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ASSETS FOR CASH
PURCHASE AGREEMENT
ACQUISITION OF THE ASSETS OF
DOMAIN MANUFACTURING CORPORATION
BY
XXXXXX AUTOMATION, INC.
DATED: JUNE 23, 1999
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________________________________________________________________________________
ASSETS FOR CASH PURCHASE AGREEMENT
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TABLE OF CONTENTS
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Page
ARTICLE 1. PURCHASE AND SALE OF ASSETS.................................... 1
1.1 Sale of Assets................................................... 1
1.2 No Assumption of Liabilities..................................... 2
1.3 Purchase Price and Payment....................................... 3
1.4 Time and Place of Closing........................................ 3
1.5 Delivery of Assumption of Liabilities............................ 4
1.6 Transfer of Subject Assets....................................... 4
1.7 Delivery of Records and Contracts................................ 4
1.8 Third Party Consents for Contracts with Domain Software
Solutions, Ltd................................................... 4
1.9 Further Assurances............................................... 5
1.10 Purchase Price Allocation........................................ 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT.............. 6
2.1 Organization and Qualification of Seller......................... 6
2.2 Subsidiaries; Other Investments.................................. 6
2.3 Stock Ownership and Foreign Affiliates........................... 6
2.4 Authorization of Transaction..................................... 6
2.5 Present Compliance with Obligations and Laws..................... 7
2.6 No Conflict of Transaction With Obligations and Laws............. 7
2.7 Financial Statements............................................. 8
2.8 Absence of Undisclosed Liabilities............................... 8
2.9 Conduct of Business; Absence of Certain Changes.................. 8
____________________________________________________________________________
(i)
2.10 Payment of Taxes................................................ 9
2.11 Title to Properties; Liens; Condition of Properties............. 10
2.12 Collectibility of Receivables................................... 11
2.13 Intellectual Property Rights.................................... 12
2.14 Contracts and Commitments....................................... 13
2.15 ERISA and Employee Benefits..................................... 15
2.16 Employee Relations.............................................. 17
2.17 Environmental Matters........................................... 17
2.18 FDA Government Authorizations................................... 18
2.19 Warranty or Other Claims........................................ 18
2.20 Litigation...................................................... 18
2.21 Borrowings and Guarantees....................................... 19
2.22 Insurance....................................................... 19
2.23 Finder's Fee.................................................... 20
2.24 Transactions with Interested Persons............................ 20
2.25 Absence of Sensitive Payments................................... 20
2.26 Year 2000....................................................... 20
2.27 Copies of Documents............................................. 21
2.28 Disclosure of Material Information.............................. 21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER........................ 21
3.1 Organization of Buyer........................................... 21
3.2 Authorization of Transaction.................................... 21
3.3 No Conflict of Transaction With Obligations and Laws............ 21
3.4 Litigation...................................................... 22
____________________________________________________________________________
(ii)
3.5 Finder's Fees................................................... 22
ARTICLE 4. COVENANTS OF THE PARTIES....................................... 22
4.1 Conduct of Business............................................. 22
4.2 Employee/Employee Compensation.................................. 22
4.3 ERISA and Employee Benefits..................................... 22
4.4 Certain Employment Costs........................................ 23
4.5 Cooperation on Certain Matters Post Closing..................... 23
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF BUYER............................. 24
5.1 Representations; Warrantees; Covenants.......................... 24
5.2 Release of Encumbrances......................................... 24
5.3 Proprietary Information Agreements.............................. 24
5.4 Consents of Third Parties....................................... 24
5.5 Opinion of Parent's Counsel..................................... 24
5.6 Real Property Leases; Leasehold Title Insurance................. 25
5.7 Absence of Certain Litigation................................... 25
5.8 No Bankruptcy................................................... 25
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF SELLER AND PARENT................. 25
6.1 Representations; Warranties; Covenants.......................... 25
6.2 Absence of Certain Litigation................................... 26
6.3 No Bankruptcy................................................... 26
ARTICLE 7. INDEMNIFICATION................................................ 26
7.1 Definitions..................................................... 26
7.2 Indemnification by Seller and Parent............................ 27
7.3 Indemnification by Buyer........................................ 29
____________________________________________________________________________
(iii)
7.4 Defense of Third Party Actions.................................. 31
7.5 Miscellaneous................................................... 32
7.6 Payment of Indemnification...................................... 32
ARTICLE 8. TERMINATION OF AGREEMENT....................................... 32
8.1 Termination..................................................... 32
8.2 Effect of Termination........................................... 32
8.3 Right to Proceed................................................ 33
ARTICLE 9. MISCELLANEOUS.................................................. 33
9.1 Survival of Warranties.......................................... 33
9.2 Fees and Expenses............................................... 33
9.3 Notices......................................................... 33
9.4 Publicity and Disclosures....................................... 35
9.5 Confidentiality................................................. 35
9.6 Time Period..................................................... 35
9.7 Entire Agreement................................................ 35
9.8 Severability.................................................... 35
9.9 Assignability................................................... 35
9.10 Amendment....................................................... 35
9.11 Governing Law................................................... 36
9.12 Remedies........................................................ 36
9.13 Counterparts.................................................... 36
9.14 Effect of Table of Contents and Headings........................ 36
List of Schedules and Exhibits......................................... 38
____________________________________________________________________________
(iv)
ASSETS FOR CASH PURCHASE AGREEMENT
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This AGREEMENT is entered into as of June 23, 1999 among Xxxxxx Automation,
Inc. a Delaware corporation with its principal place of business in Chelmsford,
Massachusetts (the "Buyer"), Domain Manufacturing Corporation, a Delaware
corporation with its principal place of business in Boca Raton, Florida (the
"Seller"), and Domain Solutions Corporation, a Delaware corporation with its
principal place of business in Lexington, Massachusetts, being the holder of all
of the issued and outstanding capital stock of Seller (the "Parent").
