EXHIBIT 10.1
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ASSET PURCHASE AGREEMENT
AMONG
WORKSTREAM INC.,
WORKSTREAM USA, INC.
AND
PROACT TECHNOLOGIES CORPORATION
December 20, 2004
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated December 20, 2004
among WORKSTREAM INC., a Canadian corporation ("Buyer"), WORKSTREAM USA, INC., a
Delaware corporation and wholly owned subsidiary of Buyer ("Buyer Sub"), and
PROACT TECHNOLOGIES CORPORATION, a Delaware corporation ("Seller"). Unless
otherwise stated, all dollar amounts (and the symbol $) appearing in this
Agreement are U.S. Dollars.
BACKGROUND
A. Seller is in the business of providing software and hosted web-based
tools for employee benefits management (the "Business").
B. Buyer desires to purchase from Seller, either directly, or indirectly
through its designee, Buyer Sub, and Seller desires to sell to Buyer, either
directly or to its designee, substantially all of the assets of Seller, all as
more fully described below, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and conditions
herein set forth, Seller hereby agrees to sell, convey, transfer, assign, grant
and deliver to Buyer, and Buyer hereby agrees to purchase, acquire and accept
from Seller at Closing (as defined in Section 3.1) all of Seller's right, title
and interest in and to all of the assets, business, rights, claims and contracts
of Seller other than the assets specifically excluded pursuant to Section 1.2
(collectively, the "Assets"), free and clear of all liabilities, obligations,
pledges, security interests, liens, defenses, setoffs, equities and encumbrances
of any kind whatsoever (collectively, "Encumbrances"), other than the Assumed
Liabilities and as otherwise set forth on Schedule 4.10, such Assets to include,
without limitation, the following:
(a) all rights to conduct the Business, together with the goodwill
related thereto and all Assumed Contracts (defined below);
(b) all source code, object code, materials, files, records, data
structures and data bases pertaining to all versions of software products ever
created and under development, without limitation, all user level documentation,
analysis documentation, requirements documentation, design documentation,
implementation documentation, user's guides and release notes;
(c) all Intellectual Property (as defined in Section 4.7);
(d) all right, title and interest in and to the Assumed Contracts
(as defined in Section 1.3), and all claims and rights of every kind arising out
of the Assumed Contracts;
(e) all Tangible Personal Property (as defined in Section 4.8);
(f) all promotional materials, sales solicitation materials, sales
reports, customer and contact lists, direct mail materials, labels and
stationery (whether in printed form, on diskette, magnetic tape or otherwise);
(g) all financial and business records, correspondence, data, files,
budgets and pricing guidelines and records of Seller (whether in printed form,
on diskette, magnetic tape or otherwise) (excluding records, correspondence and
files relating to the transactions contemplated by this Agreement); provided,
however, that Seller shall be permitted to maintain copies of such financial and
business records, correspondence, data, files, budgets and pricing guidelines
and records necessary to liquidate, dissolve or wind up the affairs of Seller
after Closing;
(h) all rights to enforce the provisions of any restrictive covenant
or agreement, prohibition on solicitation of customers or protection of trade
secrets and confidential information which are contained in any agreement
between Seller and any of its current or former suppliers, independent
contractors, customers or employees or any prospective purchaser;
(i) all phone and fax numbers, internet domain names and web
sites/web pages;
(j) all accounts receivable, including, without limitation, trade
receivables and unbilled accounts receivable, as set forth on Schedule 1.1(j)
(the "Accounts Receivable");
(k) the name "ProAct Technologies"; and
(l) all other property and assets of whatever nature and wherever
located, owned, used or held by Seller, except for the Excluded Assets (as
defined in Section 1.2).
SECTION 1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1, Buyer and Seller
acknowledge and agree that Buyer is not buying and Seller is not selling any of
the following assets (collectively the "Excluded Assets"):
(a) Seller's cash, cash equivalents and bank accounts and Seller's
cash and banking records;
(b) the corporate books and records of Seller and all of the capital
stock of Seller;
(c) prepaid Taxes (as defined in Section 4.12) and any rights of
Seller to any federal, state or local Tax refunds;
(d) all insurance policies of Seller and all rights of Seller
arising under such policies;
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(e) the items listed on Schedule 1.2(e), none of which are used in
the operation of the Business;
(f) all rights of Seller under this Agreement; and
(g) all deposits made by or on behalf of Seller except the deposit
under the White Plains Lease.
SECTION 1.3 NON-ASSUMPTION OF LIABILITIES. Buyer shall not assume any
liabilities or obligations of Seller, whether such liabilities are known or
unknown, actual or contingent, liquidated or unliquidated, except that Buyer
agrees to assume from and after the Closing, (a) the liabilities and obligations
of Seller which arise after the Closing Date (as defined in Section 3.1) and
relate to periods after the Closing Date pursuant to any contract, agreement or
lease set forth on Schedule 1.3(a) ("Assumed Contracts"); (b) the accounts
payable and accrued expenses described on Schedule 1.3(b); and (c) commitments
of Seller to provide products or services which have not been completed as of
the Closing Date, as set forth on Schedule 1.3(b) (the liabilities described in
clauses (a), (b) and (c) are referred to as the "Assumed Liabilities"). Seller
will indemnify and hold harmless Buyer, in accordance with Article VIII, from
and against all of its liabilities and obligations, other than the Assumed
Liabilities (collectively, the "Excluded Liabilities"), even if Buyer
voluntarily pays any such Excluded Liability, it being agreed that Buyer shall
not pay any such Excluded Liability without the prior written consent of Seller
unless, (x) with respect to any liabilities or obligations relating to Taxes,
Buyer has given Seller 45 days' prior written notice (or such lesser time as may
be necessary based on the notice given to Buyer by the obligee, provided that
Buyer immediately notifies Seller of such notice and provides Seller a copy
thereof) of the request or demand for payment and thereafter the creditor or
obligee threatens in writing to bring suit or does bring suit against Buyer in
respect of such obligations, and (y) with respect to any other Excluded
Liability, Buyer has given 20 days prior written notice (or such lesser time as
may be necessary based on notice given to Buyer by the obligee, provided that
Buyer immediately notifies Seller of such notice and provides Seller a copy
thereof) of the request or demand and thereafter Buyer receives another demand
or the creditor or obligee threatens to bring suit and does bring suit against
Buyer in respect of such obligation. By way of illustration and not limitation,
Excluded Liabilities include but are not limited to the following: (i) all
litigation, actual or threatened, relating to any act or omission of Seller;
(ii) all liabilities and obligations under all employee benefit plans in which
individuals or employees of Seller or its affiliates (or former employees or
beneficiaries thereof) have participated, including any liability for failure to
comply with the requirements of ERISA or any other federal, state, local or
foreign statute; (iii) all liabilities or obligations to employees of Seller
arising from or relating to (A) earned or accrued vacation pay, (B) earned or
accrued sick leave, (C) short-term or long-term disability benefits, (D)
severance pay, or (E) any other employee benefits, except the employee-related
liabilities described on Schedule 1.3(b); (iv) all liabilities or obligations
for Taxes owed by Seller; (v) all liabilities and obligations under any
environmental statutes; (vi) all accrued liabilities and accounts payable of
Seller as of the Closing Date, except the payables and expenses described on
Schedule 1.3(b); (vii) all liabilities of Seller to make any distributions to
its stockholders or former stockholders; (viii) all liabilities and obligations
in respect of the White Plains Lease (as defined in Section 4.9) arising prior
to the Closing Date and all liabilities and obligations in respect of the lease
listed in item #2 of Schedule 4.9 and (ix) all liabilities set forth on the
Schedules hereto except for the Assumed Liabilities.
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ARTICLE II
PAYMENTS
SECTION 2.1 PURCHASE PRICE. In consideration for the sale, assignment,
transfer and delivery of the Assets to Buyer, Buyer shall pay to Seller Nine
Million, Seven Hundred and Thirty Thousand U.S. Dollars (US$9,730,000) (the
"Purchase Price"), payable as follows:
(a) US$5,500,000 (the "Closing Payment") shall be paid by Buyer to
Seller at the Closing in cash, by wire transfer, to an account designated by
Seller.
(b) US$750,000 in the form of shares of Buyer's common shares, no
par value (the "Escrow Shares"), shall be deposited for one year from the
Closing Date with Wachovia Bank, National Association, as escrow agent (the
"Escrow Agent"), such Escrow Shares to be held as the exclusive source (except
as otherwise set forth in Section 8.8) against which Buyer may assert claims for
indemnification under Article VIII, and disbursed, in accordance with an Escrow
Agreement, substantially in the form attached hereto as Exhibit 2.1(b) with such
changes as may be required by the Escrow Agent (the "Escrow Agreement"). The
number of Escrow Shares shall be determined by valuing each such share at the
average of the closing prices for the Buyer's common shares as quoted on the
Nasdaq SmallCap Market for the 20 days that such Market was open for the
transaction of business prior to the Closing Date.
(c) US$1,530,000 in the form of a promissory note of Buyer (the
"Promissory Note") shall be delivered by Buyer to Seller at the Closing. The
note shall (i) bear interest at the rate of 6.0% per annum; (ii) subject to
adjustment under Section 2.4, provide for payment in full on June 1, 2005 of
principal plus all accrued interest; (iii) be secured by the Assets; (iv) be
senior to all of Buyer's other debt, except for Buyer's existing debt with the
Bank of Montreal or any successor financing (the "Senior Debt") up to an
aggregate amount equal to the sum of (A) Cdn$3,000,000 plus (B) US$900,000 (the
"Senior Debt Limit"); (v) accelerate in the event and to the extent of any
increase in the amount of debt of outstanding over the Senior Debt Limit; (vi)
accelerate upon and to the extent of the net proceed of a sale of assets of
Buyer after the Closing Date, other than a sale in the ordinary course of
business; (vii) accelerate upon the issuance or sale of any equity of Buyer by
Buyer up to and to the extent of any net proceeds received by Buyer in such
sale; and (viii) be substantially in the form attached hereto as Exhibit 2.1(c).
Notwithstanding any other provisions of this document, in the event that Buyer
sells 0XxxxxxXxxx.xxx ("6Figure") or substantially all of the assets of 6Figure
after the date of this Agreement but prior to the Closing, the US$1,530,000 of
the Purchase Price otherwise payable in the form of the Promissory Note, shall
be payable at Closing in United States dollars.
(d) US$1,950,000 in the form of Buyer's common shares, no par value
(the "Purchase Price Shares," and together with the Escrow Shares, the
"Shares"). The number of Purchase Price Shares shall be determined by valuing
each such share at the average of the closing prices for the Buyer's common
shares as quoted by the Nasdaq SmallCap Market for the 20 days that such Market
was open for the transaction of business prior to the Closing Date.
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SECTION 2.2 ALLOCATION OF PURCHASE PRICE. The aggregate Purchase Price
payable hereunder shall be allocated in accordance with Schedule 2.2. Neither
Buyer nor Seller shall take any position or action with any taxing authority
which is inconsistent with such allocation. Each party agrees to take any and
all action and sign any and all documents reasonably requested by the other
party to give effect or evidence of such allocation, including without
limitation, any forms required to be filed with the Internal Revenue Service.
SECTION 2.3 CLOSING BALANCE SHEET. Within 30 days of after the Closing
Date (defined in Section 3.1), Buyer will prepare a balance sheet for the
Company as of the Closing Date (the "Closing Date Balance Sheet") and deliver it
to Seller. The Closing Date Balance Sheet will be prepared in accordance with
GAAP on a basis consistent with the accounting practices used in connection with
the preparation of the of the interim balance sheet of the Seller as of October
31, 2004 attached hereto on Schedule 4.4 (the "October Balance Sheet"), and the
line items on the Closing Date Balance Sheet will be limited to the current
assets and current liabilities of Seller transferred and assumed by Buyer at
Closing.
