SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 28, 1996
PROGRAMMER'S PARADISE, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-92810 13-3136104
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
1163 Shrewsbury Avenue, Shrewsbury, New Jersey 07702
(Address of principal executive offices)
(908) 389-8950
(Registrant's telephone number,
including area code)
(Former name or former address, if changed since last report)
Exhibit Index on Sequentially Numbered Page 5
PAGE 1
<PAGE>
Item 2. Acquisition or Disposition of Assets
As of June 28, 1996, pursuant to an Agreement of
Purchase and Sale of Assets (the "Purchase Agreement"), dated as
of May 16, 1996, between the Registrant, The Software Developer's
Company, Inc. ("SDC") and Software Developer's Company GmbH
("SDEV Germany", and together with SDC, the "Selling Parties"),
the Registrant acquired from SDC substantially all of the assets
and business related to The Programmer's SuperShop catalog
business, inbound and outbound telemarketing, reseller
operations, web site, and, subject to the satisfaction of certain
conditions, either all of the capital stock, or all of the
operations of SDEV Germany, its German subsidiary (collectively,
the "Business"). SDC had been the Registrant's largest direct
mail competitor, offering a similar array of technical software.
At the closing, the Registrant paid to SDC an amount
equal to $10,022,089, reflecting a $22,089 adjustment of the
purchase price in respect of the estimated balance sheet of the
Business, and deposited $1,000,000 with an escrow agent to held
as follows: (i) $600,000 to be held for a period of one-year to
secure the Selling Parties' indemnification and other obligations
under the Purchase Agreement, and (ii) $400,000 to be held until
July 22, 1996 (the "Stock Transfer Escrow") pending the closing
of the acquisition of all of the capital stock or assets of SDEV
Germany and the satisfaction of certain conditions in connection
therewith (the "Stock Transfer"). The purchase price is subject
to further adjustment by the amount by which the tangible net
assets of the Business as of June 21, 1996, the business date
preceding the date on which the Registrant took over management
control of the Business, shall be greater or less than $1,500,000,
as set forth on the closing balance sheet of the Business to be
delivered after the closing date.
Additionally, at the closing, the Selling Parties made
the following payments to the Registrant: (i) $200,000 to On-Line
2000 GmbH, an indirect subsidiary of the Registrant, for certain
management services through June 28, 1996; (ii) $200,000 to the
Registrant for certain management services through June 28, 1996;
and (iii) $300,000 to the Registrant, on a non-accountable basis,
in respect of certain moving, bonus, out-placement, employee,
facilities and other fees and expenses.
At the closing, the Registrant and the Selling Parties
entered into that certain Letter Agreement dated as of June 28,
1996 between the Registrant and the Selling Parties relating to
the Stock Transfer. In the event that the conditions set forth
in such Letter Agreement are satisfied (which include, without
limitation, the delivery to the Registrant of certain accounting
opinions relating to the value of certain tax attributes of SDEV
Germany) and the Registrant or its designated subsidiary
purchases all of the capital stock of SDEV Germany on or before
July 22, 1996, the entire Stock Transfer Escrow shall be released
to SDC. If for any reason the Stock Transfer is not completed
prior to the close of business on July 22, 1996, the Registrant
will be deemed to have purchased all of the assets of SDEV
Germany as of the closing date of the Purchase Agreement,
$135,000 of the Stock Transfer Escrow shall be released to SDC
and the remainder thereof shall be released to the Registrant.
PAGE 2
<PAGE>
The Registrant paid the Purchase Price utilizing its
cash on hand.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired - It is
impracticable to provide the required financial statements
relating to the acquired business at this time. Such financial
statements are to be filed by amendment to this Report as soon as
practicable, but no later than sixty (60) days after this Report
is required to be filed.
(b) Pro forma Financial Information - It is
impracticable to provide the required pro forma financial
information relating to the acquired business at this time. Such
pro forma financial information is to be filed by amendment to
this Report as soon as practicable, but no later than sixty (60)
days after this Report is required to be filed.
(c) Exhibits: 1. Agreement of Purchase and Sale of
Assets, dated as of May 16, 1996,
between the Registrant and the
Selling Parties, and the exhibits
thereto.
2. Bill of Sale, dated as of June 28,
1996, executed by the Selling Parties.
3. Facilities and Employee Use Agreement,
dated as of June 28, 1996, between the
Registrant and SDC.
4. Closing Statement, dated as of June 28,
1996, between the Registrant and the
Selling Parties.
5. Letter Agreement regarding the Acquisition
of Stock of SDEV Germany, dated as of
June 28, 1996, between the Registrant
and the Selling Parties.
6. Stock Acquisition Escrow Agreement, dated
as of June 28, 1996, between the Registrant,
the Selling Parties and Golenbock, Eiseman,
Assor & Bell, as escrow agent.
PAGE 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant as duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
PROGRAMMER'S PARADISE, INC.
(Registrant)
By: /s/ Roger Paradis
Roger Paradis, President
PAGE 4
<PAGE>
Dated: July 12, 1996
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
1. Agreement of Purchase and Sale of Assets, dated as of
May 16, 1996, between the Registrant and the Selling
Parties, and the exhibits thereto. 6
2. Bill of Sale, dated as of June 28, 1996, executed by the
Selling Parties. 108
3. Facilities and Employee Use Agreement, dated as of
June 28, 1996, between the Registrant and SDC. 110
4. Closing Statement, dated as of June 28, 1996, between
the Registrant and the Selling Parties. 114
5. Letter Agreement regarding the Acquisition of Stock of
SDEV Germany, dated as of June 28, 1996, between the
Registrant and the Selling Parties. 118
6. Stock Acquisition Escrow Agreement, dated as of
June 28, 1996, between the Registrant, the Selling Parties
and Golenbock, Eiseman, Assor & Bell, as escrow agent. 124
PAGE 5
<PAGE>
Exhibit 1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND BETWEEN
PROGRAMMER'S PARADISE, INC., AS BUYER
AND
THE SOFTWARE DEVELOPER'S COMPANY, INC.
AND
SOFTWARE DEVELOPER'S COMPANY GMBH, AS THE SELLING PARTIES
PAGE 6
<PAGE>
1. Purchase and Sale of Business and Assets 1
1.1 Agreement to Sell 1
1.2 Excluded Assets 6
1.3 Title to Seller's Assets 7
1.4 Instruments of Transfer 7
1.5 Assignments of Certain Contracts 8
2. Purchase Price; Assumption of Liabilities; Adjustments 9
2.1 Purchase Price 9
2.2 Payment of Purchase Price 9
2.3 Allocation 10
2.4 Assumed Liabilities 10
2.5 Excluded Liabilities 10
2.6 Tangible Net Asset Requirement; Revenue
Maintenance 13
2.7 Collection of Accounts Receivable 18
2.8 Reimbursement of Certain Shut-Down Expenses 18
3. Closing; Deliveries; Conditions Precedent 19
3.1 Closing 19
3.2 Deliveries of Selling Parties 19
3.3 Deliveries of Buyer 21
3.4 Further Assurances 22
3.5 Certain Agreements to be Executed and
Delivered and Certain Actions to be Taken
at or prior to the Closing 22
3.6 Conditions Precedent of Buyer 22
3.7 Conditions Precedent of Selling Parties 25
4. Representations and Warranties of Selling Parties 26
4.1 Organization, Standing and Qualification 26
4.2 Authority 27
4.3 No Violation 27
4.4 Financial Statements; Sales Information 28
4.5 Title to and Condition of Purchased Assets;
Leases 30
4.6 Proprietary Rights 32
4.7 Litigation 34
4.8 Compliance; Permits 34
4.9 Schedules 35
4.10 Absence of Changes or Events 38
4.11 Taxes 40
4.12 Employee Benefits; Labor Matters 41
4.13 Accounts Receivables 42
4.14 Environmental Matters 42
PAGE 7
<PAGE>
4.15 SEC Filings 43
4.16 Consent Solicitation Statement 43
4.17 Customers and Suppliers 44
4.18 Disclosure 44
5. Representations and Warranties of Buyer 45
5.1 Organization and Standing 45
5.2 Authority of Buyer 45
5.3 Litigation 45
5.4 No Violation 45
6. Covenants of Selling Parties 46
6.1 Conduct of Business 46
6.2 Changes in Information 47
6.3 Access to Information 47
6.4 Confidentiality 48
6.5 Preservation of Business 48
6.6 Offer of Employment: Seller's Retention Plan 49
6.7 Consents of Third Parties; Governmental
Approvals 51
6.8 Financial Statements 51
6.9 Preparation of Consent Solicitation Statement;
Action by Stockholders 52
6.10 Information Provided to Stockholders 52
6.11 Recommendations of Buyer; Transition 52
6.12 Books and Records 54
7. Further Agreements 54
7.1 Bulk Sales Compliance 54
7.2 Sales and Other Taxes 55
7.3 Brokerage and Finder's Fee 55
7.4 Settlement of Assumed Liabilities 55
7.5 Name Change 56
7.6 Referral 56
7.7 Break-up Fee 56
7.8 No Shop 58
7.9 Temporary Extension of Occupancy 59
7.10 Non-Competition 60
7.11 Plant Closings 61
8. Indemnification 62
8.1 Obligation to Indemnify 62
8.2 Survival; Limitations 64
8.3 Claims 67
8.4 Arbitration 68
PAGE 8
<PAGE>
9. Termination 69
9.1 Termination 69
9.2 Remedies 70
10. Miscellaneous 71
10.1 Specific Performance 71
10.2 Binding Agreement; Assignment 72
10.3 Law To Govern 72
10.4 No Public Announcement 72
10.5 Notices 72
10.6 Fees and Expenses 73
10.7 Convenience of Forum; Consent to Jurisdiction 73
10.8 Severability 74
10.9 Entire Agreement 74
10.10 Amendments; Consents and Waivers 74
10.11 Counterparts 75
10.12 No Third-Party Beneficiaries 75
10.13 Section Headings 75
PAGE 9
<PAGE>
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement dated as of May 16, 1996, by and
between Programmer's Paradise, Inc., a Delaware corporation
("Buyer"), The Software Developer's Company, Inc., a Delaware
corporation ("Seller") and Software Developer's Company GmbH
("SDEV Germany", and together with Seller, collectively referred
to herein as the "Selling Parties", and each individually as a
"Selling Party").
W I T N E S E T H:
WHEREAS, Seller is a direct marketer and distributor of
PC-based specialty software and hardware to technical and
professional PC users, through its three proprietary catalogs
(The Programmer's SuperShop ("TPS"), Personal Computing Tools
SuperShop ("PCT") and New Media SuperShop ("New Media")), its TPS
World Wide Web site ("Web Site"), its corporate sales group, and
SDEV Germany, and through SDC Communications addresses the
marketing needs of the developers and publishers of the products
it distributes by providing advertising and promotional services;
and
WHEREAS, Buyer desires to purchase and acquire from
each Selling Party, and each Selling Party desires to sell,
assign and transfer to Buyer, substantially all of its assets,
properties and business as a going concern, including all of the
assets and business related to or used in connection with the TPS
business, inbound and outbound telemarketing operations, reseller
operations, all of the operations of SDEV Germany, all
advertising and promotional operations (including the operations
of SDC Communications) and service and support operations
relating to TPS and SDEV Germany (collectively, the "Business"),
with the exception of certain excluded assets and operations
hereinafter specified, upon the terms and subject to the
conditions hereinafter set forth;
PAGE 10
<PAGE>
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1
1. Purchase and Sale of Business and Assets.
1 Agreement to Sell. Subject to and upon the terms and
conditions of this Agreement, each Selling Party will sell,
transfer, convey, assign, grant and deliver to Buyer, and Buyer
will purchase, at the Closing (as defined in Section 3.1 hereof),
all of the business, properties (real, personal, mixed, tangible
and intangible), assets, goodwill and rights of the Selling
Parties with respect to the Business as a going concern, of every
kind, nature and description, owned or leased, wherever located
and whether or not carried or reflected on the books or records
of the Selling Parties, as the same shall exist on the Closing
Date, including, without limiting the generality of the
foregoing:
(a) all trademarks, trademark applications, trade names and
service marks owned or used by the Selling Parties or any of them
in connection with the Business, including without limitation,
"The Programmer's Shop", "The Programmer's SuperShop",
"SuperShop", "The Software Developer's Company", "Software
Developers' Company GmbH", "ComputerWare", "Applications
Development Digest" and the other names set forth on Schedule
1.1(a) hereto, and any names similar to or any derivation or
variation of any and all such names, and the goodwill pertaining
thereto and right to fully exploit such names (collectively,
"Marks");
(b) all copyrights and copyright applications owned or used
by the Selling Parties or any of them in connection with the
Business, including without limitation, the copyright to the Web
Site and each and every issue of the TPS catalog, as set forth on
Schedule 1.1(b) hereto (collectively, "Copyrights");
PAGE 11
<PAGE>
(c) all mailing lists and lists and records of customers
and prospects and related information and data base or bases used
by the Selling Parties or any of them in connection with the
Business, including without limitation, the distribution of the
TPS catalog and the marketing, publishing, sale and licensing of
products and services, including the names of all persons
actually known to the Selling Parties or any of them to have
licensed or purchased products or services of or from the
Business, other users of such products and services known to the
Selling Parties or any of them and user prospects of such
products and services known to the Selling Parties or any of
them, together with file layouts and other information related to
such products and services necessary to or used by the Selling
Parties or any of them for the processing of such information by
Buyer (collectively, the "Mailing List") (such list shall also
include information relating to responses to reader service or
information cards received by any Selling Party from customers or
which any Selling Party received from other sources with respect
to the Business, including, without limitation, responses from so-
called "Bingo cards");
(d) all of the right, title and interest (including by reason
of license or lease) of the Selling Parties or any of them in or
to any software, computer program or software product owned,
used, developed or being developed by or for any of the Selling
Parties for use in the Business, whether for internal use
(including without limitation, sales, marketing and training
programs for use in the business and software to create, publish,
manufacture and distribute its Web Site) or for sale or license
to others, and any software, computer program or software
product, manufactured, published, licensed and/or marketed by the
Selling Parties or any of them through the Business at any time
prior to the Closing, in all versions and releases, including all
run-time systems, libraries, examples, utilities, data files,
manuals, guides and written and related materials and all
Proprietary Rights and Documentation, whether or not patented or
copyrighted, related to the implementation or use thereof
(collectively, "Programs");
PAGE 12
<PAGE>
(e) all documentation, records and software (other than
Inventory), whether in machine or visually readable or other
tangible form, evidencing, representing or containing any
Proprietary Rights (as hereinafter defined) in the possession or
under the control of the Selling Parties or any of them relating
to a Program or used in or necessary to the Business, including,
without limitation, any manuals, functional and design
specifications, user and programmer instructions, sales and
marketing training and instructions, flow charts and diagrams,
coding constructions, alpha and beta testing notes, error reports
and logs, patches and patch instructions, itemizations of
development tools, and all other writings which would be
necessary or helpful to a skilled programmer or skilled software
salesperson or marketeer to understand, maintain and enhance any
Program (collectively, "Documentation");
(f) the TPS catalog, Web Site and all property and assets
(tangible and intangible) used by or necessary for the Selling
Parties or any of them to create, publish, manufacture and
distribute such catalog and Web Site, and all know-how and other
intellectual property of the Selling Parties or any of them
relating to or necessary or used in any aspect of the operation
of the Business as of the Closing Date, including, without
limitation, all trade secrets, vendor information, lists and data
bases, proprietary processes, methods and apparatus, information
not known to the general public, each literary work, whether or
not copyrightable, ideas, concepts, designs, discoveries,
formulae, patents, patent applications, product and service
developments, inventions, improvements, disclosures, software,
source codes and materials, object codes and materials,
algorithms, techniques, architecture, mask work rights,
prototypes, engineering and design models, information with
respect to firmware and hardware, and any information relating to
any product or program which has either been developed, acquired
or licensed for or by any Selling Party, including the
maintenance, modification or enhancement thereof, all vendor and
customer sales and purchase records and files of or related to
the Business, and all publishing, outsourcing, fulfillment,
reseller and manufacturing information (collectively, together
PAGE 13
<PAGE>
with the Marks, Copyrights, Mailing List and Programs,
"Proprietary Rights");
(g) each contract, agreement, lease, license, franchise,
purchase order, sale order, permit, instrument, commitment,
arrangement and understanding (in each case, whether written or
oral) to which the Selling Parties or any of them is a party or
by which it is bound or under which it has any rights or is
entitled to benefits, relating to the Business, including,
without limitation, (i) all license, supply, purchase,
distribution, OEM, VAR, dealer, advertising and promotional
services agreements and agreements for software acquisition,
development, publishing, support, maintenance, outsourcing,
manufacture and fulfillment, reseller and manufacture relating to
the Business, (ii) all restrictive and negative covenants, non-
competition, proprietary property and confidentiality agreements
in favor of the Selling Parties or any of them from or with any
and all former or current employees and consultants having access
to Proprietary Information or rendering services to a Selling
Party in connection with the Business, and (iii) all leases of
tangible personal property accepted by Buyer and listed on
Schedule 1.1(g) hereto relating to the Business (collectively,
"Contracts"), other than those identified as Excluded Assets or
Excluded Liabilities;
(h) all inventory of items of the type sold or offered for
sale by or through the Business, including, without limitation,
goods held by or for the Selling Parties or any of them for sale,
lease or license or to be furnished under contracts of service,
samples, goods-in-transit, work-in-process, raw materials, and
other materials and supplies of every kind, nature and
description used or which may be used in connection with the
manufacture, publishing, packing, shipping, advertising, selling,
leasing, licensing or furnishing of such inventory relating to
the Business, including, without limitation, all physical copies
of items constituting any part thereof such as user manuals and
diskettes, and all sales literature and packaging and printed
material related to any of the foregoing, in each case, in which
any Selling Parties has any right, title or interest and of the
type sold or offered for sale by or through the Business, and any
PAGE 14
<PAGE>
and all rights of the Selling Parties on the Closing Date to the
warranties received from its suppliers with respect to such items
(to the extent assignable) and related claims, credits, rights of
recovery and set-off with respect thereto (collectively,
"Inventory");
(i) all capital equipment, furniture and furnishings employed
in the normal historical course of the Business, and all computer
systems, including without limitation, all management
information, order, bar coding and inventory tracking systems and
technology, hardware, software, servers, computers, printers,
scanners, monitors, peripheral and accessory devices and the
related media, manuals, documentation and user guides, whether or
not related to the Business, including, without limitation, all
of same used to create, publish, manufacture and distribute the
TPS catalog and TPS Web Site and distribute products pursuant
thereto, all of which are described on Schedule 1.1(i) hereto,
together with the original cost, depreciated cost and carrying
cost thereof (collectively, "Equipment"), with all such items
leased by a Selling Party designated by an asterisk (*);
(j) all supplies of or related to or used in connection
with the Business, including without limitation, advertising,
artwork and related creative materials for catalogs, web sites
and advertisements, catalog insertions, page layouts, promotional
and product literature and displays;
(k) all accounts, notes and other receivables of the Selling
Parties or any of them arising from the Business or products or
services sold by or through the Business (whether payable in cash
or product) and all rights of the Selling Parties or any of them
under any security agreements with respect thereto, including
rights to all files and documentation substantiating Sellers
rights to said Receivables in sufficient diary form to effect an
efficient collection of said receivables (collectively,
"Receivables"), and the lock box to which same are currently
payable;
PAGE 15
<PAGE>
(l) the proceeds of any insurance, and the right to receive
the proceeds of any insurance, with respect to any claims which
have been or may be asserted in connection with any of the
Purchased Assets or Assumed Liabilities (as such terms are
hereinafter defined) and the right to continue and maintain any
insurance with respect thereto; subject to certain rights of
Seller with respect to a certain insurance claim specifically
identified as an Excluded Asset;
(m) all unfilled sales and purchase orders of or related to
the Business made or entered into by any Selling Party in the
ordinary course of its business and all rights which any Selling
Party may have against its licensors and other suppliers under
express or implied warranties related to the Business or products
or services sold or offered by or through the Business, and the
right to receive mail and other communications and shipments of
merchandise addressed to the Selling Parties or any of them
related to the Business;
(n) all books, files and records of or relating to any of
all aspects of the Business, whether in hard copy, magnetic or
other format, including, without limitation, all files of the
three executive officers of Seller relating to the Business,
records relating to employees of a Selling Party retained by
Buyer, inventory records, sales records, customers' inventory
records, records pertaining to customer requirements, equipment
maintenance and warranty information, customer contracts,
customer invoices, suppliers' invoices, expense invoices,
customer returns and vendor product rotation, and restrictive and
negative covenants, non-competition, proprietary property and
confidentiality agreements, files and records (collectively,
"Files and Records"); provided, however, that any file or record
that pertains solely to the Excluded Assets or Excluded
Liabilities shall not be included;
(o) all deferred charges and prepaid items, advance payments,
customer advances and prepayments in respect of backlog of the
Business, including catalog and marketing backlog, or which
otherwise relate to the Purchased Assets or the Business; and
PAGE 16
<PAGE>
(p) all of the Business as a going concern, including, without
limitation, all of the right, title and interest of each Selling
Party in and to its telephone, telex, telefacsimile and facsimile
numbers and directory listings, and all passwords and security
protection procedures and systems.
The business, properties, assets, licenses,
franchises, goodwill and rights relating to the Business to be
sold, transferred, conveyed, assigned, granted and/or delivered
to Buyer are hereinafter sometimes collectively referred to as
the "Purchased Assets".
2 Excluded Assets. Notwithstanding anything to the contrary
contained in this Agreement, it is understood that the Selling
Parties are not selling and Buyer is not acquiring contracts and
other assets of the Selling Parties unrelated to the Business and
specifically designated as "Excluded Assets" on Schedule 1.2
hereto, including, without limitation, any real property of the
Selling Parties, the lease of Seller's offices and warehouse
space in Pembroke, Massachusetts, the lease of SDEV Germany's
offices in Dortmund, Germany, or other leased space wherever
located, and those assets of Seller used solely in connection
with its ISC, PCT and New Media businesses, which Seller shall
continue to be responsible for following the closing.
3 Title to Seller's Assets. Except as specifically
permitted by this Agreement and as expressly set forth in the
Disclosure Schedule hereto, title to all of the Purchased Assets
and all other rights, licenses and franchises granted pursuant to
this Agreement to Buyer at or after the Closing, shall be
transferred to Buyer free and clear of any and all claims,
liabilities and obligations except to the extent of those
liabilities and obligations expressly assumed by Buyer hereunder
and free and clear of any and all liens, pledges, charges,
mortgages, security interests, restrictions, leases, licenses,
easements, liabilities, claims, encumbrances or rights of others
of every kind and description (collectively, "Liens").
PAGE 17
<PAGE>
4 Instruments of Transfer. (a) The sale, conveyance,
grant, transfer, assignment and delivery to Buyer of each
Purchased Asset as herein provided shall be effected by bills of
sale, licenses, endorsements, assignments, certificates of title,
and/or other good and sufficient instruments of transfer and
conveyance, satisfactory in form and substance to Buyer and its
counsel, as shall be effective to vest in Buyer title to each
such Purchased Asset as contemplated by this Agreement.
