ASSET PURCHASE AGREEMENT
between
FILENET CORPORATION
as Purchaser
and
APPLICATION PARTNERS, INC.
as Seller
Dated as of May 18, 2000
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TABLE OF CONTENTS
ANNEX A DESCRIPTION OF BUSINESS/LIST OF ASSETS
ANNEX A-1 EQUIPMENT INCLUDED IN PURCHASED ASSETS
ANNEX A-2 TRADEMARKS AND LOGOS INCLUDED IN PURCHASED ASSETS
ANNEX A-3 INTELLECTUAL PROPERTY INCLUDED IN PURCHASED ASSETS
ANNEX B ALLOCATION OF PURCHASE PRICE
EXHIBIT A BILL OF SALE
EXHIBIT B ASSUMPTION AGREEMENT
EXHIBIT C SUBLEASE AGREEMENT
EXHIBIT E CONSULTING AGREEMENT
EXHIBIT F OFFER LETTERS
EXHIBIT G ESCROW AGREEMENT
EXHIBIT H MANAGEMENT PRINCIPAL AGREEMENTS
EXHIBIT I SUPPORT AGREEMENTS
DISCLOSURE SCHEDULES
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 18, 2000 (as hereafter amended,
modified or supplemented, this "Agreement"), between FileNET Corporation, a
Delaware corporation ("Purchaser"), and Application Partners, Inc., a California
Corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns and operates a business, a division of which conducts
the activities described on Annex A hereto (the "Division"); and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the assets relating to the Division listed on Annex A
hereto (the "Assets") and in connection therewith Purchaser is willing to assume
certain liabilities of Seller relating thereto, all upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and intending to be legally bound hereby,
Purchaser and Seller hereby agree as follows:
Article 1.
DEFINITIONS
Section 1.01 Certain Defined Terms. Unless the context otherwise requires,
the following terms, when used in this Agreement, shall have the respective
meanings specified below:
"Acquisition Documents" shall mean this Agreement, the Ancillary
Agreements, and any certificate, Financial Statement, report or other document
delivered pursuant to this Agreement or the transactions contemplated hereby.
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Ancillary Agreements" shall mean the Assumption Agreement, the Bill of
Sale and the Sublease Agreement.
"Assets" shall have the meaning specified in the recitals to this
Agreement.
"Assumed Liabilities" shall have the meaning specified in Section 2.02(a).
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"Assumption Agreement" shall mean the Assumption Agreement to be executed
by Purchaser and Seller on the Closing Date substantially in the form of Exhibit
B.
"Bill of Sale" shall mean the Bill of Sale and Assignment to be executed by
Seller on the Closing Date substantially in the form of Exhibit A.
"Business Day" shall mean any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Law to be closed in California.
"Cause" shall mean that Purchaser, acting in good faith based upon
information then known to Purchaser, determines that a Division Employee or
Division Contractor has: (1) committed a material breach of his duties and
responsibilities (other than as a result of incapacity due to Disability); (2)
been convicted of a felony; (3) materially failed to perform required duties and
responsibilities or performed them unsatisfactorily or incompetently; (4)
materially violated a Purchaser policy; (5) violated any fiduciary duty owed to
Purchaser; or (6) violated any of the terms of the Proprietary Information and
Inventions Agreement signed by such Division Employee or Division Contractor .
"Closing" shall have the meaning specified in Section 2.04.
"Closing Date" shall have the meaning specified in Section 2.04.
"Code" shall mean the Internal Revenue Code of 1986, as amended through the
date hereof.
"Confidentiality Agreement" shall mean the letter agreement dated as of
February 1, 2000 between Seller and Purchaser.
"Consulting Agreement" shall mean the consulting agreement to be executed
by Purchaser and Seller, attached hereto as Exhibit E.
"Contract Software Engineers" shall have the meaning specified in Section
2.07(a)(3).
"Control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
shall mean the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Disability" shall mean a physical or mental impairment which substantially
limits a major life activity of a Division Employee or Division Contractor and
which renders such Division Employee or Division Contractor unable to perform
the essential functions of his or her position, even with reasonable
accommodation which does not impose an undue hardship on the Purchaser.
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"Disclosure Schedule" shall mean the Disclosure Schedules attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
"Division" shall have the meaning specified in the recitals to this
Agreement.
"Division Contractors" shall mean those contract software engineers listed
on Schedule 6.01.
"Division Employees" shall mean those employee software engineers listed on
Schedule 6.01.
"Employee Software Engineers" shall have the meaning specified in Section
2.07(a)(3).
"Equipment" shall have the meaning specified in Annex A.
"ERISA" shall have the meaning specified in Section 3.12(a).
"Escrow Agent" shall mean the Bank of San Francisco.
"Escrow Agreement" shall mean the agreement to be executed by Purchaser,
Seller, and the Escrow Agent, attached hereto as Exhibit G.
"Excluded Liabilities" shall have the meaning specified in Section 2.02(b).
"Financial Statements" shall have the meaning specified in Section
3.04(a)(i).
"Governmental Authority" shall mean any national, federal, state, municipal
or local or other government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Holdback Payment" shall mean have the meaning specified in Section 2.07.
"Indemnified Party" shall have the meaning specified in Section 9.04.
"Indemnifying Party" shall have the meaning specified in Section 9.04.
"Intellectual Property" shall mean, with respect to the Division, (i) all
inventions listed in Annex A-3, whether or not patentable, whether or not
reduced to practice, and whether or not yet made the subject of a pending patent
application or applications, (ii) national (including the United States) and
multinational statutory invention registrations, patents, patent registrations
and patent applications listed on Annex A-3 (including all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations) and all
rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (iii) all trademarks, service marks, trade dress, logos, trade
names, domain names and corporate names, whether or not registered, listed on
Annex A-3(including the names and logos set forth on Annex A-2), including all
common law rights, and registrations and applications for registration thereof,
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(iv) all copyrights (registered or otherwise) and registrations, applications
for registration and licenses thereof listed on Annex A-3, and all rights
therein provided by international treaties or conventions, (v) all trade secrets
and confidential, technical and business information (including ideas, formulas,
compositions, inventions, and conceptions of inventions whether patentable or
unpatentable and whether or not reduced to practice) listed on Annex A-3, (vi)
copies and tangible embodiments of all the foregoing, in whatever form or
medium, (vii) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights related to the foregoing, and (viii) all
rights to sue or recover and retain damages and costs and attorneys' fees for
present and past infringement of any of the foregoing.
"IRS" shall mean the Internal Revenue Service of the United States.
"Law" shall mean any national, federal, state, municipal or local or other
statute, law, ordinance, regulation, rule, code, order, other requirement or
rule of law.
"Leased Real Property" shall mean the real property related to the Division
leased by Seller as tenant, together with, to the extent leased by Seller, all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of Seller related to the Division attached or appurtenant
thereto, and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Letter of Intent" shall mean that Letter of Intent executed by the Parties
on April 3, 2000.
"Liabilities" shall mean any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licensed Intellectual Property" shall mean all Intellectual Property
licensed or sublicensed by Seller from a third party, which can be used by
Purchaser after the Closing and which is listed on Schedule 3.10.
"Loss" shall have the meaning specified in Section 9.02(a).
"Management Principals" shall mean James Hockett and Jun Huang.
"Management Principal Agreements" shall mean the employment agreements to
be executed by Purchaser and each Management Principal, attached hereto as
Exhibit H.
"Material Adverse Effect" shall mean any circumstance, change in, or effect
on, the Division that, individually or in the aggregate with any other
circumstances, changes in, or effects on, the Division (i) is, or could
reasonably be expected to be, materially adverse to the business, operations,
assets or liabilities (including, without limitation, contingent liabilities),
employee relationships, customer or supplier relationships, results of
operations or the financial condition of the Division or (ii) could reasonably
be expected to materially adversely affect the ability of Purchaser to operate
or conduct the Division in the manner in which it is currently operated or
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conducted by Seller. A material adverse effect shall not include the following:
(A) a reduction in the value of the Division of less than $1,000,000.00; or (B)
changes, events and effects that are directly caused by (i) conditions affecting
the United States economy as a whole; (ii) conditions affecting the software
industry as a whole, which conditions (in the case of clause (i) or (ii) do not
affect the Division in a disproportionate manner).
