EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
STRATEGIC IMPLICATIONS INTERNATIONAL, INC.
A DELAWARE CORPORATION.
AS BUYER
BORON, XXXXXX & ASSOCIATES, INC.
AS PARENT
EFAN HOLDINGS, INC.
A MARYLAND CORPORATION
(FORMERLY STRATEGIC IMPLICATIONS INTERNATIONAL, INC., A MARYLAND CORPORATION)
AS SELLER
AND
XXXXXXXX X. XXXXXXXX
AND
XXXXXX X. XXXXXXXXX
AS STOCKHOLDERS
MARCH 18, 1998
TABLE OF CONTENTS
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PAGE
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SECTION 1. PURCHASE AND SALE OF ASSETS....................... 1
1.1 Sale of Assets....................................... 1
1.2 Liabilities.......................................... 2
1.3 Purchase Price and Payment........................... 3
1.4 Place of Closing; Closing Date....................... 3
1.5 Transfer of Subject Assets........................... 4
1.6 Delivery of Records and Contracts.................... 4
1.7 Further Assurances................................... 4
1.8 Allocation of Purchase Price......................... 5
1.9 Procedures for Assets not Transferable............... 5
1.10 Employees, Wages and Benefits........................ 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND
STOCKHOLDERS....................................... 6
2.1 Making of Representations and Warranties............. 6
2.2 Organization and Qualification; Capital Stock........ 6
2.3 Authority............................................ 7
2.4 Title to Properties; Liens; Condition of Properties.. 8
2.5 Location of Subject Assets........................... 8
2.6 Financial Statements; Undisclosed Liabilities........ 8
2.7 Tax Matters.......................................... 9
2.8 Collectibility of Accounts Receivable................ 10
2.9 Intellectual Property Rights; Employee Restrictions.. 10
2.10 Business; Compliance with Laws....................... 11
2.11 Insurance............................................ 11
2.12 Transactions with Affiliates......................... 11
2.13 Employee Benefit Plans............................... 12
2.14 Hazardous Waste, Etc. ............................... 12
2.15 List of Certain Employees and Suppliers.............. 13
2.16 Employees; Labor Matters............................. 14
2.17 Customers, Distributors, Panel Members,
Salespersons......................................... 14
2.18 Litigation........................................... 14
2.19 Finder's Fee......................................... 15
2.20 Material Adverse Change.............................. 15
2.21 Contracts............................................ 15
2.22 Banking Relations.................................... 16
2.23 Disclosure........................................... 16
2.24 Securities Law Matters............................... 17
2.25 Millennium Compliance................................ 18
SECTION 3. COVENANTS OF STOCKHOLDERS AND SELLER.............. 18
3.1 Making of Covenants and Agreements.................... 18
(i)
3.2 Non-Use of Trade Names, etc.......................... 18
3.3 Non-Disclosure and Non-Competition................... 18
3.4 Payment of Obligations............................... 19
3.5 Collection of Assets................................. 19
3.6 Securities Filings................................... 20
3.7 Payment of Constructive Trust........................ 20
3.8 Assist in Accreditation.............................. 20
3.9 Transfer of Bank Accounts............................ 20
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
AND PARENT........................................ 20
4.1 Making of Representations and Warranties............. 20
4.2 Organization of Buyer................................ 20
4.3 Authority of Buyer................................... 20
4.4 Finder's Fees........................................ 21
4.5 SEC Reports.......................................... 21
4.6 Material Adverse Change.............................. 22
SECTION 5. COVENANTS OF BUYER AND PARENT..................... 22
5.1. Distribution of Income.............................. 22
SECTION 6. SURVIVAL OF WARRANTIES............................ 22
SECTION 7. INDEMNIFICATION................................... 23
7.1 Indemnification by Stockholders...................... 23
7.2 Indemnification by Buyer and Parent.................. 25
7.3 Notice; Defense of Claims............................ 27
7.4 Sole Remedy.......................................... 28
7.5 Satisfaction of Indemnification Obligations.......... 28
7.6 Insurance Proceeds................................... 28
SECTION 8. MISCELLANEOUS..................................... 29
8.1 Law Governing....................................... 29
8.2 Notices............................................. 29
8.3 Prior Agreements Superseded......................... 30
8.4 Assignability....................................... 30
8.5 Captions and Gender................................. 30
8.6 Certain Definitions................................. 30
8.7 Execution in Counterparts........................... 31
8.8 Amendments; Waivers................................. 31
8.9 Severability........................................ 31
8.10 Publicity and Disclosures........................... 31
8.11 Consent to Jurisdiction and Service................. 31
8.12 Expenses............................................ 32
(ii)
SCHEDULES
Schedule 1.1(a)(i) - Intellectual Property Rights
Schedule 1.1(a)(ii) - Receivables
Schedule 1.1(a)(iv) - Assumed Contracts
Schedule 1.1(a)(v) - Certificates
Schedule 1.1(a)(vi) - Inventory
Schedule 1.1(a)(vii) - Equipment
Schedule 1.2 - Contract Liabilities
Schedule 1.3(b) - Project Information
Schedule 1.8 - Allocation of Purchase Price
Schedule 1.10 - Vacation
Schedule 2.2 - Capitalization
Schedule 2.3 - Liens
Schedule 2.4 - Title to Properties
Schedule 2.6 - Undisclosed Liabilities
Schedule 2.8 - Accounts Receivable
Schedule 2.9 - Intellectual Property Rights
Schedule 2.10 - Compliance with Laws
Schedule 2.11 - Insurance
Schedule 2.12 - Transactions with Affiliates
Schedule 2.13 - Employee Benefit Plans
Schedule 2.14 - Hazardous Waste, Etc.
Schedule 2.15 - Employees and Suppliers
Schedule 2.17 - Suppliers, Customers Distributors, Etc.
Schedule 2.18 - Litigation
Schedule 2.20 - Material Adverse Changes
Schedule 2.21 - Contracts
Schedule 2.22 - Banking Relations
Schedule 4.6 - Material Adverse Changes
(iii)
EXHIBITS
Exhibit A Contingent Payment
Exhibit B Form of Employment Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Registration Rights Agreement
(iv)
ASSET PURCHASE AGREEMENT dated as of March 18, 1998 by and among Boron,
XxXxxx & Associates, Inc., a Delaware corporation ("Parent"), Strategic
Implications International, Inc., a newly formed Delaware corporation ("Buyer"),
EFAN Holdings, Inc., a Maryland corporation formerly named Strategic
Implications International, Inc.("Seller"), and Xxxxxxxx X. Xxxxxxxx and Xxxxxx
X. Xxxxxxxxx (individually a "Stockholder" and collectively the "Stockholders").
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller, and Seller desires to sell, transfer and assign
to Buyer, substantially all of the properties and assets of Seller. The
business and operations of Seller which include the properties and assets to be
transferred to Buyer under this Agreement are referred to herein as the
"Business."
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
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1.1 Sale of Assets.
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(a) Subject to the provisions of this Agreement, at the Closing (as
defined in Section 1.4 hereof) Seller shall sell, transfer and assign to Buyer
and Buyer shall acquire all right, title and interest in and to (1) the names
"Strategic Implications International," "Cogent" and "Design Power" and all
related and associated logos and trademarks and all licenses to or from third
parties with respect thereto (2) all of the goodwill of the Business and (3) all
of the properties, assets and business of Seller used or held for use in the
Business (except as hereinafter provided in Section 1.1(b)) of every kind and
description, tangible and intangible, real, personal or mixed, and wherever
located, including without limitation, the following:
(i) all goodwill and intellectual property rights, including
trade secrets, proprietary information, designs, styles, technologies,
inventions, know-how, formulae, processes, procedures, research records,
test information, software and software documentation, source and object
code, algorithms, promotional materials, customer lists, supplier and
dealer lists, market surveys, marketing know-how and manufacturing,
research and technical information, trade names, copyrights and copyright
registrations, service marks and trademarks (including applications and
registrations therefor), patents and patent applications (including without
limitation the trade names, copyrights and copyright registrations, service
xxxx and trademark registrations and applications and patents and patent
applications described in Schedule 1.1(a)(i) attached hereto), and all
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licenses to or from third parties with respect to the foregoing or rights
related thereto, in each case which is used or held for use in the
Business, and all documentation and media constituting, describing or
relating to the foregoing, including without limitation, manuals, memoranda
and records (collectively, the "Intellectual Property Rights");
(ii) all accounts receivable of the Business, all of which are
listed on Schedule 1.1(a)(ii) attached hereto (the "Receivables");
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(iii) all cash and bank deposits of Seller;
(iv) all of Seller's rights and interests in and to the orders,
commitments, contracts and agreements of the Business, all of which are
listed on Schedule 1.1(a)(iv) attached hereto (the "Contracts");
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(v) all of Seller's right, title and interest in and to all
franchises, licenses, permits, certifications, approvals and authorizations
(each to the extent assignable) relating to the Business all of which are
listed on Schedule 1.1(a)(v) attached hereto (the "Certificates");
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(vi) all of Seller's inventory, stock in trade, work-in-progress,
finished goods and raw materials listed on Schedule 1.1(a)(vi)
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(collectively, the "Inventory");
(vii) all of Seller's equipment, tools, spare parts, fixtures
and other tangible assets related to or used in connection with the
Business, all of which are listed on Schedule 1.1(a)(vii) attached hereto
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(collectively, the "Equipment");
(viii) all other assets and properties of every nature
whatsoever tangible and intangible, and wherever located, used or held for
use in connection with the Business, including without limitation, rights
under contracts or agreements with representatives marketing and selling
the products and services of the Business, copies of customer lists,
customer records and histories, customer invoices, lists of suppliers and
vendors and all records relating thereto, market research information,
advertising matter, catalogues, photographs, sales materials, purchasing
materials, files, data, media materials and all records with respect to the
Business.