RECITALS
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WHEREAS, Buyer and Seller have previously entered into a purchase agreement
dated May 14, 1999 (the "Patterns Purchase Agreement") pursuant to which the
Buyer purchased all of the properties, assets and business used in the conduct
of the Patterns Product Line Business (as therein defined) for a purchase price
of $1,000,000;
WHEREAS, Buyer wishes to acquire substantially all of the properties and
assets of Seller and certain of those of Foreign Affiliates (as hereinafter
defined), and Seller wishes to convey such assets to Buyer, subject to the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration for the mutual agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1. PURCHASE AND SALE OF ASSETS
1.1 Sale of Assets.
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(a) Subject to the provisions of this Agreement and except as
expressly excluded in paragraph (c), Seller agrees to sell and Buyer agrees to
purchase, at the Closing (as defined in Section 1.5 hereof), all of the
properties, assets and business of Seller of every kind and description,
tangible and intangible, real, personal or mixed, and wherever located,
including without limitation all assets shown or reflected on the Base Balance
Sheet (as defined in Section 2.7 hereof) of Seller. The assets, property and
business to be sold to and purchased by Buyer under this Agreement (including
paragraph (b) below) are hereinafter sometimes referred to as the "Subject
Assets".
(b) In addition, Seller or Parent will cause the various Foreign
Affiliates as defined in Section 2.3 hereof to sell, and Buyer agrees to
purchase, at the Closing, only those specific assets of the Foreign Affiliates
which are listed on Schedule 1.1(b) hereof. The assets and properties of the
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Foreign Affiliates listed on Schedule 1.1(b) to be sold and purchased under this
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Agreement are sometimes referred to as the "Foreign Assets" and are included
within the Subject Assets.
(c) The following assets shall be excluded from the Subject Assets:
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Page 1
(i) assets and property disposed of by Seller since the date of the
Base Balance Sheet in the ordinary course of business and such other assets, if
any, as have been disposed of pursuant to this Agreement and pursuant to the
Patterns Purchase Agreement; and
(ii) Seller's corporate franchise, stock record books, corporate
record books containing minutes of meetings of directors and stockholders and
such other records as have to do exclusively with Seller's organization or stock
capitalization.
(iii) The Buyer is not purchasing any assets of the Foreign
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Affiliates that are not listed on Schedule 1.1(b).
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1.2 No Assumption of Liabilities.
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(a) Except to the extent expressly assumed pursuant to Section 1.2(b)
below, Buyer does not assume and shall not be liable for any debt, obligation,
responsibility or liability of Seller or any Foreign Affiliate (as defined
below), or any claim against any of the foregoing, whether known or unknown,
contingent or absolute. Without limiting the foregoing sentence, Buyer shall
have no responsibility with respect to the following, whether or not disclosed
in a schedule hereto:
(i) liabilities and obligations related to or arising from
transactions between Seller or any Foreign Affiliate on the one hand and any
officer, director or stockholder of Parent or any Affiliate (for the purposes of
this Agreement, an Affiliate means any person or organization controlled by,
controlling, or under common control with Parent, including the Foreign
Affiliates);
(ii) liabilities and obligations of Seller, Parent or any
Affiliate for taxes of any kind, including sales, use, value added or other
taxes related to or arising from the transfers contemplated hereby;
(iii) liabilities and obligations of Seller, Parent or any
Affiliate for damage or injury to person or property based upon events occurring
prior to the date of Closing;
(iv) liabilities and obligations to employees of Seller, Parent
or any Affiliate, whether for accident, disability, or workers compensation
insurance or benefits, benefits under employee benefit plans, or obligations
related to or resulting from severance of employment by any of them, whether or
not subsequently hired by Buyer, other than the liabilities listed on Schedule
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1.2(b)(ii);
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(v) workmen's liens on any of the Subject Assets;
(vi) liabilities incurred by Seller, Parent or any Affiliate of
Parent in connection with this Agreement and the transactions provided for
herein, including counsel and accountant's fees and expenses pertaining to its
liquidation or the performance by Seller of its obligations hereunder;
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Page 2
(vii) liabilities of Seller or any Foreign Affiliate to Parent or
any Affiliate (however, there shall be a purchase price adjustment pursuant to
Section 1.3(b) with respect to certain amounts advanced by Parent or an
Affiliate); and
(viii) liabilities of Seller or any Foreign Affiliate with respect
to any options, warrants, agreements or convertible or other rights to acquire
any shares of its capital stock of any class.
The foregoing liabilities not being assumed are sometimes hereafter
referred to as the "Excluded Liabilities".
(b) Buyer shall assume responsibility for:
(i) the performance of contracts of Seller or any Foreign
Affiliate specifically listed on or of the types described by category on
Schedule 1.2(b)(i) (the "Assumed Contracts"); and
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(ii) the liabilities listed on Schedule 1.2(b)(ii) (the "Assumed
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Liabilities").
The foregoing assumption of liabilities by Buyer hereunder shall be treated as
independent of Buyer's existing business and shall not enlarge any rights of
third parties under contracts or arrangements with Buyer or Seller or any of
their respective subsidiaries or the Foreign Affiliates.
1.3 Purchase Price and Payment.
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(a) Subject to the provisions of this Agreement, the Seller agrees to
sell and Parent agrees to cause each Foreign Affiliate to sell, and Buyer agrees
to purchase, at the Closing (as defined in Section 1.4 hereof), the Subject
Assets for an aggregate purchase price of $2,551,000, subject to adjustment as
provided in paragraph (b) below (the "Purchase Price"). (The Purchase Price in
the preceding sentence has been reduced to reflect the fact that Seller has
already been paid $1 million for the Patterns Product Line Business under the
Patterns Purchase Agreement.) The Purchase Price (as such amount may be
adjusted as provided below), shall be paid by Buyer at the Closing by wire
transfer of immediately available funds at the Closing. Seller shall designate
the account(s) into which such funds are to be wired in writing at least two (2)
business days prior to the Closing.
(b) In addition, an amount equal to any net cash transferred from
Parent and Domain Pharma Corporation ("Pharma") to the Seller after the Base
Balance Sheet Date (as defined in Section 2.7 hereof) and before Closing, up to
an aggregate maximum of $500,000, shall be paid to Parent by wire transfer of
immediately available funds at Closing.
1.4 Time and Place of Closing. The closing of the purchase and sale
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provided for in this Agreement (herein called the "Closing") shall be held at
the offices of Buyer on June 23,
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Page 3
1999 or at such other place, date or time as may be fixed by mutual agreement of
the parties (the "Closing Date").
1.5 Delivery of Assumption of Liabilities. At the Closing, Buyer shall
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deliver or cause to be delivered to Seller, among other things, an agreement to
assume the Assumed Liabilities having substantially the provisions of Section
1.2(b) hereof.