SECTION 2.4 POST-CLOSING ADJUSTMENTS TO THE PURCHASE PRICE. Following
delivery of the Closing Date Balance Sheet in accordance with Section 2.3, the
Purchase Price will be adjusted as follows:
(a) Within 30 days of receipt of the Closing Date Balance Sheet,
Seller will, in a written notice to Buyer, either accept the Closing Date
Balance Sheet or object to it by describing in reasonably specific detail any
proposed adjustments to the Closing Date Balance Sheet and the estimated amounts
of and reasons for such proposed adjustments. The failure by Seller to object to
the Closing Date Balance Sheet within such 30-day period will be deemed to be an
acceptance by Seller of the Closing Date Balance Sheet.
(b) If any adjustments to the Closing Date Balance Sheet are
proposed by Seller in accordance with Section 2.4(a), Buyer and Seller will
negotiate in good faith to resolve any dispute, provided that if the dispute is
not resolved within 20 days following the receipt by Buyer of notice from Seller
objecting to a proposed Purchase Price Adjustment (or such longer period upon
which Buyer and Seller may agree upon in writing), Buyer and Seller will retain
the office of a mutually acceptable "Big Four" independent certified public
accounting firm (the "Accountants") to resolve such dispute, which resolution
will be final and binding. The Accountants will be retained under a retention
letter executed by Buyer and Seller that specifies that the determination by the
Accountants of any such disputes concerning the Closing Balance Sheet will be
resolved in accordance with GAAP on a basis consistent with the accounting
practices used in connection with the preparation of the October Balance Sheet
by choosing the position of Buyer or Seller without change, within 30 days of
the engagement. The fees and expenses of the Accountants will be paid by the
non-prevailing party.
(c) Within 30 days after the later of acceptance of the Closing
Balance Sheet by Seller or the determination made by the Accountants pursuant to
Section 2.4(b), as the case may be, then to the extent that the Adjusted Current
Net Worth (defined below) as set forth on the Closing Date Balance Sheet is less
than the Adjusted Current Net Worth as reflected on the October Closing Balance
Sheet, the Purchase Price will be reduced by the difference, and such difference
will be refunded to Buyer by reducing the outstanding principal amount payable
December 15, 2005 under the Promissory Note (in the event that Seller pays to
Buyer cash in lieu of issuing the Promissory Note pursuant to Section 2.1(c),
however, such refund to Buyer shall be paid immediately in United States
dollars). If the Adjusted Current Net Worth as set forth on the Closing Date
Balance Sheet is more than the Adjusted Current Net Worth as reflected on the
October Closing Balance Sheet, the Purchase Price will be increased by an amount
equal to such increase and such amount will be added to the June 15, 2005
payment under the Promissory Note (in the event that Seller pays to Buyer cash
in lieu of issuing the Promissory Note pursuant to Section 2.1(c), however, such
amount will paid to Seller immediately in United States dollars).
Notwithstanding the forgoing, any adjustment to the Purchase Price pursuant to
this Section 2.4, shall not exceed the then outstanding principal amount owing
under the Promissory Note and in the event that Seller pays to Buyer cash in
lieu of issuing the Promissory Note pursuant to Section 2.1(c), however, such
adjustment shall not exceed US$1,800,000.
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(d) For purposes of this Agreement, "Adjusted Current Net Worth" means,
respectively, (i) as determined as of October 31, 2004, $104,516, which equals
the difference between (A) the amount of current assets that would have been
transferred to Buyer and (B) the current liabilities that would have been
assumed by Buyer, in each case if the Closing had occurred on October 31, 2004
and as such amounts are reflected and agreed upon on Schedule 2.4(d), and (ii)
as determined as of the Closing Date, the difference between (C) the amount of
current assets transferred to Buyer at Closing (such current assets to consist
of the same categories of current assets included on Schedule 2.4(d)) , and (D)
the current liabilities assumed by Buyer at Closing (such assumed liabilities to
consist of the same categories of assumed liabilities included on Schedule
2.4(d)).
ARTICLE III
THE CLOSING
SECTION 3.1 TIME OF CLOSING. The closing of the purchase and sale of the
Assets hereunder (the "Closing") shall take place at the offices of Cozen
X'Xxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX at 10:00 a.m. December 30, 2004
or at such other place and time as Buyer and Seller shall mutually agree (the
"Closing Date").
SECTION 3.2 DELIVERY OF ITEMS BY SELLER. Seller shall deliver to Buyer at
the Closing the items listed below in form and substance reasonably satisfactory
to Buyer and its counsel:
(a) Such bills of sale, endorsements of transfers, conveyances,
assignments and other agreements as shall vest in Buyer title to the Assets in
accordance with the terms hereof, each executed by Seller.
(b) The Escrow Agreement, executed by Seller.
(c) A copy, certified by the Secretary of Seller, of resolutions
duly adopted by the Board of Directors of Seller and the stockholders of Seller
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
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(d) A receipt for payment of the Purchase Price, executed by Seller.
(e) The Registration Rights Agreement, substantially in the form
attached hereto as Exhibit 3.2(e) (the "Registration Rights Agreement"),
executed by Seller.
(f) A certificate executed by an officer of Seller certifying that
(i) all representations and warranties of Seller contained in this Agreement are
true and correct in all material respects on the Closing Date, (ii) all
obligations, agreements and covenants of Seller required by this Agreement to be
performed prior to the Closing have been performed in all material respects, and
(iii) all necessary corporate actions by the Boards of Directors and the
stockholders of Seller have been taken to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
(g) A good standing certificate dated as of a date within 15 days
prior to the Closing Date for Seller from the Secretary of State of the state of
its organization.
(h) All documents necessary to release any and all Encumbrances on
the Assets (other than Encumbrances set forth on Schedule 4.10), including,
without limitation, Uniform Commercial Code termination statements, duly
executed by all necessary parties and, if not required to be executed by the
releasing party, accompanied by written authorization duly executed by the
releasing party.
(i) Evidence of receipt of all consents and approvals required for
the consummation of the transactions contemplated hereby.
(j) The legal opinion of Xxxxx & Xxxxxxx, L.L.P., counsel for the
Seller, dated the Closing Date, substantially in the form attached hereto as
Exhibit 3.2(j).
(k) The Accounts Receivable, updated as of the close of business on
the day prior to the Closing.
(l) All tangible personal property included in the Assets, it being
understood that Seller will not be delivering prior versions of the software
being purchased which are no longer in existence or in the possession of Seller.
(m) The Lease Assignment (as defined in Section 6.7).
SECTION 3.3 DELIVERY OF ITEMS BY BUYER. Buyer shall deliver to Seller (or
to the Escrow Agent with respect to the Escrow Shares) at the Closing the items
listed below:
(a) The Closing Payment.
(b) The Escrow Shares to the Escrow Agent (or evidence of
irrevocable transfer instructions given to transfer agent regarding the same).
(c) The Escrow Agreement, executed by Buyer and the Escrow Agent.
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(d) The Purchase Price Shares (or evidence of irrevocable transfer
instructions given to transfer agent regarding the same).
(e) The Registration Rights Agreement executed by Buyer.
(f) The Promissory Note (unless Seller pays to Buyer cash in lieu of
issuing the Promissory Note pursuant to Section 2.1(c)).
(g) A security agreement in the form attached hereto as Exhibit
3.3(g) (the "Security Agreement").
(h) A copy, certified by the Secretary of Buyer, of resolutions duly
adopted by the Board of Directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the transactions contemplated hereby.
(i) A certificate executed by an officer of Buyer certifying that
(i) all representations and warranties of Buyer contained in this Agreement are
true and correct in all material respects as of the Closing, (ii) all
obligations of Buyer required by this Agreement to be performed prior to Closing
have been performed in all material respects, and (iii) that all necessary
corporate action by the Board of Directors of Buyer has been taken to authorize
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
(j) a good standing certificate dated as of a date within 15 days
prior to the Closing Date for Buyer from Canada.
(k) Evidence of receipt of all consents and approvals required for
the consummation of the transactions contemplated hereby.
(l) The legal opinions of Cozen X'Xxxxxx, and of Xxxxxx-Xxxxxxxxx,
Xxxx & McDongall, LLP, counsel for Buyer, dated the Closing Date, substantially
in the forms attached hereto as Exhibit 3.3(l)
(m) The Lease Assignment.
(n) Evidence to the reasonable satisfaction of Seller that all liens
on the assets of Buyer Sub (including a lien held by Xxxxxxx Xxxxxxxxx) have
been terminated.
(o) The Consent Agreement, executed by Buyer and the Bank of
Montreal.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and
purchase the Assets, Seller hereby makes the following representations and
warranties to Buyer, except as set forth in the Disclosure Schedule attached
hereto which shall modify the following representations and warranties by the
statements contained therein:
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SECTION 4.1 ORGANIZATION AND STANDING OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller has all requisite power and authority to own and to
sell its assets, to conduct its business as now conducted, to execute, deliver
and perform this Agreement and the agreements, instruments and other documents
being executed and delivered pursuant to this Agreement (collectively, the
"Purchase Documents") to be performed by Seller, and to consummate the
transactions contemplated hereby and thereby.
SECTION 4.2 VALIDITY OF AGREEMENT. The execution and delivery of this
Agreement and the Purchase Documents by Seller and the consummation of the
transactions contemplated hereby and thereby have been authorized and approved
by all necessary corporate action on the part of Seller. This Agreement and each
of the Purchase Documents to which Seller is a party have been duly and validly
executed and delivered by Seller and constitute the legal, valid and binding
obligations of Seller enforceable against Seller in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency,
fraudulent conveyance, reorganization or other similar laws and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy.
SECTION 4.3 NO VIOLATION. The execution, delivery and performance of this
Agreement and each of the Purchase Documents to which Seller is a party does not
and will not, with or without the giving of notice, the lapse of time or both
(a) result in the breach of or conflict with any of the terms and provisions of
such Seller's Articles of Incorporation or Bylaws, (b) conflict with, violate or
result in a breach of or default under any of the terms, conditions or
provisions of, or result in or constitute a ground for termination,
cancellation, modification of or acceleration of any obligations under, any
contract, agreement, commitment, indenture, mortgage, pledge, note, bond,
license, permit or other instrument to which Seller is a party or by which
Seller or any of the Assets are or may be bound, the result of which would be to
have a material adverse effect on the Assets, (c) result in the creation or
imposition of any Encumbrance upon or otherwise adversely affect Seller or any
of the Assets, or (d) violate any law, statute, regulation or decree which
relates to Seller or the Assets, or which requires the consent, approval or
authorization of any court, governmental or regulatory agency, authority or
body.
SECTION 4.4 FINANCIAL STATEMENTS. Attached hereto as Schedule 4.4 are
copies of the audited balance sheets of the Seller at December 31, 2002 and
December 31, 2003, the unaudited balance sheet of Seller at September 30, 2004,
and the related statements of income of Seller for the years ended December 31,
2002, December 31, 2003 and the ten-month period ended October 31, 2004 (all of
the aforesaid statements hereinafter referred to collectively as the "Financial
Statements"). The Financial Statements (including any related notes thereto) (i)
have been prepared from and are consistent with the books and records of Seller;
(ii) fairly and accurately present, in all material respects, the financial
condition and the results of operations of Seller as of the respective dates
thereof and for the respective periods covered thereby; and (iii) have been
prepared in accordance with GAAP consistently applied during the periods covered
thereby and consistent with Seller's past practices, provided that the October
31, 2004 financial statements contain certain deviations from GAAP consistent
with interim reporting, including the absence of footnotes. No changes, events
or developments have occurred since October 31, 2004 which, individually or
together, have resulted or could result in a material adverse change in the
business, assets, prospects or results of operations of Seller since that date.
Seller has made available all final workpapers (including those of its
independent accountants in the possession of Seller) relating to all of the
foregoing.
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SECTION 4.5 CONTRACTS.
