Exhibit 10.1
ASSET PURCHASE AGREEMENT
by and among
QUADRAMED CORPORATION
and
QUADRAMED OPERATING CORPORATION
as Seller,
and
OAO TECHNOLOGY SOLUTIONS, INC.
and
OAO TRANSITION, LLC
as Purchaser
Dated as of August 16, 2001
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS.................................................2
Section 1.1 Definitions........................................2
ARTICLE II SALE AND PURCHASE OF ASSETS........................................9
Section 2.1 Transfer of Assets.................................9
Section 2.2 Assignment of Conveyed Assets.....................11
Section 2.3 Excluded Assets...................................11
Section 2.4 Assumption of Assumed Liabilities and
Assumed Contracts.................................12
Section 2.5 Purchase Price....................................15
Section 2.6 Earn-Out Payment Calculation......................15
Section 2.7 Closing...........................................21
Section 2.8 Allocation of Purchase Price......................22
Section 2.9 Deferred Revenue..................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.........................23
Section 3.1 Organization......................................23
Section 3.2 Authority Relative to this Agreement..............23
Section 3.3 Consents and Approvals; No Violations.............23
Section 3.4 Financial Statements..............................24
Section 3.5 Absence of Certain Changes........................24
Section 3.6 Title to Assets...................................25
Section 3.7 Intellectual Property.............................26
Section 3.8 Material Contracts................................27
Section 3.9 Compliance with Law...............................29
Section 3.10 Litigation........................................29
Section 3.11 Real Property.....................................29
Section 3.12 Employees and Independent Contractors.............29
Section 3.13 Employee Benefit Plans............................30
Section 3.14 Brokers or Finders................................31
Section 3.15 Environmental Matters.............................31
Section 3.16 Customers.........................................31
Section 3.17 Suppliers.........................................31
Section 3.18 Licenses and Permits..............................31
Section 3.19 Tax Liens.........................................32
Section 3.20 Product Warranties................................32
Section 3.21 Guaranties........................................32
Section 3.22 Accounts Receivable...............................32
Section 3.23 Accounts Payable..................................32
Section 3.24 Affiliate Transactions............................32
Section 3.25 Products Liability................................32
Section 3.26 No Other Representations or Warranties............33
Section 3.27 Software..........................................33
Section 3.28 Undisclosed Liabilities...........................34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................34
Section 4.1 Organization......................................35
Section 4.2 Authority Relative to this Agreement..............35
Section 4.3 Consents and Approvals; No Violations.............35
Section 4.4 No Proceedings....................................36
Section 4.5 Financing.........................................36
Section 4.6 Brokers or Finders................................36
Section 4.7 No Other Representations or Warranties............36
Section 4.8 Investigation by Purchaser........................36
ARTICLE V COVENANTS..........................................................36
Section 5.1 Conduct of the Business...........................36
Section 5.2 Access to Information; Confidentiality............38
Section 5.3 Best Efforts......................................38
Section 5.4 Further Assurances................................39
Section 5.5 Transfer and Similar Taxes........................39
Section 5.6 Publicity.........................................39
Section 5.7 Supplemental Disclosure...........................40
Section 5.8 Mail And Communications...........................40
Section 5.9 Employees.........................................40
Section 5.10 Transition Services...............................43
Section 5.11 Non-Competition; Non-Solicitation.................45
Section 5.12 Collection of Receivables.........................47
Section 5.13 Financial Information.............................48
ARTICLE VI CONDITIONS........................................................49
Section 6.1 Conditions to Each Party's Obligations............49
Section 6.2 Conditions to Obligations of Purchaser............49
Section 6.3 Conditions to Obligations of Seller...............50
ARTICLE VII TERMINATION AND AMENDMENT........................................51
Section 7.1 Termination.......................................51
Section 7.2 Effect of Termination.............................51
Section 7.3 Amendment.........................................51
Section 7.4 Extension; Waiver.................................51
ARTICLE VIII SURVIVAL; INDEMNIFICATION.......................................52
Section 8.1 Survival Period...................................52
Section 8.2 Indemnification...................................52
Section 8.3 Limitation of Liability...........................52
Section 8.4 Indemnification Procedures........................53
Section 8.5 Other Matters.....................................55
Section 8.6 No Right to Set-Off...............................55
ARTICLE IX MISCELLANEOUS.....................................................56
Section 9.1 Notices...........................................56
Section 9.2 Descriptive Headings..............................57
Section 9.3 Counterparts......................................57
Section 9.4 Entire Agreement..................................57
Section 9.5 Fees and Expenses.................................57
Section 9.6 Governing Law.....................................57
Section 9.7 Specific Performance..............................58
Section 9.8 Assignment........................................58
Section 9.9 Parties in Interest...............................58
Section 9.10 Knowledge.........................................58
Section 9.11 Interpretation....................................58
Section 9.12 Severability......................................58
Section 9.13 Payments..........................................58
Section 9.14 Amendment.........................................59
Section 9.15 Gender............................................59
Section 9.16 Delivery by Facsimile.............................59
EXHIBITS
Exhibit A - Instrument of Assumption of Assumed Liabilities
Exhibit B - Xxxx of Sale and Assignment
Exhibit C- List of EZ-CAP Customers
LIST OF SCHEDULES
Schedule 2.1(b) Assumed Contracts
Schedule 2.1(c) Tangible Personal Property
Schedule 2.1(d) Software
Schedule 2.1(e) Licensed Software
Schedule 2.1(i) Off-Site Assets and Off-Site Employees
Schedule 2.3(i) Security Deposits and Prepaid Rent
Schedule 2.3(j) Excluded Employees and Assets of Excluded Employees
Schedule 2.6(a)(vii) EZ-CAP Maintenance Customers as of August 1, 2001
Schedule 2.6(a)(xv) Net Revenues
Schedule 2.6(a)(xix) EZ-CAP Pipeline Customers
Schedule 2.7(d) Net Cash Reconciliation
Schedule 2.8 Section 1060 Allocation
Schedule 3.1 Jurisdictions
Schedule 3.3(a) Consents and Approvals; No Violations
Schedule 3.3(b) Filings
Schedule 3.5 Absence of Certain Changes
Schedule 3.6 Leasehold and Personal Leased Property
Schedule 3.7(a) Intellectual Property
Schedule 3.7(f) Infringements
Schedule 3.7(g) Use
Schedule 3.8(a)(i) Material Contracts Full Force and Effect
Schedule 3.8(a)(ii) Material Contracts Not Assignable
Schedule 3.8(b) Consent for Assignment of Material Contracts
Schedule 3.8(c) Breach or Cancellation of Material Contracts
Schedule 3.8(d) Certain Contracts
Schedule 3.10 Litigation
Schedule 3.12 Employees and Independent Contractors
Schedule 3.16(a) Customers
Schedule 3.16(b) Terminated Customers
Schedule 3.17 Suppliers
Schedule 3.18 Licenses and Permits
Schedule 3.22 Accounts Receivable
Schedule 3.24 Affiliate Transactions
Schedule 3.27(b) Software Developed by Employees
Schedule 3.27(c) Software Owned by Seller
Schedule 3.27(d) Source Code
Schedule 3.27(g) Shareware, Open Source Code, Freeware
Schedule 5.1 Conduct of Business
Schedule 5.9(a) Employees
Schedule 5.10(b) Transition Services
Schedule 5.10(k) Purchaser Transition Services
Schedule 6.2(d) Hired Employees
Schedule 6.2(e) Consents
Schedule 9.10 Knowledge
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made
as of the 16th day of August, 2001, by and among QuadraMed Corporation, a
Delaware corporation ("QuadraMed"), QuadraMed Operating Corporation, a
Delaware corporation ("QuadraMed Operating Corporation" and, together with
QuadraMed, "Seller"), OAO Transition, LLC, a Delaware limited liability
company ("OAO Transition") and OAO Technology Solutions, Inc., a Delaware
corporation ("OAO" and, together with OAO Transition, "Purchaser").
RECITALS
WHEREAS, Seller is the owner of those certain assets (as
hereinafter defined in Section 2.1 as "Conveyed Assets") used to conduct
the Seller's EZ-CAP software business (the "Business"). The Business,
except for certain activities conducted off-site by the employees listed on
Schedule 2.1(i), is conducted at and the Conveyed Assets are located at
Seller's facility located at 00000 Xxxxxx Xxxxxx Xxxx, Xxxxxxxx Xxxxx,
Xxxxxxxxxx (the "Facility"). The Business (i) designs and markets software
to automate the managed care administration and medical management
operations of at risk healthcare provider organizations under the product
names of EZ-CAP(R) and EZ-NET, EZ-LINKs, EZ-PARTNER, PRIME ANALYSIS,
IQ-PARTNER, Multi-Company, and the EZ-Member Service (collectively, the
"EZ-CAP Owned Products"); (ii) markets licensed software under the product
names of Explorer, Eligibility Manager, Cap Check, Premium Pro, Report
Server and Cap. Rec. (collectively, the EZ-CAP Licensed Products"); (iii)
resells and installs hardware and other equipment necessary for the
operation of the EZ-CAP Owned Products and EZ-Cap Licensed Products; (iv)
provides implementation, training, maintenance, enhancement, and consulting
services related to the installation and operation of the EZ-CAP Owned
Products and EZ-CAP Licensed Products.
WHEREAS, Seller desires to sell to Purchaser and
Purchaser desires to purchase from Seller all assets of Seller necessary to
conduct the Business, as described in Section 2.1, pursuant to the terms
and conditions set forth herein; and
WHEREAS, Purchaser desires to assume from Seller the
Assumed Liabilities (as defined herein); and
WHEREAS, Seller desires to transfer to Purchaser Deferred
Revenues (as defined herein) in the manner provided herein;
NOW, THEREFORE, in consideration of the premises,
covenants, representations and warranties contained herein, and other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Accounts Receivable" shall mean all accounts receivable,
notes receivable and other indebtedness due and owed by any third party to
Seller or any of its Affiliates arising or held in connection with the
Business.
"Affiliate" shall mean, with respect to any Person, any
Person which, directly or indirectly, controls, is controlled by, or is
under common control with, the specified Person. For purposes of this
definition, the term "control" as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management of that Person, whether through ownership of
voting securities, contract or otherwise.
"Aggregate Earn-Out" shall have the meaning ascribed to
it in Section 2.6(a).
"Aggregate Earn-Out Amount" shall have the meaning
ascribed to it in Section 2.6(a).
"Aggregate Earn-Out Cap Amount" shall have the meaning
ascribed to it in Section 2.6(a).
"Allocation" shall have the meaning ascribed to it in
Section 2.8.
"Assumed Contracts" shall have the meaning ascribed to it
in Section 2.1(b).
"Assumed Liabilities" shall have the meaning ascribed to
it in Section 2.4(b).
"Audited Financial Statements" shall have the meaning
ascribed to it in Section 5.13(a).
"Authorizations" shall have the meaning ascribed to it in
Section 6.1(a).
"Bad Debt" shall mean an amount equal to the aggregate
outstanding balance due on any accounts receivable of Purchaser that is
attributable to Hardware Revenues and/or Non-Hardware Revenues and where
all or any portion of such receivable becomes outstanding for at least one
hundred eighty (180) days after the invoice service period date at any time
during either of the First Earn-Out Period or the Second Earn-Out Period.
To illustrate the foregoing, assume that, during the First Earn-Out Period,
the aggregate accounts receivable balance for a customer is $60,000 and
that such receivable relates to Hardware Revenues. Assume also that $40,000
of such accounts receivable has been outstanding for 180 days, $15,000 has
been outstanding for 90 days, and $5,000 has been outstanding for 25 days.
For purposes of this definition, the amount of the Bad Debt shall be equal
to $60,000.
"Xxxx of Sale" shall have the meaning as ascribed to it
in Section 2.7(b).
"Business" shall have the meaning ascribed to it in the
Recitals.
"Cash Paid Deferred Revenue" shall have the meaning
ascribed to it in Section 2.9.
"Claim" shall have the meaning ascribed to it in Section
8.4.
"Claim Notice" shall have the meaning ascribed to it in
Section 8.4.
"Closing" shall have the meaning ascribed to it in
Section 2.7(a).
"Closing Deferred Revenue Statement" shall have the
meaning ascribed to it in Section 2.9.
"Closing Date" shall have the meaning ascribed to it in
Section 2.7(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" shall have the meaning
ascribed to it in Section 5.2(b).
"Conveyed Assets" shall have the meaning ascribed to it
in Section 2.1.
"Copyrights" shall include all registered copyrights and
copyrightable works as each are solely associated with the specific
Conveyed Assets or the Business.
"Deferred Revenue" shall have the meaning ascribed to it
in Section 2.9.
"Earn-Out Amount" shall have the meaning ascribed to it
in Section 2.6(a).
"Earn-Out Period" shall have the meaning ascribed to it
in Section 2.6(a).
"Earn-Out Resolution Period" shall have the meaning
ascribed to it in Section 2.6(c)(iii).
"Earn-Out Statement" shall have the meaning ascribed to
it in Section 2.6(a).
"Employees" shall have the meaning ascribed to it in
Section 5.9(a).
"Environmental and Safety Requirements" shall mean all
Laws relating to public health and safety, worker health and safety and
pollution or protection of the environment, including, without limitation,
all those relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control or cleanup of
any hazardous or otherwise regulated materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, as the foregoing are enacted
and in effect prior to or on the Closing Date.
"ERISA Affiliate" shall have the meaning ascribed to it
in Section 3.13.
"Excluded Assets" shall have the meaning ascribed to it
in Section 2.3.
"Excluded Employees" shall have the meaning ascribed to
it in Section 2.1(i).
"Excluded Liabilities" shall have the meaning ascribed to
it in Section 2.4(b).
"EZ-CAP Add-on Modules" shall mean the following
functional modules of the Business: EZ-NET, EZ-PARTNER, EZ-LINKS, PRIME
ANALYSIS, IQ-PARTNER, Multi-Company Explorer, Cap Check, Premium Pro,
Eligibility Manager, Cap Rec., Report Server and the EZ member service and
any additional add-on modules and any upgrades, enhancements and
modifications thereto, and the Software and Intellectual Property
associated with such modules.
"EZ-CAP Core Modules" shall mean the following functional
modules of the Business: health plan, benefits, member eligibility,
provider and vendor fee schedules and contracts, authorizations, claims
entry, customer service, case management, processing, capitation, system
setup and reports modules, any additional base functionality modules and
any upgrades, enhancements and modifications thereto, and the Software and
Intellectual Property related thereto.
"EZ-CAP Customers" shall mean customers of the Seller,
under contract with the Seller at the Closing Date in connection with the
Business, as set forth on Exhibit C.
"EZ-CAP Pipeline Customers" shall have the meaning
ascribed to it in Section 2.6(a).
"Facility" shall have the meaning ascribed to it in the
Recitals.
"Financial Statements" shall have the meaning ascribed to
it in Section 3.4.
"Financing" shall have the meaning ascribed to it in
Section 4.5.
"First Earn-Out Period Amount" shall have the meaning
ascribed to it in Section 2.6(a).
"First Earn-Out Period" shall have the meaning ascribed
to it in Section 2.6(a).
"First Earn-Out Period Hardware Component" shall have the
meaning ascribed to it in Section 2.6(a).
"First Earn-Out Period Non-Hardware Component" shall have
the meaning ascribed to it in Section 2.6(a).
"Force Majeure Event" shall have the meaning ascribed to
it in Section 5.10(e).
"GAAP" shall have the meaning ascribed to it in Section
3.4.
"Governmental Entity" shall mean a court, legislature,
governmental agency, commission or regulatory authority or instrumentality.
"Hardware" shall have the meaning ascribed to it in
Section 2.6(a).
"Hardware Revenues" shall have the meaning ascribed to it
in Section 2.6(a).
"Hired Employees" shall have the meaning ascribed to it
in Section 5.9(c).
"Indemnified Party" shall have the meaning ascribed to it
in Section 8.4.
"Indemnifying Party" shall have the meaning ascribed to
it in Section 8.4.
"Infringe" shall have the meaning ascribed to it in
Section 3.7(f).
"Initial Purchase Price" shall have the meaning ascribed
to it in Section 2.5(i).
"Instrument of Assumption" shall have the meaning
ascribed to it in Section 2.7(c).
"Intellectual Property" shall mean, in each case as each
are solely associated with the specific Conveyed Assets or the Business all
registered and unregistered intellectual property rights used by Seller
exclusive to the Business, including, without limitation, all of the
following items along with, all income, royalties, damages, equitable
relief and payments due (including, without limitation, damages, equitable
relief and payments for past, present or future infringements or
misappropriations thereof, the right to xxx and recover for past
infringements or misappropriations thereof and any and all corresponding
rights that, now or hereafter, may be secured throughout the world): (i) if
any exist, such patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to
practice) and any reissue, continuation, continuation-in-part, division,
revision, extension or reexamination thereof; (ii) Trademarks; (iii) if any
exist, Trade Secrets; (iv) Copyrights; (v) other proprietary rights
exclusive to the Business; (vi) licenses or other agreements to or from
third parties regarding the foregoing; and (vii) all copies and tangible
embodiments of the foregoing (in whatever form or medium).
