Execution Copy
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Exhibit 2.3
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STOCK PURCHASE AGREEMENT
AMONG
MATHSOFT ENGINEERING & EDUCATION, INC.
MATHSOFT, INC.
AND
MATHSOFT CORPORATE HOLDINGS, INC.
DATED AS OF JANUARY 23, 2001
TABLE OF CONTENTS
PAGE
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ARTICLE I -- DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . .. 1
1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II -- PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . 5
2.01. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . 5
2.02. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III -- REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY . 5
3.01. CORPORATE EXISTENCE AND POWER. . . . . . . . . . . . . . . . . 5
3.02. CORPORATE AUTHORIZATION. . . . . . . . . . . . . . . . . . . . 6
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS . . . . . . . . . . . . . 6
3.04. NON-CONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . 6
3.05. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 7
3.06. SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.07. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 7
3.08. ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . . . . . . . 8
3.09. PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . 9
3.10. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11. MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . 10
3.12. COMPLIANCE WITH LAWS; NO DEFAULTS. . . . . . . . . . . . . . . 11
3.13. FINDERS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.14. INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . 12
3.15. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16. LABOR RELATIONS AND EMPLOYMENT . . . . . . . . . . . . . . . . 13
3.17. CUSTOMERS, DISTRIBUTORS, PARTNERS AND SUPPLIERS. . . . . . . . 14
3.18. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . 15
3.19. INTERCOMPANY ARRANGEMENTS. . . . . . . . . . . . . . . . . . . 15
3.20. INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.21. RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.22. CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . 16
3.23. DISCLOSURE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES RELATING TO SELLER . . . . 16
4.01. CORPORATE EXISTENCE AND POWER. . . . . . . . . . . . . . . . . 16
4.02. CORPORATE AUTHORIZATION. . . . . . . . . . . . . . . . . . . . 16
4.03. NON-CONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . 16
4.04. TITLE TO AND VALIDITY OF SHARES. . . . . . . . . . . . . . . . 17
4.05. TRANSFER OF THE BUSINESS . . . . . . . . . . . . . . . . . . . 17
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . 17
5.01. ORGANIZATION AND EXISTENCE . . . . . . . . . . . . . . . . . . 17
5.02. CORPORATE AUTHORIZATION. . . . . . . . . . . . . . . . . . . . 18
5.03. GOVERNMENTAL AUTHORIZATION; CONSENTS . . . . . . . . . . . . . 18
5.04. NON-CONTRAVENTION. . . . . . . . . . . . . . . . . . . . . . . 18
5.05. FINDERS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.06. FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.07. PURCHASE FOR INVESTMENT. . . . . . . . . . . . . . . . . . . . 19
5.08. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.09. SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10. NO PRIOR ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . 19
5.11. DISCLOSURE SCHEDULE. . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI -- COVENANTS OF THE COMPANY AND SELLER . . . . . . . . . . . 19
6.01. RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.02. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII -- COVENANTS OF SELLER. . . . . . . . . . . . . . . . . . . 20
7.01. ANNUAL MEETING OF SELLER STOCKHOLDERS. . . . . . . . . . . . . 20
7.02. DELIVERY OF AUDITED PRO FORMA FINANCIALS . . . . . . . . . . . 20
7.03. ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.04. TICKER SYMBOL CHANGE . . . . . . . . . . . . . . . . . . . . . 21
7.05. COMPANY REQUIRED CONSENTS. . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII -- COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . 21
8.01. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 21
8.02. ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.03. RESOLUTION OF CONTRACT DISPUTE . . . . . . . . . . . . . . . . 22
ARTICLE IX -- COVENANTS OF ALL PARTIES. . . . . . . . . . . . . . . . . 22
9.01. COMMERCIALLY REASONABLE EFFORTS. . . . . . . . . . . . . . . . 22
9.02. CERTAIN FILINGS. . . . . . . . . . . . . . . . . . . . . . . . 22
9.03. PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . 22
9.04. UNITED STATES GENERAL SERVICESADMINISTRATION AGREEMENT . . . . 22
ARTICLE X -- EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . 23
10.01. EMPLOYEE BENEFITS DEFINITIONS . . . . . . . . . . . . . . . . 23
10.02. ERISA REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 23
10.03. NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . 25
10.04. UK EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . 25
10.05. GERMAN EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI - TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 26
11.01. CODE SECTION 338(H)(10) ELECTION. . . . . . . . . . . . . . . 26
11.02. INDEMNIFICATION FOR POST-CLOSING TRANSACTIONS . . . . . . . . 27
11.03. ALLOCATION OF TAXES . . . . . . . . . . . . . . . . . . . . . 27
11.04. VALUE ADDED TAX . . . . . . . . . . . . . . . . . . . . . . . 27
11.05. TAX RETURNS, COOPERATION, AND ELECTIONS. . . . . . . . . . . . 27
ARTICLE XII -- SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . . . . . 28
12.01. SELLER INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 29
12.02. BUYER INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 29
12.03. NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 29
12.04. LIMITATION OF INDEMNIFICATION . . . . . . . . . . . . . . . . 30
12.05. MINIMUM LOSSES OF BUYER INDEMNIFIED PARTY . . . . . . . . . . 31
12.06. MAXIMUM INDEMNIFICATION BY SELLER . . . . . . . . . . . . . . 31
12.07. MINIMUM LOSSES OF BUYER INDEMNIFIED PARTY . . . . . . . . . . 31
12.08. MAXIMUM INDEMNIFICATION BY BUYER. . . . . . . . . . . . . . . 31
12.09. EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XIII -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 32
13.01. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.02. AMENDMENTS; NO WAIVERS. . . . . . . . . . . . . . . . . . . . 33
13.03. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.04. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . 33
ii
13.05. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 33
13.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 33
13.07. COUNTERPARTS; EFFECTIVENESS . . . . . . . . . . . . . . . . . 33
13.08. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 34
13.09. CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.10. JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . 34
13.11. JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . . 34
Seller Disclosure Schedules:
Section 3.03 Company Required Consents
Section 3.05 Capitalization of the Company
Section 3.07 Financial Statements
Section 3.08 Certain Changes
Section 3.09 Property and Equipment
Section 3.10 Litigation
Section 3.11 Material Contracts
Section 3.12 Permits
Section 3.14 Intellectual Property
Section 3.16 Employees
Section 3.17 Distributors, Customers and Partners
Section 3.19 Intercompany Arrangements
Section 6.01 Directors
Section 10.02 ERISA Disclosure
Section 10.04 UK Employees' Vacation
Section 10.05 German Employees' Vacation
Section 11.01 Tax; Allocation of Consideration
Buyer Disclosure Schedules:
Section 5.03 Buyer Required Consent
Section 5.06 Buyer Indebtedness
Exhibits:
Exhibit A Axum License Agreement
Exhibit B Research Development Agreement
Exhibit C Non-Competition Agreement
Exhibit D Intellectual Property Agreement
Exhibit E Transitional Services Agreement
iii
Exhibit F Assignment, Xxxx of Sale and Assumption Agreement
Exhibit G Trademark License Agreement
iv
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of January 23, 2001 among MathSoft Engineering &
Education, Inc., a Delaware corporation ("Company"); MathSoft, Inc., a
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Massachusetts corporation ("Seller"); and MathSoft Corporate Holdings, Inc., a
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Delaware corporation ("Buyer").
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W I T N E S S E T H :
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, the business and assets, rights and privileges of its Engineering &
Education Products Division, as set forth in the Assignment and Assumption
Agreement and the Intellectual Property Agreement (the "Business");
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WHEREAS, on the date of this Agreement, Seller is conducting the Business
through the Company;
WHEREAS, Buyer desires to purchase from Seller all of the outstanding
shares of capital stock of the Company (the "Shares"); and
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WHEREAS, Seller desires to sell to Buyer the Shares;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
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following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
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indirectly controlling, controlled by, or under common control with such Person.
"Ancillary Agreements" means the Axum License Agreement attached as Exhibit
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A hereto, the Research Development Agreement attached as Exhibit B hereto, the
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Non-Competition Agreement attached as Exhibit C hereto, the Intellectual
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Property Agreement attached as Exhibit D hereto, the Transitional Services
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Agreement attached as Exhibit E hereto, the Assignment and Assumption Agreement
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attached as Exhibit F hereto, the Trademark License Agreement attached as
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Exhibit G hereto and the Side Letter, dated the date hereof, between Seller and
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Buyer.
"Assignment and Assumption Agreement" means that Assignment, Xxxx of Sale
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and Assumption Agreement, dated January 23, 2001, between Seller and the
Company.
"Axum License Agreement" means that Axum License Agreement by and between
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Buyer, Seller and the Company dated the date hereof.
"Balance Sheet" means the pro forma balance sheet of the Company as of
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December 31, 2000 referred to in Section 3.07.
"Balance Sheet Date" means September 30, 2000.
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"Buyer's Counsel" means the law firm of Xxxxxxx, Procter & Xxxx, LLP,
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Boston, Massachusetts.
"Buyer Material Adverse Effect" means a material adverse effect on the
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business, assets, condition (financial or otherwise) or results of operations of
Buyer, taken as whole.
"Closing Date" means the date of the Closing.
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"Common Stock" means the common stock, $.01 par value, of the Company.
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"Company's Proprietary Rights" means all Proprietary Rights of the
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Business, as described in the Assignment and Assumption Agreement and
Intellectual Property Agreement.
