EXHIBIT 10.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
AMONG
S.O.S. COMPUTER SYSTEMS, INC.
THE DUNSTER FAMILY TRUST,
THE XXXXX XXXXXXX XXXXXXXXXX TRUST,
THE XXXXX XXXXXXXXXX WARNER TRUST,
XXXXX XXXXX
AND
SHIP ACQUISITION CORP.
CLOSING DATE APRIL 6, 2005
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TABLE OF CONTENTS
PAGE
1 DEFINITIONS..................................................................................... 1
2 SALE OF ASSETS; CLOSING......................................................................... 5
2.1. Sale of Assets.......................................................................... 5
2.2. Consideration........................................................................... 5
2.3. Net Current Assets Adjustment to Purchase Price......................................... 5
2.4. Accounts Receivable Adjustment to Purchase Price........................................ 7
2.5. Buyer's Assumption of Liabilities....................................................... 7
2.6. Closing................................................................................. 8
2.7. Deliveries by Seller Parties at Closing................................................. 8
2.8. Deliveries by Buyer at Closing.......................................................... 9
3 REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES............................................ 9
3.1. Organization and Power.................................................................. 9
3.2. Authorization........................................................................... 10
3.3. No Conflict............................................................................. 10
3.4. Title to Purchased Assets............................................................... 10
3.5. Condition of Purchased Assets........................................................... 10
3.6. Financial Statements.................................................................... 10
3.7. Accounts Receivable; Credits............................................................ 11
3.8. Pre-Xxxx................................................................................ 11
3.9. Litigation.............................................................................. 11
3.10. Compliance with Law..................................................................... 11
3.11. Absence of Undisclosed Liabilities...................................................... 12
3.12. Absence of Certain Changes.............................................................. 12
3.13. Contracts............................................................................... 13
3.14. Intellectual Property................................................................... 13
3.15. Real Property........................................................................... 15
3.16. Environmental Matters................................................................... 16
3.17. Labor; ERISA............................................................................ 17
3.18. Taxes................................................................................... 17
3.19. Capitalization; Relationships with Related Persons...................................... 18
3.20. Brokers................................................................................. 18
3.21. Insurance............................................................................... 18
3.22. Powers of Attorney...................................................................... 19
3.23. Debt.................................................................................... 19
3.24. Solvency................................................................................ 19
3.25. Statements not Misleading............................................................... 19
4 REPRESENTATIONS AND WARRANTIES OF BUYER......................................................... 19
4.1. Organization and Power of Buyer......................................................... 19
4.2. Authorization........................................................................... 20
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4.3. No Conflict............................................................................. 20
4.4. No Creditors............................................................................ 20
5 COVENANTS....................................................................................... 20
5.1. Further Assurances; Cooperation......................................................... 20
5.2. Covenants not to Compete................................................................ 21
5.3. Use of Names............................................................................ 23
5.4. Passage of Title and Risk of Loss....................................................... 23
5.5. Transfer of Goodwill and Business....................................................... 23
5.6. Expenses; Transfer Taxes................................................................ 23
5.7. Taxes................................................................................... 23
5.8. Employment Matters...................................................................... 24
5.9. Agreement Regarding Lease Payments...................................................... 25
5.10. Enforcement of Assignments.............................................................. 25
6 INDEMNIFICATION................................................................................. 26
6.1. Indemnified Losses...................................................................... 26
6.2. Indemnification by Seller Parties....................................................... 26
6.3. Indemnification By Buyer................................................................ 26
6.4. Third Party Claims Against Buyer........................................................ 27
6.5 Third Party Claims Against Seller....................................................... 27
6.6. Procedures; No Waiver; Exclusivity...................................................... 27
6.7. Set-Off................................................................................. 28
6.8. Survival................................................................................ 29
6.9. Limitations on Indemnification by the Seller Parties.................................... 29
6.10. Set-Off Against Lease................................................................... 30
6.11. Exclusive Remedy........................................................................ 30
7 MISCELLANEOUS................................................................................... 31
7.1. Notices................................................................................. 31
7.2. Entire Agreement........................................................................ 31
7.3. Counterparts............................................................................ 31
7.4. Parties in Interest; Assignment......................................................... 32
7.5. Governing Law; Fees and Costs........................................................... 32
7.6. Schedules and Headings.................................................................. 32
7.7. Amendment............................................................................... 32
7.8. Waiver.................................................................................. 32
7.9. Joint and Several Liability............................................................. 32
7.10. Facsimile Signatures.................................................................... 32
7.11 Press Release........................................................................... 32
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EXHIBITS AND SCHEDULES
Exhibit A -- Escrow Agreement
Exhibit B -- Opinion of Counsel to the Seller Parties
Exhibit C -- Xxxx of Sale, Assignment and Conveyance
Exhibit D -- Lease
Exhibit E -- Assumption of Liabilities
Schedule 1A -- Assumed Liabilities
Schedule 1B -- Purchased Assets
Schedule 2.3 -- Re-classified Assets
Schedule 2.7(e) -- Consents Required for Closing
Schedule 3.3 -- Consents, Etc.
Schedule 3.4 -- Title to Purchased Assets
Schedule 3.5 -- Condition of Purchased Assets
Schedule 3.6 -- Reference Date Balance Sheet
Schedule 3.7 -- Accounts Receivable; Credits
Schedule 3.8 -- Pre-Xxxx
Schedule 3.10 -- Compliance with Law
Schedule 3.11 -- Absence of Undisclosed Liabilities
Schedule 3.12 -- Absence of Certain Changes
Schedule 3.13 -- Contracts
Schedule 3.14 -- Intellectual Property
Schedule 3.15 -- Real Property
Schedule 3.17 -- Labor; ERISA
Schedule 3.19 -- Capitalization
Schedule 3.20 -- Brokers
Schedule 3.21 -- Insurance
Schedule 3.23 -- Debt
Schedule 5.7 -- Additional Obligation
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is executed as of April 6,
2005, by and among S.O.S. COMPUTER SYSTEMS, INC., a corporation incorporated
under the laws of the State of Utah ("Seller"), and solely for purposes of
Articles 3, 5 and 6 hereof, G. Xxxxxxx Xxxxxxx, as trustee of the Xxxxx Xxxxxxx
Ballantyne Trust (the "Xxxxx Trust"), G. Xxxxxxx Xxxxxxx, as trustee of the
Xxxxx Xxxxxxxxxx Xxxxxx Trust (the "Warner Trust"), Xxxxxx Xxxxxxx Xxxxxxx and
Xxxxxx Xxxx Xxxxxxx as trustees of the Dunster Family Trust (the "Dunster Trust"
and together with the Xxxxx Trust and the Warner Trust, each a "Trust" and
collectively, the "Trusts") and Xxxxx Xxxxx, an individual ("Smart" and together
with Seller and the Trust the "Seller Parties") and SHIP ACQUISITION CORP., a
corporation incorporated under the laws of the State of Delaware ("Buyer")
(collectively, the "parties").
RECITALS
WHEREAS, Buyer wishes to purchase from Seller, and Seller wishes to sell
to Buyer, the Purchased Assets (as defined below) upon the terms and conditions
of this Agreement; and
WHEREAS, in order to induce Buyer to purchase the Purchased Assets, Smart
and the Trusts, each of whom will receive a direct, tangible and material
benefit from the transactions contemplated by this Agreement by virtue of the
fact the Trusts and Smart are equity owners of Seller, are willing to be parties
to this Agreement as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Accounts Receivable" shall mean (a) all trade accounts receivable and
other rights to payment from customers of Seller and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of Seller, (b) all other
accounts or notes receivable of Seller and the full benefit of all security for
such accounts or notes, and (c) any claim, remedy or other right related to any
of the foregoing.
"Additional Escrow Funds" shall have the meaning set forth in Section 5.9
and Section 6.10.
"Assumed Liabilities" shall mean only the duties, liabilities or
obligations of Seller, if any, arising after the Closing Date in connection with
the items identified on Schedule 1A, except as otherwise noted on Schedule 1A,
and shall specifically exclude, among other things, (i) any liabilities for
employment, income, sales, property or other Taxes incurred or accrued by
Seller, including without limitation as a result of this transaction; (ii) any
fees or expenses incurred by Seller in connection with this transaction; (iii)
any debt, payables or other liabilities to Related Persons other than salary and
other payroll related expenses that may be specifically set forth on Schedule
1A; (iv) any liabilities related to any employee benefit plan, including,
without limitation, any 401(k), any profit sharing or pension plan, whether or
not sponsored by Seller, any deferred compensation payables, accrued bonus
payables, other accrued liabilities, and any COBRA-related obligations; (v) any
and all liability related to Seller's Real Property except as specifically set
forth in the Lease; (vi) any litigation pending against Seller; (vii) any
warranty liability to Seller's customers, including any liability arising out of
or relating to any breach by Seller of any obligation to a customer that
occurred prior to the Closing; and (viii) any liability or obligation
constituting or arising out of any Debt of Seller.
"Business" shall mean the business of developing, marketing and providing
data processing software and/or services to credit unions, including, without
limitation, the licensing or provision of Seller's "Centryx," "m*teller" and
e*teller software products and related services.
"Closing" shall mean the consummation of the purchase, sale, assignment
and assumption transactions described herein.
"Closing Date" shall mean the date on which the Closing occurs, as
specified in Section 2.6.
"Contract" shall have the meaning assigned to it in Section 3.13.
"Current Assets" shall mean all cash, cash equivalents, marketable
securities, Accounts Receivable, inventory and prepaid expenses of Seller and
other assets classified as current assets in accordance with GAAP.
"Current Liabilities" shall mean all trade accounts payable and deferred
revenue obligations (whether categorized as deferred revenue or as customer
deposits), accrued sales commissions, accrued costs of sales and amounts owing
to vendors and suppliers for goods and services provided before the Closing Date
but invoiced after the Closing Date, and other debts, liabilities and
obligations that are classified as current liabilities in accordance with GAAP.
"Debt", as applied to any Person, means: (a) indebtedness or liability of
such Person for borrowed money, or with respect to deposits or advances of any
kind, or for the deferred purchase price of property or services; (b) all
obligations of such Person evidenced by notes bonds, debentures or similar
instruments, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by such
Person, (d) all obligations of such Person for the deferred purchase price of
property or services; (e) all obligations of such Person as lessee under capital
leases; (f) current liabilities of such Person in respect of the present value
of unfunded vested benefits under any employee benefit plan;
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(g) obligations of such Person under letters of credit, bankers acceptances, or
comparable arrangements; (h) obligations of such Person arising under acceptance
facilities; (i) guaranties; endorsements (other than for collection or deposit
in the ordinary course of business), and other contingent obligations of such
Person to purchase, to provide funds for payment, to supply funds to invest in
any Persons, or otherwise to assure a creditor against loss; (j) all obligations
of such Person secured by any Lien on any of such Person's assets or property,
whether or not the obligations have been assumed, and (k) all obligations of
such Person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements.
"Excluded Assets" shall mean those items listed as such on Schedule 1B
hereto.
"Financial Statements" shall have the meaning assigned to it in Section
3.6.
"GAAP" shall mean United States generally accepted accounting principles
consistently applied.
"Governmental Entity" shall mean any court, administrative agency,
commission, state, municipality or other governmental authority or
instrumentality, domestic or foreign, national or international.
