EXHIBIT 10.37
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ASSET PURCHASE AGREEMENT
AMONG
XXXXX.XXX, INC., TMT HOLDINGS, INC., AELIX, INC.
AND
XXXXX COMMUNICATIONS, INC.
DATED AS OF MAY 29, 2001
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................1
SECTION 1.1 DEFINITIONS............................................1
ARTICLE II PURCHASE AND SALE OF THE BUSINESS......................8
SECTION 2.1 PURCHASE AND SALE OF THE ACQUIRED ASSETS...............8
SECTION 2.2 TAX TREATMENT..........................................8
ARTICLE III CLOSING; ASSUMPTION OF LIABILITIES.....................9
SECTION 3.1 CLOSING................................................9
SECTION 3.2 ASSUMPTION OF ASSUMED LIABILITIES......................9
SECTION 3.3 EXCLUSION OF LIABILITIES...............................9
ARTICLE IV CONDITIONS TO CLOSING..................................9
SECTION 4.1 CONDITIONS TO BUYER'S OBLIGATION.......................9
SECTION 4.2 CONDITIONS TO PARENT AND SELLER'S OBLIGATION..........11
SECTION 4.3 FRUSTRATION OF CLOSING CONDITIONS.....................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER...12
SECTION 5.1 ORGANIZATION, STANDING AND AUTHORITY..................12
SECTION 5.2 NO VIOLATION; CONSENTS AND APPROVALS..................13
SECTION 5.3 SEC DOCUMENTS; UNDISCLOSED LIABILITIES................14
SECTION 5.4 ABSENCE OF CHANGES OR EVENTS..........................14
SECTION 5.5 TAXES.................................................15
SECTION 5.6 TITLE TO ASSETS AND REAL PROPERTY LEASES..............16
SECTION 5.7 CONTRACTS.............................................17
SECTION 5.8 LITIGATION............................................20
SECTION 5.9 EMPLOYEE AND RELATED MATTERS; ERISA...................20
SECTION 5.10 COMPLIANCE WITH LAWS..................................22
SECTION 5.11 LABOR MATTERS.........................................23
SECTION 5.12 INTELLECTUAL PROPERTY, ETC............................23
SECTION 5.13 SUFFICIENCY OF ASSETS.................................25
SECTION 5.14 CONDITION OF ACQUIRED ASSETS..........................25
SECTION 5.15 RECEIVABLES...........................................25
SECTION 5.16 INSURANCE.............................................25
SECTION 5.17 BROKERS...............................................25
SECTION 5.18 SUPPLIERS.............................................25
SECTION 5.19 CUSTOMERS; RESELLERS..................................26
SECTION 5.20 DISCLOSURE DOCUMENTS..................................26
SECTION 5.21 STATE TAKEOVER STATUTES...............................26
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER...............26
SECTION 6.1 ORGANIZATION, STANDING AND AUTHORITY. BUYER...........26
SECTION 6.2 NO VIOLATION; CONSENTS AND APPROVALS..................27
SECTION 6.3 BROKERS...............................................27
SECTION 6.4 DISCLOSURE DOCUMENTS..................................27
ARTICLE VII COVENANTS OF PARENT AND SELLER........................28
SECTION 7.1 ACCESS................................................28
SECTION 7.2 ORDINARY CONDUCT......................................28
SECTION 7.3 CONFIDENTIALITY.......................................31
SECTION 7.4 STOCKHOLDER ACTION BY WRITTEN CONSENT;
PREPARATION OF THE PARENT INFORMATION STATEMENT.......31
SECTION 7.5 EXPENSES..............................................32
ARTICLE VIII COVENANTS OF BUYER....................................32
ARTICLE IX MUTUAL COVENANTS......................................32
SECTION 9.1 BUYER STOCKHOLDER APPROVAL............................32
SECTION 9.2 BULK TRANSFER LAWS....................................33
SECTION 9.3 CONSENTS; EXCLUDED CONTRACTS..........................33
SECTION 9.4 PUBLICITY.............................................34
SECTION 9.5 COMMERCIALLY REASONABLE EFFORTS.......................34
SECTION 9.6 FURTHER ASSURANCES....................................34
SECTION 9.7 TAX MATTERS...........................................34
SECTION 9.8 ACCOUNTS..............................................35
ARTICLE X NONCOMPETITION........................................35
SECTION 10.1 NONCOMPETITION........................................35
ARTICLE XI INDEMNIFICATION.......................................36
SECTION 11.1 INDEMNIFICATION BY PARENT AND SELLER..................36
SECTION 11.2 INDEMNIFICATION BY BUYER..............................36
SECTION 11.3 LOSSES NET OF INSURANCE...............................37
SECTION 11.4 TERMINATION OF INDEMNIFICATION........................37
SECTION 11.5 PROCEDURES RELATING TO THIRD PARTY AND
DIRECT INDEMNIFICATION CLAIMS.........................37
SECTION 11.6 INDEMNITY PAYMENTS....................................39
ARTICLE XII TERMINATION...........................................39
SECTION 12.1 TERMINATION...........................................39
SECTION 12.2 OTHER TRANSACTION AGREEMENTS;
MATERIAL TO BE RETURNED...............................40
SECTION 12.3 EFFECT OF TERMINATION.................................41
ARTICLE XIII MISCELLANEOUS.........................................41
SECTION 13.1 ASSIGNMENT............................................41
SECTION 13.2 NO THIRD PARTY BENEFICIARIES..........................41
SECTION 13.3 AMENDMENTS............................................41
SECTION 13.4 CONSENTS AND APPROVALS................................41
SECTION 13.5 WAIVERS...............................................41
SECTION 13.6 SURVIVAL OF REPRESENTATIONS...........................42
SECTION 13.7 NOTICES...............................................42
SECTION 13.8 EXHIBITS AND SCHEDULES; INTERPRETATION................43
SECTION 13.9 COUNTERPARTS..........................................43
SECTION 13.10 ENTIRE AGREEMENT......................................43
SECTION 13.11 SEVERABILITY..........................................43
SECTION 13.12 GOVERNING LAW.........................................43
SCHEDULES
Schedule 1.1(a)...Fixed Assets and Equipment
Schedule 1.1(b)...Credits and Prepaid Expenses
Schedule 1.1(c)...Acquired Intellectual Property
Schedule 1.1(d)...Permits
Schedule 1.1(e)...Assigned Contracts
Schedule 2.2...... Purchase Price Allocation
Schedule 5.2...... No Violation; Consents and Approvals
Schedule 5.4(a)...Absence of Changes or Events
Schedule 5.4(b)...Absence of Changes or Events
Schedule 5.5...... Taxes
Schedule 5.6(a)...Title to Assets and Real Property Leases
Schedule 5.6(b)...Title to Assets and Real Property Leases
Schedule 5.7(a) ..Contracts
Schedule 5.7(b)...Contracts
Schedule 5.8...... Litigation
Schedule 5.9(a)...Employee and Related Matters; ERISA
Schedule 5.9(e)...Employee and Related Matters; ERISA
Schedule 5.10(a)..Compliance with Laws
Schedule 5.10(b)..Compliance with Laws
Schedule 5.11..... Labor Matters
Schedule 5.12(a)..Intellectual Property
Schedule 5.12(b)..Intellectual Property
Schedule 5.16..... Insurance
Schedule 5.18..... Suppliers
Schedule 5.19..... Customers; Resellers
Schedule 6.2...... No Violation; Consents and Approvals
Schedule 7.2...... Ordinary Conduct
42
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 29, 2001,
among Xxxxx.xxx, Inc., a Florida corporation ("Parent"), TMT Holdings, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("TMT"), Aelix,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Aelix"
and, collectively with TMT, "Seller"), and Xxxxx Communications, Inc., a
Delaware corporation ("Buyer").
Buyer desires to purchase from Parent and Seller, and Parent and Seller
desire to sell to Buyer, the Business (defined below) upon the terms and subject
to the conditions of this Agreement.
The Board of Directors of Parent, by resolution duly adopted, has
declared that it deems the sale of the property and assets of Parent and Seller
to Buyer to be expedient and for the best interests of Parent, and deems it
advisable and in the best interests of its stockholders to consummate, and has
approved, this Agreement and the transactions contemplated hereby on the terms
and conditions set forth herein.
Accordingly, the parties hereto hereby agree as follows:
ARTICLE I.........
DEFINITIONS
Section 1.1.......DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Acquired A/R" shall mean all receivables constituting the right to
receive payments in respect of goods or services arising out of or relating to
the operation or conduct of the Business.
"Acquired Assets" shall mean all the right, title and interest of
Parent and Seller in all the businesses, properties, assets, goodwill and rights
of Parent and Seller of whatever kind and nature, wherever located, real or
personal, tangible or intangible, that are owned, controlled, leased or licensed
by Parent and Seller and used, held for use or intended to be used in the
operation or conduct of the Business other than the Excluded Assets, including
(other than the Excluded Assets):
(i) subject to Section 9.1, the Acquired Intellectual Property;
(ii) subject to Section 9.1, the Assigned Contracts, including any rights
thereunder arising at or after the Closing;
(iii) the Acquired A/R;
(iv) subject toSection 9.1, the Acquired Permits;
(v) the Leased Real Property and the improvements and fixtures thereon,
furniture and other appurtenances thereto;
(vi) all equipment (including vehicles) and other tangible fixed assets that
are listed on Schedule 1.1(a);
(vii) all credits, prepaid expenses, deferred charges, advance payments,
security deposits and other prepaid items that are listed on Schedule
1.1(b) used, held for use or intended to be used in, or that arise out
of, the operation or conduct of the Business;
(viii) all rights, claims and credits to the extent relating to the Business
or to any Acquired Asset or any Assumed Liability, including all rights
in and to products sold or leased (including products returned after
the applicable Closing and rights of rescission, replevin and
reclamation) in the operation or conduct of the Business and any
rights, claims and credits arising under insurance policies and all
guarantees, representations, warranties, indemnities and similar rights
in favor of Parent or Seller to the extent relating to the Business or
to any Acquired Asset or Assumed Liability;
(ix) all goodwill generated by or associated with the Business; and
(x) all customers' and suppliers' lists, sales and promotional literature,
customer and supplier correspondence, manuals, files, data, papers, and
other information, whether in hard copy or computer or other format,
that are used, held for use or intended to be used, or that arise out
of, the operation or conduct of the Business (collectively, the "Books
and Records").
"Acquired Intellectual Property" shall mean all right, title and
interest of Parent and Seller in, to and under the Intellectual Property
(including rights under licenses and settlement agreements) that is listed on
Schedule 1.1(c).
"Acquired Permits" shall mean all Permits listed on Schedule 1.1(d).
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly Controlling, Controlled by or under common Control with
such first person.
"Agreement" shall mean this Asset Purchase Agreement.
"Asset Acquisition Statement" shall have the meaning ascribed to such
term in Section 2.2(a).
"Assigned Contract" shall mean the Contracts of Parent or Seller that
are listed on Schedule 1.1(e).
"Assumed Liabilities" shall mean (i) all obligations, liabilities and
commitments under the Assigned Contracts arising after the date of the Closing,
except obligations, liabilities or obligations arising out of any actual or
alleged breach on or prior to the Closing Date by Parent or Seller of, or
nonperformance on or prior to the Closing Date by Parent or Seller under, any
Assigned Contract and (ii) those obligations, liabilities and commitments for
operating expenses (such as telephone, utilities or payroll) incurred in the
ordinary course of business during the thirty (30) day period immediately
preceding the Closing Date.
"Benefit Plans" shall have the meaning ascribed to such term in Section
5.9(a).
"Books and Records" shall have the meaning ascribed to such term in the
definition of "Acquired Assets".
"Business" shall mean the intelligent message communications service
business of Parent and Seller, including the research, development, manufacture,
distribution, marketing, sale and service of intelligent message communications
service systems.
"Business Day" shall mean any day other than (a) a Saturday or Sunday,
(b) any other day on which commercial banks in Chicago, Illinois are authorized
or required by law to close.
"Business Material Adverse Effect" shall mean any state of facts,
change, development, event, occurrence, action or omission that individually or
in the aggregate could reasonably be expected to (i) result in a material
adverse effect on the business, assets, properties, financial condition or
results of operations of the Business, taken as a whole, (ii) prevent or
materially impede, interfere with, hinder or delay the consummation by Parent or
Seller of the transactions contemplated by this Agreement or (iii) result in a
material impairment on the ability of Buyer to continue operating the Business
after the Closing in substantially the same manner as it was operated
immediately prior to the date of this Agreement.
"Business Net Income" shall mean the after-Tax income calculated in
accordance with GAAP generated by the Business, after charging all appropriate
cost of sales, selling, general and administrative expenses, whether direct or
allocated. Allocations of Buyer's overhead, interest expense, income taxes and
other expenses to the Business shall be made in the reasonable discretion of
Buyer's Board of Directors.
"Business Property" shall have the meaning ascribed to such term in
Section 5.6(b).
"Buyer" shall have the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Buyer Material Adverse Effect" shall mean any state of facts, change,
development, event, occurrence, action or omission that could reasonably be
expected to prevent or materially impede, interfere with, hinder or delay the
consummation by Buyer of the transactions contemplated by this Agreement.
"Buyer Stockholder Approval" shall have the meaning ascribed to such
term in Section 9.1.
"Closing" shall have the meaning ascribed to such term in Section 3.1.
"Closing Date" shall mean the date on which the Closing shall occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury Regulations promulgated thereunder.
"Commonly Controlled Entity" shall have the meaning ascribed to such
term in Section 5.9(a).
"Competitive Activities" shall have the meaning ascribed to such term
in Section 10.1(a).
"Contracts" shall mean any loan or credit agreement, note, bond,
mortgage, indenture, benefit plan, deed of trust, license, lease, sublease,
contract, purchase order commitment or agreement, written or unwritten.
"Control" shall mean the power to direct the affairs of a person by
reason of ownership of voting stock (or other similar equity interest), by
contract or otherwise.