"Intellectual Property Agreement" means that Intellectual Property
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Agreement by and between Seller, Buyer and Company dated the date hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
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charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"Material Adverse Change" means a material adverse change in the business,
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assets, condition (financial or otherwise) or results of operations of the
Company or the Business, taken as a whole, but excluding any change,
circumstance or effect that results from or arises out of (1) changes in the
economy in general, or (2) changes in the industry in which such party operates
that do not affect such party and its Subsidiaries disproportionately in any
material respect relative to other entities operating in such industry.
"Material Adverse Effect" means a material adverse effect on the business,
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assets, condition (financial or otherwise), or results of operations of the
Company or the Business, taken as a whole but excluding any change, circumstance
or effect that results from or arises out of (1) changes in the economy in
general, or (2) changes in the industry in which such party operates that do not
affect such party and its Subsidiaries disproportionately in any material
respect relative to other entities operating in such industry.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
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rules and regulations promulgated thereunder.
2
"Non-Competition Agreement" means that Non-Competition Agreement by and
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between Seller, Buyer, the Company and the other parties thereto dated the date
hereof.
"Person" means an individual, corporation, partnership, association, trust,
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limited liability company or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Proprietary Rights" means all (A) patents, patent applications, patent
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disclosures and all related continuation, continuation-in-part, divisional,
reissue, re-examination, utility, model, certificate of invention and design
patents, patent applications, registrations and applications for registrations,
(B) trademarks, service marks, trade dress, logos, tradenames, service names and
corporate names and registrations and applications for registration thereof, (C)
copyrights and registrations and applications for registration thereof, (D) mask
works and registrations and applications for registration thereof, (E) computer
software, data and documentation, (F) trade secrets and confidential business
information, whether patentable or nonpatentable and whether or not reduced to
practice, know-how, manufacturing and product processes and techniques, research
and development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information, (G) other proprietary rights
relating to any of the foregoing (including without limitation associated
goodwill and remedies against infringements thereof and rights of protection of
an interest therein under the laws of all jurisdictions) and (H) copies and
tangible embodiments thereof.
"Research Development Agreement" means that Research Development Agreement
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by and between Buyer, Seller and the Company dated the date hereof.
"Seller's Counsel" means the law firm of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP,
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Boston, Massachusetts.
"Subsidiary" means any entity of which securities or other ownership
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interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"Tax" or "Taxes" shall mean all taxes, assessments, charges, duties, fees,
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levies or other governmental charges, including, without limitation, all
federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Tax Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as result of either being a member of a combined
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
3
"Transitional Services Agreement" shall mean that Transitional Services
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Agreement by and between Buyer, Seller and the Company dated the date hereof.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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Annual Meeting 7.01
Benefit Arrangement 10.01
Buyer Indemnified Party 12.01
Buyer Required Consents 5.03
Cambridge Lease 3.09
Closing 2.02
Code 3.15
Company Required Consents 3.03
Company Securities 3.05
Contingent Workers 3.16
Customers 3.17
Distributors 3.17
Employees 3.16
Employee Plans 10.01
ERISA 10.01
ERISA Affiliate 10.01
Financial Statements 3.07
Financing 5.06
Financing Agreement 5.06
German Employees 10.05
German Lease 3.09
Indemnified Party 13.03
Indemnifying Party 13.03
Losses 12.01
Multiemployer Plan 10.01
Name Change 7.01
Partners 3.17
Permit 3.12
Purchase Price 2.01
Riverfront 3.09
Section 338(h)(10) Election 11.01
Seller Indemnified Party 12.02
Tax Return 3.15
Transaction Documents 3.02
TUPE Regulations 10.04
U.K. Employees 10.04
U.K. Lease 3.09
VAT Act 11.04
4
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions of
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this Agreement, Seller shall sell to Buyer, and Buyer shall purchase from
Seller, at the Closing, one thousand (1,000) shares of the Company's common
stock, which is all of the outstanding capital stock of the Company, for an
aggregate purchase price of $7,000,000 (the "Purchase Price"). The Purchase
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Price shall be paid as provided in Section 2.02.
2.02. CLOSING. The closing (the "Closing") of the purchase and sale of
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the Shares hereunder shall take place at the offices of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP in Boston, Massachusetts on the date of this Agreement, or at
such other time or place as Buyer and Seller may agree. At the Closing,
(a) Buyer shall deliver to Seller $7,000,000 in immediately available
funds by wire transfer to an account maintained by Seller, such account to be
designated by Seller by written notice to Buyer not later than two business days
prior to the Closing Date.
(b) Seller shall deliver to Buyer a certificate or certificates for the
Shares in the name of Buyer.
(c) The appropriate parties shall enter into the Ancillary Agreements.
(d) The parties shall execute and deliver any other instruments, documents
and certificates that are required to be delivered pursuant to this Agreement or
as may be reasonably requested by any party in order to consummate the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO
THE COMPANY
Except as set forth on the attached disclosure schedule ("Seller Disclosure
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Schedule"), Seller hereby represents and warrants to Buyer as of the Closing
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Date that:
5
3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Buyer true and complete
copies of the corporate charter and bylaws of the Company as currently in
effect. The Company is not in violation of any term or provision of its charter
or by-laws, each as in effect as of this date. To the knowledge of the Seller,
the Company has not used any trade names, assumed names and/or prior corporate
names since its formation.
3.02. CORPORATE AUTHORIZATION. The Company has all requisite power and
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authority to enter into and perform this Agreement, the Ancillary Agreements and
the other agreements, documents and instruments contemplated hereby (together,
the "Transaction Documents") to which it is a party and to carry out the
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transactions contemplated hereby and thereby. The Transaction Documents are
valid and binding obligations of the Company, enforceable in accordance with
their terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws, from time to time in
effect, which affect enforcement of creditors' rights generally. The execution,
delivery and performance of the Transaction Documents 'and the sale and delivery
of the Shares in accordance with this Agreement have been duly authorized by
all necessary corporate or other action of the Company and its stockholders.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
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and performance by the Company and Seller of the Transaction Documents require
no action by or in respect of, or filing with, any governmental body, agency,
official or authority.
(b) Except as set forth in Section 3.03 of the Seller Disclosure Schedule,
no consent, approval, waiver or other action (a "Company Required Consent") by
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any Person under the express terms of any contract, agreement, indenture,
license, lease, mortgage, note or other evidence of indebtedness, instrument or
other document required to be disclosed on Section 3.11 of the Seller Disclosure
Schedule is required for the execution, delivery and performance of the
Transaction Documents by the Company or Seller or the consummation of the
transactions contemplated hereby or thereby.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by the
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Company of the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) contravene or conflict
with the corporate charter or bylaws of the Company, (ii) contravene or conflict
with any provision of any law, regulation, rule, judgment, injunction, order or
decree or other restriction binding upon or applicable to the Company or the
Business; (iii) assuming the receipt of all Company Required Consents,
constitute a default (whether after the giving of notice, lapse of time or both)
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of the Company or Seller that relates to the Business or
to a loss of any benefit to which the Company or Seller is entitled under any
express provision of any contract, agreement, indenture, license, lease,
mortgage, note or other evidence of indebtedness, instrument or other document
required to be disclosed on Section 3.11 of the Seller Disclosure Schedule or
(iv) assuming the receipt of all Company Required Consents, result in the
creation or imposition of any Lien on the Shares or on any material asset of the
Company or the Business.
6
3.05. CAPITALIZATION. Section 3.05 of the Seller Disclosure Schedule sets
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forth (i) the designation of each class of capital stock of the Company, (ii)
the number of authorized shares of each class of capital stock of the Company,
(iii) the number of outstanding shares of each class of capital stock of the
Company, (iv) the number of outstanding employee stock options, (v) the number
of outstanding employee stock options that are currently exercisable and (vi)
all relevant information regarding any outstanding convertible securities and
any other outstanding options, warrants or other rights to acquire capital stock
of, or other equity interests in, the Company. All outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and are owned by Seller. Except as set forth in this Section,
there are no outstanding (i) shares of capital stock, other securities or
phantom or other equity interests of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or other securities
of the Company or (iii) options, warrants, agreements, arrangements, commitments
or other rights to acquire from the Company any capital stock, convertible or
other securities or phantom or other equity interests of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
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Securities"). There are no outstanding obligations of the Company, actual or
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contingent, to issue or deliver or to repurchase, redeem or otherwise acquire
any Company Securities. There are no preemptive rights, rights of first
refusal, put or call rights or obligations or anti-dilution rights with resect
to the issuance, sale or redemption of the Company's capital stock. There are
no rights to have the Company's capital stock registered for sale to the public
pursuant to the laws of any jurisdiction, and there are no agreements relating
to the voting of the Company's voting securities or restrictions on the transfer
of the Company's capital stock.
3.06. SUBSIDIARIES. The Company does not have and never has had any
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Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.07. FINANCIAL STATEMENTS. (a) Attached as Section 3.07 of the Seller
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Disclosure Schedule are true and complete copies of the unaudited pro forma
balance sheets of the Company as of December 31, 1998, December 31, 1999 and
December 31, 2000 and the unaudited pro forma statements of operations, cash
flows and changes in stockholders' equity of the Company for the respective
fiscal years then ended (together collectively the "Financial Statements").
--------------------
(b) Each of the balance sheets included in the Financial Statements is
complete and correct and fairly presents in all material respects the financial
position of the Company's business as of its date, and each of the other
statements included in the Financial Statements is complete and correct and
fairly presents in all material respects the results of operations, cash flows
and stockholders' equity, as the case may be, of the Company's business for the
periods therein set forth, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved except as
otherwise stated therein and, with respect to the unaudited interim financial
statements, for the omission of footnote disclosures and, to the extent
consistent with generally accepted accounting principles, normally recurring
year-end audit adjustments.