"Knowledge" - an individual will be deemed to have "Knowledge" of a fact
or other matter if:
(a) such individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of that fact or matter in the course of conducting
a reasonably comprehensive investigation regarding the accuracy of any
representation or warranty contained in this Agreement, provided however,
that the Listed Persons (as defined below) shall not be required to make
inquiry of other employees of Seller.
Seller will be deemed to have "Knowledge" of a particular fact or other
matter if Xxxxx Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxxxx,
Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxxx or Xxxxx Xxxxxxxx and/or any other
individual who is serving as a director or officer of Seller (or in any similar
capacity) (the "Listed Persons") has Knowledge of that fact or other matter (as
set forth in (a) and (b) above).
"Lease" shall have the meaning assigned to it in Section 2.7(h).
"Liens" shall mean all liabilities, claims, liens, charges, pledges,
security interests, options, restrictions on the use of property or other
encumbrances of any kind.
"Material Adverse Effect" means any circumstance, change in, or effect on,
the Business or Seller that, individually or in the aggregate with any other
circumstances, changes in, or effects on, Seller or the Business: (a) is
materially adverse to the business, operations, assets or liabilities
(including, without limitation, contingent liabilities), employee relationships,
customer
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or supplier relationships, results of operations or the condition (financial or
otherwise) of the Business, or (b) materially adversely affects the ability of
Buyer to operate or conduct the Business in the manner in which it is currently
operated or conducted by Seller, or (c) impairs the ability of Seller to
consummate the transactions contemplated by this Agreement; provided, however,
that the parties hereto agree that the following shall not constitute a Material
Adverse Effect: (i) general economic conditions; (ii) any changes generally
affecting the industry or industries in which Seller currently operates the
Business; (iii) any fact, matter or condition expressly disclosed in the
Disclosure Schedule, to the extent of such disclosure; or (iv) any material
adverse effect arising out of or resulting from this Agreement or the
transactions contemplated hereby or any announcement thereof.
"Net Current Assets" shall mean the amount of Current Assets included in
the Purchased Assets minus the amount of Current Liabilities included in the
Assumed Liabilities.
"Permitted Liens" shall have the meaning assigned to it in Section 3.4.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity (or any department, agency or political subdivision
thereof).
"Primary Losses" means Losses for which the Seller Parties have agreed to
indemnify Buyer pursuant to Section 6.2(a), other than Losses resulting from
breaches of the representations and warranties set forth in Sections 3.1, 3.2,
3.4, 3.14, 3.16, 3.17 and 3.18.
"Purchase Price" shall mean the aggregate amount to be paid by Buyer to
Seller for the Purchased Assets and includes the cash consideration payable
pursuant to Section 2.2(a) and the Escrow Funds payable pursuant to Section
2.2(b).
"Purchased Assets" shall mean all of Seller's property and assets as of
the Closing Date, whether real, personal or mixed, tangible and intangible, of
every kind and description, wherever located, including without limitation those
items identified on Schedule 1B, but excluding the Excluded Assets.
"Records" shall mean all books of account, general, financial and
accounting records, files, invoices, payment authorizations, correspondence to
and from customers, suppliers and payors, and other data and information owned
by Seller.
"Reference Date" shall mean November 30, 2004.
"Reference Date Balance Sheet" shall mean the unaudited balance sheet for
Seller as of the Reference Date.
"Related Person" shall mean any officer, director, stockholder or trustee
of any stockholder of Seller, or any member of the immediate family of any such
officer, director, stockholder or trustee or any entity controlled by any such
officer, director, stockholder or trustee or by a family member of any such
officer, director, stockholder or trustee.
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"Secondary Losses" means Losses for which Seller Parties have agreed to
indemnify Buyer which do not constitute Primary Losses. In the event that a Loss
otherwise satisfies the conditions of both a Primary Loss and a Secondary Loss,
such Loss shall be deemed to be a Secondary Loss for all purposes.
"Taxes" (or "Tax" where the context requires) shall mean all federal,
state, county, city, local, foreign and other taxes (including, without
limitation, premium, excise, value added, sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, import duties and other governmental charges and assessments), whether or
not measured in whole or in part by net income, including deficiencies,
interest, additions to tax or interest or penalties with respect thereto.
ARTICLE 2
SALE OF ASSETS; CLOSING
SECTION 2.1. SALE OF ASSETS. At the Closing, Seller shall sell, assign,
transfer, convey and deliver to Buyer, free and clear of all Liens (except
Permitted Liens), good and marketable title to all of the Purchased Assets. It
is intended that the consummation of the purchase and sale of the Purchased
Assets will transfer the Business to Buyer as a going concern with all of the
assets, properties and rights used in or required for the operation and conduct
of the Business as of the Closing Date.
SECTION 2.2. CONSIDERATION. The Purchase Price shall be $11,400,000.00,
subject to the adjustments set forth in this Agreement, including without
limitation in Sections 2.3 and 2.4 hereof. Buyer shall pay the Purchase Price by
delivery in the following manner:
(a) $10,032,000 in cash by wire transfer at Closing to Seller; and
(b) $1,368,000 (the "Escrow Funds") in cash by wire transfer at Closing
to U.S. Bank National Association (the "Escrow Agent"), to be held under an
escrow agreement in substantially the form of Exhibit A (the "Escrow
Agreement"), said Escrow Funds to be paid to Seller on the two year anniversary
of the Closing Date in accordance with the Escrow Agreement but subject to the
terms and conditions described in this Agreement, including, without limitation,
in Sections 2.3, 2.4 and 6.7 hereof.
SECTION 2.3. NET CURRENT ASSETS ADJUSTMENT TO PURCHASE PRICE.
(a) Estimated Net Current Assets. Within sixty (60) days following the
Closing Date, Buyer will prepare, or cause to have prepared, and deliver to
Seller a balance sheet of the Business and a statement of the Net Current Assets
of the Business as of the Closing Date, each of which shall include as a Current
Asset as of the Closing Date fixed assets that are included in the Purchased
Assets and that are properly included as fixed assets on a balance sheet in
accordance with GAAP (e.g., have not been sold, transferred or written-off) and
which were
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included on the Reference Date Balance Sheet as current assets but have since
been re-classified as fixed assets (the "Re-classified Assets"). Schedule 2.3
lists the assets that Seller believes constitute the Re-classified Assets as of
Closing, in the aggregate amount of $153,881. The parties agree that the same
methodology used to calculate the bad debt reserve for Accounts Receivable in
the preparation of the Reference Date Balance Sheet shall be used to calculate
the bad debt reserve in the preparation of the Final Net Current Assets. As
prepared by Buyer, this statement of the Net Current Assets shall be referred to
as the "Estimated Net Current Assets." The Estimated Net Current Assets shall be
prepared in accordance with GAAP.
(b) Objection. The Estimated Net Current Assets shall be deemed accepted
by Seller and binding unless Seller sends Buyer a written objection thereto
within thirty (30) days following Seller's receipt thereof. In the event that
Seller delivers a timely written objection as aforesaid, and Buyer and Seller
are unable to resolve such objection within thirty (30) days after Buyer is
notified of Seller's objection, the matters in dispute shall be submitted for
final and binding determination to a firm of independent certified public
accountants of national recognition and standing jointly selected by Buyer and
Seller (the "Accountants"). The Accountants shall prepare their resolution
statement within forty-five (45) days of appointment. In the event that the
parties are required to agree on the identity of the Accountants but are unable
to do so, then the firm to be used shall be selected by lot from among the "Big
4" accounting firms, other than those firms which have had a material
relationship with Buyer or Seller. The Estimated Net Current Assets proposed by
Buyer, as adjusted by agreement of Seller and Buyer or finally determined by the
Accountants, as applicable, to reflect the resolution of any timely objections
made thereto by Seller in accordance with this paragraph, shall constitute the
"Final Net Current Assets" and shall be binding on the parties hereto. Buyer and
Seller shall each pay their own expenses of preparing and analyzing the
Estimated Net Current Assets and resolving objections thereto. The fees and
expenses of the Accountants used to resolve objections will be borne equally by
Buyer and Seller.
(c) Access to Information. Solely in connection with the preparation of
the Estimated Net Current Assets and the Final Net Current Assets:
(i) Buyer shall give Seller and its accountants reasonable access
to the books and records of the Business, and shall cause employees of the
Business to cooperate with them and provide them with all relevant
information requested, all after receiving reasonable notice from them of
their requirements and reaching agreement as to mutually convenient times
for review; and
(ii) Buyer and the Seller Parties, to the extent within their
respective control, shall give to each other and their agent's access to
the books, financial records, work papers and other materials and
documents used or produced in connection with the preparation of the
Estimated Net Current Assets and the Final Net Current Assets.
(d) Final Net Current Assets. In the event that the Final Net Current
Assets are less than $2,076,000 (the difference is referred to as a "Reduction
in Net Current Assets"), the Seller Parties shall be jointly and severally
liable for such difference as a reduction in the cash portion of the Purchase
Price. Buyer shall first set-off the amount of such Reduction in Net Current
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Assets from the Escrow Funds and Additional Escrow Funds, if any, in accordance
with Section 6.7 of this Agreement, and, to the extent the Reduction in Net
Current Assets exceeds the amount of the Escrow Funds and Additional Escrow
Funds then available under the Escrow Agreement, the Seller Parties shall pay
the difference to Buyer within (10) days after receipt of written demand
therefor. In the event that the Final Net Current Assets are greater than
$2,076,000 (the excess is referred to as an "Excess in Net Current Assets"), the
Purchase Price shall be increased by such difference. Buyer shall pay the Excess
in Net Current Assets to Seller within ten (10) days following the determination
of Final Net Current Assets.
SECTION 2.4. ACCOUNTS RECEIVABLE ADJUSTMENT TO PURCHASE PRICE.
(a) Receivable Shortfall. Buyer and the Seller Parties agree that the
Purchase Price payable to Seller shall be reduced to the extent that the
Accounts Receivable, less a bad debt reserve in the amount of $7,600 have not
been collected by Buyer within ninety (90) days following the Closing Date (the
"Collection Period").
(b) Adjustment to Purchase Price. Within sixty (60) days following the
end of the Collection Period, Buyer shall prepare and furnish to Seller a
statement setting forth the Accounts Receivable and all payments made thereon,
calculated as of the end of the Collection Period, and the amount, if any, owing
from the Seller Parties to Buyer pursuant to Section 2.4(a) (a "Receivable
Shortfall"). The Seller Parties shall be jointly and severally liable for the
Receivable Shortfall. Buyer shall set-off the Receivable Shortfall from the
Escrow Funds and Additional Escrow Funds, if any, in accordance with Section 6.7
and, to the extent the amount of the Receivable Shortfall exceeds the amount of
the Escrow Funds and Additional Escrow Funds then available under the Escrow
Agreement, the Seller Parties shall pay the difference to Buyer within (10) days
after receipt of written demand therefor. Upon payment of the Receivable
Shortfall, Buyer shall assign to Seller those Accounts Receivable which were
uncollected at the end of the Collection Period and Seller may thereafter
collect such re-assigned Accounts Receivable for Seller's own account.
Notwithstanding anything to the contrary herein, to the extent an Account
Receivable is excluded from the calculation of Final Net Current Assets in
Section 2.3, the failure to collect such Account Receivable within the
Collection Period shall not entitle the Buyer to any reimbursement under this
Section 2.4(a).
