EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
Dated as of February 5, 2002
by and between
AMERICAN SOFTWARE, INC.
and
INFOCROSSING, INC.
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of February 5,
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2002 by and among AMERICAN SOFTWARE, INC., a Georgia corporation ("Seller") and
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INFOCROSSING, INC., a Delaware corporation ("Purchaser").
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W I T N E S S E T H:
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WHEREAS, Seller owns 1,000 shares (the "Shares") of common stock, no
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par value, of AMQUEST, INC., a Georgia corporation (the "Company"), such Shares
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being all of the outstanding shares of capital stock of the Company;
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Shares pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Shares pursuant to this Agreement,
Purchaser shall own all of the outstanding shares of capital stock of the
Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises hereinafter contained, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto intending to be legally bound hereby agree as follows:
ARTICLE I
DEFINITIONS
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(S)1.1 Definitions.
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(a) Defined Terms. When used in this Agreement, the following terms
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shall have the respective meanings specified therefor below.
"Affiliate" shall mean, with respect to any Person, any other Person
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directly or indirectly controlling, controlled by, or under common control with,
such Person; provided that, for the purposes of this definition, "control"
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(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise and provided, further,
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that an Affiliate of any Person shall also include (i) any Person that directly
or indirectly owns more than five percent (5%) of any class of capital stock or
other equity interest of such Person, (ii) any officer, director, trustee or
beneficiary of such Person, (iii) any spouse, parent, sibling or descendant of
any Person described in clauses (i) or (ii) above, and (iv) any trust for the
benefit of any Person described in clauses (i) through (iii) above or for any
spouse, issue or lineal descendant of any Person described in clauses (i)
through (iii) above.
"Application Service Provider Services" shall mean the management and
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distribution of Seller Software based services and solutions to Persons from a
data center that is (i) owned or leased by a Seller Entity, and (ii) operated by
a Seller Entity.
"Business Day" shall mean any day, other than a Saturday, Sunday or a
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day on which banks located in New York, New York or Atlanta, Georgia shall be
authorized or required by law to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
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time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at Closing Date and
any subsequent provisions of the Code, amendatory thereof, supplemental thereto
or substituted therefor.
"Company Intellectual Property" shall mean any Intellectual Property or
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rights thereto used by the Company in connection with its business and owned by
or under license to the Company, the Seller or American Software USA, Inc.
Company Intellectual Property (i) shall include, without limitation, any item
reflected on the Unaudited Balance Sheet, and (ii) shall not include application
software products or data provided by and hosted for third parties.
"Company Property" shall mean any real property and improvements owned
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(directly, indirectly, or beneficially), leased, used, operated or occupied by
the Company.
"Environmental Law" shall mean any Law, Order or other requirement of
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Law, including any principle of common Law, relating to the protection of human
health or the environment, or to the manufacture, use, transport, treatment,
storage, disposal, release or threatened release of petroleum products,
asbestos, urea formaldehyde insulation, polychlorinated biphenyls or any
substance listed, classified or regulated as hazardous or toxic, or any similar
term, under such Environmental Law.
"GAAP" shall mean U.S. generally accepted accounting principles.
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"Governmental or Regulatory Authority" shall mean any instrumentality,
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subdivision, court, administrative agency, commission, official or other
authority of the United States or any other country or any state, province,
prefect, municipality, locality or other government or political subdivision
thereof, or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority.
"Indebtedness" of any Person shall mean and include (i) indebtedness
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for borrowed money or indebtedness issued or incurred in substitution or
exchange for indebtedness for borrowed money, (ii) amounts owing as deferred
purchase price for property or services, including all seller notes and
"earn-out" payments, (iii) indebtedness evidenced by any note, bond, debenture,
mortgage or other debt instrument or debt security, (iv) commitments or
obligations by which such Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (v)
indebtedness secured by a Lien on assets or properties of such Person, (vi)
obligations or commitments to repay deposits or other amounts advanced by and
owing to third parties, (vii) obligations under any interest rate, currency or
other hedging agreement, (viii) any obligation to pay rent or other amounts
under
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any lease of (or other arrangement conveying the right to use) real or personal
property, which such obligation is required to be treated as a capitalized lease
under GAAP, or (ix) guarantees or other contingent liabilities (including so
called take-or-pay or keep-well agreements) with respect to any indebtedness,
obligation, claim or liability of any other Person of a type described in
clauses (i) through (viii) above. Indebtedness shall not, however, include
accounts payable to trade creditors and accrued expenses arising in the ordinary
course of business consistent with past practice and shall not include the
endorsement of negotiable instruments for collection in the ordinary course of
business.
"Intellectual Property" shall mean any of the following: (i) patents,
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domestic and foreign, and applications and statutory registrations of any nature
and their direct off-shoots; (ii) registered and common law trade and service
marks, pending registration applications therefor, and intent-to-use
registrations or similar reservations of marks; (iii) registered and
unregistered copyrights, and applications for registration; (iv) Sites; (v)
trade secrets and proprietary information not otherwise listed in (i) through
(iv) above, including inventions, invention disclosures, moral and economic
rights of authors and inventors (however denominated), confidential information,
technical data, customer lists, corporate and business names, trade names, trade
dress, brand names, know-how, methods, designs, processes, procedures,
technology, source codes, object codes, computer software, databases or
collections and derivatives, improvements and refinements thereof, howsoever
recorded, or unrecorded; and (vi) good will associated with any of the
foregoing.
"IRS" shall mean the United States Internal Revenue Service.
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"Key Employee" shall mean the individuals set forth on Schedule
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1.1(a)(i).
"Law" shall mean any statute, law, ordinance, rule or regulation of any
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Governmental or Regulatory Authority.
"Liens" shall mean liens, security interests, options, rights of first
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refusal, claims, easements, mortgages, charges, indentures, deeds of trust,
rights of way, restrictions on the use of real property, encroachments, licenses
to third parties, leases to third parties, security agreements, or any other
encumbrances and other restrictions or limitations on use of real or personal
property or irregularities in title thereto.
"Material Adverse Change" or "Material Adverse Effect" shall mean, (i)
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when used with respect to the Company, any materially adverse change in or
effect on the business, assets, liabilities, results of operation, condition
(financial or otherwise) or prospects of the Company, taken as a whole, other
than changes or effects relating to general economic conditions, or general
conditions in the information technology infrastructure management services
industry, in each case, which do not disproportionately affect the Company, or
(ii) when used with respect to Purchaser or Seller, as the case may be, any
materially adverse change in or effect on (including any material delay) the
ability of Purchaser or Seller, as the case may be, to perform their respective
obligations hereunder.
"Order" shall mean any judgment, order, injunction, decree, writ,
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permit or license of any Governmental or Regulatory Authority or any arbitrator.
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"Permitted Liens" shall mean (i) Liens reflected in the Balance Sheet,
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(ii) Liens consisting of zoning or planning restrictions or regulations,
easements, Permits, restrictive covenants, encroachments and other restrictions
or limitations on the use of real property or irregularities in, or exceptions
to, title thereto which, individually or in the aggregate, do not materially
detract from the value of, or impair the use of, such property by the Company
and (iii) Liens for current taxes, assessments or governmental charges or levies
not yet due and payable.
"Person" shall mean and include an individual, a partnership, a joint
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venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an incorporated organization and a Governmental or
Regulatory Authority.
"Seller Entity" shall mean each of Seller, American Software USA, Inc.,
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Logility, Inc. and each other Affiliate of the Seller (other than the Company)
as of the Closing Date.
"Seller Software" shall mean software applications which have been
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developed by or for any Seller Entity as at the Closing Date which are licensed
by any Seller Entity in the ordinary and regular course of its business to any
third Person.
"Sites" shall mean internet domain names, applications and reservations
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therefor, universe resource locators and the corresponding Internet sites.
"Subsidiary" shall mean, with respect to any Person, (i) any
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corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is owned by such Person directly or indirectly
through one or more Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through one or more Subsidiaries of such Person has more than a 50%
equity interest.
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
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levies or other governmental charges, including all federal, state, local,
foreign and other income, franchise, profits, gross receipts, capital gains,
capital stock, transfer, sales, use, value added, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, social security,
withholding and other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Return (as defined
below)), all estimated taxes, deficiency assessments, additions to tax,
penalties and interest and shall include any liability for such amounts as a
result either of being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any Person or other
entity.
"Working Capital" shall mean the amount by which the Company's current
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assets exceed its current liabilities, determined in accordance with GAAP, in a
manner consistent with the policies and principles used by the Company in
connection with the preparation of the Balance Sheet, except that the current
portion of any capital leases shall be excluded from
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current liabilities for purposes of determining such amount. For purposes of the
foregoing sentence, the current portion of capital leases shall include any sums
accruing under such leases with respect to the twelve months following the date
on which Working Capital is determined.
"Working Capital Target Amount" shall mean Two Hundred and Fifty
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Thousand Dollars ($250,000).
(b) Additional Defined Terms. In addition to the terms defined in
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(S)1.1, the following terms shall have the respective meanings assigned thereto
in the sections indicated below.
Defined Term Section
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Acquired Entity (S)5.3(b)
Actual Value (S)2.3(b)(ii)
ADSP (S)7.8
Agreed Claims (S)8.3(c)
Agreement Preamble
Allocation (S)7.8
Arbitrator (S)2.3(b)(ii)
ASI Software ss.5.7
Xxxxx Assignment Agreement (S)6.1(d)(iii)
Xxxxx Claim (S)5.6
Balance Sheet (S)3.7(a)
Balance Sheet Date (S)3.7(a)
Certificate (S)8.3(a)
Closing (S)2.4
Closing Date (S)2.4
COBRA (S)5.5
Common Stock (S)3.5
Company First Recital
Company Customer (S)5.3(a)(i)
Company/Sprint Agreements (S)5.3(a)(ii)(C)
Confidentiality Agreement (S)5.1(a)
Contract (S)3.3(a)
Effective Date (S)2.2(a)
Effective Date Working Capital (S)2.3(a)
Employee Benefit Plans (S)3.21(a)
ERISA (S)3.21(a)
Estimated Working Capital (S)2.2(a)
Estimated Working Capital Difference (S)2.2(a)
Exhibit A Property (S)3.17(a)
High Value (S)2.3(b)(ii)
Indemnified Party (S)8.3(a)
Indemnifying Party (S)8.3(a)
Lease Agreement (S)6.1(d)(i)
Lease Guaranty (S)6.1(d)(vii)
Losses (S)8.2(a)
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Defined Term Section
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Low Value (S)2.3(b)(ii)
Medical Plan (S)5.5
Multiemployer Plan (S)3.21(c)
Notice of Objection (S)2.3(b)(i)
Overlap Period (S)7.1(b)
Permit (S)3.25
Pre-Closing Periods (S)3.15(b)
Purchase Price (S)2.2(b)
Purchaser Preamble
Purchaser Indemnitee (S)8.2(a)
Returns (S)3.15(a)
Seller Preamble
Seller Indemnitee (S)8.2(b)
Seller/Sprint Agreements (S)8.2(b)
Service Fee Letter Agreement (S)6.1(d)(vi)
Services Agreement (S)6.1(d)(ii)
Shares First Recital
Tax Benefit (S)8.2(f)
Tax Matter (S)7.3(a)
Temporary Staffing Business (S)3.6(b)
Unaudited Balance Sheet (S)3.7(a)
Unaudited Balance Sheet Date (S)3.7(a)
VEBAs (S)3.21(a)
WARN (S)3.20(l)
Warranty Claims (S)3.29
(S)1.2 Construction. In this Agreement, unless the context otherwise
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requires:
(a) any reference in this Agreement to "writing" or comparable
expressions includes a reference to facsimile transmission or comparable means
of communication;
(b) words expressed in the singular number shall include the plural
and vice versa, words expressed in the masculine shall include the feminine and
neuter gender and vice versa;
(c) references to Articles, Sections, Exhibits, Schedules and
Recitals are references to articles, sections, exhibits, schedules and recitals
of this Agreement;
(d) reference to "day" or "days" are to calendar days;
(e) this "Agreement" or any other agreement or document shall be
construed as a reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time to time be,
amended, varied, novated or supplemented; and
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(f) "include," "includes," and "including" are deemed to be followed by
"without limitation" whether or not they are in fact followed by such words or
words of similar import.
(S)1.3 Schedules and Exhibits. The Schedules and Exhibits to this Agreement
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are incorporated into and form an integral part of this Agreement. If an Exhibit
is a form of agreement, such agreement, when executed and delivered by the
parties thereto, shall constitute a document independent of this Agreement.
(S)1.4 Knowledge. (a) Where any representation or warranty contained in
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this Agreement is expressly qualified by reference to the knowledge of Seller,
it means the actual or implied knowledge of the officers and directors of
Seller, and for this purpose, "implied knowledge" means all information that
such officers and directors should have known (i) in the course of operating and
managing the business and affairs of the Company, assuming they operated and
managed such business and affairs in accordance with prudent and customary
business practices, or (ii) after having made due and diligent inquiry of all
persons responsible for the operation and management of the business and affairs
of the Company, as to the matters that are the subject of such representations
and warranties.
(b) Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge of Purchaser, it means the
actual or implied knowledge of Xxxx Xxxxxxxx, Xxxxxx Xxxxxxx and Xxxxxxxx
Xxxxxxx, and for this purpose, "implied knowledge" means all information that
such persons should have known (i) in the course of operating and managing the
business and affairs of Purchaser, assuming they operated and managed such
business and affairs in accordance with prudent and customary business
practices, or (ii) after having made due and diligent inquiry of all persons
responsible for the operation and management of the business and affairs of
Purchaser, as to the matters that are the subject of such representations and
warranties.
ARTICLE II
SALE OF SHARES
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(S)2.1 Sale of Shares. On the terms, and subject to the conditions, set
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forth in this Agreement, Seller agrees to sell, assign, transfer and deliver to
Purchaser on the Closing Date, and Purchaser agrees to purchase from Seller on
the Closing Date, the Shares. The certificates representing the Shares shall be
duly endorsed in blank, or accompanied by either stock powers duly executed in
blank by Seller or such other instruments of transfer as are reasonably
acceptable to Purchaser in each case, with all necessary transfer tax and other
revenue stamps, acquired at Seller's expense, affixed and canceled. Seller
agrees to cure any deficiencies with respect to the endorsement of the
certificates representing the Shares or with respect to the stock power
accompanying any such certificates.
(S)2.2 Determination and Payment of Closing Payment. (a) At least two (2)
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but no more than five (5) Business Days prior to the Closing Date, Seller shall
have caused the Company to prepare and deliver to Purchaser (i) a statement
setting forth a good faith estimate of the aggregate Working Capital of the
Company (the "Estimated Working Capital"), as of
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January 31, 2002 (the "Effective Date"), which shall quantify in reasonable
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detail the items constituting such Working Capital, and (ii) a statement of the
difference between the Working Capital Target Amount and the Estimated Working
Capital, which amount could be a positive or a negative number (such amount, the
"Estimated Working Capital Difference"). The statement of Estimated Working
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Capital shall be prepared in accordance with GAAP and in a manner consistent
with the policies and principles used by the Company in connection with the
preparation of the Balance Sheet.
(b) In consideration for the sale of the Shares by Seller to Purchaser,
Purchaser shall deliver to Seller at the Closing an amount equal to the amount
by which Twenty Million Dollars ($20,000,000) exceeds the Estimated Working
Capital Difference (which Estimated Working Capital Difference could be a
positive or a negative number) (the "Purchase Price"), by certified check or
wire transfer of immediately available funds to the account notified by Seller
in writing to Purchaser at least two (2) Business Days prior to the Closing
Date.
(S)2.3 Determination of Purchase Price. (a) Promptly after the Closing
Date, and in any event not later than sixty (60) days following the Closing
Date, Purchaser shall cause the Company to prepare and deliver to Seller a
statement of the aggregate Working Capital of the Company (the "Effective Date
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Working Capital"), as of the Effective Date, which shall quantify in reasonable
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detail the items constituting such Working Capital. The Effective Date Working
Capital shall be prepared in accordance with GAAP and in a manner consistent
with the policies and principles used by the Company in connection with the
preparation of the Balance Sheet. Upon delivery of such statements by Purchaser,
Purchaser shall provide Seller and its representatives with reasonable access
during business hours to the books and records of the Company in order to allow
Seller and its representatives to verify the accuracy of determination by
Purchaser of the Effective Date Working Capital.
(b) (i) In the event that Seller does not object to the determination
by Purchaser of the Effective Date Working Capital by written notice of
objection(the "Notice of Objection") delivered to Purchaser within fifteen (15)
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Business Days after Seller's receipt of the statements referred to in Section
2.3(a), such Notice of Objection to describe in reasonable detail Seller's
proposed adjustments to the Effective Date Working Capital, the Effective Date
Working Capital shall be deemed final and binding.