(a) Buyer shall have the sole and exclusive right to use,
assert and/or apply for patent, trademark, copyright and other
statutory or common law protection for any or all Proprietary
Rights in any and all countries. Each Selling Party agrees to
assist (at Buyer's expense), and to use commercially reasonable
efforts to cause each of its current employees and contractors to
assist, Buyer in every way to apply for, prosecute and obtain,
and from time to time enforce, any and all patent, trademark,
copyright and other statutory or common law protection for any of
the Proprietary Rights in any and all countries. Each Selling
Party shall, or shall use commercially reasonable efforts to
cause the appropriate employee or contractor to, execute any and
all assignments, transfers, applications and other papers
covering any Proprietary Rights which may be considered necessary
or helpful by Buyer in furtherance of the foregoing and/or to
accomplish the assignment, transfer and/or license of any
Proprietary Rights to persons designated by Buyer. Without
limiting the generality of the foregoing, Buyer shall be
authorized to comply with the registration and deposit
requirements of the United States Copyright Acts with respect to
each separately distributable element of a Purchased Asset at
Buyer's expense. Each Selling Party constitutes and appoints
Buyer its attorney-in-fact to execute and deliver all
applications for registration in its behalf of such copyrights
and to cause all assignments required or permitted under the
terms of this Agreement to be recorded.
5 Assignments of Certain Contracts. (a) Buyer and the
Selling Parties acknowledge that certain of the Contracts may
not, by their terms, be assignable without obtaining third-party
consents or approvals. A complete and correct list of all such
PAGE 18
<PAGE>
unassignable contracts and non-transferrable rights and other
assets are set forth as item 1.5 of the Disclosure Schedule
(collectively, "Unassignable Contracts"). Each of the Selling
Parties acknowledges that the inability to assign any of the
Unassignable Contracts shall not relieve the Selling Parties of
the obligation to sell and deliver such of the Purchased Assets
as shall be tangible and physically capable of being delivered or
otherwise assignable. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement
to assign any Unassignable Contracts if an attempted assignment
thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way affect the rights of
Buyer or a Selling Party thereunder. Until such consents are
obtained, the Selling Parties will cooperate with Buyer, in any
arrangement designed to provide for Buyer all rights and benefits
under all Unassignable Contracts, including enforcement for the
benefit of Buyer of any and all rights of such Selling Party
against any third party thereto arising out of the breach or
cancellation by such third party or otherwise, and such Selling
Party shall, without further consideration therefor, pay, assign
and remit to Buyer promptly all monies, and, to the extent
permitted, all other rights or consideration received, or which
may be received or obtained in respect of performance of any
Unassignable Contracts. When any such consent shall be obtained
or any Unassignable Contract shall otherwise become assignable,
such Selling Party shall promptly assign same to Buyer and Buyer
shall, without the payment of any further consideration therefor,
be deemed hereby to have assumed such rights and also, to the
extent constituting Assumed Liabilities (as hereinafter defined
in Section 2.4) to have assumed such Selling Party's obligations
under the Unassignable Contracts, but only if Buyer shall be
entitled to the benefits associated therewith. Until such time,
no Selling Party shall enter into any amendment of any
Unassignable Contract without the prior written consent of Buyer.
(a) At the Closing and effective as of the Closing Date, all
bids and requests for proposals related to the Business shall be
transferred to Buyer to the extent permitted by law. Buyer and
Seller shall work together and use commercially reasonable
PAGE 19
<PAGE>
efforts to preserve such bids and requests for proposals and to
facilitate award thereon consistent with applicable laws and
regulations.
(b) Each Selling Party shall cooperate with Buyer in obtaining
any necessary novation agreements of Government Contracts and any
other Contracts requiring novation, and each Selling Party shall
use commercially reasonable efforts to obtain such novations by
the Closing Date.
1.6 German Stock Acquisition Right. At any time prior
to the Closing, Buyer and Seller may mutually agree to cause this
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
terms substantially equivalent, from a legal and business
perspective, and with substantially equivalent benefits and risks
to the parties, as contemplated by the purchase of assets
contemplated by this Agreement.
ARTICLE 2
2. Purchase Price; Assumption of Liabilities; Adjustments.
1 Purchase Price. Subject to and upon the terms and
conditions of this Agreement, including, without limitation, the
adjustments hereinafter referred to, Buyer shall pay to the
Selling Parties, in full payment for the Purchased Assets and the
Business and in reliance upon the representations and warranties
made herein by the Selling Parties, a total purchase price (the
"Purchase Price") of Eleven Million Dollars ($11,000,000).
2 Payment of Purchase Price. The Purchase Price shall be
payable as follows:
(a) At the Closing, Buyer shall pay to the Selling Parties
Ten Million Dollars ($10,000,000) less the Estimated Adjustment,
if any, determined in accordance with the provisions of Section
2.6 hereto (the "Closing Payment"), by certified check, bank
check or wire transfer in immediately available funds.
PAGE 20
<PAGE>
(b) At the closing, Buyer shall pay to the Escrow Agent
under the Escrow Agreement in the form of Exhibit 2.2(b) hereto
(the "Escrow Agreement"), the sum of One Million Dollars
($1,000,000) (the "Escrow Fund"), such amount to be held and
dealt with as provided in Escrow Agreement. As more fully set
forth in the Escrow Agreement, the escrow period shall expire on
the date one year after the Closing Date, except with respect to
claims on the Escrow Fund made prior to such date.
(c) The balance of the Purchase Price, if any, shall be
payable at the Post-Closing Settlement in accordance with Section
2.6 hereto.
3 Allocation. The Purchase Price for the Purchased Assets
shall be allocated between the Selling Parties and among the
Purchased Assets as set forth on Schedule 2.3 hereto.
4 Assumed Liabilities. Except as may otherwise be provided
hereunder, Buyer shall, at the Closing, execute and deliver to
the Selling Parties an Undertaking in the form of Exhibit 2.4
hereto, pursuant to which Buyer shall assume and agree to pay,
perform and otherwise discharge as the same shall become due in
accordance with their respective terms, the liabilities and
obligations of such Selling Party set forth below, in each case,
only to the extent that the same shall be documented to a
commercially reasonably extent as to the events causing such
liability and also shall not have been paid, performed or
discharged prior to the Closing (hereinafter collectively
referred to as the "Assumed Liabilities"):
(a) all trade payables and unfilled purchase orders for
inventory incurred by and for the benefit of the Business by such
Selling Party in the ordinary course of its business and
consistent with its past practices during the period prior to the
Closing Date, but only if the same are of the type which would be
set forth on a balance sheet in accordance with generally
accepted accounting principles consistently applied and which
PAGE 21
<PAGE>
otherwise are incurred in accordance with this Agreement and
which are not expressly Excluded Liabilities (as defined below),
in each case only to the extent included on the Closing Balance
Sheet (as described in Section 2.6 hereto); and
(b) all liabilities and obligations after the Closing Date in
respect of the period after the Closing Date under the Contracts
which are assigned to Buyer under this Agreement to the extent
they are listed or described under item 2.4(b) of the Disclosure
Schedule (the "Assumed Contracts").
5 Excluded Liabilities. Except as expressly set forth in
Section 2.4 hereof, Buyer shall not assume any debts,
commitments, obligations or liabilities of the Selling Parties or
any of them. Without limiting the generality of the foregoing,
Buyer shall not assume any of the following (herein collectively
referred to as the "Excluded Liabilities"):
(a) any obligation or liability of a Selling Party to
distribute to its stockholders or otherwise apply all or any part
of the Purchase Price received hereunder;
(b) any obligation or liability of a Selling Party based upon
acts or omissions of a Selling Party occurring after the Closing
Date;
(c) Seller's obligations under any stock option, stock
purchase or profit-sharing plans or under any outstanding
qualified or non-qualified stock options;
(d) any brokerage or finder's fee payable by a Selling Party
in connection with the transactions contemplated hereby;
(e) any liabilities of Seller to any of its present or former
stockholders as such arising out of any action by Seller in
connection with the transactions contemplated hereby;
(f) any and all obligations of the Selling Parties or any of
them for indebtedness for borrowed money, including without
PAGE 22
<PAGE>
limitation, Seller's line of credit with Silicon Valley Bank or
other lender, long-term debt to Stephen L. Watson, and
capitalized leases for equipment not expressly assumed by Buyer
hereunder (shown on the audited balance sheet of Seller as at
March 31, 1995 as $1,423,470, $300,000 and $27,011,
respectively), and any and all obligations of the Selling Parties
under operating leases or for intercompany obligations;
(g) any and all debts, liabilities and obligations of the
Selling Parties or any of them incurred or accrued with respect
to any period, or circumstances, or state of facts or
occurrences, on or prior to the Closing Date, relating to
bonuses, salaries, wages, incentive compensation, compensated
absences, workmen's compensation, FICA, unemployment taxes,
employee benefits, deferred compensation, wage continuation,
severance, termination, pension, section 401(k) plans, cafeteria,
retirement, profit-sharing or similar plans or arrangements and
any and all vacation, holiday or sick pay or leave incurred or
accrued with respect to any employees of the Selling Parties or
any of them whether or not such employees become employees of
Buyer, and any and all liabilities or obligations incurred or
accrued under Benefit Plans (as such term is defined in Section
4.12(a), including, without limitation, contractual and statutory
wage continuation, severance, reemployment assistance,
termination pay and other benefits as may be provided in the
Employee Retention Plan included as part of the Transition Plan
referred to in Section 4.4(e) thereof.
(h) any and all domestic and foreign federal, state and local
income, payroll, property, sales, use, franchise or value added
tax liabilities, imposed on the Selling Parties or any of them or
with respect to income or activities of the Selling Parties or
any of them, including assessments and governmental charges or
levies imposed in respect of such taxes; its being understood
that Buyer shall be responsible for sales tax properly invoiced
and included as part of Receivables transferred to Buyer and use
tax imposed on it from and after the Closing Date.
(i) any and all obligations and liabilities of the Selling
Parties or any of them arising under this Agreement (including,
PAGE 23
<PAGE>
without limitation, indemnification obligations and obligations
to pay expenses arising out of this Agreement), or from its
failure to perform any of its agreements contained herein or
incurred by it in connection with the consummation of the
transactions contemplated hereby, or for which any of the Selling
Parties is responsible under this Agreement, including, without
limitation, fees of lawyers, accountants and other advisors;
(j) any and all liabilities and obligations with respect to
claims, suits, legal, administrative, arbitral or other actions,
proceedings and judgments with respect to causes of action or
disputes arising, and other non-contractual liabilities of the
Selling Parties or any of them asserted or imposed, or arising
out of, any events occurring, or circumstances or state of facts
existing, on or prior to the Closing Date (including, without
limitation, under the Mail or Telephone Order Merchandise Rule in
respect of the acceptance or receipt of money or credit by Seller
prior to the Closing for product not theretofore shipped), or any
product liability or warranty claim with respect to products
sold, licensed or distributed or services rendered by the Selling
Parties or any of them prior to the Closing Date;
(k) any and all leases of real property or improvements
thereon, including, without limitation, any and all premises
occupied by any of the Selling Parties, all leases of tangible
personal property not listed on Schedule 1.1(g) hereto, and the
other leases specified in item 2.5(k) of the Disclosure Schedule;
(l) any commitment, liability or obligation under any
Contracts other than Assumed Contracts; and
(m) all liabilities and obligations arising in respect of
closing down and terminating the operations of Seller relating to
the Business and the operations of SDEV Germany, including,
without limitation, all rent and utility charges, taxes, vendor
and supplier terminations, and statutory and contractual wage
continuation, severance, reemployment assistance, termination and
other benefits payable in respect of the continuation of the
Business, including the operations of Seller and SDEV Germany, by
PAGE 24
<PAGE>
Buyer, the failure of Buyer to retain employees of Seller or SDEV
Germany or the consummation of the transactions contemplated
hereby (collectively, "Shut-Down Expenses"), subject to Section
2.8 hereof; and any and all liabilities and obligations under
Work Force Laws (as defined in Section 7.11).
6 Tangible Net Asset Requirement; Revenue Maintenance.
(a) For purposes hereof:
(i) The term "Tangible Net Assets" shall mean
an amount equal to the difference between the total tangible
Purchased Assets and the liabilities of the Business included as
"accounts payable-trade" and "other accrued expenses" in respect
of the Business, in all cases of the type which would be set
forth on a balance sheet of the Business in accordance with
generally accepted accounting principles consistently applied,
after taking into account the Permitted Adjustments, but not
including Excluded Assets or Excluded Liabilities.
(ii) The term "Revenue Measurement Period"
shall mean the thirty-day measurement period ending on the date
prior to the Closing Date.
(iii) The terms "Estimated Closing Balance
Sheet" and "Estimated Statement of Revenue" (collectively, the
"Estimated Statements"), and the "Closing Balance Sheet" and
"Closing Statement of Revenue" (collectively, the "Closing
Statements") are defined in this Section 2.6.
(iv) The term "Permitted Adjustments" shall
mean with respect to the Estimated Statements and Closing
Statements, and for purposes of calculating Estimated Tangible
Net Assets and Tangible Net Assets, the following: (i) the amount
of all indebtedness for borrowed money and the liabilities not
included as Assumed Liabilities shall not be included, (ii) the
amount of any and all Receivables outstanding which were included
(to the extent not reserved against or written-off) in an
Estimated Statement or Closing Statement but which in the good
PAGE 25
<PAGE>
faith judgment of the Selected Accountants are considered to be
uncollectible and are actually written off, or are in excess of
the stated allowance for doubtful accounts of the Selling Parties
therefor as of the Closing Date, shall not be included, unless
such excluded Receivables are collected by Buyer within thirty
(30) days after the Closing, (iii) the amount of all tax credits,
refunds and other benefits included on the Estimated or Closing
Statements but not available to Buyer after the Closing by virtue
of the change in control, consolidated return regulations, by
contract or otherwise, shall not be included, (iv) the carrying
value of all assets not transferred to Buyer following the
Closing, including Excluded Assets, shall not be included, (v)
one-half of the costs associated with the preparation of the
Estimated and Closing Statements shall be reflected on the
Estimated and Closing Balance Sheets as an expense and shall be
deducted from Tangible Net Assets, except to the extent paid by
Seller to Buyer in cash, and (vi) the amount of all returns prior
to the delivery of the Closing Statements in excess of the stated
return rate of the Selling Parties shall not be included as a
Receivable, but may be included as Inventory if of merchantable
quality for sale in the ordinary course of business.
(b) Within five (5) days prior to the Closing Date, Buyer
and Seller shall in good faith jointly prepare an estimate of the
Closing Balance Sheet (the "Estimated Closing Balance Sheet") and
Statement of Revenue (the "Estimated Statement of Revenue"),
utilizing the books and record of the Selling Parties and the
taking of a physical inventory, in accordance with generally
accepted accounting principles and as herein provided for the
respective Closing Statement, as adjusted to take into account
good faith estimates of the Permitted Adjustments.
If the Tangible Net Assets of the Business being
purchase as set forth on the Estimated Closing Balance Sheet
reflects (i) Tangible Net Assets of the Business being purchased
less than $1,500,000 as of the Closing Date, the Closing Payment
shall be reduced, dollar for dollar, by an amount equal to such
shortfall, or (ii) Tangible Net Assets of the Business being
purchased more than $1,500,000 as of the Closing Date, the
Closing Payment shall be increased, dollar for dollar, by an
PAGE 26
<PAGE>
amount equal to such excess. If during the Revenue Measurement
Period the revenue from operations of the Business being
purchased hereunder, as shown on the Estimated Statement of
Revenue, shall be more than twelve percent (12%) less than the
revenue for such period reflected on the Transition Plan
contemplated by Section 4.4(e) hereof, calculated pursuant to
this Section 2.6, the Closing Payment shall be reduced by the
amount determined in accordance with Section 2.6(h) below. The
net amount of any and all such adjustments pursuant to this
paragraph is herein referred to as the "Estimated Adjustment."
(c) As promptly as practicable after the Closing Date but in
no event later than forty-five (45) days thereafter, Buyer shall
oversee and cause to be prepared by such of either Seller's or
Buyer's auditors as shall be selected by Buyer (the "Selected
Accountants") and delivered to Buyer and Seller an audited
balance sheet of the Business being purchased hereunder, the
Purchased Assets and Assumed Liabilities as at the close of
business on the day immediately preceding the Closing Date, and
an unaudited statement of revenue from operations of the Business
being purchased hereunder for the Revenue Measurement Period,
together with the report of the Selected Accountants, addressed
to Buyer and Seller, stating that its examinations of such
closing date balance sheet and statement of revenue were made in
accordance with U.S. generally accepted accounting principles and
applied on a basis consistent with such U.S. generally accepted
accounting principles and the financial statements of Seller as
at and for the period ended March 31, 1995, previously furnished
to Buyer. Such balance sheet, as so audited, and as adjusted to
take into account the Permitted Adjustments, is referred to
herein as the "Closing Balance Sheet" and such statement of
revenue, as so adjusted, is referred to herein as the "Closing
Statement of Revenue". The cost of such audit and the
preparation of the Estimated and Closing Statements by the
Selected Accountants shall be shared equally by Buyer and Seller;
and Seller's share thereof shall be an Excluded Liability, and
paid to Buyer on receipt of an invoice therefor.
PAGE 27
<PAGE>
(d) The scope of the audit and the procedures to be followed
shall be agreed upon by the Selected Accountants, Seller and
Buyer prior to the commencement of field work. The scope of the
engagement and procedures to be followed with respect to the
Closing Statement of Revenue shall be determined by Buyer and the
Selected Accountants. Buyer and its accountants shall be
provided with all information used to value or record balance
sheet or revenue items and have the right to witness or
participate in the taking and pricing of the physical inventory.
In addition, Buyer and its accountants shall have full access to
review the work papers of Seller's accountants, and shall have
access to the books and records of the Selling Parties as shall
be necessary in connection with such audit simultaneously with
the delivery of such books and records to the Selected
Accountants.
(e) The calculation of Tangible Net Assets set forth in the
Closing Balance Sheet and revenue on the Closing Statement of
Revenue shall be deemed to be conclusive and binding upon the
parties, unless at or prior to the fifth business day following
the completion of the Closing Balance Sheet or Closing Statement
of Revenue and its delivery to Buyer and Seller, Seller or Buyer
shall give written notice to the other that it objects to the
valuation, inclusion or omission of any item. Such notice shall
specify Seller's or Buyer's objections to the computation of
Tangible Net Assets or revenue, citing the items or principles
disputed. In the event that Seller and Buyer are unable to
mutually agree upon the valuation or amount of any disputed item
set forth in such notice within twenty (20) days after the
receipt thereof by the non-objecting party, the parties shall
submit the unresolved items to arbitration by a firm of
independent public accountants to be selected jointly by Buyer
and Seller. Such accounting firm shall be requested to consider
the respective positions of the parties and render an opinion as
to the valuation or amount of the disputed items. The
determination of such jointly selected accounting firm shall be
conclusive and binding upon the parties hereto. The cost of such
accounting firm shall be paid by the non-prevailing party. A
party shall be deemed to have prevailed with regard to disputed
matters if its last offer or demand immediately prior to
submission to such accounting firm is closer to the final
resolution of the disputed matters than the other party's offer
or demand.
PAGE 28
<PAGE>
(f) If the Tangible Net Assets of the Business being purchased
shown on the Closing Balance Sheet as finally determined in
accordance with the above shall be more or less than $1,500,000
(the shortfall or excess being referred to as the "Final
Adjustment"), Buyer or Seller shall pay to each other, at the
Post- Closing Settlement, an amount necessary to reconcile the
Estimated Adjustment and the Final Adjustment. For example, if
such Tangible Net Assets shall be less than $1,500,000, Buyer and
Seller, as the case may be, shall make the following payments:
(i) Buyer shall pay to, or on behalf of, the
Selling Parties, as allocated between them as determined by
Seller, an amount equal to the amount by which the Estimated
Adjustment exceeds the Final Adjustment, if any; or
(ii) Seller shall pay to Buyer an amount
equal to the amount by which the Final Adjustment exceeds the
Estimated Adjustment, if any, and for such purposes, Seller shall
be entitled to cause to be delivered to Buyer under the Escrow
Agreement an aggregate amount (together with any adjustment
pursuant to Section 2.6(g) below) up to $500,000, and any unpaid
balance remaining after depletion of the Escrow Fund to (but not
in excess of) $500,000 shall be payable to Buyer in cash by
Seller.
PAGE 29
<PAGE>
(g) Without limiting the foregoing, if during the Revenue
Measurement Period, the revenue from operations of the Business
being purchased hereunder (after taking into account the
Permitted Adjustments), as shown on the Closing Statement of
Revenue as finally determined in accordance with the above, shall
be more than twelve percent (12%) less than the revenue for such
period reflected on the Transition Plan contemplated by Section
4.4(e) hereof (calculated as the weighted average between the two
months within which such Revenue Measurement Period arises if
such period does not end at a month-end), the Purchase Price
shall be reduced by and the Selling Parties shall pay and/or
cause the Escrow Agent to pay from the Escrow Fund to Buyer at
the Post-Closing Settlement, the amount specified below;
provided, that the aggregate amount payable from the Escrow Fund
for all adjustments pursuant to this Section 2.6 shall not exceed
$500,000:
<TABLE>
<CAPTION>
Negative Variation Total
to Transition Plan Reduction
<S> <C>
0 to 12% 0
more than 12 and up $1,000,000
to 17%
more than 17 and up $2,000,000
to 27%
more than 27 and up $4,000,000
to 32%
more than 32 and up $6,000,000
to 42%
more than 42% $8,000,000
</TABLE>
For purposes of determining the variance from the
Transition Plan of such revenue for the calculation of such
revenue adjustment only (and without affecting the adjustment
based on Tangible Net Assets in any way), the following
adjustments shall be made:
(i) Potential revenue associated with
unfilled advertising contracts (i.e., catalog insertion orders)
PAGE 30
<PAGE>
that are validly signed by advertisers on the Closing Date, and
subsequently within thirty (30) days after the Closing Date are
placed in the regularly scheduled TPS catalog and the currently
scheduled Applications Development Digest and are paid for by
such advertisers within sixty (60) days after the actual catalog
drop date of the TPS catalog which includes such advertisement,
shall be deemed to be considered as revenue for purposes of
determining any adjustment to the Closing Payment or Purchase
Price based on revenue (but not Tangible Net Assets),
notwithstanding that under generally accepted accounting
principles such revenue would not then be recognized; and
(ii) Eighty percent (80%) of the value of
backlog associated with announced but unreleased Powerbuilder 5.0
at Closing will be considered revenue associated with the Revenue
Measurement Period for purposes of determining the revenue-based
adjustment, provided such backlog consists of valid customer
purchase orders and on weighted average is priced at ten percent
(10%) gross margin; provided, further, that the revenue
adjustment pursuant to this clause (ii) shall in no event exceed
five percent (5%) of the total revenue for the Revenue
Measurement Period. All cancellations and returns associated
with such backlog that occur during the forty-five (45) days
immediately following Closing will be eliminated from the gross
and any backlog that remains unfilled through no fault of Buyer
at the end of said forty-five (45) day period shall likewise be
subtracted from the gross amount.