"Material Contracts" shall mean all contracts and agreements, whether or
not made in the ordinary course of business, which are (i) material to the
conduct of the Division, (ii) related to the Assets, or (iii) the absence of
which would have a Material Adverse Effect on the Division or the Assets.
"Offer Letters" shall mean the offer by Purchaser to each Transferred
Employee, attached hereto as Exhibit F.
"Owned Intellectual Property" shall mean all Intellectual Property in and
to which Seller has a right to hold right, title and interest.
"Permitted Activities" shall mean marketing, sales and consulting
activities by Seller with respect to each of the following products: (i)
ClaimPro, Claims Processing Workstation, Image System Connectivity Program, Work
Management Engine, and any derivative works, modifications and improvements to
the foregoing made by Seller, its agents or licensees.
"Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Plans" shall have the meaning specified in Section 3.12(a).
"Purchase Price" shall have the meaning specified in Section 2.03.
"Purchaser" shall have the meaning specified in the recitals to this
Agreement.
"Receivables" shall mean any and all accounts receivable, notes and other
amounts receivable from third parties, including, without limitation, customers
and employees, arising from the conduct of the Division before the Closing Date,
whether or not in the ordinary course, together with any unpaid financing
charges accrued thereon.
"Reference Balance Sheet" shall have the meaning specified in Section
3.04(a)(ii).
"Reference Balance Sheet Date" shall mean April 30, 2000.
"Regulations" shall mean the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Restricted Period" shall have the meaning specified in Section 5.07.
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"Seller" shall have the meaning specified in the recitals to this
Agreement.
"Sublease Agreement" shall mean the Sublease Agreement to be executed by
Purchaser and Seller on the Closing Date substantially in the form of Exhibit C.
"Support Agreements" shall mean the agreements to be executed by Purchaser
and each of the Support Principals, attached hereto as Exhibit I.
"Support Principals" shall mean Jerry Goedicke and Lakshman Watawala.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, loss, damage, liability, expense, additions to tax and
additional amounts or costs incurred or imposed with respect thereto) imposed by
any government or taxing authority, to the extent Purchaser may be held liable
for any such amount or to the extent any such amount constitutes a lien on the
Assets or the Division.
"Third Party Claims" shall have the meaning specified in Section 9.04(b).
"Threshold Amount" shall have the meaning specified in Section 9.02(b).
"Transferred Employee" shall have the meaning specified in Section 6.01.
"Transferred Contractor" shall have the meaning specified in Section 6.01.
Article 2.
PURCHASE AND SALE
Section 2.01 Assets to Be Sold.
On the terms and subject to the conditions of this Agreement, Seller shall,
on the Closing Date, sell, convey and assign to Purchaser, free and clear of all
claims, liens and interests except as is provided for herein, all of Seller's
right, title and interest in and to the Assets.
Section 2.02 Assumption and Exclusion of Liabilities.
(a) On the terms and subject to the conditions of this Agreement, Purchaser
shall, on the Closing Date, assume the following Liabilities: (i) liabilities
and obligations arising out of ownership, use and operation of the Assets after
the Closing Date; and (ii) liabilities and obligations arising after the Closing
Date under the terms of any real property lease agreement and license agreement
that is assigned, sublet or sublicensed by Seller to Purchaser in connection
with the execution of this Agreement or the Ancillary Agreements set forth on
Schedule 2.02 (a) (the "Assumed Liabilities").
(b) Seller shall retain, and shall be responsible for paying, performing
and discharging when due, and Purchaser shall not assume or have any
responsibility for, all assets other than the Assets and all Liabilities of
Seller or the Division as of the Closing Date other than the Assumed Liabilities
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(the "Excluded Liabilities"), whether or not the Excluded Liabilities relate to
the Division.
Section 2.03 Purchase Price; Allocation of Purchase Price.
The aggregate purchase price for the Assets shall be US$20,000,000.00 (the
"Purchase Price"), subject to adjustment as set forth in Section 2.07, to be
paid as follows: (i) $15,000,000.00 in cash paid by wire transfer from Purchaser
to Seller on the Closing Date; and (ii) an aggregate of $5,000,000 in Holdback
Payments which shall be deposited with the Escrow Agent on the Closing Date and
released pursuant to the Escrow Agreement, if, as and when the conditions
specified in Section 2.07 have been satisfied.
Section 2.04 Closing.
Subject to the terms and conditions of this Agreement, the sale and
purchase of the Assets and the assumption of the Assumed Liabilities
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Seller, at 10:00 A.M. California time on May 23, 2000
provided there has been satisfaction or waiver of all conditions to the
obligations of the parties set forth in Article VIII, or at such other place or
at such other time or on such other date as Seller and Purchaser may mutually
agree upon in writing (the day on which the Closing takes place being the
"Closing Date").
Section 2.05 Closing Deliveries by Seller.
At the Closing, Seller shall deliver or cause to be delivered to Purchaser:
(a) the Bill of Sale, and such other instruments, in form and substance
satisfactory to Purchaser, as may be requested by Purchaser to transfer the
Assets to Purchaser or evidence such transfer on the public records;
(b) executed counterparts of the Consulting Agreement, the Management
Principal Agreements, the Offer Letters and the Support Agreements;
(c) a receipt for the Purchase Price; and
(d) the opinions, certificates and other documents required to be delivered
pursuant to Section 8.02.
Section 2.06 Closing Deliveries by Purchaser.
At the Closing, Purchaser shall deliver to Seller:
(a) $15,000,000.00 by wire transfer in immediately available funds;
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(b) $5,000,000.00 by wire transfer into an escrow account established for
the payment of the Holdback described in Section 2.07, below, with directions to
retain, hold, and dispose of these funds in accordance with the terms of the
Escrow Agreement attached hereto as Exhibit H.
(c) executed Offer Letters and executed counterparts of the Consulting
Agreement, the Management Principal Agreements and the Support Agreements; and
(d) the opinions, certificates and other documents required to be delivered
pursuant to Section 8.01.
Section 2.07 Holdback; Adjustment of Purchase Price
(a) Upon completion of certain product objectives, worker transfers and
worker retention milestones, as described below, Purchaser shall authorize the
Escrow Agent to pay the following amounts (the "Holdback Payments") to Seller at
the time of such completion:
1. $1,500,000, upon the achievement of release readiness objectives
for Sequis 1.0, as described on Schedule 2.07(a)(1).
2. $1,500,000, upon the transfer of the workers designated on Schedule
2.07(a)(2) to full-time employment or service status with Purchaser by the
dates indicated on Schedule 2.07(a)(2). If any such transfer shall be
delayed by any immigration related Law, Seller shall offer such affected
workers to Purchaser by contract, at Seller's actual cost, in satisfaction
of this section.
3. $2,000,000, twelve months after the Closing, provided that (x) both
of the Management Principals, and (y) 8 of the combined group of 11
Employee Software Engineers (the "Employee Software Engineers") and
Contract Software Engineers (the "Contract Software Engineers") designated
on Schedule 2.07(a)(3) remain actively employed by, or in active service
with, as applicable, Purchaser on such date.
(b) If the conditions of Section 2.07(a)(2) are not met within three months
of the dates required therefor, none of the $1,500,000 provided for in that
Section will be paid to Seller or the designated employees. If the conditions
are not met by the dates required therefor, but are met within three months of
such required dates, the Holdback Payment to be made to Seller and the
designated employees will be prorated, based on the ratio of the number of
man-days that such employees were available to Purchaser over the number of
man-days that such employees would have been available to Purchaser had the
conditions been met by the required dates.