(ii) If Seller delivers a Notice of Objection to Purchaser, then
any dispute shall be resolved as follows:
(A) Seller and Purchaser shall promptly endeavor to agree upon the
determination of the Effective Date Working Capital. In the event that a
written agreement determining the amount of the Effective Date Working
Capital has not been reached within ten (10) Business Days after the date
of receipt by Purchaser from Seller of the Notice of Objection, Purchaser's
determination of the Effective Date Working Capital shall be submitted to a
certified public accountant who has a minimum of ten (10) years of
experience with, and is currently employed by, one of the top five (5)
national accounting firms with which none of the parties have had a prior
relationship (the "Arbitrator").
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(B) Within thirty (30) days of the submission of any
dispute concerning the determination of the Effective Date
Working Capital to the Arbitrator, the Arbitrator shall render
a decision in accordance with this Section 2.3(b) along with a
statement of reasons therefor. The decision of the Arbitrator
shall be final and binding upon each party hereto.
(C) In the event Seller and Purchaser submit any
unresolved disputes to the Arbitrator for resolution, Seller
and Purchaser shall share responsibility for the fees and
expenses of the Arbitrator as follows:
(1) if the Arbitrator resolves all of the
remaining objections in favor of Purchaser's position (the
Effective Date Working Capital so determined is referred to
herein as the "Low Value"), then Seller shall be responsible
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for all of the fees and expenses of the Arbitrator;
(2) if the Arbitrator resolves all of the
remaining objections in favor of Seller's position (the
Effective Date Working Capital so determined is referred to
herein as the "High Value"), then Purchaser shall be
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responsible for all of the fees and expenses of the
Arbitrator; and
(3) if the Arbitrator neither resolves all of the
remaining objections in favor of Purchaser's position nor
resolves all of the remaining objections in favor of Seller's
position (the Effective Date Working Capital so determined is
referred to herein as the "Actual Value"), Seller shall be
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responsible for that fraction of the fees and expenses of the
Arbitrator for the Effective Date Working Capital equal to (x)
the difference between the High Value and the Actual Value
over (y) the difference between the High Value and the Low
Value, for the Effective Date Working Capital, and Purchaser
shall be responsible for the remainder of the fees and
expenses of the Arbitrator.
(c) If the Effective Date Working Capital is less than the
amount of the Estimated Working Capital, then Seller shall be obligated to pay
to Purchaser the amount of any such deficiency within three (3) Business Days
after the determination of the Effective Date Working Capital by wire transfer
of immediately available funds to an account designated in writing by Purchaser.
If the Effective Date Working Capital exceeds the amount of the Estimated
Working Capital, then Purchaser shall be obligated to pay to Seller the amount
of any such excess within three (3) Business Days after the determination of the
Effective Date Working Capital by wire transfer of immediately available funds
to an account designated in writing by Seller.
(d) Notwithstanding any other provision in this Agreement,
the parties hereto agree that all earnings, cash flow and other receipts of the
Company for the period from the Effective Date through the Closing Date shall be
for the benefit of and retained by the Company.
(S)2.4 Closing. The sale referred to in Section 2.1 (the
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"Closing") shall take place immediately after the execution of this Agreement by
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the parties hereto at the offices of Holland & Knight LLP, 0000 Xxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx or at such other time, date
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(not later than February 5, 2002) and place as the parties hereto shall agree.
Such date is referred to herein as the "Closing Date".
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(S)2.5 Transaction Costs of the Company. At the Closing, Seller shall
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pay, or reimburse the Company for, all fees and expenses (including the fees and
expenses of counsel, accountants and other professional advisors) incurred by
the Company in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS OF SELLER
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(S)3. Representations of Seller. Seller represents, warrants and
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agrees as follows:
(S)3.1 Ownership of Shares; Existence and Good Standing of Seller.
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Seller is the lawful owner, beneficially and of record, of all of the Shares,
free and clear of all Liens. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia. The
delivery to Purchaser of the Shares pursuant to this Agreement will, assuming
the payment in full of the Purchase Price, transfer to Purchaser good and valid
title to all of the outstanding capital stock of the Company, free and clear of
all Liens.
(S)3.2 Authority and Enforceability. Seller has the corporate power
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and authority to execute and deliver this Agreement and the other instruments
and agreements to be executed and delivered by Seller as contemplated hereby.
Seller has the corporate power and authority to consummate the transactions
contemplated hereby and by the other instruments and agreements to be executed
and delivered by Seller as contemplated hereby, including the sale, assignment,
transfer and conveyance of the Shares pursuant to this Agreement. The execution,
delivery and performance of this Agreement, and all other instruments and
agreements to be executed and delivered by Seller as contemplated hereby, and
the consummation of the transactions contemplated hereby and thereby, have been
duly authorized by Seller's Board of Directors and no other corporate or
shareholder action on the part of Seller or its shareholders is necessary to
authorize the execution, delivery and performance of this Agreement and such
other instruments and agreements by Seller and the consummation of the
transactions contemplated hereby and thereby. This Agreement and all other
instruments and agreements to be executed and delivered by Seller as
contemplated hereby, when delivered in accordance with the terms hereof,
assuming the due execution and delivery of this Agreement and each such other
document by the other parties hereto and thereto, shall have been duly executed
and delivered by Seller and shall be valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except to the extent
that their enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
(S)3.3 Consents and Approvals; No Violations. (a) Other than as set
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forth on Schedule 3.3(a), the execution and delivery of this Agreement by Seller
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do not, the execution and delivery by Seller of the other instruments and
agreements to be executed and delivered by Seller as contemplated hereby will
not, and the consummation by Seller of the transactions
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contemplated hereby and thereby will not, result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Lien on any of the
properties or assets of Seller or the Company under: (i) any provision of the
articles of incorporation or by-laws of Seller or the Company; (ii) subject to
obtaining and making any of the approvals, consents, notices and filings
referred to in paragraph (b) below, any Law or Order applicable to Seller or the
Company or by which any of their respective properties or assets may be bound;
(iii) any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, license, franchise, permit, agreement, understanding,
arrangement, contract, commitment, lease, franchise agreement or other
instrument or obligation (whether oral or written) (each, including all
amendments thereto, a "Contract") to which Seller or the Company is a party, or
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by which they or any of their respective properties or assets is bound except in
the case of clauses (ii) and (iii) above, for such violations, filings, permits,
consents, approvals, notices, breaches or conflicts which could not reasonably
be expected to have a Material Adverse Effect with respect to Seller or the
Company.
(b) Except for such filings and approvals as are set forth on
Schedule 3.3(b), no consent, approval or action of, filing with or notice to any
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Governmental or Regulatory Authority or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or Order
applicable to Seller or the Company or by which any of their respective
properties or assets may be bound, any Contract to which Seller or the Company
is a party or by which any of them or any of their respective assets or
properties may be bound, for the execution and delivery of this Agreement by
Seller, the performance by Seller of its obligations hereunder or the
consummation of the transactions contemplated hereby other than those which, the
failure to obtain or make, could not reasonably be expected to have a Material
Adverse Effect with respect to the Company or Seller.
(S)3.4 Existence and Good Standing of the Company. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. The Company has all requisite corporate power and
authority to own its property and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the character or location of the properties owned,
leased or operated by the Company or the nature of the business conducted by the
Company makes such qualification necessary, except for such jurisdictions where
the failure to be so qualified or licensed and in good standing could not
reasonably be expected to have a Material Adverse Effect with respect to the
Company.
(S)3.5 Capital Stock. The Company has an authorized capitalization
-------------
consisting of 100,000 shares of common stock, no par value ("Common Stock"), of
------------
which 1,000 shares are issued and outstanding and no shares are held in the
Company's treasury. All such outstanding shares of capital stock have been duly
authorized and validly issued, are fully paid and nonassessable and are not
subject to, nor were they issued in violation of, any preemptive rights. Except
as described above, no shares of capital stock of the Company are authorized,
issued, outstanding or reserved for issuance. There are no outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments contingent or otherwise, relating to the capital stock of, or other
equity or voting interest in, the Company, pursuant to which the Company is or
-11-
may become obligated to issue, deliver or sell or cause to be issued, delivered
or sold, shares of Common Stock, any other shares of the capital stock of or
other equity or voting interest in, the Company or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of the capital stock of or other equity or voting interest in, the
Company. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the capital stock
of, or other equity or voting interest in, the Company. The Company has no
authorized or outstanding bonds, debentures, notes or other Indebtedness the
holders of which have the right to vote (or convertible into, exchangeable for,
or evidencing the right to subscribe for or acquire securities having the right
to vote) with the shareholders of the Company on any matter. There are no
Contracts to which the Company is a party or by which the Company is bound to
(i) repurchase, redeem or otherwise acquire any shares of capital stock of, or
other equity or voting interest in, the Company or any other Person or (ii) vote
or dispose of any shares of capital stock of, or other equity or voting interest
in, the Company. There are no outstanding proxies and no voting agreements with
respect to any shares of capital stock of, or other equity or voting interest
in, the Company.
(S)3.6 Subsidiaries and Investments.
----------------------------
(a) The Company has no Subsidiaries and has never had any
Subsidiaries. The Company does not own, directly or indirectly, any capital
stock of, or other equity, ownership, proprietary or voting interest in, any
Person.
(b) The temporary staffing business conducted by the Company prior
to the Closing, together with all Contracts to which the Company is a party and
all other rights and obligations of the Company relating thereto (collectively,
the "Temporary Staffing Business") have been terminated or disposed of,
---------------------------
transferred or spun-off to Seller, without liability or cost to the Company.
(S)3.7 Financial Statements; Accounts Receivable; Working Capital.
----------------------------------------------------------
(a)Seller has furnished Purchaser with the audited balance sheets of the Company
as of April 30, 2000 and April 30, 2001, and the related audited statements of
operations, shareholders' equity and cash flows for the years then ended
together with statements of operations, shareholders' equity and cash flows for
the year ended April 30, 1999, all certified by the Company's accountants, and
the unaudited balance sheet of the Company as at December 31, 2001 and the
related unaudited statements of operations, shareholders' equity and cash flows
for the eight (8) months then ended (the audited balance sheet of the Company as
at April 30, 2001 (the "Balance Sheet Date") is hereinafter referred to as the
------------------
"Balance Sheet", and the unaudited balance sheet of the Company as at December
-------------
31, 2001 (the "Unaudited Balance Sheet Date") is hereinafter referred to as the
----------------------------
"Unaudited Balance Sheet"). The financial statements referred to above,
-----------------------
including the footnotes thereto, except as described therein, have been prepared
in accordance with GAAP consistently applied throughout the periods indicated,
subject, in the case of the Unaudited Balance Sheet and the unaudited statements
of operations, shareholders' equity and cash flows for the eight (8) months
ended December 31, 2001, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be material) and the absence
of notes (that, if presented, would not differ materially from those included in
the Balance Sheet).
-12-
(b) The Balance Sheet and such other audited balance sheets of the
Company referred to in (a) above fairly present, in all material respects, the
financial condition of the Company at the date thereof and the related
statements of operations, shareholders' equity and cash flows fairly present, in
all material respects, the results of the operations and cash flows of the
Company and the changes in its financial condition for the periods indicated.
(c) The Unaudited Balance Sheet fairly presents, in all material
respects, the financial condition of the Company as of the date thereof and the
related statements of operations, shareholders' equity and cash flows fairly
present, in all material respects, the results of operations and cash flows of
the Company and the changes in its financial condition for the periods
indicated.
(d) All of the Company's accounts and notes receivable as at the
Closing Date have arisen from bona fide sales transactions in the ordinary
course of business, are carried at values determined in accordance with GAAP
consistently applied, and are legal, valid and binding obligations of the
respective debtors. No person has any Lien on, valid set-off or counterclaim
against any of the Company's accounts or notes receivable and no request or
Contract for any deduction or discount has been made or is contemplated with
respect to any of the Company's accounts or notes receivable. No account or note
receivable has been collected prior to the due date thereof except in a manner
consistent with past practices in the ordinary course of business. There has
been no material adverse change since the Balance Sheet Date in the amount of
accounts and notes receivable of the Company or the allowances or reserves with
respect thereto, or accounts payable of the Company, from that reflected in the
Balance Sheet.
(S)3.8 Liabilities; Indebtedness. (a) Except as set forth on Schedule
------------------------- --------
3.8(a), the Company has no claims, obligations or liabilities, whether absolute,
-----
accrued, contingent or otherwise, except for (i) claims, obligations or
liabilities set forth in the Balance Sheet or specifically disclosed in the
footnotes thereto, (ii) accounts payable to trade creditors and accrued expenses
incurred subsequent to the Balance Sheet Date in the ordinary course of business
and which, individually and in the aggregate, could not reasonably be expected
to have a Material Adverse Effect with respect to the Company, and (iii) claims,
obligations or liabilities which are not of the type required to be reflected on
a balance sheet prepared in accordance with GAAP which do not exceed $5,000
individually or $15,000 in the aggregate.
(b) Except as set forth on Schedule 3.8(b), the Company has no
---------------
Indebtedness.
(S)3.9 Books and Records. The minute book of the Company, as
-----------------
previously made available to Purchaser and its representatives, contains
accurate records of all meetings of, and corporate action taken by (including
action taken by written consent) the shareholders and Board of Directors of the
Company. The Company has none of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Company.
(S)3.10 Title to Personal Properties. Except as set forth on Schedule
---------------------------- --------
3.10(a), the Company has good title to or, in the case of leased assets, a valid
------
leasehold interest in, free and
-13-
clear of all Liens, except for Permitted Liens, all of the tangible and
intangible personal property and assets reflected in the Balance Sheet or
thereafter acquired, except for properties and assets disposed of in the
ordinary course of business, consistent with past practice, since the date of
the Balance Sheet. Except as set forth on Schedule 3.10(b), the Company owns or
---------------
has the exclusive right to use all of the tangible personal properties and
assets necessary for the conduct of its business as currently conducted. All of
the tangible personal property used in the business of the Company is in good
operating condition and repair, ordinary wear and tear excepted, and is adequate
and suitable for the purposes for which it is presently being used.
(S)3.11 Owned Real Property. The Company does not own any real
-------------------
property, in whole or in part.
(S)3.12 Leased Real Property. The Company does not lease or sublease
--------------------
any real property or hold any other possessory interest in real property, except
pursuant to leases of real property owned by Seller, which such leases will be
terminated, without liability to the Company, at Closing.
(S)3.13 Material Contracts. (a) Schedule 3.13(a) sets forth an
------------------ ---------------
accurate and complete list of the following Contracts to which the Company is a
party and by which it is currently bound or in respect of which assets, rights
or property are held for use by the Company by any other Person:
(i) all Contracts which contain restrictions with respect to
payment of dividends or any other distribution in respect of the capital
stock or other equity interests of the Company;
(ii) all Contracts relating to capital expenditures or other
purchases of material, supplies, equipment or other assets or properties
(other than purchase orders for inventory or supplies in the ordinary
course of business) in excess of $10,000 individually;
(iii) all Contracts involving a loan (other than accounts receivable
from trade debtors in the ordinary course of business) or advance to (other
than travel and entertainment allowances to the employees of the Company
extended in the ordinary course of business), or investment in, any Person
or any Contract relating to the making of any such loan, advance or
investment;
(iv) all Contracts involving Indebtedness of the Company;
(v) all Contracts (including so called take-or-pay or keep-well
agreements) under which any Person (other than the Company) has directly or
indirectly guaranteed Indebtedness of the Company;
(vi) all Contracts granting or evidencing a Lien on any properties
or assets of the Company, other than a Permitted Lien;
(vii) all management service, consulting, financial advisory or any
other similar type Contract and any Contracts with any investment or
commercial bank;
-14-
(viii) all Contracts limiting the ability of the Company to engage in
any line of business or to compete with any Person;
(ix) all Contracts (other than this Agreement and any agreement or
instrument entered into pursuant to this Agreement) with (A) Seller, any other
Affiliate of the Company or any Affiliate of Seller (other than the Company) or
(B) any current or former officer or director of the Company, Seller or any
Affiliate of Seller;
(x) all Contracts (including letters of intent) involving the
disposition or acquisition or the future disposition or acquisition of material
assets or properties, or any merger, consolidation or similar business
combination transaction, whether or not enforceable;
(xi) all Contracts involving any joint venture, partnership,
strategic alliance, shareholders' agreement, co-marketing, co-promotion,
co-packaging, joint development, distribution or similar arrangement;
(xii) all Contracts involving any material resolution or settlement
of any actual or threatened litigation, arbitration, claim or other dispute;
(xiii) all Contracts involving a confidentiality, standstill or
similar arrangement;
(xiv) all Contracts involving leases or subleases of personal
property, including capital leases, to which the Company is a party (as lessee
or lessor);
(xv) all Contracts which are material to the Company and contain a
"change in control" or similar provision;
(xvi) all Contracts including an indemnity by the Company for or
against costs relating to infringement of any of the Company Intellectual
Property (unless capped in liability at or below three months' of the Company's
revenues thereunder);
(xvii) all Contracts which include an obligation of the Company to
provide web hosting services or software maintenance services (unless, in either
case, terminable by the Company on no more than thirty (30) days' prior notice);
(xviii) all network interconnection Contracts;
(xix) all Contracts currently in effect or pursuant to which the
Company could have any future liability with respect to the Company's former
temporary staffing operations;
(xx) all Contracts involving $10,000 or more which are not
cancelable by the Company without penalty on thirty (30) days or less notice; or
(xxi) all other Contracts that are material to the business of the
Company taken as a whole.
