EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
CITEL TECHNOLOGIES LIMITED,
MCK CANADA OPERATIONS INC.
CITEL TECHNOLOGIES INC.,
MCK COMMUNICATIONS, INC. (NEVADA),
MCK COMMUNICATIONS, INC. (DELAWARE),
MCK TELECOMMUNICATIONS INC. (CANADA),
DIGITAL TECHNIQUES, INC.
AND
VERSO TECHNOLOGIES, INC.
JANUARY 21, 2005
EXECUTION VERSION
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................................................... 2
2. PURCHASE OF CERTAIN ASSETS................................................................................ 8
2.1 PURCHASED ASSETS.............................................................................. 8
2.2 EXCLUDED ASSETS............................................................................... 9
3. ASSUMPTION OF CERTAIN LIABILITIES......................................................................... 10
3.1 ASSUMED LIABILITIES........................................................................... 10
3.2 EXCLUDED LIABILITIES.......................................................................... 11
4. CLOSING................................................................................................... 11
4.1 CLOSING....................................................................................... 11
4.2 PAYMENT OF PURCHASE PRICE..................................................................... 12
4.3 CONVEYANCE OF ASSETS AND OTHER CLOSING DELIVERABLES........................................... 12
4.4 ADJUSTMENT AMOUNT; PROCEDURE AND PAYMENT...................................................... 14
4.5 ALLOCATION OF PURCHASE PRICE AND ASSUMED LIABILITIES.......................................... 15
5. SELLERS' REPRESENTATIONS AND WARRANTIES................................................................... 16
5.1 ORGANIZATION AND STANDING..................................................................... 16
5.2 AUTHORIZATION AND BINDING OBLIGATION.......................................................... 16
5.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS........................................ 16
5.4 TITLE TO AND CONDITION OF REAL PROPERTY....................................................... 17
5.5 TITLE TO AND CONDITION OF PERSONAL PROPERTY................................................... 17
5.6 CONTRACTS..................................................................................... 17
5.7 INTELLECTUAL PROPERTY......................................................................... 18
5.8 FINANCIAL STATEMENTS.......................................................................... 20
5.9 INSURANCE..................................................................................... 20
5.10 PERSONNEL INFORMATION OF TRANSFERRED EMPLOYEES................................................ 20
5.11 EMPLOYEES AND LABOR RELATIONS MATTERS......................................................... 21
5.12 LITIGATION AND ADMINISTRATIVE PROCEEDINGS..................................................... 22
5.13 COMPLIANCE WITH LAWS.......................................................................... 22
5.14 INVENTORIES................................................................................... 22
5.15 ABSENCE OF CERTAIN CHANGES.................................................................... 23
5.16 NO UNDISCLOSED LIABILITIES.................................................................... 23
EXECUTION VERSION
i
5.17 TAX MATTERS................................................................................... 24
5.18 BROKERAGE..................................................................................... 25
5.19 EMPLOYEE PLANS................................................................................ 25
5.20 ACCOUNTS RECEIVABLE........................................................................... 27
5.21 WARRANTIES.................................................................................... 27
5.22 CUSTOMERS..................................................................................... 27
5.23 ASSETS........................................................................................ 27
5.24 SOLVENCY...................................................................................... 27
5.25 DISCLOSURE.................................................................................... 28
5A. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PARENT....................................................... 28
5A.1 ACCREDITED STATUS............................................................................. 28
5A.2 DISCLOSURE.................................................................................... 28
5A.3 NO REGISTRATION............................................................................... 28
5A.4 INVESTMENT FOR OWN ACCOUNT.................................................................... 28
5A.5 RESTRICTIVE LEGEND; TRANSFER AGENT INSTRUCTIONS............................................... 28
6. REPRESENTATIONS AND WARRANTIES OF BUYERS.................................................................. 29
6.1 ORGANIZATION AND STANDING..................................................................... 29
6.2 AUTHORIZATION AND BINDING OBLIGATION.......................................................... 29
6.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS........................................ 29
6.4 BROKERAGE..................................................................................... 30
6.5 LITIGATION AND ADMINISTRATIVE PROCEEDINGS..................................................... 30
6.6 FINANCIAL STATEMENTS.......................................................................... 30
6.7 NO UNDISCLOSED LIABILITIES.................................................................... 30
6.8 DISCLOSURE.................................................................................... 30
6.9 FINANCING..................................................................................... 30
7. COVENANTS OF BUYERS....................................................................................... 30
7.1 PRIVACY COMPLIANCE............................................................................ 30
7.2 SATISFACTION OF CLOSING CONDITIONS............................................................ 31
7.3 OFFERS OF EMPLOYMENT.......................................................................... 31
8. COVENANTS OF SELLERS...................................................................................... 31
8.1 CONSENTS AND APPROVALS........................................................................ 31
8.2 NET RECEIVABLES REPORT........................................................................ 31
8.3 CHANGE OF NAME................................................................................ 31
EXECUTION VERSION
ii
8.4 SATISFACTION OF CLOSING CONDITIONS............................................................ 31
9. JOINT COVENANTS........................................................................................... 31
9.1 PUBLIC ANNOUNCEMENTS.......................................................................... 31
9.2 EMPLOYEE MATTERS.............................................................................. 31
9.3 CERTIFICATE OF TAX AUTHORITIES................................................................ 32
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS............................................................. 32
10.1 CONSENTS AND FILINGS.......................................................................... 32
10.2 CLOSING DELIVERABLES.......................................................................... 33
10.3 ADVERSE PROCEEDINGS........................................................................... 33
10.4 LIST OF TRANSFERRED EMPLOYEES................................................................. 33
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS............................................................ 33
11.1 CLOSING DELIVERABLES.......................................................................... 33
11.2 ADVERSE PROCEEDINGS........................................................................... 33
12. ADDITIONAL COVENANTS...................................................................................... 33
12.1 TRANSFER TAXES; EXPENSES...................................................................... 33
12.2 SVB CONSENT AND COLLATERAL RELEASE AGREEMENT.................................................. 33
12.3 CANADIAN TAX AUDIT............................................................................ 34
12.4 PAYMENT OF LIABILITIES........................................................................ 34
12.5 COOPERATION; FURTHER ASSURANCES............................................................... 34
12.6 COVENANT NOT TO COMPETE....................................................................... 36
12.7 TREATMENT OF PROPRIETARY INFORMATION AND CONFIDENTIAL INFORMATION............................. 36
12.8 NON-ASSIGNABLE CONTRACTS...................................................................... 36
12.9 INFORMATION COVENANTS......................................................................... 37
12.10 COVENANT REGARDING CERTAIN EMPLOYEES......................................................... 37
12.11 REMAINING CONTRACTS........................................................................... 38
12.12 CANADIAN TAX ELECTIONS........................................................................ 39
13. INDEMNIFICATION........................................................................................... 39
13.1 SELLERS' AGREEMENT TO INDEMNIFY............................................................... 39
13.2 BUYERS' AGREEMENT TO INDEMNIFY................................................................ 39
13.3 INDEMNIFICATION PROCEDURE..................................................................... 39
13.4 INDEMNIFICATION THRESHOLDS AND LIMITATIONS.................................................... 41
13.5 SETOFF RIGHT.................................................................................. 42
13.6 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE.......................... 44
EXECUTION VERSION
iii
13.7 NO CONSEQUENTIAL DAMAGES...................................................................... 44
14. [INTENTIONALLY OMITTED]................................................................................... 44
15. OTHER PROVISIONS.......................................................................................... 44
15.1 BENEFIT AND ASSIGNMENT........................................................................ 44
15.2 ENTIRE AGREEMENT.............................................................................. 44
15.3 GOVERNING LAW................................................................................. 44
15.4 NOTICES....................................................................................... 44
15.5 COUNTERPARTS.................................................................................. 46
15.6 SEVERABILITY.................................................................................. 46
15.7 WAIVERS....................................................................................... 46
15.8 ENFORCEMENT OF AGREEMENT...................................................................... 47
15.9 CONSTRUCTION AND INTERPRETATION............................................................... 47
EXECUTION VERSION
iv
Exhibit Index
Exhibit A-1: Assignment and Assumption Agreement (U.K.)
Exhibit A-2 Assignment and Assumption Agreement (U.S.)
Exhibit A-3 Assignment and Assumption Agreement (Canada)
Exhibit B-1: Xxxx of Sale (U.K.)
Exhibit B-2: Xxxx of Sale (U.S.)
Exhibit B-3: Xxxx of Sale (Canada)
Exhibit C-1: Form of 6% Secured Convertible Promissory Note
Exhibit C-2: Form of Security Agreement
Exhibit D-1: Form of U.S. Employment Offer Letter
Exhibit D-2: Form of Canada Employment Offer Letter
Exhibit D-3: Form of U.S. Security and Confidentiality Agreement
Exhibit D-4: Form of Canada Security and Confidentiality Agreement
Exhibit E-1: Form of Opinion of Counsel to Verso, MCK-DE, MCK-NV, and DTI
Exhibit E-2: Form of Opinion of Counsel to MCK-Canada
Exhibit F-1: Form of Opinion of Counsel to CITEL (U.S.)
Exhibit F-2: Form of Opinion of Counsel to CITEL (Canada)
Exhibit F-3: Form of Opinion of Counsel to CITEL (U.K.)
Exhibit G: Copyright Assignment Agreement
Exhibit H: Domain Name Assignment Agreement
Exhibit I: Patent Application Assignment Agreement
Exhibit J: Trademark Assignment Agreement
EXECUTION VERSION
v
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT"), dated January 21, 2005, is by and
among CITEL Technologies Limited, a company organized under the laws of England
and Wales ("CITEL (U.K.)"), CITEL Technologies, Inc., a Delaware corporation
("CITEL (U.S.)"), and MCK Canada Operations Inc., a company organized under the
laws of the Province of British Columbia ("CITEL (CANADA)") (each of the
foregoing parties is referred to herein as a "BUYER" and collectively as the
"BUYERS"),
and
MCK Communications, Inc., a Nevada corporation ("MCK-NV"), MCK Communications,
Inc., a Delaware corporation ("MCK-DE"), MCK Telecommunications, Inc., a company
organized under the laws of Yukon ("MCK CANADA"), Digital Techniques, Inc., a
Texas corporation ("DTI"), and Verso Technologies, Inc., a Minnesota corporation
("PARENT") (each of the foregoing parties is referred to herein as a "SELLER"
and collectively as the "SELLERS").
RECITALS
A Sellers own certain assets that can be used to allow (i) legacy digital
business telephone handsets to be used in a distributed voice network using
public/private IP-based, circuit-switched, frame relay or wireless technology
networks, and (ii) products that enable call recording of legacy business
telephone systems in non packet environments (the "MCK BUSINESS").
B Sellers desire to sell, transfer, assign, deliver and otherwise convey
to Buyers, and Buyers desire to purchase from Sellers, all of the right, title
and interest of Sellers in, to and under the Assets (as defined below), and to
assume specified liabilities, of the MCK Business, on the terms and subject to
the conditions set forth herein.
C Sellers and Buyers desire to make certain representations, warranties,
covenants, and agreements in connection with the transactions contemplated
herein.
EXECUTION VERSION
1
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises and covenants contained herein, the parties agree as follows:
1. DEFINITIONS. The following terms will have the following meanings:
"ACCOUNTS RECEIVABLE" means all trade accounts receivable (whether or not
invoiced) and other rights to payment from Sellers' customers, re-sellers,
distributors, and licensees that relate to the MCK Business, including any
claims, credits, refunds, offsets, back charges or similar other amounts owing
to Sellers, and the full benefit of all security for such accounts or rights to
payment.
"ACTUAL VALUE" is defined in Section 4.4(d)(iii).
"ADJUSTMENT AMOUNT" means the adjustment to the Purchase Price, as more
fully specified in Section 4.4.
"ASSETS" means the assets to be purchased and transferred to Buyers
hereunder, as more fully specified in Section 2.1.
"ASSIGNMENT AND ASSUMPTION AGREEMENTS" means the assignment and assumption
agreements attached as Exhibits A-1 through A-3 hereto, pursuant to which, as of
the Closing, Sellers will assign to Buyers, and Buyers will accept and assume,
all of Sellers' rights and obligations with respect to the Assumed Liabilities
referenced in such agreements.
"ASSUMED PAYABLES" means accrued warranty costs, deferred service revenue,
and deferred stock rotation, as set forth on the Balance Sheet, the Net
Receivables Report, and the Closing Financial Statements, as the case may be.
"ASSUMED LIABILITIES" means the Liabilities of Sellers to be assumed by
Buyers hereunder, as more fully specified in Section 3.1.
"BALANCE SHEET" means the unaudited December 31, 2004 balance sheet of the
MCK Business described in Section 5.8.
"BILLS OF SALE" means the bills of sale attached as Exhibits B-1 through
B-3 hereto, effecting the sale, transfer, assignment, and conveyance by Sellers
of the Assets to Buyers at the Closing.
"BUYER INDEMNIFIED PARTIES" means Buyers and each of their respective
officers, directors, agents, employees, affiliates, and representatives.
"CLAIM" means any claim for indemnification under Section 13.
"CLAIM NOTICE" means a written notice of any Claim.
EXECUTION VERSION
2
"CLOSING" means the closing described in Section 4.1.
"CLOSING NET RECEIVABLES" means (a) all Accounts Receivable that are
outstanding and aged less than 45 days as of the Closing Date, less (b) any
Assumed Payables, as calculated from the face of the Closing Financial
Statements.
"CLOSING DATE" means the date described in Section 4.1.
"CLOSING FINANCIAL STATEMENTS" means the unaudited balance sheet and
statements of income and expense of the MCK Business as of and for the period
ended the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPUTER SOFTWARE" means computer software programs (in object code and
source form), databases, and all documentation related thereto, in each case
related to the MCK Business.
"CONFIDENTIAL INFORMATION" means any information relating to the MCK
Business provided to or received by any Seller from a third party pursuant to an
obligation to keep such information confidential.
"CONTRACTS" means all contracts, agreements, Licenses, leases, and all
other consensual obligations, promises or undertakings, written or oral, of a
Seller or to which a Seller is a party, relating to the MCK Business.
"CONVERSION SHARES" means the shares of capital stock of CITEL (U.K.) that
are issuable upon conversion of the Note.
"COPYRIGHTS" means U.S. and foreign registered and unregistered copyrights
(including those in Computer Software), rights of publicity, and all
registrations and applications to register the same relating to the MCK
Business.
"DOLLARS" or "$" means United States Dollars.
"DOMAIN NAMES" means Internet domain name registrations and Internet
domain name registration applications relating to the MCK Business.
"EMPLOYEE BENEFIT PLANS" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA, whether or not subject to ERISA; any pension,
profit sharing, retirement, stock purchase, severance, termination pay, wages,
overtime, deferred or incentive compensation, commissions, bonus, stock
appreciation right, stock option or other equity based, paid or personal time
off, vacation, holiday pay, sick pay, other paid leave, disability,
hospitalization, healthcare, dental care, life insurance, accidental death and
dismemberment coverage, medical insurance or other fringe benefit plan, program,
policy, employee handbook or manual, arrangement, agreement or commitment; and
any employment or change of control agreement, in each case only to the extent
that employees of the MCK Business may participate in or receive benefits under
any such Employee Benefit Plan.