"Inventory" shall mean all inventory owned by Seller in
connection with the Business, including raw materials, work-in-process and
finished goods that (i) was directly procured to fulfill an open customer
order and (ii) the vendor or supplier has been paid by Seller but for which
Seller has not invoiced its customer.
"Knowledge" shall have the meaning ascribed to it in
Section 9.10.
"Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, order, code, policy or rule of common
law, now or hereafter in effect, and in each case as amended, and any
judicial or administrative interpretation thereof by a Governmental Entity
or otherwise, including, without limitation, any judicial or administrative
order, consent, decree or judgment.
"Leasehold" shall have the meaning ascribed to it in
Section 2.1(h).
"Leased Property" shall have the meaning ascribed to it
in Section 3.6.
"Licensed Software" shall mean all software, data,
databases and content which is licensed to Seller for use exclusively in
connection with the Business as listed on Schedule 2.1(e) hereof.
"Licenses" shall have the meaning ascribed to it in
Section 3.18.
"Lien" shall mean any lien, security interest, pledge,
mortgage or similar encumbrance.
"Losses" shall have the meaning ascribed to it in Section
8.2(a).
"Maintenance Revenues" shall have the meaning ascribed to
it in Section 2.6(a).
"Material Adverse Effect" shall mean a material adverse
effect on the business, results of operations or financial condition of the
Business, taken as a whole; provided, however, that Material Adverse Effect
shall not include, either alone or in combination, (i) a change in a party,
including, without limitation, any disruption of customer or supplier
relationships or loss of any employees or independent contractors, arising
out of or resulting solely from any actions of Purchaser as of or after the
date of execution hereof related to the transactions contemplated hereby,
(ii) conditions affecting the healthcare information technology industry
generally, (iii) failure by the Business to meet its projections with
respect to revenues or expenses, or (iv) any adverse change, event or
effect that is caused by conditions affecting the economy of the United
States generally.
"Net Revenues" shall have the meaning ascribed to it in
Section 2.6(a).
"Non-Compete Area" shall mean (i) any country in the
world where Purchaser is doing business during the term of the Non-Compete
Period, (ii) any state, territory or district within the United States,
(iii) the State of California, or (iv) within 500 miles of the Los Angeles,
California greater metropolitan area.
"Non-Compete Period" shall have the meaning ascribed to
it in Section 5.11.
"Non-Hardware Revenues" shall have the meaning ascribed
to it in Section 2.6(a).
"Notice Period" shall have the meaning ascribed to it in
Section 8.4.
"Permitted Liens" shall mean, collectively (i) Liens for
Taxes or assessments which are not delinquent or are being contested in
good faith by appropriate proceedings; (ii) mechanics', warehousemens',
materialmens', contractors', workmens', repairmens' and carriers' liens,
and other similar Liens arising in the ordinary course for obligations
which are not delinquent; or (iii) the rights, if any, of third-party
suppliers or other vendors having possession of equipment of the Business.
"Person" shall mean any individual, group, corporation,
partnership or other organization or entity (including, without limitation,
any Governmental Entity).
"PPC" shall have the meaning ascribed to it in Section
2.6(e)(iii).
"Proceeding" shall have the meaning ascribed to it in
Section 3.10.
"Purchase Price" shall have the meaning ascribed to it in
Section 2.5(a).
"Purchaser" shall have the meaning ascribed to it in the
preamble hereto.
"Purchaser Savings Plan" shall have the meaning ascribed
to it in Section 5.9(h).
"Purchaser Plans" shall have the meaning ascribed to it
in Section 5.9(a).
"Qualified Leads" shall have the meaning ascribed to it
in Section 2.6(a).
"Schedule", unless otherwise indicated, shall mean a
schedule to this Agreement.
"Second Earn-Out Period Amount" shall have the meaning
ascribed to it in Section 2.6(a).
"Second Earn-Out Period" shall have the meaning ascribed
to it in Section 2.6(a).
"Second Earn-Out Period Hardware Component" shall have
the meaning ascribed to it in Section 2.6(a).
"Second Earn-Out Period Non-Hardware Component" shall
have the meaning ascribed to it in Section 2.6(a).
"Seller" shall have the meaning ascribed to it in the
preamble hereto.
"Seller Plans" shall have the meaning ascribed to it in
Section 5.9(a).
"Seller Savings Plan" shall have the meaning ascribed to
it in Section 5.9(i).
"Software" shall mean (individually and collectively)
the computer databases and software owned by Seller for use exclusively in
connection with the Business as listed on Schedule 2.1(d) hereof; including
all exclusively related (i) current, previous, enhanced and developmental
versions of the source code, object code, job control language, macros,
algorithms and load modules thereof in both source code and executable file
format (whether held directly or in escrow), (ii) output reports, test or
other data relating to the installation, checkout and operation thereof and
reports on the analysis of errors or defects therein, (iii) items of
computer software derived from any or all of the foregoing and all rights
to use thereof for any purpose, (iv) Copyrights, (v) Trademarks or Trade
Secrets and/or (vi) software, data, databases and content. The term
"Software" shall also include, except as set forth in the Schedules
attached to this Agreement, the absolute, unrestricted and exclusive right
to use all of the foregoing items, including the right to sell, lease,
rent, license or otherwise market any and all aspects of the Software.
"Survival Period" shall have the meaning ascribed to it
in Section 8.1.
"S-X Financial Statements" shall have the meaning
ascribed to it in Section 5.13.
"Taxes" shall mean any and all taxes, levies or other
like assessments, including, but not limited to, income, transfer, gains,
gross receipts, excise, inventory, property (real, personal or intangible),
sales, use, license, withholding, payroll, employment, capital stock and
franchise taxes, imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof.
"Tax Return" shall mean any report, return or other
information filed with any taxing authority with respect to Taxes imposed
upon or attributable to the operations of the Business.
"Trademarks" shall mean the trademarks and related
design, service marks, trade names, as well as the Internet domain names,
content, designs, logos, slogans, and general intangibles of like nature
set forth in Schedule 3.7(a), together with all goodwill, registrations and
applications related to the foregoing, as each are solely related with the
specific Conveyed Assets or the Business.
"Trade Secrets" shall mean databases; technology, trade
secrets and other confidential information, know-how, proprietary
processes, formulae, algorithms, models, and methodologies (including,
without limitation, ideas, compositions, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, financial,
business and marketing plans, and customer and supplier lists and related
information) as each are solely associated with the specific Conveyed
Assets or the Business.
"Transfer Taxes" shall have the meaning ascribed to it in
Section 5.5.
"Unaudited Financial Statements" shall have the meaning
ascribed to it in Section 5.13.
ARTICLE II
SALE AND PURCHASE OF ASSETS
Section 2.1 Transfer of Assets. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, Seller shall assign, transfer,
convey and deliver to Purchaser, and Purchaser shall purchase, acquire,
assume, and accept from Seller and except as set forth in Section 2.2, all
of Seller's rights, title and interest of every kind and nature in those
certain assets, set forth below, which, except for certain Microsoft office
suite shrink-wrap software, Seller represents are all the assets necessary
to conduct the Business as it is presently conducted (collectively, the
"Conveyed Assets"):
(a) Intellectual Property. Seller's rights in the
Intellectual Property, TradeMarks, including the EZ-CAP(R) Trademark, Trade
Secrets and Copyrights; provided, however, that the Conveyed Assets do not
include or confer any rights, title or interest to use the name "QuadraMed"
or any trademark confusingly similar or dilutive thereof.
(b) Contract Rights. Seller's rights in the contracts and
agreements exclusively related to the Business set forth on Schedule 2.1(b)
hereof (the "Assumed Contracts");
(c) Tangible Personal Property. The office equipment,
computer hardware, machinery, office furniture, fixed assets, other
tangible assets and similar items located at the Facility listed on
Schedule 2.1(c) hereof;
(d) Software. The Software as listed on Schedule 2.1(d)
hereof;
(e) Licensed Software. The Licensed Software as listed on
Schedule 2.1(e) hereof;
(f) Books and Records. All existing books, records,
documents, manuals and files maintained by or on behalf of Seller in any
form or medium (electronic, paper or otherwise) relating to past, current
or prospective customers, suppliers, distributors, personnel or otherwise
exclusively related to the Business or the Conveyed Assets, but not those
relating to Taxes or Tax Returns or other minute books, capital records and
other documents of Seller;
(g) Inventory. The Inventory;
(h) Leasehold. The leasehold interest in the Facility
(the "Leasehold");
(i) Off-Site Assets. Seller's rights in the assets set
forth on Schedule 2.1(i) hereof, relating to assets used by certain
Employees of the Business, listed on Schedule 2.1(i), outside of the
Facility; and
(j) Goodwill. All goodwill of the Business.
Section 2.2 Assignment of Conveyed Assets. Except as otherwise
provided in this Agreement, Seller shall use its reasonable best efforts to
obtain all consents and approvals to assign to Purchaser the Conveyed
Assets. Notwithstanding anything to the contrary contained in this
Agreement, (a) Seller shall assign the rights and obligations under the
Conveyed Assets only to the extent that such rights and obligations are
assignable, and no action hereunder shall constitute an assignment thereof
except to such extent, and (b) to the extent consent of a third party to
the assignment of any Conveyed Asset by Seller to Purchaser is required, no
assignment or attempted assignment will be deemed to have been effected by
the provisions of this Agreement without such consent. To the extent that
Seller cannot assign any contracts or agreements that would otherwise
constitute Assumed Contracts, Seller and Purchaser will use their
reasonable efforts to enter into arrangements sufficient to provide
equivalent benefits and burdens to Purchaser. In addition, if the landlord
under the Leasehold does not unconditionally release Seller from its
obligations under the Leasehold pursuant to the assignment of the Leasehold
to Purchaser, Purchaser shall indemnify Seller for any Losses to Seller
under the Leasehold arising after the Closing Date; provided, however, that
Purchaser shall not indemnify Seller for any Losses to Seller under the
Leasehold arising after the Closing Date due to acts or omissions of
Seller.
Section 2.3 Excluded Assets. Notwithstanding anything to the
contrary contained in this Agreement, Seller and Purchaser expressly
understand and agree that the Conveyed Assets shall not include, and Seller
is not under this Agreement selling, assigning, transferring or conveying
to Purchaser, the following assets (the "Excluded Assets"):
(a) all cash and all Accounts Receivable, subject to the
provisions of Section 2.9;
(b) prepaid Taxes and prepaid insurance;
(c) all insurance policies maintained by or on behalf of
Seller;
(d) any right, title or interest of Seller in any refunds
or credits of Taxes receivable after the Closing for actions occurring on
or before the Closing Date;
(e) the books and records relating to the organization
and operation of Seller;
(f) all intellectual property and all software not
exclusively used in the Business, including, but not limited to, any
rights, title or interest to use the name "QuadraMed" or any trademark or
copyright confusingly similar thereto or dilutive thereof;
(g) all assets under any of the Seller Plans of any kind
or nature maintained by or on behalf of Seller, whether or not such assets
relate to the Business;
(h) any real estate of Seller;
(i) security deposits and prepaid rent for the Facility
and prepaid royalties on certain agreements with original equipment
manufacturers set forth on Schedule 2.3(i);
(j) Seller's rights in the assets set forth on Schedule
2.3(j) hereof, relating to assets used by nine (9) employees of the
Business located at the Facility listed on Schedule 2.3(j) that will not be
offered employment pursuant to Section 5.9 hereof (such Employees, the
"Excluded Employees"); and
(k) all claims, causes of action, rights of recovery and
rights of set-off of any kind relating to the foregoing Excluded Assets.
Section 2.4 Assumption of Assumed Liabilities and Assumed Contracts.
(a) Subject to the conditions specified in this
Agreement, from and after the Closing Date, Purchaser will not assume or in
any way be responsible for any liabilities of Seller or any other
liabilities related to the ownership, operation or condition of the
Business or the Conveyed Assets at any time on or prior to the Closing
Date. From and after the Closing Date, Purchaser will assume and agree to
pay, defend, discharge and perform as and when due only the following
specific liabilities of Seller that relate exclusively to the Business (the
"Assumed Liabilities"):
(i) on the terms and subject to the conditions
set forth in this Agreement, at the Closing, Purchaser shall
assume liabilities arising out of the Assumed Contracts, to the
extent such Assumed Contracts are actually assigned to Purchaser,
but excluding any liabilities relating to any transaction, status,
event, situation, condition, occurrence existing or occurring on
or prior to Closing Date;
(ii) liabilities related to accrued vacation
pay, accrued sick leave, any other accrued employee fringe
benefits, if any, accrued unpaid amounts since April 1, 2001 under
Seller's bonus plan, and any other accrued incentive compensation,
if any, for the Hired Employees for which Purchaser receives a
credit under Section 2.7(d)(i); and
(iii) liabilities, obligations and claims
arising as a result of Purchaser's purchase, ownership, use or
operations of the Business or the Conveyed Assets subsequent to
the Closing Date.
(b) Other than the Assumed Liabilities, Purchaser shall
not assume any other liabilities or obligations of Seller (the "Excluded
Liabilities") including, without limitation, the following liabilities of
Seller:
(i) liabilities for any contracts, accounts
payable, accrued liabilities or other short-term liabilities other
than those specifically described in Section 2.1 hereof;
(ii) Except as provided in Section 5.5, Tax
liabilities of Seller and its subsidiaries, arising with respect
to any period, or portion thereof, occurring prior to or ending on
the Closing Date relating to or allocable to the ownership or
operation of the Business and/or the Conveyed Assets on or prior
to the Closing Date;
(iii) liabilities of Seller for costs and
expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby;
(iv) liabilities of Seller under or pursuant to
this Agreement or the Xxxx of Sale;
(v) liabilities arising out of or relating to
the Excluded Assets;
(vi) liabilities for any claims (whenever made)
or proceedings arising out of, relating to, resulting from or
caused by any products manufactured, serviced, distributed or
sold, or services rendered, by Seller or any of its Affiliates
with respect to the Business (or any predecessor) at any time on
or prior to the Closing Date;
(vii) liabilities for any claims (whenever
made), including Permitted Liens, arising out of, relating to,
resulting from or caused by any transaction, status, event,
condition, occurrence or situation existing, arising or occurring
(A) in connection with the ownership or operation of the Business,
and/or the Conveyed Assets on or prior to the Closing Date or (B)
in connection with Seller's or any of its Affiliates' businesses
or activities at any time prior to or on or after the Closing
Date;
(viii) except as expressly assumed by Purchaser
in Section 5.9, (A) any and all liabilities, commitments and
obligations relating to employee benefits, fringe benefits,
payroll practices or compensation arrangements of Seller or any of
its Affiliates existing on or prior to the Closing Date,
including, without limitation, liabilities, commitments and
obligations for uninsured workers compensation claims incurred on
or prior to the Closing Date, (B) any accrued vacation pay,
accrued sick leave, any other accrued employee fringe benefits, if
any, accrued unpaid amounts since April 1, 2001 under Seller's
bonus plan and any other accrued incentive compensation, if any,
to the extent that the amounts credited under Section 2.7(d)(i)
are not true and correct, and (C) any benefits under the Seller
Plans (as hereinafter defined) or any other benefit plan of
Seller;
(ix) liabilities resulting from or relating to
(A) any claims, warranty claims, actions, investigations or
proceedings (whenever arising) relating to products manufactured,
merchandised, distributed, sold or delivered by or services
rendered by Seller (or any predecessors) at any time on or prior
to the Closing Date, and (B) any other claims, actions or
proceedings of any nature pending or threatened against Seller (or
any predecessors) at any time on or prior to the Closing Date;
(x) contributions, premiums, duties and
liabilities relating to Seller's or its subsidiaries' obligation
to contribute to any of the Seller's Plans with respect to the
operation of Seller's business on or prior to the Closing Date
(regardless of when any such contribution is required to be made);
(xi) except as expressly assumed by the
Purchaser in Section 5.9, duties and liabilities relating to any
claims for notice, pay in lieu of notice, severance pay, vacation
pay, bonus, commissions, overtime pay, death, disability or other
health or welfare or fringe benefits, including, without
limitation, any benefit offered or available under any Seller
Plans, payable as a result of facts, actions or conditions
existing on or prior to the Closing Date or which are provided to
any Person who is not an active employee (or a dependent thereof)
of Seller or its subsidiaries on or immediately prior to the
Closing Date;
(xii) duties and liabilities relating to any
fact, event or condition existing or threatened on or prior to the
Closing Date (whether or not disclosed in any schedule hereto)
pertaining to any past or present facility, property or operation
of Seller (or any predecessors) which at any time interferes with
or prevents continued compliance with, or gives rise to any
investigation liability under any Environmental and Safety
Requirements;
(xiii) liabilities for any indebtedness of
Seller, including, without limitation, any obligation of Seller
for borrowed money, capital leases and similar obligations;
(xiv) any obligation of Seller to indemnify any
Person by reason of the fact that such Person was a director,
officer, employee or agent of Seller or was serving at the request
of Seller as a partner, trustee, director, officer, employee or
agent of another Person (whether such indemnification is for
judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such
indemnification is pursuant to statute, charter document, bylaw,
agreement or otherwise); and
(xv) liabilities for the actions or omissions of
Seller, except as contemplated by this Agreement, the Xxxx of Sale
and the Instrument of Assumption.
