EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
POWERCERV CORPORATION,
POWERCERV TECHNOLOGIES CORPORATION
PCV ACQUISITION, INC
AND
ASA INTERNATIONAL, LTD.
DATED AS OF OCTOBER 1, 2002
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Promissory Note
Exhibit B Form of Instrument of Assumption of Liabilities
Exhibit C Xxxx of Sale and General Assignment of Seller Assets
Exhibit D Trademark Assignment
Exhibit E Copyright Assignment
Exhibit F Non-Competition Agreement
INDEX OF SCHEDULES
SELLER SCHEDULE DESCRIPTION
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the or this "AGREEMENT") is made and
entered into as of October 1, 2002 by and among PCV Acquisition, Inc., a
Delaware corporation ("BUYER"); PowerCerv Corporation, a Florida corporation
("POWERCERV"); PowerCerv Technologies Corporation, a Florida Corporation and
wholly-owned subsidiary of PowerCerv (the "SUBSIDIARY", and together with
PowerCerv, the "SELLER"); and ASA International Ltd., a Delaware Corporation and
the sole Stockholder of Buyer ("ASA").
RECITALS
A. The Boards of Directors of each of Seller and Buyer believe it
is in the best interests of each company and its respective stockholders that
Buyer acquire certain of the assets of, and assume certain of the liabilities
of, Seller (the "ACQUISITION").
B. Seller is engaged in the business of designing, developing,
licensing, supporting, maintaining, selling and marketing and implementing
software primarily for manufacturing companies (the "BUSINESS").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 Purchase of Assets.
(a) Purchase and Sale of Assets. On the terms and subject
to the conditions set forth in this Agreement, Seller will sell, convey,
transfer, assign and deliver to Buyer, and Buyer will purchase and acquire from
Seller on the Closing Date (as defined in Section 1.5), all of Seller's rights,
title and interest in and to all of the assets of Seller (collectively the
"SELLER ASSETS") free and clear of all liens, pledges, charges, claims, security
interests or other encumbrances of any sort (collectively, "LIENS"), (excluding
Liens listed on Schedule 2.7), including without limitation, the following
(provided, however, that the Seller Assets shall not include those assets set
forth on Schedule 1.1(b)):
(i) All rights, title and interest in and to (a)
the software designed, developed, maintained, implemented, supported, licensed
or sold by Seller (including but not limited to ERP Plus, eSeries and their
respective components), including all released and unreleased source code and
object code versions thereof and all related documentation and development notes
(the "SOFTWARE"), and (b) all other intellectual property of Seller including
databases, market information, research and development, patents, patent
applications, copyrights, copyright registration applications, trademarks and
service marks and related applications, trade names, trade secrets, proprietary
information, technology rights and licenses, proprietary rights and processes,
know-how,
research and development in progress, and any and all other intellectual
property including, without limitation, all things authored, discovered,
developed, made, perfected, improved, designed, engineered, devised, acquired,
produced, conceived or first reduced to practice by Seller, or that are relevant
to an understanding or to the development of the Business or to the performance
by the products of the Business of their intended functions or purposes, whether
tangible or intangible, in any stage of development, including without
limitation enhancements, designs, technology, improvements, inventions, works of
authorship, formulas, processes, routines, subroutines, techniques, concepts,
object code, flow charts, diagrams, coding sheets, source code, listings and
annotations, programmers' notes, information, work papers, work product and
other materials of any types whatsoever, and all rights of any kind in or to any
of the foregoing (collectively, with the Software, "INTELLECTUAL PROPERTY");
(ii) All rights, title and interest in and to all
end-user software licenses (any such contracts to be listed on Schedule
1.1(a)(ii) and to be referred to the "LICENSE AGREEMENTS") sold by Seller in
connection with the use of the Software; provided, however, that pursuant to the
Purchase Price Adjustment Notice (as defined in Section 1.3), Buyer may, in its
sole discretion, reject any such License Agreements, in which event such
rejected License Agreements shall constitute Excluded Assets (as defined in
Section 1.1(b)).
(iii) All rights, title and interest in and to any
contracts for maintenance in connection with the Software (any such contracts to
be listed on Schedule 1.1(a)(iii) and to be referred to as the "MAINTENANCE
AGREEMENTS"); provided, however, that pursuant to the Purchase Price Adjustment
Notice, Buyer may, in its sole discretion, reject any such Maintenance
Agreements, in which event such rejected Maintenance Agreements shall constitute
Excluded Assets.
(iv) All rights, title and interest in and to any
contracts for implementation of the Software whether arising from License
Agreements, statements of work, purchase orders, work or services orders or
other agreements (any such contracts to be listed on Schedule 1.1(a)(iv) and to
be referred to as the "IMPLEMENTATION AGREEMENTS"); provided, however, that
pursuant to the Purchase Price Adjustment Notice, Buyer may, in its sole
discretion, reject any such Implementation Agreements, in which event such
rejected Maintenance Agreements shall constitute Excluded Assets.
(v) The right, but not the obligation, to employ
all employees of Seller on the Closing Date;
(vi) All accounts receivable, notes receivable
and interest receivable of Seller which are outstanding as of the Closing Date
(the "ACCOUNTS RECEIVABLE"), which Accounts Receivable shall be listed, together
with the allowance for bad debt which is allocated to each such Account
Receivable, on a schedule to be delivered by Seller to Buyer and agreed to by
Buyer prior to the Closing (the "RECEIVABLES SCHEDULE"); provided, however, that
pursuant to the Purchase Price Adjustment Notice, Buyer may, in its sole
discretion, reject any such Accounts Receivable which Buyer, in its sole
discretion, believes may not be collectible in full on a timely basis, in which
event such rejected Accounts Receivable (including the amount of any allowance
for bad debt which has
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been allocated to such Accounts Receivable as set forth on the Receivables
Schedule) shall constitute Excluded Assets.
(vii) All prepaid expenses of Seller as of the
Closing Date (the "PREPAID EXPENSES"); provided, however, that pursuant to the
Purchase Price Adjustment Notice, Buyer may, in its sole discretion, reject any
such Prepaid Expenses which Buyer, in its sole discretion, believes may not have
tangible future benefits to Buyer, in which event such rejected Prepaid Expenses
shall constitute Excluded Assets.
(viii) All other current assets of Seller as of the
Closing Date;
(ix) All computers, computer equipment and
related software owned by Seller or used in conjunction with all aspects of the
Seller's business;
(x) All inventory of Seller as of the Closing
Date (the "INVENTORY"); provided, however, that pursuant to the Purchase Price
Adjustment Notice, Buyer may, in its sole discretion, reject any such Inventory
which Buyer, in its sole discretion, believes may not be salable in the ordinary
course of business, in which event such rejected Inventory shall constitute
Excluded Assets.
(xi) All rights, title and interest in the
promissory note in the original principal amount of $100,000 due to PowerCerv
(the "STOCKHOLDER NOTE") from X.X. Xxxxxxx (the "STOCKHOLDER"); and
(xii) All other property, plant, equipment,
leasehold improvements and other assets owned by Seller or used in connection
with the Business.
(b) Assets Not Acquired. Seller shall retain all assets
set forth on Schedule 1.1(b), (collectively, the "EXCLUDED ASSETS") including
but not limited to (i) all cash and cash equivalents as of the Closing Date
(collectively, the "CASH EQUIVALENTS") and (ii) all assets rejected by Buyer
pursuant to Section 1.1(a).
(c) Assumption of Liabilities. Buyer shall not assume any
liabilities or obligations of Seller except for those liabilities and
obligations which Buyer expressly assumes pursuant to this Section 1.1(c).
Without limiting the foregoing, it is expressly agreed that Buyer shall not
assume any liabilities for payroll, bonus, severance, change of control, accrued
vacation, 401K, other benefits or related obligations accrued prior to the
Closing Date, or taxes thereon, or for employment, income, sales, property or
other taxes incurred or accrued by Seller (collectively, "Excluded
Liabilities"). Seller will indemnify and hold Buyer harmless from and against
any and all losses, costs, expenses, claims, liabilities, deficiencies,
judgments and damages incurred or suffered by Buyer or any of its affiliates
related to or arising out of any liabilities or obligations of Seller, except
for those liabilities or obligations expressly assumed by Buyer in this Section
1.1(c). At the Closing, Buyer shall assume the following obligations and
liabilities of Seller (collectively, the "ASSUMED LIABILITIES"):
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(i) All of Seller's implementation and software
development obligations, whether arising from License Agreements, Maintenance
Agreements, Implementation Agreements, statements of work, purchase orders, work
or services orders or other agreements, that are transferred to Buyer
("IMPLEMENTATION OBLIGATIONS") as of the Closing Date, provided that Seller
identifies on Schedule 1.1(c)(i) (which schedule shall be updated by Seller
prior to the Closing for any Implementation Obligations entered into after the
date of this Agreement) each such Implementation Obligation to Buyer and
provides to Buyer on Schedule 1.1(c)(i) the following information for each such
Implementation Obligation:
(1) Customer name;
(2) Commencement date and estimated
completion dates of implementation
project;
(3) Method of fee calculation (time and
materials or fixed price) and the
agreed upon billing rates involved,
where applicable;
(4) Amount, if any, of deposits
received from customer in advance
of work performed;
(5) Nature of any custom software
development involved with the
implementation, excluding normal
configuration and integration to
back-end accounting systems; and
(6) Material problems, if any, in
connection with the implementation;
(ii) All of Seller's maintenance, support and
warranty obligations, whether arising from License Agreements, Maintenance
Agreements, Implementation Agreements, statements of work, purchase orders, work
or service orders or other agreements, that are transferred to Buyer
("MAINTENANCE OBLIGATIONS") as of the Closing Date, provided that Seller
identifies each such Maintenance Obligation to Buyer on Schedule 1.1(c)(ii)
(which schedule shall be updated by Seller prior to the Closing for any
Maintenance Obligations entered into after the date of this Agreement) and
provides to Buyer on Schedule 1.1(c)(ii) the following information for each such
Maintenance Obligation:
(1) Customer name;
(2) Maintenance period and related
maintenance fee; and
(3) Any Maintenance Obligations assumed
by Buyer that are out of the
ordinary course of business; and
(iii) The following liabilities of Seller solely
to the extent they are set forth with supporting detail on Schedule 1.1(c)(iii):
(1) Accounts payable and accrued
expenses incurred in the normal
course of business (excluding
Excluded Liabilities);
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(2) Deferred revenue; and
(3) The Assigned Contracts set forth on
Schedule 2.11.
