SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): June 28, 1996
The Software Developer's Company, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-10139 04-2911320
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(Commission File Number) (IRS Employer Identification No.)
245 Winter Street, Waltham, Massachusetts 02154
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(Address of principal execute offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 890-1700
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90 Industrial Park Road, Hingham, Massachusetts 02043
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(Former name or former address, if changed since last report)
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SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
DATE OF REPORT JUNE 28, 1996 PAGE 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 16, 1996, The Software Developer's Company, Inc. ("the Company")
entered into an Agreement of Purchase and Sale of Assets with Programmer's
Paradise, Inc. (the "Purchaser") (the "Agreement") to sell substantially all of
its operating assets relating to its catalog operations, "The Programmer's
SuperShop," its Web Site relating to its catalog operations, its corporate sales
group, inbound and outbound telemarketing operations, reseller operations, and
the operations of its German subsidiary, Software Developer's Company GmbH.
On June 4, 1996, the Board of Directors caused to be distributed to
stockholders of record as of May 24, 1996, a Notice and Consent Solicitation
Statement for action to be taken by Written Consent in Lieu of a Meeting of
Stockholders. As of the record date, there were issued and outstanding 8,405,017
shares of Common Stock and 628,330 shares of Series C Preferred Stock, each
share entitled to one vote per share, in connection with the approval of the
proposal put forth in the Consent Solicitation Statement. On June 14, 1996, the
Company received sufficient shareholder consent (58% of the outstanding shares
of all classes of stock) necessary to approve the transaction.
In connection with the solicitation, stockholders acted upon the
proposal to authorize and approve the proposed sale of certain assets of the
Company to the Purchaser pursuant to the terms and conditions of the Agreement
to authorize such further action by the Company's Board of Directors and proper
officers as may in their discretion be necessary or desirable to carry out the
intents and purposes of the Agreement; and in furtherance of the disposition
contemplated by the Agreement, to authorize and approve an amendment to the
Company's Restated Certificate of Incorporation to change the Company's name to
Netegrity, Inc.
Pursuant to the terms of the Agreement the Company agreed to sell to
the Purchaser substantially all of its operating assets, comprised of all of the
operating assets relating to its business of The Programmer's SuperShop ("TPS")
catalog, its TPS Web Site, its corporate sales group, its German subsidiary,
Software Developer's GmbH ("SDC Germany"), and SDC Communications (collectively,
the "Target Business") for a consideration of $11,000,000 in cash, subject to
certain adjustments and purchase price reductions based on revenues and tangible
net assets as of the Closing. The aggregate purchase price consists of payment
of $10,000,000 in immediately available funds and the deposit of $1,000,000
under an escrow arrangement.
TPS offers software development tools, utilities, databases, languages
and business productivity applications to software developers and business
professionals. Also included in the purchased assets of the Target Business are
all advertising and promotional operations of SDC Communications and its service
and support operations relating to the TPS catalog business and the Company's
German operations. The assets of the Target Business also include all
tradenames, trademarks and copyrights, mailing lists and customer databases,
computer
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
DATE OF REPORT JUNE 28, 1996 PAGE 3
programs used internally or externally in the business, rights under reseller
contracts with software manufacturers and distributors, all inventory relating
to the TPS catalog and the Target Business, capital equipment and computer
systems relating to the Target Business, all accounts receivable and unfilled
sales and purchase orders relating to the Target Business, and all deferred
charges and prepaid items, advance payments and prepayments for backlog orders
relating to the Target Business.
The aggregate purchase price of $11,000,000 assumes that the Company
will transfer to the Purchaser as of the Closing tangible net assets of the
Target Business that equal $1,500,000. These net assets are comprised primarily
of accounts receivable, inventory, equipment, and other assets related tot he
TPS catalog operation. In addition to the assets transferred, the Purchaser also
agreed to assume certain liabilities, including accounts payable and other
accrued expenses relating to the TPS catalog business. The Purchaser also agreed
to assume a capitalized lease obligation of the Company for a computer system
relating to the TPS catalog business. The following liabilities are specifically
excluded from the transfer of assets relating to the Target Business: all
employee-related expenses except those specifically assumed; brokerage or
finder's fees; stockholder obligations; secured debt; taxes; product liability
and warranty claims; leases of real property and certain operating leases of
personal property; and shutdown costs associated with the Company's German
operations, except that the Purchaser agrees to pay one-half of the German
subsidiary shutdown costs up to $85,000.
The purchase price is also adjusted for declines in revenues forecasted
prior to the closing and set forth in a transition plan agreed to by the
parties. If, during the thirty days preceding the closing date, the actual
revenues from operations of the Target Business are no more than 12% less than
the Company's projected revenues for this period reflected on the transition
plan, the purchase price shall not be reduced. If, however, such revenues are
greater than 12% and up to 17% less than that reflected on the transition plan,
the purchase price is reduced by $1,000,000. If such revenues are greater than
17% and up to 27% less than that reflected on the transition plan, the purchase
price is reduced by $2,000,000. If such revenues are greater than 27% and up to
32% less than that reflected on the transition plan, the purchase price is
reduced by $4,000,000. If such revenues are greater than 32% and up to 42% less
than that reflected on the transition plan, the purchase price is reduced by
$6,000,000. Finally, if such revenues are more than 42% less than that reflected
on the transition plan, the purchase price is reduced by $8,000,000.
The Company and the Purchaser entered into a Closing Statement as of
June 28, 1996 in which the Company and Purchaser agreed to cause the Agreement
to be modified to provide for the purchase by Purchaser of all of the
outstanding shares of capital stock of SDC Germany in lieu of the assets thereof
included in the purchased assets. The parties also settled a disagreement
regarding the inclusion of revenue associated with certain advertising contracts
under the Agreement and the consequences of a purchase price adjustment based on
not achieving the revenue goals outlined in the Agreement. At the closing, the
parties also agreed to reduce the
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
DATE OF REPORT JUNE 28, 1996 PAGE 4
escrow fund from $1,000,000 to $600,000 and establish an additional escrow, in
the amount of $400,000 to be paid pending the closing of the purchase by
Purchaser of the shares of SDC Germany and agreed that the Company would pay the
Purchaser $400,000 for certain management services and $300,000 for certain
moving, bonus, out-placement, employee, facilities and other fees and expenses.
The parties also entered into a short term facilities and employee use agreement
as set forth under the Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information.
Pro forma financial information of the Registrant regarding
the disposition of assets was filed as a part of the Consent Solicitation
Statement dated June 4, 1996 and incorporated by reference.
(c) Exhibits.
7.01 - Agreement of Purchase and Sale of Assets by
and between Programmer's Paradise, Inc., The
Software Developer's Company, Inc. and
Software Developer's Company GmbH dated May
16, 1996 (filed as Appendix A to Consent
Solicitation Statement dated June 4, 1996
and incorporated by reference).