"Controlling Party" shall have the meaning ascribed to such term in
Section 11.5(a).
"Direct Claim" shall have the meaning ascribed to such term in Section
11.5(b).
"Due Date" shall have the meaning ascribed to such term in .Section
9.7(d)
"Earn Out" shall have the meaning ascribed to such term in Section 2.1.
"Environmental Law" shall mean all laws (including common law), rules,
regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by any Governmental
Entity, relating in any way to the environment, the preservation or reclamation
or natural resources, the presence or handling of, or exposure to, hazardous
substances, or to health and safety matters.
"Environmental Permits" shall have the meaning ascribed to such term in
Section 5.10(b).
"ERISA" shall have the meaning ascribed to such term in Section 5.9(a)
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" shall mean all assets of Parent and Seller not
specifically included in the definition of Acquired Assets and such assets shall
not be sold, conveyed, assigned, transferred or delivered to Buyer pursuant to
this Agreement.
"Excluded Liabilities" shall mean:
(a) any obligation, liability or commitment of whatever nature, whether
presently in existence or arising hereafter, of Parent or Seller the
assumption of which is not expressly provided for by this Agreement;
and
(b) (i) any liability, obligation or commitment of Parent or Seller that
arises out of or is associated with any Excluded Asset or any business
of Parent or Seller, or that arises out of the ownership by, Parent or
Seller of the Excluded Assets or is associated with the realization of
the benefits of any Excluded Asset;
(ii) any liability, obligation or commitment of Parent or Seller to any of
their respective Affiliates;
(iii) any liability, obligation or commitment of or relating to the Benefit
Plans, or relating to any current or former officer, employee,
independent contractor or director of Parent or Seller or their
benefits or compensation, including the termination thereof;
(iv) any liabilities for Excluded Taxes;
(v) any indebtedness (other than ordinary course trade payables); and
(vi) any liability, obligation or commitment arising under Environmental
Law, which liability, obligation or commitment relates to or arises out
of (A) any acts or omissions of Parent or Seller on or prior to the
Closing, or (B) any facts, circumstances or conditions existing on or
prior to the Closing relating to Hazardous Substances, including any
management, disposal or arranging for disposal of Hazardous Substances
by Parent or Seller or otherwise in connection with the Business or the
Acquired Assets or activities or operations occurring or conducted in
connection with any predecessor operations of the Business or
otherwise.
"Excluded Taxes" shall mean any liability, obligation or commitment for
Taxes whether or not accrued, assessed or currently due and payable, (A) of
Parent or Seller or (B) relating to the operation and ownership of the Business,
the Acquired Assets or the Assumed Liabilities for any Pre-Closing Tax Periods
and, except as otherwise provided in Section 9.8(a), any liability, obligation
or commitment for Transfer Taxes. For purposes of this Agreement, in the case of
any Straddle Period, (i) Property Taxes for the Pre-Closing Tax Period shall be
equal to the amount of such Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days during
the Straddle Period that are in the Pre-Closing Tax Period and the denominator
of which is the number of days in the entire Straddle Period, and (ii) Taxes
(other than Property Taxes) for the Pre-Closing Tax Period shall be computed as
if such taxable period ended as of the close of business on the date of the
Closing.
"Exhibits" shall mean the exhibits to this Agreement.
"Final Determination" shall mean, a "determination" as defined in
Section 1313(a) of the Code or the execution of an Internal Revenue Service Form
870-AD.
"GAAP" shall mean generally accepted accounting principles in effect
from time to time in the United States of America.
"Governmental Entity" shall have the meaning ascribed to such term in
Section 5.2(b).
"Hazardous Substances" shall mean any (A) petroleum, petroleum products
or byproducts or any other hydrocarbons, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, radon gas, chlorofluorocarbons or any
other ozone-depleting substances; or (B) any chemical, material, substance,
waste, pollutant or contaminant that is prohibited, limited or regulated by or
pursuant to any Environmental Law.
"Indemnified Party" shall have the meaning ascribed to such term in
Section 11.5.
"Injunction" shall have the meaning ascribed to such term in Section
4.1.
"Intellectual Property" shall mean Software, trademarks, service marks,
brand names, certification marks, trade dress, assumed names, domain names,
trade names (including the name "Aelix") and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction of,
and applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including divisions,
provisionals, continuations, continuations in-part and renewal applications),
and any renewals, extensions or reissues thereof, in any jurisdiction;
non-public information, trade secrets, know-how, formulae, processes,
procedures, research records, records of inventions, test information, market
surveys, software and confidential information, whether patentable or not in any
jurisdiction and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not in
any jurisdiction; registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights; and any claims or causes of action
(pending, threatened or which could be filed) arising out of or related to any
infringement or misappropriation of any of the foregoing.
"IRS" shall mean the Internal Revenue Service.
"Leased Real Property" shall have the meaning ascribed to such term in
Section 5.6(b).
"Liens" shall have the meaning ascribed to such term in Section 5.6(a)
"Loss" shall have the meaning ascribed to such term in Section 11.1.
"Multiemployer Plan" shall have the meaning ascribed to such term in
Section 5.9(b).
"Non-Controlling Party" shall have the meaning ascribed to such term in
Section 11.5(a)(i).
"Parent" shall have the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Parent Information Statement" shall have the meaning ascribed to such
term in Section 5.2(b).
"Parent SEC Documents" shall have the meaning ascribed to such term in
Section 5.3.
"Parent Stockholder Consent" shall have the meaning ascribed to such
term in Section 7.4.
"Pension Plans" shall have the meaning ascribed to such term in Section
5.9(a).
"Permits" shall have the meaning ascribed to such term in Section
5.10(a).
"Permitted Liens" shall have the meaning ascribed to such term in
Section 5.6(a).
"Person" shall mean any natural person, corporation, limited liability
company, partnership, joint venture, trust, business association, Governmental
Entity or other entity.
"Personnel" shall have the meaning ascribed to such term in Section
5.12(c).
"Pre-Closing Tax Period" shall mean, any Tax period (or portion
thereof) ending on or before the Closing Date.
"Property Taxes" shall mean real, personal and intangible property
taxes and similar ad valorem obligations.
"Proxy Statement" shall have the meaning ascribed to such term in
Section 9.1.
"Purchase Price" shall have the meaning ascribed to such term in
Section 2.1.
"Real Property Leases" shall have the meaning ascribed to such term in
Section 5.6(b).
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating, or migrating of any Hazardous Substances into
or through the environment.
"Representatives" shall have the meaning ascribed to such term
in.Section 7.1(a)
"Restricted Assets" shall have the meaning ascribed to such term in
Section 9.1.
"Return" shall mean any return, statement, report or form, including in
each case any amendments thereto, required to be filed with any Taxing Authority
by or with respect to Taxes of the Business.
"Schedules" shall mean the schedules to this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"Seller" shall have the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Software" shall mean all types of computer software programs,
including operating systems, application programs, software tools, firmware and
software imbedded in equipment, including both object code and source code. The
term "Software" shall also include all written or electronic data,
documentation, and materials that explain the structure or use of Software or
that were used in the development of Software or are used in the operation of
the Software including logic diagrams, flow charts, procedural diagrams, error
reports, manuals and training materials, look-up tables and databases.
"Straddle Period" shall mean, any complete Tax period that includes but
does not end on the Closing Date.
"Subsidiary" of any person shall mean any other person (i) more than
50% of whose outstanding shares or securities representing the right to vote for
the election of directors or other managing authority of such other person are,
now or hereafter, owned or Controlled, directly or indirectly, by such first
person, but such other person shall be deemed to be a Subsidiary only so long as
such ownership or Control exists, or (ii) which does not have outstanding shares
or securities with such right to vote, as may be the case in a partnership,
joint venture or unincorporated association, but more than 50% of whose
ownership interest representing the right to make the decisions for such other
person is, now or hereafter, owned or Controlled, directly or indirectly, by
such first person, but such other person shall be deemed to be a Subsidiary only
so long as such ownership or Control exists.
"Tax" shall mean all income, profits, franchise, gross receipts,
capital, net worth, sales, use, withholding, turnover, value added, ad valorem,
registration, general business, employment, social security, disability,
occupation, real property, personal property (tangible and intangible), stamp,
transfer (including real property transfer or gains), conveyance, severance,
production, excise and other taxes, withholdings, duties, levies, imposts,
license and registration fees and other similar charges and assessments
(including any and all fines, penalties and additions attributable to or
otherwise imposed on or with respect to any such taxes, charges, fees, levies or
other assessments, and interest thereon) imposed by or on behalf of any
Governmental Entity.
"Tax Claim" shall have the meaning ascribed to such term in Section
11.5(a)(ii)
"Taxing Authority" shall mean any governmental or regulatory authority,
body or instrumentality exercising any authority to impose, regulate or
administer the imposition of Taxes.
"Third Party Claim" shall have the meaning ascribed to such term in
Section 11.5(a).
"Transaction Agreements" shall mean this Agreement and all other
agreements executed in connection herewith including, without limitation, any
and all bills of sale, assignments or other instruments of transfer or
conveyance, and any and all assumption agreements and other instruments of
assumption.
"Transfer Taxes" shall have the meaning ascribed to such term in
Section 9.7(a).
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section 2.1 PURCHASE AND SALE OF THE ACQUIRED ASSETS. On the terms and subject
to the conditions of this Agreement, each of Parent and Seller shall sell,
convey, transfer, assign and deliver to Buyer, and Buyer shall purchase from
Parent and Seller, the Acquired Assets, free and clear of any Liens (other than
Permitted Liens), for a purchase price (the "Purchase Price") equal to (i)
$2,980,000, plus any amounts loaned between the date hereof and the Closing
Date, payable in the form of cancellation of notes payable of Parent and Seller
to Buyer or its Subsidiaries, (ii) the payment by Buyer to Parent of five
percent (5%) of the Business Net Income for a period of five (5) years following
the Closing Date (the "Earn Out") and (iii) the assumption of the Assumed
Liabilities as provided in Section 3.2. The Earn Out shall be payable annually,
within ninety (90) days of the end of the calendar year. Buyer may carry forward
any net losses from any year to offset future Business Net Income, but in no
event shall Parent be required to refund any Earn Out amounts previously paid.
Section 2.2 TAX TREATMENT.
(a) Buyer, Parent and Seller recognize their mutual obligations pursuant to
Section 1060 of the Code to timely file IRS Form 8594 (the "Asset
Acquisition Statement") with each of their respective Federal income
tax returns. Buyer and Seller shall mutually agree upon the allocation
of the Purchase Price in a manner consistent with Schedule 2.2 and the
provisions of Section 1060 of the Code, which allocation shall be
revised from time to time to reflect any adjustment to the Purchase
Price required by this Agreement or otherwise by applicable law. Buyer,
Parent and Seller agree that, to the extent that the Purchase Price is
so adjusted, Buyer, Parent and Seller, for all Tax purposes (including
for purposes of completing Form 8594) shall allocate such adjustment to
the item or items to which it is principally attributable.
(b) Except as otherwise required pursuant to a Final Determination, Buyer,
Parent and Seller agree to be bound by and act in accordance with the
allocations of the Purchase Price set forth in Schedule 2.2 for all Tax
purposes, including for purposes of any Returns, including any forms or
reports (including IRS Form 8594) required to be filed pursuant to
Section 1060 of the Code or any comparable provision of local, state or
foreign law, to refrain from taking any position inconsistent with any
such Return or Schedule 2.2, and to cooperate in the preparation of,
and to timely file, any such forms or reports required to be filed
pursuant to Section 1060 or any such comparable provision in the manner
required by applicable law.
ARTICLE III
CLOSING; ASSUMPTION OF LIABILITIES
Section 3.1 CLOSING. The closing (the "Closing") of the purchase and sale of the
Acquired Assets shall be held at 10:00 a.m. on September 30, 2001, or as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Section 4.1 and Section 4.2(excluding those conditions intended to be satisfied
at such Closing). The Closing shall take place at the offices of Xxxxxxxx
Xxxxxxxx & Xxxxxx P.C., 5400 Renaissance Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx
00000 or at such other location as may be designated by Buyer, subject to
Parent's consent (which shall not be unreasonably withheld or delayed). At the
Closing, Parent and Seller shall cause to be delivered to Buyer all bills of
sale, assignments and other instruments of transfer or conveyance as may be
required under applicable law or as Buyer may reasonably request to transfer to
Buyer the Acquired Assets.
Section 3.2 ASSUMPTION OF ASSUMED LIABILITIES. At the Closing, Buyer shall
deliver to Parent or Seller all assumption agreements and other instruments as
may be required under applicable law or reasonably requested by Parent to effect
the assumption of the Assumed Liabilities; PROVIDED that the terms of such
instruments shall not result in an increase in the obligations of Buyer beyond
those expressly set forth in this Agreement.
Section 3.3 EXCLUSION OF LIABILITIES. Notwithstanding any provision of this
Agreement to the contrary, the Excluded Liabilities are excluded from the
Assumed Liabilities and Buyer shall not assume or be liable for any Excluded
Liability, and all Excluded Liabilities shall be retained by and shall be
obligations and commitments of Parent and Seller.
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.1 CONDITIONS TO BUYER'S OBLIGATION. The obligation of Buyer to
consummate the Closing is subject to the satisfaction (or waiver by Buyer) as of
the Closing Date of the following conditions:
(i) The Buyer Stockholder Approval shall have been obtained.
(ii) The Parent Stockholder Consent shall have been obtained.
(iii) The representations and warranties of Parent and Seller in this
Agreement (without regard to any qualifications therein as to
materiality or Business Material Adverse Effect) shall be true and
correct, in each case as of the date of this Agreement and as of the
date of the Closing as though made on such date (or, in the case of
each representation and warranty which expressly speaks as of an
earlier date, as of the earlier date as of which such representation
and warranty speaks), unless the failure of such representations and
warranties to be true and correct, individually or in the aggregate,
could not reasonably be expected to have a Business Material Adverse
Effect. Each of Parent and Seller shall have delivered to Buyer a
certificate on its behalf dated the Closing Date, and signed by an
authorized officer or other signatory representing and confirming that
the foregoing condition has been satisfied.