(d) Limitation on Assumed Liabilities. Notwithstanding
anything to the contrary set forth herein:
(i) In no event shall Buyer assume any
liabilities associated with any Excluded Assets, including but not limited to
Excluded Assets which are rejected by Buyer pursuant to Section 1.1 hereof; and
(ii) In no event shall the value of the Assumed
Liabilities cause a deficit in the value of the Net Tangible Assets (as defined
in Section 1.3). To the extent that the Assumed Liabilities would cause a
deficit in Net Tangible Assets, then the Buyer shall be entitled, in the
Purchase Price Adjustment Notice, (x) to the extent of the first $90,000 of such
deficit, to reduce the amount of the Note in an amount equal to the amount of
the deficit; and (y) to the extent such deficit exceeds $90,000, to reject any
liabilities equal to the amount of such excess, which liabilities would
otherwise constitute Assumed Liabilities, and such rejected liabilities shall be
paid in full by Seller when due. Any liabilities so rejected shall be deemed not
to have been assigned to or assumed by Buyer; provided, however, that if
necessary or appropriate, Buyer shall assign or re-convey such liabilities to
Seller, which shall cooperate with and accept such assignment or reconveyance.
(e) Risk of Loss. In the event any of the Seller Assets
are unavailable for delivery to Buyer on the Closing Date as a result of risks
for which such Seller Assets were insured by Seller, Buyer may at its option
elect (i) to require Seller to deliver to Buyer assignments of such Seller's
rights under its insurance policies, if any, applicable to such Seller Assets
and to close on that basis, or (ii) to not close due to the failure of a
condition to closing if the amount of the loss reasonably can be expected to be
in excess of $50,000, unless such loss is covered by Seller's insurance policies
and Seller has used the proceeds of any insurance proceeds to repair or replace
such Assets to Buyer's satisfaction. Seller hereby agrees to make an assignment
of its rights under its insurance policies if Buyer so elects and if Seller can
do so without violating the terms and conditions of such insurance policies.
1.2 Purchase Price for Assets. As consideration (the "PURCHASE
PRICE") for the sale of the Seller Assets to Buyer, in addition to the
assumption of the Assumed Liabilities provided by Section 1.1(c):
(a) at the Closing, on the terms and subject to the
conditions set forth in this Agreement, Buyer shall pay to PowerCerv, by wire
transfer of same day funds, an amount equal to $500,000; and
(b) at the Closing, Buyer shall deliver to PowerCerv a
promissory note in substantially the form of Exhibit A hereto in the principal
amount of $90,000 and due on the date which is six months after the Closing date
(the "NOTE").
1.3 Adjustment to Purchase Price. The Purchase Price will be
increased or
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decreased, as the case may be, dollar for dollar, to the extent that the value
of the Net Tangible Assets of Seller as reflected on the Closing Balance Sheet
is greater or less than zero (the "PURCHASE PRICE ADJUSTMENT"). The Closing
Balance Sheet shall be a balance sheet of the Seller comprised of the Acquired
Assets and Assumed Liabilities (provided, however, that no value shall be
assigned to the Intellectual Property included in the Acquired Assets or the
deferred revenue included in the Assumed Liabilities) as of the Closing Date,
prepared by the Buyer, in the form and incorporating the adjustments set forth
on Schedule 1.3 hereto. The Buyer shall send a copy of the Closing Balance Sheet
to the Seller within forty-five (45) days following the Closing Date, (the date
of such notice being sometimes referred to herein as the "PURCHASE PRICE
ADJUSTMENT DATE") together with a notice setting forth (a) the amount of the
adjustment in the Purchase Price and (b) a list of any assets and liabilities
rejected by Buyer pursuant to Section 1.1 hereof (the "PURCHASE PRICE ADJUSTMENT
NOTICE"). In the event that the Purchase Price Adjustment Notice sets forth an
increase in the Purchase Price, the Buyer shall pay such amount to the Seller
within fifteen (15) days of the Purchase Price Adjustment Date. In the event
that the Purchase Price Adjustment Notice sets forth a decrease in the Purchase
Price, the amount of such decrease shall be set-off against the amounts due
under the Note, subject to Seller's right to dispute the Purchase Price
Adjustment pursuant to Section 7.2 hereof.
1.4 Sales Taxes. Seller shall bear and pay, and, to the extent
that Buyer incurs any, shall reimburse Buyer for, any sales taxes, use taxes,
transfer taxes, documentary charges, recording fees or similar taxes, charges,
fees or expenses ("SALES TAXES") that may become payable in connection with the
sale of the Seller Assets to Buyer. The parties shall cooperate with each other
to the extent reasonably requested and legally permitted to minimize any such
Sales Taxes.
1.5 Allocation. Prior to the Closing, Buyer and PowerCerv shall
mutually agree on the manner in which the Purchase Price is to be allocated
among the Seller Assets (the "ALLOCATION"), which Allocation shall be set forth
in Schedule 1.5 as of the Closing Date, subject to adjustment by the parties to
reflect Purchase Price Adjustment. The Allocation shall be conclusive and
binding upon Buyer and Seller for all purposes, and the parties agree that all
tax returns and reports (including Internal Revenue Service ("IRS") Form 8594)
and all financial statements shall be prepared in a manner consistent with (and
the parties shall not otherwise file a tax return position inconsistent with)
the Allocation unless required by the IRS or state taxing authority. The
Allocation shall be prepared in a manner consistent with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the income tax
regulations promulgated thereunder.
1.6 Closing.
(a) Closing. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be held at the offices of Xxxxxxx Xxxxxx &
Green, P.C., 000 Xxxxxxxxxx Xxxxxx, Xxxxxx, XX 00000 at 10:00 a.m. on December
1, 2002 or such other time and/or date as to which the parties agree (the
"CLOSING DATE").
(b) Delivery. At the Closing:
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(i) Buyer shall deliver to PowerCerv the Note in
substantially the form of Exhibit A hereto;
(ii) Buyer shall deliver to Seller an Instrument
of Assignment and Assumption of Liabilities in substantially the form of Exhibit
B hereto by which Seller shall assign the Seller Assets to Buyer and Buyer shall
assume the Assumed Liabilities as of the Closing;
(iii) Seller shall deliver to Buyer all bills of
sale, endorsements, assignments, consents to assignments to the extent obtained
and other instruments and documents as Buyer may reasonably request to sell,
convey, assign, transfer and deliver to Buyer good title to all the Seller
Assets free and clear of any and all Liens (other than Liens set forth on
Schedule 2.7), including, without limitation, a Xxxx of Sale and General
Assignment of Seller Assets in substantially the form attached hereto as Exhibit
C;
(iv) Seller shall deliver to Buyer a Trademark
Assignment in substantially the form attached hereto as Exhibit D;
(v) Seller shall deliver to Buyer a Copyright
Assignment in substantially the form attached hereto as Exhibit E; and
(vi) Seller and Buyer shall deliver or cause to
be delivered to one another such other instruments and documents reasonably
necessary or appropriate to evidence the due execution, delivery and performance
of this Agreement.
(c) Taking of Necessary Action; Further Action. If, at
any time after the Closing Date, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest Buyer with full right,
title and possession to all Seller Assets, the officers and directors of Seller
are fully authorized in the name Seller or otherwise to take, and will take, all
such lawful and necessary and/or desirable action.
1.7 Non-Assignment or Subcontracting of Certain Assets.
Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment or subcontracting hereunder of any of the Assets shall require
the consent of any other party (or in the event that any of the same shall be
nonassignable or unable to be subcontracted), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or
subcontract or an agreement to assign or subcontract if such assignment or
subcontract or attempted assignment or subcontract would constitute a breach
thereof or result in the loss or diminution thereof, provided, however, that in
each such case, Seller and Buyer shall each use its reasonable commercial
efforts to obtain the consent of such other party to an assignment to Buyer. If
such consent is not obtained by the Closing Date, Seller shall cooperate with
Buyer in any arrangement designed for Buyer to perform Seller's obligations with
respect to such Asset after the Closing Date and for Buyer to receive the
benefits under any such Asset after the Closing Date, which arrangements may
include enforcement, for the account and benefit of Buyer of any and all rights
of Seller against any person or entity arising out of the breach or cancellation
by such person or entity or otherwise, all of such actions of Seller to be at
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the direction and expense of Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on a schedule to this Agreement, Seller represents
and warrants to Buyer and ASA that as of the date hereof:
2.1 Organization of Seller.
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(a) Each of PowerCerv and Subsidiary is a corporation duly
incorporated and validly existing under the laws of the State of Florida and has
full corporate power and authority to carry on the Business as it is now being
conducted and to own the Seller Assets. Each of PowerCerv and Subsidiary is duly
qualified or licensed to do business as a foreign corporation in good standing
in each state except where the failure to so qualify could not reasonably be
expected to have a material adverse effect on the financial condition, result of
operation, assets, liabilities, business or prospects of the Seller (a "SELLER
MATERIAL ADVERSE EFFECT").
