be, reasonably apprised of the status of the defense of any claim
the defense of which they are maintaining, and to cooperate in good faith with
each other with respect to the defense of any such action.
(ii) Notwithstanding anything herein to the contrary (including
responsibility for defense of the claim), no Affiliate Indemnified Party may
settle or compromise any claim or consent to the entry of any judgment with
respect to which indemnification is being sought from the Shareholders under
this Agreement, unless such settlement, compromise or consent includes an
unconditional release of the Shareholders from all liability arising out of such
claim, otherwise the prior written consent of the Shareholders must be obtained.
The Shareholders shall not, without the prior written consent of Buyer, settle
or compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought under this Agreement unless such
settlement, compromise or consent includes an unconditional release of the
Affiliate Indemnified Parties from all liability arising out of such claim and
does not contain any equitable order, judgment or term which in any manner
affects, restrains or interferes with the business of Buyer, any of the
Affiliate Indemnified Parties or any of their respective affiliates.
(iii) In the event that a Affiliate Indemnified Party does claim
a right to payment pursuant to this Agreement, such Affiliate Indemnified Party
shall send written notice of such claim to the Shareholders. Such notice shall
specify the basis for such claim. As promptly as possible after the Affiliate
Indemnified Party has given such notice, such Affiliate Indemnified Party and
the Shareholders shall establish the merits and amount of such claim (by mutual
agreement or arbitration as set forth in Section 8.8 hereof). However, Buyer may
not make any claim for a Loss unless and until one or more claims have been made
according to this Article VI and the Stock Purchase Agreement, and such claims
are in excess of $100,000 in the aggregate (the "BASKET AMOUNT"), in which case
Buyer shall be entitled to recover all Losses in excess of the Basket Amount.
Notwithstanding the foregoing, the Basket Amount shall not apply with respect to
(i) the Purchase Price adjustment for Net Book Value, if any, to be made in
accordance with Section 4.1(a), (ii) any breaches of representations, warranties
or covenants contained in Sections 2.4 (Capitalization) or 2.19 (Brokers) or
(iii) legal and accounting fees incurred by Seller in connection with this
Agreement or the transactions contemplated hereby remaining unpaid after the
Closing.
(iv) At Buyer's option, it may setoff against the outstanding
principal and interest due and payable to the Shareholders under the Promissory
Note(s) the payment of any claims due to Buyer under this Article VI.
(v) Notwithstanding the express language of the Master Xxxx of
Sale, Assignment and Assumption Agreement, Buyer agrees to provide notice of any
proposed compromise or settlement and provide the Affiliate with opportunity to
control the negotiation, litigation, arbitration or mediation of such compromise
or settlement or other action which could result in a Loss to an Affiliate
Indemnified Party in accordance with the provisions set forth in this Section
6.2(b).
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6.3 BUYER INDEMNIFICATION.
(a) Buyer agrees to indemnify (up to the Deferred Payment amount
(as defined in the Stock Purchase Agreement)) and hold the Seller and the
Affiliates (the "BUYER INDEMNIFIED PARTIES"), harmless against all Losses
incurred or suffered by the Buyer Indemnified Parties, or any of them, directly
or indirectly, as a result of (i) any breach or inaccuracy of a representation
or warranty of Buyer contained in this Agreement, or (ii) any failure by Buyer
to perform or comply with any covenant applicable to it contained in this
Agreement.
(b) INDEMNIFICATION PROCEDURE.