(iv) Each of Parent and Seller shall have performed, in all material
respects all covenants, obligations and agreements required to be
performed or complied with by Parent or Seller, as the case may be, by
the time of the Closing. Each of Parent and Seller shall have delivered
to Buyer a certificate on its behalf dated the Closing and signed by an
authorized officer or other signatory representing and confirming that
the foregoing condition has been satisfied.
(v) There shall not be pending or threatened any suit, action or proceeding
by any person that has a reasonable likelihood of success (A) seeking
to restrain or prohibit the acquisition by Buyer or any of its
Subsidiaries of any of the Acquired Assets or the Business or seeking
to obtain from Buyer or any of its Subsidiaries any damages that are
material (individually or in the aggregate) in relation to the value of
the Business, taken as a whole, (B) seeking to prohibit or limit the
ownership or operation by Buyer or any of its Subsidiaries of any
material portion of the business or assets of Buyer or any of its
material Subsidiaries or the Business, or to compel Buyer or any of its
Subsidiaries to dispose of or hold separate any material portion of the
business or assets of Buyer or any of its Subsidiaries or the Business,
in each case as a result of any of the transactions contemplated by
this Agreement, (C) seeking to impose limitations on the ability of
Buyer or any of its Subsidiaries to acquire or hold, or exercise full
rights of ownership of, the Acquired Assets or (D) seeking to prohibit
Buyer or any of its Subsidiaries from effectively controlling in any
material respect the Business.
(vi) No action shall have been taken, or any statute, rule, regulation or
order shall have been enacted or entered or deemed applicable to the
transactions contemplated by this Agreement, and no temporary
restraining order or preliminary or permanent injunction or other order
(each, an "Injunction") shall have been issued by any Governmental
Entity, (A) granting any of the relief referred to in clauses (A)
through (D) of (Subsection v)or (B) which otherwise could reasonably
be expected to have a Business Material Adverse Effect.
(vii) All material (individually or in the aggregate) authorizations,
consents, Permits, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental
Entity reasonably necessary in connection with the consummation of the
Closing shall have been obtained or made.
(viii) All material (individually or in the aggregate) consents, waivers,
authorizations and approvals of any person necessary to transfer all of
the Acquired Assets (other than with respect to Assigned Contracts) to
Buyer (without regard to the effect of, or any reference to, Section
9.1) or otherwise shall have been duly obtained and shall be in full
force and effect on the Closing Date.
(ix) Since the date of this Agreement, there shall not have occurred any
state of facts, change, development, event, occurrence, action or
omission that individually or in the aggregate could reasonably be
expected to result in a Business Material Adverse Effect. Each of
Parent and Seller shall have delivered to Buyer a certificate on its
behalf dated the Closing Date, and signed by an authorized officer or
other signatory representing and confirming that the foregoing
condition has been satisfied.
(x) Buyer shall have received the opinion of XxxXxxxx Valuation Advisors,
Inc. to the effect that, as of the Closing Date, the acquisition by
Buyer of the Acquired Assets as contemplated by this Agreement is fair
to the stockholders of Buyer from a financial point of view.
Section 4.2 CONDITIONS TO PARENT AND SELLER'S OBLIGATION. The obligation of each
of Parent and Seller to consummate the Closing is subject to the satisfaction
(or waiver by Parent and/or Seller, as applicable) as of the Closing Date of the
following conditions:
(i) The Parent Stockholder Consent shall have been obtained.
(ii) The representations and warranties of Buyer in this Agreement (without
regard to any qualifications therein as to materiality or Buyer
Material Adverse Effect) shall be true and correct, in each case as of
the date of this Agreement and as of the Closing Date as though made on
such date (or, in the case of each representation and warranty which
expressly speaks as of an earlier date, as of the earlier date as of
which such representation and warranty speaks, unless the failure of
such representations and warranties to be true and correct,
individually or in the aggregate, could not reasonably be expected to
have a Buyer Material Adverse Effect. Buyer shall have delivered to
Parent and Seller a certificate on behalf of Buyer dated the Closing
Date and signed by an authorized officer of Buyer representing and
confirming that the foregoing condition has been satisfied.
(iii) Buyer shall have performed in all material respects all covenants,
obligations and agreements required by this Agreement to be performed
or complied with by Buyer, by the time of the Closing. Buyer shall have
delivered to Parent and Seller a certificate on behalf of Buyer dated
the Closing Date and signed by an authorized officer of Buyer
representing and confirming that the foregoing condition has been
satisfied.
(iv) All material (individually or in the aggregate) authorizations,
consents, Permits, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental
Entity reasonably necessary in connection with the consummation of the
Closing shall have been obtained or made.
(v) There shall not be pending or threatened any suit, action or proceeding
by any Governmental Entity that has a reasonable likelihood of success
(A) seeking to restrain or prohibit the disposition by Parent or Seller
of any of the Acquired Assets or the Business or (B) seeking to obtain
from Parent or Seller any damages to the extent relating to the
transactions contemplated by this Agreement that are material
(individually or in the aggregate) in relation to the value of Parent
and Seller, taken as a whole
(vi) No statute, rule, regulation or order shall have been enacted or
entered or deemed applicable to the transactions contemplated by this
Agreement which has the effect of prohibiting the consummation of any
of such transactions and no Injunction shall have been issued by any
Governmental Entity prohibiting any of the transactions contemplated by
this Agreement.
(vii) Parent shall have received the opinion of XxxXxxxx Valuation Advisors,
Inc. to the effect that, as of the Closing Date, the Purchase Price is
fair to Parent from a financial point of view.
Section 4.3 FRUSTRATION OF CLOSING CONDITIONS. None of Buyer, Parent or Seller
may rely on the failure of any condition set forth in this Article IV to be
satisfied if such failure was caused by such party's failure to act in good
faith or to use its commercially reasonable efforts, as and to the extent
required by Section 9.3, to cause the Closing to occur.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Each of Parent and Seller hereby jointly and severally represents and
warrants to Buyer as follows:
Section 5.1 ORGANIZATION, STANDING AND AUTHORITY. PARENT AND SELLER. Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of Florida. Each Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. Each of Parent and
Seller has all requisite corporate power and authority to conduct the Business
in the United States of America as it is currently conducted and to own, lease
or operate the assets and properties used in connection therewith. Parent is the
holder of all of the issued and outstanding capital stock of each Seller. Each
of Parent and Seller is duly authorized, qualified or licensed to do business as
a foreign corporation and is in good standing in every jurisdiction wherein, by
reason of the nature of the Business or the character of the Acquired Assets,
such qualification is necessary or desirable, except for failures to be so
authorized, qualified, licensed or in good standing which, individually or in
the aggregate, could not reasonably be expected to have a Business Material
Adverse Effect. Subject, in the case of the sale of the property and assets of
Parent and Seller to Buyer pursuant to this Agreement, to Parent obtaining the
Parent Stockholder Consent, each of Parent and Seller has all requisite
corporate power and authority to enter into this Agreement to which it is a
party, to comply with the terms of such Transaction Agreements and to consummate
the transactions contemplated thereby. All corporate acts and other proceedings
required to be taken by each of Parent and Seller to authorize the execution,
delivery and performance of the Transaction Agreements to which it is a party
and the consummation of the transactions contemplated thereby have been duly and
properly taken, subject, in the case of the sale of the property and assets of
Parent and Seller to Buyer pursuant to this Agreement, to Parent obtaining the
Parent Stockholder Consent. The Board of Directors of Parent, by resolution duly
adopted, has declared the sale of such property and assets to Buyer to be
expedient and for the best interests of Parent, and deems it advisable and in
the best interests of its stockholders to consummate, and has approved, the
Transaction Agreements and the transactions contemplated thereby on the terms
and conditions set forth in the Transaction Agreements. Each of the Transaction
Agreements to which each of Parent and Seller is a party has been duly executed
and delivered by it and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing regardless of whether considered in
a proceeding in equity or at law).
Section 5.2 NO VIOLATION; CONSENTS AND APPROVALS.
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(a) Except as set forth on Schedule 5.2, the execution and delivery of this
Agreement by each of Parent and Seller does not, and the execution and
delivery by each of Parent and Seller of the other Transaction
Agreements to which it is a party and the consummation of the
transactions contemplated thereby and compliance with the terms thereof
will not, (i) conflict with or result in any violation of any provision
of the certificate or articles of incorporation or by-laws of Parent or
Seller, (ii) conflict with, result in a violation or breach of, or
constitute a default (with or without notice or lapse of time or both),
or give rise to any right of, or result in, a termination, right of
first refusal, amendment, revocation, cancellation or acceleration, or
loss of material benefit, or to increased, guaranteed, accelerated or
additional rights or entitlements of any person, or result in the
creation of any Lien on any asset or in or upon any property of Parent
or Seller under, any Contract or Permit to which Parent or Seller is a
party, except for any such conflict, violation, breach, default, loss,
right, entitlement or Lien which, individually or in the aggregate,
could not reasonably be expected to have a Business Material Adverse
Effect, or (iii) conflict with or result in a violation of, or give
rise to the loss of a material benefit, or result in the creation of
any Lien on any asset or any property of the Parent or Seller under,
any judgment, order, decree, writ, injunction, statute, law, ordinance,
rule or regulation applicable to Parent or Seller or to the property or
assets of Parent or Seller, except for any such conflict, violation,
loss or Lien which, individually or in the aggregate, could not
reasonably be expected to have a Business Material Adverse Effect.
(b) Except as set forth on Schedule 5.2, no consent, approval, license,
Permit, order, authorization of, registration, declaration or filing
with, or notice to, any domestic or foreign court, administrative or
regulatory agency or commission or other governmental authority or
instrumentality (whether local, municipal, provincial, Federal or
otherwise) (each, a "Governmental Entity") is required to be obtained
or made by or with respect to Parent or Seller in connection with the
execution and delivery of the Transaction Agreements or the
consummation of the transactions contemplated thereby or compliance
with the terms thereof, other than (i) the filing by Parent with the
SEC of an information statement relating to the Parent Stockholder
Consent (the "Parent Information Statement"), and (ii) such other
consents, approvals, licenses, permits, orders, authorizations,
registrations, declarations or filings the failure of which to be
obtained or made could not reasonably be expected, individually or in
the aggregate, to have a Business Material Adverse Effect.
Section 5.3 SEC DOCUMENTS; UNDISCLOSED LIABILITIES. Parent has filed all
required reports, schedules, forms, statements and other documents with the SEC
since December 4, 1999 (including all filed reports, schedules, forms,
statements and other documents whether or not required, the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended, or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Parent SEC Documents, and,
with respect to any matter relating to the Business, none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Parent
SEC Document has been revised or superseded by a later filed Parent SEC Document
which was filed and publicly available prior to the date of this Agreement, with
respect to any matter relating to the Business, none of the Parent SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Parent
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end adjustments). Except for
exceptions to the following which, individually or in the aggregate, could not
reasonably be expected to have a Business Material Adverse Effect, neither
Parent nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be recognized or disclosed on a consolidated balance sheet of Parent and its
consolidated Subsidiaries or in the notes thereto and which are not so
recognized or disclosed.
Section 5.4 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule
5.4(a), since December 31, 2000, there has been no set of facts, change,
development, event, effect, condition or occurrence which, individually or in
the aggregate, has had or could reasonably be expected to constitute a Business
Material Adverse Effect. Since December 31, 2000, as of the date of this
Agreement, Parent and Seller have carried on the Business in the ordinary course
of business consistent with past practice. Since December 31, 2000, except as
set forth on Schedule 5.4(b), as of the date of this Agreement neither Parent
nor Seller has, in each case insofar as the Business is concerned:
(i) failed to pay any creditor any amount arising from the operation of the
Business owed to such creditor when due, other than good faith disputes
reserved against in accordance with GAAP and trade payables arising in
the ordinary course of business and not past due more than 45 days;
(ii) failed to discharge or satisfy any Lien on any of the Acquired Assets
other than Permitted Liens;
(iii) permitted, allowed or suffered any Acquired Asset to become subjected
to any Lien of any nature whatsoever other than Permitted Liens;
(iv) sold, leased, licensed or otherwise disposed of any of the assets of
the Business (or entered into any contract to do any of the foregoing),
except obsolete or worn out equipment sold in the ordinary course of
business consistent with past practice which was not otherwise material
(individually or in the aggregate) to the Business or canceled any
material indebtedness or waived any material claims or rights of
material value;
(v) disposed of any material Intellectual Property used, or held for use,
or intended to be used, in the conduct or operation of the Business or
allowed any material rights with respect to such Intellectual Property
to lapse for a period of 180 days prior to the applicable Closing;
(vi) defaulted on any material obligation relating to the conduct or
operation of the Business;
(vii) granted any allowances or discounts outside the ordinary course of
business consistent with past practice;
(viii) changed the employee compensation and benefits structure of the
Business in a manner that adversely affects in a material (individually
or in the aggregate) respect the cost structure of the Business, taken
as a whole;
(ix) incurred or assumed any liabilities, obligations or indebtedness or
guaranteed any such liabilities, obligations or indebtedness, other
than in the ordinary course of business, in each case, with respect to
the Business;
(x) suffered any damage, destruction or loss, whether or not covered by
insurance, that, individually or in the aggregate, could reasonably be
expected to have a Business Material Adverse Effect;
(xi) effected any material write down of any of the material assets of the
Business; or
(xii) entered into any agreement or made any commitment to do any of the
foregoing.