(b) The authorized capital stock of PowerCerv consists of (i)
Fifty Million (50,000,000) Shares of common stock, $0.001 par value per share
(the "COMMON SHARES"), of which 1,312,315 are issued and outstanding, and (ii)
Five Million (5,000,000) shares of preferred stock, par value $0.001 per share
(the "PREFERRED SHARES"), of which 1,022,222 are issued and outstanding. All of
the outstanding Common Shares and Preferred Shares (collectively, the "SHARES")
have been duly authorized and are validly issued, fully paid and nonassessable,
and are not subject to any rights of first refusal upon sale or transfer. The
Company has no Preferred Shares reserved for issuance. As of the date hereof,
other than the 519,444 Common Shares reserved for issuance upon exercise of
outstanding options and stock option plans and the 1,022,222 Common Shares
reserved for issuance upon conversion of the outstanding Preferred Shares, there
are no Common Shares reserved for issuance or any commitments for PowerCerv to
issue Shares. There are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements or commitments to issue or sell any shares of
capital stock or other securities of PowerCerv or the Subsidiary or any
securities or obligations convertible or exchangeable into or exercisable for,
or giving any person a right to subscribe for or acquire from PowerCerv or the
Subsidiary, any shares of capital stock or other securities of PowerCerv or the
Subsidiary, and no securities or obligations evidencing such rights are
authorized, issued, or outstanding. PowerCerv does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the shareholders of PowerCerv on any matter. The Common
Shares constitute the only class of securities of PowerCerv or the Subsidiary
registered or required to be registered under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT").
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(c) All of the issued and outstanding shares of capital stock of
Subsidiary are owned by PowerCerv and are fully paid, nonassessable and, except
as set forth on Schedule 2.1, are not subject to any Lien. Except as set forth
on Schedule 2.1, there are no other shares of capital stock authorized, issued
or outstanding, nor are there any options, or other rights to acquire any
capital stock of Seller outstanding.
(d) Except for PowerCerv's ownership interest in Subsidiary,
Seller does not own, directly or indirectly, any ownership interest in or
control any corporation, partnership, joint venture or other entity.
2.2 Due Authorization. Each of PowerCerv and Subsidiary has all
requisite corporate power and authority to execute and deliver this Agreement,
and each document, instrument or agreement contemplated hereby, including but
not limited to the documents delivered at Closing, and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and each document, instrument or agreement executed pursuant to
this Agreement by each of PowerCerv and Subsidiary and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action subject only to the approval of this Agreement by
shareholders of PowerCerv at the Shareholders Meeting.
2.3 Due Execution and Enforceability. This Agreement, and each
document, instrument or agreement executed pursuant to this Agreement by
PowerCerv or Subsidiary, including but not limited to the documents delivered at
Closing, have been or will be duly executed and delivered by each of PowerCerv
and Subsidiary, and assuming due authorization, execution and delivery by Buyer,
if required, this Agreement and each document, instrument or agreement executed
pursuant to this Agreement by each of PowerCerv and Subsidiary, including but
not limited to the documents delivered at Closing, constitute the legal, valid
and binding obligations of each of PowerCerv and Subsidiary, enforceable against
each of PowerCerv and Subsidiary in accordance with their terms, subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or other
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or equity).
2.4 No Conflict. The execution and delivery of this Agreement, and
each document, instrument or agreement executed pursuant to this Agreement,
including but not limited to the documents delivered at Closing, and the
performance of Seller's obligations hereunder and thereunder, (i) are not in
violation or breach of, and will not conflict with or constitute a default
under, any of the terms of (A) the articles of incorporation or bylaws of each
of PowerCerv or Subsidiary or (B) except where the violation, breach, conflict
or default would not reasonably be expected to have a Seller Material Adverse
Effect, any contract, agreement or commitment binding upon each of PowerCerv or
Subsidiary or any of the Seller Assets,; and (ii) except for (x) obtaining the
required shareholder vote at the Shareholder Meeting (as defined in Section
5.16), (y) the filing of a proxy statement, and (z) obtaining all required
consents, approvals, orders, and authorization as may be required under
applicable federal and state law (clauses (x) through (z), collectively, the
"Required Filings"),will not conflict with or violate any applicable law, rule,
regulation, judgment,
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order or decree of any government, governmental instrumentality or court having
jurisdiction over Seller or any of the Seller Assets.
2.5 Consents and Approvals of Governmental Authorities. Except for
the Required Filings, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority is
required to be made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement and each document, instrument and
agreement executed pursuant to this Agreement.
2.6 PowerCerv Financial Statements and Reports.
(a) The PowerCerv annual report on Form 10-KSB for the
year ended December 31, 2001 (the "POWERCERV 10-K") sets forth PowerCerv's
consolidated balance sheets and income statements as of and for the years ended
December 31, 2000 and 2001, and Seller's June 30, 2002 balance sheet and income
statement (the "SELLER FINANCIALS"). The Seller Financials have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (subject to, in the case of the June 30,
2002 balance sheet and income statement, normal, recurring year-end adjustments
consistent with prior periods). The Seller Financials present fairly in all
material respects the operating results of the Business during the periods
indicated therein. June 30, 2002 is referred to herein as the "BALANCE SHEET
DATE."
(b) All accounts receivable of Seller have arisen from
bona fide transactions by Seller in the ordinary course of its business. All
accounts and notes receivable reflected on the Seller Financials are (i) valid,
genuine and existing, (ii) subject to no defenses, setoffs or counterclaims,
(iii) except as set forth on Schedule 2.6(b)(iii), current (not more than ninety
(90) days past due) and (iv) collectible in the ordinary course of business net
of any reserves set forth in the Seller Financials. Seller has no knowledge that
any customer of Seller with an account balance is involved in voluntary or
involuntary bankruptcy proceedings or is otherwise insolvent or has notified
Seller that such customer will not pay its account.
(c) PowerCerv has made available to the Buyer each
registration statement, report, proxy statement or information statement filed
with the Securities and Exchange Commission (the "SEC") by it since December 31,
2001, (the "AUDIT DATE") including the PowerCerv 10-K in the form (including
exhibits, annexes, and any amendments thereto) filed with the SEC (collectively,
including any such reports filed subsequent to the date hereof, the "POWERCERV
REPORTS"). As of their respective dates (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing), the
PowerCerv Reports complied, and any PowerCerv Reports filed with the SEC after
the date hereof will comply, as to form in all material respects with the
applicable requirements of the Exchange Act and the PowerCerv reports did not,
and any PowerCerv reports filed with the SEC after the date hereof will not, at
the time of their filing, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected by a subsequently filed
PowerCerv Report; provided however, that PowerCerv's report on Form 10-QSB for
the quarter ended June 30, 2002 has not been timely filed. PowerCerv has
heretofore made available or promptly will make available to the
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Buyer a complete and correct copy of all amendments or modifications (in draft
or final form) which are required to be filed with the SEC but have not yet been
filed with the SEC to the PowerCerv Reports, agreements, documents or other
instruments which previously had been filed by PowerCerv with the SEC pursuant
to the Exchange Act.
2.7 Ownership and Transfer of Assets.
(a) Ownership. Except as set forth on Schedule 2.7(a),
Seller owns all rights, title and interest in and to the Seller Assets free and
clear of any Liens, and has the rights to sell, assign, transfer, license and
deliver, as applicable, such Seller Assets as contemplated herein.
(b) Real Property. Schedule 2.7(b) sets forth a list of
all real property currently leased by the Seller, the name of the lessor, and
the date and term of the lease and each amendment thereto. The Seller does not
own any real property. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both would constitute an event of a
default) that would give rise to a material claim. To the knowledge of the
Seller, neither its operations on any such real property, nor such real
property, including improvements thereon, violate in any material respect any
applicable building code, zoning requirement, or classification, and such
non-violation is not dependent, in any instance, on so-called non-conforming use
exceptions.
(c) Effective Transfer. By means of this Agreement,
together with the documents, instruments and agreements contemplated hereby,
Seller will transfer to Buyer good and marketable title to all Seller Assets,
free and clear of all Liens other than Liens set forth on Schedule 2.7. The
Seller Assets sold to Buyer pursuant to this Agreement and the documents,
instruments and agreements contemplated hereby and thereby, will transfer all
necessary assets and intellectual property rights required by Buyer to conduct
the Business.
2.8 Restrictions on Business Activities. Except as set forth on
Schedules 2.10(a) and 2.10(b), there is no agreement, commitment, judgment,
injunction, order or decree binding upon Seller, the Seller Assets or, to the
best knowledge of Seller, any employee of Seller, which has or could reasonably
be expected to have the effect of prohibiting or impairing in any material
respect any use by Buyer of the Seller Assets or Buyer's conduct of the Business
following the Closing in the manner generally used and conducted prior to the
Closing Date.
2.9 Capital Equipment and Hard Assets. To Seller's knowledge, all
tangible assets and equipment of Seller other than those listed on Schedule
1.1(b) are in good condition and repair, reasonable wear and tear excepted, and
are adequate for the uses to which they are being put or would be put in the
ordinary course of business consistent with Seller's prior conduct of the
Business and will be transferred to Buyer without any Liens, other than the
Liens set forth on Schedule 2.7.
2.10 Intellectual Property.
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(a) Except as set forth in Schedule 2.7(a): Seller owns
all rights, title and interest in and to the Intellectual Property, and the
conduct of the activities of the Business currently and in the past does not
conflict with and has not conflicted with Intellectual Property rights of
others. All Intellectual Property used or held for use in the conduct of the
activities of the Business owned by Seller is so owned free and clear of all
Liens (other than as set forth on Schedule 2.7)and no other person, including
without limitation any present or former employee, officer or director of
Seller, has any right whatsoever therein. Neither Seller, nor to Seller's
knowledge, any present or former employee thereof, has violated or, by
conducting the activities of the Business in the ordinary course consistent with
past practice would violate, any intellectual property rights whatsoever of any
other person or entity. Seller does not have any obligation to compensate any
person or entity for the use of any Intellectual Property relating to the Seller
Assets. Except for License Agreements granted in the ordinary course of
business, Seller has not granted to any person or entity any license, option or
other rights to use in any manner any Intellectual Property whether requiring
the payment of royalties or not.