1.6 Transfer of Subject Assets. At the Closing, Parent and Seller shall
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cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all the Subject Assets, including bills of sale,
assignments of leases, documents representing assignment of the Foreign Assets
(each an Ancillary Document as defined in Section 2.4 hereof) and such other
instruments of transfer as may be required. Such instruments of transfer (a)
shall be in the form and will contain the warranties, covenants and other
provisions (not inconsistent with the provisions hereof) which are usual and
customary for transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers, (b) shall be in form and substance
satisfactory to counsel for Buyer, and (c) shall effectively vest in Buyer good
and marketable title to all the Subject Assets, free and clear of all liens,
restrictions and encumbrances except those specifically disclosed in the
schedules hereto or in the Base Balance Sheet and which Buyer has agreed herein
may remain in place at and after Closing.
1.7 Delivery of Records and Contracts. At the Closing, Parent and Seller
---------------------------------
shall deliver or cause to be delivered to Buyer all of Seller's or any Foreign
Affiliate's leases, contracts, commitments and rights included in the Subject
Assets, with such assignments thereof and consents to assignments as are
necessary to assure Buyer of the full benefit of the same. Seller shall also
deliver to Buyer at the Closing all of Seller's business records, tax returns,
books and other data relating to its assets, business and operations (except
corporate records and other property of Seller excluded under Subsection 1.1(c))
and Seller shall take all requisite steps to put Buyer in actual possession and
operating control of the assets and business of Seller. After the Closing,
Buyer shall afford to Parent, Seller, Foreign Affiliates and their respective
accountants and attorneys reasonable access to the books and records of Seller
and the Foreign Affiliates delivered to Buyer under this Section 1.7 and shall
permit Parent, Seller and Foreign Affiliates to make extracts and copies
therefrom for the purpose of preparing such tax returns of Parent, Seller and
Foreign Affiliates as may be required after the Closing and for other proper
purposes approved by Buyer. In addition, Buyer shall cause those employees of
Seller and Foreign Affiliates transferred to Buyer or any subsidiary of Buyer to
cooperate as may be necessary and reasonable with Seller, Parent and any Foreign
Affiliate in connection with preparing the aforementioned tax returns of Parent,
Seller and Foreign Affiliates.
1.8 Third Party Consents for Contracts with Domain Software Solutions,
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Ltd.
---
(a) Buyer shall after Closing carry out and complete for its own
account each of the Material Contracts to the extent the same have not been
performed prior thereto.
(b) If any consent or approval of or an agreement or novation with any
person who is not a party to this Agreement is required for the transfer to
Buyer of the benefit or burden
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Page 4
of any of the Material Contracts and any such consent or approval has not been
received or such agreement of novation has not been entered into at or prior to
Closing:
(i) this Agreement shall not constitute an assignment or
attempted assignment of any such Material Contract whose terms would be broken
by an assignment or attempted assignment;
(ii) the transfer of each such Material Contract shall be
conditional upon such consent, approval, agreement or novation which Seller and
Parent and Buyer shall use all reasonable endeavors to obtain as soon as
practicable;
(iii) until such time as such consent or approval is received or
such agreement or novation is entered into in each case to the reasonable
satisfaction of Buyer, Seller and Parent shall be deemed to be holding the
benefit thereof in trust for Buyer and Buyer shall perform and observe such
Material Contract as Seller or Parent's agent. Buyer shall keep Seller and
Parent fully and effectively indemnified at all times from and against all
claims, proceedings, actions, losses, demands, damages, debts, liabilities,
obligations, costs and expenses arising by reason of the Buyer's failure to
perform and observe the terms of such Material Contract after Closing as
provided in Section 7.3(a)(iv).
(iv) Seller and Parent shall cooperate with Buyer, at the
Buyer's expense, in taking such action as Buyer may reasonably require to
enforce the Seller and Parent's rights under such Material Contracts; and
(v) Seller and Parent shall receive any goods delivered
pursuant to any of the Material Contracts after the Closing Date by a supplier
as agent for the Buyer at the risk of Buyer and shall forthwith make the same
available for collection by Buyer and Buyer shall indemnify Seller and Parent
against or reimburse it for any payment required to be made by the Seller to a
supplier in respect thereof after the Closing Date.
1.9 Further Assurances. Seller from time to time after the Closing at the
------------------
request of Buyer and without further consideration shall execute and deliver
further instruments of transfer and assignment (in addition to those delivered
under Section 1.6) and take such other action as Buyer may reasonably require to
more effectively transfer and assign to, and vest in, Buyer each of the Subject
Assets. To the extent that the assignment of any lease, contract, commitment or
right shall require the consent of other parties thereto, this Agreement shall
not constitute an assignment thereof; however, Seller shall use commercially
reasonable efforts before and after the Closing to obtain any necessary consents
or waivers to assure Buyer of the benefits of such leases, contracts,
commitments or rights. Seller shall cooperate with Buyer to permit Buyer to
enjoy Seller's rating and benefits under the xxxxxxx'x compensation laws and
unemployment compensation laws of applicable jurisdictions, to the extent
permitted by such laws. Nothing herein shall be deemed a waiver by Buyer of its
right to receive an effective assignment of each of the leases, contracts,
commitments or rights of Seller.
1.10 Purchase Price Allocation. Within sixty days after Closing, Buyer
-------------------------
will give written notice to Parent, proposing an allocation of the purchase
price among the Subject Assets
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Page 5
for purposes of financial and tax reporting. Parent shall within thirty days
after receipt of proposed allocation give written notice to Buyer of its
agreement to such allocation and both parties shall file all tax returns
reflecting that agreed allocation.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
The Seller and Parent hereby jointly and severally represent and warrant to
Buyer as follows:
2.1 Organization and Qualification of Seller. The Seller is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority to own, operate or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it. The
copies of the Seller's Certificate of Incorporation as amended to date
("Charter"), certified by the Delaware Secretary of State, and of the Seller's
bylaws as amended to date, certified by the Seller's Secretary, copies of which
have previously been delivered to Buyer, are complete and correct. The Seller
is duly qualified to do business and in good standing as a foreign corporation
in each of the jurisdictions identified on Schedule 2.1 and it is not required
------------
to be licensed or qualified to conduct its business or own its property in any
other jurisdiction, where the failure to be so qualified would have a material
adverse effect upon its business.
