EXHIBIT 10.1
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EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.,
AS PURCHASER,
AND
XXXXXX XXXX,
XXXXX XXXXX,
XXXXX XXXXXX,
XXXX XXXXXX,
XXXXXXX XXXXXXXX,
AND
XXXXXX XXXXXXXX
AS THE SHAREHOLDERS OF
ACHIEVEMENT DATA, INC.
AND
ACHIEVEMENT DATA, INC.
AS THE ACQUIRED COMPANY
DATED
JUNE 15, 2005
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
AND
LIST OF EXHIBITS AND SCHEDULES
PAGE
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1. DEFINITIONS...............................................................1
2. COVENANTS AND UNDERTAKINGS
2.1 Purchase and Sale of Shares..................................1
2.2 Purchase Price...............................................2
2.3 Discharge of Debt and Other Obligations......................3
2.4 Cooperation..................................................3
2.5 Consents and Approvals.......................................3
2.6 Non-competition Agreement....................................4
2.7 Resignations and Employment..................................4
2.8 Tax Matters..................................................4
2.9 Employee Plans and Compensation Agreements...................6
2.10 Conduct of Parties Prior to the Closing......................8
2.11 Brokers......................................................11
2.12 Publicity....................................................11
2.13 No Shop......................................................11
2.14 Access to Books and Records..................................11
2.15 Confidentiality..............................................12
2.16 Certain Post-Closing Environmental Procedures................12
2.17 Certain Intellectual Property Matters........................13
3. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization.................................................14
3.2 Authority and Status.........................................14
3.3 Capitalization...............................................15
3.4 Absence of Equity Investments................................15
3.5 Liabilities and Obligations of ADI...........................15
3.6 Tax Matters..................................................16
3.7 Personal Property............................................17
3.8 Bank Accounts................................................17
3.9 Consents and Approvals; Noncontravention.....................17
3.10 Absence of Changes...........................................17
3.11 Litigation...................................................18
3.12 Licenses and Permits.........................................18
3.13 Real Property................................................19
3.14 Environmental Matters........................................20
3.15 Contracts, Etc...............................................21
3.16 Intellectual Property........................................21
3.17 Labor Matters and Employee Relations.........................23
3.18 Benefit Plans................................................24
3.19 Title to Assets..............................................27
3.20 Accounts Receivable..........................................28
3.21 Insurance....................................................28
3.22 Guaranties...................................................28
3.23 Full Disclosure..............................................28
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization and Standing....................................28
4.2 Authority and Status.........................................28
4.3 Consents and Approvals; Noncontravention.....................29
4.4 Purchase for Investment......................................29
4.5 Inspections; No Other Representations........................29
4.6 Availability of Funds........................................30
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
5.1 Representations True at Closing..............................30
5.2 Covenants....................................................30
5.3 No Material Adverse Change...................................30
5.4 Officer's Certificate........................................30
5.5 Consents and Waivers.........................................31
5.6 Regulatory Approvals.........................................31
5.7 Judgment.....................................................31
5.8 Deliveries...................................................31
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
6.1 Representations True at Closing..............................32
6.2 Covenants....................................................32
6.3 Officer's Certificate........................................32
6.4 Regulatory Approvals.........................................32
6.5 Judgment.....................................................32
6.6 Deliveries...................................................32
7. CLOSING
7.1 Time and Place of Closing....................................32
7.2 Transactions at Closing......................................33
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
8.1 Survival of Representations and Warranties of Seller.........35
8.2 Survival of Representations and Warranties of Purchaser......35
8.3 Assertion of Indemnification Claims..........................36
8.4 Certain Limitations on Obligation to Indemnify...............37
9. TERMINATION
9.1 Agreement Between Seller and Purchaser.......................38
9.2 Termination by Seller........................................38
9.3 Termination by Purchaser.....................................39
9.4 Effect of Termination........................................39
9.5 Attorneys' Fees..............................................40
9.6 Exclusivity..................................................40
10. GENERAL PROVISIONS
10.1 Notices......................................................40
10.2 Further Assurances...........................................41
10.3 Waiver.......................................................41
10.4 Expenses.....................................................42
10.5 Assignment...................................................42
10.6 Headings.....................................................42
10.7 Entire Agreement.............................................42
10.8 Counterparts.................................................42
10.9 Pronoun and Number...........................................42
10.10 Schedules and Exhibits Incorporated..........................42
10.11 Severability.................................................43
10.12 Governing Law................................................43
10.13 Jurisdiction.................................................43
10.14 Third-party Beneficiaries....................................43
10.15 Waiver of Jury Trial.........................................43
Exhibits:
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Exhibit A Definitions
Exhibit B Xxxxxxxx Note
Exhibit C Xxxxx Note
Exhibit D Registration Rights Agreement
Exhibit E Non-competition Agreement
Exhibit F Employee Proprietary Rights Agreement
Exhibit G Borg Employment Agreement
Exhibit H Xxxxxx Employment Agreement
Exhibit I Xxxxxxxxx Employment Agreement
Exhibit J License Agreements
Exhibit K Existing Employee Proprietary Rights
Agreement
Schedules:
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2.3 Discharge of Debts and Other Obligations
2.8 Tax Returns Prepared by Purchaser
2.9.5 Terminated Employees
2.10.2 Negative Covenants
3.1 Organization , Standing and Foreign Qualification
3.3.1 Capitalization
3.4 Investment Interests
3.5.2 Liabilities and Obligations
3.5.3 Defaulted Liabilities and Obligations
3.6 Jurisdictions Requiring Tax Returns
3.8 Bank Accounts and Safe Deposit Boxes
3.9 Seller Consents and Approvals
3.10 Absence of Changes
3.11 Litigation
3.12 Licenses & Permits
3.13 Real Property
3.14 Environmental Matters
3.15 Material Contracts
3.16 Patents, Trademarks, Trade Names, Etc.
3.17 Labor Matters and Employee Relations
3.18 Employee Plans and Compensation Agreements
3.19 Leased Assets
3.21 Insurance
3.22 Guaranties
4.3 Purchaser's Consents and Approvals;
Noncontravention
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), made this
15th day of June, 2005, by and among TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation, with its principal
place of business at 0 Xxxxxxxxxxxx Xxxxxxx, Xxxxxxxx, XX 00000
("Purchaser"), and XXXXXX XXXX, residing at 00000 00xx Xxxxxx
Xxxxx, Xxxxxxxx, XX 00000, XXXXX XXXXX, residing at 0000 Xxx
Xxxx, Xxxxx Xxxxx Xxxxxxx, XX _______, XXXXX XXXXXX, 0000 000xx
Xxxxxx, Xxxxx, Xxxxxxxx XX 00000, XXXX XXXXXX, residing at 0000
Xxxxxxxxx Xxxx, Xxxxx, XX 00000, XXXXXXX XXXXXXXX, residing at
000 Xxxxxxx Xxxxx, Xxxxx, XX 00000 and XXXXXX XXXXXXXX,
residing at 000 Xxxxxxx Xxxxx, Xxxxx, XX 00000, each a
"Shareholder" and collectively, the "Seller") and ACHIEVEMENT
DATA, INC., a Minnesota corporation with its principal place of
business at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, XX
00000 ("ADI").
W I T N E S S E T H:
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WHEREAS, Seller, is the owner of 100,000 shares of the
common stock, $.01 par value per share, of ADI;
WHEREAS, ADI owns and operates an online evaluation and
assessment company, together with related assets, including, but
not limited to, intellectual property and technology;
WHEREAS, the parties hereto desire to enter into this
Agreement pursuant to which Purchaser will purchase from Seller
all of the issued and outstanding shares of capital stock of ADI
(the "Shares") upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise stated in this Agreement,
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certain terms used herein shall have the meanings set forth in
Exhibit "A" attached hereto.
2. COVENANTS AND UNDERTAKINGS.
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2.1 PURCHASE AND SALE OF SHARES. Subject to the
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terms and conditions hereinafter set forth, Seller shall, at
Closing, sell, assign, transfer, convey and deliver to Purchaser
the Shares, free and clear of all Encumbrances. Such sale,
assignment, transfer, conveyance and delivery shall be evidenced
by share certificates duly endorsed in blank or by instruments
of transfer reasonably satisfactory in form and substance to
Purchaser and its counsel.
2.2 PURCHASE PRICE.
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2.2.1 In consideration of the sale,
assignment, transfer, conveyance and delivery of the Shares and
in reliance upon the representations and warranties made herein
by Seller, Purchaser, in full payment for the Shares and the
Non-Competition Agreement, shall pay to Seller the aggregate
amount of One Million Six Hundred Fifty Thousand Dollars
($1,650,000) (the "Purchase Price") payable as follows:
2.2.1.1 by wire transfer at Closing, as Seller
directs, the aggregate amount of ONE MILLION ONE HUNDRED FIFTY-
FIVE THOUSAND and 00/100 ($1,155,000) DOLLARS (the "Cash
Portion" of the Purchase Price); and
2.2.1.2 by delivery to Xxxxxxx Xxxxxxxx of a
subordinated promissory note of the Purchaser in the principal
amount of TWENTY-FOUR THOUSAND SEVEN HUNDRED FIFTY AND 00/100
($24,750.00) DOLLARS in the form of Exhibit "B" annexed hereto and
made a part hereof (the "Xxxxxxxx Note"); and
2.2.1.3 by delivery to Xxxxx Xxxxx of a
subordinated promissory note of the Purchaser in the principal
amount of ONE HUNDRED THIRTY-EIGHT THOUSAND SIX HUNDRED AND 00/100
($138,600.00) DOLLARS in the form of Exhibit "C" annexed hereto
and made a part hereof (the "Xxxxx Note"); and
2.2.1.4 by delivery to Xxxxxx Xxxx, Xxxx Xxxxxx,
Xxxxxx Xxxxxxxx and Xxxxx Xxxxxx, in proportion to their
ownership of the Shares, common stock of Purchaser, $.0001 par
value (the "Stock") in such number of shares as will aggregate
the amount of THREE HUNDRED THIRTY-ONE THOUSAND SIX HUNDRED
FIFTY AND 00/100 ($331,650.00) DOLLARS (the "Stock Portion" of
the Purchase Price) priced at the "Fair Market Value" (defined
in Section 2.2.1.5) of such shares on the Closing (as
hereinafter defined), for which shares Purchaser agrees to file a
registration statement under the Securities Act of 1933, not later
than September 30, 2005 pursuant to the terms of the registration
rights agreement in substantially the form of Exhibit "D" annexed
hereto and made a part hereof (the "Registration Rights
Agreement"). Fractional shares shall be paid in cash.
2.2.1.5 "Fair Market Value" as used in Section
2.2.1.4 above shall mean the average of the closing prices of the
Stock in the over-the-counter market, as reported by the
National Association of Securities Dealers Electronic Bulletin
Board or otherwise, in either case for the five trading days
immediately preceding the date of calculation of the Fair Market
Value; provided that if no transactions in the Stock are
reported for a day during that period, the average of the high
and low sale prices or the closing prices, as appropriate, as so
reported for the remaining days during such period on which
transactions in the Stock were effected.
2.2.1.6 The parties agree that the Purchase
Price shall be paid to Seller in full payment for the Shares and
in full payment for the Non-Competition Agreements and Employee
Proprietary Rights Agreements.
2.3 DISCHARGE OF DEBT AND OTHER OBLIGATIONS.
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2.3.1 On or before the Closing Date, Seller shall
cause to be paid, discharged in full or otherwise satisfied and
released, and shall deliver satisfactory releases, and
terminations of any security interest held in respect of, or
other evidence thereof reasonably satisfactory to Purchaser, (i)
all Indebtedness of ADI; (ii) unpaid consulting or non-
competition fees or additional payments due in connection with
any acquisitions or other similar obligations of ADI, if any;
(iii) any debt or liabilities or any other inter-company
arrangement owed ADI by any Affiliate of ADI; and (iv) any long-
term obligations (including any guaranties or similar
obligations) of ADI whether or not directly related to the
operations of ADI other than obligations under the Material
Licenses or agreements, leases, contracts or other instruments
which have been disclosed under this Agreement or which
otherwise are not required to be disclosed hereunder. All
documents evidencing obligations under subsections (i), (ii) and
(iv) of this Section 2.3.1 are listed on Schedule 2.3 attached
hereto.
2.3.2 On or before the Closing Date, Seller shall
also cause any Affiliate of Seller to cause to be paid,
discharged in full or otherwise satisfied and released, and
shall deliver evidence thereof reasonably satisfactory to
Purchaser, any inter-company debt or liabilities owed by any of
such Affiliates to ADI.
2.4 COOPERATION. Purchaser and Seller shall cooperate
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fully with each other and their respective counsel and
accountants in connection with any actions required to be taken
as a part of their respective obligations under this Agreement,
and Purchaser and Seller shall execute such other documents as
may be necessary and desirable to the implementation and
consummation of this Agreement and otherwise use their
commercially reasonable efforts to consummate the transactions
contemplated hereby and to fulfill their obligations hereunder.
2.5 CONSENTS AND APPROVALS.
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2.5.1 Subject to the last sentence of this
Section 2.5.1, Seller agrees to use good faith, best efforts and
to take any and all actions reasonably necessary to obtain the
written waiver, consent and approval of all Persons whose
waiver, consent or approval is required (i) in order to
consummate the transactions contemplated by this Agreement, or
(ii) by any agreement, lease, instrument, arrangement, judgment,
writ, decree, order or license to which ADI is a party or
subject on the Closing Date and which would prohibit, or require
the waiver, consent or approval of any Person to such
transactions or under which, without such waiver, consent or
approval, the consummation of such transactions would constitute
an occurrence of default under the provisions thereof, result in
the acceleration of any obligation thereunder or result in the
creation or imposition of any Encumbrance upon the Shares or any
property or asset of ADI or give rise to a right of any party
thereto to terminate its obligations thereunder.
Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall not be required to accept or honor
(nor shall ADI be permitted to accept or honor except with
Purchaser's prior written consent) any conditions, changes,
modifications or additions to, or in connection with, any
contracts, agreements, licenses, permits or other authorizations
of ADI that may be imposed or required by the party from whom
consent or approval is sought under this Agreement or in
connection with the transactions contemplated hereby, other than
those of an immaterial or ministerial nature.
2.6 NON-COMPETITION AGREEMENTS AND EMPLOYEE PROPRIETARY
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RIGHTS AGREEMENTS OF SELLER. Each of Xxxx Xxxxxx, Xxxxxxx
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Xxxxxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxxxx shall enter into a
Non-Competition Agreement at Closing. Each of Xxxxxx Xxxx and
Xxxxx Xxxxxx shall enter into an Employee Proprietary Rights
Agreement.
2.7 RESIGNATIONS AND EMPLOYMENT. At Closing, Seller
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shall cause to be delivered to Purchaser the resignation of each
of the directors and officers of ADI, which resignations shall
be effective immediately subsequent to Closing. At Closing,
Xxxxxx Xxxx shall enter into the Borg Employment Agreement,
Xxxxx Xxxxxx shall enter into the Xxxxxx Employment Agreement
and Xxxx Xxxxxxxxx shall enter into the Xxxxxxxxx Employment
Agreement.
2.8 TAX MATTERS.
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2.8.1 "Booked Taxes" means Taxes of ADI payable with
respect to a Straddle Period (as defined in Section 2.8.2.1
below) that are reflected on the "Final Report" (such report as
shall be agreed upon by the accountants for Seller and
Purchaser), as current assets or current liabilities with
respect to such Taxes.
2.8.2 Taxes of ADI with respect to the period ending
on (and including) the Closing Date, other than Booked Taxes,
shall be the responsibility of Seller. Taxes of ADI with
respect to the period after the Closing Date shall be the
responsibility of Purchaser.
2.8.2.1 Seller agrees to pay and,
notwithstanding any disclosure of potential tax liabilities made
by Seller or ADI, to indemnify, reimburse and hold harmless
Purchaser and ADI and their respective successors, and their
respective officers, directors, employees, agents and
representatives, from and against any and all Taxes of ADI
payable with respect to, and any and all claims, liabilities,
losses, damages, costs and expenses (including, without
limitation, court costs and reasonable professional fees
incurred in the investigation, defense or settlement of any
claims covered by this indemnity) (herein referred to as
"Indemnifiable Tax Damages"), arising out of or in any manner
incident, relating or attributable to Taxes of ADI payable with
respect to, or Tax Returns required to be filed by ADI under
Section 2.8 with respect to, (i) any taxable year (or other
applicable reporting period) (a "Reporting Period") of ADI
ending on or before the Closing Date, and (ii) any Reporting
Period of ADI that begins before the Closing Date and that ends
after the Closing Date (a "Straddle Period"), whether such Taxes
are imposed directly on ADI or as a result of including ADI in
consolidated or combined returns filed by the affiliated group
of which ADI is a member (the "Seller Consolidated Group"),
except that with respect to any Straddle Period, Seller shall be
responsible for the payment of such Taxes only to the extent
that they exceed Booked Taxes. Seller shall be entitled to any
credits or refunds of Taxes of ADI payable with respect to any
Reporting Period of ADI ending on or before the Closing Date.
Purchaser shall cause the amount of any credits or refunds of
Taxes to which Seller is entitled under this Section 2.8, but
which are received by or credited to ADI after the Closing Date,
to be paid to Seller within ten business days following such
receipt or crediting; provided that Seller shall reimburse ADI
to the extent of any required subsequent repayment of, or
reduction in, the amount of such credits or refunds of Taxes so
received or credited.
2.8.2.2 Purchaser agrees to pay
and to indemnify, reimburse and hold harmless Seller and their
heirs, successors, and representatives, from and against (i) any
and all Booked Taxes and (ii) any and all Taxes of ADI payable
with respect to, and any and all Indemnifiable Tax Damages,
arising out of or in any manner incident, relating or
attributable to Taxes of ADI payable with respect to, or Tax
Returns required to be filed by ADI with respect to, (A) any
Reporting Period of ADI beginning after the Closing Date and (B)
any Reporting Period that includes the Closing Date but only for
that portion of such period commencing the day after the Closing
Date, whether such Taxes are imposed directly on ADI or as a
result of including ADI in consolidated returns.
2.8.3 Any tax sharing practice or other similar
arrangement between ADI and the Seller shall be terminated as of
the Closing Date.
2.8.4 The Tax liabilities for each Straddle
Period for ADI shall be determined by closing the books and
records of ADI as of the Closing Date, by treating each such
Straddle Period as if it were a separate Reporting Period and by
employing accounting methods which are consistent with those
employed in preparing the Tax Returns for ADI in prior Reporting
Periods and which do not have the effect of distorting income or
expenses (taking into account the transactions contemplated by
this Agreement), except that Taxes based on items other than
income or sales shall be computed for the Reporting Period
beginning on the first day of the applicable Straddle Period and
prorated on a time basis between the Straddle Period and the
period beginning on the first day after the Closing Date and
ending on the last day of the Reporting Period which includes
the Closing Date; provided that with respect to any Tax which is
not in effect during the entire Straddle Period, the proration
of such Tax shall be based on the period during the Straddle
Period that such Tax was in effect.
2.8.5 Except as shown on Schedule 2.8, Seller shall
be responsible for preparing and filing on behalf of ADI all Tax
Returns for Reporting Periods of ADI ending on or before the
Closing Date, including Tax Returns of ADI for such periods
which are due after the Closing Date, and Seller shall be
responsible for the contents of such returns; provided, however,
that Seller shall furnish Purchaser and ADI with copies of such
returns of ADI, within 30 days following the filing date.
Purchaser shall be responsible for preparing and filing on
behalf of ADI all Tax Returns for Reporting Periods of ADI
ending after the Closing Date (including for Reporting Periods
beginning before and ending after the Closing Date).
2.8.6 SECTION 338(H)(10) ELECTION.
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2.8.6.1 ADI shall make timely
and irrevocable elections under Section 338(h)(10) of the Code
and, if permissible, similar elections under any applicable
state or local income tax laws with respect to ADI (the "Section
338(h)(10) Elections"), and Seller shall join with Purchaser in
making Section 338(h)(10) Elections. Seller and Purchaser shall
report the transactions contemplated by this Agreement
consistent with such Section 338(h)(10) Elections and shall take
no position contrary thereto, unless otherwise required by a
determination within the meaning of Section 1313 of the Code (or
similar provision of state or local law). Seller shall pay to
the applicable taxing authority any Tax attributable to the
Section 338(h)(10) Elections.
2.8.6.2 Seller and Purchaser agree
to allocate the modified Aggregate Deemed Sale Price (as defined
under applicable laws, rules and regulations of the United
States Treasury) among the assets of ADI in accordance with the
agreement of Seller and Purchaser reached within 100 days
following the Closing (the "Agreement Period"). Neither Seller
nor Purchaser shall take a position before any Taxing Authority
or otherwise (including in any Tax Return) inconsistent with
such allocation, unless otherwise required by a determination
within the meaning of Section 1313 of the Code (or similar
provision of state or local law).
2.8.7 COOPERATION ON TAX MATTERS.
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2.8.7.1 Seller and Purchaser shall cooperate fully,
as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this
Section 2.8 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such Tax
Return, audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. Seller and Purchaser agree (i) to retain all books
and records with respect to Tax matters pertinent to ADI
relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the
extent notified by Seller or Purchaser, any extensions thereof)
of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority, and
(ii) to give the other party reasonable written notice prior
transferring, destroying or discarding any such books and
records and, if the other party so requests, Seller or
Purchaser, as the case may be, shall allow the other party to
take possession of such books and records to the extent they
would otherwise be destroyed or discarded.
2.8.7.2 Seller and Purchaser further agree, upon
request, to use commercially reasonable efforts to obtain any
certificate or other document from any Governmental Authority or
any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including Taxes with
respect to the transactions contemplated hereby).
2.8.7.3 Each of Purchaser and Seller shall promptly
deliver to the other any notice from any Tax authority received
by it relating to Taxes for which the other is or may be liable
pursuant to this Agreement.
2.9 EMPLOYEE PLANS AND COMPENSATION ARRANGEMENTS.
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2.9.1 With respect to all of its group health
plans, and compliance with the continuation coverage
requirements with respect to all qualifying events as described
in the Consolidated Omnibus Budget Reconciliation Act (COBRA)
health benefit provisions of 1986, affecting any current or
former employees of ADI and any qualifying beneficiary of such
employees or former employees that occurred on or prior to the
Closing Date, Seller shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code) harmless from and
fully indemnify them against any costs, expenses, losses,
damages and liabilities incurred or suffered by them directly or
indirectly, including, but not limited to, reasonable attorneys'
fees and expenses, which relate to continuation coverage and
arise as a result of any action or omission by Seller.
2.9.2 Prior to the Closing Date, Seller shall
cause ADI to terminate any Employee Plans described on Schedule
3.18 that provide medical or death benefit coverage to former
employees of ADI (the "Retiree Medical Plans"), except to the
extent required by Section 4980B of the Code, in a manner that
precludes the imposition of any future liability on ADI under
such Retiree Medical Plans. Seller shall hold Purchaser and any
entity required to be combined with Purchaser (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code),
including ADI, harmless from and fully indemnify them against
any costs, expenses, losses, damages and liabilities incurred or
suffered by them directly or indirectly, including, but not
limited to, reasonable attorneys' fees and expenses, which
relate to the Retiree Medical Plans. Notwithstanding the
foregoing, Seller shall assume the liability for benefits under
the Retiree Medical Plans with respect to employees of ADI that
terminated their employment on or prior to the Closing Date.
2.9.3 With respect to the Gevity HR 401(k)
Retirement Plan into which was merged the Achievement Data Inc.
401(K) Profit Sharing Plan & Trust (the "Plan") and compliance
with laws, rules and regulations applicable to the Plan, Seller
agrees to pay, and notwithstanding any disclosure of potential
liabilities made by Seller or ADI, shall hold Purchaser and any
entity required to be combined with Purchaser (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code),
including ADI, harmless, from and fully indemnify them against
any and all liabilities of ADI payable with respect to, and any
and all claims, liabilities, losses, damages, costs and expenses
(including, without limitation, court costs and reasonable
professional fees incurred in the investigation, defense or
settlement of any claims covered by this indemnity) (herein
referred to as "Indemnifiable Plan Damages"), arising out of or
in any manner incident, relating or attributable to liabilities
of ADI payable with respect to, the Plan, or filings and returns
required to be filed by ADI with respect to, (i) any Plan year
(or other applicable reporting period) (a "Reporting Period") of
ADI ending on or before the Closing Date, and (ii) any Reporting
Period of ADI that begins before the Closing Date and that ends
after the Closing Date (a "Straddle Period") (the "Plan
Liabilities"). The Plan Liabilities for each Straddle Period
for ADI shall be determined by treating each such Straddle
Period as if it were a separate Reporting Period and by
employing accounting methods which are consistent with those
employed in preparing the Plan filings for ADI. Seller shall be
responsible for preparing and filing on behalf of ADI all Plan
filings for Reporting Periods of ADI ending on or before the
Closing Date, including Plan filings of ADI for such periods
which are due after the Closing Date, and Seller shall be
responsible for the contents of such returns; provided, however,
that Seller shall furnish Purchaser and ADI with copies of such
returns of ADI not less than fifteen days prior to filing and
such returns shall be subject to approval of Purchaser and
copies of same shall be delivered to Purchaser within 30 days
following the filing date. Purchaser shall be responsible for
preparing and filing on behalf of ADI all Plan Returns for
Reporting Periods of ADI ending after the Closing Date
(including for Reporting Periods beginning before and ending
after the Closing Date). Any claims for Indemnificable Plan
Damages shall be subject to the provisions and process of
Paragraph 8 hereof.