Section 5.5 TAXES. Except as set forth on Schedule 5.5, (a) none of the Acquired
Assets is "tax exempt use property" within the meaning of Section 168(h) of the
Code; (b) none of the Acquired Assets is a lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954; (c) neither Parent nor Seller
nor any of their respective Affiliates has made with respect to Parent or
Seller, or any assets of the Business any consent under Section 341 of the Code;
(d) none of the Acquired Assets to be transferred by persons other than U.S.
persons (as defined in Section 7701(a)(30) of the Code) is a "United States Real
Property Interest" as defined in Section 897 of the Code; (e) no Liens (other
than Permitted Liens) for material Taxes have been filed and no material claims
for Taxes have been asserted in writing with respect to the Business, the
Acquired Assets or the Assumed Liabilities; (f) Parent and Seller and any
affiliated group, within the meaning of Section 1504 of the Code, of which
Parent or Seller is or has been a member, (i) has filed or caused to be filed in
a timely manner (within any applicable extension periods) all material Tax
returns, reports and forms required to be filed by the Code or by applicable
state, local or foreign Tax laws and (ii) all Taxes due on such returns, reports
and forms have been timely paid in full or will be timely paid in full by the
due date thereof; (g) none of Parent or Seller has been a member of an
affiliated group, within the meaning of Section 1504 of the Code, filing a
consolidated Federal income tax return (other than a group the common parent of
which was Parent); and (h) none of Parent or Seller has any liability for the
Taxes of any Person (other than any of Parent or Seller) under Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law) or
pursuant to any tax allocation or sharing agreement.
Section 5.6 TITLE TO ASSETS AND REAL PROPERTY LEASES.
(a) Either Parent or Seller has good and valid title to, or, with respect
to real property and interests in real property, a leasehold interest
in, all the Acquired Assets, in each case free and clear of all
mortgages, liens, options, charges, easements, leases, subleases, title
defects, security interests, charges, claims, rights of first refusal,
options and encumbrances of any kind ("Liens") except (i) those
disclosed on Schedule 5.6(a), (ii) mechanics', carriers', workmen's,
repairmen's or other similar liens arising or incurred in the ordinary
course of business, (iii) conditional sales contracts (covering
personalty and equipment, but not real property) and equipment leases
entered into in the ordinary course of business, (iv) Liens for Taxes,
assessments and other governmental charges which are not due and
payable or which may thereafter be paid without penalty and (v) other
Liens which do not impair the continued use and operation of any
Acquired Asset in the conduct of the Business (the items described in
clauses (i) through (v) above are hereinafter referred to collectively
as "Permitted Liens"). None of the Liens described in clauses (i)
through (v), individually or in the aggregate, materially impairs, or
could reasonably be expected to materially impair, the continued use
and operation of the Acquired Assets (other than immaterial Acquired
Assets) to which they relate in the conduct of the Business as
presently conducted. This Section 5.6(a)does not relate to matters with
respect to Real Property Leases, which are the subject of Section
5.6(b) below.
(b) Schedule 5.6(b) sets forth a complete list of all leases, subleases and
occupancy agreements (collectively, as same may have been amended or
supplemented, "Real Property Leases") and also identifies real property
and interests in real property leased by Parent or Seller and used,
held for use or intended to be used in the operation or conduct of the
Business (individually, a "Leased Real Property"), and identifies each
of the Real Property Leases by date thereof (as well as the dates of
any amendments, modifications and supplements thereto), the original
parties thereto (and, in the event of any assignments, the current
parties thereto), the expiration date of the term thereof, and whether
any unexercised, extant renewal option(s) exist thereunder (and, in the
event that any of the Real Property Leases are subleases, identifies
the underlying prime leases), and identifies any nondisturbance
agreements, reciprocal easement or operating agreements relating
thereto. True, correct and complete descriptions of any easements and
copies of the Real Property Leases and any operating agreements and any
other instruments and agreements identified in Schedule 5.6(b) have
been delivered to Buyer. Each of the Real Property Leases, and each
such instrument and agreement, is in full force and effect, and, except
as set forth on Schedule 5.6(b), neither (as applicable) Parent nor
Seller, or party to or beneficiary of such instrument and agreement,
nor, to the knowledge of Parent or Seller, any of the other parties
thereto, has received or given any notice of default thereunder which
is extant (i.e., same was not cured or waived within the applicable
grace period), and, to the knowledge of Parent or Seller, no event has
occurred which, with the giving of notice or the passage of time, or
both, would constitute a material default by Parent or Seller under any
Real Property Lease or under any such instrument and agreement. Parent
or Seller has good and valid title to the leasehold estates under the
Real Property Leases in all Leased Property (such Leased Property being
sometimes referred to herein, individually, as a "Business Property"),
in each case free and clear of all Liens, except the following Liens:
(i) such as are set forth in Schedule 5.6(b), (ii) leases, subleases
and similar agreements set forth in Schedule 5.7, (iii) easements,
covenants, rights-of-way and other similar restrictions of record and
(i) (A) zoning, building and other similar restrictions, (B) Liens that
have been placed by any developer, landlord or other third party on
property over which Parent or Seller has easement rights or on any
Leased Property and subordination or similar agreements relating
thereto and (C) unrecorded easements, covenants, rights-of-way and
other similar restrictions. None of the items set forth in clauses (i)
through (iv) above, individually or in the aggregate, materially
impairs, or could reasonably be expected to materially impair, the
continued use and operation of the Leased Real Property to which they
relate in the conduct of the Business as presently conducted.
Section 5.7 CONTRACTS.
(a) Except as set forth on the subsection of Schedule 5.7(a), referencing
the subsection of this Section 5.7(a) set forth below, there is no
Contract that constitutes or contains an Acquired Asset or an Assumed
Liability that is:
(i) a Contract providing for future performance in consideration of amounts
previously paid;
(ii) a Contract that is material, individually or in the aggregate, to the
Assigned Contracts, taken as a whole, and that provides for future
performance with materially less than the standard charges to be due
for such performance or with materially lower than standard profit
margins, in each case measured as of the date on which such Contract
was entered into;
(iii) a Contract falling within a category for which Parent or Seller has
standard form agreements (as such form agreements existed on the date
on which such Contract was entered, which form agreements have been
made available to Buyer) that deviates from such standard form
agreements in a manner that (A) materially increases the actual or
potential liabilities or costs of Parent or Seller or (B) materially
limits the actual or potential rights or benefits of Parent or Seller,
in each case as compared to those which would have arisen if there had
been no such deviation from the relevant standard form agreement;
(iv) a Contract granting the other party or any third person "most favored
nation" status;
(v) a Contract pursuant to which following the Closing would limit the
ability of Buyer to compete with any person or to engage in any
activity or business, or pursuant to which any benefit is required to
be given or lost as a result of so competing or engaging;
(vi) a Contract providing for "exclusivity" or under which Parent or Seller
is restricted, or which after the Closing would restrict Buyer, or any
of its Affiliates, with respect to distribution, marketing, development
or manufacture;
(vii) a license or franchise granted by Parent or Seller pursuant to which
Parent or Seller has agreed to provide any third party with access to
source code or to provide for source code to be put in escrow or to
refrain from granting license or franchise rights to any other person;
(viii) a Contract providing for liquidated damages;
(ix) a Contract granting a third party any license to Intellectual Property
that is not limited to the internal use of such third party other than
any such Contract with a value added reseller or a distributor entered
into in the ordinary course of business consistent with past practice;
(x) a Contract that guarantees a result or commits to performance levels;
(xi) a Contract which (A) has aggregate future sums due from Parent or
Seller in excess of $50,000 and is not terminable by Parent or Seller
for a cost of less than $25,000 or (B) is otherwise material to the
Business as presently conducted;
(xii) a Contract providing for payments of royalties to third parties that is
not terminable on 90 days or less notice;
(xiii) an employment agreement or employment Contract that is not terminable
at will by Parent or Seller or both without any penalty and without any
obligation of Parent or Seller to pay severance or other amounts other
than base salary, accrued commissions, on-target earnings, vacation pay
and legally mandated benefits;
(xiv) (A) an employee collective bargaining agreement or other Contract with
any labor union, (B) a plan, program or a Contract that provides for
the payment of bonus, severance, termination or similar type of
compensation or benefits upon the termination or resignation of any
employee of the Business or (C) a plan, program or Contract that
provides for medical or life insurance benefits for former employees of
the Business or for current employees of the Business upon their
retirement from, or termination of employment with, the Business (other
than health coverage continuation provided under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended);
(xv) a Contract providing for confidential treatment by the Parent or Seller
of third party information other than non-disclosure agreements entered
into by the Parent or Seller in the ordinary course of business
consistent with past practice;
(xvi) a Contract under which Parent or Seller has (A) incurred any
indebtedness for borrowed money that is currently owing or (B) given
any guarantee of any such indebtedness;
(xvii) a Contract creating or granting a Lien (including Liens upon properties
acquired under conditional sales, capital leases or other title
retention or security devices);
(xviii) a Contract (A) that contains a prohibition on the assignment of all or
any portion thereof by Parent or Seller to any other person (without
regard to any exception permitting assignments to Subsidiaries or
Affiliates) or (B) that the consummation of any of the transactions
contemplated by the Transaction Agreements or the execution and
delivery or effectiveness of the Transaction Agreements will conflict
with, result in a violation or breach of, or constitute a default under
(with or without notice or lapse of time or both), or give rise under
such Contract to any right of, or result in, a termination, right of
first refusal, amendment, revocation, cancellation or acceleration, or
loss of material benefit, or to increased, guaranteed, accelerated or
additional rights or entitlements of any person;
(xix) except to the extent included in the preceding subparagraph (xviii) a
Contract that requires consent, waiver, approval or authorization of or
notice to a third party in the event of or with respect to the
consummation of any of the transactions contemplated by the Transaction
Agreements or the execution and delivery or effectiveness of the
Transaction Agreements;
(xx) a Contract containing (whether in the Contract itself or by operation
of law) any provisions dealing with a "change of control" or similar
event with respect to the Parent or Seller or all or any part of the
Business which would apply in any way to the Business, the Acquired
Assets or Buyer following the Closing, in each case to the extent such
provision(s) would apply to the consummation of the transactions
contemplated by the Transaction Agreements;
(xxi) a Contract with (A) any shareholder of Parent, (B) any Affiliate of
Parent or Seller or of any shareholder of Parent or Seller or (C) any
director, officer or employee of Parent or Seller or of any Affiliate
of Parent or Seller (other than (A) employment agreements otherwise
covered above, offer letters of at will employment or benefit plans or
(B) invention assignments, confidentiality agreements or nondisclosure
agreements for the benefit of Parent or Seller);
(xxii) a Contract not containing a waiver of incidental, consequential,
punitive and special damages in favor of Parent or Seller (and their
respective assignees) in all circumstances;
(xxiii) a Contract entered into in the last five years in connection with the
settlement or other resolution of any suit, claim, action,
investigation or proceeding; and
(xxiv) a Contract not made in the ordinary course of business.
(b) Except as set forth on Schedule 5.7(b) or for exceptions which could
not reasonably be expected to be material, individually or in the
aggregate, to such Assigned Contract, each Assigned Contract is valid,
binding and in full force and effect and is enforceable by Parent or
Seller, as applicable, in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of
equity, including concepts of materiality, reasonableness, good faith
and fair dealing regardless of whether considered in a proceeding in
equity or at law). Except as set forth on Schedule 5.7(b), Parent and
Seller have performed in all material respects all obligations required
to be performed by them under the Assigned Contracts, and no event has
occurred that would render them (with or without the lapse of time or
the giving of notice, or both) in breach in any material respect or
default thereunder and, to the knowledge of Parent and Seller as of the
date hereof, no event has occurred that would render any other party to
an Assigned Contract (with or without the lapse of time or the giving
of notice, or both) in breach in any material respect or default
thereunder. Neither Parent nor Seller has, except as disclosed on
Schedule 5.7(b), received any written notice of the intention of any
party to terminate any Assigned Contract or that any party considers
that Parent or Seller is in breach in any material respect or default
thereunder or in potential breach in any material respect or default
thereunder. Complete and correct copies of all the Assigned Contracts
identified on Schedule 5.7(a), together with all modifications and
amendments thereto to the date of this Agreement, have been made
available to Buyer.
Section 5.8 LITIGATION. Schedule 5.8 sets forth a complete and correct list of
all claims, actions, suits or judicial, administrative and regulatory
proceedings or investigations pending or, to the knowledge of Parent and Seller,
threatened by or against Parent or Seller affecting the Business or the Acquired
Assets (i) which involves an amount in controversy in excess of $50,000, (ii)
which, as of the date hereof, seeks material injunctive relief, (iii) which may
give rise to any legal restraint on or prohibition against or limit the material
benefits to Buyer of the transactions contemplated by the Transaction Agreements
or (iv) which if resolved in accordance with plaintiff's demands could
reasonably be expected to have a Business Material Adverse Effect. There is no
injunction, order, judgment, writ or decree to which Parent or Seller is a party
or subject to, or in default under which, individually or in the aggregate,
could reasonably be expected to have a Business Material Adverse Effect. This
Section 5.8 does not relate to matters with respect to Taxes, which are the
subject of Section 5.5, or Acquired Intellectual Property, which are the subject
of Section 5.12.
Section 5.9 EMPLOYEE AND RELATED MATTERS; ERISA.
(a) Schedule 5.9(a) contains a true and complete list of all "employee
welfare benefit plans" (as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
"employee pension benefit plans" (as defined in Section 3(2) of ERISA)
("Pension Plans") and any other bonus, pension, profit-sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock appreciation, restricted stock, stock option, phantom
stock, performance, retirement, thrift, savings, stock bonus,
cafeteria, paid time-off, perquisite, fringe benefit, vacation,
severance, disability, death benefit, hospitalization, medical, welfare
benefit or other plan, program, policy, arrangement or understanding,
and each employment, consulting, deferred compensation, severance,
termination or indemnification agreements or arrangements but expressly
excluding any governmental plan or program that requires mandatory
payment of social insurance taxes or similar contributions to a
governmental fund with respect to wages of any employee (collectively,
"Benefit Plans") that are maintained or contributed to or required to
be maintained or contributed to by Parent or Seller or any person or
entity that, together with Parent or Seller, is treated as a single
employer (a "Commonly Controlled Entity") under Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA. Parent and Seller have
made available to Buyer true, correct and complete copies of (1) each
such Benefit Plan, (3) the most recent summary plan description or
similar document for each such Benefit Plan for which such summary plan
description is required or was otherwise provided to plan participants
or beneficiaries and (4) each trust agreement and insurance annuity
contract relating to any such Benefit Plan. Each Benefit Plan has been
administered in accordance with its terms. Parent and Seller and all
the Benefit Plans are in substantial compliance in all material
respects with all applicable provisions of ERISA and the Code and all
other applicable laws.