2.2 Subsidiaries; Other Investments. Domain Manufacturing SARL (the
-------------------------------
"Subsidiary") is a corporation organized under the laws of the Republic of
France all of the capital stock of which is owned by Seller. Other than the
Subsidiary, Seller does not own, directly or indirectly, any capital stock of
any corporation or any equity interest in any other form of business enterprise,
and it is not a partner or participant in any joint venture or partnership of
any kind.
2.3 Stock Ownership and Foreign Affiliates. The Seller is a wholly-owned
--------------------------------------
subsidiary of Parent. Domain Software Solutions Ltd. is a corporation organized
under the laws of England and Wales, Domain Manufacturing Singapore Pte. Ltd. is
a corporation organized under the laws of Singapore and Domain Solutions GmbH is
a corporation organized under the laws of the Federal Republic of Germany. Each
of those three corporations is a wholly-owned subsidiary of Domain Solutions
International Holdings, Inc., a wholly-owned subsidiary of Parent. The
Subsidiary, Domain Software Solutions Ltd., Domain Manufacturing Singapore Pte.
Ltd. and Domain Solutions GmbH are hereafter collectively referred to as the
"Foreign Affiliates".
2.4 Authorization of Transaction. Each of the Seller and Parent has the
----------------------------
full power and authority to (i) execute, deliver and perform this Agreement and
the other agreements or documents to be executed and delivered pursuant to this
Agreement (the "Ancillary Documents"); (ii) perform its obligations hereunder
and thereunder, and (iii) carry out the transactions contemplated hereby and
thereby. All necessary action, corporate or otherwise, has been taken by each
of the Parent, the Seller and any Foreign Affiliate to authorize the execution,
delivery and performance of this Agreement and each of the Ancillary Documents
and the transactions contemplated hereby and thereby. The Agreement has been,
and each Ancillary
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Page 6
Document will be at the Closing, duly executed and delivered by the Seller and
Parent or any Foreign Affiliate. The Agreement is, and it and each Ancillary
Document upon the Closing will be, the legal, valid and binding obligation of
each of the Seller, Parent or any Foreign Affiliate a party thereto, enforceable
against it in accordance with its terms.
2.5 Present Compliance with Obligations and Laws. Except as set forth on
--------------------------------------------
Schedule 2.5, neither Seller nor Parent nor any Foreign Affiliate is: (a) in
------------
violation of its Charter or bylaws or equivalent corporate organization
documentation; (b) in material default in the performance of any obligation,
agreement or condition of any debt instrument related to the Subject Assets
which (with or without the passage of time or the giving of notice) affords to
any person the right to accelerate any indebtedness or terminate any right; (c)
in default of or in breach of (with or without the passage of time or the giving
of notice) any other contract to which it is a party or by which it or any of
the Subject Assets are bound which default is material to the Seller's business;
or (d) in violation of any court order, judgment, administrative or judicial
order, writ, decree, stipulation, arbitration award or injunction (collectively,
"Court Orders") or any material license, permit, order, franchise agreement,
concession, grant, authorization, consent or approval (collectively, "Government
Authorizations") that is held by the Seller, Parent or any Foreign Affiliate
applicable to Seller, the business of Seller, or the Subject Assets. The Seller
is now conducting its business and the ownership and operation of its assets in
compliance with material aspects of all applicable statutes, laws, ordinances,
rules and regulations (collectively, "Laws"). All notices and complaints of
violations or alleged violations of Law received by the Seller since January 1,
1998 are attached to Schedule 2.5 together with a description of the status and
------------
disposition of such matters.
2.6 No Conflict of Transaction With Obligations and Laws.
----------------------------------------------------
(a) Except as set forth on Schedule 2.6(a), neither the execution and
---------------
delivery of this Agreement or any Ancillary Document, nor the performance of the
transactions contemplated hereby or thereby, will: (i) violate any provision of
the Charter or bylaws of the Seller, or Parent or any Foreign Affiliate, or any
resolutions of either the Board of Directors or company body of any of them;
(ii) require any consent, approval or authorization of or declaration, filing or
registration with any person other than a governmental agency as described in
paragraph (b) below, including consents of parties to material loans, contracts,
leases, licenses and other agreements; (iii) constitute (with or without the
passage of time or giving of notice) a material breach of, or material default
under, any material agreement, instrument or obligation to which the Seller,
Parent or any Foreign Affiliate is a party or by which the Subject Assets are
bound; (vi) result in the creation of any lien, option (including right of first
refusal or first offer), encumbrance, charge, restriction, mortgage, pledge,
security interest, title exception, restriction, claim or charge of any kind or
character (each an "Encumbrance") upon any of the Subject Assets; (v)
contravene, conflict with, or result in a violation of any Court Order or Law,
or give any governmental authority, whether foreign, federal, state, local or
other political subdivision or agency of any of the foregoing (each a
"Government Authority"), or give any other person, the right to exercise any
remedy or obtain any relief under any Court Order or Law, to which the Seller or
Parent is subject or by which the Subject Assets are bound, or (vi) conflict
with or result
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Page 7
in a violation of any of the terms or requirements of, or give any Governmental
Authority the right to revoke, withdraw, suspend, cancel, terminate or modify,
any Government Authorization.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by the Seller, Parent and Foreign Affiliates do
not require the consent, waiver, approval, authorization, exemption of or giving
of notice to any Governmental Authority.
2.7 Financial Statements. Attached as Schedule 2.7 hereto is a copy of
-------------------- ------------
the unaudited balance sheet of Seller dated April 30, 1999 (the "Base Balance
Sheet Date"), certain line items of which have been reviewed by Seller's
Accountants in accordance with procedures agreed between Seller's Accountants
and Buyer's Accountants, but which balance sheet has not been audited. Said
balance sheet is sometimes referred to hereinafter as the "Base Balance Sheet".
The Base Balance Sheet is complete and correct and presents fairly the present
financial position of the Seller on the date thereof and has been prepared in
accordance with GAAP applied consistently with prior periods.
2.8 Absence of Undisclosed Liabilities. As of the date hereof, the Seller
----------------------------------
has no material liabilities of any nature, whether accrued, absolute, contingent
or otherwise (including without limitation liabilities as guarantor or otherwise
with respect to obligations of others, or liabilities for taxes due or then
accrued or to become due), except: (a) material liabilities stated or adequately
reserved against on the Base Balance Sheet, (b) liabilities not in excess of
$5,000 incurred since the Base Balance Sheet Date in the ordinary course of
business consistent with past practices (none of which is a claim for breach of
contract, breach of duty, breach of warranty, tort, or infringement of an
intellectual property right), and (c) liabilities disclosed on Schedule 2.8
------------
hereto.