2.9.4 Prior to the Closing Date, Seller shall
cause ADI to enter into Existing Employee Proprietary Rights
Agreements with all employees other than Xxxxxx Xxxx, Xxxxx
Xxxxxx and Xxxx Xxxxxxxxx.
2.9.5 Prior to the Closing Date, Seller shall
cause ADI to terminate effective concurrently with the Closing,
any existing bonus and other incentive plans or programs,
including deferred bonus plans or programs, that provide
benefits to employees or former employees of ADI, and to make
certain payments for same in escrow as described in Schedule
2.9.5.
2.9.6 After the Closing Date, Purchaser shall
waive, or cause ADI to waive, limitations on benefits relating
to any pre-existing conditions under any welfare benefit plan in
which the employees of ADI participate immediately following the
Closing Date.
2.9.8 Purchaser shall grant and shall continue to
grant, or shall cause ADI to grant and continue to grant, to all
employees of ADI employed as of the Closing Date credit for all
employment service with ADI, to the extent that such service was
credited under similar employee benefit plans, programs and
arrangements that cover the employees as of the Closing Date,
under the employee plans, programs and arrangements that cover
such employees immediately following the Closing Date unless
such credit is not permitted by applicable law or would result
in the duplication of benefits; provided, that no such service
credit shall be granted for purposes of benefit accruals or for
determining eligibility for retiree medical benefits.
2.9.9 Purchaser, at its option, shall cause ADI to
provide benefit coverage under the Employee Plans and
Compensation Arrangements listed in Schedule 3.18 for a period
through December 31, 2005 or may terminate such Employee Plans
and Compensation Arrangements in lieu of the current benefit
plans and compensation arrangements offered to other employees
of Purchaser.
2.10 CONDUCT OF PARTIES PRIOR TO THE CLOSING. Except
---------------------------------------
as expressly contemplated by this Agreement or with the prior
written consent of Purchaser, during the period from the date
hereof to the Closing Date, Seller shall cause ADI to maintain
its business, properties and assets in good operating condition
and repair and conduct the Business consistent with prior
practice and in the ordinary and usual course of business and
abide by the following affirmative and negative covenants.
2.10.1 AFFIRMATIVE COVENANTS. Seller shall cause ADI
---------------------
to:
2.10.1.1 continue its current efforts to
preserve its business relationships with its employees, suppliers,
distributors, advertisers, customers and others having business
relationships with it;
2.10.1.2 maintain all existing insurance
coverage with respect to ADI and use the proceeds of any claims
for loss payable under such insurance policies, plus such
additional funds as may be required, to replace or restore any
of the assets of ADI destroyed by fire or other casualties to
their former condition as soon as possible after the loss and
prior to the Closing Date;
2.10.1.3 promptly notify Purchaser in writing
of any unusual or material developments with respect to the
business or operations of ADI and of any material change in any
of the information contained in the representations and
warranties set forth in Article 3 or in the Schedules hereto;
provided that such notification shall not relieve Seller of any
obligations hereunder; and
2.10.1.4 if the Closing is extended past July 1,
2005, furnish to Purchaser within 30 days after the end of each
month ending May 30, 2005 and the Closing Date a statement of
income and expense of ADI for the month just ended and such
financial information (including information on payables and
receivables) as Purchaser may reasonably request and which is
prepared in the ordinary course of business.
2.10.2 NEGATIVE COVENANTS. Except as set forth on
------------------
Schedule 2.10.2, Seller shall not permit ADI to:
2.10.2.1 permit any material increase in the
rate or terms of compensation payable or to become payable to
employees of ADI, including, without limitation, any Employee
Plan or Compensation Arrangement, except increases occurring in
accordance with customary practices which have been disclosed to
Purchaser and to which Purchaser has consented in writing;
2.10.2.2 enter into, modify, amend, renew,
extend, terminate or waive any right under any Contract or
commitment involving total payments or expenditures to any
single Person of more than $10,000 on any single Contract or
commitment or $50,000 in the aggregate for all such Contracts or
commitments;
2.10.2.3 release, cancel or assign any material
indebtedness owed to it or waive any rights or claims having
value, except rights or claims waived in the ordinary course of
business;
2.10.2.4 violate in any material respect any
laws, ordinances, orders, injunctions or decrees applicable to
the Business or ADI;
2.10.2.5 do any act or fail to do any act which
might result in the expiration, revocation, suspension or
modification of any of the Material Licenses or Material
Contracts of ADI, or fail to prosecute with due diligence any
material applications to any Governmental Authority in
connection with the operation of the Business of ADI;
2.10.2.6 fail to collect the accounts receivable
or to pay the accounts payable and other current liabilities of
ADI in any manner other than consistent with past practices;
2.10.2.7 suffer, create or assume any monetary
Encumbrance or any material non-monetary Encumbrance with
respect to the Business or the assets of ADI, whether now owned
or hereafter acquired;
2.10.2.8 sell, assign, lease, transfer or
otherwise dispose of, or enter into any agreement for the sale,
assignment, lease, transfer or disposition of, any material part
of the Business or material assets of ADI, except in the
ordinary course of business and consistent with past practices
and (i) in connection with the acquisition of equivalent
replacement property or (ii) pursuant to transactions not
exceeding $5,000 in the aggregate;
2.10.2.9 declare, set aside or pay any dividend
or other distribution or payment (whether in cash, stock or
property) in respect of shares of its capital stock owned by any
Person, or purchase, redeem or otherwise acquire any of its
capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities;
2.10.2.10 permit or effect any change in
accounting or bookkeeping methods, principles or practices;
2.10.2.11 permit or effect any borrowing of
money, including, without limitation, any increase or extension
of purchase money credit, or permit any increase in liabilities,
other than current liabilities incurred in the ordinary course
of business and consistent with past practices;
2.10.2.12 Subject to Section 2.3, enter into any
inter-company transactions with Seller or any Affiliates, other
than in the ordinary course of business and consistent with past
practices;
2.10.2.13 make, approve or permit any change in
the Articles or Certificate of Incorporation or Bylaws or
applicable governing instruments of ADI, or in its authorized,
issued or outstanding securities;
2.10.2.14 issue, sell or grant shares of capital
stock, options, warrants or rights to purchase or subscribe to,
or enter into any arrangement or contract with respect to the
issuance or sale of any of the capital stock of ADI or rights or
obligations convertible into or exchangeable for any shares of
capital stock of ADI and not make any changes (by split-up,
stock dividend, combination, reorganization or otherwise) in the
capital structure of ADI;
2.10.2.15 make any material increase in the size
of the workforce employed by ADI;
2.10.2.16 enter into, modify, amend, renew,
extend, terminate or waive any rights under any collective
bargaining agreement; or
2.10.2.17 voluntarily recognize any union or
other collective bargaining agent as the representative of any
of the employees of ADI for purposes of collective bargaining,
except as may be required by law.
2.11 BROKERS. Purchaser shall pay Signal Hill Capital
-------
Group LLC and agrees to indemnify and hold harmless ADI and
Seller against any fee, loss or expense arising out of any claim
by any other broker or finder employed or alleged to have been
employed by Purchaser, and Seller shall agree to indemnify and
hold harmless Purchaser against any fee, loss or expense arising
out of any claim by any other broker or finder employed or
alleged to have been employed by Seller or ADI or any of its
Affiliates.
2.12 PUBLICITY. Except as otherwise required by law,
---------
rule or regulation, none of the parties hereto shall issue any
press release or make any other public statement, in each case
relating to or connected with or arising out of this Agreement
or the matters contained herein, without obtaining the prior
written approval of Purchaser and Seller to the contents and the
manner presentation and publication thereof. The parties agree
to cooperate and seek the other party's comment with respect to
any disclosures required by law.
2.13 NO SHOP. None of Seller, ADI, its Affiliates or
-------
any agent or representative of any of them will, during the
period commencing on the date of this Agreement and ending with
the earlier to occur of the Closing or the termination of this
Agreement in accordance with Article 9 below, directly or
indirectly, (i) solicit or initiate the submission of proposals
or offers from any Person for; (ii) participate in any
discussions pertaining to or (iii) furnish any information to
any Person other than Purchaser relating to any direct or
indirect acquisition or purchase of all or any portion of the
capital stock or assets of any of ADI. Seller and ADI shall
promptly notify Purchaser if either receives an unsolicited
offer from any Person relating to any direct or indirect
acquisition or purchase of all or any portion of the capital
stock or assets of ADI.
2.14 ACCESS TO BOOKS AND RECORDS.
----------------------------
2.14.1 Between the date of this Agreement and the
Closing Date, Seller will cause ADI to allow Purchaser, its
counsel and other representatives and agents access to the
books, records, files, documents, assets, properties, contracts
and agreements, including, without limitation, any personnel
records or any environmental studies, title policies or surveys
relating to the Real Property, of ADI as Purchaser may
reasonably request. In the event that Purchaser desires to
obtain title commitments or environmental audits of the Real
Property owned by ADI, Seller shall also, and shall cause ADI
to, assist Purchaser in obtaining such commitments or audits,
including by delivering a "non-imputation" endorsement to the
effect that the title defects known to the officers, directors
and shareholders of ADI shall not be deemed "facts known to the
insured" for purposes of the title insurance policy. Purchaser
will conduct any investigation in a manner that will not
unreasonably interfere with the business of ADI. Purchaser will
treat as confidential all confidential information disclosed to
it or its representatives in connection with Purchaser's
investigation of ADI, except as otherwise required by law.
2.14.2 After the Closing Date, Purchaser shall, upon
request of Seller, and with reasonable notice to Purchaser, in
connection with the preparation by Seller of financial
statements and tax returns and for such other purposes as Seller
shall reasonably request (but only with respect to operations of
ADI prior to Closing), (i) provide to Seller reasonable access,
during normal business hours, to files, books, records,
documents and other information of ADI (and, at Seller's
expense, copies thereof), (ii) cause its officers and personnel
and ADI to furnish to Seller any and all financial and operating
data and other information pertaining to ADI, and (iii) make
available, for consultation with Seller, personnel of Purchaser
and of ADI having access to such information and documents. In
exercising its rights under this Section 2.14, Seller and its
representatives shall not interfere with ADI's normal
operations. Purchaser shall retain the files, books, records and
documents of ADI, and comply with the aforesaid provisions, for
at least three years after the Closing Date. Seller acknowledges
and agrees that any and all information to which it is granted
access pursuant hereto shall be the subject of the
confidentiality provisions set forth and contained in the Non-
Competition Agreements or applicable Employment Agreements with
respect to Xxxxx Xxxxxx, Xxxxxx Xxxx, and Xxxx Xxxxxxxxx and
Employee Proprietary Rights Agreements with such same employees.
2.15 CONFIDENTIALITY. Purchaser and Seller are parties
---------------
to a letter agreement, dated January 2005 (the "Confidentiality
Agreement"). Notwithstanding the execution, delivery and
performance of this Agreement, or the termination of this
Agreement prior to Closing, the Confidentiality Agreement shall
remain in full force and effect in accordance with its terms.
2.16 CERTAIN POST-CLOSING ENVIRONMENTAL PROCEDURES.
---------------------------------------------
2.16.1 From and after Closing, with respect to
environmental liabilities or breaches of representations set
forth in Section 3.14, Purchaser shall provide written notice to
Seller, specifying the nature of and basis for such
environmental liability or breach, and Seller shall have the
option to control the resolution of any remedial action relating
thereto, including, without limitation, the performance of any
tests, reports, investigations or any other activities relating
to such remedial action and contacting Governmental Authorities,
making any reports to such Governmental Authorities, submitting
any remedial action plans to such Governmental Authorities and
negotiating with such Governmental Authorities; provided that,
in addition to the provisions set forth in Section 2.16.3 below,
Seller agrees (i) to provide Purchaser, in advance, with a
reasonably detailed description of any such proposed remedial
action and a reasonable period of time, given the specific
circumstances, to permit Purchaser to comment on proposed
activity, and Seller agrees to consider in good faith any such
comments, (ii) to perform any such remedial action in a
reasonably prudent manner to avoid any harm to the environment
or to human health and safety, to comply with all laws,
including Environmental Laws, to obtain and maintain all
necessary permits, financial assurances and insurance and to
obtain their own EPA Identification Number (if practicable),
arrange for disposal and be identified on manifests as the
"generator" (if practicable), of all Hazardous Materials
generated from or otherwise arising out of any such remedial
action, (iii) to perform all actions reasonably necessary to
remove or remediate the Hazardous Materials, contamination or
environmental degradation arising out of or relating to the
indemnification claim and to bring the facility or property into
compliance with all Environmental Laws with respect to such
Hazardous Materials, contamination or degradation and agree to
obtain written governmental approval confirming that no further
actions are required with respect to such Hazardous Materials,
contamination or degradation, and (iv) not to perform any
remedial action in a manner which is reasonably likely to reduce
the value of or materially alter the use of the Real Property.
Purchaser and Seller agree that the use of the Real Property as
of the Closing Date shall be the appropriate property
classification to be used in determining which actions are
reasonably necessary pursuant to clause (iii) above with respect
to such Real Property. Notwithstanding the foregoing, Seller must
provide Purchaser with written notice within ten days of their
receipt of Purchaser's notice pursuant to this Section 2.16.1
whether or not they desire to control the resolution of such
remedial action, and, if no such written notice is received by
Purchaser within such ten-day period, Purchaser shall have the
option to control the resolution of such remedial action.
2.16.2 Purchaser and Seller each agree to maintain in
strict confidence all information concerning any environmental
matters of ADI. If any Environmental Law requires Seller to
disclose any such information, Seller agrees to promptly notify
Purchaser of such requirement and to give Purchaser the
opportunity to review and comment in advance upon the content
and timing of any disclosures that Seller propose to make.
2.16.3 Purchaser and Seller agree that each shall, in
connection with any activities they each undertake in connection
with this Section 2.16 or otherwise, (i) provide or be provided
with reasonable access to employees with relevant facts about
such activities, (ii) provide copies of any material documents
to the other parties and a reasonable opportunity to comment on
such documents, (iii) keep the other parties reasonably informed
relating to the progress of such activities, (iv) where
applicable, select counsel, contractors and consultants of
recognized standing and competence after consultation with the
other parties, (v) take all steps necessary in the defense of
any claims which are the subject of such activities, (vi) at all
times diligently and promptly pursue the resolution of any
claims which are the subject of such activities, (vii) allow the
other parties to participate in any communications or
proceedings involving any Governmental Authority or any other
Person and consult with the other parties hereto as to the
manner of managing or resolving such communications or
proceedings, in each case, except to the extent necessary to
protect attorney-client privilege or attorney work product and
(viii) use reasonable efforts to avoid unreasonable interference
with the other parties' normal business operations.
2.17 CERTAIN INTELLECTUAL PROPERTY MATTERS. At
-------------------------------------
Closing, Seller shall cause ADI to enter into and deliver to
Purchaser fully executed License Agreements substantially in the
form of Exhibit "J" attached hereto and made a part hereof (the
"License Agreement") with each of Liafail, Clerisys
Technologies, PLATO and Medical Learning (each a "Licensee"),
pursuant to which each Licensee will limit its current license
from ADI.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
Each Shareholder, jointly and severally, represents and
warrants to Purchaser, as of the date hereof and as of the
Closing Date, as follows (any representation made "to the
knowledge of Seller" shall be deemed a representation made to
the knowledge of each Shareholder and ADI):
3.1 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION. ADI
------------------------------------------------
is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization as
set forth in Schedule 3.1. Schedule 3.1 sets forth a list of
all Subsidiaries of ADI and their respective jurisdictions of
organization and identifies ADI's direct or indirect percentage
ownership interest therein. ADI has all corporate, powers
required to carry on its business as now conducted, except for
such matters as would not have a Material Adverse Effect. ADI is
duly qualified and licensed to do business as a foreign
corporation or other foreign legal entity and are in good
standing in each jurisdiction where such qualification and/or
licensing is necessary, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect.
Complete and correct copies of ADI's and each Subsidiary of
ADI's articles or certificate of incorporation and bylaws or
other applicable governing instruments, all as amended to date,
and of the stock ledgers of each have been delivered to
Purchaser.
3.1.1 Expert Coding, Inc. ("Expert Coding") was a
former wholly-owned subsidiary of ADI, which was incorporated in
Minnesota, and has been dissolved in accordance with the laws,
rules and regulations of such state. Any and all right, title
and interest of Expert Coding in its assets was sold,
transferred or assigned to ADI which now owns such assets free
and clear of any Encumbrance, and the authorization of no other
Person is required in order to consummate the transactions
contemplated by this Agreement by virtue of any such Person
having an equitable or beneficial interest in Expert Coding or
its assets.
3.2 AUTHORITY AND STATUS. Seller has the full power and
--------------------
authority to execute and deliver this Agreement and all other
agreements, instruments and certificates contemplated hereby and
thereby (the "Seller Related Agreements") and ADI has the full
corporate power and authority to execute and deliver this
Agreement all other agreements, instruments and certificates
contemplated hereby and thereby (the "ADI Related Agreements",
together with the Seller Related Agreements, the "Related
Agreements"), to be executed and delivered by them, to carry out
and perform their obligations under the terms of this Agreement
and the Related Agreements to be executed and delivered by them
and to consummate the transactions contemplated hereby and
thereby, without the necessity of any act, approval or consent
of any other Person whomsoever. All corporate action on the part
of ADI and its directors and Shareholders necessary for the
authorization, execution, delivery and performance by Seller and
ADI of this Agreement and the Related Agreements to be executed
and delivered by Seller or ADI has been taken. This Agreement
and the Related Agreements to be executed and delivered by
Seller constitute or will, when executed and delivered by
Seller, constitute the valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting the
enforcement of creditors' rights generally and except as
enforcement of remedies may be limited by general equitable
principles. This Agreement and the Related Agreements to be
executed and delivered by ADI constitute or will, when executed
and delivered by ADI, constitute the valid and legally binding
obligations of ADI, enforceable against ADI in accordance with
their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting the
enforcement of creditors' rights generally and except as
enforcement of remedies may be limited by general equitable
principles.
3.3 CAPITALIZATION.
--------------
3.3.1 Schedule 3.3.1 sets forth the authorized,
issued and outstanding capital stock of ADI and each Affiliate,
and no shares are held in the treasury of ADI. All of the issued
and outstanding shares of capital stock of ADI are owned by
Seller, free and clear of all Encumbrances and preemptive or
other rights or options of any nature whatsoever, and the
authorization of no other Person is required in order to
consummate the transactions contemplated by this Agreement by
virtue of any such Person having an equitable or beneficial
interest in ADI. All of the Shares and the issued and
outstanding capital stock of ADI are duly authorized, validly
issued, fully paid and nonassessable. Except for this Agreement,
there are no outstanding subscriptions, options, warrants,
calls, demands, commitments, plans or agreements to issue any
additional shares of ADI capital stock or to pay any dividends
on such shares, or to purchase, redeem or retire any outstanding
shares of its capital stock, or outstanding securities or
obligations which are convertible into or exchangeable for any
shares of capital stock of ADI.
3.3.2 All issuances, transfers or purchases of the
capital stock of ADI have been effected in compliance with all
applicable agreements and all applicable laws, including federal
and state securities laws, and all Taxes thereon, if any, have
been paid. No former or present holder of any of the Shares or
any other capital stock of ADI has any legally cognizable claim
against Seller or ADI based on any issuance, sale, purchase,
redemption or involvement in any transfer of any Shares or any
such other capital stock by ADI.
3.4 ABSENCE OF EQUITY INVESTMENTS. Except as described in
-----------------------------
Schedule 3.4 hereto (the "Investment Interests"), ADI does not
own or have the right or obligation to acquire voting securities
or other ownership interests in any other Person.
3.5 LIABILITIES AND OBLIGATIONS OF ADI.
----------------------------------
3.5.1 Seller has delivered annual federal tax returns
and all schedules to Purchaser for ADI for fiscal years ended
December 31, 2002, 2003 and 2004, and ADI's balance sheet and
income statement on a cash basis for the period ended December
31, 2004 and the four months ended April 30, 2005, each of which
are true, correct and complete copies of the tax returns and
statements (collectively, the "Financial Statements"). The
Financial Statements are correct and complete, are in accordance
with the books and records of ADI, have been prepared on the
cash basis of accounting, consistently applied, and fairly
present the financial position and results of operations of ADI
as of the respective dates and for the respective periods
presented therein.
3.5.2 ADI has no actual or potential liability or
obligation related to its assets, business, operations or
financial condition (whether accrued, absolute, contingent or
otherwise) which is of a nature required to be reflected in
financial statements prepared in accordance with GAAP,
consistently applied, including, without limitation, any
liability that might result from an audit of its Tax Returns by
any appropriate Governmental Authority, except for (i) the
liabilities and obligations of ADI which are disclosed or
reserved against in the Financial Statements or disclosed on
Schedule 3.5.2 hereto, to the extent and in the amounts so
disclosed or reserved against, and (ii) liabilities incurred or
accrued in the ordinary course of business since the date of the
most recent Financial Statements, and which do not, either
individually or in the aggregate, have (and would not reasonably
be expected to have) a Material Adverse Effect.
3.5.3 Except as set forth in Schedule 3.5.3, ADI is
not in default in any material respect with respect to any
liabilities or obligations which are related to the assets,
business or operations of ADI.
3.6 TAX MATTERS.
-----------
3.6.1 ADI has filed or has caused to be filed in a
timely manner all required Tax Returns with the appropriate
Governmental Authorities in all jurisdictions in which such Tax
Returns are required to be filed by ADI, and any Subsidiary or
Affiliate of ADI (except Tax Returns for which the filing date
has not expired or has been extended and such extension period
has not expired), and all Taxes shown on such Tax Returns have
been properly accrued or paid to the extent such Taxes have
become due and payable. Schedule 3.6 lists all jurisdictions
where Tax Returns are required to be filed with respect to ADI
and any Subsidiary or Affiliate. To the knowledge of Seller,
except as set forth in Schedule 3.6, the Financial Statements
reflect an adequate reserve in accordance with GAAP (without
regard to any amounts reserved for deferred taxes) for all
unpaid Taxes payable by ADI and any Subsidiary or Affiliate for
all Tax periods and portions thereof through the date of such
Financial Statements. Except as disclosed in Schedule 3.6,
Seller has not, and ADI has not, executed any waiver or
extension of any statute of limitations on the assessment or
collection of any Tax or with respect to any liability arising
therefrom. Except as disclosed in Schedule 3.6, none of the
federal, state or local income Tax Returns filed by or on behalf
of ADI, or any Subsidiary or Affiliate of ADI are currently
being audited by any taxing authority, and there are no other
examinations, requests for information or other administrative
or judicial proceedings pending with respect to Taxes of ADI or
any such Subsidiary or Affiliate. Except as disclosed in
Schedule 3.6, (i) neither the Internal Revenue Service nor any
other taxing authority has asserted any deficiency or claim for
additional Taxes against, or any adjustment of Taxes relating
to, any of ADI, its Subsidiaries or Affiliates and (ii) there
are no proposed reassessments of any property owned by any of
ADI, its Subsidiaries or Affiliates that would affect the Taxes
of ADI. There are no Tax liens on any assets of ADI, other than
liens for current Taxes not yet due and payable without penalty.
3.6.2 Except as disclosed in Schedule 3.6, ADI has
not been at any time a member of any partnership, joint venture
or other arrangement or contract which is treated as a
partnership for federal, state, local or foreign tax purposes or
the holder of a beneficial interest in any trust for any period
for which the statute of limitations for any Tax has not
expired.
3.6.3 As of the Closing, there will be no tax sharing
agreements or similar arrangements with respect to or involving
ADI.
3.7 PERSONAL PROPERTY. All of the tangible assets material
-----------------
to the operations of ADI are in good operating condition and
repair (ordinary wear and tear excepted), are performing
satisfactorily and are available for immediate use in the
conduct of the Business of ADI as presently conducted.
3.8 BANK ACCOUNTS. Set forth and described on Schedule 3.8
-------------
hereto is a complete list of all bank accounts and safe deposit
boxes of ADI, all powers of attorney in connection with such
accounts and the names of all persons authorized to draw thereon
or to have access thereto.
3.9 CONSENTS AND APPROVALS; NONCONTRAVENTION.
----------------------------------------
3.9.1 Except as set forth on Schedule 3.9, there is
no requirement applicable to Seller or ADI to make any filing
with, or to obtain any permit, authorization, consent or
approval of, any Governmental Authority as a condition to the
lawful consummation by Seller of the sale of the Shares and to
enable Purchaser to hold the Shares and conduct the full
operation of the Business as presently conducted by ADI pursuant
to this Agreement.
3.9.2 Except as set forth on Schedule 3.9, the
execution, delivery and performance of this Agreement by Seller
do not, and the consummation of the transactions contemplated
hereby will not (with or without the giving of notice, the lapse
of time or both), (i) conflict with or result in any breach of
any provision of the Articles or Certificate of Incorporation,
Bylaws or other applicable governing instruments, each as
amended to date, of ADI; (ii) violate, result in a breach of or
constitute an occurrence of default under any provision of, or
conflict with, or result in acceleration of any obligation
under, or give rise to a right by any party to terminate its
obligations under, or result in the creation or imposition of
any Encumbrance upon the property of ADI pursuant to any
provision of, any Material Contract; or (iii) violate any
Material License or any applicable law, rule, regulation, order,
writ, judgment, ordinance, injunction or decree of any
Governmental Authority to which ADI or Seller is a party or is
bound or by which the assets or business of ADI are affected.