7.02 - Indemnification Escrow Agreement dated June
28, 1996 among Programmer's Paradise, Inc.,
The Software Developer's Company, Inc. and
Golenbock, Eiseman, Assor & Bell.
7.03 - Closing Statement dated June 28, 1996 by and
among Programmer's Paradise, Inc., The
Software Developer's Company, Inc. and
Software Developer's Company, GmbH.
7.04 - Letter Agreement by The Software Developer's
Company, Inc. and Software Developer's
Company GmbH to and agreed by Programmer's
Paradise, Inc. dated June 28, 1996 re:
Acquisition of Stock of SDEV Germany.
7.05 - Stock Acquisition Escrow Agreement dated
June 28, 1996 among Programmer's Paradise,
Inc., The Software Developer's Company, Inc.
and Golenbock, Eiseman, Assor & Bell.
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
DATE OF REPORT JUNE 28, 1996 PAGE 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this current report on Form 8-K to be signed on its behalf by the
undersigned hereunto duly authorized.
THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By /s/ James O'Connor, Jr.
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James O'Connor, Jr.
Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
DATE OF REPORT JUNE 28, 1996 PAGE 6
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Number Description Sequential
Page Number
<S> <C> <C>
7.01 Agreement of Purchase and Sale of Assets by and
between Programmer's Paradise, Inc., The Software
Developer's Company, Inc. and Software Developer's
Company GmbH dated May 16, 1996 (filed as Appendix A
to Consent Solicitation Statement dated June 4, 1996
and incorporated by reference).
7.02 Indemnification Escrow Agreement dated June 28, 1996 among
Programmer's Paradise, Inc., The Software Developer's
Company, Inc. and Golenbock, Eiseman, Assor & Bell.
7.03 Closing Statement dated June 28, 1996 by and among
Programmer's Paradise, Inc., The Software Developer's
Company, Inc. and Software Developer's Company, GmbH.
7.04 Letter Agreement by The Software Developer's Company, Inc.
and Software Developer's Company GmbH to and agreed by
Programmer's Paradise, Inc. dated June 28, 1996 re:
Acquisition of Stock of SDEV Germany.
7.05 Stock Acquisition Escrow Agreement dated June 28, 1996 among
Programmer's Paradise, Inc., The Software Developer's
Company, Inc. and Golenbock, Eiseman, Assor & Bell.
</TABLE>
EXHIBIT 7.02
INDEMNIFICATION ESCROW AGREEMENT
AGREEMENT dated as of June 28, 1996, among Programmer's Paradise, Inc.,
a Delaware corporation, having offices at 1163 Shrewsbury Avenue, Shrewsbury,
New Jersey 07702 ("Buyer"), The Software Developer's Company, Inc., having
offices at 33 Riverside Drive, Pembroke, Massachusetts 02359 ("Seller"), and
Golenbock, Eiseman, Assor & Bell, having offices at 437 Madison Avenue, New
York, New York 10022 ("GEAB" or the "Escrow Agent").Buyer and Seller are
hereinafter sometimes referred to as the "Parties."
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement of Purchase and Sale of
Assets, dated as of May 16, 1996 (the "Purchase Agreement"), among Buyer, Seller
and Software Developers Company GmbH ("SDEV Germany"), Buyer is concurrently
herewith purchasing from Seller and SDEV Germany the Purchased Assets, with any
capitalized term used herein but not otherwise defined having the meaning
ascribed to such term in the Purchase Agreement.
WHEREAS, pursuant to Section 2.2(b) of the Purchase Agreement, the
Parties have agreed that on the date hereof, $1,000,000 of the Purchase Price
shall be deposited into escrow upon the terms stated herein.
WHEREAS, the Parties desire to establish with the Escrow Agent the
escrow contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
Appointment. The Parties hereby appoint and designate the law firm of
GEAB as the Escrow Agent for the purposes herein set forth, and the Escrow Agent
hereby accepts such appointment, subject to and in accordance with the
provisions of this Escrow Agreement.
Deposit. Seller hereby authorizes Buyer to deliver to the Escrow Agent
on behalf of the Selling Parties, simultaneously with the execution and delivery
of this Agreement and as partial payment of the Purchase Price under the
Purchase Agreement, $1,000,000 (such amount, or any future balance thereof,
being referred to herein as the "Escrow Fund"), to be held in accordance with
the terms of this Agreement in a money-market account sponsored or managed by
Republic National Bank, New York, New York (the "Escrow Account"). Upon the
opening of the Escrow Account, the Escrow Agent will advise the Parties of the
account number thereof.
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3. Claims Procedure.
1 Notice of Claims. At any time prior to the Escrow
Termination Date (as hereinafter defined), Buyer may give notice to the Escrow
Agent and Seller that pursuant to the terms of the Purchase Agreement Buyer is
asserting a claim ("Claim") against a Selling Party. Such notice shall
constitute the assertion of such Claim by Buyer against the Escrow Fund held in
escrow hereunder. Buyer shall be entitled to make or assert a Claim under the
Purchase Agreement that it is entitled to (a) an adjustment to the Purchase
Price in accordance with Section 2.6 of the Purchase Agreement ("Purchase Price
Claims"), or (b) indemnification under the Purchase Agreement. Upon the receipt
of such notice of a Claim by the Escrow Agent in accordance with Section 8
hereof, the Escrow Agent shall hold in escrow hereunder such portion of the
Escrow Fund as shall equal the amount of such Claim and all other pending Claims
hereunder. Notice of a Claim given to the Escrow Agent and Seller pursuant to
this Section 3.1 shall briefly set forth the basis of the Claim and, if then
determinable by Buyer, a reasonable estimate of the amount thereof, which
estimate may include an estimate of attorneys', accountants' and other fees to
be incurred to resolve such Claim. If the estimated amount of a Claim is not set
forth in the notice of the Claim given to the Escrow Agent and Seller, Buyer
will give a further notice to the Escrow Agent and Seller setting forth Buyer's
estimate of the amount of such Claim promptly after it is reasonably able to
make such estimate. If the Claim is a Purchase Price Claim, Buyer shall state in
such notice the status of the determination thereof pursuant to Section 2.6 of
the Purchase Agreement and, if finally determined as therein provided, so
indicate.