EXECUTION VERSION
3
"ENCUMBRANCE" means any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, mortgage, right of way, easement,
encroachment, servitude, right of first option, right of first refusal or
similar restriction, including any restriction on use, transfer, receipt of
income or exercise of any other attribute of ownership.
"ENVIRONMENTAL MATTERS" means, as the context may require, any federal,
state, provincial, municipal or local tax, rule, regulation, ordinance, statute,
guideline, standard, order, license, permit, judgment or award relating to
pollution of the ambient environment, including matters relating to air, water
or soil quality, or the handling, storage, release or disposal of hazardous
substances, or compliance with any of the foregoing, or both.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ESTIMATED NET RECEIVABLES" means (a) all Accounts Receivable that are
outstanding and aged less than 45 days as of the date of the Net Receivables
Report, less (b) any Assumed Payables as of the date of the Net Receivables
Report, as calculated from the face of the Net Receivables Report.
"EXCLUDED ASSETS" is defined in Section 2.2.
"EXCLUDED CONTRACT" is defined in Section 12.11.
"EXCLUDED LIABILITIES" is defined in Section 3.2.
"FINANCIAL STATEMENTS" is defined in Section 5.8.
"GOVERNMENTAL BODY" means any federal, state, local, municipal, foreign or
other government; governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers); body
exercising, or entitled or purporting to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power; or any official of any of the foregoing.
"HIGH VALUE" is defined in Section 4.4(d)(ii).
"INDEMNIFIED PARTIES" means the Buyer Indemnified Parties or the Seller
Indemnified Parties, as the case may be.
"INDEPENDENT ACCOUNTANTS" means a firm of independent certified
accountants mutually agreeable to CITEL (U.S.) and Parent. In the event the
parties cannot mutually agree, Citel (U.S.) and Parent shall each select a firm
of independent certified accountants who shall jointly select a third firm,
which such firm shall serve as the Independent Accountants.
"INTELLECTUAL PROPERTY" means Trademarks, Patents, Copyrights, Trade
Secrets, and Domain Names.
EXECUTION VERSION
4
"INTELLECTUAL PROPERTY ASSIGNMENTS" means the copyright assignment
agreement, domain name assignment agreement, patent application assignment
agreement, and trademark assignment agreement, all to be executed by Sellers and
dated as of the Closing Date, attached as Exhibits G, H, I and J hereto.
"INVENTORIES" means all inventories of Sellers related to the MCK
Business, wherever located, including all finished goods, work in process, raw
materials, spare parts and all other materials and supplies to be used or
consumed by Sellers in the production of finished goods.
"KNOWLEDGE" (whether or not capitalized) means, with respect to any
Seller, the actual knowledge of Xxxxxx X. Xxxx, Xxxxx Xxxxx, Xxxxxx X. Xxxxxxx,
Xxxxx X. Xxxx, Xxx Xxxxx, Xxxxx Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxx or Xxxxxxx
Xxxxxx of a fact or matter, or the knowledge that any such person reasonably
could be expected to discover or otherwise become aware in the course of
performing his or her customary duties on behalf of Sellers, or any of them,
regarding the accuracy or any representation or warranty contained in this
Agreement.
"LIABILITIES" means all debts, claims, actions, grievances, complaints,
liabilities, obligations, losses, damages, deficiencies, fines, penalties, costs
and expenses and interest of every kind and nature, whether liquidated or
unliquidated, direct or indirect, absolute, accrued, contingent or otherwise,
regardless of when such debt, claim, actions, grievances, complaints, liability,
obligation, loss, damage, deficiency, fine, penalty, interest, cost or expense
arose or might arise.
"LICENSE" means any license or agreement pursuant to which a Seller has
acquired rights in or to any Trademarks, Patents, Copyrights, Trade Secrets,
Domain Names or Computer Software, in all cases limited to those related to the
MCK Business, or license or agreement pursuant to which a Seller has licensed or
transferred the right to use any of the foregoing.
"LOW VALUE" is defined in Section 4.4(d)(i).
"MCK PRODUCTS" means the products (and any versions thereof) manufactured
by or on behalf of, and sold by, Sellers in the conduct of the MCK Business as
of the Closing Date, as set forth on Schedule 1.
"NET RECEIVABLES REPORT" means an accurate and complete Accounts
Receivable aging report and corresponding report of Assumed Payables, reflecting
such accounts and payables as of a date within five business days of the Closing
Date.
"NON-ASSIGNABLE CONTRACTS" means a Contract that cannot be assigned to
Buyers without the consent of a third party by reason of its terms and for which
the required consent has not been obtained prior to the Closing Date.
"NOTE" means a 6% secured convertible promissory note in substantially the
form attached as Exhibit C-1 hereto.
"OEMW" is defined in Section 2.1(n).
EXECUTION VERSION
5
"OEMW OPEN ORDERS" is defined in Section 2.1(n).
"PATENTS" means issued U.S. and foreign patents and pending patent
applications, patent disclosures, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention and similar statutory
rights, in all cases limited to those related to the MCK Business.
"PERMITTED ENCUMBRANCE" means (a) minor imperfections of title that do not
detract from the value or impair the use of any Asset; (b) liens for Taxes not
yet due or which are being contested in good faith by appropriate action and as
to which adequate reserves have been set aside in the Financial Statements (as
defined in Section 5.8) in accordance with generally accepted accounting
principles; and (c) statutory liens of mechanics, materialmen, warehousemen or
carriers and similar liens arising by operation of law in the ordinary course of
business for sums not yet due or being contested in good faith and as to which
adequate reserves have been set aside in the Financial Statements (as defined in
Section 5.8) in accordance with generally accepted accounting principles.
"PERSON" means an individual, partnership, corporation, association, joint
stock company, trust, joint venture, unincorporated organization, and
Governmental Body.
"PERSONAL INFORMATION" means information about an identifiable individual,
excluding business contact information when collected, used or disclosed for the
purposes of contacting an individual in that individual's capacity as an
employee or an official of a Person and for no other purpose.
"POST-CLOSING ASSET" means an asset of Sellers relating to the MCK
Business that is not an Asset, the existence of which is discovered by Buyers or
Sellers after execution of this Agreement or, if the existence of such asset was
known prior to execution of this Agreement (such as, by way of example, an
Excluded Contract), is determined by Buyers after Closing to be material to the
MCK Business and subject to assignment and transfer to Buyers in accordance with
Section 12.5(d).
"PROPRIETARY INFORMATION" means information not readily available in the
public domain or already known to the recipient that is of such a nature or that
is conveyed in such a way that a reasonable recipient would understand that the
disclosing party considered the information to be proprietary. Information may
be proprietary even if no formal claim to that effect is made by the disclosing
party but the burden of proof that information is proprietary is on the
disclosing party. The term proprietary information refers to specific items of
information furnished by one party to the other and does not include, without
more, a general increase in the understanding of one party of the nature of the
business of the other.
"PURCHASE AGREEMENTS" means, collectively, this Agreement, the Assignment
and Assumption Agreements, the Intellectual Property Assignments, and the Bills
of Sale.
"PURCHASE PRICE" means the consideration delivered to Sellers by Buyers
pursuant to Section 4.2, as adjusted pursuant to Section 4.4.
EXECUTION VERSION
6
"REGISTERED INTELLECTUAL PROPERTY" means all Patents, registered
Copyrights and Copyright applications, registered Trademarks and Trademark
applications, and Domain Names owned by Sellers that relate to the MCK Business.
"SALES ORDERS" is defined in Section 2.1.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER INDEMNIFIED PARTIES" means Sellers and each of their respective
officers, directors, agents, employees, affiliates, and representatives.
"TAX" OR "TAXES" means all taxes, assessments, charges, dues, duties,
rates, fees, imposts, levies and similar charges of any kind lawfully levied,
assessed or imposed by any Governmental Body, under any applicable Tax
Legislation, including federal, state, territorial, municipal and local, foreign
or other income, gross receipts, license, severance, stamp, occupation, capital,
goods and services, sales, use, consumption, excise, value-added, business, real
property, personal property, transfer, franchise, withholding, payroll, or
employer health taxes, customs, import, anti-dumping, or countervailing duties,
employment insurance premiums, Canada pension plan contributions, and workers'
compensation payments, alternative or add-on minimum, or any other tax of any
kind whatsoever, whether computed on a separate or consolidated, unitary or
combined basis or in any other manner, including any interest, penalties and
fines associated therewith.
"TAX LEGISLATION" means, collectively, the Code and all federal, state,
municipal, foreign, or other statutes imposing a Tax, including all treaties,
conventions, rules, regulations, orders, and decrees of any jurisdiction.
"TAX RETURNS" means any return, declaration, report, election, claim for
refund, information return or statement or other document required to be filed
under the provisions of any Tax Legislation and any tax forms required to be
filed, whether in connection with a Tax Return or not, under any provisions of
any applicable Tax Legislation.
"TRADEMARKS" means U.S. and foreign registered and unregistered
trademarks, trade dress, service marks, logos, trade names, corporate names and
all registrations and applications to register the same, in each case that
relate to the MCK Business.
"TRANSFERRED EMPLOYEE" means an employee or consultant listed on Schedule
5.10 who is being made an offer of employment in accordance with Section 9.2.
"TRANSFERRED INFORMATION" means the Canadian Personal Information to be
disclosed or conveyed to Buyers or any of its representatives or agents by or on
behalf of Sellers as a result of or in conjunction with the transactions
contemplated herein, and includes all such Canadian Personal Information
disclosed to Buyers during the period leading up to and including the completion
of the transactions contemplated herein.
"TRADE SECRETS" means all categories of trade secrets as defined in the
Uniform Trade Secrets Act, including business information, that relate to the
MCK Business.
EXECUTION VERSION
7
2. PURCHASE OF CERTAIN ASSETS
2.1 PURCHASED ASSETS. Upon the terms and subject to the conditions
of this Agreement and pursuant to the Bills of Sale, the Assignment and
Assumption Agreements, and the Intellectual Property Assignments, at the Closing
Sellers will sell, assign, transfer, deliver, and otherwise convey to Buyers,
and Buyers will purchase, acquire, and accept from Sellers, free and clear of
any Encumbrances except for Permitted Encumbrances, all of Sellers' right,
title, and interest in and to all of Sellers' property and assets, personal or
mixed, tangible and intangible, of every kind and description, related to and
used in the conduct of the MCK Business (but excluding all Excluded Assets),
including the following:
(a) all Accounts Receivable, including those set forth in the
Net Receivables Report, as attached on Schedule 2.1(a);
(b) all prepaid expenses, as listed on Schedule 2.1(b), and
the proceeds of any insurance coverage in respect of an Asset or an
Assumed Liability;
(c) all leasehold interests in the real property listed on
Schedule 2.1(c);
(d) all tangible personal property, including all machinery,
equipment, tools, furniture, office equipment, computer hardware,
supplies, materials, vehicles and other items of tangible personal
property of every kind owned or leased by Sellers (wherever located and
whether or not carried on Sellers' books), together with any express or
implied warranty by the manufacturers, sellers or lessors of any item or
component part thereof and all maintenance records and other documents
relating thereto, as listed on Schedule 2.1(d);
(e) all Inventories, as listed on Schedule 2.1(e);
(f) all Trademarks, Copyrights, and Patents, as listed on
Schedule 2.1(f), together with any related, legally subsisting rights to
use any of the foregoing and all other rights in, to and under the
foregoing in all countries in which such rights legally subsist;
(g) all other intangible assets, including all inventions,
shop rights, know-how, Trade Secrets, Domain Names, improvements,
processes, formulae, Computer Software, Proprietary Information,
specifications and ideas, whether patentable or not, and all drawings,
records, books or other indicia, however evidenced, of all of the
foregoing, as listed on Schedule 2.1(g), together with any related,
legally subsisting rights to use any of the foregoing and all other rights
in, to and under the foregoing in all countries in which such rights
legally subsist;
(h) all creative materials, including photographs, films, art
work, color separations and the like, advertising and promotional
materials and all other printed or written materials, in each case to the
extent related to the MCK Business;
EXECUTION VERSION
8
(i) all policies of insurance and rights thereunder, rights of
indemnity from third parties, standby commitments of third parties and
other similar rights of every kind and nature, as listed on Schedule
2.1(i);
(j) the Contracts listed on Schedule 2.1(j) and the
Confidential Information incident thereto;
(k) the right to receive mail and other communications
addressed to Sellers, including mail and communications from customers,
suppliers, distributors, licensors, licensees, agents and others, but
excluding mail and other communications relating solely to Excluded Assets
or Excluded Liabilities;
(l) all lists and records pertaining to customers, suppliers,
distributors, licensors, licensees, resellers, end-users, business
partners, personnel, and agents (including original invoices relating to
Accounts Receivable and associated evidence of order and shipping) and all
other books, ledgers, files, documents, correspondence, and business
records of every kind and nature, other than records (i) required by law
to be retained by Sellers, copies of which have been furnished to Buyer at
or before the Closing, (ii) having no relation to the MCK Business; (iii)
relating to current litigation not assumed by Buyer, copies of which have
been furnished to Buyer at or before the Closing; and (iv) relating
exclusively to Excluded Assets or Excluded Liabilities;
(m) all claims, refunds, credits, causes of action, choses in
action, rights of recovery and rights of set-off of every kind and nature,
other than those (i) associated with Excluded Assets or Excluded
Liabilities or (ii) having no relation to the MCK Business;
(n) all rights under all outstanding purchase orders issued to
OEMW Worldwide, LLC ("OEMW") that are unfulfilled (in whole or in part) as
of the Closing (the "OEMW OPEN ORDERS"), as set forth on Schedule
2.1(n)(i), and all outstanding sales orders as set forth on Schedule
2.1(n)(ii) ("SALES ORDERS"); and
(o) all goodwill as a going concern and all goodwill
associated with the Assets described in Sections 2.1(f), 2.1(g), and
2.1(h).
2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained in Section 2.1 or elsewhere in this Agreement, the following assets of
Sellers (collectively, the "EXCLUDED ASSETS") are not part of the sale and
purchase contemplated hereunder, are excluded from the Assets, and shall remain
the property of Sellers after the Closing:
(a) Sellers' cash, cash equivalents, bank accounts,
securities, short-term investments, and all other instruments and
interests of a similar nature;
(b) the outstanding capital stock of Parent's subsidiaries,
including MCK-NV, MCK-DE, MCK-Canada, and DTI;
EXECUTION VERSION
9
(c) Sellers' minute books, charter documents, corporate stock
record books, and such other books and records as pertain to the
organization, existence or share capitalization of Sellers or as are
necessary to enable Sellers to file their Tax Returns; provided, however,
that such books and records will be maintained in existence and made
available to Buyers for not less than six years following the Closing
Date;
(d) copies of such other records that relate to the MCK
Business as Sellers may deem reasonably necessary to permit Sellers to
prepare financial statements and Tax Returns, respond to any tax audits or
inquires and to defend claims, demands, disputes, arbitrations, and other
legal proceedings with respect to the MCK Business;
(e) all rights in and assets of Sellers' Employee Benefits
Plans;
(f) the Non-assignable Contracts;
(g) the Excluded Contracts and any other Contracts not listed
on Schedule 2.1(j), except those that are Post-Closing Assets;
(h) those properties and assets specified on Schedule 2.2; and
(i) all Assets owned by the Parent other than those that are
(i) used exclusively for the MCK Business or (ii) necessary to conduct the
MCK Business in the manner presently conducted by Sellers and are located
in the Xxxxxxx, Xxxxxxxxxxxxx xx Xxxxxxx, Xxxxxxx facilities of Sellers.