(c) If the conditions of Section 2.07(a)(3) are not met, but (i) both of
the Management Principals and (ii) at least 6 of the combined group of 11
Employee Software Engineers and Contract Software Engineers remain actively
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employed by, or in active service with, as applicable, Purchaser twelve months
after the Closing, then the Holdback Payment provided for in Section 2.07(a)(3)
shall be reduced to $1,500,000. If either (i) one of the Management Principals
or (ii) more than 5 of the Employee Software Engineers and Contract Software
Engineers, collectively, are not actively employed by, or in active service
with, as applicable, Purchaser twelve months after the Closing, no Holdback
Payment shall be made under Section 2.07(a)(3).
(d) For purposes of Section 2.07(a)(3) only, if any Contract Software
Engineers leave within 12 months of the Closing, reasonable accommodations shall
be made to replace such Contract Software Engineers, and any mutually agreed
replacement Contract Software Engineers shall count in favor of satisfaction of
the requirements of Section 2.07(a)(3).
(e) Notwithstanding anything in this Section 2.07 to the contrary, if the
number of Management Principals, Employee Software Engineers or Contract
Software Engineers is not adequate to satisfy the conditions necessary for the
payment of the Holdback Payments, due to acts or omissions of the Purchaser such
as termination without Cause, an office relocation beyond fifteen miles, staff
reduction due to budgetary constraints or unusually adverse employment
conditions, or, with respect to 2.07(a)(3) only, is due to the death or
Disability of a Transferred Employee, Management Principal or, within thirty
days prior to the relevant date of determination provided for in Section
2.07(a)(3), a Transferred Contractor, such conditions shall be deemed met and no
reduction shall be made in the Holdback Payments as a result of the failure to
meet such conditions.
(f) The Holdback Payments shall be paid in accordance with the procedures
set forth in the Escrow Agreement.
(g) Any reduction in the Holdback Payments pursuant to this Section 2.07
shall be treated for all purposes as an adjustment to the Purchase Price.
Article 3.
REPRESENTATIONS AND WARRANTIES
OF SELLER
As an inducement to Purchaser to enter into this Agreement, Seller hereby
represents and warrants to Purchaser as follows:
Section 3.01 Organization, Authority and Qualification of Seller.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary. The execution and
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delivery of this Agreement and the Ancillary Agreements by Seller, the
performance by Seller of its obligations hereunder and thereunder and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all requisite action on the part of Seller and its
shareholders. This Agreement has been, and upon their execution the Ancillary
Agreements will be, duly executed and delivered by Seller, and (assuming due
authorization, execution and delivery by Purchaser) this Agreement constitutes,
and upon their execution the Ancillary Agreements will constitute, legal, valid
and binding obligations of Seller enforceable against Seller in accordance with
their respective terms.
Section 3.02 No Conflict.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements by Seller (a) do not and will not violate, conflict with or result in
the breach of any provision of the charter or by-laws (or similar organizational
documents) of Seller, (b) do not conflict with or violate (or cause an event
which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to Seller or any of its assets, properties or
businesses, including, without limitation, the Assets and the Division, or (c)
except as set forth in Schedule 3.02, do not and will not conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
encumbrance on any of the assets or properties of Seller pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Seller is a party
or by which any of such assets or properties is bound or affected.
Section 3.03 Governmental Authority and Approvals.
The execution, delivery and performance of this Agreement and each
Ancillary Agreement by Seller do not and will not require Seller to obtain any
consent, approval, authorization or other order of, action by, filing with or
notification to, any Government Authority, except as described in Schedule 3.03;
Section 3.04 Financial Information; Books and Records.
Schedule 3.04(a)(i) sets forth true and complete copies of (i) the
unaudited balance sheet of Seller for the fiscal years ended as of December 31,
1999, and the related statements of income (collectively, the "Financial
Statements") and (ii) the unaudited balance sheet of the Division as of April
30, 2000 (the "Reference Balance Sheet") has been delivered by Seller to
Purchaser. The Financial Statements and the Reference Balance Sheet (A) were
prepared in accordance with the books of account and other financial records of
Seller, (B) present fairly the financial condition and results of operations of
Seller related to the Division as of the dates thereof or for the periods
covered thereby, (C) have been prepared in accordance with prudent accounting
principles applied on a basis consistent with the past practices of Seller and
throughout the periods involved, and (D) will include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
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presentation of the financial condition of Seller related to the Division and
the results of the operations of Seller related to the Division as of the dates
thereof for the periods covered thereby.
(a) The books of account and other financial records of Seller as they
relate to the Division: (i) reflect all items of income and expense and all
assets and Liabilities required to be reflected therein in accordance with
prudent accounting principles applied on a basis consistent with the past
practices of Seller and throughout the periods involved, (ii) are in all
material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies, and (iii) have been maintained in
accordance with good business and accounting practices.
Section 3.05 No Undisclosed Liabilities.
There are no Liabilities of Seller related to the Division other than
Liabilities (i) reflected or reserved against on the Reference Balance Sheet,
(ii) disclosed in Schedule 3.05, or (iii) incurred since the date of this
Agreement in the ordinary course of business, consistent with past practice, of
Seller related to the Division and which do not and could not be reasonably
expected to have a Material Adverse Effect.
Section 3.06 Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions.
Since the Reference Balance Sheet Date, except as disclosed in Schedule
3.06, the Division has been conducted in the ordinary course and consistent with
past practice. Since the Reference Balance Sheet Date, Seller has not permitted
or suffered any liens or encumbrances on the Assets, made any unusual payments,
purchases, transactions, capital expenditures or agreements. As amplification
and not limitation of the foregoing, since the Reference Balance Sheet Date,
except as disclosed on Schedule 3.06, Seller has not:
(i) written down or written up (or failed to write down in accordance
with prudent accounting principles consistent with past practice) the value
of any Inventories or Receivables or revalued any assets of Seller related
to the Division other than in the ordinary course of business consistent
with past practice and in accordance with prudent accounting principles;
(ii) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by Seller related to the Division to any of its employees,
including, without limitation, any increase or change pursuant to any Plan,
or (B) established or increased or promised to increase any benefits under
any Plan, in either case except as required by Law or any collective
bargaining agreement and involving ordinary increases consistent with the
past practice of Seller related to the Division; or
(iii) to the best of Seller's knowledge, suffered any Material Adverse
Effect related to the Division.
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Section 3.07 Litigation.
Except as set forth in Schedule 3.07, there are no Actions by or against
Seller related to the Division, or affecting any of the Assets or the Division,
pending before any Governmental Authority (or, to the best knowledge of Seller
without duty of inquiry, threatened to be brought by or before any Governmental
Authority). Except as set forth in Schedule 3.07, neither Seller nor any of its
assets or properties, including, without limitation, the Assets, is subject to
any Governmental Order (nor, to the best knowledge of Seller without duty of
inquiry, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority).
Section 3.08 Compliance with Laws.
To the best of Seller's knowledge, it has conducted and continues to
conduct the Division in accordance with all Laws and Governmental Orders
applicable to Seller or any of its properties or assets, including, without
limitation, the Assets and the Division, and Seller is not in violation of any
such Law or Governmental Order.
Section 3.09 Material Contracts.
Except as disclosed in Schedule 3.09, each Material Contract: (i) is legal,
valid and binding on the respective parties thereto and is in full force and
effect, (ii) is freely and fully assignable to Purchaser without penalty or
other adverse consequences, and (iii) upon consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, except to the
extent that any consents set forth in Schedule 3.02 are not obtained, shall
continue in full force and effect without penalty or other adverse consequence.
Seller is not in breach of, or default under, any Material Contract.
Section 3.10 Intellectual Property.(a)
The rights of Seller in or to the Owned Intellectual Property do not
conflict with or infringe on the rights of any other Person and Seller has not
received any claim or written notice from any Person to such effect.
To the best of Seller's knowledge, which does not include any investigation
or inspection of the validity of such licenses, the Licensed Intellectual
Property do not conflict with or infringe on the rights of any other Person and
Seller has not received any claim or written notice from any Person to such
effect.