(c) Collection of Accounts Receivable. Between the Closing Date and the
end of the Collection Period, Buyer shall use reasonable efforts consistent with
its usual and customary collection practices to collect the Accounts Receivable,
provided that Buyer shall not be obligated to resort to litigation.
(d) Payments in Transit after the Closing. Any payments that are
received by Seller after the Closing Date in respect of Accounts Receivable
shall be owned by and deemed the property of Buyer, and Seller shall turn over
to Buyer all such amounts within ten (10) days of receipt thereof.
SECTION 2.5. BUYER'S ASSUMPTION OF LIABILITIES. On the terms and subject
to the conditions set forth in this Agreement, and in further consideration of
the transfer of the Purchased Assets, at the Closing Buyer shall assume, and
thereafter pay, honor and discharge
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when due, only those duties, liabilities or obligations of Seller included in
the Assumed Liabilities.
SECTION 2.6. CLOSING. The Closing shall take place (via facsimile,
telephone, mail and other mutually acceptable means of communication and
delivery) simultaneously at the offices of Buyer's counsel, Xxxxxxx & Xxxxxxx
LLP in Hartford, Connecticut and Seller's counsel, Holme Xxxxxxx & Xxxx LLP in
Salt Lake City, Utah on the date hereof or at such other time and location as
the parties hereto shall agree in writing.
SECTION 2.7. DELIVERIES BY SELLER PARTIES AT CLOSING. At the Closing,
Seller shall convey, transfer, assign and deliver to Buyer all of the Purchased
Assets, including good and merchantable title to all personal property included
therein, free and clear of all Liens (except Permitted Liens). At the Closing,
Seller shall deliver to Buyer:
(a) The Escrow Agreement fully executed by Seller;
(b) An opinion of the Seller's counsel, dated the Closing Date, to the
effect and substantially in the form of Exhibit B to this Agreement;
(c) Evidence of authorization to change Seller's name and documents
sufficient to effectuate such change and to convey to Buyer all rights in the
names and marks S.O.S. Computer Systems, Inc., Centryx, m*teller, e*teller,
i*support, SOSystems, member*centric and personalized*technology;
(d) Buyer's standard NDA/invention assignment agreement for all
employees of Seller whom Buyer has indicated a desire to employ;
(e) Xxxx of Sale in the form of Exhibit C, and such assignments and
other instruments of transfer as may be reasonably satisfactory to Buyer's
counsel, and with such consents to the conveyance, transfer and assignment
thereof as may be necessary to effect the conveyance, transfer, assignment and
delivery of the Purchased Assets and to vest in Buyer the title specified in
this Section, including without limitation:
(i) the transfer of all registered Proprietary Rights of Seller
(as such term is defined in Section 3.14 hereof) and applications
therefor; and
(ii) the consents listed on Schedule 2.7(e);
(f) Releases of all Liens (other than Permitted Liens) on the Purchased
Assets;
(g) A Lease Agreement between Buyer and Seller with respect to 000 Xxxx
Xxxxxxxxxx Xxxxxxx, Xxxx, Xxxx 00000, in the form attached hereto as Exhibit D,
fully executed by Seller (the "Lease");
(h) Good Standing Certificate of recent date for Seller from the
Secretary of State of the State of Utah;
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(i) A Secretary's Certificate with respect to Seller's Certificate of
Incorporation, By-laws, director and stockholder resolutions and officer
incumbency, in form and substance satisfactory to Buyer;
(j) Evidence that Xxxxx Xxxxx has entered into a proprietary information
and invention assignment agreement in favor of Seller, in form acceptable to
Buyer;
(k) A certificate of the Trustees of each of the Trusts with respect to
certain organizational matters of such Trusts, in form and substance
satisfactory to Buyer; and
(l) Such other documents and instruments as Buyer or Buyer's counsel may
reasonably request to better evidence or effectuate the transactions
contemplated hereby.
Simultaneously with the delivery referred to in this Section, the Seller
Parties shall take or cause to be taken all such actions as may reasonably be
required to put Buyer in actual possession and operating control of the
Purchased Assets.
SECTION 2.8. DELIVERIES BY BUYER AT CLOSING. At the Closing, Buyer shall
deliver to Seller:
(a) The Escrow Agreement fully executed by Buyer;
(b) Assumption Agreement in the form attached hereto as Exhibit E, fully
executed by Buyer, pursuant to which Buyer assumes, as of the Closing Date, the
Assumed Liabilities;
(c) The Lease fully executed by Buyer;
(d) In accordance with Section 2.2(a) of this Agreement, Buyer shall
deliver to Seller an amount equal to $10,032,000, constituting the cash portion
of the Purchase Price; and
(e) In accordance with Section 2.2(b) of this Agreement, Buyer shall
deliver to the Escrow Agent the Escrow Funds.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties hereby jointly and severally represent and warrant to
Buyer as follows as of the Closing Date (or, as of such other date as is set
forth below with respect to a particular representation or warranty):
SECTION 3.1. ORGANIZATION AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Utah. Seller has full power and authority to own its properties and conduct the
Business as presently being conducted by it. Each Trust is a duly established
trust and is validly subsisting, the persons listed on Schedule 3.19 are the
respective trustees of the Trusts, and as trustees, such persons have all
necessary
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power, authority and capacity to enter into this Agreement and to consummate the
transactions contemplated by this Agreement on behalf of the Trusts. Each Seller
Party has full legal power, authority and capacity to execute this Agreement and
to consummate the transactions contemplated hereby.
SECTION 3.2. AUTHORIZATION. The execution, delivery and performance of
this Agreement by Seller have been duly authorized and approved by all requisite
action on the part of its directors and stockholders. This Agreement constitutes
the valid and binding obligation of each Seller Party and is enforceable against
each Seller Party in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to or limiting creditors' rights generally and by
equitable principles.
SECTION 3.3. NO CONFLICT. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not (a) violate any law, judgment, order,
decree, statute, ordinance, rule or regulation applicable to any Seller Party,
or any permit, license or approval of any Governmental Entity, (b) conflict with
any provision of Seller's Articles of Incorporation or By-laws, (c) conflict
with any Trust's declaration or agreement of trust (or equivalent instrument),
(d) except as set forth on Schedule 3.3, result in any violation of, and will
not conflict with, or result in a breach of any terms of, or constitute a
default under, any Contract or create any Lien upon any of the Purchased Assets,
or (e) except as set forth on Schedule 3.3, require any notice to, or consent,
approval, order or authorization of, or the registration, declaration or filing
with, any Governmental Entity or other Person, including, without limitation,
under any Contract.
SECTION 3.4. TITLE TO PURCHASED ASSETS. Seller has good, valid and
marketable title to all of the Purchased Assets, free and clear of all Liens,
except those Liens set forth on Schedule 3.4 ("Permitted Liens"). Except as set
forth on Schedule 3.4, no other party has any rights or claims to possession of
any of the Purchased Assets. None of the Purchased Assets are subject to any
option, contract, arrangement or understanding that would restrict Seller's
ability to transfer the Purchased Assets to Buyer as contemplated herein. Except
for the Excluded Assets, the Purchased Assets constitute all assets, rights and
properties used by Seller to operate, or necessary to operate the Business as
operated by Seller prior to Closing. Except as set forth on Schedule 3.4, no
Seller Party and no other Related Person of Seller, (including without
limitation, Smart and the Trusts) owns, leases or licenses assets, properties or
other rights used in the conduct of the Business. All employees engaged in
conducting the Business are employees of Seller.
SECTION 3.5. CONDITION OF PURCHASED ASSETS. Except as set forth on
Schedule 3.5, all of the tangible property included in the Purchased Assets is
in good operating condition and repair, ordinary wear and tear excepted, and, to
Seller Parties' Knowledge, in the state of maintenance, repair and operating
condition required for the proper operation and use thereof in the ordinary and
usual course of business by Seller.
SECTION 3.6. FINANCIAL STATEMENTS. Seller has delivered to Buyer financial
information respecting Seller (the "Financial Statements"), as follows: (i) the
Reference Date Balance Sheet,
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a copy of which is attached hereto as Schedule 3.6; (ii) unaudited profit and
loss statements of Seller for the eleven (11) months ended as of the Reference
Date; (iii) unaudited balance sheet for Seller as of December 31, 2004; and (iv)
unaudited profit and loss statements for Seller for the fiscal year ended
December 31, 2004. The Financial Statements fairly present the financial
position and results of operations of Seller for the periods then ended and the
financial position of Seller at the dates thereof, and except as set forth on
Schedule 3.6, were prepared in accordance with GAAP, provided, however, that the
unaudited Financial Statements (a) are subject to normal recurring year-end
adjustments and (b) do not contain all footnote disclosures required by GAAP.
Seller's books of account are and, during the period covered by the Financial
Statements were, complete in all material respects, fairly and accurately
reflect or reflected the income, expenses, assets and liabilities of Seller,
including the nature thereof and the transactions giving rise thereto, and
provide or provided a fair and accurate basis for the preparation of the
Financial Statements.
SECTION 3.7. ACCOUNTS RECEIVABLE; CREDITS. The Accounts Receivable
recorded on the books of Seller, less a bad debt reserve in the amount of $7,600
(which was determined by Seller in accordance with GAAP applied on a basis
consistent with Seller's prior accounting practices) are bona fide and good, and
are collectible in the amounts shown on the books of account of Seller. Except
as set forth on Schedule 3.7, no Account Receivable has been released by Seller,
in whole or in part, so as to reduce its value, and there are no outstanding
customer credits or allowances (including allowances for bad debts) which have
been authorized by Seller prior to the Closing Date. The uncollectibility of any
Accounts Receivable resulting in an adjustment to the Purchase Price based on a
Receivable Shortfall in accordance with Section 2.4 shall not be considered a
breach of the representation and warranty of collectibility contained in this
Section 3.7.
SECTION 3.8. PRE-XXXX. Except as set forth on Schedule 3.8, Seller has not
pre-billed or received prepayment for products to be sold, services to be
rendered, or expenses to be incurred subsequent to the Closing Date, except in
the ordinary course of business and consistent with Seller's prior practices,
with a corresponding current liability included on the Reference Date Balance
Sheet.
SECTION 3.9. LITIGATION. There is no suit, action or proceeding pending
against or affecting any Seller Party or, to the Knowledge of any Seller Party,
the employees of Seller relating to the Business, the Purchased Assets, or the
transactions contemplated hereby, nor to Seller Parties' Knowledge is there any
such suit, action or proceeding threatened against any Seller Party or any of
the employees of Seller. Neither Seller nor the Business is subject to any order
of a Governmental Entity.
SECTION 3.10. COMPLIANCE WITH LAW. Except as set forth on Schedule 3.10,
Seller has all licenses, permits and other approvals of Governmental Entities
necessary to operate the Business as now conducted, each of which is in good
standing, and Seller has conducted the Business and properly filed all necessary
reports in substantial compliance with applicable laws and regulations.
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SECTION 3.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3.11, Seller does not have any liabilities or obligations, either
accrued, contingent or otherwise, which are not reflected in (i) the Reference
Date Balance Sheet or (ii) this Agreement or the Schedules hereto, except as
have been incurred in the ordinary course of business since the Reference Date.