3. ASSUMPTION OF CERTAIN LIABILITIES
3.1 ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, at the Closing, Buyers will assume and agree to
pay, defend, discharge, and perform as and when due only the following
Liabilities of Sellers (the "Assumed Liabilities"):
(a) any Liability arising after the Closing Date under the
Contracts that are included among the Assets, other than any Liability
arising out of or relating to a Seller's breach of such Contract that
occurred on or before the Closing Date;
(b) all accrued warranty obligations and deferred service
revenue under the Contracts specified on Schedule 3.1(b);
(c) all stock rotation obligations under the Contracts
specified on Schedule 3.1(c), where the amount of such obligation is
determined by reference to the historical product cost for the inventory
required to satisfy such stock rotation obligation); and
(d) all Liabilities arising out of or relating to the OEMW
Open Orders and the Sales Orders.
EXECUTION VERSION
10
3.2 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
herein, Buyers are not assuming and shall not become responsible for any
Liability of any Seller of whatever nature, whether presently in existence or
arising hereafter, including any Liability incurred in connection with, arising
out of, or related to the ownership or use of any of the Assets or the conduct
of the MCK Business on or before the Closing Date, except as otherwise set forth
in this Agreement. In particular, Sellers shall remain liable for all, and
Buyers shall have no obligation or responsibility for any, Liabilities relating
to:
(a) any Employee Benefit Plan of Sellers, or any multiemployer
plan (as defined under section 4001(a)(3) of ERISA) to which Sellers or
any member of the same controlled group (as defined under Code section
414(b) or (c)) that includes Sellers;
(b) any Transferred Employee for any period before the date on
which such Transferred Employee becomes an employee of a Buyer (and, for
greater certainty, Sellers shall remain liable for any Liability for any
Transferred Employee who does not accept Buyers' offer of employment);
(c) all Taxes applicable to the MCK Business and the Assets to
the extent attributable to taxable years or periods (or portions thereof)
ending on or before the Closing Date;
(d) any employee, consultant, officer, director or former
employee of Sellers who is not a Transferred Employee, whether such
Liability arose before or after the Closing;
(e) the Non-assignable Contracts and the Excluded Contracts;
(f) Post-Closing Assets unless and until Buyers assume the
Liabilities thereunder pursuant to Section 12.5(d);
(g) Subject to Section 3.2(f), any Contracts not listed on
Schedule 2.1(j);
(h) any matter listed on Schedule 5.7(e), Schedule 5.12 or
Schedule 5.17;
(i) any other Liability that is neither set forth in a
Schedule to this Agreement nor listed in this Section 3.2, except as
otherwise set forth in this Agreement.
All such Liabilities other than the Assumed Liabilities are referred to
herein as the "EXCLUDED LIABILITIES" and shall be retained by and remain
Liabilities of Sellers.
4. CLOSING
4.1 CLOSING. The closing of the transactions contemplated hereby
(the "CLOSING") shall take place at the offices of Stoel Rives LLP, 36th Floor,
One Union Square, Seattle, Washington, at a mutually acceptable time on the
second business day after the date on
EXECUTION VERSION
11
which all of the conditions set forth in Sections 10 and 11 have been satisfied
or waived, or at such other time or place as the parties may agree (the "CLOSING
DATE").
4.2 PAYMENT OF PURCHASE PRICE. At the Closing, Buyers will deliver
to Sellers the Purchase Price as follows:
(a) an amount in cash equivalent to 75% of the Estimated Net
Receivables; and
(b) one or more Notes in the aggregate principal amount of
three million five hundred thousand dollars ($3,500,000).
All cash payments required by this Section 4 will be made by wire transfer of
immediately available funds denominated in dollars in accordance with wire
transfer instructions provided to Buyers before Closing. The Purchase Price
shall be subject to adjustment as set forth in Section 4.4.
4.3 CONVEYANCE OF ASSETS AND OTHER CLOSING DELIVERABLES. At the
Closing, each party shall deliver to the other parties such documents,
certificates, schedules, agreements, and instruments contemplated by this
Agreement. In particular:
(a) Sellers shall deliver to Buyers:
(i) the Bills of Sale, Assignment and Assumption
Agreements, and Intellectual Property Assignments, each duly
executed by Sellers;
(ii) a certificate executed by Sellers as to the
accuracy and completeness of their representations and warranties as
of the date of this Agreement and as of the Closing and as to their
compliance with and performance of their covenants and obligations
to be performed or complied with at or before the Closing;
(iii) a certificate of the Secretary of each Seller
certifying, as complete and accurate as of the Closing, attached
copies of the charter documents of each Seller, certifying and
attaching all requisite resolutions or actions of such Seller's
board of directors and shareholders, as applicable, approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, and certifying to the incumbency
and signature of the officer of Seller executing this Agreement and
any other document relating to the transactions contemplated herein;
(iv) the opinions of counsel to Sellers substantially in
the forms attached as Exhibit E-1 and Exhibit E-2 hereto;
(vi) such other deeds, bills of sale, assignments,
certificates of title, documents, and other instruments of transfer
and conveyance as may
EXECUTION VERSION
12
reasonably be requested by Buyers, each in form and substance
reasonably satisfactory to Buyers and its legal counsel and duly
executed by Sellers; and
(vii) a properly completed Internal Revenue Service Form
W-9, Request for Taxpayer Identification Number and Certification,
or valid substitute or successor form (or Form W-8BEN, Certificate
of Foreign Status of Beneficial Owner for United States Tax
Withholding, or other applicable Form W-8 in the case of a Seller
that is not a U.S. person) showing that no federal income tax
withholding is required with respect to payments of interest
pursuant to the Note.
(b) Buyers shall deliver to Sellers:
(i) the cash portion of the Purchase Price, as set forth
in Section 4.2(a);
(ii) the Note, duly executed by CITEL (U.K.) and CITEL
(U.S.);
(iii) the Security Agreement, duly executed by CITEL
(U.K.) and CITEL (U.S.);
(iv) counterparts of the Assignment and Assumption
Agreements, duly executed by Buyers;
(v) a certificate executed by Buyers as to the accuracy
and completeness of their representations and warranties as of the
date of this Agreement and as of the Closing and as to their
compliance with and performance of their covenants and obligations
to be performed or complied with at or before the Closing;
(vi) a certificate of the Chief Executive Officer or
Secretary of each Buyer certifying, as complete and accurate as of
the Closing, attached copies of the charter documents of each Buyer,
certifying and attaching all requisite resolutions or actions of
such Buyer's board of directors, shareholders, and members, as
applicable, approving the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein, and
certifying to the incumbency and signature of the officer of such
Buyer executing this Agreement and any other document relating to
the transactions contemplated herein;
(vii) the opinions of counsel to Buyers substantially in
the forms attached as Exhibit F-1, Exhibit F-2, and Exhibit F-3
hereto; and
(viii) such other assignments, documents, and other
instruments of assumption as may reasonably be requested by Sellers,
each in form and substance reasonably satisfactory to Sellers and
its legal counsel and duly executed by Buyers.
EXECUTION VERSION
13
4.4 ADJUSTMENT AMOUNT; PROCEDURE AND PAYMENT.
(a) The Adjustment Amount (which may be a positive or negative
number) will be equal to 75% of the amount determined by subtracting the
Closing Net Receivables from the Estimated Net Receivables. If the
difference between the Closing Net Receivables and Estimated Net
Receivables is positive, the Adjustment Amount shall be deducted from the
outstanding principal amounts owing under the Note in order of maturity.
If the Adjustment Amount is negative, Buyers shall pay the Adjustment
Amount in cash to Sellers. Within three business days after the
calculation of the Closing Net Receivables becomes binding and conclusive
on the parties pursuant to Section 4.4(c) or 4.4(d), Buyers shall setoff
the Adjustment Amount against the Note or make the cash payment, as the
case may be, provided for in this Section 4.4(a).
(b) Buyers shall prepare the Closing Financial Statements of
the MCK Business as of the Closing Date and for the period from the date
of the Balance Sheet through the Closing Date on the same basis and
applying the same accounting principles, policies and practices that were
used in preparing the accounts reflected in the Balance Sheet that are
applicable to the determination of the Adjustment Amount, including the
principles, policies and practices set forth on Schedule 4.4(b). Buyers
shall then determine the Closing Net Receivables based on the Closing
Financial Statements using the same methodology as was used to calculate
the Estimated Net Receivables. Subject to Sellers' satisfaction of their
obligations under Section 12.5, Buyers shall deliver the Closing Financial
Statements and the determination of the Closing Net Receivables to Sellers
within 30 days after the Closing Date.
(c) If within 15 business days following delivery of the
Closing Financial Statements and the Closing Net Receivables calculation
Sellers have not given Buyers written notice of their objection as to the
Closing Net Receivables calculation (which notice shall state the basis of
Sellers' objection), then the Closing Net Receivables calculated by Buyers
shall be binding and conclusive on the parties and be used in determining
the Adjustment Amount.
(d) If Sellers give Buyers such notice of objection, and if
Sellers and Buyers fail to resolve the issues outstanding with respect to
the Closing Financial Statements and the calculation of the Closing Net
Receivables within 15 business days of Buyers' receipt of Sellers'
objection notice, then within five business days thereafter, Sellers and
Buyers shall submit the issues remaining in dispute to the Independent
Accountants for resolution, applying the principles, policies, and
practices referred to in Section 4.4(b). If issues are submitted to the
Independent Accountants for resolution, (i) Seller and Buyer shall furnish
or cause to be furnished to the Independent Accountants such work papers
and other documents and information relating to the disputed issues as the
Independent Accountants may request and are available to that party or its
agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss
the issues with the Independent Accountants; (ii) the determination by the
Independent Accountants, as set forth in a notice to be delivered to both
Sellers and Buyers within 60 days of the submission to the
EXECUTION VERSION
14
Independent Accountants of the issues remaining in dispute, shall be
final, binding, and conclusive on the parties and shall be used in the
calculation of the Closing Net Receivables; and (iii) Sellers and Buyers
will bear the fees and costs of the Independent Accountants for such
determination as follows:
(i) if the Independent Accountants resolve all of the
objections with respect to the Closing Net Receivables in favor of
Buyers' position (the Closing Net Receivables so determined is
referred to herein as the "LOW VALUE"), then Sellers will, jointly
and severally, be responsible for all of the fees and expenses of
the Independent Accountants;
(ii) if the Independent Accountants resolve all of the
objections with respect to the Closing Net Receivables in favor of
Sellers' position (the Closing Net Receivables so determined is
referred to herein as the "HIGH VALUE"), then Buyers will, jointly
and severally, be responsible for all of the fees and expenses of
the Independent Accountants; and
(iii) if the Independent Accountants neither resolve all
of the objections with respect to the Closing Net Receivables in
favor of Buyers' position nor resolve all of the objections with
respect to the Closing Net Receivables in favor of Sellers' position
(the Closing Net Receivables so determined is referred to herein as
the "ACTUAL VALUE"), then Sellers will, jointly and severally, be
responsible for that fraction of the fees and expenses of the
Independent Accountants 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, and Buyers will, jointly and severally, be
responsible for the remainder of the fees and expenses of the
Independent Accountants.
4.5 ALLOCATION OF PURCHASE PRICE AND ASSUMED LIABILITIES
(a) As soon as practicable after the Closing, Buyers shall
deliver to Sellers a statement setting forth the allocation of the
Purchase Price and the Assumed Liabilities (the "ALLOCATION") among the
Assets in accordance with Section 1060 of the Code and the regulations
promulgated thereunder (and any similar provision of state, local or
foreign law, as applicable). Sellers shall have a period of 15 business
days after the delivery of the Allocation to present in writing to Buyers
notice of any objections Sellers may have to the allocation set forth
therein. Unless Sellers timely object, the Allocation shall be binding on
the parties without further adjustment.
(b) If Sellers shall raise any objections within the 15
business day period, Buyers and Sellers shall negotiate in good faith and
use their commercially reasonable efforts to resolve such dispute. If the
parties fail to agree within five business days after the delivery of
Sellers' notice, then the disputed items shall be resolved by the
Independent Accountants, which shall resolve the dispute within 20
business days of having the item referred to it. The costs, fees, and
expenses of the Independent Accountants shall be borne equally by Sellers
and Buyers.
EXECUTION VERSION
15
(c) Any adjustment made with respect to the Purchase Price
pursuant to Section 4.4 of this Agreement shall be allocated in accordance
with the determination mutually agreed by Sellers and Buyers. In the event
that an agreement over allocation is not reached within five business days
after the determination of the Adjustment Amount pursuant to Section 4.4,
the disputed item(s) shall be resolved pursuant to Section 4.5(b).
(d) Sellers and Buyers shall report an allocation of the
Purchase Price and Assumed Liabilities among the Assets in a manner
entirely consistent with the Allocation (including any adjustment made
pursuant to Section 4.5(c)), and shall act in accordance with such
Allocation in the preparation of financial statements and the timely
filing of all Tax Returns (including, without limitation, filing Form 8594
with its Federal Income Tax Return for the taxable year that includes the
date of the Closing) and in the course of any Tax audit, Tax review or Tax
litigation relating thereto. No later than 10 business days prior to the
filing of their respective Forms 8594 relating to this transaction, each
party shall deliver to the other party a copy of its Form 8594.
5. SELLERS' REPRESENTATIONS AND WARRANTIES. Each Seller, jointly and
severally, represents and warrants to Buyers as follows:
5.1 ORGANIZATION AND STANDING. Each Seller is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or continuation. Each Seller is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which such qualification is required, except where the failure
to be so qualified could not reasonably be expected to have a material adverse
effect upon the MCK Business or any of the Assets. Each Seller has full
corporate power and authority to own or lease its properties and to carry on the
MCK Business as now being conducted.
5.2 AUTHORIZATION AND BINDING OBLIGATION. Each Seller has full
corporate power and authority to execute and deliver the Purchase Agreements and
perform its obligations thereunder. The execution, delivery, and performance of
the Purchase Agreements by each Seller have been duly authorized by all
necessary corporate action on the part of such Seller. This Agreement has been
duly executed and delivered by Seller and constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as enforceability thereof may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
by the exercise of judicial discretion in accordance with equitable principles.
5.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except
as set forth on Schedule 5.3, the execution, delivery and performance of the
Purchase Agreements by Seller (a) do not require (i) the consent, approval or
authorization of any Governmental Body having jurisdiction over any Seller or of
any third party or (ii) the submission or filing of any notice, report or other
filing with any Governmental Body having jurisdiction over any Seller; (b) will
not violate any provisions of any Seller's charter documents; (c) will not
violate any law, judgment, order, injunction, decree, rule, regulation, or
ruling of any Governmental Body applicable to any Seller; (d) will not, either
alone or with the giving of notice or the passage of time or both, conflict
with, constitute grounds for termination of, or result in a breach of the
EXECUTION VERSION
16
terms, conditions, or provisions of, or constitute any default under any
Contract or permit to which any Seller is subject or by which any property of
Seller is bound or affected; and (e) will not result in the creation of any
Encumbrance on any of the Assets.