(h) Any payments or offsets required to be made following
the Closing, if any, shall be paid and made at the post-closing
settlement (the "Post-Closing Settlement"), which shall take
place at the offices of Buyer's counsel at 11:00 a.m. local time
on the tenth (10th) business day following the date that the
Closing Balance Sheet and Closing Statement of Revenue become
final and binding upon the parties, or at such other time and
place as Buyer and Seller shall agree in writing.
7 Collection of Accounts Receivable. (a) Each of the
Selling Parties agrees that Buyer shall have the right and
authority from and after the Closing to collect for its own
account all Receivables and other items which shall be included
PAGE 31
<PAGE>
within the Purchased Assets and to endorse with the name of any
of the Selling Parties any checks received on account of any such
Receivables or other items; and, in furtherance thereof,
effective at the Closing, each of the Selling Parties shall
transfer to Buyer any and all lock boxes into which such
Receivables are sent, and hereby constitutes and appoints Buyer
its attorney-in-fact to so endorse and/or deposit such checks.
Each payment collected by Buyer after the Closing Date from any
person or entity who is an account debtor of any Receivable
constituting a Purchased Asset shall be applied against the
oldest outstanding Receivable of such account debtor in the case
of payments on account, unless payment shall be specified
otherwise, in which event payment shall be applied to the
accounts receivable specified by the account debtor as being paid
thereby.
(a) From and after the Closing Date, Buyer or its agents
shall be entitled to contact accounts of the Selling Parties
conveyed to Buyer hereunder to disclose the sale of such accounts
and the Business and to direct payment to Buyer as it shall
determine. Each of the Selling Parties shall hold in trust for
and immediately deliver to Buyer any and all cash, checks,
drafts, notes, money orders and other evidences of payment of any
Receivable received by such Selling Party, and also amounts paid
to a Selling Party in respect of sales of goods or services
invoiced by Buyer, in the original form received. When remitting
sums to Buyer as aforesaid, the Selling Parties shall, to the
extent practicable, specifically identify the Receivable with
respect to which such payment relates.
8 Reimbursement of Certain Shut-Down Expenses. The Selling
Parties have established and furnished to Buyer a Shut-Down Plan
for SDEV Germany, reflecting an itemization of any and all Shut-
Down Expenses relating to SDEV Germany, including, without
limitation, wage continuation, severance, reemployment
assistance, termination pay and the benefits payable to each
employee pursuant to any applicable contract, guild or trade
agreement, or sections 419 and 613(a) of the BGB (German Civil
Code), and a timetable therefor, in form and substance reasonably
satisfactory to Buyer (the "German Shut-Down Plan"). A copy of
PAGE 32
<PAGE>
the German Shut-Down Plan is included as item 2.8 to the
Disclosure Schedule. Actions with employees under the German
Shut-Down Plan shall be coordinated between Buyer and Seller.
Upon presentation to Buyer of documentation reasonably
satisfactory to Buyer evidencing such payment, Buyer shall
reimburse SDEV Germany (within thirty days) for one-half of the
portion of the Shut-Down Expenses paid by SDEV Germany to its
employees in respect of such statutory severance pursuant to the
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 $85,000; provided that such maximum reimbursable
amount shall be reduced, on a dollar for dollar basis, by the
amount of the severance set forth on the German Shut-Down Plan in
respect of each employee of SDEV Germany who accepts employment
with Buyer or any subsidiary thereof.
ARTICLE 3
3. Closing; Deliveries; Conditions Precedent.
1 Closing.
(a) The Closing under this Agreement (the "Closing") shall
take place at the offices of Testa, Hurwitz & Thibeault, LLP,
High Street Tower, 125 High Street, Boston, Massachusetts 02110,
at 10:00 a.m., local time, on June 28, 1996 or such other date,
place or time as the parties hereto shall mutually agree upon
(the "Closing Date").
(b) All proceedings to be taken and all documents to be
executed and delivered by all parties at the Closing shall be
deemed to have been taken and executed simultaneously and no
proceedings shall be deemed taken nor any documents executed or
delivered until all have been taken, executed and delivered.
2 Deliveries of Selling Parties. At the Closing each of the
Selling Parties shall deliver to Buyer:
PAGE 33
<PAGE>
(a) a Bill of Sale and Assignment (the "Bill of Sale") in the
form of Exhibit 3.2(a) hereto;
(b) an Assignment of Copyrights in the form of Exhibit 3.2(b)-
1 hereto, an Assignment of Patents in the form of Exhibit 3.2(b)-
2, and an Assignment of Trademarks in the form of Exhibit 3.2(b)-
3, in each case in recordable form;
(c) possession and control over, (i) all Programs in machine
readable object code and source code for computers, including
receipt by Buyer of a "gold" disk complete back-up of Seller's
MIS system, Internet Web Site documentation, programs and
materials, (ii) such Programs' Documentation in machine readable
form or in paper or in other electronic medium (including, but
not limited to, user Documentation, technical Documentation,
production materials and marketing materials) in the possession
of such Selling Party, (iii) all advertising, artwork and related
creative materials, catalog insertions completed and in progress
and page layouts in existence on the Closing Date used for
current advertising and packaging in camera ready and other
existing form (it being understood that all deliverables conveyed
by electronic transmission shall be made using mutually
acceptable protocols), and (iv) all Files and Records; and a
verification report of Smith Gardener Associates, Inc.,
reasonably acceptable to Buyer and addressed to Buyer and Seller,
to the effect that the MACs to be transferred to Buyer shall be
complete and machine readable;
(d) original copies (including an assignment thereof to Buyer
and, if necessary, the other party's written consent thereto) of
all Assumed Contracts;
(e) a certificate of good standing of Seller, issued as of a
recent date by the Secretary of State of the State of Delaware
and comparable evidence with respect to SDEV Germany;
(f) a certificate of the Secretary or an Assistant Secretary
of each Selling Party, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to (i) the
resolutions of the Board of Directors of such Selling Party
authorizing the execution, delivery and performance of this
PAGE 34
<PAGE>
Agreement and each exhibit hereto to which it is a signatory and
the consummation of the transactions contemplated herein and
therein and the consents of the stockholders (and classes or
series of stockholders) of each Selling Party adopting this
Agreement in accordance with applicable law; and (ii) the
incumbency and signatures of the officers of each Selling Party
executing this Agreement and any Seller Documents (as hereinafter
defined);
(g) a copy (in paper and electronic form) of its Mailing List;
(h) possession of, and control over, all Inventory, together
with a listing of where all such Inventory is located;
(i) the written consents and approvals required by Section
3.6(e) of this Agreement;
(j) the certificate required by Section 3.6(f) hereto;
(k) a certificate executed by the Chief Financial Officer
of Seller affirming that the Estimated Closing Balance Sheet
fairly reflects the Tangible Net Assets of the Business purchased
as of the Closing Date and the Estimated Statement of Revenue
fairly reflects Seller's revenue for the Revenue Measurement
Period, in accordance with Section 2.6; and
(l) all other documents, materials, items and property
required by the terms of this Agreement to be delivered to Buyer
under or to effect the provisions of this Agreement.
3 Deliveries of Buyer. At the Closing, Buyer will deliver
to Seller:
(a) cash, certified check(s) and/or wire transfer(s) in the
amount required by Sections 2.2(a) and (b) hereof;
PAGE 35
<PAGE>
(b) the Undertaking;
(c) a certificate of good standing of Buyer, issued as of a
recent date by the Secretary of State of the State of Delaware;
(d) a certificate of the Secretary or an Assistant Secretary
of Buyer, dated the Closing Date, in form and substance
reasonably satisfactory to Seller, as to (i) the resolutions of
the Board of Directors of Buyer authorizing the execution
delivery and performance of this Agreement and each exhibit
hereto to which it is a party and the consummation of the
transactions contemplated herein and therein; and (ii) the
incumbency and signatures of the officers of Buyer executing this
Agreement and each exhibit hereto to which it is a party; and
(e) the certificate required by Section 3.7(d) hereof; and
(f) all other documents required by the terms of this
Agreement to be delivered to Seller at the Closing under or to
effect the provisions of this Agreement.
4 Further Assurances. At any time and from time to time
after the Closing, 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, and to confirm Buyer's title to, all
of the Purchased Assets, to put Buyer in actual possession and
operating control thereof, and to assist Buyer in exercising all
rights with respect thereto. Buyer and each of the Selling
Parties hereby agree to cooperate to effectively transfer the
Business worldwide to Buyer.
5 Certain Agreements to be Executed and Delivered and
Certain Actions to be Taken at or prior to the Closing. The
following agreements shall be executed and delivered by each
PAGE 36
<PAGE>
party thereto and delivered to the other at the Closing or at
such earlier time or shall be specified below:
(a) Seller's and SDEV Germany's lenders shall have
consented to this Agreement and released their liens on the
Purchased Assets, and there shall have been delivered to Buyer
executed counterparts reasonably satisfactory in form and
substance to Buyer and its counsel; and
(b) Licensors of Seller's MIS system, including without
limitation MACs, shall have consented to the transfer thereof to
Buyer in accordance with this Agreement and the re-transfer by
Buyer as it shall determine; and
(c) Seller's and SDEV Germany's landlord and warehousemen
shall have released their liens on the Purchased Assets, and
there shall have been delivered to Buyer executed counterparts
reasonably satisfactory in form and substance to Buyer and its
counsel.
6 Conditions Precedent of Buyer. The obligations of Buyer
under this Agreement to proceed with the purchase and other
transactions contemplated hereby, are, at the option of Buyer in
its sole discretion, subject to the fulfillment of all of the
following conditions at or prior to the Closing, and each of the
Selling Parties shall use commercially reasonable efforts to
cause each such condition to be fulfilled:
(a) No Litigation. No action, suit, proceeding or
investigation shall have been instituted against Buyer or any of
the Selling Parties and be continuing before or by any court,
tribunal or governmental body or agency or have been threatened,
and be unresolved, to restrain or prevent, or to obtain
substantial damages by reason of, any of the transactions
contemplated hereby;
(b) Representations. The representations and warranties of
each of the Selling Parties contained in this Agreement, and any
Schedules hereto and any certificate or documents delivered in
accordance with this Agreement shall be true and correct in all
PAGE 37
<PAGE>
material respects at the time of the Closing with the same force
and effect as though such representations and warranties were
made at that time except for changes expressly permitted by this
Agreement;
(c) Performance of Covenants. Each covenant, agreement and
obligation required by the terms of this Agreement to be complied
with and performed by the Selling Parties or any of them at or
prior to the Closing shall have been duly and properly complied
with and performed;
(d) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any material adverse
change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or results of the
Business or in the value of the Purchased Assets or in the
utilizability thereof by Buyer, and Seller shall not have
suffered a substantial fire or other casualty loss or damage; and
without limiting the foregoing, if any of the following shall
occur, then a material adverse change shall be deemed to have
occurred, entitling Buyer to withdraw from this Agreement and to
immediate receipt of the Break-up Fee contemplated by Section 7.7
hereof: (i) the Estimated Closing Balance Sheet shall reflect
Tangible Net Assets of less than $900,000, or the Estimated
Statement of Revenue shall reflect revenues during the Revenue
Measurement Period of twenty-five percent (25%) or more less than
the revenue for such period reflected in the Transition Plan, or
(ii) the weighted average product gross margin achieved during
the Revenue Measurement Period is less than 13%, or (iii) the
dollar backlog for insertion orders for the next scheduled TPS
catalog is less than 75% of the same backlog for the identical
calendar period of the then most recent TPS catalog (such
insertion order backlog to be priced at a weighted average per
page rate no less than 85% of that of the then most recent TPS
catalog); provided, however, that if Buyer shall take over the
supervision of and management and control of the Business as
contemplated by Section 6.10(c) below and the Transition Plan,
then and only in such event, the condition under this Section
shall be limited to a substantial fire or other casualty loss or
damage and any of the occurrences set forth in clauses (i), (ii)
or (iii) of this Section;
PAGE 38
<PAGE>
(e) Consents. All consents necessary to the assignment to
Buyer of the Contracts specified on Schedule 3.6(e), and all
approvals or actions necessary to the assignment to Buyer of
those governmental licenses as specified on such Schedule, shall
have been obtained by the Selling Parties, and there shall have
been delivered to Buyer executed counterparts reasonably
satisfactory in form and substance to Buyer and its counsel, of
all such consents, approvals and actions;
(f) Certificate. There shall have been delivered to Buyer a
certificate executed by the President of each Selling Party,
dated the date of the Closing, certifying that the conditions set
forth in subsections (a), (b), (c), (d) and (e) of this Section
3.6 have been fulfilled;
(g) Certain Agreements. Each other document, instrument and
agreement contemplated hereby shall have been executed and
delivered by each party thereto other than Buyer;
(h) Stockholder Approval. This Agreement and each exhibit
hereto to which a Selling Party is a party and the transactions
contemplated hereby and thereby, including the change of
corporate name of each Selling Party, shall have been duly
approved by written consent or affirmative vote of the requisite
holders of shares of capital stock of each Selling Party entitled
to vote thereon and by the written consent or affirmative vote of
the requisite holders of the shares of each class and series of
capital stock of each Selling Party entitled to vote thereon, as
required, in the case of Seller, by the General Corporation Law
of the State of Delaware, the Certificate of Incorporation of
Seller and all applicable federal and state securities laws, and,
in the case of SDEV Germany, by applicable federal and local
German laws;
(i) Letter of Coopers & Lybrand. Buyer shall have received
a comfort letter addressed to Buyer from Coopers & Lybrand LLP,
independent certified public accountants, dated the Closing Date,
in form and substance reasonably satisfactory to Buyer;
PAGE 39
<PAGE>
(j) Escrow Agreement. Each of the Selling Parties shall
have executed and delivered to Buyer the Escrow Agreement
substantially in the form of Exhibit 2.2(b) hereto;
(k) Fairness Opinion At the reasonable request of Buyer,
Buyer shall have received an opinion of a firm reasonably
acceptable to Buyer, attesting to the fairness of the financial
terms of the transaction contemplated by this Agreement;
PAGE 40
<PAGE>
(l) Opinion of Counsel. Buyer shall have received the written
opinion of Seller's counsel covering the matters set forth on
Exhibit 3.6(l) hereto in form and substance reasonably acceptable
to Buyer and its legal counsel; and Buyer shall have received an
opinion from German counsel to the Selling Parties, dated the
Closing date, in form and substance satisfactory to Buyer;
(m) Financial Statements. Seller shall have delivered to
Buyer copies of the (i) audited consolidated balance sheet of
Seller as at March 31, 1996 and audited consolidated statements
of operations, stockholders' equity and cash flows, certified by
Coopers & Lybrand LLP, independent certified public accountants,
whose opinion shall be unqualified and (ii) unaudited
consolidated and consolidating balance sheets of each Selling
Party as at April 30, 1996, and unaudited consolidated and
consolidating statements of operations, stockholders' equity and
cash flow of each Selling Party for the period then ended,
prepared by Seller, and in each case certified by Seller's
President as being true, correct and complete in all material
respects and prepared from the books and records of Seller and
its subsidiaries as contemplated in Section 6.8 (collectively,
the "Recent Financial Statements"); and
(n) Proceedings. All legal matters and proceedings taken
in connection with the sale of the Purchased Assets by the
Selling Parties to Buyer as herein contemplated and the other
transactions contemplated by this Agreement shall be reasonably
satisfactory to Buyer's legal counsel.
7 Conditions Precedent of Selling Parties. The
obligations of the Selling Parties under this Agreement to
proceed with the sale contemplated hereby and to proceed with the
other transactions contemplated hereby, are, at the option of
Seller, subject to the fulfillment of all of the following
conditions at or prior to the Closing, and Buyer shall use
commercially reasonable efforts to cause each such condition to
be fulfilled:
(a) No Litigation. No action, suit, proceeding or
investigation shall have been instituted against any Selling
PAGE 41
<PAGE>
Party and be continuing before or by any court, tribunal or
governmental body or agency or have been threatened, and be
unresolved, to restrain or prevent, or to obtain substantial
damages by reason of, any of the transactions contemplated
hereby;
(b) Representations. The representations and warranties of
Buyer contained in this Agreement or any certificates or
documents delivered in accordance with this Agreement shall be
true and correct in all material respects at the time of the
Closing with the same force and effect as though such
representations and warranties were made at that time except for
changes expressly permitted by this Agreement;
(c) Performance of Covenants. Each covenant, agreement and
obligation required by the terms of this Agreement to be complied
with and performed by Buyer at or prior to the Closing, shall
have been duly and properly complied with and performed;
(d) Certificate. There shall have been delivered to Seller
a certificate executed by an officer of Buyer, dated the date of
the Closing, certifying that the conditions set forth in
subsections (a), (b) and (c) of this Section 3.7 have been
fulfilled;
(e) Escrow Agreement Buyer shall have executed and
delivered to Seller the Escrow Agreement substantially in the
form attached hereto as Exhibit 2.2(b).
(f) Opinion of Counsel. Seller shall have received the
written opinion of Buyer's counsel covering the matters set forth
on Exhibit 3.7(f) hereto in form and substance reasonably
acceptable to Seller and its legal counsel; and
(g) Proceedings. All legal matters and proceedings taken in
connection with the sale of the Purchased Assets by the Selling
Parties to Buyer and the assumption of the Assumed Liabilities by
Buyer as herein contemplated and the other transactions
contemplated by this Agreement shall be reasonably satisfactory
to Seller's counsel.
PAGE 42
<PAGE>
ARTICLE 4
4. Representations and Warranties of Selling Parties. Each of
the Selling Parties hereby jointly and severally represents and
warrants to Buyer as follows (except as otherwise disclosed in
the Disclosure Schedule delivered concurrently herewith by Seller
to Buyer):
1 Organization, Standing and Qualification.
(a) Each of the Selling Parties is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, as set forth in Schedule
4.1 of the Disclosure Schedule; and has all requisite power and
authority and is entitled to own, lease and operate its
properties and to carry on its business as and in the places such
properties are now owned, leased or operated and where such
business is presently conducted. Each of the Selling Parties is
qualified to do business and is in good standing in each state or
jurisdiction listed in Schedule 4.1 of the Disclosure Schedule,
which states constitute all states in which the failure to be so
qualified could have a material adverse effect on the condition
(financial or otherwise), business, properties, assets,
liabilities, prospects or results of the operations of a Selling
Party.
(b) No part or aspect of the Business has been conducted
through any direct or indirect subsidiary or any direct or
indirect affiliate of Seller, other than SDEV Germany, or of any
stockholder of any thereof. All of the outstanding capital stock
of SDEV Germany is validly issued, fully paid and nonassessable.
Except as set forth in this Agreement in Schedule 4.1(b), there
are no agreements, arrangements, options, warrants, calls, rights
or commitments of any character (i) relating to the issuance,
sale, purchase or redemption of any capital stock, partnership
interest or other equity interest of SDEV Germany, or (ii)
requiring it to purchase any capital stock, partnership interest
or other equity interest held by others. None of the issued and
outstanding shares of capital stock or partnership interests or
other equity interests of SDEV Germany has been issued in
PAGE 43
<PAGE>
violation of, or is subject to, any preemptive or subscription
rights. Except as set forth in this Agreement and in Schedule
4.1(b), there are no voting trust agreements or any other similar
contracts, agreements, arrangements, commitments, plans or
understandings restricting or otherwise relating to voting,
dividend, ownership or transfer rights of any shares of capital
stock or partnership interests or other equity interests of SDEV
Germany. Seller has good and valid title to, and beneficial
ownership of, all of the outstanding capital stock of SDEV
Germany, free from any and all Liens.
2 Authority. Each Selling Party has all requisite power and
authority to enter into this Agreement, the Bill of Sale and each
other agreement, document and instrument to be executed or
delivered by it in accordance with this Agreement (the "Seller
Documents") and to carry out the transactions contemplated hereby
and thereby. The execution, delivery and performance of this
Agreement and the Seller Documents by each Selling Party have
been duly authorized and approved by its board of directors and,
except for the adoption of this Agreement by the stockholders of
Seller, no other corporate proceedings on the part of any Selling
Party are necessary to authorize this Agreement, the Seller
Documents and the transactions contemplated hereby and thereby.
This Agreement has been duly authorized, executed and delivered
by each Selling Party and is the legal, valid and binding
obligation of each Selling Party enforceable in accordance with
its terms, and each of the Seller Documents has been duly
authorized by each Selling Party and upon execution and delivery
by such Selling Party will be a legal, valid and binding
obligation of such Selling Party enforceable in accordance with
its terms.
3 No Violation. The execution, delivery and performance of
the Seller Documents and the consummation of the transactions
contemplated hereby and thereby, including without limitation the
sale of the Purchased Assets to Buyer, will not (a) conflict with
or violate any provision of the Certificate of Incorporation or
By-Laws of any Selling Party, (b) with or without the giving of
notice or the passage of time, or both, result in a breach of, or
violate, or be in conflict with, or constitute a default under,
or permit the termination of, or cause or permit acceleration
under, any mortgage, indenture, loan agreement, security
PAGE 44
<PAGE>
document, deed of trust, capitalized lease, sales order,
governmental contract or distribution agreement, or any material
other agreement or instrument of any kind or character to which
any Selling Party is a party or by which it, or any of its
properties or assets are bound, or result in the loss or adverse
modification of any license, franchise, or other authorization
granted to or otherwise held by any Selling Party, (c) require
the consent of any party to any Contract, (d) result in the
creation or imposition of any Lien upon any of the Purchased
Assets, or (e) violate, with or without the giving of notice or
the passage of time, any law, rule or regulation or any order,
judgment, decree or award of any court, governmental authority or
arbitrator to which any Selling Party is subject or by which it
or its properties or assets may be bound or affected.
4 Financial Statements; Sales Information.
(a) Seller has delivered to Buyer copies of the financial
statements of Seller listed on Schedule 4.4(a) of the Disclosure
Schedule, including without limitation, the consolidated balance
sheet of Seller as of March 31, 1996 (the "Balance Sheet" and the
date thereof is the "Balance Sheet Date"). All of the financial
statements are complete and correct, have been prepared from the
books and records of Seller and its subsidiaries in accordance
with generally accepted accounting principles consistently
applied and maintained throughout the periods indicated and
fairly present the consolidated financial condition of Seller as
at their respective dates and the consolidated results of its
operations for the periods covered thereby. Such financial
statements do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of
business except as expressly specified therein, and include all
adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation. All of the Recent
Financial Statements, upon delivery to Buyer, shall be complete
and correct, shall have been prepared from the books and records
of Seller and its subsidiaries and shall fairly present the
consolidated financial condition of Seller as at the dates hereof
and the consolidated results of its operations for the period
covered thereby. Such statement of profits and losses will not
contain any items of special or nonrecurring income or any other
PAGE 45
<PAGE>
income not earned in the ordinary course of business except as
expressly specified therein, and such Recent Financial Statements
shall include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(b) At least ten days prior to the Closing Date and again
at the Closing, Seller shall deliver to Buyer an estimated
Closing Balance Sheet and estimated Statement of Revenue of the
Business being purchased hereunder, setting forth Seller's good
faith estimate of the Closing Balance Sheet and Closing Statement
of Revenue as of the scheduled Closing Date, prepared pursuant to
Section 2.6 hereof and reflecting Seller's good faith estimates
thereof.