Section 2.5 Purchase Price. In consideration of the sale of the
Conveyed Assets, in addition to the assumption by Purchaser of the Assumed
Liabilities, Purchaser shall pay to Seller:
(i) at the Closing, $8,900,000 in cash by wire
transfer of immediately available funds to the bank account
designated by Seller or in accordance with such other instructions
as may be provided by Seller to Purchaser and (the "Initial
Purchase Price"); and
(ii) after the Closing, (a) $100,000 in cash by
wire transfer of immediately available funds to the bank account
designated by Seller, within two (2) business days after the
receipt by Purchaser of the Audited Financial Statements and
Unaudited Financial Statements (as such terms are defined in
Section 5.13(a)), provided that (A) such statements are delivered
within sixty- five (65) days of Closing and (B) the Audited
Financial Statements contain an unqualified audit opinion of P&B
(as defined in Section 5.13(b)) and (b) as provided in Section 2.6
herein, the Aggregate Earn-Out Amount, calculated and paid in
accordance with said Section 2.6 the amounts in clauses (a) and
(b) shall, together with the Initial Purchase Price, be
collectively referred to as the "Purchase Price".
Section 2.6 Earn-Out Payment Calculation.
(a) For all purposes of this Section 2.6, the following
terms shall have the following meanings:
(i) "Aggregate Earn-Out Amount" shall mean an
amount that is equal to the sum of (A) the First Earn-Out Period
Amount and (B) the Second Earn-Out Period Amount; provided,
however, that the Aggregate Earn-Out Amount shall not, in any
event, exceed the Aggregate Earn-Out Cap Amount.
(ii) "Aggregate Earn-Out Cap Amount" shall mean
an amount that is equal to Five Million Dollars ($5,000,000).
(iii) "Earn-Out Amount" shall mean, as the case
may be, (A) the First Earn-Out Period Amount or (B) the Second
Earn-Out Period Amount.
(iv) "Earn-Out Period" shall mean, as the case
may be, (A) the First Earn-Out Period or (B) the Second Earn-Out
Period.
(v) "First Earn-Out Period" shall mean the
twelve (12)-month period commencing on September 1, 2001 and
ending on August 31, 2002.
(vi) "Second Earn-Out Period" shall mean the six
(6)-month period commencing on September 1, 2002 and ending on
February 28, 2003.
(vii) "First Earn-Out Period Amount" shall mean
an amount that is equal to the sum of (A) the First Earn-Out
Period Hardware Component and (B) the First Earn-Out Period
Non-Hardware Component; provided, however, that if the amount of
annualized Maintenance Revenues invoiced from EZ-CAP Customers of
the Business as of September 1, 2001 (the "EZ-CAP Maintenance
Customers"), is greater than or equal to seventy-five percent
(75%) of the amount of annualized Maintenance Revenues invoiced
from the same EZ-CAP Maintenance Customers of the Business as of
September 1, 2002, the First Earn-Out Period Amount shall be equal
to the greater of (x) the sum of (A) and (B) above, or (y) One
Million Five Hundred Thousand Dollars ($1,500,000). The EZ-Cap
Customers of the Business and the Maintenance Revenues related
thereto as of August 1, 2001 is set forth on Schedule 2.6(vii);
such Schedule shall be updated as of September 1, 2001 and shall
be provided to Purchaser no later than September 5, 2001. Schedule
2.6(vii) is, and, when updated, will be, true and correct.
(viii) "Second Earn-Out Period Amount" shall
mean an amount that is equal to the sum of (A) the Second Earn-Out
Period Hardware Component and (B) the Second Earn-Out Period
Non-Hardware Component; provided, however, that if the amount set
forth in (y) of the definition of First-Earn-Out Period Amount
(i.e., One Million Five Hundred Thousand Dollars ($1,500,000)) was
paid to the Seller in respect of the First Earn-Out Period, the
Second Earn-Out Period Amount shall be equal to: (x) the sum of
(A) the First Earn-Out Period Hardware Component, (B) the First
Earn-Out Period Non-Hardware Component, (C) the Second Earn-Out
Period Hardware Component, and (D) the Second Earn-Out Period
Non-Hardware Component, minus (y) One Million Five Hundred
Thousand Dollars ($1,500,000).
(ix) "First Earn-Out Period Hardware Component"
shall mean the product of (A) one hundred fifty percent (150%) of
Hardware Revenues during the First Earn-Out Period times (B)
twenty percent (20%).
(x) "Second Earn-Out Period Hardware Component"
shall mean the product of (A) one hundred fifty percent (150%) of
Hardware Revenues during the Second Earn-Out Period times (B)
twenty percent (20%).
(xi) "First Earn-Out Period Non-Hardware
Component" shall mean one hundred fifty percent (150%) times the
amount of (A) the Non-Hardware Revenues during the First Earn-Out
Period which exceeds (B) Eight Million Five Hundred Thousand
Dollars ($8,500,000).
(xii) "Second Earn-Out Period Non-Hardware
Component" shall mean one hundred fifty percent (150%) times the
amount of (A) Non-Hardware Revenues during the Second Earn-Out
Period which exceeds (B) Four Million Five Hundred Thousand
Dollars ($4,500,000).
(xiii) "Hardware" shall mean equipment,
computers, servers, routers and similar personal property that
functions with the EZ-Cap Core Modules, EZ-CAP Add-on Modules and
Non-EZ-CAP products for which an EZ-CAP alternative exists.
(xiv) "Hardware Revenues" shall mean Net
Revenues recognized by the Business from the sale of Hardware to
EZ-CAP Customers, EZ-CAP Pipeline Customers, Qualified Leads and
any new customers of the Business following the Closing Date;
provided, however, that with respect to new customers of the
Business following the Closing Date, Hardware Revenues shall be
limited to sales of Hardware associated with EZ-Cap Core Modules
and EZ-Cap Add-on Modules; and provided, further, that if there is
a sale of Hardware that functions with any Non-EZ-CAP products for
which an EZ-CAP alternative exists, then the amount of Hardware
Revenues derived from the sale of such Hardware shall not exceed
the then-existing base price that would have been received if the
EZ-CAP alternative were substituted for the Non-EZ-CAP products.
(xv) "Net Revenues" shall mean revenue as
reduced by all related returns, discounts, credits, cancellations,
Bad Debt and allowances, all determined (A) in accordance with
GAAP and (B) to the extent inconsistent with GAAP, in accordance
with the accounting principles used by the Business prior to the
Closing Date, as set forth in Schedule 2.6(a)(xv). Further, any
Bad Debt that is subsequently collected shall be treated as "Net
Revenues".
(xvi) "Maintenance Revenues" shall mean Net
Revenues payable for maintenance, training and enhancement of
products licensed or sold by the Business.
(xvii) "Non-Hardware Revenues" shall mean Net
Revenues recognized by the Business with respect to EZ-CAP
Customers, EZ-CAP Pipeline Customers, Qualified Leads and any new
customers of the Business following the Closing Date, whether in
the form of licensing fees, installation fees, Maintenance
Revenues, training services and similar types of income,
attributable to (x) any EZ-Cap Core Modules, (y) any EZ-CAP Add-on
Modules and (z) solely with respect to EZ-CAP Customers, EZ-CAP
Pipeline Customers and Qualified Leads, any Non EZ-CAP products
for which an EZ-CAP alternative exists. In determining
Non-Hardware Revenues, the following principles shall apply:
o For any Non EZ-CAP product for which an EZ-CAP
alternative exists, the amount of revenues that
would be included as Non-Hardware Revenue
pursuant to the sale of such Non EZ-CAP product
shall not be greater than the then-existing base
price for the EZ-CAP alternative.
o In the event of a transaction that involves a
combination of (i) EZ-Cap Core Modules and/or
EZ-CAP Add-on Modules and (ii) Non-EZ CAP
products for which an EZ-CAP alternative does
not exist, then the amount of revenues that
would be included as Non-Hardware Revenue shall
be equal to the difference between (x) the total
revenues from such transaction, and (y) the
portion allocable to the Non-EZ Cap products for
which an EZ-CAP alternative does not exist. To
illustrate, if the total revenues from the
transaction is $240,000 and the portion
allocable to the Non-EZ CAP products is $40,000,
then the amount to be included in Non-Hardware
Revenue shall be equal to $200,000 ($240,000 -
$40,000).
o Deferred Revenues as of the Closing Date for
which Purchaser receives cash from Seller for
services to be rendered after the Closing Date
shall be included as Non-Hardware Revenue for
the First Earn-Out Period.
(xviii) "Qualified Leads" shall mean any new
customer of the Business identified by Seller and approved, during
the Earn-Out Period, by Purchaser's Vice President of Sales for
the Business, or by the person designated by Purchaser who
fulfills a similar position or authority.
(xix) "EZ-CAP Pipeline Customers" shall mean the
potential customers of the Business listed on Schedule
2.6(a)(xix).
(b) For each Earn-Out Period, on the fifth (5th) business
day following the earliest of (i) acceptance by Seller of the Earn-Out
Statement (as defined in Section 2.6(c)(i)), (ii) any such later date as
Seller and Purchaser agree on the amount of the Earn-Out Amount for such
period, or (iii) if there is no such acceptance or agreement, the
determination by a certified public accounting firm of the Earn-Out Amount
for such period as contemplated by Section 2.6(c), Purchaser shall pay to
Seller the Earn-Out Amount for such period in cash or by wire transfer of
immediately available funds to the bank account designated by Seller;
provided, however, that, in no event, shall Purchaser be obligated to pay
to Seller the Earn-Out Amount any earlier than seventy-five (75) days
following the end of the Earn-Out Period.
(c) Each Earn-Out Statement shall be prepared by
Purchaser in the following manner:
(i) For each Earn-Out Period, Purchaser shall
cause to be delivered to Seller as promptly as reasonably
practicable, but no later than forty (40) days following the end
of the Earn-Out Period, a statement executed by Purchaser's Chief
Financial Officer or President reflecting the Earn-Out Amount for
such Earn-Out Period (each such statement, the "Earn-Out
Statement").
(ii) Within thirty (30) days following the
delivery to Seller of each Earn-Out Statement, Seller shall notify
Purchaser of any dispute of any item contained in such Earn-Out
Statement, which notice shall set forth in reasonable detail the
basis for such dispute. If Seller fails to notify Purchaser of any
dispute within such thirty (30)-day period, the applicable
Earn-Out Amount shall be deemed to be accepted by Seller and
payable in accordance with Section 2.6(b).
(iii) If Seller notifies Purchaser in writing of
any dispute, Purchaser and Seller shall cooperate in good faith to
resolve such dispute as promptly as possible. If Purchaser and
Seller are unable to resolve any such dispute within fifteen (15)
days of Seller's notification of a dispute (the "Earn-Out
Resolution Period"), then all amounts remaining in dispute shall
be submitted to a certified public accounting firm selected by
Seller and Purchaser within ten (10) days after the expiration of
the Earn-Out Resolution Period. If Seller and Purchaser are unable
to agree on the certified public accounting firm within seven (7)
days following the expiration of the Earn-Out Resolution Period,
then Purchaser and Seller shall each request the American
Arbitration Association to appoint the certified public accounting
firm, which firm shall not have had a material relationship with
Seller, Purchaser or any of their respective Affiliates within the
then-previous two (2) years. Each party agrees promptly to
execute, if requested by the certified public accounting firm, a
reasonable engagement letter. All fees and expenses relating to
the work, if any, to be performed by the certified public
accounting firm shall be borne by Seller and Purchaser equally.
The certified public accounting firm shall act as an arbitrator to
determine only those issues still in dispute and shall be limited
to those adjustments, if any, that need be made for the applicable
Earn-Out Statement. The certified public accounting firm's
determination (i) shall be requested to be made within thirty (30)
days of its selection, (ii) shall be set forth in a written
statement delivered to Seller and Purchaser, and (iii) shall be
final, binding and conclusive on the parties. The Earn-Out Amount,
as set forth in such firm's determination, shall thereafter be
payable in accordance with Section 2.6(b).
(iv) In order to facilitate preparation of any
Earn-Out Statement, and in particular, to ensure that Seller and
Purchaser adopt similar methodology, procedures and analysis with
respect to calculating Net Revenues, Hardware Sales, and
Non-Hardware Revenues, Seller and Purchaser agree that, within
forty (40) days after the ninetieth (90th) day following the
Closing Date, Purchaser will deliver to Seller an interim
statement setting forth Purchaser's calculation of the foregoing
items during such ninety (90)-day period. Within five (5) days
following delivery by Purchaser of such statement, Seller shall
notify Purchaser of any dispute of any item contained therein,
failing which the applicable calculations shall be deemed to be
accepted by Seller for all purposes of this Section 2.6 and may
not thereafter be disputed by Seller. If Seller notifies Purchaser
of any dispute, Seller and Purchaser agree to resolve such dispute
in accordance with the provisions of (iii) above.
(d) If any dispute arises with respect to any items
contained in an Earn-Out Statement, Purchaser shall give Seller, Seller's
independent auditors, Seller's authorized representatives and their
respective employees and agents, and the certified public accounting firm
appointed under Section 2.6(c)(iii) hereof, access at all reasonable times
to the working papers and other books, documents and papers and the
personnel of Purchaser and the Business and of Purchaser's accounting firm,
including, but not limited to, (x) any description of the methodology,
procedures, audits and analysis undertaken in connection with the
applicable Earn-Out for purposes of preparing, reviewing and resolving any
disputes concerning such Earn-Out Statement, or (y) any information related
to past, existing and new customers of the Business and all contracts with
past, existing and new customers. For all purposes hereof, any access shall
be granted solely to the extent reasonably necessary to analyze any
disputed item; access to any workpapers, books, documents and papers of
Purchaser's accounting firm shall be limited to the certified public
accounting firm appointed under Section 2.6(c)(iii).
(e) During the period between the Closing Date and the
end of the Second Earn-Out Period, Purchaser agrees that:
(i) Purchaser shall use its commercially
reasonable best efforts to generate Hardware Revenues and
Non-Hardware Revenues for the Business. Purchaser shall conduct
the Business in such a way as to not delay or defer the
recognition of Hardware Revenues and Non-Hardware Revenues beyond
the end of the Second Earn-Out Period. Purchaser shall use its
commercially reasonable best efforts to provide support for sales,
marketing and customer support of the Business until the end of
the Second Earn-Out Period.
(ii) Purchaser shall maintain separate books and
records for the Business, including separate records of accounting
for the Hardware Revenues and Non-Hardware Revenues.
(iii) Purchaser shall not discontinue, wind up,
reduce the scope of, sell, liquidate or otherwise dispose of all
or any part of the Business or the Conveyed Assets other than
hardware and software sales in the ordinary course; provided,
however, that Purchaser may terminate or reduce its relationship
with Personable PC Solutions, Inc. ("PPC") if Purchaser
substitutes one or more products that are equivalent to those
provided under its then-existing agreement with PPC. Purchaser
shall not divert any part of the Business or the Conveyed Assets
or other assets of the Business to any other division or entity
except for transfers of the entire Business and the Conveyed
Assets to a one hundred percent (100%) owned subsidiary (which
includes limited liability companies and other legal entities) of
OAO or any Affiliate of OAO.
(iv) For purposes of determining each Earn-Out
Amount and each Earn-Out Statement, Purchaser shall employ
accounting methods, policies or practices consistent with Schedule
2.6(a)(xv).
(v) Purchaser shall not, during any Earn-Out
Period, acquire through merger, consolidation or a similar
transaction, all or part of the assets, business or stock of
another corporation or business that competes with the Business,
without Seller's consent, which shall not be unreasonably
withheld.
Section 2.7 Closing
(a) The consummation of the transactions contemplated by
this Agreement (the "Closing") will take place on the second business day
following the satisfaction or waiver of the conditions set forth in Article
VI hereof, at 10:00 a.m., at the offices of Venable, Baetjer, Xxxxxx and
Xxxxxxxxx, LLP 0000 Xxx Xxxx Xxxxxx, Xxxxxxxxxx, X.X. or at such other time
and place as shall be mutually agreed upon by the parties. The parties
agree to use their best efforts to cause the Closing to occur on or before
August 31, 2001. The date on which the Closing occurs is referred to herein
as the "Closing Date."