5.4 TITLE TO AND CONDITION OF REAL PROPERTY. No Seller owns any real
property. Schedule 5.4 contains a list of all real property currently leased by
Seller that is used in the conduct of the MCK Business. Each Seller has
delivered to Buyers copies of all leases referenced in Schedule 5.4 (including
any and all amendments and other modifications of such leases), all of which
leases and other agreements are valid, binding, and enforceable in accordance
with their terms and in full force and effect. No Seller is in default under any
such leases, and no event has occurred and is continuing that, with the passage
of time or upon giving of notice or both, would constitute an event of default
thereunder. All property listed in Schedule 5.4 (including improvements thereon)
is in satisfactory condition and repair consistent with its present use, and
available for immediate use in the conduct of the MCK Business. None of the
property listed in Schedule 5.4 violates in any material respect any applicable
building or zoning code or regulation of any Governmental Body having
jurisdiction. The property and leases described in Schedule 5.4 include all such
property or property interests necessary to conduct the MCK Business in the
manner presently conducted by Seller.
5.5 TITLE TO AND CONDITION OF PERSONAL PROPERTY. Schedule 5.5
contains descriptions of all tangible personal property and assets owned, leased
or held by Seller (other than Parent) material to the conduct of the MCK
Business, and, with respect to such tangible personal property owned, leased or
held by Parent, such Schedule lists such tangible personal property exclusively
used in the conduct of the MCK Business. All of the tangible personal property
and assets set forth on Schedule 5.5 is located at the facilities identified in
Schedule 5.4 that currently are leased by Seller, the Needham, Massachusetts PBX
facility, at OEMW's facilities or are in possession or control of the
Transferred Employees who accept employment with a Buyer. Except as shown in
Schedule 5.5, Seller has delivered to CITEL copies of all leases and other
agreements or documents affecting the properties and assets listed in Schedule
5.5 (including any and all amendments and other modifications to such leases and
other agreements), all of which leases are valid, binding and enforceable in
accordance with their terms, and neither it nor, to such Seller's knowledge, any
other party thereto is in default under any of such leases and other agreements.
The properties and assets listed therein are in good operating condition and
repair, ordinary wear and tear excepted, and are available for immediate use in
the conduct of the MCK Business. Seller has, and at Closing will have, good and
marketable title to all of the personal property included in the Assets, free
and clear of all Encumbrances except Permitted Encumbrances or other
Encumbrances to be released in connection with the Closing.
5.6 CONTRACTS
(a) Schedule 5.6 lists all Contracts relating to the conduct
of the MCK Business that (i) are not entered into in the ordinary course
of business and impose monetary obligations or confer monetary benefits on
any Seller in excess of $5,000; (ii) are not terminable without payment of
premium or penalty at will or upon notice of not more than thirty days and
impose monetary obligations or confer monetary benefits
EXECUTION VERSION
17
on any Seller in excess of $5,000; (iii) impose any monetary obligations
or confer any monetary benefits on any Seller in excess of $1,000; or (iv)
impose any non-monetary obligation or confer any non-monetary benefit.
(b) By Closing, Seller shall have delivered to Buyers copies
of or memoranda of all written Contracts, and memoranda of all oral
Contracts as listed in Schedule 5.6, including any and all amendments and
other modifications to such Contracts. With the exception of those
Contracts that are Excluded Assets, the Contracts listed in Schedule 5.6
are the valid and binding obligations of the parties thereto as of the
Closing Date, enforceable against such parties in accordance with their
respective terms.
(c) The parties to each Contract listed therein have complied
in all material respects therewith and, to Seller's knowledge, no such
party is in material default under any of such Contracts, nor has any
Seller granted or been granted any material waiver or forbearance with
respect to any of such Contracts. Subject to the receipt of any required
consents (as set forth on Schedule 5.3), Seller has full legal power and
authority to assign its rights under all Contracts that are included among
the Assets to Buyers in accordance with this Agreement, and such
assignment will not affect the validity, enforceability and continuity of
any of such Contracts in accordance with their terms.
5.7 INTELLECTUAL PROPERTY
(a) Set forth on Schedule 5.7(a) is a list of all Registered
Intellectual Property. At least one of Sellers is listed in the records of
the appropriate United States federal or state agency as the sole owner
for each item of the Registered Intellectual Property that is the subject
of a registration in the United States, and at least one of Sellers is
listed in the records of the appropriate foreign agency as the sole owner
for each item of Registered Intellectual Property that is the subject of a
registration outside the United States. No Seller has done, or failed to
do, any act or thing which could reasonably be expected, after the Closing
Date, to prejudice the validity or enforceability of any Intellectual
Property in any material respect. The Intellectual Property included among
the Assets, including the Registered Intellectual Property, includes all
Intellectual Property rights in and to all material inventions, works of
authorship, and know-how created, invented or authored, as the case may
be, by any employee of, or consultant to, Seller in the course of such
employment or consulting relationship, and Seller is the sole and
exclusive owner of all such Intellectual Property. Each employee,
contractor, and other party who has created Intellectual Property for, or
on behalf of, such Seller has executed a confidentiality and assignment
agreement in substantially the form provided to Buyers, transferring
ownership of such Intellectual Property to, and waiving any moral rights
in favor of, such Seller.
(b) Schedule 5.7(b) sets forth a list of all Computer Software
owned or licensed by Seller, or necessary to conduct the MCK Business in
the manner presently conducted by Seller, other than (x) third party
software applications that are generally available and have an individual
acquisition cost of $10,000 or less, or (y) software
EXECUTION VERSION
18
applications that are used in general infrastructure and administrative
functions that are generally available and have an individual acquisition
cost of $10,000 or less, or (z) enterprise software owned or licensed by
Parent used in the general infrastructure and administrative functions of
Parent in respect of all or any portion of its business, and (ii)
identifies whether each of the foregoing items of Computer Software are
owned, licensed, or otherwise used, as the case may be.
(c) Schedule 5.7(c) sets forth a list of all material
Licenses, specifying the name of the parties thereto and whether the
License is an inbound license, an outbound license or a cross-license.
(d) Seller owns, free and clear of all Encumbrances, or
otherwise has the right to use, all Intellectual Property and Computer
Software necessary to: (i) provide the services currently provided by such
Seller to third parties; (ii) use, manufacture, copy, modify, market and
distribute the products currently manufactured, marketed, sold, licensed
or otherwise distributed by such Seller; and (iii) operate the internal
systems of such Seller that are material to the MCK Business (other than
any back-office systems used by Parent). There are no facts or
circumstances that would reasonably lead any Seller to believe that such
Seller does not own or otherwise have the right to use all Intellectual
Property necessary to engage in the activities set forth in the
immediately foregoing sentence. Each material item of such Intellectual
Property and Computer Software (to the extent such Intellectual Property
and Computer Software constitute Assets) shall be owned, available for use
or enforceable, as the case may be, by Buyers immediately following the
Closing on substantially identical terms and conditions as it was
available to or enforceable by Seller immediately before the Closing.
(e) Except as set forth on Schedule 5.7(e), the activities and
the conduct of the MCK Business did not, before Closing, and will not,
when conducted in the same manner after Closing, infringe upon, violate or
constitute the unauthorized use of the intellectual property rights of any
third party in existence as of the Closing Date. There are no facts or
circumstances that would reasonably lead any Seller to believe that the
activities or the conduct of the business or operations of such Seller did
before Closing, or will when conducted in the same manner following the
Closing, infringe upon, violate or constitute the unauthorized use of the
intellectual property rights of any third party. There is no pending or,
to any Seller's knowledge, threatened claim (i) alleging that the
activities or the conduct of the MCK Business does or will infringe upon,
violate or constitute the unauthorized use of the intellectual property
rights of any third party; or (ii) challenging the ownership, use,
validity, enforceability or registrability of any Intellectual Property by
such Seller. There are no settlements, forbearances to xxx, consents,
judgments, or orders or similar obligations (other than license agreements
in the ordinary course of business) which (A) restrict the rights of any
Seller to use any material Intellectual Property; (B) restrict the MCK
Business in order to accommodate a third party's intellectual property
rights; or (C) permit third parties to use any material Intellectual
Property owned by such Seller.
EXECUTION VERSION
19
(f) No third party possesses any copy of any source code to
any material Computer Software of any Seller, except as permitted under a
License set forth on Schedule 5.7(c). To Seller's knowledge, no Seller has
disclosed the source code for any of the Computer Software owned by Seller
or other Proprietary Information constituting, embodied in or pertaining
to such Computer Software to any Person, except pursuant to effective
nondisclosure agreements, and Seller has taken commercially reasonable
measures to prevent disclosure of such source code.
(g) Except as set forth on Schedule 5.7(g), no Computer
Software that is open source, public source or freeware, or any
modification or derivative thereof, including any version of any Computer
Software licensed pursuant to any GNU general public license or limited
general public license was or is used in, incorporated into, integrated or
bundled with any material service offerings, Computer Software or other
products or services of any Seller.
(h) Seller has taken commercially reasonable actions to
protect each item of material Intellectual Property owned by it, except
where the failure to take such actions was the result of a reasonable
business decision by such Seller made in the ordinary course of business.
5.8 FINANCIAL STATEMENTS. Parent has delivered to Buyers an
unaudited balance sheet ("BALANCE SHEET") and statement of income and expense of
the MCK Business as of and for the year ended December 31, 2004 (collectively,
the "FINANCIAL STATEMENTS"). The Financial Statements have been prepared from
the books and records of Sellers on an accrual basis in the ordinary course of
Sellers' business and fairly present the financial condition of the MCK Business
as of their respective dates and the results of its operations for the periods
indicated, in each case prepared in accordance with generally accepted
accounting principles and on a basis consistent with prior periods, except for
(i) the absence of footnote disclosure or as otherwise specified in such
statements, (ii) adjustments which consist only of normal recurring accruals and
which are not individually or in the aggregate material in amount, and (iii) any
expenses that are part of the shared services performed by Parent. Except as set
forth on Schedule 5.8, since December 31, 2004, there have been no changes in
the financial condition or in the assets or liabilities of the MCK Business as
set forth in the Financial Statements, except for changes in the ordinary course
of business that individually and in the aggregate have not been materially
adverse to the MCK Business or any of the Assets.
5.9 INSURANCE. Schedule 5.9 is a list of all policies of insurance
that insure any part of the Assets or the MCK Business. All policies of
insurance listed in Schedule 5.9 are in full force and effect and will remain so
until the Closing.
5.10 PERSONNEL INFORMATION OF TRANSFERRED EMPLOYEES. Schedule 5.10
contains a list of all Transferred Employees, including a description of all
compensation arrangements and a list of all benefits, vacation, employment,
recognized service date, title, affecting such persons and a description of the
basis for their compensation. There are currently no Transferred Employees on a
paid or unpaid leave of absence.
EXECUTION VERSION
20
5.11 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on
Schedule 5.11 or as provided in this Agreement and, in each case, only with
respect to the MCK Business:
(a) Each of Seller's employees' is an "at-will" employee and
there are no collective bargaining agreements, commission, compensation or
severance agreements of any kind between Seller and any of its employees.
Schedule 5.11 lists all Seller's employment or supervisory manuals,
employment or supervisory policies, and written information generally
provided to employees (such as applications or notices), and true and
complete copies of those manuals, policies and written information have
been provided to Buyer. Seller does not have any agreements or
understandings with its employees except as reflected in the items listed
in Schedule 5.11 or any employment practices contrary to those reflected
in the items listed in Schedule 5.11.
(b) Seller has complied in all material respects with all
labor and employment, human rights, occupational health and safety, and
workers' compensation laws, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of
social security, employment insurance, Canada pension plan contributions,
payroll remittances, and other taxes;
(c) there is no unfair labor practice charge, complaint or
other action against any Seller pending or, to any Seller's knowledge,
threatened before the National Labor Relations Board or Alberta Labor
Relations Board, and no Seller is subject to any order to bargain by the
National Labor Relations Board or Alberta Labor Relations Board, nor is
there any charge, complaint, dispute, grievance, arbitration or any
discrimination, wage and hour, wrongful or constructive termination, or
any other employment-related claim under any Canadian, U.S., U.K., state,
provincial, or local labor or employment laws or regulations, or based on
contract, tort or other common law theories, threatened against or
involving any Seller, and none has occurred;
(d) there is no labor strike, dispute, request for
representation, slowdown or stoppage that has occurred in the last two
years, that is currently pending or, to any Seller's knowledge, threatened
against any Seller;
(e) no questions concerning representation have been raised
or, to any Seller's knowledge, are threatened with respect to employees of
any Seller;
(f) no grievance that might have a material adverse effect on
the MCK Business or any of the Assets and no arbitration proceeding
arising out of or under any collective bargaining agreement is pending
and, to Seller's knowledge, no basis exists for any such grievance or
arbitration proceeding;
(g) to Seller's knowledge, no employee of Seller is subject to
any non-compete, nondisclosure, confidentiality, employment, consulting or
similar agreements other than with Seller relating to the MCK Business;
and
(h) Seller has complied in all material respects with all
privacy laws.
EXECUTION VERSION
21
5.12 LITIGATION AND ADMINISTRATIVE PROCEEDINGS. Except as set forth
on Schedule 5.12, there is no litigation, proceeding or investigation pending
or, to any Seller's knowledge, threatened against any Seller or any of the
Assets in any federal, state, local or foreign court, or before any Governmental
Body, that might result in any material adverse effect upon the MCK Business or
any of the Assets or that seeks to enjoin or prohibit, or otherwise questions
the validity of, any action taken or to be taken pursuant to or in connection
with this Agreement.
5.13 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.13, no
Seller has received any written notice or, to any Seller's knowledge, any oral
notice, asserting any noncompliance in any material respect by it with any
applicable statute, rule or regulation, whether federal, state, provincial,
municipal, local, or foreign, from any Governmental Body having jurisdiction
over it with respect to the MCK Business. No Seller is in default with respect
to any judgment, order, injunction or decree of any Governmental Body in any
respect material to the transactions contemplated hereby. Seller is in
compliance in all material respects with all laws, regulations, orders,
guidelines, and standards of any Governmental Body applicable to the conduct of
the MCK Business, including laws, regulations, orders, guidelines, and standards
relating to Environmental Matters, and its present use of the Assets does not
violate in any material respect any of such laws, regulations, orders,
guidelines, and standards except, in each case, where such non-compliance is the
result of facts that are not, and in the exercise of reasonable diligence should
not be, known to such Seller. Seller has currently in full force and effect all
of the licenses and permits required to conduct the MCK Business as it is
presently conducted. Copies of each such license and permit, as currently in
force, will be delivered to CITEL before the Closing. No Seller has received
notice from any Governmental Body indicating its intention to amend materially
and adversely or to revoke any such license or permit or to conduct hearings,
investigations or other proceedings potentially leading to such action. All
material reports and statements required to be filed by any Seller with any
Governmental Body with respect to the MCK Business have been filed, and all
reporting requirements of any Governmental Body having jurisdiction thereof have
been complied with in all material respects. All of such reports and statements
are substantially complete and correct as filed.