The assets, property and business of Seller being sold to and purchased by
Buyer under this Section 1.1(a) are hereinafter sometimes referred to as
"Subject Assets."
(b) Notwithstanding the foregoing, there shall be excluded from such
purchase and sale, Seller's corporate franchise, stock record books, and
corporate record books containing minutes of meetings of directors and
stockholders (collectively, the "Corporate Records" or the "Excluded Assets").
1.2 Liabilities. Except for the Contract Liabilities (as defined below),
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Buyer shall not assume or be bound by any obligations or liabilities of Seller
or any affiliate of Seller of any kind or nature, known, unknown, accrued,
absolute, contingent or otherwise, whether now existing or hereafter arising
whatsoever (the "Excluded Liabilities"). Seller shall be
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responsible for and pay any and all losses, damages, obligations, liens,
assessments, judgments, fines, disposal and other costs and expenses,
liabilities and claims, including, without limitation, interest, penalties and
reasonable fees of counsel, engineers and experts, as the same are incurred, of
every kind or nature whatsoever (all the foregoing being a "Claim" or the
"Claims"), made by or owed to any person to the extent any of the foregoing
relates to (a) the Excluded Assets, (b) the Excluded Liabilities or (c) the
operations or assets of the Business and arises in connection with or on the
basis of events, acts, omissions, conditions or any other state of facts
occurring or existing prior to or on the Closing Date (including, in each case,
without limitation, any Claim relating to or associated with tax matters,
pension and benefits matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, environmental and worker health and safety
matters).
Upon the sale and purchase of the Subject Assets, Buyer agrees to perform
in accordance with their terms (i) the obligations of Seller arising under the
Contracts from and after the Closing, and (ii) those liabilities specified in
Schedule 1.2 (collectively, the "Contract Liabilities"). The assumption of the
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Contract Liabilities by Buyer hereunder shall not enlarge any rights of third
parties under contracts or arrangements with Buyer or Seller or any of their
respective affiliates or subsidiaries. No parties other than the Buyer, the
Parent and Seller shall have any rights under this Agreement. Notwithstanding
anything contained in this Section 1.2 to the contrary, the only liabilities and
obligations of Seller existing on or prior to the Closing Date (including,
without limitation, contractual liabilities and obligations) to be assumed by
Buyer under this Agreement are the Contract Liabilities.
1.3 Purchase Price and Payment.
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(a) In consideration of the sale by Seller to Buyer of the Subject
Assets, subject to the assumption by Buyer of the Contract Liabilities, Buyer
shall pay to Seller on the Closing Date (i) by federal funds wire transfer in
immediately available funds to an account designated by Seller, the sum of four
million, three hundred and thirty thousand dollars ($4,330,000); and (ii)
137,052 shares of common stock of the Parent, par value $.01 per share ("Parent
Stock").
(b) Upon the achievement of the performance goals listed in Exhibit A
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hereto, with reference to Schedule 1.3(b), and subject to the terms and
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conditions contained therein, Buyer shall deliver to Seller an aggregate payment
of one million three hundred and forty thousand dollars ($1,340,000) (the
"Contingent Payment") by check or wire transfer of immediately available funds.
(c) As of the Closing, Seller shall be deemed to pay to Buyer an
amount equal to the amount of deferred revenue reflected on the balance sheet of
Seller as of the Closing, as determined by the auditors of Buyer in accordance
with GAAP, in consideration for Buyer assuming Seller's obligation to perform to
the extent necessary to earn such amount of deferred revenue.
3
1.4 Place of Closing; Closing Date. The closing of the purchase and sale
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provided for in this Agreement (the "Closing") shall be held at the offices of
Xxxxxxx, Procter & Xxxx LLP, Boston, MA, at 10:00 a.m. (local time) on March 18,
1998, or at such other place or earlier or later date as may be fixed by mutual
agreement of Buyer and Seller (the "Closing Date").
1.5 Transfer of Subject Assets. At the Closing, (a) Seller shall deliver
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or cause to be delivered to Buyer (i) good and sufficient instruments of
transfer transferring to Buyer title to all of the Subject Assets and such
instruments of transfer (w) shall be in the form which is usual and customary
for transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers, (x) shall be in form and substance
satisfactory to Buyer and its counsel, (y) shall effectively vest in Buyer good
title to all of the Subject Assets free and clear of all mortgages, pledges,
security interests, charges, liens, restrictions and encumbrances of any kind,
except for liens for taxes not yet due and payable (collectively, "Liens"), and
(z) where applicable, shall be accompanied by evidence of the discharge of all
liens and encumbrances against the Subject Assets; (ii) employment agreements in
the form of Exhibit B, executed by each Stockholder (collectively, the
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"Employment Agreements"); (iii) non-competition agreements in the form of
Exhibit C, executed by each Stockholder (collectively, the "Non-Competition
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Agreements"); (iv) a registration rights agreement in the form of Exhibit D,
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executed by Seller and each Stockholder (the "Registration Rights Agreement");
and (v) such other documentation as may be reasonably agreed to by Buyer and
Seller in connection with the consummation of the transactions contemplated by
this Agreement; and (b) Buyer shall deliver to Seller and the Stockholders (i)
the amounts of cash and Parent Stock set forth in Section 1.3; (ii) the
Employment Agreements executed by Buyer and Parent; (iii) the Registration
Rights Agreement executed by each of Buyer and Parent; and (iv) such other
documentation as may be reasonably agreed to by Buyer and Seller in connection
with the consummation of the transactions contemplated by this Agreement.
1.6 Delivery of Records and Contracts. At the Closing, Seller shall
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deliver or cause to be delivered to Buyer all of the Contracts. Seller shall
also deliver to Buyer at the Closing, all of Seller's business records, books
and other data relating to the assets, business and operations of the Business,
to the extent the same constitute part of the Subject Assets. For five years
after the Closing Date, Buyer shall not destroy any business records, books or
data delivered to it by Seller in accordance with this Section 1.6 without first
giving notice to Seller of the intention to destroy such records, books or data.
Seller at the Closing shall also provide Buyer with copies of the Corporate
Records. Seller may keep copies of the Seller's records to the extent necessary
to comply with Seller's or either Stockholder's tax reporting obligations.
1.7 Further Assurances.
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(a) Seller from time to time after the Closing at the request of Buyer
and without further consideration shall (i) execute and deliver further
instruments of transfer and assignment (in addition to those delivered under
Section 1.5) and take such other actions as
4
Buyer may reasonably require to more effectively transfer and assign to,
including assignments in such forms as are acceptable to the United States
Patent and Trademark Office, and vest in, Buyer each of the Subject Assets and
(ii) cooperate with and provide assistance to Buyer in taking possession of the
Subject Assets.
(b) Buyer and Parent from time to time after the Closing at the
request of Seller and without further consideration shall (i) execute and
deliver further instruments and take such other actions as Seller may reasonably
require to more effectively transfer and assign to, and vest in, Seller the
consideration paid pursuant to this Agreement and (ii) cooperate with and
provide assistance to Seller in taking possession of such consideration.
1.8 Allocation of Purchase Price. The purchase price payable by Buyer
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pursuant to Section 1.3 and the amount of the Contract Liabilities assumed by
Buyer shall represent payment for the Subject Assets and the Non-Competition
Agreements in the amounts set forth on Schedule 1.8 hereto. The amounts
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reflected in said Schedule shall represent the fair market values of the Subject
Assets at the Closing, to the best of the knowledge and belief of the parties
hereto. At or as soon as practicable after the Closing, Buyer and Seller shall
execute an IRS Form 8594 in accordance with the allocation set forth in said
Schedule and in compliance with Section 1060 of the Internal Revenue Code of
1986, as amended, and the rules and regulations thereunder. All tax returns and
reports filed by Buyer and Seller with respect to the transactions contemplated
by this Agreement shall be consistent with such Schedule.
1.9 Procedures for Assets not Transferable. If any of the contracts or
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agreements or any other property or rights included in the Subject Assets is not
assignable or transferable either by virtue of the provisions thereof or under
applicable law without the consent of some party or parties and any such consent
is not obtained prior to the Closing, this Agreement and the related instruments
of transfer shall not constitute an assignment or transfer thereof and, unless
otherwise agreed between Buyer and Seller with respect to such contract, Buyer
shall assume Seller's economic obligations with respect thereto, and Seller
shall use all commercially reasonable efforts to obtain any such consent as soon
as possible after the Closing or otherwise obtain for Buyer the practical and
economic benefit of such property or rights and Buyer shall use all commercially
reasonable efforts to assist in that endeavor.