(i) Except as disclosed in Schedule 3.10(a): all the Owned
Intellectual Property is owned by Seller, free and clear of any encumbrance
and (ii) no Actions have been made or asserted (nor, to the best knowledge
of Seller is any action pending nor has any such Action been threatened)
against Seller either (A) based upon or challenging or seeking to deny or
restrict the use by Seller of any of the Owned Intellectual Property or (B)
alleging that any services provided, or products manufactured or sold by
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Seller are being provided, manufactured or sold in violation of any patents
or trademarks, or any other rights of any Person. To the best knowledge of
Seller, no Person is using any trademarks, service marks, trade names or
similar property that are confusingly similar to the Owned Intellectual
Property or any patents, copyrights trademarks, service marks, trade names,
trade secrets or similar property that infringe upon the Owned Intellectual
Property or upon the rights of Seller therein.
(ii) Except as disclosed in Schedule 3.10(b): (i) no Actions have been
made or asserted (nor, to the knowledge of Seller is any Action pending or
has any Action been threatened) against Seller either (A) based upon or
challenging or seeking to deny or restrict the use by Seller of any of the
Licensed Intellectual Property or (B) alleging that any Licensed
Intellectual Property is being licensed, sublicensed or used in violation
of any patents or trademarks, or any other rights of any Person; and (ii)
to the best knowledge of Seller, no Person is using any trademarks, service
marks, trade names or similar property that are confusingly similar to the
Licensed Intellectual Property or any patents, copyrights, trademarks,
service marks, trade names, trade secrets or similar property that infringe
upon the Licensed Intellectual Property or upon the rights of Seller
therein.
Section 3.11 Assets.
(a) Except as disclosed in Schedule 3.11(a), Seller owns, leases or has the
legal right to use all the Assets and has good and marketable title to, or, in
the case of leased or subleased Assets, valid and subsisting leasehold interests
in, all the Assets, free and clear of all encumbrances.
(b) The Assets and Leased Real Properties constitute all the properties,
assets and rights forming a part of, used, held or intended to be used in, and
all such properties, assets and rights as are necessary in the conduct of, the
Division.
(c) Except as set forth in Schedule 3.10(b), 3.11(a) or 3.11(c), and
subject to the consent of third parties disclosed elsewhere in the Disclosure
Schedule, Seller has the complete and unrestricted power and unqualified right
to sell, assign, transfer, convey and deliver the Assets to Purchaser without
penalty or other adverse consequences.
Section 3.12 Employee Benefit Matters.
(a) Plans and Material Documents. Schedule 3.12(a) lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, to which Seller is
a party with respect to the Division, with respect to which Seller has any
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obligation or which are maintained, contributed to or sponsored by Seller for
the benefit of any current or former employee, officer or director of Seller
with respect to the Division (collectively, "Plans").
(b) Absence of Certain Liabilities and Events. There has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Plan. Seller has not incurred any liability for any
excise tax arising under Section 4971, 4972, 4980 or 4980B of the Code and to
the best of Seller's knowledge no fact or event exists which could give rise to
any such liability. Seller has not incurred any liability under, arising out of
or by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course), including,
without limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could give rise to any such liability. No complete
or partial termination has occurred within the five years preceding the date
hereof with respect to any Plan. No reportable event (within the meaning of
Section 4043 of ERISA) has occurred or is expected to occur with respect to any
Plan subject to Title IV of ERISA. No Plan had an accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived, as of the most recently ended plan year of such Plan. Section
3.13 Labor Matters.
Except as set forth in Schedule 3.13, (a) Seller is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Seller with respect to the Division, and, to Seller's
knowledge, currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Division; (b) there are no controversies, strikes,
slowdowns or work stoppages pending or, to the best knowledge of Seller after
due inquiry, threatened between Seller and any of the employees of the Division,
and Seller has not experienced any such controversy, strike, slowdown or work
stoppage within the past three years; (c) Seller has not breached or otherwise
failed to comply with the provisions of any collective bargaining or union
contract with respect to the Division and there are no grievances outstanding
against Seller under any such agreement or contract; (d) there are no unfair
labor practice complaints pending against Seller with respect to the Division
before the National Labor Relations Board or any other Governmental Authority or
any current union representation questions involving employees of the Division;
(e) Seller is currently in compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining, employee benefits and the payment and withholding of taxes and other
sums as required by the appropriate Governmental Authority with respect to the
Division and has withheld and paid to the appropriate Governmental Authority or
is holding for payment not yet due to such Governmental Authority all amounts
required to be withheld from employees of the Division and is not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with any
of the foregoing; (f) Seller has paid in full to all employees of the Division
or adequately accrued for in accordance with prudent accounting principles
consistently applied all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees; (g) there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or threatened before any Governmental Authority with respect
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to any Persons currently or formerly employed by Seller in the Division; (h)
Seller is not a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Authority relating to employees or employment
practices with respect to the Division; (i) there is no charge or proceeding
with respect to a violation of any occupational safety or health standards that
has been asserted or is now pending or threatened with respect to the Division;
and (j) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender, race,
religion or other legally protected category, which has been asserted or is now
pending or threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which
Seller has employed or currently employs any Person with respect to the
Division.
Section 3.14 Taxes.
All returns and reports in respect of Taxes required to be filed have been
timely filed and all Taxes required to be shown on such returns and reports or
otherwise due have been timely paid. All such returns and reports are true,
correct and complete in all material respects. There are no Tax liens on the
Assets.
Section 3.15 Insurance.
All material assets and properties of the Division are, and for the past
five years have been, covered by valid and, except for policies that have
expired under their terms in the ordinary course, currently effective insurance
policies or binders of insurance (including, without limitation, general
liability insurance, property insurance and workers' compensation insurance)
issued in favor of Seller, in each case with responsible insurance companies and
in adequate amounts, covering such risks as are consistent with customary
practices and standards of companies engaged in businesses and operations
similar to those of Seller with respect to the Division.
Section 3.16 Full Disclosure.
None of the warranties made by Seller, or made in any Disclosure Schedule,
Financial Statement, Reference Balance Sheet or any other certificate furnished
or to be furnished by Seller, contains or will contain any untrue statement of a
material fact, or omits to state a material fact necessary to prevent the
statements from being misleading.
Section 3.17 Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements based upon
arrangements made by or on behalf of Seller.
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Section 3.18 Vote Required.
The affirmative vote of the board of directors and of the shareholders of
Seller are necessary to approve this Agreement and the transactions contemplated
hereby. The board of directors and the shareholders of Seller have approved this
Agreement and the transactions contemplated hereby.
Article 4.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As an inducement to Seller to enter into this Agreement, Purchaser hereby
represents and warrants to Seller as follows:
Section 4.01 Organization and Authority of Purchaser.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements by Purchaser, the performance by
Purchaser of its obligations hereunder and thereunder and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of Purchaser. This Agreement has
been, and upon their execution the Ancillary Agreements will be, duly executed
and delivered by Purchaser, and (assuming due authorization, execution and
delivery by Seller) this Agreement constitutes, and upon their execution the
Ancillary Agreements will constitute, legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms.
Section 4.02 No Conflict.
Assuming the making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referred to in Section 4.03, except
as may result from any facts or circumstances relating solely to Seller, the
execution, delivery and performance of this Agreement and the Ancillary
Agreements by Purchaser, do not and will not (a) violate, conflict with or
result in the breach of any provision of the Articles of Incorporation or
by-laws (or other organizational documents) of Purchaser, or (b) conflict with
or violate any Law or Governmental Order applicable to Purchaser.
Section 4.03 Governmental Consents and Approvals.
The execution, delivery and performance of this Agreement and each
Ancillary Agreement to which it is a party by Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority.
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Section 4.04 Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements based upon
arrangements made by or on behalf of Purchaser.
Section 4.05 Vote Required.
No vote of the shareholders of the Purchaser is required to approve this
Agreement and the transactions contemplated hereby. The board of directors of
Purchaser has approved this Agreement and the transactions contemplated hereby.
Article 5.
ADDITIONAL AGREEMENTS
Section 5.01 Conduct of Business Prior to the Closing.
Seller covenants and agrees that, between the date hereof and the Closing,
Seller shall conduct the operations of the Division in the ordinary course and
consistent with Seller's past practice.