-15-
(b) Except as noted on Schedule 3.13(a), each Contract set forth on
----------------
Schedule 3.13(a) (or required to be set forth on Schedule 3.13(a)) is in full
---------------- -----------------
force and effect and each covenant of Seller and, to the knowledge of Seller, of
any other party thereto required to have been performed has been fully performed
in all material respects, and there exists no (i) default or event of default by
the Company or any Person (including Seller or any of its Affiliates) holding
rights, assets or property for use by the Company or, to the knowledge of
Seller, any other party to any such Contract with respect to any material term
or provision of any such Contract, or (ii) event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default by the Company or, to the
knowledge of Seller, any other party thereto, with respect to any material term
or provision of any such Contract. Seller has delivered to Purchaser true and
complete copies, including all amendments, of each Contract set forth on
Schedule 3.13(a) that has been reduced to writing and a summary of the material
----------------
terms of each Contract set forth on Schedule 3.13(a) that has not been reduced
----------------
to writing.
(S)3.14 Litigation. Except as set forth on Schedule 3.14, there is no
---------- -------------
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by (or to the knowledge of Seller any investigation by) any
Governmental or Regulatory Authority or any other Person pending, or, to the
knowledge of Seller, threatened, against the Company or any of its properties,
assets or rights (or any properties, assets or rights held by any other Person
for use by the Company). Seller does not know of any valid basis for any such
action, proceeding or investigation. Except as set forth on Schedule 3.14, the
-------------
Company is not subject to any Order.
(S)3.15 Taxes.
-----
(a) Tax Returns. The Company has timely filed or caused to be
-----------
timely filed with the appropriate taxing authorities all tax returns,
statements, forms and reports (including, elections, declarations, disclosures,
schedules, estimates and informational tax returns) for Taxes ("Returns") that
-------
are required to be filed by, or with respect to, the Company on or prior to the
Closing Date. The Returns, including any amendments thereto, if any, accurately
reflect all liability for Taxes of the Company for the periods covered thereby.
(b) Payment of Taxes. All Taxes and Tax liabilities of the Company
----------------
for all taxable years or periods that end on or before the Closing Date and,
with respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and including
the Closing Date ("Pre-Closing Periods") have been timely paid or, except for
-------------------
income taxes which may accrue by reason of the Section 338(h)(10) election
referred to Section 7.7 hereof, accrued and adequately disclosed and fully
provided for on the books and records of the Company in accordance with GAAP
applied on a consistent basis.
(c) Other Tax Matters. (i) Except as set forth on Schedule
----------------- --------
3.15(c)(i), the Company has not been the subject of an audit or other
----------
examination of Taxes by the tax authorities of any nation, state or locality
(and to Seller's knowledge no such audit is pending or contemplated) nor has the
Company received any notices from any taxing authority relating to any issue
which could result in a material Tax liability of the Company.
-16-
(ii) Except as set forth on Schedule 3.15(c)(ii), neither Seller nor
--------------------
the Company, as of the Closing Date, (A) has entered into an agreement or waiver
or been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of the Company, (B)
is presently contesting the Tax liability of the Company before any court,
tribunal or agency, (C) has granted a power-of-attorney relating to Tax matters
to any person or (D) has applied for and/or received a ruling or determination
from a taxing authority regarding a past or prospective transaction of the
Company.
(iii) Except as set forth on Schedule 3.15(c)(iii), the Company has not
been included in the "consolidated" Return of any Person, as provided for under
the law of the United States and any applicable non-U.S. jurisdiction or any
applicable state or locality with respect to Taxes for any taxable period for
which the statute of limitations has not expired.
(iv) All Taxes which the Company is (or was) required by law to
withhold or collect in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party have been
duly withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(v) No written claim has ever been received from any taxing authority
in a jurisdiction where the Company does not file Returns that the Company is or
may by subject to taxation by that jurisdiction.
(vi) There are no tax sharing, allocation, indemnification or similar
agreements, arrangements or undertakings in effect, written or unwritten, as
between the Company or any predecessor or Affiliate thereof and any other party
(including Seller and any predecessors or Affiliates thereof) under which
Purchaser or the Company could be liable for any Taxes or other claims of any
party.
(vii) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
(viii) No election under Section 341(f) of the Code has been made to
treat the Company as a consenting corporation, as defined in Section 341 of the
Code.
(ix) The Company is not a party to any agreement that would require it
to make any payment that would constitute an "excess parachute payment" for
purposes of Sections 280G and 4999 of the Code.
(x) No indebtedness of the Company consists of "corporate acquisition
indebtedness" within the meaning of Section 279 of the Code.
(xi) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(xii) The Company is a member of Seller's affiliated group (as such
term is defined in Section 1504 of the Code) and will be included in Seller's
consolidated Federal
-17-
income Tax Return that includes the period from May 1, 2001 through the Closing
Date. As such, Seller is and will be eligible to file an election under Section
338(h)(10) of the Code with respect to a "qualified stock purchase" (as such
term is defined in Section 338 of the Code) of the stock of the Company.
(S)3.16 Insurance. Set forth on Schedule 3.16 is an accurate and
--------- -------------
complete list of each insurance policy which covers the Company or its business,
property, assets or employees (including self-insurance). Such policies are in
the name of Seller and are in full force and effect; all premiums thereon have
been paid; and Seller is otherwise in compliance in all material respects with
the terms and provisions of such policies. The Company will not be covered by
such policies following the Closing. Seller is not in default under any of the
insurance policies set forth on Schedule 3.16 (or required to be set forth on
-------------
Schedule 3.16), and, to the knowledge of Seller, there exists no event,
-------------
occurrence, condition or act (including the purchase of the Shares hereunder)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default thereunder. Seller has received
no notice of cancellation or non-renewal of any such policy or arrangement and,
to the knowledge of Seller, the termination of any such policies or arrangements
has never been threatened. To the knowledge of Seller, there exists no event,
occurrence, condition or act (including the purchase of the Shares hereunder)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would entitle any insurer to terminate or cancel any
such policies. Such policies, with respect to their amounts and types of
coverage, are adequate to insure fully, until the Closing Date, against risks to
which the Company and its property and assets are normally exposed in the
operation of the business. Since October 31, 2000, there has not been any
material adverse change in Seller's relationship with its insurers or in the
premiums payable pursuant to such policies. Schedule 3.16 also sets forth a list
-------------
of all pending claims and the claims history for the Company during the past
three (3) years (including with respect to insurance obtained but not currently
maintained).
(S)3.17 Intellectual Properties. (a) Schedule 3.17(a) lists all the
----------------------- ----------------
Company Intellectual Property owned by or licensed to Seller or American
Software USA, Inc., respectively, and any license therefor running to Seller or
American Software USA, Inc. that Seller or American Software USA, Inc. granted
(if owned) or assigned (if licensed) to the Company prior to the Closing. All
other Company Intellectual Property that is owned by or licensed to Seller or
American Software USA, Inc., respectively, is listed on Exhibit A to the
Services Agreement (the "Exhibit A Property").
------------------
(b) Schedule 3.17(b) sets forth each item of Company Intellectual
----------------
Property (i) officially registered to or in the name of the Company, Seller or
American Software USA, Inc. (i.e., registered copyrights, trade or service
marks, patents and applications) or (ii) material to the conduct of the
Company's business. For each registered listed item, Schedules 3.17(b) sets
-----------------
forth the (i) registrant, (ii) the jurisdiction where issued, registered,
legally sanctioned, filed or the equivalent, (iii) the jurisdictions of issuance
and use.
(c) Schedule 3.17(c) sets forth each license or other agreement by
----------------
which the Company enjoys the use of Company Intellectual Property, together with
(i) the identity of the licensor and licensee, and (ii) if the licensee is the
Seller or American Software USA, Inc., the basis (documented or otherwise)
pursuant to which the Company enjoys such rights.
-18-
(d) Schedule 3.17(d) sets forth each item of Intellectual Property
----------------
licensed by the Company as licensor, if any.
(e) The Intellectual Property and rights under licenses and
agreements set forth on Schedules 3.17(b), 3.17(b) and 3.17(c) include all
----------------- ------- -------
Intellectual Property rights necessary or material to the Company to conduct its
business as and where conducted on the Closing Date (including all necessary
rights to install and operate licensed Intellectual Property on the CPUs
currently used by the Company), and the Company does not use Intellectual
Property which is not owned by the Company or licensed to, and enjoyed by, the
Company under an agreement listed in Schedule 3.17(c). The business operations
----------------
of the Company, and those of Seller and American Software USA, Inc. to the
extent related to the business of the Company, do not violate, infringe,
misappropriate or misuse the Intellectual Property rights of another Person or
licenses thereof, except for such violations, infringements, misappropriations
or misuses which would not (i) individually or in the aggregate (A) interfere
with the Company's ability to conduct its business operations in a manner
substantially similar to the conduct thereof on the Closing Date, or (B) cause
the Company to suffer, incur or pay any material damages, penalties, liabilities
or claims; and (ii) in the case of Exhibit A Property, exist or arise if the
Company (rather than Seller or American Software USA, Inc.) was a signatory or
express license grantee thereof.
(f) Each item of Company Intellectual Property listed on Schedules
---------
3.17(b) which is registered, filed, issued or applied for, has been duly and
-------
validly registered in, filed in or issued by, the official governmental
registrars and/or issuers (or officially recognized issuers) of patents,
trademarks, copyrights or Internet domain names, in the various jurisdictions
(national, state, provincial, prefectural and local) indicated on such
Schedules, and except as set forth on Schedule 3.17(f), each such registration,
----------------
filing and/or issuance (i) has not been abandoned, cancelled or otherwise
compromised, (ii) has been maintained by all requisite filings, renewals and
payments, and (iii) remains in full force and effect as of the Closing Date.
Except as set forth on Schedule 3.17(f), there are no actions that must be taken
----------------
or payments that must be made by the Company within one hundred and eighty (180)
days following the Closing Date that, if not taken, will adversely effect the
Intellectual Property or the right of the Company to use same as and where used
as of the Closing Date.
(g) To the extent any Intellectual Property is or has been used
under license in the business of the Company, including that listed in Schedule
--------
3.17(c), the Company, Seller, and American Software USA, Inc., as applicable,
-------
are in compliance with such license, except for such non-compliance that would
not (i) individually or in the aggregate, (A) interfere with the Company's
ability to conduct its business operations in a manner substantially similar to
the conduct thereof on the Closing Date, or (B) cause the Company to suffer,
incur or pay any material damages, penalties, liabilities or claims; and (ii) in
the case of Exhibit A Property, exist or arise if the Company (rather than
Seller or American Software USA, Inc.) was a signatory or express license
grantee thereof. None of the Company, Seller or American Software USA, Inc. has
received notice of (A) a material default of any license which remains uncured,
(B) any claim, or a threat of any claim, from any third party challenging (1)
the right of the Company (or the Seller or American Software USA, Inc., as
applicable) to use any Intellectual Property or alleging any violation,
infringement, misuse or misappropriation by the Company, Seller or American
Software USA, Inc. of Intellectual Property or indicating that the failure to
take a
-19-
license would result in any such claim, or (2) the ownership rights of the
Company, Seller or American Software USA, Inc. in any Company Intellectual
Property or asserting any opposition, interference, invalidity, termination,
abandonment, unenforceability or other infirmity of any Company Intellectual
Property, which remains unresolved. The Seller's execution, delivery and
performance hereof (together with the other instruments and agreements
contemplated hereby) will not result in any such default, infringement or
impairment, except for such defaults, infringements or impairments that would
not (i) individually or in the aggregate, (A) interfere with the Company's
ability to conduct its business operations in a manner substantially similar to
the conduct thereof on the Closing Date, or (B) cause the Company to suffer,
incur or pay any material damages, penalties, liabilities or claims; and (ii) in
the case of Exhibit A Property, exist or arise if the Company (rather than
Seller or American Software USA, Inc.) was a signatory or express license
grantee thereof. Each license of Company Intellectual Property to which the
Company, Seller or American Software USA, Inc. is a party is a legal, valid and
binding obligation of the Company, Seller or American Software USA, Inc. and the
relevant other parties thereto, enforceable in accordance with the terms
thereof, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and to general
equitable principles, and the transactions contemplated by this Agreement will
not breach the terms thereof, except for such breaches that would not (i)
individually or in the aggregate, (A) interfere with the Company's ability to
conduct its business operations in a manner substantially similar to the conduct
thereof on the Closing Date, or (B) cause the Company to suffer, incur or pay
any material damages, penalties, liabilities or claims; and (ii) in the case of
Exhibit A Property, exist or arise if the Company (rather than Seller or
American Software USA, Inc.) was a signatory or express license grantee thereof.
Except as set forth on Schedule 3.17(g), the Company owns or is licensed to use
----------------
the Company Intellectual Property free and clear of any Liens, other than
Permitted Liens without obligation to pay any royalty or any other fees with
respect thereto.
(h) Except as set forth on Schedule 3.17(h), none of the Company,
----------------
Seller or American Software USA, Inc. has made any claim of a violation,
infringement, misuse or misappropriation by any third party (including any
employee or former employee of the Company) of the Company's, Seller's or
American Software USA, Inc.'s rights to, or in connection with, any Company
Intellectual Property, which claim is pending. Except as set forth on Schedule
--------
3.17(h), none of the Company, Seller or American Software USA, Inc. has entered
-------
into any agreement to indemnify any other Person against any charge of
infringement of any Company Intellectual Property, other than indemnification
provisions contained in customer agreements, purchase orders or license
agreements arising in the ordinary course of business.
(i) Except as set forth on Schedule 3.17(i), the Company, Seller or
----------------
American Software USA, Inc., as applicable, has secured valid written
assignments or irrevocable, perpetual, royalty-free licenses from all
consultants, contractors and employees who contributed to the creation or
development of any Company Intellectual Property for any rights to such
contributions that the Company does not already own by operation of law.
(j) The Company has published internal policies and taken all other
necessary and reasonable steps to protect and preserve the confidentiality of
all the Company's trade secrets, customer data and software and other
proprietary and confidential information (including know-how, source codes,
databases, customer lists, schematics, ideas, algorithms and processes);
-20-
and all disclosure of such information to, and use by, any third party (other
than (i) to competent regulators, accountants and counsel, in each instance
acting in their professional capacities, or (ii) pursuant to an applicable
Order) has been pursuant to the terms of a written confidentiality undertaking
between such third party and the Company. The Company has not breached any
agreements of non-disclosure or confidentiality, nor is it currently alleged or
claimed to have done so.
(k) Except as set forth on Schedule 3.17(k), for the twelve month
----------------
period prior to the Closing Date, the internet domain names and universal
resource locators listed in Schedule 3.17(a) (i) generally direct and resolve to
---------------
the appropriate internet protocol addresses, (ii) are and have been generally
accessible to Internet users supporting the Sites, and (iii) are and have been
generally operational for downloading content from the those computers
supporting the Sites, on a "24/7" basis. The Company maintains current back-up
copies of the Sites (and all related software, databases and other information)
and such back-up copies are and have been stored in a safe and secure
environment, fit for the back-up of such media, and are not located at the same
location as the server supporting the Sites. The Company has no reason to
believe that the Sites will not operate or will not continue to be accessible to
internet users on substantially a 24/7 basis prior to, at the time of, and after
the Closing Date
(l) Except as set forth on Schedule 3.17(l), each customer
----------------
agreement between the Company and a customer includes (i) either (A) a
customer's representation and warranty that performance thereof shall not
violate any right or duty owed to the owner or licensor of said customer's
application and/or data, or (B) a customer's indemnity of the Company for costs
and expenses relating to claims of infringement (whether or not proven); and
(ii) the Company's hosting of its customers applications and/or data files has
not, and does not, violate the Intellectual Property or other rights of any
third party.
(S)3.18 Compliance with Laws. The Company has complied and is in
--------------------
compliance with all applicable Laws and Orders except where the failure to so
comply, individually and in the aggregate, could not reasonably be expected to
have a Material Adverse Effect with respect to the Company. The Company has
received no notice that any violation of the foregoing is being or may be
alleged.
(S)3.19 Suppliers and Customers. Schedule 3.19(a) sets forth each
----------------------- ----------------
supplier and customer accounting for more than $5,000 of monthly purchases and
sales, as the case may be, of the Company. Except as set forth on Schedule
--------
3.19(b), the relationships of the Company with each such supplier and customer
-------
are good commercial working relationships. Except as set forth on Schedule
--------
3.19(c), no such supplier or customer has canceled or otherwise terminated or,
------
to the knowledge of Seller, threatened to cancel or otherwise terminate, its
relationship with the Company, and Seller has not received any notice that any
such supplier or customer may cancel or otherwise materially and adversely
modify its relationship with the Company or limit its services, supplies or
materials to the Company, or its usage or purchase of the services and products
of the Company either as a result of the transactions contemplated hereby or
otherwise.