7
3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except as
--------------------------
reflected in the Financial Statements or in Section 3.08 of the Seller
Disclosure Schedule, Seller has conducted the Business in the ordinary course
consistent with past practices and there has not been:
(a) any Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any Company Securities or any repurchase,
redemption or other acquisition by the Company of any Company Securities;
(c) any amendment of any of Company Securities;
(d) any incurrence, assumption, cancellation or guarantee by the Company
of any indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on any asset;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any material damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business;
(h) except for the Transaction Documents, any transaction or commitment
made, or any contract or agreement entered into, amended, modified or terminated
by the Company or Seller relating to the Business (including the acquisition or
disposition of any assets) or any relinquishment by the Company or Seller of any
contract or other right, in either case, material to the Business taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(i) any loss of any material distributor or customer of the Business;
(j) any change in any method of accounting or accounting practice by the
Company;
(k) other than in the ordinary course of business consistent with past
practices or pursuant to an existing agreement, any (i) grant of any severance
or termination pay to any director, officer or employee of the Company, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company, (iii) change in benefits payable under
existing severance or termination pay policies of the Company or employment
agreements to which the Company is a party or (iv) change in compensation, bonus
or other benefits payable to directors, officers or employees of the Company;
8
(l) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representation thereof to organize
any employees of the Company, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any employees of the Company;
or
(m) any commitment (contingent or otherwise) to do any of the foregoing.
3.09. PROPERTY AND EQUIPMENT.
------------------------
(a) The Company does not own any real property. Except as disclosed on
Section 3.09 of the Seller Disclosure Schedule, the Company has, and immediately
after giving effect to the transactions contemplated by the Transaction
Documents, will have, good title to, or a valid and enforceable leasehold
interest in, all personal property and assets (whether real or personal,
tangible or intangible) reflected on the Balance Sheet or acquired after the
Balance Sheet Date, except for properties and assets sold since the Balance
Sheet Date in the ordinary course of business consistent with past practices.
None of such properties or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Balance Sheet); or
(iii) Liens disclosed on Schedule 3.09 hereto.
(b) The lease between National Office Partners Limited Partnership,
successor-in-interest to Riverfront Office Park Joint Venture ("Riverfront"), as
----------
landlord, and Seller, as tenant, dated August 17, 1993, as amended by (a)
Amendment No. 1 to Agreement to Lease dated as of October 23, 1998 between
Riverfront and Seller and (b) Amendment No. 2 to Agreement to Lease dated as of
November 30, 1998 between Riverfront and Seller (the "Cambridge Lease") has been
---------------
duly and validly assigned by Seller to the Company prior to the date hereof, and
all rights of the lessee under the Cambridge Lease are vested in the Company.
The Contract between ibc International Business Center and MathSoft
International, effective April 19, 1999 (the "German Lease" and, together with
------------
the Cambridge Lease, the "Leases") has been duly and validly assigned by Seller
------
to the Company prior to the date hereof, and all rights of the lessee under the
German Lease are vested in the Company. Other than under the Leases and a lease
for office space in the United Kingdom that is awaiting Freeholder aproval, the
Company does not lease any real property.
3.10. LITIGATION. Except as disclosed in Section 3.10 of the Seller
----------
Disclosure Schedule, there is no action, suit, investigation or proceeding
pending against, or, to the knowledge of Seller, threatened against or
affecting, the Company or the Business or any of their respective properties or
assets or the transactions contemplated by the Transaction Documents before any
court or arbitrator or any governmental body, agency, official or authority.
9
3.11. MATERIAL CONTRACTS. (a) Except for agreements, contracts, plans,
-------------------
leases, arrangements or commitments disclosed in Section 3.11 of the Seller
Disclosure Schedule (with true and correct copies or summaries of oral
agreements provided to Buyer) or any other schedule to this Agreement and except
for agreements, contracts, plans, leases, arrangements or commitments of Seller
that do not relate to the Business, as of the date of this Agreement neither the
Company nor Seller is a party to or subject to:
(i) any lease;
(ii) any contract, agreement, arrangement or commitment which is not
cancelable by the Company without penalty on less than ninety (90) days notice;
(iii) any contract, agreement, arrangement or commitment relating to
indebtedness for borrowed money or the deferred purchase price of property
(whether incurred, assumed, guaranteed or secured by any asset), except for
those relating to indebtedness incurred in the ordinary course of business in an
amount not exceeding $10,000;
(iv) any contract, agreement, arrangement or commitment for the
purchase of materials, supplies, goods, services, equipment or other assets
providing for annual payments by the Company of $10,000 or more;
(v) any sales, distribution, licensing or other similar contract,
agreement, arrangement or commitment providing for the sale by the Company of
materials, supplies, goods, services, equipment or other assets providing for
annual payments to the Company of $10,000 or more;
(vi) any agency, dealer, sales representative or other similar
contract, agreement, arrangement or commitment;
(vii) any employment, consulting, severance or noncompetition
contract, agreement, arrangement or commitment;
(viii) any partnership, joint venture or other similar contract,
agreement, arrangement or commitment;
(ix) any license, franchise or similar contract, agreement,
arrangement or commitment or contract, agreement, arrangement or commitment in
respect of similar rights granted to or held by the Company;
(x) any contract, agreement, arrangement or commitment or other
document that limits the freedom of the Company to engage in the Business or to
compete in any line of business or with any Person or in any area or which would
so limit the freedom of the Company after the Closing Date;
10
(xi) any royalty, dividend or similar arrangement based on the
revenues or profits of the Business or any contract or agreement involving fixed
volume arrangements;
(xii) any acquisition, merger or similar agreement;
(xiii) any contract, agreement, commitment or arrangement with any
governmental entity; or
(xiv) any other contract, agreement, arrangement or commitment not
made in the ordinary course of business that is material to the Company taken as
a whole.
(b) Each contract, agreement, arrangement and commitment disclosed in
Section 3.11 of the Seller Disclosure Schedule is a valid and binding agreement
of the Company and is in full force and effect, and neither the Company or
Seller, nor, to the knowledge of Seller, any other party thereto is in default
in any material respect under the terms of any such contract, agreement,
arrangement or commitment. Seller has no knowledge of any oral or written
notice to terminate any such contract, agreement, arrangement or commitment.
The contracts, agreements, arrangements and commitments listed in Section 3.11
of the Seller Disclosure Schedule comprise all of the material contracts,
agreements, arrangements and commitments entered into by Seller or the Company
that relate to the Business.
3.12. COMPLIANCE WITH LAWS; NO DEFAULTS. (a) The Company, and the
-------------------------------------
conduct of the Business, are each in compliance in all respects with all
applicable laws and regulations, except where the failure to be in compliance
would not reasonably be expected to have a Material Adverse Effect.
(b) Section 3.12 of the Seller Disclosure Schedule correctly describes
permits, licenses, orders, franchises and other rights and privileges of all
federal, state, local or foreign governmental or regulatory bodies (each, a
"Permit") material to the Business, together with the name of the governmental
------
agency or entity issuing such Permit. The Permits are valid and in full force
and effect, and none of the Permits will be terminated or impaired or become
terminable as a result of the transactions contemplated by the Transaction
Documents.
(c) Neither Seller nor the Company has ever entered into or been subject
to any judgment, consent decree, compliance order or administrative order with
respect to any aspect of the Business or received any request for information,
notice, demand letter, administrative inquiry or formal or informal complaint or
claim from any regulatory agency with respect to any aspect of the Business.
3.13. FINDERS' FEES. Except for Orchard Partners, Inc., whose fees will
--------------
be paid by Seller, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Seller, the Company or any Subsidiary who might be entitled to any fee or
commission from Buyer, the Company or any of their respective Affiliates upon
consummation of the transactions contemplated by the Transaction Documents.
11
3.14. INTELLECTUAL PROPERTY. (a) Section 3.14 of the Seller Disclosure
----------------------
Schedule includes a list of all of the Company's Proprietary Rights specifying
as to each, as applicable: (i) the nature of such right; (ii) the owner of such
right; (iii) the jurisdictions by or in which such right has been issued or
registered or in which an application for such issuance or registration has been
filed, including the respective registration or application numbers; and (iv)
licenses, sublicenses and other agreements as to which the Company or any of its
Affiliates is a party and pursuant to which any Person is authorized to use any
such right, including the identity of all parties thereto, a description of the
nature and subject matter thereof, the applicable royalty and the term thereof.
All issued patents and marks that are part of the Company Proprietary Rights are
currently in compliance with formal legal requirements (including without
limitation as to patents, the payment of filing, examination and maintenance
fees, and as to marks, other than as set forth on Section 3.14 of the Seller
Disclosure Schedule, the timely post-registration filing of affidavits of use
and incontestability and renewal applications) are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the date of the Closing. All former and current
employees, consultants and contractors of Seller who have done work for the
Business have executed written instruments with Seller that assign all rights to
any inventions, improvements, discoveries, writings, or information relating to
the Business to Seller. To Seller's knowledge, for all Company Proprietary
Rights for which Seller is not the exclusive owner, the other ownership
interests are clearly indicated in Section 3.14 of the Disclosure Schedule and
Seller has a valid license, such license agreements are in full force and
effect, and to the knowledge of Seller, there is no material default by any
party thereto. The Company Proprietary Rights owned by Seller or the Company
are free and clear of all mortgages, pledges, charges, liens, security interests
or other encumbrances.