(b) (i) No Benefit Plan is a "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA (a "Multiemployer Plan"), (ii) no Pension
Plan is subject to Title IV of ERISA, (iii) each Pension Plan intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, and no such
letter has been revoked, nor has revocation been threatened, nor has
any such Plan been amended since the date of its most recent letter in
any respect that would adversely affect its qualification or increase
its costs, and (iv) there is no pending, or to the knowledge of Parent
and Seller, threatened litigation relating to the Benefit Plans.
(c) (i) None of Parent, Seller, any officer of Parent or Seller or any of
the Benefit Plans which are subject to ERISA, including the Pension
Plans, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility that could reasonably be
expected to subject Parent, Seller, or any officer of Parent or Seller
to the Tax or penalty on prohibited transactions imposed by such
Section 4975 or to any liability under Section 502(i) or 502(l) of
ERISA, (ii) none of such Benefit Plans and trusts has been terminated,
nor has there been any "reportable event" (as that term is defined in
Section 4043 of ERISA) for which the 30-day reporting requirement has
not been waived with respect to any Benefit Plan during the last five
years, and no notice of a reportable event will be required to be filed
in connection with the transactions contemplated by this Agreement,
(iii) neither Parent nor Seller has incurred a "complete withdrawal" or
a "partial withdrawal" (as such terms are defined in Sections 4203 and
4205, respectively, of ERISA) since the effective date of such Sections
4203 and 4205 with respect to any Multiemployer Plan, and (iv) all
contributions and premiums required to be made under the terms of any
Benefit Plan as of the date hereof have been timely made.
(d) With respect to any Benefit Plan that is an employee welfare benefit
plan, (i) no such Benefit Plan is unfunded or funded through a "welfare
benefit fund" (as such term is defined in Section 419(e) of the Code),
(ii) each such Benefit Plan that is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code), complies with the
applicable requirements of Section 4980B(f) of the Code and (iii) each
such Benefit Plan may be amended or terminated without liability to
Parent or Seller. Neither Parent has any obligations for retiree health
and life benefits under any Benefit Plan.
(e) Except as set forth on Schedule 5.9(e), neither the execution and
delivery of this Agreement nor the obtaining of the Parent Stockholder
Consent nor the consummation of the transactions contemplated by this
Agreement will (x) entitle any Covered Employee to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other
obligation pursuant to, any of the Benefit Plans in respect of any
Covered Employee or (z) result in any breach or violation of, or a
default under, any of the Benefit Plans.
Section 5.10 COMPLIANCE WITH LAWS.
(a) Except for exceptions to the following which, individually or in the
aggregate, could not reasonably be expected to have a Business Material
Adverse Effect, the Business has in effect all certificates, permits,
licenses, franchises approvals, qualifications, registrations,
certifications, and other similar authorizations from any Governmental
Entity ("Permits") that are necessary or desirable for the conduct of
the Business as currently conducted and the ownership of the assets and
the properties of the Business. The Permits that are material
(individually or in the aggregate) to the Business or the Acquired
Assets, in each case taken as a whole, are set forth on Schedule
5.10(a). Parent and Seller have complied and are in compliance in all
material respects with all existing laws, rules, regulations, Permits,
ordinances, orders, judgments, writs, injunctions, statutes and decrees
applicable to the existence, condition (financial or otherwise),
operations, properties, assets or business of the Business and no
condition or state of facts exists that could reasonably be expected to
give rise to a violation of, or a material liability or default under,
any of the foregoing. The execution and delivery of this Agreement by
each of Parent and Seller does not, and the execution and delivery by
each of Parent and Seller of the other Transaction Agreements to which
it is a party and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof are
not reasonably likely to cause the revocation or cancellation of any
such Permit, except for such revocations or cancellations that,
individually or in the aggregate, could not reasonably be expected to
be material (individually or in the aggregate) to the Business. Neither
Parent nor Seller has received any written communication during the
past two years from any person that alleges that the Business is not in
compliance in all material respects with, or is subject to any
liability under, any existing laws, rules, regulations, Permits,
ordinances, orders, judgments, writs, injunctions, statutes or decrees
applicable to the existence, condition (financial or otherwise),
operations, properties, assets or business of the Business or relating
to the revocation or modification of any material Permit. Except as set
forth on Schedule 5.10(a), neither Parent nor Seller has received any
written notice that any investigation or review by any Governmental
Entity is pending with respect to any of the Acquired Assets or the
Business or that any such investigation or review is contemplated. This
Section 5.10(a) does not relate to matters with respect to Taxes, which
are the subject of Section 5.5, labor matters, which are the subject of
Section 5.11, Intellectual Property, which are the subject of Section
5.12 or environmental matters, which are the subject of Section
5.10(b).
(b) Except as set forth on Schedule 5.10(b),
(i) the Business is in compliance in all material respects with
all Environmental Laws;
(ii) the Business holds and is in compliance in all material
respects with all Permits required under Environmental Laws
("Environmental Permits");
(iii) neither Parent nor Seller has received any written
communication that alleges that the Business is subject to
liability under Environmental Laws;
(iv) neither Parent nor Seller is subject to, with respect to the
Business or Acquired Assets, any judgment, decree or order
relating to compliance with any Environmental Law or to any
investigation, remediation, reclamation, Release or monitoring
of, or in connection with, any Hazardous Substance;
(v) no Lien has been attached, asserted or, to the knowledge of
Parent or Seller, threatened, to or against any of the Leased
Real Property pursuant to any Environmental Law;
(vi) there has been no treatment, storage, disposal, arrangement
for disposal or Release of any Hazardous Substance in, on, at
or under any property in connection with the Business or the
Acquired Assets at any time that could reasonably be expected
to result in liability under Environmental Law;
(vii) with respect to the Business and the Acquired Assets, neither
Parent nor Seller has received an information request
regarding, or has been named a potentially responsible party
for, any Federal National Priorities List site (as defined
under Environmental Law) or any other site under analogous
state or foreign law; and
(viii) there are not now, and to the knowledge of Parent or Seller,
there never have been, any aboveground or underground storage
tanks at, on or under any of the Leased Real Property.
Section 5.11 LABOR MATTERS. Except as set forth in Schedule 5.11, (i) there is
not any pending or threatened, and during the past 12 months there has not been
any, labor dispute or strike, work stoppage or lockout with respect to the
Business; (ii) neither Parent nor Seller is engaged in any unlawful labor
practice in connection with the conduct of the Business; (iii) there are not any
unfair labor practice charges against Parent or Seller pending before the
National Labor Relations Board or any similar sovereign, state or local agency
in connection with the conduct of the Business; and (iv) there are not any
proceedings in connection with the conduct of the Business pending before the
Equal Employment Opportunity Commission or any similar foreign, state or local
agency responsible for the prevention of unlawful employment practices, in the
case of each of clauses (i), (ii), (iii) and (iv) above which is material
(individually or in the aggregate) to the Business.
Section 5.12 INTELLECTUAL PROPERTY, ETC.
(a) Schedule 1.1(c) sets forth a true and complete list of all Acquired
Intellectual Property organized, where applicable, under categories
labeled "software", "patents", "trademarks" and "copyrights." With
respect to all Acquired Intellectual Property that is registered or
subject to an application for registration, Schedule 5.12(a) sets forth
a list of all jurisdictions in which such Acquired Intellectual
Property is registered or registrations applied for and all
registration and application numbers. Except as set forth in Schedule
5.12(a), (i) all the Acquired Intellectual Property consisting of
patents, trademarks or copyrights has been duly registered in, filed in
or issued by the appropriate Governmental Entity where such
registration, filing or issuance is necessary or desirable for the
conduct of the Business as presently conducted and all necessary
affidavits of continuing use have been filed and all necessary
maintenance fees have been paid to continue all rights in effect, (ii)
Parent or Seller is the sole and exclusive owner of, and Parent and
Seller have the right to use, execute, reproduce, display, perform,
modify, enhance, distribute, prepare derivative works of and to make,
have made, sell, convey, transfer or assign, without payment to any
other person, all the Acquired Intellectual Property and the
consummation of the transactions contemplated by the Transaction
Agreements do not and will not conflict with, alter or impair any such
rights, and (iii) during the past 3 years neither Parent nor Seller has
received any written or oral communication from any person asserting
any ownership interest in any Acquired Intellectual Property. All of
the Acquired Intellectual Property is merchantable and fit for its
intended purpose. All of the software (including any data) included in
the Acquired Intellectual Property is free of viruses and other harmful
code and none of such software (including any data) contains any
material (individually or in the aggregate) errors, bugs or defects.
(b) Except as set forth on Schedule 5.12(b) or except for any such license
entered into in the ordinary course of business consistent with past
practice, neither Parent or Seller has granted any license of any kind
relating to the Acquired Intellectual Property or the marketing or
distribution thereof. Neither Parent nor Seller is bound by or a party
to any option, license or similar Contract relating to the Intellectual
Property of any other person for the use of such Acquired Intellectual
Property in the conduct of the Business, except as set forth in
Schedule 5.12(b) and except for "shrink-wrap" license agreements
relating to computer software licensed in the ordinary course of the
Business. Neither the Acquired Intellectual Property nor the conduct of
the Business as presently conducted violate, conflict with or infringe
in any material respect the Intellectual Property of any other person.
No claims are pending or, to the knowledge of Parent and Seller,
threatened, against Parent or Seller by any person with respect to the
ownership, validity or enforceability or use in the Business of any
Intellectual Property and (ii) during the past 3 years Parent nor
Seller has received any written communication alleging that Parent or
Seller has in the conduct of the Business violated any rights relating
to Intellectual Property of any person.
(c) All Acquired Intellectual Property has been maintained in confidence in
accordance with protection procedures customarily used in the industry
to protect rights of like importance. All former and current members of
management and key personnel of the Business, including all former and
current employees, agents, consultants and independent contractors who
have contributed to or participated in the conception and development
of the Acquired Intellectual Property (collectively, "Personnel"), have
executed and delivered to Parent or Seller a proprietary information
agreement restricting such person's right to disclose proprietary
information of Parent and Seller and assigning all rights in the
Acquired Intellectual Property to Parent or Seller, and waiving all
moral rights in any works in which moral rights may exist. No former or
current Personnel has filed, asserted or, to the knowledge of Parent or
Seller, threatened any claim against Parent or Seller in connection
with such person's involvement in the conception and development of any
of the Acquired Intellectual Property. None of the current employees of
Parent or Seller has any patents issued or applications pending for any
device, process, design or invention of any kind now used or needed by
Parent or Seller in the furtherance of the Business, which patents or
applications have not been assigned to Parent or Seller.
(d) To the knowledge of Parent or Seller, no person is infringing or
otherwise violating any right of Parent or Seller in any material
respect with respect to any Intellectual Property owned by or licensed
to Parent or Seller.
Section 5.13 SUFFICIENCY OF ASSETS. The Acquired Assets, comprise all the assets
primarily employed by Parent or Seller in connection with the Business. The
Acquired Assets are sufficient for the conduct of the Business immediately
following the Closing in substantially the same manner as currently conducted
and there are no assets which are material to the conduct of the Business as
currently conducted other than the Acquired Assets.
Section 5.14 CONDITION OF ACQUIRED ASSETS. The Acquired Assets are in normal
operating condition and repair (ordinary wear and tear and immaterial defects
excluded).
Section 5.15 RECEIVABLES. All the Acquired A/R (a) represent actual indebtedness
or other obligations incurred by the applicable account debtors and (b) have
arisen from bona fide transactions in the ordinary course of the Business. As of
the date of this Agreement, all the Acquired A/R, to the knowledge of Parent and
Seller, are good and collectible at the aggregate recorded amounts thereof, net
of any applicable reserves for doubtful accounts reflected on the financial
statements included in the Parent SEC Documents.
Section 5.16 INSURANCE. Parent or Seller maintain policies of fire and casualty,
liability and other forms of insurance with respect to the Business in such
amounts, with such deductibles and against such risks and losses as are
customary for businesses such as the Business. The insurance policies maintained
by Parent and Seller with respect to the Business are listed in Schedule 5.16.
All such policies are in full force and effect, all premiums due and payable
thereon have been paid, and no notice of cancellation or termination has been
received with respect to any such policy which has not been replaced on
substantially similar terms prior to the date of such cancellation. There is no
claim pending under any such policies as to which coverage has been questioned,
denied or disputed. Such insurance is of the type and in the amounts customarily
carried by persons conducting businesses similar to the Business.
Section 5.17 BROKERS. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transaction Agreements or the
transactions contemplated thereby based upon arrangements made by or on behalf
of Parent or Seller.
Section 5.18 SUPPLIERS. Except for the suppliers named in Schedule 5.18, as of
the date of this Agreement, the Business has not purchased, from any single
supplier, goods or services for which the aggregate purchase price exceeds 5% of
the total amount of goods and services purchased by the Business during its most
recent full fiscal year. Except as set forth in Schedule 5.18, between March 31,
2001 and the date of this Agreement, there has not been (i) any material adverse
change in the business relationship of the Business with any supplier of
merchandise named in Schedule 5.18 or (ii) any change in any material term
(including credit terms) of the supply agreements or related arrangements with
any such supplier.