(c) Attached to the Disclosure Schedule as item 4.4(c) are
copies of certain historical sales figures for each of the
Selling Parties for the Business for the periods indicated
thereon, and copies of weekly management reports of the Selling
Parties for the month preceding the date thereof. All of such
historical figures are true, correct and complete and are fairly
presented in all material respects.
(d) Except as and to the extent reflected or reserved
against on the Balance Sheet (including the notes thereto), or
set forth on Schedule 4.4(d) of the Disclosure Schedule, as of
the Balance Sheet Date, neither of the Selling Parties had any
debts, liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature whatsoever relating to or
arising out of any act, transaction, circumstance or state of
facts which occurred or existed on or before the Balance Sheet
Date, whether or not then known, due or payable (other than
contract obligations disclosed pursuant to this Agreement or not
required to be disclosed pursuant to this Agreement, which in
each case conform to the representations and warranties with
respect thereto in this Agreement).
(e) Seller has established and furnished to Buyer a
Transition Plan prepared by Seller and accepted by Buyer (the
"Transition Plan"), a copy of which is attached as item 4.4(e) to
the Disclosure Schedule relating to the operations of the Selling
Parties prior to the Closing, including, without limitation,
PAGE 46
<PAGE>
revenue targets and scheduled catalog drops. As more
particularly described therein, the Transition Plan provides for
revenue of at least $12,300,000 for the quarter ending June 30,
1996, allocated by month as follows: $3,600,000 for April 1996;
$4,200,000 for May 1996; and $4,500,000 for June 1996. The
Transition Plan sets forth the current plans and forecasts of the
Selling Parties, and the revenue targets therein were prepared in
good faith on the basis of information and assumptions (including
without limitation, assumptions as to a normal and historical mix
of revenues) which the Selling Parties believe to be reasonable.
Without limiting the foregoing, the Selling Parties have no
reason to believe that they will be unable to meet such revenue
targets or make such catalog drops. The Transition Plan also
includes the Employee Retention Plan, which shall be the
responsibility of the Selling Parties.
5 Title to and Condition of Purchased Assets; Leases.
(a) None of the Selling Parties owns any real property. Each
Selling Party has good and marketable title to all of the
Purchased Assets which it owns or uses in the Business or
purports to own, including, without limitation, all items which
are located on its premises or held in storage by or for it which
would constitute Inventory or Equipment if such Selling Party had
any right, title or interest therein, and to all leasehold and
franchise interests and all interests in all of the Contracts.
None of the Purchased Assets are subject to any Lien of any
nature whatsoever, direct or indirect, whether accrued, absolute,
contingent or otherwise.
(b) All of the tangible Purchased Assets (other than
Inventory) are in good operating condition and repair, reasonable
wear and tear excepted, are suitable for the purposes used and
are adequate and sufficient for all of the current operations of
such Selling Party relating to the Business. Each item of
Inventory now owned or hereafter acquired (and not subsequently
disposed of in the ordinary course of business) is of
merchantable quality for sale in the ordinary course of business,
and passes for what it purports to be in accordance with normal
trade standards. No Selling Party is aware of any fact which
PAGE 47
<PAGE>
could materially and adversely affect the future marketability of
Inventory. Each Selling Party has on hand sufficient Inventory
to fill all outstanding and reasonably expected sales orders and
licenses, subject only to backlog in respect of announced but
unreleased Powerbuilder 5.0.
(c) Each Selling Party enjoys peaceful possession of all
leasehold interests and personal property constituting any part
of the Purchased Assets and held under lease or license. All of
the Contracts (other than those which have been fully performed)
are legal, valid, binding and enforceable in accordance with
their respective terms against such Selling Party, and to the
best of each Selling Party's knowledge, against each other party
thereto, are in full force and effect and will be unaffected by
the sale or other transfer of the Purchased Assets to Buyer
hereunder so that, after such sale, Buyer will be entitled to the
full benefits thereof subject to no Lien. Each Selling Party is
in good standing and has met all of its obligations and paid all
amounts due under each Contract. There is not under any
Contract, any existing default or event which, after notice or
lapse of time, or both, would constitute a default by a Selling
Party, or to each Selling Party's best knowledge, by any other
party thereto, or result in a right to accelerate or loss of
rights by a Selling Party, or to each Selling Party's best
knowledge, by any other party thereto. To the best of each
Selling Party's knowledge, no party to any material Contract has
threatened to or is likely to breach, violate or terminate such
Contract. No amount payable or reserved under any Contract has
been assigned or anticipated and no amount payable under any
Contract is in arrears or has been collected in advance and to
the best of each Selling Party's knowledge, there exists no
offset or defense to payment of any amount due to Seller under a
Contract. True and complete copies of all Contracts (to the
extent in writing or if not in writing, an accurate summary
thereof), other than sales orders for products with end users,
have been delivered to Buyer.
(d) The Purchased Assets, including the Assumed Contracts, are
all of the assets, contracts, leases and licenses and all of the
other properties and rights of every type and description, real,
personal and mixed, tangible and intangible, which are necessary
or appropriate to the conduct of the Business as presently
PAGE 48
<PAGE>
conducted, and for Buyer to conduct all the Business in the same
manner, subject to the arrangements with respect to the occupancy
of the existing premises of Seller contemplated by Section 7.9
hereof.
(e) During the past three years, except as disclosed in
filings made by Seller with the Securities and Exchange
Commission, no Selling Party has, directly or indirectly,
purchased, leased or otherwise acquired any property or obtained
any services from, or sold, leased to others or otherwise
disposed of any property or furnished any services to, or
otherwise dealt with, in the ordinary course of business or
otherwise, except with respect to customary remuneration for
services rendered as an officer or employee of a Selling Party in
the ordinary course of business, any of its directors or officers
or any other person, firm or corporation which, directly or
indirectly, alone or together with others, controls, is
controlled by or is under common control with a Selling Party or
any director or officer thereof or any member of the family
thereof (an "Affiliate"). No Selling Party owes any amount to,
or has any contract with or commitment to any of its Affiliates
(other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary
course of business), and none of such persons owes any amount to
a Selling Party. No part of the property or assets of any
Affiliate of a Selling Party is used by a Selling Party in
connection with the Business.
(f) Each of the Selling Parties maintains mailing and
subscription lists and data bases which it uses in connection
with the marketing, distribution, sale and licensing of its
products, distribution of materials and otherwise in connection
with its business. No person or entity other than the Selling
Parties may utilize, or has utilized, any or all of the Mailing
List without the prior consent of Seller and Seller has not since
March 31, 1993 given any such consent, nor has any or all of the
Mailing List of a Selling Party been rented, leased or otherwise
made available since such date to any party for any purpose
whatsoever. The Mailing List is proprietary to the Selling
Parties, which own all right, title and interest in and to the
Mailing List. The Mailing List includes at least 120,000
PAGE 49
<PAGE>
customers as set forth in Seller's Form 10-K for the year ended
March 31, 1995, plus new customers since such date.
6 Proprietary Rights.
(a) The Selling Parties own or possess the perpetual and
royalty-free licenses and other rights to use all Proprietary
Rights used in connection with or necessary to conduct the
Business as it is presently operated (including, without
limitation, any necessary to create, publish, manufacture and
distribute the TPS catalog, TPS Web Site and the planned release
of the Applications Development Digest, and market, license and
sell products and services in connection therewith), all of which
are free and clear of any Liens and rights of others of any kind
and, to Seller's knowledge, in good standing and uncontested. No
Proprietary Rights are owned or licensed or held by any
shareholder, director, officer, entity controlled by a Selling
Party or any director, officer, consultant or employee thereof
other than a Selling Party itself. No Selling Party is
infringing upon or otherwise acting adversely to any copyrights,
trademarks, trademark rights, service marks, service names, trade
names, licenses or trade secrets or other Proprietary Rights or
intellectual property of any other person or entity, which
representation and warranty is made to the knowledge of the
Selling Parties with respect to third party software distributed
or resold by a Selling Party. No claim, suit, demand, proceeding
or investigation is pending, has been asserted or, to the
knowledge of the Selling Parties, is threatened against a Selling
Party with respect to, based on or alleging infringement of any
such rights or the proprietary rights or intellectual property of
any third party, or challenging the validity or effectiveness of
any license for such rights, and no Selling Party knows of any
basis for any such claim, suit, demand, proceeding or
investigation.
(b) The Selling Parties have the exclusive right to
manufacture, develop, publish, market, license or sell the
products set forth on Schedule 4.6(b) of the Disclosure Schedule
in such media and by print or electronic means as shall be
specified on such Schedule, including the TPS catalog, the TPS
Web Site and the planned Applications Development Digest (the
PAGE 50
<PAGE>
"Proprietary Products"). Except as disclosed to Buyer on the
Disclosure Schedule, no person or entity other than Seller may
manufacture, develop, publish, market, license or sell all or any
part of the Proprietary Products without the prior consent of
Seller and Seller has not given any such consent and Seller owns
or is the exclusive licensee (as shall be designated on such
Schedule) of all right, title and interest in and to the
Proprietary Products and the exclusive right to apply for
copyright protection therefor. No director, officer, employee or
independent contract of a Selling Party has in his or her
personal possession outside the offices of such Selling Party,
for safekeeping, convenience of work or otherwise, any
proprietary material of such Selling Party. To the best of
Seller's knowledge, none of the individuals or entities who have
performed services in connection with the development of any of
the Proprietary Products, as employees or as independent
contractors, or any other employee of a Selling Party, holds any
proprietary rights with respect to such Proprietary Products and
each of such employees and independent contractors has signed an
employment contract or confidentiality agreement with Seller in
the form annexed as item 4.6(b) to the Disclosure Schedule, which
contains a covenant prohibiting the use or disclosure of
confidential information and proprietary rights.
(c) Schedule 4.6(c) of the Disclosure Schedule contains a true
and complete list of all software licensed to, owned, developed,
or published by a Selling Party in connection with the Business,
with all such software owned by a Selling Company designated by
an asterisk (*) (the "Company Software") as well as a description
of any instructions or sequences of instructions, in whatever
form embodied, which are included in any of the Company Software
and which requires the consent (whether subject to royalty or
otherwise) of a party other than a Selling Party in order for any
such Company Software (including without limitation sales,
marketing and training programs, Seller's MIS system, and
software to create, publish, manufacture and distribute the TPS
catalog or Web Site) to be sold, transferred, used, licensed,
updated, enhanced or modified or integrated with other software
by a Selling Party, Buyer or other party together with true and
correct copies of all contracts between or among a Selling Party,
on the one hand, and such authors or licensors, on the other
PAGE 51
<PAGE>
hand. To the best of Seller's knowledge, there has been no
publication or public distribution of any of the source codes of
any of the Company Software that would in any way affect the
right of Seller or Buyer to seek copyright protection for such
Company Software. Item 4.6(c) to the Disclosure Schedule
contains true and correct copies of each form of license
agreement which has been used by Seller, in connection with the
marketing, license and distribution of the Company Software. To
the best of Seller's knowledge, each end user of Company Software
has either signed a license agreement or has acquired the Company
Software pursuant to a so-called "shrink wrap license." With
respect to the Contracts pertaining to Company Software entered
into by a Selling Party, such Selling Party has licensed the
Company Software and not sold it, thus retaining ownership of the
underlying software. Seller is not aware of any claims actually
or purporting to be within the scope of any warranty coverage,
express or implied, afforded to licensees of any Company Software
or of any errors, omissions or failures to perform. To the best
of Seller's knowledge, there are no bugs in the Company Software
reasonably detectable with normal use of the Company Software
except as set forth in the Disclosure Schedule, all of which can
be corrected by Buyer without unreasonable effort or expense.
(d) The Selling Parties have the non-exclusive right to
market or sell the products set forth on Schedule 4.6(d) of the
Disclosure Schedule in connection with the Business in such media
and by print or electronic means as shall be specified on such
Schedule.
7 Litigation.
(a) There is no action, suit, proceeding, arbitration or
investigation pending against or affecting any Selling Party or
the transactions contemplated by this Agreement, nor to the best
of the knowledge of any Selling Party, any basis therefor or
threat thereof which, in any case or in the aggregate, could if
adversely determined have a material advance effect on the
business, assets, liabilities, operations or financial condition
of such Selling Party, the Business or the Purchased Assets or
the use thereof by Buyer. No Selling Party is subject to any
court or administrative order, writ, injunction or decree,
PAGE 52
<PAGE>
applicable specifically to it or to its business, property or
employees, nor is it in default with respect to any order, writ,
injunction or decree, of any court or federal, state, municipal
or other governmental department, commission, board, agency or
instrumentality, domestic or foreign.
(b) Schedule 4.7 of the Disclosure Schedule sets forth a
complete list and description of all defective product or service
warranty and/or third party liability claims, other than returns
or exchanges of defective or unwanted goods in the ordinary
course of business consistent with industry practice, made
against any Selling Party with respect to Company Software during
the past three years and with respect to other software since
March 31, 1995, in each case, together with the resolution
thereof (whether under insurance policies or otherwise).
8 Compliance; Permits.
(a) No Selling Party, nor any officer or director thereof has
violated any law, rule, regulation, order, judgment or decree
applicable to any Selling Party, any of its employees, any of the
Purchased Assets and/or any aspect of the Business, including
without limitation, any laws, rules, regulations, ordinances,
codes, orders, judgments or decrees as to zoning, building
requirements or standards, import, export, environmental, health
and/or safety matters, and any rules and related regulations
promulgated by the Federal Trade Commission, including, without
limitation, the Mail or Telephone Order Merchandise Rule, which
violation could have a material adverse effect on the condition
(financial or otherwise), business, properties, assets,
liabilities, prospects or results of the operations of a Selling
Party, the Purchased Assets or the Business. Each Selling Party
has all licenses, consents, certificates, franchises, permits,
and authorizations issued by any department, board, commission,
bureau or instrumentality ("Licenses") necessary to conduct the
Business in the manner that it is currently conducted by it, and
none of operations of any Selling Party are being conducted in
any manner which violates in any material respect any of the
terms of conditions under which such License was granted. Each
License has been duly obtained, is valid and in full force and
effect, and is not subject to any pending or, to the knowledge of
PAGE 53
<PAGE>
a Selling Party, threatened administrative or judicial proceeding
to revoke, cancel or declare such License invalid in any respect.
No Licenses by their terms will terminate or lapse by reason of
the transaction contemplated by this Agreement.
(b) Neither of the Selling Parties nor any officer employee or
agent thereof, nor any other person acting on its behalf, has,
directly or indirectly, within the past five years given or
agreed to give any gift or similar benefit to any client,
customer, governmental employee or other person who is or may be
in a position to help or hinder the business of a Selling Party
(or assist a Selling Party in connection within any actual or
proposed transaction) which (i) might subject a Selling Party to
any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might
have had an adverse effect on the assets, operations or prospects
of such Selling Party or (iii) if not continued in the future,
might adversely affect the retention of such account or business
or the assets, operations or prospects of such Selling Party or
which might subject such Selling Party to suit or penalty in any
private or governmental litigation or proceeding.
9 Schedules. The Disclosure Schedule hereto contains a
true, complete and accurate list and description of the
following:
(a) all real property in which a Selling Party has an
ownership, leasehold or other interest or which is used by a
Selling Party in connection with the conduct of the Business;
(b) all items of Equipment, owned, leased or used by a Selling
Party in connection with the Business and setting forth with
respect to all such listed property an identification of all
leases relating thereto, including the parties thereto, the
current rental or other payment terms, and expiration date
thereof;
(c) all Proprietary Rights (including any licensed to a
Selling Party) specifying such Selling Party's interest therein
and in the case of any licensed to a Selling Party, the
PAGE 54
<PAGE>
expiration date of such license, or if owned by a Selling Party,
the date on, and manner in, which acquired; and all Contracts
(including Licenses) relating to any Proprietary Rights; and all
Licenses, permits and approvals;
(d) all fire, theft, casualty, liability, collision, personal
injury and other insurance policies insuring any Purchased Assets
or any Designated Employees, specifying with respect to each such
policy, the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount (if any), the premium
rate and the date through which coverage will continue by virtue
of premiums already paid;
(e) all sales agency, supply, purchase, distribution, OEM,
VAR, dealer, advertising, promotional, support, maintenance,
outsourcing, manufacture and fulfillment agreements or
franchises, and agreements for software acquisition, development
agreements, author agreements and publishing agreements, and all
agreements providing for the services of an independent
contractor to which a Selling Party is a party or by which it is
bound and which relate to any of the Purchased Assets or the
conduct of the Business;
(f) all guarantees, loan agreements, indentures, mortgages and
pledges, all conditional sale or title retention agreements,
security agreements, equipment obligations, leases or lease
purchase agreements as to items of personal property, in each
case to which Seller is a party or by which it is bound or under
which it has rights and which are secured by or otherwise relate
to any of the Purchased Assets or the Business;
(g) all collective bargaining agreements, employee policies,
employment and consulting agreements, and all other employee
bonus or benefit plans and all group insurance plans, whether or
not legally binding, relating to the Business or any person or
firm providing services to or for the Business, including,
without limitation, wage continuation, severance, reemployment
assistance, termination, deferred compensation, holiday,
sympathy, sick leave or pay, vacation, personal day, education,
pension, retirement, welfare and group or individual life,
health, hospitalization, dental and accident insurance and other
PAGE 55
<PAGE>
bonus practices, plans, agreements, arrangements, and/or
commitments to which any Selling Party is a party or bound and,
with respect to each Designated Employee, the current annual
rates, showing separately for each such person, the amounts paid
or payable as salary, bonus payments and any indirect
compensation for the year ended March 31, 1996 and the current
fiscal year;
(h) all contracts, agreements, commitments, purchase
orders, leases, licenses or other understandings or arrangements
to which Seller is a party or by which it or any of its property
is bound or affected, relating to or in connection with the
Business, except for the Proprietary Rights agreements set forth
on Schedule 4.6 of the Disclosure Schedule, end user licenses on
a form included as Schedule 4.6 of the Disclosure Schedule and
excluding contracts entered into in the ordinary course of
business which are terminable by a Selling Party on less than 30
days' notice without any penalty or consideration and involving
payments or receipts during the entire life of such contracts by
the Selling Parties of less than $2,000 in the case of any single
contract but not more than $10,000 in the aggregate, and
including, without limitation, a true and complete itemized
description all Contracts between Seller and software developers,
licensors and authors or pursuant to which any royalty or similar
payment shall be payable;
(i) a listing of all Inventory as of a date within five (5)
days of the execution of this Agreement (which shall be updated a
day not more than one week prior to the Closing), broken down by
type, quantity and location; and
(j) a listing of all outstanding Receivables and accounts
payable of the type to be assumed by Buyer hereunder, as of a
date within five (5) days of the execution of this Agreement
(which shall be updated as of a day not more than one week prior
to the Closing), broken down by customer or vendor, as the case
may be, and the amounts and dates due.
True and complete copies of all contracts,
agreements, plans, arrangements, commitments and documents
required to be listed or identified pursuant to this Section 4.9
(to the extent in writing or if not in writing, an accurate
PAGE 56
<PAGE>
summary thereof), together with any and all amendments thereto,
have either been delivered to Buyer or attached to Schedule 4.9.
Except as set forth on Schedule 4.9 of the
Disclosure Schedule, all of the contracts and agreements required
to be listed or identified pursuant to this Section 4.9 (other
than those which have been fully performed) are legal, valid,
binding and enforceable in accordance with their respective
terms, in full force and effect, do not require the consent or
approval of any party to the assignment thereof and will be
unaffected by the sale or other transfer of the Purchased Assets
to Buyer hereunder, and Buyer will be entitled to the full
benefits thereof, and none of such contracts and agreements is
with a governmental agency or authority. To the best of the
knowledge of each Selling Party, there is not under any contract
or agreement required to be listed or identified pursuant to this
Section 4.9 any existing default or event which, after notice or
lapse of time, or both, would constitute a default or result in a
right to accelerate or loss of rights. There have been no oral
or written modifications to the terms or provisions of any of
such agreements. No amount payable or reserved under any such
agreement has been assigned or anticipated and no amount payable
under any such agreement is in arrears or has been collected in
advance and to the best of the knowledge of the Selling Parties,
there exists no offset or defense to payment of any amount under
such an agreement.
10 Absence of Changes or Events. Since the Balance Sheet
Date each of the Selling Parties, has conducted its business only
in the ordinary course in a manner consistent with past
practices. Without limiting the foregoing, since such date,
neither of the Selling Parties has:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations incurred in
the ordinary course of business and consistent with its prior
practice, none of which liabilities, in any case or in the
aggregate, materially adversely affects the business, assets,
liabilities, operations, or financial condition of a Selling
Party;
PAGE 57
<PAGE>
(b) discharged or satisfied any Lien, other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether
due or to become due, other than current liabilities shown on the
Balance Sheet and current liabilities incurred since the Balance
Sheet Date as permitted by subsection (a) above;
(c) mortgaged, pledged or subjected to any Lien any of the
Purchased Assets;
(d) sold, transferred, leased to others or otherwise disposed
of any assets relating to the Business, except for the sale of
non-exclusive licenses of third-party software in object code
form to end-users and other inventory in the ordinary course of
business and consistent with prior practice; or canceled or
compromised any debt or claim, or waived or released any right of
value;
(e) received any notice of termination of any contract,
license, lease or other agreement relating to the Business;
(f) suffered any damage, destruction or loss (whether or not
covered by insurance) which, in any case or in the aggregate,
could have a material or adverse effect on its assets, operations
or prospects; or disposed of or destroyed any records other than
disposal of duplicates, drafts and other immaterial documents in
the ordinary course of business in accordance with its written
document retention policy;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any
United States or foreign license, patent, copyright, trademark,
trade name, invention or other proprietary right, or modified any
existing rights with respect thereto;
(h) instituted, settled or agreed to settle any litigation,
action, arbitration, investigation or proceeding before any court
PAGE 58
<PAGE>
or governmental body relating to it or its property or received
any threat thereof;
(i) suffered any change, event or condition which, in any case
or in the aggregate, has had or may have a materially adverse
effect on its condition (financial or otherwise), properties,
assets, liabilities, operations or prospects, including, without
limitation, any change in its revenues, costs, backlog, or
relations with its employees, landlords, agents, customers, OEMs,
VARs, dealers, suppliers or government regulators;
(j) entered into any transaction, contract or commitment other
than in the ordinary course of business or, except as
contemplated by the Employee Retention Plan included as part of
the Transition Plan, incurred any severance pay obligations by
reason of this Agreement or the transactions contemplated hereby;
(k) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable to, or
paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus or extra compensation to, or made any change
in any pension, wage continuation, severance, reemployment
assistance, termination or vacation pay policy covering, any
officer, employee, salesman, distributor or agent relating to the
Business or providing services to or for the Business, other than
as specifically identified in the Employee Retention Plan
included as part of the Transition Plan;
(l) made any capital expenditure or capital additions or
betterments, whether or not reflected on its financial statements
as capitalized expenditures;
(m) failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice
and prudent business practices prevailing in the industry, or
made any purchase commitment in excess of normal, ordinary and
usual requirements of its business or at any price materially in
excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the
PAGE 59
<PAGE>
industry or trade, or made any change in its selling, pricing,
advertising or personnel practices inconsistent with its prior
practice or prudent business practices prevailing in the industry
or trade;
(n) encountered any labor union organizing activity, had
any actual or threatened employee strikes, work stoppages, slow
downs or lockouts, or had any material change in its relations
with its employees, agents, customers or supplies or any
governmental regulatory authority or self-regulatory authorities;
(o) received any notice from any customer or supplier that it
intends to cease doing business with it (or will refuse to do
business with Buyer), which, in any case, has had or could have a
material adverse effect on the business, financial condition,
assets, liabilities, operations or prospects of any Selling Party
or of the Business, or on the value of Purchased Assets or the
transfer thereof to Buyer;
(p) failed to publish and distribute its catalogs in
substantially the same manner with substantially the same
frequency, volume and style as in prior periods, and no such
failure to publish or distribute, in any case or in the
aggregate, has had, or could have, a material and adverse affect
on the business, condition (financial or otherwise), assets,
liabilities, operations or prospects of a Selling Party; or
delayed or accelerated activities or planned events for the
unusual benefit of Seller and detriment of Buyer; or
(q) entered into any agreement or made any commitment to take
any of the types of action described in subsections (a) through
(p) above.