2.9 Conduct of Business; Absence of Certain Changes. Except as set forth
-----------------------------------------------
on Schedule 2.9, since the Base Balance Sheet Date, the Seller has conducted its
------------
business only in the ordinary course of business, consistent with prior
practices. Without limiting the generality of the foregoing, except as
disclosed on Schedule 2.9 hereto, since the Base Balance Sheet Date there has
------------
not been (whether or not in the ordinary course of business, except in the case
of paragraph (j)):
(a) any Encumbrance placed on any of the Subject Assets which remains
in existence on the date hereof;
(b) any obligation incurred by the Seller outside the ordinary course
of business;
(c) any sale or other disposition other than the Patterns Product Line
Business, or any agreement or other arrangement for the sale or other
disposition, of any of the properties or assets of the Seller in excess of
$5,000 other than in the ordinary course of business;
(d) any capital expenditure or commitment by Seller in excess of
$5,000 with respect to any individual item or in excess of $25,000 with respect
to all such items, or any lease
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Page 8
or agreement to lease any assets with an annual rental in excess of $5,000 with
respect to any individual item or in excess of $25,000 with respect to all such
items;
(e) any damage, destruction or loss, whether or not covered by
insurance, of any of the Subject Assets;
(f) any increase in the compensation or other amounts payable or to
become payable by the Seller to any of its officers, employees or agents; or any
change in any bonus, pension or profit sharing payment, entitlement or
arrangement made to or with any of such officers, employees or agents or any
grant of any loans or severance or termination pay; or any change in the terms
of any employment agreement or adoption of or increase in, the benefits under
any employee benefit plan;;
(g) any change in the management or supervisory personnel of the
Seller;
(h) any obligation or liability incurred by the Seller to any of its
officers, directors or shareholders or those of Parent or any Affiliate, or any
loans or advances made by the Seller to any of its officers, directors or
shareholders, except normal compensation and expense allowances payable to
officers;
(i) any write-downs of the value of any inventory (including write-
downs by reason of shrinkage or xxxx-down) or write-offs as uncollectible of any
notes or accounts receivable, except for write-downs or write-offs that are in
the aggregate less than $5,000 incurred in the ordinary course of business;
(j) any disposal, sale, assignment or grant not in the ordinary course
of business of a license of any rights to the use of or disclosure to any person
other than Buyer of any Intellectual Property (as defined in Section 2.13
hereof) not theretofore a matter of public knowledge other than pursuant to
confidentiality agreements;
(k) any change in any method of accounting or accounting practice,
whether or not such change was permitted by GAAP; or
(l) any agreement, whether in writing or otherwise, to take any action
described in this Section 2.9.
2.10 Payment of Taxes.
----------------
(a) Except as set forth on Schedule 2.10, Seller has duly and timely
-------------
filed all Federal, state, local, and foreign, government income, excise, gross
receipts and franchise tax returns, real estate and personal property tax
returns, sales, use or value added tax returns, employee tax and contribution
returns and all other tax returns, reports and declarations, including valid
extensions therefor, or estimated taxes required to be filed by it, with respect
to all applicable taxes (the "Tax Returns") including, without limitation,
income, profit, franchise, sales, use, value added, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes, severance, stamp, occupation, and windfall taxes, of every
________________________________________________________________________________
Page 9
kind, character or description imposed by any Governmental Authority or quasi-
Governmental Authority (domestic or foreign), and any interest or fines, and any
and all penalties or additions relating to such taxes, charges, fees, levies or
assessments ("Taxes"). All of the Tax Returns are complete and correct in all
respects. All Taxes shown to be due on such Tax Returns have been paid or are
being contested in good faith by the Seller and such contest is being diligently
pursued, all of which contested taxes are listed on Schedule 2.10. With respect
-------------
to all other Taxes for which no return is required or which have not yet accrued
or otherwise become due, to the Seller's knowledge, adequate provision has been
made in the Base Balance Sheet referred to in Section 2.7 above (as of the date
thereof). The provisions for Taxes reflected in the Base Balance Sheet are
adequate to cover any tax liabilities of the Seller in respect of its business,
properties and operations during the periods covered by said financial
statements and all prior periods. All Taxes and other assessments and levies
which the Seller is required to withhold or collect have been withheld or
collected and paid over or will be paid over to proper governmental authorities
as required.
(b) Each of the Foreign Affiliates has paid all national, regional or
local Taxes owing by them related in any way to the Foreign Assets or which
could give rise to an Encumbrance upon any of the Subject Assets.
(c) All transfer, excise and other taxes payable to any jurisdiction
by reason of the sale and transfer of the Subject Assets pursuant to this
Agreement shall be paid or provided for by Parent after the Closing out of the
consideration payable by Buyer hereunder.
(d) Except as set forth on Schedule 2.10, the Tax Returns have never
-------------
been examined by any Governmental Authority, including the Internal Revenue
Service. The Seller is not aware of any intention on the part of any
Governmental Authority to examine any of the Tax Returns. No deficiencies have
been asserted or assessments made against the Seller, nor is the Internal
Revenue Service nor any other Governmental Authority now asserting or, to the
knowledge of the Seller or Parent, threatening to assert against the Seller any
deficiency or claim for additional taxes or interest thereon or penalties in
connection therewith. The Seller has not extended the time for the filing of
any Tax Return or the assessment of deficiencies or waived any statute of
limitations for any year, which extension or waiver is still in effect.
(e) Neither Seller nor Parent is a foreign real estate holding
corporation subject to Section 1445 of the Internal Revenue Code of 1986.
2.11 Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(a) Neither Seller nor any Foreign Affiliate owns any real property.
Set forth on Schedule 2.11 (a) is a listing of all leases under which the Seller
-----------------
or a Foreign Affiliate leases real property as a tenant (collectively, the "Real
Property") together with a description of such property, the name of the
landlord and a brief description of the significant terms of each lease.
(b) Set forth on Schedule 2.11(b) is a listing of (i) all machinery,
----------------
equipment and other tangible personal property with an original cost in excess
of $5,000 used or owned by the Seller; (ii) a listing of all leases under which
the Seller leases any personal property requiring
________________________________________________________________________________
Page 10
annual rental payments in excess of $5,000, together with a description of such
property; and (iii) all machines, equipment, tangible personal property and
leases thereof included in the Foreign Assets (collectively, the "Material
Personal Property"). Schedule 2.11(b) lists all locations where Material
----------------
Personal Property is located.