(b) Except as set forth on Schedule 2.10(b): Seller owns
all right, title and interest in and to the Software. No person or entity other
than Seller owns any right, title or interest in the Software including, without
limitation, any right to manufacture, use, copy, distribute or sublicense any
object code or source code thereof. The Software is (i) not subject to any Liens
(other than as set forth on Schedule 2.7) (ii) not subject to any pending or, to
Seller's best knowledge, threatened challenge of infringement of the rights of
others, nor to the best knowledge of Seller is there any basis for a challenge
of infringement of any such rights of others, and (iii) freely transferable and
assignable to Buyer.
2.11 Contracts. Schedule 2.11 accurately lists all of the contracts
to be assigned to Buyer in connection with the Acquisition (the "ASSIGNED
CONTRACTS"). Each of the Assigned Contracts is a legal, binding and enforceable
obligation by or against Seller, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity). Except as set forth in Schedule 2.11, Seller has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any agreement required to
be set forth in Schedule 2.11, except for breaches, violations, or defaults
which would not reasonably be expected to have a Seller Material Adverse Effect.
Except as set forth in Schedule 2.11, each Assigned Contract is in full force
and effect and is not subject to any default thereunder of which Seller has
knowledge by any party obligated to Seller pursuant thereto. Except as set forth
in Schedule 2.11, Seller has obtained all necessary consents, waivers and
approvals of parties to any Assigned Contract as are required to assign all
rights and benefits thereunder to Buyer as of the Closing.
2.12 Governmental Authorization. Schedule 2.12 accurately lists
each material consent, license, permit, grant or other authorization issued to
Seller by each court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (each a "GOVERNMENTAL ENTITY")
(a) pursuant to which Seller currently operates or holds any interest in any of
the Seller Assets or (b) which is required for the operation of the activities
of the Business or the
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holding of any such interest (herein collectively called "AUTHORIZATIONS"),
which Authorizations are in full force and effect and constitute all
Authorizations required to permit Seller to operate or conduct the activities of
the Business or hold any interest in the Seller Assets. No Governmental Entity
has at any time notified Seller of any challenge or question regarding the legal
right of Seller to manufacture, offer or sell any of the products of the
Business, including the Seller Assets, in the present manner or style thereof.
2.13 Compliance with Applicable Laws. Seller has complied with all
laws, regulations, rules and orders (including those relating to environmental
matters) of each Governmental Entity applicable to it. Seller has not received
any written notice of any asserted violation of any such laws, regulations,
rules or orders. Seller has not received any written notice that any
investigation or review by any Governmental Entity of Seller or that any such
investigation or review is contemplated.
2.14 Taxes.
(a) Except as set forth in Schedule 2.14, Seller has (i)
timely filed within the time the period for filing or any extension granted with
respect thereto, all federal, state, local and foreign tax returns, reports and
estimates ("RETURNS") which it is required to file, and (ii) paid any and all
taxes ("TAXES") it is required to pay in connection with the taxable periods to
which such Returns relate. Except as set forth in Schedule 2.7(a), there are
(and immediately following the Closing there will be) no Liens or similar
encumbrances on the Seller Assets relating or pertaining to taxes, except with
respect to taxes not yet due and payable. Seller has no knowledge of any basis
for the assertion of any material claims which, if adversely determined, would
result in a Lien or other encumbrance on the Seller Assets or otherwise
materially and adversely affect Buyer or the Seller Assets. Except as set forth
in Schedule 2.14, no extension of any filing date applicable to any taxes has
been requested or granted. All deposits required by law to be made by Seller
with respect to employees' withholding taxes that have been duly made. Except as
set forth in Schedule 2.14, Seller is not delinquent in the payment of any
material Tax, assessment or governmental charge or deposit, and Seller does not
have any Tax deficiency or claim currently pending, outstanding or asserted
against it, and there is no basis for any such Tax deficiency or claim. There is
no audit currently pending regarding any Taxes and Seller has not extended the
period in which any Tax could be assessed or collected. The unpaid Taxes of
Seller do not exceed the reserve for Taxes established on the books and records
of the Seller. No Governmental entity (a "Taxing Authority") responsible for the
imposition of any Tax (domestic or foreign), has asserted jurisdiction to impose
any Taxes upon Seller.
(b) For purposes of this Agreement, "Tax" (and, with
correlative meaning, "TAXES" and "TAXABLE") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts. sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, Governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period and (iii) any liability for the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
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2.15 Brokers' or Finders' Fees. Except as disclosed in Schedule
2.15, Seller is not a party to, or in any way obligated under, any contract or
outstanding claim for the payment of any broker's or finder's fee in connection
with the origin, negotiation, execution or performance of this Agreement, the
nonpayment of which could result in the placement of a lien or other encumbrance
on the Seller Assets, or a claim against Buyer or its affiliates.
2.16 Material Adverse Change. Between the Balance Sheet Date and
the date hereof, (a) there has not been any change in or effect (or any
development that is reasonably likely to result in any change or effect) that
has resulted in or could reasonably be expected to result in a Seller Material
Adverse Effect and (b) Seller has not taken, and there has not occurred, any
actions of a type referred to in Section 4.1; provided, however, that none of
the following shall be deemed to constitute and none of the following shall be
taken into account in determining whether there has been or will be a Seller
Material Adverse Effect: (A) any litigation or threat of litigation filed or
made after the date hereof challenging any of the transactions contemplated
herein or any shareholder litigation filed or made after the date hereof
resulting from this Agreement of the transactions contemplated herein; or (B)
the increase or decrease in the Seller's stock price or trading volume; or (C) a
decrease in the Seller's revenues unless such revenues are less than $1.1
million for the six (6) months ended July 31, 2002.
2.17 Litigation. Except as set forth in Schedule 2.17, there is no
suit, action or proceeding pending in connection with Seller or the Business or
the Seller Assets, in which Seller has been served, nor is there any judgment,
decree, injunction or order of any Governmental Entity or arbitrator outstanding
against Seller or the Seller Assets that would have, individually or in the
aggregate, a Material Adverse Effect. Seller has not received any written
communication threatening litigation.
2.18 Knowledge. Wherever used in this Agreement, the term "to the
best of Seller's knowledge" or any similar terms shall mean those matters of
which the Seller has actual knowledge and of which the Seller should have had
knowledge after reasonable inquiry.
2.19 Products.
(a) There are no known defects in the design or
technology embodied in any product which Seller currently markets, or has
marketed in the past that impair or are likely to impair the intended use of the
product or damage any consumer of the product or third party (their business,
assets or property), except that warranty claims may arise in the normal course
of business, for products shipped prior to the Closing, in an aggregate amount
of no more than the warranty reserves established on the most recent balance
sheet of Seller.
(b) None of the computer software, computer firmware,
computer hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are used or
relied on by the Seller in the conduct of its business will malfunction, will
cease to function, will generate incorrect data or will produce incorrect
results when
14
processing, providing or receiving (i) date related data from, into and between
the twentieth (20th) and Twenty-First (21st) centuries or (ii) date-released
data in connection with any valid date in the Twentieth (20th) and Twenty-First
(21st) centuries.
(c) None of the products and services sold, licensed,
rendered, or otherwise provided by the Seller in the conduct of its business
will malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing, or receiving, (i) date
related date from, into and between the twentieth (20th) and Twenty-First (21st)
centuries or (ii) date-released data in connection with any valid date in the
Twentieth (20th) and Twenty-First (21st) centuries.
(d) The Seller has not made any representations or
warranties any representations or warranties specifically relating to the
ability of any product or service sold, licensed, rendered, or otherwise
provided by the Company in the conduct of its business to operate without
malfunction, to operate without ceasing to function, to generate correct data or
to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the Twentieth (20th) and Twenty-First
(21st) centuries and (ii) date-related data in connection with any valid date in
the Twenty (20th) and Twenty-First (21st) centuries.
2.20 Undisclosed Liabilities. Except as set forth in Schedule 2.20,
there are no debts, liabilities or obligations with respect to Seller or to
which the Seller Assets are subject, liquidated, unliquidated, accrued,
absolute, contingent, or otherwise, that are not specifically identified in the
Seller Financials or the Schedules to this Agreement, other than for trade
accounts payable incurred in the ordinary course of business from the Balance
Sheet Date to the Closing Date.
2.21 Inventory. All inventory of Seller consists of items that are
or upon delivery to Buyer will be good and merchantable and of a quality and
quantity presently usable and saleable in the ordinary course of business. All
such inventory is and will be valued in accordance with generally accepted
accounting principles consistently applied as set forth in the Seller
Financials.
2.22 Product Warranties and Product Liability. Seller has delivered
to Purchaser copies of its warranty policies and all outstanding warranties or
guarantees relating to any of Seller's products other than warranties or
guarantees implied by law. Seller is not aware of any claim asserting (a) any
damage, loss or injury caused by any Product, or (b) any breach of any express
or implied product warranty or any other similar claim with respect to any
Product other than standard warranty obligations (to replace, repair or refund)
made by Seller in the ordinary course of business except for those claims that,
if adversely determined against the Business, would not have a Seller Material
Adverse Effect.
2.23 Labor Relations. Except as set forth on Schedule 2.23: Seller
has not failed to comply in any material respect with any applicable federal,
state, and local laws, rules, and regulations relating to employment or
employment termination, and all applicable laws, rules and regulations governing
payment of minimum wages and overtime rates, and the withholding and payment of
taxes from compensation of employees, which could reasonably be expected to have
a Seller Material Adverse Effect. There are no labor controversies pending or,
to the knowledge of the Seller, threatened
15
between Seller and any of its employees or former employees or any labor union
or other collective bargaining unit representing any of the employees. Seller
has never entered into a collective bargaining agreement or other labor union
contract relating to the Business and applicable to the employees. There are no
written employment or separation agreements, or oral employment or separation
agreements other than those establishing an "at-will" employment relationship
between Seller and any of its employees. Seller does not maintain any employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
2.24 Certain Payments. Seller has not and no person directly or
indirectly on behalf of Seller has made or received any payment that was not
legal to make or receive.