Section 5.19 CUSTOMERS; RESELLERS. Except for the customers and resellers named
in Schedule 5.19, as of the date of this Agreement the Business does not have
any customer or reseller to whom it made more than 5% of its sales during its
most recent full fiscal year. Except as set forth in Schedule 5.19, between
March 31, 2001 and the date of this Agreement, there has not been (i) any
material adverse change in the business relationship of the Business with any
customer or reseller named in Schedule 5.19 or (ii) any change in any material
term (including credit terms) of the sales agreements or related agreements with
any such customer or reseller. During the past three years preceding the date of
this Agreement, neither Parent nor Seller has received any written customer
complaint concerning the products and services of the Business, nor have they
had any such products returned by a purchaser thereof, other than complaints and
returns made in the ordinary course of business that, individually or in the
aggregate, could not reasonably be expected to have a Business Material Adverse
Effect.
Section 5.20 DISCLOSURE DOCUMENTS. The Parent Information Statement and any
amendments or supplements thereto will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act. At the
time the Parent Information Statement and the Proxy Statement or any amendments
or supplements thereto, first mailed to the stockholders of Parent and Buyer,
respectively, the Parent Information Statement and the Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties contained in this
Section 5.20 will not apply to statements or omissions included in the Parent
Information Statement based upon information furnished to Parent by Buyer
specifically for use therein.
Section 5.21 STATE TAKEOVER STATUTES. No state takeover statute or similar
statute or regulation applies to the execution and delivery by Parent and Seller
of the Transaction Agreements or the consummation by Parent and Seller of the
transactions contemplated by the Transaction Agreements in accordance with the
Transaction Agreements.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Parent and Seller as follows:
Section 6.1 ORGANIZATION, STANDING AND AUTHORITY. BUYER. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware. Buyer has all requisite corporate power and authority to enter into
the Transaction Agreements to which it is a party and to consummate the
transactions contemplated thereby. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of the Transaction Agreements to which it is a party and the
consummation of the transactions contemplated thereby have been duly and
properly taken. Each of the Transaction Agreements to which Buyer is a party has
been duly executed and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing regardless
of whether considered in a proceeding in equity or at law).
Section 6.2 NO VIOLATION; CONSENTS AND APPROVALS.
(a) Except as set forth on Schedule 6.2, the execution and delivery of this
Agreement by Buyer does not, and the execution and delivery by Buyer of
the other Transaction Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby and
compliance with the terms hereof and thereof will not, (i) conflict
with or result in any violation of any provision of the certificate of
incorporation or by-laws of Buyer, (ii) conflict with, result in a
violation or breach of, or constitute a default (with or without notice
or lapse of time or both), or give rise to any right of termination,
right of first refusal, amendment, revocation, cancellation or
acceleration, or loss of material benefit, or to increased, guaranteed,
accelerated or additional rights or entitlements of any person or
result in the creation of any Lien on any asset or any property of
Buyer under any Contracts or Permit, to which Buyer or any other
Purchasing Company is a party, except for any such conflict, violation,
breach, default, loss or right, entitlement or Lien which, individually
or in the aggregate, could not reasonably be expected to result in a
Buyer Material Adverse Effect or (iii) conflict with or result in a
violation of, or give rise to the loss of a material benefit or result
in the creation of any Lien on any asset or property of Buyer under,
any judgment, order, decree, writ, injunction, statute, law, ordinance,
rule or regulation applicable to Buyer or to the property or assets of
Buyer, except for any such conflict, violation, loss or Lien which,
individually or in the aggregate, could not reasonably be expected to
have a Buyer Material Adverse Effect.
(b) Except as set forth on Schedule 6.2, no consent, approval, license,
permit, order or authorization of, registration, declaration or filing
with, or notice to, any Governmental Entity is required to be obtained
or made by or with respect to Buyer in connection with the execution
and delivery of the Transaction Agreements or the consummation of the
transactions contemplated thereby, other than (i) such consents,
approvals, licenses, permits, orders, authorizations, registrations,
declarations or filings the failure of which to be obtained or made
could not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
Section 6.3 BROKERS. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transaction Agreements or the
transactions contemplated thereby based upon arrangements made by or on behalf
of Buyer or any of its Subsidiaries.
Section 6.4 DISCLOSURE DOCUMENTS. The written information with respect to Buyer
and any of its Subsidiaries that Buyer furnishes to Parent specifically for use
in the Parent Information Statement will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading at the time such Parent Information Statement, or any
amendment or supplement thereto, is first mailed to the stockholders of Parent.
ARTICLE VII
COVENANTS OF PARENT AND SELLER
Each of Parent and Seller covenants and agrees as follows:
Section 7.1 ACCESS.
(a) Prior to the Closing, Parent and Seller shall give Buyer and its
employees, counsel, accountants, investment bankers and other
representatives and advisors (collectively, "Representatives") full
access upon reasonable advance notice and during normal business hours
to all offices and other facilities used in the Business and to all
books, records, agreements, documents, information, personnel, data and
files to the extent relating to the Business, and during such period
shall furnish to the Representatives any information concerning the
Business as they may reasonably request (including, to the extent
practicable, by electronic means). No investigation by Buyer or any of
its Subsidiaries and no other receipt of information by Buyer or its
Subsidiaries shall operate as a waiver or otherwise affect any
representation or warranty of Parent or Seller or any covenant or other
provision in this Agreement.
(b) After the Closing, Parent and Seller will give Buyer and its
Subsidiaries and their Representatives reasonable access, during normal
business hours and upon reasonable notice, to all books, documents,
information, data, files and other records relating to (i) the
operation of the Business prior to such Closing, (ii) the Acquired
Assets or (iii) the Assumed Liabilities, and to furnish copies thereof,
which Buyer or its Subsidiaries or their Representatives reasonably
request, including in connection with claims, proceedings, actions,
investigations, audits and other regulatory or legal proceedings
involving (x) the operation of the Business after such Closing, (y) the
Acquired Assets or (z) the Assumed Liabilities, and Parent and Seller
shall furnish reasonable assistance (at Buyer's expense) (including
access to personnel) to Buyer and its Subsidiaries and their
Representatives in connection with such claims and other proceedings.
Parent and Seller shall not destroy any such records prior to the
seventh anniversary of the Closing, and in any event will not destroy
or permit the destruction of any such records without providing Buyer
with notice detailing the contents of such records, and providing Buyer
with the opportunity to obtain such records, at least 60 days prior to
the destruction thereof.
Section 7.2 ORDINARY CONDUCT.
(a) Except for matters set forth in Schedule 7.2 or otherwise expressly
permitted or required by the terms of this Agreement, from the date of
this Agreement to the Closing, Parent and Seller shall conduct the
Business in the usual, regular and ordinary course consistent with past
practice and use all commercially reasonable efforts to keep intact the
Business, and preserve the relationships of the Business with
customers, suppliers, licensors, licensees, distributors, resellers and
others with whom the Business deals to the end that the Business and
the goodwill of the Business shall be unimpaired at the Closing. Prior
to the Closing, Parent and Seller shall not take any action that would,
or that could reasonably be expected to, result in any of the
conditions set forth in Article IV not being satisfied. In addition
(and without limiting the generality of the foregoing), during such
period prior to the Closing, except as set forth in Schedule 7.2 or
otherwise expressly permitted by the terms of this Agreement, Parent
and Seller shall not in each case insofar as the Business is concerned:
(i) amend any certificate of incorporation, by-laws or other
similar governing instrument of any Subsidiary the equity or
other ownership interests of which are included in the
Acquired Assets;
(ii) incur or assume any liabilities, obligations or indebtedness
or guarantee any such liabilities, obligations or
indebtedness, other than in the ordinary course of business
and consistent with past practice;
(iii) (A) 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,
company, partnership, limited liability company, trust, joint
venture, business association or other business organization
or division thereof or otherwise acquire any assets that are
material (individually or in the aggregate) to the Business or
(B) make or incur or commit to make or incur any capital
expenditure;
(iv) enter into any lease of real property or any renewal of an
existing lease of real property that may constitute Leased
Real Property;
(v) pay, discharge, modify or satisfy any claims, liabilities or
obligations (whether accrued, absolute, contingent, asserted
or otherwise) outside of the ordinary course of business
consistent with past practice;
(vi) make loans, advances or capital contributions to, or
investments in, any other person;
(vii) enter into, extend or renew (A) any Contract or amendment
thereof (1) which contains any provision listed in Section
5.7, (2) which contains any other provision listed in Section
5.7 unless such Contract or amendment is necessary to operate
the Business as it was operated in the ordinary course
consistent with past practice immediately prior to the date of
this Agreement or (3) which restricts the ability of the
Business to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Acquired Asset, (B) any Contract or
amendment thereof that grants any party the right or ability
to access, license or use all or a material portion of the
Acquired Intellectual Property of, (C) any Contract providing
for the services of any dealer, distributor, sales
representative, or similar representative, or (D) any other
Contract, other than, in the case of clauses (C) or (D), in
the ordinary course of business consistent with past practice
with a term not in excess of one year; or accelerate,
terminate, modify, waive, relinquish, assign or cancel any
material (individually or in the aggregate) Contract;
(viii) engage in any other transaction involving the Business or the
Acquired Assets other than in the ordinary course of business
consistent with past practice;
(ix) settle or compromise (A) any suit or claim relating to the
transactions contemplated by the Transaction Agreements or
threatened suit or claim relating to the transactions
contemplated by the Transaction Agreements or (B) other than
any such litigation set forth on Schedule 5.8, any material
litigation or material threatened litigation;
(x) accelerate the billing or collection or other realization of
cash or Excluded Assets from the Acquired Assets or accelerate
the provision of goods and services of the Business or delay
the payment of liabilities which would become Assumed
Liabilities or grant any allowance or discount, in each case
outside the ordinary course of business consistent with past
practice;
(xi) write down any of its material assets, including any Acquired
Intellectual Property, or make any change in any accounting
principal, method or practice (financial, Tax or otherwise)
other than those required by GAAP or applicable law;
(xii) take any action or fail to take any action which would result
in the material loss or reduction in value of the Acquired
Intellectual Property, taken as a whole;
(xiii) take any action that would or that could reasonably be
expected to result in (A) any representation and warranty of
Parent or Seller set forth in this Agreement that is qualified
as to materiality becoming untrue, (B) any such representation
and warranty that is not so qualified becoming untrue in any
material respect or (C) any condition to the transactions
contemplated hereby and set forth in Section 4.1 not being
satisfied; or
(xiv) authorize any of, or commit or agree to take, whether in
writing or otherwise, to do any of, the foregoing actions.
(b) CONSULTATION AND NOTICE. (i) In connection with the continuing
operation of the Business between the date of this Agreement and the
Closing, Parent and Seller shall consult in good faith on a reasonably
regular basis with the Representatives of Buyer to report material
(individually or in the aggregate) operational developments, the
general status of relationships with customers and resellers of the
Business and the general status of ongoing operations pursuant to
procedures reasonably requested by such Representatives. Parent and
Seller acknowledge that any such consultation shall not constitute a
waiver by Buyer of any rights it may have under this Agreement
(including any such rights under Section 4.1 or Article XI), and that
the Buyer shall not have any liability or responsibility for any
actions of Parent, Seller, or any of their respective Representatives
with respect to matters that are the subject of such consultations.
(ii) Parent and Seller shall promptly notify Buyer of:
(A) Parent and Seller shall promptly advise Buyer in writing of the
occurrence of any matter or event that (I) is, or that could reasonably
be expected to be, material (individually or in the aggregate) to the
business, assets, properties, condition (financial or otherwise), or
results of operations of the Business or (II) could reasonably be
expected to result in (a) any representation and warranty of Parent or
Seller set forth in this Agreement that is qualified as to materiality
becoming untrue, (b) any such representation and warranty that is not
so qualified becoming untrue in any material respect or (c) any
condition to the transactions contemplated hereby and set forth in
Section 4.1 not being satisfied;
(B) any written notice or other written communication from any person
(other than a Governmental Entity) alleging that the consent of such
person is required in connection with the transactions contemplated by
the Transaction Agreements;
(C) any written notice or other written communication from any customer,
distributor or reseller of the Business to the effect that such
customer or reseller is terminating or otherwise materially adversely
modifying its relationship with Parent or Seller as a result of the
transactions contemplated by the Transaction Agreements;
(D) except as otherwise prohibited by applicable law, any notice or other
communication from any Governmental Entity in connection with the
transactions contemplated by the Transaction Agreements; and
(E) any actions, suits, claims, investigations or proceedings commenced or,
to its knowledge threatened against, relating to or involving or
otherwise affecting Parent or Seller, or the Business that, if pending
on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 5.8 or that relate to the consummation of
the transactions contemplated by the Transaction Agreements.
Section 7.3 CONFIDENTIALITY. Parent and Seller shall keep confidential, and
shall use commercially reasonable efforts to cause their respective officers,
directors, employees and advisors to, keep confidential all non-public
information relating to the Business, the Acquired Assets or the Assumed
Liabilities, except as required by compulsory legal process. Each of Parent and
Seller shall enforce any confidentiality agreement to which it is a party
relating to the Business, the Acquired Assets or the Assumed Liabilities on
Buyer's behalf and, following the Closing, at Buyer's request and cost.
Section 7.4 STOCKHOLDER ACTION BY WRITTEN CONSENT; PREPARATION OF THE PARENT
INFORMATION STATEMENT. In lieu of calling a meeting of the stockholders of
Parent, Parent will seek approval and adoption of this Agreement and the
transactions contemplated hereby by written consent of the stockholders of
Parent (the "Parent Stockholder Consent"). Such approval will be sought so that
the Parent Stockholder Consent shall be obtained and shall be effective on the
21st day after the date the Parent Information Statement is first sent or given
to the stockholders of Parent. The Board of Directors of Parent shall recommend
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of Parent. In connection with such action by written
consent, Parent will (i) promptly prepare and file with the SEC, use its best
efforts to have cleared by the SEC and thereafter mail to its stockholders as
promptly as practicable the Parent Information Statement, and (ii) otherwise
comply with all legal requirements applicable to approvals by its stockholders
of this Agreement and the transactions contemplated hereby. Parent shall provide
Buyer and its counsel with sufficient opportunity to comment upon the form and
substance of the Parent Information Statement (including any amendments or
supplements thereto) prior to filing such with the SEC and Parent shall use its
reasonable best efforts to incorporate Buyer's reasonable comments into the
Parent Information Statement (including any amendments or supplements thereto).