3.10 ABSENCE OF CHANGES. Since December 31, 2004, ADI
------------------
has not, except as otherwise expressly provided in this
Agreement or disclosed on Schedule 3.10:
3.10.1 transferred, assigned, conveyed or liquidated
any of the assets of ADI or entered into any transaction or
incurred any liability or obligation that materially affects the
business, operations or financial condition of ADI other than in
the ordinary course of its business;
3.10.2 suffered any material adverse change in the
business, operations or financial condition of ADI or become
aware of any event or state of facts that may reasonably be
expected to result in any such material adverse change;
3.10.3 suffered any physical destruction, damage or
loss, materially and adversely affecting the assets of ADI,
whether or not covered by insurance;
3.10.4 incurred the imposition of any Encumbrance or
claim upon any of the material assets of ADI, except for any
current year lien with respect to personal or real property
Taxes not yet due and payable;
3.10.5 committed or permitted any default in any
liability or obligation which has had or will have a Material
Adverse Effect;
3.10.6 declared, promised or made any distribution
or other payment from the assets of ADI to Seller or issued any
additional shares or rights, options or calls with respect to
any of ADI's capital stock, or redeemed, purchased or otherwise
acquired any of ADI's capital stock, or made any change
whatsoever in ADI's capital structure;
3.10.7 except in the ordinary course of business and
consistent with past practices, paid, agreed to pay or incurred
any obligation for any payment for, any contribution or other
amount to, or with respect to, any Employee Plan or Compensation
Arrangement, or paid any bonus to, or granted any increase in
the compensation of, any ADI directors, officers, agents or
employees, or made any increase in the pension, retirement or
other benefits of its directors, officers, agents or other
employees;
3.10.8 changed its accounting methods, practices or
principles; or
3.10.9 incurred any other material liability or
obligation or entered into any transaction, in each case other
than in the ordinary course of business.
3.11 LITIGATION. Except as otherwise set forth in
----------
Schedule 3.11 hereto, there is no suit, action, proceeding,
claim or investigation pending or, to the best knowledge of
Seller, threatened against or affecting ADI. None of the items
described in Schedule 3.11, singly or in the aggregate, would
(if determined adversely to ADI) have a Material Adverse Effect
on the assets, Business, operations or financial condition of
ADI, or the right of Seller to consummate the transactions
contemplated hereby.
3.12 LICENSES AND PERMITS; COMPLIANCE WITH LAW. ADI
-----------------------------------------
holds all material licenses, certificates, permits, franchises
and rights (the "Material Licenses") from all appropriate
federal, state or other Governmental Authorities required for
the conduct of the Business as currently conducted by ADI, and
none of the Material Licenses is subject to any restriction or
condition which would limit the full operation of the Business
of ADI as presently operated. All of the Material Licenses are
listed on Schedule 3.12. Except as noted in Schedule 3.12, ADI
is presently conducting the Business so as to comply in all
material respects with all applicable statutes, ordinances,
rules, regulations, laws and orders of any Governmental
Authority. Further, ADI is not presently charged with, nor to
the best knowledge of Seller, is under governmental
investigation with respect to, any actual or alleged violation
of any statute, ordinance, rule or regulation, nor is presently
the subject of any pending or threatened adverse proceeding by
any Governmental Authority having jurisdiction over the assets
or Business of ADI. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby will result in the termination of any Material License
held by ADI.
3.13 REAL PROPERTY.
-------------
3.13.1 Schedule 3.13 lists all Real Property owned or
leased by any of ADI and used or held for use in the Business,
indicating in each case whether the property is owned or leased.
The Real Property disclosed on Schedule 3.13 includes all real
property or interests therein necessary to conduct lawfully the
Business as presently conducted. To the knowledge of Seller,
except as otherwise set forth on Schedule 3.13, all of the Real
Property (including the improvements thereon) has full legal and
practical access to public roads or streets and is supplied in
all material respects with all utilities and other services,
including gas, electricity, water, telephone, sanitary sewer and
storm sewer, necessary for the conduct and operation of the
Business of ADI as now conducted, all of which services are
adequate in accordance in all material respects with all
applicable laws, ordinances, rules and regulations and are
provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the Real Property. To the
knowledge of Seller, except as otherwise set forth on Schedule
3.13, all improvements, installations, equipment and facilities
made by or constructed for ADI or utilized in connection with
ADI were constructed and are maintained, placed and located in
compliance in all material respects with all applicable federal,
state or other statutes, laws, ordinances, regulations, rules,
codes, orders, deeds, easements, restrictions, leases, licenses,
permits or other arrangements or requirements (including, but
not limited to, any building, zoning or Environmental Laws or
codes) affecting such premises and are located entirely on the
Real Property, and none of the Real Property is located within
any flood plain.
3.13.2 Except as otherwise set forth on Schedule
3.13, with respect to each leasehold interest included in the
Real Property, neither ADI nor the landlord is in default under
any agreement relating thereto (nor, to the knowledge of Seller,
is any other party thereto), and such leasehold interest (i) is
valid, subsisting and in full force and effect; (ii) is free and
clear of all Encumbrances of any nature whatsoever, and without
reservation or exclusion of any mineral, timber or other rights
or interests, except for (a) liens for real estate Taxes not yet
due and payable, (b) easements, rights-of-way and restrictions
of record, all of which, to the knowledge of Seller, are
described in Schedule 3.13, and (c) statutory liens in favor of
landlords with respect to rent not yet due and payable, (d) any
other claims or Encumbrances which are described in Schedule
3.13 and annotated to indicate whether such claims or
Encumbrances will be removed prior to or at Closing, and (e)
those non-monetary Encumbrances which do not, individually or in
the aggregate, materially interfere with the use of such Real
Property or materially detract from its value; and (iii) will at
Closing include enforceable rights to nondisturbance with
respect to all prior Encumbrances and peaceful and quiet
enjoyment, so long as ADI fulfills its obligations under the
lease and/or mortgage therefor.
3.13.3 Except as otherwise set forth on Schedule
3.13, to the knowledge of Seller, all Real Property (including
the improvements thereon) (i) is in good condition and repair in
accordance with normal and customary industry practices
(excepting ordinary wear and tear), (ii) is available for
immediate use in the conduct of the business or operations of
ADI and (iii) complies in all material respects with all
applicable building, safety and zoning codes and the regulations
of any Governmental Authority having jurisdiction. Except as
otherwise set forth on Schedule 3.13, to the knowledge of
Seller, none of the Real Property or buildings or improvements
thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications. To the
knowledge of Seller, there are no condemnation proceedings or
eminent domain proceedings, lawsuits or legal proceedings of any
kind pending or, to the knowledge of Seller, threatened in
connection with any of the Real Property. To the knowledge of
Seller, the Real Property and the present use and condition
thereof do not violate in any material respect any applicable
deed restrictions or other covenants, restrictions, agreements,
existing site plan approvals, or in any material respect, any
zoning or subdivision regulations or urban redevelopment plans
applicable to the Real Property as modified by any duly issued
variances, and no permits, licenses or certificates pertaining
to the ownership or operation of the Real Property, other than
those which are transferable with the Real Property and the
Material Licenses, are required by any Governmental Authority
having jurisdiction over the Real Property or their operation.
Except as otherwise set forth on Schedule 3.13, ADI has paid, or
shall have paid prior to Closing, all amounts owing by ADI to
any architect, contractor, subcontractor or materialman for
labor or materials performed, rendered or supplied to or in
connection with any Real Property. Schedule 3.13 sets forth a
true and complete list of all construction, architect,
engineering and other agreements, if any, relating to
uncompleted construction projects entered into by ADI in
connection with any Real Property.
3.14 ENVIRONMENTAL MATTERS.
---------------------
3.14.1 Except as disclosed on Schedule 3.14 hereto,
(i) ADI operations with respect to the Business and to the
knowledge of Seller, all Real Property has complied and
currently complies in all material respects with all applicable
Environmental Laws; (ii) none of ADI's operations thereon are
subject to any judicial or administrative proceeding alleging
the violation of any Environmental Law; (iii) to the knowledge
of Seller, none of the Real Property is the subject of any
federal or state investigation concerning any use or release of
any Hazardous Material; (iv) neither Seller nor ADI, nor, to the
knowledge of Seller, any predecessor-in-title to the Real
Property has filed any notice under any federal or state law
indicating past or present treatment, storage or disposal of a
hazardous waste or reporting a spill or release of a Hazardous
Material into the environment; (v) to the knowledge of Sellers,
ADI has no material contingent liability in connection with any
release of any Hazardous Material into the environment, and no
release which could require material remediation has occurred;
(vi) none of the operations of ADI on the Real Property involves
the generation, transportation, treatment, storage or disposal
of Hazardous Materials of "Reportable Quantity" (as defined by
CERCLA); and (vii) except in accordance in all material respects
with all legal requirements, ADI has not disposed of any
Hazardous Material of Reportable Quantity in, on or about the
Real Property and, to the knowledge of Seller, neither has any
lessee, prior owner or other Person.
3.14.2 Except as disclosed in Schedule 3.14, to the
knowledge of Seller there are no surface impoundments or above
ground or underground storage tanks located in, on or about the
Real Property.
3.15 CONTRACTS, ETC. All Material Contracts are listed
--------------
in Schedule 3.15 hereto, and ADI and, except for two material
contracts that contain confidentiality provisions prohibiting
their disclosure, Seller has delivered to Purchaser a true and
complete copy of each such Material Contract. All of the
Material Contracts are valid and binding upon ADI, and, to the
best knowledge of Seller, the other parties thereto and are in
full force and effect. Except as set forth on Schedule 3.15
hereto, there is no existing material default, event of default
or other event with respect to the Material Contracts to which
ADI is a party or by which its or its properties are bound
which, with or without due notice or lapse of time or both,
would constitute a material default or event of default on the
part of ADI.
3.16 INTELLECTUAL PROPERTY.
---------------------
3.16.1 INTELLECTUAL PROPERTY DISCLOSURE AND
------------------------------------
DEFINITION. For purposes of this Agreement the term
----------
"Intellectual Property" shall have the following meaning: ADI
created, developed or owned: (i) patents and patent
applications; (ii) copyrights, and registrations thereof; (iii)
mask works and registrations and applications for registration
thereof; (iv) computer software, including source and object
code, data, processes and documentation; (v) trade secrets and
confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research
and development information, copyrightable works, financial,
marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information; (vi) trademarks, service marks, trade names, brand
names, domain names, urls and applications and registrations
therefore; and (vii) other proprietary rights relating to any of
the foregoing or used or useful in the conduct of the business
of ADI. Schedule 3.16 hereto sets forth a complete and correct
list of all (i) patents and patent applications; (ii) registered
copyrights, copyright applications and other copyrights material
to the business of ADI; (iii) mask works and registrations and
applications for registration thereof; (iv) computer software
programs including those test taking methodologies and processes
developed or owned by ADI and embodied therein; (v) material
customers and suppliers information; (vi) trademarks, service
marks, trade names, brand names, domain names, urls and
applications and registrations therefore; (vii) other
proprietary rights relating to any of the foregoing or used or
useful in the conduct of the business of ADI; and (viii)
licenses granted by or to ADI with respect to any of the above.
Seller warrants that all documents, computer records, disks and
other materials of any nature or kind containing the
Intellectual Property or any portion thereof have been turned
over to the Purchaser and that the Seller will not retain the
Intellectual Property or any portion thereof, in any form
whatsoever after the Closing except as specifically permitted
hereunder. For the purposes of this Agreement, the term
"documents" includes all information fixed in any tangible
medium of expression in whatever form or format, and copies
thereof.
3.16.2 ADI'S OWNERSHIP OF THE INTELLECTUAL
-----------------------------------
PROPERTY. ADI is the sole owner of all right, title and
--------
interest in the Intellectual Property free of any security
interest, charge or encumbrance. ADI has the sole right to
assign the Intellectual Property and it has not assigned it or
any part of it to any Person, nor are there any agreements,
transactions or arrangements of any kind that would restrict the
assignment of the Intellectual Property. The Intellectual
Property is reasonably fit and suitable to conduct the business
of ADI as it is now being conducted. Except as otherwise
provided on Schedule 3.16: (i) the Intellectual Property arises
out of, and was developed through the sole, exclusive and
original work of, the employees and contractors of ADI; (ii) to
the knowledge of Seller and ADI, the Intellectual Property is
not in the public domain; (iii) the Intellectual Property,
specifically including the test engines utilized by ADI, is not
the derivative work of a third party under United States
Copyright Law, except as utilized pursuant to license as
disclosed on the schedules hereto; and (iv) the Intellectual
Property is owned by ADI free and clear of all liens, judgments
or other encumbrances, as of the date of the Closing, ADI's
right, title and interest in and to the Intellectual Property is
valid and enforceable and uncontested and will be owned or
available for continued use by ADI after the Closing. Any
software or product that ADI or Seller created for the
Bloomington School District, as an employee or independent
contractor, is not the basis for any of ADI's current
Intellectual Property and that ADI's Intellectual Property,
including its test engine(s), is not is based on, derived from,
or a derivative work of, any product created by or for the
Bloomington School District by ADI or Seller.
3.16.3 NO INFRINGEMENT. Except as set forth on
---------------
Schedules 3.11 and 3.16, no claims, notices, oppositions or
demands have been asserted by any third party with respect to
any of the Intellectual Property or any of the items listed in
Schedule 3.16, and no Person has interfered with, infringed
upon, misappropriated, acted adversely to or otherwise come into
conflict with the Intellectual Property that ADI or any of its
Affiliates owns or has an exclusive license to use. ADI has not
interfered with, infringed upon, misappropriated, acted
adversely to or otherwise come into conflict with any
trademarks, trade names, copyrights, patents, patent
applications, know-how, methods or processes owned by any other
Person or Persons, and there is no claim or action pending or,
to the knowledge of Seller, threatened with respect thereto.
3.16.4 ASSIGNMENT OF EMPLOYEES AND CONTRACTORS.
---------------------------------------
Each employee of ADI or any of its Affiliates who created any of
ADI's or its Affiliates' Intellectual Property and each
independent contractor engaged by ADI or any of its Affiliates
who created any of ADI's or its Affiliates' Intellectual
Property has assigned to ADI or its Affiliates, by written
agreement, all of such employee's or contractor's right, title
and interest in such Intellectual Property. No current or former
employee or independent contractor of ADI, has any rights to any
of the Intellectual Property owned, developed or contributed to
by ADI or its Affiliates.
3.16.5 THIRD PARTY LICENSES AND ROYALTY
--------------------------------
OBLIGATIONS. Except as set forth on Schedules 3.15 and 3.16,
-----------
there are no agreements with any Person pursuant to which ADI
obtains rights to Intellectual Property material to the business
of ADI or any of its Affiliates (other than software that is
generally commercially available) that is owned by a party other
than ADI. Other than license fees for software that is generally
commercially available, ADI is not obligated to pay any
royalties or other compensation to any third party in respect of
its ownership, use or license of any of its Intellectual
Property.
3.16.6 ADI'S DILIGENT PROTECTION OF
----------------------------
INTELLECTUAL PROPERTY. Except as otherwise disclosed on
---------------------
Schedules 3.11 and 3.16, ADI has taken reasonable and necessary
precautions (i) to protect its rights in its and its Affiliates'
Intellectual Property; (ii) to maintain the confidentiality of
its and its Affiliates' trade secrets, know-how and other
confidential Intellectual Property, and to Seller's knowledge,
there have been no acts or omissions by the officers, directors,
employees and agents of ADI or its Affiliates, the result of
which would be to materially compromise the value of the
Intellectual Property or the rights of ADI or its Affiliates to
apply for or enforce appropriate legal protection of ADI's or
its Affiliates' Intellectual Property; and (iii) to ensure that
all existing registrations and applications to Government
Entities with respect to the Intellectual Property are in full
force and effect and that all necessary fees required to
maintain or continue those registrations and applications, as of
the date of the Closing, have been paid.
3.16.7 THIRD-PARTY SOFTWARE LICENSES. ADI
-----------------------------
has all necessary licenses to use all material third-party
software used in ADI's business and in connection with its
Intellectual Property. ADI's use of third-party software does
not exceed the scope of those licenses and ADI is not in breach
of any of the underlying agreements related to those licenses.
3.17 LABOR MATTERS AND EMPLOYEE RELATIONS. Attached
------------------------------------
hereto as Schedule 3.17 is a list of all current employees of
ADI, including their titles and annual wages, salary and bonus
information. Except as otherwise set forth on Schedule 3.17
hereto:
3.17.1 Neither Seller nor ADI has received notice (or
has knowledge) that any present or former employee, or union or
other collective bargaining agents claiming to represent any
employee, of ADI has advanced a claim in writing or orally
against ADI (whether under any foreign, federal, state or common
law, through any Governmental Authority, under an employment
agreement, collective bargaining agreement, personal service or
independent contractor agreement or otherwise) that is currently
pending or threatened, including without limitation, any claim
for (i) overtime pay, other than overtime pay for the current
period; (ii) wages, salaries or profit sharing (excluding wages,
salaries or profit sharing for the current payroll period);
(iii) vacations, time off (including, without limitation,
potential sick leave) or pay in lieu of vacation or time off,
other than vacation or time off (or pay in lieu thereof) earned
in respect of ADI's current fiscal year; (iv) any violation of
any statute, ordinance or regulation relating to minimum wages
or maximum hours of work; (v) discrimination against employees
on any basis; (vi) unlawful employment or termination practices;
(vii) unfair labor practices or alleged violations of collective
bargaining agreements; (viii) any violation of occupational
safety and/or health standards; (ix) benefits under any Employee
Plan or Compensation Agreement; (x) breach of any employment,
personal service or independent contractor agreement; or (xi)
the misclassification of employees as independent contractors.
3.17.2 Except as set forth in Schedule 3.17, within
the past five years, ADI has not been the subject of any union
organizing activity or labor dispute, nor has there been any
strike, slowdown, picketing or work stoppage of any kind called,
or, to the knowledge of Seller, threatened to be called, against
ADI. ADI has not violated in any material respect any
applicable federal or state law or regulation relating to labor
or labor practices, including, without limitation, those related
to wages, hours, collective bargaining, occupational safety,
discrimination and the payment of social security and other
payroll-related Taxes. Except as set forth in Schedule 3.17, ADI
is not a party to any collective bargaining agreement, no such
agreement determines the terms and conditions of employment of
any employee of ADI, no union or other collective bargaining
agent has been recognized or certified, or claims to be, or has
requested recognition as, a representative of any of the
employees of ADI and, to the knowledge of Seller, no
representation campaign or election is now in progress or
threatened with respect to any of the employees of ADI.
3.17.3 There is not pending or threatened by written
notice to any of ADI or Seller any charge or complaint against
ADI by or before the National Labor Relations Board, any
representative thereof or any comparable foreign or state agency
or authority.
3.17.4 Except as set forth on Schedule 3.17, neither
Seller nor ADI has any written or oral contracts of employment
with any current employee of ADI, except for oral employment
contracts terminable at will without penalty.
3.18 BENEFIT PLANS.
-------------
3.18.1 All of the Employee Plans and Compensation
Arrangements that provide benefit coverage to employees or
former employees of ADI are listed and described in Schedule
3.18, and complete and accurate copies of any such written
Employee Plans and Compensation Arrangements (including any
amendments, related trust agreements, IRS favorable
determination letters and rulings, and related insurance
policies) have been furnished to Purchaser, along with copies of
any employee handbooks, summary plan descriptions or similar
documents describing such Employee Plans and Compensation
Arrangements. Any unwritten Employee Plans or Compensation
Arrangements and prior Employee Plans or Compensation
Arrangements also are listed in Schedule 3.18, and complete
descriptions and copies have been furnished to Purchaser.
"Prior" Employee Plans or Compensation Arrangements include, but
are not limited to, all prior plans and arrangements that were
terminated; all prior plans and arrangements that were merged or
spun off from any existing plan or arrangement and all prior
versions of all existing and prior plans and arrangements.
Except as disclosed in Schedule 3.18, neither Seller nor any of
ADI is a party to and/or has in effect or to become effective
after the date of this Agreement any plan arrangement or other
scheme which will become an Employee Plan or Compensation
Arrangement (including, but not limited to, any bonus, cash or
deferred compensation, severance, medical, pension, profit
sharing or thrift, stock option, employee stock ownership, life
or group insurance, death benefit, vacation, sick leave,
disability or trust agreement or arrangement) or any amendment
to an Employee Plan or Compensation Arrangement.
3.18.2 Seller has furnished to Purchaser all the
Forms 5500, 5329, 5330, 945, 1096, 1099-R, 990-T and PBGC-1
filed for at least each of the last six Plan Years, for each of
the existing and prior Employee Plans listed in Schedule 3.18
(including all attachments and schedules) and all actuarial
reports, summaries of material modifications, summary annual
reports and any other employer notices (including governmental
filings and descriptions of material changes to Employee Plans)
relating to such Employee Plans. Except as set forth in
Schedule 3.18, all Forms and notices required to be filed with
the Internal Revenue Service, Department of Labor, Employee
Benefit Security Administration or Pension Benefit Guaranty
Corporation and all notices and disclosures required to be made
to Plan participants and beneficiaries have been filed and/or
made on a timely basis.
3.18.3 Each Employee Plan and Compensation
Arrangement has been administered in compliance with its own
terms and in material compliance with the provisions of ERISA,
the Code, the Age Discrimination in Employment Act and any other
applicable federal or state laws.
3.18.4 Except as set forth in Schedule 3.18, neither
ADI, nor any ERISA Affiliate (or former ERISA Affiliate)
thereof, is contributing to, is required to contribute to, or
has contributed within the last six years to, any Multiemployer
Plan, and none of ADI nor any ERISA Affiliate (or former ERISA
Affiliate) thereof has incurred within the last six years, or
reasonably expects to incur, any "withdrawal liability," as
defined under Section 4201 ET SEQ. of ERISA. Also, except as
set forth in Schedule 3.18 neither ADI nor any ERISA Affiliate
(or former ERISA Affiliate) thereof, is required to contribute
to, or has contributed within the last six years to, any defined
benefit pension plan with respect to which ADI is potentially
jointly and severally liable under Section 412(c)(11)(B) of the
Code.
3.18.5 At all times on or prior to the Closing, each
Employee Plan, to the extent such Employee Plan is intended to
be tax-qualified, satisfies all minimum coverage, minimum
participation, nondiscrimination and other qualification
requirements, if any, imposed on such Employee Plan by the
applicable terms of the Code and ERISA. Neither Seller nor ADI
is aware of the existence of any facts or circumstances that
could adversely affect the qualified status of any Employee Plan
or the tax-exempt status of any related Plan Trust, or that is
noncompliant with any law or regulation that could subject ADI
or the Plan to any income tax, excise tax, penalty or civil
liability.
3.18.6 Neither Seller nor ADI is aware of the
existence of any governmental inspection, investigation, audit
or examination of any Employee Plan or Compensation Arrangement
or of any facts which would lead them to believe that any such
governmental inspection, investigation, audit or examination is
pending or threatened. There exists no action, suit or claim
(other than routine claims for benefits) with respect to any
Employee Plan or Compensation Arrangement pending or, to the
knowledge of Seller and ADI, threatened against any of such
plans or arrangements, and neither Seller nor ADI possesses any
knowledge of any facts which could give rise to any such action,
suit or claim.
3.18.7 Except as described in Schedule 3.18, neither
ADI nor any ERISA Affiliate thereof sponsors, maintains or
contributes to any Employee Plan or Compensation Arrangement
that provides medical or death benefit coverage to former
employees of ADI, except to the extent required by Section 4980B
of the Code. Schedule 3.18 lists all active and former employees
of ADI eligible for a benefit, if any, described in the
preceding sentence.
3.18.8 Except as described in Schedule 3.18, with
respect to each Employee Plan and, to the extent applicable,
each Compensation Arrangement: (i) each Employee Plan that is
intended to be tax-qualified, and each amendment thereto, is the
subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination
letter would adversely affect the qualified status of an
Employee Plan or the tax-exempt status of any related Plan
Trust; (ii) no condition or event exists or is expected to occur
that could subject, directly or indirectly, Seller or any ERISA
Affiliate thereof or any Employee Plan to any material
liability, contingent or otherwise, or the imposition of any
lien on the assets of ADI or any ERISA Affiliate thereof or any
Employee Plan under the Code or Title IV of ERISA whether to the
Pension Benefit Guaranty Corporation, the Internal Revenue
Service or any other Person; (iii) no Employee Plan ever has
incurred an "accumulated funding deficiency," as such term is
defined in Section 302(a)(2) of ERISA and Section 412(a) of the
Code, whether or not waived, and otherwise always has fully met
the funding standards required under Title I of ERISA and
Section 412 of the Code; (iv) no "reportable event," as that
term is defined in Section 4043(b)(1) through (8) of ERISA and,
to the knowledge of Seller and ADI, Section 4043(b)(9) of ERISA,
ever has occurred with respect to any Employee Plan and no
reportable event requires prior notice; (v) there are no
unfunded liabilities with respect to any Employee Plan, i.e.,
the actuarial present value of all "benefit liabilities"
(determined within the meaning of Section 401(a)(2) of the Code)
under such Employee Plan, whether or not vested, does not exceed
the current value of the assets of such Employee Plan; (vi) no
prohibited transaction, within the definition of Section 4975 of
the Code or Title 1, Part 4 of ERISA, has occurred which would
subject Seller or any ERISA Affiliate thereof to any liability;
(vii) all contributions, premiums or payments accrued, in whole
or in part, under each Employee Plan or Compensation Arrangement
or with respect thereto as of the Closing will be paid by
Seller, on or prior to Closing or, if later, within the time
period required by ERISA and the Cod; (viii) all contributions
were timely deposited into the Plan so as to not subject ADI to
any late deposit excise tax or penalty or to negatively affect
any contribution deduction ADI may have taken for the taxable
year in which it was taken; and (ix) all income taxes each
Employee Plan was required to withhold from each distribution
made to any participant or beneficiary was properly withhold and
timely deposited.