(i) Promptly after receipt by a Buyer Indemnified Party of
notice by a third party of any complaint or the commencement of any action or
proceeding with respect to which indemnification is being sought under this
Agreement, such Buyer Indemnified Party shall notify Buyer of such complaint or
of the commencement of such action or proceeding; provided, however, that
failure to so notify Buyer does not relieve Buyer from liability for such claim
except and only to the extent that such failure to notify Buyer results in the
forfeiture of, or otherwise prejudices Buyer's or any of its affiliates ability
to establish rights and defenses otherwise available to Buyer or any of its
affiliates with respect to such claim. Buyer will have the right, upon written
notice to Buyer Indemnified Party, to assume the defense of such action or
proceeding, including the employment of counsel reasonably satisfactory to Buyer
Indemnified Party and the payment of the reasonable fees and disbursements of
such counsel as incurred. If Buyer does not elect to assume control of the
defense of any such claims, Buyer shall be bound by the results otherwise
obtained with respect to such claim. In the event, however, that Buyer declines
or fails to assume the defense of the action or proceeding or to employ counsel
reasonably satisfactory to such Buyer Indemnified Party, in either case in a
timely manner, then such Buyer Indemnified Party may employ counsel to represent
or defend it in any such action or proceeding and Buyer shall pay the reasonable
fees and disbursements of such counsel as incurred; provided, however, that
Buyer is not required to pay the fees and disbursements of more than one counsel
for all Buyer Indemnified Parties in any jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which indemnification is
being sought under this Agreement, Buyer Indemnified Parties or Buyer, whichever
is not assuming the defense of such action, shall have the right to participate
in such litigation and to retain its own counsel at such party's own expense.
Buyer Indemnified Parties or Buyer, as the case may be, shall at all times use
reasonable efforts to keep Buyer or Buyer Indemnified Parties, as the case may
be, reasonably apprised of the status of the defense of any claim the defense of
which they are maintaining and to cooperate in good faith with each other with
respect to the defense of any such action.
(ii) No Buyer Indemnified Party may settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought from Buyer under this Agreement without the
prior written consent of Buyer, unless such settlement, compromise or consent
includes an unconditional release of Buyer and its affiliates from all liability
arising out of such claim and does not contain any equitable order, judgment or
term which in any manner affects, restrains or interferes with the business of
Buyer, any of the
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Buyer Indemnified Parties or any of their respective affiliates. Buyer shall
not, without the prior written consent of each Buyer Indemnified Party, settle
or compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought under this Agreement unless such
settlement, compromise or consent includes an unconditional release of Buyer
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any material manner
affects, restrains or interferes with the business of Buyer Indemnified Parties
or any of their respective affiliates.
(iii) In the event that an Buyer Indemnified Party does claim
a right to payment pursuant to this Agreement, such Buyer Indemnified Party
shall send written notice of such claim to Buyer. Such notice shall specify the
basis for such claim. As promptly as possible after such Buyer Indemnified Party
has given such notice, Shareholders and Buyer shall establish the merits and
amount of such claim (by mutual agreement, litigation, arbitration, mediation or
otherwise) and, within five business days of the final determination of the
merits and amount of such claim, Buyer shall deliver an amount of cash in
immediately available funds to such Buyer Indemnified Party as appropriate to
satisfy and discharge such claim as so determined.
ARTICLE VII
FEES, AMENDMENT AND WAIVER
7.1 FEES AND EXPENSES. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses whether or not the Transaction is consummated,
with the exception that such legal, accounting and other expenses incurred by
the Seller in connection with the Transaction shall be paid by the Shareholders.
7.2 AMENDMENT. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Buyer, Seller and the Affiliates.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Buyer, to:
Optio Software, Inc.
Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxxx XX
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Cape, Chief Executive Officer
Telecopy No.: (000) 000-0000
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with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy No.:(000) 000-0000
(b) if to Seller to:
Translink Solutions Corporation
000 X. Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxx and Xxxxxxxx, LLP
Xxxxxxx Plaza, Suite 2800
000 Xxxx Xxxxxxx Xxxx.
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
(c) if to Shareholders to:
Xxxxxxx X. Xxxxxxx Family Trust
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
Xxxxxxxx X. Xxxxxxx Family Trust, dated 1/31/98
000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxx
Xxxxx Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxxx Xxxx and Xxxxxxxx, LLP
Xxxxxxx Xxxxx, Xxxxx 0000
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000 Xxxx Xxxxxxx Xxxx.