Parent shall promptly provide to Buyer copies of any comments received from the
SEC in connection therewith and shall consult with Buyer in responding to the
SEC.
Section 7.5 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise expressly provided in the Transaction
Agreements, all costs and expenses incurred in connection with the Transaction
Agreements and the transactions contemplated thereby shall be paid by Buyer.
ARTICLE VIII
COVENANTS OF BUYER
Intentionally omitted.
ARTICLE IX
MUTUAL COVENANTS
Each of Parent, Seller and Buyer covenants and agrees as follows:
Section 9.1 BUYER STOCKHOLDER APPROVAL. If, in the sole discretion of Buyer,
acting through its Board of Directors, Buyer determines to submit this Agreement
and the transactions contemplated hereby to Buyer's stockholders for approval,
or, it shall be determined that such approval is required under applicable law
(in either case, the "Buyer Stockholder Approval"), Buyer shall (i) as soon as
practicable following the date of this Agreement, establish a record date for,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Buyer Stockholders Meeting") for the purpose of obtaining the Buyer Stockholder
Approval, (ii) through its Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement and the other transactions contemplated
hereby and (iii) use its reasonable efforts to solicit the Buyer Stockholder
Approval. Buyer shall prepare and file with the SEC a proxy or information
statement (in either case, the "Proxy Statement"). The Parent and Seller shall
furnish all information concerning the Parent and Seller and the holders of
Parent's common stock as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Proxy Statement.
Buyer will use all reasonable efforts to cause the Proxy Statement to be mailed
to Buyer's stockholders as promptly as practicable after being advised that the
SEC has no further comments with respect thereto. No filing of, or amendment or
supplement to, or correspondence to the SEC or its staff with respect to the
Proxy Statement will be made by Parent, Seller or Buyer without providing the
other party a reasonable opportunity to review and comment thereon. Buyer will
inform Parent and Seller, promptly after it receives notice thereof, of any
request by the SEC for the amendment of the Proxy Statement or comments thereon
and responses thereto or requests by the SEC for additional information and
will, as promptly as practicable, provide to Parent and Seller copies of all
correspondence and filings with the SEC with respect to the Proxy Statement. If
at any time prior to the Closing Date any information relating to Buyer, Parent
or Seller, or any of their respective Affiliates, directors or officers, should
be discovered by Buyer, Parent or Seller, that should be set forth in an
amendment or supplement to the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party that
discovers such information shall promptly notify the other parties hereto, and
an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of Buyer.
Section 9.2 BULK TRANSFER LAWS. Buyer, Parent and Seller each hereby waive
compliance by Parent and Seller with the provisions of the "bulk sales", "bulk
transfer" or similar laws of any state. Each of Parent and Seller agrees to
indemnify and hold Buyer harmless against any and all claims, losses, damages,
liabilities, costs and expenses incurred by Buyer or any of its Affiliates as a
result of any failure to comply with any such "bulk sales", "bulk transfer" or
similar laws.
Section 9.3 CONSENTS; EXCLUDED CONTRACTS. Notwithstanding anything in any of the
Transaction Agreements to the contrary, none of the Transaction Agreements shall
constitute an agreement to assign or transfer any interest in any asset, claim,
right or benefit the transfer of which is otherwise contemplated hereby if such
an assignment or transfer or attempt to make such an assignment or transfer
without the consent or approval of a third party would constitute a breach or
other contravention of the rights of such third party, or affect adversely the
rights of any party hereto or any of their Affiliates, as the case may be,
thereunder (such assets being collectively referred to herein as "Restricted
Assets"); and any transfer or assignment to Buyer by Parent or Seller of any
interest under any such Restricted Asset shall be made subject to such consent
or approval being obtained. Parent, Seller and Buyer shall use commercially
reasonable efforts, to obtain such consents or approvals prior to the Closing;
PROVIDED, HOWEVER, that Buyer shall not be required to incur any out of pocket
cost or expense in connection with such efforts and Parent and Seller shall not
be required to pay any consent fees or make any other financial accommodation to
any person in order to obtain any such consents or approvals. In the event any
such consent or approval is not obtained by five Business Days prior to the
Closing, (i) Parent and Seller shall inform Buyer at such time of such fact and
continue at Buyer's request to cooperate with Buyer in attempting to obtain any
such consent or approval and (ii) at the Closing, Parent and Seller shall at
their expense effect alternative arrangements in the form of a license,
sublease, or operating agreement in form and substance satisfactory to Buyer
until such time as such consent or approval has been obtained which results in
Buyer receiving all the benefits and bearing all the ordinary course costs,
liabilities and other obligations with respect to any such Restricted Asset, and
(iii) notwithstanding anything in the Transaction Agreements to the contrary,
unless and until any such consent or approval with respect to any Restricted
Asset is obtained, such Restricted Asset shall not constitute an Acquired Asset
and any associated liability shall not constitute an Assumed Liability for any
purpose under the Transaction Agreements.
Section 9.4 PUBLICITY. Parent, Seller and Buyer each agree that no public
release or announcement concerning the transactions contemplated by the
Transaction Agreements shall be issued by such party or any of their
Representatives without the prior written consent of the other such party,
except as required by applicable law or the rules or regulations of any
securities exchange on which securities of such party are listed, in which case
the party that is required (or whose Representatives are required) to make the
release or announcement shall allow the other such party reasonable time to
comment on such release or announcement in advance of such issuance; PROVIDED,
HOWEVER, that each of Parent and Buyer may, following reasonable prior
consultation with the other party, make internal announcements to their
respective employees.
Section 9.5 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement, including Section 9.3, each of Parent, Seller and Buyer shall
use all commercially reasonable efforts to cause the Closing to occur, including
using its commercially reasonable efforts to obtain all material consents,
permits, authorizations and approvals of, and to make all necessary filings,
notifications or registrations with, all Governmental Entities and other persons
which are necessary for the consummation of the transactions contemplated by the
Transaction Agreements.
Section 9.6 FURTHER ASSURANCES. From time to time after the Closing, and for no
further consideration, each of Parent, Seller and Buyer shall execute,
acknowledge and deliver such assignments, transfers, consents, assumptions and
other documents and instruments and take such other actions as may reasonably be
deemed necessary or desirable by the other party to consummate the transactions
contemplated hereby (including (i) transferring back to Parent or Seller any
Excluded Asset or Excluded Liability, which Excluded Asset or Excluded Liability
was inadvertently transferred to Buyer at the Closing and (ii) transferring to
Buyer any Acquired Asset or Assumed Liability contemplated by this Agreement to
be transferred to Buyer at the Closing which was not so transferred at the
Closing).
Section 9.7 TAX MATTERS.
(a) All real, personal and intellectual property transfer, documentary,
sales, use, registration, value-added, stamp duty and other similar
Taxes (including interest, penalties and additions to Tax) incurred in
connection with the transactions contemplated by the Transaction
Agreements ("Transfer Taxes") shall be borne by Buyer.
(b) Each of Parent and Seller shall deliver to Buyer at each Closing a
Certificate in form and substance satisfactory to Buyer, duly executed
and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding pursuant to the
provisions of the Foreign Investment in Real Property Tax Act.
(c) Buyer, Parent and Seller shall cooperate with respect to Tax matters.
(d) In the case of any Return with respect to a Straddle Period required to
be filed by Buyer after the Closing for the Business, Seller shall pay
Buyer the amount of any Excluded Tax that is or would otherwise be
payable with respect to such Return at least five Business Days prior
to the date such payment is or would otherwise be due (the "Due Date");
PROVIDED that Buyer shall furnish Parent and Seller with a copy of such
Return and Buyer's calculations with respect to such Excluded Taxes
within a reasonable period of time (but no less than 10 days) prior to
the relevant Due Date, and Buyer shall make such revisions to such
Returns as are reasonably requested by Parent or Seller.
Section 9.8 ACCOUNTS.
(a) Each of Parent and Seller hereby constitutes and appoints, effective as
of the Closing, Buyer and assigns them as true and lawful attorney of
Parent and Seller with full power of substitution (i) to collect for
the account of Buyer any Acquired Assets and (ii) to institute and
prosecute all proceedings which Buyer and its Subsidiaries may in their
sole discretion deem proper in order to enforce any right, title or
interest in, to or under the Acquired Assets, and to defend or
compromise any and all actions, suits or proceedings in respect of the
Acquired Assets.
(b) All payments and reimbursements received by Parent or Seller or any
Affiliate thereof in connection with or arising out of the Acquired
Assets or Assumed Liabilities after the Closing shall be held by such
person in trust for the benefit of Buyer and, promptly upon receipt by
such person of any such payment or reimbursement such person shall pay
over to Buyer, the amount of such payment or reimbursement without
right of setoff.
(c) All payments and reimbursements received by Buyer or their Affiliates
in connection with or arising out of the Excluded Assets or Excluded
Liabilities after the applicable Closing shall be held by such person
in trust for the benefit of Parent or Seller, as applicable, and,
promptly upon receipt by such person of any such payment or
reimbursement, such person shall pay over to Parent or Seller, as
applicable, the amount of such payment or reimbursement without right
of setoff.
(d) Each of Parent and Seller covenants and agrees that it shall promptly
forward to Buyer any mail (physical, electronic or otherwise),
facsimile or telephone inquiries of actual or potential clients,
customers, suppliers and vendors of or relating to the Business,
including customer orders.
ARTICLE X
NONCOMPETITION
Section 10.1 NONCOMPETITION. Each of Parent and Seller understands that Buyer
shall be entitled to protect and preserve the going concern value of the
Business to the extent permitted by law and that Buyer would not have entered
into the Transaction Agreements absent the provisions of this Article X and,
therefore, for a period of five years (subject to the limitations set forth
below) from the Closing Date, Parent and Seller shall not and shall use
commercially reasonable efforts to cause their respective Affiliates not to,
directly or indirectly:
(a) engage in activities or businesses, or establish any new businesses,
that compete in any respect with the Business ("Competitive
Activities"), including not (i) developing, distributing,
manufacturing, marketing or selling products or services of the type
sold by the Business, (ii) soliciting any customer or prospective
customer of the Business to purchase any products or services sold by
the Business or products or services, competitive therewith from anyone
other than Buyer and its Subsidiaries, and (iii) assisting any person
in any way to do, or attempt to do, anything prohibited by clause (i)
or (ii) above;
(b) except to the extent prohibited by applicable law, engage in any
action, activity or course of conduct that is substantially detrimental
to the Business or its business reputation, including (i) soliciting,
recruiting or hiring any employees of the Business or persons who have
worked for the Business and (ii) soliciting or encouraging any employee
of the Business to leave the employment of the Business;
PROVIDED, that, the foregoing shall not prohibit Parent, Seller or any
of their respective Affiliates from hiring any employee who has ceased to be
employed by the Business for at least 12 months.
ARTICLE XI
INDEMNIFICATION
Section 11.1 INDEMNIFICATION BY PARENT AND SELLER. Parent and Seller shall,
jointly and severally, indemnify Buyer and its Affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from (whether in connection with
a Third Party Claim or a Direct Claim) any loss, claim, damage, liability
(whether asserted or unasserted, absolute or contingent), cost, expense,
obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings,
dues, assessments, Taxes, fines, penalties, fees and amounts paid in settlement
(including reasonable fees and expenses of counsel consistent with Section
11.5(a)(ii)) (each a "Loss" and, collectively, "Losses") as incurred (payable
promptly upon written request) by any such indemnified party arising from, in
connection with or otherwise with respect to (i) subject to Section 13.6, any
failure of any representation or warranty of Parent or Seller contained in the
Transaction Agreements or any certificate delivered by or on behalf of Parent or
Seller in connection therewith to be true and correct in all respects (it being
agreed that for purposes of such right to indemnification, the representations
and warranties of Parent and Seller shall be deemed not qualified by any
references therein to materiality generally or to whether or not any breach
would result or could reasonably be expected to result in a Buyer Material
Adverse Effect or a Business Material Adverse Effect); (ii) any breach of any
obligation of Parent or Seller contained in the Transaction Agreements; (iii)
any of the Excluded Liabilities; or (iv) the operation or ownership of the
Excluded Assets.
Section 11.2 INDEMNIFICATION BY BUYER. From and after the Closing, Buyer shall
indemnify Parent, Seller and each of their respective Affiliates and each of
their respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from (whether in connection with
a Third Party Claim or a Direct Claim) any Loss as incurred (payable promptly
upon written request) by any such indemnified party arising from, in connection
with or otherwise with respect to (i) subject to Section 13.6, any failure of
any representation or warranty of Buyer or any of its Affiliates contained in
the Transaction Agreements or any certificate delivered by or on behalf of Buyer
in connection therewith to be true and correct in all material respects (it
being agreed that for the purposes of such right to indemnification, the
representations and warranties of Buyer and shall be deemed not qualified by any
reference therein to materiality generally or to whether or not any breach would
result or could reasonably be expected to result in a Buyer Material Adverse
Effect or a Business Material Adverse Effect), (ii) any breach of any obligation
of Buyer, or any of its Affiliates contained in the Transaction Agreements;
(iii) any of the Assumed Liabilities or (iv) the operation of the Business after
the Closing.
Section 11.3 LOSSES NET OF INSURANCE. The amount of any Loss for which
indemnification is provided under this Article XI shall be net of any amounts
actually recovered by the indemnified party under insurance policies with
respect to such Loss and any such amounts actually recovered by any indemnified
party to the extent relating to any Loss previously paid by any indemnifying
party hereunder shall be paid over promptly to such indemnifying party.
Section 11.4 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless any party (i) pursuant to clause (i) of each of Section 11.1 and
Section 11.2 shall terminate when the applicable representation or warranty
terminates pursuant to Section 13.6 and (ii) pursuant to the other clauses of
Section 11.1 and Section 11.2 shall not terminate; PROVIDED, HOWEVER, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, made a Third Party Claim or Direct Claim,
as applicable.