(b) At the Closing, Seller shall deliver or cause to be
delivered to Purchaser the following: (i) a duly executed Xxxx of Sale and
Assignment, in substantially the form of Exhibit B hereto (the "Xxxx of
Sale"); (ii) duly executed assignments of all Trademarks to Purchaser; and
(iii) all other previously undelivered documents required to be delivered
by Seller to Purchaser at or prior to the Closing to consummate the
transactions contemplated in this Agreement.
(c) At the Closing, Purchaser shall deliver or caused to
be delivered to Seller the following: (i) cash in the amount of the Initial
Purchase Price by wire transfer of immediately available funds to an
account designated by Seller; (ii) a duly executed Instrument of Assumption
of the Assumed Liabilities substantially in the Form of Exhibit A hereto
(the "Instrument of Assumption"); and (iii) all other previously
undelivered documents required to be delivered by Purchaser to Seller at or
prior to the Closing to consummate the transactions contemplated in this
Agreement.
(d) At the Closing, Seller and Purchaser will settle on
the net cash reconciliation in which (i) Cash Paid Deferred Revenue and
accrued vacation pay, accrued sick pay and other employee benefits, if any,
accrued unpaid amounts since April 1, 2001 under Seller's bonus plan, and
any other incentive compensation, if any, for the Hired Employees that is
payable after the Closing shall be credited to Purchaser, (ii)
reimbursement for prepaid assets, prepaid commissions, transition services,
and amounts related to Inventory shall be credited to Seller and (iii)
other miscellaneous items, as needed, shall be credited to Seller or
Purchaser, as the case may be, all of which to be set forth on a statement
to be prepared by Seller and as approved by Seller and Purchaser. The items
to be included in the net cash reconciliation shall be as set forth on
Schedule 2.7(d).
Section 2.8 Allocation of Purchase Price. Seller and Purchaser
shall allocate the Purchase Price among the Conveyed Assets being purchased
by Purchaser pursuant to this Agreement and in accordance with applicable
laws, including, without limitation, Section 1060 of the Code and
applicable Treasury Regulations and as set forth in Schedule 2.8 (the
"Allocation"). Each of Seller and Purchaser shall (i) be bound by the
Allocation for purposes of determining Taxes, (ii) prepare, file, and cause
its affiliates to prepare and file, its Tax Returns on a basis consistent
with the Allocation and (iii) take no position, and cause its affiliates to
take no position, inconsistent with the Allocation on any applicable Tax
Return, in any proceeding before any Taxing authority or otherwise. In the
event that the Allocation is disputed by any Taxing authority, the party
receiving notice of the dispute shall promptly notify the other party
hereto concerning resolution of the dispute.
Section 2.9 Deferred Revenue. At the Closing, Seller shall provide
Purchaser with a statement (the "Closing Deferred Revenue Statement")
setting forth the revenues paid or payable to Seller for products,
installations, product enhancements, other obligations or ongoing services
billed by Seller on or prior to the Closing Date to be performed by the
Business after the Closing Date (the "Deferred Revenue"), and, at the
Closing, Seller shall pay Purchaser any such amounts so paid in cash to
Seller prior to the Closing Date (the "Cash Paid Deferred Revenue"). After
the Closing, Seller shall pay Purchaser any revenues thereafter paid to
Seller for such ongoing services billed by Seller on or prior to the
Closing Date to be performed by the Business after the Closing Date, within
five (5) business days of receipt thereof; provided, however, that the full
amount of Deferred Revenue shall be paid, to the extent it has not
previously been paid, by Seller to Purchaser no later than the sixtieth
(60th) day after Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 3.1 Organization. Each of QuadraMed and QuadraMed
Operating Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. All jurisdictions
in which Seller is qualified to do business are set forth on Schedule 3.1.
Each of QuadraMed and QuadraMed Operating Corporation has all requisite
corporate power and authority to own, lease and operate the Conveyed Assets
and to carry on the Business as it is presently conducted.
Section 3.2 Authority Relative to this Agreement. Each of
QuadraMed and QuadraMed Operating Corporation has the requisite corporate
power and authority to execute and deliver this Agreement and the Xxxx of
Sale and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Xxxx of Sale and the
performance by each of QuadraMed and QuadraMed Operating Corporation of
their obligations hereunder and thereunder have been authorized by all
requisite corporate action on the part of each of QuadraMed and QuadraMed
Operating Corporation. This Agreement has been validly executed and
delivered by each of QuadraMed and QuadraMed Operating Corporation and,
assuming that this Agreement has been duly authorized, executed and
delivered by Purchaser, constitutes, and the Xxxx of Sale that is to be
executed and delivered by each of QuadraMed and QuadraMed Operating
Corporation at the Closing will constitute when executed and delivered by
each of QuadraMed and QuadraMed Operating Corporation, a valid and binding
obligation of each of QuadraMed and QuadraMed Operating Corporation,
enforceable against each of QuadraMed and QuadraMed Operating Corporation
in accordance with its terms; except that such enforceability is subject to
and limited by the effect of bankruptcy, insolvency, reorganization,
arrangement and moratorium laws, laws relating to fraudulent transfers or
conveyances and general principles of equity (whether asserted in an action
at law or in equity).
Section 3.3 Consents and Approvals; No Violations.
(a) Except as set forth in Schedule 3.3(a), neither the
execution and delivery of this Agreement or the Xxxx of Sale by each of
QuadraMed and QuadraMed Operating Corporation nor the performance by each
of QuadraMed and QuadraMed Operating Corporation of its obligations
hereunder or thereunder will (i) violate the certificate of incorporation
or by-laws of either of QuadraMed and QuadraMed Operating Corporation, (ii)
result in a violation or breach of, or constitute a default under, any
contract, agreement or instrument to which either of QuadraMed and
QuadraMed Operating Corporation is a party or by which the Conveyed Assets
are bound or (iii) violate any Law applicable to either of QuadraMed and
QuadraMed Operating Corporation or the Conveyed Assets, except in the case
of clauses (ii) or (iii) for violations, breaches or defaults which would
not result in a Material Adverse Effect.
(b) Except as set forth on Schedule 3.3(b), no filing
with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by Seller of the
transactions contemplated by this Agreement, except for those filings,
permits, authorizations, consents or approvals the failure of which to be
made or obtained would not result in a Material Adverse Effect.
Section 3.4 Financial Statements. Seller has previously delivered
to Purchaser the unaudited income statements of the Business for the three
(3) months ended March 31, 2001, each of the months ended April 30, May 31,
and June 30, 2001, the pro forma income statement of the Business for the
years ended December 31, 2000 and December 31, 1999, and a pro forma
balance sheet for the Business dated as of June 30, 2001 (the "Financial
Statements"). Seller represents that the pro forma income statements
provided to Purchaser contain all estimated accruals and estimated direct
expenses incurred by Seller on behalf of and related to the Business
consistently applied for all periods presented in accordance with United
States generally accepted accounting principles, practices and methods
("GAAP"). Seller represents that the assets and liabilities on the pro
forma balance sheet provided to Purchaser contain all estimates for carried
balances for all asset and liability accounts related to the Business
consistently applied for all periods presented in accordance with GAAP.
Seller also represents that the Financial Statements fairly present (i) in
all material respects the financial condition and results of operations of
the Business as a separate operating division as of the dates set forth
therein for such periods and (ii) a true and accurate representation of the
revenues, estimated expenses, including estimated allocations for corporate
shared services, and estimated pre-tax income of the Business.
Section 3.5 Absence of Certain Changes. From March 31, 2001 and
through the date hereof, with respect to the Business and except as set
forth on Schedule 3.5:
(a) Seller has conducted the Business in the ordinary
course,
(b) there has not been any change resulting in a Material
Adverse Effect;
(c) Seller has not taken any action which, if taken after
the date hereof without the consent of Purchaser, would violate Section 5.1
of this Agreement;
(d) suffered any losses which have materially and
adversely affected the Business or the Conveyed Assets;
(e) paid, discharged or satisfied any claims, liabilities
or obligations (absolute, accrued, contingent or otherwise), except in the
ordinary course of Business consistent with its past practices;
(f) sold, transferred, or otherwise disposed of any of
its properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of Seller's Business consistent with its past
practices;
(g) forgiven or canceled material debts or waived any
claims or rights of substantial value;
(h) permitted or allowed any of the Business or the
Conveyed Assets (real, personal or mixed, tangible or intangible) to be
subject to any Lien, except Permitted Liens;
(i) entered into any contract or series of
related contracts, except in the ordinary course of the Business
consistent with its past practices;
(j) made any material change in its accounting
principles, methods or practices;
(k) made any change in the terms of any employment
agreement or compensatory arrangement, or any bonus, pension, insurance or
other employee benefit plan, or any payment or benefit made to or for any
employee;
(l) failed to pay any of its obligations in the ordinary
course of the Business; or
(m) made any capital expenditure for additions to
property or equipment other than in the ordinary course of the Business.
Section 3.6 Title to Assets.
Seller has, and at the Closing Seller will deliver to
Purchaser, good title to all of the Conveyed Assets, free and clear of all
Liens, other than Permitted Liens. Each of the Leasehold and the personal
property leases listed on Schedule 3.6 (the "Personal Leased Property") are
valid, binding, enforceable against Seller in accordance with its terms;
except that such enforceability is subject to and limited by the effect of
bankruptcy, insolvency, reorganization, arrangement and moratorium laws,
laws relating to fraudulent transfers or conveyances and general principles
of equity (whether asserted in an action at law or in equity). Neither the
Leasehold nor any of the Personal Leased Property has been modified (except
to the extent disclosed in the documents delivered to Purchaser). Seller
holds a leasehold interest in the Leasehold for the term set forth in
Schedule 3.6. The Leasehold and Personal Leased Property constitutes all of
the leases under which Seller holds leasehold or subleasehold interests or
personal property leases in real or personal property in connection with
its operation of the Business. Seller has delivered to Purchaser complete
and accurate copies of each of the Leasehold and the Personal Leased
Property, together with all amendments, waivers or other changes thereto.
The Leasehold constitutes all of the real property used or occupied by
Seller in connection with its operation of the Business, except for
off-site locations used by employees identified on Schedule 2.1(i). To
Seller's Knowledge, there is no reason that any lessor under the Leasehold
will not consent (where such consent is necessary) to the assignment of the
Leasehold without requiring material modifications to the rights and
obligations of the lessee thereunder.
Section 3.7 Intellectual Property.
(a) Schedule 3.7(a) hereof contains an accurate and
complete description of all of Seller's Intellectual Property rights.
Seller owns and has the right and power to sell, assign and/or license,
said Intellectual Property rights. All licenses for software to which
Seller is a party or which are binding on Seller are included on Schedule
3.7(a) hereof as contracts, and Seller is in full compliance with the terms
thereof. No royalties, honoraria or other fees are payable by the Seller to
any third parties for the use of or right to use any Intellectual Property
except as set forth on Schedule 3.7(a).
(b) The Intellectual Property owned by Seller and to
Seller's Knowledge, any Intellectual Property used and not otherwise owned
by Seller, is valid and subsisting, in full force and effect, and has not
been cancelled, expired, or abandoned. There is no pending threatened
opposition, interference or cancellation proceeding before any court or
registration authority in any jurisdiction against the Intellectual
Property owned by Seller and to Seller's Knowledge, any Intellectual
Property used by Seller against any Intellectual Property licensed to
Seller.
(c) To Seller's Knowledge, the conduct of the Business as
currently conducted or as planned to be conducted does not infringe upon
(either directly or indirectly such as through contributory infringement or
inducement to infringe) any Intellectual Property owned or controlled by
any third party.
(d) There are no claims or suits pending or threatened,
and Seller has not received any written notice of a third party claim or
suit: (a) alleging that its activities or the conduct of the Business
infringes upon, violates or constitutes the unauthorized use of the
intellectual property rights of any third party or (b) challenging the
ownership, use, validity or enforceability of any Intellectual Property.
(e) Seller exclusively owns, free and clear of all Liens,
obligations to license or other adverse claims, all its owned Intellectual
Property.
(f) Seller has taken all reasonable steps to maintain,
police and protect the Intellectual Property which it owns. Except as
disclosed on Schedule 3.7(f), and to Seller's Knowledge, (i) neither the
conduct of Seller's Business nor the use of the Conveyed Assets (including,
without limitation, the Intellectual Property), nor the products
manufactured, distributed or sold by Seller infringe or otherwise impair or
conflict with ("Infringe") any intellectual property of any Person, (ii)
the Intellectual Property of the Seller is not being Infringed by any
Person, and (iii) there is no litigation or order pending or outstanding,
threatened or imminent, that seeks to limit or challenge or that concerns
the ownership, use, validity or enforceability of any Intellectual Property
of Seller and there is no valid basis for the same.
(g) Except as set forth on Schedule 3.7(g), the
consummation of the transactions contemplated hereby will not result in the
alteration, loss or impairment of the validity, enforceability or Seller's
right to own or use any of the Intellectual Property, nor will such
transactions require the approval of any Person with respect to any
intellectual property rights.
(h) Seller has taken all reasonable steps to protect the
Seller's rights in its confidential information. Without limiting the
foregoing, Seller requires each employee to execute appropriate agreements.
Except under valid and enforceable confidentiality obligations, to Seller's
Knowledge, there has been no material disclosure of any of Seller's
confidential information to any Person.
Section 3.8 Material Contracts.
(a) Seller has delivered to Purchaser true and correct
copies of the Assumed Contracts. To Seller's Knowledge, there are no
material oral contracts relating to the Assumed Contracts or the Business.
The Assumed Contracts are the only material agreements or contracts of
Seller (other than this Agreement, the Xxxx of Sale and the Instrument of
Assumption) which relate to the Business and the Conveyed Assets. Except as
set forth on Schedule 3.8(a)(i), (i) all of such Assumed Contracts are
currently in full force and effect, (ii) Seller has performed all the
obligations required to be performed by it in connection with the Assumed
Contracts and is not in default under or in breach of any Assumed Contract,
and no event has occurred which with the passage of time or the giving of
notice or both would result in a default or breach thereunder, and (iii) to
Seller's Knowledge there is no anticipated breach by the Seller or the
other parties thereto. Except as set forth on Schedule 3.8(a)(ii), the
Assumed Contracts (x) are assignable by Seller to Purchaser; and (y) were
entered into at arm's length in the ordinary course of business.
(b) Except as disclosed on Schedule 3.8(b), no Assumed
Contract requires the consent of a third party to assign such Assumed
Contract to Purchaser.
(c) Except as disclosed in Schedule 3.8(c), (i) to the
Knowledge of Seller, no contract or commitment required to be disclosed on
Schedule 2.1(b) has been breached or canceled by the other party; (ii)
within the previous twelve (12) months no customer or supplier has
indicated in writing or to Seller's Knowledge orally that it shall stop or
decrease the rate of business done with Seller or that it desires to
renegotiate its Assumed Contract with Seller; (iii) Seller is not a party
to any contract requiring it to purchase goods or services or lease
property above or below (as the case may be) prevailing market rates and
prices or to sell goods or services below prevailing market rates or below
the cost of such goods or services to Seller, and (iv) no other party to
any such Assumed Contract has asserted the right to renegotiate, cancel or
terminate prior to the full term of any such Assumed Contract.
(d) Except as specifically contemplated by this Agreement
and except as set forth in Schedule 3.8(d), with respect to the Business,
Seller is not a party to or bound by, and the Conveyed Assets are not bound
by, whether written or oral, any:
(i) contract relating to mortgaging, pledging or
otherwise placing a Lien, except for Permitted Liens, on any of
its assets;
(ii) contract with respect to the lending or
investing of funds;
(iii) guaranty of any obligation, other than
endorsements made for collection;
(iv) contract which prohibits Seller from freely
engaging in the Business anywhere in the world, other than the
Assumed Contracts;
(v) contract relating to the distribution,
marketing or sales of its products, other than the Assumed
Contracts;
(vi) contract pursuant to which Seller
subcontracts work to third parties; or
(vii) contract relating to the acquisition or
sale of the Business (or any material portion thereof), other than
this Agreement.
Section 3.9 Compliance with Law. The Business is being conducted
in compliance with all permits, orders, judgments, injunctions and decrees
and applicable laws, and the rules and regulations of any Governmental
Entity purporting to have jurisdiction over the conduct of the Business or
the Conveyed Assets, except to the extent such noncompliance would not have
a Material Adverse Effect.
Section 3.10 Litigation.
(a) Except as set forth on Schedule 3.10, there are no
actions, suits, proceedings, orders, judgments, decrees or investigations
pending or, to Seller's Knowledge, threatened against or affecting Seller
with respect to the Business or the Conveyed Assets at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, and to the Knowledge of Seller there is no basis known for any
of the foregoing. Except as set forth on Schedule 3.10, Seller has not
received any opinion or legal advice in writing to the effect that Seller
is exposed from a legal standpoint to any liability or disadvantage which
may be material to the Business as previously, presently or as proposed to
be conducted or the business prospects of the Business. Neither Seller with
respect to the Business nor any of the Conveyed Assets is subject to any
outstanding order, judgment or decree issued by any court or quasi-judicial
or administrative agency of any federal, state, local or foreign
jurisdiction or any arbitrator.