(a) Seller is not a party to or bound by any written, oral or
implied contract, agreement, lease or other commitment (each, a "Contract" and
collectively, the "Contracts"), except for (i) those listed on Schedule 4.5(a),
and (ii) agreements involving the maximum possible liability or obligation on
the part of Seller of less than US$12,000 each and less than US$50,000 in the
aggregate.
(b) True, correct and complete copies of all of the written
Contracts, including all of the amendments thereto, and descriptions of all oral
Contracts have been delivered or made available to Buyer. The Contracts are
valid, binding and enforceable against the respective parties in accordance with
their respective terms. Seller and, to Seller's knowledge, all other parties to
all Contracts have performed, in all material respects, all of the obligations
required to be performed by such parties under the Contracts, and except as
disclosed on Schedule 4.5(b), neither Seller, nor to Seller's knowledge, any
other party is in default or in arrears under the terms thereof and no condition
exists or event has occurred, which, with the giving of notice or lapse of time
or both, will constitute a default under such Contracts. Except as disclosed on
Schedule 4.5(b), to Seller's knowledge, there is no intention by any party to
terminate or amend any Contract or to refuse to renew the same upon expiration
of its term.
(c) Except as set forth on Schedule 4.5(c), all rights of Seller
under the Assumed Contracts shall continue unimpaired and unchanged in Buyer
after Closing, without (i) the consent of any person (except for any consent(s)
which have been, or will as of the Closing be, obtained and set forth on
Schedule 4.6), or (ii) the payment of any penalty, the incurrence of any
additional obligations or the change of any term. No Assumed Contract limits the
freedom of Seller to compete in any line of business or with any person or
entity.
(d) Schedule 4.5(d) contains a listing of all outstanding written
and oral proposals, bids, offers for projects or services, guaranties, advances
and credits which, if accepted, could impose any debts, obligations or
liabilities upon Buyer in excess of $12,000 after the Closing Date. No person or
party is renegotiating, or has the right to renegotiate, any amount paid or
payable to Seller under any Assumed Contract or any item or provision of any
Assumed Contract.
SECTION 4.6 CONSENTS. Schedule 4.6 contains a true and complete list of
all consents, approvals, notices and other authorizations which are required for
the consummation of the transactions contemplated by this Agreement, including,
without limitation, assignment to and assumption by Buyer of the Assumed
Contracts.
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SECTION 4.7 INTELLECTUAL PROPERTY RIGHTS.
(a) Schedule 4.7(a) contains a true and complete list of all
Patents, Trademarks and Copyrights (each of which is hereinafter defined) owned
by, licensed by, licensed to or used by Seller. For purposes of this Agreement,
"Intellectual Property" means all of the following (including all authorized
copies and embodiments thereof): (i) all registered and unregistered trademarks,
service marks, logos, corporate names, trade names, internet domain names and
other indications of origin, together with all translations, adaptations,
derivations and combinations thereof, the goodwill associated with the foregoing
and registrations and renewals in any jurisdiction, and applications in any
jurisdiction to register the same (the "Trademarks"); (ii) all issued United
States and foreign patents and pending patent applications, including, without
limitation, divisionals, continuation, continuation in part, continuing and
renewal applications (the "Patents"); (iii) all registered and unregistered
copyrights, copyrightable and copyright works and all registrations, renewals
and applications to register the same (whether or not constituting "work made
for hire" as defined in 17 U.S.C. Sections 101 and 201(b)(4)) (the
"Copyrights"); (iv) all protectable items of trade dress; (v) all computer
software owned or under development, including without limitation, all source
code, object code, material files, record data structures and databases and all
other components and enhancements thereof ("Software"), and all related support,
maintenance and user-level documentation; (vi) all licenses and agreements
pursuant to which rights in or to the Trademarks, Patents, Copyrights or
Software have been acquired ("Licenses-In"); (vii) all licenses and agreements
pursuant to which the rights in and to Intellectual Property have been licensed
or transferred ("Licenses-Out"); and (viii) all confidential and proprietary
trade secrets, inventions, ideas, discoveries (whether or not patentable and
whether or not reduced to practice), know-how, processes, procedures, drawings,
specifications, designs, plans, proposals, customer lists, supplier lists,
independent contractor lists, pricing and cost information, and other technical
data or confidential business information, together with all documentation and
media constituting or describing any of the foregoing and tangible embodiments
thereof (in whatever form of media and whether or not registered) ("Proprietary
Information").
(b) Except as set forth on Schedule 4.7(b):
(i) The rights of Seller in and to each item of Intellectual
Property used by Seller are owned or licensed by Seller, free and clear of any
Encumbrances whatsoever. Seller has the right to use, sell, license and dispose
of, and has the right to bring actions for the infringement of all Intellectual
Property owned by Seller. Seller's rights in and to the Intellectual Property
owned by Seller are freely assignable by Seller including the right to create
derivative works. Seller's rights in and to the Intellectual Property licensed
by Seller are freely assignable by Seller. As of the date of this Agreement,
Seller is not under any obligation to pay any royalty, license fee or other
similar consideration to any third party or to obtain any approval or consent
for use of any Intellectual Property owned by Seller. None of the Intellectual
Property owned by Seller is subject to any outstanding judgment, order, decree,
or injunction issued by a court of competent jurisdiction. Seller has not
received written notice that any complaint, action, suit, proceeding, or hearing
is pending, and to Seller's knowledge, no charge, investigation, claim or
demand, is threatened, which challenges the legality, validity, enforceability,
or ownership of any of the Intellectual Property owned by Seller.
(ii) No material breach or default (or event which with notice
or lapse of time or both would result in an event of default) by Seller exists
or has occurred, but not been cured, under any License-In or other agreement
pursuant to which Seller uses any Intellectual Property, and the consummation of
the transactions contemplated by this Agreement will not violate or conflict
with or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) or result in a forfeiture under, or constitute
a basis for termination of, any such License-In or other agreement.
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(iii) To Seller's knowledge, no Intellectual Property owned or
used by Seller, and no product or service licensed or sold by Seller, infringes
any trademark, trade name, copyright or patent, or misappropriates any trade
secret, right of publicity, right of privacy or other proprietary right of any
person or would give rise to an obligation to render an accounting to any person
as a result of co-authorship or co-invention. Seller has not received any
written notice of any adversely held patent, trademark, copyright, service xxxx,
trade name or trade secret of any other person alleging or threatening to assert
that Seller's use of any Intellectual Property infringes upon or is in conflict
with any intellectual property or proprietary rights of any third party. To
Seller's knowledge, there is no basis for any charge, claim, suit or action
asserting any such infringement or asserting that Seller does not have the legal
right to use any such Intellectual Property.
(iv) All Patents and registered Trademarks shown on Schedule
4.7(b) as having been filed in, issued by or registered with the United States
Patent and Trademark Office or the corresponding offices of other countries in
the name of Seller have been so duly filed, registered or issued, as the case
may be, and have been maintained and renewed in accordance with all applicable
provisions of law and administrative regulations in the United States and each
such other country. Seller has used reasonable efforts to protect its rights in
such Patents and Trademarks, and there have been no acts or omissions by Seller,
the direct result of which would be to compromise the rights of Seller to apply
for or enforce appropriate legal protection of such Patents and Trademarks. To
Seller's knowledge, no person is infringing, violating or misappropriating any
of the Intellectual Property owned by Seller.
(v) Except as disclosed on Schedule 4.7(b), each current
employee and independent contractor of Seller, and each former employee and
independent contractor who was employed or engaged within the two years
immediately prior to the date hereof, who, either alone or in concert with
others, created or creates, developed or develops, invented or invents,
discovered or discovers, derived or derives, programmed or programs or designed
or designs any of the owned Intellectual Property, has entered into a written
agreement with Seller providing, in substance, that all such Intellectual
Property shall be owned by, or otherwise assigned to, Seller and that Seller's
Proprietary Information shall not be used, or disclosed to any third party
except as authorized by Seller. No former employee or independent contractor of
Seller who was employed by, or contracted with, Seller in the last two years,
has any valid claim or right to any of the Intellectual Property owned by
Seller.
(vi) Seller has used its reasonable efforts to protect the
proprietary and, as appropriate, confidential nature of all Proprietary
Information that it presently owns or uses or to which it has access.
(vii) To Seller's knowledge, there are no errors or defects,
including without limitation, bugs, logic errors or failure, in the Software
which prevents any of the Software from operating and performing in all material
respects as described in its published specification attached hereto on Schedule
4.7(b); except for the disclosed problems or defects on Schedule 4.7(b).
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(viii) All third party software residing on Seller's computer
system is licensed pursuant to enforceable agreements with third party
licensors, and Seller has not made any unlicensed copies of such software except
those permitted for archival and back-up purposes or that would not result in a
material adverse affect on Seller or the Assets.
(ix) To Seller's knowledge, there is no portion or version of
the Software that is not in Seller's possession or which is in the possession of
a person or entity which is not authorized to have such possession of such
Software pursuant to an Assumed Contract.
SECTION 4.8 TANGIBLE PERSONAL PROPERTY. Schedule 4.8 contains a true and
complete list of all of the fixed assets and other tangible assets now owned or
used by Seller in connection with the Business with an original cost, on a per
asset basis, equal to or greater than US$5,000, including, without limitation,
office furniture, fixtures, leasehold improvements, computer equipment and
peripherals (the "Tangible Personal Property"). Seller makes no representation
or warranty as to the condition of the Tangible Personal Property. Without
limiting the forgoing, the parties agree that the Tangible Personal Property is
being sold on as "as is and where is" basis with all faults.
SECTION 4.9 REAL ESTATE. Seller does not have any interest in any real
estate except that Seller leases the White Plains, New York property described
in item # 1 on Schedule 4.9. Seller has paid all material amounts due and is not
in material default under the lease for such property (the "White Plains
Lease"), and there exists no condition or event, which, with the passage of
time, giving of notice or both, will constitute a default under or breach of the
White Plains Lease.
SECTION 4.10 TITLE TO THE ASSETS. Seller has good and valid title to all
of the Assets to be transferred to Buyer by it free and clear of all
Encumbrances except for the Assumed Liabilities and as otherwise set forth in
Schedule 4.10. This Agreement and the Purchase Documents to be executed and
delivered pursuant hereto will vest in Buyer good and valid title to all of the
Assets free and clear of all Encumbrances.
SECTION 4.11 LEGAL MATTERS. Except as set forth on Schedule 4.11, Seller
is not a party, and, to the knowledge of Seller, Seller has not been threatened
with, any suit, action, arbitration, administrative or other proceeding or any
governmental investigation, and there is no judgment, decree, award or order
outstanding against Seller. Seller is not contemplating the institution of any
suit, action, arbitration, administrative or other proceeding.
SECTION 4.12 TAX RETURNS AND PAYMENTS.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" shall mean
any federal, state, local, foreign or other income, gross receipts, profits,
franchise, license, transfer, sales, use, ad valorem, customs, payroll,
withholding, employment, occupation, property (real or personal), excise or
other taxes, fees, duties, assessments, withholdings or governmental charges of
any nature (including interest, penalties or additions to such taxes or
charges); and (ii) "Returns" shall mean all returns, reports, estimates,
documents, information returns and statements of any nature regarding Taxes for
any period prior to Closing required to be filed by Seller and relating to its
income, receipts, properties or operations.
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(b) Except as set forth on Schedule 4.12, (i) All Returns required
to have been filed by Seller have been or, to the extent due between the date
hereof and Closing, will be filed when due in timely fashion; (ii) all Taxes,
including, without limitation, those shown on the Returns, have been or, to the
extent due between the date hereof and Closing, will be deposited or paid when
due in timely fashion; (iii) to the extent required by applicable law, the
Returns are accurate and complete in all material respects; (iv) there is no
action, suit, proceeding, audit or claim now pending or, to Seller's knowledge,
threatened, regarding any Taxes relating to the income, receipts, properties or
operations of Seller for any period; (v) all Taxes which Seller is required by
law to withhold and collect have been duly withheld and collected, and have been
timely paid over to the proper authorities to the extent due and payable; and
(vi) there are no liens for any Tax on the Assets.