2.25 Customers and Suppliers. Seller is neither aware nor has any
reason to believe that any of Seller's ten largest customers and ten largest
suppliers during the twelve months ended December 31, 2001 determined on the
basis of both revenues and bookings during such period) has terminated, or
intends to materially reduce or terminate, the amount of its business with
Seller, and Seller has no reason to believe that such termination or alteration
would occur as a result of the consummation of this Agreement.
2.26 Approval and Recommendation. The Board of Directors of
PowerCerv, at a meeting duly called and held, has, subject to the terms and
conditions set forth herein, (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of
PowerCerv its shareholders (ii) approved this Agreement and the transactions
contemplated hereby, and (iii) resolved to recommend that the shareholders of
PowerCerv approve and adopt this Agreement. The Board of Directors of PowerCerv
has reviewed the opinion of Capitalink, L.C., financial advisor to the Board of
Directors of PowerCerv (the "FINANCIAL ADVISOR"), that, as of the date of this
Agreement, the consideration to be received pursuant to this Agreement is fair
to the shareholders of PowerCerv from a financial point of view (the "Fairness
Opinion"). The Company has been authorized by the Financial Advisor to permit,
subject to the prior review and consent by the Financial Advisor (such consent
not to be unreasonably withheld), the inclusion of the Fairness Opinion (or a
reference thereto) in the Proxy Statement (as defined below).
2.27 Environmental Matters.
(i) The term "Environmental Laws" means any Federal,
state, local or foreign statute, treaty, ordinance, rule, regulation, policy,
permit, consent, approval, license, judgment, order, decree or injunction
relating to: (A) Releases (as defined in 42 U.S.C. (S) 9601(22)) or threatened
Releases of Hazardous Material (as hereinafter defined) into the environment,
(B) the generation, treatment, storage, presence, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material, (C) natural
resources, or (D) the environment. The term "Hazardous Material" means (1)
hazardous substances (as defined in 42 U.S.C. (S) 9601(14)), (2) petroleum,
including crude oil and any fractions thereof, (3) natural gas, synthetic gas
and any mixtures thereof, (4) asbestos and/or asbestos containing materials, (5)
PCBs or materials containing PCBs, and (6) radioactive materials.
16
(ii) During the period of ownership or operation by the
Seller of any of its current or previously owned or leased properties, there
have been no Releases of Hazardous Material by the Seller in, on, under or
affecting such properties or any surrounding site, and the Seller has not
disposed of any Hazardous Material in a manner that has led, or could reasonably
be anticipated to lead to a Release, except in each case for those which
individually or in the aggregate would not have a Seller Material Adverse
Effect. Except as set forth on Schedule 2.27, to the knowledge of the executive
officers of the Seller, there have been no Releases of Hazardous Material in,
on, under or affecting such properties or any surrounding site by any other
party except for those which individually on in the aggregate would not have a
Seller Material Adverse Effect. To the knowledge of the executive officers of
the Seller no third party property is contaminated with any Hazardous Substances
that may subject the Seller to liability under any Environmental Laws. The
Seller has not received any written notice of, or entered into any order,
settlement or decree relating to: (A) any violation of any Environmental Laws or
the institution or pendency of any suit, action, claim, proceeding or
investigation by any governmental entity or any third party in connection with
any alleged violation of Environmental Laws, (B) the response to or remediation
of Hazardous Material at or arising from any of the Seller's properties. The
properties currently owned or operated by the Seller possess all material
permits, licenses, authorizations and approvals required under applicable
Environmental Laws with respect to the conduct of business thereat, and are in
compliance with all Environmental Laws, except where instances of noncompliance
would not, individually or in the aggregate, be reasonable likely to have a
Material Adverse Effect.
(iii) To the knowledge of the Seller there are no
circumstances or conditions involving the Seller or its employees that could
reasonably be expected to result in any material claims, liability or
investigations under any Environmental Law or relating to Hazardous Substances
arising out of the ownership, operation, management of all or any portion of a
facility, or out of the arrangement for the treatment, transportation, or
disposal of, or ownership or possession or choice of the treatment, storage or
disposal facility for, any material with respect and to the extent to the Seller
provided services before the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND ASA
Buyer and ASA, jointly and severally, represent and warrant to Seller
as follows:
3.1 Organization, Standing and Power. Each of Buyer and ASA is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Buyer and ASA has the corporate power to own
its properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on its
ability to consummate the transactions contemplated hereby.
3.2 Authority. Each of Buyer and ASA has all requisite corporate
power and authority to execute and deliver this Agreement, and each document,
instrument or agreement contemplated
17
hereby, including, but not limited to the documents delivered at Closing, and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement, and each document, instrument or agreement executed pursuant to
this Agreement by Buyer and ASA and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer and ASA.
3.3 Due Execution and Enforceability. This Agreement, and each
document, instrument or agreement executed pursuant to this Agreement by Buyer
and ASA, including but not limited to the documents delivered at Closing, have
been duly executed and delivered by Buyer and ASA, and assuming due
authorization, execution and delivery by each of PowerCerv and Subsidiary, if
required, this Agreement and each document, instrument or agreement executed
pursuant to this Agreement by Buyer and ASA, including but not limited to the
documents delivered at Closing, constitute the legal, valid and binding
obligations of Buyer and ASA, enforceable against Buyer and ASA in accordance
with their terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other federal or state laws affecting the rights
of creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or equity).
3.4 No Conflict. The execution and delivery of this Agreement, and
each document, instrument or agreement executed pursuant to this Agreement,
including but not limited to the documents delivered at Closing, and the
performance of Buyer's and ASA's obligations hereunder and thereunder, (i) are
not in violation or breach of, and will not conflict with or constitute a
default under, any of the terms of the certificate of incorporation or bylaws of
Buyer or ASA or any contract, agreement or commitment binding upon Buyer or ASA,
or (ii) will not conflict with or violate any applicable law, rule, regulation,
order or degree of any government, governmental instrumentality or court having
jurisdiction over Buyer or ASA.
3.5 Consents and Approvals of Government Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required to be made or obtained by Buyer
or ASA in connection with the execution, delivery and performance of this
Agreement and each document, instrument and agreement executed pursuant to this
Agreement.
3.6 Financing. ASA has funds in the aggregate sufficient to
perform its obligations under this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing Date, Seller agrees that it will (except to the extent that Buyer
shall otherwise consent in writing with such consent not being unreasonably
withheld or delayed) carry on its business in the usual, regular and ordinary
course in substantially the same manner as conducted since January 1, 2002, to
pay its debts and Taxes when
18
due, to pay or perform other obligations when due, and, to the extent consistent
with such business, use all reasonable efforts consistent with past practice and
policies to preserve intact Seller's present business organizations, keep
available the services of its present officers and key employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired the Seller Assets, including without limitation, goodwill
of the Business at the Closing Date. Seller shall promptly notify Buyer of any
event or occurrence or emergency not in the ordinary course of business, and any
event which could have a Material Adverse Effect. Except as expressly
contemplated by this Agreement, without the prior written consent of Buyer,
which consent shall and be unreasonably withheld or delayed, Seller shall not,
except in the ordinary course of business consistent with past practice since
January 1, 2002, until the earlier of the termination of this Agreement or the
Closing Date, do any of the following:
(a) Enter into any commitment or transaction not in the
ordinary course of business;
(b) Transfer to any person or entity any rights to the
Seller Assets other than the granting of end-user Software licenses;
(c) Enter into or amend any agreements pursuant to which
any other party is granted marketing, distribution or similar rights of any type
or scope with respect to any products of Seller;
(d) Amend or otherwise modify (or agree to do so), or
materially violate the terms of the agreements set forth or described in any of
the Schedules hereto;
(e) Commence any litigation;
(f) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate;
(g) Sell, lease, license or otherwise dispose of any of
its properties or Seller Assets other than the granting of end-user Software
licenses;
(h) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of Seller
or guarantee any debt securities of others;
(i) Adopt or amend any employee benefit plan, or enter
into any employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;
(j) Revalue any of the Seller Assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable;
19
(k) Enter into any strategic alliance or joint marketing
arrangement or agreement;
(l) Enter into any license agreement with respect to any
intellectual property of any third party for the purpose of its use with the
Intellectual Property;
(m) Hire or fire any employees (and notice of all such
hirings or firings shall be given to Buyer);
(n) Declare or pay any dividend or distribution to the
shareholders of PowerCerv or purchase, redeem or otherwise acquire or commit to
acquire, directly or indirectly, any shares of capital stock of PowerCerv;
(o) Amend the certificate of incorporation or by-laws of
either PowerCerv or Subsidiary; or
(p) Agree in writing or otherwise to take any of the
actions described in Sections 4.1(a) through (o) above, or take (or agree in
writing to take) any other action that would prevent Seller from performing or
cause Seller not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Seller shall afford Buyer and
its accountants, counsel and other representatives, full access during normal
business hours upon reasonable prior notice during the period prior to the
Closing Date to (a) all of Seller's properties, books, contracts, commitments
and records, (b) the employees, customers and suppliers of Seller and (c) all
other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of Seller as Buyer may reasonably
request. Seller agrees to maintain and retain any and all information regarding
its business operations on or prior to the Closing Date necessary for Buyer to
calculate the availability to it of future tax credits for research activities
under Section 41 of the Code. Seller agrees to provide to Buyer and its
accountants, counsel and other representatives copies of internal financial
statements as promptly as practicable upon request. Buyer shall conduct its
investigation of Seller in such a manner so as not to unreasonably interfere
with Seller's conduct of the Business. No information or knowledge obtained in
any investigation pursuant to this Section 5.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Acquisition.