1.10 Employees, Wages and Benefits.
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(a) Seller shall terminate all employees of the Business and shall be
responsible for making all severance payments to such employees in respect of
such terminations. Buyer shall not assume or have any obligations or
liabilities with respect to such terminations.
(b) Buyer currently intends to offer employment to each of Seller's
employees. Such offer of employment, when and if extended, will include terms
providing for paid vacation and salary for each employee, each as set forth on
Schedule 1.10. Buyer
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5
specifically reserves to itself the right to employ or reject any of Seller's
employees or other applicants in its sole and absolute discretion. Seller
acknowledges and agrees that Buyer may interview and discuss employment terms
and issues with employees. Nothing in this Agreement shall be construed as a
commitment or obligation of Buyer to accept for employment, or otherwise
continue the employment of, any of Seller's employees.
(c) Seller shall pay all wages, salaries, commissions, and the cost of
all fringe benefits provided to each employee of the Business which shall have
become due for work performed as of and through the day on which such employee
is terminated, and Seller shall collect and pay all taxes in respect of such
wages, salaries, commissions and benefits.
(d) Seller acknowledges and agrees that Buyer is not assuming and
shall not have any obligations or liabilities of under, any benefit plan
maintained by, or for the benefit of employees of, the Business, including
without limitation obligations for severance, provided, however, that Buyer will
assume Seller's obligation for vacation accrued but not taken as of the Closing
Date to the extent set forth on Schedule 1.10.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS.
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2.1 Making of Representations and Warranties. As a material inducement to
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Buyer and Parent to enter into this Agreement and consummate the transactions
contemplated hereby, Seller and each of the Stockholders jointly and severally
hereby make the representations and warranties contained in this Section 2.
2.2 Organization and Qualification; Capital Stock. Seller is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland with full power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it. Seller
is qualified to do business as a foreign corporation in Virginia, it being the
only jurisdiction in which such qualification is necessary, except where the
failure to be so qualified would not have a material adverse effect on Seller or
the Business. All of the issued and outstanding capital stock of the Seller is
owned beneficially and of record as set forth in Schedule 2.2, free and clear of
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any lien, restrictions or encumbrances, and there are no outstanding options,
warrants, rights, commitments, pre-emptive rights (except as provided by law) or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Seller.
Seller does not have any subsidiaries or own any securities issued by any
other business organization or governmental authority or any direct or indirect
interest in or control over any corporation, partnership, joint venture or
entity of any kind relating to the business conducted by Seller. Prior to the
Closing Date, Seller has amended its Articles of Incorporation to
6
change its corporate name to a name which does not include the name "Strategic
Implications International" or any related name.
2.3 Authority.
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(a) The Seller has full corporate power and authority to execute,
deliver and perform this Agreement and each other agreement or instrument
contemplated hereby and the execution and delivery of this Agreement and each
other agreement or instrument contemplated hereby and the performance of all
obligations hereunder and thereunder have been duly authorized by all necessary
action of Seller. This Agreement and each other agreement, document and
instrument executed by Seller pursuant to or in connection with this Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable principles.
Except as disclosed on Schedule 2.3, the execution, delivery and performance by
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the Seller of this Agreement and each other agreement, document and instrument
contemplated hereby:
(i) do not and will not violate any provision of the Articles of
Incorporation or By-laws of Seller, each as amended or restated to date;
(ii) do not and will not violate any laws of the United States or any
state or other jurisdiction applicable to Seller or require Seller to
obtain any approval, authorization, declaration, consent or waiver of, or
make any filing with or give notice to, any person, entity or public or
governmental authority that has not been obtained, made or given; and
(iii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, require a consent under or give
rise to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease,
permit, license, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which Seller is a party or by which
Seller or its property is bound or affected, or result in the creation or
imposition of any Lien on any of the Subject Assets.
(b) Each Stockholder has full right, authority, power and capacity to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by or on behalf of him or her pursuant to or contemplated by this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument executed and
delivered by each Stockholder pursuant to or contemplated by this Agreement
constitute, or when executed and delivered will constitute, valid and binding
obligations of each Stockholder enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency or
reorganization laws, or other
7
laws relating to or affecting the availability of the remedy of specific
performance or equitable principles of general application. The execution,
delivery and performance by each Stockholder of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate any laws of the United States or any
state or other jurisdiction applicable to either Stockholder or require
either Stockholder to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made, except that no representation is made with
respect to the HSR Act; and
(ii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which either Stockholder is a party or by which the
property of either Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or
other charge or encumbrance on any of the Subject Assets.
2.4 Title to Properties; Liens; Condition of Properties.
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(a) The Subject Assets do not include any real property. Schedule 2.4
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sets forth the addresses and uses of all real property that the Seller leases.
Seller owns all of the Subject Assets and Seller has and is conveying to Buyer
hereunder good title to all of its personal property, tangible and intangible
(to the extent Seller owns rights in such intangible property), included in the
Subject Assets. None of such property or assets of Seller, tangible or
intangible, is subject to any Lien. Except as set forth on Schedule 2.4, no
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financing statement under the Uniform Commercial Code with respect to any of the
Subject Assets is active in any jurisdiction, and Seller has not signed any such
active financing statement or any security agreement authorizing any secured
party thereunder to file any such financing statement. The Subject Assets are
all of the material assets used in the operation of the Business as the same has
been operated prior to the date hereof. The Subject Assets (i) are in working
order (reasonable wear and tear excepted), (ii) have been and shall through the
Closing be maintained in a manner consistent with the past maintenance practices
of Seller, and (iii) to the best knowledge of Seller, conform with all
applicable state and federal statutes, ordinances, regulations and laws.
(b) Upon delivery to Buyer of the instruments of transfer referred to
in Section 1.5 hereof, Buyer will receive good and valid title to all of the
Subject Assets, free and clear of all Liens.
2.5 Location of Subject Assets. The material tangible Subject Assets are
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located at Seller's facility at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000 (the "Facility").
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The remainder of the tangible assets are computers in the possession of Seller's
employees, as indicated in the records of the Seller provided by Seller to Buyer
at Closing.
2.6 Financial Statements; Undisclosed Liabilities.
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(a) Seller has previously furnished to Buyer and Parent copies of its
unaudited financial statements for the fiscal years ended December 31, 1995,
1996 and 1997 and the interim period ending February 28, 1998, which financial
statements for 1997 and part year 1998 are set forth in Schedule 2.6(a) .
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Except as described in Schedule 2.6(a), such financial statements referred to in
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this Section 2.6(a) were prepared in conformity with generally accepted
accounting principles applied on a consistent basis, and fairly and accurately
present the financial position of Seller as of the dates thereof and the results
of operations and cash flows of Seller for the periods shown therein (subject to
the absence of footnotes that would be required by generally accepted accounting
principles), and to the best of Seller's knowledge, are complete, correct and
consistent in all material respects with the books and records of Seller.
(b) The projections set forth on Schedule 2.6(b) represent good faith
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estimates of Seller's performance for 1998 which were in good faith believed to
be reasonable when made and continue to be reasonable as of the date hereof.
Notwithstanding the foregoing, no representation is made that the projections
will be achieved.
(c) Except as and to the extent reflected or reserved against in the
audited balance sheet of Seller at December 31, 1997 contained in the financial
statements referred to in Section 2.6(a) (the "Base Balance Sheet") or as listed
on Schedule 2.6(c), the Seller does not have and is not subject to any material
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liability or obligation of any nature, whether accrued, absolute or otherwise,
of a kind that would be required to be disclosed in such financial statements
or, to its knowledge, any other material liability or obligation.
2.7 Tax Matters. Seller has timely and properly filed all federal, state,
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local and foreign income, excise and franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and other tax returns
required to be filed by it and has paid all Taxes (as defined below) owing by it
(whether or not shown on any Tax Return), except Taxes which have not yet
accrued or otherwise become due, for which adequate provision has been made in
the pertinent financial statements referred to in Section 2.6 above. The
provision for taxes on the Base Balance Sheet is sufficient as of its date for
the payment of all material accrued and unpaid federal, state, county and local
taxes of any nature of Seller, and any applicable taxes owing to any foreign
jurisdiction (collectively, "Taxes"), whether or not assessed or disputed. All
Taxes and other assessments and levies which Seller is required to withhold or
collect have been withheld and collected and have been paid over to the proper
governmental authorities. Seller has never received notice of any audit or of
any proposed deficiencies from the Internal Revenue Service or any other
taxation authority. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the best knowledge of Seller, threatening to
assert
9
against the Seller any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith. The Seller is and has been since
January 1, 1993 an "S Corporation" within the meaning of Section 1361(a)(1) of
the Internal Revenue Code of 1986, as amended, and the applicable laws of the
State of Virginia.
2.8 Collectibility of Accounts Receivable. All of the accounts receivable
-------------------------------------
of the Seller arise from services actually provided in the ordinary course of
business and are to the best of Seller's knowledge, valid and enforceable claims
not subject to set-off or counterclaim. To the best of Seller's and each
Stockholder's knowledge, all of the accounts receivable of Seller are
collectible in the ordinary course of business (less reserve for bad debts set
forth on the Base Balance Sheet). Notwithstanding the preceding sentence, Seller
does not guarantee collectibility of such receivables. Seller does not have any
accounts receivable or loans receivable from any person, firm or corporation
which is affiliated with Seller or from any stockholder, director, officer or
employee of Seller or any affiliate thereof. Schedule 2.8 lists the accounts
------------
receivable of the Seller as of February 28, 1998.