SECTION 4.13 EMPLOYEE MATTERS.
(a) Schedule 4.13(a) sets forth (i) a complete and accurate list of
all employees of Seller (the "Employees") as of October 31, 2004, together with
their positions, salaries, vacation benefits (both maximum annual and accrued
and outstanding as of a recent date), original date of hire and classification
as full-time, part-time or on lay-off or other type of leave; (ii) a list and
description of all individual employment and compensation (including salary,
commission, bonus and benefit agreements applicable to Employees, copies of
which have been provided to Buyer; and (iii) all bonus and severance
arrangements individually or generally made available to Employees in connection
with the sale of the Assets or otherwise.
(b) Except as set forth on Schedule 4.13(b), Seller does not
maintain, sponsor or contribute to any employee pension benefit plan, as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Employee pension benefit plans, whether involving Seller or
any entity which would be considered a single employer with Seller under ERISA
Section 4001(b)(1) or Section 414(b), (c), (m) or (o) of the Internal Revenue
Code (the "Code") (an "ERISA Affiliate"), are individually referred to as an
"Employee Benefit Plan." Seller has delivered or made available to Buyer a true
and complete copy of each Employee Benefit Plan that is intended to qualify
under Code Section 401(a), including all texts, amendments and other agreements
(whether formal or informal) adopted in connection therewith.
(c) Each Employee Benefit Plan has been maintained in compliance
with all material aspects of applicable law, including, without limitation,
ERISA and the Code.
(d) Neither Seller nor any ERISA Affiliate now maintains or makes
contributions to or has, at any time in the past, maintained or made
contributions to (i) any employee benefit plan that is subject to the minimum
funding requirements of ERISA, or (ii) any multi-employer plan subject to the
terms of the Multi-Employer Pension Plan Amendments Act of 1980.
(e) Seller is not a party to any union agreement or collective
bargaining agreement. To Seller's knowledge, there is no union organization
activity involving the Employees. There is no complaint filed or, to Seller's
knowledge, threatened to be filed against Seller before any federal, state or
local governmental or quasi-governmental agency or governmental body alleging
violation of law (federal, state or local) relating to employment practices or
discrimination in employment. Seller has complied, in all material respects,
with all applicable provisions of the applicable federal, state, local and
foreign laws relating to the employment of labor, including but not limited to
the provisions thereof relative to wages, hours, collective bargaining, payment
of Social Security taxes, immigration laws and the employment of non-U.S.
citizens, and Seller is not liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing.
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SECTION 4.14 INSURANCE. Seller maintains the insurance policies set forth
on Schedule 4.14. True and complete copies of all such policies have been
provided or made available to Buyer. All of such policies are in full force and
effect, all premiums payable under such policies have been paid in full, and
Seller is not in default of any provision thereof. Except as set forth on
Schedule 4.14, there is no claim by Seller pending under any of such policies as
to which coverage has been questioned, denied or disputed by the insurer. Seller
has not received written notice or any other notice from any issuer of any such
policies of its intention to cancel or refusal to renew any policy issued by it.
SECTION 4.15 LIABILITIES. Seller does not have any liabilities in excess,
in the aggregate, of $50,000, whether related to Tax or non-Tax matters, known
or unknown, due or not yet due, liquidated or unliquidated, fixed or contingent,
determined or determinable in amount or otherwise except as and only to the
extent (a) reflected in the balance sheet at October 31, 2004 included as part
of Schedule 4.4; (b) current liabilities which arose in the ordinary course of
business since October 31, 2004 (none of which is a liability for breach of
contract, breach of warranty, tort or infringement); or (c) set forth on
Schedule 4.15.
SECTION 4.16 SUPPLIERS; CUSTOMERS; CONFLICTS OF INTEREST.
(a) Schedule 4.16(a) sets forth a complete and accurate list of all
suppliers and customers of Seller who respectively contributed more than
US$25,000 of sales or services to, and orders and use of services from, Seller
during fiscal years 2002 or 2003. Other than as disclosed on Schedule 4.16(a),
Seller has no knowledge of any present intention on the part of any supplier or
customer listed on Schedule 4.16(a) to terminate its business relationship with
Seller (either prior to the end of any relevant contract period, at the end of
such contract period or otherwise) or materially reduce its existing business
relationship with Seller, either now or in the foreseeable future.
(b) Except as shown on Schedule 4.16(b), to Seller's knowledge,
neither Seller nor any director or officer of Seller, or stockholder
beneficially owning greater than 10% of the outstanding shares of capital stock
of Seller, or any relative or affiliate of any of the foregoing: (i) has any
material pecuniary interest in any supplier or customer of Seller, or in any
other business with which Seller conducts business or with which it is in
competition; (ii) has any ownership interest in any property or assets used by
Seller, including the Assets other than through an ownership interest in Seller;
(iii) has any contractual or other claim, express or implied, of any kind
whatsoever against Seller; or (iv) is a party to a contract with Seller.
SECTION 4.17 ACTIONS SINCE BALANCE SHEET DATE. Except as set forth on
Schedule 4.17 or as contemplated by this Agreement, since October 31, 2004,
Seller:
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(a) has not taken any action outside of the ordinary course of
business inconsistent with past practice;
(b) has not borrowed any money or become contingently liable for any
obligation or liability of others in excess, in the aggregate, of $50,000;
(c) has paid all of its debts and obligations as they became due;
(d) has not incurred any debt, liability or obligation of any nature
to any party except for obligations arising in the ordinary course of business;;
(e) has not increased either the base pay, commission rate, bonus or
other compensation or benefits to any Employee or independent contractor;
(f) has not materially amended or modified any of the Contracts;
(g) has not created or permitted to become effective any Encumbrance
on any of the Assets;
(h) has not disposed of any Assets except for non-material portions
in the ordinary course of business; and
(i) has not engaged in any transaction which involves the
expenditure or commitment of more than US$50,000.
SECTION 4.18 PERMITS AND LICENSES. Seller holds all franchises, licenses,
permits, consents, approvals, waivers and other authorizations (collectively,
the "Permits") which are necessary for its operation, including, without
limitation, all Permits issued by federal, state, local or foreign governments
and governmental agencies, except for such Permits, the failure to hold would
not have a material adverse effect on Seller or the Assets. Schedule 4.18
attached hereto sets forth a complete list of all Permits held by Seller. Except
as set forth on Schedule 4.18, all such Permits are transferable to Buyer
without the consent of any governmental body or agency or the payment of money.
Seller is not in default, and Seller has not received any notice of any claim of
default, with respect to any such Permits or of any notice of any other claim or
proceeding or threatened proceeding relating to any such Permits. All such
Permits are in full force and effect, except for such Permits, the failure of
which to be in full force and effect would not have a material adverse effect on
Seller or the Assets.
SECTION 4.19 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.19,
Seller is not using any hazardous or toxic waste, substance, oil or material
("Hazardous Substances") at any of the facilities owned or operated, including
the facilities leased by Seller (collectively, "Seller's Facilities"), during
Seller's occupancy thereof in any manner which: (a) violates applicable
Environmental Laws (defined below); (b) requires "removal" or "remediation" as
those terms are defined in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. xx.xx. 9601 et seq; or (c) would
reasonably be expected to subject Seller to damages, penalties, liability or an
obligation to perform any work, clean-up, removal, remediation, repair,
construction, alteration, demolition, renovation or installation in or in
connection with such facility in order to comply with any federal, state or
local law, regulation, ordinance or order concerning the environmental state,
condition or quality of such facility applicable to owners, operators or
developers of real property ("Environmental Cleanup Work"). Except as set forth
on Schedule 4.19, with respect to Seller's Facilities, Seller is, and its
respective activities are being conducted, in compliance with all applicable
federal, state and local environmental laws and regulations, including, but not
limited to, the Clean Air Act, 42 U.S.C. Section 7401, et seq.; the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33
U.S.C. Section 1251, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; CERCLA, as amended; the Hazard Communication
Standard, 29 CFR Section 1910.1200; and the Toxic Substances Control Act, 15
U.S.C. Section 2601, et seq. and the requirements of applicable common law
relating to Hazardous Substances ("Environmental Laws"). No notice from any
governmental body has ever been served upon Seller claiming that Seller has
violated Environmental Laws on or in connection with any of Seller's Facilities,
or requiring Seller to perform any Environmental Cleanup Work, on or in
connection with any of Seller's Facilities in order to comply with any
Environmental Laws. Notwithstanding any other provision of this Agreement, this
Section 4.19 shall constitute Seller's sole representations and warranties with
respect to Hazardous Substances, Environmental Laws and other environmental
matters.
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SECTION 4.20 ACCOUNTS RECEIVABLE. Schedule 1.1(j) sets forth a true and
complete list by customer, project and date of invoice (if applicable) of each
of Seller's Accounts Receivable as the day prior to the Closing Date. Each of
the Accounts Receivable on Schedule 1.1(j) (on the date hereof and at Closing)
constitutes a valid claim in the full amount thereof against the debtor charged
therewith and arises out of a bona fide sale or delivery of goods or performance
of services in the ordinary course of business. To Seller's knowledge, there are
no claims, defenses or rights of set-off against Seller with respect to any
Accounts Receivable, except as set forth on Schedule 4.20. The Accounts
Receivable are valid and enforceable.
SECTION 4.21 NO OTHER ASSETS. The Assets constitute all of the material
assets, property, rights and privileges which are used in the operation of the
Business or are required for Seller to conduct its business as it is presently
conducted and currently planned and to satisfy and perform the contracts,
commitments, arrangement and understandings with the customers of Seller
existing or proposed as of the Closing Date.
SECTION 4.22 ABSENCE OF CERTAIN PRACTICES. None of (a) Seller, or (b) to
Seller's knowledge, any director, officer or employee of Seller, or (c) to
Seller's knowledge, any agent or representative of Seller working on behalf of
Seller, or (d) to Seller's knowledge, any other person or entity acting on
behalf of Seller, has (i) used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to, or on behalf of, employees of
any governmental body or agency or others, or accepted or received any unlawful
contributions, payments, gifts or expenditures or (ii) directly or indirectly
given, made or agreed to give or make any illegal payment, gratuity, gift,
political contribution or similar benefit to a customer, supplier, or employee
thereof, or to any governmental official, or to any other person or entity, who
is or was in a position to help or hinder Seller or assist Seller in connection
with any proposed transaction.
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SECTION 4.23 SELLER STATUS. Seller: (a) is an "accredited investor" as
such term is defined in Rule 501 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"); (b) is acquiring the Shares for investment
and for Seller's own account (and for the account of the shareholders of Seller,
all of whom are accredited investors, pursuant to the winding down or
liquidation of Seller) and not with a view to, or for resale in connection with,
any distribution; (c) understands that the Shares have not been registered under
the Securities Act or under any state securities or blue sky laws, and, as a
result thereof, are subject to substantial restrictions on transfer; (d)
acknowledges that appropriate legends will be placed on the certificates
representing the Shares indicating the restrictions on transfer of such Shares;
and (e) acknowledges that the Shares must be held indefinitely unless
subsequently registered under the Securities Act and any applicable state
securities or blue sky laws, or sold or otherwise transferred pursuant to
exemptions from registration under the Securities Act or such laws, and that
except as set forth in the Registration Rights Agreement, Buyer has no
obligation to register the Shares.
SECTION 4.24 BROKERS. Except as disclosed on Schedule 4.24, neither Buyer
nor Seller has or will have an obligation to pay any broker's, finder's,
investment banker's, financial advisor's or similar fee in connection with this
Agreement or the transactions contemplated hereby by reason of any action taken
by or on behalf of Seller.