3.18.9 With respect to ADI, Schedule 3.18 contains a
complete and accurate list of all qualified beneficiaries, as
defined under Section 4980B(g)(1) of the Code, as of the
effective date of this Agreement (including qualified
beneficiaries who are in the election period for continuation
coverage but who have not yet elected continuation coverage),
the date of the applicable qualifying event and the nature of
the qualifying event relating to the duration of such coverage.
There have been no failures to provide continuation coverage as
required by Section 4980B(f) of the Code. Seller agrees to provide
to Purchaser at Closing an updated list of such qualified
beneficiaries, as described above, effective as of the Closing Date.
3.18.10 Except as disclosed on Schedule 3.18, neither
the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i)
result in any material payment (including, without limitation,
severance or unemployment compensation) becoming due to any
director or employee of ADI; (ii) result in the acceleration of
vesting under any Employee Plan or Compensation Arrangement; or
(iii) materially increase any benefits otherwise payable under
any Employee Plan; and any such payment or increase in benefits
is fully deductible under the Code, including, but not limited
to, Sections 162, 280G and 404.
3.18.11 Except as set forth on Schedule 3.18, all
Employee Plans that provide health and welfare benefits coverage
to current and/or former employees, directors or independent
contractors of ADI are fully insured.
3.18.12 The assets in the Plan out of which the
benefits accrued under the Plan are paid consist of an amount
sufficient to provide for lump sum payments to those employees
and/or former employees of ADI entitled to benefits under the
Plan either upon termination of the Plan or in the event of a
"change of control," as such term is defined in the Plan.
3.18.13 No current or former employee of ADI is
entitled to make a claim for long-term disability benefit
coverage under any Employee Plan, except for those employees or
former employees of ADI set forth in Schedule 3.18 who currently
are receiving long-term disability benefit coverage under a
long-term disability program previously sponsored by ADI that is
fully insured. ADI retains no liability of any nature,
including, but not limited to, the payment of insurance
premiums, with respect to the provision of long-term disability
coverage to the employees or former employees set forth in
Schedule 3.18.
3.18.14 For purposes of this Agreement, the following
terms shall have the meanings indicated: (i) "EMPLOYEE PLAN"
shall mean any retirement or welfare plan or arrangement or any
other employee benefit plan as defined in Section 3(3) of ERISA
to which ADI or any ERISA Affiliate thereof contribute or to
which ADI or any ERISA Affiliate thereof sponsor, maintain or
otherwise are bound; (ii) "COMPENSATION ARRANGEMENT" shall mean
any plan or compensation arrangement other than an Employee
Plan, whether written or unwritten, which provides to employees,
former employees, officers, directors and shareholders of ADI or
any ERISA Affiliate thereof any compensation or other benefits,
whether deferred or not, in excess of base salary or wages,
including, but not limited to, any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other
employee fringe benefit plan; (iii) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended, any
successor thereto and any regulations promulgated thereunder;
(iv) "MULTIEMPLOYER PLAN" means a plan, as defined in ERISA
Section 3(37), to which ADI or any ERISA Affiliate thereof has
contributed, is contributing or is required to contribute; and
(v) "ERISA AFFILIATE" shall mean any trade or business related
to ADI (or formerly related to ADI within the past six years)
under the terms of Sections 414(b), (c), (m) or (o) of the Code.
3.19 TITLE TO ASSETS. Except for leased assets
---------------
described in Schedule 3.19 or as otherwise set forth in Schedule
3.19, ADI has sole, good, valid and, in the case of Real
Property, marketable title to, all Real Property, and all
tangible and intangible personal properties and assets used in
the conduct of the Business of ADI, including, without
limitation, the Intellectual Property (and no Subsidiary or
Affiliate of ADI has any right, title or interest therein);
except for (i) such as are no longer used or useful in the
conduct of the Business or as have been disposed of in the
ordinary course of business consistent with past practices, (ii)
with respect to owned Real Property, other than those which do
not materially interfere with the use or materially detract from
the value of the Real Property, as currently used and as
reasonably anticipated to be used, all of which, to the
knowledge of Seller, are described in Schedule 3.19, (iii) liens
arising from current Taxes not yet due and payable and (iv) any
other Encumbrances which are described in Schedule 3.19 and
annotated to indicate whether such Encumbrances will be removed
prior to or at Closing. Except pursuant to this Agreement,
neither Seller nor ADI is a party to any contract or obligation
whereby there has been granted to anyone an absolute or
contingent right to purchase, obtain or acquire any rights in
any of the assets, properties or operations of ADI.
3.20 ACCOUNTS RECEIVABLE. Except as disclosed on
-------------------
Schedule 3.20, all of the accounts receivable of ADI reflect
actual transactions, arose in the ordinary course of business
and are not subject to offset or deduction.
3.21 INSURANCE. Schedule 3.21 contains a complete list
---------
and brief description of all insurance policies maintained by
ADI. All policies of insurance listed in Schedule 3.21 are in
full force and effect and will remain in effect until the
Closing Date and true and correct copies thereof have been
delivered to Purchaser, including all amendments thereto.
3.22 GUARANTIES. Except as set forth in Schedule 3.22,
----------
ADI is not, directly or indirectly, (i) liable, by guaranty or
otherwise, upon or with respect to, (ii) obligated by discount
or repurchase agreement or in any other way to provide funds in
respect of or (iii) obligated to guarantee or assume any debt,
dividend or other obligation of any Person, except endorsements
made in the ordinary course of business in connection with the
deposit of items for collection.
3.23 FULL DISCLOSURE. To the knowledge of Seller, no
---------------
statement contained herein or in any certificate, Schedule,
Exhibit, list or other instrument furnished to Purchaser
pursuant to the provisions hereof contains, or will contain, any
untrue statement of any material fact or omits, or will omit, to
state a material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
Purchaser represents and warrants to Seller, as of the date
hereof and as of the Closing Date, as follows:
4.1 ORGANIZATION AND STANDING. Purchaser is a corporation
-------------------------
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Purchaser is duly qualified and
licensed to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification and/or
licensing is necessary.
4.2 AUTHORITY AND STATUS. Purchaser has the full corporate
--------------------
power and authority to execute and deliver this Agreement and
the Related Agreements to be executed and delivered by
Purchaser, to carry out and perform its obligations under the
terms of this Agreement and the Related Agreements to be
executed and delivered by it and to consummate the transactions
contemplated hereby, without the necessity of any act, approval
or consent of any other Person whomsoever. All corporate action
on the part of Purchaser and its directors and shareholders
necessary for the authorization, execution, delivery and
performance by Purchaser of this Agreement and the Related
Agreements to be executed and delivered by Purchaser has been
taken or will have been taken on or prior to the Closing Date.
This Agreement and the Related Agreements to be executed and
delivered by Purchaser constitute or will, when executed and
delivered, constitute the valid and binding obligations of
Purchaser, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting the
enforcement of creditors' rights generally, and except as
enforcement of remedies may be limited by general equitable
principles.
4.3 CONSENTS AND APPROVALS; NONCONTRAVENTION.
----------------------------------------
4.3.1 Except as set forth on Schedule 4.3, there is
no requirement applicable to Purchaser to make any filing with,
or to obtain any permit, authorization, consent or approval of,
any Governmental Authority as a condition to the lawful
consummation by Purchaser of the purchase of the Shares or to
enable Purchaser to hold the Shares and conduct the full
Business and operations of ADI as presently conducted pursuant
to this Agreement.
4.3.2 Except as set forth on Schedule 4.3, the
execution, delivery and performance of this Agreement by
Purchaser do not, and the consummation of the transactions
contemplated hereby will not (with or without the giving of
notice, the lapse of time or both), (i) conflict with or result
in any breach of any provision of the Articles or Certificate of
Incorporation or Bylaws or other applicable governing
instruments, each as amended to date, of Purchaser or (ii)
violate, result in a breach of or constitute an occurrence of
default under any provision of, or conflict with, or result in
an acceleration of any obligation under, or give rise to a right
by any party to terminate its obligations under, or result in
the creation or imposition of any Encumbrance upon the property
of Purchaser pursuant to any provision of any Material Contract;
or (iii) violate any Material License or any applicable law,
rule, regulation, order, writ, judgment, ordinance, injunction
or decree of any Governmental Authority to which Purchaser is a
party or is bound or by which the assets or business of
Purchaser are affected, or (iv) violate any applicable law,
rule, regulation, order, writ, judgment, ordinance, injunction
or decree of any Governmental Authority to which Purchaser is a
party or is bound.
4.4 PURCHASE FOR INVESTMENT. Purchaser is purchasing the
-----------------------
Shares for investment for its own account and not with a view
to, or for sale in connection with, any distribution thereof.
Purchaser (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks
of its investment in the Shares.
4.5 INSPECTIONS; NO OTHER REPRESENTATIONS. Purchaser
-------------------------------------
agrees to accept the Shares and ADI on the condition they are in
on the Closing Date based upon its own inspection, examination
and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or
warranties of any nature made by or on behalf of or imputed to
Seller, except as expressly set forth in this Agreement.
Notwithstanding the foregoing, nothing in this Section 4.5 shall
limit, affect or impair the ability of Purchaser, its successors
or assigns to rely upon the representations, warranties,
covenants and obligations of Seller set forth herein.
4.6 AVAILABILITY OF FUNDS. Purchaser has, and will have,
---------------------
as of the Closing Date, available sufficient cash, available or
committed lines of credit or other immediately available funds
to enable it to consummate the transactions contemplated hereby.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
------------------------------------------------
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement to occur at Closing shall be
subject to the satisfaction, on or before the Closing Date, of
each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by Purchaser, but
without prejudice to any other right or remedy which Purchaser
may have hereunder as a result of any misrepresentation by, or
breach of any covenant or warranty of, Seller contained in this
Agreement or any other certificate or Instrument furnished by
Seller hereunder.
5.1 REPRESENTATIONS TRUE AT CLOSING. The representations
-------------------------------
and warranties of Seller and ADI shall be true and correct in
all material respects as of the Closing Date, as though made on
the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case
such representations and warranties shall be true and correct in
all material respects as of such earlier date). All other
representations and warranties of Seller and ADI set forth in
this Agreement shall be true and correct as of the Closing Date,
as though made on the Closing Date, except (i) to the extent any
such representation or warranty expressly relates to an earlier
date (in which case such representation and warranty shall be
true and correct as of such earlier date, subject to clause
(iii) below); (ii) for changes in the accuracy of such
representations or warranties that result from actions which are
expressly permitted by this Agreement; or (iii) any inaccuracy
in the representations and warranties that, individually or in
the aggregate (and without regard to any materiality qualifiers
contained therein) are not reasonably likely to have a Material
Adverse Effect.
5.2 COVENANTS. Each Shareholder and ADI shall have duly
---------
performed in all material respects all of the covenants, acts
and undertakings to be performed by them and it on or prior to
the Closing Date.
5.3 NO MATERIAL ADVERSE CHANGE. Since the date of this
--------------------------
Agreement, there shall not have been any Material Adverse Effect
or any damage, destruction or loss materially adversely
affecting the assets or the business of ADI.
5.4 OFFICER'S CERTIFICATE. Each Shareholder, and a duly
---------------------
authorized officer of ADI without personal liability, shall
deliver to Purchaser a certificate dated as of the Closing Date
certifying to the compliance with the conditions set forth in
Sections 5.1, 5.2 and 5.3 above.
5.5 CONSENTS AND WAIVERS. Purchaser shall have received a
--------------------
true and correct copy of each consent and waiver that has been
marked with an asterisk on Schedule 3.9 in form and substance
consistent with the requirements of Section 2.5 and otherwise
reasonably satisfactory to Purchaser, without any conditions,
changes, modifications or additions to the underlying contract,
agreement, license, permit or other authorizations for which
consent or approval was sought, other than those of an
immaterial or ministerial nature or required under the
provisions of this Agreement.
5.6 REGULATORY APPROVALS. No action, suit or other
--------------------
proceeding shall have been instituted, threatened or proposed by
any Governmental Authority, and no order issued by any
Governmental Authority shall be outstanding which would (i)
enjoin, restrain, prohibit or obtain substantial damages against
Purchaser or any of its Affiliates in respect of, or which is
related to, or arising out of, this Agreement or the
consummation of the transactions contemplated hereby, (ii)
prohibit or limit the ownership or operation by Purchaser or any
of its Affiliates of all or any portion of the business,
operations or assets of Purchaser or any of its Affiliates,
(iii) compel Purchaser or any Affiliate of Purchaser to dispose
of or hold separate all or any portion of the business,
operations or assets of Purchaser or any of its Affiliates, (iv)
impose limitations (than routine reporting requirements) on the
ability of Purchaser to acquire or hold, or exercise full rights
of ownership of, any shares of capital stock of ADI, including
the right to vote such capital stock on all matters properly
presented to the applicable shareholders, or (v) prohibit
Purchaser or any of its Affiliates from effectively controlling
in any respect the business or operations of Purchaser or its
Affiliates. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall
have been approved by all regulatory authorities whose approvals
are required by law, including state governmental approvals.
5.7 JUDGMENT. There shall not be in effect on the date on
--------
which the Closing is to occur any judgment, decree, order or
other prohibition of a court of competent jurisdiction having
the force of law that would prevent the Closing; provided that
Purchaser shall have used good faith, best efforts to prevent
the entry of any such judgment, decree, order or other
prohibition and to appeal as expeditiously as possible any such
judgment, decree, order or other prohibition that may be
entered.
5.8 MATERIAL CONTRACTS. Seller shall have delivered to
------------------
Purchaser not later than 7 days prior to the Closing Date,
true, complete and correct copies of such Material Contracts
which were not, as of the date of this Agreement, delivered to
Purchaser.
5.9 DELIVERIES. Seller shall have made or stands willing
----------
to make all the deliveries to Purchaser described in Section
7.2.1.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
---------------------------------------------
The obligations of Seller to consummate the transactions
contemplated by this Agreement to occur at Closing shall be
subject to the satisfaction, on or before the Closing Date, of
each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by Seller, but without
prejudice to any other right or remedy which Seller may have
hereunder as a result of any misrepresentation by, or breach of
any covenant or warranty of, Purchaser contained in this
Agreement or any other certificate or instrument furnished by
Purchaser hereunder.
6.1 REPRESENTATIONS TRUE AT CLOSING. The representations
-------------------------------
and warranties of Purchaser set forth in this Agreement shall be
true and correct in all material respects at and as of the
Closing Date (except to the extent such representations and
warranties expressly relate to an earlier date in which case
such representations shall be true and correct in all material
respects as of such earlier date) as though made at and as of
the Closing Date.
6.2 COVENANTS. Purchaser shall have duly performed in all
---------
material respects all of the covenants, acts and undertakings to
be performed by it on or prior to the Closing Date.
6.3 OFFICERS' CERTIFICATE. A duly authorized officer of
---------------------
Purchaser shall deliver a certificate dated as of the Closing
Date certifying, without personal liability, to the compliance
with the conditions set forth in Sections 6.1 and 6.2 above.
6.4 REGULATORY APPROVALS. No action, suit or other
--------------------
proceeding shall have been instituted, threatened or proposed by
any Governmental Authority, and no order issued by any
Governmental Authority shall be outstanding which would (i)
enjoin, restrain, prohibit or obtain substantial damages against
Seller or any of its Affiliates in respect of, or which is
related to, or arising out of, this Agreement or the
consummation of the transactions contemplated hereby, (ii)
prohibit or limit the ownership or operation by Seller or any of
its Affiliates of all or any portion of the business, operations
or assets of Seller or any of its Affiliates, (iii) compel
Seller or any Affiliate of Seller to dispose of or hold separate
all or any portion of the business, operations or assets of
Seller or any of its Affiliates, or (iv) prohibit Seller or any
of its Affiliates from effectively controlling in any respect
the business or operations of Seller or its Affiliates. For
purposes of this Section 6.4, Affiliates of Seller shall not
include ADI.
6.5 JUDGMENT. There shall not be in effect on the date on
--------
which the Closing is to occur any judgment, decree, order or
other prohibition of a court of competent jurisdiction having
the force of law that would prevent the Closing; provided that
ADI and Seller shall have used good faith, best efforts to
prevent the entry of any such judgment, decree, order or other
prohibition and to appeal as expeditiously as possible any such
judgment, decree, order or other prohibition that may be
entered.
6.6 DELIVERIES. Purchaser shall have made or stand willing
----------
to make all the deliveries to Seller described in Section 7.2.2.
7. CLOSING.
-------
7.1 TIME AND PLACE OF CLOSING. Subject to the
-------------------------
satisfaction or, to the extent permitted by law, waiver, of the
closing conditions set forth in Articles 5 and 6, and subject to
Sections 7.2.1 and 7.2.2, the Closing shall be held at the
offices of Rider, Weiner & Xxxxxxx, P.C., located at 000 Xxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxxx, XX 00000, as of July 1, 2005 on the
date and time specified by Purchaser by notice to Seller,
provided it is at least three business days after the consents
described in Section 5.5 shall have been obtained or waived (or
at such other place and/or on such other date as Purchaser and
Seller may mutually agree).
7.2 TRANSACTIONS AT CLOSING. At the Closing, each of the
-----------------------
following transactions shall occur:
7.2.1 At the Closing, Seller shall deliver to
Purchaser the following:
(i) all certificates representing the Shares, duly
endorsed for transfer or accompanied by instruments of transfer
reasonably satisfactory in form and substance to Purchaser and
its counsel;
(ii) copies of the consents and waivers described in
Section 5.5 which have been obtained;
(iii) certificates of compliance or a certificate of
good standing of ADI and tax status, as of the most recent
practicable date, from the appropriate Governmental Authority of
the jurisdiction of its incorporation and any other jurisdiction
which is set forth in Schedule 3.1 hereto;
(iv) certified copies of resolutions of the Board of
Directors of ADI approving the transactions set forth in this
Agreement;
(v) certificate of incumbency for the officers of
ADI;
(vi) the Non-Competition Agreements, executed by ADI;
(vii) the certificate of Seller and a duly authorized
officer of ADI described in Section 5.4;
(viii) an opinion of counsel for Seller and ADI in
such form as counsel to the parties shall agree;
(ix) the License Agreements, executed by Licensee(s);
(x) all minute books, corporate seals and corporate
records of ADI;
(xi) copies of the Certificate of Incorporation or
other applicable governing instruments, and all amendments
thereof, of ADI, certified by the Secretary of State of the
state in which such entity is incorporated;
(xii) copies of the bylaws or other applicable
governing instruments of ADI certified by the Secretary as being
correct, complete and in full force and effect on the Closing
Date;
(xiii) the resignation of each of the directors and
officers of ADI;
(xiv) the Borg Employment Agreement, Xxxxxx
Employment Agreement and Xxxxxxxxx Employment Agreement
described in Section 2.7;
(xv) the Employee Proprietary Rights Agreements for
Xxxxxx Xxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxxxx;
(xvi) the Existing Employee Proprietary Rights
Agreements
(xvii) such other documents and instruments as
counsel for Purchaser shall reasonable require.
7.2.2 At the Closing, Purchaser shall deliver to
Seller, or shall cause to be delivered to the Shareholders as
indicated, the following:
(i) the Cash Portion of the Purchase Price;
(ii) the Stock Portion of the Purchase Price;
(iii) the Xxxxx Note and the Xxxxxxxx Note;
(iv) the Non-Competition Agreements, executed by
Purchaser;
(v) certified copies of the resolutions of the Board
of Directors of Purchaser approving the transactions set forth
in this Agreement;
(vi) certificates of incumbency for the officers of
Purchaser;
(vii) the certificate of a duly authorized officer of
Purchaser described in Section 6.3;
(viii) an opinion of counsel for Purchaser in such
form as counsel to the parties shall agree.
(ix) the Registration Rights Agreement; and
(xi) such other documents and instruments as counsel
for Seller shall reasonably require.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
--------------------------------------------------------------
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------------------
AND ADI. All representations, warranties, agreements, covenants
-------
and obligations made or undertaken by Seller and ADI in this
Agreement or in any document or instrument executed and
delivered pursuant hereto are material, have been relied upon by
Purchaser and shall survive the Closing hereunder for a period
of twenty-four months from the Closing Date, or for such longer
period as is set forth in Section 8.4 to the extent applicable,
and shall not merge in the performance of any obligation by any
party hereto. Subject to the limitations set forth in this
Article 8, Seller agrees from and after Closing to jointly and
severally indemnify and hold Purchaser or any of Purchaser's
Affiliates, including ADI, and their respective successors and
assigns, harmless from and against all liability, loss, damages
or injury and all reasonable costs and expenses (including
reasonable counsel fees and costs of any suit related thereto)
(collectively, "DAMAGES") suffered or incurred by Purchaser or
any of Purchaser's Affiliates, including ADI, and their
respective successors or assigns arising from, resulting from or
relating to:
8.1.1 any misrepresentation by, or breach of any
covenant, agreement or warranty, of Seller or ADI contained in
this Agreement or the Related Agreements or any certificate,
Schedule, document or instrument furnished by Seller or ADI
pursuant thereto; or
8.1.2 (i) the business or operations of ADI on or
prior to the Closing Date except as disclosed on the Schedules
hereto; or (ii) liabilities or obligations of ADI attributable
to acts or omissions, or the business or operations, of Seller
or any of its Affiliates (other than ADI); and in the case of
either clause (i) or (ii) irrespective of when any claim, suit,
action, proceeding or investigation in respect of such matters
is asserted or made. It is understood and agreed by Seller that
since ADI will be owned by Purchaser following the Closing, any
recovery by Purchaser hereunder after Closing will be against
Seller, who will have no right of reimbursement or contribution
against ADI. Any examination, inspection or audit of the assets
or business of ADI conducted pursuant to this Agreement shall in
no way limit, affect or impair the ability of Purchaser, its
successors or assigns to rely upon the representations,
warranties, covenants and obligations of Seller set forth
herein.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
---------------------------------------------
PURCHASER. All representations, warranties, agreements,
---------
covenants and obligations made or undertaken by Purchaser in
this Agreement or in any document or instrument executed and
delivered pursuant hereto are material, have been relied upon by
Seller and shall survive the Closing hereunder for a period of
twenty-four (24) months, or for such longer period as is set
forth in Section 8.4 to the extent applicable, and shall not
merge in the performance of any obligation by any party hereto.
Subject to the limitations set forth in this Article 8,
Purchaser agrees from and after Closing to indemnify and hold
Seller harmless from and against all Damages, suffered or
incurred by Seller, its Affiliates and its successors or assigns
arising from (i) any misrepresentation by, or breach of any
covenant or warranty of, Purchaser contained in this Agreement,
the Related Agreements or any certificate, document or
instrument furnished by Purchaser pursuant thereto and (ii) the
business or operations of ADI following the Closing Date.
8.3 ASSERTION OF INDEMNIFICATION CLAIMS. All claims for
-----------------------------------
indemnification under Section 8.1, 8.2, or Article 2 shall be
asserted and resolved as follows:
8.3.1 DEFENSE OF CLAIMS. (a) If any action or
-----------------
proceeding is commenced by a third party against a party
entitled to indemnification under Sections 8.1, 8.2 or Article 2
(an "Indemnitee") in respect of which the Indemnitee proposes to
hold any party or parties obligated to provide such
indemnification with respect thereto (the "Indemnitor(s)")
liable under the provisions of Sections 8.1, 8.2 or Article 2 (a
"Covered Proceeding"), the Indemnitee shall give the
Indemnitor(s) prompt written notice of such Covered Proceeding
and copies of all pleadings filed relating thereto within twenty
(20) days after the Indemnitee's receipt thereof.
8.3.2 If the Indemnitor(s) shall, at its (their)
option, elect by prompt written notice to each Indemnitee to
contest or defend any such Covered Proceeding, the Indemnitor(s)
shall, subject to the provisions of this Section 8.3, be
entitled, at its or their sole cost and expense, to contest or
defend the same with counsel of its or their own choosing, but
reasonably satisfactory to the Indemnitee, and in such event the
Indemnitee shall not settle, compromise, pay or discharge the
same without the prior written consent of the Indemnitor(s)
(which consent shall, however, not be unreasonably withheld or
delayed), so long as the Indemnitor(s) is(are) actively
contesting and defending the same in good faith.
8.3.3 Notwithstanding the foregoing provisions of
this Section 8.3, if the Covered Proceeding does not seek only
monetary damages, but seeks any injunction or other equitable
relief or specific performance against any Indemnitee, then the
Indemnitee shall be entitled to elect not to contest, and shall
be entitled to settle and discharge, any claim to the extent
that such claim seeks such injunctive or other equitable relief
or specific performance.
8.3.4 Notwithstanding anything to the contrary
contained in this Section 8.3:
8.3.4.1 Even if the Indemnitee fails to give
the Indemnitor(s) timely notice of a Covered Proceeding or
otherwise defaults in its obligations under this Section 8.3,
the sole remedy of the Indemnitor(s) for such default shall be
to offset against the indemnification liability otherwise
payable by the Indemnitor(s) to the Indemnitee the amount of
damages actually suffered by the Indemnitor(s) as a result of
such default.
8.3.4.2 In the event the Indemnitor(s) elect(s)
(and is (are) entitled as provided herein) to defend a Covered
Proceeding, the Indemnitee shall be entitled to participate in
the defense thereof with its own separate counsel and receive
copies of all pleadings and other papers in connection
therewith. In such event, the fees and expenses of such
Indemnitee's counsel shall, except as otherwise provided in this
Section 8.3, be borne by the Indemnitee, unless the Indemnitee
on advice of counsel reasonably determines that it may have one
or more defenses available to it which are different from or in
additional to those available to the Indemnitor or the Covered
Proceeding also involves or could reasonably be expected to have
an adverse effect upon material matters beyond the scope of the
indemnification obligations set forth in this Agreement. In
such event, the Indemnitor shall not have the right to direct
the defense thereof, but may still participate in such defense
with its own separate counsel and receive copies of all
pleadings and other papers in connection therewith.