(S)3.20 Employment Relations. (a) Except as set forth on Schedule
-------------------- --------
3.20, the Company has been and is in compliance with all applicable laws
----
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where
-21-
the failure to so comply, individually and in the aggregate, could not
reasonably be expected to have a Material Adverse Effect with respect to the
Company. The Company has not been and is not engaged in any unfair labor
practice.
(b) No unfair labor practice complaint against the Company is pending
before the National Labor Relations Board.
(c) There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of Seller, threatened against or involving the
Company.
(d) No union is currently certified, and there is no union
representation question and, to the knowledge of Seller, no union or other
organizational activity that would be subject to the National Labor Relations
Act (20 U.S.C.(S)151 et seq.) existing or threatened with respect to the
------
operations of the Company.
(e) No arbitration proceeding arising out of or under any collective
bargaining agreement is pending and, to the knowledge of Seller, no grievance
with respect thereto exists and no claim therefor has been asserted.
(f) The Company is not subject to or bound by any collective
bargaining or labor union agreement applicable to any Person employed by the
Company, and no collective bargaining or labor union agreement is currently
being negotiated by the Company.
(g) The Company has not experienced any material labor difficulty or
work stoppage during the last three years.
(h) There has not been, and to the knowledge of Seller there will not
be, any material adverse change in relations with employees of the Company as a
result of any announcement of the transactions contemplated by this Agreement.
(i) The Company has no Equal Employment Opportunity Commission
charges or other claims of employment discrimination pending or threatened
against it.
(j) To the knowledge of Seller, no wage and hour department
investigation has been made of the Company.
(k) There are no occupational health and safety claims pending or, to
the knowledge of Seller, threatened against the Company.
(l) Since the enactment of the Worker Adjustment and Retraining
Notification Act ("WARN"), the Company has not effectuated either (i) a "plant
----
closing" (as defined in WARN) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Company or (ii) a "mass layoff" (as defined in WARN) affecting any site of
employment or facility of the Company. The Company has not been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar Law and none of the employees of
the Company has not suffered an "employment loss" (as defined in WARN) during
the six months prior to the Closing Date.
-22-
(m) The Company is in compliance with the terms and provisions of the
Immigration Reform and Control Act of 1996, as amended, and all related
regulations promulgated thereunder except for such non-compliance which,
individually and in the aggregate, could not reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(n) Prior to the date hereof, Seller has provided Purchaser with an
accurate and complete list showing the names of all individuals whose
compensation from the Company for services rendered during the fiscal year ended
on the Balance Sheet Date exceed an annualized rate of $50,000, together with a
statement of the full amount paid or payable to each such person for services
rendered during such fiscal year and for services expected to be rendered during
the current fiscal year.
(S)3.21 Employee Benefit Plans.
----------------------
(a) List of Plans. Set forth on Schedule 3.21(a) is an accurate and
------------- ----------------
complete list of all U.S. and non-U.S. (i) "employee benefit plans," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder ("ERISA"); (ii) bonus,
-----
stock option, stock purchase, restricted stock, incentive, fringe benefit,
"voluntary employees' beneficiary associations" ("VEBAs"), under Section
-----
501(c)(9) of the Code, profit-sharing, pension, or retirement, deferred
compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans, programs, arrangements, commitments
and/or practices (whether or not insured); and (iii) employment, consulting,
termination, and severance contracts or agreements for active, retired or former
employees or directors, whether or not any such plans, programs, arrangements,
commitments, contracts, agreements and/or practices (referred to in (i), (ii) or
(iii) above) are in writing or are otherwise exempt from the provisions of ERISA
that have been established, maintained or contributed to (or with respect to
which an obligation to contribute has been undertaken) or with respect to which
any potential liability is borne by the Company (including, for this purpose and
for the purpose of all of the representations in this Section 3.21, any
predecessors to the Company and all employers (whether or not incorporated) that
would be treated together with the Company and/or Seller as a single employer
(1) within the meaning of Section 414 of the Code or (2) as a result of the
Company and/or Seller being or having been a general partner of any such
employer), since September 2, 1974 ("Employee Benefit Plans").
----------------------
(b) Status of Plans. Each Employee Benefit Plan (including any
---------------
related trust) complies in form with the requirements of all applicable laws,
including ERISA and the Code, and has at all times been maintained and operated
in compliance with its terms and the requirements of all applicable laws,
including ERISA and the Code, except for such non-compliance which, individually
and in the aggregate, could not reasonably be expected to have a Material
Adverse Effect with respect to the Company. No complete or partial termination
of any Employee Benefit Plan has occurred or is expected to occur, and no
proceedings have been instituted, and no condition exists and no event has
occurred that would constitute grounds, under Title IV of ERISA to terminate, or
appoint a trustee to administer, any Employee Benefit Plan. The Company has no
commitment, intention or understanding to create, modify or terminate any
Employee Benefit Plan. Except as required to maintain the tax-qualified status
of
-23-
any Employee Benefit Plan intended to qualify under Section 401(a) of the Code,
no condition or circumstance exists that would prevent the amendment or
termination of any Employee Benefit Plan. No event has occurred and no condition
or circumstance has existed that would result in a material increase in the
benefits under or the expense of maintaining any Employee Benefit Plan from the
level of benefits or expense incurred for the most recent fiscal year ended
thereof. No Employee Benefit Plan is a plan described in Section 4063(a) of
ERISA.
(c) Liabilities. The Company has never maintained or contributed to,
-----------
or had any obligation to contribute to (or borne any liability with respect to)
any "employee pension benefit plan" (within the meaning of Section 3(2) of
ERISA) subject to Section 412 of the Code or Section 302 or Title IV of ERISA;
any "multiple employer plan" (within the meaning of the Code or ERISA) or any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) (each such
plan, a "Multiemployer Plan").
------------------
The Company does not maintain any Employee Benefit Plan which is a
"group health plan," (as such term is defined in Section 5000(b)(1) of the Code
or Section 607(1) of ERISA) that has not been administered and operated in all
respects in compliance with the applicable requirements of Part 6 of Subtitle I
of ERISA and Section 4980B of the Code and the Company is not subject to any
liability, including additional contributions, fines, taxes, penalties or loss
of tax deduction, as a result of such administration and operation. No Employee
Benefit Plan is a "multiple employer welfare arrangement," within the meaning of
Section 3(40) of ERISA. Each Employee Benefit Plan that is intended to meet the
requirements of Section 125 of the Code meets such requirements, and each
program of benefits for which employee contributions are provided pursuant to
elections under any Employee Benefit Plan meets the requirements of the Code
applicable thereto. The Company does not maintain any Employee Benefit Plan
which is an "employee welfare benefit plan" (as such term is defined in Section
3(1) of ERISA) that has provided any "disqualified benefit" (as such term is
defined in Section 4976(b) of the Code) with respect to which an excise tax
could be imposed.
The Company does not maintain any Employee Benefit Plan (whether
qualified or non-qualified under Section 401(a) of the Code) providing for
post-employment or retiree health, life insurance and/or other welfare benefits
and having unfunded liabilities, and the Company has no obligation to provide
any such benefits to any retired or former employees or active employees
following such employees' retirement or termination of service. The Company has
no unfunded liabilities pursuant to any Employee Benefit Plan that is not
intended to be qualified under Section 401(a) of the Code.
The Company has incurred no liability for any tax or excise tax
arising under Chapter 43 of the Code, and to the knowledge of Seller, no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
No asset of the Company is subject to any Lien arising under Section
302(f) of ERISA or Section 412(n) of the Code, and no event has occurred and no
condition or circumstance has existed that would give rise to any such Lien. The
Company has not been required to provide any security under Section 307 of ERISA
or Section 401(a)(29) or 412(f) of the Code and, to the knowledge of Seller, no
event has occurred and no condition or
circumstance has existed that would give rise to any such requirement to provide
any such security.
There are no actions, suits, claims or disputes pending, or, to the
knowledge of Seller, threatened, anticipated or expected to be asserted against
or with respect to any Employee Benefit Plan or the assets of any such plan
(other than routine claims for benefits and appeals of denied routine claims).
No civil or criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or expected to
be asserted against the Company or any fiduciary of any Employee Benefit Plan,
in any case with respect to any Employee Benefit Plan. No Employee Benefit Plan
or any fiduciary thereof has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental agency.
(d) Contributions. Full payment has been timely made of all amounts
-------------
which the Company is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to which the
Company is a party, to have paid as contributions or premiums thereto as of the
last day of the most recent fiscal year of such Employee Benefit Plan ended
prior to the date hereof. All such contributions and/or premiums have been fully
deducted for income tax purposes and no such deduction has been challenged or
disallowed by any governmental entity, and to the knowledge of Seller no event
has occurred and no condition or circumstance has existed that would give rise
to any such challenge or disallowance. The Company has made adequate provision
for reserves to meet contributions and premiums and any other liabilities that
have not been paid or satisfied because they are not yet due under the terms of
any Employee Benefit Plan, applicable Law or related agreements. Benefits under
all Employee Benefit Plans are as represented and have not been increased
subsequent to the date as of which documents have been provided.
(e) Funded Status; Withdrawal Liability. No Employee Benefit Plan is
-----------------------------------
covered by Title IV of ERISA, and the Company is not currently required to
contribute to, and never has been required to contribute to, a Multiemployer
Plan.
(f) Tax Qualification. Each Employee Benefit Plan intended to be
-----------------
qualified under Section 401(a) of the Code has, as currently in effect, been
determined to be so qualified by the IRS. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from Federal
income taxation under Section 501(a) of the Code has, as currently in effect,
been determined to be so exempt by the IRS. Each VEBA has been determined by the
IRS to be exempt from Federal income tax under Section 501(c)(9) of the Code.
Since the date of each most recent determination referred to in this paragraph
(f), no event has occurred and no condition or circumstance has existed that
resulted in or, to the knowledge of Seller, is likely to result in the
revocation of any such determination or would adversely affect the qualified
status of any such Employee Benefit Plan or the exempt status of any such trust
or VEBA.
(g) Transactions. Neither the Company nor any of its directors,
------------
officers, employees or, to the knowledge of Seller, other persons who
participate in the operation of any Employee Benefit Plan or related trust or
funding vehicle, has engaged in any transaction with respect to any Employee
Benefit Plan or breached any applicable fiduciary responsibilities or
-25-
obligations under Title I of ERISA that would subject any of them to a tax,
penalty or liability for prohibited transactions or breach of any obligations
under ERISA or the Code or would result in any claim being made under, by or on
behalf of any such Employee Benefit Plan by any party with standing to make such
claim.
(h) Triggering Events. The execution of this Agreement and the
-----------------
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable, which
(either alone or upon the occurrence of any additional or subsequent event) will
or may result in any payment (whether of severance pay or otherwise), "parachute
payment" (as such term is defined in Section 280G of the Code), acceleration,
vesting or increase in benefits to any employee or former employee or director
of the Company. No Employee Benefit Plan provides for the payment of severance,
termination, change in control or similar-type payments or benefits.
(i) Documents. Seller has delivered or caused to be delivered to
---------
Purchaser and its counsel true and complete copies of all material documents in
connection with each Employee Benefit Plan, including (where applicable): (i)
all Employee Benefit Plans as in effect on the date hereof, together with all
amendments thereto, including, in the case of any Employee Benefit Plan not set
forth in writing, a written description thereof; (ii) all current summary plan
descriptions, summaries of material modifications, and material communications;
(iii) all current trust agreements, declarations of trust and other documents
establishing other funding arrangements (and all amendments thereto and the
latest financial statements thereof); (iv) the most recent IRS determination
letter, if any, obtained with respect to each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code or exempt under Section 501(a) or
501(c)(9) of the Code; (v) the annual report on IRS Form 5500-series or 990 for
each of the last three years for each Employee Benefit Plan required to file
such form; (vi) the most recently prepared actuarial valuation report for each
Employee Benefit Plan covered by Title IV of ERISA; (vii) the most recently
prepared financial statements; and (viii) all contracts and agreements relating
to each Employee Benefit Plan, including service provider agreements, insurance
contracts, annuity contracts, investment management agreements, subscription
agreements, participation agreements, and recordkeeping agreements and
collective bargaining agreements.
(S)3.22 Environmental Laws and Regulations. Except as set forth on
----------------------------------
Schedule 3.22 and except as could not reasonably be expected to have a Material
-------------
Adverse Effect with respect to the Company, (i) the Company is in compliance
with all applicable Environmental Laws, and has obtained, and is in compliance
with, all Permits required of it under applicable Environmental Laws; (ii) there
are no claims, proceedings, investigations or actions by any Governmental or
Regulatory Authority or other Person or entity pending, or to the knowledge of
Seller threatened, against the Company under any Environmental Law; and (iii)
there are no facts, circumstances or conditions relating to the past or present
business or operations of the Company (including the disposal of any wastes,
hazardous substances or other materials), or to any past or present Company
Property, that could reasonably be expected to give rise to any claim,
proceeding or action, or to any liability, under any Environmental Law.
-26-
(S)3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions.
-------------------------------------------------------------
Except as set forth on Schedule 3.23, (a) there are no Contracts, liabilities or
-------------
obligations between the Company, on the one hand, and either (i) Seller or any
or Affiliate of Seller (other than the Company) or (ii) any other Affiliate of
the Company, on the other hand, and (b) neither Seller, any Affiliate of Seller
nor any officer or director of the Company possesses, directly or indirectly,
any financial interest in, or is a director, officer or employee of, any Person
which is a client, supplier, customer, lessor, lessee, or competitor or
potential competitor of the Company. Ownership of securities of a company whose
securities are registered under the Securities Exchange Act of 1934, as amended,
of 1% or less of any class of such securities shall not be deemed to be a
financial interest for purposes of this Section 3.23.
(S)3.24 Bank Accounts and Powers of Attorney. Set forth on Schedule
------------------------------------ --------
3.24 is an accurate and complete list showing (a) the name and address of each
----
bank in which the Company has an account or safe deposit box, the number of any
such account or any such box and the names of all Persons authorized to draw
thereon or to have access thereto and (b) the names of all Persons, if any,
holding powers of attorney from the Company and a summary statement of the terms
thereof.
(S)3.25 Permits. Seller has delivered or made available to Purchaser
-------
for inspection a true and correct copy of each permit (including occupancy
permit), certificate, license, consent or authorization of any Governmental or
Regulatory Authority (each, a "Permit") obtained or possessed by the Company.
------
The Company has obtained and possesses all Permits and has made all
registrations or filings with or notices to any Governmental or Regulatory
Authority necessary for the lawful conduct of its business as presently
conducted, or necessary for the lawful ownership of its properties and assets or
the operation of its business as presently operated, other than those the
failure of which to obtain, possess or make could not reasonably be expected to
have a Material Adverse Effect with respect to the Company. All such Permits are
in full force and effect. The Company is in compliance with all such Permits
except for such non-compliance that could not reasonably be expected to have a
Material Adverse Effect with respect to the Company. Each such Permit can be
renewed or transferred in the ordinary course of business by the Company. Any
applications for the renewal of any such Permit which are due prior to the
Closing Date have been timely made or filed by the Company prior to the Closing
Date. No proceeding to modify, suspend, revoke, withdraw, terminate or otherwise
limit any such Permit is pending or, to the knowledge of Seller, threatened, and
Seller does not know of any valid basis for such proceeding, including the
transactions contemplated hereby. No administrative or governmental action or
proceeding has been taken or, to the knowledge of Seller, threatened, in
connection with the expiration, continuance or renewal of any such Permit, and
Seller does not know of any valid basis for any such proceeding.