(b)(i) Neither the Company nor Seller has during the three years preceding
the date of this Agreement, been sued or charged in writing with or been a
defendant in any claim, suit, action or proceeding relating to the Business that
has not been finally terminated prior to the date hereof and that involves a
claim of infringement of any patents, trademarks, service marks or copyrights,
and (ii) there is no claim of infringement by the Company, and the Company and
Seller have no knowledge of any continuing infringement by any other Person of
any Company Proprietary Rights. No Company Proprietary Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or restricting the licensing thereof by the Company
to any Person. The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any patent, trademark,
service xxxx or copyright.
(c) To the knowledge of Seller, none of the processes and formulae,
research and development results and other know-how of the Business, the value
of which to the Business is contingent upon maintenance of the confidentiality
thereof, has been disclosed by Seller to any Person other than Persons that are
parties to confidentiality agreements with Seller.
(d) No third party has asserted any claim, or, to the knowledge of Seller
has any reasonable basis to assert any valid claim, against the Company with
respect to (i) the continued employment by, or association with, the Company of
any of the present officers, employees of or consultants to the Company or any
Subsidiary or (ii) the use by the Company or any of such Persons in connection
with their activities for or on behalf of the Company of any information which
the Company or any of such Persons would be prohibited from using under any
prior agreements or arrangements or any laws applicable to unfair competition,
trade secrets or proprietary information.
12
3.15. TAXES. All material tax returns, reports, information returns,
-----
declarations of estimated tax and forms, including any schedule or attachment
thereto ("Tax Return"), required to be filed on or before the Closing Date by or
----------
on behalf of the Company with respect to any Taxes have been filed through the
date hereof, or will be filed on or before the Closing Date in accordance with
all applicable laws, and all Taxes shown to be due on such Tax Returns have been
paid, and there are no material deficiencies for any Taxes owed to any
government. As of the time of filing, the foregoing returns correctly reflected
in all material respects the facts regarding the income, business, assets,
operations and status of any entity required to be shown thereon. All Taxes not
yet due and payable by the Company for periods prior to Closing have been fully
accrued (consistent with the Company's method of accounting) on its books and
adequate reserves have been established therefor, and all such Taxes not yet due
and payable for all periods covered by the Financial Statements have been
adequately provided for in the Financial Statements. The Company has not been
notified in writing of any action, suit, proceeding, investigation, audit or
claim brought by a taxing authority that is now pending with respect to any
assessed Tax or assessment against the Company. The Company has not filed any
agreement or consent under Section 341(f) of the Internal Revenue Code of 1986,
as amended (the "Code"). There are no Liens for Taxes upon the assets of the
----
Company, except Liens for Taxes not yet due and payable. There are no
agreements for the extension of the time for the assessments of any Taxes of the
Company with respect to any income, properties or operations of the Company.
The Company has not waived any statute of limitations in respect of Taxes with
respect to a Tax assessment or deficiency. The Company has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party. The Company has no liability for unpaid Taxes for periods
prior to Closing (whether or not shown on any Tax Return) (including, without
limitation, because it is or once was a member of an "affiliated group" (as
defined in Section 1504(a) of the Code)). The Company has no liability for
Taxes of any other person under Treasury Regulations Section 1.1502-6 (or
similar provisions of state, local, or foreign law), as a transferee or
successor, by contract or law.
3.16. LABOR RELATIONS AND EMPLOYMENT. (a) Section 3.16(a) of the Seller
-------------------------------
Disclosure Schedule contains a true and complete list of all full-time and
part-time employees of the Business ("Employees"), including their respective
---------
positions, titles, salary or wage rates (as applicable, other bonuses,
incentives and compensation, and accrued paid time off (and current rate of
accrual), and a description of their status (i.e., whether active or on leave of
absence). To the extent any Employee is on leave of absence, Section 3.16(a) of
the Seller Disclosure Schedule further describes the type of leave, the date it
commenced and the expected duration of leave. There are no Employees on layoff,
13
and there are no individuals with recall or preferential rehire rights. All
Employees are employed at-will, except as indicated on Section 3.16 of the
Seller Disclosure Schedule. The Company and Seller are in compliance in all
material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours with respect to the Employees.
The Company and Seller are not delinquent in any payments to any Employees or
Contingent Workers (as defined in Section 3.16(d) below) for any wages,
salaries, commissions, bonuses, fees or other direct compensation due with
respect to any services performed to the date hereof or amounts required to be
reimbursed to such Employees or Contingent Workers. There are no formal or
informal grievances, complaints or charges with respect to employment or labor
matters (including, without limitation, charges of employment discrimination,
retaliation or unfair labor practices) pending or threatened in any judicial,
regulatory or administrative forum, or under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement). Neither the Company's nor
Seller's employment policies with respect to the Employees or practices are
currently being audited or investigated, or to Seller's knowledge subject to
imminent audit or investigation, by any foreign, federal, state or local
government agency. The Business is not subject to any consent decree, court
order or settlement in respect of any labor or employment matters. All
Employees became employed by the Company in compliance with all applicable laws,
including without limitation, the Immigration Reform Control Act of 1986. The
transaction contemplated by this Agreement will not adversely effect the ability
of any Employee to work in the United States.
(b) Except as set forth on Section 3.16(b) of the Seller Disclosure
Schedule, (i) there is no labor strike, picketing of any nature, material labor
dispute, slowdown or any other concerted interference with normal operations,
stoppage or lockout pending or to the knowledge of Seller threatened against or
affecting the Business, (ii) there are no union claims or demands to represent,
or union organizing activities among, the Employees or Contingent Workers, and
(iii) neither the Company nor Seller has collective bargaining obligations with
respect to any Employees or Contingent Workers.
(c) No Employee has indicated to Seller or the Company any plans to
terminate employment with the Company. No payments or promises have been made
to any Employee by the Company or Seller in connection with, or in anticipation
of, the transactions contemplated by the Transaction Documents.
(d) Except as set forth on Section 3.16 of the Seller Disclosure Schedule,
there are no independent contractors, temporary employees, leased employees or
any other servants or agents compensated other than through reportable wages
employed or retained in connection with the Business (collectively, "Contingent
----------
Workers"). All Contingent Workers have been properly classified and treated in
-------
accordance with applicable laws and for purposes of all benefit plans and
perquisites by Seller and the Company.
3.17. CUSTOMERS, DISTRIBUTORS, PARTNERS AND SUPPLIERS. Section 3.17 of
--------------------------------------------------
the Seller Disclosure Schedule sets forth the name of each customer and
distributor, or group of customers or distributors that are under common
ownership or control, of the Business who accounted for more than five percent
(5%) of the revenues of the Business for the year ended December 31, 2000 (the
"Customers" and "Distributors", respectively) together with the names of any
--------- ------------
persons or entities with which the Business has a material strategic partnership
14
or similar relationship ("Partners"). No Customer, Distributor or Partner of
--------
the Business has canceled or otherwise terminated its relationship with the
Business. No Customer, Distributor or Partner has cancelled or otherwise
terminated its relationship with the Business or to the knowledge of Seller, any
plan or intention to terminate, to cancel or otherwise materially and adversely
modify its relationship with the Business or to decrease materially or limit its
usage, purchase or distribution of the services of products of the Business.
3.18. TRANSACTIONS WITH AFFILIATES. To the knowledge of Seller, none of
------------------------------
the officers or directors of the Company or Seller or any of their respective
family members (a) has any material direct or indirect interest in any entity
that does business with the Company; (b) has any direct or indirect interest in
any property, asset or right that is used by the Company or Seller in the
conduct of the Business; or (c) has any contractual relationship with the
Company other than such relationships that result solely from being an officer,
director or stockholder of the Company.
3.19. INTERCOMPANY ARRANGEMENTS. Except as contemplated by the
--------------------------
Transaction Documents, there are no contracts, agreements, arrangements or
commitments between Seller and the Company. The Company does not own any note,
bond, debenture or other indebtedness, or is otherwise a creditor, of Seller or
any of its Affiliates. Since the date the Company was incorporated, there has
not been any payment by the Company to Seller or any of its Affiliates, charge
by Seller or any of its Affiliates to the Company or other transaction between
the Company and Seller or any of its Affiliates, except for the Transaction
Documents.
3.20. INVENTORIES. The inventories set forth in the Balance Sheet were
-----------
properly stated therein at the lesser of cost or fair market value determined in
accordance with generally accepted accounting principles consistently applied by
the Company. Since the Balance Sheet Date, the inventories of the Company have
been maintained in the ordinary course of business. At least 38% of the
inventory of the Business, including raw materials, work in progress, and
finished goods, consist of items of a quantity and quality usable or saleable in
the ordinary course of business in a manner consistent with the past practices
of the Company and Seller with respect to the Business. All such inventory is
owned free and clear of all Liens except as disclosed in the Financial
Statements.
3.21. RECEIVABLES. All accounts, notes receivable and other receivables
-----------
(other than receivables collected since the Balance Sheet Date) of the Company
are reflected on the Balance Sheet are, and all accounts and notes receivable of
the Company at the Closing Date represent bona fide claims against debtors for
sales, services performed or other charges arising on or before the date
thereof, subject to normal and customary trade discounts, and are subject to any
reserves for doubtful accounts recorded on the Balance Sheet. All accounts,
notes receivable and other receivables of the Business at the Balance Sheet Date
have been included in the Balance Sheet. The accounts, notes receivable and
other receivables (other than receivables collected since the Balance Sheet
Date) of the Company, in the aggregate, are collectible in the ordinary course
of business, consistent with past practices, except to the extent that reserves
for doubtful accounts are included in the Balance Sheet.