(b) There are no outstanding orders, injunctions or,
decrees of any Governmental Entity that apply to the Conveyed Assets that
restrict the ownership, disposition or use of the Conveyed Assets or the
conduct of the Business in any material respect.
Section 3.11 Real Property. Except for the Leasehold, the Business
and the Conveyed Assets include no owned or leased real property of any
kind. To Seller's Knowledge, there are no violations of any applicable
building, zoning, safety or other laws, ordinances or regulations with
respect to Seller's use and/or occupancy of the Leasehold.
Section 3.12 Employees and Independent Contractors. Schedule 3.12
lists each independent contractor who is retained by Seller exclusively in
connection with the Business on the date hereof. Employees of Seller who
are assigned exclusively to the operations of the Business on the date
hereof are listed in Schedule 5.9(a). Except as set forth in Schedule 3.12,
Seller is not a party to or bound by any agreement for the employment of
any person who works for Seller on the date hereof in connection with the
Business which is not terminable without liability or any payment
obligation on thirty (30) days' or less notice. Schedule 3.12 sets forth
all individual employment and compensation agreements applicable to the
employees of Seller who are assigned exclusively to the operations of the
Business on the date hereof. Schedule 3.12 further sets forth all bonus and
severance arrangements, if any, individually or generally made available to
employees of Seller who are assigned exclusively to the operations of the
Business on the date hereof in connection with the transactions
contemplated by this Agreement. Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of Seller with respect to the
Business, nor is Seller a party to any collective bargaining agreement with
any labor union. Seller is not subject to any claim for wrongful dismissal,
constructive dismissal or any other claim or complaint, actual or
threatened, or any audit or investigation by a government agency, or any
litigation, actual or threatened, relating to employment, discrimination or
termination of employment of any employee or former employee of Seller, who
is or was employed in connection with the Business. Seller has complied in
all material respects with all applicable laws relating to the Employees,
including provisions thereof relating to wages, hours, vacation, overtime,
notice, pay in lieu of notice, termination and severance pay, occupational
health and safety, equal opportunity, collective bargaining and the payment
of social security and other Taxes, the Worker Adjustment and Retraining
Notification Act, and the Immigration Reform and Control Act of 1986, or
any similar provisions of foreign, federal, state or local law. To the
Knowledge of Seller, no Employee is in breach of any noncompete,
nondisclosure, confidentiality, or similar provision of any contract to
which such Employee is bound, by virtue of his or her employment with the
Business. Section 3.13 Employee Benefit Plans. Each "employee benefit
plan", within the meaning of Section 3(3) of ERISA, maintained by or on
behalf of Seller is in substantial compliance with all applicable
provisions of ERISA and the Code except for instances of noncompliance or
liabilities or obligations that would not, individually or in the
aggregate, have a Material Adverse Effect on the Business. Except as any of
the following either individually or in the aggregate would not have a
Material Adverse Effect on the Business, or result in any material
liability to Purchaser following the Closing Date, (w) neither Seller nor
any trade or business, whether or not incorporated (an "ERISA Affiliate"),
which together with Seller would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA, has incurred any unsatisfied liability
under Title IV of ERISA and no condition exists that could reasonably be
expected to present a risk to Seller or any ERISA Affiliate of incurring
any such liability (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course which have been
paid when due), (x) neither Seller nor any ERISA Affiliate contributes, or
has been obligated to contribute to, any "multiemployer plan," within the
meaning of Section 4001(c) of ERISA, during the five (5)- year period prior
to the date hereof, (y) no "employee benefit plan," maintained or
contributed to by Seller or any ERISA Affiliate has incurred an
"accumulated funding deficiency" (within the meaning of Section 302 of
ERISA or Section 412 of the Code) whether or not waived; and (z) there are
no pending or, to the Knowledge of Seller, threatened, claims, actions,
investigations or suits with respect to any Seller Plan. Upon the request
of Purchaser, Seller will provide or make available to Purchaser true and
complete copies of each Seller Plan.
Section 3.14 Brokers or Finders. Neither Seller nor any of its
Affiliates has retained any agent, broker, investment banker, financial
advisor or other firm or person that is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with
any of the transactions contemplated by this Agreement.
Section 3.15 Environmental Matters. Seller has complied with and
is currently in compliance in all material respects with all Environmental
and Safety Requirements, has no material liabilities, including, without
limitation, corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements and has not received any oral or
written notice, report or information regarding any such liabilities,
including, without limitation, corrective, investigatory or remedial
obligations arising under Environmental and Safety Requirements which
relate to the Business or any of its properties or facilities or any of the
Conveyed Assets. To the Knowledge of the Seller, none of the following
exists at the Facility with respect to the Business: (i) underground
storage tanks or surface impoundments; (ii) asbestos-containing material in
any form or condition; or (iii) materials or equipment containing
polychlorinated biphenyls.
Section 3.16 Customers. Schedule 3.16(a) hereof contains a
complete and accurate list of all customers of the Business who have
licensed software and/or other Intellectual Property Rights or purchased
other goods and services within the past twelve (12) months. Schedule
3.16(b) hereof contains a complete and accurate list of all customers of
the Business to which licensing, maintenance, support and/or other services
are no longer being provided by Seller due to poor credit history or other
disputes with such customers. Except for the customers set forth on
Schedule 3.16(b), there has not been any material adverse change in the
business relationship between Seller and any customers of the Business
within the past twelve (12) months.
Section 3.17 Suppliers. Schedule 3.17 hereof contains a complete
and accurate list of all suppliers of Seller to whom Seller has made
payment of at least Fifty Thousand Dollars ($50,000) for licensed software,
other Intellectual Property or goods and services furnished within the past
twelve (12) months. There has been no material adverse change in the
business relationship between Seller and any supplier listed on Schedule
3.17.
Section 3.18 Licenses and Permits. Schedule 3.18 contains a
complete listing of all permits, licenses, variances, franchises, orders,
approvals, consents, certificates, registrations and other authorizations
of a Governmental Entity (foreign, national or local) (collectively, the
"Licenses") owned or possessed or used by Seller in the Business as it is
presently conducted. Except as indicated on Schedule 3.18, Seller owns or
possesses all right, title and interest in and to all Licenses which are
necessary to own and operate the Conveyed Assets and to conduct the
Business as presently conducted and shall use its reasonable efforts to
maintain such Licenses. Seller is in material compliance with the terms and
conditions of such Licenses. No loss or expiration of any License is
pending or, to Seller's knowledge, threatened, other than expiration in
accordance with the terms thereof.
Section 3.19 Tax Liens. The Conveyed Assets are free and clear of
any Lien related to any Tax liability whatsoever or howsoever arising
(whether accrued, absolute or contingent) or any Lien arising under ERISA.
Section 3.20 Product Warranties. All written product warranties of
Seller made in connection with the Business and all written product
warranties made by third parties to Seller in connection with the Business
have been made available to Purchaser. All material product warranties made
by Seller in the Business are contained in the Assumed Contracts listed in
Schedule 2.1(b), other than implied warranties by operation of law or
otherwise.
Section 3.21 Guaranties. Seller is not a guarantor or otherwise
held liable for any liability or obligation (including indebtedness) of any
other person or entity relating to the Business.
Section 3.22 Accounts Receivable. Schedule 3.22 sets forth (i) all
current Accounts Receivable and (ii) invoices related to the Business that
have been written off as uncollectable by Seller within the past twelve
(12) months.
Section 3.23 Accounts Payable. The accounts payable relating to
the Business all were (and as of the Closing Date will be) incurred in the
ordinary course of the Business. Seller is current and is not in default
with respect to such accounts payable.
Section 3.24 Affiliate Transactions. Except as disclosed on
Schedule 3.24 or in connection with employees' employment with Seller, no
officer, director, employee, stockholder, or Affiliate of Seller is a party
to any contract or transaction with Seller relating to the Business or has
any interest in any of the Conveyed Assets. Schedule 3.24 hereto describes
all intercompany or affiliated services provided to or on behalf of the
Business by Seller or its Affiliates and to or on behalf of Seller and its
Affiliates by the Business and all intercompany transactions or contracts
among Seller and its Affiliates with respect to the Business.
Section 3.25 Products Liability. There are not presently pending
or, to the Knowledge of Seller, threatened any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against it
arising out of any injury to individuals or property as a result of
Seller's ownership of the Conveyed Assets.
Section 3.26 No Other Representations or Warranties. Except for
the representations and warranties contained in this Agreement, neither
Seller nor any other Person makes any other express or implied
representation or warranty on behalf of Seller or any of its Affiliates.
Section 3.27 Software.
(a) The computer software, data content (in both source
and executable file format), including the Software included in the
Business, and the Intellectual Property performs in all material respects
in accordance with the documentation and other written material used in
connection with the Software, is free of material defects in programming
and operation, is in machine-readable and human readable form, contains all
current revisions of the Software and includes all computer programs,
materials and processes related to the Software. Seller has made available
to Purchaser complete and correct copies of all existing technical, user
manuals, design documents, configuration documents, compilation
instructions related to the Software and the required operating
environment, the absence of which would not have a Material Adverse Effect.
(b) To Seller's Knowledge, no employee of the Seller is
in default under any term of any employment contract or nondisclosure
agreement with the Seller relating to the Software, or any other contract
or any restrictive covenant with the Seller relating to the Software or its
development or exploitation. Except as set forth on Schedule 3.27(b), the
Software was developed entirely by employees of the Seller, and within the
employee's scope of employment for the Seller. To Seller's Knowledge, each
such employee was, during the time of such employee's participation in such
development, exclusively an employee of the Seller. To Seller's Knowledge,
the Software does not include any inventions of any employees made prior to
the time such employees became employees of the Seller or any intellectual
property of any previous employer of such employee.
(c) To Seller's Knowledge, and except as set forth on
Schedule 3.27(c), all right, title and interest in and to the Software is
owned by the Seller, free and clear of all Liens, and, except for
non-exclusive licenses granted to customers in the ordinary course of
business, no party other than the Seller has any interest in the Software,
including, without limitation, any security interest, license, contingent
interest or otherwise. To Seller's Knowledge, the Seller's development,
use, sale or exploitation of the Software does not violate in any material
respect any rights of any other Person, and the Seller has not received any
written communication alleging such a violation. Except as set forth on
Schedule 3.27(c), other than employees and sales agents, the Seller does
not have any obligation to compensate any person for the development, use,
sale or exploitation of the Software nor has the Seller granted to any
other person or entity other than customers and sales agents any license,
option or other rights to develop, use, sell or exploit in any manner the
Software, whether requiring the payment of royalties or not.
(d) The Seller has used commercially reasonable efforts
to prohibit the public disclosure of the source code for the Software to
any person or entity other than certain employees of the Seller. The Seller
has used commercially reasonable efforts to protect the confidential and
proprietary nature of the Software. There have been no patents applied for
and, except as set forth on Schedule 3.27(d), no copyrights registered for
any part of the Software. Except as set forth on Schedule 3.27(d), Seller
has not licensed the source code to any party except to an escrow agent as
part of an escrow agreement, as set forth on Schedule 3.27(d), and no such
source code has been released from escrow to a third party.
(e) To Seller's Knowledge, the Conveyed Assets do not
contain any viruses, Trojan horses, trap doors, back doors, Easter eggs,
worms, time bombs, cancelbots or other computer programming routines that
could damage, detrimentally interfere with, surreptitiously intercept or
expropriate any system, data or personal information, other than as would
not have a Material Adverse Effect.
(f) Except as set forth on Schedule 3.27(g), neither the
Conveyed Assets nor the Intellectual Property contain any shareware, open
source code and/or freeware.
(g) Except for Microsoft office suite shrink-wrap
software, Schedule 2.1(e) sets forth a complete and accurate list of all
agreements granting or obtaining any right to use or practice any rights
under any Licensed Software, to which the Seller is a party or otherwise
bound (collectively, the "License Agreements").
(h) The License Agreements are valid, binding and
transferable obligations of Seller, enforceable in accordance with their
terms, and, to the Seller's knowledge, there exists no event or condition
which will result in a violation or breach of, or constitute a default by
Seller under any such License Agreement.
Section 3.28 Undisclosed Liabilities. Except (a) as disclosed in
the Financial Statements and (b) for liabilities and obligations incurred
in the ordinary course of business and consistent with past practice since
June 30, 2001, Seller has not incurred any liability or obligation of any
nature, whether or not accrued, contingent or otherwise, that has, or would
be reasonably likely to have, a Material Adverse Effect on the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 4.1 Organization. OAO is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. OAO Transition is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware. OAO has
all requisite corporate power and authority and OAO Transition has all
requisite limited liability company power and authority to own, lease and
operate its properties and to conduct its business as now being conducted.
Section 4.2 Authority Relative to this Agreement. OAO has the
requisite corporate power and authority and OAO Transition has the
requisite limited liability company power and authority to execute and
deliver this Agreement and the Instrument of Assumption. The execution and
delivery of this Agreement and the Instrument of Assumption and the
performance by each of OAO and OAO Transition of its obligations hereunder
and thereunder have been authorized by all requisite corporate action on
the part of Purchaser. This Agreement has been validly executed and
delivered by each of OAO and OAO Transition and, assuming that this
Agreement has been duly authorized, executed and delivered by Seller,
constitutes, and the Instrument of Assumption that is to be executed and
delivered by each of OAO and OAO Transition at the Closing will constitute
when executed and delivered by each of OAO and OAO Transition, a valid and
binding obligation of Purchaser, enforceable against each of OAO and OAO
Transition in accordance with its terms; except that such enforceability is
subject to and limited by the effect of bankruptcy, insolvency,
reorganization, arrangement and moratorium laws, laws relating to
fraudulent transfers or conveyances and general principles of equity
(whether asserted in an action at law or in equity).
Section 4.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement
or the Instrument of Assumption by Purchaser nor the performance by
Purchaser of its obligations hereunder or thereunder will (i) violate the
certificate of incorporation or by-laws of OAO or the certificate of
formation or the operating agreement of OAO Transition, (ii) result in a
violation or breach of, or constitute a default under, any contract,
agreement or instrument to which Purchaser is a party or by which any of
its properties or assets may be bound or (iii) violate any Law applicable
to Purchaser, except in the case of clauses (ii) or (iii) for violations,
breaches or defaults which would not delay the consummation of the
transactions contemplated by this Agreement.
(b) No filing with, and no permit, authorization, consent
or approval of any Governmental Entity is necessary for the consummation by
Purchaser of the transactions contemplated by this Agreement, except for
those filings, permits, authorizations, consents or approvals the failure
of which to be made or obtained would not materially delay the consummation
of the transactions contemplated hereby.
Section 4.4 No Proceedings. There are no proceedings, pending or,
to the knowledge of Purchaser, threatened against or related to Purchaser
which could affect Purchaser's ability to consummate the transactions
contemplated by this Agreement and the Instrument of Assumption.
Section 4.5 Financing. Purchaser has (through cash on hand,
existing credit arrangements or otherwise) as of the date hereof, and will
have at the Closing and at the time required for payment of the First
Earn-Out and the Second Earn-Out, sufficient funds to pay the Purchase
Price then due and all other amounts payable by Purchaser at the Closing
and to perform its obligations hereunder following the Closing and to
provide adequate working capital to the Business (the "Financing").
Section 4.6 Brokers or Finders. Neither Purchaser nor its
Affiliates has retained any agent, broker, investment banker, financial
advisor or other firm or person that is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with
any of the transactions contemplated by this Agreement.
Section 4.7 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement, neither
Purchaser nor any other Person makes any other express or implied
representation or warranty on behalf of Purchaser.