3.2 Objection; Delivery. For a period of twenty (20) days
after the giving of any such notice of Claim to Seller, the Escrow Agent shall
make no payment of any of the Escrow Funds in respect thereof unless the Escrow
Agent shall have received written authorization from Seller to make such payment
with respect to such Claim; provided, that if such notice of Claim shall be with
respect to a Purchase Price Claim that has been finally determined in accordance
with Section 2.6 of the Purchase Agreement, as certified in such notice, the
Escrow Agent shall deliver to Buyer, without regard to the twenty-day period in
this Section 3.2, free and clear of any interest of the Selling Parties therein,
from the Escrow Fund, an amount equal to the amount of such Claim payable to
Buyer pursuant to such determination, without further authorization from or
right to object by Seller. Except with respect to a Purchase Price Claim that
has been finally determined as aforesaid, after the expiration of such twenty
(20) day period, the Escrow Agent shall, to the extent of the Escrow Fund, make
payment to Buyer of the amount stated in the notice of such Claim given by Buyer
pursuant to Section 3.1 hereof, unless prior to the expiration of such
twenty-day period the Escrow Agent and Buyer have received written notice from
Seller that it disputes the Claim. In the event of a payment to Buyer, the Claim
shall be deemed to have resulted in a determination in favor of Buyer, solely
for purposes of delivery of the Escrow Fund to Buyer, it being understood that
the provisions of Section 2.6 of the Purchase Agreement shall govern with
respect to the determination of claims for purchase price adjustments under the
Purchase Agreement and the provisions of Article 8 of the Purchase Agreement
shall govern with respect to the determination of claims for indemnification
under the Purchase Agreement. Any such written objection by Seller shall specify
the amount stated in the notice of Claim, if any, Seller agrees Buyer is
entitled to in respect of any such Claim. In the event of such specification by
Seller, the Escrow Agent shall, to
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the extent of the Escrow Fund, make payment to Buyer of the amount agreed to by
Seller in such notice. In the event it is later determined that Buyer is
entitled to receive an amount in respect of such Claim in excess of the amount
agreed to by Seller in such notice, and Seller shall not have paid such
additional amount to Buyer, the Escrow Agent shall, to the extent of the Escrow
Fund, make payment to Buyer of the amount of such excess or additional sum.
3.3 Determination of Claims. In case Seller shall, in the
manner provided in Section 3.2 hereof, object in respect of any Claim (or any
portion thereof) made by Buyer, then Seller and Buyer shall, within the fifteen
(15) day period beginning on the date of the receipt by Buyer of such written
objection, attempt in good faith to agree upon the rights and obligations of the
respective parties with respect to such Claim and how such Claim shall be paid.
If Seller and Buyer so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties. The Escrow Agent shall be entitled to rely
on any such memorandum and shall, to the extent of the Escrow Fund and the
direction in such memorandum, make payment to Buyer as provided in such
memorandum. If Seller and Buyer fail to so agree, such dispute shall be settled
either by (a) mutual agreement of Buyer and Seller, evidenced by single written
instructions to the Escrow Agent, (b) a binding and final arbitration award,
provided the parties have agreed in the Purchase Agreement or otherwise to
arbitration with respect to the matters in dispute, or (c) a final judgment,
order or decree of a court of competent jurisdiction in the United States of
America (the time for appeal therefrom having expired and no appeal having been
perfected), all costs and expenses of which (including reasonable attorneys'
fees) shall be borne as provided in the Purchase Agreement or, failing any such
agreement therein, by the party against whom the dispute is settled as
aforesaid. Buyer and Seller agree to proceed in good faith and use their best
efforts to resolve any disputes hereunder in a timely and commercially
reasonable manner. The Escrow Agent shall be under no duty to institute or
defend any such proceedings, and none of the costs and expenses of any such
proceedings shall be borne by the Escrow Agent. Notwithstanding anything
contained herein to the contrary, a determination with respect to a Purchase
Price Claim may be made in accordance with Section 2.6 of the Purchase
Agreement, without regard to any other or further periods set forth in this
Agreement, and upon receipt of a certificate of Buyer as to such determination
the Escrow Agent shall deliver to Buyer free and clear of any interest of the
Selling Parties, from the Escrow Fund, an amount equal to the amount of such
Claim payable to Buyer pursuant to such determination.
4. Term.
4.1 Term. The term of the escrow under this Agreement shall
continue until 5:00 p.m. on the day (1) one year from the date of this Agreement
(the "Escrow Termination Date"), except with respect to any then pending Claim.
4.2 No Claims at Termination. If at the Escrow Termination
Date there shall be no Claims pending or awards or judgments outstanding, the
Escrow Agent shall deliver the Escrow Funds then being held by it in escrow to
Seller.
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4.3 Claims at Termination. If at the Escrow Termination Date
there shall be any Claims pending or awards or judgments outstanding, the Escrow
Fund shall be reduced to and the Escrow Agent shall retain, until the final
disposition of such Claim, such amount of the Escrow Fund as shall equal the
amount of such Claim stated in the notice thereof, and the Escrow Agent shall
deliver to Seller any portion of the Escrow Fund in excess of the aggregate of
the outstanding or pending Claims, awards and judgments. If the Escrow Fund is
equal to or less than the aggregate of the outstanding Claims, awards and
judgments, the full amount of the Escrow Fund shall continue to be held in
escrow. Any amount not theretofore delivered to Seller shall be delivered to
Seller at such time or from time to time when the Claim, award or judgment to
which the retained Escrow Funds relate has been fully rendered as herein
provided and all amounts payable as a result thereof have been paid to Buyer.
Notwithstanding anything to the contrary, in no event shall the Escrow Agent be
required to release the Escrow Fund to Seller by reason of the occurrence of the
Escrow Termination Date if Buyer shall object thereto by written notice to the
Escrow Agent specifying the reasons for such objection.
4.4 Delivery. Promptly after the determination of a Claim in
accordance with the provisions of Section 3.2 hereof and promptly after giving
receipt of notice of the determination of a Claim in accordance with the
provisions of Section 3.3 hereof, including a Purchase Price Claim (which notice
shall be accompanied by a copy of any agreement, certificate, final arbitration
award, provided that the parties hereto have agreed in the Purchase Agreement or
otherwise to arbitration with respect to such matter, or final court order,
judgment or decree evidencing such determination), the Escrow Agent shall
deliver to Buyer, free and clear of any interest of the Selling Parties therein,
from the Escrow Fund, an amount equal to the amount of such Claim payable to
Buyer pursuant to such determination. If the amount of the Escrow Fund then held
by the Escrow Agent is less than or equal to the amount of such Claim so
payable, the Escrow Agent shall deliver to Buyer all of the Escrow Fund then
held by it, free and clear of any interest of the Selling Parties therein.
4.5 Remedies Cumulative. The rights and remedies of Buyer
under this Agreement are cumulative with, and in addition to, any and all other
rights and remedies which Buyer may have under the Purchase Agreement.
4.6 Purchase Price Claim. Seller acknowledges that Buyer may,
in its sole and absolute discretion, limit the amount to be delivered to it from
the Escrow Fund in respect of a Purchase Price Claim to an amount not less than
$500,000, and if a Purchase Price Claim or other Claim, as determined hereunder,
shall exceed such limit, or the amount of the Escrow Fund, the Selling Parties
shall be liable therefor.