8.3.4.3 If the Indemnitor(s) do(es) not (or is
(are) not entitled to) elect to contest or defend a Covered
Proceeding, or after so electing do(es) not actively contest and
defend the same in good faith, and in conformity with the
requirements of this Section 8.3, the Indemnitee shall be
entitled to contest, defend and/or settle such Covered
Proceeding on such terms and with such counsel as the Indemnitee
reasonably deems appropriate, and at the sole cost and expense
of the Indemnitor(s).
8.3.4.4 If the Indemnitor(s) is (are) otherwise
entitled to control the settlement of a Covered Proceeding
(subject to the requirements and limitations of this Section
8.3), the Indemnitor(s) will be entitled to control such
settlement only if (A) the terms of such settlement require no
more than the payment of money (i.e., such settlement does not
require the Indemnitee to admit any wrongdoing or take or
refrain from taking any action), (B) the full amount of such
monetary settlement is paid by the Indemnitor(s), and (C) the
Indemnitee receives as part of such settlement a legally binding
and enforceable unconditional satisfaction and/or release, in
form and substance reasonably satisfactory to the Indemnitee,
providing that the Covered Proceeding and any claimed liability
or obligation of the Indemnitee with respect thereto is being
fully satisfied by reason of such settlement and that the
Indemnitee is being released from any and all obligations or
liabilities it may have with respect thereto.
8.3.4.5 No Indemnitor shall have any right to
defend any Covered Proceeding (except with respect to any
Covered Proceeding in which such Indemnitor is a named party and
then, only as to such Indemnitor's individual defense) unless
each Indemnitor unconditionally acknowledges in writing, within
a reasonable period of time after any Indemnitee gives notice of
such Covered Proceeding, that each Indemnitor is obligated to
indemnify each Indemnitee, subject to the limitations of Section
8.4, with respect to such Covered Proceeding as provided in
Section 8.1, Section 8.2 and and this Section 8.3.
8.4 CERTAIN LIMITATIONS ON OBLIGATION TO INDEMNIFY.
----------------------------------------------
Notwithstanding anything contained in this Article 8 to the
contrary, no party shall have any obligation to indemnify any
other party or hold it harmless pursuant to this Article 8,
Article 2 or otherwise:
8.4.1 with regard to any claim for breach or alleged
breach of any representation or warranty of such party, unless
such claim is asserted by notice to Seller or Purchaser, as the
case may be, on or prior to the second anniversary of the
Closing Date; provided, however that (i) any claim for violation
of the representations and warranties regarding title to the
Shares of ADI contained in Section 3.3 or elsewhere in this
Agreement or in any documents or instruments delivered pursuant
hereto shall survive indefinitely, (ii) any claim for violation
of the representations and warranties set forth in Sections 3.6,
3.14, 3.16, 3.17 and 3.18, shall survive until the expiration of
the applicable statute of limitations applicable to any claim or
right of action related thereto, (iii) the covenants and
agreements contained in this Agreement to be performed at
Closing or during the period following Closing will survive
until fully performed in accordance with their terms, and (iv)
the covenants and agreements contained in Sections 2.3 and 2.14
shall survive indefinitely;
8.4.2 until the aggregate amount of such other party's
Damages exceeds Ten Thousand Dollars ($10,000) (the "Threshold
Amount"), in which case Seller or Purchaser, as the case may be,
shall then be liable for such Threshold Amount and any amounts
in excess of the Threshold Amount; provided, however, that the
limitations on Seller's indemnification obligations set forth in
this Section 8.4.2 (i.e. the Threshold Amount) shall not apply
(i) to any claim for a violation of the representations in
Section 3.3 and representations and warranties regarding title
to the Shares of ADI contained in this Agreement or in any
documents or instruments delivered pursuant hereto, (ii) with
respect to the covenants and agreements contained in Sections
2.3 and 2.14.
8.4.3 indemnification in amounts greater than that
set forth in Section 8.4.3.1 below.
8.4.3.1 Any indemnification payable under the
terms of this Agreement shall be, to the extent permitted by
law, an adjustment to Purchase Price. Except for any
indemnification pursuant to breaches of representations or
warranties described in 8.4.3.2, in no event when aggregated
with other indemnification payments made hereunder to an
Indemnitee by an Indemnitor, shall indemnification obligations
of Purchaser or Seller, pursuant to Section 8 exceed an amount
equal to Two Hundred Ninety-Five Thousand Two Hundred Fifty
($295,250.00) Dollars.
8.4.3.2 Indemnification pursuant to breaches of
representations or warranties contained in Sections 3.3, 3.6,
3.14, 3.16, 3.17 and 3.18 shall, in no event when aggregated
with other indemnity payments made hereunder to an Indemnitee by
an Indemnitor, exceed an amount equal to One Million One Hundred
and Sixty-Five Thousand ($1,165,000.00) Dollars.
9. TERMINATION.
-----------
9.1 AGREEMENT BETWEEN SELLER AND PURCHASER. This Agreement
--------------------------------------
may be terminated at any time prior to the Closing, and the
purchase and sale of the Shares abandoned, by written agreement
among Seller and Purchaser.
9.2 TERMINATION BY SELLER. This Agreement may be
---------------------
terminated at any time prior to the Closing by Seller, and the
purchase and sale of the Shares abandoned, upon written notice
to Purchaser, upon the occurrence of any of the following:
9.2.1 CONDITIONS. If on any date determined for
----------
the Closing in accordance with Section 7.1 if each condition set
forth in Article 5 has been satisfied (or will be satisfied by
the delivery of documents at the Closing) or waived in writing
by Purchaser on such date and either (i) a condition set forth
in Article 6 has not been satisfied (or will not be satisfied by
the delivery of documents at the Closing) or waived in writing
by Seller on such date or (ii) Purchaser has nonetheless refused
to consummate the Closing. Notwithstanding the foregoing, Seller
may not rely on the failure of any condition set forth in
Article 6 to be satisfied if such failure was caused by Seller's
failure to act, or to cause ADI to act, in good faith or a
breach of or failure to perform, or to cause ADI to perform, any
of its representations, warranties, covenants or other
obligations in accordance with the terms of this Agreement.
9.2.2 UPSET DATE. If the Closing shall not have
----------
occurred on or prior to September 1, 2005 (the "Upset Date")
unless the failure of the Closing to occur was caused by
Seller's failure to act, or to cause ADI to act, in good faith
or a breach of or failure to perform, or to cause ADI to
perform, any of its representations, warranties, covenants or
other obligations in accordance with the terms of this
Agreement.
9.3 TERMINATION BY PURCHASER. This Agreement may be
------------------------
terminated at any time prior to the Closing by Purchaser, and
the purchase and sale of the Shares abandoned, upon written
notice to Seller, upon the occurrence of any of the following:
9.3.1 CONDITIONS. If on any date determined for the
----------
Closing in accordance with Section 7.1 if each condition set
forth in Article 6 has been satisfied (or will be satisfied by
the delivery of documents at the Closing) or waived in writing
by Seller on such date and either (i) a condition set forth in
Article 5 has not been satisfied (or will not be satisfied by
the delivery of documents at the Closing) or waived in writing
by Purchaser on such date or (ii) Seller has nonetheless refused
to consummate the Closing. Notwithstanding the foregoing,
Purchaser may not rely on the failure of any condition set forth
in Article 5 to be satisfied if such failure was caused by
Purchaser's failure to act in good faith or a breach of or
failure to perform any of its representations, warranties,
covenants or other obligations in accordance with the terms of
this Agreement.
9.3.2 UPSET DATE. If the Closing shall not have
----------
occurred on or prior to the Upset Date, unless the failure of
the Closing to occur was caused by Purchaser's failure to act in
good faith or a breach of or failure to perform any of its
representations, warranties, covenants or other obligations in
accordance with the terms of this Agreement.
9.4 EFFECT OF TERMINATION. If this Agreement is terminated
---------------------
as provided in this Article 9, then, subject to Purchaser's
right to specific performance provided below, which may be
asserted without termination of this Agreement, this Agreement
will forthwith become null and void, and there will be no
liability on the part of any party to any other party or any
other Person in respect thereof; provided that:
9.4.1 SURVIVING OBLIGATIONS. The obligations of the
---------------------
parties described in Sections 2.15, 9.4, 9.5 and 10.4 (and all
other provisions of this Agreement relating to expenses) will
survive any such termination.
9.4.2 WITHDRAWAL OF APPLICATIONS. All filings,
--------------------------
applications and other submissions relating to the consummation
of the transaction contemplated hereby shall, to the extent
practicable, be withdrawn from the Governmental Authority or
other Person to whom made.
9.4.3 BREACH BY PURCHASER. No such termination will
-------------------
relieve Purchaser from liability for a breach by Purchaser of
this Agreement, and, in such event, Seller shall have the right
to monetary damages.
9.4.4 BREACH BY SELLER. No such termination will
----------------
relieve Seller from liability for a breach of this Agreement.
Purchaser may elect to specifically enforce rather than
terminate this Agreement in the event of Seller's breach, and,
in such event, the parties recognize that monetary damages alone
will not be adequate. Purchaser, therefore, shall be entitled,
in addition to any other remedies which may be available,
including monetary damages, to obtain specific performance of
the terms of this Agreement. In the event of any action to
enforce this Agreement, Seller hereby waives the defense that
there is an adequate remedy at law.
9.5 ATTORNEYS' FEES. Notwithstanding any provision in this
---------------
Agreement that may limit or qualify a party's remedies, in the
event of a default by any party that results in a lawsuit or
other proceeding for any remedy available under this Agreement,
the prevailing party shall be entitled to reimbursement from the
defaulting party of its reasonable legal fees and expenses
(whether incurred at trial or on appeal).
9.6 EXCLUSIVITY. In the absence of fraud and other than
-----------
any action to enforce Sections 10.2 and 10.4 hereof, after the
Closing Date, Sections 2.4, 2.8, 2.9, 2.14, 2.16 and 10.2 and
the provisions of Article 8 shall provide the sole and exclusive
remedy of any party for any misrepresentation or any breach of a
warranty or covenant set forth in or made pursuant to this
Agreement; provided, however, that this provision shall not be
construed to apply to the enforcement of the Non-Competition
Agreements or non-competition provisions of the Borg Employment
Agreement, Xxxxxx Employment Agreement and Xxxxxxxxx Employment
Agreement and the Employee Proprietary Rights Agreements.
10. GENERAL PROVISIONS.
------------------
10.1 NOTICES. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be
delivered by courier or personal delivery, telecopier (to be
followed promptly by written confirmation mailed by certified
mail as provided below) or mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
10.1.1 If to Seller:
------------
Xxxxxx Xxxx and Xxxxx Xxxxxx
c/o Achievement Data, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxx, XX 00000
Xxxxx Xxxxx
0000 Xxx Xxxx
Xxxxx Xxxxx Xxxxxxx, XX ______
Xxxx Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
with a copy to:
--------------
Rider Bennett LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Att: Xxxxxx Xxxxx, Esq.
10.1.2 If to Purchaser:
---------------
Touchstone Applied Science Associates, Inc.
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Att: Xxxxxx X. Xxxxx, President and CEO
with a copy to:
--------------
Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Att: Xxxxxxx Crush, Esq.
10.1.3 If delivered personally by courier or facsimile
transmission (confirmed as aforesaid and provided written
confirmation and receipt is obtained by the sender), the date on
which the delivery of a notice, request, instruction or document
is effective shall be the date on which such delivery is
actually received. Notices given by mail as aforesaid shall be
effective and deemed received upon the date of actual receipt.
10.1.4 Any party hereto may change its address
specified for notices herein by designating a new address by
notice given to the other party in accordance with this Section
10.1.
10.2 FURTHER ASSURANCES. Each party hereto covenants
------------------
that at any time, and from time to time, after the Closing Date,
it will execute such additional instruments and take such
actions as may be reasonably requested by the other parties to
confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
10.3 WAIVER. Any failure on the part of any party
------
hereto to comply with any of its obligations, agreements or
conditions hereunder may be waived by any other party to whom
such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a waiver of any failure other than that waived.
10.4 EXPENSES. Except as otherwise set forth herein,
--------
all expenses incurred by the parties hereto in connection with
or related to the authorization, preparation and execution of
this Agreement and the Closing of the transactions contemplated
hereby, including, without limitation of the generality of the
foregoing, all fees and expenses of agents, representatives,
counsel and accountants employed by any such party, shall be
borne solely and entirely by the party which has incurred the
same. In the case of Sellers, it is understood and agreed that
the fees and expenses of Rider Bennett LLP in connection with
this Agreement and the closing of the transactions contemplated
herein incurred through and including the Closing Date shall be
paid by ADI.
10.5 ASSIGNMENT. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective permitted successors and assigns.
10.6 HEADINGS. The section and other headings in this
--------
Agreement are inserted solely as a matter of convenience and for
reference and are not a part of this Agreement.
10.7 ENTIRE AGREEMENT; AMENDMENT. This Agreement
---------------------------
constitutes the entire agreement among the parties hereto and,
except as specifically set forth in this Agreement, supersedes
and cancels any prior agreements, representations, warranties or
communications, whether oral or written, among the parties
hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision
hereof may be modified, changed, waived, discharged or
terminated orally, other than by an agreement in writing signed
by the party against whom or which the enforcement of such
modification, change, waiver, discharge or termination is
sought.
10.8 COUNTERPARTS. This Agreement may be executed in
------------
multiple counterpart copies, each of which will be considered an
original and all of which constitute one and the same
instrument, binding on all parties hereto, even though all the
parties are not signatory to the same counterpart. Any
counterpart of this Agreement which has attached to it separate
signature pages, which taken together contain the signature of
all parties hereto, shall for all purposes be deemed a fully
executed original and a facsimile transmission shall be deemed
to be an original signature.
10.9 PRONOUNS AND NUMBER. All pronouns used herein
-------------------
shall be deemed to refer to the masculine, feminine or neuter
gender as the context requires.
10.10 SCHEDULES AND EXHIBITS INCORPORATED. All
-----------------------------------
Schedules and Exhibits attached hereto are incorporated herein
by reference, and all blanks in such Schedules and Exhibits, if
any, will be filled in as required in order to consummate the
transactions contemplated herein and in accordance with this
Agreement.
10.11 SEVERABILITY. In the event that any provision of
------------
this Agreement or any word, phrase, clause, sentence or other
portion thereof should be held to be unenforceable or invalid
for any reason, such provision or portion thereof shall be
modified or deleted in such a manner so as to make this
Agreement, as modified, legal and enforceable to the fullest
extent permitted under applicable laws.
10.12 GOVERNING LAW. This Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of New
York without regard to the conflicts of law principles of such
State.
10.13 JURISDICTION. Except as otherwise expressly
------------
provided in this Agreement, the parties hereto agree that any
suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or related to, this
Agreement, or the transactions contemplated hereby, may be
brought in either the United States District Court for the
Southern District of New York or any New York state court, and
each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in
any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objections which it may
now or hereafter have that the venue of any such suit, action or
proceeding which is brought in any such court is improper or
that the suit, action or proceeding has been brought in an
inconvenient forum; provided, however, that if such court for
any reason determines that it does not have subject matter or
personal jurisdiction over one or more necessary parties or one
or more claims in such suit, action or proceeding, or if the
consent to jurisdiction and venue or the waiver of forum
conveniens contained in this Section 10.13 is deemed not to be
enforceable by such court, or if such court determines for any
reason that venue is not proper or that forum non conveniens
applies, a party may bring such suit, action or proceeding in
any court having jurisdiction with respect thereto, and,
provided further, that any judgment obtained in any court
pursuant to this Section 10.13 may be domesticated and enforced
anywhere in the world. Process in any such suit, action or
proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court.
Without limiting the generality of the foregoing, each party
hereto agrees that service upon such party as provided in
Section 10.1 shall be deemed effective service of process on
such party.
10.14 THIRD-PARTY BENEFICIARIES. No person other than
-------------------------
the parties hereto and their respective successors and permitted
assigns (and in the case of Article 8, the parties specified
therein) is intended to be a beneficiary of this Agreement. In
executing this Agreement, the parties do not intend to create
third-party beneficiary rights in anyone not a party to this
Agreement.
10.15 WAIVER OF JURY TRIAL. Each of the parties hereto
--------------------
hereby irrevocably waives any and all right to trial by jury in
any suit, action, proceeding, counterclaim or crossclaim seeking
to enforce any provision of, or based on any matter arising out
of or related to, this Agreement or the transactions
contemplated hereby.
IN WITNESS WHEREOF, each party hereto has executed or
caused this Agreement to be executed under seal on its behalf,
all on the day and year first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:_____________________________
Xxxxxx X. Xxxxx
President and CEO
ACHIEVEMENT DATA, INC.
By:_______________________
Xxxxxx Xxxx
President
SELLER: SHAREHOLDERS
_________________________
Xxxxxx Xxxx
_________________________
Xxxxx Xxxxx
_________________________
Xxxxx Xxxxxx
_________________________
Xxxx Xxxxxx
_________________________
Xxxxxxx Xxxxxxxx
_________________________
Xxxxxx Xxxxxxxx
EXHIBIT A
CERTAIN DEFINITIONS
1.1. "AFFILIATES" means any Person directly or indirectly
controlling, controlled by, or under common control with, the
Person with respect to whom the term "Affiliate" is used.
Notwithstanding the foregoing a Person shall be deemed an
"Affiliate" of a Person with respect to whom the term
"Affiliate" is used if 10% or more of the voting securities of
such Person is owned, directly or indirectly, by the Person with
respect to whom the term "Affiliate" is used.
1.2 "BORG EMPLOYMENT AGREEMENT" shall mean the Employment
Agreement between Xxxxxx Xxxx and ADI in the form of Exhibit "G"
annexed hereto.
1.3 "XXXXXXXXX EMPLOYMENT AGREEMENT" shall mean the
Employment Agreement between Xxxx Xxxxxxxxx and ADI in the form
of Exhibit "I" annexed hereto.
1.4 "BUSINESS" shall mean the operation of an online
evaluation and assessment company and any related businesses,
including, without limitation, internet, software and other
technology efforts conducted by ADI or otherwise conducted
ancillary to the Business, as such operations are currently
conducted by ADI.
1.5 "CAPITALIZED LEASE OBLIGATIONS" means (without
duplication) that portion of any obligation of ADI as lessee
under a lease which at the time would be required to be
capitalized on the balance sheet of such lessee in accordance
with GAAP.
1.6 "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
1.7 "CLOSING" shall mean the consummation of the
transactions provided for in this Agreement.
1.8 "CLOSING DATE" shall mean the date on which the
Closing occurs pursuant to Section 7.1 hereof.
1.9 "CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the regulations thereunder, or any subsequent
legislative enactment thereof, as in effect from time to time.
1.10 "CONTRACTS" means all contracts, agreements, options,
leases, commitments, undertakings, written and oral, and other
similar rights and interests of ADI relating to the conduct of
the business and operations of ADI, plus such contracts entered
into between the date hereof and the Closing Date (including
amendments or other modifications of existing contracts).
1.11 "EMPLOYEE PROPRIETARY RIGHTS AGREEMENT" shall mean
those certain Employee Proprietary Rights Agreements entered
into between each of Xxxxxx Xxxx, Xxxxx Xxxxxx and Xxxx
Xxxxxxxxx, as Employees, and ADI as Employer in the form of
Exhibits "F".
1.12 "ENCUMBRANCE" means any claim, mortgage, lien,
security interest, security agreement, conditional sale or other
title retention agreement, limitation, pledge, option charge,
assessment, restrictive agreement, restriction, encumbrance,
adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter,
encroachments, easements, rights of entry, restrictive
covenants, leases and licenses) of any nature whatsoever.
1.13 "ENVIRONMENTAL LAW" means any Legal Requirement
pertaining to land use, air, soil, surface water, groundwater
(including protection, cleanup, removal, remediation or damage
thereof), public or employee health or safety or any other
environmental matter, including, without limitation, the
following laws as the same may be amended from time to time: (i)
Clean Air Act (42 X.X.X.xx. 7401, ET SEQ.), (ii) Clean Water Act
(33 X.X.X.xx. 1251 et SEQ.), (iii) Resource Conservation and
Recovery Act (42 X.X.X.xx. 6901, ET SEQ.) ("RCRA"), (iv)
Comprehensive Environmental Response Compensation Liability Act,
as amended (42 X.X.X.xx. 9601, ET SEQ.) ("CERCLA"), (v) Safe
Drinking Water Act (42 X.X.X.xx. 300f ET SEQ.), (vi) Toxic
Substance Control Act (15 U.S.C. ss. 2601, ET SEQ.), (vii)
Rivers and Harbors Act (33 X.X.X.xx. 401, ET SEQ.), (viii)
Endangered Species Act (16 X.X.X.xx. 1531, ET SEQ.), and (ix)
Occupational Safety and Health Act (29 X.X.X.xx. 651, ET seq.),
together with any other
applicable federal, state or local laws relating to emissions,
discharges, releases or threatened releases of any Hazardous
Substance into ambient air, land, surface water, ground water,
personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of any Hazardous
Substance.
1.14 "EXISTING EMPLOYEE PROPRIETARY RIGHTS AGREEMENTS"
shall mean those certain Existing Employee Proprietary Rights
Agreements to be entered into between each existing employee of
ADI other than Xxxxxx Xxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxxxx, in
the form of Exhibit "K".
1.15 "GAAP" means generally accepted accounting principles
as in effect from time to time in the United States.
1.16 "XXXXXX EMPLOYMENT AGREEMENT' shall mean that certain
Employment Agreement entered into between Xxxxx Xxxxxx and ADI
in the form of Exhibit "H" annexed hereto.
1.17 "GOVERNMENTAL AUTHORITY" means (i) the United States
of America, (ii) any state, commonwealth, territory or
possession of the United States of America and any political
subdivision thereof (including counties, municipalities and the
like) or (iii) any agency, authority or instrumentality of any
of the foregoing, including any court, tribunal, department,
bureau, commission or board.
1.18 "HAZARDOUS MATERIALS" shall mean (i) hazardous
materials, contaminants, constituents, hazardous wastes and
hazardous substances as those terms are defined in the following
statutes and their implementing regulations, as amended: the
Hazardous Materials Transportation Act, 49 X.X.X.xx. 1801 ET
SEQ., RCRA, 42 X.X.X.xx. 6901 ET SEQ., CERCLA, as amended by the
Superfund Amendments and Reauthorization Act, 42 X.X.X.xx. 9601
ET SEQ., the Clean Water Act, 33 X.X.X.xx. 1251 ET SEQ., and the
Toxic Substance Control Act, 15 X.X.X.xx. 2601 ET SEQ., (ii)
petroleum, including crude oil and any fractions thereof, (iii)
natural gas, synthetic gas and any mixtures thereof, (iv)
asbestos and/or asbestos-containing materials, (v)
polychlorinated biphenyls (PCBs), or PCB-containing materials or
fluids, (vi) any other substances with respect to which any
federal, state or local agency or other Governmental
Authority may require either an environmental investigation or
environmental remediation, and (vii) any other hazardous or
noxious substance, material, pollutant or solid or liquid waste
that is regulated by any Environmental Laws.
1.19 "INDEBTEDNESS" means, at any particular time, with
respect to ADI, all indebtedness of ADI for borrowed money or on
account of advances to ADI or obligations under acquisition
agreements, in respect of which ADI is liable or evidenced by
any bond, debenture, note or similar instrument issued by ADI,
including all principal, accrued and unpaid interest, prepayment
premiums, penalties and other fees or charges related thereto,
any Capitalized Lease Obligations, swaps, collars, caps, xxxxxx
or other agreements relating to the fixing of interest rates of
indebtedness.
1.20 "MATERIAL ADVERSE EFFECT" shall mean any change,
effect or circumstance (other than any change, effect or
circumstance resulting from the public announcement of the
transactions contemplated by this Agreement) that, individually
or when taken together with all other changes, effects or
circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect,
is, or is reasonably likely to be, materially adverse to the
business, assets (including intangible assets), financial
condition or results of operation of ADI, as the case may be.
1.21 "MATERIAL CONTRACTS" means, with respect to ADI, (i)
all Contracts currently in effect which involve either (a)
payments or receipts in excess of $5,000 on an annual basis or
which are not terminable on notice or have a term of one year or
more (b) material nonmonetary obligations or commitments; (ii)
all leases of Real Property; (iii) all collective bargaining
agreements and (iv) all Employee Plans and Compensation
Arrangements.
1.22 "NON-COMPETITION AGREEMENT" shall mean each of the
Non-Competition Agreements of each of Xxxxxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx, Xxxxx Xxxxx and Xxxx Xxxxxx, substantially in the form
attached hereto as Exhibit "E".
1.23 "PERSON" means an individual, corporation,
partnership, limited liability company, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
1.24 "RCRA" shall mean the Resource Conservation and
Recovery Act, and the rules and regulations promulgated
thereunder.
1.25 "REAL PROPERTY" means all of the fee estates and
buildings and other improvements thereon, leasehold interests,
easements, licenses, rights to access, rights-of-way, and other
real property interest which are used by ADI, or owned by ADI,
as of the date hereof, in the business or operations of ADI,
plus such additions thereto and deletions therefrom arising in
the ordinary course of business and permitted by this Agreement
between the date hereof and the Closing Date.
1.26 "SUBSIDIARY" shall mean, as to any Person, any other
Person of which at least 50% of the equity and voting interests
are owned, directly or indirectly, by such first Person and
shall include, with respect to ADI, its former wholly-owned
subsidiary, Expert Coding, Inc.