SECTION 3.12. ABSENCE OF CERTAIN CHANGES. Since the Reference Date and
except as set forth on Schedule 3.12, neither Seller nor the Business has or
will have as of the Closing:
(a) suffered any adverse change in its financial condition, assets,
liabilities, net worth or business from that shown on the Reference Date Balance
Sheet that, either individually or in the aggregate, has had a Material Adverse
Effect;
(b) suffered any damage, destruction or loss, whether or not covered by
insurance, adversely affecting its properties or the Business, which could
reasonably be expected to have a Material Adverse Effect;
(c) declared or paid or agreed to declare or pay any dividends or
distributions of any assets of any kind whatsoever, excluding distributions of
cash consistent with prior practice;
(d) mortgaged, pledged, hypothecated or otherwise encumbered any of its
material assets, tangible or intangible;
(e) sold or transferred any of its assets, property or rights, or
canceled or agreed to cancel any of its debts or claims, except for fair value,
in the ordinary course of business;
(f) suffered any Material Adverse Effect with respect to its
relationships with customers or employees, or with respect to its contracts with
customers;
(g) incurred any commitment (through negotiations or otherwise) or any
liability to any labor organization, or been involved in any labor dispute;
(h) increased the amount of its Debt or other obligations or liabilities
by more than $700,000 in the aggregate;
(i) entered or agreed to enter into any agreement or arrangement
granting any preferential rights to purchase a material part of its assets,
property or rights;
(j) placed any orders for materials, merchandise or supplies in
exceptional or unusual quantities based upon past operating practices or
accepted orders from customers under conditions relating to price, terms or
payment, time or delivery, or like matters materially different from the
conditions regularly and usually specified on acceptance of orders for similar
merchandise from customers similarly situated;
(k) made any change in the accounting practices or methods followed by
it;
(l) engaged in any restructuring or changed its constitutive documents;
or
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(m) entered into any other transaction, or been involved in any event or
experienced any condition of any character, that, either individually or in the
aggregate, has had a Material Adverse Effect on Seller, any of the Purchased
Assets or the Business.
SECTION 3.13. CONTRACTS. Schedule 3.13 lists all of the contracts, leases,
arrangements and understandings to which Seller is a party, or by which Seller,
the Business or the Purchased Assets are bound, including, without limitation,
sales orders, purchase orders and distribution agreements, which relate to the
Business as it is conducted by Seller, other than the Proprietary Agreements
(which are listed on Schedule 3.14) and other than any agreement involving
solely the payment or receipt of money by the Business or Seller and involving
(and expected to involve for future periods) less than $2,500 of payments or
receipts in any one year (the "Contracts"), each of which was entered into,
arrived at or conducted on behalf of Seller with appropriate authority and in
accordance with Seller's customary practices. Except as set forth on Schedule
3.13, neither Seller nor, to any Seller Party's Knowledge, the other parties to
such Contracts, arrangements and understandings are in default thereof and all
Contracts are valid and in effect. Except as set forth on Schedule 3.13, no
customer, supplier or vendor of Seller has given any notice or made any threat
or otherwise revealed to Seller an intent to cancel or otherwise terminate its
relationship with Seller, to materially and adversely change the relationship,
to substantially reduce the volume of business it currently does with Seller or
to refuse to renew any Contract when it expires.
SECTION 3.14. INTELLECTUAL PROPERTY. (a) Except as set forth on Schedule
3.14(a), Seller either owns or possesses the perpetual, royalty-free license and
other rights to use the Proprietary Rights (as defined in Section 3.14(h) below)
used by Seller in connection with the Business or related to any Purchased
Asset, including, without limitation, the proprietary computer software and
programs known as Centryx, e*teller and m*teller and any Proprietary Rights
necessary to develop, manufacture, publish, market, license and sell such
proprietary computer software and programs (collectively, the "S.O.S.
Software"), reference manuals, CD-ROMs and other materials and products
published, marketed or licensed by Seller (collectively, the "Products"), all of
which are in good standing and uncontested and free and clear of any liens or
any deposit arrangements and none of the same are owned or licensed or held by
any Related Person.
(b) Except as set forth on Schedule 3.14(b), Seller is not infringing
upon or, otherwise acting adversely to, any Proprietary Rights, including trade
secrets, owned by any other Person or Persons. Except as set forth on Schedule
3.14(b), no claim, suit, demand, proceeding or, investigation is pending or has
been asserted and, to the best Knowledge of the Seller Parties, no claim, suit,
demand, proceeding or investigation is threatened with respect to, based on or
alleging infringement of, any such rights of any third party, or challenging the
validity or effectiveness of any license for such rights, and there is no basis
for any such claim, suit, demand, proceeding or investigation. Except as set
forth on Schedule 3.14(b), no such Proprietary Rights infringe or violate any
Proprietary Rights of any Person. Seller has taken all actions reasonably
necessary to maintain and protect those Proprietary Rights which it owns or uses
or have been licensed to Seller.
(c) Schedule 3.14(c) contains a list of all contracts, agreements,
commitments or licenses relating to the Proprietary Rights or the Products to
which Seller is a party or by which it
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is bound, including, without limitation, all license agreements (including,
without limitation, all forms of "shrink wrap" or "click wrap" and other license
agreements), agreements for software acquisition, development agreements, author
agreements, publishing agreements and OEM, VAR and other distribution agreements
(the "Proprietary Rights Agreements"). The Proprietary Rights Agreements include
all such contracts, agreements, commitments or licenses to which Seller is a
party or by which it is bound related to Seller's Proprietary Rights. Seller has
delivered to Buyer true and complete copies of all of the Proprietary Rights
Agreements (other than end user agreements on a form provided to Buyer in
accordance with Section 3.14(f) below) prior to the execution of this Agreement.
To each Seller Party's Knowledge, all of the Proprietary Rights Agreements are
in full force and effect and enforceable in accordance with their terms and
there is no violation or default under the Proprietary Rights Agreements. To
each Seller Party's Knowledge, no event has occurred or circumstance exists
which with notice or lapse of time or both would constitute an event of default,
or give rise to a right of termination or cancellation, or result in the loss or
adverse modification of any right or benefit under any of the Proprietary Rights
Agreements. No party to any Proprietary Rights Agreement has given Seller
written notice of or made a claim with respect to, and no Seller Party is
otherwise aware of, any material breach or default under any thereof. Except as
set forth in Schedule 3.14(c), there have been no oral or written modifications
to the terms or provisions of any of the Proprietary Rights Agreements. No
amount payable to Seller or reserved under any Proprietary Rights Agreement has
been assigned by Seller or anticipated and no amount payable to Seller under any
Proprietary Rights Agreement is in arrears or has been collected in advance and
to each Seller Party's Knowledge, there exists no offset or defense to payment
of any amount under a Proprietary Rights Agreement. Except as specifically
identified on Schedule 3.14(c), no Contract and no Proprietary Agreement
contains any non-compete covenant, exclusivity clause or other restriction that
would limit Buyers' ability to engage in the Business and market the Products,
on an outsourced basis, a licensed, in-house basis or otherwise.
(d) Seller has the exclusive right to manufacture, develop, publish,
market, license or sell the Products (all of which are listed on Schedule
3.14(d)) in any and all media and by print or electronic means. Except as set
forth on Schedule 3.14(d), no Person other than Seller may manufacture, develop,
publish, market, license or sell the Products without the prior consent of
Seller and Seller has not given any such consent and Seller owns, or is the
exclusive licensee of, all right, title and interest in and to the Products and
the exclusive right to apply for copyright protection therefor. None of the
individuals or entities who have performed services in connection with the
development of any of the Products, as employees or as independent contractors
of Seller, holds any proprietary rights with respect to such Products. Except as
set forth on Schedule 3.14(d), each of such employees and independent
contractors has signed a nondisclosure and invention assignment agreement with
or for the benefit of Seller.
(e) Schedule 3.14(e) contains a true and complete list of all software
owned, developed, published or sold by Seller, including, without limitation,
the S.O.S. Software, with all such software owned by Seller designated by an
asterisk (*) (the "Company Software"). The Company Software does not contain any
embedded software of a third party which requires the consent (whether subject
to royalty or otherwise) of a party other than Seller in order for any such
Company Software to be sold, licensed, updated, enhanced or modified or
integrated with the software by Seller.
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(f) There has been no publication or public distribution by Seller of
any of the source codes of any of the Company Software that would in any way
affect the right of Seller to seek copyright protection for the Company
Software. Seller has provided Buyer with true and correct copies of each form of
license agreement which has been used by Seller, in connection with the
marketing, license and distribution of the Company Software. Each end user of
the Company Software has either signed a license agreement or has acquired the
Company Software pursuant to a so-called "shrink wrap" or "click wrap" license
with Seller. With respect to any contracts pertaining to the Company Software
entered into by Seller, Seller has licensed the Company Software and not sold
it, thus retaining ownership of the Company Software. Seller is not aware of any
claims actually or purporting to be within the scope of the warranty coverage
afforded to purchasers or licensees of any of the Company Software, or of any
efforts, omissions or failures to perform. Except as set forth on the bug list
attached as part of Schedule 3.14(f), there are no bugs in any of the Company
Software reasonably detectable with normal use. The S.O.S. Software functions in
accordance with the specifications provided to Buyer and attached as part of
Schedule 3.14(f).
(g) Schedule 3.14(g) contains a true and complete list of all
trademarks, trademark registrations, and applications therefor, service marks,
service names, trade names, domain names, patents and patent applications,
copyrights and copyright registrations, and applications therefor, wholly or
partially owned, licensed, held or used by Seller or in the conduct of the
Business.
(h) For purposes hereof, "Proprietary Rights" shall mean know-how,
technology or other intellectual property, including, without limitation, all
trade secrets, customer and vendor information, lists and databases, including,
without limitation, customer, mailing and subscription lists, proprietary
processes, methods and apparatus, information not known to the general public,
any literary work, whether or not copyrightable, ideas, concepts, designs,
discoveries, formulae, patents, patent applications, product and service
developments, inventions, improvements, processes, disclosures, trademarks,
trademark applications, trade names, fictional business names, service marks,
copyrights, copyright applications, logos, all rights in internet web sites and
internet domain names, software, source codes and materials, object codes and
materials, algorithms, techniques, architecture, mask work rights, prototypes,
engineering and design models, information with respect to firmware and
hardware, and any information relating to any product or program which has
either been developed, acquired or licensed for or by Seller, including the
maintenance, modification or enhancement thereof and all publishing and
manufacturing information (including with respect to custom chips, boards and
other components) and all license agreements (whether as licensor or licensee)
relating thereto.
SECTION 3.15. REAL PROPERTY. Schedule 3.15 contains a true and complete
description of all interests in real property held by Seller including, without
limitation, all fee interests, all surface ownership rights, life estates,
leasehold interests and easements, and the agreements which document those
interests (the "Real Property"). Seller has good and marketable title to those
interests in the Real Property indicated as held by Seller on Schedule 3.15, and
no improvement or structure on the Real Property encroaches on any adjacent
property or conflicts with the rights of any owner thereof. The Real Property is
not subject to any zoning ordinance,
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Lien, or other restriction or encumbrance which has had or could reasonably be
expected to have a Material Adverse Effect on the Business or the use and
enjoyment of such property in the manner in which such property is currently
used and enjoyed. There are no defaults by Seller or any other party to the
leases or other agreements listed on Schedule 3.15, and such agreements are
valid and in effect on the Closing Date. To the best of each Seller Party's
Knowledge, there is no planned or threatened taking or condemnation of all or
any part of the Real Property. Seller owns certain Real Property as indicated on
Schedule 3.15 and except as set forth on Schedule 3.15 no other party has any
rights or interests in such property, including without limitation any leasehold
interest.