5.14 INVENTORIES. All items included in Inventories consist of a
quality and quantity usable and, with respect to finished goods, saleable, in
the ordinary course of business except for obsolete items and items of
below-standard quality, all of which have been written-off or written-down to
net realizable value in the Balance Sheet or on the accounting records of Seller
as of the Closing Date, as the case may be. No Seller is in possession of any
inventory related to the MCK Business not owned by such Seller, including goods
already sold. All of the Inventories have been valued at the lower of cost or
market value on an average basis. Inventories now on hand that were purchased
after the date of the Balance Sheet were purchased in the ordinary course of
business at a cost not exceeding market prices prevailing at the time of
purchase. The quantities of each item of Inventories (whether raw materials,
work-in-process or finished goods) are not excessive but are reasonable in the
present circumstances of Seller. Work-in-process Inventories are now valued, and
will be valued on the Closing Date, according to generally accepted accounting
principles.
EXECUTION VERSION
22
5.15 ABSENCE OF CERTAIN CHANGES. Since December 31, 2004, there has
not been, in each case only with respect to the MCK Business:
(a) any material adverse change in the MCK Business or any of
the Assets;
(b) any pending or, to any Seller's knowledge, threatened
union organizational activity, labor dispute, strike or work stoppage
affecting the MCK Business, or any charge or complaint against any Seller
filed with the National Labor Relations Board, the Alberta Labor Relations
Board, or any administrator of any applicable state, provincial or federal
equal employment opportunity or human rights or labor laws;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially affecting the Assets;
(d) any increase in compensation payable or to become payable
to any of the employees of any Seller, or any bonus payment made or
promised to any employee of Seller, or any change in personnel policies,
insurance benefits or other compensation arrangements affecting the
employees of any Seller, except for increases or changes substantially in
accordance with existing employment practices;
(e) any sale, assignment, lease or other transfer of any
property of any Seller included among the Assets, except in the ordinary
course of business or in connection with the acquisition of similar
property or assets;
(f) any creation or assumption of any Encumbrance upon any
Assets, except for Permitted Encumbrances;
(g) any sale, assignment, transfer, abandonment or lapse on
the part of any Seller of any material Licenses or permits or Intellectual
Property or other intangible assets;
(h) any amounts borrowed or material Liabilities incurred,
except current liabilities incurred in the ordinary course of business and
Liabilities under Contracts entered into in the ordinary course of
business;
(i) any loans or advances to or guarantees for the benefit of
any Persons, except for advances made to employees for expenses in the
ordinary course of business; or
(j) any extraordinary losses or waivers of any rights of
material value, whether or not in the ordinary course of business or
consistent with past practice.
5.16 NO UNDISCLOSED LIABILITIES. Except for Liabilities incurred in
the ordinary course of business, since December 31, 2004, there is no Liability
that was, in accordance with generally accepted accounting principles applied
consistently with past practice,
EXECUTION VERSION
23
required to be included or adequately reserved against in the Financial
Statements and was not so included, reserved against or described.
5.17 TAX MATTERS. Except as set forth on Schedule 5.17:
(a) Seller has filed all Tax Returns that it was required to
file. All such Tax Returns are true, correct and complete. All Taxes owed
by Seller (whether or not shown on any Tax Return) has been paid. No
Seller currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by a taxing authority
in a jurisdiction where a Seller does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. Seller has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party, and all Forms W-2, 1099, T-4 and T-5
required with respect thereto have been properly completed and timely
filed. There are no liens on any of the Assets that arose in connection
with any failure, or alleged failure, to pay any Tax, and no Seller has
any knowledge of any basis for the assertion of any claims attributable to
Taxes that, if adversely determined, would result in such a lien.
(b) No taxing authority has assessed or, to Seller's
knowledge, intends to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no material dispute or claim
concerning any Tax liability of any Seller either (i) claimed or raised by
any taxing authority in writing or (ii) as to which any Seller has
knowledge.
(c) None of the federal, state, local, and foreign Tax Returns
filed with respect to Seller for taxable periods ending on or after
December 31, 2001, have been audited or currently are the subject of
audit, and no notice of assessment has been received under the Code or any
other Tax Legislation with respect to any such Tax Returns. Seller has
delivered or made available to Buyers correct and complete copies of all
federal, state, local, and foreign Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by such Seller.
No Seller has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(d) No Seller is a party to any Tax allocation or sharing
agreement. No Seller (i) is or has been a member of an Affiliated Group
filing a consolidated federal Tax Return (other than a group the common
parent of which was Parent) or (ii) has any liability for the Taxes of any
Person (other than such Seller) under Reg. Section 1.1502-6 (or any
similar provision of federal, state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(e) The unpaid Taxes of Seller (i) did not, as of December 31,
2004, exceed the reserve for Tax liability (rather than any reserve for
deferred taxes established to reflect timing differences between book and
tax income) set forth on the face of the Balance Sheet and (ii) will not
exceed by any amount that reserve as adjusted for
EXECUTION VERSION
24
operations and transactions through the Closing Date in accordance with
the past custom and practice of Seller in filing their Tax Returns.
(f) MCK-Canada is not a non-resident within the meaning of the
Income Tax Act (Canada) and it is registered for the purposes of the
Excise Tax Act (Canada) under number GST # 11942 9645 RT0001.
5.18 BROKERAGE. Except as set forth on Schedule 5.18, neither Seller
nor any of its respective affiliates has entered into any agreements for
brokerage commissions, finders' fees or similar compensation in connection with
the purchase of the Assets and the other transactions contemplated hereby.
5.19 EMPLOYEE PLANS.
(a) Schedule 5.19 lists and describes all Employee Benefit
Plans maintained or contributed to by Seller. Copies of each written
Employee Benefit Plan, and all related documents, including funding
agreements and employee booklets, as amended to the date hereof, have been
provided to Buyers. In the case of any unwritten Employee Benefit Plan, a
written description thereof, which accurately describes all material
provisions of such Employee Benefit Plan, has been provided to Buyers.
(b) There have been no promised improvements, increases or
changes to the benefits provided under the Employee Benefit Plans. Each
Employee Benefit Plan is, and has been, established and administered in
compliance with all applicable laws, the terms of such Employee Benefit
Plan and all written and oral understandings between Seller and the
employees of Seller, in each case, in all material respects. No prohibited
transaction (as such term is defined in Section 4975 of the Code and
Section 406 of the Employee Retirement Income Security Act of 1974
("ERISA") has occurred with respect to an Employee Benefit Plan that is
subject to either of such provisions for which an exemption is not
available. Seller and each Employee Benefit Plan providing health benefits
comply with the applicable provisions of the Health Insurance Portability
and Accountability Act (HIPAA) and have done so since the applicable
effective date of each applicable provision of HIPAA.
(c) Each Employee Benefit Plan that is intended to be
tax-qualified under Section 401(a) of the Code has been determined by the
IRS to qualify under Section 401(a) of the Code and nothing has occurred
that could cause the loss of such qualification.
(d) All obligations required under the Employee Benefit Plans
and all applicable laws have been satisfied in all material respects and
there are no defaults, violations or funding deficiencies thereunder.
There are no claims (other than claims for benefits in the normal course),
actions or lawsuits asserted or instituted against, and there are no
pending or threatened litigation or claims against the assets of any
Employee Benefit Plan (other than a Multiemployer Plan) or against any
fiduciary of such Employee Benefit Plan with respect to the operation of
such Benefit Plan, which, if adversely determined, could have a material
effect on Seller.
EXECUTION VERSION
25
(e) Schedule 5.19 also lists any defined benefit plan (as
defined in Section 3(35) of ERISA), or any other pension plan (as defined
in Treasury Regulation section 1.401-1(b)) to which Seller or any
subsidiary or trade or business (whether or not incorporated) that is a
member of a "controlled group" of which either Seller is a member or under
"common control" with Seller (within the meaning of Section 414(b) and (c)
of the Code) (an "ERISA Affiliate") is or ever has been a party or by
which any of them is or ever has been bound, legally or otherwise, and any
Multiemployer Plan to which Seller or any ERISA Affiliate contributes or
is or was required to contribute (an "ERISA Affiliate Plan"). Neither
Seller nor any ERISA Affiliate has incurred (i) any liability to the
Pension Benefit Guaranty Corporation (other than routine claims and
premium payments), (ii) any withdrawal liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 of ERISA as a result of
a "complete withdrawal" or a "partial withdrawal" (within the meaning of
Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (iii) any
liability under Section 4062 of ERISA to the Pension Benefit Guaranty
Corporation, or to a trustee appointed under Section 4042 of ERISA.
Neither Seller nor any of ERISA Affiliate nor any organization to which
either Seller or any such ERISA Affiliate is a successor or parent
corporation (as described in Section 4069(b) of ERISA) has engaged in a
transaction described in Section 4069 of ERISA.
(f) Seller has not established any "welfare benefit plan" in
which employees of the MCK Business may participate in or receive benefits
under, other than those listed on Schedule 5.19, that provides for
continuing benefits or coverage for any participant or any beneficiary of
a participant after such participant's termination of employment except as
may be required by the Section 4980B of the Code or Part 6 of Title I of
ERISA ("COBRA"), and the regulations thereunder and at the expense of the
participant or the beneficiary of the participant. With respect to the MCK
Business, Seller is either exempt from or have complied with all
applicable notice and continuation coverage requirements of COBRA and the
regulations thereunder such that there would not result in any material
tax, penalty or liability to either Seller or Buyers.
(g) Seller has made, or will, prior to the Closing Date, have
made, all contributions required (including payments of insurance
premiums), if any, under all Employee Benefit Plans to fund fully all
benefits and obligations accrued thereunder prior to the Closing Date.
(h) There are no liabilities or obligations with respect to
any of the plans, agreements or Employee Benefit Plans described in
Schedule 5.19 that are required to be funded for which contributions have
not been made or properly accrued and there are no unfunded benefit
obligations that have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting
principles on Seller's financial statements.
(i) Except as set forth on Schedule 5.19, the consummation of
the transactions contemplated by this Agreement shall not accelerate the
time of payment or
EXECUTION VERSION
26
vesting, or increase the amount of benefits or compensation due to any
individual under any of the Employee Benefit Plans.
5.20 ACCOUNTS RECEIVABLE. Schedule 5.20 contains a complete and
accurate list of all Accounts Receivable as of December 31, 2004, which list
sets forth the aging of each such Account Receivable. All Accounts Receivable
that are reflected on the Balance Sheet, Net Receivables Report, or on the
accounting records of Seller as of the Closing Date represent or will represent
valid obligations arising from sales actually made or services actually
performed by Seller in the ordinary course of business. Except to the extent
paid before the Closing Date or as set forth on the Net Receivables Report, such
Accounts Receivable are or will be as of the Closing Date current and, to
Seller's knowledge, collectible net of the respective reserves shown on the
Balance Sheet (which reserves are calculated consistent with past practice). To
Seller's knowledge, there is no contest, claim, defense or right of setoff,
other than returns in the ordinary course of business, under any Contract with
any account debtor of an Account Receivable relating to the amount or validity
of such Account Receivable.
5.21 WARRANTIES. All products and services, in each case relating to
the MCK Business, of Seller under warranty as of the date of this Agreement,
have been serviced, distributed, or sold by such Seller in conformity with all
applicable contractual warranty commitments of such Seller (which warranty
commitments consist only of warranty commitments under Seller's standard form of
warranty or as otherwise disclosed on Schedule 5.21).
5.22 CUSTOMERS. Schedule 5.22 contains an accurate and complete list
of all current customers and licensees, in each case with respect to the MCK
Business, of Seller in respect of which such Seller billed in excess of $25,000
in 2004. Except as listed on Schedule 5.22, no Seller has any knowledge that any
customer or licensee listed thereon intends to discontinue its purchases of
products or services.
5.23 ASSETS. The Assets referenced in Section 2.1 comprise all of
the assets, except for the Excluded Assets described in Sections 2.2(a), (e),
(g), and (h), necessary to conduct the MCK Business in the manner presently
conducted by Seller.
5.24 SOLVENCY
(a) No Seller is now insolvent or will be rendered insolvent
by any of the transactions contemplated in the Purchase Agreements. As used in
this section, "insolvent" means that the sum of the debts and other probable
Liabilities of a Seller exceeds the present fair saleable value of such Seller's
assets.
(b) Immediately after giving effect to the consummation of the
transactions contemplated in the Purchase Agreements, (i) Seller will be able to
pay its Liabilities as they become due in the ordinary course of its business;
(ii) Seller will not have unreasonably small capital with which to conduct its
present or proposed business; (iii) Seller will have assets (calculated at fair
market value) that exceed its Liabilities; and (iv) taking into account all
pending and threatened litigation, final judgments against any Seller in actions
for money damages are not reasonably anticipated to be rendered at a
EXECUTION VERSION
27
time when, or in amounts such that, such Seller will be unable to satisfy
any such judgments promptly in accordance with their terms (taking into
account the maximum probable amount of such judgments in any such actions
and the earliest reasonable time at which such judgments might be
rendered) as well as all other obligations of such Seller. The cash
available to Seller, after taking into account all other anticipated uses
of the cash, will be sufficient to pay all such debts and judgments
promptly in accordance with their terms.
5.25 DISCLOSURE. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other information
furnished to Buyers by or on behalf of Seller in connection with the
transactions provided for herein, is false or misleading in any material
respect. In connection with such information and this Agreement, no Seller has
made any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made or information delivered, in
light of the circumstances under which they were made, not misleading.
5A. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PARENT
5A.1 ACCREDITED STATUS. Parent is an "accredited investor" as
defined in Regulation D of the Securities Act.
5A.2 DISCLOSURE. Parent has been furnished with all information that
it deems necessary to evaluate the risks and merits of the Note as part of the
Purchase Price. Parent has had the opportunity to ask questions and receive
answers concerning the information it has received about Buyers and the Note.
5A.3 NO REGISTRATION. Parent is aware and understands that (a)
neither the Note nor the Conversion Shares have been and will not before
issuance be registered under the Securities Act; (b) it must continue to bear
the economic risk of the investment in the Note for the duration of its term;
(c) neither the Note nor the Conversion Shares may be sold unless it or they
subsequently are registered or an exemption from registration is available; and
(d) Buyers have no obligation to register the Note or the Conversion Shares with
the Securities and Exchange Commission and have not represented that such
securities will be registered.
5A.4 INVESTMENT FOR OWN ACCOUNT. The Note is being acquired by
Parent for investment for its account, not as a nominee or agent, and not with a
view to the distribution of any part thereof; Parent has no present intention of
selling, granting any participation in or otherwise distributing the Note in a
manner contrary to the Securities Act or to any applicable state securities or
blue sky law, nor does Parent have any contract, undertaking, agreement or
arrangement with any person or entity to sell, transfer or grant a participation
to such person or entity with respect to the Note.