(c) The only intangible assets and properties owned by the Seller or
used in the conduct of its business are the Intellectual Property rights
described in Section 2.3 hereof. The Real Property, Material Personal Property
and Intellectual Property include all properties and assets (whether real,
personal or mixed, tangible or intangible) reflected on the Base Balance Sheet
or purchased by the Seller since the Base Balance Sheet (except for such
properties or assets sold since the Base Balance Sheet Date in the ordinary
course of business), and necessary to conduct the Seller's business as currently
conducted.
(d) The Seller has made available true, correct and complete copies of
all leases, notices of leases, subleases, rental agreements, contracts of sale,
tenancies and licenses, together with all amendments, modifications and renewals
thereof, related to any of the Real Property or the Material Personal Property.
All of the foregoing agreements are valid, subsisting and enforceable in
accordance with their terms against the parties thereto. The Seller and each
Foreign Affiliate is in material compliance with all terms and conditions of
such agreements and no event has occurred nor does any circumstance exist that
(with or without notice or the passage of time or both) would constitute a
violation or default under any such agreements and the Seller has neither given
nor received notice of any alleged violation or of any default under any such
agreement.
(e) Except as specifically disclosed on Schedule 2.11(e) or on the
----------------
Base Balance Sheet, the Seller and each Foreign Affiliate has good and
marketable title in fee simple to all of its personal property included in the
Subject Assets. None of the Subject Assets is subject to any Encumbrance (other
than for taxes not yet due and payable), or other adverse claim or charge or
interest of any kind, except as specifically disclosed on Schedule 2.11(e) or on
----------------
the Base Balance Sheet.
(f) Except as set forth on Schedule 2.11(f), all of the machinery and
----------------
equipment included in the Subject Assets: (i) are in satisfactory condition,
working order and repair, normal wear and tear excepted, are adequate for the
uses to which they are being put, and have been adequately maintained, and (ii)
substantially conform with all applicable ordinances, regulations and zoning,
safety or other laws.
2.12 Collectibility of Receivables. Except as set forth on Schedule 2.12
----------------------------- -------------
all of the accounts receivable, trade accounts, notes receivable, contract
receivables, unbilled invoices and other receivables ("Receivables") of the
Seller shown or reflected on the Base Balance Sheet, less a reserve for bad
debts in the amount shown on the Base Balance Sheet are, and those existing on
the Closing Date, are as of the Closing Date, (a) valid and enforceable claims,
(b) which arose out of transactions with unaffiliated parties, (c) fully
collectible within ninety (90) days of invoice date through normal means of
collection, and (d) subject to no set-off, defense or counterclaim. None of the
Receivables has at any time been placed for collection with any
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Page 11
attorney, collection agency or similar individual or entity. The reserves for
doubtful accounts and the values at which Receivables are accrued on the Base
Balance Sheet are and on the Closing Balance Sheet will be, accrued in
accordance with GAAP applied on a basis consistent with prior financial
statements of the Seller. A complete and accurate list of each Receivable
accrued on the Seller's books on May 31, 1999, which lists the name, age and
amount thereof, has been delivered to Buyer. An accurate summary of the aging of
the Seller's Receivables on May 31, 1999 is attached as Schedule 2.12. Since the
-------------
Base Balance Sheet Date, there has not been a material change in the Seller's
receivables' aging practice.
2.13 Intellectual Property Rights.
----------------------------
(a) For purposes of this Section 2.13, "Intellectual Property" means
(i) all patents, patent applications, trade marks or service marks, trade xxxx
or service xxxx applications, trade names, copyrights and masks works (whether
registered or unregistered) and computer software or other statutorily defined
rights to intellectual property under the laws of the United States of America,
or other relevant jurisdiction (collectively, "Statutory Intellectual
Property"), and (ii) all trade secrets, and manufacturing and other secret
processes and technologies and know-how required for or used in or related to
the Subject Assets Business (collectively "Trade Secrets").
(b) All material rights of ownership or use of Intellectual Property
currently held by Seller are listed on Schedule 2.13(b) or in the case of Trade
----------------
Secrets generally described on Schedule 2.13(b). Except as set forth on
--------------------
Schedule 2.13(b), Seller owns or has the right to use, without payment of any
----------------
material royalty not otherwise expressly disclosed in this Agreement or a
schedule or exhibit hereto, all Intellectual Property rights necessary to or
regularly used in the conduct of the business of the Seller or a Foreign
Affiliate as presently conducted.
(c) Except as set forth on Schedule 2.13(c), all rights to Statutory
----------------
Intellectual Property required to be listed in Schedule 2.13(b):
-----------------
(i) have been duly registered, filed in, or issued by, the
United States Patent and Trademark Office, United States Register of Copyrights,
or the corresponding offices of other countries identified on said schedule;
(ii) have been properly maintained and renewed in accordance
with all applicable laws and regulations in the United States and such foreign
countries;
(iii) in the case of patents or patent applications filed in the
names of individual inventors, have been duly assigned to Seller and such
assignment(s) have been recorded in the appropriate government offices;
(iv) are owned exclusively by one or more of Seller or a Foreign
Affiliate, free and clear of any licenses, sub-licenses, or Encumbrances, such
that no other person has any right or interest in or license to use or right to
license others, except for resellers in the ordinary course of business, to use
any of the Statutory Intellectual Property;
________________________________________________________________________________
Page 12
(v) are freely transferable (except as otherwise required by
law); and
(vi) are not subject to any outstanding order, decree, judgment
or stipulation.
(d) All material copyrightable works of authorship included in the
Subject Assets were developed and authored as original works of authorship
either by full-time employees of Seller or a Foreign Affiliate within the normal
scope of their duties as works for hire, or by third persons as works for hire
under an express written agreement so stating or under a written agreement
expressly transferring and assigning all rights to the Seller.
(e) Except as set forth on Schedule 2.13(e). The Seller and each
----------------
Foreign Affiliate has adopted measures adequate to protect their trade secrets.
All noncompetition, nonsolicitation, confidentiality, nondisclosure and related
covenants and agreements related to Trade Secrets to which Seller or a Foreign
Affiliate is a party or which benefit Seller or Foreign Affiliate have been made
available for review. All such agreements are valid, binding and enforceable
against the parties thereto. There are no defaults or conditions which, after
notice or lapse of time or both, would constitute a default by Seller under any
such agreements or, to the knowledge of Seller or Parent, a default by any other
party thereto.