15
3.22. CORPORATE RECORDS. The corporate record books of the Company
------------------
accurately record all corporate action taken by its stockholders and board of
directors and committees. The copies of the corporate records of the Company,
as made available to Buyer for review, are true and complete copies of the
originals of such documents.
3.23. DISCLOSURE SCHEDULE. Neither the Transaction Documents, nor any
--------------------
other agreement, document or written statement made by Seller or the Company and
furnished by Seller or the Company to Buyer in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statements contained herein or
therein not misleading, in light of the circumstances under which they were
made.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES RELATING TO SELLER
Seller represents and warrants to, and agrees with, Buyer as follows:
4.01. CORPORATE EXISTENCE AND POWER. Seller is a corporation duly
--------------------------------
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and has all power and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. The Seller has not used any trade names, assumed names and/or prior
corporate names within the past five years.
4.02. CORPORATE AUTHORIZATION. Seller has all requisite power and
------------------------
authority to enter into and perform the Transaction Documents to which it is a
party and to carry out the transactions contemplated hereby and thereby. The
Transaction Documents are valid and binding obligations of Seller, enforceable
in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws,
from time to time in effect, which affect enforcement of creditors' rights
generally. The execution, delivery and performance of the Transactions
Documents and the sale and delivery of the Shares in accordance with this
Agreement have been duly authorized by all necessary corporate or other action
of Seller and its stockholders.
4.03. NON-CONTRAVENTION. The execution, delivery and performance by
-----------------
Seller of the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) require any action by or
in respect of, or filing with, or consent of, any governmental body, agency or
official or authority (other than filings required by the Securities and
Exchange Commission, the Nasdaq-AMEX Stock Market or the Securities Exchange Act
of 1934, as amended, or the rules and regulations promulgated thereunder), (ii)
16
conflict with the corporate charter or bylaws of Seller, (iii) contravene or
conflict with any provision of any law, regulation, rule, judgment, injunction,
order or decree or other restriction binding upon or applicable to Seller; or
(iv) assuming the receipt of all Company Required Consents, constitute a default
(whether after the giving of notice, lapse of time or both) under or give rise
to any right of termination, cancellation or acceleration of any right or
obligation of Seller or to a loss of any benefit to which Seller is entitled
under any provision of any contact, obligation or permit binding upon Seller or
by which it or the assets of Seller are bound, excluding from the foregoing
clauses (iii) and (iv) exceptions to the foregoing that, in the aggregate, would
not have a material adverse effect on the ability of Seller to consummate the
transactions contemplated hereby or thereby.
4.04. TITLE TO AND VALIDITY OF SHARES. Seller now has, and on the Closing
-------------------------------
Date will have, good and marketable title to and unrestricted power to vote and
sell the Shares, free and clear of any Lien and, upon purchase and payment
therefor and delivery to Buyer thereof in accordance with the terms of this
Agreement, Buyer will obtain good and marketable title to the Shares free and
clear of any Lien. The Shares have been duly authorized and validly issued and
are fully paid and non-assessable. All of the Shares are registered in the name
of Seller.
4.05. TRANSFER OF THE BUSINESS. In connection with the incorporation of
--------------------------
the Company, Seller (a) contributed all of its right, title and interest in the
property (whether real, personal, tangible or intangible) and assets comprising
the Business (except as otherwise explicitly contemplated in the Assignment and
Assumption Agreement, Intellectual Property Agreement or other Transaction
Documents) and (b) assigned all of the contracts, agreements, permits,
authorizations, leases, instruments, rights and commitments comprising the
Business (except as otherwise explicitly contemplated in the Assignment and
Assumption Agreement, Intellectual Property Agreement or other Transaction
Documents).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the attached disclosure schedule ("Buyer Disclosure
----------------
Schedule"), Buyer hereby represents and warrants Seller that:
--------
5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
----------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Buyer is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Buyer Material
Adverse Effect. Buyer has heretofore delivered to Seller and Company true and
complete copies of the corporate charter and bylaws of Buyer as currently in
effect. Buyer is not in violation of any term or provision of its charter or
by-laws, each as in effect as of this date.
17
5.02. CORPORATE AUTHORIZATION. Buyer has all requisite power and authority
-----------------------
to enter into and perform the Transaction Documents to which it is a party and
to carry out the transactions contemplated hereby and thereby. The Transaction
Documents are valid and binding obligations of Buyer, enforceable in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws, from time to
time in effect, which affect enforcement of creditors' rights generally. The
execution, delivery and performance of the Transaction Documents and the
purchase of the Shares in accordance with this Agreement have been duly
authorized by all necessary or other action of Buyer and its stockholders.
5.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery
--------------------------------------
and performance by Buyer of the Transaction Documents require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority.
(b) Except as set forth in Section 5.03 of the Disclosure Schedule, no
consent, approval, waiver or other action (a "Buyer Required Consent") by any
----------------------
Person under the express terms of any contract, agreement, indenture, license,
lease, mortgage, note or other evidence of indebtedness, instrument or other
document to which Buyer is a party or by which it is bound is required for the
execution, delivery and performance of the Transaction Documents by Buyer or the
consummation of the transactions contemplated hereby or thereby.
5.04. NON-CONTRAVENTION. The execution, delivery and performance by Buyer
-----------------
of the Transaction Documents and the consummation by Buyer of the transactions
contemplated hereby and thereby do not and will not (i) contravene or conflict
with the corporate charter or bylaws of Buyer or (ii) contravene or conflict
with any provision of any law, regulation, rule, judgment, injunction, order or
decree or other restriction binding upon or applicable to Buyer or (iii)
assuming the receipt of all Buyer Required Consents, constitute a default
(whether after the giving of notice, lapse of time or both under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Buyer or to a loss of any benefit to which Buyer is entitled under
any express provision of any contract, agreement, indenture, license, lease,
mortgage, note or other evidence of indebtedness, or other instrument binding
upon Buyer or any permit held by Buyer or (iv) assuming the receipt of all Buyer
Required Consents result in the creation or imposition of any Lien on any
material asset of Buyer.
5.05. FINDERS' FEES. Except for Xxxxx Xxxxxxxx LLP, Spring Capital
--------------
Partners, L.P. and Edison Venture Fund IV, whose fees and expenses will be paid
by Buyer, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of Buyer who might
be entitled to any fee or commission from Seller or any Affiliate thereof upon
consummation of the transactions contemplated by the Transaction Documents.
5.06. FINANCING. Each of Edison Venture Fund IV and Spring Capital
---------
Partners, L.P. have committed to enter into debt financing agreements and stock
subscription agreements with Buyer to contribute to the equity capital of Buyer.
These debt financing agreements and the stock subscription agreements are
referred to herein as the "Financing Agreements," and the financing to be
---------------------
provided thereunder or under any alternative arrangements made by Buyer is
18
referred to herein as the "Financing." The aggregate proceeds of the Financing
---------
will be in an amount sufficient to acquire the Shares and to pay all related
fees and expenses. As of the date hereof, Buyer knows of no facts or
circumstances that are reasonably likely to result in any of the conditions set
forth in the Financing Agreements not being satisfied. Buyer has made available
to Seller true and complete copies of all Financing Agreements. Buyer has
collected all funds it is entitled to receive as of the date hereof pursuant to
the Financing Agreements.
5.07. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares for
-------------------------
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof.
5.08. LITIGATION. There is no action, suit, investigation or, proceeding
----------
pending against, or to the knowledge of Buyer, threatened against or affecting,
Buyer or any of its properties or the transactions hereby before any court or
arbitrator or any governmental body, agency or official.
5.09. SUBSIDIARIES. Buyer does not have and never has had any Subsidiaries
------------
or any ownership or equity interest in or control of (direct or indirect) any
other Person.
5.10. NO PRIOR ACTIVITIES. Buyer was formed solely for the purpose of
---------------------
consummating the transactions contemplated by the Transaction Documents. As of
the date hereof, except for obligations or liabilities (i) incurred in
connection with its formation, and (ii) contained in or relating to the
Transaction Documents and any other agreements or arrangements contemplated by
the Transaction Documents or in furtherance of the transaction, Buyer has not
incurred, directly or indirectly, any obligations or liabilities or engaged in
any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person, excluding such obligations or
liabilities which would not, individually or in the aggregate, restrict or
impair the ability of Buyer to consummate the transactions or otherwise have a
Buyer Material Adverse Effect.
5.11. DISCLOSURE SCHEDULE. Neither the Transaction Documents, nor any
--------------------
other agreement, document or written statement made by Buyer and furnished by
Buyer to Seller in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein not
misleading, in light of the circumstances under which they were made.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLER
The Company and Seller agree that:
6.01. RESIGNATIONS. Section 6.01 of the Seller Disclosure Schedule lists
------------
each director of the Company. The Company will deliver to Buyer the
resignations of all officers and directors of the Company from their positions
with the Company at or prior to the Closing Date.
19
6.02. CONFIDENTIALITY. The Company (prior to Closing), and Seller and its
---------------
Affiliates, will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law (following notice and an
opportunity to contest), all confidential documents and information concerning
Buyer furnished to or in the possession of Seller or its Affiliates, in
connection with the transactions contemplated by this Agreement, and after the
Closing Date all confidential documents and information concerning the Company
or the Business, except to the extent that such information can be shown to have
been (i) previously known on a nonconfidential basis by Seller, (ii) in the
public domain through no fault of Seller or (iii) later lawfully acquired or
developed by Seller from sources other than the Company or Buyer; provided that
--------
Seller and its Affiliates may disclose such information to their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by the Transaction
Documents so long as such persons are informed by Seller of the confidential
nature of such information and are directed by Seller to treat such information
confidentially. If this Agreement is terminated, the Company, and Seller and
its Affiliates, will, and will use their efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to, destroy or deliver to Buyer, upon request, all documents and other
materials, and all copies thereof, obtained by the Company, or by Seller or its
Affiliates, or on their behalf from Buyer in connection with this Agreement that
are subject to such confidence.