1.27 "TAX" (and, with correlative meaning, "TAXES" and
"Taxable") means all federal, state, local or foreign income,
gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, capital,
transfer, employment, withholding and other taxes and
assessments, together with any interest, additions or penalties
with respect thereto and any interest in respect of such
additions or penalties, and any interest, additions and
penalties with respect to a failure to file a Tax Return or a
failure to file a complete and correct Tax Return and any
interest in respect of such additions or penalties.
1.28 "TAX RETURNS" means all federal, state, local and
foreign income and franchise Tax returns and Tax reports
(including any attached Schedules) and other Tax statements and
other similar filings required to be filed, including any
information return (including, without limitation, any
information return required to be filed under Section 60501 of
the Code), claim for refund, amended return or declaration of
estimated Tax.
2.2 LIST OF ADDITIONAL DEFINITIONS. The following is a
------------------------------
list of additional terms used in this Agreement and a reference
to the Section hereof in which such term is defined:
Term Section
---- -------
ADI Preamble
ADI License Agreement 2.18.1
ADI Related Agreement 3.2
Aggregate Deemed Sales Price 2.8.6.2
Agreement Preamble
Agreement Period 2.8.6.2
Booked Taxes 2.8.1
Xxxxx Note 2.2.1.3
Cap 8.4.3
Cash Portion 2.2.1.1
Claim Notice 8.3.1
COBRA 2.9.1
Compensation Arrangement 3.18.14
Confidentiality Agreement 2.15
Covered Proceeding 8.3.1
Damages 8.1
Election Notice 2.18.2
Employee Plan 3.18.14
Employee Plans and Compensation
Arrangements 2.9.1
Enforcement Action 2.18.2
ERISA 3.18.14
ERISA Affiliate 3.18.14
Expert Coding 3.1.1
Fair Market Value 2.2.1.5
Final Report 2.8.1
Financial Statements 3.5.1
Indemnifiable Plan Damages 2.9.3
Indemnifiable Tax Damages 2.8.2.1
Indemnitee(s) 8.3.1
Indemnitor(s) 8.3.1
Intellectual Property 3.16
Investment Interests 3.4
Xxxxxxxx Note 2.2.1.2
Material Licenses 3.12
Multiemployer Plan 3.18.14
Plan 2.9.3
Plan Liabilities 2.9.3
Plan Years 3.18.2
Purchase Price 2.2.1
Purchaser Preamble
Registration Rights Agreement 2.2.1.4
Related Agreements 3.2 and 4.2
Reporting Period 2.8.2.1 and 2.9.3
Retiree Medical Plans 2.9.2
Section 338(h)(10) Elections 2.8.6.1
Seller Preamble
Seller Consolidated Group 2.8.2.1
Seller Related Agreements 3.2
Shares Preamble
Shareholder Preamble
Stock 2.2.1.4
Stock Portion 2.2.1.4
Straddle Period 2.8.2.1 and 2.9.3
Taxing Authority 2.8.6.2
Threshold Amount 8.4.2
Upset Date 9.22
EXHIBIT B
XXXXXXXX NOTE
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS
NOTE ARE SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS
AND THE RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE
TERMS OF THAT CERTAIN LOAN AGREEMENT DATED JULY 1, 2005 BY AND
BETWEEN THE ISSUER OF THIS NOTE AND XXXXXX UNITED BANK AS
AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO TIME.
U.S. $24,750.00 July 1, 2005
FOR VALUE RECEIVED, the undersigned, Touchstone
Applied Science Associates, Inc. a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of Xxxxxxx
Xxxxxxxx, an individual with a residence address at 000 Xxxxxxx
Xxxxx, Xxxxx, XX 00000 (the "Lender"), the principal sum of
TWENTY-FOUR THOUSAND SEVEN HUNDRED AND FIFTY AND 00/100 DOLLARS
($24,750.00), which principal sum shall bear interest from the
date hereof at the rate of five (5.0%) percent per annum on the
unpaid principal balance ("Interest"), calculated on the basis
of a 360 day year consisting of twelve 30 day months.
Subject to the provisions for prepayment described below,
principal and interest on the unpaid principal balance shall be
paid commencing on January 1, 2006, and continuing on the 1st
day of each succeeding July 1 and January 1 thereafter, to and
including July 1, 2008, in equal installments of FOUR THOUSAND
FOUR HUNDRED NINETY-THREE AND 37/100 DOLLARS ($4,493.37).
All payments shall be in lawful money of the United States.
The entire outstanding principal balance and accrued interest
thereon, if any, shall in any event be due and payable on July
1, 2008 (the "Maturity Date").
If all or a portion of the principal or Interest shall not
be paid when due (whether at its stated maturity, by
acceleration or otherwise), the Borrower hereby promises to pay,
on demand, interest on such overdue amount from and including
the due date to, but excluding, the date such amount is paid in
full at 9.0% per annum (and until the date such overdue amount
is paid in full, "Interest" on such overdue amount shall mean
interest at such rate).
This Note is being delivered pursuant to that certain
Stock Purchase Agreement, dated June ___, 2005 among the
Borrower and the Lender and the other Sellers, and Achievement
Data, Inc., a Minnesota corporation (the "Stock Purchase
Agreement"). All capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to such terms in
the Stock Purchase Agreement.
1. SUBORDINATION.
-------------
The Lender's right to payment pursuant to the terms of
this Note shall be subordinated to any and all indebtedness of
the Borrower pursuant to that certain Loan Agreement dated July
1, 2005, by and between Xxxxxx United Bank and the Borrower (the
"Loan Agreement"), and the terms and provisions of the Loan
Agreement are incorporated herein by reference.
2. PAYMENT.
-------
Payments of principal and Interest shall be made by
certified or bank cashier's check payable to the Lender at the
Lender's principal address set forth in Section 4 hereof (or at
such other place as the Lender hereof shall notify the Borrower
in writing) in lawful money of the United States of America, The
Borrower may prepay this Note at any time, without premium or
penalty, in whole or in part, with accrued interest to the date
of such payment on the amount prepaid. If the Maturity Date or
any semi-annual payment date occurs on a date that is not a
Business Day then the payment then due shall be paid on the next
succeeding Business Day. "Business Day" shall mean any day
other than Saturday, Sunday or any day upon which banks in the
city of New York, New York are authorized or required to be
closed.
3. DEFAULT AND REMEDIES.
--------------------
(a) If any of the following events or conditions
(each an "Event of Default") shall occur and be continuing:
(i) the Borrower shall fail to pay an
installment of principal and interest within 10 days of when and
as the same shall become due and payable, whether at its stated
maturity, by acceleration or otherwise;
(ii) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (A) relief in respect of the Borrower,
or of a substantial part of the property or assets of the Borrower,
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such statute, or
any other Federal or state bankruptcy, insolvency, receivership
or similar law, (B) the appointment of a receiver, trustee,
custodian, conservator or similar official for the Borrower or
for a substantial part of the properties or assets of the Borrower
or (C) the winding-up, liquidation or dissolution of the Borrower;
and such proceeding or petition shall continue undismissed for 90
days or an order or decree approving or ordering any of the foregoing
shall be entered; or
(iii) the Borrower (A) voluntarily commences
any proceeding or files any petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such statute, or
any other Federal or state bankruptcy, insolvency, receivership
or similar law, (B) consents to, or fails to contest in a timely
and appropriate manner, the commencement against of any
proceeding or the filing of any petition described in clause (v)
above, (C) applies for or consents to the appointment of a
receiver, trustee, custodian, conservator or similar official
for the Borrower or for a substantial part of the properties or
assets of the Borrower, (D) files an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (E) makes a general assignment for the benefit of
creditors, (F) becomes unable, admits in writing its inability
or fails generally to pay its debts as they become due or (G)
takes any action for the purpose of effecting any of the
foregoing;
then, in the case of an Event of Default, the Lender may, at any
time during the continuance of such Event of Default, by written
notice to the Borrower, declare the entire outstanding principal
sum, together with all accrued and unpaid Interest, to be due
and payable.
(b) In the case of an Event of Default, the Borrower
will pay to the Lender such further amount as shall be
sufficient to cover the costs and expenses of collection,
including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
(c) The Borrower shall promptly furnish the Lender
notice of any Event of Default or event which, with notice,
lapse of time or both, would become an Event of Default under
this Section 3.
4. NOTICES
-------
All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing.
Any such notice, instruction or communication shall be sent
either (i) by certified mail, return receipt requested, postage
prepaid or (ii) via a reputable nationwide overnight courier, in
each case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been
delivered upon receipt of confirmation of delivery after it is
sent by certified mail, return receipt requested, postage
prepaid, or one (1) Business Day after it is sent via a
reputable nationwide overnight courier service.
If to the Borrower to: Touchstone Applied Science
Associates, Inc.
4 Hardscrabble Heights
X.X. Xxx 0000
Xxxxxxxx, XX 00000
Att: President
With a copy to: Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Att: Xxxxxxx Crush, Esq.
If to the Lender to: Xx. Xxxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxx, XX 00000
With a copy to: Rider Bennett LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Att: Xxxxxx Xxxxx, Esq.
Either party may give any notice, instruction or communication
in connection with this Note using any other means (including
personal delivery or ordinary mail), but no such notice,
instruction or communication shall be deemed to have been
delivered unless and until it is received by the party to whom
it was sent. Either party may change the address to which
notices, instructions or communications are to be delivered by
giving the other party to this Note notice thereof in the manner
set forth in this Section 4.
5. MISCELLANEOUS.
-------------
This Note shall be construed and enforced in
accordance with the laws of the State of New York, without
regard to its conflicts of laws rules. The Borrower waives
presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance,
performance, default and enforcement of this Note. The Borrower
hereby irrevocably and unconditionally submits, for itself and
its property, to the non-exclusive jurisdiction of the courts of
the State of New York of the United States District Court for
the Southern District of New York, and any appellate court of
such courts, in any action or proceeding arising out of or
relating to this Note, or for recognition or enforcement of any
judgment, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New
York court (or, to the extent permitted by law, in such federal
court). The Borrower agrees that a final, unappealable judgment
in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Nothing in this Note shall
affect any right that the Lender may otherwise have to bring any
action or proceeding relating to this Note against the Borrower
or its properties in the courts of any jurisdiction.
THE LENDER AND THE BORROWER AGREE THAT NEITHER OF THEM NOR ANY
ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG
ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE LENDER AND THE BORROWER, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE
BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
If any provision of this Note shall be held invalid or
unenforceable by any court of competent jurisdiction, that
holding shall not invalidate or render unenforceable any other
provision hereof.
This Note may not be changed, amended or modified
except by agreement in writing signed by the Borrower and the
Lender.
IN WITNESS WHEREOF, the Borrower has caused this Note
to be signed on its behalf, in its corporate name, by its duly
authorized officer, as of the day and year first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:_____________________________
Name: Xxxxxx X. Xxxxx
Title: President
EXHIBIT C
XXXXX NOTE
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS
NOTE ARE SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS
AND THE RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE
TERMS OF THAT CERTAIN LOAN AGREEMENT DATED JULY 1, 2005 BY AND
BETWEEN THE ISSUER OF THIS NOTE AND XXXXXX UNITED BANK AS
AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO TIME.
U.S. $138,600.00 July 1, 2005
FOR VALUE RECEIVED, the undersigned, Touchstone
Applied Science Associates, Inc. a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of Xxxxx Xxxxx,
an individual with a residence address at 0000 Xxx Xxxx, Xxxxx
Xxxxx Xxxxxxx, XX _________, (the "Lender"), the principal sum
of ONE HUNDRED THIRTY-EIGHT THOUSAND SIX HUNDRED AND 00/100
DOLLARS ($138,600.00), which principal sum shall bear interest
from the date hereof at the rate of five (5.0%) percent per
annum on the unpaid principal balance ("Interest"), calculated
on the basis of a 360 day year consisting of twelve 30 day
months.
Subject to the provisions for prepayment described below,
principal and interest on the unpaid principal balance shall be
paid commencing on January 1, 2006, and continuing on the 1st
day of each succeeding July 1 and January 1 thereafter, to and
including July 1, 2008, in equal installments of TWENTY-FIVE
THOUSAND ONE HUNDRED SIXTY-TWO AND 85/100 DOLLARS ($25,162.85).
All payments shall be in lawful money of the United States.
The entire outstanding principal balance and accrued interest
thereon, if any, shall in any event be due and payable on July
1, 2008 (the "Maturity Date").
If all or a portion of the principal or Interest shall not
be paid when due (whether at its stated maturity, by
acceleration or otherwise), the Borrower hereby promises to pay,
on demand, interest on such overdue amount from and including
the due date to, but excluding, the date such amount is paid in
full at 9.0% per annum (and until the date such overdue amount
is paid in full, "Interest" on such overdue amount shall mean
interest at such rate).
This Note is being delivered pursuant to that certain
Stock Purchase Agreement, dated June ___, 2005 among the
Borrower and the Lender and the other Sellers, and Achievement
Data, Inc., a Minnesota corporation (the "Stock Purchase
Agreement"). All capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to such terms in
the Stock Purchase Agreement.
1. SUBORDINATION.
-------------
The Lender's right to payment pursuant to the terms of
this Note shall be subordinated to any and all indebtedness of
the Borrower pursuant to that certain Loan Agreement dated July
1, 2005, by and between Xxxxxx United Bank and the Borrower (the
"Loan Agreement"), and the terms and provisions of the Loan
Agreement are incorporated herein by reference.
2. PAYMENT.
-------
Payments of principal and Interest shall be made by
certified or bank cashier's check payable to the Lender at the
Lender's principal address set forth in Section 4 hereof (or at
such other place as the Lender hereof shall notify the Borrower
in writing) in lawful money of the United States of America, The
Borrower may prepay this Note at any time, without premium or
penalty, in whole or in part, with accrued interest to the date
of such payment on the amount prepaid. If the Maturity Date or
any semi-annual payment date occurs on a date that is not a
Business Day then the payment then due shall be paid on the next
succeeding Business Day. "Business Day" shall mean any day
other than Saturday, Sunday or any day upon which banks in the
city of New York, New York are authorized or required to be
closed.
3. DEFAULT AND REMEDIES.
--------------------
(a) If any of the following events or conditions
(each an "Event of Default") shall occur and be continuing:
(i) the Borrower shall fail to pay an
installment of principal and interest within 10 days of when and
as the same shall become due and payable, whether at its stated
maturity, by acceleration or otherwise;
(ii) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (A) relief in respect of the Borrower,
or of a substantial part of the property or assets of the Borrower,
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such statute, or
any other Federal or state bankruptcy, insolvency, receivership
or similar law, (B) the appointment of a receiver,
trustee, custodian, conservator or similar official for the
Borrower or for a substantial part of the properties or assets
of the Borrower or (C) the winding-up, liquidation or
dissolution of the Borrower; and such proceeding or petition
shall continue undismissed for 90 days or an order or decree
approving or ordering any of the foregoing shall be entered; or
(iii) the Borrower (A) voluntarily commences
any proceeding or files any petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such statute, or
any other Federal or state bankruptcy, insolvency, receivership
or similar law, (B) consents to, or fails to contest in a timely
and appropriate manner, the commencement against of any
proceeding or the filing of any petition described in clause (v)
above, (C) applies for or consents to the appointment of a
receiver, trustee, custodian, conservator or similar official
for the Borrower or for a substantial part of the properties or
assets of the Borrower, (D) files an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (E) makes a general assignment for the benefit of
creditors, (F) becomes unable, admits in writing its inability
or fails generally to pay its debts as they become due or (G)
takes any action for the purpose of effecting any of the
foregoing;
then, in the case of an Event of Default, the Lender may, at any
time during the continuance of such Event of Default, by written
notice to the Borrower, declare the entire outstanding principal
sum, together with all accrued and unpaid Interest, to be due
and payable.
(b) In the case of an Event of Default, the Borrower
will pay to the Lender such further amount as shall be
sufficient to cover the costs and expenses of collection,
including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
(c) The Borrower shall promptly furnish the Lender
notice of any Event of Default or event which, with notice,
lapse of time or both, would become an Event of Default under
this Section 3.
4. NOTICES
-------
All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing.
Any such notice, instruction or communication shall be sent
either (i) by certified mail, return receipt requested, postage
prepaid or (ii) via a reputable nationwide overnight courier, in
each case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been
delivered upon receipt of confirmation of delivery after it is
sent by certified mail, return receipt requested, postage
prepaid, or one (1) Business Day after it is sent via a
reputable nationwide overnight courier service.
If to the Borrower to: Touchstone Applied Science
Associates, Inc.
4 Hardscrabble Heights
X.X. Xxx 0000
Xxxxxxxx, XX 00000
Att: President
With a copy to: Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Att: Xxxxxxx Crush, Esq.
If to the Lender to: Mr. Xxxxx Xxxxx
0000 Xxx Xxxx
Xxxxx Xxxxx Xxxxxxx, XX
With a copy to: Rider Bennett LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Att: Xxxxxx Xxxxx, Esq.
Either party may give any notice, instruction or communication
in connection with this Note using any other means (including
personal delivery or ordinary mail), but no such notice,
instruction or communication shall be deemed to have been
delivered unless and until it is received by the party to whom
it was sent. Either party may change the address to which
notices, instructions or communications are to be delivered by
giving the other party to this Note notice thereof in the manner
set forth in this Section 4.
5. MISCELLANEOUS.
-------------
This Note shall be construed and enforced in
accordance with the laws of the State of New York, without
regard to its conflicts of laws rules. The Borrower waives
presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance,
performance, default and enforcement of this Note. The Borrower
hereby irrevocably and unconditionally submits, for itself and
its property, to the non-exclusive jurisdiction of the courts of
the State of New York of the United States District Court for
the Southern District of New York, and any appellate court of
such courts, in any action or proceeding arising out of or
relating to this Note, or for recognition or enforcement of any
judgment, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New
York court (or, to the extent permitted by law, in such federal
court). The Borrower agrees that a final, unappealable judgment
in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Nothing in this Note shall
affect any right that the Lender may otherwise have to bring any
action or proceeding relating to this Note against the Borrower
or its properties in the courts of any jurisdiction.
THE LENDER AND THE BORROWER AGREE THAT NEITHER OF THEM NOR ANY
ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG
ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE LENDER AND THE BORROWER, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE
BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
If any provision of this Note shall be held invalid or
unenforceable by any court of competent jurisdiction, that
holding shall not invalidate or render unenforceable any other
provision hereof.
This Note may not be changed, amended or modified
except by agreement in writing signed by the Borrower and the
Lender.
IN WITNESS WHEREOF, the Borrower has caused this Note
to be signed on its behalf, in its corporate name, by its duly
authorized officer, as of the day and year first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:_____________________________
Name: Xxxxxx X. Xxxxx
Title: President
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
July 1, 2005, by and among TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation (the "Company"), and
the individuals who are signatory hereto (collectively, the "ADI
Stockholders").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Stock Purchase Agreement, dated as
of the date hereof (the "Stock Purchase Agreement"), the Company
has purchased from the ADI Stockholders all of the outstanding
shares of capital stock of Achievement Data, Inc. ("ADI");
WHEREAS, as part of the consideration paid to the ADI
Stockholders, the Company has issued to the ADI Stockholders
shares of the Common Stock, par value $0.0001 per share (the
"Common Stock") of the Company in the respective amounts set
forth opposite each such ADI Stockholder's name on Exhibit A
attached hereto (collectively, the "Shares");
WHEREAS, the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and
therefore, may not be sold, transferred or assigned except
pursuant to an effective registration statement under the
Securities Act or an exemption therefrom;
WHEREAS, in order to induce the ADI Stockholders to enter
into the Stock Purchase Agreement and to consummate the
transactions contemplated thereby, the Company has agreed to
register the Shares under the Securities Act, and applicable
state securities laws, upon the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. COMPANY'S AGREEMENT TO REGISTER THE SHARES. No later
------------------------------------------
than September 30, 2005, the Company shall file with the
Securities and Exchange Commission (the "SEC") a registration
statement on Form S-3, which shall include the Shares, in
addition to any other unregistered outstanding shares of Common
Stock as the Company determines to be appropriate; provided,
however, that if the Company, for any reason, is ineligible to
use Form S-3 for such registration, and must, instead, use Form
SB-2 or any other long-form registration statement, the Company
may, upon written notice to the ADI Stockholders no later than
September 15, 2005, postpone the deadline for the filing of such
registration statement until October 31, 2005, in order to allow
the Company sufficient time to complete such long-form
registration statement. Upon the filing of such registration
statement with the SEC, the Company shall file such applications
or registrations under applicable blue sky laws with respect to
the ADI Stockholders. After the filing of such registration
statement, the Company shall use its best efforts to respond
promptly to any SEC comments, and make such additional filings
as shall be reasonably necessary in order to have such
registration statements declared effective by the SEC.
2. DEMAND REGISTRATION. If, for any reason, by October
-------------------
31, 2005, the Company shall have failed to file a registration
statement with the SEC including the Shares, at any time
thereafter, some or all of the ADI Shareholders who,
collectively, own at least 50% of the Shares originally issued
to the ADI Shareholders, may request registration, which shall
not be required to be underwritten under the Securities Act of
all or any portion of their respective Shares Any such request
from the ADI Shareholders shall be deemed to be a request from
all ADI Shareholders, and accordingly, the Company shall include
all Shares in the registration. A registration requested as
described in this Section 2 is referred to herein as a "Demand
Registration". Within ten (10) days of its receipt of a request
for a Demand Registration from ADI Stockholders in accordance
with this Section 2, the Company shall notify all other
stockholders of the Company who own of record unregistered
shares of the Company's Common Stock and offer such stockholders
the opportunity to include their shares in the Demand
Registration. Within seventy-five (75) days after its receipt
of a request for a Demand Registration, the Company shall use
commercially reasonable efforts to file with the SEC a
registration statement including the Shares and any other shares
of other stockholders of the Company who respond to the
Company's notice pursuant to this Section 2(a) in a timely
manner. The Company shall not be required to effect more than
one (1) Demand Registration.
3. RESTRICTIONS ON DEMAND REGISTRATION. Notwithstanding
-----------------------------------
any other provision of this Agreement to the contrary:
(a) the Company will not be obligated to effect any
Demand Registration within 180 days after the effective date of
a previous registration in which the ADI Stockholders were given
piggyback rights to have such ADI Stockholder's Shares included
in such registration;
(b) if the Company's board of directors in good faith
determines that the filing of a registration statement in
connection with any requested Demand Registration would be
reasonably likely to materially and adversely affect any
material contemplated acquisition, divestiture, registered
primary offering or other action as to which the Company or any
of its Subsidiaries has then taken substantial steps, or would
require disclosure of facts or circumstances which disclosure
would be reasonably likely to materially and adversely affect
any material contemplated acquisition, divestiture, registered
primary offering or other action as to which the Company or any
of its Subsidiaries has then taken substantial steps, then the
Company may delay such registration for a period of up to 90
days so long as the Company is still pursuing the action that
allowed such delay (it being agreed that the Company may not
delay requested registrations pursuant to this Section 3(b) more
than once during any period of 360 consecutive days). If the
Company postpones the filing of a registration statement
pursuant to this Section 3(b), it will promptly notify in
writing the ADI Stockholders when the events or circumstances
permitting such postponement have ended.
4. PIGGYBACK REGISTRATIONS. Whenever the Company proposes
-----------------------
to register any of its Common Stock under the Securities Act
(other than pursuant to Form X-0, X-0 or the equivalent form)
and the registration form to be used may be used for the
registration of Shares (a "Piggyback Registration"), the Company
will give prompt written notice to all ADI Stockholders of its
intention to effect such a registration and will include in such
registration all Shares with respect to which the Company has
received written requests for inclusion in such registration
within 20 days after the receipt of the Company's notice.
5. REGISTRATION PROCEDURES. Whenever the ADI
-----------------------
Stockholders have requested that the Shares be registered
pursuant to this Agreement, the Company will, subject to the
provisions of Section 7, use its commercially reasonable efforts
to effect the registration of the Shares, and pursuant thereto
the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration
statement with respect to the Shares and use its commercially
reasonable efforts to cause such registration statement to
become effective;
(b) notify each ADI Stockholder of the effectiveness
of such registration statement and prepare and file with the SEC
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for the
earlier of (i) a period of not less than six months and not more
than one year (or, in the case of a 415 Registration, not more
than two years) and (ii) the date as of which there are no
longer any shares covered by such registration statements that
are Shares, in each case in order to comply with the provisions
of the Securities Act with respect to the disposition of all
shares of Common Stock covered by such registration statement;
(c) furnish to each ADI Stockholder such number of
copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus), exhibits, and
such other documents as such seller and underwriter, if any, may
reasonably request in order to facilitate the disposition of the
Shares owned by such seller in accordance with the procedures
described therein;
(d) use its best efforts to register or qualify such
Shares under such other securities or blue sky laws of such
jurisdictions as any seller and underwriter reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller and underwriter to
consummate the disposition in such jurisdictions of the Shares
owned by such seller (provided that the Company will not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this Section, (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(e) notify each seller of Shares, at any time when a
prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any
fact necessary to make the statements in such prospectus not
misleading and, at the request of any such seller, promptly
prepare and file a supplement or amendment to such prospectus
and/or registration statement so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements in such
prospectus not misleading;
(f) otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least 12 months beginning with the first day of the Company's
first full calendar quarter after the effective date of the
applicable registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities Act
and applicable rules and regulations thereunder;
(g) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of
any order suspending or preventing the use of any related
prospectus or suspending the qualification of any securities
included in such registration statement for sale in any
jurisdiction, use its commercially reasonable efforts to obtain
promptly the withdrawal of such order;
(h) use its commercially reasonable efforts to cause
all Shares covered by the applicable registration statement to
be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller
or sellers of such Shares to consummate the disposition of such
Shares in accordance with the procedures set forth in such
registration statement;
(i) notify the ADI Stockholders (i) when the
registration statement, the prospectus or any prospectus
supplement related to such registration statement or any post
effective amendment to such registration statement has been
filed, and, with respect to such registration statement or any
post effective amendment to such registration statement, when
the same has become effective; (ii) notify the ADI Stockholders
of any request by the SEC for amendments or supplements to the
registration statement or the prospectus or for additional
information; (iii) of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the registration or the initiation of any
proceedings by any Person for that purpose; and (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of any Shares for sale under the
securities or blue sky laws of any jurisdiction or the
initiation or threat of any proceeding for such purpose;
(j) at least five days before filing a registration
statement or prospectus and as promptly as practicable prior to
filing any amendments or supplements thereto, furnish to legal
counsel representing the holders of the Shares covered by such
registration statement copies of all such documents proposed to
be filed;
(k) use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a
registration statement filed in connection herewith, or the
lifting of any suspension of the qualification (or exemption
from qualification) of any of the Shares for sale in any
jurisdiction, at the earliest possible moment;
6. REGISTRATION EXPENSES.
---------------------
(a) All expenses incidental to the Company's
performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger
and delivery expenses, fees and disbursements of custodians, and
fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained
by the Company (all such expenses being herein called
"Registration Expenses"), will be borne by the Company, and the
Company will pay its internal expenses (including all salaries
and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses
and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation
system.