(S)3.26 No Changes Since Balance Sheet Date. Except as set forth on
-----------------------------------
Schedule 3.26, since the Balance Sheet Date, the operations of the Company have
-------------
been conducted in the ordinary and usual course of business and there has been
no Material Adverse Change with respect to the Company; no fact, circumstance or
event exists or has occurred which could reasonably be expected to result in a
Material Adverse Change with respect to the Company; and the Company has not:
-27-
(a) amended or restated its charter or by-laws (or comparable
organizational or governing documents);
(b) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (i) any capital stock of, or other equity or
voting interest in, the Company or (ii) any securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire either (A)
any shares of capital stock of, or other equity or voting interest in, the
Company, or (B) any securities convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire, any shares of the capital stock of, or
other equity or voting interest in, the Company;
(c) declared, paid or set aside any dividend or made any distribution
with respect to, or split, combined, redeemed, reclassified, purchased or
otherwise acquired directly, or indirectly, any shares of capital stock of, or
other equity or voting interest in, the Company, or made any other change in the
capital structure of the Company;
(d) increased the compensation payable (including, but not limited to,
wages, salaries, bonuses or any other remuneration) or to become payable to any
officer, employee or agent being paid an annual base salary of $50,000 or more,
or any director of the Company, except for (i) such increases that were required
in accordance with the terms of any Employee Benefit Plan set forth on Schedule
--------
3.21(a) and (ii) salary increases made in the ordinary course of business not
------
exceeding four percent (4%) of the annual base salary for any individual;
(e) made any bonus, profit sharing, pension, retirement or insurance
payment, distribution or arrangement to or with any officer, employee or agent
being paid an annual base salary of $50,000 or more, or any director of the
Company, except for payments that were already accrued prior to the Balance
Sheet Date or were required by the terms of any Employee Benefit Plan set forth
on Schedule 3.21(a);
---------------
(f) except as set forth on Schedule 3.26, entered into, materially
-------------
amended or become subject to any Contract of a type described in Section 3.13(a)
or outside the ordinary course of business;
(g) incurred, assumed or modified any Indebtedness not set forth on
Schedule 3.13(a), except Indebtedness incurred, assumed or modified in the
---------------
ordinary course of business consistent with past practice;
(h) permitted any of its properties or assets to be subject to any
Lien (other than Permitted Liens);
(i) sold, transferred, leased, licensed or otherwise disposed of any
assets or properties material to the Company, taken as a whole except for (i)
sales of inventory in the ordinary course of business consistent with past
practice, and (ii) leases or licenses entered into in the ordinary course of
business consistent with past practice with annual lease or royalty payments
that are not reasonably expected to exceed $10,000;
(j) acquired any business or Person, by merger or consolidation,
purchase of substantial assets or equity interests, or by any other manner, in a
single transaction or a series of
-28-
related transactions, or entered into any Contract, letter of intent or similar
arrangement (whether or not enforceable) with respect to the foregoing;
(k) made any capital expenditure or commitment therefor in excess of
$10,000 individually or otherwise acquired any assets or properties (other than
inventory in the ordinary course of business consistent with practice) that are
material to the Company, taken as a whole, or entered into any Contract, letter
of intent or similar arrangement (whether or not enforceable) with respect to
the foregoing;
(l) entered into, materially amended or become subject to any joint
venture, partnership, strategic alliance, shareholders' agreement, co-marketing,
co-promotion, co-packaging, joint development or similar arrangement;
(m) written-off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business consistent with past
practice charged to applicable reserves which individually and in the aggregate
are not material to the Company, taken as a whole;
(n) canceled or waived any claims or rights of substantial value;
(o) made any change in any method of accounting or auditing practice;
(p) made any tax election or settled and/or compromised any tax
liability; prepared any Returns in a manner which is inconsistent with the past
practices of the Company, with respect to the treatment of items on such
Returns; incurred any material liability for Taxes other than in the ordinary
course of business; or filed an amended Return or a claim for refund of Taxes
with respect to the income, operations or property of the Company;
(q) paid, discharged, settled or satisfied any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than payments, discharges or satisfactions in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in the Balance Sheet;
(r) planned, announced, implemented or effected any reduction in
force, lay-off, early retirement program, severance program or other program or
effort concerning the termination of employment of employees of the Company;
(s) established, adopted, entered into, amended or terminated any
Employee Benefits Plan or any collective bargaining, thrift, compensation or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees;
(t) conducted its cash management customs and practices (including the
collection of receivables and payment of payables) other than in the ordinary
course of business consistent with past practice; or
(u) entered into any contract or letter of intent with respect to
(whether or not binding), or otherwise committed or agreed, whether or not in
writing, to do any of the foregoing.
-29-
(S)3.27 Disclosure. None of this Agreement, the financial statements
----------
referred to in Section 3.7 (including the footnotes thereto), any Schedule,
Exhibit or certificate delivered to Purchaser or its representatives by or on
behalf of Seller, the Company or any of their respective directors, officers or
employees pursuant to this Agreement or any document or statement in writing
which has been supplied to Purchaser or its representatives by or on behalf of
Seller, the Company or any of their respective directors, officers or employees
in connection with the transactions contemplated by this Agreement, contains any
untrue statement of a material fact, or omits any statement of a material fact
necessary to make the statements contained herein or therein not misleading.
There is no fact known to Seller that would have a Material Adverse Effect with
respect to the Company which has not been set forth in this Agreement, the
financial statements referred to in Section 3.7 (including the footnotes
thereto) any Schedule, Exhibit or certificate or delivered pursuant to this
Agreement.
(S)3.28 Government Contracts. Except as set forth on Schedule 3.28,
-------------------- -------------
the Company:
(a) has no contracts with any Governmental Authority involving any
information, technology or data which is classified under Executive Order 12356
of April 2, 1982;
(b) has no products or services (including research and
development) with respect to which it is a supplier, direct or, to the knowledge
of Seller, indirect, to any of the military services of the United States or the
Department of Defense;
(c) does not export (a) products or technical data under validated
licenses or technical data under General License GTDR pursuant to the U.S.
Export Administration Regulations (15 CFR Parts 768 through 799) or (b) defense
articles and defense services under the International Traffic in Arms
Regulations (22 CFR Subchapter M); or
(d) does not have a Facility Security Clearance under the
Department of Defense Industrial Security Program.
(S)3.29 Warranty Claims. There are no pending or, to the knowledge of
---------------
Seller, threatened Warranty Claims against the Company in connection with the
sales of the Company's products, which Warranty Claims exceed $10,000 in the
aggregate or are not covered by insurance, the proceeds of which will be
available to the Company at or after Closing. Except as set forth on Schedule
--------
3.29, the Company does not make any representation or warranty to its customers
----
with respect to products sold or services delivered by it. Schedule 3.29
-------------
contains a complete list of the pending, and, to the knowledge of Seller,
threatened Warranty Claims against the Company. As used herein, the phrase
"Warranty Claims" means claims by third parties for defects in products sold by
---------------
the Company which the customer claims do not meet the product warranty.
(S)3.30 Brokers' or Finders' Fees. No agent, broker, person or firm
-------------------------
acting on behalf of either Seller or the Company is, or will be, entitled to any
commission or brokers' or finders' fees from the Company or Purchaser, or from
any of their Affiliates, in connection with any of the transactions contemplated
by this Agreement.
-30-
(S)3.31 Inter-company Balances. At the Closing, all inter-
----------------------
company Indebtedness, and amounts owed, and all inter-company balances
outstanding, between Seller or any Affiliate of Seller (other than the Company),
on the one hand, and the Company, on the other hand, have been satisfied in full
in a manner that does not create any Tax or other liability for or obligation of
the Company.
(S)3.32 Conduct of Business of the Company. (a) Without
----------------------------------
prejudice to the generality of any of the foregoing representations and
warranties, during the period from the Effective Date through the Closing Date:
(b) Seller has caused the Company to conduct its operations
only in the ordinary and usual course of business and to preserve intact its
business organization, keep available the services of its officers and employees
and maintain satisfactory relationships with licensors, suppliers, distributors,
clients and others having business relationships with the Company.
Notwithstanding the immediately preceding sentence, during such period, except
as set forth on Schedule 3.32, Seller has caused the Company to refrain from the
following:
(i) declaring, paying or setting aside any dividend
or making any distribution with respect to the Company;
(ii) increasing or promising to increase the
compensation payable (including, but not limited to, wages, salaries,
bonuses or any other remuneration) or to become payable to any officer,
employee, agent or director of the Company or making or promising to
make any bonus, profit sharing, pension, retirement or insurance
payment, distribution or arrangement to or with any such officer,
employee, agent or director of the Company;
(iii) entering into, materially amending, becoming
subject to or terminating any Contract of a type described in Section
3.13(a) or any real property lease or sublease (other than pursuant to
the Lease Agreement);
(iv) incurring, assuming or modifying any
Indebtedness;
(v) subjecting any of its properties or assets or
any capital stock, or other equity or voting interests to any Lien;
(vi) selling, transferring, leasing, licensing or
otherwise disposing of any assets or properties except for leases or
licenses entered into in fulfillment of Seller's obligations under the
Services Agreement;
(vii) making any capital expenditure or commitment
therefor individually or otherwise acquiring any assets or properties;
(viii) writing-off as uncollectible any notes or
accounts receivable or waiving any claims or rights of substantial
value;
-31-
(ix) paying, discharging, settling or satisfying any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise) including, without limitation, any
accounts payable or other debts due by the Company;
(x) taking any action, engaging in any transaction
or entering into any Contract that is material to the Company;
(xi) making any loans, advances or capital
contributions to, or investments in, any other Person;
(xii) making changes to the working capital of the
Company, other than in the ordinary and usual course of business
consistent with this Section 3.32, or taking any action or omitting to
take any action that has, or could reasonably be expected to have, an
adverse effect on the working capital of the Company; and
(xiii) entering into any contract or letter of intent
(whether or not binding) with respect to, or committing or agreeing to
do, whether or not in writing, any of the foregoing.
(c) Seller has caused the Company to retain for its own
benefit and account all earnings, cash flow and other receipts
accruing to the Company in the conduct of its business for the period
from the Effective Date through the Closing Date including, without
limitation, receipts arising from payment of any accounts receivable,
invoices and other debts due to the Company.
ARTICLE IV
REPRESENTATIONS OF PURCHASER
----------------------------
(S)4. Representations of Purchaser. Purchaser represents, warrants
and agrees as follows:
(S)4.1 Existence and Good Standing of Purchaser; Power and
---------------------------------------------------
Authority. Purchaser is a corporation duly organized, validly existing and in
---------
good standing under the Laws of the State of Delaware. Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other instruments and agreements to be executed and delivered by
Purchaser as contemplated hereby. Purchaser has all requisite corporate power
and authority to consummate the transactions contemplated hereby and thereby,
including the purchase of the Shares pursuant to this Agreement. The execution,
delivery and performance of this Agreement, and all other instruments and
agreements to be executed and delivered by Purchaser as contemplated hereby, and
the consummation of the transactions contemplated hereby and thereby, have been
duly authorized by Purchaser's Board of Directors and no other corporate or
stockholder action on the part of Purchaser or its stockholders is necessary to
authorize the execution, delivery and performance of this Agreement and such
other instruments and agreements by Purchaser and the consummation of the
transactions contemplated hereby and thereby. This Agreement and all other
instruments and agreements to be executed and delivered by Purchaser as
contemplated hereby, when delivered in accordance with the terms hereof,
assuming the due execution and delivery of this Agreement and each such other
document by the
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other parties hereto and thereto, shall have been duly executed and delivered by
Purchaser and shall be legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their terms, except to the
extent that their enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the enforcement
of creditors' rights generally and to general equitable principles.
(S)4.2 Consents and Approvals; No Violations. (a) Other than
-------------------------------------
as set forth on Schedule 4.2(a), the execution and delivery of this Agreement by
---------------
Purchaser do not, the execution and delivery by Purchaser of the other
instruments and agreements to be executed and delivered by Purchaser as
contemplated hereby will not and the consummation by Purchaser of the
transactions contemplated hereby and thereby will not result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any Lien upon any
of the properties or assets of Purchaser under: (1) any provision of the
certificate of incorporation or by-laws of Purchaser; (2) subject to obtaining
and making any of the approvals, consents, notices and filings referred to in
paragraph (b) below, any Law or Order applicable to Purchaser or by which any of
its properties or assets may be bound; or (3) any Contract to which Purchaser is
a party, or by which any of its properties or assets is bound except in the case
of clauses (2) and (3) above, for such violations, filings, permits, consents,
approvals, notices, breaches or conflicts which could not reasonably be expected
to have a Material Adverse Effect with respect to Purchaser.
(b) Except for such filings and approvals as may be set
forth on Schedule 4.2(b) no consent, approval or action of, filing with or
---------------
notice to any Governmental or Regulatory Authority or private third party is
necessary or required under any of the terms, conditions or provisions of any
Law or Order, any Contract to which Purchaser is a party or by which any of its
properties or assets is bound, for the execution and delivery of this Agreement
by Purchaser, the performance by Purchaser of its obligations hereunder or the
consummation of the transactions contemplated hereby other than those, the
failure to obtain or make, which could not reasonably be expected to have a
Material Adverse Effect with respect to Purchaser.
(S)4.3 Purchase for Investment. Purchaser will acquire the
-----------------------
Shares for its own account for investment and not with a view toward any resale
or distribution thereof; provided, however, that the disposition of Purchaser's
-------- -------
property shall at all times remain within the sole control of Purchaser.
(S)4.4 No Action or Proceedings. No action or proceedings have
------------------------
been instituted or, to Purchaser's knowledge, threatened before a court or other
Governmental or Regulatory Authority to restrain or prohibit any of the
transactions contemplated hereby.
(S)4.5 Brokers' or Finders' Fees. No agent, broker, person or
-------------------------
firm acting on behalf of Purchaser is, or will be, entitled to any commission or
brokers' or finders' fees from Seller or from any Affiliate of Seller, in
connection with any of the transactions contemplated by this Agreement.
(S)4.6 Financing. On the Closing Date, Purchaser shall have
---------
sufficient cash available to satisfy its obligations to pay the Purchase Price
pursuant to this Agreement.
-33-
(S)4.7 Disclosure. There is no fact known to Purchaser that
----------
would have a Material Adverse Effect with respect to the Purchaser
ARTICLE V
COVENANTS OF SELLER AND PURCHASER
---------------------------------
(S)5.1 Confidentiality. (a) Effective upon the Closing,
---------------
Infocrossing, Inc.'s obligations under that certain Agreement regarding Mutual
Disclosure of Information made on August 2, 2001, between American Software,
Inc. and Infocrossing, Inc. (the "Confidentiality Agreement") shall terminate
-------------------------
with respect to information relating to the Company. The terms of the
Confidentiality Agreement shall otherwise be incorporated herein by reference.
(b) Seller acknowledges that it is in possession of
Confidential Information (as defined in the Confidentiality Agreement; provided,
that, for the purposes hereof, "Confidential Information" shall be deemed to
include any information, technical data or know-how regarding the Company or
Purchaser, provided or available to Seller and/or its Affiliates pursuant to (i)
the Services Agreement, or relating to any Supplier Agreement and the Subject
Matter (as those terms are defined in the Services Agreement), (ii) the Xxxxx
Assignment Agreement; and (ii) the Service Fee Letter Agreement) concerning
Purchaser and/or the Company and its business and operations. Seller agrees that
it will, and will cause its Affiliates and its and their respective directors,
officers, employees, agents and representatives, including financial advisors,
consultants, accountants and counsel (collectively "representatives") to, treat
---------------
confidentially and not disclose all or any portion of such Confidential
Information; provided that the Company may use any such Confidential Information
--------
for the purpose of operating its business in the ordinary course. Seller
acknowledges and agrees that such Confidential Information is proprietary and
confidential in nature and may be disclosed to its representatives only to the
extent necessary for Seller to evaluate the transactions contemplated by this
Agreement (it being understood that Seller shall be responsible for any breach
of these confidentiality provisions by any such representative, other than
breaches by the Company following the Closing). If Seller or any of its
representatives are legally required to disclose (after Seller has used its
commercially reasonable efforts to avoid such disclosure and after promptly
advising and consulting with Purchaser about its intention to make, and the
proposed contents of such, disclosure) any of such Confidential Information
(whether by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process), Seller agrees that Seller shall, or
shall cause such representative, to provide Purchaser with prompt written notice
of such request so that Purchaser may seek an appropriate protective order or
other appropriate remedy. If such protective order or remedy is not obtained,
Seller or such representative, may disclose only that portion of such
Confidential Information which such Person is legally required to disclose, and
Seller shall exercise its commercially reasonable efforts to obtain assurance
that confidential treatment will be accorded to such Confidential Information so
disclosed. Seller further agrees that from and after the Closing Date, Seller
and its representatives, upon the request of Purchaser or the Company, promptly
will deliver to Purchaser or the Company or destroy all such Confidential
Information without retaining any copy thereof. Notwithstanding the foregoing,
any Seller Entity may make use of Confidential Information to the extent and for
the purpose that such Confidential Information is used by such Seller Entity in
the conduct of its business as conducted as at the Closing Date; provided,
--------
-34-
however, that such purpose and use are each in compliance with Seller's
-------
obligations under Section 5.3, any other provision of this Agreement and the
Services Agreement.
(S)5.2 Public Announcements. Neither Seller nor Purchaser
--------------------
shall, nor shall any of their respective Affiliates, without the approval of the
other party, issue any press releases or otherwise make any public statements
with respect to the transactions contemplated by this Agreement, except as may
be required by applicable Law or regulation or by obligations pursuant to any
listing agreement with any national securities exchange so long as such party
has used commercially reasonable efforts to obtain the approval of the other
party prior to issuing such press release or making such public disclosure.