11 Taxes. Each Selling Party has paid or made adequate
provision for the payment of all taxes, fees, assessments and
charges, including, without limitation, income, property, sales,
use, franchise, added value, employees' income withholding and
social security taxes, imposed by the United States or by any
foreign country, or by any state, municipality or instrumentality
of any of same or by any other taxing authority, and for all
PAGE 60
<PAGE>
penalties and interest thereon, which has or may become due for
or during all periods ending, and in respect of all operations,
on or prior to the Closing Date. All tax returns required to be
filed in connection therewith have been accurately prepared and
filed and all deposits required by law to be made by Seller or
any Subsidiary with respect thereto have been duly made. Neither
Selling Party is a party to any pending action, proceeding or
audit by any governmental authority for assessment or collection
of any amount of taxes for which it may be directly or indirectly
liable, and there is no claim for assessment or collection of any
amount of taxes for which it may be directly or indirectly
liable. No Lien for taxes exists with respect to any Purchased
Asset. Attached to the Disclosure Schedule as item 4.11 is a
list of the Tax Exemption Certificates of the Selling Parties
relating to the Business, together with copies thereof.
12 Employee Benefits; Labor Matters. (a) All pension,
retirement, profit-sharing, deferred compensation, bonus,
incentive, medical, vision, dental and other health insurance,
life insurance or any other employees benefit plan, arrangement
or understanding and any trusts or insurance contracts maintained
in connection therewith (collectively, "Benefit Plans"), conform
to, and the administration thereof is in material compliance
with, all applicable laws and regulations, including, without
limitation, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Internal Revenue Code of 1986, as
amended (the "Code"), and comparable foreign laws, rules and
regulations, and neither the operation or administration of any
such Benefit Plan, nor the transactions contemplated by this
Agreement will result in any liability to any Selling Party or
Buyer under or in respect of any of such Benefit Plans, in Buyer
incurring or suffering any liability, or have any adverse effect
on the financial condition, assets liabilities or results of
operations of any Selling Party, Buyer or the Business. All
contributions required, by law or by contract, to be made to any
Benefit Plans subject to ERISA or any foreign law for any plan
year, or other period on the basis of which contributions are
required, ending before the date hereof, have been made as of the
date hereof. Each Selling Party has complied in all material
respects with all reporting and disclosure requirements with
respect to each Benefit Plan. No such Benefit Plan (including
any trust created thereunder), nor any trustee or administrator
PAGE 61
<PAGE>
thereof, has engaged in any transaction prohibited by ERISA or
any foreign law, or by Section 4975 of the Code, which could
subject any Selling Party, or such Plan to any penalty imposed
under ERISA or any foreign law or to any tax imposed by Section
4975 of the Code or any foreign law or, if any such transaction
has occurred, it has been corrected within the meaning of Section
4975 of the Code or such foreign law, and all applicable taxes
and penalties with respect thereto have been paid. No
"reportable event" as that term is defined in ERISA has occurred
with respect to any of the Benefit Plans. No liability to the
Pension Benefit Guaranty Corporation or comparable foreign
authority has been or is expected to be incurred with respect to
any of such Benefit Plans. Neither Selling Party participates,
maintains or contributes to (nor has neither within the preceding
three years participated, maintained or contributed to) nor has
any liability or obligation under or with respect to any multi-
employer plan governed by or subject to ERISA or any foreign law,
nor has it participated, maintained, contributed or incurred any
liability in respect of any thereof within the last three fiscal
years. Neither Selling Party has any liability or obligation
with respect to any Benefit Plan or trust related thereto that
may have been terminated prior to the date hereof.
(a) Each Selling Party has complied in all material respects
with all applicable laws, rules and regulations relating to the
employment of labor, including those relating to hiring, wages,
hours, collective bargaining and the payment and withholding of
taxes, and has withheld all amounts required by law, regulation
or agreement to be withheld from the wages or salaries of its
employees and is not liable for any arrears of wages or any taxes
or penalties for failure to comply with any of the foregoing.
Neither of the Selling Parties has engaged in any unfair labor
practice, and there is no unfair labor practice, sexual
harassment or other employment-related complaint pending, or, to
the knowledge of any Selling Party, threatened against any
Selling Party or any officer, director or employee thereof.
There do not exist any pending workmen's compensation claims
against any Selling Party that are not adequately provided for by
insurance, or any pending or, to the knowledge of any Selling
Party, threatened claims that the workplace of any Selling Party
is unsafe or that any Selling Party has engaged in unfair labor
PAGE 62
<PAGE>
practices, employment discrimination or wrongful discharge. No
union, trade, guild or collective bargaining unit represents any
employees of any Selling Party, and no union organizing or
election activities involving any non-union employees of Seller
or any Subsidiary is now in progress nor, to the best of Seller's
knowledge, threatened.
(b) Prior to the date hereof, Seller has not been required
by the Worker Adjustment and Retraining Notification Act
("WARN"), the Massachusetts Reemployment Assistance Program or
German law to provide any type of notice or report in respect of
terminations of employees, reductions in the work force, plant
closings, temporary shutdowns of work sites, or as may otherwise
be required thereunder.
13 Accounts Receivables. All Receivables constituting any
part of the Purchased Assets have arisen only from bona fide
transactions in the ordinary course of business.
14 Environmental Matters. Each Selling Party has taken all
steps necessary to determine and have determined that no
Hazardous Substance (as hereinafter defined) is or has been
stored, treated, recycled, released, disposed of or discharged
on, about, from or affecting any of the premises occupied by any
Selling Party or where any of the Purchased Assets are stored or
located. Neither Selling Party has any liability which is based
upon or in any way related to the environmental conditions under
or about any of the premises where any of the Purchased Assets
are stored or located. The term "Hazardous Substance" as used in
this Agreement shall include, without limitation, gasoline, oil
and other petroleum products, explosives, radioactive materials
and related and similar materials, and any other substance or
material defined as a hazardous, toxic or polluting substance or
material by any ordinance, rule or regulation, domestic or
foreign including PCBs, asbestos and urea formaldehyde foam
insulation.
15 SEC Filings. Seller has filed with the Securities and
Exchange Commission (the "SEC") all notices, prospectuses,
offering statements and registration statements required to be
filed in connection with the offer or sale of securities by
Seller under the Securities Act of 1933, as amended (the
PAGE 63
<PAGE>
"Securities Act"), and the rules and regulations promulgated
thereunder. All such notices, prospectuses, offering statements
and registration statements comply in all material respects with
the requirements of the Securities Act, and the rules and
regulations promulgated thereunder, and such notices,
prospectuses, offering statements and registration statements at
the date of filing thereof with the SEC did not contain an untrue
statement of any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances
under which they were made. In addition, Seller has filed with
the SEC all reports and proxy statements required to be filed by
Seller under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations promulgated
thereunder, and such reports and proxy statements at the date of
filing thereof with the SEC did not contain an untrue statement
of any material fact nor omit to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they
were made. Seller has delivered to Buyer copies of (i) all
notices, prospectuses, offering statements and registration
statements filed with the SEC by Seller under the Securities Act
since January 1, 1993; and (ii) all reports and definitive proxy
statements filed with the SEC by Seller under the 1934 Act since
such date.
16 Consent Solicitation Statement. (a) The consent
solicitation statement and related materials (collectively, the
"Consent Solicitation Statement") to be prepared by Seller in
accordance with Section 6.9 and used in connection with Seller's
solicitation of consents from stockholders described in Section
6.9, relating to the adoption of this Agreement, the sale of the
Business, the change of corporate name and other transactions
contemplated hereby (the "Consent Solicitation") will, when
prepared by Seller and distributed to the stockholders, comply in
all material respects with the provisions of the Delaware General
Corporation Law and the 1934 Act and the rules and regulations
promulgated thereunder and will not, at the time of the mailing
of the Consent Solicitation Statement to the holders of capital
stock of Seller (the "Stockholders") or at the Closing Date,
PAGE 64
<PAGE>
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading;
provided, that Seller makes no representation with respect to
information concerning Buyer supplied by Buyer to Seller for
inclusion in the Consent Solicitation Statement. The manner and
conduct of the Consent Solicitation by Seller shall comply in all
material respects with the provisions of the Delaware General
Corporation Law and the 1934 Act and the rules and regulations
promulgated thereunder.
(a) Set forth on Schedule 4.16 is a list of not more than
ten (10) persons (within the meaning of Rule 14a-2(b)(2)
promulgated under the 1934 Act), specifying the number of shares
of Common Stock of Seller owned or believed by Seller to be
controlled by each such person (specifying shares owned or
controlled) and the percentage ownership of each such person
based on the number of shares entitled to be voted in the Consent
Solicitation. Such persons are the owners of or control the
requisite number of shares of each class and series of capital
stock of Seller entitled to consent thereto as a class or series,
and have duly and validly approved by written consent the sale of
the Business contemplated hereby and other matters to be covered
by the Consent Solicitation, as required by the Delaware General
Corporation Law (subject to the consent of such other
stockholders as may be required to attain a majority of the
shares of Seller entitled to consent thereto), the Certificate of
Incorporation of Seller and all applicable federal and state
securities laws. True and complete copies of all such written
consents have been delivered to Buyer or attached to Schedule
4.16.
17 Customers and Suppliers. Set forth in Schedule 4.17 is a
list of the names and addresses of the fifty (50) largest
customers and the one hundred (100) largest suppliers (measured
by dollar volume of purchases or sales in each case) of each
Selling Party and the percentage of the business of such Selling
Party which each such customer or supplier represented during
each of the years ended March 31, 1995 and 1994. Except as set
forth in Schedule 4.17, there exists no actual or threatened
termination, cancellation or limitation of, or any modification
or change in, the business relationship of any Selling Party with
any supplier or customer listed in Schedule 4.17.
PAGE 65
<PAGE>
18 Disclosure. No representation or warranty by any Selling
Party contained in this Agreement nor any written statement or
certificate furnished or to be furnished by or on behalf of any
Selling Party to Buyer in connection herewith contains or will
contain any untrue statement of a material fact, or omits or will
omit to state any material fact required to make the statements
herein or therein contained, under the circumstances under which
made, not misleading or necessary in order to provide a
prospective purchaser of the Purchased Assets with adequate
information as to the operations of each Selling Party and the
Purchased Assets and each Selling Party has disclosed to Buyer in
writing all material adverse facts known to it relating to the
same.
ARTICLE 5
5. Representations and Warranties of Buyer.
Buyer represents and warrants to the Selling Parties
that:
1 Organization and Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and authority to enter into this Agreement and each other
agreement, document and instrument to be executed or delivered by
Buyer in accordance with this Agreement (the "Buyer Documents")
and to carry out the transactions contemplated hereby and
thereby.
2 Authority of Buyer. The execution, delivery and
performance of this Agreement and the Buyer Documents by Buyer
have been duly authorized and approved by its board of directors
and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement, the Buyer Documents and
the transactions contemplated hereby and thereby. This Agreement
has been duly authorized, executed and delivered by Buyer and is
the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms, and each of the Buyer Documents has
been duly authorized by Buyer and upon execution and delivery by
PAGE 66
<PAGE>
Buyer will be a legal, valid and binding obligation of Buyer
enforceable in accordance with its terms.
3 Litigation. There is no action, suit, proceeding,
arbitration or investigation pending against or affecting Buyer
or the transactions contemplated by this Agreement, nor to the
best of Buyer's knowledge, any basis therefor or threat thereof,
which is reasonably likely to have a materially adverse effect on
Buyer's ability to make the payment of the Purchase Price
pursuant hereto. Buyer is not subject to any court or
administrative order, writ, injunction or decree, applicable
specifically to it or to its business, property or employees, nor
is it in default with respect to any order, writ, injunction or
decree, of any court or federal, state, municipal or other
governmental department, commission, board, agency or
instrumentality, domestic or foreign, in each case, which is
reasonably likely to have a materially adverse effect on Buyer's
ability to make the payments of the Purchase Price pursuant
hereto.
4 No Violation. The execution, delivery and performance
of the Buyer Documents and the consummation of the transactions
contemplated hereby and thereby, including without limitation,
the purchase of the Purchased Assets from Seller, does not (a)
conflict with or violate any provision of the Certificate of
Incorporation or By-Laws of Buyer, or to Buyer's knowledge,
(b)(i) with or without the giving of notice or the passage of
time, or both, result in a breach of, or violate, or conflict
with, or constitute a default under, or permit the termination
of, or cause or permit acceleration under, any loan or credit
agreement or instrument to which Buyer is a party or by which it,
or any of its properties or assets are bound, (ii) require the
consent of any party to any such agreement, or (iii) violate with
or without the giving of notice or the passage of time, any law,
rule or regulation or any order, judgment, decree or award of any
court, governmental authority or arbitrator to which Buyer is
subject or by which it or its properties or assets may be bound
or affected.
PAGE 67
<PAGE>
ARTICLE 6
6. Covenants of Selling Parties.
1 Conduct of Business. During the period from the date of
this Agreement to and including the Closing Date, each Selling
Party shall conduct or cause to be conducted the Business in the
ordinary and usual course of business and consistent with past
practices, and shall not take any action which might result in
any material change in such operations or which might have a
materially adverse effect on the value of the Purchased Assets or
the Business other than changes made with the prior written
consent of Buyer. Without limiting the generality of the
foregoing, prior to the Closing, no Selling Party will, without
the prior written consent of Buyer:
(a) dissolve, liquidate, merge or consolidate or sell,
transfer, lease or otherwise dispose of any assets or properties
of or related to the Business or obligate itself to do so, other
than the sale of non-exclusive licenses of third-party software
in object code form to end users and other inventory in the
ordinary course of business on standard terms, conditions and
operating procedures customarily used by it, or change the
frequency of publication, volume or style of the TPS catalog, Web
Site, or discontinue any products, or effect or announce price
changes or special promotions, or sell or otherwise make
available to any third person any or all of the Mailing List;
(b) amend, modify, change, alter, terminate, rescind or waive
any rights or benefits under any Contract;
(c) fail to maintain the Purchased Assets in reasonably
good condition, repair and working order, reasonable and ordinary
wear and tear excepted;
(d) perform, take any action or incur or permit to exist any
of the acts, transactions, events or occurrences of a type which
would be inconsistent with or render untrue any of the
representations or warranties set forth in Section 4.10 hereof
had the same occurred after the Balance Sheet Date and prior to
the date hereof;
PAGE 68
<PAGE>
(e) fire, discharge or otherwise terminate the employment of
any Designated Employee or alter, change, adjust or modify the
terms of any existing employment agreement or arrangement with
any Designated Employee (including changes in compensation);
(f) cancel, compromise or modify or agree to cancel,
compromise or modify any Receivable; or
(g) cancel any of the current insurance policies or any of the
coverage thereunder maintained for the protection of the Selling
Parties, any of the Purchased Assets, or the Business or the
operation thereof.
2 Changes in Information. During the period from the date
of this Agreement to the Closing Date, each Selling Party shall
give Buyer prompt written notice of any change in, or any of the
information contained in, the representations and warranties made
by it in or pursuant to this Agreement or the Disclosure Schedule
or of any event or circumstance which if it had occurred on or
prior to the date hereof, would cause any of such representations
or warranties not to be true or correct.
3 Access to Information.
(a) During the period from the date of execution of this
Agreement to the Closing Date, Buyer and its counsel, accountants
and other representatives shall be given, during normal business
hours, and without undue disruption of the Business, full access
to and copies of all of the books, tax returns, contracts,
commitments, records, facilities and properties of the Selling
Parties pertaining to the Business or constituting any part of
the Purchased Assets, work papers of accountants of each Selling
Party pertaining to the Business and all personnel of each
Selling Party, and they shall be furnished with all such
documents and information with respect to the affairs of each
Selling Party pertaining to the Business as may from time to time
reasonably be requested, including without limitation, employee
files, employee benefit files, contracts with the current
customer and vendor base of the Business, projections of customer
and vendor activities, all computer files, systems and records,
PAGE 69
<PAGE>
leases, and accounts payable and receivable. During the period
from the date of this Agreement and prior to Closing, Seller and
its subsidiaries and their respective directors, officers and
employees shall cooperate fully with Buyer's investigation.
Prior to Closing, Buyer will (and will cause its representatives
to) maintain the confidentiality of the confidential information
it receives from the Selling Parties, provided that such
information may be disclosed (in confidence) to lawyers,
accountants, prospective lenders and investors, and other persons
or entities involved in the transactions, and that nothing herein
shall prevent disclosure or use of any information as may be
required by applicable law or that is at the date hereof or
hereafter becomes generally available to and known by the public
other than by reason of Buyer's breach of its obligations under
this Section 6.3, or is or becomes available to Buyer on a non-
confidential basis from a source that is not (after due inquiry)
known by Buyer to be prohibited from disclosing such information
pursuant to a confidentiality agreement with Buyer or its
representatives, or has been independently developed by Buyer
without violation of any obligation under this Agreement and
without access by the developing person or persons to such
material.
(b) Without limiting the foregoing, from time to time after
the date hereof and prior to the Closing Date, each Selling Party
shall provide to Buyer sample electronic files so as to allow
Buyer to prototype the transfer of all management information
system records of or pertaining to the Business electronically on
Buyer's management information system at its facility in New
Jersey, and all block, process and flow diagrams of its MIS,
telephone and desktop publishing systems.
4 Confidentiality. Each Selling Party shall hold
confidential (and will not disclose) (a) any information obtained
by it or any of its representatives from or concerning Buyer or
otherwise arising out of its negotiations with Buyer or
investigations of Buyer, and such information shall not be used
except in furtherance of the transactions contemplated herein or
(b) after the Closing, any information regarding the Purchased
Assets or the Business, including without limitation, the Mailing
List, except (i) information which is publicly available at the
PAGE 70
<PAGE>
time of disclosure (through no act of Seller or any of its
affiliates) or (ii) which is disclosed to Seller or an affiliate
of Seller by a third party which did not disclose it in violation
of a duty of confidentiality or (iii) disclosures which (x) are
required to be made by Seller under applicable laws or
regulations, (y) are requested by Buyer or (z) with respect to
information under clause (b), are required in connection with
dealing with any Excluded Liabilities.
5 Preservation of Business. During the period from the date
of this Agreement to the Closing Date, each Selling Party shall
use commercially reasonable efforts to preserve intact the
present goodwill of such Selling Party and the relationships of
such Selling Party with customers, dealers, OEMs, VARs,
suppliers, creditors, distributors, consultants, governmental
authorities and others having business relations with it and the
present business organization and personnel of such Selling
Party. Each Selling Party shall cause to be paid before they
become delinquent all taxes, assessments, and governmental
charges or levies imposed prior to the Closing Date upon its
business or properties and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords, and other similar
persons asserted prior to the Closing Date which, if unpaid,
might result in the creation of a Lien upon any Purchased Assets
or otherwise have an adverse effect on the conduct the Business.
6 Offer of Employment: Seller's Retention Plan.
(a) Seller has heretofore supplied Buyer with a list setting
forth the names, dates of birth, dates of hire, social security
numbers (or foreign equivalents), current rates of compensation
and date and amount of last salary adjustment, of all employees
presently employed by each Selling Party. Prior to the Closing,
Buyer shall review such list and advise Seller of those employees
whom Buyer desires to employ in its business following the
Closing Date, but Buyer has no obligation to employ any of such
employees in its business following the Closing Date. Each
Selling Party agrees that Buyer shall have the right to employ
the employees so designated (each of whom that accepts such
employment being hereinafter referred to as a "Designated
Employee") and Buyer agrees to offer employment commencing on the
PAGE 71
<PAGE>
Closing Date to all of such employees on such date at such basic
salary rates and on such other terms as Buyer shall determine,
provided that each such employee executes and delivers to Buyer a
confidentiality agreement substantially in the form executed by
other employees of Buyer and further provided that Buyer shall
not be obligated to maintain any Designated Employees for any
specific length of time after the Closing Date and all Designated
Employees shall be employees at will. Nothing in this Section
6.6 shall be construed to confer any rights or remedies on any
employee of any Selling Party (Designated or not). Each Selling
Party will use its best efforts to encourage and induce such
persons to become employees of Buyer and will not take any action
to prevent any such employee from being employed by Buyer from
and after the Closing Date or derogate Buyer, nor will any
Selling Party solicit, invite, induce or entice any Designated
Employee to remain, directly or indirectly, in the employ or be
employed by such Selling Party or otherwise attempt to retain the
services of any Designated Employee; provided, however, Seller
shall be entitled to re-hire former employees of Seller who
become employees of Buyer and who leave the employ of Buyer and
request to return to Seller's ISC business, so long as such
persons are not so solicited, invited, induced or enticed while
an employee of Seller.
(b) Seller shall be solely responsible for any and all
claims and obligations, if any, for wages, commissions, salary,
insurance, wage continuation, severance pay, termination pay and
other benefits (including accrued and unearned vacation, holiday,
sick pay and other benefits, if any) arising or accruing or
claimed to arise or accrue with respect to any employee of any
Selling Party for any period on or prior to the Closing Date, or
out of termination of employment of any employee of any Selling
Party on or prior to the Closing Date, or the failure of Buyer or
a subsidiary to retain any employee of a Selling Party after the
Closing Date, or the effect of the transactions contemplated by
this Agreement on the employment status of any employee of any
Selling Party, including without limitation, Designated
Employees, and/or the termination of employment with Buyer or any
subsidiary thereof within 120 days after the Closing Date of any
employee who prior to the Closing Date was an employee of any
Selling Party and thereafter becomes an employee of Buyer (in
this latter case to the same extent as if any such employee were
PAGE 72
<PAGE>
then still employed by such Selling Party). Each Selling Party
shall pay all withholding tax and similar obligations in each
case with respect to all employees of such Selling Party for all
periods ending on or prior to the Closing Date.