2.9 Intellectual Property Rights; Employee Restrictions. Except as set
---------------------------------------------------
forth in Schedule 2.9:
------------
(a) Seller has exclusive ownership of, with the right to use, sell,
license, dispose of, and bring actions for infringement of, all patent,
copyright, trade secret, trademark or other proprietary rights ("Intellectual
Property Rights") material to the conduct of its business, as presently
conducted or currently contemplated to be conducted (the "Seller Rights"), which
rights are set forth on Schedule 2.9(a), provided that no representation is made
---------------
with respect to "off the shelf" software used by Seller that is generally
commercially available.
(b) The business of Seller as presently conducted does not violate any
agreements which Seller has with any third party or, to the best of Seller's or
either Stockholder's knowledge, infringe any patent, trademark, copyright or
trade secret or, to the best knowledge of Seller, any other Intellectual
Property Rights of any third party.
(c) No claim is pending or, to the best knowledge of the Seller,
threatened against the Seller nor has Seller received any notice or claim from
any person asserting that any of the Seller's present or contemplated activities
infringe or may infringe any Intellectual Property Rights of such person, and
Seller is not aware of any infringement by any other person of any rights of
Seller under any Intellectual Property Rights.
(d) Each current and former contract employee of the Seller involved
in development of any of the Seller Rights, has executed an agreement regarding
confidentiality and proprietary information, and, to the best knowledge of
Seller, none of such employees, consultants or independent contractors is in
violation of any agreement or in breach of any agreement or arrangement with
former or present employers relating to proprietary information.
10
All of the registered patents, trademarks and copyrights constituting
Intellectual Property Rights have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified on
Schedule 2.9, and have been properly maintained and renewed in accordance with
------------
all applicable provisions of law and administrative regulations in the United
States and each such country.
2.10 Business; Compliance with Laws. Seller has all material
------------------------------
franchises, permits, licenses and other material rights and privileges
reasonably necessary to permit it to own its property and to conduct its
business as it is presently or currently contemplated to be conducted. Seller
is currently and has heretofore been in compliance in all material respects with
all applicable federal, state, local and foreign laws, regulations and
guidelines, including without limitation all laws, regulations and guidelines of
the Food and Drug Administration, the Federal Trade Commission, the Federal
Communications Commission, the American Medical Association and the
Pharmaceutical Marketing Association, in each case to the extent applicable.
Schedule 2.10 contains a complete and accurate description of the status of
-------------
Seller's accreditation status with the Accreditation Council for Continuing
Medical Education (the "ACCME") and the American Council on Pharmaceutical
Education (the "ACPE") and each additional action required to be taken by
Seller, the ACCME of the ACPE in order for Seller to obtain full accreditation
from each of the ACCME and the ACPE. No other consent of either the ACCME or
the ACPE is required in order for Seller's accreditation status to remain in
full force and effect following the transactions contemplated by this Agreement.
Seller has no knowledge that the current director of the Strategic Institute or
any person who was "accredited" by the ACCME or the ACPE does not plan to accept
employment with Buyer after the Closing. Neither Seller or either Stockholder
has been: (a) convicted in a criminal proceeding or named as a subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses); (b) subject to any order, judgment, or decree (not subsequently
reversed, suspended or vacated) of any court of competent jurisdiction
permanently or temporarily enjoining it or him from, or otherwise imposing
limits or conditions on its or his engaging in any securities, investment
advisory, banking, insurance or other type of business or acting as an officer
or director of a public company; or (c) found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated any federal or state
commodities, securities or unfair trade practices law, which such judgment or
finding has not been subsequently reversed, suspended, or vacated. Seller is
not subject to or bound by any agreement, judgment, decree or order which may
materially and adversely affect any of the Subject Assets or the business,
prospects or condition (financial or otherwise) of the Business.
2.11 Insurance. Schedule 2.11 sets forth all insurance policies
--------- -------------
currently held by Seller and the limits applicable thereto.
2.12 Transactions with Affiliates. There are no loans, leases,
----------------------------
contracts or other transactions between Seller and any officer, director or
stockholder of Seller or any family
11
member or affiliate of the foregoing persons and there have been no such
transactions within the past two (2) years except as set forth in Schedule 2.12.
-------------
Schedule 2.12 sets forth the distributions made to Seller's stockholders for the
-------------
purpose of satisfying their obligations for 1997, and an estimate of each
stockholder's obligations for the portion of 1998 prior to the Closing, arising
out of Seller's status as a subchapter S corporation, and such distributions are
good faith estimates of stockholders' actual obligations.
2.13 Employee Benefit Plans. Seller does not maintain or contribute
----------------------
to any employee benefit plan, stock option, bonus or incentive plan, severance
pay policy or agreement, deferred compensation agreement, or any similar plan or
agreement (an "Employee Benefit Plan") other than the Employee Benefit Plans
identified in Schedule 2.13. To the best of Seller's or either Stockholder's
-------------
knowledge, the operation of each Employee Benefit Plan comply in all material
respects with all applicable laws and regulations relating to such Employee
Benefit Plans. There are no unfunded obligations of Seller under any
retirement, pension, profit-sharing, deferred compensation plan or similar
program, except as reflected on the financial statement of December 31, 1997
attached as Schedule 2.6. Seller is not required to make any payments or
-------------
contributions to any Employee Benefit Plan pursuant to any collective bargaining
agreement or, to the knowledge of Seller, any applicable labor relations law,
and all Employee Benefit Plans are terminable at the discretion of Seller
without liability to the Seller upon or following such termination. Seller has
never maintained or contributed to any Employee Benefit Plan providing or
promising any health or other nonpension benefits to terminated employees except
with respect to the continuation of group health plan benefits to the extent
authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (commonly known as
"COBRA").
2.14 Hazardous Waste, Etc.
---------------------
(a) Except as set forth in Schedule 2.14 hereto, (i) Seller has never
-------------
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the best of Seller's knowledge, no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned, or to
the best of Seller's and each Stockholder's knowledge, operated, leased, or used
by Seller, or has ever been located in the soil or groundwater at any such site;
(iii) to the best of Seller's knowledge, no Hazardous Material has ever been
transported from any site presently or formerly owned, or to the best of
Seller's and each Stockholder's knowledge, operated, leased, or used by Seller
for treatment, storage, or disposal at any other place; (iv) to the best of
Seller's knowledge, Seller does not presently own, operate, lease, or use, nor
has it previously owned, nor to the best of Seller's and each Stockholder's
knowledge, has it previously operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any governmental agency on any property, facility, machinery, or
equipment owned, or to the best of Seller's and each Stockholder's knowledge,
operated, leased, or used by Seller in connection with the presence of any
Hazardous Material.
12
(b) Except as set forth in Schedule 2.14 hereto, (i) Seller does not
-------------
have any material liability under, nor has it ever violated, any Environmental
Law (as defined below); (ii) Seller, any property owned, operated, leased, or
used by Seller, and any facilities and operations thereon, and to the best of
Seller's and either Stockholder's knowledge are presently in compliance with all
applicable Environmental Laws; (iii) Seller has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
Seller has no reason to believe that any of the items enumerated in clause (iii)
of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.14 hereto, no site owned, or to
-------------
the best of Seller's or either Stockholder's knowledge, operated, leased, or
used by Seller or any of its subsidiaries contains any asbestos or asbestos-
containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) Seller has provided to Buyer copies of all documents, records, and
information in the possession and control of Seller or any of its subsidiaries
concerning any environmental or health and safety matter relevant to Seller or
any of its subsidiaries, whether generated by the Seller, its subsidiaries, or
others, including without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.14, (i) "Hazardous Material" shall
------------
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller, each of its subsidiaries and all other entities for whose
conduct the Seller or any of its subsidiaries is or may be held responsible
under any Environmental Law.
2.15 List of Certain Employees and Suppliers. Schedule 2.15 contains
--------------------------------------- -------------
a list of all managers, employees and consultants and independent contractors of
Seller who, individually, have received or are scheduled to receive compensation
or payments for the fiscal year ended December 31, 1997 in excess of $35,000.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual. Schedule 2.15 sets forth a list
-------------
13
of all suppliers to whom Seller made payments aggregating $35,000 or more during
the fiscal year ended December 31, 1997 showing, with respect to each, the name,
address and dollar volume involved. No supplier has terminated or reduced its
business with Seller or materially and adversely modified its relationship
therewith.
2.16 Employees; Labor Matters. Seller employs approximately 26 full-
------------------------
time employees and 2 part-time employees, has 3 contracts with independent
contractors and has no notice of any information that would commonly be
considered the type that would impede or indicate a lack of a good employer-
employee relationship. Seller is not delinquent in payments to any of its
employees or independent contractors for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed for it to the
date hereof or amounts required to be reimbursed to such employees or
independent contractors. Upon termination of the employment of any of said
employees or independent contractors who is not under a written contract
disclosed in Schedule 2.21, no severance or other payments will become due.