SECTION 4.25 STATEMENTS NOT MISLEADING. No representation or warranty or
other statement made by Seller in this Agreement , including all Schedules as
delivered on the date hereof and updated as of the Closing Date pursuant to the
terms hereof, contains, or will contain any untrue statement of any material
fact or omit to state any material fact required to be stated herein to make
such statement in light of the circumstances under which they were made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
As a material inducement to Seller to enter into this Agreement, Buyer
hereby makes the following representations and warranties to Seller (and in the
event that Buyers assigns its rights under this Agreement pursuant to Section
10.7 hereof, Buyer Sub, together with Buyer, jointly and severally make the
following representations and warranties to Seller), except as set forth in the
Disclosure Schedule attached hereto which shall modify the following
representations and warranties by the statements contained therein. Unless the
context indicates otherwise, a reference to Buyer in these representations and
warranties shall be deemed to mean Buyer and its subsidiaries, including Buyer
Sub, taken as a whole.
SECTION 5.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of Canada.
Buyer has all requisite power and authority to execute, deliver and perform this
Agreement and each of the Purchase Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. Buyer Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Buyer Sub has all requisite power and authority to
execute, deliver and perform each of the Purchase Documents to which it is a
party and to consummate the transactions contemplated thereby.
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SECTION 5.2 VALIDITY OF AGREEMENT AND PURCHASE DOCUMENTS. The execution
and delivery by Buyer of this Agreement and each of the Purchase Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby, including without limitation the issuance of the Shares and the
Promissory Note (unless Buyer pays to Seller cash in lieu of issuing the
Promissory Note pursuant to Section 2.1(c)), have been duly and validly
authorized by all necessary corporate action on the part of Buyer. This
Agreement and each of the Purchase Documents to which Buyer is a party are the
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar
laws and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The execution and
delivery by Buyer Sub of each of the Purchase Documents to which it is a party
and the consummation of the transactions contemplated thereby, including without
limitation the issuance of the Promissory Note (unless Buyer pays to Seller cash
in lieu of issuing the Promissory Note pursuant to Section 2.1(c)), have been
duly and validly authorized by all necessary corporate action on the part of
Buyer Sub. Each of the Purchase Documents to which Buyer Sub is a party are the
valid and binding obligations of Buyer Sub, enforceable against Buyer Sub in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency, fraudulent conveyance,
reorganization or other similar laws and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of pubic policy.
SECTION 5.3 NO VIOLATION. The execution, delivery and performance by Buyer
of this Agreement and each of the Purchase Documents to which Buyer is a party
and compliance by Buyer with the terms and provisions of this Agreement and each
of the Purchase Documents to which Buyer is a party do not and will not, with or
without the giving of notice, the lapse of time or both (a) result in the breach
of or conflict with any of the terms and provisions of Buyer's Certificate of
Incorporation or Bylaws, (b) conflict with, violate or result in a breach or
default under any of the terms, conditions or provisions of, or result in a
ground for termination, cancellation, modification or acceleration of any
obligations under any contract, agreement, commitment, indenture, mortgage,
pledge, note, bond, license, permit or other instrument to which Buyer is a
party or by which Buyer is bound, the result of which would be to have a
material adverse effect on Buyer, except for the Senior Debt for which Buyer
must obtain the consent of the Senior Lender (c) violate any law, statute,
regulation or decree which relates to Buyer or requires the consent, approval or
authorization of any court or governmental or regulatory agency, authority or
body. The execution, delivery and performance by Buyer Sub of each of the
Purchase Documents to which Buyer Sub is a party and compliance by Buyer Sub
with the terms and provisions of each of the Purchase Documents to which Buyer
Sub is a party do not and will not, with or without the giving of notice, the
lapse of time or both (a) result in the breach of or conflict with any of the
terms and provisions of Buyer Sub's Certificate of Incorporation or By-laws, (b)
conflict with, violate or result in a breach or default under any of the terms,
conditions or provisions of, or result in a ground for termination,
cancellation, modification or acceleration of any obligations under any
contract, agreement, commitment, indenture, mortgage, pledge, note, bond,
license, permit or other instrument to which Buyer Sub is a party or by which
Buyer Sub is bound, the result of which would be to have a material adverse
effect on Buyer Sub, or (c) violate any law, statute, regulation or decree which
relates to Buyer Sub or requires the consent, approval or authorization of any
court or governmental or regulatory agency, authority or body.
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SECTION 5.4 BROKERS. Neither Buyer nor Seller has or will have an
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or the transactions
contemplated hereby by reason of any action taken by or on behalf of any Buyer.
SECTION 5.5 SEC DOCUMENTS; PURCHASER FINANCIAL STATEMENTS. Buyer has
furnished or made available to Seller its most recent true and complete copy of
(i) each annual, quarterly and other report pursuant to Sections 13, 14 or 15(d)
of the Securities Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "1934 Act"), and (ii) all filings made pursuant to
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act") filed by Buyer with the Securities
and Exchange Commission (the "SEC") since June 1, 2003 (the "Buyer SEC
Documents"), which are all the documents (other than preliminary material) that
Buyer was required to file with the SEC under the 1934 Act and Securities Act
since such date. As of their respective filing dates, the Buyer SEC Documents
complied in all material respects with the requirements of the 1934 Act or the
Securities Act, as applicable. The Buyer SEC Documents (including the exhibits
and schedules hereto), when taken together, do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the extent
corrected by a subsequently filed Buyer SEC Document provided to Seller prior to
the Closing. The financial statements of Buyer included in the Buyer SEC
Documents (the "Buyer Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present in all
material respects the consolidated financial position of Buyer and its
subsidiaries at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments). There has been no
change in Buyer's accounting policies, methods or practices (including any
change in depreciation or amortization policies or rates, revenue recognition
for software, assets of goodwill, impairment of intangible assets and valuation
of deferred taxes) or any material revaluation by Buyer of any of its material
assets, except as described in the notes to the Buyer Financial Statements.
Except as and to the extent reflected or reserved against on the most recent
balance sheet contained in the Buyer SEC Documents or as otherwise disclosed in
the Buyer SEC Documents, Buyer has no material obligations or liabilities of any
nature that would have been required to be included on a balance sheet prepared
in accordance with generally accepted accounting principles as in effect on such
date; other than current liabilities incurred in the ordinary course of
business. To Buyer's knowledge, Buyer is not now and never has been the subject
of any investigation undertaken by the SEC.
SECTION 5.6 APPROVALS; RESTRICTIONS. Except for the filings and/or notices
required (a) under the Securities Act of 1933, the 1934 Act, and the rules and
regulations promulgated thereunder (collectively, the "Securities Laws"), (b)
under any foreign anti-trust or trade regulation law, (c) to be made with: (i)
the NASD and/or its Nasdaq SmallCap Market, (ii) the Boston Stock Exchange, and
(iii) each state securities or "blue sky" authority which may have jurisdiction,
or (d) pursuant to the Investment Canada Act, no approval, order or consent of
or filing with any governmental authority is required on the part of Buyer in
connection with the execution, delivery and performance by Buyer of this
Agreement or any of the Purchase Documents to which Buyer is a party, including
without limitation the issuance of the Shares. The Shares will be of the same
class as is currently registered under the 1934 Act. Such Shares to be issued
hereunder will constitute prior to registration "restricted securities" within
the meaning of Rule 144 under the Securities Act and may not be offered, sold,
transferred or otherwise disposed of by any other person except in strict
compliance with all applicable provisions of such United States securities laws,
rules and regulations, and all state and Canadian securities laws, rules and
regulations. Buyer is in compliance in all material respects with the
Xxxxxxxx-Xxxxx Act of 2002, as amended.
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SECTION 5.7 ISSUANCE OF SHARES AND PROMISSORY NOTE. The offer, sale and
issuance of the Shares and Promissory Note as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act and from the
registration or qualification requirements of the laws of any applicable state
United States or Canadian jurisdiction which has not or will not be obtained.
Neither Buyer nor any agent on its behalf has solicited or will solicit any
offers to sell or has offered to sell or will offer to sell all or any part of
the Shares to any person or persons so as to bring the issuance of such Shares
by Buyer within the registration provisions of the Securities Act.
SECTION 5.8 ABSENCE OF CERTAIN CHANGES OF EVENTS. Since October 15, 2004,
and except as otherwise disclosed in the Buyer SEC Documents or on Schedule 5.8
hereof, Buyer has conducted its business and operated in the ordinary course and
Buyer has not (i) split, combined or reclassified any shares of its capital
stock or made any other changes in its equity capital structure; (ii) purchased,
redeemed or otherwise acquired, directly or indirectly, any material amount of
shares of its capital stock or any options, rights or warrants to purchase any
material amount of such capital stock or any securities convertible into or
exchangeable for any material amount of such capital stock; (iii) purchased any
business, or merged or consolidated with any person; (iv) sold, leased or
otherwise disposed of any assets or properties which were material to Buyer and
its subsidiaries, taken as a whole, other than dispositions in the ordinary
course of business; (v) incurred, assumed or guaranteed any material
indebtedness for money borrowed other than intercompany indebtedness; or (vi)
suffered any business interruption, damage to or destruction of its properties
that has had (after giving effect to insurance coverage) a material adverse
effect on Buyer.
SECTION 5.9 NASDAQ AND BOSTON STOCK EXCHANGE COMPLIANCE. Buyer's common
shares are registered pursuant to Section 12(b) and Section 12(g) of the
Exchange Act, and are listed on the Nasdaq SmallCap Market and the Boston Stock
Exchange, and Buyer has taken no action designed to terminate the registration
of Buyer's common shares under the Exchange Act or delisting such common shares
from the Nasdaq SmallCap Market or the Boston Stock Exchange. The issuance of
the Shares does not require shareholder approval, including, without limitation,
pursuant to the Nasdaq Marketplace Rules or the rules of the Boston Stock
Exchange. Notwithstanding the foregoing, if the value of the Shares as
determined pursuant to Section 2.1 is such that the aggregate number of Shares
issued pursuant to Section 2.1 would equal or exceed 20% of the number of shares
of common stock of Buyer outstanding immediately before the issuance of the
Shares, Buyer cannot issue the Shares without obtaining prior shareholder
approval for such issuance.
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SECTION 5.10 CAPITALIZATION. The authorized capital stock of Buyer
consists of an unlimited number of shares of common shares, no par value per
share, and an unlimited number of preferred shares, of which 47,116,537 common
shares are issued and outstanding. All of the Shares have been duly authorized
and at the Closing will be validly issued, fully paid and nonassessable, free
and clear of all pledges, liens and encumbrances (other than restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed). Other than
as disclosed in the Buyer SEC Documents or listed on Schedule 5.10, there are no
stock appreciation rights, options, warrants, calls, rights, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any of Buyer's authorized but unissued capital
stock or any securities or debt convertible into or exchangeable for shares of
Buyer's capital stock or obligating Buyer to grant, extend or enter into such
option, warrant, call, commitment, conversion privileges or preemptive or other
right or agreement.
SECTION 5.11 INTELLECTUAL PROPERTY. Except as otherwise specifically
disclosed in the Buyer SEC Documents, to its knowledge, Buyer and its
subsidiaries: (i) own, or have obtained licenses or rights to use the
Intellectual Property used in the conduct of their respective businesses; (ii)
have not received written notice from any third party who has asserted any
ownership rights to any such Intellectual Property; (iii) are not aware of sales
of any products that would constitute an infringement by third parties of any
such Intellectual Property; (iv) are aware of no pending or threatened action,
suit, proceeding or claim by a third party challenging the ownership rights in,
validity or scope of, such Intellectual Property which has had or is reasonably
likely to cause a material adverse effect on the result of operations of Buyer;
and (v) are not aware of any pending or threatened action, suit, proceeding or
claim by a third party asserting that Buyer or any of its subsidiaries infringe
or otherwise violate any patent, trademark, copyright, trade secret or other
proprietary right of any third party, in each case or collectively, as would
reasonably be expected to result in a material adverse effect on the results of
operations of Buyer.