Section 11.5 PROCEDURES RELATING TO THIRD PARTY AND DIRECT INDEMNIFICATION
CLAIMS.
(a) THIRD PARTY CLAIMS. In order for a person (the "indemnified party") to
be entitled to any indemnification pursuant to this Article XI in
respect of, arising out of or involving a claim or demand made by any
person other than a party hereto against the indemnified party (a
"Third Party Claim"), such indemnified party must notify the
indemnifying party in writing of the Third Party Claim promptly, and in
any event within 20 Business Days, after receipt by such indemnified
party of notice of the Third Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification
provided under this Agreement except to the extent the indemnifying
party shall have been actually and materially prejudiced as a result of
such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party promptly, and in any event within ten Business Days,
after the indemnified party's receipt thereof, copies of all notices
and documents (including court papers) received by the indemnified
party relating to the Third Party Claim; PROVIDED, HOWEVER, that
failure to make such delivery shall not affect the indemnification
provided under this Agreement except to the extent the indemnifying
party shall have been actually and materially prejudiced as a result of
such failure.
(ii) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges its obligation to fully
indemnify the indemnified party therefor in accordance with this
Agreement, to assume and control the defense thereof with counsel
selected by the indemnifying party and reasonably acceptable to the
indemnified party (which acceptance shall not be unreasonably withheld
or delayed.) Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for legal expenses subsequently
incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense
thereof and to employ at its own expense counsel not reasonably
objected to by the indemnifying party separate from the counsel
employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense, subject to the remaining
terms of this Section 11.5(a)(ii). The indemnifying party shall be
liable for the reasonable fees and expenses of one primary counsel, and
to the extent reasonably required in connection with such Third Party
Claim, one or more local counsel, and such other counsel as may be
reasonably required due to a conflict among indemnified parties, in
each case employed by the indemnified party for any period during which
the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute any Third Party
Claim, all the parties hereto shall cooperate and shall cause their
Affiliates to cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying
party's request) the provision to the indemnifying party of records and
information that are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. Whether or not the indemnifying party assumes the defense of
a Third Party Claim, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld or delayed).
If the indemnifying party assumes the defense of a Third Party Claim,
the indemnified party shall agree to any settlement, compromise or
discharge of such Third Party Claim that the indemnifying party may
recommend and that by its terms (or pursuant to a binding commitment of
the indemnifying party) obligates the indemnifying party to pay the
full amount (subject to any limitation on payment contained in this
Article XI) of such liability in connection with such Third Party
Claim, which releases the indemnified party completely in connection
with such Third Party Claim. Notwithstanding the foregoing, the
indemnifying party shall not be entitled to assume the defense of any
Third Party Claim (and shall be liable for the reasonable fees and
expenses of one primary counsel, and to the extent reasonably required
in connection with such Third Party Claim, one or more local counsel,
and such other counsel as may be reasonably required due to a conflict
among indemnified parties, incurred by the indemnified party in
defending such Third Party Claim) if the Third Party Claim seeks an
order, injunction or other equitable relief or relief for other than
money damages against the indemnified party that the indemnified party
reasonably determines, after conferring with its outside counsel,
cannot be separated from any related claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can
be so separated from that for money damages, the indemnifying party
shall be entitled to assume the defense of the portion relating to
money damages.
Notwithstanding the foregoing in this Section 11.5(a)(ii), if a Third
Party Claim includes or could include both a claim for Taxes that are Excluded
Taxes and a claim for Taxes that are Assumed Liabilities, and such claim for
Taxes that are Excluded Taxes is not separable from such claim for Taxes that
are Assumed Liabilities, Parent and/or Seller, as applicable (if the claim for
Taxes that are Excluded Taxes exceeds or could reasonably be expected to exceed
in amount the claim for Taxes that are Assumed Liabilities), or otherwise the
Buyer (Parent and/or Seller or Buyer, as the case may be, the "Controlling
Party"), shall be entitled to control the defense of such Third Party Claim
(such Third Party Claim, a "Tax Claim"). In such case, the other party (the
"Non-Controlling Party") shall be entitled to participate fully (at the
Non-Controlling Party's sole expense) in the conduct of such Tax Claim and the
Controlling Party shall not settle such Tax Claim without the consent of such
Non-Controlling Party (which consent shall not be unreasonably withheld or
delayed). The costs and expenses of conducting the defense of such Tax Claim
shall be reasonably apportioned based on the relative amounts of the claim for
Taxes that are Excluded Taxes and the claim for Taxes that are Assumed
Liabilities.
(b) DIRECT CLAIMS. In the event any indemnified party should have an
indemnification claim against any indemnifying party under the
Transaction Agreements that does not involve a Third Party Claim being
asserted against or sought to be collected from such indemnified party
(a "Direct Claim"), the indemnified party shall deliver notice of such
Direct Claim to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may have to such
indemnified party, except to the extent that the indemnifying party has
been actually and materially prejudiced by such failure. If the
indemnifying party does not notify the indemnified party within 15
Business Days following its receipt of such notice that the indemnified
party disputes such Direct Claim, such Direct Claim specified by the
indemnified party in such notice shall be conclusively deemed a
liability of the indemnifying party under this Article XI and the
indemnifying party shall pay the amount of such liability to the
indemnified party on demand, or in the case of any notice in which the
amount of the Direct Claim is estimated, on such later date when the
amount of such Direct Claim is finally determined; PROVIDED that in any
such case such payment shall be made in accordance with Section 11.9.
If the indemnifying party disputes its liability with respect to such
Direct Claim in a timely manner, the indemnifying party and the
indemnified party shall proceed in good faith to negotiate a resolution
of such dispute.
Section 11.6 INDEMNITY PAYMENTS. Any indemnity payment hereunder (i) shall be
made by wire transfer to an account specified by Buyer in immediately available
funds, (ii) shall be made on an after-tax basis and (iii) shall be treated as an
adjustment to the Purchase Price for Tax purposes unless otherwise provided in a
Final Determination.
ARTICLE XII
TERMINATION
Section 12.1 TERMINATION.
(a) Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date whether before or after
the Parent Stockholder Consent has been obtained upon written notice
(other than in the case of Section 12.1(a)(i) below) from the
terminating party to the non-terminating party specifying the
subsection of this Section 12.1 pursuant to which such termination is
effected:
(i) by mutual written consent of Parent and Buyer;
(ii) by Buyer upon written notice to Parent if any of the conditions to the
Closing set forth in Section 4.1 shall have become incapable of
fulfillment and shall not have been waived in writing by Buyer;
(iii) by Parent upon written notice to Buyer if any of the conditions to the
Closing set forth in Section 4.2 shall have become incapable of
fulfillment and shall not have been waived in writing by Parent;
(iv) by either Parent or Buyer upon written notice to the other such party
if the Closing does not occur on or prior to December 31, 2001;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this Section 12.1(a)(iv) shall not be available to any party hereto
if the failure to consummate the Closing by such date was caused by the
breach of this Agreement by such party;
(v) by Parent, if Buyer breaches or fails to perform in any respect any of
its representations, warranties or covenants contained in this
Agreement and such breach or failure to perform (x) would give rise to
the failure of a condition set forth in Section 4.2(ii) or Section
4.2(iii) and (y) cannot be or has not been cured within 30 days
following delivery by Parent of written notice of such breach or
failure to perform;
(vi) by Buyer, if Parent or Seller breaches or fails to perform in any
respect any of its representations, warranties or covenants contained
in this Agreement and such breach or failure to perform (x) would give
rise to the failure of a condition set forth in Section 4.1(ii) or
Section 4.1(iii) and (y) cannot be or has not been cured within 30 days
following delivery by Buyer of written notice of such breach or failure
to perform;
(vii) by either Parent or Buyer if any Injunction granting any of the relief
set forth in clauses (A) through (D) of Section 4.1(v) shall be in
effect and shall have become a final non-appealable order, decree or
ruling; PROVIDED that the party seeking to terminate this Agreement
pursuant to this clause shall have used commercially reasonable efforts
to prevent the entry of and to remove such Injunction.
Section 12.2 OTHER TRANSACTION AGREEMENTS; MATERIAL TO BE RETURNED.
(a) In the event that this Agreement is terminated by Parent or Buyer
pursuant to Section 12.1, the transactions contemplated by the
Transaction Agreements shall be terminated, without further action by
any party hereto, and each of Parent and Buyer shall immediately enter
into written consents to terminate Transaction Agreements.
(b) Furthermore, in the event that this Agreement is terminated as provided
herein:
(i) Buyer shall return all documents and other material received
from Parent or Seller or any of their respective
Representatives relating to the Business or the transactions
contemplated by the Transaction Agreements, whether obtained
before or after the execution of this Agreement, to Parent or,
at its option, destroy such documents and material; and
(ii) Parent and Seller shall return all documents and other
material received from Buyer or its Subsidiaries or any of
their Representatives relating to Buyer or the transactions
contemplated by the Transaction Agreements, whether obtained
before or after the execution of this Agreement, to Buyer, or
at its option, destroy such documents and material.
Section 12.3 EFFECT OF TERMINATION. Upon the termination hereof, this Agreement
shall become void and of no further force and effect, except for the provisions
of (i) Section 5.17 and Section 7.5 relating to brokers, (ii) Section 7.3
relating to confidentiality, (iii) Section 9.4 relating to publicity, (iv)
Section 7.5 relating to certain expenses and (v) this Article XII. Nothing in
this Article XII shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned or otherwise transferred by any party (including by
operation of law) without the prior written consent of the other parties hereto,
and any assignment or transfer without such consent shall be null and void and
of no effect, except that Buyer may assign its right to purchase the Acquired
Assets or any portion thereof hereunder to an Affiliate or Subsidiary of Buyer
without the prior written consent of Parent or Seller; PROVIDED, HOWEVER, that
no assignment shall limit the assignor's obligations hereunder.
Section 13.2 NO THIRD PARTY BENEFICIARIES. Except as provided in Article XI,
this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any person, other than the parties hereto and such permitted assigns,
any legal or equitable rights hereunder, whether as third party beneficiaries or
otherwise.
Section 13.3 AMENDMENTS. This Agreement may be amended by the parties hereto at
any time, whether before or after the Parent Stockholder Consent has been
obtained; PROVIDED, HOWEVER, that after the Parent Stockholder Consent has been
obtained, there shall be made no amendment that by law requires further approval
by the stockholders of Parent without the further approval of such stockholders.
No amendment to this Agreement shall be effective unless it shall be in writing
and signed by Parent and Buyer (and Parent agrees to cause Seller to execute any
such amendment).
Section 13.4 CONSENTS AND APPROVALS. For any matter under this Agreement
requiring the consent or approval of any party to be valid and binding on the
parties hereto, such consent or approval must be in writing.
Section 13.5 WAIVERS. No failure or delay of any party in exercising any right
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. Subject to
Section 11.6 the rights and remedies of the parties hereunder are cumulative and
are not exclusive of any rights or remedies which they would otherwise have
hereunder. None of the Transaction Agreements (or any provision thereof) may be
waived except pursuant to a writing executed by the waiving party; PROVIDED,
HOWEVER, that after the Parent Stockholder Consent has been obtained, there
shall be made no waiver that by law requires further approval by the
stockholders of Parent without the further approval of such stockholders.
Section 13.6 SURVIVAL OF REPRESENTATIONS. The representations and warranties in
the Transaction Agreements shall survive the Closings solely for purposes of
Article XI hereof and such representations and warranties shall terminate on the
day that is one year after the Closing Date; PROVIDED, HOWEVER, that if any
Third Party or Direct Claim for indemnification which relates to a
representation or warranty is made prior to the time such representation or
warranty terminates under this Section 13.6, then such representation and
warranty shall survive solely in connection with such Claim until such time as
such Claim has been finally resolved in accordance with the terms of this
Agreement.
Section 13.7 NOTICES. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered by hand or sent
by facsimile or sent, postage prepaid, by registered, certified or express mail
or reputable overnight courier service and shall be deemed given when so
delivered by hand or sent by facsimile, or if mailed, three days after mailing
(one Business Day in the case of express mail or overnight courier service), as
follows (or at such other address for a party as shall be specified by notice
given in accordance with this Section 13.7):
if to Buyer:
Xxxxx Communications, Inc.
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, III
Facsimile: (000) 000-0000
with copies to:
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
5400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Fax: (000) 000-0000
if to Parent or Seller:
Xxxxx.xxx, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with copies to:
Xxxxx.xxx, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Xx.
Facsimile: (000) 000-0000
Section 13.8 EXHIBITS AND SCHEDULES; INTERPRETATION. The headings contained in
this Agreement or in any Exhibit or Schedule hereto and in the table of contents
to this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement. When a reference is made in this Agreement
to a Section, Article, Exhibit or Schedule, such reference shall be to a Section
or Article of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. For all purposes hereof, the terms "include", "includes" and
"including" shall be deemed followed by the words "without limitation".
Section 13.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by facsimile), all of which shall be considered one and
the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
parties.
Section 13.10 ENTIRE AGREEMENT. The Transaction Agreements, including the
schedules, exhibits, annexes and attachments thereto, contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings relating to such subject matter.
Section 13.11 SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
Section 13.12 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to the
laws that might otherwise govern under applicable principles of conflict of
laws.
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed as of the date first above written.
XXXXX COMMUNICATIONS, INC.
By: /s/ Xxxx X. XxXxxxxxx
-----------------------------------------------------
Name: Xxxx X. XxXxxxxxx
----------------------------------------------
Title: Vice President and Chief Financial Officer
---------------------------------------------
XXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
----------------------------------------------
Title: Chief Financial Officer
---------------------------------------------
TMT HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
----------------------------------------------
Title: Chief Financial Officer
---------------------------------------------
AELIX, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
----------------------------------------------
Title: Chief Financial Officer
---------------------------------------------