Section 5.02 Access to Information.
From the date hereof until the Closing, upon reasonable notice, Seller
shall: (i) afford Purchaser reasonable access, during normal business hours, to
Seller's offices, other facilities, books and records and to Seller's agents
regarding the Assets, and (ii) furnish to the Purchaser such additional
financial and operating data, reasonable access to Seller's books and records
and other information regarding the Assets of Seller as Purchaser may from time
to time reasonably request.
In order to facilitate the resolution of any claims made by or against or
incurred by Purchaser after the Closing or for any other reasonable purpose, for
a period ending on the close of business on the 120th day following the
expiration of the applicable statute of limitations with respect to Tax
liabilities, Seller shall (i) retain all books and records of Seller which are
not transferred to Purchaser pursuant to this Agreement and which relate to
Seller, its Division or the Assets for periods prior to the Closing and which
shall not otherwise have been delivered to Purchaser, and (ii) upon reasonable
notice, afford the officers, employees and authorized agents and representatives
of Purchaser reasonable access (including the right to make photocopies at
Purchaser's expense), during normal business hours, to such books and records.
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Section 5.03 Confidentiality.
The parties acknowledge that Purchaser and Seller have previously executed
the Confidentiality Agreement, which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms. If this Agreement is
terminated for any reason, the Confidentiality Agreement shall survive, and
neither party shall use any Information obtained from the other party (as
defined in the Confidentiality Agreement) for any purposes.
Section 5.04 Regulatory and Other Authorizations; Notices and Consents.
Purchaser and Seller shall use commercially reasonable efforts to obtain
all authorizations, consents, orders and approvals of all Governmental
Authorities and officials, customers, vendors and other parties who may have or
be able to assert legal rights with respect to this transaction that may be or
become necessary for execution and delivery of this Agreement, and the
performance of Purchaser's and Seller's obligations pursuant to, this Agreement
and the Ancillary Agreements and will cooperate fully with each other in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Purchaser is responsible for conducting an independent investigation
in order to determine whether the Acquisition Agreement and the transactions
contemplated thereunder are subject to compliance with the Hart-Scott-Rodino
Act, and for taking all required action if such compliance is necessary. Seller
hereby acknowledges that Purchaser has made or will make such determination in
reliance upon the Seller's balance sheet and financial statements, each dated as
of December 31, 1999 and provided by Seller.
Section 5.05 Notice of Developments.
Prior to the Closing, Seller shall promptly notify Purchaser in writing of
(a) all events, circumstances, facts and occurrences arising subsequent to the
date of this Agreement which are reasonably likely to have a Material Adverse
Effect on the Division, and (b) all other material developments affecting the
Assets, Liabilities, business, financial condition, operations, results of
operations, customer or supplier relations, employee relations of the Division.
Section 5.06 Use of Intellectual Property.
Except as set forth in Schedule 5.06, from and after the Closing, Seller
shall not use any of the Owned Intellectual Property or the Licensed
Intellectual Property.
Section 5.07 Non-Competition.
(a) For a period of one (1) year after the Closing (the "Restricted
Period"), the Seller shall not engage, directly or indirectly, in any business
anywhere in the world that produces or supplies products or services
substantially similar to the Assets of the Division nor, without the prior
written consent of Purchaser, directly or indirectly, own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with, as an officer, employee,
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partner, stockholder, consultant or otherwise, any person or entity that
competes with the aspect of the Division related to the Assets by producing or
supplying products or services of the kind produced or supplied by the Assets of
the Division; provided, however, (i) this Section 5.07 shall not apply to
Permitted Activities, and (ii) for the purposes of this Section 5.07, ownership
of securities having no more than five percent (5%) of the outstanding voting
power of any competitors which are listed on any national securities exchange or
traded actively in the national over-the-counter market shall not be deemed to
be in violation of this Section 5.07 so long as the Seller has no other
connection or relationship with such competitor. The fact that the Seller has
specified that an activity is a Permitted Activity is not to be interpreted as
an admission that such activity would otherwise be a competitive activity under
this Section.
(a) Seller acknowledges that the covenants of Seller set forth in this
Section 5.07 are an essential element of this Agreement and that, but for
the agreement of Seller to comply with these covenants, Purchaser would not
have entered into this Agreement. Seller acknowledges that this Section
5.07 constitutes an independent covenant and shall not be affected by
performance or nonperformance of any other provision of this Agreement by
Purchaser.
(b) Seller has independently consulted with its counsel and after such
consultation agrees that the covenants set forth in this Section 5.07 are
reasonable and proper.
Section 5.08 Sublease.
Purchaser agrees to sublet a portion of Seller's premises for a minimum
period of one (1) year after Closing, under the terms and conditions of the
Sublease Agreement attached hereto as Exhibit C.
Section 5.09 Bulk Transfer Laws.
Purchaser hereby waives compliance by Seller with any applicable bulk sale
or bulk transfer laws of any jurisdiction in connection with the sale of the
Assets to Purchaser (other than any obligations with respect to the application
of the proceeds herefrom). Pursuant to Article IX, Seller has agreed to
indemnify Purchaser against any and all liabilities which may be asserted by
third parties against Purchaser as a result of Seller's noncompliance with any
such law.
Section 5.10 Further Action.
Each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate action, do or cause to be done all things
necessary, proper or advisable under applicable Laws, including obtaining any
necessary consents or approvals from, or making any necessary filings with any
domestic or foreign regulatory agencies, and execute and deliver such documents
and other papers, as may be required to carry out the provisions of this
Agreement and consummate and make effective the transactions contemplated by
this Agreement.
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Article 6.
EMPLOYEE MATTERS
Section 6.01 Offer of Employment.
Schedule 6.01 contains a true and complete list of all Division Employees
of the date hereof and sets forth their position, current salary, (proposed)
retention bonus, and status. Schedule 6.01 also contains a true and complete
list of all Division Contractors as of the date hereof and sets forth the entity
which employes each such Division Contractor. Seller shall update such
information with as much notice to Buyer as possible prior to the Closing Date.
As of the Closing Date, Purchaser shall offer employment to each of the then
current Division Employees. Each employee who accepts such offers of employment
effective as of the Business Day immediately following the Closing Date(or such
later date as Seller and Purchaser shall agree) shall be referred to herein as a
"Transferred Employee." Seller makes no representation or warranty as to whether
any or all of the Division's employees will accept Purchaser's offers of
employment. Seller shall also reassign the services, to the extent that it is
permitted under its agreement with each Division Contractor's employer, of each
Division Contractor listed on Schedule 2.07(a)(3) under the heading "Contract
Software Engineers" to the Purchaser as of the Closing Date (or such later date
as Seller and Purchaser shall agree). Each Division Contractor that is assigned
to Purchaser shall be referred to as a "Transferred Contractor". Seller will
take all steps reasonably necessary to effect such reassignments including, but
not limited to, the execution of the Consulting Agreement. Seller shall invoice
Purchaser monthly for its actual cost of providing such Transferred Contractors
to Purchaser.
Section 6.02 Accrued Wages, Salaries and Vacation; Benefits.
Seller shall pay to each Transferred Employee all wages, salaries, business
expenses and compensation for accrued vacation, insurance benefits and COBRA
premiums, if applicable, earned by him or her prior to the Closing Date. Seller
shall retain all liability under, and responsibility for, the Plan listed (or
required to be listed) in Schedule 3.12(a) and Purchaser shall have no
obligation under or with respect to any such plan or arrangement.
Article 7.
TAX MATTERS
Section 7.01 Indemnity.
Seller agrees to indemnify and hold harmless Purchaser against the
following Taxes and against any loss, damage, liability or expense, including
reasonable fees for attorneys and other outside consultants, incurred in
contesting or otherwise in connection with any such Taxes: (i) Taxes imposed on
Purchaser (excluding any taxes attributable to assets or businesses of Purchaser
other than the Assets or the Division) with respect to taxable periods ending on
or before the Closing Date; (ii) with respect to taxable periods beginning
before the Closing Date and ending after the Closing Date, Taxes imposed on
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Purchaser (excluding any taxes attributable to assets or businesses of Purchaser
other than the Assets or the Division) which are allocable to the portion of
such period ending on the Closing Date; and (iii) Taxes imposed on Purchaser as
a result of any breach of warranty or misrepresentation under Section 3.14 of
this Agreement. Purchaser shall be responsible for Taxes of the Division for
periods after the Closing Date.