(c) Without limiting the foregoing, Seller has adopted and
furnished Buyer with a copy of and Seller shall at its sole
expense offer to its employees the benefits of Seller's Employee
Retention Plan included as part of the Transition Plan,
incorporating bonuses, incentives and other contingencies
designed to retain employees of the Business of Seller through
the Closing Date. Seller shall pay for, and indemnify and hold
harmless Buyer from and against, all costs incurred in connection
with such plan and any and all claims, liabilities, damages and
losses associated with or arising out of such plan.
(d) As soon as reasonably practicable after the Closing
Date, the Selling Parties shall, at their sole expense, cause the
termination of the participation of the Designated Employees in
all Benefit Plans covering such employees in accordance with the
provisions of such plans and applicable law and, as soon as is
reasonably practicable, shall cause the trustees, or other
persons responsible for the administration of such plans, to make
distributions to all participants or their beneficiaries of all
accrued benefits thereunder in accordance with the provisions of
such Plans and all applicable requirements of ERISA and
comparable foreign laws, rules and regulations. The Selling
Parties shall pay for, and indemnify and hold harmless Buyer from
and against, all costs incurred in connection with terminating
such plans or such participation therein and any and all claims,
liabilities, damages and losses associated with or arising out of
such plans and/or any such termination.
(e) All liabilities of the Selling Parties under this
Section shall constitute Excluded Liabilities.
7 Consents of Third Parties; Governmental Approvals. (a)
Each of the Selling Parties will act diligently and reasonably to
secure, before the date initially scheduled as the Closing Date
herein, the consent, approval or waiver, in form and substance
reasonably satisfactory to Buyer, from any party with respect to
PAGE 73
<PAGE>
the assignment of the Contracts and all other contracts,
including without limitation, any governmental consents,
licenses, permits and approvals, and consents of lessors,
landlords, licensors, manufacturers, authors, publishers,
suppliers, distributors, OEMs, VARs and dealers, requested by
Buyer prior to the consummation of the transaction contemplated
by this Agreement; provided that no Selling Party shall have any
obligation to offer or pay any consideration in order to obtain
any such consents or approvals; and provided, further, that no
Selling Party shall make any agreement or understanding affecting
the Business or the Purchased Assets as a condition for obtaining
any such consents or waivers except with the prior written
consent of Buyer.
8 Financial Statements. Between the date of this
Agreement and the Closing Date, Seller shall deliver to Buyer
true and complete copies (i) not later than twenty-one days after
the date hereof, the Recent Financial Statements, (ii) within
twenty-one days after the end of each month ended before the
Closing Date, an unaudited combined and combining balance sheets
and statements of operations, stockholders' equity and cash flow
as of the end of such month, prepared and certified by the chief
financial officer of Seller, (iii) as soon as available, daily
and weekly management reports of the Selling Parties and (iv)
promptly after the same become publicly available, copies of all
reports, registration statements, proxy and information
statements and other documents filed with the SEC on behalf of
Seller prior to the Closing Date. All such financial statements
will be prepared at Seller's expense from the respective books
and records of Seller and its subsidiaries in accordance with
generally accepted accounting principles consistently applied
throughout the periods covered by such statements; and will
fairly present the consolidated financial condition of Seller as
of their respective dates and the results of operations and
changes in the financial condition of Seller and its subsidiaries
for the periods then ended. Notwithstanding the foregoing, any
of such financial statements that are unaudited will not
necessarily reflect normal year-end adjustments, which adjustment
will not individually or in the aggregate have a material adverse
effect upon the business or financial condition of Seller or any
of its subsidiaries taken as a whole or necessarily contain
footnotes prepared in accordance with generally accepted
PAGE 74
<PAGE>
accounting principles. Buyer shall have access to the underlying
records and work papers sufficient to enable Buyer's accountants
to prepare all financial statements required to be filed by Buyer
with the SEC in a timely manner.
9 Preparation of Consent Solicitation Statement; Action
by Stockholders. (a) Seller shall prepare the Consent
Solicitation Statement as promptly as possible after the date
hereof and use its best efforts to cause the preliminary Consent
Solicitation Statement to be filed with the SEC within four (4)
business days after the execution of this Agreement. Seller
shall submit the proposed Consent Solicitation Statement to Buyer
and its counsel not less than two days prior to submitting the
Consent Solicitation Statement to the SEC or the Stockholders.
Buyer shall furnish Seller with such information concerning Buyer
as shall be required to be included in the Consent Solicitation
Statement, and Seller shall be responsible for all other
information included therein. Seller shall cause to be
distributed to the Stockholders of record as of the record date
for the Consent Solicitation, in accordance with the applicable
regulations of the SEC and the applicable provisions of the
Delaware General Corporation Law, a copy of the Consent
Solicitation Statement filed by Seller with and cleared by the
SEC. Seller shall use commercially reasonable efforts to mail
the Consent Solicitation Statement to Stockholders on or before
June 6, 1996. If prior to the Closing Date either Seller or
Buyer determines that the Consent Solicitation Statement needs to
be amended or supplemented in order to comply with the 1934 Act
or the rules and regulations promulgated thereunder or for
Seller's representations or warranties in Section 4.16 to be
correct, Buyer or Seller, as the case may be, shall notify the
other of such determination and shall deliver to the other such
amendment or supplement as such party believes is necessary to
comply with the applicable regulations of the SEC and to make
such representation and warranty correct. Seller shall consider
all such amendments proposed by Buyer, and shall cause all such
amendments or supplements that the parties reasonably believe are
necessary to be mailed to the Stockholders as soon as practicable
after such delivery.
PAGE 75
<PAGE>
(a) Seller shall, through its Board of Directors, recommend
to the Stockholders the adoption of this Agreement and approval
of all other matters in the Consent Solicitation, and shall use
all reasonable efforts to make the actions contemplated by the
Consent Solicitation to be effective on or before June 26, 1996.
Seller shall keep Buyer apprised of the progress of the Consent
Solicitation from time to time.
10 Information Provided to Stockholders. Between the date
of this Agreement and the Closing Date, Seller shall deliver to
Buyer true and correct copies of all information, materials,
notices, mailings and other written communications sent by Seller
to its Stockholders or any class or series thereof.
11 Recommendations of Buyer; Transition. (a) Each Selling
Party shall consult with and follow (and cause its executive
officers to consult with and follow) the recommendations of Buyer
with respect to (i) the management of contracts, agreements,
commitments and other understandings or arrangements to which it
is a party, including, without limitation, renewal, modification
or termination of any agreement for the supply of products, (ii)
the granting of any rights or licenses or the commencement of the
orderly and gradual discontinuation of particular programs or
operations, (iii) the discontinuation of any products, or the
initiation of any special promotion or any change (or
announcement of a change) in its selling, pricing, advertising or
personal practices, (iv) any deviation in the date of a catalog
drop or other deviation from the Transition Plan and (v) business
policies, strategies, decisions, directives and tactics
concerning the Business and the integration of the Business with
the operations of Buyer; provided however, that nothing contained
in this subsection (a) shall require a Selling Party to take or
fail to take an action that, in its reasonable judgment, is
likely to give rise to a substantial penalty or a claim for
damages by any third party against it, or is likely to result in
losses to it, or is otherwise likely to prejudice in any material
respect or unduly interfere with the conduct of its business and
operations in the ordinary course consistent with prior
practices, or is likely to result in a breach by any Selling
Party.
PAGE 76
<PAGE>
(a) To facilitate and prepare for the transition from the
current management of the Business to management of the Business
by Buyer and without limiting the provisions of Section 6.3
hereof, each of the Selling Parties shall permit Buyer to have a
reasonable management presence on site at each location from
which any part of the Business shall be conducted and shall
provide such representatives of Buyer, without charge, with
reasonable office space and secretarial assistance, as well as
access to its telephone and other systems. The provisions of
Section 6.3 shall be applicable to such persons.
(b) Consistent with the provisions of Sections 6.1 and 6.5
hereto, each of the Selling Parties shall adhere to and follow
the Transition Plan and use its best efforts and take all steps
necessary to manage the Business in order to meet its monthly
plan as provided in the Transition Plan and neither of the
Selling Parties shall, without the prior written consent of
Buyer, deviate from or take any action inconsistent with the
Transition Plan. Notwithstanding anything contained in this
Agreement to the Contrary, Buyer shall be entitled, by written
notice to Seller, at any time prior to the Closing Date, to take
over the supervision of and management and control of the
Business in accordance with the Transition Plan; provided that
Seller shall have previously received written consents from the
holders of a majority of the outstanding shares of Common Stock
of Seller approving this Agreement. Each of the Selling Parties
shall continue their management responsibilities in accordance
with the provisions of this Agreement until the Closing Date or
such earlier date as Seller shall receive such written notice
from Buyer.
(c) Upon Buyer actually taking over the supervision and
management control of the Business operated by any or all of the
Selling Parties as contemplated by and pursuant to the Transition
Plan, Buyer and such Selling Party shall enter into a joint
written confirmation thereof. For purposes of allocating the
risk of the operations of the Business between Buyer and the
Selling Parties and determining adjustments to the Purchase
Price, the "Closing Date" solely with regard to Sections 2.4,
2.5, 2.6, 4.5, 4.6, 4.8, 4.9, 4.10 and 4.13 hereof shall be
deemed to be the date of such written confirmation; provided,
that the actual Closing shall occur, and all Purchased Assets
PAGE 77
<PAGE>
shall be transferred by the Selling Parties to and the Purchase
Price paid by Buyer, as set forth in Article 3, without regard to
such change in management (except as contemplated by Sections
3.6(b) and (d) hereof).
(d) No advice, recommendation, management presence, request,
notice or confirmation by Buyer nor participation in or take-over
of supervision or management of the Business under this Section
6.11, the Transition Plan or otherwise shall affect or impair any
of the rights of Buyer under this Agreement or act as or
constitute a waiver of any of the provisions of this Agreement,
including without limitation, the provisions of Sections 3.6, 7.7
and 7.8 and Articles 8 and 9 hereof, or release any Selling Party
from any covenant, agreement or obligation required by the terms
of this Agreement to be complied with or performed by it.
12 Books and Records. Each of the Selling Parties will
maintain its books, accounts and records in the usual, regular
and ordinary manner, and on a basis consistent with prior
periods, and will duly comply with all legal and accounting
requirements applicable thereto and to the conduct of its
business. In maintaining its accounting records, neither of the
Selling Parties will make any change in the accounting methods or
practices followed or in the depreciation policies adopted in
connection with the preparation of the financial statements
heretofore delivered to Buyer.
PAGE 78
<PAGE>
ARTICLE 7
7. Further Agreements.
1 Bulk Sales Compliance. Each Selling Party shall comply
with the provisions of any applicable bulk sales law or
comparable statute relating to notice to and rights of creditors
of a Selling Party in connection with the transfer of the
Purchased Assets and Business, or the execution of this Agreement
and the consummation of the transactions contemplated hereby. To
the extent any such bulk sales law or comparable statute requires
Buyer to assure that the proceeds of the transfer are applied so
far as necessary to pay any Excluded Liabilities, Seller shall
(from and after the Closing Date) pay or cause to be paid (or
provide for payment of, in a manner reasonably satisfactory to
Buyer) any claim or debt of a Selling Party which is payable with
respect to an Excluded Liability and for which Buyer would be
liable under such law or statute if not paid by a Selling Party.
2 Sales and Other Taxes. Each Selling Party shall pay all
sales tax, transfer tax, intangibles tax, filing fees, recording
and registration fees and similar government charges applicable
to the transactions contemplated by this Agreement, including,
without limitation, all taxes and charges payable, if any, upon
the transfer of title to any Purchased Assets. Buyer and the
Selling Parties will cooperate to prepare and file with the
proper public officials, as and to the extent available and
necessary, all appropriate sales tax exemption certificates or
similar instruments as may be necessary to avoid the imposition
of sales, transfer and similar taxes on the transfer of Purchased
Assets pursuant hereto.
3 Brokerage and Finder's Fee. Buyer represents and warrants
to the Selling Parties and the Selling Parties jointly and
severally represent and warrant to Buyer, that no person is
entitled to any brokerage commissions or finder's fees in
connection with the transactions contemplated by this Agreement
as a result of any action taken by it or any of its affiliates,
officers, directors or employees, other than to Broadview
Associates and Unterberg Harris. The Selling Parties agree
jointly and severally that they will pay all amounts due to
Broadview Associates, and Buyer agrees that it will pay all
amounts due to Unterberg Harris, arising out of any services
PAGE 79
<PAGE>
rendered by it in connection with this Agreement or the
transactions contemplated hereby pursuant to a separate agreement
with such firm.
4 Settlement of Assumed Liabilities. From and after the
Closing Date, Buyer shall have complete control over the payment,
settlement or other disposition of, or any dispute involving, any
Assumed Liability, and Buyer shall have the right to conduct and
control all negotiations and proceedings with respect thereto.
Each Selling Party will notify Buyer promptly of any claim made
with respect to any such obligation or liability and will not,
except with the prior written consent of Buyer, voluntarily make
any payment of, or settle or offer to settle, or consent to any
compromise with respect to, any such obligations or liabilities.
Each Selling Party will cooperate with Buyer in any reasonable
manner requested by Buyer in connection with any negotiations or
proceedings involving any such obligations or liabilities.
5 Name Change. Each Selling Party will change its name and
will cooperate with Buyer to enable Buyer to use the name "The
Software Developer's Company" and/or any names similar thereto
which Buyer may designate by executing and filing such forms with
the State of Delaware and in Germany and with such other
jurisdictions as shall be reasonably necessary to effectuate such
change in all relevant jurisdictions and/or as Buyer shall
request and by taking such other actions as shall be reasonably
requested by Buyer to effectuate such change. In furtherance
thereof, at the Closing, Seller shall deliver to Buyer a
certificate of amendment to its certificate of incorporation
changing the name of Seller to a name other than any of the
Marks, Buyer's Marks or any name similar thereto, and SDEV
Germany shall deliver to Buyer a certificate of amendment to its
certificate of incorporation changing the name of SDEV Germany to
a name acceptable to Buyer. Nothing contained herein shall
require a Selling Party to liquidate or dissolve itself.
6 Referral. Each Selling Party shall use its best efforts
to refer all requests for and forward all orders for products to
Buyer at such telephone number and address as Buyer from time to
time informs such Selling Party. The Selling Parties and Buyer
shall each attempt in good faith to direct or deliver to the
PAGE 80
<PAGE>
other all incoming mail, telephone or other communications or
deliveries which are not received by the appropriate party (that
is, Buyer in the case of matters or materials pertaining to the
Business or Seller in the case of matters or materials pertaining
to the Excluded Assets).
7 Break-up Fee. (a) Subject to and upon the occurrence of
a "Break-up Event" (as defined in Subsection 7.7(b) below),
Seller shall pay, in immediately available funds, to Buyer, at
the offices of its counsel in New York, New York, the "Break-up
Fee" specified in subsection 7.7(c) hereof.
(a) The following shall each be a "Break-up Event":
(i) Any Selling Party (or any successor, assign, trustee or
custodian thereof) shall execute or the Board of Directors of any
Selling Party shall authorize or approve (with or without and
whether or not subject to, diligence, financing or other
conditions), or publicly announce or confirm an agreement with
any group, entity or person other than Buyer providing for the
acquisition of all or any portion of the Business by such other
party, whether by merger, purchase of assets or stock, purchase
of claims against such Selling Party or its estate, plan of
reorganization, liquidation or otherwise (other than the sale of
inventory for fair consideration in the ordinary course of
business, and the sale of obsolete tangible property which is
replaced by other tangible property at least the functional
equipment thereof);
(ii) A Change of Control of Seller or any subsidiary shall
occur. For purposes of this paragraph, "Change of Control" shall
mean:
(A) a stock purchase of any "person"
or "entity" (as such terms are used in Sections 13(d) and 14(d)
(2) of the Securities Exchange Act of 1934, as amended) who then
owns or by virtue of such purchase becomes the beneficial owner
of, directly or indirectly, voting securities of Seller or of any
of the subsidiaries, or rights or options with respect thereto or
PAGE 81
<PAGE>
securities convertible into or exchangeable for any of same,
representing 35% or more of the combined voting power of the then
outstanding voting securities of Seller or any of its
Subsidiaries,
(B) any change in the composition of the
Board of Directors of Seller or any subsidiary in any period
which involves a majority of such directors, or
(C) any proxy, voting trust, or any
voting or other agreement by any of the persons listed on
Schedule 4.16, or any management agreement, having the
effect of transferring the power or authority (whether or
not exercised) to influence control (affirmatively or
negatively) over Seller, a subsidiary or its operations
(other than covenants in a loan or credit agreement in favor
of the holder of the secured indebtedness of Seller
following the acquisition and other than agreements in favor
of Buyer).
(iii) The withdrawal from this Agreement by Buyer as
contemplated by Section 3.6(d) hereof, or the termination of this
Agreement by Buyer as contemplated by Section 9.1(b) hereof.
(iv) Buyer shall fail to receive, by 5:00 p.m. on June 15,
1996, duly and validly approved written consents from the holders
of record of a majority of the shares of capital stock of Seller
entitled to consent in the Consent Solicitation with respect to
and in favor of the sale of the Business contemplated hereby and
other matters to be covered by the Consent Solicitation, as
required by the Delaware General Corporation Law, the Certificate
of Incorporation of Seller and all applicable federal and state
securities laws.
(b) If a Break-up Event shall have occurred prior to April
30, 1997, then the Break-up Fee shall be $250,000; provided, that
if the applicable Break-up Event shall be as set forth in clause
(iv) of Section 7.7(b) above, or if another Break-up Event shall
occur prior to satisfaction of the condition set forth in Section
3.6(h) above (provided that Seller shall have until June 15, 1996
to satisfy such condition), then in any such case the Break-up
Fee shall be $1,000,000; provided, that the obligation of Seller
PAGE 82
<PAGE>
to pay such Break-up Fee in respect of a Break-up Event set forth
in any of clause (i), (ii) or (iii) of Section 7.7(b) above shall
be subject to the satisfaction of the following conditions:
(i) Buyer shall not have theretofore exercised any right or
stated its intent to terminate or not to perform this Agreement,
except as a consequence of the failure of a Selling Party to
perform its obligations hereunder;
(ii) the representations and warranties of Buyer contained in
this Agreement shall have been true and correct in all material
respects and Buyer shall have performed all of its obligations
under the this Agreement to the extent required to be performed
on or prior to the date of the Break-up Event; and
(iii) consummation of the transaction contemplated thereby
shall not have been prevented by the failure of any condition to
the obligations of a Selling Party set forth in the this
Agreement to have been satisfied as a consequence of any act or
omission by Buyer.
(c) The obligations of Seller to pay the Break-up Fee shall
be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which any
Selling Parties may have against Buyer or any principal thereof,
or anyone else. Neither Buyer nor any principal thereof shall be
required to mitigate its or his damages.
(d) If a Break-up Event occurs, Buyer shall nevertheless
continue to be entitled to make competing bids for any or all of
the business of the Selling Parties (and to present the relative
merits of bids it may make to parties in interest) but in the
event that Buyer is the successful bidder, or if Buyer shall
receive a Break-up Fee hereunder and thereafter close the
acquisition contemplated hereby, then Seller shall be entitled to
offset from the Purchase Price the Break-up Fee received by
Buyer.
8 No Shop. From the date hereof until the expiration of
the "Restricted Period" described below, (i) Seller agrees,
PAGE 83
<PAGE>
directly or indirectly, without Buyer's prior written consent,
that it shall not and shall not permit any subsidiary to (A)
offer or convey any of the Purchased Assets or the Business
(except only the sale of non-exclusive licenses of software in
object code form to end users and other inventory for fair
consideration and in the ordinary course of business consistent
with past practices), (B) issue, sell or purchase any shares of
any class or series of any of the issued and outstanding capital
stock of Seller or any subsidiary or any security convertible
into or exchangeable for such stock or any option or warrant with
respect to such stock (except options granted under existing
stock option plans and shares of Seller capital stock issuable
upon the exercise or conversion of options, rights, or securities
presently outstanding), or (C) merge or consolidate with another
entity, and (ii) neither of the Selling Parties nor anyone acting
on their behalf will solicit, entertain or encourage inquiries or
proposals, or enter into, pursue, or carry on any discussions or
negotiations, with respect to any transaction of the type
referred to in clause (i) above with any person or entity other
than Buyer. Seller will immediately cease and cause to be
terminated any existing activities, discussions or negotiations
with any parties conducted heretofore in respect of any such
transaction. Without limiting the generality of, or providing an
exception to the foregoing, if an offer unsolicited by Seller,
its investment bankers or their representatives, agents or others
is received by Seller prior to the signing of this Agreement or
the earlier approval by the Board of Directors, consistent with
the fiduciary obligation Seller may then owe to its stockholders
and to the extent required by applicable law, such offer may be
communicated to the Board of Directors of Seller, provided that
Seller will not provide information to such offeror. Seller will
promptly advise Buyer of the identity of such offeror and
communicate to Buyer the terms of any oral inquiry or proposal
which it or they may receive and deliver to Buyer a copy of any
such offer in writing. For purposes of this Section, such an
unsolicited offer shall not include an offer by any offeror who
has previously submitted an offer or proposal for, or had (or is
currently having) negotiations with Seller. Buyer will have the
right, prior to any other person, firm or corporation (including
such offeror), to enter into an agreement to purchase the
Purchased Assets and the Business from Seller at the same price
PAGE 84
<PAGE>
and for the same terms and conditions as offered by such offeror.
Without limiting the rights of Buyer to pursue any remedies, the
parties agree that damages are not an adequate remedy for a
breach of this Section and that the obligations hereunder may be
specifically enforced.
The "Restrictive Period" shall continue until the
expiration of the earlier of (a) forty-five (45) days after the
date of the execution and delivery of this Agreement by all
parties, and (b) the Closing.
If requested by Buyer, Barry N. Bycoff shall exercise
all vested options at their own expense.
9 Temporary Extension of Occupancy. Each of the Selling
Parties agrees to permit after the Closing Date the temporary
continuation of the occupancy of the Business in its current
space until Buyer makes alternative arrangements and so notifies
Seller, or until the expiration of thirty (30) days from the
Closing Date, whichever is earlier. Such occupancy shall be in
accordance with a short-term facilities lease in the form of
Exhibit 7.9 hereto, pursuant to which Buyer will agree to
reimburse Seller for the pro rata portion of costs incurred on
account of the continuation of such occupancy from and after the
second Friday after the Closing Date, upon presentation of
invoices therefore and proof of payment, and Seller will agree to
make available to Buyer, as a contract provider, employees of
Seller that Buyer wishes to assist it temporarily through such
period of occupancy.