Seller has no policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment
or services. To the best of Seller's or either Stockholder's knowledge, Seller
is in compliance in all material respects with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. There are no changes pending, or
of which Seller has knowledge threatened with respect to (including, without
limitation, resignation of) the senior management or key supervisory personnel
or independent contractors of Seller nor has Seller received any notice or
information concerning any prospective change with respect to such senior
management or key supervisory personnel.
2.17 Customers, Distributors, Panel Members, Salespersons. Schedule
---------------------------------------------------- --------
2.17 sets forth each representative, distributor and independent contractor of
----
Seller at the date hereof, any panel member who participated as a panel member
in more than five (5) meetings in fiscal 1997 and each customer, salesperson
and/or broker of Seller who accounted for more than 5% of the sales of Seller
for the twelve (12) months ended December 31, 1997 (collectively, the
"Customers, Distributors and Brokers"). Seller has received no notice from its
Customers, Distributors, and Brokers of any information that would commonly be
considered the type that would impede or indicate a lack of good commercial
working relationships. Except as set forth on Schedule 2.17, no Customer,
-------------
Distributor or Broker of Seller has canceled or otherwise terminated its
relationship with Seller, or has during the last twelve months decreased
materially its services, supplies or materials to Seller or its usage or
purchases of the services or products of Seller. No Customer, Distributor or
Broker has, to the best knowledge of the Seller, any plan or intention to
terminate, to cancel or otherwise materially and adversely modify its
relationship with Seller or to decrease materially or limit its services,
supplies or materials to Seller or its usage, purchase or distribution of the
services or products of Seller.
2.18 Litigation. Except as set forth on Schedule 2.18, there is no
---------- -------------
litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in
14
effect or, to the best knowledge of Seller, threatened against Seller or either
Stockholder relating to or affecting any of the Subject Assets or the Business.
2.19 Finder's Fee. Seller has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
2.20 Material Adverse Change. Except as specifically disclosed on
-----------------------
Schedule 2.20 to this Agreement, since December 31, 1997:
-------------
(a) there has not been any material adverse change in the business,
results of operations, condition (financial or otherwise), properties,
assets, liabilities or obligations of the Business of the kind that would
be required to be disclosed in financial statements prepared in accordance
with GAAP;
(b) there has not been any damage, destruction or loss (whether or not
covered by insurance), materially and adversely affecting the business,
prospects, results of operations, condition (financial or otherwise),
assets or properties of the Business;
(c) there has not been any change in the relationships of Seller with
respect to its suppliers, distributors, licensees, licensors, customers or
others with whom it has business relationships which would have a material
adverse effect on the Business, and Seller does not have knowledge of any
fact or contemplated event which may cause any such material adverse
change;
(d) the business conducted by the Business has been conducted and
carried on only in the ordinary and regular course consistent with past
practice;
(e) since January 15, 1998, there has not been any payment made by
Seller to either Stockholder of any affiliate thereof, including without
limitation, any payment by means of a dividend, distribution, redemption of
capital stock or similar payment; and
(f) there has not been any alteration or change in the methods of
operation employed by the Business.
2.21 Contracts. Except for Contracts and Certificates listed in
---------
Schedule 1.1(a)(iv) and Schedule 1.1(a)(v) (true and complete copies (or, in the
-------------------- ------------------
case of material verbal agreements, written descriptions) of which have been
delivered to Buyer), neither Seller nor either Stockholder is a party to or
subject to any of the following contracts or agreements, in each case which
relates to, or is necessary in connection with the operation of, the Business:
15
(a) any contract or agreement which by its terms does not terminate or
is not terminable without penalty by Seller or any successor or assign
within one year after the date hereof;
(b) any contract or agreement for the sale or lease of its products or
services, except orders in the ordinary course of the Business;
(c) any contract with any sales agent or distributor of products or
services of Seller;
(d) any contract containing covenants limiting the freedom of Seller
to compete in any line of business or with any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any indenture, mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for the borrowing of money and any related
security agreement;
(g) any contract or agreement with any officer, employee, director or
stockholder of Seller or with any persons or organizations controlled by or
affiliated with any of them; or
(h) any material verbal contract, agreement, arrangement or
understanding with the suppliers or customers of the Business.
All of the Contracts are valid and are in full force and effect and
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other rights affecting creditors'
rights generally, and general equitable principles. To the best knowledge of
Seller, each Contract constitutes the legal, valid and binding obligation of
each party thereto other than Seller enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other rights affecting creditors' rights generally, and general equitable
principles. Except as set forth on Schedule 2.21, to the best knowledge of
-------------
either Stockholder or Seller, neither Seller nor any other party to any Contract
is in material default in complying with any provisions thereof, and no
condition or event or facts exist which, with notice, lapse of time or both
would constitute a material default thereof on the part of Seller or, to the
best knowledge of Seller, on the part of any other party thereto.
2.22 Banking Relations. All of the arrangements which the Seller has
-----------------
with any banking or similar institution are completely and accurately described
in Schedule 2.22 attached hereto, indicating with respect to each of such
-------------
arrangements
16
the type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.23 Disclosure. The representations, warranties and statements made
----------
or contained in this Agreement, in the documents, certificates, filings,
Schedules and Exhibits given or delivered by Seller and either Stockholder in
connection with and pursuant to this Agreement do not, either individually or
when taken together, contain any untrue statement of a material fact, and do not
omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties and statements not materially
misleading in light of the circumstances in which they were made or delivered.
2.24 Securities Law Matters. Seller hereby represents and warrants to
----------------------
the Buyer and Parent that with respect to Seller's receipt of Parent Stock
hereunder:
(a) Seller is acquiring the Parent Stock for its own account, for
investment, and not with a view to any "distribution" thereof within the
meaning of the Securities Act. Seller is an "accredited investor" as
defined in the Securities Act and is knowledgeable and experienced in the
making of investments of the type involved in the acquisition of the Parent
Stock pursuant to the Agreement, is able to bear the economic risk of loss
of its investment in the Parent, has been granted the opportunity to
investigate the affairs of the Buyer and Parent and to ask questions of
their officers and employees, and has availed itself of such opportunity
either directly or through its authorized representative; and
(b) Seller understands that because the shares of Parent Stock have
not been registered under the Securities Act or securities or "blue sky"
laws of any jurisdiction, it cannot dispose of any or all of the shares of
the Parent Stock unless such shares of Parent Stock are subsequently
registered under the Securities Act or exemptions from such registration
are available. Seller acknowledges and understands it has no right to
require Parent to register the Parent Stock except as set forth in the
attached Registration Rights Agreement. Seller further understands that
the Parent may, as a condition to the transfer of any of the Parent Stock,
require that the request for transfer be accompanied by an opinion of
counsel as described below. Seller understands that each certificate
representing the Parent Stock will bear a legend in substantially the form
provided below (in addition to any legend required under applicable state
securities laws).
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER NAMED
HEREON FOR HIS OWN ACCOUNT FOR INVESTMENT; AND SUCH SECURITIES MAY NOT
BE PLEDGED, SOLD OR IN ANY OTHER WAY TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH
17
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS IN EFFECT AT THAT
TIME, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
2.25 Millennium Compliance. All computer software products, except
---------------------
for commercially available software, that are owned by Seller, exclusively
licensed to Seller, licensed, sold or otherwise distributed to others by Seller
or are otherwise required for the conduct of the Business ("Software") are
Millennium Compliant. As used herein, "Millennium Compliant" shall mean the
ability of the Software to provide the following date related functions:
(i) consistently handle date information before, during and after
January 1, 2000, including but not limited to accepting date input,
providing date output and performing calculations on dates or portions of
dates;
(ii) function accurately in accordance with the documentation
relating to the applicable Software and without interruption before, during
and after January 1, 2000, without any change in operations associated with
the advent of the new century;
(iii) respond to two-digit date input in a way that resolves any
ambiguity as to the century in a disclosed, defined and predetermined
manner; and
(iv) store and provide output of date information in ways that
are unambiguous as to century.
SECTION 3. COVENANTS OF STOCKHOLDERS AND SELLER.
------------------------------------
3.1 Making of Covenants and Agreements. Seller and Stockholders hereby
----------------------------------
covenant and agree as set forth in this Section 3.
3.2 Non-Use of Trade Names, etc. After the Closing Date, neither Seller,
---------------------------
nor any person controlling, controlled by or under common control with Seller or
the Stockholders will for any reason, directly or indirectly, for itself or any
other person, (a) use any Intellectual Property Rights transferred pursuant to
this Agreement (including the names "Strategic Implications International,"
"Cogent" or "DesignPower"), or (b) use or disclose any Intellectual Property
Rights or any trade secrets, confidential information, know-how, proprietary
information or other intellectual property described in Section 1.1(a)(i) hereof
and transferred pursuant to this Agreement or otherwise arising in connection
with the operation of the Business, except that Seller may disclose such
information to Buyer and Parent in connection with the operation of the Business
by Buyer and Parent after the Closing Date.