(S)5.3 Non-Competition; Non-Interference. (a) In consideration
---------------------------------
of the purchase of the Shares by Purchaser, Seller shall not, and shall cause
its Affiliates to not:
(i) for the period from the Closing Date until the fifth
(5th) anniversary of the Closing Date, solicit for the benefit of or fulfillment
by Seller or any Person other than the Company the business of the type and
character engaged in or competitive with that conducted by the Company on the
Closing Date, of any Person which is a customer or client of the Company, or was
its customer or client, at any time within the two (2) years prior to the
Closing Date (each, a "Company Customer"), or attempt to hurt, hinder, diminish
----------------
or interfere with the relationship between the Company and any such Company
Customer (including making any negative or disparaging statements or
communications about the Company).
(ii) for the period from the Closing Date until the fourth
(4th) anniversary of the Closing Date, within the United States of America or
any state, region or territory thereof, conduct, directly or indirectly, any
business of the type and character engaged in or competitive with that conducted
by the Company on the Closing Date, other than the business of such type that
Logility, Inc., currently conducts with certain existing customers or clients of
Logility, Inc., but including any services involving the management of software
applications (other than Seller Software); provided, however, that:
-------- -------
(A) if the business of any Person (other than any Company
Customer) involves Seller Software licensed to or otherwise used by
such Person, and such Person requests any Seller Entity to provide to
it Application Service Provider Services related to such Seller
Software which would otherwise cause Seller to violate the provisions
of this Section 5.3(a)(ii), a Seller Entity may provide such
Application Service Provider Services to such Person if:
(1) Seller shall have given the Company the
opportunity to provide the same services to such Person as
follows: Seller shall, within three (3) Business Days or such
shorter period as is consistent with the urgency of the request,
have (w) given written notice to the Company of each request
made to the Seller or any of its Affiliates to provide
Application Service Provider Services to such Person, (x) given
notice to such Person that such services are provided by the
written Company, (y) recommended to such Person that it utilize
the services of the Company and not the services of Seller or
any of its Affiliates, and (z) used its
-35-
commercially reasonable efforts to provide the Company with an
opportunity to make a presentation to such Person for the provision of
such services to it; and
(2) within thirty (30) days from the date of receipt by the
Company of the written notice referred to in clause (A)(1)(w) above,
such Person has notified Seller that, despite Seller's notification
and recommendation referred to in clause (A)(1) above, it requires
that a specific Seller Entity perform such Application Service
Provider Services in preference to the Company, or the Company has
notified Seller in writing that it does not wish to provide such
services to such Person; or
(B) if the business of any Person (other than any Company
Customer) involves Seller Software licensed to or otherwise used by such Person,
and such Person requests any Seller Entity to provide to it Application Service
Provider Services related to such Seller Software which would otherwise cause
Seller to violate the provisions of this Section 5.3(a)(ii), a Seller Entity may
provide such Application Service Provider Services to such Person if such Person
pays less than $5,000 per month for such Application Service Provider Services;
provided, however, that such Seller Entity shall first have used its
-------- -------
commercially reasonable efforts to cause the provision of such Application
Service Provider Services to be subcontracted to the Company, unless the Company
shall have notified such Seller Entity, within five (5) Business Days of receipt
by the Company of written notice by such Seller Entity to subcontract such
services to the Company (including the terms and conditions applicable thereto),
that it does not wish to provide such services;
(C) if, at any time prior to the fourth (4/th/) anniversary of
the Closing Date, the Company fails to provide the Services (as defined in that
certain Equipment Rental and Services Agreement between Sprint Spectrum L.P. and
the Company, dated June 21, 1999 (the "Company/Sprint Agreement"), excluding the
------------------------
deliveries of the software and hardware pursuant thereto), or such other
services to be provided under a replacement agreement for the Company/Sprint
Agreement, substantially in the form set forth in Exhibit L, and Sprint Spectrum
---------
L.P. has not frustrated the Company's performance and is in material compliance
with its obligations thereunder, then, if the Company shall not cure such
failure within ten (10) Business Days following receipt by it of written notice
thereof, Seller shall be entitled to provide such services to Sprint Spectrum
L.P. or to enter into an agreement with a third party to provide such services
to Sprint Spectrum L.P; or
(D) Seller shall be entitled to lease or sublease its data
processing facilities located at 000 Xxxx Xxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx or
any part thereof to any Person (other than any Company Customer) and provide to
any such lessee or sublessee access to such facility, in each case, on terms
consistent with a customary landlord/tenant relationship, provided that no part
--------
of the rent or other consideration received by or on behalf of Seller or any of
its Affiliates from such lessee or sublessee shall be tied to, or determined by
reference to, the revenues or profits of any such lessee or sublessee; provided,
--------
however, that if the business of any such lessee or sublessee is not of a type
-------
or character competitive with that conducted by the Company on the Closing
-36-
Date, Seller shall be entitled to tie or determine such rent or other
consideration received from such lessee or sublessee to, or by
reference to, the revenues or profits of any such lessee or sublessee.
(b) Notwithstanding Section 5.3(a)(ii), Seller may, and may
permit its Affiliates to, engage in activities which violate Section 5.3(a)(ii)
of this Agreement if, it does so solely in connection with, or as a result of,
the acquisition of all of the capital stock or other equity interests of a
Person which is not an individual Person (the "Acquired Entity") and which is
---------------
primarily engaged in (i) a business other than the business engaged in by the
Company on the Closing Date or (ii) a business competitive with the business
engaged in by the Company on the Closing Date, if (A) the activities of the
Acquired Entity are incidental to the primary business of the Acquired Entity
and do not result in net revenues in excess of forty percent (40%) of the net
revenues of the Acquired Entity, and (B) Seller and its Affiliates continue to
comply with this Section 5.3 (except that Seller and its Affiliates shall not be
required to comply with Section 5.3(a)(ii) with respect to any Person who is a
customer of the Acquired Entity on the date on which the Acquired Entity is
acquired).
(c) It is the desire and intent of the parties to this
Agreement that the provisions of this Section 5.3 shall be enforced to the
fullest extent permissible under the Laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of this Section 5.3 shall be adjudicated to be invalid or unenforceable,
this Section shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, such amendment to apply only
with respect to the operation of such Section in the particular jurisdiction in
which such adjudication is made.
(d) The parties recognize that the performance of the
obligations under this Section 5.3 by Seller is special, unique and
extraordinary in character, and that in the event of the breach by Seller of the
terms and conditions of this Section 5.3 to be performed by Seller, Purchaser
and the Company shall be entitled, if it so elects, to seek damages for any
breach of this Section 5.3, and/or to enforce the specific performance thereof
by Seller or to enjoin Seller from performing services for any Person.
(S)5.4 Non-Solicitation of Employees. (a) In consideration of
-----------------------------
the purchase of the Shares by Purchaser, Seller shall not, and shall cause its
Affiliates to not, for the period from the Closing Date until the third (3/rd/)
anniversary of the Closing Date, (i) solicit (A) the employment, or (B) the
engagement as a consultant or contractor, for itself or any third Person, of, or
(ii) employ or engage as a consultant or contractor, any Key Employee. Nothing
herein is intended to preclude (1) Seller's or its Affiliates' general
solicitations in public media regarding opportunities in general executive,
programming or product development capacities or (2) Seller's or its Affiliates'
solicitation of or hiring any Key Employee (as an employee, consultant or
otherwise) whose employment by the Company (or any of its Affiliates) shall have
been terminated at the instigation of the Company (or such Affiliate, as the
case may be), if the activities associated with such solicitation or hiring are
commenced after the date which is one hundred and eighty (180) days after the
last date of employment of such Key Employee by the Company (or its Affiliate,
as the case may be).
-37-
(b) It is the desire and intent of the parties to this
Agreement that the provisions of this Section 5.4 shall be enforced to the
fullest extent permissible under the Laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of this Section 5.4 shall be adjudicated to be invalid or unenforceable,
this Section shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, such amendment to apply only
with respect to the operation of such Section in the particular jurisdiction in
which such adjudication is made.
(c) The parties recognize that the performance of the
obligations under this Section 5.4 by Seller is special, unique and
extraordinary in character, and that in the event of the breach by Seller of the
terms and conditions of this Section 5.4 to be performed by Seller, Purchaser
and the Company shall be entitled, if it so elects, to obtain damages for any
breach of this Section 5.4, or to enforce the specific performance thereof by
Seller.
(S)5.5 Employee Matters. Immediately upon Closing, Purchaser
----------------
shall offer all employees of the Company who were employees immediately prior to
the Closing eligibility to participate in a medical benefit plan, program,
arrangement or commitment (whether or not insured) (a "Medical Plan"); provided,
------------ --------
however, that any such employee receiving long-term disability benefits under
-------
any of Seller's welfare benefit plans shall continue to receive such benefits
under Seller's welfare benefit plan, and Purchaser shall not be required to
provide such benefits to such employees on or following the Closing. The terms
and conditions of the Medical Plan shall permit all such employees to
participate immediately in the Medical Plan and to be eligible immediately to
receive benefits under the Medical Plan, so that if any such employee terminated
his or her employment following the Closing, any post-employment obligations
with respect to the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") related to medical benefits shall not be obligations of Seller with
-----
respect to any such employees solely as a result of their termination following
the Closing. Seller shall be responsible for any severance, termination,
retention pay, benefits or similar payments to any employees of the Company
whose employment is terminated or who elects to retire, resign or otherwise
terminate their employment, in each case only to the extent that all action
resulting in any such termination, retirement or resignation occurs before the
Closing. Seller agrees to indemnify and hold Purchaser and its Affiliates
harmless on an after-tax basis from and against all Losses suffered, incurred or
paid, directly or indirectly, as a result of, in connection with or arising out
of any such termination, retirement or resignation. Effective as of the Closing,
Seller agrees that Company and/or Purchaser will have no liability under, or
with respect to, any employee benefit plans sponsored or maintained by Seller or
any of its Affiliates.
(S)5.6 Xxxxx Claim. Prior to the Closing Date, the Company
shall assign to the Seller all of the benefits, rights and interests of the
Company (including any rights of the Company arising out of any judgment award
or settlement in favor of the Company) in and to the litigation proceedings
entitled AmQUEST, Inc. v. Xxxxx Xxxxxxxx Corporation, Case No. 1:00-CV-2618,
-------------------------------------------
filed December 15, 2000 and pending before the United States District Court for
the Northern District of Georgia and any appeals arising therefrom (the "Xxxxx
-----
Claim") to Seller, on the terms and subject to the conditions set forth in the
-----
Xxxxx Assignment Agreement; provided, however, that the fees, costs, expenses
-------- -------
and any liabilities and obligations associated therewith shall be borne by
Seller and Seller shall, at all times, have complied with its indemnification
obligations under Section 8.2(a)(iii). Seller shall assume the conduct and
control
-38-
of the prosecution and settlement of the Xxxxx Claim, through counsel selected
by Seller. Purchaser shall cooperate, upon the written request of Seller and at
the cost of Seller, with Seller in all reasonable respects in connection with
the prosecution and settlement of the Xxxxx Claim. Seller shall not, except with
the prior written consent of Purchaser, agree to any settlement of the Xxxxx
Claim or consent to entry into of any judgment with respect thereto that results
in any restriction on the Company and does not include as an unconditional term
thereof the giving by Xxxxx Xxxxxxxx Corporation to the Company of an
unconditional release from all liability and obligations of the Company with
respect thereto.
(S)5.7 Outsourcing Charges. From and after the Closing, Seller
-------------------
agrees not to charge, and to cause American Software USA, Inc. not to charge,
licensees of ASI Software a transfer, access or additional license fee as a
result of Purchaser's purchase of the Company or as a result of the Company's
relocation of any processing units to another facility of Company, Purchaser or
its Affiliates; provided, however, that the prohibition contained in this
-------- -------
Section 5.7 shall not apply to any such licensee that terminates its existing
customer contract with the Company and enters into a new customer contract with
a third party. For the purposes of this Section 5.7, "ASI Software" shall mean
------------
software licensed by Seller or American Software USA, Inc. to third parties.
(S)5.8 AS 400 Process Units. Purchaser agrees that, for a
--------------------
period of two (2) years following the Closing, it will, and will cause the
Company to, refrain from moving any of the AS 400 processing units located at
000 Xxxx Xxxxx Xxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx on the date hereof; provided,
--------
however, that Purchaser and the Company shall be entitled to move any such
-------
processing units (a) in compliance with any obligations or contracts in
existence on the date hereof or otherwise at the direction of any customer that
owns or leases any such processing unit; (b) on termination of the customer
contract relating to any such processing unit or the termination of any
applicable lease; or (c) as may otherwise be required by any applicable Laws.
ARTICLE VI
DELIVERIES AT CLOSING
---------------------
(S)6.1 Seller's Obligations. At the Closing, Seller shall
--------------------
deliver to Purchaser:
(a) the certificates representing the Shares duly endorsed
in blank, or accompanied by either stock powers duly executed in blank by Seller
or such other instruments of transfer as are reasonably acceptable to Purchaser
in each case, with all necessary transfer tax and other revenue stamps, acquired
at Seller's expense, affixed and canceled;
(b) (i) copies of the Company's Articles of Incorporation
as in effect on the Closing Date, including all amendments thereto, in each case
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation, (ii) a certificate from the Secretary of State or
other appropriate official of the jurisdiction of incorporation of the Company
to the effect that the Company is in good standing or subsisting in such
jurisdiction and listing all charter documents of the Company on file, (iii) a
certificate from the Secretary of State or other appropriate official of each
state in which the Company is qualified to do business to the effect that the
Company is in good standing in such state, and (iv) a copy of the By-Laws
-39-
of the Company, certified by the Secretary of the Company as being true and
correct as of the Closing Date;
(c) resignation letters, effective on the Closing Date,
executed by (i) each of Xxxxx X. Xxxxxxxxx, J. Xxxxxxx Xxxxxxxxx and Xxxxx X.
Xxxxxxx, pursuant to which each of them has resigned from all of his positions
as a member of the Board of Directors and as an officer of the Company; and (ii)
each of Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxx Xxxxxx and Xxxxx X.
XxXxxxx, pursuant to which each of them has resigned from all of his positions
as an officer of the Company;
(d) (i) the Lease Agreement between Seller and the Company
(the "Lease Agreement"), in the form attached hereto as Exhibit A, (ii) the
--------------- ---------
Services Agreement between Seller, Purchaser, the Company and American Software
USA, Inc. (the "Services Agreement"), in the form attached hereto as Exhibit B,
------------------ ---------
(iii) the Assignment Agreement between Seller and the Company relating to the
Xxxxx Claim (the "Xxxxx Assignment Agreement"), in the form attached hereto as
--------------------------
Exhibit C, (iv) the letter agreement between Seller and the Company regarding
---------
Norfolk Southern Corporation, in the form attached hereto as Exhibit D, (v) one
---------
or more assignment agreements, in the form attached hereto as Exhibit E, between
---------
Seller and the Company relating to Seller's rights and obligations under the
Contracts set forth on Schedule 6.1(g), in each case duly executed by Seller and
---------------
the Company; (vi) the letter agreement between Seller and the Company (the
"Service Fee Letter Agreement") with respect to certain service fee cost
----------------------------
allocations, in the form attached hereto as Exhibit F; and (vii) the Guaranty of
---------
Lease from Purchaser to ASI Properties, Inc. (the "Lease Guaranty") with respect
--------------
to the Lease Agreement, in the form attached hereto as Exhibit G, and (vii) the
---------
First Amendment to Customer Agreement Number 2070 and Statements of Work Numbers
One, Two, Three, Four, Five, Eight and Nine thereunder between Seller and the
Company, in the form attached hereto as Exhibit H, in each such case duly
---------
executed by or on behalf of Seller, the Company and/or American Software USA,
Inc., as applicable; and
(e) a favorable opinion, dated the Closing Date, of Holland
& Knight LLP, in the form and substance set forth in Exhibit I.
---------
(S)6.2 Purchaser's Obligations. At the Closing, Purchaser
-----------------------
shall deliver to Seller:
(a) a favorable opinion, dated the Closing Date, of White &
Case LLP, in the form and substance set forth in Exhibit J; and
---------
(b) (i) the Services Agreement; and (ii) the Lease
Guaranty, in each such case duly executed by or on behalf of Purchaser; and
(c) the Purchase Price (subject to adjustment pursuant to
Section 2.3 of this Agreement).
(S)6.3 Further Assurances. Each party shall use commercially
------------------
reasonable efforts to assist the other party in realizing the benefits of this
Agreement and the transactions
-40-
contemplated hereby, including by delivering any further certificates and
documents as may be requested by the other party and by taking all actions
necessary to acquire such governmental and third party consents, waivers,
approvals, assignments or novations as the other party may consider necessary or
useful in realizing the benefits of the transactions contemplated by this
Agreement.