SECTION 3.16. ENVIRONMENTAL MATTERS. (a) There are no outstanding or, to
the best of each Seller Party's Knowledge, threatened actions, claims,
proceedings, determinations or judgments by any party, including but not limited
to any Governmental Entity, against or involving Seller in any manner arising
under any national, international, federal, state, local or other environmental,
health or safety law, regulation, order or requirement or requiring the
remediation or removal of an existing condition or substance, including without
limitation the Comprehensive Environmental Response Compensation and Liability
Act (collectively, the "Environmental Laws"). No Seller Party has received any
notice of, nor is aware of, any outstanding or threatened orders, determinations
or notices of violation issued by any Governmental Entity administering any
Environmental Law in connection with ownership of or operation by Seller of the
Business which have not been complied with or resolved to the satisfaction of
such Governmental Entity.
(b) The Business is being and has been operated in substantial
compliance with all applicable Environmental Laws governing Seller and the
Business including, but not limited to, all discharges into or onto the soil
and/or the ground or surface water, emissions into the ambient air, and
generation, accumulation, labeling, transportation, handling, treatment, storage
and disposal of waste material or process by-products (including solid,
hazardous or toxic waste or hazardous materials or substances, if any) or
removal of any existing condition, material or substance. Seller has complied in
all material respects with all notice, record keeping and reporting requirements
imposed by any Governmental Entity and any informational requests or demands
arising under any Environmental Law.
(c) Schedule 3.15 lists all Real Property presently owned or leased or
rented by Seller. Such Real Property has been owned or operated by Seller in
accordance with the representations of paragraphs (a), (b) and (d) of this
Section 3.16.
(d) Seller has not used, stored, released, disposed of or caused or
permitted the disposal of any solid waste, hazardous waste, hazardous material
or hazardous substance, as such terms are defined by the Environmental Laws (the
"Controlled Substances"), in violation of any Environmental Laws, upon any of
the Real Property or any of the real properties from which Seller has conducted
its Business. Seller has not, directly or indirectly, disposed of Controlled
Substances off-site.
(e) There are no pending or, to the best of each Seller Party's
Knowledge, threatened actions, claims, proceedings or judgments against Seller
by any present or former officers, agents
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or employees of Seller alleging or involving personal injury or damage as a
result of the violation of any Environmental Laws, or otherwise involving
environmental conditions under which such persons were employed nor to any
Seller Party's Knowledge is there a basis for commencing any such action, claim
or proceeding.
SECTION 3.17. LABOR; ERISA. (a) Except as set forth on Schedule 3.17,
Seller is not, and, as of the Closing Date will not be, a party to any
employment, severance or consulting agreement or to any collective bargaining
agreement, nor are its employees members of a collective bargaining unit or
union, nor to Seller Parties' Knowledge, has there been any unionization
activity. Seller has substantially complied with all laws relating to the
employment of labor, including provisions relating to wages, hours, collective
bargaining, and the payment of unemployment, workers' compensation, Social
Security, payroll, withholding and similar Taxes, and is not liable for any
arrears of wages, compensation fund contributions or any Taxes or penalties for
failure to comply with such laws. Schedule 3.17 attached hereto contains a list
of all persons employed by Seller at the Closing Date with their respective
current salaries, any commission compensation received during the last twelve
(12) months and a description of all benefits provided by Seller to its
employees. No employee of Seller has given to Seller any notice or to Seller's
Knowledge, made any threat, or otherwise revealed to Seller an intent, to cancel
or otherwise terminate his or her relationship with Seller or indicated to
Seller an intention not to accept employment with Buyer, if employment is
offered. At the Closing Date, all employees are terminable at will by Seller and
will be free of all employment obligations to Seller and all non-competition and
confidentiality covenants in favor of Seller and will be free to become
employees of Buyer, if Buyer so desires.
(b) Schedule 3.17 lists all "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any other plans pursuant to which Seller has any continuing
obligation to provide benefits (including without limitation, equity, deferred
compensation, severance, retirement, and medical or life insurance) to any
present or former employee, or any beneficiary thereof. Seller has furnished
Buyer with a complete and accurate copy of each such plan. No such plan requires
Buyer to assume any employment, compensation, fringe benefit, pension, profit
sharing or deferred compensation agreement or plan in respect of any employee,
and Seller does not and has not contributed to or maintained a "multiemployer
plan" (as defined in ERISA Section 3(37)).
SECTION 3.18. TAXES.
(a) Except as set forth on Schedule 3.18, Seller has prepared and filed
or caused to be prepared and filed, all federal, state, local and foreign
returns, estimates, information statements and reports, including without
limitation, all informational returns ("Returns") relating to any and all Taxes
concerning or attributable to Seller, the Purchased Assets or the Business which
Seller is required to file on or before the Closing and such Returns were true
and accurate in all material respects and were completed in accordance with
applicable law when filed.
(b) Seller has (i) paid all Taxes it is required to pay and (ii)
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be
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withheld, and Seller has not been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding, proposed or assessed against Seller.
(c) No audit or other examination of any Return of Seller is presently in
progress, nor has Seller been notified of any request for such an audit or other
examination.
(d) Seller does not have any liabilities for unpaid Taxes which have not
been accrued or reserved against on the Reference Date Balance Sheet, whether
asserted or unasserted, contingent or otherwise, and no Seller Party has any
Knowledge of any basis for the assertion of any such liability attributable to
Seller, the Purchased Assets or the Business.
(e) The transactions contemplated herein are not subject to the tax
withholding provisions of Code Section 3406 or Subchapter A of Chapter 3 of the
Code or any other provision of law.
SECTION 3.19. CAPITALIZATION; RELATIONSHIPS WITH RELATED PERSONS. (a)
Schedule 3.19 sets forth a true and complete list of all holders of capital
stock of Seller, and of all holders of rights, options or warrants to acquire
capital stock of Seller, and of all holders of securities convertible into or
exchangeable or exercisable for capital stock of Seller including the settlor,
trustee and beneficiaries (or equivalent) of each Trust. Except as set forth on
Schedule 3.19, there are no other interests in any Trust granted to or held by
any party.
(b) Neither Smart, the Trusts nor any other Related Person of Seller, any
Trust or Smart has any interest in any property (whether real, personal, or
mixed and whether tangible or intangible) used in or pertaining to the Business
except the Excluded Assets. Except as set forth on Schedule 3.19, neither Seller
nor any Related Person of Seller, the Trusts or Smart, is, or has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (a) had business dealings or a material
financial interest in any transaction with the Business, or (b) engaged in
competition with Seller with respect to any line of the products or services of
Seller in any market presently served by Seller. Neither the Trusts, Smart nor
any other Related Person of Seller, the Trusts or Smart is a party to any
Proprietary Agreement or Contract.
SECTION 3.20. BROKERS. Except as set forth on Schedule 3.20, there are no
claims for brokerage commissions, finder's fees or similar compensation arising
out of or due to any act of or on behalf of any Seller Party in connection with
the transactions contemplated by this Agreement.
SECTION 3.21. INSURANCE. Seller is adequately insured in respect of the
Business and the Purchased Assets and will continue to be so insured with
respect to all events occurring prior to the Closing Date, in amounts and
against risks that are commercially reasonable. Schedule 3.21 lists all policies
of insurance and bonds covering the assets and operations of Seller as of the
date hereof. All of such insurance policies and bonds covering Seller and the
Business are in full force and effect and no written notice of termination of
any such insurance policies or bonds has been received by Seller. Seller has not
received any written communication or other written notice regarding any actual
or possible refusal of any coverage or rejection of any claim related to the
Business.
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SECTION 3.22. POWERS OF ATTORNEY. No Person has any power of attorney to
act on behalf of Seller in connection with any of its properties or business
affairs other than such powers to so act as normally pertain to the officers of
Seller.
SECTION 3.23. DEBT. Set forth in Schedule 3.23 hereto is a complete and
correct list of all Debt of Seller other than trade debt incurred in the
ordinary course of business, none of which is overdue unless such trade debt is
being contested diligently and in good faith by appropriate proceedings and
appropriate cash reserves have been established therefor.
SECTION 3.24. SOLVENCY. (a) Seller is not now insolvent and will not be
rendered insolvent by the transactions contemplated by this Agreement. As used
in this section, "insolvent" means that the sum of the debts and other probable
liabilities of Seller exceeds the fair market value of Seller's assets.
(b) Immediately after giving effect to the consummation of the
transactions contemplated by this Agreement: (i) Seller will be able to pay its
remaining liabilities as they become due in the usual course of its business;
(ii) Seller will not have unreasonably small capital, given its circumstances;
(iii) Seller will have assets (calculated at fair market value) that exceed its
remaining liabilities; and (iv) taking into account all pending and threatened
litigation, final judgments against Seller in actions for money damages are not
reasonably anticipated to be rendered at a time when, or in amounts such that,
Seller will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered) as well as all other obligations of Seller. The cash
available to Seller after Closing, after taking into account all other
anticipated uses of the cash, will be sufficient to pay all such liabilities,
debts and judgments promptly in accordance with their terms.
SECTION 3.25. STATEMENTS NOT MISLEADING. To Seller Parties' Knowledge, the
Seller Parties have fully complied with all of Buyer's (and Buyer's counsel's)
due diligence requests and have provided Buyer with all information and
documentation requested by Buyer and Buyer's counsel. The Seller Parties have
disclosed all facts, events or transactions which are material to the Purchased
Assets and the Business. No representation or warranty of any Seller Party or
document furnished by any Seller Party hereunder is false or inaccurate in any
material respect or contains any untrue statement of a material fact or omits to
state any fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the Closing Date, as
follows:
SECTION 4.1. ORGANIZATION AND POWER OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has full
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corporate power and authority to own its properties and conduct the business
presently being conducted by it, to execute this Agreement, and to consummate
the transactions contemplated by this Agreement.
SECTION 4.2. AUTHORIZATION. The execution, delivery and performance of
this Agreement by Buyer have been duly authorized and approved by all requisite
action on the part of Buyer, and this Agreement constitutes the valid and
binding obligation of Buyer and is enforceable against Buyer in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws relating to or
limiting creditors' rights generally and by equitable principles.
SECTION 4.3. NO CONFLICT. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not, (a) violate any law, judgment, order,
decree, statute, ordinance, rule or regulation applicable to Buyer, or any
permit, license or approval of any Governmental Entity, (b) conflict with any
provision of Buyer's certificate of incorporation or by-laws, (c) result in any
violation of, and will not conflict with, or result in a breach of any terms of,
or constitute a default under, any mortgage, instrument or agreement to which
Buyer is a party or by which Buyer is bound, or (d) require any notice to, or
consent, approval, order or authorization of, or the registration, declaration
or filing with, any Governmental Entity or other third party, which, in the case
of clause (c) or (d), would have a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement.
SECTION 4.4. NO CREDITORS. Immediately prior to Closing, Buyer has no
creditors.