Section 7.02 Conveyance Taxes.
Seller shall be responsible for any real property transfer or gains, use,
transfer, value added, stock transfer, and stamp taxes, any transfer, recording,
registration, and other fees, and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements. Notwithstanding the foregoing, Purchaser shall be
responsible for any sales tax incurred in connection with the transactions
contemplated by this Agreement and the Bill of Sale.
Section 7.03 Miscellaneous.
(a) Seller and Purchaser agree to treat all payments made by either to or
for the benefit of the other under this Article VII, under other indemnity
provisions of this Agreement and for any misrepresentations or breach of
warranties or covenants, as adjustments to the Purchase Price or as capital
contributions for Tax purposes and that such treatment shall govern for purposes
hereof except to the extent that the laws of a particular jurisdiction provide
otherwise, in which case such payments shall be made in an amount sufficient to
indemnify the relevant party on an after-Tax basis.
(a) Notwithstanding any provision in this Agreement to the contrary,
the obligations of Seller to indemnify and hold harmless Purchaser pursuant
to this Article VII, and the representations and warranties contained in
Section 3.14, shall terminate at the close of business on the 120th day
following the expiration of the applicable statute of limitations with
respect to the Tax liabilities in question (giving effect to any waiver,
mitigation or extension thereof).
(b) For purposes of this Article VII, "Purchaser" and "Seller",
respectively, shall include each member of the affiliated group of
corporations of which it is or becomes a member.
Article 8.
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Seller.
The obligations of Seller to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
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(a) Representations, Warranties and Covenants. The representations and
warranties of Purchaser contained in this Agreement shall have been true
and correct when made and shall be true and correct in all material
respects as of the Closing, with the same force and effect as if made as of
the Closing Date, other than such representations and warranties as are
made as of another date, the covenants and agreements contained in this
Agreement to be complied with by Purchaser on or before the Closing shall
have been complied with in all material respects, and Seller shall have
received a certificate from Purchaser to such effect signed by a duly
authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against either Seller or Purchaser,
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of Seller, is likely to render it impossible or unlawful to
consummate such transactions;
(c) Ancillary Agreements. Purchaser shall have executed and delivered
to Seller each of the Ancillary Agreements to which it is a party; and
(d) Management Principal Agreements, Consulting Agreement, Offer
Letters and Support Agreements. Purchaser shall have executed and delivered
to Seller each of the Management Principal Agreements, the Consulting
Agreement, the Offer Letters and the Support Agreements.
Section 8.02 Conditions to Obligations of Purchaser.
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Seller contained in this Agreement shall have been true and
correct when made and shall be true and correct as of the Closing with the
same force and effect as if made as of the Closing Date, other than such
representations and warranties as are made as of another date, the
covenants and agreements contained in this Agreement to be complied with by
Seller on or before the Closing shall have been complied with, and
Purchaser shall have received a certificate of Seller to such effect signed
by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against either Seller
or Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated hereby which in the good faith determination of
Purchaser is likely to render it impossible or unlawful to consummate the
transactions contemplated by this Agreement or otherwise render
inadvisable, in the good faith determination of the Board of Directors of
Purchaser based on information not known to Purchaser as of the date
hereof, the consummation by Purchaser of the transactions contemplated by
this Agreement; provided, however, that the provisions of this Section
8.02(b) shall not apply if Purchaser has caused, solicited or encouraged
any such Action;
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(c) Resolutions of Seller. Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Seller, of the resolutions duly and validly adopted by the Board of
Directors of Seller evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby;
(d) Consents and Approvals. Purchaser and Seller shall have received,
each in form and substance reasonably satisfactory to Purchaser in its sole
and absolute discretion, all authorizations, consents, orders and approvals
of all Governmental Authorities and officials and all third party consents
and estoppel certificates which Purchaser reasonably deems necessary or
desirable for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements;
(e) Ancillary Agreements. Seller shall have executed and delivered to
Purchaser each of the Ancillary Agreements to which it is a party;
(f) Management Principal Agreements, Consulting Agreement, Offer
Letters and Support Agreements. Seller shall have delivered to Purchasers
the Management Principal Agreements, the Consulting Agreement, the Offer
Letters and the Support Agreements, executed by the respective parties
thereto ; provided, that if the combination of Management Principal
Agreements and Offer Letters delivered pursuant to this Section, together
with the number of Transferred Contractors pursuant to Section 6.01, is
sufficient to satisfy the requirement of Section 2.07(a)(2), then this
condition shall be deemed satisfied.
(g) Material Contracts. Purchaser shall have received, each in form
and substance reasonably satisfactory to Purchaser, amendments or novations
of each Material Contract identified in Schedule 3.09 which Purchaser
reasonably deems necessary or desirable for the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements
and the ongoing operation of the Division, including, without limitation,
all third party consents required under any Material Contracts; and
(h) No Material Adverse Effect. No circumstance, change in, or effect
on the Division shall have occurred which has a Material Adverse Effect.
Article 9.
INDEMNIFICATION
Section 9.01 Survival of Representations and Warranties.
The representations and warranties of Seller contained in this Agreement
and the Ancillary Agreements, and all statements contained in the Acquisition
Documents, shall survive the Closing until twelve (12) months thereafter;
provided, however, that (a) the representations and warranties dealing with Tax
matters shall survive as provided in Section 7.03(a), (b) insofar as any claim
is made by Purchaser for the breach of any representation or warranty of Seller
contained herein, which claim is attributable to products shipped, or activities
or omissions related to Intellectual Property that occur on or prior to the
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Closing Date, such representations and warranties shall, for purposes of such
claim by Purchaser, survive the Closing until five (5) years thereafter, and (c)
insofar as any claim is made by Purchaser for the breach of any representation
or warranty of Seller contained herein, which claim arises out of allegations of
personal injury suffered by any third party on or prior to the Closing Date,
such representations and warranties shall, for purposes of such claim by
Purchaser, survive until thirty (30) calendar days after the expiration of the
applicable statute of limitations governing such claims. Neither the period of
survival nor the liability of Seller with respect to Seller's representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of Purchaser. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by Purchaser to
Seller, then the relevant representations and warranties shall survive as to
such claim until the claim has been finally resolved.
Section 9.02 Indemnification by Seller.
(a) Indemnifiable Losses. Subject to Section 9.02(b) below, Purchaser and
its Affiliates, officers, directors, employees, agents, successors and assigns
shall be indemnified and held harmless by Seller for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (a "Loss"), arising
out of or resulting from the following:
(i) the breach of any representation or warranty made by Seller
contained in the Acquisition Documents;
(ii) the breach of any covenant or agreement by Seller contained in
the Acquisition Documents;
(iii) any and all Losses suffered or incurred by Purchaser by reason
of or in connection with any claim or cause of action of any third party to
the extent arising out of any action, inaction, event, condition, liability
or obligation of Seller occurring or existing prior to the Closing which
would constitute a breach of a representation or covenant of Seller
hereunder; and
(iv) without limiting the generality of the foregoing, any and all
Losses suffered or incurred by Purchaser by reason of or in connection with
any claim or cause of action of the Freedom Group arising out of
Purchaser's use or ownership of the Assets, including any Intellectual
Property.
Notwithstanding the foregoing, Seller shall not be responsible for any
Losses resulting from Purchaser's modification or alteration of the Assets,
including any Intellectual Property, or responsible for any Losses incurred by
Purchaser for punitive damages or claimed by Purchaser as a loss of profits.