ARTICLE VII
TAX MATTERS
-----------
(S)7.1 Tax Returns. (a) Seller shall have the exclusive
-----------
authority and obligation to prepare, execute on behalf of the Company and timely
file, or cause to be prepared and timely filed, all Returns of the Company that
are due with respect to any taxable year or other taxable period ending prior to
or ending on and including the Closing Date. Such authority shall include, but
not be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and
operations of the Company shall be reported or disclosed in such Returns;
provided that such Returns shall be prepared by treating items on such Returns
--------
in a manner consistent with the past practices of the Company with respect to
such items and such Returns shall not be filed without the prior written consent
of Purchaser, which consent shall not be unreasonably withheld or delayed.
(b) Except as provided in Section 7.1(a), Purchaser shall
have the exclusive authority and obligation to prepare and timely file, or cause
to be prepared and timely filed, all Returns of the Company; provided that with
--------
respect to Returns to be filed by Purchaser pursuant to this Section 7.1 for
taxable periods beginning before the Closing Date and ending after the Closing
Date (the "Overlap Period"), items set forth on such Returns shall be treated in
--------------
a manner consistent with the past practices with respect to such items unless
otherwise required by Law. Such authority shall include, but not be limited to,
the determination of the manner in which any items of income, gain, deduction,
loss or credit arising out of the income, properties and operations of the
Company shall be reported or disclosed on such Returns.
(S)7.2 Payment of Taxes. (a) Except for additional income
----------------
taxes accruing by reason of the Section 338(h)(10) election described in Section
7.7 hereof, Seller shall be responsible and liable for the timely payment of any
and all Taxes imposed on or with respect to the properties, income and
operations of the Company for all Pre-Closing Periods, including the portion of
the Overlap Period up to and including the Closing Date. In addition, Seller
shall pay to Purchaser the amount of any Taxes allocated to Seller pursuant to
Section 7.2(b) below (to the extent that Seller is liable therefor and to the
extent not already paid by Seller on or before the Closing Date) on or prior to
the due date of such Taxes.
(b) All Taxes and Tax liabilities with respect to the
income, property or operations of the Company that relate to the Overlap Period
shall be apportioned between Seller and Purchaser as follows: (i) in the case of
Taxes other than income, sales and use and withholding Taxes, on a per diem
basis, and (ii) in the case of income, sales and use and withholding Taxes, as
determined from the books and records of the Company as though the taxable year
of the Company terminated at the close of business on the Closing Date. Seller
shall be liable for Taxes of the Company which are attributable to the portion
of the Overlap Period
-41-
ending on and including the Closing Date and Purchaser shall be liable for Taxes
of the Company which are attributable to the portion of the Overlap Period
beginning on the day following the Closing Date.
(S)7.3 Controversies. (a) Purchaser shall promptly notify
-------------
Seller upon receipt by Purchaser or any Affiliate of Purchaser (including the
Company after the Closing Date) of written notice of any inquiries, claims,
assessments, audits or similar events with respect to Taxes relating to a
taxable period ending prior to or ending on and including the Closing Date for
which Seller may be liable under this Agreement (any such inquiry, claim,
assessment, audit or similar event, a "Tax Matter"). Seller, at its sole
----------
expense, shall have the authority to represent the interests of the Company with
respect to any Tax Matter before the IRS, any other taxing authority, any other
Governmental or Regulatory Authority or any court and shall have the sole right
to control the defense, compromise or other resolution of any Tax Matter,
including responding to inquiries, filing Returns and contesting, defending
against and resolving any assessment for additional Taxes or notice of Tax
deficiency or other adjustment of Taxes of, or relating to, a Tax Matter;
provided that neither Seller nor any of its Affiliates shall enter into any
--------
settlement of or otherwise compromise any Tax Matter that adversely affects or
may adversely affect the Tax liability of Purchaser, the Company or any
Affiliate of the foregoing for any period ending after the Closing Date,
including the portion of the Overlap Period that is after the Closing Date,
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed. Seller shall keep Purchaser fully and timely
informed with respect to the commencement, status and nature of any Tax Matter.
Seller shall, in good faith, allow Purchaser to make comments to Seller
regarding the conduct of or positions taken in any such proceeding.
(b) Except as otherwise provided in this Section 7.3,
purchaser shall have the sole right to control any audit or examination by any
taxing authority, initiate any claim for refund or amend any Return, and
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of, or relating to, the income,
assets or operations of the Company for all taxable periods.
(S)7.4 Transfer Taxes. All transfer, sales and use,
--------------
registration, stamp and similar Taxes imposed in connection with the sale of the
Shares or any other transaction that occurs pursuant to this Agreement shall be
borne solely by Seller.
(S)7.5 Indemnification. Notwithstanding any provision to the
---------------
contrary contained in this Agreement, Seller agrees to indemnify, defend and
hold Purchaser and its Affiliates (including the Company) and their respective
stockholders, officers, directors, employees agents, successors and assigns,
harmless on an after-tax basis from and against: (i) all Taxes and Losses
resulting from, arising out of, or incurred with respect to, any claims that may
be asserted by any party based on, attributable to, or resulting from the
failure of any representation or warranty made pursuant to Section 3.15 to be
true and correct in all respects as of the Closing Date; (ii) all Taxes imposed
on or asserted against the properties, income or operations of the Company for
all Pre-Closing Periods; (iii) all Taxes imposed on Seller or any corporation in
which Seller or its Affiliates have a direct or indirect equity interest, for
any taxable year or period; and (iv) all Taxes imposed on the Company, or for
which the Company may be liable, as a result of any transaction contemplated by
this Agreement excluding any Taxes imposed on Purchaser or the
-42-
Company as a result of a joint election under Section 338(h)(10) of the Code to
treat the sale of stock pursuant to this Agreement as an asset sale for Federal
income tax purposes, and any analogous provisions of state and local Law,
except, in each instance, to the extent such Taxes have been paid prior to the
Closing Date.
(S)7.6 Post-Closing Access and Cooperation. From and after
-----------------------------------
the Closing Date, Purchaser agrees, and agrees to cause the Company, to permit
Seller to have reasonable access, during normal business hours, to the Company's
books and records, to the extent that such books and records relate to a
Pre-Closing Period, and personnel, for the purpose of enabling Seller to: (i)
prepare the Returns specified in Section 7.1(a); (ii) investigate or contest any
Tax Matter which Seller has the authority to conduct under Section 7.3; and
(iii) evaluate any claim for indemnification under Section 7.5.
(S)7.7 Section 338 Election. (a) Purchaser may elect, in its
--------------------
sole and absolute discretion, at the Closing or thereafter, to make an election
under Section 338(h)(10) of the Code (with respect to the Company). In such
event, Seller and Purchaser shall jointly complete and make such election on a
timely basis on Form 8023 or in such other manner as may be required by rule or
regulation of the IRS, and shall jointly make an election in the manner required
under any analogous provisions of state or local Law as Purchaser shall
designate or as shall be required, concerning the transactions contemplated by
this Agreement. In such event, Purchaser shall, with the assistance and
cooperation of Seller, prepare all such Section 338(h)(10) forms required as
attachments to Form 8023 (and all forms under analogous provisions of state or
local Law) in accordance with applicable Tax laws, and Purchaser shall deliver
such forms and related documents to Seller at least sixty (60) days prior to the
due date of filing. Seller shall deliver to Purchaser, at least forty-five (45)
days prior to the due date of filing, such duly executed completed forms as are
required to be filed under Section 338(h)(10) of the Code (and analogous
provisions of state or local Law).
(b) In the event that Purchaser elects to make an
election under Section 338(h)(10) of the Code (with respect to the Company)
pursuant to Section 7.7(a), Purchaser agrees that it shall, within ten (10)
Business Days of making such election, pay to Seller the amount of $530,000. The
parties hereto agree that any payment made pursuant to this Section 7.7(b)
shall, to the extent permitted by applicable law, be treated as an adjustment to
the Purchase Price.
(S)7.8 Allocation. The purchase price and all other items
----------
that comprise the aggregate deemed sale price ("ADSP") (as defined under
----
Treasury Regulations Section 1.338-4) shall be allocated to the assets of the
Company for all purposes in accordance with the allocation (the "Allocation")
----------
contained in a schedule to be prepared by Purchaser. Seller hereby agrees in
advance to the Allocation by Purchaser in such schedule. The valuations and
Allocations determined pursuant to this Section 7.8 shall be used for purposes
of all relevant Tax Returns, reports and filings.
-43-
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
(S)8.1 Survival of Representations. (a) Except as set forth
---------------------------
in paragraph (b) below, the respective representations and warranties of Seller
and Purchaser contained in this Agreement or in any Schedule, Exhibit or
certificate delivered pursuant to this Agreement shall survive the purchase and
sale of the Shares pursuant to this Agreement for a period of twenty-four (24)
months after the Closing Date.
(b) The representations and warranties contained in
Sections 3.1 (Ownership of Shares; Existence and Good Standing of Seller) and
3.5 (Capital Stock) shall survive indefinitely. The representations and
warranties contained in Sections 3.2 (Authority and Enforceability), 3.15
(Taxes), 3.21 (Employee Benefit Plans), 3.22 (Environmental Laws and
Regulations), 3.30 (Brokers' or Finders' Fees) and 4.1 (Existence and Good
Standing of Purchaser; Power and Authority) shall survive until sixty (60) days
after the expiration of the applicable statute of limitations period (after
giving effect to any waivers and extensions thereof).
(S)8.2 Indemnification. (a) Seller agrees to indemnify and
---------------
hold Purchaser and its Affiliates (including the Company) and their respective
stockholders, officers, directors, employees, agents, successors and assigns
(each a "Purchaser Indemnitee"), harmless on an after-tax basis from and against
--------------------
any damages, losses, liabilities, penalties, obligations, claims of any kind,
interest or expenses (including reasonable attorneys' fees and expenses, but
excluding any special, incidental, indirect, or consequential damages)
(collectively, "Losses"), suffered, incurred or paid, directly or indirectly,
------
through application of the Company's or Purchaser's assets or otherwise, as a
result of, in connection with or arising out of (i) the failure of any
representation or warranty made by Seller in this Agreement (whether or not
contained in Article III) or in any Schedule, Exhibit or certificate delivered
pursuant to this Agreement (other than pursuant to Section 3.15 (Taxes)) to be
true and correct in all respects as of the Closing Date (without giving effect
to any "materiality", "material adverse effect" or similar qualification), (ii)
any breach by Seller of any of its covenants or agreements contained herein,
(iii) the Xxxxx Claim and the matters referred to in Section 5.6, and (iv) the
operation, termination, disposal, transfer or spin-off of the Temporary Staffing
Business.
(b) Purchaser agrees to indemnify and hold Seller and its
Affiliates and their respective shareholders, officers, directors, employees,
agents, successors and assigns (other than the Company and its Subsidiaries)
(each a "Seller Indemnitee") harmless from and against Losses suffered, incurred
-----------------
or paid, directly or indirectly, as a result of, in connection with or arising
out of (i) the failure of any representation or warranty made by Purchaser in
this Agreement (whether or not contained in Article IV) or in any Schedule,
Exhibit or certificate delivered pursuant to this Agreement to be true and
correct in all respects as of the Closing Date, (ii) any breach by Purchaser of
any of its covenants or agreements contained herein, and (iii) any failure of
the Company from and after the Closing Date, to perform any of the agreements,
the performance of which is guaranteed by a Seller Entity, which agreements and
guarantees are listed on Schedule 8.2(b). In addition, Purchaser agrees to
---------------
indemnify and hold Seller and American Software USA, Inc. harmless from and
against all out-of-pocket amounts Seller or
-44-
American Software USA, Inc. is obliged to pay to Sprint Spectrum L.P. and all
amounts that Sprint Spectrum L.P. is entitled to set off against amounts that it
would otherwise be obligated to pay Seller or American Software USA, Inc. under
the terms of (A) that certain Software License and Support Agreement between
American Software USA, Inc., and Sprint Spectrum L.P., dated June 22, 1999, and
(B) that certain Custom Software Modification and Support Services Agreement
between Sprint Spectrum L.P. and American Software USA, Inc., dated June 22,
1999, in each case as amended through the Closing Date, or the corresponding
provisions of any replacement agreements substantially in the form set forth in
Exhibit M which are executed after the Closing Date (such agreements and any
---------
replacements thereof, the "Seller/Sprint Agreements"), in each case to the
------------------------
extent directly attributable to the failure of the Company, from and after the
Closing Date, to provide any of the Services (as defined in the Company/Sprint
Agreement) which the Company is required to perform under the terms of the
Company/Sprint Agreement, in effect from time to time.
(c) The obligations to indemnify and hold harmless
pursuant to Sections 8.2(a)(i) and 8.2(b)(i) shall survive the consummation of
the transactions contemplated by this Agreement for the time periods set forth
in Section 8.1, except for claims for indemnification asserted prior to the end
of such periods, which claims shall survive until final resolution thereof.
(d) Except as otherwise expressly provided in Sections
5.5 (Employee Matters), 5.6 (Xxxxx Claim), 7.3 (Tax Matters - Controversies) and
7.5 (Tax Matters - Indemnification) of this Agreement, and excluding fraud and
willful misconduct, the rights of Purchaser Indemnitees, on the one hand, and
the Seller Indemnitees, on the other hand, under this Article VIII comprise the
sole rights and remedies of Purchaser Indemnitees and the Seller Indemnitees,
respectively, at Law or in equity or otherwise for any misrepresentation, breach
of warranty, or the failure to fulfill any agreement or covenant hereunder on
the part of Seller or Purchaser, respectively, including the right of rescission
or restitution but excluding the right to seek specific performance or equitable
enforcement of any agreement or covenant of Seller or Purchaser, respectively,
hereunder.
(e) Neither Seller nor Purchaser shall have any liability
with respect to the matters described in Sections 8.2(a)(i) and 8.2(b)(i),
respectively, until the total of all Losses with respect thereto exceeds two
hundred thousand dollars ($200,000.00), and then only for the amount by which
such Losses exceed two hundred thousand dollars ($200,000.00). In no event shall
the aggregate liability of Seller or Purchaser under this Article VIII exceed
the Purchase Price, provided that the limitations on indemnification contained
--------
in this Section 8.2(e) and the limitations on the time when Purchaser is
entitled to seek indemnification pursuant to this Article VIII shall not apply
to Losses suffered, incurred or paid as a result of, in connection with or
arising out of the failure of any of the representations and warranties made by
Seller in (i) Section 3.8(b), (ii) Section 3.31; and (iii) Section 3.32;
provided, further, that for purposes of calculating the threshold set forth in
-------- -------
the first section of this Section 8.2(e), any individual Loss (or series of
related Losses arising out of the same or substantially related facts and
circumstances) shall be disregarded unless the aggregate amount of such Loss (or
series of related Losses) exceeds one thousand dollars ($1,000.00).
(f) If Seller pays an amount to Purchaser pursuant to a
claim for indemnification and Purchaser determines in its reasonable discretion
that it or any of its
-45-
Affiliates has actually received or realized in connection therewith any refund
or any reduction of, or credit against, its Tax liabilities in or prior to the
taxable year in which the indemnification amount is paid (a "Tax Benefit"),
-----------
Purchaser shall pay to Seller an amount that Purchaser shall reasonably
determine is equal to Seller's proportionate share of the actual net benefit
(calculated on the basis of the actual reduction in cash payments for Taxes),
after tax, which was obtained by Purchaser or any of its Affiliates in or prior
to such year as a consequence of such Tax Benefit; provided, however, that (i)
-------- -------
Purchaser shall not be obligated to file amended Tax Returns for such purpose;
(ii) any Taxes that are imposed on Purchaser or any of its Affiliates as a
result of a disallowance or reduction (including through the expiration of any
tax credit carryover or carryback of Purchaser or such Affiliate that otherwise
would not have expired) of any Tax Benefit with respect to which Purchaser has
made a payment to Seller pursuant to this Section 8.2(f) shall be treated as a
Tax for which Seller is obligated to indemnify Purchaser pursuant to Section 8.2
hereof without any exclusions or defenses or limitations on the time when
Purchaser shall be entitled to seek repayment of such Tax; and (iii) nothing in
this Section 8.2(f) shall require Purchaser to disclose any confidential
information to Seller (including, without limitation, its Tax Returns).
(g) Subject to Section 8.4, upon payment in full by Seller
of any claim for indemnification, or the payment by Seller of any judgment or
settlement with respect to a claim by a third party, Seller shall be subrogated
to the extent of such payment to the rights of Purchaser Indemnitee (at no cost
or expense to any Purchaser Indemnitee) against any person or entity (other than
any Purchaser Indemnitee, including, without limitation, the Company) with
respect to the subject matter of such claim for indemnification or claim by such
third party, provided, however, that: (i) Purchaser shall have the right to
-------- -------
assume the conduct and control, through counsel reasonably acceptable to the
Seller, of the prosecution of any action, lawsuit, proceeding or other claim
made or brought against such person or entity if Purchaser or the Company has
any remaining unsatisfied claim for Losses against such entity or party
connected with, or arising from, the subject matter of such claim for
indemnification or claim by such third party; (ii) any amount recovered as a
result of any such action, lawsuit, proceeding or other claim shall be paid to
Purchaser and set-off against the amount of Purchaser's unsatisfied claim for
Losses and any balance remaining (up to the amount of the payment made by the
Seller for such claim for indemnification or judgment or settlement with respect
to such claim by a third party) shall be paid to Seller; and (iii) no action
shall be taken by Seller pursuant to this Section 8.2(g) unless and until any
such remaining unsatisfied claim of Purchaser or the Company for Losses has been
satisfied in full.