5. The Escrow Agent.
5.1 Disputes. In the event the Escrow Agent shall believe
there shall be any disagreement among or between the Parties resulting in
adverse claims or demands being made in connection with the Escrow Fund, or in
the event that the Escrow Agent in good faith is in doubt as to what action it
should take hereunder, the Escrow Agent shall be entitled, at its option, (a) to
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refuse to comply with any claims or demands on it as long as such disagreement
shall continue and, in so refusing, shall make no delivery or other disposition
of the Escrow Fund pursuant to the terms of this Agreement and shall not be or
become liable in any way or to any person for its failure or refusal to comply
with such conflicting or adverse claims or demands and shall be entitled to
continue so to refrain from acting and so to refuse to act until the Escrow
Agent shall have received (i) a final and non-appealable order of a court of
competent jurisdiction directing delivery of the Escrow Fund, or (ii) a written
agreement executed by Buyer and Seller directing delivery of the Escrow Fund, in
which event the Escrow Agent shall disburse the Escrow Fund in accordance with
such order or agreement, or (b) to place the Escrow Fund with a proper court and
to apply to any court of competent jurisdiction (including the commencement of
immediate action or suit) to determine the rights of the parties. Any court
order referred to in (i) above shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow Agent to the effect
that said court order is final and non-appealable. The Escrow Agent shall act on
such court order and legal opinion without further question.
5.2 Performance. To induce the Escrow Agent to act hereunder,
it is further agreed by the parties that:
(a) The duties and obligations of the Escrow Agent
shall be determined solely by the express provisions of this Agreement. No
implied duties or obligations shall be read into this Agreement against the
Escrow Agent. The Escrow Agent shall not be under any duty to give the Escrow
Fund held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement. Uninvested funds held hereunder shall not
earn or accrue interest.
(b) The Escrow Agent shall be entitled to rely upon
any order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(c) The Escrow Agent shall not be bound or in any way
affected by any notice of any modification or cancellation of this Agreement or
the Purchase Agreement, or of any fact or circumstance affecting or alleged to
affect rights or liabilities hereunder other than as is herein set forth, or
affecting or alleged to affect the rights and liabilities of any other person,
unless notice of the same is delivered to the Escrow Agent in writing, signed by
the proper parties to the Escrow Agent's satisfaction and, in the case of
modification of the duties or responsibilities of the Escrow Agent, unless such
modification shall be satisfactory to the Escrow Agent and approved by the
Escrow Agent in writing.
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(d) The Escrow Agent shall not be liable for any
error of judgment, or any action taken by it in good faith and believed by it to
be authorized or within the rights or powers conferred upon it by this
Agreement, except in the case of its gross negligence or bad faith, nor shall it
be liable for the default or misconduct of any employee, agent or attorney
appointed by it who shall have been selected with reasonable care. Except with
respect to claims based upon such gross negligence or bad faith that are
successfully asserted against the Escrow Agent, the Parties shall defend (by
attorneys selected by the Escrow Agent), indemnify and hold harmless the Escrow
Agent (and any successor escrow agent) from and against any and all losses,
liabilities, claims, actions, judgments, damages, costs and expenses arising out
of and in connection with this Agreement or the Escrow Agent's duties or
services hereunder. This indemnity includes, without limitation, disbursements
and reasonable attorneys' fees either paid to retain attorneys or representing
the fair value of legal services rendered by the Escrow Agent to itself. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith and in accordance with the terms hereof, including without
limitation, any liability for any delays (not resulting from gross negligence or
bad faith) in the investment or reinvestment of the Escrow Fund or any loss of
interest incident to any such delays.
(e) The Escrow Agent shall not charge a separate
administrative fee for its services as Escrow Agent hereunder. However, the
Parties agree to pay or reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements and advances, including reasonable attorneys'
fees, incurred or made by it in the performance of its duties hereunder.
(f) The Escrow Agent shall be entitled to consult
with counsel of its own choice and shall have full and complete authorization
and protection for any action taken or suffered by it hereunder in good faith
and in accordance with the opinion of such counsel.
(g) Escrow Agent shall be entitled to represent or to
act as an advisor of Buyer and its affiliates in any lawsuit or any other
matter.
(h) The Escrow Agent does not have any interest in
the Escrow Fund deposited hereunder but is serving as stakeholder only. Upon
payment of the Escrow Fund as herein provided, the Escrow Agent shall be fully
released from all liability and obligations with respect thereto.
(i) Any payments of income from the Escrow Account
shall be subject to withholding regulations then in force with respect to United
States taxes. The Parties will provide the Escrow Agent with appropriate W-9
forms for tax I.D., number certification, or non-resident alien certification.
The Escrow Agent shall have no responsibility for tax reporting or filing, and
such reporting or filing, if required, shall be the responsibility of Seller.
6. Resignation. The Escrow Agent (and any successor escrow agent) at
any time may be discharged from its duties and obligations hereunder by the
delivery to it of notice of termination signed by the Parties or at any time may
resign by giving written notice to such effect to the Parties.
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Upon any such termination or resignation, the Escrow Agent shall deliver the
Escrow Fund to any successor escrow agent designated by the Parties in writing,
or to any court of competent jurisdiction if no such successor escrow agent is
agreed upon, whereupon the Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
termination or resignation of the Escrow Agent shall take effect on the earlier
of (i) the appointment of a successor (including a court of competent
jurisdiction) or (ii) the day that is 30 days after the date of delivery: (A) to
the Escrow Agent of the other parties' notice of termination or (B) to the other
parties hereto of the Escrow Agent's written notice of resignation. If at that
time the Escrow Agent has not received a designation of a successor escrow
agent, the Escrow Agent's sole responsibility after that time shall be to keep
the Escrow Fund safe until receipt of a designation of successor escrow agent or
a joint written disposition instruction by the other parties hereto or an
enforceable order of a court of competent jurisdiction.
7. Jurisdiction and Venue. The Parties irrevocably (i) submit to the
jurisdiction of any New York State or federal court sitting in New York in any
action or proceeding arising out of or relating to this Agreement, (ii) agree
that all claims with respect to such action or proceeding shall be heard and
determined in such New York State or federal court and (iii) waive, to the
fullest extent possible, the defenses of an inconvenient forum. The parties
hereby consent to and grant any such court jurisdiction over the persons of such
parties and over the subject matter of any such dispute and agree that delivery
or mailing of process or other papers in connection with any such action or
proceeding in the manner provided hereinabove, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
8. Notices. All notices, instructions and other communications required
or permitted to be given, forwarded or transmitted hereunder or necessary or
convenient in connection herewith shall be in writing and shall be deemed to
have been duly given if delivered personally, or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at its address
set forth above (with a copy thereof as aforesaid to counsel designated by it),
or when delivered to a nationally recognized overnight courier service or when
sent by electronic facsimile transmission (with a copy to follow by mail as
aforesaid), or to such other address as the person to whom notice is to be given
shall have given notice of pursuant hereto.