5.2 Confidentiality. Each of the parties hereto hereby
agrees to keep such information or knowledge obtained in any investigation
pursuant to Section 5.1, or pursuant to the negotiation and execution of this
Agreement or the effectuation of the transactions contemplated hereby,
confidential; provided, however, that the foregoing shall not apply to
information or knowledge which (a) a party can demonstrate was already lawfully
in its possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any violation
of law
20
or this Agreement, (c) became known to the public through no fault of such
party, (d) is later lawfully acquired by such party from other sources, (e) is
required to be disclosed by order of court or government agency with subpoena
powers or (f) which is disclosed in the course of any litigation between any of
the parties hereto.
5.3 Expenses. Whether or not the Acquisition is consummated, all
fees and expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties ("TRANSACTION EXPENSES") incurred by Seller
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of and paid by Seller. Buyer shall pay for all of its Transaction
Expenses.
5.4 Public Disclosure. Unless otherwise required by law or this
Agreement, prior to the Closing Date, no disclosure (whether or not in response
to an inquiry) of the subject matter of this Agreement shall be made by Seller
or Buyer unless approved by the other party.
5.5 Consents. Seller shall use its reasonable efforts to obtain
any consents as may be required by the Assigned Contracts in connection with the
Acquisition so as to transfer to Buyer all rights of Seller thereunder as of the
Closing.
5.6 Reasonable Commercial Efforts. Subject to the terms and
conditions provided in this Agreement, each of the parties hereto shall use its
reasonable commercial efforts to take promptly, or cause to be taken promptly,
all actions, and to do promptly, or cause to be done promptly, all things
necessary, proper or advisable under applicable laws and regulations: to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
5.7 Notification of Certain Matters. Seller shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Seller, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of Seller or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing Date, and (ii) any failure of Seller or Buyer, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.7 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
5.8 Additional Documents and Further Assurances; No Interference.
(a) Each party hereto, at the request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be reasonably necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby.
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(b) Following the Closing, ASA agrees to assist PowerCerv, at
PowerCerv's expense, in PowerCerv's collection of any Accounts Receivable which
are included in the Excluded Assets. ASA shall provide such assistance at
mutually agreeable hourly rates.
5.9 Tax Returns. Except for any Taxes which are expressly included
in the Assumed Liabilities, Seller shall be responsible for and pay when due (i)
all of Seller's Taxes attributable to or levied or imposed upon the Seller
Assets relating or pertaining to the period (or that portion of any period)
ending prior to the Closing Date and (ii) all Taxes attributable to, levied or
imposed upon, or incurred in connection with the Seller's business operations
prior to the Closing Date. Seller shall continue to timely file within the time
period for filing, or any extension granted with respect thereto, all Returns
required to be filed in connection with the Seller Assets and any portion of any
such Returns connected therewith shall be true and correct and completed in
accordance with applicable laws.
5.10 Payment of Taxes. As of the Closing, Seller shall have (a)
paid all Taxes it is required to pay as of such time and which are not being
disputed by Seller in good faith pursuant to appropriate proceedings, and (b)
withheld with respect to its employees, and paid to the appropriate taxing
authority, all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld as of such time. Except for any Taxes which are
expressly included in the Assumed Liabilities, all Taxes that become due or
payable with respect to Seller's operation of the Business prior to the Closing
Date shall be the responsibility of and shall be paid by Seller on a timely
basis, and Seller shall be entitled to all tax benefits or credits arising out
of such pre-closing operations.
5.11 Employees. At least (10) days prior to the Closing, Buyer
shall provide a written list to Seller setting forth any employees of Seller to
whom Buyer does not intend to make offers of employment.
5.12 Use of Name. Following the Closing Date, neither PowerCerv nor
Subsidiary shall use the name "PowerCerv" or any variation thereof in connection
with any enterprise software business, including but not limited to the
development, marketing, sole licensing or service of enterprise software.
5.13 Cooperation and Records Retention. Seller and Buyer shall (a)
each provide the other with such assistance as may reasonably be requested by
them in connection with the preparation of any tax return, statement, report,
form or other document (hereinafter collectively a "Tax Return"), or in
connection with any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for taxes, (b)
until the fifth anniversary of the Closing Date, each retain and provide the
other, with any records or other information which may be relevant to any such
Tax Return, audit or examination, proceeding or determination, or any other
reasonable business purpose or any other legal proceeding, and (c) each provide
the other with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on any
Tax Return of the other for any period.
5.14 No Solicitation. Until the earlier of (a) the Closing or (b)
the termination of this Agreement, each of PowerCerv and Subsidiary will not,
and PowerCerv and Subsidiary shall each use
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its best efforts to cause all of their respective officers, directors,
stockholders, agents, representatives and affiliates not to, directly or
indirectly take any of the following actions with any party other than Buyer and
its designees:
(i) solicit, encourage, initiate or participate in any
negotiations or discussions with respect to any offer or proposal to acquire all
or any portion of the Business or the Seller Assets or any capital stock of
Seller;
(ii) disclose any information not customarily disclosed to
any person other than its attorneys or financial advisors concerning Seller's
business and properties or afford to any person or entity access to its
properties, books or records;
(iii) assist or cooperate with any person to make any
proposal to purchase all or any part of the Seller Assets or Business or capital
stock of each of PowerCerv and Subsidiary, other than selling products of Seller
in the ordinary course of business; or
(iv) enter into any agreement with any person providing
for the acquisition of all or any portion of the Business, the Seller Assets or
any capital stock of the each of PowerCerv and Subsidiary.
Nothing herein shall prohibit PowerCerv's Board of Directors from
taking and disclosing to its shareholders a position with respect to an
unsolicited tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act; provided, however, that in the event that the position so taken
and disclosed (a "TENDER OFFER POSITION") is not an unqualified opposition to
the unsolicited tender offer, then PowerCerv may only take and disclose such
position if, simultaneously with such action, PowerCerv terminates this
Agreement pursuant to Section 8.1(f). Notwithstanding the provisions of this
Section 5.14, if an unsolicited Alternative Proposal (as defined herein) shall
be received by the PowerCerv Board of Directors, then, to the extent the
PowerCerv Board of Directors believes in good faith that such Alternative
Proposal is reasonably capable of being consummated and would, if consummated,
be reasonably likely to result in a transaction more favorable to its
shareholders than the transaction contemplated by this Agreement (any such more
favorable Alternative Proposal being referred to in this Agreement as a
"SUPERIOR PROPOSAL") and the PowerCerv Board of Directors determines in good
faith and upon the advice of its legal counsel that it could reasonably be
deemed necessary for the PowerCerv Board of Directors to further entertain and
consider the Superior Proposal in order to comply with its fiduciary duties to
shareholders under applicable law, PowerCerv may furnish information and afford
access to the properties, books, or records of PowerCerv or Subsidiary to the
party making such Superior Proposal and engage in negotiations with such party,
and such actions shall not be considered a breach of this Section 5.14 or any
other provisions of this Agreement; provided that in any event PowerCerv shall
notify Buyer of the receipt of a Alternative Proposal and shall notify Buyer of
any such determination by the PowerCerv Board of Directors and PowerCerv shall
deliver to Buyer a true and complete copy of the Alternative Proposal (or
summary of any oral proposal) received from such third party and all documents
containing or referring to non-public information of PowerCerv that are supplied
to such third party. An Alternative Proposal shall mean any offer or proposal
for a merger or other business combination involving the Seller or the
acquisition of 20% or more of the Seller's outstanding capital stock or a
significant portion of the Seller's assets other than the transactions
contemplated by this Agreement.
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The parties agree that irreparable damage would be caused to Buyer in
the event the provisions of this Section 5.14 were not performed in accordance
with their specific terms or were otherwise breached. Seller hereby agrees that
in the event of any such breach or threatened breach, Buyer shall be entitled to
injunctive relief and to specifically enforce the provisions of this Section
5.14 in any court having competent jurisdiction, in addition to any other remedy
which Buyer may have at law or equity.
5.15 Filings; Other Actions; Notification. PowerCerv shall as
promptly as practicable, following the execution of this Agreement with the
assistance and cooperation of Buyer, prepare and file with the SEC, a proxy
statement and any required amendment or supplement thereto (the "Proxy
Statement"), which shall include the recommendation of the Board of Directors of
PowerCerv that shareholders of PowerCerv vote in favor of the approval and
adoption of this Agreement and the written opinion of the Financial Advisor that
the consideration to be received by the Seller pursuant to this Agreement is
fair from a financial point of view. PowerCerv and Buyer shall use all
reasonable efforts to have the Proxy Statement respond to any comments made by
the SEC with respect to the preliminary Proxy Statement as promptly as
practicable after receipt of such comments, and promptly thereafter mail the
Proxy Statement to the shareholders of PowerCerv. PowerCerv will notify the
Buyer promptly upon the receipt of any comments from the SEC or its staff in
connection with the filing of, or amendments or supplements to, the Proxy
Statement. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, PowerCerv will promptly inform
the Buyer of such occurrence. PowerCerv will provide the Buyer and its counsel a
reasonable opportunity to review and comment on the Proxy Statement and any
amendment or prior to filing such with the SEC. The Seller will cause the Proxy
Statement to be mailed to its shareholders at the earliest practicable time.