(b) In connection with each Demand Registration and
each Piggyback Registration, the Company will reimburse the ADI
Stockholders for the reasonable fees and disbursements of one
law firm chosen by them with respect to review of a registration
statement including the Shares.
(c) Notwithstanding the foregoing, the Company shall
not pay any commissions or fees incurred by any ADI Stockholder
in connection with the sale of any of the Shares.
7. INDEMNIFICATION.
---------------
(a) The Company agrees to indemnify, to the extent
permitted by law, each holder of Shares, against all losses,
claims, damages, liabilities and expenses caused by any untrue
or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or
any amendment of such registration statement or supplement to
such registration statement or any omission or alleged omission
of a material fact required to be stated in such registration
statement or necessary to make the statements in such
registration statement not misleading, except insofar as the
same are caused by or contained in any information furnished in
writing to the Company by such holder expressly for use in such
registration statement or by such holder's failure to deliver to
the purchaser a copy of the related registration statement or
prospectus or any amendments or supplements to such registration
statement after the Company has furnished such holder with
copies of the same, in each case to the extent that such
document was required to be delivered and the damages,
liabilities or expenses are caused by a failure to deliver such
document.
(b) In connection with any registration in which a
holder of Shares is participating, each such holder will furnish
to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any
related registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its directors and
officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in any such
registration statement, prospectus or preliminary prospectus or
any amendment of such registration statement or supplement to
such registration statement or any omission or alleged omission
of a material fact required to be stated in such registration
statement or necessary to make the statements in such
registration statement not misleading, but only to the extent
that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder
or on such holder's behalf, in such holder's capacity as a
holder of Shares and not in such holder's capacity as a director
or officer of the Company, if applicable, expressly for use
therein; provided that the obligation to indemnify will be
individual, not joint and several, for each holder and will be
limited to the net amount of proceeds received by such holder
from the sale of Shares pursuant to the registration statement,
prospectus or amendment upon which the claim for indemnification
is based.
(c) Any person entitled to indemnification under this
Section will (i) give prompt written notice to the indemnifying
party of any claim with respect to which it seeks
indemnification (provided that the failure to give prompt notice
will not impair any person's right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying
party) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party will
not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not
be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than
one law firm for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or
any officer, director or controlling Person of such indemnified
party and will survive the transfer of securities and the
termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, will, except with the
consent of any indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as
an unconditional term of such settlement a requirement that the
claimant or plaintiff give to such indemnified party a release
from all liability in respect to such claim or litigation.
(e) If the indemnification provided for in this
Section is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any losses,
claims, damages or liabilities referred to in this Agreement,
each indemnifying party, in lieu of indemnifying such
indemnified party thereunder, will, to the extent permitted by
applicable law, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the
omissions or violations (or alleged omissions or violations)
which resulted in such loss, claim, damage or liability. The
relative fault of the indemnifying party and of the indemnified
party will be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that in
no event will any contribution by a holder hereunder exceed the
net proceeds from the offering received by such holder. The
Company and each holder of Shares agrees that it would not be
just and equitable if contribution pursuant to this Section 8(e)
were determined by any method of allocation which does not take
into account the equitable considerations referred to in this
Section 8(e). No Person guilty of fraudulent misrepresentation
(within the meaning of subsection 11(f) of the Securities Act)
will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8. MISCELLANEOUS.
-------------
(a) Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights
specifically to recover damages caused by reason of any breach
of any provision of this Agreement and to exercise all other
rights granted by law. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in
its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the
provisions of this Agreement.
(b) Except as otherwise provided in this Agreement,
the provisions of this Agreement may be amended or waived only
upon the prior written consent of the Company and holders of a
majority of the Shares; provided that no such amendment or
waiver will adversely affect the rights hereunder of any party
hereto when compared with its effect on the other similarly-
situated parties to this Agreement without the prior written
approval of a majority-in-interest of such adversely affected
parties.
(c) All covenants and agreements in this Agreement by
or on behalf of any of the parties to this Agreement will bind
and inure to the benefit of the respective successors and
assigns of the parties to this Agreement; provided, however,
that an ADI Stockholder may not transfer or assign any of its
rights under this Agreement without the prior written consent of
the Company in each instance.
(d) Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
(e) This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together
will constitute one and the same agreement.
(f) The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a
substantive part of this Agreement. Whenever required by the
context, any pronoun used in this Agreement will include the
corresponding masculine, feminine or neuter forms, and the
singular forms of nouns, pronouns, and verbs will include the
plural and vice versa. Reference to any agreement, document, or
instrument means such agreement, document, or instrument as
amended or otherwise modified from time to time in accordance
with the terms of such agreement, document or instrument, and if
applicable, of this Agreement. The use of the words "include"
or "including" in this Agreement will be by way of example
rather than by limitation. The use of the words "or," "either"
or "any" will not be exclusive.
(g) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York,
without giving effect to any choice of law of conflict of law
rules.
(h) All communications or notices required or
permitted by this Agreement shall be in writing and shall be
sent in accordance with the notice provisions contained in the
Purchase Agreement.
(i) Each party to this Agreement hereby waives, to
the fullest extent permitted by law, any right to trial by jury
of any claim, demand, action, or cause of action (i) arising
under this Agreement or (ii) in any way connected with or
related or incidental to the dealings of the parties hereto in
respect of this Agreement or any of the transactions related
hereto, in each case whether now existing or hereafter arising,
and whether in contract, tort, equity, or otherwise. Each party
to this Agreement hereby agrees and consents that any such
claim, demand, action, or cause of action will be decided by
court trial without a jury and that the parties to this
Agreement may file an original counterpart or a copy of this
Agreement with any court as written evidence of the consent of
the parties hereto to the waiver of their right to trial by jury.
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By ________________________
Xxxxxx X. Xxxxx, President
ADI STOCKHOLDERS:
(EXHIBIT A)
SHARES ISSUED TO ADI STOCKHOLDERS
EXHIBIT E
NON-COMPETITION AGREEMENT
SELLER POST-CLOSING AGREEMENT
-----------------------------
This Agreement, made, executed and delivered as of the 1st
day of July, 2005, by _____________________, an individual
residing at ___________________________ ("Seller"), in favor of
Achievement Data, Inc., a Minnesota corporation ("ADI"), with
its principal place of business at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxxxx, XX 00000 and Touchstone Applied Science
Associates, Inc., a Delaware corporation, with its principal
place of business at 0 Xxxxxxxxxxxx Xxxxxxx, Xxxxxxxx, XX 00000
("Purchaser").
RECITALS
Whereas, in accordance with that certain Stock Purchase
Agreement dated July 1, 2005, (the "Agreement") by and among
Purchaser, Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx and ADI (the "Stock
Purchase Agreement"), Purchaser shall acquire one hundred
percent (100%) of the issued and outstanding capital stock of
ADI. The execution and delivery of this Agreement is an express
condition to the fulfillment by the Seller of Seller's
obligations under the Stock Purchase Agreement; and
Whereas, Purchaser and ADI would suffer substantial damage
and Purchaser's investment in developing the strategy underlying
the acquisition of ADI would be negatively impacted, if the
undersigned Seller engaged in activities prohibited by this
Agreement.
NOW THEREFORE, in consideration of the foregoing and the
covenants of Seller hereinafter contained, Seller agrees with
the Purchaser as follows:
AGREEMENT
1. RESTRICTIVE COVENANT. In consideration of the sums
--------------------
paid to Seller pursuant to the Stock Purchase Agreement, Seller
agrees that s/he will not for a period of one (1) year from and
after the date hereof, without the prior written consent of
Purchaser, anywhere in the United States (or for such lesser
area or such lesser period as may be determined by a court of
competent jurisdiction to be a reasonable limitation on the
competitive activity of Seller) directly or indirectly:
(a) render any services as an officer, director,
employee, partner, consultant or in any similar role or have
any interest as a stockholder, lender or other financial or
beneficial interest in any entity which competes with the
Purchaser, ADI or a Subsidiary of Purchaser or ADI
("Subsidiary" means a company 50% or more of the voting
securities of which are owned by Purchaser); provided,
however, that ownership of not more than two percent (1 %)
of any class of securities traded actively, over-the-counter
or through a stock exchange shall not violate this
subparagraph (a);
(b) own, manage, control, operate, participate
in, consult with, render services to, as an employee,
consultant, contractor, or otherwise assist in any manner any
person or entity that owns, manages, controls or engages in
any educational product and assessment business, which
publishes, manages, operates, licenses, markets or distributes
any educational, test preparation or assessment books or
instructional material, including, without limitation,
journals, student resource books, work books, work sheets,
assessments, test preparation or other educational
materials, for any of school grades K through 12, or any
software, web site and/or internet-based publishing or
distribution system relating to any of the foregoing, in each
case whether in print, film, tape, electronic, internet or
other media or forms, anywhere in the world, in any language;
(c) solicit, induce or persuade any employee or
contractor of Purchaser, ADI or a Subsidiary of Purchaser to
leave employment with that entity for any reason;
(d) hire or retain or assist others in hiring or
retaining any individuals who are employees or contractors of
Purchaser, ADI or a Subsidiary of Purchaser who were employees
or contractors at any time during the twelve (12) month period
prior to the date of this Agreement;
(e) solicit, call on or take away any Customers of
ADI, Purchaser or a Subsidiary of Purchaser ("Customer"
means any person or entity to whom ADI, Purchaser or a
Subsidiary of Purchaser has provided goods or services, or
to whom ADI, Purchaser or a Subsidiary of Purchaser has
submitted a proposal to provide goods or services and who
Seller has been introduced to by or through ADI or has
become acquainted with by working for ADI);
(f) perform or supply any services or products (as an
employee, contractor or otherwise) to such Customers;
(g) induce or persuade or assist others in inducing or
persuading any such Customer to reduce or discontinue doing
business with ADI, Purchaser or a Subsidiary of Purchaser or
to purchase from another person or entity goods or services
supplied or which could be supplied by ADI, Purchaser or a
Subsidiary of Purchaser to that Customer; or
(h) interfere with any business relationship between
ADI, Purchaser or a Subsidiary of Purchaser and any other
person or entity.
2. ADDITIONAL CONSIDERATION. This Agreement, and the
------------------------
restrictive covenant contained herein, is made as an additional
enticement for Purchaser to enter into the above mentioned Stock
Purchase Agreement and is incident thereto.
3. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE. Seller
--------------------------------------------
understands and acknowledges that as a result of Seller's
involvement with ADI, Seller may have had access to confidential
information of ADI including, without limitation, ADI's trade
secrets and proprietary information regarding its test engines,
inventions, patentable technologies, technical information,
computer code, source codes, mask works, software development
tools, specifications, schematics, processes, techniques,
designs, know-how, marketing plans, business strategy, pricing
information, financial data, customer lists, referral and vendor
sources (collectively "Confidential Information"). Seller
understands and acknowledges that such Confidential Information,
even though it may have been or may be developed or otherwise
acquired by Seller, is the exclusive property of ADI and Seller
shall not at any time, from this date forward, reveal, report,
publish, transfer or otherwise disclose to any person,
corporation or other entity, or use or exploit, any of ADI's
Confidential Information, without the written consent of
Purchaser, except for such information which legally and
legitimately is or becomes of general public knowledge from
authorized sources other than Seller.
4. SURRENDER OF ADI CONFIDENTIAL INFORMATION. In
-----------------------------------------
connection with the execution of this Agreement, Seller shall
deliver to Purchaser (a) all Confidential Information and (b)
all documents, computer discs, electronic files, computer code,
materials, equipment, documents, drawings and other information
both in hard copy and in machine readable form that in any way
relate to the Confidential Information. Seller shall not make
or retain any hard or electronic copies of any such information
or materials, make or retain any summaries or descriptions of
any such information or materials, and/or erase any hard drives
or otherwise delete any such information or materials from any
laptop or desktop computers, computer networks or other
electronic devices or services of ADI.
5. OWNERSHIP OF ADI PROPERTY AND RIGHTS.
------------------------------------
(a) INVENTIONS. Seller understands and acknowledges that
----------
as a result of Seller's involvement with ADI, Seller may have
conceived, developed or produced ideas, inventions,
documentation, computer code, tools, procedures, techniques,
know-how, improvements and/or other materials, whether or not
they were reduced to practice or made or conceived by Seller
solely or jointly with others that relate to ADI's business
(collectively "Inventions"). Seller acknowledges and
understands that ADI shall be deemed the sole creator and owner
of the Inventions.
(b) INTELLECTUAL PROPERTY RIGHTS. ADI shall solely own
----------------------------
and have exclusive worldwide right, title and interest in and to
the Confidential Information and Inventions, and to all
modifications, enhancements and derivative works thereof, in all
United States and worldwide trademarks, service marks, trade
dress, copyrights, patents, trade secrets and all other
intellectual property rights related thereto and to the ADI
business (including all renewals and extensions thereof)
(collectively "Intellectual Property Rights"). Seller
understands and acknowledges that no license or other interest
of any kind in the Confidential Information, Inventions or
Intellectual Property Rights has been directly or indirectly
granted to Seller. Seller represents and warrants that Seller
will not, from this date forward, challenge or otherwise impair
ADI or Purchaser's rights to the Confidential Information,
Inventions or the validity or enforceability of the Intellectual
Property Rights.
(c) ASSIGNMENT OF RIGHTS. From the moment of creation,
--------------------
Seller irrevocably assigns and transfers to ADI all right, title
and interest worldwide in and to all of the Inventions, to all
modifications, enhancements and derivative works thereof, and to
all worldwide Intellectual Property Rights related thereto. The
above assignment includes without limitation the exclusive right
for ADI to exploit the Inventions by and through all media,
platforms, processes, and other means now known or hereafter
devised. Seller further irrevocably waives all rights to assert
any moral rights in any way regarding the Inventions and/or the
Intellectual Property Rights related thereto.
(d) NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to
--------------------------------
Minnesota Statute Section 181.78(3), Seller is hereby notified
that Paragraph 5(c) regarding assignment of Inventions does not
apply to any invention for which no equipment, supplies,
facility or trade secret information of ADI was used and which
was developed entirely on Seller's own time, and (1) which does
not relate (a) directly to the business of ADI or (b) to ADI's
actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by Seller for
ADI.
6. EQUITABLE RELIEF FOR BREACH. Because the breach or
---------------------------
anticipated breach of the restrictions set forth in this
Agreement shall result in the immediate and irrevocable harm and
injury to Purchaser and/or ADI, for which the Purchaser and/or
ADI will not have an adequate remedy at law, Seller agrees that
the Purchaser and/or ADI shall be entitled to relief in equity
to enjoin temporarily and/or permanently such breach or
anticipated breach and to seek any and all other legal and
equitable remedies to which each may be entitled. If the
Purchaser and/or ADI prevails in any action at equity or at law
brought to enforce this Agreement, Seller agrees to pay all
costs of litigation including the reasonable attorneys' fees and
expenses of the Purchaser and ADI. In the event the foregoing
restrictions are considered by a court of competent jurisdiction
to be excessive in its duration of scope, it shall be considered
modified and valid for such duration and for such business and
area as such court may determine to the maximum extent
permitted by applicable law.
7. GOVERNING LAW. This Agreement shall, with respect to
-------------
any and all matters, including, but not limited to, validity,
construction or performance, be governed by the laws of the
State of Minnesota.
8. SEVERABILITY. All provisions of this Agreement are
------------
intended to be severable. Each provision of this Agreement
constitutes a separate and distinct covenant. In the event any
term, provision, or restriction in this Agreement is held to be
illegal, invalid, or unenforceable in any respect, such findings
shall in no way affect the legality, viability, or
enforceability of all other provisions of this Agreement.
Seller and Purchaser agree that any such unenforceable term,
provision or restriction shall be deemed modified to the extent
necessary to permit its enforcement to the maximum extent
permitted by applicable law.
9. NO WAIVER. Neither any failure or delay on the part
---------
of any party in exercising its rights shall operate as a waiver,
nor shall a single or partial exercise preclude any further
exercise in any right, power, or privilege by any party.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be
----------------------
binding upon and inure to the benefit of the Purchaser, ADI and
Seller and their respective successors and assigns and legal
representatives.
11. ENTIRE AGREEMENT. This Agreement sets forth the
----------------
parties' final and entire Agreement with respect to its subject
matter and supersedes any and all prior understandings and
agreements. No waiver, alteration or modification of any
provision of this Agreement will be valid unless made in writing
and signed by all of the parties hereto.
12. COUNTERPARTS. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same
instrument.
In Witness Whereof, the parties have executed this
Agreement as of the day and year first above written.
Touchstone Applied Science
Associates, Inc.
By:________________________
Name:
Title:
Seller:
__________________________
Name:
Achievement Data, Inc.
By:________________________
Name:
Title:
EXHIBIT F
EMPLOYEE PROPREITARY RIGHTS AGREEMENT
ACHIEVEMENT DATA, INC.
PROPRIETARY INFORMATION AGREEMENT
---------------------------------
As a condition of my employment by Achievement Data, Inc.,
a Minnesota Corporation, its successors or assigns ("ADI"), and
in consideration of my compensation and other benefits, I,
____________________________, agree as follows:
1. NOT AN EMPLOYMENT AGREEMENT. This Proprietary
---------------------------
Information Agreement shall not be deemed to be an employment
agreement. I understand that nothing in this Proprietary
Information Agreement changes, modifies or replaces or is
intended to change, modify or replace the terms on my existing
employment agreement ADI dated July 1, 2005. No representative
of ADI has the authority to enter into an agreement contrary to
this, except in a written contract of employment executed by the
President of ADI and me.
2. CONFIDENTIAL INFORMATION AND INVENTIONS. I
---------------------------------------
acknowledge that I will have access to ADI's trade secrets and
proprietary information regarding its test engines, Test Scout
and other technologies. ADI=s trade secrets and proprietary
information shall include without limitation ideas, computer
code, source codes, mask works, software development tools,
specifications, schematics, processes, techniques, designs,
know-how, marketing plans, financial data, customer lists,
referral and vendor sources, and testing methods (collectively
"Confidential Information").
I may also have access to proprietary information or
materials belonging to other parties which ADI is required to
keep confidential (collectively "Third Party Information").
During my employment, I may also conceive, develop or produce
ideas, inventions, documentation, computer code, tools,
procedures, techniques, know-how, improvements and/or other
materials, whether or not they are reduced to practice or made
or conceived by me solely or jointly with others that relate to
ADI's business (collectively "Inventions").
2. CONFIDENTIALITY. During and after my employment, I
---------------
will not disclose or otherwise distribute the Confidential
Information, Inventions or Third Party Information to any third
party. I will use the Confidential Information, Inventions and
Third Party Information only to perform my duties as an employee
of ADI, and for no other purpose. I further agree that after I
leave ADI, I will not incorporate, use or exploit any of the
Confidential Information, Inventions or Third Party Information
(disclosed separately or embodied in ADI's products, procedures
or operations), or assist others in doing so.
3. PROPERTY RIGHTS. ADI shall solely own and have
---------------
exclusive worldwide right, title and interest in and to the
Confidential Information and Inventions, and to all
modifications, enhancements and derivative works thereof, in all
United States and worldwide trademarks, service marks, trade
dress, copyrights, patents, trade secrets and all other
intellectual property rights related thereto (including all
renewals and extensions thereof) (collectively "Intellectual
Property Rights"). No license or other interest of any kind in
the Confidential Information, Inventions or Third Party
Information is directly or indirectly granted to me. During and
after my employment with ADI, I will not challenge or otherwise
impair ADI's rights to the Confidential Information, Inventions,
its products, and/or the validity or enforceability of its
Intellectual Property Rights.
4. ASSIGNMENT. I agree that the Inventions are made
----------
within the scope of my employment with ADI, are commissioned at
ADI's specific request and control, and shall be deemed "works
made for hire" under the United States copyright laws, and ADI
shall be the sole creator and owner of the Inventions. From the
moment of creation, I irrevocably assign and transfer to ADI all
right, title and interest worldwide in and to all of the
Inventions, to all modifications, enhancements and derivative
works thereof, and to all worldwide Intellectual Property Rights
related thereto. The above assignment includes without
limitation the exclusive right for ADI to exploit the Inventions
by and through all media, platforms, processes, and other means
now known or hereafter devised. I further irrevocably waive all
rights to assert any moral rights in any way regarding the
Inventions and/or the Intellectual Property Rights related
thereto.
NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to Minnesota
Statute Section 181.78(3), I am hereby notified that this
Paragraph 4 regarding assignment of Inventions does not apply to
any invention for which no equipment, supplies, facility or
trade secret information of ADI was used and which was developed
entirely on my own time, and (1) which does not relate (a)
directly to the business of ADI or (b) to ADI's actual or
demonstrably anticipated research or development, or (2) which
does not result from any work performed by me for ADI.
5. REPRESENTATIONS. I warrant that in performing my job
---------------
at ADI, I have not and will not violate any legal or equitable
duties owed to any of my current or previous employers,
customers or other business or consulting relationships
(collectively "Relationships"), including without limitation
duties relating to protecting confidential information or
refraining from competitive activities. I further warrant that
(a) I have not and will not disclose to anyone at ADI any
confidential or proprietary information or material of a current
or previous Relationship; (b) I will not in any way use,
incorporate or refer to any confidential or proprietary
information or material of a current or previous Relationship in
performing my job at ADI; and (c) my Inventions shall be new and
original, and shall not use or incorporate any materials or
intellectual properties of third parties, except for such
materials as specifically authorized in advance by ADI for which
ADI has or obtains a license to use.
6. PRIOR INVENTIONS. I understand that all inventions,
----------------
if any, which I made prior to my employment with ADI are
excluded from this Agreement. I warrant that Exhibit "A"
represents a complete and accurate list of all of my prior
inventions, including numbers of all patent, trademark and
copyright applications or registrations and brief descriptions
of all unpatented, untrademarked or uncopyrighted inventions
which are not the property of a current or previous
Relationship. I agree to notify ADI in writing before I make
any disclosure or perform any work on behalf of ADI which
appears to threaten or conflict with my rights in a prior
invention. In the event I fail to give such notice, I agree
that I will have no right to make any claim at any time against
ADI regarding the prior invention. To the extent that I
incorporate any of my prior inventions into ADI's products or
services, I hereby grant to ADI a non-exclusive, irrevocable,
royalty free, perpetual and worldwide license, with the right to
sublicense, to make, have made, modify, copy, perform, display,
make derivative works, distribute, use and/or sell such prior
inventions as part of or in connection with such product or
service.
7. CONFLICTING INTEREST. While I am employed by ADI, I
--------------------
will devote all working hours of each business day to performing
my employment services for ADI. I also agree that during such
employment, I will not engage in any other employment,
consulting or other activity relating to ADI=s business or which
would conflict with my obligations to ADI, and will not have any
direct or indirect financial interest in any company that may
compete with ADI; provided, I may own one percent (1%) or less
of the outstanding or preferred stock of any corporation listed
on a national securities exchange.
8. NO SOLICITATION. During my employment with ADI and
---------------
for a period of one (1) year thereafter, I will not (for my
benefit or for the benefit of any other person or entity other
than ADI) in any way (a) solicit, induce or persuade any
employee or contractor of ADI to leave ADI for any reason, (b)
hire or retain or assist others in hiring or retaining any
individuals who are employees or contractors of ADI or who were
employees or contractors during the 6 (six) month period prior
to such hiring or retaining, (c) solicit, call on or take away
any Customers (as hereafter defined) of ADI, (d) perform or
supply any services or products in competition with products or
services provided by ADI or its affiliated entities (as an
employee, contractor or otherwise) to such Customers, and/or (e)
induce or persuade or assist others in inducing or persuading
any such Customer to reduce or discontinue doing business with
ADI or to purchase from another person or entity goods or
services supplied or which could be supplied by ADI to that
Customer. The term "Customer" means any person or entity to
whom ADI has provided goods or services, or to whom ADI has
submitted a proposal to provide goods or services and who I have
been introduced to by ADI or have become acquainted with by
working for ADI.