Section 4.8 Investigation by Purchaser(a) . Purchaser has
conducted its own independent review and analysis of the Conveyed Assets,
the Assumed Liabilities and the Business and acknowledges that Purchaser
has been provided access to the key management, properties, premises and
records of Seller relating to the Conveyed Assets and the Business for such
purpose.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Business. During the period from the
date hereof to the Closing, Seller shall, except as otherwise contemplated
by this Agreement, operate the Business only in the ordinary course of
business consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise contemplated by this Agreement or as
set forth on Schedule 5.1, from the date of this Agreement to the Closing,
without the prior written consent of Purchaser (which consent shall not be
unreasonably withheld or delayed), Seller:
(a) will not incur any Assumed Liability that is
materially adverse to the Business, except for liabilities and obligations
incurred in the ordinary course of business;
(b) will not mortgage, pledge or subject any Conveyed
Assets to any Lien other than Permitted Liens;
(c) except in the ordinary course of business, will not
transfer to any third party any material rights under any licenses,
sublicenses or other agreements with respect to any material Intellectual
Property;
(d) will not surrender, revoke or otherwise terminate any
material license, permit, registration or other approval, authorization or
consent from any Governmental Entity relating to the conduct of the
Business;
(e) will not increase the compensation or fringe benefits
payable or to become payable to any Employee (as defined herein), other
than regular salary increases in the ordinary course of business;
(f) will not surrender, revoke or otherwise terminate any
material License from any Governmental Entity relating to the conduct of
the Business;
(g) maintain in full force and effect policies of
insurance in such amounts as Seller has heretofore maintained;
(h) continue its normal policies and procedures regarding
suppliers of goods and services to the Business and sales and licenses to
customers;
(i) maintain the Conveyed Assets in as good working order
and condition as they were on the date of this Agreement, normal wear and
tear excepted;
(j) not make any capital expenditure in excess of One
Hundred Thousand Dollars ($100,000) in the aggregate, or enter into any
long-term lease or other agreement involving real estate or capital
equipment;
(k) not sell or otherwise dispose of any of the Conveyed
Assets, except for Conveyed Assets consumed or disposed of in the ordinary
course of business, or if no longer used in the operation of the Business,
or in connection with the acquisition of replacement property of equivalent
kind or value;
(l) use reasonable efforts to preserve its goodwill with
all employees, customers and suppliers;
(m) not waive any material right under any contract
relating to the Business; and
(n) furnish a list of all material contracts entered into
between the date of this Agreement and the Closing Date; and
(o) will not enter into any agreement or arrangement to
take any action described in clauses (a) to (e), (k) and (m) of this
Section 5.1.
Section 5.2 Access to Information; Confidentiality.
(a) After the date hereof and prior to the Closing,
Seller shall permit Purchaser and its representatives and agents to have
reasonable access during normal business hours to Seller's books and
records relating to the Business, employees identified by Purchaser and
customers, and Seller shall furnish promptly to Purchaser such available
information concerning the Conveyed Assets and the Business as Purchaser
may reasonably request. Notwithstanding the foregoing, Seller need not
disclose to Purchaser any information which would violate applicable laws
or regulations.
(b) Information disclosed to Purchaser pursuant to
Section 5.2(a) hereof shall be subject to the Confidentiality Agreement,
dated as of March 9, 2001, by and between Seller and Purchaser (the
"Confidentiality Agreement"), and Purchaser shall, in accordance therewith,
cause its directors, officers, employees, Affiliates, advisers,
representatives and agents to, treat as confidential all of the information
provided by Seller pursuant to Section 5.2(a) hereof or otherwise and not
to use such information except in connection with the transactions
contemplated hereby and in accordance with the Confidentiality Agreement,
and Purchaser shall be responsible for any breach by any of said directors,
officers, employees, Affiliates, advisers, representatives and agents of
any of such confidentiality obligations.
(c) Following the Closing, each party shall permit the
other party and its representatives and agents to have reasonable access
during normal business hours to the books and records relating to the
Business to the extent that such access may be reasonably required (i) in
connection with preparation of accounting records, (ii) in connection with
the preparation of any Tax Returns or with any Tax audits, (iii) in
connection with any Proceeding relating to the Business, or (iv) for any
other proper business purpose, including, without limitation, information
and records relating to customers.
(d) Any information disclosed to Purchaser or Seller
pursuant to Sections 5.2(c) or 2.6(d) hereof shall be treated as
confidential information and the parties shall cause their officers,
directors, officers, employees, Affiliates, advisers, representatives to
treat as confidential all of the information provided pursuant to Sections
5.2(c) or 2.6(d) and not to use such information except in connection with
the transactions contemplated hereby and each party shall be responsible
for any breach by any of said directors, officers, employees, Affiliates,
advisers, representatives and agents of any such confidentiality
obligations.
Section 5.3 Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable including, but
not limited to the preparation and filing of all other forms, registrations
and notices required to be filed by such party in order to consummate the
transactions contemplated by this Agreement and the taking of such actions
as are necessary to obtain any approvals, consents, orders, exemptions or
waivers of Governmental Entities required to be obtained by such party in
order to consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing, this Section 5.3 shall not be deemed to
require any party hereto to accept, as a condition to obtaining any
consent, permit or license, any material limitation on its ability or the
ability of its Affiliates to own their respective assets or conduct their
respective businesses as currently conducted or proposed to be conducted.
Section 5.4 Further Assurances. Each party hereto shall from time
to time after the Closing, without additional consideration, execute and
deliver such further instruments and take such other action as may be
reasonably requested by the other party to make effective the transactions
contemplated by this Agreement. Seller will execute such documents as may
be necessary to assist Purchaser in preserving or perfecting its rights in
the Conveyed Assets. Purchaser will execute and deliver such further
instruments and take such additional actions as Seller may reasonably
request to effect, consummate, confirm or evidence the assumption by
Purchaser of the Assumed Liabilities.
Section 5.5 Transfer and Similar Taxes. Except as otherwise
provided herein, all sales, use, transfer, gains, stamp, duties, recording
and similar Taxes incurred in connection with the transfer of the Conveyed
Assets and the assignment and assumption of the Assumed Contracts and the
Assumed Liabilities pursuant to the terms of this Agreement ("Transfer
Taxes") shall be allocated equally between Seller, on the one hand, and
Purchaser, on the other hand. Each of Seller, on the one hand, and
Purchaser, on the other hand, will be responsible for the preparation of
any Tax Returns with respect to any Transfer Taxes payable in connection
with the transfer of the Conveyed Assets for which it is primarily liable.
Each of Seller and Purchaser shall provide the other party with copies of
such Tax Returns at least ten business days prior to the due date of each
such Tax Return. If the receiving party materially disagrees with such Tax
Return as prepared, within three days after receiving the copy of such Tax
Return, the receiving party shall deliver to the preparing party a written
notice specifying the basis for such disagreement. The parties shall then,
in good faith, attempt to reach a mutual resolution prior to the date upon
which such Tax Return is due. If the parties are unable to reach a mutual
resolution, the preparing party shall timely file such Tax Return as
originally sent to the receiving party.
Section 5.6 Publicity. Except as otherwise required by law,
Securities and Exchange Commission regulations or applicable stock exchange
requirements, prior to the Closing neither Purchaser nor Seller shall, and
each of them shall cause their respective Affiliates, representatives and
agents not to, issue or cause the publication of any press release or
public announcement with respect to the transactions contemplated by this
Agreement without the express prior approval of the other party, which
approval shall not unreasonably be withheld. Each party shall notify the
other forty-eight (48) hours in advance of any press release concerning the
Business. Seller acknowledges that Purchaser shall be required to disclose
this transaction via press release, a copy of which shall be delivered to
Seller prior to release for Seller's review and comment.
Section 5.7 Supplemental Disclosure. Seller shall have the right
from time to time prior to the Closing to supplement or amend a schedule
attached hereto with respect to any matter hereafter arising or discovered
which if existing or known at the date of this Agreement would have been
required to be set forth or described in any Section of such Schedule. Any
such supplemental or amended disclosure shall not be deemed to have cured
any breach of any representation or warranty made in this Agreement for
purposes of determining whether or not the conditions set forth in Article
VI have been satisfied, but will be deemed to have cured any such breach of
representation or warranty made in this Agreement and to have been
disclosed as of the date of this Agreement for purposes of Article VIII
hereof.
Section 5.8 Mail And Communications. Seller shall promptly remit
to Purchaser any mail or other communications, including, without
limitation, any written or e-mail inquiries and payments received by Seller
relating to the Business or the Conveyed Assets and any invoices received
by Seller relating to Assumed Liabilities which are received by Seller from
and after the Closing Date. Purchaser shall promptly remit to Seller any
mail or other communications, including, without limitation, any written or
e-mail inquiries and payments received by Purchaser relating to any
business or activity of Seller other than the Business, and any invoices
received by Purchaser relating to liabilities other than the Assumed
Liabilities which are received by Purchaser from and after the Closing
Date. With respect to any mail addressed to Seller received by Purchaser
from and after the Closing Date which relates to the Business, the Conveyed
Assets or the Assumed Liabilities, Seller hereby authorize Purchaser to
receive and open such mail and deal with the contents thereof in any
reasonable manner, provided that any such action in no way damages or
prejudices Seller.
Section 5.9 Employees. (a) Schedule 5.9(a) sets forth the name,
title, base rate of salary or wages, bonus eligibility, date of hire, years
of service, exempt or non exempt status and active or inactive status, of
each full-time and part-time employee of Seller assigned exclusively to the
operations of the Business as of the date hereof or prior to the Closing
(collectively, the "Employees"). Except for the Excluded Employees, no
later than ten (10) days prior to the Closing Date, Purchaser will make
offers of employment to each of the Employees, including those Employees
who are on military leave, family leave, sick leave, vacation, or other
temporary leave of absence as of such date, subject to the provisions of
Section 5.9(b). Each employment offer made pursuant to this paragraph will
be for employment (i) effective after the Closing Date; (ii) at the same or
greater rate of annual base salary or wages that is in effect with respect
to such Employee as of the day immediately preceding the Closing Date; and
(iii) that will allow such Employee to participate in the employee benefit
plans, programs, polices and arrangements of Purchaser and/or its
Affiliates (collectively, the "Purchaser Plans") on terms no less favorable
in the aggregate than those that apply to similarly situated employees of
Purchaser. Subject to the express agreements of Purchaser contained in this
Section 5.9, nothing contained herein shall be deemed to limit the ability
of Purchaser, following the Closing Date, to (A) terminate the employment
of any Hired Employee or (B) amend, modify or terminate any Purchaser
compensation policy or Purchaser Plan in accordance with its terms, so long
as, during the eighteen (18) month period following the Closing Date, any
such amendment, modification or termination is applicable with respect to
Purchaser's employees generally and does not solely affect the Hired
Employees. For all purposes under each employee benefit plan, program,
policy or arrangement maintained by or on behalf of Seller (collectively,
the "Seller Plans"), Hired Employees (as such term is defined in Section
5.9(c) below) will be deemed to have terminated employment with Seller as
of the Closing Date.
(b) Notwithstanding anything to the contrary contained in
Section 5.9(a), as of the Closing, any Employee who is on leave under the
provisions of the Family Medical Leave Act, on leave and receiving workers
compensation benefits, or receiving benefits under Seller's short-term
disability program shall be deemed to be an employee of Seller until such
time as the employee is no longer on such leave, receiving workers
compensation benefits or eligible for benefits under Seller' short-term
disability program. At such time Purchaser shall offer such Employee
employment in accordance with provisions of this Section 5.9; provided,
that such time occurs within 100 days following the Closing Date; and
provided, further, that Purchaser shall not be required to hire any such
Employee unless he or she has been certified as able to return to work by
his or her treating physician.
(c) Each Employee who accepts Purchaser's offer of
employment made pursuant to Section 5.9(a) and who remains employed with
Seller as of the Closing Date will be referred to herein as a "Hired
Employee." For the purposes of this Agreement, except with respect to
Employees referenced in Section 5.9(b), any Employee who fails to accept in
writing employment with Purchaser by the Closing Date will be deemed to
have rejected employment with Purchaser effective as of the Closing Date
and will not be treated as a Hired Employee. On the Closing Date, Purchaser
shall provide Seller with a list of Employees who have accepted employment
with Purchaser as of the Closing Date.
(d) With respect to Hired Employees, Purchaser shall
assume and honor the obligation to provide or pay the Hired Employees with
respect to their accrued but unpaid vacation time as of the Closing Date,
in accordance with Seller's policy as in effect as of the Closing Date, as
disclosed to Purchaser prior to the Closing Date, for which Purchaser shall
receive reimbursement pursuant to Section 2.7(d). With respect to those
employees of the Business who receive offers of employment from Purchaser
in accordance with Section 5.9(a) but do not accept such offers of
employment, the employment of such individuals with Seller and its
Affiliates shall be terminated as of the Closing Date and Seller will be
liable for payment of vacation time accrued but unpaid as of the Closing
Date in accordance with Seller's policies as in effect as of the Closing
Date.
(e) Seller will retain responsibility for any legally
mandated continuation of health coverage and related notices for any
Employee who has a loss of health care coverage due to a "qualifying
event," within the meaning of Section 4980B of the Code, which occurs on or
prior to the Closing Date.
(f) Purchaser will credit each Hired Employee's full and
partial years of service with Seller for purposes of eligibility (but not
for purposes of benefit accrual) under the Purchaser Plans and for purposes
of determining the level of benefits under any Purchaser Plan that is a
vacation pay plan; provided, that such crediting of service will not result
in a duplication of the benefits that shall have been paid or that shall be
payable by Seller to such Hired Employee under any of the Seller Plans.
With respect to the participation of any Hired Employee in a Purchaser Plan
that relates to health, sickness, salary continuation, or short-term or
long-term disability benefits, Purchaser will (i) waive all waiting periods
for participation or coverage to the extent that, as of the day immediately
preceding the Closing Date, such waiting period shall have been waived or
satisfied with respect to such Hired Employee under the terms of the
analogous Seller Plan, and (ii) to the extent required by applicable law,
waive all pre-existing condition limitations to the extent that, as of the
day immediately preceding the Closing Date, such limitations shall have
been waived with respect to such Hired Employee under the terms of the
analogous Seller Plan. The Hired Employees shall be vested in their full
and partial years of service under the Purchaser Savings Plan.
(g) As of the Closing, and for a period of one year from
and after the Closing Date, Purchaser will provide Hired Employees
severance benefits equal to one week of severance benefits for each year of
service; however, such severance benefits shall not exceed six (6) weeks
nor be less than two (2) weeks, taking into account for this purpose the
service of such Hired Employee with Seller, plus the term of his or her
employment with Purchaser, provided that such Hired Employee is not
terminated for cause.
(h) Purchaser shall cause each Hired Employee who is
covered under, or eligible to participate in, the tax-qualified 401(k)
savings plan maintained by Seller (the "Seller Savings Plan") immediately
prior the Closing Date to be covered under a 401(k) savings plan maintained
by Purchaser (the "Purchaser Savings Plan") immediately following the
Closing Date. Seller shall cause to be transferred from the Seller Savings
Plan to the Purchaser Savings Plan the full cash value of the Hired
Employees' vested account balances under the Seller Savings Plan, including
any outstanding participant loans, and Purchaser shall cause the Purchaser
Savings Plan to accept such transfer. The transfer of assets and the
related liabilities shall take place as soon as practicable following the
Closing Date; provided, however, that in no event shall the transfer take
place until Seller has provided Purchaser with a favorable determination
letter from the Internal Revenue Service with respect to the qualification
of the Seller Savings Plan under Section 401(a) of the Code; and Seller has
no Knowledge that any event has occurred since its receipt of such letter
that would adversely affect the qualification of such Seller Savings Plan.
Seller and the Seller Savings Plan shall be relieved of the liability for
the Hired Employees' accounts under the Seller Savings Plan following the
transfer of assets and liabilities described in this paragraph.
(i) Purchaser agrees that each Hired Employee currently
participating in the Seller's written sales bonus plan provided to
Purchaser prior to the Closing Date, will continue under the terms of such
plan through calendar year 2001. As soon as is practicable following the
end of 2001, Purchaser shall pay the amount of the bonuses earned for the
calendar year 2001 between April 1, 2001 and the Closing Date and
compensate any Hired Employee under such plan for its pro-rata portion for
any such bonus for services rendered to the Purchaser after the Closing
Date through the end of calendar year 2001; provided, however, that
pursuant to Section 2.7(d), Purchaser shall be credited for any portion of
such bonus earned prior to or on the Closing Date.
Section 5.10 Transition Services. Subject to Section 5.11 hereof,
Seller shall not take any action that would or is reasonable likely to
result in discouraging EZ-CAP Customers, suppliers, vendors, service
providers, employees, lessors, licensors and other business relations from
maintaining the same business relationships with the Business after the
date of this Agreement. Seller shall refer all customer inquiries with
respect to the Business to Purchaser from and after the Closing Date.
(a) Seller shall provide to Purchaser certain corporate
support services and access to certain Seller systems and
telecommunications services which were previously utilized in supporting
certain functions of the Business and the Conveyed Assets, which support
functions were not transferred to Purchaser, as set forth in Schedule
5.10(b) (the "Services") from the Closing Date up to the time specified on
Schedule 5.10(b). The Services to be provided by Seller are limited to
providing Purchaser: (i) access to those inter-company and affiliated
services set forth on Schedule 5.10(b), (ii) access to Seller's software
that provides administrative, customer, technical, financial, accounting,
product, business data support to the extent set forth on Schedule 5.10(b),
(iii) access to historical records pertaining to the Business set forth on
Schedule 5.10(b), (iv) customer service call center support at a level no
less than provided previous to the Closing Date, and (v) access to the data
contained on Seller's Vantive and Goldmine systems for an aggregate fixed
monthly fee set forth on Schedule 5.10(b). Purchaser agrees that any access
to Seller's software and/or databases shall be used only as the software
and databases relate to the Business, and that Purchaser shall not access
or use any data that does not relate to the Business. Seller agrees to use
commercially reasonable efforts to provide the Services in the manner and
to the extent Seller customarily has provided such Services to the Business
based on the ordinary course of business during the twelve (12)-month
period prior to the Closing Date. Purchaser shall pay Seller the reasonable
costs for each Service as set forth opposite the relevant Service on
Schedule 5.10(b).