10 Non-Competition. (a) The Selling Parties will not and
will not permit any parent or subsidiary to, for a period of ten
(10) years from the Closing Date (the "Limited Period"):
(i) directly or indirectly, anywhere within the
United States and Germany (the "Territory"), own, manage, operate
or control, or participate in the ownership, management,
operation or control of, or be connected with or have any
interest in, as a stockholder, agent, consultant, partner or
otherwise, or refer or exploit any customers, business or
opportunities to or with, or otherwise assist in any manner any
PAGE 85
<PAGE>
business which is competitive within the Territory with the
Business and/or any business related or similar to the Business;
or
(ii) without the express prior written consent of
Buyer, directly or indirectly employ or attempt to employ, or
knowingly arrange or solicit to have any other person or entity
employ, any person who heretofore has been, or is, on the date
hereof or hereafter, in the employ of either of the Selling
Parties or Buyer.
For purposes hereof, the sale or distribution of software in any
and all media and advertising and promotional services in each
case through catalogs and other direct mail publications, web
site, Internet, Intranet and other on-line or electronic
communications or distribution, and corporate reseller and
wholesale operations, shall be deemed competitive with the
Business, except that a Selling Party may provide product
integration and consulting and support services as a value added
reseller or systems integrator of software products providing
Internet, Intranet and other on-line network security protection
for electronic or enterprise-wide communications for corporate
enterprises doing business on the Internet; provided that any
third-party software products being distributed by Buyer are
offered by Seller as a component of network security services and
not on a stand-alone basis.
(b) Since Buyer will be irreparably damaged if the
provisions of Section 7.10(a) above are not specifically
enforced, Buyer shall be entitled to an injunction restraining
any violation or attempted violation of any of the provisions of
this Section (without any bond or other security being required),
or any other appropriate decree of specific performance. Such
remedies shall not be exclusive and shall be in addition to any
other remedy which Buyer may have.
11 Plant Closings. Each of the Selling Parties shall be
responsible for making any and all filings with and reports to
any governmental authorities and furnishing any and all notices
to employees and others under all laws, rules and regulations,
domestic and foreign, relating to the closure of a plant or
facility, the reduction of a work force or the termination of
PAGE 86
<PAGE>
employment of any employee, including without limitation, under
WARN, the Massachusetts Reemployment Assistance Program and the
German Civil Code (collectively, "Work Force Laws"). Subject to
Section 2.8, the Selling Parties shall be responsible for making,
prior to or as soon as reasonably practicable after the Closing
Date, all payments to employees and others required under such
laws, including, without limitation all such payments
contemplated by the German Shut-Down Plan, and using their best
efforts to obtain releases from such employees and others in
favor of Buyer and its subsidiaries reasonably satisfactory to
Buyer. All such filings, reports and notices shall be made
within such time period as shall be prescribed by applicable law,
and in any event within ten days from the date hereof. Set forth
as item 7.11 to the Disclosure Schedule is a calculation of such
payments for each of the Selling Parties.
12 Record Retention. Buyer agrees that for a period of
not less than six years following the Closing Date it shall not,
and shall not permit any other person to, destroy or otherwise
dispose of any Files and Records existing on or before the
Closing Date except in a manner consistent with policies approved
by counsel for Buyer in light of applicable statutes of
limitation. For a period of six years following the Closing
Date, Buyer agrees that it shall upon reasonable notice make
available to Seller and its representatives and agents all Files
and Records relating to the Business on or before the Closing
Date, and permit Seller and its respective representatives and
agents to examine, make extracts from and, at their expense, copy
such Files and Records relating to the Business on or before the
Closing Date at any time during normal business hours for any
proper purpose relating to the Excluded Liabilities. Buyer shall
have the right to destroy all or part or the Files and Records
relating to the Business on or before the Closing Date after the
sixth anniversary of the Closing Date or at an earlier time by
giving Seller thirty days' prior written notice of such intended
disposition and by offering to deliver to Seller, at Seller's
expense, custody of such Files and Records relating to the
Business on or before the Closing Date as Buyer may intend to
destroy; if Buyer delivers any Files and Records to Seller,
Seller agrees to retain such Files and Records and the provisions
of this Section shall apply thereto with Seller having the rights
and obligations of Buyer and Buyer having the rights and
PAGE 87
<PAGE>
obligations of Buyer and Buyer having the rights and obligations
of Seller.
ARTICLE 8
8. Indemnification.
1 Obligation to Indemnify.
(a) Buyer hereby assumes and agrees to indemnify and hold each
Selling Party harmless from, against and in respect of, and shall
on demand reimburse the Selling Parties for:
(i) any and all Assumed Liabilities;
(ii) any and all loss, liability, damage or deficiency
suffered or incurred by a Selling Party resulting from any
misrepresentation or breach of warranty by Buyer or
nonfulfillment of any covenant to be performed or complied with
by Buyer under this agreement or in any agreement, certificate,
document or instrument executed by Buyer and delivered to Seller
pursuant hereto or in connection with this Agreement; and
(iii) all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable
attorneys' fees, incident to any of the foregoing, or reasonably
incurred in investigating or attempting to avoid any of same or
to oppose the imposition thereof or in enforcing any of the
obligations under this Section 8.1(a).
(b) The Selling Parties jointly and severally hereby assume
and agree to indemnify and hold Buyer harmless from, against and
in respect of, and shall on demand reimburse Buyer for:
(i) any and all Excluded Liabilities;
(ii) any and all loss, liability, damage or deficiency
suffered or incurred by Buyer resulting from any
misrepresentation or breach of warranty or nonfulfillment of any
covenant by Seller under this agreement to be performed or
PAGE 88
<PAGE>
complied with or in any agreement, certificate, document or
instrument executed by a Selling Party and delivered to Buyer
pursuant hereto or in connection with this Agreement;
(iii) any and all loss, liability, damage, cost or expense
suffered or incurred by Buyer in respect of or in connection with
any and all debts, liabilities and obligations of, and any and
all violation of laws, rules, regulations, codes or orders by a
Selling Party, direct or indirect, fixed, contingent, legal,
statutory, contractual or otherwise, which exist at or as of the
Closing Date or which arise after the Closing Date but which are
based upon or arise from any act, transaction, circumstance, sale
of goods or services, state of facts or other condition which
occurred or existed on or before the Closing Date, whether or not
then known, due or payable, except to the extent specifically
assumed by Buyer under the terms of this Agreement;
(iv) any and all loss, liability, damage, cost or expense
suffered or incurred by Buyer based on or arising out of the
infringement or alleged infringement of products of the Business
sold by a Selling Party of the Proprietary Rights of any third
party;
(v) any and all loss, liability, damage, cost or expense
suffered or incurred by Buyer based on or arising out of any
defective or allegedly defective product or service warranty
and/or third party liability claims (whether alleged in contract,
tort, strict liability or otherwise), which exist at or as of the
Closing Date or which arise after the Closing Date but which are
based upon or arise from any act, transaction, circumstance, sale
of goods or services, state of fact or other condition which
occurred or existed on or before the Closing Date, including,
without limitation, any products manufactured, assembled, sold or
distributed by a Selling Party or its predecessors in interest at
any time;
(vi) any and all loss, liability, damage, cost or expense
suffered or incurred by Buyer based on or arising from (A) the
presence of any Hazardous Substance on or about any premises
occupied by any Selling Party or any hazardous discharge on or
prior to the Closing Date, and/or any environmental complaint,
PAGE 89
<PAGE>
and/or the failure to obtain any license or permit required in
connection with any Hazardous Substance or hazardous discharge or
the retention, disposal, treatment or use thereof, and/or arising
out of any noncompliance with any environmental, health or safety
law, ordinance, rule or regulation (each, an "Environmental
Requirement"), in each case, based on or arising from any act,
transaction, state of facts or other condition which occurred or
existed on or before the Closing Date, whether or not then known,
(B) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any
hazardous discharge, the presence, use, disposal or treatment of
a Hazardous Substance, or noncompliance with any Environmental
Requirement, on or prior to the Closing Date, and/or (C) any
environmental complaint and/or any demand of any government
agency or authority prior to, on or after the Closing Date which
is based upon or in any way related to any hazardous discharge,
the presence, use, disposal or treatment of a Hazardous
Substance, and/or noncompliance with any Environmental
Requirement on or prior to the Closing Date, and including,
without limitation and in each such case under this clause (vi),
the reasonable costs and expenses of all remedial action and
clean-up, attorney and consultant fees, investigation, sampling
and laboratory fees, court costs and litigation expense and costs
arising out of emergency or temporary assistance or action
undertaken by or as required by any duly authorized regulatory
body in connection with any of the foregoing;
(vii) any and all loss, liability damage, cost or expense
suffered or incurred by Buyer by reason of noncompliance with the
provisions of the bulk transfer provisions of the Uniform
Commercial Code or any other bulk transfer law of any
jurisdiction, or with the provisions of any and all Work Force
Laws (including, without limitation, the failure of a Selling
Party to satisfy all obligations to its current employees for
wage continuation, severance, reemployment assistance and
termination pay and other benefits), in connection with any of
the transactions contemplated by this Agreement, except to the
extent of liability specifically assumed by Buyer under the terms
of this Agreement;
PAGE 90
<PAGE>
(viii) any and all loss, liability, damage, cost or expense
suffered or incurred by Buyer by reason of any claims of or
entitlements to severance pay, termination pay and/or other
benefits arising or accruing or claimed to arise or accrue with
respect to any employee of Seller, whether by reason of or in
connection with any of the transactions contemplated by this
Agreement or otherwise to the extent based on any employment of
such employee by any Selling Party;
(ix) any and all taxes, including, without limitation,
income, franchise, property, sales, use, added value, employees'
income withholding and social security taxes, and all assessments
or governmental charges imposed by the United States or by any
foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country,
or by any other taxing authority, which are due or payable by any
Selling Party in connection with or arising out of the operation
of its business on or prior to the Closing Date and all interest
and penalties thereon; and
(x) all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable
attorneys' fees, incident to any of the foregoing, or reasonably
incurred in investigating or attempting to avoid any of same or
to oppose the imposition thereof or in enforcing any of the
obligations under this Section 8.1(b).
2 Survival; Limitations. (a) The respective representations
and warranties of the parties contained in this Agreement or in
any agreement, instrument or document delivered pursuant hereto
and indemnification in respect thereof shall survive the Closing
Date until April 30, 1998, except for the provisions of Sections
4.11, 4.12, 4.15, 4.16 and 8.1(b)(ix) hereof, which shall survive
for thirty (30) days beyond the full period of all applicable
statutes of limitations (giving effect to any waiver, mitigation
or extension thereof), and except for the provisions of Sections
4.2, 4.5, 4.6 and 4.8 hereof which shall survive the Closing Date
without time limit. Notwithstanding the foregoing, individual
representations and warranties referred to in this Section 8.2(a)
shall survive the periods specified if notice of
misrepresentation or breach thereof giving rise to such right of
PAGE 91
<PAGE>
indemnity shall have been given as herein provided to the party
or parties against whom such indemnity may be sought prior to the
expiration of such periods, and the covenants and agreements of
parties hereto contained in this Agreement or any agreement,
instrument or document delivered pursuant hereto and
indemnification in respect thereof shall survive the Closing Date
without time limit.
(a) No party hereto shall have an indemnification
obligation pursuant to this Article 8 in respect of any
representation, warranty or covenant unless such party shall have
received from the party seeking indemnification written notice of
the existence of the claim for or in respect of which
indemnification is sought. Such notice shall set forth with
reasonable specificity (i) the basis under this Agreement, and
the facts that otherwise form the basis, of such claim, (ii) an
estimate of the amount of such claim (which estimate shall not be
conclusive of the final amount of such claim) and an explanation
of the calculation of such estimate, including a statement of any
significant assumptions employed therein, and (iii) the date on
and manner in which the party delivering such notice became aware
of the existence of such claim.
(b) Notwithstanding anything to the contrary contained in
this Agreement, the Selling Parties shall not be required
hereunder to indemnify or hold Buyer or any affiliate thereof
harmless against damages or other losses until such time as the
aggregate amount of all losses, liabilities, damages, and
expenses of indemnitees based thereon or resulting therefrom
shall exceed $75,000 (the "Liability Cushion"), at which time the
Selling Parties jointly and severally shall be responsible
without regard to such threshold; provided, however, that such
Liability Cushion shall not apply to or include (A) any
obligations of the Selling Parties for Excluded Liabilities or
under Sections 2, 6 or 7 hereof, or any other covenant or
agreement of any Selling Party (as opposed to their
representations and warranties) relating to a period after the
Closing contained in this Agreement, or (B) any losses,
liabilities, damages and expenses in respect of
misrepresentations or breaches of warranty as to title contained
in Sections 4.5 or 4.6 hereof, taxes or other payments contained
in Sections 4.11 or 4.12, litigation contained in Section 4.7, or
PAGE 92
<PAGE>
as to the Consent Solicitation Statement or Consent Solicitation
contained in Section 4.16 hereof; provided, further, however,
that the aggregate liability of the Selling Parties under this
Agreement to Buyer shall not exceed the Purchase Price
theretofore actually received by the Selling Parties (including
the Escrow Fund).
(c) In the event that a Selling Party becomes liable to
Buyer hereunder, the Selling Parties shall be entitled to a
credit or offset against any such liability an amount equal to
(i) the net amount of insurance proceeds received by Buyer in
respect of such indemnifiable loss, and (ii) except to the extent
already provided for in Section 8.2(e) or elsewhere in this
Agreement, the present value (as calculated pursuant to Section
8.2(e) of any net tax benefit, if any, attributable to such loss
and actually realized by Buyer during any taxable period after
the Closing Date in connection with the loss or damage suffered
by it which forms the basis of the liability of the Selling
Parties' liability hereunder. Such tax benefit shall be equal to
the product of (x) any allowable tax deduction attributable to
such loss (reduced by any tax income or tax basis reduction
resulting from the receipt of any indemnity payment in respect of
such loss) which was or will be available in computing any tax
owed by Buyer for any taxable period after the Closing Date and
(y) the maximum marginal rate of such tax payable by Buyer for
any taxable period in which such deduction was or will be
available after first reflecting all other items of income, gain,
deduction, loss or credit (including but not limited to any net
operating loss) for such taxable period.
(d) Whenever any indemnification payment is made by any
party and such payment is includable in the taxable income of the
indemnified party for purposes of any tax, such payment shall be
adjusted to an amount that will provide the indemnified on an
after-tax basis with an amount equal to the amount of the
underlying indemnification claim. For purposes of calculating
the adjustment to the indemnified party pursuant to the preceding
sentence, if any, the following items shall be taken into
account: (A) all taxes imposed with respect to the accrual or
receipt of such indemnification payment (as the same may be
increased pursuant to this Section 8.2(e)), and (B) any tax
PAGE 93
<PAGE>
savings (including without limitation any credit, deduction or
other benefit) realized or to be realized by the indemnified
party as a result of (i) the payment or accrual of the amounts in
respect of which the underlying indemnification payment and any
additional payments to be made pursuant to this Section 8.2(e) to
or on behalf of the indemnified party hereunder is made, and (ii)
if the payment to or on behalf of the indemnified party hereunder
relates to taxes, any additional tax benefit that the indemnified
party will be entitled to receive as a result of any tax
adjustment to which such indemnification payment relates. For
purposes of the preceding sentence, when the indemnified party
will receive a tax savings in a year following the tax year the
indemnification is made, the value of the tax savings shall be
calculated on a present value basis, and the discount rate used
shall be the rate set forth from time to time under the authority
of Section 7520(a)(2) of the Code. To the extent that any
disagreements relating to this Section 8.2(e) arise in regard to
tax effecting any indemnification payment, and such disagreements
are not resolved by mutual agreement, such agreements shall be
resolved by an accounting firm in the manner set forth in Section
2.6.
(e) Except as otherwise provided in the Escrow Agreement,
and subject to the provisions of Section 8.4 hereof, any
indemnification payment shall be made not later than thirty (30)
days after receipt by the indemnifying party of a request for
indemnification from the indemnified party specifying that an
indemnifiable amount has been paid by or is payable by such
indemnified party and the amount thereof, and any such
indemnification payment that is not made when due shall bear
interest at the rate of ten percent (10%) per annum for each day
until paid.
(f) To the extent that a Selling Party liquidates or dissolves
or distributes assets after the Closing Date, the provisions of
this Article 8 shall be applicable to those persons or entities
who shall then be stockholders of such Selling Party, on the same
terms and subject to the same limitations as are applicable to
such Selling Party.
3 Claims. Buyer shall promptly give Seller written
notice of any matter which Buyer has determined has given or
PAGE 94
<PAGE>
which Buyer expects is likely to give rise to a right of
indemnification under this agreement stating the amount of the
loss, if known, provided that failure to give any such notice
shall not reduce the indemnity available hereunder except to the
extent such failure increased the amount to be indemnified
hereunder. The obligations and liabilities of the Selling
Parties under this Article 8 with respect to loss arising from
claims of any third party (including, without limitation, claims
by any assignee or successor of Buyer or any governmental agency)
that are subject to the indemnification provided for in this
Article 8 ("Third-Party Claims") shall be governed by and be
contingent upon the following additional terms and conditions: if
Buyer shall receive notice of any Third-Party Claim, Buyer shall
give Seller prompt written notice thereof and shall permit
Seller, at its option, to participate in the defense of such
Third-Party Claim by counsel of its own choosing and at its
expense, provided that failure to give any such notice shall not
reduce the indemnity available hereunder except to the extent
such failure increased the amount to be indemnified hereunder.
If Seller acknowledges in writing its obligation to indemnify
Buyer hereunder against any loss, damage, cost or expense that
may result from such Third-Party Claim (subject to the
limitations set forth in Section 8.2, if applicable), Seller
shall be entitled, at its option, to assume and control the
defense of such Third-Party Claim at its expense and through
counsel of its choice if it gives prompt written notice of its
intention to do so to Buyer. Buyer shall have the right to
employ separate counsel and participate in the defense of such
Third-Party Claim which has been assumed by Seller, but the fees
and expenses of such counsel shall be at the expense of Buyer
unless either of the following conditions exists (in which case
the fees and expenses of such counsel shall be at the expense of
Seller): (i) Seller has agreed in writing to pay such fees and
expenses, (ii) Seller, or Seller's counsel, is not diligently
pursuing such defense or (iii) Buyer has defenses which are
different from those of Seller. If Seller exercises its right to
assume the defense against any such Third-Party Claim as provided
above, Buyer shall cooperate with Seller in such defense and make
available to Seller, at Seller's expense, all pertinent records,
materials and information in its possession or under its control
relating thereto as is reasonably required by Seller. Similarly,
if Buyer is, directly or indirectly, conducting the defense
PAGE 95
<PAGE>
against any such Third-Party Claim, Seller shall cooperate with
Buyer in such defense and make available to it all such records,
materials and information in its possession or under its control
relating thereto as is reasonably required by Buyer. No such
Third-Party Claim may be settled by either Buyer or Seller
without the written consent of the other, which consent shall not
be unreasonably withheld.
4 Arbitration. (a) The parties hereto agree that they
shall use their best efforts to settle amicably any disputes,
differences or controversies arising among the parties out of or
in connection with the indemnification provisions of this
Agreement. However, any such disputes, differences or
controversies, if not so settled within thirty (30) days after
occurrence thereof, shall be submitted to arbitration in
accordance with the rules and procedures of the American
Arbitration Association, by three arbitrators appointed in
accordance with such rules, at the request of any party;
provided, however, that nothing contained herein shall prevent
the party or parties hereinafter indicated from pursuing any and
all of their rights and remedies in the courts of any competent
jurisdiction, without submitting the same to arbitration or
consenting to the arbitration thereof, as follows:
(i) Buyer, in the event of a default or alleged
default by a Selling Party in its obligations with respect to
Excluded Liabilities or under Articles 2, 6, or 7 hereof or any
other matter to which the Liability Cushion shall not be
applicable.
(ii) Either party, in the event of the occurrence or
alleged occurrence of an event of termination under Article 9 or
payment of the Break-up Fee in respect thereof.
(iii) Buyer, in the event of a claim for or in the
nature of fraud. An individual matter shall be deemed fully and
finally resolved in the event of a matter submitted to
arbitration upon the entry of an award by the arbitrator and, in
the event of a matter submitted to a court, upon the entry of
judgment by a court of final authority. Any award rendered as a
PAGE 96
<PAGE>
result of arbitration shall be final and may be enforced in any
court having jurisdiction over the party to be bound.
ARTICLE 9
9. Termination.
1 Termination. Notwithstanding anything in this
Agreement to the contrary:
(a) Mutual Consent. This Agreement may be terminated by
the mutual written consent of Buyer and Seller.
(b) Selling Party Breach. If, notwithstanding the terms of
this Agreement, any of the conditions to Buyer's obligation to
proceed set forth in Article 3 hereof shall not have been
fulfilled, or any of the covenants, agreements or obligations
required by the terms of Article 6 to be performed by a Selling
Party shall not have been duly or properly performed or complied
with or a Selling Party hereto shall intentionally fail or refuse
to consummate the transactions contemplated herein or to take any
other action referred to herein to be taken by it necessary to
consummate the transactions contemplated herein, then Buyer shall
have the right in addition to the other rights specified in
Section 9.2, at its election, to terminate this Agreement by five
(5) days' written notice given to Seller or to close the purchase
of the Purchased Assets as herein provided.
(c) Outside Date. Except as provided in Section 9.1(b)
hereof, if for any reason the Closing Date shall not have
occurred on or before June 28, 1996, unless otherwise agreed to
in writing between Buyer and Seller, this Agreement shall
terminate automatically at the close of business on such date.
(d) Legal Restraint. Any party may, by at least forty-five
days' prior notice to the other parties, terminate this Agreement
if at the time the written notice of termination is given there
is in effect a preliminary or permanent injunction enjoining the
sale, transfer or delivery of the Purchased Assets or the payment
PAGE 97
<PAGE>
of the Purchase Price, unless such injunction shall be stayed,
lifted or dismissed.
(e) No Shop. Without limiting Section 7.8 or any other
provision of this Agreement, Buyer shall have the option
(exercisable in its sole discretion) to terminate this Agreement,
upon written notice to Seller, if after the date hereof (i) there
is any negotiation or solicitation by Seller or any of its
Affiliates which would violate Section 7.8 of this Agreement or
(ii) any person conducts an auction, or solicits or requests bids
or offers, with respect to a purchase of all or a material
portion of the Purchased Assets or the Business or any other
transaction referred to in Section 7.8 (whether or not any such
bids or offers are made or accepted).