ARTICLE VII
COVENANTS OF SELLER
Seller agrees that:
7.01. ANNUAL MEETING OF SELLER STOCKHOLDERS. At the 2001 Annual Meeting
---------------------------------------
of Stockholders (the "Annual Meeting"), Seller shall cause the shareholders of
--------------
Seller to consider a proposal to effect the change of Seller's corporate name
from MathSoft, Inc. to Insightful Solutions Corporation, or some other name as
determined by the management of Seller, in its sole discretion (the "Name
----
Change"). Seller will insert a proposal in its proxy statement consistent with
------
the foregoing and use commercially reasonable efforts to cause the Name Change
to be approved by Seller's shareholders.
7.02. DELIVERY OF AUDITED PRO FORMA FINANCIALS. No later than March 31,
------------------------------------------
2001, Seller shall cause its accountants, Xxxxxx Xxxxxxxx LLP, to deliver to
Buyer, at Seller's cost and expense, audited pro forma balance sheets of the
Company as of December 31, 1998, December 31, 1999, December 31, 2000 and the
Closing Date and the statement of operations, cash flows and changes in
stockholders' equity of the Company for the respective fiscal periods then
ended. Seller agrees to permit its Chief Financial Officer and representatives
of Xxxxxx Xxxxxxxx LLP to communicate freely with representatives of Buyer to
discuss said financial statements.
20
7.03. ACCESS. Seller, on and after the Closing Date, will afford promptly
------
to Buyer and its agents reasonable access to its properties, books, records,
employees and auditors of Seller to the extent necessary to permit Buyer to file
timely any tax reports, other tax filings or other regulatory filings. Buyer
will hold, and will use its best efforts to cause its representatives, officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law (following notice and an opportunity to
contest), all confidential documents and information concerning Seller provided
to it pursuant to this Section 7.03.
7.04. TICKER SYMBOL CHANGE. Seller, within 5 business days following the
---------------------
Closing Date, will change its Nasdaq ticker symbol to a symbol other than
"MATH".
7.05. COMPANY REQUIRED CONSENTS. Seller shall use commercially reasonable
-------------------------
efforts (without the payment of any money) between the Closing Date and March
31, 2001 to obtain any Company Required Consents that have not been obtained on
or prior to the date hereof.
ARTICLE VIII
COVENANTS OF BUYER
Buyer agrees that:
8.01. CONFIDENTIALITY. Buyer and its Affiliates will hold, and will use
---------------
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors, agents and financial sources to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law (following notice and an opportunity to
contest), all confidential documents and information concerning Seller (and
until Closing, the Company and the Business) furnished to Buyer or its
Affiliates in connection with the transactions contemplated by this Agreement,
except to the extent that such information can be shown to have been (i)
previously known on a nonconfidential basis by Buyer, (ii) in the public domain
through no fault of Buyer or (iii) later lawfully acquired or developed by Buyer
from sources other than Seller or the Company; provided that Buyer may disclose
--------
such information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement and to its financing sources in connection with
obtaining the financing for the transactions contemplated by the Transaction
Documents so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such information
confidentially. If this Agreement is terminated, Buyer and its Affiliates will,
and will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy or
deliver to Seller, upon request, all documents and other materials, and all
copies thereof, obtained by Buyer or its Affiliates or on their behalf from
Seller or the Company in connection with this Agreement that are subject to such
confidence.
21
8.02. ACCESS. Buyer, on and after the Closing Date, will afford promptly
------
to Seller and their agents reasonable access to their properties, books,
records, employees and auditors of the Company to the extent necessary to permit
Seller to determine any matter relating to its rights and obligations hereunder
or, including without limitation, information necessary for Seller to prepare
its financial statements and file timely any tax reports, other tax filings or
other regulatory filings. Seller will hold, and will cause its representatives,
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law (following notice and an
opportunity to contest), all confidential documents and information concerning
the Company provided to it pursuant to this Section 8.02.
8.03. RESOLUTION OF CONTRACT DISPUTE. Buyer agrees to use commercially
resaonable efforts to resolve any dispute with Hill, Holliday, Connors,
Cosmopulos, Inc. by March 31, 2001.
ARTICLE IX
COVENANTS OF ALL PARTIES
The parties hereto agree that:
9.01. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
---------------------------------
conditions of this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Seller and Buyer
each agree, and Seller, prior to the Closing, and Buyer, after the Closing,
agree to cause the Company, to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may reasonably be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by the Transaction Documents.
9.02. CERTAIN FILINGS. The Company, Seller and Buyer shall cooperate with
---------------
each other (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
9.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each other
---------------------
before issuing any press release or making any public statement with respect to
the Transaction Documents or the transactions contemplated hereby and thereby
and, except as may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
9.04. UNITED STATES GENERAL SERVICES ADMINISTRATION AGREEMENT. (a) The
----------------------------------------------------------
parties agree to use commercially reasonable efforts to obtain for Buyer a
United States General Services Administration Agreement ("New GSA Contract") on
commercially reasonable terms; provided, however that Seller's obligation under
this Section 9.04(a) shall terminate on March 31, 2001.
22
(b) Each party shall pay fifty percent (50%) of the costs of obtaining the
New GSA Contract; provided, however, that Seller's maximum liability for such
costs shall not exceed more than $3,000.
ARTICLE X
EMPLOYEE BENEFITS
10.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used
-------------------------------
herein, having the following meanings:
"Benefit Arrangement" means each employment, severance or other similar
--------------------
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
the Company or any of its ERISA Affiliates and (iii) covers any employee or
former employee of the Company.
"Employee Plans" means each "employee benefit plan", as such term is
---------------
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" of any entity means any other entity that, together with
----------------
such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer plan,
------------------
as defined in Section 3(37) of ERISA.
10.02. ERISA REPRESENTATIONS. The Company and Seller, jointly and
----------------------
severally, hereby represent and warrant to Buyer that:
(a) The Company has provided Buyer with complete salary, service and
related data as of the most recent practicable date for employees of the
Company.
23
(b) Section 10.02 of the Seller Disclosure Schedule lists each Employee
Plan that covers any employee of the Company, copies or descriptions of all of
which have previously been made available or furnished to Buyer. With respect
to each Employee Plan, the Company has provided Forms 5500 for the past three
years and an accurate summary description of such plan.
(c) Section 10.02 of the Seller Disclosure Schedule also includes a list
of each Benefit Arrangement of the Company, copies or descriptions of which have
been made available or furnished previously to Buyer.
(d) None of the Employee Plans or Benefit Arrangements listed on Section
10.02 of the Seller Disclosure Schedule covers any non-United States employee or
former employee of the Business.
(e) No non-exempt "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code and for which the Company is reasonably likely
to incur material liability, has occurred with respect to any Employee Plan.
(f) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. The Company and its Affiliates have not incurred
any liability under Title IV or ERISA arising in connection with the termination
of any plan covered or previously covered by Title IV of ERISA.
(g) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to Buyer
copies of the most recent Internal Revenue Service determination letters with
respect to each such plan. Each Employee Plan has been maintained in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such plan.
(h) Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Benefit Arrangement.
(i) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code. No material tax under Section 4980B
of the Code has been incurred in respect of any Employee Plan that is a group
health plan, as defined in Section 5000(b)(1) of the Code.
(j) All contributions and payments accrued under each Employee Plan and
Benefit Arrangement, determined in accordance with prior funding and accrual
practices, as adjusted to include proportional accruals for the period ending on
the Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent (i) reflected on the Balance Sheet or (ii) retained by
Seller. Except as disclosed in writing to Buyer prior to the date hereof, there
has been no amendment to, written interpretation of or announcement (whether or
not written) by Seller or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement in which employees of the Company participate that would increase
materially the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended prior to the date hereof.
24
(k) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
(l) No litigation or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to Seller's knowledge, threatened with respect to
any Benefit Arrangement.
(m) Each Benefit Arrangement and Employee Plan may be amended, terminated,
or otherwise modified by the Company to the greatest extent permitted by
applicable law, including the elimination of any and all future benefit accruals
under any Benefit Arrangement or Employee Plan and no employee communications or
provision of any Benefit Arrangement or Employee Plan document has failed to
effectively reserve the right of the Company to so amend, terminate or otherwise
modify such Benefit Arrangement or Employee Plan.
(n) Neither Company nor any of its ERISA Affiliates maintains or is
required to contribute to or has ever maintained or been required to contribute
to any Multiemployer Plan.
(o) Neither Company nor any of its ERISA Affiliates sponsors or maintains
any Employee Plan subject to the funding standards of Section 412 of the Code.
(p) Neither Company nor any of its ERISA Affiliates has any liability
arising our of or relating to a failure of any Employee Plan to comply with the
provisions of ERISA or the Code, which liability is reasonably likely to have a
Material Adverse Effect.
10.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article X shall
----------------------------
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of the Company in
respect of continued employment (or resumed employment) with the Company and no
provision of this Article X shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under any
Employee Plan or Benefit Arrangement or any plan or arrangement that may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after the
Closing Date any Employee Plan or Benefit Arrangement.