18
3.3 Non-Disclosure and Non-Competition. Each Stockholder and Seller, in
----------------------------------
order to induce Buyer and Parent to enter into this Agreement, expressly
covenants and agrees that neither Seller nor either Stockholder, nor any of
their affiliates will, directly or indirectly, (a) for a period of ten (10)
years following the Closing Date, disclose or furnish to any person, other than
Buyer or Parent, any proprietary information of, or confidential information
concerning, the Business, Buyer or Parent or any affiliate of Buyer or Parent
except as required by law; and (b) for a period of three (3) years following the
Closing Date, without the express written consent of the Buyer, directly or
indirectly, anywhere in the United States, engage in any activity which is, or
participate or invest in, or provide or facilitate the provision of financing
to, or assist (whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity), any
business, organization or person other than the Buyer or Parent (or any
affiliate of the Buyer or Parent, including Cogent Interactive Communications,
Inc. and DesignPower, Inc.) whose business, activities, products or services are
competitive with any of the business, activities, products or services conducted
or offered by the Buyer or Parent and their subsidiaries during any period in
which the Stockholder serves as an officer or employee of the Buyer or Parent or
any of its subsidiaries, which business, activities, products and services shall
include in any event the provision of marketing services to and related
marketing activities involving pharmaceutical companies, providing accredited or
unaccredited training and education programs to the health care industry,
healthcare telemarketing and Internet marketing of pharmaceuticals, or providing
other services currently provided by Seller or currently contemplated to be
provided by Seller in such general areas of service. In addition, neither
Stockholder will disparage the Buyer or Parent, the Business or the products or
services conducted or offered by the Buyer or Parent and their subsidiaries
during any period in which the Stockholder served as an officer or employee of
the Buyer or Parent or any of their subsidiaries. Without implied limitation,
the forgoing covenant shall include hiring or engaging or attempting to hire or
engage for or on behalf of himself or herself or any such competitor any officer
or employee of the Buyer or Parent or any of their direct and/or indirect
subsidiaries, encouraging for or on behalf of himself or herself or any such
competitor any such officer or employee to terminate his or her relationship or
employment with the Buyer or the Parent or any of their direct or indirect
subsidiaries, soliciting for or on behalf of himself or herself or any such
competitor any client of the Buyer or Parent or any of their direct or indirect
subsidiaries and diverting to any person (as hereinafter defined) any client or
business opportunity of the Buyer, the Parent or any of any of their direct or
indirect subsidiaries.
3.4 Payment of Obligations. Subsequent to the Closing, Seller and its
----------------------
affiliates shall pay all of the Excluded Liabilities in the ordinary course of
business as they become due. Seller and Stockholders agree that Seller shall
maintain sufficient net worth and liquidity after the Closing in order to
satisfy such Excluded Liabilities, if any, known to Seller as of the Closing.
3.5 Collection of Assets. Subsequent to the Closing, Buyer and its
--------------------
assignees shall have the right and authority to collect all receivables and
other items transferred and assigned
19
by Seller hereunder and to endorse with the name of Seller or any of its
affiliates any checks received on account of such receivables or other items,
and Seller and each Stockholder agree that they will promptly transfer or
deliver to Buyer and its assignees from time to time, any cash or other property
that it may receive on or after the Closing with respect to any claims,
contracts, licenses, leases, commitments, sales orders, purchase orders,
receivables of any character or any other items included in the assets
transferred to Buyer pursuant to this Agreement.
3.6 Securities Filings. Seller and each Stockholder shall reasonably
------------------
cooperate with Buyer and Parent to permit the Buyer, Parent and their
subsidiaries in accordance with applicable law to promptly prepare and file on
or before the due date or any extension thereof all filings required to be made
by Buyer or Parent with the NASDAQ Stock Market and the Securities and Exchange
Commission (the "SEC"), including without limitation, the 8-K (and related
financial statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement. All such filings shall be at
Buyer's or Parent's sole cost and expense, and Buyer shall reimburse Seller for
any costs incurred by Seller in connection with this Section 3.6.
3.7 Payment of Constructive Trust. Efessiou shall ensure that the
-----------------------------
consideration paid to Seller hereunder and distributed to him, including the
Parent Stock and the Contingent Payment are distributed in accordance with the
intent and terms of the constructive trust on 10% of Efessiou's interest in the
business of Seller established in favor of Xxxxxx Xxxxxxxx.
3.8 Assist in Accreditation. Seller and each Stockholder shall each use
-----------------------
their reasonable best efforts to assist Buyer in transferring the accreditation
status of Seller to Buyer.
3.9 Transfer of Bank Accounts. At the Closing, Seller shall transfer to
-------------------------
Buyer all deposits held in any of Seller's bank accounts and any other cash of
Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
--------------------------------------------------
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Seller and each Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and Parent hereby makes the
representations and warranties to Seller and each Stockholder contained in this
Section 4.
4.2 Organization of Buyer. Each of Buyer and Parent is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of Delaware with
full corporate power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it. Buyer and Parent are qualified to
do business as a foreign corporation in each jurisdiction
20
in which such qualification is necessary, except where the failure to be so
qualified would not have a material adverse effect on Buyer and Parent as a
whole.
4.3 Authority of Buyer. Buyer and Parent have full corporate power and
------------------
authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Buyer and Parent pursuant to this
Agreement and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Buyer and Parent of this Agreement
and each such other agreement, document and instrument have been duly authorized
by all necessary action of Buyer and Parent and no other action on the part of
Buyer or Parent is required in connection therewith. This Agreement and each
other agreement, document and instrument executed and delivered by Buyer and
Parent pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the valid and binding obligation of Buyer and Parent
enforceable in accordance with its terms. The execution, delivery and
performance by Buyer and Parent of this Agreement and each agreement, document
and instrument contemplated hereby:
(i) do not and will not violate any provision of the certificate of
incorporation or by-laws of Buyer or Parent;
(ii) do not and will not violate any laws of the United States, or any
state or other jurisdiction applicable to Buyer or Parent or require Buyer
or Parent to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made; and
(iii) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award, whether written or oral, to which Buyer or Parent is
bound or affected.
4.4 Finder's Fees. Buyer and Parent have not incurred or become liable
-------------
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement.
4.5 SEC Reports. Parent's prospectus dated September 23, 1997 included in
-----------
its registration statement filed with the SEC and all other forms, reports and
documents filed with the SEC since September 23, 1997 (collectively, the "SEC
Reports") have been prepared in accordance with the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and accurately state all material facts with respect to
finances, operation and management of Parent. The balance sheets (including the
related notes) included in the SEC Reports are complete and correct in all
material respects and fairly present the financial position of Parent as of the
respective dates thereof, and the other
21
related statements (including the related notes) included therein are complete
and correct in all material respects and fairly present the results of
operations and cash flows of Parent for the respective fiscal periods set forth
therein in accordance with generally accepted accounting principles applied on a
consistent basis, except in the case of interim financial statements for normal
recurring and certain non-recurring audit adjustments necessary for a fair
presentation of the financial position and operating results of Parent for the
interim periods which will not be materially adverse and for the omission of
footnotes to said interim financial statements that would be required by
generally accepted accounting principles. Parent will promptly prepare and file
on or before the due date or any extension thereof all filings required to be
made by Parent with the NASDAQ Stock Market and the Securities and Exchange
Commission (the "SEC"), including without limitation, the 8-K (and related
financial statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement.
4.6 Material Adverse Change. Except as set forth on Schedule 4.6, since
----------------------- ------------
September 30, 1997, (a) there has not been a material adverse change in the
business, results of operations, condition (financial or otherwise), properties,
assets, liabilities or obligations of Parent that would be required to be
disclosed in financial statements prepared in accordance with GAAP; and (b)
there is no material litigation pending or, to the best knowledge of Buyer or
Parent, threatened against Buyer or Parent.
SECTION 5. COVENANTS OF BUYER AND PARENT.
-----------------------------
5.1. Distribution of Income. Following the Closing, the Stockholders
----------------------
shall notify Parent of their taxable income in respect of income of Seller for
the period from January 1, 1998 through the date prior to the date of the
Closing and the aggregate amount of their unpaid income tax due or to become due
thereon (after adjustments for any credits, losses or deductions) and supply
reasonable supporting documentation for such income and income tax due. Parent
shall thereafter distribute to each of Efessiou and Angelides cash, net of
taxes, in the amount of such unpaid income tax obligations. Each of Efessiou
and Angelides shall thereafter, in accordance with applicable law, timely and
properly prepare and file, or cause to be prepared and filed, on or before the
due date or any extension thereof, all federal, state and local tax returns
required to be filed by such person with respect to taxable periods ending on or
before the Closing and to pay or cause to be paid all taxes due with respect
thereto.
SECTION 6. SURVIVAL OF WARRANTIES.
----------------------
6.1 Survival of Warranties. All representations, warranties, agreements,
----------------------
covenants and obligations herein or in any Schedule or Exhibit to this Agreement
or any certificate or other document specifically required to be delivered under
this Agreement by any party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the parties receiving the
same and shall survive the Closing for a period of two (2) years (subject to the
provisions of Sections 7.1 and 7.2 hereof) regardless of any
22
investigation and shall not merge into the performance of any obligation by any
party hereto; provided, however, that the representations and warranties shall
expire on the same dates and to the extent that the rights to indemnification
with respect thereto under Section 7 shall expire.
SECTION 7. INDEMNIFICATION.