(f) All material licenses and other agreements pursuant to which any
item of Intellectual Property is licensed to Seller or a Foreign Affiliate or is
licensed by Seller or a Foreign Affiliate are valid, binding and enforceable.
There does not exist under any such license or agreement a default or event or
condition which, after notice or lapse of time or both, would constitute a
default by any party thereto. None of such licenses or agreements contain any
provision that would prevent use of the Intellectual Property as presently used
by Seller or a Foreign Affiliate.
(g) No proceedings to which Seller or a Foreign Affiliate is a party
are pending which (i) challenge the rights of Seller or a Foreign Affiliate in
respect of the Intellectual Property required to be listed on Schedule 2.13, or
-------------
(ii) charge Seller or a Foreign Affiliate with infringement of any other
person's rights in Intellectual Property. To the knowledge of each of Seller
and Parent, no such proceeding to which a Seller or a Foreign Affiliate is a
party has been filed or is threatened to be filed.
(h) To the knowledge of each of Seller and Parent, neither Seller nor
any Foreign Affiliate is infringing upon any valid Statutory Intellectual
Property rights of any other person and, to the knowledge of Seller or Parent
none of the rights in Statutory Intellectual Property listed on Schedule 2.13 is
-------------
being infringed by any other person other than as set forth on Schedule 2.13(h).
----------------
To the knowledge of each of Seller, Parent, and Foreign Affiliate, the Seller is
not using or in any way making use of any Trade Secrets of any third party,
including without limitation a former employer of any employee of Seller and, to
the knowledge of each of Seller and Parent, no other person is using any Trade
Secret of Seller without authorization.
(i) Except as set forth on Schedule 2.13(i), no officer or
----------------
employee of Parent, Seller, or any Foreign Affiliate owns, directly or
indirectly, in whole or in part, any Intellectual
________________________________________________________________________________
Page 13
Property right which Seller has used, is presently using, or the use of which is
reasonably necessary to the business of Seller as presently conducted or which
constitutes part of the Subject Assets.
2.14 Contracts and Commitments.
-------------------------
(a) Except for contracts, commitments, plans, agreements and licenses
described in Schedule 2.14(a), Seller is not a party to or subject to any
----------------
contract, agreement or commitment (written or oral):
(i) for the purchase of any commodity, material, equipment or
asset, yet to be performed by Seller(except for purchase orders in the ordinary
course of business involving payments of less than $5,000 each);
(ii) creating any obligations of the Seller after the Base
Balance Sheet Date which call for payments of more than $5,000 during any month
for agreements without a fixed term or more than $25,000 over the term of the
agreement for agreements with a fixed term other than leases and other than
agreements which are terminable at will without penalty;
(iii) providing for the purchase of all or substantially all of
its requirements of a particular product from a supplier;
(iv) which by its terms does not terminate or is not terminable
without premium or penalty by the Seller (or its successor or assign) (except
for software license agreements and reseller agreements in the ordinary course
of business) upon ninety (90) days notice;
(v) for the sale or lease of its products not made in the
ordinary course of business;
(vi) with any sales agent or distributor of products of the
Seller;
(vii) containing covenants limiting the freedom of the Seller to
compete in any line of business or with any person or entity;
(viii) for a license or franchise (except for software license
agreements and reseller agreements in the ordinary course of business) (as
licensor or licensee or franchisor or franchisee);
(ix) involving any arrangement or obligation with respect to
the return of inventory or merchandise, other than (A) on account of a defect in
condition, (B) failure to conform to the applicable contract by either party to
such applicable contract or (C) maintenance cancellation by Seller for failure
of licensee to install current software revisions;
(x) with the United States government; or
(xi) which is material to the assets or business of the Seller.
________________________________________________________________________________
Page 14
(b) Each of the contracts, commitments, plans, agreements and licenses
described in Schedule 2.14(a) ("each a Material Contract") is valid, binding and
enforceable against the Seller and, to the knowledge of the Seller, against the
other parties thereto; the Seller is in full compliance with all terms and
conditions of each Material Contract; and, except as set forth on Schedule
--------
2.14(b), no event has occurred or circumstance exists that (with or without
-------
notice or the passage of time or both) would constitute a violation of or
default under such Material Contract by the Seller or by the other party or
parties thereto, and the Seller has neither given nor received notice of any
alleged violation of or default under any such Material Contract.
(c) Except as set forth on Schedule 2.14(c), to the knowledge of each
----------------
of the Seller and Parent, the Seller is not a party to any Material Contract or
order for the sale of goods or the performance of services which, if performed
by the Seller in accordance with its terms, could only be performed by the
Seller with a negative gross profit margin or which has no reasonable likelihood
of being performed within the time limits therein provided.
(d) Set forth on Schedule 2.14(d) is a list of each contract,
----------------
commitment, agreement or license included within the Foreign Assets which, if
Seller were a party thereto would have been required to be included on Schedule
--------
2.14(a). Each of the representations in paragraph (b) and (c) above is also
-------
true with respect to the Foreign Affiliate a party thereto for each contract,
commitment plan, agreement or license included in the Foreign Assets.
(e) Schedule 2.14(e) lists every material supplier of the Seller and
----------------
the Foreign Affiliates and the amount of business with that supplier. (For
purposes hereof, a supplier is material if during calendar 1998, it accounted
for more than three percent by value of the non pay-roll purchases of the Seller
and Foreign Affiliates on a consolidated basis for such year. Schedule 2.14(e)
also lists the material customers of Seller. For purposes hereof, a customer is
material if it was included in the list provided to Buyer of the software
license purchases for the period beginning in the second quarter of 1997 through
the first quarter of 1999 (excluding the fourth quarter of 1997) representing in
aggregate approximately 68% of the Seller's license revenue for that period.)
Since January 1, 1998, neither the Seller nor any Foreign Affiliate has
experienced any material change ( whether termination, cancellation, limitation
or modification or other change) in any business relationship with any material
supplier or material customer, nor have any of them received notice or otherwise
become aware that any such material customer or material supplier intends to
materially reduce or change the terms of doing business with Seller or the
Foreign Affiliate or to terminate any agreement with Seller or any Foreign
Affiliate where such action has had or would have a material adverse effect on
their business.