5A.5 RESTRICTIVE LEGEND; TRANSFER AGENT INSTRUCTIONS. Parent
understands that, before the effectiveness of a registration statement
registering the Note or the Conversion Shares for sale, if any, the Note and the
certificates representing the Conversion Shares will bear legends substantially
similar to the following, in addition to any other legends required by federal
or state laws:
EXECUTION VERSION
28
The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any other applicable federal or state
securities laws, and may not be sold, distributed, pledged on or otherwise
transferred unless (I) there is an effective registration statement under
the Securities Act and applicable state securities laws covering any such
transaction involving these securities, (II) the company receives an
opinion of legal counsel for the holder of the securities satisfactory to
the company stating that such transaction is exempt from registration, or
(III) the company otherwise satisfies itself that such transaction is
exempt from registration.
Parent agrees that, in order to ensure and enforce compliance with the
restrictions imposed by applicable law and those referred to in the foregoing
legend, CITEL (U.K.) may, before the effectiveness of a registration statement,
issue appropriate "stop transfer" instructions to its transfer agent, if any,
with respect to any certificate or other instrument representing the Note or the
Conversion Shares or if, CITEL (U.K.) transfers its own securities, that it may
make appropriate notations to the same effect in its records.
6. REPRESENTATIONS AND WARRANTIES OF BUYERS.
Each Buyer, jointly and severally, represents and warrants to Sellers as
follows:
6.1 ORGANIZATION AND STANDING. Buyer is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
organization.
6.2 AUTHORIZATION AND BINDING OBLIGATION. Buyer has full corporate
power and authority to execute and deliver the Purchase Agreements and perform
its obligations thereunder. The execution, delivery, and performance of the
Purchase Agreements by Buyer have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid, and binding obligations thereof,
enforceable against each such party in accordance with their terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and by the
exercise of judicial discretion in accordance with equitable principles.
6.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except
as set forth on Schedule 6.3, the execution, delivery, and performance of the
Purchase Agreements by Buyer (a) does not require (i) the consent, approval or
authorization of any Governmental Body having jurisdiction over Buyer or of any
third party or (ii) the submission or filing of any notice, report or other
filing with any Governmental Body having jurisdiction over Buyer; (b) will not
violate the charter documents of a Buyer; (c) will not violate any law,
judgment, order, injunction, decree, rule, regulation or ruling of any
Governmental Body applicable to Buyer; and (d) will not, either alone or with
the giving of notice or the passage of time or both, conflict with, constitute
grounds for termination of, or result in a breach of the terms, conditions or
provisions of, or constitute a default under any Contract material to the
transactions contemplated hereby and to which a Buyer is now subject.
EXECUTION VERSION
29
6.4 BROKERAGE. Buyer has not entered into any agreements for
brokerage commissions, finders' fees or similar compensation in connection with
the purchase of the assets and the other transactions contemplated hereby.
6.5 LITIGATION AND ADMINISTRATIVE PROCEEDINGS. There is no
litigation, proceeding or investigation pending or, to the knowledge of Buyer,
threatened against Buyer in any federal, state, local or foreign court, or
before any Governmental Body, that seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken pursuant to or in
connection with this Agreement.
6.6 FINANCIAL STATEMENTS. The (a) audited balance sheet and
statement of income and expense as of and for the twelve months ended March 31,
2003 and (b) unaudited summary balance sheets and statements of income and
expense as of and for the periods ended March 31, 2004, and October 31, 2004
(collectively, the "CITEL FINANCIAL STATEMENTS") are set forth on Schedule 6.6.
The CITEL Financial Statements have been prepared from the books and records of
Buyer on an accrual basis in the ordinary course of its business and fairly
present the financial condition of Buyer as of their respective dates and the
results of its operations for the periods indicated, in each case prepared in
accordance with generally accepted accounting principles and on a basis
consistent with prior periods, except as otherwise specified in such statements
and except, in the case of the unaudited statements, for audit adjustments which
are not expected to be, in the aggregate, material in amount.
6.7 NO UNDISCLOSED LIABILITIES. Except for (i) Liabilities incurred
in the ordinary course of business since December 31, 2004 and (ii) Liabilities
described in Schedule 6.7, Buyer is not subject to any Liability that was, in
accordance with generally accepted accounting principles applied consistently
with past practice, required to be included or adequately reserved against in
the December 31, 2004 unaudited financial statements and was not so included,
reserved against or described.
6.8 DISCLOSURE. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other information
furnished to Seller by or on behalf of Buyer in connection with the transactions
provided for herein, is false or misleading in any material respect. In
connection with such information and this Agreement, Buyer have not made any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made or information delivered in light
of the circumstances under which they were made, not misleading.
6.9 FINANCING. Assuming that Sellers fully comply with this
Agreement, Buyer will have sufficient funds readily available to satisfy its
obligation to pay the Purchase Price, including, as applicable, amounts due
under the Note.
7. COVENANTS OF BUYERS
7.1 PRIVACY COMPLIANCE. Buyers shall use and disclose the
Transferred Information only for those purposes for which the Transferred
Information was initially collected from or in respect of the individual to
which such Transferred Information relates, unless (a) Buyers have first
notified such individual of such additional purpose, and where required by law,
EXECUTION VERSION
30
obtained the consent of such individual to such additional purpose, or (b) such
use or disclosure is permitted or authorized by law, without notice to, or
consent from, such individual.
7.2 SATISFACTION OF CLOSING CONDITIONS. Each Buyer shall use its
commercially reasonable efforts to cause the conditions set forth in Section 11
to be satisfied at of before the Closing.
7.3 OFFERS OF EMPLOYMENT. Buyers shall make offers of employment to
the Transferred Employees listed on Schedule 10.4 by delivering to them the form
of employment offer letters attached hereto as Exhibit D-1 or Exhibit D-2, as
appropriate.
8. COVENANTS OF SELLERS
8.1 CONSENTS AND APPROVALS. Where the consent of any third party is
required under the terms of any of the Contracts to be assigned by Sellers
hereunder, Sellers will use their commercially reasonable efforts to obtain such
consent on terms and conditions not materially less favorable than those in
effect on the date hereof. Sellers and Buyers will cooperate fully with each
other to the extent reasonably required to obtain such consents.
8.2 NET RECEIVABLES REPORT. Parent shall deliver to Buyers the Net
Receivables Report.
8.3 CHANGE OF NAME. On or before the Closing Date, each Seller
(other than the Parent) shall amend its charter document and take all other
actions necessary to change its name to one sufficiently dissimilar to Seller's
present name, in Buyers' reasonable judgment, to avoid confusion with the
Trademarks and other Assets being acquired by Buyers hereunder.
8.4 SATISFACTION OF CLOSING CONDITIONS. Each Seller shall use its
commercially reasonable efforts to cause the conditions set forth in Section 10
to be satisfied at or before the Closing.
9. JOINT COVENANTS.
9.1 PUBLIC ANNOUNCEMENTS. Except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or The Nasdaq Stock Market, no press release or other public
announcement with respect to this Agreement or the transactions contemplated
herein will be issued or made without the joint approval of Parent and CITEL
(U.S.), which consent shall not be unreasonably withheld, delayed or
conditioned.
9.2 EMPLOYEE MATTERS
(a) Sellers shall cooperate with Buyers in communicating
offers of employment to Transferred Employees, and shall not interfere
with the hiring of any such Transferred Employee. Each Seller waives as of
the Closing Date any noncompetition restriction to which any Transferred
Employee may be subject to the extent that any such
EXECUTION VERSION
31
restriction would prevent any such Transferred Employee from accepting a
Buyer's offer of employment and carrying out his duties as an employee of
any Buyer.
(b) As soon as practicable after the Closing, and subject to
compliance with all applicable laws and regulations, Buyers will use their
reasonable efforts to permit all Transferred Employees who accept offers
of employment and commence employment with a Buyer effective as of the
Closing Date to participate in Buyers' Employee Benefits Plans that are
designated by Buyers (the "CITEL PLANS") as applicable to the Transferred
Employees at the level of participation designated by Buyers, which
designations of the CITEL Plans and levels of participation shall be made
by Buyers in their discretion based on the criteria Buyers would apply to
similarly-situated employees of Buyers and otherwise in accordance with
this Section 9.2. Buyers shall, or shall cause the applicable subsidiary
to, give credit to Transferred Employees for purposes of eligibility to
participate and vesting (but not for benefit accrual purposes) in the
CITEL Plans for all service by Transferred Employees with Sellers before
the Closing, to the extent such service was taken into account for each
such purpose by Sellers under the corresponding Seller Employee Benefit
Plan in which such Transferred Employee was an active participant
immediately before the Closing.
(c) Buyers shall be solely responsible for any Liabilities
arising from the employment or subsequent termination of any such
employment by a Buyer of any Transferred Employee who accepts employment
with a Buyer.
(d) Except as set forth in this Section 9.2, Sellers shall be
solely responsible for any Liabilities arising from any act, omission,
contractual obligation or other legal obligation alleged by any
Transferred Employee to arise out of such employee's employment with, or
termination from, any Seller.
9.3 CERTIFICATE OF TAX AUTHORITIES. Sellers shall provide to Buyers
all consents, authorizations and other reasonably requested assistance in
connection with efforts by Buyers to obtain certificates from the appropriate
taxing authority stating that as of a date on or close to the Closing Date no
Taxes are due to any state, provincial or other taxing authority for which
Buyers could have liability to withhold or pay Taxes with respect to the
transfer of the Assets.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS. The obligations of
Buyers hereunder are, at their option, subject to satisfaction, at or before the
Closing Date, of each of the following conditions:
10.1 CONSENTS AND FILINGS. All applicable consents or filings with
respect to the assignment of any permits or authorizations of any Governmental
Body to be assigned hereunder will have been obtained or made. Sellers will have
obtained such third party consents as are required under the terms of the
Contracts (other than with respect to any Non-assignable Contracts) to be
assigned by them hereunder on terms and conditions not materially less favorable
than those in effect on the date hereof. Sellers will have obtained releases of
all Encumbrances on the Assets.
EXECUTION VERSION
32
10.2 CLOSING DELIVERABLES. Sellers will have delivered to Buyers the
documents, certificates, and other instruments contemplated in Section 4.3(a).
10.3 ADVERSE PROCEEDINGS. No suit, action, claim or proceeding will
have been instituted or, to Buyers' knowledge, threatened against, and no order,
decree, or judgment of any Governmental Body shall have been rendered against,
any party hereto (a) seeking to restrain, prohibit or otherwise interfere with
the sale by Sellers of and/or the ownership or operation by Buyers or any of
their affiliates of all or any material portion of the MCK Business or the
Assets, or (b) seeking to impose or confirm limitations on the ability of Buyers
or any of their affiliates effectively to exercise full rights of ownership of
the Assets.
10.4 LIST OF TRANSFERRED EMPLOYEES. Each of the Transferred
Employees listed on Schedule 10.4 shall have signed and delivered to CITEL the
form of employment offer letters attached hereto as Exhibit D-1 and Exhibit D-2
and the security and confidentiality agreements attached hereto as Exhibit D-3
and Exhibit D-4.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligations of
Sellers hereunder are, at their option, subject to satisfaction, at or before
the Closing Date, of each of the following conditions:
11.1 CLOSING DELIVERABLES. Buyers will have delivered to Sellers the
Purchase Price and the documents, certificates, and other instruments
contemplated in Section 4.3(b).
11.2 ADVERSE PROCEEDINGS. No suit, action, claim or proceeding will
have been instituted or, to Sellers' knowledge, threatened against, and no
order, decree, or judgment of any Governmental Body shall have been rendered
against, any party hereto which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms or that materially adversely effect the ability of Buyers to
perform their obligations hereunder or under the Notes.
12. ADDITIONAL COVENANTS
12.1 TRANSFER TAXES; EXPENSES. Sellers shall pay in a timely manner
all Taxes and costs resulting from or payable in connection with the sale and
transfer of the Assets pursuant to this Agreement, including recordation,
transfer and documentary taxes and fees, and any excise, sales or use taxes.
Except as set forth in the immediately preceding sentence, each party shall be
solely responsible for their respective costs and expenses incurred in
connection with the negotiation, preparation, performance and compliance with
this Agreement, including all fees and expenses of counsel and accountants.
12.2 SVB CONSENT AND COLLATERAL RELEASE AGREEMENT. Sellers shall
deliver or cause to be delivered to Silicon Valley Bank a copy of this Agreement
(together with all schedules and exhibits hereto), and a duly executed
counterpart of that certain Consent and Collateral Release Agreement between
Verso, MCK-DE and Silicon Valley Bank dated January 21, 2005, within five
business days of Closing.
EXECUTION VERSION
33
12.3 CANADIAN TAX AUDIT. Sellers shall provide copies of all
communications to and from Sellers or their agents and Canadian tax authorities
concerning the matter identified on Schedule 5.17 within five business days of
the communication being sent or received.
12.4 PAYMENT OF LIABILITIES. Sellers shall pay or cause to be paid
or otherwise satisfied when due all of the Excluded Liabilities in accordance
with their terms. Buyers and Sellers hereby waive compliance with the
bulk-transfer provisions of the Uniform Commercial Code (or any similar law) in
connection with the transactions contemplated herein.
12.5 COOPERATION; FURTHER ASSURANCES.
(a) After the Closing Date, Sellers and Buyers will each make
available to the other for inspection and copying at reasonable times any
documents retained by Buyers or Sellers, as the case may be, that are
reasonably required by the party requesting such documents and that are
related to the MCK Business and the transactions contemplated hereby.
After the Closing, Sellers and Buyers will reasonably assist each other
and cooperate in the administration, defense, and disposition of any
claims made against the other parties relating to the MCK Business,
including the production of relevant documents and making available
employees for consultation or testimony in a manner that does not disrupt
normal business operations. Except as otherwise provided in Section 13
hereof, neither Buyers nor Sellers will be obligated to compensate or
reimburse the other party for any assistance or cooperation rendered
pursuant to this Section 12.5, except for copying costs and
transportation, lodging and miscellaneous travel expenses.
(b) After the Closing Date, Sellers will take such actions and
execute and deliver to Buyers such further instruments of assignment,
conveyance, and transfer as may be necessary, in the reasonable opinion of
counsel for Buyers, to ensure, complete, and evidence the full and
effective transfer of the Assets to, and assumption of Assumed Liabilities
by, Buyers pursuant to this Agreement; and Buyers and Sellers shall
cooperate reasonably with each other in connection with any steps required
to be taken as part of their respective obligations under this Agreement,
including (i) furnishing upon request to each other such further
information (including such books and records of Sellers as may be
reasonably necessary to enable Buyers to prepare the Closing Financial
Statements); (ii) executing and delivering to each other such other
documents; and (iii) doing such other acts and things, all as the other
party may reasonably request, for the purpose of carrying out the intent
of this Agreement and the transactions contemplated herein.
(c) Sellers will promptly forward, or cause to be forwarded,
to Buyers any payments on Accounts Receivable, and all mail and other
communications addressed to Sellers related to the MCK Business, that are
received by Sellers or any of their affiliates after the Closing Date,
including mail and communications from customers, suppliers, distributors,
agents and others, but excluding any mail or other communications relating
solely to Excluded Assets and Excluded Liabilities.
EXECUTION VERSION
34
(d) (i) After the Closing, if Sellers discover the existence
of a Post-Closing Asset, Sellers shall within five business days of
such discovery inform Buyers of the existence of such Post-Closing
Asset and use commercially reasonable efforts to obtain and forward
to Buyers all relevant documentation and information relating to
such Post-Closing Asset.