ARTICLE 5
COVENANTS
SECTION 5.1. FURTHER ASSURANCES; COOPERATION. (a) The Seller Parties will
provide such other information, and execute and deliver all such other and
additional instruments, notices, releases, undertakings, consents and other
documents, and will do all such other acts and things, as may be reasonably
requested by Buyer as necessary to assure to Buyer all the rights and interests
granted or intended to be granted under this Agreement. The Seller Parties shall
take or shall cause to be taken such other reasonable actions as Buyer may
require more effectively to transfer, convey and assign to, and vest in, Buyer,
and put Buyer in possession of, the Purchased Assets as contemplated by this
Agreement. In the event that any of the Purchased Assets cannot be fully and
effectively transferred to Buyer without the consent of a third party or
parties, and if at the Closing Buyer shall have waived its right to receive at
the Closing such consent, the Seller Parties shall thereafter be obligated to
use their commercially reasonable efforts to assure to Buyer the benefits of
such contract, commitment, other arrangement or other Purchased Asset.
(b) The Seller Parties have prior to the Closing and will continue after
Closing to (i) permit Buyer's appropriate officers, employees and accountants to
meet with the officers,
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employees and accountants of Seller responsible for Seller's financial
statements, the internal controls of Seller and the disclosure controls and
procedures of Seller to discuss such matters as Buyer may deem necessary or
appropriate for Buyer to satisfy its obligations under Sections 302 and 906 of
the Xxxxxxxx-Xxxxx Act of 2003 and any rules and regulations relating thereto,
and (ii) afford to Buyer's accountants access to such books and records as are
necessary or appropriate for the purposes of preparing audited statements of the
Business for such periods prior to Closing as Buyer may reasonably request.
SECTION 5.2. COVENANTS NOT TO COMPETE. (a) Non-Competition. For the
applicable Non-Compete Period (as that term is defined below), no Seller Party
shall, directly or indirectly, anywhere in the world (the "Territory") engage in
competition with Buyer or an affiliate thereof, in any manner or capacity (e.g.,
as an advisor, principal, agent, partner, member, officer, director,
shareholder, employee, member of any association, or otherwise), in the Business
(together, the "Competitive Activities"), or in the design, development,
manufacture, distribution, marketing, licensing or selling of products, services
or systems which are competitive with the products, services or systems being
sold, marketed or produced by Buyer or an affiliate thereof at the time of the
Closing. No Seller Party shall own, participate in the ownership of, lend money,
guarantee loans, make gifts of money or other property, or otherwise lend
financial or other assistance in any form to any Person, firm, association,
partnership, venture, corporation or other business entity which is engaged in,
or will within the Non-Compete Period engage in, any of the activities
prohibited by this Section 5.2.
(b) Limitation on Covenant. Ownership by a Seller Party, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock or debt of any corporation listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a breach of
this Section 5.2.
(c) Customers. In addition to the more general restrictions set forth
above, during the Non-Compete Period, no Seller Party, nor any of their
affiliates shall, directly or indirectly, either on such party's own account or
in conjunction with or on behalf of any other Person, firm or company, solicit
any Person, firm or company who was a customer or client of Seller, Buyer or an
affiliate of Buyer as of the Closing, for business which is competitive with the
business, activities, products, services or systems provided by Seller, Buyer or
any affiliate of Buyer as of the Closing Date.
(d) Employees. During the Non-Compete Period, no Seller Party shall,
either on such party's own account or in conjunction with or on behalf of any
other Person, firm or company, employ, solicit, entice away or attempt to
employ, solicit or entice away from Buyer or any affiliate of Buyer any person
who at the date hereof is, or at the date of or within the year preceding such
employment, solicitation, enticement or attempt shall have been, an officer,
manager, consultant or employee of Buyer or any affiliate of Buyer.
(e) Confidentiality. No Seller Party will at any time hereafter make use
of or disclose or divulge to any Person any information (other than any
information properly available to the public or disclosed or divulged pursuant
to an order of a court of competent jurisdiction) relating to Buyer or the
Business, the identity of the customers and suppliers of Buyer or the Business,
or
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the products, finances, contractual arrangements, business or methods of
business of Buyer or the Business and shall use reasonable efforts to prevent
the publication or disclosure of any such information by any Seller Party. Each
Seller Party acknowledges that many of the Purchased Assets are trade secrets
which Buyer has purchased and which Seller Parties are forever restricted from
using or disclosing. If, in connection with the business or affairs of Seller,
any Seller Party shall have obtained trade secrets or other confidential
information belonging to any third party under an agreement which contained
restrictions on disclosure by any Seller Party, then the Seller Parties will not
at any time infringe such restrictions.
(f) Injunctive Relief. Each Seller Party acknowledges that any violation
of any provision of this Section 5.2 will cause irreparable harm to Buyer, that
damages for such harm will be incapable of precise measurement and that, as a
result, Buyer will not have an adequate remedy at law to redress the harm caused
by such violations. Therefore, in the event of a violation of Section 5.2 by any
Seller Party, each Seller Party agrees that, in addition to its other remedies,
Buyer shall be entitled, without the necessity of either proof of actual damage
or the posting of a bond, to injunctive relief, including but not limited to an
immediate temporary injunction, temporary restraining order and/or preliminary
or permanent injunction to restrain or enjoin any such violation. Each Seller
Party acknowledges that any violation of this Section 5.2 will cause Buyer
irreparable harm and that such irreparable harm will affect Buyer at its
principal place of business in Glastonbury, Connecticut, and, therefore, each
Seller Party does hereby submit to jurisdiction before any state or federal
court sitting in the State of Connecticut, at Buyer's election, and each Seller
Party hereby waives any right to raise the question of jurisdiction and venue in
any action that Buyer may bring in any such court against any Seller Party.
(g) Severability. The parties understand and agree that the covenant set
forth in this Section 5.2 shall be construed as a series of separate covenants
not to compete, one covenant for each country, state and province within the
Territory, one for each separate line of the Competitive Activities, and one for
each month of the Non-Compete Period. Should any clause, portion or paragraph of
this Section 5.2 be unenforceable or invalid for any reason, such
unenforceability or invalidity shall not affect the enforceability or validity
of the remainder of this Section 5.2. Should any particular covenant or
restriction, including but not limited to the covenants and restrictions of
Section 5.2(a), 5.2(c), 5.2(d) and 5.2(e), be held to be unreasonable or
unenforceable for any reason, including without limitation the time period,
geographical area and scope of activity covered by such covenant, then a court
may modify any such covenant or restriction in order to give it effect and allow
it to be enforced to the greatest extent that would be reasonable and
enforceable.
(h) Acknowledgment. Each Seller Party acknowledges that this covenant not
to compete is a mandatory condition precedent to the Closing of the transactions
contemplated by this Agreement, and that, in the absence of the preceding
covenant not to compete, Buyer would not have consented to the Closing.
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(i) Seller's Non-Compete Period.
(i) With respect to each Seller Party, the Non-Compete Period shall
be three (3) years after the Closing Date or, if ordered by a court of
competent jurisdiction, one of the periods of time listed in clause (ii).
(ii) If ordered by a court of competent jurisdiction, the
Non-Compete Period for any Seller Party shall be one of the following
periods of time:
(A) two (2) years and six (6) months from the Closing Date;
(B) two (2) years from the Closing Date;
(C) one (1) year and six (6) months from the Closing Date;
(D) one (1) year from the Closing Date; or
(E) six (6) months from the Closing Date.
SECTION 5.3. USE OF NAMES. From and after the Closing Date, Seller shall
cease to use the names S.O.S. Computer Systems, Inc., SOSystems, Centryx,
e*teller, m*teller, i*support, member*centric and personalized*technology or any
similar name and, as indicated in Section 2.7(c), shall change their names at
Closing. Notwithstanding the foregoing, if required to do so by law, Seller may
indicate its former corporate name (S.O.S. Corporation Systems, Inc.) in
filings, Tax returns and similar instruments.
SECTION 5.4. PASSAGE OF TITLE AND RISK OF LOSS. Legal title, equitable
title, and risk of loss with respect to the property and rights to be
transferred hereunder shall not pass to Buyer until the property or right is
transferred at the Closing and possession thereof is delivered to Buyer.
SECTION 5.5. TRANSFER OF GOODWILL AND BUSINESS. From and after the Closing
Date, the Seller Parties shall, when requested to do so by Buyer, provide
reasonable good faith assistance to effectuate a smooth transfer of the Business
and goodwill to Buyer.
SECTION 5.6. EXPENSES; TRANSFER TAXES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense. Any sales, use, franchise, conveyance
or other transfer Tax which becomes payable by any of the parties to this
Agreement as a result of the conveyance and transfer from Seller to Buyer of the
Purchased Assets or otherwise as a result of the transactions contemplated
hereby and any other transfer or documentary Taxes or any filing or recording
fees applicable to such conveyance and transfer shall be paid by the Seller
Parties, and the Seller Parties shall, upon written request of Buyer, promptly
provide Buyer with proof of payment of such Taxes.
SECTION 5.7. TAXES. (a) Continuing Obligation. The Seller Parties shall be
responsible for and pay or cause to be paid when due all of Seller's Taxes
attributable to, levied
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or imposed upon or incurred in connection with the Purchased Assets or the
Business relating or pertaining to the period (or that portion of any period)
ending on or prior to the Closing Date. The Seller Parties shall continue to
timely file within the time period for filing, or any extension granted with
respect thereto, all of Seller's Returns required to be filed in connection with
the Purchased Assets and such Returns shall be true and correct and completed in
accordance with applicable laws.
(b) Status at Closing. At Closing, Seller shall have (i) paid or cause to
be paid all Taxes it is required to pay as of such time, and (ii) withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld as of such time, if any.
(c) Tax Elections. No new elections with respect to Taxes, or any changes
in current elections with respect to Taxes, affecting the Purchased Assets shall
be made by Seller after the date of this Agreement without the prior written
consent of Buyer.
(d) Cooperation and Records Retention. The Seller Parties and Buyer shall
each (i) provide the others with such assistance as may reasonably be requested
by any of them in connection with the preparation of any Return, audit or other
examination by any taxing authority or judicial or administrative proceeding
relating to liability for Taxes, (ii) retain and provide the others with any
records or other information which may be relevant to such Return, audit or
examination, proceeding or determination, and (iii) provide the others with any
final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Return of the
others for any period. Without limiting the generality of the foregoing, Buyer
and the Seller Parties shall retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all Returns,
supporting work schedules and other records or information which may be relevant
to such Returns for all Tax periods or portions thereof ending before or
including the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing the other party with a reasonable
opportunity to review and copy the same.
(e) Assignment. In the event the Seller Parties indemnify Buyer for Losses
pursuant to Article 6 hereof with respect to any Taxes that constitute sales and
use taxes payable on account of taxable goods and services provided by Seller to
its customers under any Contracts, Buyer shall transfer and assign to Seller,
without further consideration therefor, Buyer's rights, entitlements and
interests in and to the provisions of such Contracts, if any, that provide for
indemnification or payment by the customer of such sales and use taxes for the
relevant periods including, without limitation, the right to enforce such
provisions.
(f) Additional Obligation. The parties will comply with the procedures set
forth on Schedule 5.7.