9. Miscellaneous. This Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and assigns
and shall not be enforceable by or inure to the benefit of any other third party
except as provided with respect to the termination of, or resignation by, the
Escrow Agent. No party may assign any of its rights or obligations under this
Agreement without the written consent of the other parties. No waiver hereunder
shall be effective unless in a writing signed by the party to be charged. This
Agreement may be amended, modified, superseded, or canceled, and any of the
terms hereof may be waived, only by a written instrument executed by the parties
hereto. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without reference to
conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date and year first above written.
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
------------------
Roger Paradis, President
THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By: /s/ Barry N. Bycoff
--------------------
GOLENBOCK, EISEMAN, ASSOR & BELL,
as Escrow Agent
By: /s/ Lawrence M. Bell
--------------------
Lawrence M. Bell, Partner
EXHIBIT 7.03
CLOSING STATEMENT
In connection with the closing of the transactions contemplated by that
certain Agreement of Purchase and Sale of Assets, dated as of May 16, 1996,
among the undersigned (the "Purchase Agreement"), the undersigned hereby agree
as follows (with all capitalized terms used herein and not otherwise defined
having the meanings ascribed to such terms in the Purchase Agreement):
1. (a) Buyer and Seller have agreed to cause the Purchase Agreement to
be modified to provide for the purchase by Buyer of all of the outstanding
shares of capital stock of SDEV Germany in lieu of the assets thereof included
in the Purchased Assets, on the terms and conditions set forth on Annex A to
this Closing Statement, and to include all of such capital stock within the
definition of the term "Purchased Assets." In this connection, the parties have
agreed that an amount equal to (i) the net amount of assets (other than net
operating losses), debts, obligations and liabilities inherited by Buyer solely
due to the change of the form of the acquisition of SDEV Germany from an asset
transaction to a stock transaction (the "German Share Adjustment"), times (ii)
50%, shall be an additional Permitted Adjustment with respect to the Estimated
Balance Sheet and the Closing Balance Sheet and for purposes of calculating
Estimated Tangible Net Assets and Tangible Net Assets; provided that the maximum
aggregate amount that the Purchase Price may be decreased in respect of such
adjustment shall be $90,000, and the amount of the German Share Adjustment in
excess of $180,000 shall be an Excluded Liability and borne solely by Seller.
(b) Without limiting the foregoing, the German Share
Adjustment shall reflect, as of the Release Date, (i) as an asset, the amount of
cash on hand of SDEV Germany transferred to Buyer (other than any cash
transferred to SDEV Germany pursuant to paragraph 6 below) and (ii) as
liabilities, except for any of same specifically assumed by Buyer as Assumed
Liabilities under the Purchase Agreement and otherwise reflected in the
calculation of Estimated Tangible Net Assets or Tangible Net Assets, (A) all
liabilities for line items reflected or reserved against on the balance sheet of
SDEV Germany furnished to Buyer and reflecting a stockholders equity of negative
$1,176,254.39, including without limitation, accrued payroll, (B) statutory
severance payments by SDEV Germany up to an aggregate of $45,000, and (C) the
aggregate amount payable by SDEV Germany in respect of all contractual
liabilities and obligations, including without limitation, obligations for
operating and capital leases and related maintenance and support contracts and
obligations, such as, but not limited to, the lease of the premises occupied by
SDEV Germany in Dortmund, the lease of the telephone system used by SDEV Germany
at such location and certain miscellaneous leases of minor office equipment,
except that any statutory severance payments shall be dealt with as provided in
paragraph 5 below and intercompany indebtedness shall be dealt with as provided
in paragraph 6 below. All debts, liabilities and obligations of SDEV Germany of
any nature whatsoever (whether absolute, accrued, contingent or otherwise)
relating to or arising out of any act, transaction, circumstance or state of
facts which occurred or existed on or before the Buyer Control Date, whether or
not
then known, due or payable, which have not been disclosed to Buyer in a Schedule
pursuant to the Purchase Agreement, and all liabilities under or in respect of
any and all litigation, and legal and accounting expenses, in all instances
shall be Excluded Liabilities.
(c) Seller has confirmed its agreement to indemnify Buyer in
respect of Excluded Liabilities, and has agreed to indemnify and hold Buyer
harmless from, against and in respect of, and shall on demand reimburse Buyer
for, an amount equal to 50% of the amount of such German Share Adjustment
applied as a Permitted Adjustment, all in accordance with Article 8 of the
Purchase Agreement.
2. The parties have had a disagreement regarding the determination and
inclusion of revenue associated with certain advertising contracts and catalog
insertion orders under Section 2.6(g)(i) of the Purchase Agreement, but have
reached the agreements contained in this Closing Statement in settlement of such
dispute. On the terms and subject to the complete and timely satisfaction and
fulfillment of obligations of the parties contained in this Closing Statement
and in the Purchase Agreement, the parties have agreed that the Purchase Price
shall not be reduced by, nor shall the Selling Parties be required to make any
payments associated with, any "Negative Variation to Transition Plan" set forth
in Section 2.6(g) of the Purchase Agreement with respect to revenue from
operations of the Business and determined under the Closing Statement of
Revenue. Notwithstanding the preceding sentence, the Purchase Price shall still
be subject to adjustment with respect to the Tangible Net Assets of the Business
as determined on the Closing Balance Sheet. In the event of any conflict between
the terms of this Closing Statement and the Purchase Agreement, the terms of
this document shall govern.
3. The Estimated Adjustment shall be $22,089, calculated by taking the
excess of the Estimated Tangible Net Assets ($1,587,089) on the Estimated
Balance Sheet over $1,500,00, and pursuant to the German Share Adjustment,
subtracting from such difference an amount equal to 50% of $130,000 (the
estimated German Share Adjustment), or $65,000. The Closing Payment shall be
$10,022,089, which amount has been paid and delivered by Buyer to Seller by wire
transfer and certified check payable to Testa, Hurwitz & Thibeault Agents &
Attorneys Account.
4. The Escrow Fund shall be reduced from $1,000,000 to $600,000, which
amount has been paid and delivered by Buyer to the Escrow Agent by wire
transfer, to be held by the Escrow Agent in accordance with the Escrow Agreement
referred to in Section 2.2(b) of the Purchase Agreement. In addition, the
parties have agreed to establish an additional escrow, in the amount of
$400,000, which amount has also been paid and delivered by Buyer to the Escrow
Agent by wire transfer, to be held by the Escrow Agent pending the closing of
the purchase by Buyer of the shares of SDEV Germany in accordance with the Stock
Acquisition Escrow Agreement attached to this Closing Statement as Annex B.
5. In addition, the parties have agreed as follows:
(a) Pursuant to Section 2.8 of the Purchase Agreement, Seller
shall reimburse Buyer (within thirty days) for one-half of the portion of the
Shut-Down Expenses paid or payable by Buyer to employees of SDEV Germany in
respect of statutory severance pursuant to the
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German Civil Code and in accordance with the German Shut-Down Plan, at the rate
of $.50 for each $1.00 of such severance paid, up to an aggregate amount payable
by Buyer in respect of such severance of $45,000; and any amounts payable by
Buyer in excess of such $45,000 shall be Excluded Liabilities.