---------------
7.1 Indemnification by Stockholders.
-------------------------------
(a) Each Stockholder, jointly and severally (subject to subsection (b)
of this Section 7.1), agree to defend, indemnify and hold Buyer, Parent and
their respective subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof and any person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (individually a "Buyer Indemnified Party" and collectively the
"Buyer Indemnified Parties") harmless from and against any and all Claims (as
defined in Section 1.2 hereof), and any diminution in value of the Subject
Assets or the Business (it being understood that the consideration paid for the
Subject Assets hereunder shall not be presumed to be the value of the Business),
whether or not arising out of third-party claims and including all reasonable
amounts paid in investigation, defense or settlement of the foregoing, which may
be sustained or suffered by any of them based upon, arising out of, by reason of
or otherwise in respect of or in connection with:
(i) any inaccuracy in or breach of any representation or warranty
made by Seller or either Stockholder in this Agreement, or in any Schedule
or exhibit to this Agreement or any certificate or other document delivered
in connection with the consummation of the transactions contemplated by
this Agreement (collectively, "Buyer Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Seller or
either Stockholder in this Agreement or in any Schedule or exhibit to this
Agreement or any certificate or other document delivered in connection with
the consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the business or operations of Seller
other than the Business;
(iv) any Claim (other than the Contract Liabilities) relating to
the operations and assets of the Business which arises in connection with
or on the basis of events, acts, omissions, conditions or any other state
of facts occurring or existing on or prior to the Closing Date (including,
in each case, without limitation, any Claim relating to or associated with
the products or services of the Business sold or provided on or prior to
the Closing Date, tax matters, pension and benefits matters, any failure to
comply with applicable laws and/or permitting or licensing requirements,
any matters
23
involving Xxxxxx Xxxxxxxx and environmental and worker health and safety
matters (provided that Efessiou and not Angelides agrees to indemnify Buyer
and Parent for any Claim related to matters involving Xxxxxx Xxxxxxxx); and
(v) any liability of Seller other than the Contract Liabilities.
The rights of Buyer Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii), (iv), or (v) of this
Section 7.1(a) shall not be limited by the fact that such Claim may also
constitute a Buyer Representation and Warranty Claim, it being understood that
the preceding clause shall not be interpreted so as to allow two separate
remedies.
(b) The rights of Buyer Indemnified Parties to recover indemnification
under this Section 7.1 shall be subject to the following limitations:
(i) No indemnification shall be payable by Seller or a
Stockholder with respect to Buyer Representation and Warranty Claims or
Claims arising under Sections 7.1(a)(ii) unless the total of all amounts
payable pursuant to this Section 7.1 shall exceed $25,000 in the aggregate,
whereupon the total amount of such Claims shall be recoverable in
accordance with the terms thereof; provided, however, that such $25,000
limitation shall not apply with respect to Claims involving fraud or
intentional misrepresentation and provided further that any claim brought
under Sections 7.1(a)(iii) or 7.1(a)(iv) above shall not be subject to such
limitation if they are also Buyer Representation and Warranty Claims; and;
(ii) All rights to indemnification with respect to Buyer
Representation and Warranty Claims shall expire on the third anniversary of
the Closing Date, except that Buyer Representation and Warranty Claims
relating to or involving fraud or tax matters shall survive until and shall
expire on the date three months after the termination of the applicable
statute of limitations relating thereto. Notwithstanding the preceding
sentence, if on or prior to the third anniversary of the Closing Date a
specific state of facts shall have become known which may give rise to a
claim for indemnification under Section 7.1(a)(i) and a Buyer Indemnified
Party shall have given written notice of such facts known by such Buyer
Indemnified Party at such time to Seller and Stockholder, then the right to
indemnification with respect thereto shall remain in effect without regard
to when such matter shall be finally determined and disposed of. All
rights to indemnification under this Section 7.1 with respect to claims
arising under Section 7.1(a)(ii), 7.1(a)(iii), 7.1(a)(iv) and 7.1(a)(v)
shall, except as they may otherwise be extended, survive until and shall
expire on the date three months after the termination of the applicable
statute of limitations relating thereto. The limitations herein with
respect to Buyer Representation and Warranty Claims and claims arising
under Sections 7.1(a)(ii), 7.1(a)(iii) and 7.1(a)(iv) shall not limit the
rights of any Buyer Indemnified Party with respect to any other claims
under this Section 7.1; and
24
(iii) Notwithstanding anything contained in this Section 7.1 to
the contrary, Seller and Stockholder shall not be required to indemnify
Buyer Indemnified Parties with respect to Buyer Representation and Warranty
Claims or Claims arising under Section 7.1(a)(ii) in an aggregate amount in
excess of $8,660,000 plus any Contingent Payment actually made (together,
the "Indemnity Cap"), except with respect to claims relating to or
involving fraud or tax matters, as to which no such limit shall apply.
Until the first anniversary of the Closing, each Stockholder may satisfy
his or her indemnification obligations to Buyer Indemnified Parties by
delivery of shares of Parent Stock to the relevant Buyer Indemnified Party
having a value equal to such indemnification obligations, such value per
share to be determined by taking the average of the closing price on the
NASDAQ National Market System for the Parent's stock for the thirty (30)
trading days immediately prior to the receipt of such stock by the Buyer
Indemnified Party.
7.2 Indemnification by Buyer and Parent.
-----------------------------------
(a) Buyer and Parent (subject to subsection (b) of this Section 7.2)
agrees to defend, indemnify and hold Seller and each Stockholder and Seller's
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof (individually a "Seller Indemnified Party" and collectively
the "Seller Indemnified Parties") harmless from and against any and all Claims
(as defined in Section 1.2 hereof), whether or not arising out of third-party
claims and including all reasonable amounts paid in investigation, defense or
settlement of the foregoing, which may be sustained or suffered by any of them
based upon, arising out of, by reason of or otherwise in respect of or in
connection with:
(i) any inaccuracy in or breach of any representation or
warranty made by Buyer or Parent in this Agreement or in any Schedule or
exhibit to this Agreement or any certificate or other document delivered in
connection with the consummation of the transactions contemplated by this
Agreement (collectively, "Seller Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Buyer or
Parent in this Agreement or in any Schedule or exhibit to this Agreement or
any certificate or other document delivered in connection with the
consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the operation by Buyer of the
Subject Assets after the Closing Date which arises in connection with or on
the basis of events, acts, omissions, conditions or any other state of
facts occurring or existing after the Closing Date (including, in each
case, without limitation, any Claim relating to or associated with the
products or services sold or provided by Buyer after the Closing Date,
product liability matters, warranty claims, tax matters, pension and
benefit matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, personal injury and property damage
matters and environmental and worker health and safety matters); and
25
(iv) the non-performance of the Contract Liabilities to the
extent assumed by Buyer hereunder as they become due, in accordance with
their respective terms.
The rights of Seller Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii) or (iv) of this Section
7.2(a) shall not be limited by the fact that such Claim may also constitute a
Seller Representation and Warranty Claim, it being understood that nothing in
the preceding clause shall not be interpreted so as to allow two separate
remedies.
(b) The rights of Seller Indemnified Parties to recover
indemnification under this Section 7.2 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Buyer or Parent with
respect to Seller Representation and Warranty Claims or Claims arising
under Section 7.2(a)(i) unless the total of all amounts payable by Buyer
and Parent taken as a whole pursuant to this Section 7.2 shall exceed
$25,000 in the aggregate, whereupon the total amount of such Claims shall
be recoverable in accordance with the terms thereof; provided, however,
that such $25,000 limitation shall not apply with respect to Claims
involving fraud (it being understood that any claim brought under Sections
7.1(a)(iii) or 7.1(a)(iv) above shall not be subject to such limitation if
they are also Seller Representation and Warranty Claims).
(ii) All rights to indemnification with respect to Seller
Representation and Warranty Claims shall expire on the third anniversary of
the Closing Date, except that Seller Representation and Warranty Claims
relating to or involving fraud, or product liability matters shall survive
until and shall expire on the date three months after the termination of
the applicable statute of limitations relating thereto. Notwithstanding the
preceding sentence, if on or prior to the third anniversary of the Closing
Date a specific state of facts shall have become known which may give rise
to a claim for indemnification under Section 7.2(a)(i) and a Seller
Indemnified Party shall have given written notice of such facts known by
such Seller Indemnified Party at such time to Buyer, then the right to
indemnification with respect thereto shall remain in effect without regard
to when such matter shall be finally determined and disposed of. All rights
to indemnification under this Section 7.2 with respect to Claims arising
under Section 7.2(a)(ii), 7.2(a)(iii) and 7.2(a)(iv), except as they may
otherwise be extended, survive until and shall expire on the date three
months after the termination of the applicable statute of limitations
relating thereto. The limitations herein with respect to Seller
Representation and Warranty Claims and Claims arising under Section
7.2(a)(ii), 7.2(a)(iii) and 7.2(a)(iv) shall not limit the rights of any
Seller Indemnified Party with respect to any other claims under this
Section 7.2; and
26
(iii) Notwithstanding anything contained in this Section 7.2 to
the contrary, Buyer and Parent shall not be required to indemnify Seller
Indemnified Parties with respect to Seller Representation and Warranty
Claims or Claims arising under Section 7.2(a)(ii) in an aggregate amount in
excess of the Indemnity Cap, except with respect to claims relating to or
involving fraud or product liability matters, as to which no such limit
shall apply.