10.04. UK EMPLOYEES. (a) The parties acknowledge and agree that,
-------------
pursuant to the Transfer of Undertakings (Protection of Employment) Regulations
1981 ("TUPE Regulations"), the contracts of employment between Seller and each
-----------------
of the employees of the Business located in the UK (the "UK Employees") will
------------
have effect from the Closing as if made originally between the Company and each
such UK Employee.
25
(b) Company will assume the outstanding obligations of Seller in respect
of the untaken holiday entitlements and unpaid holiday remuneration of the UK
Employees accrued up to the Closing and disclosed on Section 10.04 of the Seller
Disclosure Schedule.
(c) As soon as reasonably practicable after the Closing the parties shall
together deliver to the UK Employees a letter, in the agreed form, between them
notifying the UK Employees of the transfer of their employment to the Company.
10.05. GERMAN EMPLOYEES. (a) The parties acknowledge and agree that
-----------------
pursuant to Para. 613 a German Civil Code, the contracts of employment between
Seller and each of the employees of the Business located in Germany (the "German
------
Employees"), including any rights or obligations resulting from collective
---------
labour or work agreements, will have effect from the day of the Closing as if
made originally between the Company and each such German Employee. Moreover,
the parties acknowledge and agree that pursuant to Para. 613 a German Civil
Code, the terms and conditions of the employment of any such German Employee for
a period of one year from the Closing can neither be validly altered to the
disadvantage of any German Employee nor be terminated for reason of the transfer
of the Business. The parties acknowledge that each of the German Employees has
the right to protest against the transfer of his employment to the Company and
in this case will remain an employee of Seller.
(b) The Company agrees to assume the outstanding obligations in respect of
untaken holiday entitlements and unpaid holiday remuneration of the German
employees accrued up to the Closing and disclosed on Section 10.05 of the Seller
Disclosure Schedule.
(c) As soon as reasonably practicable after the Closing, the parties shall
together deliver to the German Employees a letter, in the agreed form, between
them notifying the German Employees of the transfer of their employment.
ARTICLE XI
TAX MATTERS
11.01. CODE SECTION 338(H)(10) ELECTION. Seller, Buyer and the Company
-----------------------------------
agree to take all necessary actions to make a timely and valid election under
Section 338(h)(10) of the Code (and any corresponding election under state,
local, or foreign tax law, where applicable) (collectively, a "Section
-------
338(h)(10) Election") to treat the purchase and sale of the stock of the Company
-------------------
hereunder as a deemed sale of the assets of the Company for tax purposes.
Seller will pay income Taxes attributable to the Company's deemed asset sale
resulting from the making of the Section 338(h)(10) Election. Seller, Buyer and
the Company agree that the purchase price and liabilities of the Company (plus
other relevant items) will be allocated to the assets of the Company for all
relevant purposes (including tax and financial accounting purposes) in a manner
consistent with the fair market values set forth in Section 11.01 of the Seller
Disclosure Schedule
26
11.02. INDEMNIFICATION FOR POST-CLOSING TRANSACTIONS. Buyer agrees to
------------------------------------------------
indemnify Seller for any additional tax owed by Seller (including tax owed by
Seller due to this indemnification payment) resulting from any transaction not
in the ordinary course of business occurring on the Closing Date after the
Closing, provided that for purposes of this Section 11.02 the Section 338(h)(10)
Election shall not be treated as a post-Closing transaction not in the ordinary
course of business.
11.03. ALLOCATION OF TAXES. Except as otherwise provided in Sections
---------------------
11.01, 11.02, 11.04 and 11.05 of this Agreement, Seller and Buyer each agree to
bear and pay its own Taxes incurred in connection with this Agreement, including
all transfer, documentary, sales, use, stamp, registration and other such Taxes
and fees (including any penalties and interest).
11.04. VALUE ADDED TAX. For the purpose of UK value added tax only, the
-----------------
parties intend that the Business is transferred to the Company as a going
concern and that Section 49 of the Value Added Tax Xxx 0000 ("VAT Act") and
-------
Article 5 of the Value Added Tax (Special Provisions) Order 1995 (as amended)
shall apply to the transfer of the Business pursuant to the provisions of this
Agreement. Accordingly,
(a) The parties shall use commercially reasonable efforts to secure that
the transfer of the assets of the Business pursuant to this Agreement is treated
as neither a supply of goods nor a supply of services for the purposes of value
added tax.
(b) The Company hereby covenants and agrees to use the assets of the
Business after the Closing in carrying on the Business and that it will, after
the Closing, be a taxable person for value added tax purposes.
(c) The parties agree that they will give notice of the transfer of the
assets of the Business pursuant to this Agreement to HM Customs & Excise as
required pursuant to the VAT Act or as otherwise required by law.
(d) Seller will deliver to the Company on Closing all records relating to
the Business referred to in Section 49 of the VAT Act.
(e) Seller undertakes to retain and make available to Buyer all such
documents and records not delivered to Buyer pursuant to clause (d) above which
are reasonably required by Buyer for the purposes of complying with its
obligations in relation to value added tax.
(f) The parties represent and warrant to each other that they are duly
registered for the purposes of value added tax.
27
11.05 TAX RETURNS, COOPERATION, AND ELECTIONS.
--------------------------------------------
(a) Pursuant to the Section 338(h)(10) Election, Seller will include
the income of the Company through the Closing Date on Seller's consolidated
federal income Tax Returns (and any applicable combined or other affiliated
group income Tax Returns where there is a corresponding Section 338(h)(10)
Election under state, local, or foreign law).
(b) Buyer shall file or cause to be filed any other Tax Returns of the
Company required to be filed after the Closing. Buyer shall permit Seller to
review and comment on any such Tax Returns that relate to periods prior to or
including the Closing and shall make such revisions as are reasonably requested
by Seller. Any Tax refunds or credits that are obtained by Buyer or the Company
that relate to periods prior to Closing shall be for the account of Seller and
promptly paid by Buyer to Seller.
(c) Seller, Buyer, and the Company will file all income Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with the allocation of purchase price and liabilities
described in Section 11.01 and consistent with information furnished by Seller
concerning the Company's Tax basis in its assets.
(d) Buyer, the Company, and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns and any audit, litigation, or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(e) At Seller's request with reasonable advance notice, Buyer will
cause the Company to make and/or join with Seller after Closing in making an
election to file consolidated returns for federal income tax purposes for all
periods during which Company is owned by Seller (or any combined or other
affiliated group Tax Return for state, local, or foreign income tax purposes).
At Seller's request, Buyer will cause the Company to make or join with Seller in
making any other election if the making of such election does not have a
material adverse impact on Buyer (or on the Company following Buyer's purchase
of Shares). Notwithstanding this Section 11.05(e), a failure of the Company to
be a member of Seller's consolidated group in no way relieves Seller of its
obligation under Section 11.01 of this Agreement to pay the Taxes attributable
to the deemed asset sale resulting from a non-consolidated affiliated group
Section 338(h)(10) Election described in Section 338(h)(10)(B) (last sentence)
of the Code and the regulations thereunder (and any corresponding state, local,
or foreign provisions, if applicable), it being understood that Buyer will
remain responsible under this Section 11.05(e) for any Losses suffered by Seller
due to any failure on the part of Buyer to comply with its obligations under
Section 11.01 and this Section 11.05(e).
28
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.01. SELLER INDEMNIFICATION. Seller shall indemnify, defend and hold
-----------------------
harmless Buyer and, effective at Closing, without duplication, the Company and
their respective affiliates, officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, a "Buyer
-----
Indemnified Party") to the fullest extent permitted by law from and against any
------------------
and all damages, losses, liabilities, diminution in value, fines, penalties,
costs and expenses of any kind or nature whatsoever (whether or not arising out
of a third party claim and including reasonable expenses of investigation,
defense or settlement of the foregoing and reasonable attorney's fees and
disbursements) (collectively, "Losses"), incurred or suffered by any Buyer
------
Indemnified Party occasioned or caused by, resulting from or arising out of (i)
any inaccuracy in or breach of any representation or warranty of Seller set
forth in this Agreement, any Ancillary Agreement, the Seller Disclosure
Schedules or any certificate or other writing delivered pursuant hereto or in
connection herewith and (ii) any failure by Seller to perform any of its
obligations, covenants or agreements set forth in this Agreement, any Ancillary
Agreement, or any certificate or other writing delivered pursuant hereto or in
connection herewith or therewith.
12.02. BUYER INDEMNIFICATION. Buyer shall indemnify, defend and hold
----------------------
harmless Seller and its affiliates, officers, directors, agents, employees,
subsidiaries, partners, stockholders, members and controlling persons (each, a
"Seller Indemnified Party") to the fullest extent permitted by law from and
--------------------------
against any and all Losses incurred or suffered by any Seller Indemnified Party
occasioned or caused by, resulting from or arising out of (i) any inaccuracy in
or breach of any representation or warranty of Buyer set forth in this
Agreement, any Ancillary Agreement, the Buyer Disclosure Schedules or any
certificate or other writing delivered by Buyer pursuant hereto or in connection
herewith, (ii) any failure by Buyer to perform any of its obligations, covenants
or agreement set forth in this Agreement, any Ancillary Agreement, or any
certificate or other writing delivered pursuant hereto or in connection herewith
or therewith, (iii) any claim made by or on behalf of any UK Employee or German
Employee which relates to his employment by the Company after the Closing, (iv)
the employment or termination of employment of any UK Employee or German
Employee after the Closing, (v) any substantial and detrimental change in the
terms and conditions of employment of any UK Employee after the Closing, (vi)
any change in the terms and conditions of the employment of any German Employee
after the Closing, (vii) the Company succeeding Seller as employer of the UK
Employees pursuant to the TUPE Regulations and (viii) the Company succeeding
Seller as employer of the German Employees pursuant to Para. 613 a German Civil
Code.