5.16 Meeting. PowerCerv will take, in accordance with applicable
law and its certificate of incorporation and bylaws, all action necessary to
convene a meeting of holders of its Shares (the "Shareholder Meeting") as
promptly as practicable after the Proxy Statement is available for mailing, to
consider and vote upon the approval of this Agreement. The Proxy Statement shall
include a statement that the Board of Directors of PowerCerv approved this
Agreement and recommended that the shareholders of PowerCerv vote in favor of
this Agreement, and PowerCerv shall use all reasonable and customary efforts to
solicit such approval, subject to the right of PowerCerv's Board of Directors to
withdraw or modify its recommendation to the extent it determines in good faith
and upon the advice of its legal counsel that such action is necessary to comply
with its fiduciary duties under applicable law; provided, however, that:
(a) The PowerCerv Board of Directors may only withdraw
its recommendation if, simultaneously with such withdrawal, PowerCerv terminates
this Agreement pursuant to Section 8.1(f); and
(b) In the event that the PowerCerv Board of Directors
modifies its recommendation and the shareholders of PowerCerv do not approve the
Acquisition at the Shareholder Meeting prior to December 31, 2002, then
PowerCerv shall pay to ASA the Termination Payment [as defined in Section
8.1(f)].
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5.17 Cincom. In the event that during the six month period
following the Closing, Buyer enters into a license or other agreement with
Cincom Systems, Inc. ("Cincom"), on terms satisfactory to Buyer in its sole
discretion, pursuant to which Cincom licenses or otherwise obtains the rights to
use or acquires any portion of the Software, then Buyer shall pay, as additional
consideration for the Seller Assets, 60% of all Net License Fees received by
Buyer from Cincom during the six (6) month period following the Closing. For
purposes of this Section 5.17, "Net License Fees" shall mean license or similar
fees actually received by Buyer, net of all expenses incurred by Buyer in
entering into and fulfilling Buyer's obligations pursuant to such agreement with
Cincom, all determined on the cash basis of accounting.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 Conditions to Obligations of Each Party to Effect the
Acquisition. The respective obligations of each party to this Agreement to
effect the Acquisition shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Acquisition shall be in effect,
nor shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition, which makes the consummation of the Acquisition
illegal.
6.2 Additional Conditions to Obligations of Seller. The
obligations of Seller to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Seller:
(a) Representations, Warranties and Covenants. The
representations and warranties of Buyer in this Agreement shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of such time, and Buyer shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Closing Date.
(b) Certificate of Buyer. Seller shall have been provided
with a certificate duly executed on behalf of Buyer to the effect that, as of
the Closing Date:
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(i) all representations and warranties made by
Buyer in this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Buyer on or before such date have been so
performed in all material respects.
(c) Governmental Approvals. Any and all consents, waivers
and approvals required from any governmental entity deemed necessary by Seller
to effect the Acquisition shall have been timely obtained.
(d) Legal Opinion. Seller shall have received the opinion
of Xxxxxxx Xxxxxx & Green, P.C., counsel to the Buyer and ASA, in form and
substance reasonably satisfactory to Seller and its counsel, regarding the legal
existence and authority of the Buyer and ASA, and the due authorization,
execution and delivery by, and enforceability of, the Agreement with respect to
the Buyer and ASA .
(e) No Material Adverse Changes. There shall not have
occurred any material adverse change in the business of the Buyer.
6.3 Additional Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Buyer:
(a) Representations, Warranties and Covenants. The
representations and warranties of Seller in this Agreement shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of such time, and Seller
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Closing Date.
(b) Certificate of Seller. Buyer shall have been provided
with a certificate executed on behalf of each of PowerCerv and Subsidiary by its
Chief Executive Officer to the effect that, as of the Closing Date:
(i) all representations and warranties made by
Seller in this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Seller on or before such date have been so
performed in all material respects.
(c) Claims. There shall not have occurred any claims
(whether or not asserted in litigation) which may materially and adversely
affect the consummation of the transactions contemplated hereby or the Business,
the Seller Assets or financial condition of Seller or Buyer.
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(d) Third Party Consents. Seller shall have obtained and
provided Buyer any and all consents, waivers, and approvals required from third
parties relating to the Assigned Contracts so as to assign all rights of Seller
thereunder to Buyer as of the Closing, except such consents, waivers and
approvals, the failure of which to obtain would not constitute a Seller Material
Adverse Effect.
(e) Governmental Approvals. Any and all consents, waivers
and approvals required from any governmental entity deemed necessary by Buyer to
effect the Acquisition shall have been timely obtained.
(f) No Injunctions or Restraints on Conduct of Business.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or regulatory
restraint or provision challenging Buyer's proposed acquisition of the Seller
Assets, or limiting or restricting Buyer's conduct or operation of the Business
(or its own business) following the Acquisition shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
(g) No Material Adverse Changes. Since the date of this
Agreement there shall not have occurred any event or development that would
reasonable be expected to have a Seller Material Adverse Effect, provided,
however, that none of the following shall be deemed to constitute and none of
the following shall be taken into account in determining whether there has been
or will be a Seller Material Adverse Effect: (A) any litigation or threat of
litigation filed or made after the date hereof challenging any of the
transactions contemplated herein or any shareholder litigation filed or made
after the date hereof resulting from this Agreement or the transactions
contemplated herein; or (B) the increase or decrease in the Seller's stock price
or trading volume; or (C) a decrease in the Seller's revenues unless such
revenues are less than $1.1 million for the two fiscal quarters prior to the
Closing; provided, however, that if Buyer does not notify Seller within three
(3) business days of Seller notifying Buyer that such revenues were less than
$1.1 million for the two fiscal quarters prior to the Closing, that Buyer does
not intend to consummate the transactions contemplated by this Agreement, then
the Buyer shall be deemed to have waived the closing condition set forth in this
Section 6.3(g)(C).
(h) Employment and Non-competition Agreements. The
individuals listed on Schedule 6.3 (h) must have agreed to become employees of
Buyer on mutually agreeable terms.
(i) Third Party Rights. No third party shall have any
right of any nature whatsoever (including, without limitation, any right to
receive royalty payments) in respect of any of the Seller Assets, except as
stated in Schedule 6.3(i).
(j) Shareholder Approval. The shareholders of PowerCerv
shall have approved the Acquisition at the Shareholder Meeting.
(k) Agreement Not to Compete. Seller shall have entered
into an Agreement Not to Compete with Buyer in the form attached hereto as
Exhibit F.
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(l) No Claims. There shall not have occurred any claims
(whether or not asserted in litigation) which may materially and adversely
affect the consummation of the transactions contemplated hereby, the Seller
Assets or the Business.
(m) Legal Opinion. Buyer shall have received the opinion
of Broad and Xxxxxx, counsel to the Seller, in form and substance reasonably
satisfactory to Buyer and its counsel, regarding the legal existence and
authority of the Seller, and the due authorization, execution and delivery by,
and enforceability of, the Agreement with respect to the Seller .
(n) Pledge Agreement. The Stockholder shall have
consented to the assignment by PowerCerv to ASA of the Stockholder Note and the
Stock Pledge and Security Agreement and Escrow Agreement, each dated as of
August 31, 2001 between PowerCerv and Stockholder, on terms acceptable to ASA;
provided, however, that if the Stockholder does not so consent, then Buyer shall
have the right to reject the Stockholder Note and treat the Stockholder Note as
an Excluded Asset.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY AND ESCROW
7.1 Survival of Representations and Warranties. Seller's and
Buyer's respective representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Acquisition
and continue until six (6) months following the Closing Date (the "EXPIRATION
DATE").
7.2 Seller Indemnity.
(a) Seller Indemnity. Seller agrees to defend, indemnify
and hold Buyer, ASA and their respective officers, directors and affiliates (the
"INDEMNIFIED PARTIES") harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation, (hereinafter individually a "LOSS" and
collectively "LOSSES") incurred by Buyer, ASA or their respective officers,
directors, or affiliates directly or indirectly which exceed in the aggregate
$20,000, as a result of (i) any inaccuracy or breach of a representation or
warranty of Seller contained in this Agreement, or (ii) any failure by the
Company to perform or comply with any covenant contained in this Agreement, or
(iii) any amount due under the Stockholder Note which is not paid when due. For
purposes of this Agreement, "INDEMNITY MATTER" shall mean any matter for which
any Indemnified Party is entitled to indemnification pursuant to this Section
7.2(a). With respect to claims for Losses, Buyer may not set-off the amount of
such Losses against amounts due pursuant to the Note as provided in Section 7.6,
unless and until Officer's Certificates (as defined in paragraph (b) below)
identifying Losses in the aggregate exceeding $20,000 (the "BASKET AMOUNT") have
been delivered to the Seller as provided in paragraph (e) below, in which case
Buyer shall be entitled to recover only those Losses exceeding the Basket
Amount. The Basket Amount shall not apply to the Purchase Price Adjustment.
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(b) Claims. Subject to subsection (c) below, ten (10)
days after receipt by the Seller at any time on or before the Expiration Date of
(X) a certificate signed by any officer of Buyer (an "OFFICER'S CERTIFICATE"):
(i) stating that Buyer has paid or properly accrued or reasonably anticipates
that it will have to pay or accrue Losses with respect to an Indemnity Matter,
and (ii) specifying in reasonable detail the individual items of Losses included
in the amount so stated, the date each such item was paid or properly accrued,
or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
and (iii) a request that the Seller deliver to Buyer the relevant dollar amount,
or (Y) the Purchase Price Adjustment Notice, the Seller shall deliver to Buyer
within five (5) days, the dollar amount with a value equal to such Losses or as
set forth in the Purchase Price Adjustment Notice, but only to the extent that
such amounts have not been set-off against the Note pursuant to Section 7.6.
(c) Objections to Claims. Seller may object in a written
statement to the claim made in any Officer's Certificate or Purchase Price
Adjustment Notice, provided such statement shall have been delivered to the
Buyer prior to the expiration of the ten (10) day period following Seller's
receipt of such certificate or notice; and further provided that any objection
to the Purchase Price Adjustment Notice may object solely to the proper
preparation of the Closing Balance Sheet in the form set forth in Schedule 1.3,
the Seller acknowledging and agreeing that the Seller may not object to Buyer's
rejection of specific assets or liabilities pursuant to Section 1.1 and 1.3,
which shall be in Buyer's sole discretion.
(d) Resolution of Conflicts; Arbitration.