SECTION 5.12 PROPERTIES. Unless it is not reasonably likely to cause a
material adverse effect on Buyer, Buyer and its subsidiaries have good and
marketable title to all the properties and assets reflected as owned in the
financial statements included in the Buyer SEC Documents, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except those, if any,
disclosed in the Buyer SEC Documents or set forth on Schedule 5.12. Buyer or the
applicable subsidiary holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
the business of Buyer. Except as disclosed in the Buyer SEC Documents, Buyer or
its subsidiaries own or lease all such properties as are materially necessary to
Buyer's and its subsidiaries' operations as now conducted or as proposed to be
conducted (except in respect of the transactions contemplated by this
Agreement).
SECTION 5.13 LEGAL ACTIONS. Except as set forth in the Buyer SEC Documents
or on Schedule 5.13, there are no legal actions or administrative proceedings or
investigations instituted, or, to Buyer's knowledge, threatened in writing,
against Buyer or any of its subsidiaries, that are reasonably likely to have a
material adverse effect on the results of operations of Buyer. Neither Buyer nor
any of its subsidiaries is a party to the provisions of any injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other government body which has had or is reasonably likely to have a
material adverse effect on Buyer.
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SECTION 5.14 INVESTMENT COMPANY. Buyer is not now, and after the issuance
of the Shares under this Agreement and the application of the net proceeds from
the sale of the Shares, will not be, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
SECTION 5.15 PASSIVE FOREIGN INVESTMENT COMPANY ACT. Buyer is, and after
the issuance of the Shares under this Agreement and the application of the net
proceeds from the sale of the Shares, will be, in compliance with the Passive
Foreign Investment Company Act, as amended.
SECTION 5.16 TAXES. Buyer and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and Buyer has no knowledge of any tax
deficiency which has been asserted or threatened against Buyer or any of its
subsidiaries which has had or is reasonably likely to cause a material adverse
effect on the results of operations of Buyer.
SECTION 5.17 CONTRACTS. Except for matters which are not reasonably likely
to have a material adverse effect on the results of operations of Buyer, (i) the
contracts listed as exhibits to the Buyer SEC Documents, other than those
contracts that are substantially or fully performed or expired by their terms,
are in full force and effect on the date hereof, and (ii) none of Buyer, its
subsidiaries nor, to Buyer's knowledge, any other party to such contracts, is in
breach of or default under any of such contracts.
SECTION 5.18 NO DEFAULT. Buyer is not in default under or with respect to
its Senior Debt or any other material obligation of Buyer, and no condition
exists or event has occurred, which with the giving of notice or lapse of time
or both, will constitute Buyer's default under or with respect to the Senior
Debt or any such material obligation.
SECTION 5.19 STATEMENTS NOT MISLEADING. No representation or warranty or
other statement made by Buyer in this Agreement , including all Schedules as
delivered on the date hereof and updated as of the Closing Date pursuant to the
terms hereof, contains, or will contain any untrue statement of any material
fact or omit to state any material fact required to be stated herein to make
such statement, in light of the circumstances under which they were made, not
misleading.
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ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS
SECTION 6.1 NON-COMPETITION. To induce Buyer to enter into this Agreement
and purchase the Assets, Seller hereby agrees as an independent covenant that,
so long as Buyer has not breached, or defaulted under, the Promissory Note, for
a period of three years after the Closing, neither Seller nor any entity owned,
controlled, directly or indirectly, by Seller, shall, directly or indirectly,
either as an owner, consultant, manager, director, officer, associate, employee,
partner, agent, principal or otherwise, (i) engage in any business operation in
the United States which, directly or indirectly, engages in the Business, (ii)
solicit, induce or encourage any employee of Seller who becomes an employee of
Buyer to terminate his or her relationship with Buyer (provided that general
advertisement of employment opportunities not targeted at the employees of Buyer
or shall not violate this cause (ii)), or (iii) solicit, induce or encourage any
clients or prospective clients or suppliers or prospective suppliers of Buyer to
terminate or reduce in scope their relationship with Buyer or any such affiliate
to the extent such business relationship or potential business relationship
relates to the Business. Seller acknowledges that the restrictions contained in
this Section 6.1 are reasonable and necessary to protect the legitimate
interests of Buyer and that any violation of this Section 6.1 will result in
irreparable injury to Buyer and that money damages would not provide an adequate
remedy to Buyer, and, therefore, Buyer shall be entitled to preliminary and
permanent injunctive relief in any court of competent jurisdiction and to an
equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which Buyer may be entitled, it being understood that the
immediately preceding clause shall not create any contractual right in Buyer to
obtain double recovery for any damages. If any portion of the covenants or
agreements contained in this Section 6.1 or the application thereof is held to
be invalid or unenforceable, then the other portions of such covenants or
agreements or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have the power to reduce the area and/or duration
and/or limit the scope thereof, and the covenant or agreement shall then be
enforceable in its reduced form.
SECTION 6.2 CONFIDENTIALITY. At all times following the Closing, Seller
shall, and shall use its commercially reasonable efforts to cause its respective
controlled affiliates to, hold in strict confidence all confidential,
proprietary or other non-public information or trade secrets of Seller and/or
the Assets (the "Confidential Information"), and Seller shall not use, and shall
use its commercially reasonable efforts to prevent each of its controlled
affiliates from using, for its own benefit or purposes or for the benefit or
purposes of others, or release or disclose to any other person or entity, any
such Confidential Information. Notwithstanding the foregoing, this Section 6.2
shall not apply to any information (a) which is required to be disclosed by law
or by any court or administrative proceeding, or (b) that was or becomes
generally available to the public other than as a result of a disclosure by
Seller; provided that with respect to subsection (a) above, Seller hereby agrees
that in such event, Seller shall, and shall cause its respective affiliates to,
(i) provide Buyer with prompt notice thereof prior to any such disclosure so
that Buyer may seek a protective order or other appropriate remedy and (ii)
consult and cooperate with Buyer in seeking any such protective order or other
appropriate remedy.
SECTION 6.3 EMPLOYEE PAYMENTS. Seller will provide the employee retention
payments described on Schedule 6.3, in the manner described on Schedule 6.3.
SECTION 6.4 YEAR END AUDIT. Seller covenants and agrees to cause its
independent certified public accounting firm to conduct an audit and prepare
year-end audited financial statements for the year ended December 31, 2004 (the
"Year End Financial Statements"), and to cause the Year End Financial Statements
to be delivered to Buyer along with consent for Buyer to include such financial
statements (and those for the years ended December 31, 2003 and 2002) in Buyer's
required SEC filings, no later than February 15, 2005.
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SECTION 6.5 EMPLOYMENT OF EMPLOYEES.
(a) Buyer will employ, at its option, the Employees listed on
Schedule 6.5(a), to be delivered at least two days prior to Closing. Seller
agrees to take no action which would interfere with such employment by Buyer,
and shall take all action required by law or otherwise to cause the valid
termination of employment at the Closing Date of such Employees who are to be
employed by Buyer following the Closing Date. Seller hereby releases, as of the
Closing Date, each Employee who is to be employed by Buyer following the Closing
Date from any obligation such Employee may have under any agreement between such
Employee and Seller to the extent such agreement would restrict such Employee
from engaging in any business conducted by Buyer or its affiliates after
Closing. Seller further agrees that upon the written request of Buyer, Seller
shall use commercially reasonable efforts to enforce, on Buyer's behalf and at
Buyer's sole cost and expense, any restrictive covenant granted by any current
or former Employee in favor of Seller.
(b) Seller acknowledges and agrees that except as provided in
Section 1.3, Buyer shall not assume any, and Seller shall remain responsible for
any, liability arising from any termination of employment of any Employee,
including, without limitation, medical or health continuation coverage required
under ERISA or the Code.
SECTION 6.6 EMPLOYEE BENEFIT PLANS. Seller shall remain responsible for
and agree to indemnify and hold harmless Buyer and its ERISA Affiliates from and
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys' fees) and penalties, if any, arising out of or based upon
or with respect to any Employee Benefit Plan maintained by Seller or any ERISA
Affiliate of Seller.
SECTION 6.7 ASSIGNMENT OF LEASE. At Closing, Buyer and Seller will enter
an Assignment of Lease, substantially in the form attached hereto as Exhibit
6.7, (the "Lease Assignment") for the White Plains Lease.
SECTION 6.8 MAIL AND COMMUNICATIONS. Seller shall promptly remit to Buyer
any mail or other communications, including, without limitation, any written
inquiries, revenue payments and Accounts Receivable included in the Assets,
received by Seller from and after the Closing Date. Buyer shall promptly remit
to Seller any mail or other communications, including, without limitation, any
written inquiries received by Buyer relating to the Excluded Assets or the
Excluded Liabilities which are received by Buyer from and after Closing Date.
SECTION 6.9 TAXES. Buyer and Seller shall each pay when due 50% of all
sales, transfer, excise, use, stamp or other Taxes which may be imposed on
Seller in any jurisdiction in connection with or arising from the sale and
transfer of any of the tangible assets to Buyer under this Agreement; provided
however, that Buyers shall pay no more than $20,000, and to the extent 50% of
such liability exceeds $20,000, the excess shall be paid by Seller.
SECTION 6.10 EXPENSES. Each of the parties shall bear their own respective
expenses incurred in connection with this Agreement and the transactions
contemplated herein.
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SECTION 6.11 PUBLIC ANNOUNCEMENT. Buyer and Seller shall jointly issue
such press releases and public statements at such times as they shall hereafter
mutually agree. Neither Buyer nor Seller shall issue any press release or make
any internal announcement (other than such disclosure that is required to
consummate the transactions contemplated hereby) prior to Closing or public
statement unless the timing and text of such announcement, release or statement
has been approved by the other party, except as may be required by applicable
law or any listing or similar agreement with any securities exchange, in which
case the party issuing such press release or public statement shall provide the
other party with a copy of such release or statement with as much notice prior
to the issuance thereof as is reasonable under the circumstances.
SECTION 6.12 REQUIREMENTS AND CONSENTS. Promptly following the date
hereof, Buyer and Seller shall use their commercially reasonable efforts to
cause to be fulfilled those conditions precedent to Buyer's and Seller's
obligation to consummate the transactions contemplated hereby which are
dependent upon actions of Buyer or Seller, as the case may be (including Seller
taking all reasonable steps as necessary to obtain the consents set forth on
Schedule 4.6 which are required to be obtained as a condition precedent to
Buyer's obligation to close). As each consent is obtained and each notice is
given, Buyer or Seller, shall promptly deliver a copy of such instrument to the
other party. Buyer and Seller further agree to respond promptly to all requests
for information and documentation made by any party that must consent to the
transactions contemplated by this Agreement. If any consent on Schedule 4.6 is
not obtained, Seller shall cooperate with Buyer in any reasonable arrangement
designed to keep such agreement in effect and shall give Buyer the benefit of
such agreement including enforcement at the cost and for the account of Buyer of
any rights of Seller against the other party thereto. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement shall not constitute
an assignment or an attempted assignment of any contract, license, commitment,
agreement or purchase or sale order or any claim or right or any benefit arising
thereunder or resulting therefrom if such assignment or attempted assignment
thereof, without the consent from a third party thereto, would constitute a
material breach thereof or in any way materially adversely affect the rights of
Buyer thereunder.
SECTION 6.13 ACCESS TO INFORMATION.
(a) Prior to the Closing, Seller shall give to Buyer and its agents
reasonable access during normal business hours to all of the properties and
assets used by Seller in the operation of the Business and all documents, books
and records relating to the current and past operations of Seller and the
Assets, and shall permit Buyer and its agents to make copies thereof (which
copies shall be returned to Seller if this Agreement is terminated), and Seller
shall permit Buyer to interview the Employees during reasonable business hours
and upon reasonable prior notice.
(b) After Closing, Buyer shall make available to Seller, upon
written request of Seller specifying the information required, at Seller's sole
cost and expense and at such times and place designated by Buyer, (i) any
information included in the Assets reasonably required by Seller in connection
with the preparation of any Return or for any litigation claim or Tax audit to
which Seller is a party or to wind up and dissolve Seller, and (ii) any
personnel files, payroll records, billing records and accounts payable records
included in the Assets and relating to any period prior to the Closing Date, of
which Seller has not retained copies.