(S)8.3 Indemnification Procedure. (a) Within a reasonable
-------------------------
period of time after the incurrence of any Losses by any Person entitled to
indemnification pursuant to Section 8.2 hereof (an "Indemnified Party"),
-----------------
including, any claim by a third party described in Section 8.4, which might give
rise to indemnification hereunder, the Indemnified Party shall deliver to the
party from which indemnification is sought (the "Indemnifying Party") a
------------------
certificate in the form of Exhibit K (the "Certificate"), which Certificate
--------- -----------
shall:
(i) state that the Indemnified Party has paid or properly
accrued Losses or anticipates that it will incur liability for Losses for
which such Indemnified Party is entitled to indemnification pursuant to
this Agreement; and
-46-
(ii) specify in reasonable detail each individual item of
Loss included in the amount so stated, the date such item was paid or
properly accrued, the basis for any anticipated liability and the nature of
the misrepresentation, breach of warranty, breach of covenant or claim to
which each such item is related and the computation of the amount to which
such Indemnified Party claims to be entitled hereunder.
(b) In the event that the Indemnifying Party shall object
to the indemnification of an Indemnified Party in respect of any claim or claims
specified in any Certificate, the Indemnifying Party shall, within ten (10) days
after receipt by the Indemnifying Party of such Certificate, deliver to the
Indemnified Party a notice to such effect and the Indemnifying Party and the
Indemnified Party shall, within the thirty (30) day period beginning on the date
of receipt by the Indemnified Party of such objection, attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
claims to which the Indemnifying Party shall have so objected. If the
Indemnified Party and the Indemnifying Party shall succeed in reaching agreement
on their respective rights with respect to any of such claims, the Indemnified
Party and the Indemnifying Party shall promptly prepare and sign a memorandum
setting forth such agreement. Should the Indemnified Party and the Indemnifying
Party be unable to agree as to any particular item or items or amount or
amounts, then the Indemnified Party and the Indemnifying Party shall submit such
dispute to a court of competent jurisdiction. The party which receives a final
judgment in such dispute shall be indemnified and held harmless for all
reasonable attorney and consultant's fees or expenses by the other party.
(c) Claims for Losses specified in any Certificate to which
an Indemnifying Party shall not object in writing within ten (10) days of
receipt of such Certificate, claims for Losses covered by a memorandum of
agreement of the nature described in Section 8.3(b), claims for Losses the
validity and amount of which have been the subject of judicial determination as
described in Section 8.3(b) and claims for Losses the validity and amount of
which shall have been the subject of a final judicial determination, or shall
have been settled with the consent of the Indemnifying Party, as described in
Section 8.4, are hereinafter referred to, collectively, as "Agreed Claims".
-------------
Within ten (10) days of the determination of the amount of any Agreed Claims,
the Indemnifying Party shall pay to the Indemnified Party an amount equal to the
Agreed Claim by wire transfer in immediately available funds to the bank account
designated by the Indemnified Party in a notice to the Indemnifying Party not
less than two (2) Business Days prior to such payment.
(S)8.4 Third Party Claims. If a claim by a third party is made
------------------
against any Indemnified Party (other than the Xxxxx Claim, which shall be
governed by the provisions of Section 5.6), and if such party intends to seek
indemnity with respect thereto under this Article VIII, such Indemnified Party
shall promptly notify the Indemnifying Party of such claims; provided that the
--------
failure to so notify shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent that the Indemnifying Party is actually and
materially prejudiced thereby. The Indemnifying Party shall have thirty (30)
days after receipt of such notice to assume the conduct and control, through
counsel reasonably acceptable to the Indemnified Party at the expense of the
Indemnifying Party, of the settlement or defense thereof and the Indemnified
Party shall cooperate with it in connection therewith; provided that it is
--------
reasonably anticipated by the Indemnified Party that the Indemnifying Party
shall permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by such Indemnified
-47-
Party, provided that the fees and expenses of such counsel shall be borne by
--------
such Indemnified Party; provided, further, that the Indemnifying Party shall not
-------- -------
be entitled to assume control of such defense and shall pay the fees and
expenses of counsel retained by the Indemnified Party if (i) the claim for
indemnification relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation; (ii) the Indemnified Party has
been advised in writing by counsel that a reasonable likelihood exists of a
conflict of interest between the Indemnifying Party and the Indemnified Party;
or (iii) upon petition by the Indemnified Party, the appropriate court rules
that the Indemnifying Party failed or is failing to vigorously prosecute or
defend such claim. Any Indemnified Party shall have the right to employ separate
counsel in any such action or claim and to participate in (but not control) the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the Indemnifying Party unless (i) the Indemnifying Party shall have
failed, within a reasonable time after having been notified by the Indemnified
Party of the existence of such claim as provided in the preceding sentence, to
assume the defense of such claim, (ii) the employment of such counsel has been
specifically authorized in writing by the Indemnifying Party, which
authorization shall not be unreasonably withheld, or (iii) the named parties to
any such action (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party and such Indemnified Party shall have been
advised in writing by such counsel that there may be one or more legal defenses
available to the Indemnified Party which are not available to the Indemnifying
Party. So long as the Indemnifying Party is reasonably contesting any such claim
in good faith, the Indemnified Party shall not pay or settle any such claim.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
--------
to indemnity therefor by the Indemnifying Party for such claim unless the
Indemnifying Party shall have consented to such payment or settlement. If the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days
after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement. The
Indemnifying Party shall not, except with the consent of the Indemnified Party,
enter into any settlement that is not entirely indemnifiable by the Indemnifying
Party pursuant to this Article VIII and does not include as an unconditional
term thereof the giving by the Person or Persons asserting such claim to all
Indemnified Parties of an unconditional release from all liability with respect
to such claim or consent to entry of any judgment. The Indemnifying Party and
the Indemnified Party shall cooperate with each other in all reasonable respects
in connection with the defense of any claim, including making available records
relating to such claim and furnishing, without expense to the Indemnifying Party
and/or its counsel, such employees of the Indemnified Party as may be reasonably
necessary for the preparation of the defense of any such claim or for testimony
as witnesses in any proceeding relating to such claim.
ARTICLE IX
MISCELLANEOUS
-------------
(S)9.1 Expenses. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Agreement, including
the fees and expenses of their respective counsel and financial advisers. Seller
shall be responsible for all expenses of the Company relating to the
transactions contemplated by this Agreement.
-48-
(S)9.2 Governing Law. The interpretation and construction of
-------------
this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of New York applicable to agreements executed and to be performed
solely within such State.
(S)9.3 Jurisdiction. (a) Any judicial proceeding brought
------------
against any of the parties to this Agreement on any dispute arising out of this
Agreement or any matter related hereto may be brought in the courts of the State
of New York, or in the United States District Court for the Southern District of
New York and, by execution and delivery of this Agreement, each of the parties
to this Agreement accepts the non-exclusive jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The foregoing consents to jurisdiction shall not be deemed
to confer rights on any Person other than the respective parties to this
Agreement. The prevailing party or parties in any such litigation shall be
entitled to receive from the losing party or parties all costs and expenses,
including reasonable counsel fees, incurred by the prevailing party or parties.
Each of the parties to this Agreement agrees that service of any process,
summons, notice or document by any method approved pursuant to Section 9.4
below, to such party's address set forth below shall be effective service of
process for any action, suit or proceeding with respect to any matters for which
it has submitted to jurisdiction pursuant to this Section 9.3.
(S)9.4 Notices. Any notice or other communication required or
-------
permitted under this Agreement shall be deemed to have been duly given (a) when
sent, if sent by facsimile transmission, if receipt thereof is confirmed by
telephone, (b) when delivered, if delivered personally to the intended recipient
and (c) two Business Days following deposit with a nationally recognized
overnight courier service, in each case addressed as follows:
if to Seller, to
American Software, Inc.
000 Xxxx Xxxxx Xxxxx Xxxx, X.X.
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Chief Financial Officer
with a copy to
Holland & Knight LLP
0000 Xxxx Xxxxxxxxx Xxxxxx, X.X.
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxxx X. XxXxxxx, Esq.
and if to Purchaser, to
Infocrossing, Inc.
-00-
Xxx Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Chief Executive Officer
with a copy to
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: X. Xxxx Xxxxxxxxx, Esq.,
or such other address or number as shall be furnished
in writing by any such party.
(S)9.5 Assignment; Parties in Interest. This Agreement may not
-------------------------------
be transferred, assigned, pledged or hypothecated by any party hereto without
the express written consent of the other party hereto, other than by operation
of Law; provided that Purchaser may assign its rights, interests and obligations
--------
hereunder (a) to any direct or indirect wholly owned Subsidiary of Purchaser and
(b) in connection with the transfer by Purchaser of all or substantially all of
the capital stock and/or assets of the Company and/or its Subsidiaries;
provided, further, that if Purchaser makes any assignment referred to in (a)
--------
above, Purchaser shall remain liable under this Agreement as if such assignment
had not occurred. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. Any purported assignment in
violation of the above shall be void and of no effect to transfer any right
hereunder.
(s)9.6 Counterparts. This Agreement may be executed in two or
------------
more counterparts, all of which taken together shall constitute one instrument.
(S)9.7 Entire Agreement. This Agreement, including the other
----------------
documents referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(S)9.8 Amendments. This Agreement may not be changed, and any
----------
of the terms, covenants, representations, warranties and conditions cannot be
waived, except pursuant to an instrument in writing signed by Purchaser and
Seller or, in the case of a waiver, by the party waiving compliance.
(S)9.9 Severability. If any term, provision, agreement,
------------
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, agreements, covenants and restrictions
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of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party hereto. Upon such a determination, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a reasonably acceptable manner
in order that the transactions contemplated hereby may be consummated as
originally contemplated to the fullest extent possible.
(S)9.10 Third Party Beneficiaries. Each party hereto intends that this
-------------------------
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
(S)9.11 No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event any
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by all parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
(S)9.12 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN ANY OF THE
PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO.
EACH OF THE PARTIES TO THIS AGREEMENT (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY OR PARTIES
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.
IN WITNESS WHEREOF, each of Seller and Purchaser has caused its
corporate name to be hereunto subscribed by its officer thereunto duly
authorized all as of the day and year first above written.
AMERICAN SOFTWARE, INC.
By:_______________________________________
Name:
Title:
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INFOCROSSING, INC.
By:_________________________________
Name:
Title:
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TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .................................................... 1
(S)1.1 Definitions .................................................... 1
(S)1.2 Construction ................................................... 6
(S)1.3 Schedules and Exhibits ......................................... 7
(S)1.4 Knowledge ...................................................... 7
ARTICLE II SALE OF SHARES ................................................. 7
(S)2.1 Sale of Shares ................................................. 7
(S)2.2 Determination and Payment of Closing Payment ................... 7
(S)2.3 Determination of Purchase Price ................................ 8
(S)2.4 Closing ........................................................ 9
(S)2.5 Transaction Costs of the Company ............................... 10
ARTICLE III REPRESENTATIONS OF SELLER ...................................... 10
(S)3 Representations of Seller ...................................... 10
(S)3.1 Ownership of Shares; Existence and Good Standing of Seller ..... 10
(S)3.2 Authority and Enforceability ................................... 10
(S)3.3 Consents and Approvals; No Violations .......................... 10
(S)3.4 Existence and Good Standing of the Company ..................... 11
(S)3.5 Capital Stock .................................................. 11
(S)3.6 Subsidiaries and Investments. .................................. 12
(S)3.7 Financial Statements; Accounts Receivable; Working Capital ..... 12
(S)3.8 Liabilities; Indebtedness ...................................... 13
(S)3.9 Books and Records .............................................. 13
(S)3.10 Title to Personal Properties ................................... 13
(S)3.11 Owned Real Property ............................................ 14
(S)3.12 Leased Real Property ........................................... 14
(S)3.13 Material Contracts ............................................. 14
(S)3.14 Litigation ..................................................... 16
(S)3.15 Taxes. ......................................................... 16
(S)3.16 Insurance ...................................................... 18
(S)3.17 Intellectual Properties ........................................ 18
(S)3.18 Compliance with Laws ........................................... 21
(S)3.19 Suppliers and Customers ........................................ 21
(S)3.20 Employment Relations ........................................... 21
(S)3.21 Employee Benefit Plans. ........................................ 23
(S)3.22 Environmental Laws and Regulations ............................. 26
(S)3.23 Interests in Clients, Suppliers, Etc.; Affiliate Transactions .. 27
(S)3.24 Bank Accounts and Powers of Attorney ........................... 27
(S)3.25 Permits ........................................................ 27
(S)3.26 No Changes Since Balance Sheet Date ............................ 27
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(S)3.27 Disclosure ..................................................... 30
(S)3.28 Government Contracts ........................................... 30
(S)3.29 Warranty Claims ................................................ 30
(S)3.30 Brokers' or Finders' Fees ...................................... 30
(S)3.31 Inter-company Balances ......................................... 31
(S)3.32 Conduct of Business of the Company ............................. 31
ARTICLE IV REPRESENTATIONS OF PURCHASER ................................... 32
(S)4 Representations of Purchaser ................................... 32
(S)4.1 Existence and Good Standing of Purchaser; Power and Authority .. 32
(S)4.2 Consents and Approvals; No Violations .......................... 33
(S)4.3 Purchase for Investment ........................................ 33
(S)4.4 No Action or Proceedings ....................................... 33
(S)4.5 Brokers' or Finders' Fees ...................................... 33
(S)4.6 Financing ...................................................... 33
(S)4.7 Disclosure ..................................................... 34
ARTICLE V COVENANTS OF SELLER AND PURCHASER .............................. 34
(S)5.1 Confidentiality ................................................ 34
(S)5.2 Public Announcements ........................................... 35
(S)5.3 Non-Competition; Non-Interference .............................. 35
(S)5.4 Non-Solicitation of Employees .................................. 37
(S)5.5 Employee Matters ............................................... 38
(S)5.6 Xxxxx Claim .................................................... 38
(S)5.7 Outsourcing Charges ............................................ 39
(S)5.8 AS 400 Process Units ........................................... 39
ARTICLE VI DELIVERIES AT CLOSING .......................................... 39
(S)6.1 Seller's Obligations ........................................... 39
(S)6.2 Purchaser's Obligations ........................................ 40
(S)6.3 Further Assurances ............................................. 40
ARTICLE VII TAX MATTERS .................................................... 41
(S)7.1 Tax Returns .................................................... 41
(S)7.2 Payment of Taxes ............................................... 41
(S)7.3 Controversies .................................................. 42
(S)7.4 Transfer Taxes ................................................. 42
(S)7.5 Indemnification ................................................ 42
(S)7.6 Post-Closing Access and Cooperation ............................ 43
(S)7.7 Section 338 Election ........................................... 43
(S)7.8 Allocation ..................................................... 43
ARTICLE VIII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION ................... 44
(S)8.1 Survival of Representations .................................... 44
(S)8.2 Indemnification ................................................ 44
(S)8.3 Indemnification Procedure ................................ 46
(S)8.4 Third Party Claims ....................................... 47
ARTICLE IX MISCELLANEOUS ............................................ 48
(S)9.1 Expenses ................................................. 48
(S)9.2 Governing Law ............................................ 49
(S)9.3 Jurisdiction ............................................. 49
(S)9.4 Notices .................................................. 49
(S)9.5 Assignment; Parties in Interest .......................... 50
(S)9.6 Counterparts ............................................. 50
(S)9.7 Entire Agreement ......................................... 50
(S)9.8 Amendments ............................................... 50
(S)9.9 Severability ............................................. 50
(S)9.10 Third Party Beneficiaries ................................ 51
(S)9.11 No Strict Construction ................................... 51
(S)9.12 Waiver of Jury Trial ..................................... 51
EXHIBIT A Form of Lease Agreement
EXHIBIT B Form of Services Agreement
EXHIBIT C Form of Xxxxx Assignment Agreement
EXHIBIT D Form of Letter Agreement: Norfolk Southern Corporation
EXHIBIT E Form of Contract Assignment Agreement
EXHIBIT F Form of Service Fee Letter Agreement
EXHIBIT G Form of Lease Guaranty
EXHIBIT H Form of Amendment to Seller Customer Agreement and Statements of Work
thereunder
EXHIBIT I Form of Seller's Counsel Legal Opinion
EXHIBIT J Form of Purchaser's Counsel Legal Opinion
EXHIBIT K Form of Certificate: Indemnification Procedures
EXHIBIT L Form of Company/Sprint Agreement
EXHIBIT M Form of Seller/Sprint Agreement
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