(b) In providing the Services hereunder, Seller may use
such personnel of Seller as it deems necessary or appropriate, provided
that they have the requisite skills and knowledge of the Business to render
the Services in a commercially reasonable manner. Purchaser agrees that its
employees and any Hired Employees will cooperate with Seller as is
reasonably required for Seller to provide the Services.
(c) Purchaser understands that the Services are
transitional in nature and are furnished by Seller for the purpose of
accommodating the transactions contemplated by this Agreement. Purchaser
further understands that Seller is not in the business of providing
Services to third parties and has no interest in providing any Services
after the dates specified on Schedule 5.10(b). Purchaser agrees to
transition to its own internal organization or other third party service
providers for the provision of the Services as promptly as reasonably
practicable but in no case later than the dates specified on Schedule
5.10(b).
(d) No liability shall result from any delay or failure
in performance by Seller resulting from any cause, condition or event
beyond the reasonable control of Seller, including but not limited to acts
of God, fire, flood, war, government action (including eminent domain),
accident, labor trouble or shortage, or inability to obtain material,
utilities, equipment or transportation (any such cause, condition or event
a "Force Majeure Event"). If Seller is wholly or partially prevented from
providing a Service or Services or if Services are interrupted or
suspended, in each case by reason of any Force Majeure Event, or if Seller,
in the exercise of its reasonable good faith judgment, shall deem it
necessary to suspend delivery of a Service hereunder for purposes of
inspection, maintenance, repair, or replacement of equipment, parts or
structures, Seller shall not be obligated to deliver such Service during
such periods, provided that Seller agrees to give, when feasible, written
notice of the interruption within a reasonable period of time explaining
the purpose and likely duration thereof. Upon cessation of a Force Majeure
Event, Seller shall resume its provision of the Services consistent with
the terms hereof.
(e) Purchaser understands that Seller is not in the
business of providing Services to third parties and that the standard of
care to which Seller and any of Seller's employees performing Services
hereunder shall be accountable shall be the standard of care used by Seller
in furnishing these Services to its own internal organization and
Affiliates, including the Business prior to the Closing Date, and under no
circumstances shall Seller or its employees be held accountable for a
greater standard of care.
(f) Aggregate fixed monthly fees set forth on Schedule
5.10(b) shall be paid by Purchaser to Seller within five (5) days of the
end of each month.
(g) Seller shall not be liable for any Loss (as defined
in Section 8.2(a) hereof) arising out of or related to the Services,
whether arising out of breach of warranty, strict liability, tort, contract
or otherwise, other than Losses which result directly from Seller's willful
failure to perform, or gross negligence in performing, the Services. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS
OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES
TO BE PROVIDED UNDER THIS SECTION 5.10.
(h) Seller's obligation to provide Services hereunder
shall terminate upon the earliest to occur of: (A) the expiration of each
Service as specified on Schedule 5.10(b); (B) that day set forth in a
termination notice delivered by Purchaser to Seller (which day shall be at
least thirty (30) calendar days following the date of such written notice);
or (C) notice by the non-breaching party to the breaching party if the
breaching party has breached or defaulted in performing any of its material
obligations under this Agreement and the breach or default has not been
cured within fifteen (15) business days after notice thereof shall have
been given to the breaching party. In the event of a termination of the
Services pursuant to this Section 5.10 (i), Seller shall be entitled to the
immediate payment of, and Purchaser shall within five business days pay to
the Seller, all non-disputed accrued amounts for Services under this
Agreement as of the date of such termination.
(i) Seller and Purchaser are independent contractors and,
during the term in which Services are provided hereunder, the relationship
between Seller and Purchaser is that of vendor and vendee, with respect to
the Services. Neither party (nor its agents or employees) shall under any
circumstances be deemed agents, partners, joint ventures or representatives
of the other party. Neither party shall have the right to bind the other
party in any respect except as expressly provided herein.
(j) Purchaser shall provide to Seller certain corporate
support services related to the nine Seller employees who will remain for a
period of time in the Leasehold ("Purchaser Services"), as set forth in
Schedule 5.10(k) for the time and for the fees specified therein. The terms
and conditions set forth in Section 5.10(c) - (j) shall apply to Purchaser
Services, with each reference to Seller replaced with Purchaser and vice
versa.
Section 5.11 Non-Competition; Non-Solicitation.
(a) For a period of five (5) years after the Closing Date
(the "Non-Compete Period"), neither Seller nor any of its Affiliates shall
compete with the Business throughout the Non-Compete Area. For purposes of
this Agreement, the phrase "compete with the Business" means engaging in
any business that offers services or sells products that are identical or
substantially similar to the services, products or functionality provided
by the Business as of the Closing Date. Notwithstanding the foregoing,
neither Seller for any of its Affiliates shall be precluded from (i)
entering into a merger, reorganization or other transaction which results
in more than fifty percent (50%) of the voting securities or assets of
Seller being acquired by any legal entity that competes with the Business,
or (ii) acquiring any legal entity that competes with the Business so long
as the primary purpose of such transactions is not to compete with the
Business.
(b) Non-Solicitation. Seller agrees that, Seller shall
not, and shall not permit any of its Affiliates to, directly or indirectly:
(i) except as set forth in this Agreement, for a
period of two (2) years from the date of Closing, contact,
approach or solicit for the purpose of offering employment to or
hiring the Hired Employees, provided, however, that this
restriction shall not apply to (A) Hired Employees no longer
employed by Purchaser or its Affiliates or (B) Hired Employees who
respond to general solicitations or employment advertisements not
specifically directed toward the Hired Employees; or
(ii) for a period of two (2) years, divert or
attempt to divert from Purchaser or any of its Affiliates, with
respect to a business that competes with the Business, any EZ-CAP
Pipeline Customers, any customer, account, the identity of which
was learned by Seller as a result of Seller's direct or indirect
ownership of the Conveyed Assets or operation of the Business.
(c) Remedy for Breach. In the event of a breach of any of
the provisions of this Section 5.11, Purchaser shall be entitled to all
Losses (as defined in Section 8.2(a)) incurred by Purchaser resulting from
or arising out of any such violation; such remedy shall be in addition to
and not in limitation of any remedy in law or in equity (including
injunctive relief) or under this Agreement; provided, however, that
Purchaser's recovery under this Section 5.11(c) shall not exceed the
Purchase Price minus any amounts due or paid by Seller to Purchaser under
Article VIII hereof.
Section 5.12 Collection of Receivables. Seller will not assign any
receivable to a collection agency or equivalent, take or threaten to take
legal action or otherwise escalate collection activities after the Closing
Date without the express written knowledge and consent of Purchaser. The
Account Receivable balance due to Seller after the Closing Date shall be
collected as follows:
(a) Purchaser and Seller will meet as early as practical
after the Closing Date but in any event no later than 5:00 PM PST on the
fifth business day after the Closing to define the receivable balance due
and payable to Seller as of the Closing Date as well as Deferred Revenue
due and payable to Purchaser. Seller shall provide access to Purchaser to
all financial statements and materials that Purchaser reasonably needs to
verify the accounts receivable and balance sheet accounts.
(b) Cash Paid Deferred Revenue due at Closing shall be
calculated as follows:
(i) Seller shall remit to Purchaser its estimate
of Cash Paid Deferred Revenue on the Closing Date according to the
following method. Any cash collected as of the Closing Date shall
be included in the Cash Paid Deferred Revenue on the Closing
Deferred Revenue Statement. Seller will estimate this amount on a
date not later than the second day preceding the Closing Date and
shall remit such amount to Purchaser on the Closing Date. This
amount will be validated on or before the sixtieth (60th) day
following the Closing Date and any balance due to either party to
the other party will be paid within 24 hours.
(ii) Should a dispute arise between the parties,
the parties will select an accounting firm jointly acceptable that
was not involved in the acquisition or an auditor of either party
to provide an opinion. The opinion will be binding upon the
parties and the expense of the opinion will be shared equally.
(c) Accounts Receivable Collection Methodology. The
parties agree to collect the outstanding receivables due to Seller as of
the Closing Date as follows:
(i) Seller retain the collection responsibility
of these monies through November 30, 2001 at which time Purchaser
will be responsible for any and all collection of outstanding
receivables due to Seller.
(ii) Seller will assign no collection agency or
equivalent, take or threaten to take any legal action or threaten
to discontinue support to any client for failure to pay after the
Closing Date without the consent of Purchaser.
(iii) Seller will make available to Purchaser
after the Closing Date all correspondence sent to clients,
employees, prospects, vendors or suppliers related to the
outstanding receivables as of the Closing Date.
(iv) Seller and Purchaser shall deem any
receivable greater than or equal to 180 days of the Closing Date
as uncollectable if payment is not received by the 180th day
following the Closing Date. All collection activity on such deemed
uncollectable amount by Seller will cease as of that point and an
amount equal to such deemed uncollectable amount will reduce the
accounts receivable balance owed to Seller.
(v) For any receivable beyond 60 days and less
than 180 days as of the Closing Date, Seller agrees that it will
pursue collections subject to the limitations described above
through November 30, 2001.
(vi) After November 30, 2001, Purchaser, on
Seller's behalf, will use its commercially reasonable efforts to
collect any outstanding receivables balance owed to Seller and
will remit any collected amount to Seller within five business
days of receipt of thereof.
(vii) Any balance due as of January 31, 2002
shall be deemed uncollectable by Seller and the monies received to
such date shall satisfy all obligations relating to Accounts
Receivable under this Section 5.12 and no further payments under
this Section 5.12 shall be due and payable.
Section 5.13 Financial Information.
(a) Purchaser represents to Seller that (i) should the
transaction contemplated by this Agreement close, Purchaser will be
required to make certain filings with the Securities and Exchange
Commission ("SEC Filings") within seventy-five (75) days of Closing; (ii)
the SEC Filings require unqualified independent auditor opinions of
financial statements of the Business for periods prior to the Closing Date
prepared in accordance with Regulation S-X of the Securities Act, as
amended (the "S-X Financial Statements"); and (ii) the S-X Financial
Statements must include (i) an audited balance sheet, income statement and
statement of cash flows of the Business for the years ending December 31,
1999 and December 31, 2000 (together, the "Audited Financial Statements")
and (ii) an unaudited balance sheet as of June 30, 2000 and 2001, and an
unaudited income statement and statement of cash flows of the Business for
the six (6) months ended June 30, 2000 and June 30, 2001 (together the
"Unaudited Financial Statements").
(b) Seller represents to Purchaser that Seller, because
of its historical operational structure and consolidated reporting, does
not have and was not required to prepare Audited Financial Statements and
Unaudited Financial Statements for the Business. Solely as an accommodation
to Purchaser, at Purchaser's request and at Purchaser's expense not to
exceed $50,000, Seller agrees to retain Xxxxxxx & Xxxxxxx, LLP ("P&B") to
prepare Audited Financial Statements and Unaudited Financial Statements for
the Business. The retention shall provide for P&B to deliver Audited
Financial Statements and Unaudited Financial Statements for the Business to
Deloitte & Touche, the auditor of Purchaser ("D&T") within sixty-five (65)
days of Closing. Purchaser shall cause D&T to be available to P&B to
respond to any questions with respect to the preparation of the Audited
Financial Statements and Unaudited Financial Statements and the SEC
Filings. Seller agrees to cooperate with Purchaser and P&B in the
preparation of the Audited Financial Statements and Unaudited Financial
Statements in the same manner as a prudent business person would cooperate
with an auditor when facing an SEC filing deadline of seventy-five (75)
days. If, in the view of Purchaser, Seller is not cooperating in such
manner, Purchaser will give timely notice to Seller, such that the parties
shall discuss and resolve any issues raised by Purchaser.
(c) Purchaser further acknowledges and agrees that (i)
Seller makes no representation or warranty, under the provisions of this
Agreement or otherwise, with respect to the Audited Financial Statements or
the Unaudited Financial Statements, and (ii) neither Seller, nor any of its
officers, directors, employees, Affiliates, or representatives shall have
any liability, on a direct or indirect basis, with respect to or arising
out of the Audited Financial Statements or the Unaudited Financial
Statements.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver, if permissible)
at or prior to the Closing of the following conditions:
(a) All authorizations, consents, and approvals of
Governmental Entities set forth in Schedule 3.3(b) (collectively, the
"Authorizations") shall have been obtained and not rescinded, except for
those Authorizations the failure of which to be obtained would not result
in a Material Adverse Effect or result in criminal liability of any party.
(b) There shall not be in effect any statute, regulation,
order, decree or judgment of any Governmental Entity which makes illegal or
enjoins or prevents the consummation of the transactions contemplated by
this Agreement.
Section 6.2 Conditions to Obligations of Purchaser. The obligation
of Purchaser to effect the transactions contemplated by this Agreement
shall be further subject to the satisfaction (or waiver) at or prior to the
Closing of the following conditions:
(a) The representations and warranties of Seller in this
Agreement shall be true and correct in all respects as of the date hereof
and the Closing Date as if made as of the Closing Date, other than
representations and warranties that expressly speak as of a specific date
or time (which need only be true and correct as of such date or time),
except where the failure of such representations and warranties to be so
true and correct would not have a Material Adverse Effect.
(b) Seller shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Closing.
(c) Seller shall have delivered or caused to be delivered
to Purchaser each of the documents specified in Section 2.7(b) hereof.
(d) The key employees listed on Schedule 6.2(d) shall
have accepted the Purchaser's offer of employment prior to or as of the
Closing Date.
(e) Seller shall have received the consents required
under the Assumed Contracts set forth on Schedule 6.2(e), in the manner
specified on Schedule 6.2(e).
Section 6.3 Conditions to Obligations of Seller. The obligation of
Seller to effect the transactions contemplated by this Agreement shall be
further subject to the satisfaction (or waiver) at or prior to the Closing
of the following conditions:
(a) The representations and warranties of Purchaser in
this Agreement shall be true and correct in all material respects as of
date hereof and the Closing Date as if made as of the Closing Date other
than representations and warranties that speak as of a specific date or
time (which need only be true and correct in all material respects as of
such date or time).
(b) Purchaser shall have performed in all material
respects all obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) Purchaser shall have delivered or caused to be
delivered to Seller each of the documents and items specified in Section
2.7(c) hereof.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at any
time prior to the Closing by:
(a) mutual consent of Seller and Purchaser;
(b) either Seller or Purchaser if the Closing shall not
have occurred on or before September 15, 2001;
(c) either Seller or Purchaser if a condition to such
party's obligation set forth in Article VI hereof to perform becomes
incapable of fulfillment; or
(d) either Seller or Purchaser if any court of competent
jurisdiction or other competent Governmental Entity shall have issued a
statute, rule, regulation, order, decree or injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such statute, rule,
regulation, order, decree or injunction or other action shall have become
final and nonappealable.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1 hereof, this Agreement shall
forthwith become null and void and have no effect, without any liability on
the part of any party hereto or its Affiliates, directors, officers or
stockholders, other than the provisions of Sections 5.2(b) and 9.5 hereof;
provided, that nothing contained in this Section 7.2 shall relieve any
party from liability for any willful, material breach of this Agreement or
the failure of Purchaser to obtain the Financing.
Section 7.3 Amendment. This Agreement may be amended or modified
at any time by Seller and Purchaser, but only by an instrument in writing
signed on behalf of each of Seller and Purchaser.
Section 7.4 Extension; Waiver. At any time prior to the Closing,
each of the parties hereto may (i) extend the time for the performance of
any of the obligations or acts of any other party, (ii) waive any
inaccuracies in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto, (iii) waive
compliance with any of the agreements of any other party contained herein
or (iv) waive any condition to its obligations hereunder. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of such party.
Except as otherwise expressly provided herein, no failure to exercise,
delay in exercising, or single or partial exercise of any right, power or
remedy by any party, and no course of dealing between the parties, shall
constitute a waiver of any such right, power or remedy.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival Period. As provided herein, all
representations and warranties of the parties contained in this Agreement,
or any certificate delivered in connection herewith shall survive the
Closing until the second anniversary of the Closing Date (the "Survival
Period"). The parties agree that no claims or causes of action may be
brought against Seller or Purchaser based upon, directly or indirectly, any
of the representations or warranties of the parties contained in this
Agreement after the Survival Period or, except as provided in Section 7.2
hereof, any termination of this Agreement; provided, that (i) the
representations and warranties of Seller in Sections 3.2 and 3.13 and
Purchaser in Sections 4.2, 4.6 and 4.8 shall survive indefinitely, (ii) the
representations and warranties of Seller in Section 3.6 shall survive until
the fourth anniversary of the Closing Date, and (iii) the representations
and warranties of Seller in Section 3.19 shall survive until the sixtieth
(60th) day after the applicable statute of limitations. The parties
expressly acknowledge and agree that the provisions of this Section 8.1
are, where applicable, intended to shorten the statute of limitations with
respect to the breach by either party of any of its representations and
warranties set forth in this Agreement.