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SECTION 6.14 OPERATION OF SELLER BETWEEN SIGNING AND THE CLOSING. From the
commencement of business on the date hereof until the Closing Date (except upon
the prior written consent of Buyer, which consent shall not be unreasonably
withheld or delayed, or as is necessary to carry out the transactions
contemplated by this Agreement), Seller agrees that it shall:
(a) not take any action, or fail to take any action, except in the
ordinary and regular course of its business consistent with past practice, and
not otherwise prohibited under this Section 6.15 or otherwise under this
Agreement;
(b) not take, suffer or permit any action or omit to take any action
which would cause any of the representations and warranties of Seller contained
in this Agreement to become untrue;
(c) not increase the compensation or rate of compensation payable to
any Employee;
(d) not waive any right or cancel any claim relating to the Business
that would have a material adverse affect on Seller or the Assets;
(e) not enter into any material contract or arrangement, other than
contracts and arrangements contemplated by this Agreement and the transactions
contemplated hereby and contracts now under negotiation by Seller with third
parties as disclosed on Schedule 6.14(e) , (or modify or terminate any existing
contract or arrangement) whether or not in the ordinary course of the Business;
(f) not authorize or make any capital expenditures in excess of
US$50,000 in the aggregate;
(g) not sell, dispose of or agree to sell or dispose of any of the
Assets;
(h) not incur any indebtedness, including without limitation, any
assumption, guaranty or endorsement, or make any loan or advance, other than in
the ordinary course of business consistent with past practice;
(i) not reveal, orally or in writing, to any party, other than Buyer
or its management, counsel, accountants, insurance representatives, investment
and commercial bankers and like agents, any of the business procedures and
practices followed by Seller or any technology used in the processing,
evaluation, creation or dissemination of any of its products or services, except
to customers of Seller in the ordinary course of business consistent with past
practice;
(j) not create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any of the Assets;
27
(k) not initiate any legal proceedings, except where failure to do
so could adversely affect the rights of Seller;
(l) not merge or consolidate, or agree to merge or consolidate, with
or into any other entity;
(m) maintain its present insurance coverages with respect to the
Assets;
(n) keep all of the equipment and tangible personal property
included in the Assets in good operating repair and perform all necessary
repairs and maintenance to keep such Assets in the same condition as of the date
hereof, reasonable wear and tear excepted;
(o) use commercially reasonable efforts to (i) preserve its
organization intact, and (ii) preserve its relationships with suppliers,
customers and others having business relations with Seller; and
(p) comply with all provisions of any Contract and all laws, rules
and regulations.
SECTION 6.15 ADVERSE CHANGE.
(a) Seller shall promptly notify Buyer in writing if between the
date hereof and the Closing Date (i) there is any material adverse change in the
assets, properties, prospects, business or condition (financial or otherwise) of
Seller or the Assets, (ii) there is any material loss or damage to the Assets,
whether or not covered by insurance, (iii) there is any litigation, proceeding
or investigation is instituted affecting Seller or the Assets, or (iv) there is
any other event that occurs which causes any of the representations or
warranties of Seller contained herein to misstate a material fact or omit to
state a material fact required to be stated. Upon any notification of any event
referred to above, Seller will provide Buyer true and complete copies of any and
all information and documents relating thereto and, in the case of clause (iv),
will use all commercially reasonable efforts to cure before the Closing any such
event that causes or will render materially untrue any representation or
warranty of Seller contained in this Agreement. No notice given pursuant to this
Section 6.15(a) shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or shall in any way limit Buyer's
right to seek indemnity under Article VIII.
(b) Buyer shall promptly notify Seller in writing if between the
date hereof and the Closing Date (i) there is any material adverse change in the
assets, properties, prospects, business or condition (financial or otherwise) of
Buyer that is not otherwise disclosed by Buyer in a filing with the SEC, (ii)
there is any litigation, proceeding or investigation is instituted which, if
adversely affecting Buyer, could have a material adverse effect on Buyer that is
not otherwise disclosed by Buyer in a filing with the SEC, or (iii) there is any
other event that occurs which causes any of the representations or warranties of
Buyer contained herein to misstate a material fact or omit to state a material
fact required to be stated other than any representation or warranty relating to
the issuance of shares of stock of Buyer or the entering into of any agreement
relating thereto that is not material to Buyer and that is not otherwise
disclosed by Buyer in a filing with the SEC. Upon any notification of any event
referred to above, Buyer will provide Seller true and complete information
relating thereto and, in the case of clause (iii), will use all commercially
reasonable efforts to cure before the Closing any such event that causes or will
render materially untrue any representation or warranty of Buyer, other than the
representations and warranties related to the issuance of stock or the entering
into any agreement related thereto as described above. No notice given pursuant
to this Section 6.15(b) shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein or shall in any way
limit Seller's right to seek indemnity under Article VIII.
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SECTION 6.16 ACTIONS BY BUYER BETWEEN SIGNING AND CLOSING. From the
commencement of business on the date hereof until the Closing Date, (except upon
the prior written consent of Seller, which consent shall not be unreasonably
withheld or delayed, or as is necessary to carry out the transactions
contemplated by this Agreement) Buyer agrees that it shall:
(a) not take, suffer or permit any action or omit to take any action
which would cause any of the representations and warranties of Buyer contained
in this Agreement other than in Section 5.12 to become untrue;
(b) not merge or consolidate, or agree to merge or consolidate, with
or into any other entity;
(c) commence, or join with any person or entity in commencing, any
bankruptcy, reorganization or insolvency case or proceeding against Buyer, or of
its subsidiaries; and
(d) liquidate, dissolve or wind up Buyer or any of its subsidiaries.
SECTION 6.17 FURTHER ASSURANCES. Each party shall, at the request of the
other (without further consideration) do, execute, acknowledge, deliver and
file, or shall cause to be done, executed, acknowledged, delivered or filed, all
such further acts, deeds, transfers, conveyances, assignments or assurances as
may be reasonably requested to consummate the transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS TO THE OBLIGATIONS OF BUYER TO CLOSE. The
obligation of Buyer to close hereunder shall be subject to satisfaction or
waiver by Buyer of the following conditions at or prior to the Closing:
(a) Seller shall have delivered to Buyer each of the items listed in
Section 3.2;
(b) Each of the representations and warranties of Seller made in or
pursuant to this Agreement shall be true and correct in all material respects as
of the Closing Date;
29
(c) Seller shall have fully performed and complied in all material
respects with all of the covenants, obligations, agreements and conditions
required by this Agreement to be performed or complied with by Seller prior to
the Closing;
(d) From the date hereof through the Closing Date there shall not
have been any material adverse change in the business, assets, results of
operations or financial condition of Seller; and
(e) No action, suit, proceeding or investigation by or before any
court, administrative agency or other governmental authority shall have been
instituted or threatened, the effect of which could (i) restrain, prohibit or
invalidate the transactions contemplated by this Agreement, (ii) affect the
right of Buyer to own or control, after the Closing, the Assets or to operate
the Business in the same manner as it has been operated by Seller, or (iii) have
a material adverse effect on Seller or the Assets.
(f) All consents and approvals of all third parties and governmental
agencies or authorities required to consummate the transactions provided for in
this Agreement, which are set forth on Schedule 4.6 shall have been obtained.
SECTION 7.2 CONDITIONS TO THE OBLIGATIONS OF SELLER TO CLOSE. The
obligation of Seller to close hereunder shall be subject to satisfaction or
waiver by Seller of the following conditions at or prior to the Closing:
(a) Buyer shall have delivered to Seller (or the Escrow Agent, as
applicable) each of the items listed in Section 3.3;
(b) Each of the representations and warranties of Buyer made in or
pursuant to this Agreement shall be true and correct in all material respects as
of the Closing Date;
(c) Buyer shall have fully performed and complied in all material
respects with all of the covenants, obligations, agreements and conditions
required by this Agreement to be performed or complied with by Buyer prior to
the Closing;
(d) From the date hereof through the Closing Date there shall not
have been any material adverse change in the business, assets, results of
operations or financial condition of Buyer; and
(e) No action, suit, proceeding or investigation by or before any
court, administrative agency or other governmental authority shall be pending
the effect of which could restrain, prohibit or invalidate the transactions
contemplated by this Agreement.
(f) All consents and approvals of all third parties and governmental
agencies or authorities required for Buyer to consummate the transactions
provided for in this Agreement, shall have been obtained.
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ARTICLE VIII
SURVIVAL; INDEMNITIES
SECTION 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Seller and Buyer have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
contained in this Agreement. The representations, warranties, covenants and
agreements of Seller and Buyer contained in this Agreement will survive the
Closing until the earlier of (i) the first anniversary date of the Closing Date,
or (ii) the termination of the Escrow containing the Escrow Shares that is the
sole source of Seller's indemnification under this Agreement in accordance with
Section 8.8 below, except that any representation, warranty, covenant or
agreement that would otherwise so terminate will continue to survive if a notice
of an indemnity claim shall have been timely given on or prior to such
termination date, until the related claim for indemnification has been satisfied
or otherwise resolved as provided in Article VIII.
SECTION 8.2 GENERAL INDEMNIFICATION BY SELLER. Seller hereby agrees to
protect, defend, indemnify and hold harmless Buyer, its officers, directors,
employees, agents and affiliates and their respective successors and assigns,
from, against and in respect of any and all losses, costs, damages, charges or
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses, and the costs of investigation) (collectively, "Losses") resulting
from (a) any misrepresentation or breach of any warranty of Seller contained in
this Agreement or any Schedules or any document or instrument to be delivered
hereunder, including without limitation the Registration Rights Agreement and
Security Agreement (b) nonfulfillment of any agreement on the part of Seller
contained in this Agreement (including any covenants to indemnify set forth
elsewhere in this Agreement), (c) the Assets arising on or prior to the Closing
Date, or (d) any Excluded Liability. Notwithstanding the foregoing, Seller shall
have no liability to indemnify Buyer under this Agreement until the amount of
Losses suffered by Buyer exceeds US$40,000, after which xxxx Xxxxxx shall be
liable for all Losses including the initial $40,000; except that any losses in
respect of any Excluded Liability, including without limitation any liability
pertaining to Taxes, shall not be subject to, or counted against the
aforementioned $40,000 "basket", provided that any liability or arising out of
the matters described in Schedule 4.11 shall not be subject to or counted in the
"basket."
SECTION 8.3 GENERAL INDEMNIFICATION BY BUYER. Buyer hereby agrees to
protect, defend, indemnify and hold harmless Seller, its officers, directors,
employees, agents and affiliates and their respective successors and assigns,
from, against and in respect of any and all Losses resulting from (a) any
misrepresentation or breach of any warranty of Buyer contained in this Agreement
or any Schedules or any document or instrument to be delivered hereunder,
including without limitation the Promissory Note, Registration Rights Agreement
and Security Agreement, (b) nonfulfillment of any agreement on the part of Buyer
contained in this Agreement (including any covenants to indemnify set forth
elsewhere in this Agreement) or any Schedules or any document or instrument to
be delivered hereunder, including without limitation the Promissory Note,
Registration Rights Agreement, Security Agreement and Lease Assignment, (c) the
Assets arising after the Closing Date or (d) the Assumed Liabilities; provided,
however, that any liability relating to or arising out of Assignor's failure to
use its good faith efforts in obtaining consent of the landlord of the White
Plains facility to the Lease Assignment shall not be subject to Buyer's
indemnification obligations hereunder. Notwithstanding the foregoing, Buyer
shall have no liability to indemnify Seller under this Agreement until the
amount of Losses suffered by Seller exceeds US$40,000, after which time Buyer
shall be liable for all Losses including the initial $40,000, except that any
losses in respect of the Lease Assignment, shall not be subject to, or counted
against the aforementioned $40,000 "basket."