SECTION 5.8. EMPLOYMENT MATTERS. Seller will terminate, effective upon
Closing, the employment of all employees of the Business whom Buyer has
indicated a desire to employ, and Seller shall pay all compensation or other
money due to such employees with respect to their employment and termination by
Seller through and including the Closing Date. The Seller Parties shall
cooperate with Buyer in Buyer's efforts to hire such employees as Buyer deems
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desirable for the continuation of the Business, and Seller shall, and hereby
does, release those employees who accept employment with Buyer from their
obligations under any non-competition or confidentiality agreement in favor of
Seller, to the extent necessary to allow them to become employed by Buyer.
Seller shall maintain in effect its self-insured health insurance program
including, without limitation, any related third party administrative services
and stop-loss coverage through and including April 30, 2005 with respect to any
such employee hired by Buyer, which employees shall continue to be participants
in and covered by such plan through April 30, 2005. Buyer shall promptly
reimburse Seller for claims incurred by Seller on account of services rendered
with respect to such employees during the month of April, 2005 (net of any
premiums or other amounts paid by such employees).
SECTION 5.9 AGREEMENT REGARDING LEASE PAYMENTS. Seller agrees that it
shall not sell or transfer the real property which is the subject of the Lease
or assign the Lease to any party unless it simultaneously deposits with the
Escrow Agent an amount equal to the lesser of (a) $912,000 and (b) the aggregate
remaining base rent payments under the Lease through the end of its initial
term, which amount, unless used to satisfy indemnity claims of Buyer, shall be
disbursed to Seller on the fifth anniversary of the Closing Date, but subject to
the terms and conditions described in this Agreement, including without
limitation in Sections 2.3, 2.4 and 6.7 hereof (the "Additional Escrow Funds").
Buyer shall have the right to record on any applicable land records an
appropriate notice of the restrictions and requirements set forth in this
Section 5.9. For purposes of this Section 5.9, the liquidation or dissolution of
Seller and the related distribution or assignment of the real property which is
the subject of the Lease to an entity, the majority in interest of which is held
by one or more of the Seller Parties or their affiliates, shall not constitute a
sale or transfer of the real property which is the subject of the Lease or an
assignment of the Lease, provided that in such event, Buyer's right to deposit
rent and taxes into escrow and apply the same to indemnities shall continue in
effect after such liquidation or dissolution, and any new owner of the real
property and any assignee as landlord under the Lease shall take the Lease
subject to the rights of Buyer under Section 6.10, this Section 5.9 and the
Lease, and shall agree in writing to comply with the requirements of this
Section 5.9 in connection with any subsequent sale or transfer of the real
property or assignment of the Lease.
5.10 ENFORCEMENT OF ASSIGNMENTS. If Buyer is required to make an
assignment to Seller pursuant to Sections 2.4(b) or 5.7(e) hereof, Seller shall
be entitled to attempt to collect and enforce the rights contemplated by such
assignments, and Buyer hereby acknowledges and agrees that any such collection
or enforcement efforts by Seller shall not constitute a breach of any obligation
of Seller not to disrupt or interfere with the Business or customers, or to
assist in the smooth transition of the Business to Buyer or other similar
covenants or obligations, nor shall such efforts be deemed a breach of any
representation or warranty contained herein.
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ARTICLE 6
INDEMNIFICATION
SECTION 6.1. INDEMNIFIED LOSSES. For the purpose of this Article 6 and
when used elsewhere in this Agreement, "Losses" shall mean and include any and
all liability, loss, damage, claim, expense, cost, fine, fee, penalty,
obligation or injury including those resulting from any and all actions, suits,
proceedings, demands, assessments or judgments, together with reasonable costs
and expenses including the attorneys' fees and other legal costs and expenses
relating thereto.
SECTION 6.2. INDEMNIFICATION BY SELLER PARTIES. Subject to the limitations
set forth in this Article 6, the Seller Parties hereby jointly and severally
agree to indemnify and hold harmless Buyer against and in respect of any Losses
which arise out of or result from:
(a) any breach by the Seller Parties of any representation or warranty of
the Seller Parties made herein or in any certificate, document, writing or
instrument delivered by any Seller Party pursuant to this Agreement;
(b) any breach by any Seller Party of any covenant or obligation of such
Seller Party in this Agreement or in any certificate, document, writing or
instrument delivered by the Seller Parties pursuant to this Agreement;
(c) any liability or obligation of Seller or the Business as operated
through the Closing Date or otherwise arising out of the ownership or operation
of Seller, the Business or the Purchased Assets prior to the Closing, other than
the Assumed Liabilities, whether or not such liability or obligation was
disclosed to Buyer, including, without limitation, sales and use Taxes for all
periods ending on or prior to the Closing Date;
(d) any noncompliance with bulk sales or fraudulent conveyance laws with
respect to the transactions contemplated by this Agreement;
(e) as provided in Section 6.4 hereof; and
(f) the assignment by Buyer to Seller of rights under the Contracts in
accordance with Section 5.9(e), or Seller's enforcement of such rights against
customers (excluding lost profits and consequential damages), including, without
limitation, Losses that arise out of or result from Buyer being made a party to
any proceedings instituted by or against Seller in connection therewith.
SECTION 6.3. INDEMNIFICATION BY BUYER. Subject to the limitations set
forth in this Article 6, Buyer agrees to indemnify and hold harmless Seller
against and in respect of any Losses which arise out of or result from:
(a) any breach by Buyer of any representation or warranty of Buyer made
herein or in any certificate, document, writing or instrument delivered by Buyer
pursuant to this Agreement;
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(b) any breach by Buyer of any covenant or obligation of Buyer in this
Agreement or in any other certificate, document, writing or instrument delivered
by Buyer pursuant to this Agreement;
(c) any liability or obligation of Buyer or the Business as operated after
the Closing Date, or otherwise arising out of the ownership or operation of
Buyer, the Business or the Purchased Assets after the Closing including, without
limitation, sales and use Taxes payable on account of taxable goods and services
provided by Buyer after the Closing; provided that, Buyer shall not be obligated
to indemnify Seller pursuant to this Section 6.3(c), (i) with respect to any
matter for which Buyer is entitled to indemnification from Seller, (ii) for
Losses that result from or arise out of the continuation of circumstances after
Closing that existed with respect to the Business as of Closing, or (iii) with
respect to any claim arising out of or relating to an Excluded Asset;
(d) the Assumed Liabilities; and
(e) as provided in Section 6.5 hereof.
SECTION 6.4. THIRD PARTY CLAIMS AGAINST BUYER. Subject to any limitations
set forth in this Article 6, the Seller Parties further agree to jointly and
severally indemnify and hold Buyer harmless from and against any and all Losses
resulting from causes of action or claims of any kind asserted by unrelated
third parties arising from any liability of any nature incurred in connection
with any action, suit, proceeding, claim or demand by any person or entity where
any of the alleged or actual breach, default, act, omission or other grounds
therefore is attributable to events occurring prior to the Closing and related
to Seller, the Business or the Purchased Assets, including, without limitation,
any and all Losses attributable to goods, products and services provided by
Seller prior to the Closing Date, whether or not such litigation, proceeding or
claim is pending, threatened, or asserted before, on or after the Closing Date.
SECTION 6.5. THIRD PARTY CLAIMS AGAINST SELLER. Subject to the limitations
set forth in this Article 6, Buyer further agrees to indemnify and hold Seller
harmless from and against any and all Losses resulting from causes of action or
claims of any kind asserted by unrelated third parties arising from any
liability of any nature incurred in connection with any action, suit,
proceeding, claim or demand by any person or entity where any of the alleged or
actual breach, default, act, omission or other grounds therefore is attributable
to events occurring after the Closing and related to Buyer, the Business or the
Purchased Assets, whether or not such litigation, proceeding or claim is
pending, threatened, or asserted before, on or after the Closing Date.
SECTION 6.6. PROCEDURES; NO WAIVER; EXCLUSIVITY. All claims for
indemnification by a party pursuant to this Article 6 in connection with an
action, suit or proceeding shall be made in accordance with the provisions of
this Section 6.6. The party entitled to indemnification under this Article 6
(the "Indemnified Person") shall give prompt written notification to the Person
obligated to provide such indemnification (the "Indemnifying Person") of the
commencement of any action, suit or proceeding relating to a third party claim
for which indemnification pursuant
- 27 -
to this Article 6 may be sought; provided, however, that no delay on the part of
the Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person from any liability or obligation under this Article 6 except
to the extent of any damage or liability caused solely by or arising out of such
delay. Within 20 days after delivery of such notification, the Indemnifying
Person may, upon written notice thereof to the Indemnified Person, assume
control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Person, provided (i) the Indemnifying
Person acknowledges in writing to the Indemnified Person that the Indemnifying
Person shall indemnify the Indemnified Person with respect to all elements of
such action, suit or proceeding and any damages, fines, costs or other
liabilities that may be assessed against the Indemnified Person in connection
with such action, suit or proceeding, and (ii) the third party seeks monetary
damages only. If the Indemnifying Person does not so assume control of such
defense, the Indemnified Person shall control such defense. The party not
controlling such defense may participate therein at its own expense; provided,
that if the Indemnifying Person assumes control of such defense and the
Indemnified Person is advised by counsel in writing that the Indemnifying Person
and the Indemnified Person may have conflicting interests or different defenses
available with respect to such action, suit or proceeding, the reasonable fees
and expenses of counsel to the Indemnified Person shall be considered "Losses"
for purposes of this Agreement. The party controlling such defense shall keep
the other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. An Indemnified Person shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Indemnifying Person, which shall not be unreasonably withheld or delayed.
The Indemnifying Person shall not agree to any settlement or the entry of a
judgment in any action, suit or proceeding without the prior written consent of
the Indemnified Person, which shall not be unreasonably withheld (it being
understood that it is reasonable to withhold such consent if, among other
things, the settlement or the entry of a judgment (A) lacks a complete release
of the Indemnified Person for all liability with respect thereto or (B) imposes
any liability or obligation on the Indemnified Person).
SECTION 6.7. SET-OFF. (a) Buyer shall be entitled to a set-off against the
Escrow Funds and Additional Escrow Funds (if any) for any amounts payable to
Buyer pursuant to this Article 6 or under Section 2.3 or Section 2.4 (a "Claimed
Set-Off"). Except as expressly set forth in Section 6.9(b), Buyer's right to
set-off against the Escrow Funds and Additional Escrow Funds does not limit
Buyer's right to indemnification above and beyond the Escrow Funds and
Additional Escrow Funds (by recovery from Seller Parties) in accordance with
this Article 6.
(b) Buyer shall give Seller written notice of any Claimed Set-Off, which
notice shall include reasonable detail as to the nature, basis for and (if
liquidated) amount of such Claimed Set-Off. Except in the case of a Claimed
Set-Off made pursuant to Section 2.3 or 2.4 of this Agreement (which claims
Buyer may make only once a Reduction in Net Current Assets or Receivable
Shortfall has been finally determined in accordance with such Sections), Seller
shall have fifteen (15) days from receipt of Buyer's written notice to object to
the Claimed Set-Off. Seller shall make any objection to a Claimed Set-Off in
writing and shall forward the same to both Buyer and the Escrow Agent in the
case of a claim against the Escrow Funds and/or Additional Escrow Funds (an
"Escrow Claim"). If Seller does not timely object to an Escrow Claim, or in the
case of any Claimed Set-Off made pursuant to Section 2.3 or 2.4 of this
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Agreement, Buyer may give unilateral written notice to the Escrow Agent to
release a portion of the Escrow Funds or Additional Escrow Funds, as applicable,
equivalent to the Claimed Set-Off (with a copy of such unilateral notice to the
Seller Parties), which written notice, the Seller Parties hereby acknowledge to
be sufficient to authorize the Escrow Agent to release the Escrow Funds or
Additional Escrow Funds, as applicable, as directed by Buyer.