9. TERMINATION. In the event my employment is terminated
-----------
for any reason, I resign or otherwise leave ADI's employ or at
any other time upon ADI's request, I will immediately deliver to
ADI (a) all Confidential Information, Third Party Information
and Inventions, and (b) all documents, computer discs,
electronic files, computer code, materials, equipment,
documents, drawings and other information both in hard copy and
in machine readable form that in any way relate to the
Confidential Information, Third Party Information, Inventions or
my employment or other work at ADI. I will not make or retain
any hard or electronic copies of any such information or
materials, make or retain any summaries or descriptions of any
such information or materials, and/or erase any hard drives or
otherwise delete any such information or materials from any
laptop or desktop computers, computer networks or other
electronic devices or services of ADI. Immediately upon my
termination or other departure, I agree to sign and deliver to
ADI the "Termination Certificate" in Exhibit "B." During my
employment with ADI and at all times thereafter, I agree that I
will not disparage ADI to third parties.
10. ENFORCEMENT. I agree that ADI will be irreparably
-----------
harmed and money damages will be inadequate compensation to ADI
in the event I breach any provision of this Agreement.
Accordingly, I agree that all the provisions of this Agreement
shall be specifically enforceable, and ADI shall be entitled to
injunctive relief against me in addition to other available
remedies, for my breach of any provision of this Agreement. I
further agree that all of the provisions of this Agreement are
reasonable and necessary to protect ADI's Confidential
Information, contractual obligations regarding Third Party
Information, Inventions, goodwill of its business and its
competitive position in the marketplace, and that such
provisions are fair and will not prevent me from earning a
sufficient livelihood. I also agree that any claim I may have
against ADI shall not constitute a defense to ADI's enforcement
of this Agreement.
11. GOVERNING LAW AND VENUE. This Agreement shall be
-----------------------
interpreted and enforced according to the substantive laws of
the State of Minnesota, without application of its conflicts or
choice of law rules. I irrevocably submit to the jurisdiction
and venue of the state and/or federal courts located in Hennepin
County, Minnesota for any action or proceeding regarding this
Agreement.
12. ASSIGNMENT. I agree that I have no right to assign or
----------
otherwise transfer any of my rights or obligations under this
Agreement, in whole or in part.
13. WAIVER. I agree that ADI's failure to enforce any
------
provision of this Agreement shall not be deemed a waiver unless
such waiver is in writing and signed by ADI.
14. VALIDITY. If any provision of this Agreement is held
--------
by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall remain in full
force and effect.
15. SUCCESSORS. This Agreement shall be binding upon me,
----------
my heirs, executors and other legal representatives, and shall
be for ADI's benefit.
16. ENTIRE AGREEMENT. This Agreement constitutes the
----------------
entire agreement regarding the subject matter hereof, and
supersedes all prior or contemporaneous understandings, whether
oral or written. This Agreement cannot be modified or amended,
except by a writing signed by both ADI and me. Exhibits "A" and
"B" are fully incorporated herein.
17. ATTORNEYS' FEES. In the event a dispute arises
---------------
regarding this Agreement, the prevailing party shall be entitled
to recover reasonable attorneys' fees and costs, in addition to
any other relief to which it is entitled.
18. SURVIVAL. I agree that all of the provisions of this
--------
Agreement shall survive the termination of this Agreement or my
employment with ADI except for Paragraph 7.
Dated as of July 1, 2005
____________________
(Name of Employee)
(EXHIBIT "A")
LIST OF PRIOR INVENTIONS
______ No prior inventions
______ See below
Title Date of Creation Identifying Number and Brief
----- ---------------- Description
----------------------------
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(EXHIBIT "B")
TERMINATION CERTIFICATE
I hereby certify that:
(a) I have delivered and returned to ADI (i) all
Confidential Information, Third Party Information and
Inventions, and (ii) all notes, records, computer discs,
electronic files, computer code, materials, equipment, drawings,
documents and other information in any way related to my
employment or other work for ADI (collectively "Materials");
(b) I have not made or retained any hard or electronic
copies of any of the Materials, and to not have in my
possession, at home or otherwise, any of the Materials or copies
thereof; and
(c) I have fully complied with and will continue to fully
comply with all the provisions of the ADI Proprietary
Information Agreement previously signed by me, including without
limitation reporting Inventions and keeping confidential all of
the Confidential Information, Third Party Information and
Inventions.
DATED: ______________________ ______________________________________
(Name of Employee)
EXHIBIT G
BORG EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 1st day of July, 2005 by and
between ACHIEVEMENT DATA, INC., a Minnesota corporation with its
principal place of business at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxx, XX 00000 (the "Corporation") and XXXXXX XXXX, an
individual residing at 00000 00xx Xxxxxx Xxxxx, Xxxxxxxx, XX
00000 ("Employee").
W I T N E S S E T H:
-------------------
WHEREAS, on the Effective Date hereof, the Corporation has
become a wholly-owned subsidiary of Touchstone Applied Science
Associates, Inc. ("TASA"), a Delaware corporation; and
WHEREAS, the Corporation recognizes the importance of
retaining its highly qualified employees by offering a certain
degree of security to such individuals against changes; and
WHEREAS, the Corporation desires to assure fair treatment
of such qualified employees and thereby increasing their
willingness to remain with the Corporation; and
WHEREAS, the Board of Directors (the "Board") of the
Corporation in recognition of the acquisition of the Corporation
by TASA, believes it is essential to provide Employee with such
degree of security and secure the services of Employee for the
Corporation, and, in order to accomplish these objectives, the
Board has caused the Corporation to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements set forth herein, the parties hereto,
intending to be legally bound, agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and
-------------------
conditions of this Agreement, the Corporation agrees to employ
Employee, and Employee hereby accepts employment by the
Corporation, for a term beginning July 1, 2005 (the "Effective
Date") and, except as set forth in the next sentence, ending on
October 31, 2008 ("Employment Term"). In the event of a "Change
of Control" of the Corporation (as defined in Section 2 below)
during the term of this Agreement, this Agreement shall remain
in effect for the period commencing on the date of Change of
Control and ending on the later of: (x) the date, not to exceed
October 31, 2008, provided by Employee in a written notice of
his election to terminate the Agreement (the "Change of Control
Election Notice"); provided Employee has given such Change of
Control Election Notice to the Corporation and TASA within
thirty (30) days of the date of the Change of Control; and (y)
if no Change of Control Election Notice is given within such
thirty (30) day period, the last day of the Employment Term; in
each case unless sooner terminated as provided in this
Agreement.
2. CERTAIN DEFINITIONS.
-------------------
(a) A reference herein to a section of the Internal
Revenue Code of 1986, as amended (the "Code") or a subdivision
thereof shall be construed to incorporate reference to any
section or subdivision of the Code enacted as a successor
thereto, any applicable proposed, temporary or final regulations
promulgated pursuant to such sections and any applicable
interpretation thereof by the Internal Revenue Service.
(b) A reference herein to a section of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any
rule or regulation promulgated thereunder shall be construed to
incorporate reference to any section of the Exchange Act or any
rule or regulation enacted or promulgated as a successor
thereto.
(c) "Subsidiary(ies)" means a company 50% or more of
the voting securities of which are owned by TASA, the
Corporation or a Subsidiary of TASA or the Corporation.
(d) "Employee Benefit Plan" means any written plan
providing benefits for employees of the Corporation.
(e) CHANGE OF CONTROL. For the purposes of this
-----------------
Agreement, a "Change of Control" shall be deemed to have
occurred upon the happening of any of the following:
(i) A. The acquisition (other than from ADI
or TASA) by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act, (excluding,
for this purpose TASA or its Subsidiaries, or any Executive
Benefit Plan which acquired beneficial ownership of voting
securities of TASA or ADI) or beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) or an
underwriter temporarily holding securities pursuant to an
offering of such securities) of: (x) 40% or more of then
outstanding shares of TASA's common stock, or the combined
voting power of TASA's then outstanding voting securities
entitled to vote generally in the election of directors; or (y)
50% or more of the then outstanding shares of ADI's common stock
or the combined voting power of ADI's then outstanding voting
securities entitled to vote generally in the election of
directors; provided, however, that for purposes of determining
whether or not a "Change of Control" has occurred with respect
to TASA, the following transactions shall be excluded from the
calculation of the change in ownership of TASA's securities:
(1) The offer or issuance of shares of
common stock pursuant to, or upon the exercise of any stock
incentive plan, of TASA, or the reservation of shares for
issuance pursuant to such plans;
(2) The offer, sale, assignment or
transfer of any of the shares of common stock of TASA owned
beneficially owned beneficially or otherwise by Xxxxxx Xxxxxxx
Strategic Partners Fund, L.P. and Strategic Associates, L.P.;
B. Any stockholder-approved
liquidation or dissolution or sale of all or substantially all
of ADI's assets
and
---
(ii) As a condition of, or in connection
with, continuing employment of Employee by TASA, ADI or any
successor thereto, either:
A. Employee is required to, and refuses
to, relocate more than fifty (50) miles from Minneapolis, MN; or
B. There is a material change in duties
inconsistent with Employee's position (including status, offices
and titles and authority, duties or responsibilities as
contemplated by Section 3 of this Agreement, and excluding
isolated, insubstantial and inadvertent actions which are
remedied by the Corporation promptly after receipt of notice
thereof given by Employee).
3. DUTIES. During the Term of this Agreement, Employee
------
shall serve in a capacity as President and Chief Executive
Officer and shall serve in such other capacity or capacities as
the Corporation may from time to time prescribe. Employee shall
report to the President of TASA. Employee shall do and perform
all services, acts or things necessary or advisable to manage
and conduct the business of the Corporation and which are
normally associated with the position of Chief Executive
Officer, consistent with the Bylaws of the Company and as
required by the Board of Directors of the Corporation,
including, but not limited to executive, administrative,
development, production, marketing and other services and duties
for the Corporation, at the present location of the Corporation
or any office or location fifty (50) or less miles from
Minneapolis, MN. The employment relationship between the
parties shall be governed by the policies and practices
established by the Board of Directors, except that when the
terms of this Agreement differ from or are in conflict with the
policies or practices of the Corporation, this Agreement shall
control. During the Employment Term, and excluding any periods
of vacation and sick leave, Employee agrees to devote full time,
best efforts to the business and affairs of the Corporation and
to perform faithfully and efficiently such responsibilities.
During the Employment Term it shall not be a violation of this
Agreement for Employee to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures to fulfill
speaking engagements and (C) manage personal investments, so
long as Employee's duties in connection therewith do not
interfere with Employee's duties under this Agreement.
4. COMPENSATION.
------------
(a) BASE SALARY. During the Term of this Agreement,
-----------
the Corporation shall pay to Employee, in equal installments at
such intervals as are in effect from time to time for officers
of TASA, an annual base salary (the "Base Salary") of One
Hundred Seventy-Five Thousand ($175,000.00) Dollars.
(b) BONUS. In addition to Base Salary, from and
-----
after November 1, 2005, and in connection with each twelve month
period thereafter during the Employment Term (November 1 -
October 31), Employee shall be eligible to participate in such
Senior Level Bonus Program as is established for executive level
employees of TASA and approved by the Compensation Committee of
TASA.
(c) INCENTIVE, SAVINGS, WELFARE BENEFIT PLANS AND
---------------------------------------------
RETIREMENT PLANS. In addition to Base Salary, Employee shall be
----------------
eligible to participate in or benefit from, such medical
insurance, life insurance, disability insurance, pension, bonus,
profit-sharing, stock option, stock purchase and any other
fringe benefit plans, practices, programs or policies provided
by the Corporation or TASA to executive level employees as a
class in accordance with the terms of such plans, practices,
programs and policies, as amended from time to time.
(d) KEY MAN INSURANCE. Employee agrees that, subject
-----------------
to approval of the Chief Executive Officer of TASA, the
Corporation or TASA may obtain key man life insurance with
respect to Employee, and in connection therewith, Employee
agrees to submit to all reasonable and customary examinations
requested by the provider of such life insurance.
(e) EXPENSES. Employee shall be entitled to
--------
reimbursement for all normal and reasonable travel,
entertainment and other expenses necessarily incurred by him in
the performance of his duties hereunder in accordance with the
policies, practices and procedures of the Corporation as amended
from time to time.
(f) VACATION. During the Employment Term, Employee
--------
shall be entitled to paid vacation in accordance with the plans,
practices, policies and programs of the Corporation as amended
from time to time.
(g) DISABILITY. The Corporation shall pay Employee
----------
for any period, up to a maximum of two months in each thirty-six
month period during the Term of this Agreement in which,
pursuant to written certification of his physician, he is unable
substantially to perform his duties because of physical or
mental disability or incapacity, an amount equal to the Base
Salary due him for such period pursuant to Section 4(a), less
the aggregate amount of all income disability benefits which for
such period he may receive by reason of (i) any group health
insurance plan, or disability insurance plan paid for by the
Corporation, in each case which is intended to function as a
salary replacement plan, (ii) any applicable compulsory state
disability law, (iii) the Federal Social Security Act, (iv) any
applicable workmen's compensation law or similar law and (v) any
plan towards which the Corporation or any subsidiary or
affiliate of the Corporation (including TASA) has contributed or
for which it has made payroll deductions, such as group accident
or health policies, other than those which reimburse for actual
medical expenses.
5. STOCK OPTIONS.
-------------
(a) As part of the consideration to be paid to
Employee for his services hereunder, Employee shall be eligible
to participate in any stock incentive plan adopted by TASA (the
"Plan") for which an executive level employee may participate.
(b) TASA hereby agrees that it shall cause to be
filed with the Securities and Exchange Commission a registration
statement on Form S-8 (or equivalent form as may be in effect at
such time) with respect to all options heretofore granted to
Employee under the Plan. TASA covenants that it will keep such
registration statement current until Employee is no longer
employed by the Corporation. TASA hereby agrees that, for so
long as either TASA does not have an effective registration
statement on Form S-8 or TASA has an effective registration
statement on Form S-8 but Employee is restricted in his ability
to resell shares acquired pursuant to the exercise of options
because of the provisions of General Instruction C.2(b) to Form
S-8, Employee shall have "piggyback" registration rights with
respect to the options granted to Employee under the Plan and
the shares underlying such options.
(c) As an incentive to enter into this Agreement,
TASA, immediately upon the Effective Date of this Agreement,
shall deliver to Employee a Stock Option Agreement pursuant to
its 2000 Stock Option Incentive Plan, granting to Employee ten
(10) year options for 40,000 shares of the common stock of the
Corporation at fair market value as of the Effective Date,
exercisable one year after the anniversary of the date of the
grant.
6. RIGHTS OF TERMINATION.
---------------------
(a) CAUSE. During the Term of this Agreement, the
-----
Corporation shall have the right, at any time effective upon
notice to Employee, to terminate Employee's employment for
"Cause" (as hereinafter defined). For purposes of this
Agreement, "Cause" shall mean (i) an act or acts of personal
dishonesty engaged in by Employee, which in the reasonable
opinion of the President of TASA is intended to result in
material personal enrichment of Employee or any material
detriment to the Corporation, (ii) failure by Employee to
perform any of Employee's material obligations under Section 3
of this Agreement which are not remedied within twenty (20) days
after receipt of written notice from the Corporation; provided,
however, that Employee shall be subject to immediate termination
hereunder if Employee has previously engaged in and received
notice to cure such failure; (iii) conviction by Employee of a
felony, (iv) any act of embezzlement or misappropriation of
funds, (v) material breach of any representation or warranty
hereunder; (vi) fraud or gross negligence in the performance of
his duties hereunder, or (vii) material breach of the provisions
of Section 8 or 9 hereof.
(b) DISABILITY; DEATH. In the event that Employee,
-----------------
due to physical or mental disability or incapacity, is unable to
fully perform his duties hereunder in the reasonable opinion of
the President of TASA for (i) a period of ninety (90) or more
days in any one hundred and eighty (180) day period, the
Corporation may terminate Employee's employment hereunder upon
30 days' prior written notice and termination shall be effective
on the 30th day after such notice is given to Employee (the
"Disability Effective Date"). In the event that Employee is
able to and recommences rendering services and fully performing
his duties hereunder within such 30-day notice period, Employee
shall be reinstated and such notice shall be without further
force or effect. If Employee dies during the Term, this
Agreement shall terminate immediately upon his death.
(c) NOTICE OF TERMINATION. Any termination of
---------------------
Employee's employment by the Corporation or by Employee shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 17 of this Agreement.
(d) DATE OF TERMINATION. "Date of Termination" means
-------------------
the date a Notice of Termination is given, or any later date
specified therein, as the case may be; provided, however, that
if Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death
of Employee or the Disability Effective Date, as the case may
be.
7. EFFECTS OF TERMINATION. In the event that Employee's
----------------------
employment is terminated pursuant to Section 6 hereof,
Employee's employment hereunder shall terminate without further
obligations to Employee, other than those obligations accrued or
earned and vested (if applicable) by Employee through the Date
of Termination, including for this purpose all "Accrued
Obligations", defined as those obligations accrued or earned and
vested (if applicable) by Employee as of the Date of
Termination, including, for this purpose (i) Employee's pro rata
Base Salary accrued but unpaid as of the Date of Termination,
(ii) any compensation previously deferred by Employee (together
with any accrued earnings thereon) and not yet paid by the
Corporation, (iii) any accrued vacation pay not yet paid by the
Company (iv) if applicable, all amounts payable to the estate or
designated beneficiaries of Employee under any pension, savings,
life insurance or other plans, practices, policies and programs
of the Corporation and (v) if termination is a result of the
death or Disability of Employee, such Bonus, if any, pursuant to
Section 4(b) hereof calculated pro rata, based upon the actual
number of complete months that Employee is employed in the
applicable fiscal year of the Corporation. In addition:
(i) All Accrued Obligations specified in:
(x) Sections 7(i), (ii) and (iii) shall be
paid to Employee in a lump sum in cash within 30 days of the
Date of Termination.
(y) Section 7(iv) shall be paid in
accordance with Employee's specific elections pursuant to, and
otherwise in accordance with the terms of, any plan, practice,
policy or program providing benefits forming a part of such
Accrued Obligations; and
(z) Section 7(v), if any, shall be paid not
later than the date bonuses are paid to executive level
employees under the Senior Level Bonus Program in effect for the
applicable fiscal year of termination.
(ii) all then non-exercisable options shall
immediately and automatically terminate, and
(iii) any registration rights theretofore
granted which have not been invoked with respect to shares of
Common Stock of the Corporation either acquired by Employee
pursuant to the exercise of stock options or underlying vested
options shall immediately and automatically terminate.
8. CONFIDENTIALITY.
---------------
(a) Employee understands and acknowledges that as a
result of Employee's employment with the Corporation, and
involvement with the business of the Corporation he is or shall
necessarily become informed of, and have access to, confidential
information of the Corporation including, without limitation,
inventions, patents, patent applications, technology, processes,
formulas, software, inventions and developments whether patented
or not, trade secrets, technical information, know-how, plans,
specifications, financial information and business strategy,
marketing plans and information, pricing information, identity
of customers and prospective customers and identity of suppliers
and vendors, research and development reports, industry and
competitive analyses, invention records and agreements, opinions
of counsel, employee intellectual property and confidentiality
agreements, licenses to and from third parties, and the like,
and that such information, even though it may have been or may
be developed or otherwise acquired by Employee, is the exclusive
property of the Corporation to be held by Employee in trust and
solely for the Corporation's benefit. Employee shall not at any
time, either during or subsequent to his employment hereunder,
reveal, report, publish, transfer or otherwise disclose to any
person, corporation or other entity, or use, any of the
Corporation's confidential information, without the written
consent of the Board, except for use on behalf of the
Corporation in connection with the Corporation's business, and
except for such information which legally and legitimately is or
becomes of general public knowledge from authorized sources
other than Employee.
(b) Upon the termination of his employment with the
Corporation for any reason, Employee shall promptly deliver to
the Corporation, and keep no copies of, all confidential
information, whether drawings, manuals, letters, notes,
notebooks, reports, and all other materials regardless of the
media in which stored or the form thereof, and copies thereof,
including, without limitation, those of a secret or confidential
nature, relating to the Corporation's business which are in
Employee's possession or control.
(c) For purposes of this Section 8 and Section 9, the
term "Corporation" includes the Corporation, TASA and any other
predecessor corporation, and Subsidiaries and joint ventures of
either.
4) Employee represents and warrants to the
Corporation that the execution and delivery of this Agreement
shall not conflict with, or violate the terms of, or constitute
a breach of any other agreement or document to which he is a
party, including, but not limited to any employment, consulting,
non-competition, restrictive covenant or similar agreement or
form of confidentiality agreement.
(e) Employee represents and warrants to the
Corporation that all data provided in his resume, related papers
and oral interviews is true, complete and correct and
acknowledges that falsification, misrepresentation or deliberate
omission of data will be deemed a material breach of this
Agreement and sufficient cause for immediate termination of
employment. Employee shall provide such information and
consents as shall be requested in connection with a background
investigation to be conducted by the Corporation, including, but
not limited to, criminal conduct.
9. NON-COMPETITION.
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(a) Employee agrees that for a period commencing on
the date hereof and ending on October 31, 2008 unless a
different date applies pursuant to the provisions of 9(b) (the
"Expiration Date"), he shall not, anywhere in the United States
(or for such lesser area or such lesser period as may be
determined by a court of competent jurisdiction to be a
reasonable limitation on the competitive activity of Employee)
directly or indirectly:
(i) own, manage, operate, control, or invest in,
any business which develops, publishes, manages, operates,
licenses, markets or distributes any software, web site and/or
internet-based distribution system relating to K-12 testing,
test development, test preparation and/or assessment business
and instructional materials related to any such K-12 testing,
test development, test preparation and/or assessment business,
or render any services as an officer, director, employee,
partner, member, consultant or otherwise to, or have any
interest as a stockholder, partner, member, investor, lender or
otherwise in, any entity which is engaged in such activities, in
each case whether in print, film, tape, electronic, internet or
other media or forms; provided further that the foregoing shall
not prohibit Employee from owning in the aggregate less than 1%
of any class of securities listed on a national securities
exchange or traded publicly in the over-the-counter market;
which, if performed by Employee would violate this Section 9; or
(ii) solicit or attempt to solicit business of
any customers of the Corporation (including prospective
customers solicited by the Corporation during the term of his
employment) for products or services the same or in competition
with those offered, sold, produced or under development by the
Corporation during the term of his employment therewith or dealt
in by Employee during his employment with the Corporation.
(b) Notwithstanding the foregoing Section 9(a), the
terms and provisions of Section 9(a) shall not apply in the
event of a termination by the Corporation without Cause, and
shall not apply:
(i) twenty-four months after the date of
termination set forth by Employee in the Change of Control
Election Notice in the event a Change of Control occurs on or
prior to June 30, 2006, and a Change of Control Election Notice
is given by Employee to terminate this Agreement as provided in
Section 1 hereof; or
(ii) twelve months after the date of termination
set forth by Employee in the Change of Control Election Notice
in the event a Change of Control occurs after June 30, 2006, and
a Change of Control Election Notice is given by Employee to
terminate this Agreement as provided in Section 1 hereof; or
(iii) eighteen months after the Date of
Termination as set forth in the Notice of Termination as
provided in Section 6(c) in the event of a termination for Cause
as defined in Section 6 hereof on or prior to June 30, 2006; or
(iv) twelve months after the Date of Termination
as set forth in the Notice of Termination as provided in Section
6(c) in the event of a termination for Cause as defined in
Section 6 hereof after June 30, 2006.
(c) NON-SOLICITATION AND NON-HIRE. Employee agrees
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that for a period beginning on the date hereof and ending two
years after the applicable Expiration Date, he shall not,
directly or indirectly, solicit or attempt to solicit for any
business endeavor any employee of the Corporation, or solicit or
attempt to solicit, or interfere with any business relationship
between the Corporation and any other person or entity which
existed during the term of employment ("Current Business
Relationship"); provided, however, that for the two year period
after the applicable Expiration Date, "Current Business
Relationship" shall be limited to any business relationship
between the Corporation and any other person or entity existing
on the applicable Expiration Date or which the Corporation is
taking reasonable steps to procure at the time of or immediately
prior to the applicable Expiration Date; and provided, further,
however, that nothing in this Section 9(c) shall prohibit
Employee from soliciting business from any such person or entity
related to a contract or business relationship that was not in
existence on the applicable Expiration Date or which expired
after the applicable Expiration Date by its terms without
renewal or extension or continuing negotiation with respect
thereto.
(d) Nothing in this Section 9 shall waive any of the
obligations of Employee under Section 8.
10. REMEDIES AND SURVIVAL. Because the Corporation does
---------------------
not have an adequate remedy at law to protect its interest in
its trade secrets, privileged, proprietary or confidential
information and similar commercial assets, or its business from
Employee's competition, the Corporation shall be entitled to
injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach of any of the provisions of
Sections 8 or 9, be available to the Corporation. A breach of
any provision of Section 8 or 9 shall constitute irreparable
harm and be deemed a material breach under this Agreement. The
provisions of Sections 8 and 9 and this Section 10 shall survive
any termination of Employee's employment with the Corporation
for any reason whatsoever.
11. SEVERANCE PAYMENT.
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(a) The Company shall pay to Employee a severance
payment in the amounts and under the circumstances set forth as
follows:
(i) in the event a Change of Control occurs on
or prior to June 30, 2006, and a Change of Control Election
Notice is given by Employee to terminate this Agreement as
provided in Section 1 hereof, twenty-four months of his then
current base salary as in effect on the Employee's last day of
employment;
(ii) in the event a Change of Control occurs after
June 30, 2006, and a Change of Control Election Notice is given
by Employee to terminate this Agreement as provided in Section 1
hereof, twelve months of his then current base salary as in
effect on the Employee's last day of employment.
(b) The severance payment shall be payable in
full within twenty (20) business days after the termination of
Employee's employment, unless the parties agree otherwise.