12.03. NOTIFICATION. Each Buyer Indemnified Party or Seller Indemnified
------------
Party (each an "Indemnified Party") shall, promptly after the receipt of notice
-----------------
of the commencement of any action, investigation, claim or other proceeding
against such Indemnified Party in respect of which indemnity may be sought under
this Article XII, notify the Seller or Buyer, as the case may be (each an
"Indemnifying Party") in writing of the commencement thereof. The omission of
--------------------
any Indemnified Party to so notify an Indemnifying Party of any such action
shall not relieve an Indemnifying Party from any liability which it may have to
such Indemnified Party under this Article XII unless, and only to the extent
that, such omission results in an Indemnifying Party's forfeiture of substantive
rights or defenses or otherwise is materially prejudicial to such Indemnifying
Party. In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify an Indemnifying Party of the
commencement thereof, an Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
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Indemnified Party in its reasonable judgment if the Indemnifying Party (i)
shall give written notice to the Indemnified Party that the Indemnifying Party
disputes and intends to defend against such claim, liability or expense at the
Indemnifying Party's own cost and expense and (ii) provides assurance reasonably
acceptable to such Indemnified Party that such indemnification will be paid
fully and promptly if required; provided, however, that the assumption of the
-------- -------
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. If the Indemnifying Party assumes such defense in accordance
with the preceding sentence, it shall have the right, with the consent of such
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. The Indemnifying Party shall keep such Indemnified
Party apprised of the status of the claim, liability or expense and any
resulting suit, proceeding or enforcement action, shall furnish such Indemnified
Party with all documents and information that the Indemnified Party shall
reasonably request. Notwithstanding anything herein stated, such 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
reasonable expense of separate counsel for such Indemnified Party shall be paid
by the Indemnifying Party, provided that the Indemnifying Party shall be
obligated to pay for only one counsel for the Indemnified Party in any
jurisdiction. If no such notice of intent to dispute and defend is given by the
Indemnifying Party within a reasonable period of time, or if such diligent good
faith defense is not being or ceases to be conducted after notice of such fact
and a reasonable opportunity to cure has been given to the Indemnifying Party,
such Indemnified Party may undertake the defense of (with counsel selected by
such Indemnified Party), and shall have the right to compromise or settle, such
claim, liability or expense (exercising reasonable business judgment). If such
claim, liability or expense is one that by its nature cannot be defended solely
by the Indemnifying Party, then such 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.
12.04. LIMITATION OF INDEMNIFICATION. Notwithstanding anything to the
-------------------------------
contrary in this Agreement, the obligations of the parties hereto for
indemnification under this Article XII shall terminate on April 30, 2002, except
(i) as to matters as to which any Indemnified Party has made a claim for
indemnity or given written notice of a possible claim for indemnity on or prior
to such date, which shall survive the expiration of such period until such claim
is finally resolved and any obligations with respect thereto are fully
satisfied; (ii) with respect to any claim for indemnification pursuant to
Section 12.01(i) for any inaccuracy in or breach of a representation or warranty
under Sections 3.01, 3.02, 3.05, 4.01, 4.02 or 4.04 of this Agreement, which
shall survive the Closing indefinitely; (iii) with respect to any claim for
indemnification pursuant to Section 12.01(i) for any inaccuracy in or breach of
a representation or warranty under Section 3.15 of this Agreement, which shall
survive until the expiration of all applicable statutes of limitations; (iv)
with respect to any claim for indemnification pursuant to Section 12.02(i) for
any inaccuracy in or breach of a representation or warranty under Sections 5.01,
5.02 or 5.06, which shall survive the Closing indefinitely; or (v) with respect
to any claim for indemnification pursuant to Section 12.01(ii) or 12.02(ii),
which shall survive the Closing indefinitely.
30
12.05. MINIMUM LOSSES OF BUYER INDEMNIFIED PARTY. A Buyer Indemnified
----------------------------------------------
Party shall not have any right to obtain indemnification pursuant to Section
12.01(i) for any inaccuracy in or breach of a representation or warranty in this
Agreement until aggregate Losses of all Buyer Indemnified Parties resulting from
inaccuracies in or breaches of representations and warranties in this Agreement
exceed $50,000, after which time the full amount of such Losses shall be
recoverable in accordance with the terms hereof.
12.06. MAXIMUM INDEMNIFICATION BY SELLER. All Buyer Indemnified Parties,
----------------------------------
collectively, shall not have any right to seek or obtain indemnification
pursuant to Section 12.01(i) for any inaccuracy in or breach of a representation
or warranty in this Agreement (other than Sections 3.01, 3.02, 3.05, 3.15, 4.01,
4.02 or 4.04) other than in an aggregate amount not exceeding $1,700,000. All
Buyer Indemnified Parties, collectively, shall not have any right to seek or
obtain indemnification pursuant to this Article XII for Losses resulting from
inaccuracies in or breaches of representations or warranties from Seller to the
extent that the total amounts paid, directly or indirectly, by Seller in respect
of indemnification claims pursuant to this Article XII for Losses resulting from
inaccuracies in or breaches of representations or warranties would exceed
$7,000,000 in the aggregate.
12.07. MINIMUM LOSSES OF SELLER INDEMNIFIED PARTY. A Seller Indemnified
--------------------------------------------
Party shall not have any right to obtain indemnification pursuant to Section
12.02(i) for any inaccuracy in or breach of a representation or warranty in this
Agreement until aggregate Losses of all Seller Indemnified Parties resulting
from inaccuracies in or breaches of representations and warranties in this
Agreement exceed $50,000, after which time the full amount of such Losses shall
be recoverable in accordance with the terms hereof.
12.08. MAXIMUM INDEMNIFICATION BY BUYER. All Seller Indemnified Parties,
---------------------------------
collectively, shall not have any right to seek or obtain indemnification
pursuant to Section 12.02(i) for any inaccuracy in or breach of a representation
or warranty in this Agreement (other than Sections 5.01, 5.02 or 5.06) other
than in an aggregate amount not exceeding $1,700,000. All Seller Indemnified
Parties, collectively, shall not have any right to seek or obtain
indemnification pursuant to this Article XII for Losses resulting from
inaccuracies in or breaches of representations or warranties from Buyer to the
extent that the total amounts paid, directly or indirectly, by Buyer in respect
of indemnification claims pursuant to this Article XII for Losses resulting from
inaccuracies in or breaches of representations or warranties would exceed
$7,000,000 in the aggregate.
12.09. EXCLUSIVE REMEDY. Except as otherwise specifically provided in
-----------------
this Agreement, the parties acknowledge that their sole and exclusive remedy
after the Closing with respect to any and all claims relating to this Agreement
(other than claims of, or causes of action arising from, fraud, intentional
misrepresentation or a deliberate or willful breach) shall be pursuant to the
indemnification provisions set forth in this Article XII.
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ARTICLE XIII
MISCELLANEOUS
13.01. NOTICES. All notices, requests and other communications to either
-------
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Buyer, to:
MathSoft Corporate Holdings, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
H. Xxxxx Xxxxxx, P.C.
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
if to the Company, to:
MathSoft Engineering & Education, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
H. Xxxxx Xxxxxx, P.C.
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
if to Seller:
MathSoft, Inc.
0000 Xxxxxxxx Xxxxxx X. #000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
32
with a copy to:
Xxxxxx X. Xxxxx, Xx.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
13.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may
------------------------
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed by Buyer, the Company and Seller.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.03. EXPENSES. Except as set forth in the next sentence, all costs and
--------
expenses incurred in connection with the transactions contemplated by the
Transaction Documents shall be paid by the party incurring such cost or expense.
All costs and expenses incurred by Seller and the Company in connection with the
transactions contemplated by the Transaction Documents shall be paid by Seller.
13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
-----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
--------
transfer any of his or its rights or obligations under this Agreement without
the consent of the other parties hereto except that Buyer may merge with and
into its parent corporation and collaterally assign its rights hereunder to one
or more lenders providing financing for the transactions contemplated by this
Agreement.
13.05. FURTHER ASSURANCES. From time to time after the Closing, at the
-------------------
request of Buyer and without further consideration, Seller will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares and the assets comprising the Business.
13.06. GOVERNING LAW. This Agreement and the Transaction Documents shall
--------------
be construed in accordance with and governed by the law of the Commonwealth of
Massachusetts, without regard to conflicts of law rules of such state.
13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement and the Transaction
----------------------------
Documents may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other parties
hereto.
33
13.08. ENTIRE AGREEMENT. This Agreement and the Transaction Documents
-----------------
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
13.09. CAPTIONS. The captions herein are included for convenience of
--------
reference only and shall be ignored in the construction or interpretation
hereof.
13.10. JURISDICTION. Any action or proceeding seeking to enforce any
------------
provision of, or based on any right arising out of, this Agreement or the
Transaction Documents may be brought against any of the parties in the courts of
the Commonwealth of Massachusetts, and each of the parties hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any obligation to venue laid therein.
Process in any such action or proceeding may be served on any party anywhere in
the world, whether within or without the Commonwealth of Massachusetts.
13.11. JURY TRIAL WAIVER. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN
-----------------
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER IN CONTRACT OR TORT) BROUGHT BY
ANY OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT
OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS.
34
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
MATHSOFT CORPORATE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxx
Title: President
MATHSOFT ENGINEERING & EDUCATION, INC.
By: Xxxxxx X. X'Xxxxx
Title: Vice President and Chief Financial Officer
MATHSOFT, INC.
By: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
35