(c) If any of the Seller Parties do timely object to a Claimed Set-Off,
except in the case of a Claimed Set-Off made pursuant to Section 2.3 or 2.4 of
this Agreement, the Escrow Agent shall not release any portion of the Escrow
Funds or Additional Escrow Funds to Buyer in payment of such Claimed Set-Off
until the Escrow Agent receives instructions which are signed by Buyer and
Seller, or until the dispute has been definitively resolved by court
proceedings. If any of the Seller Parties do timely object and Seller and Buyer
are unable to agree to the amount of the Claimed Set-Off within thirty (30)
days, either Seller or Buyer may institute court proceedings for a determination
of the amount of the Claimed Set-Off. If the Seller Parties object to a Claimed
Set-Off, or during the pendency of Seller's fifteen (15) day notice period,
Buyer may require the Escrow Agent to retain a portion of the Escrow Funds
and/or Additional Escrow Funds to cover an Escrow Claim by giving the Escrow
Agent unilateral written notice to retain said portion of the Escrow Funds
and/or Additional Escrow Funds (with a copy of such unilateral notice to the
Seller Parties), which written notice the Seller Parties hereby acknowledge to
be sufficient to authorize the Escrow Agent to retain said portion of the Escrow
Funds and/or Additional Escrow Funds as directed by Buyer, and in which event
the Escrow Agent shall not release that portion of the Escrow Funds and/or
Additional Escrow Funds to Seller in accordance with the Escrow Agreement until
the Escrow Agent receives instructions which are signed by both Buyer and
Seller, or until the dispute has been definitively resolved by court
proceedings.
(d) Notwithstanding anything to the contrary herein, any set-off against
the Escrow Funds and Additional Escrow Funds made pursuant to this Section 6.7
shall first be made against the Escrow Funds until all such funds have been paid
out (or are subject to dispute).
SECTION 6.8. SURVIVAL. All representations and warranties made by the
Seller Parties and Buyer herein (except for those set forth in Sections 3.1,
3.2, 3.4, 4.1 and 4.2, which shall survive indefinitely, those set forth in
Section 3.14, which shall survive until the six (6) year anniversary of the
Closing Date, and those set forth in Sections 3.16, 3.17 and 3.18, which shall
survive until expiration of the applicable statute of limitation), or in any
certificate, document, writing or instrument delivered pursuant to this
Agreement, shall survive the Closing for a period of three (3) years following
the Closing Date. No claim may be asserted under Section 6.2(a) or 6.3(a) with
respect to breach of a representation or warranty after the two (2) year
anniversary of the Closing Date (except for claims for breach of a
representation or warranty set forth in Section 3.1, 3.2, 3.4, 3.14, 3.16, 3.17,
3.18, 4.1 or 4.2), provided that claims as to which written notice is given
prior to such date may be prosecuted thereafter. The indemnity obligations set
forth in Sections 6.2(b), (c), (d), and (f), Sections 6.3(b), (c) and (d),
Section 6.4 and Section 6.5, and the indemnity limitations set forth in Section
6.9, shall survive indefinitely.
SECTION 6.9. LIMITATIONS ON INDEMNIFICATION BY THE SELLER PARTIES.
Notwithstanding any other provision of this Article 6:
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(a) The Seller Parties shall not be liable to Buyer under 6.2(a) for
breaches of representations or warranties: (i) for Losses which are less than
$500 with respect to a particular matter or set of facts; or (ii) until the
aggregate amount of all Losses, each of which is greater than $500, exceeds
$75,000, after which, subject to this Section 6.9, the Seller Parties shall be
liable back to dollar one such that such amount is a threshold and not a
deductible;
(b) Subject to Section 6.9(d) and 6.10, the Seller Parties shall not be
liable to Buyer under this Article 6: (i) for Primary Losses in excess of the
Escrow Funds and Additional Escrow Funds; or (ii) for Losses in excess of
$11,400,000;
(c) If the Escrow Funds or Additional Escrow Funds, or any portion
thereof, are used to satisfy Secondary Losses or to satisfy any adjustment in
favor of Buyer pursuant to Section 2.3 or 2.4, and the Buyer has claims for
Primary Losses for which Escrow Funds or Additional Escrow Funds are not
available, then notwithstanding Section 6.9(b) hereof, the Seller Parties shall
be jointly and severally liable to Buyer for such Primary Losses to the extent
the Escrow Funds and Additional Escrow Funds are insufficient to cover such
Primary Losses, up to an amount equal to the amount of Escrow Funds and
Additional Escrow Funds previously used to satisfy adjustments pursuant to
Sections 2.3 and 2.4 and Secondary Losses; and
(d) Nothing set forth in this Section 6.9 limits the Seller Parties'
liabilities and obligations for Losses arising from the fraud of any Seller
Party.
SECTION 6.10. SET-OFF AGAINST LEASE. Notwithstanding anything to the
contrary herein, if at any time and from time-to-time Buyer asserts one or more
claims for indemnification pursuant to Section 6.2 or Section 6.4 at any time
prior to April 6, 2010 and the Escrow Funds and any then existing Additional
Escrow Funds are insufficient to satisfy all such claims, then Buyer may at its
option withhold from Seller and instead deposit with the Escrow Agent any
monthly rental payments due Seller and any real property taxes that Buyer is
required to pay under the Lease, until the aggregate amount on deposit in escrow
is equal to the aggregate amount of all pending indemnity claims. In no event
may the aggregate amount deposited by Buyer into escrow pursuant to this Section
6.10 exceed $912,000. All additional escrow deposits made by Buyer under this
Section 6.10 shall be deemed Additional Escrow Funds for all purposes under this
Agreement and the Escrow Agreement. In the event that Buyer elects to deposit
real property taxes into escrow under this Section 6.10, Seller shall pay such
taxes in lieu of Buyer paying the same.
SECTION 6.11. EXCLUSIVE REMEDY. The provisions of this Article 6 set forth
the sole and exclusive remedy of the parties hereto with respect to any matter
or event described in this Article 6, provided however that the provisions of
this Article 6 shall not limit the rights or remedies of Buyer with respect to
the breach of Sections 5.2 or 5.3, or the provisions of the second sentence of
Section 7.5, and Section 5.9.
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ARTICLE 7
MISCELLANEOUS
SECTION 7.1. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and delivered personally or sent by
overnight delivery, postage prepaid to the addresses set forth below:
To Buyer:
Ship Acquisition Corp.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
With a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Vice President, General Counsel & Secretary
Open Solutions Inc.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
To any Seller Party:
S.O.S. Computer Systems, Inc.
000 X. Xxxxxxxxxx Xxxxxxx
Xxxx, XX 00000
Attn: Mr. Xxxxx Xxxxx, CEO
With a copy (which shall not constitute notice) to:
Holme Xxxxxxx & Xxxx, LLP
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
SECTION 7.2. ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits hereto) constitutes the sole understanding of the parties with respect
to the subject matter hereof provided that the Confidentiality Agreement between
the Seller and the Buyer dated as of November 17, 2004 shall continue in full
force and effect.
SECTION 7.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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SECTION 7.4. PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and their respective
successors and assigns, provided that no Seller Party may assign or delegate
this Agreement or any right, liability or obligation hereunder without Buyer's
prior written consent and any assignment or delegation by any Seller Party
without the prior written consent of Buyer shall be void and of no force or
effect.
SECTION 7.5. GOVERNING LAW; FEES AND COSTS. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Connecticut, without reference to its conflicts of laws principles. Without
limiting the indemnity and hold harmless obligations of the parties' under
Article 6 of this Agreement, the prevailing party in any litigation with respect
to this Agreement shall be entitled to recover its attorney's fees and costs
from the breaching party or parties.
SECTION 7.6. SCHEDULES AND HEADINGS. All of the schedules and exhibits
attached hereto are a part of this Agreement and all of the matters contained
therein are incorporated herein by reference. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for convenience
only and do not constitute part of this Agreement.
SECTION 7.7. AMENDMENT. This Agreement may be amended only by the parties
hereto by any instrument in writing signed by or on behalf of each of the
parties hereto.
SECTION 7.8. WAIVER. Any term or provision of this Agreement may be waived
only in writing by the party or parties who are entitled to the benefits being
waived.
SECTION 7.9. JOINT AND SEVERAL LIABILITY. All obligations and liabilities
of Seller and/or any other Seller Party under this Agreement shall be the joint
and several obligations and liabilities of all of the Seller Parties.
SECTION 7.10. FACSIMILE SIGNATURES. Facsimile signatures shall be fully
binding and effective for all purposes and shall be given the same effect as
original signatures. If any party delivers a copy of this Agreement containing a
facsimile signature, such party shall promptly forward copies containing
original signatures to the other party; provided, however, that the copies
containing the facsimile signatures shall remain binding even if the document
containing original signatures is not sent to the other party.
SECTION 7.11 PRESS RELEASE. No Seller Party shall make any public
announcement or issue any press release relating to this Agreement, the or any
related agreements or transactions contemplated hereby or thereby, provided
however, that nothing herein shall prevent Seller from making any disclosure
required by law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SUCCEEDING PAGE IS A SIGNATURE
PAGE.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first above written.
S.O.S. COMPUTER SYSTEMS, INC. SHIP ACQUISITION CORP.
By: /s/ Xxxxx Xxxxx By: /s/ Xxxx X. Xxxxxxxx
------------------------- ---------------------
Name: Xxxxx Xxxxx Name: Xxxx X. Xxxxxxxx
Title: President Title: Secretary and Treasurer
THE DUNSTER FAMILY TRUST
By: /s/ Xxxxxx Xxxxxxx Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx Xxxxxxx, as Trustee
of the Dunster Family Trust u/t/d June 14, 1979, as amended
By: /s/ Xxxxxx Xxxx Xxxxxxx
---------------------------------
Xxxxxx Xxxx Xxxxxxx, as Trustee
of the Dunster Family Trust u/t/d June 14, 1979, as amended
THE XXXXX XXXXXXX XXXXXXXXXX TRUST
By: /s/ G. Xxxxxxx Xxxxxxx
-------------------------------
G. Xxxxxxx Xxxxxxx, as Trustee
of the Xxxxx Xxxxxxx Ballantyne Trust u/t/d December 19, 1988
THE XXXXX XXXXXXXXXX TRUST
By: /s/ G. Xxxxxxx Xxxxxxx
-----------------------
G. Xxxxxxx Xxxxxxx, as Trustee
of the Xxxxx Xxxxxxxxxx Trust u/t/d December 19, 1988
/s/ Xxxxx Xxxxx
------------------
XXXXX XXXXX
OMITTED SCHEDULES
Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, Open Solutions
Inc. (the "Company") has, with respect to the Asset Purchase Agreement, dated as
of April 6, 2005, among Ship Acquisition Corp., S.O.S. Computer Systems, Inc.,
the Xxxxx Xxxxxxx Xxxxxxxxxx Trust, the Xxxxx Xxxxxxxxxx Warner Trust, the
Dunster Family Trust and Xxxxx Xxxxx, omitted to file the schedules listed in
the table of contents herewith. These schedules will be supplementally furnished
to the Commission upon request.