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
(d) if to Principals to:
Xxxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
Xxxxxxxx Xxxxxxx
000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxx Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxxx Xxxx and Xxxxxxxx, LLP
Xxxxxxx Plaza, Suite 2800
000 Xxxx Xxxxxxx Xxxx.
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
8.2 INTERPRETATION; DEFINITIONS.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "KNOWLEDGE" means with respect to any corporate
party hereto, with respect to any matter in question, knowledge of the executive
officers of such party after reasonable inquiry and with respect to any
individual parties hereto, actual knowledge;
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(ii) the term "MATERIAL ADVERSE EFFECT" when used in
connection with an entity means any change, event, violation, inaccuracy,
circumstance or effect that is materially adverse to the business, assets,
liabilities, financial condition, results of operations or prospects of such
entity and its subsidiaries taken as a whole; PROVIDED, HOWEVER, that in no
event shall a decrease in such entity's stock price or the failure to meet or
exceed Wall Street research analysts' in and of itself constitute a Material
Adverse Effect;
(iii) the term "PERSON" shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust, Seller
(including any limited liability Seller or joint stock Seller), firm or other
enterprise, association, organization, entity or Governmental Entity;
(iv) the term "ORDINARY COURSE OF BUSINESS" shall mean an
action taken by a person only if: (A) such action is consistent with the past
practices of such person and is taken in the ordinary course of the normal
day-to-day operations of such person; (B) such action is not required to be
authorized by the board of directors of such person (or by any Person or group
of persons exercising similar authority) and is not required to be specifically
authorized by the parent Seller (if any) of such person; and (C) such action is
similar in nature and magnitude to actions customarily taken, without any
authorization by the board of directors (or by any person or group of persons
exercising similar authority), in the ordinary course of the normal day-to-day
operations of other persons that are in the same line of business as such
person;
(v) the term "AFFILIATE" of a person means any other person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such person.
8.3 TAX PAYMENTS. Notwithstanding anything to the contrary elsewhere in
this Agreement, all transfer, documentary, sales, use, stamp, registration and
other such taxes and fees (including penalties and interest) incurred in
connection with this Agreement (including the acquisition by Buyer of the
Assets) shall be paid by Seller when due, and Seller will, at its own expense,
file all necessary tax returns and other documentation with respect to such
transfer, documentary, sales, use, stamp, registration and other taxes and fees.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Seller Disclosure Schedule
and the Buyer Disclosure Schedule (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in
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full force and effect until the Closing and shall survive any termination of
this Agreement; and (b) are not intended to confer upon any other person any
rights or remedies hereunder.
8.6 SEVERABILITY. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 GOVERNING LAW; BINDING ARBITRATION.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
(b) Except as otherwise specifically provided herein, all
disputes arising under this Agreement shall be submitted to and settled by
arbitration. Arbitration shall be by one (1) arbitrator selected in accordance
with the rules of the American Arbitration Association, Xxxxxx County, Georgia
("AAA"), by the AAA. The hearing before the arbitrator shall be held in Xxxxxx
County, Georgia and shall be conducted in accordance with the rules existing at
the date thereof of the AAA, to the extent not inconsistent with this Agreement.
The decision of the arbitrator shall be final and binding as to any matters
submitted to them under this Agreement. All costs and expense incurred in
connection with any such arbitration proceeding and those incurred in any civil
action to enforce the same shall be borne by the party against which the
decision is rendered.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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8.10 ASSIGNMENT. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
*****
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EXECUTION COPY
ASSET PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
BUYER:
OPTIO SOFTWARE, INC.
By: /s/ C. WAYNE CAPE
------------------------------------
Its: CHIEF EXECUTIVE OFFICER
-----------------------------
SELLER:
TRANSLINK SOLUTIONS CORPORATION
By: /s/ XXXXXXXX XXXXXXX
------------------------------------
Its: PRESIDENT
-----------------------------
AFFILIATES:
XXXXXXX X. XXXXXXX FAMILY TRUST
By: /s/ XXXXXXX XXXXXXX
------------------------------------
Its: TRUSTEE
-----------------------------
XXXXXXXX X. XXXXXXX FAMILY TRUST
By: /s/ XXXXXXXX XXXXXXX
------------------------------------
Its: TRUSTEE
-----------------------------
/s/ XXXXX XXXXXX
-----------------------------------------
Xxxxx Xxxxxx
/s/ XXXXXXX XXXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXXXXX XXXXXXX
-----------------------------------------
Xxxxxxxx Xxxxxxx