(f) Decrease of Revenue - Seller. If during the Revenue
Measurement Period the revenue from operations of the Business
being purchased hereunder shall be twenty percent (20%) or more
less than the revenue for such period reflected on the Transition
Plan (calculated as provided in Section 2.6 above), then Seller
shall have the right, at its election, to terminate this
Agreement by five (5) days' written notice given to Buyer upon
payment to Buyer of a sum equal to two (2) times the Break-up Fee
(i.e., $500,000) (unless such termination shall occur prior to
the satisfaction of the condition set forth in Section 3.6(h)
above, then in any such case the Break-up Fee shall be
$1,000,000), or to close the sale of the Purchased Assets as
herein provided; provided, that Seller shall be entitled to so
terminate this Agreement only if (i) the representations and
warranties of each of the Selling Parties contained in this
Agreement shall be true and correct in all material respects and
each of the Selling Parties shall have performed all of its
obligations under this Agreement to the extent required to be
performed on or prior to the scheduled Closing Date; and (ii) the
consummation of the transaction contemplated hereby shall not
have been prevented by the failure of any condition to its
obligations set forth in this Agreement to have been satisfied as
a consequence of any act or omission by a Selling Party.
(g) Buyer Breach. If, notwithstanding the terms of this
Agreement, any of the conditions to a Selling Party's obligation
PAGE 98
<PAGE>
to proceed set forth in Article 3 hereof shall not have been
fulfilled, or Buyer shall intentionally fail or refuse to
consummate the transactions contemplated herein or to take any
other action referred to herein to be taken by it necessary to
consummate the transactions contemplated herein, then Seller
shall have the right, at its election, to terminate this
Agreement by five (5) days' written notice given to Buyer or to
close the purchase of the Purchased Assets as herein provided.
2 Remedies.
(a) Specific Performance. If Buyer shall desire to proceed
with the Closing despite any breach, condition or intentional
failure or refusal of a Selling Party of the type described in
Section 9.1(b) hereof, Buyer shall have the right to pursue the
remedy of specific performance as provided in Section 10.1.
(b) Damages. Subject to compliance with the terms of
Section 9.2(d), if Buyer shall terminate this Agreement pursuant
to Section 9.1(b), 9.1(c) or 9.1(e), it shall have the right to
collect from the Selling Parties or any of them the Break-up Fee;
and if Seller shall terminate this Agreement pursuant to Section
9.1(f), Buyer shall have the right to collect from the Selling
Parties or any of them a sum equal to the applicable Break-up Fee
set forth in Section 9.1(f), depending on whether the condition
set forth in Section 3.6(h) shall have been satisfied. If Seller
shall terminate this Agreement pursuant to Section 9.1(g), it
shall have the right to collect from Buyer its reasonable
attorneys' fees and other out-of-pocket expenses incurred in
connection with the negotiation and execution of this Agreement,
the Consent Solicitation and other matters contemplated hereby.
(c) Effect of Termination. Any termination of this
Agreement by either party hereto shall have the effect of causing
this Agreement thereupon to become void and of no further force
or effect whatsoever, and thereupon no party hereto will have any
rights, duties, liabilities or obligations of any kind or nature
whatsoever against any other party hereto based upon either this
Agreement or the transactions contemplated hereby, except, in
PAGE 99
<PAGE>
each case (i) the obligations of Seller to pay Buyer under
Sections 7.7 or 9.2(d), (ii) the obligations of each party with
respect to confidentiality set forth in Sections 6.1 and 6.4, and
with respect to brokers and finders set forth in Section 7.3,
(iii) any obligations under Section 7.8 and Sections 9.2(b) or
9.2(d), and (iv) the obligations of each party with respect to
accountants' fees set forth in Section 2.6.
(d) Attorneys' Fees. In any action, suit, or other
proceeding under or to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover its reasonable
attorneys' fees and other out-of-pocket expenses from the losing
party.
ARTICLE 10
10. Miscellaneous.
1 Specific Performance. The Selling Parties jointly and
severally agree that the Purchased Assets are unique property
that cannot be readily obtained on the open market and that Buyer
will be irreparably injured if this Agreement is not specifically
enforced. Therefore, Buyer shall have the right specifically to
enforce the performance of the Selling Parties under this
Agreement without the necessity of posting any bond or other
security, and each Selling Party hereby waives the defense in any
such suit that Buyer has an adequate remedy at law and agrees not
to interpose any opposition, legal or otherwise, as to the
propriety of specific performance as a remedy. The remedy of
specifically enforcing any or all of the provisions of this
Agreement in accordance with this Section shall not be exclusive
of any other rights which Buyer may have to terminate this
Agreement, or of any other rights or remedies which Buyer may
otherwise have under this Agreement or otherwise, all of which
rights and remedies shall be cumulative.
2 Binding Agreement; Assignment. All the terms and
provisions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their
respective successors, heirs, legal representatives and permitted
PAGE 100
<PAGE>
assigns. No Selling Party may assign any of its rights or
obligations under this Agreement. This Agreement and all rights
of Buyer shall be assignable to one or more subsidiaries or
affiliates of Buyer. Such assignment shall not relieve Buyer of
its obligations hereunder.
3 Law To Govern. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of
Delaware applicable to contracts executed, delivered and to be
fully performed in the State of Delaware, without regard to
contrary principles of conflict of laws.
4 No Public Announcement. No party hereto shall, without
the prior written approval of Buyer and Seller, make any press
release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that
Buyer or Seller shall be so obligated by law or the rules of any
stock exchange, in which case such party shall so advise the
other party and Buyer and Seller shall use their reasonable best
efforts to cause a mutually agreeable release or announcement to
be issued; provided that the foregoing shall not preclude
communications or disclosures necessary to implement the
provisions of this Agreement or to comply with accounting and SEC
disclosure or reporting obligations.
5 Notices. All notices shall be in writing and shall be
deemed to have been duly given if delivered personally or when
deposited in the mail if mailed via registered or certified mail,
return receipt requested, postage prepaid, 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), to the other party hereto at the following
addresses:
if to Seller, to:
The Software Developers Company, Inc.
33 Riverside Drive
Pembroke, Massachusetts 02359
Attention: President
PAGE 101
<PAGE>
with a copy to:
Testa Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attention: John M. Hession, Esq.
if to Buyer, to:
Programmer's Paradise, Inc.
1163 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
Attention: President
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, New York 10022
Attention: Lawrence M. Bell, Esq.
or to such other address as any such party may designate in
writing in accordance with this Section 10.5.
6 Fees and Expenses. Except as otherwise provided in
Sections 2.6, 7.7 and 9, each of the parties hereto shall bear
its own costs and expenses (including, without limitation, fees
and disbursements of its counsel, accountants and other
financial, legal, accounting or other advisors) incurred or
otherwise payable by it in connection with the preparation,
negotiation, execution, delivery and performance of this
Agreement and each of the other documents and instruments
executed in connection with or contemplated by this Agreement.
7 Convenience of Forum; Consent to Jurisdiction. The
parties to this Agreement, acting for themselves and for their
respective successors and assigns, without regard to domicile,
citizenship or residence, hereby expressly and irrevocably elect
as the sole judicial forum for the adjudication of any matters
PAGE 102
<PAGE>
arising under or in connection with this Agreement, and consent
and subject themselves to the jurisdiction of, the courts of the
State of New York located in New York City, and/or the United
States District Court for the Southern District of New York
and/or the Bankruptcy Court for the Southern District of New
York, in respect of any matter arising under this Agreement.
Service of process, notices and demands of such courts may be
made upon any party to this Agreement by personal service at any
place where it may be found or giving notice to such party as
provided in Section 10.5.
8 Severability. In the event that any of the provisions
contained in this Agreement would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason
because of the scope, duration or area of its applicability or
for other reasons, unless narrowed by construction, such
provision shall for purposes of such jurisdiction only, be
construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable (or if such language cannot be drawn
narrowly enough, the court making any such determination shall
have the power to modify, to the extent necessary to make such
provision or provisions enforceable in such jurisdiction, such
scope, duration or area or all of them, and such provision shall
then be applicable in such modified form). If, notwithstanding
the foregoing, any such provision would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason,
such provision, as to such jurisdiction only, shall be
ineffective to the extent of such invalidity, prohibition or
unenforceability, without invalidating the remaining provisions
of this Agreement. No narrowed construction, court-modification
or invalidation of any provision shall affect the construction,
validity or enforceability of such provision in any other
jurisdiction. Subject to the foregoing, in case any one or more
of the provisions contained herein should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not be affected in any way thereby.
9 Entire Agreement. This Agreement and the schedules,
exhibits and other documents referred to herein which form a part
PAGE 103
<PAGE>
hereof contain the entire understanding of the parties hereto in
respect of the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants,
or undertakings, other than those expressly set forth or referred
to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject
matter, except that the provisions of any former letter agreement
between or among Buyer and any of the Selling Parties with
respect to confidentiality shall survive until the Closing.
10 Amendments; Consents and Waivers. This Agreement and
the other agreements to be executed in connection herewith may
not be modified, amended or terminated except by a written
agreement specifically referring to this Agreement signed by
Buyer and Seller. Any failure by any party to this Agreement to
comply with any of its obligations hereunder may be waived by any
Seller in the case of a default by Buyer and by Buyer in case of
a default by a Selling Party. No waiver shall be effective
unless in writing and signed by the party granting such waiver,
and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same instrument.
12 No Third-Party Beneficiaries. Nothing herein, express or
implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the
parties hereto, any rights, remedies or other benefits under or
by reason of this Agreement or any other documents executed in
connection with this Agreement.
13 Section Headings. The Article, Section and paragraph
headings contained herein are for the purposes of convenience
only and are not intended to define or limit the contents of this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
PAGE 104
<PAGE>
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
President
THE SOFTWARE DEVELOPER'S
COMPANY, INC.
By: /s/ Barry N. Bycoff
President
SOFTWARE DEVELOPER'S COMPANY
GMBH
By: /s/ Barry N. Bycoff
Managing Director
PAGE 105
<PAGE>
Schedule 1.2
EXCLUDED ASSETS
1. All cash-on-hand or in banks or savings institutions on
the Closing Date, deposits (including security deposits), bank
accounts, money market instruments and cash equivalents, other
than cash-in-transit which shall be a Purchased Asset, and other
than advance payments, customer advances and prepayments in
respect of backlog of the Business or which otherwise relate to
the Purchased Assets or the Business;
2. Accounts receivable arising from ISC, PCT or New Media
sales;
3. ISC;
4. PCT;
5. New Media;
6. Real property leases and leasehold improvements;
7. Furniture in the offices of Barry Bycoff, Joseph Burke
and James O'Connor;
8. Tangible personal property subject to an operating
lease; and leases of tangible personal property not set forth on
Schedule 1.1(g) hereto;
9. Machinery and equipment not specifically included as a
Purchased Asset, including without limitation, a certain stand-by
generator.
10. Any and all claims and rights to claim for income,
franchise and other tax benefits, whether or not applied for, and
PAGE 106
<PAGE>
all rights of tax offset, refunds and credits in favor of a
Selling Party;
11. All insurance and similar claims and proceeds of a
Selling Party with respect to assets not transferred to Buyer at
Closing which have been damaged by events or occurrences on or
prior to the Closing Date;
12. The minute books, corporate seal and stock and
organizational records and tax records of a Selling Party and all
other corporate records of the Selling Party having exclusively
to do with the corporate organization or capitalization of the
Selling Party.
13. The consideration to be delivered to a Selling Party
pursuant to this Agreement, and the bank accounts into which the
Purchase Price shall be wired or deposited pursuant to the
provisions hereto;
14. All insurance policies maintained by or on behalf of a
Selling Party (including, without limitation, any return of
charges or premiums under retrospective rating plans);
15. All intercompany indebtedness, receivables and other
obligations;
16. All motor vehicles;
17. Theft insurance proceeds of approximately $40,000
(claim number ______________).
18. Employee Receivables;
19. Investment in subsidiaries;
20. Recoveries from previously written-off receivables; and
21. Inventory and assets of PCT and New Media
PAGE 107
<PAGE>
EXHIBIT 2
BILL OF SALE
THIS BILL OF SALE ("Bill of Sale"), dated June 28,
1996, is entered into among THE SOFTWARE DEVELOPER'S COMPANY,
INC., a Delaware corporation (the "SDC"), and SOFTWARE
DEVELOPER'S COMPANY GMBH, a German corporation ("SDEV Germany")
(SDC and SDEV Germany are hereinafter referred to individually
and collectively as the "Selling Parties"), and Programmer's
Paradise, Inc., a Delaware corporation (the "Buyer") pursuant to
the terms of the Agreement of Purchase and Sale of Assets (the
"Agreement"), dated as of May 16, 1996, by and among Buyer and
the Selling Parties.
Capitalized terms used herein shall have the same meanings and
definitions as set forth in the Agreement, unless otherwise
specifically defined in this Bill of Sale.
KNOW ALL MEN BY THESE PRESENTS, that pursuant to the
terms and conditions of the Agreement and for the consideration
set forth therein, the receipt and sufficiency of which are
hereby acknowledged, the Selling Parties hereby grant, convey,
assign, transfer and deliver to Buyer all of the Selling Parties'
right, title, interest and benefit, of whatever kind and nature,
in and to the Purchased Assets, free and clear of any liens,
charges and encumbrances of any nature whatsoever.
TO HAVE AND TO HOLD the same unto Buyer, its successors
and assigns forever.
All of the terms and provisions of this Bill of Sale
will be binding upon and inure to the benefit of the parties
hereto and their successors and assigns.
The Selling Parties hereby constitute and appoint
Buyer, its successors and assigns, the true and lawful attorney
or attorneys of the Selling Parties, with full power of
substitution, in the name of Buyer or in the name of any of the
Selling Parties, by and on behalf of and for the sole benefit of
Buyer, its successors and assigns, to demand and receive from
time to time any and all of the Purchased Assets, and from time
to time to institute and prosecute, in the name of the Selling
Parties or otherwise, any and all proceedings at law, in equity
or otherwise, which Buyer or its successors or assigns, may deem
necessary or desirable in order to receive, collect, assert or
enforce any claim, right or title of any kind in or to the
Purchased Assets hereby transferred, assigned and conveyed to
Buyer and to defend and compromise any and all actions, suits or
proceedings in respect thereof and to do all such acts and things
and execute any instruments in relation thereto as Buyer or its
successors or assigns shall deem advisable. Without limitation
of the foregoing, the Selling Parties hereby authorize any
officer of Buyer to endorse or assign any instrument, contract or
chattel paper relating to the Purchased Assets. The Selling
PAGE 108
<PAGE>
Parties agree that the foregoing appointment made and the powers
hereby granted are coupled with an interest and shall be
irrevocable.
Notwithstanding the foregoing, no provision of this
Bill of Sale shall in any way modify, replace, amend, change,
rescind, waive or in any way affect the express provisions
(including the warranties, covenants, agreements, conditions,
representations or any of the obligations and indemnifications,
and the limitations related thereto) set forth in the Agreement,
this Bill of Sale being intended solely to effect the transfer of
property sold and purchased pursuant to the Agreement in
accordance with the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
executed this Bill of Sale on the date first above written.
THE SOFTWARE DEVELOPER'S COMPANY,
INC.
By: /s/ Barry N. Bycoff
Name: Barry N. Bycoff
Title: President
SOFTWARE DEVELOPER'S COMPANY GMBH
By: /s/ Barry N. Bycoff
Name: Barry N. Bycoff
Title: Managing Director
PAGE 109
<PAGE>
EXHIBIT 3
FACILITIES AND EMPLOYEE USE AGREEMENT
Agreement, dated as of June 28, 1996, by and between
Programmer's Paradise, Inc. ("Buyer") and The Software
Developer's Company, Inc. ("Seller").
W I T N E S S E T H:
WHEREAS, Buyer and Seller are parties to that certain
Agreement of Purchase and Sale of Assets, dated as of May 16,
1996 (the "Purchase Agreement"):
WHEREAS, to induce Buyer to enter into the Purchase
Agreement, Seller has agreed to provide Buyer, following the
Closing, with (i) the use of its office and warehouse facility
located at 33 Riverside Drive (the "Riverside Facility") and its
warehouse facility located at 300 Oak Street, 810 Corporate Park
(the "Oak Facility"), each located in Pembroke, Massachusetts
(collectively referred to herein as the "Facilities"), and
(ii) the services of certain of its employees designated by
Buyer; and
WHEREAS, this Agreement is entered into in connection with
Section 7.9 of the Purchase Agreement.
NOW THEREFORE, in consideration of the foregoing, the
parties hereto 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. Use of the Facilities. Following the Closing, Seller
shall permit Buyer unrestricted occupancy and use of the
Facilities in connection with the operation of the Business,
including, without limitation, for the purposes of storing,
staging and shipping of Purchased Assets, and supervising and
observing such operations, sales and other activities, on the
following terms and conditions:
(a) Buyer shall have the right of peaceful, quiet and
uninterrupted possession, use and enjoyment of each of the
Facilities until the earlier to occur of (the "Termination Date")
(i) August 15, 1996, and (ii) with respect to either Facility so
designated by Buyer, the effective date of any notice from Buyer
to Seller that Buyer no longer intends to occupy and use such
designated Facility.
PAGE 110
<PAGE>
(b) As full consideration for the use of the
Facilities as aforesaid, Buyer shall pay to Seller the applicable
fee set forth below (the "Facilities Fee"):
(i) For the period beginning on the day
immediately following the Closing Date through and including
July 14, 1996, no Facilities Fee shall be owing or payable by
Buyer;
(ii) For the period from July 15, 1996 through and
including July 31, 1996, the total Facilities Fee for such period
shall be equal to (A)$4,482 for the Riverside Facility and
(B) $879 for the Oak Facility; provided, however, that such fee
shall be reduced, on a pro-rata basis, if the Termination Date
shall have occurred prior to the end of such period.
(iii) For the period following July 31, 1996
through the Termination Date, the Facilities Fee shall be equal
to one-half of the monthly rent for each such facility on a per
diem basis (i.e. $289.16 per day for the Riverside Facility and
$56.71 per day for Oak Facility); provided, however, that in the
event that Buyer is then occupying less than one-half of the
space in any such Facility, the per diem Facilities Fee for such
facility for such period shall be reduced on a pro-rata basis
based upon Buyer's actual occupancy percentage of each such
Facility.
The Facilities Fee for any such period specified above shall be
payable on the last day of the applicable period. Buyer shall
deposit with the Seller, on or prior to July 10, 1996, $35,000 as
a security deposit in connection with the Facilities Fee. Such
deposit shall pay interest at a rate of 6% per annum.
(c) Seller shall continue to pay and be responsible
and liable for all amounts payable under the leases for the
Facilities, as well as all other costs and expenses associated
with, or related to, the use and occupancy the Facilities,
including, without limitation, fees for utilities, cleaning
services, taxes, water and maintenance and Seller agrees to
maintain all such services at all times prior to the Termination
Date.
(d) Seller shall cooperate with Buyer in all respects
reasonably requested by Buyer to facilitate the occupancy and use
of the Facilities by Buyer, including, without limitation,
permitting Buyer to establish such security measures as Buyer
deems appropriate. Seller agrees to restrict the occupancy and
use of the Facilities by its officers, directors and employees to
normal business hours (8:00 a.m. to 8:00 p.m.) and shall permit
any interference with the operations or activities of Buyer or
any security measures adopted by Buyer.
(e) Seller represents and warrants that
occurrence-based fire and extended "all risk" insurance on the
Facilities is currently in effect (as indicated in the
PAGE 111
<PAGE>
certificate of insurance delivered to Buyer concurrently with the
execution and delivery hereof), and Seller shall maintain such
insurance in full force and effect with respect to all periods
from the date hereof through the Termination Date.
(f) Seller's executive officers and human resource
personnel shall have access to the Facilities during normal
business hours (8:00 a.m. to 8:00 p.m.).
2. Use of the Designated Employees. Seller hereby agrees
provide to Buyer the services of the employees of Seller listed
on Schedule A hereto (the "Designated Employees"), on a full-time
basis, for the period(s) set forth opposite such employee's name
on Schedule A, until no later than July 31, 1996, on the
following terms and conditions:
(a) As full consideration for the services of the
Designated Employees during the such period(s), Buyer shall pay
to Seller a fee for each Designated Employee equal to the product
of (i) 150% of such Designated Employee's base salary, divided by
365, and (ii) the number of days such Designated Employee shall
have performed full-time services for Buyer in accordance with
Schedule A (provided such Designated Employee continues to
provide full-time services to Buyer for such period). Such fee
shall be payable by Buyer to Seller on the last day of every week
during such period.
(b) During such period(s), Seller shall use its best
efforts to maintain the employment of the Designated Employees
and continue to pay and be responsible and liable for all
liabilities, costs and expenses associated with, or related to,
the Designated Employees. The Designated Employees shall not be
deemed to be employed by, or employees or independent contractors
of, Buyer.
(c) During such period(s), Seller shall, at its
expense, continue to pay for and maintain in effect all employee
benefits described in the Employee Retention Plan.
(d) Buyer shall be deemed and entitled to own all of
the results and proceeds of any of the Designated Employees
services, including all right, title and interest in and to any
and all sales, contacts, clients, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including,
without limitation, all those of an advertising, marketing or
promotional nature), and any improvement thereon, which may be
produced, generated, developed, created or devised by any
Designated Employee during such period in connection with the
services rendered for Buyer.
3. No Third-Party Beneficiaries. Nothing herein, express
or implied, is intended or shall be construed to confer upon or
give to any person, firm, corporation or legal entity, other than
PAGE 112
<PAGE>
the parties hereto, any rights, remedies or other benefits under
or by reason of this Agreement or any documents executed in
connection with this Agreement.
4. Miscellaneous. This Agreement supplements, but does
not supersede, the Purchase Agreement. This Agreement shall not
be assignable by Buyer or Seller. This Agreement may not be
amended orally.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date 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
James O'Connor, Vice President
PAGE 113
<PAGE>
EXHIBIT 4
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
PAGE 114
<PAGE>
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
PAGE 115
<PAGE>
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 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
adjust-ment. 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
PAGE 116
<PAGE>
Germany and without SDEV Germany recognizing any 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
Vice President
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
President
SOFTWARE DEVELOPER'S COMPANY GmbH
By: /s/ Barry N. Bycoff
Mangaging Director
PAGE 117
<PAGE>
EXHIBIT 5
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.
PAGE 118
<PAGE>
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):
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).
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:
PAGE 119
<PAGE>
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;
(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.
PAGE 120
<PAGE>
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
PAGE 121
<PAGE>
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
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
Vice President
PAGE 122
<PAGE>
SOFTWARE DEVELOPER'S COMPANY,
GMBH
By: /s/ Barry N. Bycoff
Managing Director
Agreed:
PROGRAMMER'S PARADISE, INC.
By: /s/ Roger Paradis
President
PAGE 123
<PAGE>
EXHIBIT 6
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
PAGE 124
<PAGE>
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
PAGE 125
<PAGE>
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.
PAGE 126
<PAGE>
(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
PAGE 127
<PAGE>
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. 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.
PAGE 128
<PAGE>
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.
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
James O'Connor, Vice President
GOLENBOCK, EISEMAN, ASSOR & BELL,
as Escrow Agent
By:/s/ Lawrence M. Bell
Lawrence M. Bell, Partner
PAGE 129