(ii) After the Closing, if Buyers identify a
Post-Closing Asset, Buyers may request that Sellers use commercially
reasonable efforts to obtain and forward to Buyers all relevant
documentation and information relating to such Post-Closing Asset.
(iii) Within (x) 14 days after receiving the
documentation pertaining to such Post-Closing Asset, or (y) in the
event that no documentation is made available, within 60 days after
receiving notice of the existence of a Post-Closing Asset, Buyers
shall have the option to request that Sellers take, at no additional
cost to Buyers, and Sellers shall so take, such actions and execute
and deliver to Buyers such further instruments of assignment,
conveyance, and transfer as may be necessary, in the reasonable
opinion of counsel for Buyers, to ensure the full and effective
transfer of such Post-Closing Asset to Buyers pursuant to this
Agreement.
(iv) After the Closing, if a Buyer discovers that it has
in its possession any Excluded Asset, it shall promptly notify
Sellers and permit Sellers reasonable access to such Buyer's
premises and systems to allow Sellers to remove such Excluded Asset.
(e) For a period of 120 days after the Closing, Sellers, upon
the reasonable request of Buyers, will use their commercially reasonable
efforts to cooperate with Buyers to continue and maintain for the benefit
of Buyers those business relationships of Sellers existing before the
Closing and relating to the MCK Business, including relationships with
lessors, licensors, customers, suppliers, and others, it being understood
that, from and after the Closing, all of Sellers' personnel theretofore
providing services to the MCK Business (other than certain management
level employees and certain corporate services personnel of Parent) will
no longer be employees of Sellers and, as a result thereof, Sellers'
ability to cooperate with Buyers pursuant to this subsection will be
limited. Sellers will refer to Buyers all inquiries relating to such
business. Neither Sellers nor any of their respective officers, employees
or agents shall take any action that would tend to diminish the value of
the Assets after the Closing or that would interfere with the MCK Business
after the Closing, including disparaging the name or business of Buyers.
(f) Within 30 days after the Closing, Sellers shall provide
Buyers with an accurate and complete list of the copies of the records
that Sellers have retained in accordance with Section 2.2(d).
EXECUTION VERSION
35
12.6 COVENANT NOT TO COMPETE. Neither Parent nor any of its
affiliates under its control will, for a period of three years after the Closing
Date, directly or indirectly carry on, engage in, support, assist or support
through investment or consulting arrangements any business activity that
competes with the MCK Business in any market in which the MCK Business is
conducted as of the Closing Date. If any Person violates or attempts to violate
the covenant set forth in this Section 12.6, Buyers will be entitled to have and
obtain injunctive relief in any court having jurisdiction to enforce such
covenants to prevent and terminate any violation or attempted violation hereof,
and may have and recover from the violating party any appropriate damages for
any violations of the covenants made herein. The parties expressly agree that
the indemnity threshold and limitation of liability provisions of Section 13.4
shall not apply to Parent's covenant pursuant to this Section 12.6. If the time
or subject area limitations, or both, contained herein are held by any court of
competent jurisdiction to be unreasonable or otherwise unenforceable, this
covenant will nevertheless be enforceable for such lesser time or lesser area,
or both, as the court shall find reasonable. Notwithstanding anything herein to
the contrary, nothing herein shall prohibit Parent or any of its affiliates from
holding or owning the Note or the Conversion Shares or owning not in excess of
5% in the aggregate of the capital stock of any corporation if such stock is
publicly traded and listed on any national or regional stock exchange or
reported on an automated quotation system of a registered securities
association.
12.7 TREATMENT OF PROPRIETARY INFORMATION AND CONFIDENTIAL
INFORMATION
(a) From and after the Closing, Sellers will not disclose, use
or allow the use or disclosure by any of their affiliates or any third
party that receives such information from Sellers of (i) any Proprietary
Information of Buyers or their affiliates or (ii) any information
contained in the copies of the records retained by Sellers pursuant to
Section 2.2(d), except in accordance with the purposes set forth therein.
From and after the Closing and except to the extent that such Proprietary
Information is an Asset, Buyers shall not disclose, use or allow the use
or disclosure by any of their affiliates or any third party that receives
such information from a Buyer of any Proprietary Information of Sellers or
their affiliates (including, without limitation, any Proprietary
Information relating to or comprising an Excluded Asset).
(b) Sellers will not disclose, use or allow the use or
disclosure by any of their affiliates or any unauthorized third party of
any Confidential Information included among the Assets and that Sellers
inadvertently may retain after Closing until the expiration or termination
of the confidentiality and non-disclosure obligations to which such
Confidential Information is subject.
12.8 NON-ASSIGNABLE CONTRACTS. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any Non-assignable Contract or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment of such Contract
without consent of a third party would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyers or a
Seller thereunder. Sellers shall use their commercially reasonable efforts (but
without any payment of money by Buyers or Sellers) to obtain the consent of the
other parties to any such Contract or claim or right or any benefit arising
thereunder for the assignment thereof to Buyers as Buyers
EXECUTION VERSION
36
may request. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights of Sellers or
Buyers thereunder so that Buyers would not in fact receive all such rights,
Sellers and Buyers will cooperate in a mutually agreeable arrangement under
which Buyers would obtain the benefits and assume the obligations (except for
Excluded Liabilities) thereunder in accordance with this Agreement, including
subcontracting, sub-licensing or subleasing to Buyers, or under which a Seller
would enforce for the benefit of Buyers, with Buyers assuming such Seller's
obligations, any and all rights of such Seller against a third party thereto.
Sellers will promptly pay to Buyers when received all monies received by a
Seller under any such Contract or any claim or right or any benefit arising
thereunder, except to the extent the same represents an Excluded Asset.
12.9 INFORMATION COVENANTS
(a) For so long as any amounts remain due and owing under the
Note, Buyers shall:
(i) deliver to the Parent an unaudited quarterly
consolidated balance sheet and income statement of Buyers within 30
days after each quarter, together with any audited financials
prepared with respect to Buyers promptly following their
preparation; and
(ii) promptly upon becoming aware of any of the
following, give Parent notice thereof, together with a written
statement of an executive officer of CITEL (U.K.) setting forth the
details thereof and any action with respect thereto taken or
proposed to be taken by Buyers: (A) any "Event of Default" under the
Note or the Security Agreement; (B) any material adverse change in
the business, assets, properties, operations or condition (financial
or otherwise) of Buyers (taken as a whole); and (C) any pending
action, suit, proceeding or investigation by or before any
Governmental Body against or affecting any of Buyers (or any such
action, suit, proceeding or investigation threatened in writing).
(b) In the event that Parent ceases to be subject to the
periodic reporting requirements under Sections 13 or 15(d) of the
Securities and Exchange Act, as amended, at any time before the
outstanding principal and accrued and unpaid interest under the Note
becomes due and payable, then Parent shall deliver to CITEL (U.K.) the
financial statements of Parent as described in Section 12.9(a)(i), and
provide prompt written notice to CITEL (U.K.) of the matters described in
Section 12.9(a)(ii)(B) and (C) as they may relate to Parent.
12.10 COVENANT REGARDING CERTAIN EMPLOYEES. For a period of three
months commencing on the Closing Date, Buyers shall not hire as an employee any
Transferred Employee who does not accept the offer of employment made pursuant
to Section 7.3 hereof.
EXECUTION VERSION
37
12.11 REMAINING CONTRACTS.
(a) Buyers acknowledge that Sellers will retain after the
Closing certain Contracts, as set forth on Schedule 12.11 (each, an
"EXCLUDED CONTRACT"), that obligate Sellers to supply MCK Products to the
counterparties thereof. If after the Closing a Seller receives a purchase
order for MCK Products under an Excluded Contract, then Seller shall
propose to the counterparty that it purchase such MCK Products directly
from Buyers rather than from Sellers under the Excluded Contract. If such
counterparty rejects such proposal and elects to purchase MCK Products
from Sellers under an Excluded Contract rather than directly from Buyers,
then from time to time after the Closing, a Seller may purchase MCK
Products from Buyers to satisfy such Seller's supply obligations under the
Excluded Contracts. In order to facilitate Sellers' performance of their
supply obligations under the Excluded Contracts, for a period of 120 days
after the Closing Date Buyers shall sell to Sellers for such purpose any
MCK Product; and thereafter Buyers shall use their respective best efforts
to honor a Seller's purchase order for any MCK Product that Buyers
manufacture or for which they maintain an unsold inventory at the xxxx
Xxxxxx'x purchase order is received by Buyers. In addition, Buyers shall
sell to Sellers a final order of any of the MCK Products ordered by
Sellers no later than 120 days after the Closing Date for the sole purpose
of establishing an inventory to meet Sellers' existing sales or support
obligations under the Excluded Contracts or other contracts discovered by
Sellers after Closing, except to the extent that such Excluded Contracts
or other contracts are Post-Closing Assets. Buyers shall at its option
hold such inventory purchased by Sellers until Sellers submit shipping
orders for the inventory or Buyers shall ship the items to Sellers.
Subject to the foregoing sentence, Buyers will sell MCK Products to
Sellers at a price equal to the greater of (i) 125% of Buyers' standard
cost for such product or (ii) the purchase price for the product set forth
in the applicable Excluded Contract, on Buyers' standard terms and
conditions of sale, through the term of the respective supply commitment
under such Excluded Contracts as set forth on Schedule 12.11. Buyers will
ship the MCK Products so purchased by a Seller in accordance with Seller's
instructions, and at Seller's expense. In addition, Buyers shall sell to
any Seller, at Buyers' standard rates then in effect, spare parts relating
to the MCK Products, to the extent that Buyers have such spare parts
available for sale, to permit any such Seller to satisfy its obligations
under any of the Excluded Contracts to provide spare parts to the
counterparty thereto.
(b) Buyers acknowledge Sellers intend to terminate certain of
the Excluded Contracts as soon as practicable after the Closing. During
the first 90 days after Closing, Sellers shall provide Buyers five
business days' advance notice before delivering a termination notice to a
counterparty under an Excluded Agreement. Upon reasonable request by
Buyers received by Sellers within such five business day period, Sellers
shall delay the delivery of such termination notice by not more than 10
business days in order to enable Buyers to determine whether such Excluded
Asset should be treated as a Post-Closing Asset.
(c) For a period of one year after the Closing, Buyers shall
provide Sellers 20 business days advance notice of a decision to
discontinue the manufacture of
EXECUTION VERSION
38
any MCK Product. Buyers shall not discontinue the manufacture of any MCK Product
during the first 120 days after the Closing Date.
(d) The MCK Products purchased by Sellers pursuant to this
Section 12.11 shall be subject to the standard product warranty offered by
Buyers in respect of such products, provided that in no event shall such
warranty expire before the date that is 15 months following the shipment date.
12.12 CANADIAN TAX ELECTIONS. Promptly after the Closing, CITEL
(Canada) and MCK-Canada shall enter into joint elections pursuant to Section 22
of the Income Tax Act (Canada) and Part IX of the Excise Tax Act (Canada). CITEL
(Canada) and MCK-Canada, as applicable, shall file such elections with the
applicable Tax Returns required to be filed for the reporting period in which
the Closing occurs.
13. INDEMNIFICATION
13.1 SELLERS' AGREEMENT TO INDEMNIFY. Subject to the limitations
hereinafter set forth, each Seller jointly and severally, shall defend,
indemnify and hold the Buyer Indemnified Parties harmless against and in respect
of, and shall reimburse the Buyer Indemnified Parties for, any and all
Liabilities arising from or in connection with (a) any breach of any
representation or warranty made by a Seller in the Purchase Agreements and any
other certificate, document or instrument delivered by a Seller pursuant
thereto; (b) any breach of any covenant or obligation of a Seller in the
Purchase Agreements and any other certificate, document or instrument delivered
by a Seller pursuant thereto; (c) any noncompliance with any bulk sales or
fraudulent transfer laws in respect of the transactions contemplated herein; (d)
any liability under the WARN Act or any similar state or local law or regulation
that may result from an "Employment Loss," as defined by 29 U.S.C. Sec.
2101(a)(6), or a loss of employment as defined under any similar state or local
law, caused by any action of a Seller before or on the date of the Closing or by
Buyers' decision not to hire former employees of a Seller; (e) any Employee
Benefit Plan established or maintained by a Seller; (f) any Excluded Asset or
Excluded Liability; or (g) the matters described on Schedule 5.7(e) and Schedule
5.17.
13.2 BUYERS' AGREEMENT TO INDEMNIFY. Subject to the limitations
hereinafter set forth, each Buyer, jointly and severally, shall defend,
indemnify and hold the Seller Indemnified Parties harmless against and in
respect of, and shall reimburse the Seller Indemnified Parties for, any and all
Liabilities arising from or in connection with (a) any breach of any
representation or warranty made by a Buyer in the Purchase Agreements and any
other certificate, document or instrument delivered by a Buyer pursuant thereto;
(b) any breach of any covenant or obligation of a Buyer in the Purchase
Agreements and any other certificate, document or instrument delivered by a
Seller pursuant thereto; (c) any Assumed Liabilities, except as otherwise set
forth in this Agreement; (d) any Liabilities relating to the conduct of the MCK
Business after the Closing, other than Excluded Liabilities; or (e) any Tax
incurred by the MCK Business with respect to activities occurring in any period
after the Closing.
13.3 INDEMNIFICATION PROCEDURE
EXECUTION VERSION
39
(a) The Indemnified Party shall give a Claim Notice of any
Claim to the indemnifying party as promptly as practicable, but in any
event: (i) if such Claim relates to the assertion against an Indemnified
Party of any claim by a third party (a "THIRD PARTY CLAIM"), within 30
days after the assertion of such Third Party Claim, or (ii) if such Claim
is not in respect of a Third Party Claim, within 30 days after the
discovery of facts upon which the Indemnified Party intends to base a
Claim for indemnification pursuant to this Section 13; provided, however,
that the failure or delay to so notify the indemnifying party shall not
relieve the indemnifying party of any obligation or liability that the
indemnifying party may have to the Indemnified Party except to the extent
that the indemnifying party demonstrates that the indemnifying party's
ability to defend or resolve such Claim is adversely affected thereby. Any
such Claim Notice shall describe the facts and circumstances on which the
asserted Claim for indemnification is based, the amount thereof if then
ascertainable and, if not then ascertainable, the estimated maximum amount
thereof, and the provisions in this Agreement on which the Claim is based.
(b) (i) Subject to the rights of or duties to any insurer or
other third party having potential liability therefor, the
indemnifying party shall have the right, upon written notice given
to the Indemnified Party within 30 days after receipt of the notice
from the Indemnified Party of any Third Party Claim, to assume the
defense or handling of such Third Party Claim, at the indemnifying
party's sole expense, in which case the provisions of Section
13.3(b)(ii) hereof shall govern.