(i) In case Seller shall object in writing to
any claim or claims made in (A) any Officer's Certificate or (B) the Purchase
Price Adjustment Notice, Seller and Buyer shall attempt in good faith to agree
upon the rights of the respective parties with respect to each of such claims.
If Seller and Buyer should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties.
(ii) If no such agreement can be reached within
twenty (20) days of Buyer's receipt of Seller's objection, then such dispute
shall be submitted for arbitration unless the amount of the damage or Loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by one arbitrator mutually agreeable to Buyer and Seller. In the event
that within thirty (30) days after submission of any dispute to arbitration,
Buyer and Seller cannot mutually agree on one arbitrator, Buyer and Seller shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The arbitrator or arbitrators, as the case may be, shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgement of the arbitrator or majority of the three arbitrators, as the
case may be, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the extent as a competent court of law or equity, should the
arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without
29
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator or a majority of the
three arbitrators, as the case may be, as to the validity and amount of any
claim in such Officer's Certificate or Purchase Price Adjustment Notice shall be
binding and conclusive upon the parties to this Agreement. Such decision shall
be written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s).
(iii) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Any such
arbitration shall be held in Boston, Massachusetts, under the rules then in
effect of the American Arbitration Association. The arbitrator(s) shall
determine how all expenses relating to the arbitration shall be paid, including
without limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration Association.
7.3 Buyer Indemnity. Buyer shall indemnify and hold Seller and its
officers, directors and affiliates (the "SELLER PARTIES") harmless against all
Losses incurred by them directly or indirectly which exceed in the aggregate
$20,000 as a result of (i) any inaccuracy or breach of a representation or
warranty or Buyer contained in this Agreement, or (ii) any failure by Buyer to
perform or comply with any covenant contained in this Agreement.
7.4 Third Party Claims. In the event that a party seeking
indemnity pursuant to this Agreement ("INDEMNITEE") shall become aware of a
third-party claim with respect to any matter as to which the other party
("INDEMNITOR") has agreed to indemnify Indemnitee under the provisions of this
Agreement (a "THIRD PARTY CLAIM"), Indemnitee shall give notice thereof in
writing to Indemnitor together, in each instance, with a statement of such
information respecting such Third Party Claim as Indemnitee shall then have.
Upon notice by Indemnitor of its request to contest a Third Party Claim
delivered to Indemnitee within twenty (20) calendar days from the date of
receipt by Indemnitor of notice of the Third Party Claim, Indemnitor, may assume
the right to contest and defend by all appropriate legal or other proceedings
the Third Party Claim with respect to which it has been called upon to indemnify
Indemnitee under the provisions of this Agreement. If Indemnitor assumes such
defense, Indemnitee shall have the right to participate in, but not control, the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by Indemnitor. If Indemnitor shall have assumed the defense of
any claim, Indemnitee shall not admit any liability with respect to, or settle,
compromise or discharge, such claim without Indemnitor's prior written consent.
In no event may Indemnitee settle any claim without the written consent of
Indemnitor.
7.5 Limitation. Notwithstanding anything else in this Agreement,
(a) except as provided herein, no claim for indemnification may be made by an
Indemnified Party more than six (6) months following the Closing Date and (b)
the maximum amount of losses for which Seller shall be liable pursuant to
Section 7.2 shall be equal to the Purchase Price (as adjusted pursuant to
Section 1.3).
7.6 Right of Set-Off. Buyer shall have the right to set-off
against and deduct from any amounts due to Seller pursuant to the Note, the
amount of any claims for indemnification which are the subject of any Officer's
Certificate, and the amount of any decrease in the Purchase Price set-forth
30
in the Purchase Price Adjustment Notice, and the principal balance of the Note
shall be adjusted to reflect the amounts set-off against the Note (the "ADJUSTED
PRINCIPAL BALANCE"); provided, however, that in the event that Seller objects in
writing to any claim or notice in accordance with the provisions of Section
7.2(c), then, upon the resolution of any such dispute pursuant to Section
7.2(d), Buyer shall pay to Seller, without interest, any amount deducted from
any amounts due to Seller in excess of the amount determined to be owed to Buyer
pursuant to Section 7.2. Such excess amount, if any, shall be payable upon the
later of the Maturity Date (as defined in the Note) or ten (10) days following
the resolution of such dispute pursuant to Section 7.2(d).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Acquisition abandoned at any time prior to
the Closing Date:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer or Seller if: (i) through no fault of the
terminating party, the Closing has not occurred by December 31, 2002; (ii) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Acquisition; or (iii) there shall be any statute,
rule, regulation or order enacted, promulgated, issued or deemed applicable to
the Acquisition by any Governmental Entity that would make consummation of the
Acquisition illegal;
(c) by Buyer if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued or deemed
applicable to the Acquisition by any Governmental Entity, which would: (i)
prohibit Buyer's ownership or operation of all or a material portion of the
Business or the Seller Assets, or (ii) compel Buyer to dispose of or hold
separate all or a portion of the Business or the Seller Assets or other
businesses or Seller Assets of Buyer as a result of the Acquisition;
(d) by Buyer if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Seller and such breach has not been cured within ten (10) business
days after written notice to Seller (provided that, no cure period shall be
required for a breach which by its nature cannot be cured);
(e) by Seller if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Buyer and such breach has not been cured within ten (10) business
days after written notice to Buyer (provided that, no cure period shall be
required for a breach which by its nature cannot be cured).
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(f) by Seller or Buyer, if Seller's Board of Directors
(i) takes a Tender Offer Position pursuant to Section 5.14 which is not an
unqualified opposition to an unsolicited tender offer, or (ii) withdraws or
modifies its recommendation pursuant to Section 5.16; provided however, in the
event that this Agreement is terminated by either Seller or Buyer pursuant to
this Section 8.1(f), the Company shall pay to the Buyer within two (2) business
days after such termination, an amount equal to (x) all of the Buyer's expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, and (y) a termination fee of $59,000 (collectively, the "TERMINATION
PAYMENT"). The Seller acknowledges that the agreements contained in this Section
8.1(f) are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, the Buyer would not enter into this
Agreement; accordingly, if the Seller fails to pay the amounts required pursuant
to Section 8.1(f) when due, the Seller shall pay to the Buyer its costs and
expenses (including attorneys' fees) in connection with Buyer's collection of
such amounts from Seller, together with interest at the rate of 18% per annum
from the date such payment was required to be made.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Buyer or Seller, or
their respective officers, directors or stockholders, provided that each party
shall remain liable for any breaches of this Agreement prior to its termination;
and provided further that, the provisions of Sections 5.2, 5.3, 5.4 and Article
X of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto
at any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Extension; Waiver. At any time prior to the Closing Date,
Buyer on the one hand, and Seller, on the other, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party or parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party or parties contained herein or
in any document delivered pursuant hereto, and (iii) waive compliance with any
of the agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party or parties.
ARTICLE IX
CERTAIN POST-CLOSING COVENANTS
9.1 Schedule. Buyer and Seller agree that the matters set forth on
Schedule 9 shall be completed following the Closing as set forth therein.
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ARTICLE X
GENERAL PROVISIONS
10.1 Attorneys' Fees. Subject to the provision of Section 7.2, if
any party to this Agreement brings an action against another party to this
Agreement to enforce its rights under this Agreement, the prevailing party in
such action shall be entitled to recover its reasonable costs and expenses,
including attorneys' fees and costs incurred in connection with such action,
including the appeal of such action.
10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (with acknowledgment of complete transmission)
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 Buyer or ASA , to:
ASA International, Ltd.
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esquire
Telecopy No.: (000) 000-0000
(b) if to PowerCerv or Subsidiary to:
PowerCerv Corporation
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Attention: Xxxx X. Xxxxxxxx, President
Xxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
with a copy to:
Broad and Xxxxxx
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xx Xxxxxxxx, Esquire
Telecopy No.: (000) 000-0000
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10.3 Interpretation. When a reference is made in this Agreement to
Schedules or Exhibits, such reference shall be to a Schedule or Exhibit to this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by facsimile also shall deliver a
manually executed counterpart of this Agreement, but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability or
binding effect of this Agreement.
10.5 Entire Agreement. This Agreement and the Schedules and
Exhibits hereto: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person any
rights or remedies hereunder, unless expressly provided otherwise; and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided; provided, however, that Buyer may assign this Agreement
to either (i) a subsidiary of Buyer or ASA or (ii) any other party so long as
the assignee agrees in writing to be bound by all of Buyer's obligations
hereunder.
10.6 Severability. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
10.7 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
10.8 Governing Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. The parties agree that,
subject to the provisions of Section 7.2(g) hereof, the courts of the
Commonwealth of
34
Massachusetts and the federal courts located therein shall have exclusive
jurisdiction over the resolution of any disputes between the parties, and each
party waives any objections based on jurisdiction, venue, forum non conviens or
similar matters, and consents to service of process as provided by the rules of
the Commonwealth of Massachusetts.
10.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
10.10 No Additional Representations. The Buyer acknowledges that
neither the Seller nor any other person or entity acting on behalf of Seller or
any affiliate of Seller, has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information regarding the
Business of the Seller except as expressly set forth in this Agreement or as and
to the extent required by this Agreement to be set forth in Schedules hereto.
IN WITNESS WHEREOF, Buyer, ASA, PowerCerv, Subsidiary and Eastern Bank
have caused this Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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PCV ACQUISITION, INC.
By:
------------------------------------------------
Xxxxxxxx X. XxXxxxxx, Vice President
WITH RESPECT TO ARTICLES III AND VII ONLY:
ASA INTERNATIONAL, LTD.
By:
------------------------------------------------
Xxxxxxxx X. XxXxxxxx, Vice President & Treasurer
POWERCERV CORPORATION
By:
------------------------------------------------
Xxxx X. Xxxxxxxx, President
POWERCERV TECHNOLOGIES CORPORATION
By: CEO
---------------------------------------------
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