(b) Claims. Threshold Amount. Notwithstanding the foregoing, Seller shall
have no liability with respect to the matters described in paragraph (a) above
unless and until the aggregate amount of Losses thereunder of which Seller
receives written notice exceeds $250,000.00 (the "Threshold Amount"). At such
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time as the aggregate Losses suffered by Purchaser with respect to matters
described in paragraph(i) exceed the Threshold Amount, Purchaser shall be
indemnified to the full extent of all such Losses (including Losses counted in
determining whether the aggregate Losses equal or exceed the Threshold Amount);
provided, however, that Seller shall be liable for any such Losses arising out
of any fraudulent breach of any representation or warranty.
Section 9.03 Indemnification by Purchaser.
Purchaser will indemnify, defend and hold harmless Seller and each of its
affiliates, officers, directors, employees, agents, successors and assigns for
any and all Losses arising out of or resulting (i) from Purchaser's breach or
misrepresentation of any representation, warranty, covenant or agreement of
Purchaser contained in the Acquisition Documents which has not been expressly
waived by Seller in writing; (ii) any act or omission of Purchaser, or any of
its successors or assigns, after the closing date, that constitutes a breach or
default under any of the Assumed Liabilities; and (iii) any Losses resulting
from Purchaser's modification or alteration of the Assets.
Section 9.04 Indemnification Procedures.
For purposes of this Section 9.04, "Indemnified Party" shall mean (i) each
of Purchaser and its Affiliates, officers, directors, employees, agents,
successors and assigns, when being indemnified by Seller pursuant to Section
9.02, and (ii) each of the Seller, its affiliates and its officers, directors,
employees, agents, successors and assigns, when being indemnified by Purchaser
pursuant to Section 9.03, and "Indemnifying Party" shall mean (x) Seller when
indemnifying Purchaser and its Affiliates, officers, directors, employees,
agents, successors and assigns pursuant to Section 9.02, and (y) Purchaser when
indemnifying Seller, its affiliates and their officers, directors, employers,
agents, successors and assigns pursuant to Section 9.03:
(a) An Indemnified Party shall give the Indemnifying Party notice of
any matter which an Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement, within sixty
(60) days of such determination, stating the amount of the Loss, if known,
and method of computation thereof, a brief description of the facts upon
which such claim is based and containing a reference to the provisions of
this Agreement in respect of which such right of indemnification is claimed
or arises. If, after the amount of the claim is specified by the
Indemnified Person, the Indemnifying Party objects to any such claim, it
may give written notice to the Indemnified Person within thirty (30) days
of the later of (i) receipt of the Indemnified Person's notice of claim or
(ii) the specification by the Indemnified Person of the amount of the
claim, advising the Indemnified Person of its objection. If no such notice
is timely received from the Indemnifying Party by the Indemnified Person,
the Indemnified Person will be entitled to payment from the Indemnifying
Party in the amount of the Loss arising out of the claim specified in its
notice of claim. If the Indemnifying Party advises the Indemnified Person
within such thirty (30) day period that it objects to such claim, the
Indemnified Person and the Indemnifying Party shall promptly meet and use
their best efforts to settle the dispute in writing. If the Indemnified
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Person and the Indemnifying Party are unable to reach agreement within
thirty (30) days after the Indemnifying Party objects to the claim, then
the disputed portion of the claim shall be submitted to the resolution
process provided in Section 11.12. If the arbiter shall determine that the
Indemnified Person is entitled to indemnification with respect to the
dispute submitted, the Indemnified Person will be entitled to obtain
payment from the Indemnifying Party within thirty (30) days in the amount
determined by the arbitrator.
(b) The obligations and Liabilities of the Indemnifying Party under
this Article IX with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article
IX ("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified Party shall
receive notice of any Third Party Claim, the Indemnified Party shall give
the Indemnifying Party notice of such Third Party Claim within thirty days
of the receipt by the Indemnified Party of such notice; provided, however,
that the failure to provide such notice shall not release the Indemnifying
Party from any of its obligations under this Article IX except to the
extent the Indemnifying Party is materially prejudiced by such failure and
shall not relieve the Indemnifying Party from any other obligation or
Liability that it may have to any Indemnified Party otherwise than under
this Article IX. If the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party hereunder against any Losses
that may result from such Third Party Claim, then the Indemnifying Party
shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within five days of the
receipt of such notice from the Indemnified Party; provided, however, that
if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the Indemnified Party,
in its reasonable discretion, for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party
shall be entitled to retain its own counsel, at its own expense, in each
jurisdiction for which the Indemnified Party determines counsel is
required. In the event the Indemnifying Party exercises the right to
undertake any such defense against any such Third Party Claim as provided
above, the Indemnified Party shall cooperate with the Indemnifying Party in
such defense and make available to the Indemnifying Party at the
Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the
Indemnified Party's control relating thereto as is reasonably required by
the Indemnifying Party. Similarly, in the event the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnifying Party shall cooperate with the Indemnified Party in
such defense and make available to the Indemnified Party, at the
Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by
the Indemnified Party. No such Third Party Claim may be settled by the
Indemnifying Party without the prior written consent of the Indemnified
Party. If the Indemnifying Party refuses to defend against the Third Party
Claim, then the Indemnified Party may defend against the Third Party Claim
at the expense of the Indemnifying Party. If an Indemnified Party does not
participate in the defense of the Third Party Claim, the Indemnified Party
may not bring a claim against the Indemnifying Party for negligently or
otherwise failing to adequately defend against the Third Party Claim.
(c) To the extent that the Indemnifying Parties' undertakings set
forth in this Article IX may be unenforceable, the Indemnifying Parties
shall be obligated, jointly and severally, to contribute the maximum amount
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that it is permitted to contribute under applicable Law to the payment and
satisfaction of all Losses incurred by the Indemnified Parties.
Section 9.05 Limitation of Liability.
Except for Third Party Claims of infringement on Intellectual Property
rights, in no event will either party's liability to indemnify the other party
pursuant to this Section 9 exceed the amount of $10,000,000.00.
Article 10.
TERMINATION AND WAIVER
Section 10.01 Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by Purchaser if, between the date hereof and the time scheduled
for the Closing an event or condition occurs that has resulted in or that
Purchaser reasonably believes may result in a Material Adverse Effect;
(b) by either Seller or Purchaser if the Closing shall not have
occurred by June 30, 2000; provided, however, that the right to terminate
this Agreement under this Section 10.01(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the
Closing to occur on or prior to such date;
(c) by either Purchaser or Seller in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; or
(d) by the mutual written consent of Seller and Purchaser.
Section 10.02 Effect of Termination.
In the event of termination of this Agreement as provided in Section 10.01,
this Agreement shall forthwith become void and there shall be no liability on
the part of either party hereto except (i) as set forth in Sections 5.03, and
11.01 and (ii) that nothing herein shall relieve either party from liability for
any willful breach of this Agreement. Notwithstanding the foregoing, if the
Closing does not occur due to the Purchaser's breach of this Agreement, the
Purchaser will pay the Seller, within 30 days of the Purchaser's failure to
close, the amount of $1,000,000 as and for liquidated damages.
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Section 10.03 Waiver.
Either party to this Agreement may (a) extend the time for the performance
of any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered by the other party pursuant hereto, or (c)
waive compliance with any of the agreements or conditions of the other party
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any of such rights.
Article 11.
MISCELLANEOUS
Section 11.01 Expenses.
Except as otherwise specified in this Agreement, all costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have occurred.
Section 11.02 Notices.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by delivery in person, or by courier service,
cable, telecopy, telegram, or registered or certified mail (postage prepaid,
return receipt requested) to the respective parties hereto at their addresses
set forth on the signature pages to this Agreement (or at such other address for
a party hereto as shall be specified in a notice given in accordance with this
Section 11.02).
Section 11.03 Public Announcements.
No party to this Agreement shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without the
prior written consent of the other party and the parties shall cooperate as to
the timing and contents of any such press release or public announcement. No
such announcement shall be made at any time prior to the execution of this
Agreement.
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Section 11.04 Headings.
The descriptive headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning, construction or
interpretation of this Agreement.
Section 11.05 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
Section 11.06 Entire Agreement.