(b) At the Closing, Seller shall make the following payments:
(i) $200,000 to On-line 2000 GmbH, an indirect
subsidiary of Buyer, for certain management
services through June 28, 1996;
(ii) $200,000 to Buyer for certain management
services through June 28, 1996; and
(iii) $300,000 to Buyer, on a non-accountable
basis, in respect of certain moving, bonus,
out-placement, employee, facilities and
other fees and expenses, as shall be
determined and allocated by Buyer.
6. The provisions of this paragraph shall have no effect on the German
Share Adjustment or any other asset-based closing adjustment. Prior to the
Release Date (as defined in Annex A), Seller shall pay in full and satisfy all
indebtedness for borrowed money owed by SDEV Germany to third parties and,
except as otherwise agreed by Buyer and Seller in writing, in a manner
satisfactory to Buyer, Seller shall contribute to the capital of SDEV Germany,
with such security arrangements as shall be satisfactory to the parties (which
may comprise release of all Escrow Funds to Seller if no satisfactory
arrangement is offered by Buyer) any and all indebt-edness, liabilities and
obligations owing or which may be owed by or due from SDEV Germany to Seller or
any affiliate thereof without satisfying any such indebtedness, and within
thirty (30) days after the Release Date, SDEV Germany shall satisfy such
intercompany obligations. After the fifth business day after the Release Date in
Germany, if such intercompany obligation shall not be so satisfied, it shall
bear interest until paid in full at the rate of ten Percent (10%) per annum. All
matter in this paragraph shall occur without affecting the net operating loss or
other tax attributes of SDEV Germany and without SDEV Germany recognizing any
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income or gain in respect of the elimination of such indebtedness or other
liabilities and obligations.
7. Except as expressly modified and supplemented by this Closing
Statement and the Annexes hereto, the parties hereby confirm that the Purchase
Agreement, as so modified and supplemented, shall remain in full force and
effect.
Dated as of June 28, 1996
THE SOFTWARE DEVELOPER'S COMPANY, INC.
By: /s/ James O'Connor, Jr.
-----------------------------
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
-----------------------------
SOFTWARE DEVELOPER'S COMPANY GmbH
By: /s/ Barry N. Bycoff
-----------------------------
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EXHIBIT 7.04
THE SOFTWARE DEVELOPER'S COMPANY, INC.
33 Riverside Drive
Pembroke, Massachusetts 02359
Programmer's Paradise, Inc.
1163 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
Re: Acquisition of Stock of SDEV Germany
Gentlemen:
Reference is hereby made to that certain Agreement of Purchase
and Sale of Assets, dated as of May 16, 1996 (the "Purchase Agreement"), by and
among Programmer's Paradise, Inc. ("Buyer"), The Software Developer's Company,
Inc. ("Seller") and Software Developer's Company GmbH ("SDEV Germany" and,
together with Seller, the "Selling Parties"), pursuant to which Buyer agreed to
purchase from the Selling Parties and the Selling Parties agreed to sell to
Buyer substantially all of their assets, including all of the operations of SDEV
Germany. In addition, pursuant to Section 1.6 of the Purchase Agreement, the
parties agreed that they could agree to convert the form of the acquisition of
SDEV Germany to a purchase of all of its outstanding shares in lieu of a
purchase of assets. The purpose of this agreement is to set forth the terms of
such purchase of shares specifically applicable due to the change from an asset
to a share purchase transaction, including the manner in which such share
purchase shall be consummated and the deliveries to be made in connection with
such purchase.
Accordingly, Seller hereby agrees to sell to Buyer or its
assigns, on the Release Date (as defined below), all of the outstanding equity
(the "Shares") of SDEV Germany, on the following terms and conditions (with all
capitalized terms used herein and not otherwise defined having the meanings
ascribed to such terms in the Purchase Agreement):
1. At the Closing under the Purchase Agreement, $400,000 of
the Purchase Price shall be delivered to Golenbock, Eiseman, Assor & Bell, as
Escrow Agent, to be held and
released in accordance with the terms of the Stock Acquisition Escrow Agreement
attached hereto (the "Share Escrow"). The date of release to Seller thereunder
is referred to herein as the "Release Date". For purposes of the Purchase
Agreement, the transfer of the Shares shall be effective at and as of the
Closing under the Purchase Agreement, and the operations of SDEV, including
without limitation, profits and losses, shall be for the account of Buyer from
and after such date (subject to the consummation of the transfer of the Shares
as herein provided).
2. Seller shall, prior to July 22, 1996, prepare, file and
record, and cause to be notarized and sealed, all documentation necessary to
transfer the Shares to Buyer, which documentation shall be effective to transfer
the Shares to Buyer free and clear of any and all Liens and shall be
satisfactory as to form and content to Buyer and its German counsel (the
"Transfer Documentation").
3. Seller has delivered to Buyer financial statements of SDEV
Germany as of and for the periods ended March 31, 1996 and 1995 and the Buyer
Control Date, and such balance sheet as of the Buyer Control Date shall be
deemed included within the term "Balance Sheet", and such financial statements
shall be deemed included within references to financial statements of Seller or
the Selling Parties for purposes of the Purchase Agreement. As of the Release
Date, the available net operating loss of SDEV Germany shall be at least
$1,150,000, without expiration.
4. Seller has agreed to indemnify and hold Buyer harmless
from, against and in respect of, and shall on demand reimburse Buyer for, any
and all loss, liability, damage, or deficiency suffered or incurred by Buyer in
respect of or in connection with any liabilities of or to Seller or any other
member of the consolidated group of which Seller is a member (other than SDEV
Germany) arising out of such status as a member of such group.
5. There shall be delivered to Buyer on the Release Date:
(a) a stock certificate representing the Shares,
registered in the name of Buyer or its assignee, in proper form,
together copies of notations, seals and recordations of all appropriate
public and private registrars, clerks and other authorities reflecting
that such transfer has been made;
(b) the opinion of Coopers & Lybrand LLP or
other independent certified auditors reasonably acceptable to Buyer,
confirmed by Ernst & Young LLP, in form and substance acceptable to
Buyer, that the net operating losses of SDEV Germany as of the Release
Date shall be equal to at least $1,150,000, all of which shall
thereafter be able to be utilized by Buyer's existing German
subsidiaries without expiration;
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(c) confirmation reasonably acceptable to Buyer
and Seller that Seller shall have contributed to SDEV Germany and that
SDEV Germany shall have retained an amount of cash equal to all
intercompany obligations owed by SDEV Germany to Seller or any
affiliate thereof;
(d) the opinion of Haarmann, Hemmelrath &
Partner, in form and substance acceptable to Buyer, that (i) the
Transfer Documentation is sufficient to transfer to Buyer all right,
title and interest in and to the Shares, free and clear of any and all
Liens and as otherwise contemplated by this Agreement and the Purchase
Agreement with respect to the Purchased Assets, (ii) the transfer of
the Shares has been properly recorded on all appropriate public and
private registrars;
(e) a certificate of the Managing Director of
SDEV Germany, certifying to the articles of organization, bylaws,
authorizing resolutions, existence and good standing of SDEV Germany;
(f) a certificate of the Selling Parties as to
the truth of Sections 4.1, 4.2 and 4.3 of the Purchase Agreement on the
Release Date; and
(g) a copy (in paper and electronic form) of the
Mailing List of SDEV Germany, and possession and control over all other
assets of SDEV Germany.