7.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
20 days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnifying party shall not be required to make any payment with respect to
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense or the payment is required
in accordance with any settlement or adjudication in accordance with the
provisions of this Section 7.3; provided, however, that the assumption of
defense of any such matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied and such
settlement does not involve the establishment of any obligations or limitations
applicable to the indemnified party. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit,
27
proceeding or enforcement action, shall furnish the indemnified party with all
documents and information that the indemnified party shall reasonably request
and shall consult with the indemnified party prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated, the
indemnified party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided, however, if
the named parties to the action or proceeding include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the expense of separate counsel for the indemnified party shall be paid
by the indemnifying party. Subject to the indemnifying party agreeing to defend
the indemnified party, assuming and pursuing the defense of the claim, and
otherwise satisfying its obligations hereunder, the indemnified party shall not
unduly interfere in the indemnifying parties defense of such suit or raise
material objections to such defense. If no such notice of intent to dispute and
defend is given by the indemnifying party, or if such diligent good faith
defense is not being or ceases to be conducted, the indemnified party shall, at
the expense of the indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense. If such claim, liability or expense is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall make
available all information and assistance that the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within 20 days after receiving the notice described in clause (a) above the
indemnifying party does not give written notice to the indemnified party that it
contests such indemnity, the amount of indemnity payable for such claim shall be
as set forth in the indemnified party's notice. If the indemnifying party
provides written notice to the indemnified party within such 20-day period that
it contests such indemnity, the matter shall be resolved by arbitration in
accordance with Section 8.11 hereof.
7.4 Sole Remedy. The parties agree that the rights to indemnification
-----------
under this Section 7 shall be exclusive of all rights of indemnification or
other remedies that any Seller Indemnified Party or Buyer Indemnified Party
would otherwise have in connection with the transactions contemplated by this
Agreement, except for Claims relating to or involving fraud, intentional
misrepresentation or the breach of Section 3.2 or Section 3.3 hereof.
7.5 Satisfaction of Indemnification Obligations. In order to satisfy the
-------------------------------------------
indemnification obligations set forth in Section 7.1 above, a Buyer Indemnified
Party shall have the right (in addition to collecting directly from the Seller
and/or Stockholders) to set off its indemnification claims against any and all
amounts under the Contingent Payment (whether or not then due and payable) and
the amounts payable pursuant to Section 5.1.
28
7.6 Insurance Proceeds. The amount of any Claim for which indemnification
------------------
may be sought under this Section 7 shall be reduced by the amount of any
insurance proceeds received in respect of such Claim by the party seeking
indemnification.
SECTION 8. MISCELLANEOUS.
-------------
8.1 Law Governing. This Agreement shall be construed under and governed
-------------
by the laws of the State of New Jersey without regard to the conflicts of laws
provisions thereof.
8.2 Notices. All communications, notices and consents provided for herein
-------
shall be in writing and be given in person, by facsimile (with request for
assurance of receipt in a manner typical with respect to such communications) or
by mail, and shall become effective (x) on delivery if given in person, (y) on
the date of transmission if sent by facsimile, or (z) four business days after
being deposited in the United States mails, with proper postage, for first-class
registered or certified mail, prepaid.
Notices shall be addressed as follows:
If to Buyer, to:
---------------
Boron, XxXxxx & Associates, Inc.
00-00 Xxxxx 000 Xxxxx
Xxxx Xxxx, XX 00000
Attn: President
Facsimile Number: (000) 000-0000
With a copy to:
--------------
Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109
Attn: Xxxx X. XxXxxxxx, P.C.
Facsimile Number: 000-000-0000
If to Seller or Stockholders:
----------------------------
Strategic Implications International, Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxxx
Facsimile Number: (000) 000-0000
29
With a copy to:
--------------
Law Offices of Xxxxxx X. Xxxxxxxxxx, P.C.
0000 Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxx, P.C.
Facsimile Number: (000) 000-0000
provided, however, that if any party shall have designated a different address
by notice to the others in accordance with this Section 8.2, then to the last
address so designated.
8.3 Prior Agreements Superseded. This Agreement supersedes all prior
---------------------------
understandings and agreements among the parties relating to the subject matter
hereof, including without limitation the letter of intent dated December 30,
1997 among Parent, Seller and the Stockholders.
8.4 Assignability. This Agreement shall not be assignable by any party,
-------------
except by Buyer and Parent to an affiliate of Parent (which assignment shall not
relieve Buyer or Parent of any of their obligations hereunder), without the
prior written consent of the other parties hereto. This Agreement (including
without limitation the provisions of Section 8) shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
8.5 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
8.6 Certain Definitions. For purposes of this Agreement, the term:
-------------------
(a) "affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee, partner or executor, by contract or credit arrangement or
otherwise;
30
(c) "knowledge" or "to best of a person's knowledge" means, after due
inquiry, actual knowledge; the conscious awareness of facts or other
information of such person.
(d) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; and
(e) "subsidiary" of a person means any corporation more than 50
percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity
interest, is directly or indirectly owned by such person.
8.7 Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.8 Amendments; Waivers. This Agreement may not be amended or modified
-------------------
except by a writing duly and validly executed by each party hereto. Compliance
with any condition or covenant set forth herein may not be waived except by a
writing duly and validly executed by the party or parties to be bound. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, or any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
8.9 Severability. Each of the provisions contained in this Agreement
------------
shall be severable and the unenforceability of one shall not affect the
enforceability of any other provision or the remainder of this Agreement.
8.10 Publicity and Disclosures. Except as required by law or the
-------------------------
rules and regulations of the SEC or any State securities commission, or
applicable NASDAQ listing requirements, neither Buyer or Parent on the one hand,
or Seller and/or the Stockholders, on the other hand, shall make any public
disclosure regarding the proposed transaction without the prior written consent
of Seller or the Buyer, respectively, which consent shall not be unreasonably
withheld.
8.11 Consent to Jurisdiction and Service. Except with respect to
-----------------------------------
matters as to which injunctive relief is being sought, in the event of a dispute
between the parties concerning their respective rights and obligations under
this Agreement that the parties are unable to resolve amicably between
themselves within sixty (60) days of proper notice from one party to another,
such dispute shall be settled by arbitration in the State of New Jersey in an
expedited manner in accordance with the Commercial Rules of the American
Arbitration Association by a duly
31
registered arbitrator to be selected jointly by the parties. The decision of the
arbitrator shall be final and binding upon the parties.
8.12 Expenses. Buyer, Seller and each Stockholder shall each bear its
--------
own expenses in connection with the transactions contemplated hereby. In
particular, all expenses of each Stockholder in connection with the negotiation
and performance of their Employment Agreements and their Non-competition
Agreements shall be borne by the Stockholders and not the Seller. Buyer shall
pay up to $25,000 of expenses actually incurred by Seller in connection with the
negotiation and performance of this Agreement and the transactions contemplated
hereby, including all transfer, excise or other taxes payable by any party to
this Agreement to any jurisdiction by reason of the sale and transfer of the
Subject Assets pursuant to this Agreement, if any (excluding any such taxes
arising solely from the identity or location of Buyer or any affiliate of
Buyer). All expenses in excess of this amount shall be paid by Seller out of
the proceeds of this Agreement.
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
BUYER:
-----
STRATEGIC IMPLICATIONS INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx
Treasurer
PARENT:
------
BORON, XXXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxxx X. XxXxxx
---------------------------------
Xxxxxxx X. XxXxxx
President
SELLER:
------
EFAN HOLDINGS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxxxx X. Xxxxxxxx
President
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STOCKHOLDERS:
------------
/s/ Xxxxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxxxx X. Xxxxxxxx, individually
/s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxx, individually
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Exhibit A
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The Contingent Payment described in 1.3(b) of the attached Asset Purchase
Agreement shall be made by Buyer to Seller upon the achievement by Buyer of a
minimum of Eight Million Dollars ($8,000,000) in revenues in calendar year 1998
from those projects set forth on Schedule 1.3(b) to the Asset Purchase
---------------
Agreement. Schedule 1.3(b) sets forth the maximum amount of Revenue (as defined
below) that can be recognized by Buyer in relation to any individual project.
If the aggregate Revenue recognized for such projects is less than Eight Million
Dollars ($8,000,000), no Contingent Payment shall be due. If the aggregate
Revenue related to such projects is more than Eight Million Dollars
($8,000,000), than the entire Contingent Payment shall be due and payable as set
forth below. No Revenue from any projects not listed on Schedule 1.3(b) shall
count in any way toward the Eight Million Dollar target set forth above.
Determination of the Revenue achieved by the Buyer shall be made by Buyer
based upon Buyers' and Sellers' good faith review of the audited financial
statements for calendar year 1998 and supporting financial and other information
for the Buyer following preparation thereof. Revenue shall mean revenue that
has been achieved and properly recognized by Buyer in its financial statements
in accordance with Buyer's revenue recognition policy and generally accepted
accounting principles as applied by Buyer consistent with past practice.
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