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SECTION 8.4 CLAIMS. Seller and Buyer shall, in a timely manner, provide
each other notice of (a) all third party actions, suits, proceedings, claims,
demands and assessments subject to the indemnification provisions of this
Article VIII (collectively, "Third Party Claims") brought at any time following
the date hereof, and (b) all other claims or demands for indemnification
pursuant to the provisions of this Article VIII.
SECTION 8.5 THIRD PARTY CLAIMS.
(a) The party against whom a Third Party Claim is brought shall make
available to the indemnifying party (at the cost of the indemnifying party) all
relevant information material to the defense of such claim. The indemnifying
party shall have the right to control the defense of all Third Party Claims with
counsel of its choice. The indemnified party shall have the right to elect to
join in the defense of any Third Party Claim at its sole expense; provided,
however, it shall be at the expense of the indemnifying party if the
indemnifying party does not undertake the defense of the Third Party Claim
within 10 days after the indemnified party provides notice pursuant to Section
8.4, fails to diligently pursue such defense or in the reasonable judgment of
the indemnified party a conflict of interest exists between the indemnified
party and indemnifying party. No claim shall be settled or compromised without
the consent of the indemnified party, which consent shall not be unreasonably
withheld or delayed.
(b) Notwithstanding Section 8.5(a), if a Third Party Claim seeks the
issuance of an injunction, specific performance or similar remedy or if the
subject matter relates to the ongoing business of Buyer or any of their
respective affiliates and if decided against Buyer (or any indemnified party
related to Buyer), would materially adversely affect the ongoing business or
reputation of Buyer or any affiliate of Buyer, then Buyer (and not Seller) shall
be entitled to contest, defend or settle such Third Party Claim at the
indemnifying party's expense.
(c) Notwithstanding Section 8.5(a), if a Third Party Claim seeks the
issuance of an injunction, specific performance or similar remedy or if the
subject matter relates to the ongoing business of Seller or any of its
respective affiliates and if decided against Seller (or any indemnified party
related to Seller), would materially adversely affect the ongoing business or
reputation of Seller or any affiliate of Seller, then Seller (and not Buyer)
shall be entitled to contest, defend or settle such Third Party Claim at the
indemnifying party's expense.
SECTION 8.6 OTHER CLAIMS. The party who asserts the claim for
indemnification other than a Third Party Claim shall provide in the notice to
the indemnifying party the nature and a reasonable estimate of the amount of the
losses asserted. If the indemnifying party, within a period of 30 days after the
giving of the indemnified party's notice, shall not give written notice to the
indemnified party announcing its intention to contest such assertion of the
indemnified party, such assertion of the indemnified party shall be deemed
accepted and the amount of the loss shall be deemed established. If however, the
indemnifying party contests the assertion of the loss, within the 30-day period,
the indemnified party shall have the right to bring suit to resolve the
contested assertion. The indemnified party and the indemnifying party may agree
in writing, at any time, as to the existence and the amount of the loss, and
upon the execution of such agreement, such loss shall be deemed established.
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SECTION 8.7 PAYMENTS. Payments of any loss shall be paid to the person
entitled thereto within 10 days following the final establishment of the loss.
SECTION 8.8 INDEMNIFICATION CAP. The maximum aggregate liability of Seller
for claims arising under this Article VIII (other than in respect of (i) the
claims related to Xxxxxxxxx x. Xxxxxx and ProAct v. Online Benefits described on
Schedule 4.11, (ii) those with respect to the three former employees,
specifically Xxxx Xxxxxxx, Xxxxxxxxx Xxxxxxxxxxx and Xxxxxx Xxxxxxx, who do not
have agreements regarding inventions and developments as described in Schedule
4.7(b), and (iii) the sales tax liability referred to on Schedule 4.12 for which
no limitation shall apply) shall be the aggregate value of the Escrow Shares at
any given time, and such amount shall be Buyer's sole source of payment in
respect thereof. Any indemnity payment by Seller to Buyer, at Seller's sole
option, shall be in the form of (a) cash, or (b) shares of Buyer common shares
the value of which shall be based on the average of the closing prices for the
Buyer's common shares as quoted on the Nasdaq SmallCap Market for the 20 days
that such Market was open for the transaction of business prior to the date of
delivery to Seller of such shares under this Article VIII.
SECTION 8.9 OTHER LIMITATIONS. Notwithstanding any other provision of this
Agreement, in no event will any party be entitled to recover any consequential,
indirect, punitive or exemplary damages; provided, that the parties agree that
Losses recoverable by Buyer or Seller under Section 8.2 or Section 8.3, as the
case may be, will include damages attributable to lost profits to the extent
that such lost profits are in the nature of direct damages suffered by the
indemnified party that result from, arise out of, relate to, are in the nature
of or are caused by the breach that gives rise to indemnification under such
Sections. Absent the commission of fraud by a party, this Article VIII will be
the exclusive remedy for the breach of representations and warranties set forth
in Section 4 and Section 5. For purposes of this Article VIII, neither party
shall be deemed to have breached a representation, warranty or covenant if the
other party hereto has actual knowledge on or prior to the Closing Date of the
breach, or any fact or circumstance constituting or resulting in the breach of
such representation, warranty or covenant.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the mutual written consent of Buyer and Seller; or
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(b) by either Buyer or Seller, if:
(i) any court or governmental body or agency thereof shall
have enacted, promulgated or issued any statute, rule, regulation, ruling, writ
or injunction, or taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and all appeals and means of
appeal therefrom have been exhausted; or
(ii) the Closing shall not have occurred on or before January
10, 2005; provided, however, that the right to terminate this Agreement pursuant
to this Section 9.1(b)(ii) shall not be available to any party whose (or whose
affiliate's) breach of any representation or warranty or failure to perform or
comply with any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; or
(c) at any time before the Closing (i) in the event of a material
breach hereof by the non-terminating party if such non-terminating party fails
to cure such breach within five days following notification thereof by the
terminating party or (ii) upon notification of the non-terminating party by the
terminating party that the satisfaction of any conditions to the terminating
party's obligations under this Agreement becomes impossible or impracticable
with the use of commercially reasonable efforts and that the failure of such
condition to be satisfied is not caused by a breach hereof by the terminating
party.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is validly
terminated, this Agreement shall forthwith become null and void (except that the
provisions with respect to expenses as set forth in Section 6.10 will continue
to apply) and there shall be no liability on the part of any party hereto,
except that nothing herein shall relieve either party from liability for a
breach of this Agreement prior to the termination hereof.
ARTICLE X
GENERAL
SECTION 10.1 WAIVER. Any failure of any party hereto to comply with any of
its obligations or agreements or to fulfill any conditions herein contained may
be waived only by a written waiver from the other parties. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder by any party preclude any other or future exercise of that right
or any other right hereunder by that party.
SECTION 10.2 NOTICES. All notices, requests or other communications
required or permitted hereunder shall be given in writing by hand delivery,
overnight express courier which provides confirmation of delivery or facsimile
(with written confirmation of receipt), provided that in the case of facsimile
delivery a copy is also sent at the same time by hand delivery or overnight
courier as provided herein, to the party to receive the same at its respective
address and/or facsimile number set forth below, or at such other address or
facsimile number as may from time to time be designated by such party to the
others in accordance with this Section 10.2:
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If to Buyer: Workstream Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, XX X0X0X0
Attention: Xxxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to: Cozen X'Xxxxxx
000 Xxxx Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to Seller: c/o ProAct Technologies Corporation
000 Xxxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx & Xxxxxxx, L.L.P.
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
Any notice so given shall be deemed to be delivered (a) when delivered if
delivered by hand, (b) on the next business day if sent by overnight express
courier, or (c) when sent (with confirmation receipt) if sent by facsimile prior
to 5:00 pm (recipient's time) on a business day or otherwise on the next
business day.
SECTION 10.3 THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
provision hereof shall create any right in favor of or impose any obligation
upon any person or entity other than Buyer and Seller and their respective
successors and permitted assigns. Notwithstanding the forgoing, stockholders of
Seller who receive or are entitled to receive common shares of Buyer received by
Seller pursuant to this Agreement, as a result of their ownership interest in
Seller, shall be entitled to rely upon the representations and warranties made
by Buyer in Section 5 hereof, and shall be entitled to the benefit of Buyer's
indemnification obligations under Section 8.3 hereof with respect to such
representations and warranties.
SECTION 10.4 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph
headings used herein and the Table of Contents are for convenience only and are
not a part of this Agreement and shall not control or affect the meaning or
construction of any provision of this Agreement.
SECTION 10.5 ENTIRE AGREEMENT. This Agreement, including all Exhibits and
Schedules hereto and all documents and instruments to be delivered hereunder,
including without limitation, the Registration Rights Agreement, Promissory Note
and Security Agreement, embodies the entire understanding of the parties and
there are no other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof. This Agreement may be
amended or modified only by an instrument signed by the parties or their duly
authorized agents. This Agreement supersedes all prior discussions,
negotiations, understandings, arrangements and agreements between the parties
relating to the subject matter hereof.
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SECTION 10.6 COUNTERPARTS. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument. The exchange of
copies of this Agreement and of signature pages by facsimile transmission shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes. Signature
pages of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
SECTION 10.7 ASSIGNABILITY. No party hereto may assign this Agreement
without the prior written consent of the other; provided, however, that (i)
Buyer may assign its rights (but not its obligations) to acquire the Assets to
its designee, Buyer Sub and (ii) Seller may assign its rights and obligations
under this Agreement to a liquidating trust or similar entity formed for the
purpose of effecting the winding down or liquidation of Seller.
SECTION 10.8 SUCCESSORS AND ASSIGNS. This Agreement and the provisions
thereof shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties.
SECTION 10.9 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (excluding
conflict of laws).
SECTION 10.10 CERTAIN TERMS. For the purpose of this Agreement, the phrase
"Seller's knowledge," "the knowledge of Seller," "Buyer's knowledge," "the
knowledge of Buyer" or the like shall refer to the actual knowledge after
reasonable inquiry under the circumstances of any officer, key employee or
director of Seller or Buyer, as the case may be. For purposes of this Section
10.10, "key employee" means Chief Executive Officer, Chief Financial Officer,
Investor Relations Officer, Chief Operating Officer, head of human resources and
those persons or entitles serving similar functions. The phrase "material
adverse affect on Seller" or "material adverse affect on Buyer" shall mean a
material adverse affect upon Seller or Buyer, as the case may be, or the
business, financial condition, properties, operations or assets of Seller or of
Buyer and Buyer's subsidiaries taken as a whole, as applicable, or Seller or
Buyer's ability to perform its respective obligations under this Agreement.
SECTION 10.11 WAIVER OF JURY TRIAL. Buyer and Seller waive their
respective rights to a jury trial of any claim or cause of action based upon or
arising out of this Agreement.
SECTION 10.12 MUTUAL DRAFTING. This Agreement is the result of the joint
efforts of the parties hereto and each provision has been subject to the mutual
negotiation and agreement of the parties. There shall be no construction against
any party based on any presumption of that party's involvement in the drafting
of this Agreement.
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SECTION 10.13 SEVERABILITY. If any term or provision of this Agreement or
any application thereof shall be invalid and unenforceable, the remainder of
this Agreement and any other application of such term or provision shall not be
affected thereby.
SECTION 10.14 DISPUTES. All disputes arising under this Agreement and any
other agreement entered into between the parties related to this Agreement shall
first be attempted to be resolved by negotiation between the Chief Executive
Officer (or a designee) of each party. If the dispute cannot be resolved by
negotiation within 45 days of commencement thereof, the dispute shall be
resolved by arbitration, using the rules of the American Arbitration Association
and the services of one arbitrator thereunder. All arbitration proceedings shall
be in English and be conducted in Chicago, Illinois.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have duly signed this Agreement the day
and year first written above.
WORKSTREAM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer
WORKSTREAM USA, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer
PROACT TECHNOLOGIES CORPORATION
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx
Chief Executive Officer
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