This Agreement (including the Annexes, Exhibits and Disclosure Schedules)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements (including the Letter
of Intent, but excluding the Confidentiality Agreement) representations,
undertakings and understandings, both written and oral, between Seller and
Purchaser with respect to the subject matter hereof.
Section 11.07 Assignment.
This Agreement may not be assigned by operation of Law or otherwise without
the express written consent of Seller and Purchaser (which consent may be
granted or withheld in the sole discretion of Seller and Purchaser); provided,
however, that Purchaser may assign its rights under this Agreement to an
Affiliate of Purchaser without the consent of Seller. No such assignment by
Purchaser to its Affiliate will relieve Purchaser of any of its obligations or
duties under this Agreement.
Section 11.08 No Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of the
parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person, including,
without limitation, any union or any employee or former employee of Seller, any
legal or equitable right, benefit or remedy of any nature whatsoever, including,
without limitation, any rights of employment for any specified period, under or
by reason of this Agreement.
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Section 11.09 Amendment.
This Agreement may not be amended, modified or supplemented except (a) by
an instrument in writing signed by, or on behalf of, Seller and Purchaser or (b)
by a waiver in accordance with Section 10.03.
Section 11.10 Non-Solicitation.
For a period of one year from the Closing Date, neither party shall solicit
the employees of the other for employment on their own behalf or on behalf of
others, including, without limitation, their Affiliates. In addition, for a
period of one year from the expiration of the Sublease, unless or until Seller
has ceased doing business, Purchaser shall not solicit the employees of Seller.
Section 11.11 Governing Law.
IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS OF EACH PARTY ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 11.12 Dispute Resolution; Arbitration.
Any controversy or claim (for purposes of this Section 11.12, an "Issue")
arising out of or relating to this Agreement (including without limitation its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions) or any of the
Ancillary Agreements, shall be subject to the following process, in order:
(a) The Issue shall be presented to an officer of Purchaser and Jerry
Goedicke for review and deliberation. If such persons agree on an
appropriate remedy, Purchaser and Seller agree to be bound by such remedy.
If not, then
(b) The Issue shall be presented to the President or Chief Executive
Officer of Purchaser, the Senior Engineer of Purchaser, Jerry Goedicke and
James Hockett. If a majority of such persons agree on an appropriate
remedy, Purchaser and Seller agree to be bound by such remedy. If not, then
(c) The Issue shall be subject to non-binding mediation. The mediator
shall be selected by mutual agreement of Purchaser and Seller. If no
mediator can be mutually agreed, then each of Purchaser and Seller shall
select a mediator, and those mediators shall select a third mediator. If no
agreement can be reached in mediation, then
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(d) The Issue shall be submitted to arbitration, to be held in Orange
County, California, in accordance with California Civil Procedure Code
ss.ss. 1282-1284.2.
In the event either party institutes mediation or arbitration under this
Agreement, the party prevailing in any such mediation or arbitration shall be
entitled, in addition to all other relief, to reasonable attorneys' fees
relating to such mediation or arbitration. The non-prevailing party shall be
responsible for all costs of the mediation or arbitration, including but not
limited to, the mediation or arbitration fees, court reporter fees, etc.
In the event that a party hereto seeks an injunctive or equitable remedy
under this Agreement or the Ancillary Agreements, then a proceeding therefor may
be commenced and maintained in Orange County Superior Court in California. The
parties consent to and waive all objections to such jurisdiction.
Section 11.13 Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Signatures may be transmitted via
facsimile.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
APPLICATION PARTNERS, INC.
By_____________________________
/s/Jerry Goedicke
President
210 Porter Drive, Suite 120
San Ramon, CA 94583
Attention: Jerry Goedicke
Telephone: (925) 552-8230
Telecopy: (925) 552-8231
FILENET CORPORATION
By_____________________________
/s/Bruce Waddington
Executive Vice President
3565 Harbor Boulevard
Costa Mesa, CA 92626
Attention: Mary Carrington
Telephone: (714) 327-3956
Telecopy: (714) 327-3232
<PAGE>
ANNEX A
DESCRIPTION OF BUSINESS/LIST OF ASSETS
I. Division: Division shall mean the development, manufacture and distribution
of all products listed in Part IV of this Annex A (the "Products")
II. Included Assets: The Assets include all assets and property used in, or
necessary for the operation of, the Division, including, without limitation
goodwill, intangible assets and the assets and property described below:
Approvals shall mean all permits, authorizations, licenses (including
software licenses) and other governmental and third party rights and
privileges necessary for proper ownership and operation of the Assets
and/or the Division.
Contracts shall mean any and all contracts and other rights used in,
or necessary for the ongoing operation of the Assets and/or the
Division, including the sublease attached as Exhibit C and the
assumption of the agreement with AAA (Missouri) attached as Exhibit B
.
Documents shall mean all books, records, diskettes or other
electronics media, logos and manuals owned or, to the extent legally
transferable, related to proper ownership and operation of the Assets
and/or the Division (subject to sharing and copyright rights). Such
documentation shall be delivered to Purchaser in electronic form on
the Closing Date.
Equipment shall mean all furniture, fixtures and all equipment used
for the operation of the Assets and/or the Division (including
remanufactured equipment) including without limitation the equipment
listed on Annex A-1.
Intellectual Property means that Intellectual Property (as such term
is defined in Article I of the Agreement) used primarily in connection
with the ownership and operation of the Assets and/or Division
including, but not limited to, the patents, copyrights, logos and
other Intellectual Property listed on Annex A-2. Intellectual Property
shall be delivered to Purchaser in electronic form on the Closing
Date.
Sequis Computers shall mean all personal computers and
computer-related equipment and related supplies owned or, to the
extent legally transferable, used by Seller which are located at the
real property Asset locations and support the Assets and/or are
necessary to operate the Division.
III. Excluded Assets. The Assets shall exclude those assets not identified
above.
IV. Products: Sequis(TM)
<PAGE>
Sequis is a web based work portal for managing the flow of work through
insurance carriers, agents, customers, and suppliers.
Sequis includes the following modules (described with their commercial names):
Sequis Work Portal (Web Desktop);
Sequis Web Server (Web Server with Application Layer);
Sequis Data Server (Relational Database Server);
Sequis Administration (System Administration, Configuration and Security);
Sequis Scan (FileNET Scanning Upgrade);
Sequis Media Blender (Industrial strength image and media routing); and Sequis
WorkFlo: FileNET Visual WorkFlo Middleware.
See Schedule 2.07(a)(i) for specific technical and functional information
regarding the Sequis program.
<PAGE>
ANNEX A-1
EQUIPMENT INCLUDED IN PURCHASED ASSETS
<PAGE>
ANNEX A-2
TRADEMARKS AND LOGOS INCLUDED IN PURCHASED ASSETS
Sequis(TM)
Logo Attached
<PAGE>
ANNEX A-3
INTELLECTUAL PROPERTY INCLUDED IN PURCHASED ASSETS
1. Sequis software, including source code and object code.
2. Sequis trademark, including the name "Sequis" and the
related logo included in Annex A-2.
<PAGE>
ANNEX B
ALLOCATION OF PURCHASE PRICE
Plant, property and equipment US$ 77,296.64
Assumed Liabilities (4,817.59)
Intangible Assets, including Goodwill 19,926,890.95
Total $20,000,000.00
<PAGE>
Schedule 2.07(a)(1)
Release Readiness Objectives
<PAGE>
Schedule 2.07(a)(2)
Workers to be Transferred
By July 30, 2000 Quiping Lu
Manoj Kumar Chandra
Pradeep Sharma
By October 1, 2000 Rekha Gupta
Suraj Prakash
<PAGE>
Schedule 2.07(a)(3)
Worker Retention
Management Principals
James Hockett
Jun Huang
Employee Software Engineers
Rambabu Uppu
Qiuping Lu
Pradeep Sharma
Rekha Gupta
Eric Vonheim
Wes Thompson
Contract Software Engineers
Parameswaran Pavar
Parameswar Raidu Vuppu
Manoj Kumar Chandra
Suraj Prakash
Siddharth Khare