6. If for any reason the Release Date shall not occur prior to
the close of business on July 22, 1996, (a) all obligations of Buyer to assume
any obligations and make any payments in respect of the operations or employees
of SDEV Germany by reason of its agreemnet to purchase the Shares shall cease,
(b) Buyer shall be deemed as of the date hereof to have consummated the purchase
of the operations of SDEV Germany and Purchased Assets and Assumed Liabilities
relating thereto as an asset transaction in accordance with the Purchase
Agreement. In such event, the purchase price for such assets shall be $135,000,
payable by Buyer from the Share Escrow against receipt of instruments of
transfer and other closing documents with respect to such purchase as shall be
comparable to those delivered to Buyer in connection with the purchase of
Seller's United States assets (modified for the German context) and such other
documents as Buyer shall reasonably request. At such time as the Escrow Agent
shall deliver to Seller the purchase price for the Purchased Assets of SDEV
Germany as aforesaid, the Escrow Agent shall deliver to Buyer the balance of the
Share Escrow held by it.
7. This Agreement shall be deemed a part of the Purchase
Agreement, and the representations, warranties, covenants, agreements,
indemnities, rights and benefits contained
-3-
therein shall be applicable to the Shares as a Purchased Asset and assets,
liabilities and operations of SDEV Germany as contemplated by the Purchase
Agreement.
8. At any time and from time to time after the date hereof, at
Buyer's request, and without further consideration therefor, each of the Selling
Parties will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation as Buyer may reasonably deem necessary
or desirable in order more effectively to transfer, convey and assign to Buyer
or its assignee, and to confirm Buyer's or such assignee's title to, all of the
Shares, and to assist Buyer or its assignee in exercising all rights with
respect thereto.
Dated as of June 28, 1996
THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By: /s/ James O'Connor, Jr.
------------------------
SOFTWARE DEVELOPER'S COMPANY,
GMBH
By: /s/ Barry N. Bycoff
------------------------
Agreed:
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
-----------------
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EXHIBIT 7.05
STOCK ACQUISITION ESCROW AGREEMENT
AGREEMENT dated as of June 28, 1996, among Programmer's
Paradise, Inc., a Delaware corporation, having offices at 1163 Shrewsbury
Avenue, Shrewsbury, New Jersey 07702 ("Buyer"), The Software Developer's
Company, Inc., having offices at 33 Riverside Drive, Pembroke, Massachusetts
02359 ("Seller"), and Golenbock, Eiseman, Assor & Bell, having offices at 437
Madison Avenue, New York, New York 10022 ("GEAB" or the "Escrow Agent"). Buyer
and Seller are hereinafter sometimes referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement of Purchase and
Sale of Assets, dated as of May 16, 1996 (the "Purchase Agreement"), among
Buyer, Seller and Software Developers Company GmbH ("SDEV Germany"), Buyer is
currently herewith purchasing from Seller and SDEV Germany the Purchased Assets,
with any capitalized term used herein but not otherwise defined having the
meaning ascribed to such term in the Purchase Agreement.
WHEREAS, it is intended that the Purchased Assets are to
include all of the outstanding capital stock of SDEV Germany (the "Shares"), but
due to the inherent delay in transferring and delivering to Buyer the Shares,
pending the receipt of the Shares and certain other deliveries set forth in that
certain Letter Agreement attached as Annex A to the Closing Statement dated as
of June 28, 1996 entered into between Buyer and the Selling Parties (the "Stock
Transfer Letter Agreement"), Buyer and the Selling Parties desire to place a
certain portion of the Purchase Price in escrow pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Appointment. The Parties hereby appoint and designate the
law firm of GEAB as the Escrow Agent for the purposes herein set forth, and the
Escrow Agent hereby accepts such appointment, subject to and in accordance with
the provisions of this Escrow Agreement.
2. Deposit. Seller hereby authorizes Buyer to deliver to the
Escrow Agent on behalf of the Selling Parties, simultaneously with the execution
and delivery of this Agreement $400,000 (such amount, or any future balance
thereof, being referred to herein as the "Escrow Fund"), to be held in
accordance with the terms of this Agreement in a money-market account sponsored
or managed by Republic National Bank, New York, New York (the "Escrow Account").
Upon the opening of the Escrow Account, the Escrow Agent will advise the Parties
of the account number thereof.
3. Release of Escrow Fund. (a) The Escrow Agent shall release
the Escrow Fund, in such amounts and to such of the Parties, in accordance with
the first to occur of the following:
(i) receipt of the joint written instructions of
Buyer and Seller in connection with the closing of the purchase of the Shares,
in which event the Escrow Fund shall be released to Seller;
(ii) receipt of a notice from Buyer at any time after
July 22, 1996, stating that a copy thereof has been sent to Seller concurrently
therewith in connection with Buyer's acquisition of the assets of SDEV Germany
in accordance with the Purchase Agreement, in which event $135,000 of the Escrow
Fund shall be delivered to Seller and the balance shall be delivered to Buyer;
or
(iii) receipt of a copy of a (A) binding and final
arbitration award, or (B) final judgment, order or decree of a court of
competent jurisdiction in the United States of America (the time for appeal
therefrom having expired and no appeal having been perfected).
4. Term. The term of the escrow under this Agreement shall
continue until the Escrow Funds are released in accordance with Section 3
hereof.
5. The Escrow Agent.
5.1 Disputes. In the event the Escrow Agent shall
believe there shall be any disagreement among or between the Parties resulting
in adverse claims or demands being made in connection with the Escrow Fund, or
in the event that the Escrow Agent in good faith is in doubt as to what action
it should take hereunder, the Escrow Agent shall be entitled, at its option,(a)
to refuse to comply with any claims or demands on it as long as such
disagreement shall continue and, in so refusing, shall make no delivery or other
disposition of the Escrow Fund pursuant to the terms of this Agreement and shall
not be or become liable in any way or to any person for its failure or refusal
to comply with such conflicting or adverse claims or demands and shall be
entitled to continue so to refrain from acting and so to refuse to act until the
Escrow Agent shall have received (i) a final and non-appealable order of a court
of competent jurisdiction directing delivery of the Escrow Fund, or (ii) a
written agreement executed by Buyer and Seller directing delivery of the Escrow
Fund, in which event the Escrow Agent shall disburse the Escrow Fund in
accordance with such order or agreement, or (b) to place the Escrow Fund with a
proper court and to apply to any court of competent jurisdiction (including the
commencement of immediate action or suit) to determine the rights of the
parties. Any court order referred to in (i) above shall be accompanied by a
legal opinion by counsel for the presenting party satisfactory to the Escrow
Agent to the effect that said court order is final and non-appealable. The
Escrow Agent shall act on such court order and legal opinion without further
question.