Section 8.2 Indemnification. Subject to the terms, conditions and
limitations set forth in this Article VIII, from and after the Closing:
(a) Seller shall defend, indemnify and hold harmless
Purchaser from and against any actual, out-of-pocket, costs or expenses
(including, without limitation, reasonable attorneys' and experts' fees),
judgments, fines, claims, damages and assessments (collectively, "Losses")
that are imposed on Purchaser arising out of (i) any breach of any
representation or warranty set forth in Article III hereof as of the
Closing, (ii) the failure to perform any covenant of Seller set forth in
this Agreement or the Xxxx of Sale, and (iii) the Excluded Liabilities.
(b) Purchaser shall defend, indemnify and hold harmless
Seller and their Affiliates from and against any Losses that are imposed on
Seller arising out of (i) any breach of any representation or warranty set
forth in Article IV hereof as of the Closing, (ii) the failure to perform
any covenant of Purchaser set forth in this Agreement or the Instrument of
Assumption and (iii) the Assumed Liabilities.
Section 8.3 Limitation of Liability.
(a) Anything in this Agreement to the contrary
notwithstanding, the liability of the Indemnifying Party to indemnify the
Indemnified Party against any Losses shall be limited to claims for
indemnification with respect to which the Indemnified Party has given to
the Indemnifying Party written notice thereof at or prior to the applicable
survival date as set forth in Section 8.1. The written notice referred to
in the previous sentence must state the basis of the claim for
indemnification with reasonable specificity, including the Section or
Sections of this Agreement alleged to have been breached.
(b) In no event shall Seller, on the one hand, or
Purchaser, on the other hand, be liable for indemnification pursuant to
Section 8.2(a) (i) or (ii) or 8.2(b) (i) or (ii) unless and until the
aggregate of all Losses which are incurred or suffered by the party seeking
indemnification exceeds Two Hundred Fifty Thousand Dollars ($250,000), in
which case such party shall only be entitled to indemnification for such
Losses in excess of Two Hundred Fifty Thousand Dollars $250,000; provided,
however, that, in the absence of fraud, neither Seller, on the one hand,
nor Purchaser, on the other hand, shall be required to make payments for
indemnification pursuant to Section 8.2(a) (i) or (ii) or Section 8.2(b)
(i) or (ii) in an aggregate amount in excess of the Purchase Price.
(c) Notwithstanding anything to the contrary in this
Agreement, Seller shall not be liable for any Losses to the extent that the
Losses suffered by any Purchaser result from any tortious act or omission
by Purchaser or its Affiliates, officers, employees, agents or
representatives or to the extent that Purchaser or its Affiliates,
officers, employees, agents or representatives fail to take reasonable and
prudent action to mitigate any Losses.
(d) In calculating amounts payable to an Indemnified
Party, the amount of the indemnified Losses shall be computed net of (i)
payments that the Indemnified Party is entitled to receive under any
insurance policy with respect to such Losses, (ii) any prior or subsequent
recovery by the Indemnified Party from any Person with respect to such
Losses and (iii) any Tax benefit and/or detriment to the Indemnified Party
with respect to such Losses.
Section 8.4 Indemnification Procedures. All claims for
indemnification by any party entitled to indemnification under this Article
VIII (an "Indemnified Party") based on or arising from a third party claim
shall be asserted and resolved as set forth in this Section 8.4. In the
event that any claim or demand by a third party for which a party (the
"Indemnifying Party") may be required to indemnify the Indemnified Party
hereunder (a "Claim") is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall as
promptly as practicable notify the Indemnifying Party in writing of such
Claim and the amount or the estimated amount thereof to the extent then
feasible as well as the basis, in reasonable detail, of why the Indemnified
Party believes that it is entitled to Indemnification hereunder (the "Claim
Notice"). The failure on the part of the Indemnified Party to give any such
Claim Notice in a reasonably prompt manner shall not relieve the
Indemnifying Party of any indemnification obligation hereunder except to
the extent that the Indemnifying Party is substantially prejudiced thereby.
The Indemnifying Party shall have 30 days from delivery of the Claim Notice
(the "Notice Period") to notify the Indemnified Party whether or not the
Indemnifying Party elects to defend the Indemnified Party against such
Claim; and prior to such time as it has been notified by the Indemnifying
Party as to its intention, the Indemnified Party shall take all reasonable
actions to preserve its defenses. Election of the Indemnifying Party to
defend a Claim shall not be construed to be an admission as to liability
for indemnification hereunder. The foregoing sentence shall not be
construed to reduce liability for indemnification otherwise required
hereunder. All costs and expenses incurred by the Indemnifying Party in
defending such Claim shall be a liability of, and shall be paid by, the
Indemnifying Party; provided, however, that the amount of such costs and
expenses that shall be a liability of the Indemnifying Party hereunder
shall be subject to the limitations set forth in Section 8.3 hereof. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such
Claim, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power
to direct and control such defense. If any Indemnified Party desires to
participate in any such defense it may do so at its sole cost and expense.
The Indemnified Party shall not settle, admit or in any other way
materially prejudice a Claim for which it is indemnified by the
Indemnifying Party without the written consent of the Indemnifying Party
unless the Indemnifying Party elects not to defend the Indemnified Party
against such Claim. The Indemnifying Party may, with the consent of the
Indemnified Party (which consent shall not be unreasonably withheld),
settle or compromise any action or consent to the entry of any judgment;
provided, however that in connection with such settlement, compromise or
entry of judgment the Indemnified Party is fully released from such action
or claim. Notwithstanding the foregoing, the Indemnified Party shall have
the sole right to defend, settle or compromise any Claim with respect to
which it has agreed in writing to waive its right to indemnification
pursuant to this Agreement. If the Indemnifying Party elects not to defend
the Indemnified Party against such Claim, then the Indemnified Party shall
defend such Claim by appropriate proceedings and shall control the defense
of such Claim, and in such case may, with the consent of the Indemnifying
Party (which consent shall not be unreasonably withheld) settle or
compromise such action or consent to the entry of any judgment. The amount
required to be paid in respect of any such Claim, or, if the same be
contested by the Indemnified Party, then that portion thereof as to which
such defense is unsuccessful (and the reasonable costs and expenses
pertaining to such defense) shall be the liability of the Indemnifying
Party hereunder, subject to the limitations set forth in Section 8.3. The
Indemnified Party will give the Indemnifying Party and its counsel
reasonable access to the personnel, business records and other documents
within the possession of the Indemnified Party or its Affiliates, and shall
permit them to consult with the counsel and other advisors of the
Indemnified Party. The Indemnified Party, if requested by the Indemnifying
Party shall cooperate and assist in the defense of all such Claims, and the
Indemnifying Party shall reimburse the Indemnified Party for its reasonable
expenses to third parties in connection with such cooperation and
assistance.
Section 8.5 Other Matters.
(a) If the Closing shall occur, the indemnification
provisions of this Article VIII shall be the sole and exclusive remedy of
Seller and Purchaser for any breach of any covenants, representations or
warranties made by the other party in this Agreement. Except for a claim
pursuant to Section 5.11(c), each party hereby waives all statutory, common
law and other claims with respect thereto, other than claims for
indemnification pursuant to this Article VIII; provided, however, that the
foregoing shall not apply to any claim seeking money damages for an event
that results from fraud by a party.
(b) There shall be no indemnification by Seller or
Purchaser for any special, incidental, punitive or consequential damages.
(c) Upon making any payment to an Indemnified Party for
any indemnification claim pursuant to this Article VIII, the Indemnifying
Party shall be subrogated, to the extent of such payment, to any rights
which the Indemnified Party or its Affiliates may have against any other
Persons with respect to the subject matter underlying such indemnification
claim and the Indemnified Party shall take such actions as the Indemnifying
Party may reasonably require to perfect such subrogation or to pursue such
rights against such other Persons as the Indemnified Party or its
Affiliates may have.
(d) Any indemnification payment by Seller pursuant to
Section 8.2(a)(i) or (ii) shall be treated as an adjustment to the Purchase
Price hereunder.
(e) In no event will there be any indemnification with
respect to the adjustment of the Purchase Price pursuant to Section 2.6
hereof.
Section 8.6 No Right to Set-Off. Purchaser shall have no right to
set-off any amount that it has claimed or to which it may be entitled under
this Article VIII or otherwise against any amounts payable to Seller by
Purchaser under this Agreement, including amounts payable by Purchaser to
Seller under Section 2.6 hereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt if
delivered personally, or when sent if mailed by registered or certified
mail (return receipt requested) or transmitted by facsimile (with
confirmation of transmittal) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Seller, to:
QuadraMed Corporation and
QuadraMed Operating Corporation
00 Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx,
Chief Financial Officer
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
(b) if to Purchaser, to:
OAO Technology Solutions
OAO Transition, LLC
0000 Xxxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: J. Xxxxxxx Xxx
Chief Financial Officer
with a copy to:
Venable, Baetjer, Xxxxxx & Civiletti, LLP
0000 Xxx Xxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Section 9.2 Descriptive Headings. The descriptive headings herein
are inserted for convenience only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 9.3 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 9.4 Entire Agreement. This Agreement, the exhibits and
schedules hereto, the Xxxx of Sale and the Instrument of Assumption
constitute the entire agreement, and except with respect to the
Confidentiality Agreement, supersede all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof.
Section 9.5 Fees and Expenses. Regardless of whether or not the
transactions contemplated by this Agreement are consummated, each party
shall bear its own fees and expenses incurred in connection with the
transactions contemplated by this Agreement.
Section 9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without
regard to any applicable principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of
the United States of America for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and agrees not
to commence any litigation relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in Section 9.1
shall be effective service of process for any litigation brought against it
in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any
litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Delaware or of the United States of
America and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such litigation
brought in any such court has been brought in an inconvenient forum.
Section 9.7 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage
would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
Section 9.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party or parties.
Section 9.9 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto their successors
and permitted assigns, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person or persons any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 9.10 Knowledge. For purposes of this Agreement,
"Knowledge" of Seller shall mean the actual knowledge of each of the
representatives of Seller set forth on Schedule 9.10 hereto and any
information which each of such representatives should have known upon
execution of this Agreement and at the Closing Date if they exercised
prudent business judgement in the discharge of their duties in connection
with the management and operation of the Business.
Section 9.11 Interpretation. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
Section 9.12 Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for
any reason, the parties shall negotiate in good faith with a view to the
substitution therefor of a suitable and equitable solution in order to
carry out, so far as may be valid and enforceable, the intent and purpose
of such invalid provision; provided, however, that the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
Section 9.13 Payments. All payments required to be made pursuant
to this Agreement shall be made in U.S. dollars in the form of cash or by
wire transfer of immediately available funds to an account designated by
the party receiving such payment.
Section 9.14 Amendment. This Agreement may be amended and any
provision of this Agreement may be waived, provided that any such amendment
or waiver shall be binding upon a party hereto only if such amendment or
waiver is set forth in writing executed by such party. No course of dealing
between or among any Persons having any interest in this Agreement shall be
deemed effective to modify, amend or discharge any part of this Agreement
or any rights or obligations of any party hereto under or by reason of this
Agreement.
Section 9.15 Gender. Unless the context clearly indicates
otherwise, where appropriate the singular shall include the plural, and the
masculine shall include the feminine or neuter, and vice versa, to the
extent necessary to give the terms defined herein and/or the terms
otherwise used in this Agreement the proper meanings.
Section 9.16 Delivery by Facsimile. This Agreement and any
Transaction Document, and any amendments hereto or thereto, to the extent
signed and delivered by means of a facsimile machine, shall be treated in
all manner and respects as an original agreement and shall be considered to
have the same binding legal effect as if it were the original signed
version thereof delivered in person. At the request of any party hereto or
by any other Person, each party hereto shall re-execute original forms
thereof and deliver them to all other parties. No party hereto shall raise
the use of a facsimile machine to deliver a signature or the fact that any
signature was transmitted or communicated through the use of a facsimile
machine as a defense to the formation of any agreement and each such party
forever waives any such defense.
Section 9.17 Joint and Several Liability. Any and all
representations, warranties and covenants and agreements by QuadraMed
and/or QuadraMed Operating Corporation as "Seller", on the one hand, and by
OAO and/or OAO Transition as "Purchaser" on the other hand, shall be made
on a joint and several basis.
Section 9.18 Construction. The language in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
any person. Any reference to any federal, state, local or foreign statute
or law shall be deemed to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires. The word "including"
shall mean including without limitation. The parties hereto intend that the
representations, warranties, covenants and agreements contained herein
shall have independent significance. If any party hereto has breached any
representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, covenant or
agreement relating to the same subject matter which the party has not
breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty, covenant or agreement.
Section 9.19 Risk of Loss. Seller hereby assumes all risk of loss,
damage and destruction to all or any part of the Conveyed Assets until and
including the Closing Date from any cause whatsoever, whether or not they
are insured therefor, including without limitation, fire, flood, accident,
acts of god, earthquake, insurrection, riot or other causes commonly
referred to as force majeure.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
QUADRAMED CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
QUADRAMED OPERATING CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
OAO TECHNOLOGY SOLUTIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
OAO TRANSITION, LLC
By: OAO Technology Solutions, Inc.,
its managing member
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
EXHIBIT A
INSTRUMENT OF ASSUMPTION
This Instrument of Assumption (this "Instrument"), dated as of
this __th day of ____, 2001, from OAO Transition, LLC, a Delaware limited
liability company ("OAO Transition") and OAO Technology Solutions, Inc., a
Delaware corporation ("OAO" and, together with OAO Transition,
"Purchaser"), to QuadraMed Corporation, a Delaware corporation
("QuadraMed") and QuadraMed Operating Corporation, a Delaware corporation
("QuadraMed Operating Corporation" and, together with QuadraMed, "Seller").
Seller and Purchaser have entered into that certain asset purchase
agreement, dated as of August __, 2001 (the "Purchase Agreement").
Capitalized terms used but not otherwise defined herein have the
meanings ascribed thereto in the Purchase Agreement.
In connection with the Purchase Agreement, Purchaser hereby
assumes and agrees to assume, pay, perform, satisfy and otherwise discharge
the Assumed Liabilities pursuant to the terms and conditions of the
Purchase Agreement.
Nothing in this Instrument, express or implied, is intended or
shall be construed to confer upon, or give to, any Person other than Seller
and its successors and any permitted assigns, any remedy or claim under or
by reason of this Instrument or any terms, covenants or condition hereof,
and all the terms, covenants and conditions, promises and agreements in
this Instrument contained shall be for the sole and exclusive benefit of
Seller and its successors and assigns.
This Instrument shall be binding upon and enforceable against
Purchaser, its successors and assigns, and will inure to the benefit of
Seller and its successors and assigns.
This Instrument shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its principles of
conflicts of laws.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to
be duly executed as of the day and year first above written.
OAO TRANSITION, LLC,
a Delaware limited liability company
By: OAO Technology Solutions, Inc.,
its managing member
----------------------------
Name::
Title:
OAO TECHNOLOGY SOLUTIONS, INC.,
a Delaware corporation
----------------------------
Name::
Title:
EXHIBIT B
XXXX OF SALE
PARTIES: QuadraMed Corporation, a Delaware corporation, and
QuadraMed Operating Corporation, a Delaware corporation,
both located at 00 Xxxxxxx Xxx, Xxx Xxxxxx, Xxxxxxxxxx
00000 (collectively referred to as "Seller")
AND: OAO Technology Solutions, Inc., a Delaware corporation, and
OAO Transition, LLC, a Delaware limited liability company,
both located at 0000 Xxxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000 ("Purchaser")
Seller and Purchaser have entered into that certain asset purchase
agreement, dated as of August __, 2001 (the "Purchase Agreement").
Capitalized terms used but not otherwise defined herein have the meanings
ascribed thereto in the Purchase Agreement.
As of the effective date listed below, Seller, for and in consideration of
the Purchase Price and other amounts to be paid pursuant to the Purchase
Agreement, and the assumption by Purchaser of the Assumed Liabilities, and
other good and valuable consideration paid by Purchaser, the sufficiency of
which is hereby acknowledged, does by these presents:
1. Grant, bargain, sell and deliver to Purchaser, free and clear of all
Liens, other than the Assumed Liabilities and Permitted Liens, all right,
title and interest of Seller in and to the Assets, pursuant and subject to
the terms and conditions of the Purchase Agreement.
2. To have and to hold the same to Purchaser, its successors and assigns
forever.
3. The effective date of the asset transfer evidenced by this Xxxx of Sale
shall be August ___, 2001.
4. This Xxxx of Sale shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of
conflicts of law.
QuadraMed Corporation, QuadraMed Operating Corporation,
a Delaware corporation a Delaware corporation
By: By:
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Its: Its:
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