(ii) The indemnifying party shall select counsel
reasonably acceptable to the Indemnified Party in connection with
conducting the defense or handling of such Third Party Claim, and
the indemnifying party shall defend or handle the same in
consultation with the Indemnified Party and shall keep the
Indemnified Party timely apprised of the status of such Third Party
Claim. The indemnifying party shall not, without the prior written
consent of the Indemnified Party, agree to a settlement of any Third
Party Claim, unless (A) the settlement provides an unconditional
release and discharge of the Indemnified Party and the Indemnified
Party is reasonably satisfied with such discharge and release and
(B) the Indemnified Party shall not have reasonably objected to any
such settlement on the ground that the circumstances surrounding the
settlement could reasonably be expected to result in an adverse
impact on the business, operations, assets, Liabilities, condition
(financial or otherwise) or prospects of the Indemnified Party. The
Indemnified Party shall cooperate with the indemnifying party and
shall be entitled to participate in the defense or handling of such
Third Party Claim with its own counsel and at its own expense.
(c) (i) If the indemnifying party does not give written notice
to the Indemnified Party within 30 days following receipt of the
notice from the Indemnified Party of any Third Party Claim of the
indemnifying party's election to assume the defense or handling of
such Third Party Claim, the provisions of Section 13.3(c)(ii) hereof
shall govern.
EXECUTION VERSION
40
(ii) The Indemnified Party may, at the indemnifying
party's expense (which shall be paid from time to time by the
indemnifying party as such expenses are incurred by the Indemnified
Party), select counsel in connection with conducting the defense or
handling of such Third Party Claim and defend or handle such Third
Party Claim in such manner as it may deem appropriate; provided,
however, that the Indemnified Party shall keep the indemnifying
party timely apprised of the status of such Third Party Claim and
shall not settle such Third Party Claim without the prior written
consent of the indemnifying party, which consent shall not be
unreasonably withheld, conditioned or delayed. If the Indemnified
Party defends or handles such Third Party Claim, the indemnifying
party shall cooperate with the Indemnified Party and shall be
entitled to participate in the defense or handling of such Third
Party Claim with its own counsel and at its own expense.
(d) The amount of any Liabilities shall be determined net of
any amounts that the Indemnified Party recovers under insurance policies,
indemnities (other than pursuant hereto), other reimbursement arrangements
with respect to such Liabilities or any Tax benefits. Each party waives,
to the extent permitted under its applicable insurance policies, any
subrogation rights that its insurer may have with respect to any
indemnifiable Liabilities.
13.4 INDEMNIFICATION THRESHOLDS AND LIMITATIONS
(a) All representations, warranties, covenants, and
obligations in this Agreement and the certificates and other instruments
delivered pursuant to this Agreement shall survive the Closing and the
consummation of the transactions contemplated herein, subject to Section
13.4(d). The right to indemnification, reimbursement or other remedy based
upon such representations, warranties, covenants, and obligations shall
not be affected by any investigation conducted with respect to, or any
knowledge acquired at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with any such representation,
warranty, covenant or obligation. The waiver of any condition based upon
the accuracy of any representation or warranty, or on the performance of
or compliance with any covenant or obligation, will not affect the right
to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations.
(b) (i) Sellers shall have no liability with respect to
claims under Section 13.1 until the total of all Liabilities with
respect to such matters exceeds $75,000 (the "Liability Threshold");
provided, however, that once such Liabilities exceed the Liability
Threshold, the Buyer Indemnified Parties shall be entitled to
indemnification for the aggregate amount of all Liabilities
irrespective of the Liability Threshold. Claims under Section
13.1(b) through 13.1(g), matters arising in respect of Sections 5.4,
5.5, 5.7, 5.17, 5.18, 5.24 or Section 5A, and claims resulting from
fraud or willful breach of a Seller's representations and warranties
shall not be subject to the Liability Threshold.
EXECUTION VERSION
41
(ii) In no event shall the Buyer Indemnified Parties be
entitled to recover more, in the aggregate, than $2,000,000 from
Sellers (the "Liability Cap"); provided, however, that claims under
Sections 5.7(a), 5.7(d), 5.7(e). 5.7(f), 5.24, 12.6, 13.1(c),
13.1(f), and 13.1(g), and claims resulting from fraud or willful
breach of a Seller's representations and warranties, shall not be
subject to the Liability Cap. Notwithstanding anything herein to the
contrary, Sellers shall have no liability with respect to the
matters set forth on Schedule 13.4(b).
(c) (i) Buyers will have no liability with respect to claims
under Section 13.2 until the total of all Liabilities with respect
to such matters exceeds the Liability Threshold; provided, however,
that once such Liabilities exceed the Liability Threshold, the
Seller Indemnified Parties shall be entitled to indemnification for
the aggregate amount of all Liabilities irrespective of the
Liability Threshold. Claims under clauses (b) through (e) of Section
13.2, matters arising in respect of Section 6.4 (Brokerage), any
claims resulting from fraud or willful breach of a Buyer's
representations and warranties shall not be subject to the Liability
Threshold.
(ii) In no event shall the Seller Indemnified Parties be
entitled to recover more, in the aggregate, than the amount of the
Liability Cap from Buyers; provided, however, that claims under
Section 13.2 relating to or arising from any Asset or any Assumed
Liability after the Closing shall not be subject to the Liability
Cap.
(d) (i) Sellers will have liability with respect to any breach
of a representation or warranty (other than those in Sections 5.4,
5.5, 5.7, 5.17, 5.19, and Section 5A, as to which a claim may be
made at any time), only if a Buyer notifies Parent of a Claim on or
before the date upon which the outstanding principal and accrued and
unpaid interest under the Note becomes due and payable; and
(ii) Buyers will have liability with respect to any
breach of a representation or warranty (other than that set forth in
Section 6.4, as to which a claim may be made at any time), only if a
Seller notifies CITEL (U.S.) of a Claim on or before the date upon
which the outstanding principal and accrued and unpaid interest
under the Note becomes due and payable.
(e) Notwithstanding the foregoing, a party shall be entitled
to equitable remedies (other than rescission) in connection with a breach
by any other party of a covenant or obligation hereunder. The right of
each party hereto to assert indemnification claims and receive
indemnification payments pursuant to this Section 13 shall be the sole and
exclusive right and remedy exercisable by such party with respect to any
breach by such other party hereto of any representation, warranty,
covenant or agreement contained in this Agreement.
13.5 SETOFF RIGHT
EXECUTION VERSION
42
(a) Upon notice to Parent specifying in reasonable detail the
basis therefor, either CITEL (U.K.) or CITEL (U.S.) may set off any amount
to which any Buyer Indemnified Party may be entitled under this Section 13
against amounts otherwise payable under the Note, unless Parent, in good
faith, reasonably believes that the Buyer Indemnified Party is not
entitled to such indemnification and delivers a written objection to the
Buyer Indemnified Party, which written objection must be delivered to the
Buyer Indemnified Party within 15 business days of Parent's receipt of the
notice from the Buyer Indemnified Party pursuant to this Section 13.5.
(b) Upon the Buyer Indemnified Party's receipt of such
objection, the parties shall submit to arbitration the issue of the Buyer
Indemnified Party's right to indemnification pursuant to Section 13.1
hereof in respect of such claim and, hence, the Buyer Indemnified Party's
right of setoff with respect thereto pursuant to Section 13.5(a). The
arbitration shall be administered by the American Arbitration Association
under the Commercial Arbitration Rules, as modified by this Section
13.5(b) and any other instructions that the parties may agree upon at the
time of such arbitration. There shall be one arbitrator selected by mutual
agreement by the parties within 10 business days after the initiation of
the arbitration proceeding or, if the parties are unable to agree on a
single arbitrator, by the Independent Accountants within 10 business days
thereafter. The parties shall be permitted to conduct reasonable (in terms
of scope and time) discovery with respect to the substance and merits of
the claim being arbitrated, but in no event shall the parties be permitted
to undertake any discovery, in the sole discretion of the arbitrator, that
could not reasonably be expected to yield relevant information with
respect to such substance and merits; and the arbitrator shall have the
power and authority to suspend, terminate and disallow any discovery
undertaken or attempted in violation of this standard. The arbitrator
shall render a reasoned determination (with findings of fact and
conclusions of law) in the arbitration not later than 60 days after the
initiation thereof. Each party shall bear its own fees and expenses with
respect to the arbitration; provided, that the unsuccessful party in the
arbitration, as determined by the arbitrator, shall pay the fees and
expenses of the American Arbitration Association and the arbitrator. The
forum for the arbitration shall be Boston, Massachusetts, and the
governing law for the arbitration shall be the law of the State of New
York, without reference to its conflicts of laws provisions. The
arbitrator shall have power and authority only to authorize setoff of
amounts payable under the Note in accordance with Section 13.5(a) if the
arbitrator determines that the Buyer Indemnified Parties are entitled to
indemnification hereunder with respect to the claim submitted to
arbitration. The determination rendered by arbitration shall be final and
binding upon the parties, and judgment upon the award may be entered in
any court of competent jurisdiction in the United States.
(c) The exercise of such right of setoff by CITEL (U.K.) or
CITEL (U.S.) in good faith, whether or not ultimately determined to be
justified, will not constitute an event of default under the Note. Neither
the exercise of nor the failure to exercise such right of setoff will
constitute an election of remedies or limit the Buyer Indemnified Parties
in any manner in the enforcement of any other remedies that may be
available to them.
EXECUTION VERSION
43
13.6 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE
NEGLIGENCE. THE INDEMNIFICATION PROVISIONS IN THIS SECTION 13 SHALL BE
ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR
FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS AND REGARDLESS OF WHETHER ANY PERSON
(INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR
ESTABLISHES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE
PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
13.7 NO CONSEQUENTIAL DAMAGES. No indemnifying party shall be liable
or otherwise responsible to a Seller Indemnified Party or a Buyer Indemnified
Party, as the case may be, for consequential, incidental or punitive damages or,
in the case of Sellers, for diminution in value of an Asset (other than a
diminution in value for which a Buyer Indemnified Party realizes a loss) or lost
profits, that arise out of or relate to this Agreement or the performance or
breach hereof or any Liability retained or assumed hereunder.
14. [INTENTIONALLY OMITTED]
15. OTHER PROVISIONS
15.1 BENEFIT AND ASSIGNMENT. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Neither this Agreement nor any rights hereunder shall be assignable
by any party without the prior written consent of the other parties. This
Agreement is for the sole benefit of the parties and their respective successors
and permitted assigns and nothing herein, express or implied, is intended or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
15.2 ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto embody the entire agreement and understanding of the parties and
supersede any and all prior agreements, arrangements and understandings relating
to matters provided for herein and therein. This Agreement may not be amended,
supplemented or otherwise modified except by a written agreement executed by the
party to be charged with the amendment.
15.3 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely within that State, without reference
to its conflict of laws rules. Each of the parties irrevocably consents to the
service of process in any action or proceeding hereunder by the mailing of
copies thereof by registered or certified airmail, postage prepaid, to the
address specified in Section 15.4. The foregoing shall not limit the rights of
any party to serve process in any other manner permitted by applicable law or
regulation or to obtain execution of judgment in any other jurisdiction.
15.4 NOTICES. Any notice, request or demand desired or required to
be given hereunder shall be in writing given by personal delivery, confirmed
facsimile transmission or overnight courier service, in each case addressed as
respectively set forth below or to such other
EXECUTION VERSION
44
address as any party shall have previously designated by such a notice. The
effective date of any notice, request or demand shall be the date of personal
delivery, the date on which successful facsimile transmission is confirmed or
the date actually delivered by a reputable overnight courier service, as the
case may be, in each case properly addressed as provided herein and with all
charges prepaid.
To Sellers:
Verso Technologies, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
Copy to (for information purposes only):
Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx XX
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Hussle
Facsimile: 000-000-0000
To Buyers:
CITEL Technologies, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: 000-000-0000
EXECUTION VERSION
45
Copies to (for information purposes only):
Stoel Rives LLP
00xx Xxxxx, Xxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxx
Facsimile: 000-000-0000
Fraser Xxxxxx Casgrain LLP
15th Floor, Grosvenor Building
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Xxxxxx
Attn: Xxxxx Xxxx
Facsimile: 000-000-0000
15.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument. A party's transmission by facsimile
of a copy of this Agreement duly executed by that party shall constitute
effective delivery by that party of an executed copy of this Agreement to the
party receiving the transmission. A party that has delivered this Agreement by
facsimile shall forthwith deliver an originally executed copy to the other party
or parties.
15.6 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction will, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms of this Agreement;
provided, however, that (a) if such invalidity or unenforceability results in an
inequity to a party to this Agreement, equitable adjustment will be made to the
extent practicable, and (b) if such invalidity or unenforceability results
(after any equitable adjustment that can be made pursuant to (a), above) in the
failure of either party hereto to achieve any objective that was otherwise
achievable and the achievement of which was a fundamental purpose of such party
in entering into this Agreement, such party may decline to proceed with the
transactions contemplated hereby if the Closing has not occurred.
15.7 WAIVERS. Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take
EXECUTION VERSION
46
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
15.8 ENFORCEMENT OF AGREEMENT. The rights and remedies of the
parties to this Agreement are cumulative and not alternative. The parties
acknowledge and agree that the other parties would be irreparably damaged if any
of the provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by any party could not be
adequately compensated in all cases by monetary damages alone. Accordingly, in
addition to any other right or remedy to which a party may be entitled, at law
or in equity, it shall be entitled to enforce any provision of this Agreement by
a decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the
provisions of this Agreement, without posting any bond or other undertaking.
15.9 CONSTRUCTION AND INTERPRETATION. Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Schedules and
Exhibits refer to the Articles and Sections of, and Schedules and Exhibits to,
this Agreement. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References in this Agreement to any gender include references to
all genders, and references to the singular include references to the plural and
vice versa. Unless the context otherwise requires, the words "hereof," "hereby"
and "herein" and words of similar meaning when used in this Agreement refer to
this Agreement in its entirety and not to any particular Article, Section or
provision of this Agreement. The Schedules and Exhibits to this Agreement
constitute a part of this Agreement and are incorporated into this Agreement for
all purposes as if fully set forth herein. The parties acknowledge that in the
negotiation and drafting of this Agreement they have been represented by and
relied upon the advice of counsel of their choice. The parties affirm that their
counsel have had a substantial role in the drafting and negotiation of this
Agreement and, therefore, the rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any Exhibit or Schedule attached
hereto.
EXECUTION VERSION
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
BUYERS:
CITEL TECHNOLOGIES LIMITED
By: /s/ Xxxxxxx Xxxxxx Xxxxxxxx
--------------------------------------------
Title: Chief Executive Officer
-----------------------------------------
CITEL TECHNOLOGIES LIMITED
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------------
Title: Secretary
-----------------------------------------
CITEL TECHNOLOGIES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------------
Title: Chief Executive Officer,
President and Secretary
-----------------------------------------
MCK CANADA OPERATIONS INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
EXECUTION VERSION
48
THE SELLERS:
MCK COMMUNICATIONS, INC. (NEVADA)
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: Vice President
------------------------------------
MCK TELECOMMUNICATIONS INC. (CANADA)
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: President
------------------------------------
MCK COMMUNICATIONS, INC. (DELAWARE)
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: Vice President
------------------------------------
DIGITAL TECHNIQUES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: Vice President
------------------------------------
VERSO TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: Executive Vice President and Chief
------------------------------------
Financial Officer
EXECUTION VERSION
49