-2-
5.2 Performance. To induce the Escrow Agent to act
hereunder, it is further agreed by the parties that:
(a) The duties and obligations of the Escrow
Agent shall be determined solely by the express provisions of this
Agreement. No implied duties or obligations shall be read into this
Agreement against the Escrow Agent. The Escrow Agent shall not be under
any duty to give the Escrow Fund held by it hereunder any greater
degree of care than it gives its own similar property and shall not be
required to invest any funds held hereunder except as directed in this
Agreement. Uninvested funds held hereunder shall not earn or accrue
interest.
(b) The Escrow Agent shall be entitled to
rely upon any order, judgment, certification, demand, notice,
instrument or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice
or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.
(c) The Escrow Agent shall not be bound or
in any way affected by any notice of any modification or cancellation
of this Agreement or the Purchase Agreement, or of any fact or
circumstance affecting or alleged to affect rights or liabilities
hereunder other than as is herein set forth, or affecting or alleged to
affect the rights and liabilities of any other person, unless notice of
the same is delivered to the Escrow Agent in writing, signed by the
proper parties to the Escrow Agent's satisfaction and, in the case of
modification of the duties or responsibilities of the Escrow Agent,
unless such modification shall be satisfactory to the Escrow Agent and
approved by the Escrow Agent in writing.
-3-
(d) The Escrow Agent shall not be liable for
any error of judgment, or any action taken by it in good faith and
believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement, except in the case of its gross
negligence or bad faith, nor shall it be liable for the default or
misconduct of any employee, agent or attorney appointed by it who shall
have been selected with reasonable care. Except with respect to claims
based upon such gross negligence or bad faith that are successfully
asserted against the Escrow Agent, the Parties shall defend (by
attorneys selected by the Escrow Agent), indemnify and hold harmless
the Escrow Agent (and any successor escrow agent) from and against any
and all losses, liabilities, claims, actions, judgments, damages, costs
and expenses arising out of and in connection with this Agreement or
the Escrow Agent's duties or services hereunder. This indemnity
includes, without limitation, disbursements and reasonable attorneys'
fees either paid to retain attorneys or representing the fair value of
legal services rendered by the Escrow Agent to itself. Without limiting
the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it
hereunder in good faith and in accordance with the terms hereof,
including without limitation, any liability for any delays (not
resulting from gross negligence or bad faith) in the investment or
reinvestment of the Escrow Fund or any loss of interest incident to any
such delays.
(e) The Escrow Agent shall not charge a
separate administrative fee for its services as Escrow Agent hereunder.
However, the Parties agree to pay or reimburse the Escrow Agent upon
request for all reasonable expenses, disbursements and advances,
including reasonable attorneys' fees, incurred or made by it in the
performance of its duties hereunder.
(f) The Escrow Agent shall be entitled to
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel.
(g) Escrow Agent shall be entitled to
represent or to act as an advisor of Buyer and its affiliates in any
lawsuit or any other matter.
(h) The Escrow Agent does not have any
interest in the Escrow Fund deposited hereunder but is serving as
stakeholder only. Upon payment of the Escrow Fund as herein provided,
the Escrow Agent shall be fully released from all liability and
obligations with respect thereto.
(i) Any payments of income from the Escrow
Account shall be subject to withholding regulations then in force with
respect to United States taxes. The Parties will provide the Escrow
Agent with appropriate W-9 forms for tax I.D., number certification, or
non-resident alien certification. The Escrow Agent shall have no
responsibility for tax reporting or filing, and such reporting or
filing, if required, shall be the responsibility of Seller.
-4-
6. Resignation. The Escrow Agent (and any successor escrow
agent) at any time may be discharged from its duties and obligations hereunder
by the delivery to it of notice of termination signed by the Parties or at any
time may resign by giving written notice to such effect to the Parties. Upon any
such termination or resignation, the Escrow Agent shall deliver the Escrow Fund
to any successor escrow agent designated by the Parties in writing, or to any
court of competent jurisdiction if no such successor escrow agent is agreed
upon, whereupon the Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with this Agreement. The termination
or resignation of the Escrow Agent shall take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) or (ii)
the day that is 30 days after the date of delivery: (A) to the Escrow Agent of
the other parties' notice of termination or (B) to the other parties hereto of
the Escrow Agent's written notice of resignation. If at that time the Escrow
Agent has not received a designation of a successor escrow agent, the Escrow
Agent's sole responsibility after that time shall be to keep the Escrow Fund
safe until receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of a
court of competent jurisdiction.
7. Jurisdiction and Venue. The Parties irrevocably (i) submit
to the jurisdiction of any New York State or federal court sitting in New York
in any action or proceeding arising out of or relating to this Agreement, (ii)
agree that all claims with respect to such action or proceeding shall be heard
and determined in such New York State or federal court and (iii) waive, to the
fullest extent possible, the defenses of an inconvenient forum. The parties
hereby consent to and grant any such court jurisdiction over the persons of such
parties and over the subject matter of any such dispute and agree that delivery
or mailing of process or other papers in connection with any such action or
proceeding in the manner provided hereinabove, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
8. Notices. All notices, instructions and other communications
required or permitted to be given, forwarded or transmitted hereunder or
necessary or convenient in connection herewith shall be in writing and shall be
deemed to have been duly given if delivered personally, or sent by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
its address set forth above (with a copy thereof as aforesaid to counsel
designated by it), or when delivered to a nationally recognized overnight
courier service or when sent by electronic facsimile transmission (with a copy
to follow by mail as aforesaid), or to such other address as the person to whom
notice is to be given shall have given notice of pursuant hereto.
9. Miscellaneous. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and assigns and shall not be enforceable by or inure to the benefit
of any other third party except as provided with respect to the termination of,
or resignation by, the Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties. No waiver hereunder shall be effective unless in a writing signed by
the party to be charged. This Agreement may be amended, modified, superseded, or
canceled, and any of the terms hereof may be waived, only by a written
instrument executed by the parties hereto. This Agreement shall be
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governed by and construed and enforced in accordance with the internal laws of
the State of New York, without reference to conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date and year first above written.
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
----------------------
Roger Paradis, President
THE SOFTWARE DEVELOPER'S COMPANY,
INC.
By: /s/ James O'Connor, Jr.
-----------------------
GOLENBOCK, EISEMAN, ASSOR & BELL,
as Escrow Agent
By: /s/ Lawrence M. Bell
-----------------------
Lawrence M. Bell, Partner
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