(f) The total backlog of the Seller (including all accepted and
unfulfilled sales orders) is not materially less than the backlog amount set
forth on Schedule 2.14(f), and the aggregate of all outstanding purchase orders
----------------
issued by the Seller (including all contracts or commitments for the purchase by
the Seller of materials or other supplies) is not materially more than the
purchase order amount set forth on such Schedule 2.14(f). All such sales and
----------------
purchase commitments were made in the ordinary course of business.
2.15 ERISA and Employee Benefits
---------------------------
________________________________________________________________________________
Page 15
(a) Except as set forth on Schedule 2.15, neither Seller nor any ERISA
-------------
Affiliate (i) maintains or ever has maintained any Plan or Other Arrangement,
(ii) is or ever has been a party to any Plan or Other Arrangement or (iii) has
obligations under any Plan or Other Arrangement.
(b) Neither Seller nor any ERISA Affiliate has ever contributed to a
Multiemployer Plan, an ESOP or a Defined Benefit Plan.
(c) Seller and its ERISA Affiliates have made all contributions and
other payments required by and due under the terms of each Plan and Other
Arrangement and have taken no action (including, without limitation, actions
required by Law) relating to any Plan or Other Arrangement that will increase
Buyer's, Seller's or any ERISA Affiliate's obligation under any Plan or Other
Arrangement.
(d) Seller and its ERISA Affiliates have complied with all applicable
provisions of the Code, ERISA, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair
Labor Standards Act, the Securities Act, the Securities Exchange Act of 1934,
and all other Laws pertaining to the Plans, Other Arrangements and other
employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. Seller has no liability for any
delinquent contributions with the meaning of Section 515 of ERISA (including,
without limitation, related attorneys' fees, costs, liquidated damages and
interest) or for any arrearages of wages.
(e) Other than as disclosed on Schedule 2.20, Seller and its ERISA
-------------
Affiliates have no pending unfair labor practice charges, contract grievances
under any collective bargaining agreement, other administrative charges, claims,
grievances or lawsuits before any court, governmental agency, regulatory body,
or arbiter arising under the Law governing any Plan, and there exist no facts
that could give rise to such a claim.
(f) For purposes of this Section 2.15 and Section 4.2 hereof, the
following terms shall have the indicated meanings:
(i) "Code" means the Internal Revenue Code of 1986, as amended,
----
and all Laws promulgated pursuant thereto or in connection therewith.
(ii) "Defined Benefit Plan" means a Plan that is or was a
--------------------
"defined benefit plan" as such term is defined in Section 3(35) of ERISA.
(iii) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
(iv) "ERISA Affiliate" means any member of a controlled group or
---------------
affiliated service group (as defined in Section 414(a), (c), (m) and (o) of the
Code).
________________________________________________________________________________
Page 16
(v) "ESOP" means an "employee stock ownership plan" as such
----
term is defined in Section 4975(e)(7) of the Code.
(vi) "Multiemployer Plan" means a "multiemployer plan" as such
------------------
term is defined in Section 3(37) of ERISA.
(vii) "Other Arrangement" means a benefit program or practice
-----------------
providing for bonuses, incentive compensation, vacation pay, severance pay,
insurance, restricted stock, stock options, employee discounts, company cars,
tuition reimbursement or any other perquisite or benefit (including, without
limitation, any fringe benefit under Section 132 of the Code) to employees,
officers or independent contractors that is not a Plan.
(viii) "Pension Plan" means an "employee pension benefit plan" as
------------
such term is defined in Section 3(2) of ERISA.
(ix) "Plan" means any plan, program or arrangement, whether or
----
not written, that is or was an "employee benefit plan" as such term is defined
in Section 3(3) of ERISA and (a) which was or is established or maintained by
Seller or any ERISA Affiliate; (b) to which Seller or any ERISA Affiliate
contributed or was obligated to contribute or to fund or provide benefits; or
(c) which provides or promises benefits to any person who performs or who has
performed services for Seller or any ERISA Affiliate and because of those
services is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
(x) "Qualified Plan" means a Pension Plan that satisfies, or
--------------
is intended by Seller to satisfy, the requirements for tax qualification
described in Section 401 of the Code.
2.16 Employee Relations.
------------------
(a) The Seller and Parent have agreed to release from employment each
of the employees of Seller or a Foreign Affiliate listed on Schedule 2.16, and
-------------
Buyer has agreed to offer each of those persons new employment. Other than as
shown on Schedule 2.16, there is no contingent liability for sick leave,
---------------
vacation time, or severance pay to any of the individuals listed thereon. The
Seller or Parent will be solely responsible for any severance pay obligation
under any contract, informal agreement or policy of Seller or any Affiliate
arising out of the termination of any employee of Seller or a Foreign Affiliate
not listed on Schedule 2.16 or the execution, delivery and performance of this
-------------
Agreement and the consummation of the transactions contemplated hereby, but
Buyer shall be responsible for any severance payment obligation to any employee
listed on Schedule 2.16 who accepts employment with Buyer as a result of actions
-------------
by Buyer after the Closing Date, plus those obligations specifically provided
for in Section 6.2 hereof.
(b) Schedule 2.16 sets forth the rates of compensation (including all
-------------
bonus compensation) of each of the employees listed thereon. Except as set
forth on Schedule 2.16, there are no currently effective consulting or
employment agreements or other material agreements with any of those persons to
which Seller, Parent or any Affiliate of Parent is a party.
________________________________________________________________________________
Page 17
(c) Except as indicated on Schedule 2.16, none of the employees shown
-------------
on Schedule 2.16, is covered by any collective bargaining agreement with any
-------------
trade or labor union, employees' association or similar association. Each of the
Seller and each Foreign Affiliate has complied in all material respects with
applicable laws, rules and regulations relating to the employment of such
employees, including without limitation those relating to wages, hours, unfair
labor practices, discrimination, and payment of social security and similar
taxes. There are no representation elections, arbitration proceedings, labor
strikes, slowdowns or stoppages, material grievances or other labor troubles
pending, or, to the knowledge of the Seller, overtly threatened, with respect to
those employees.
2.17 Environmental Matters. Except for commercially reasonable quantities
---------------------
of office supplies, Seller has never generated, transported, used, stored,
treated, disposed or, or managed any Hazardous Material, to the knowledge of
Parent and Seller, Seller has no material liability under, nor has Seller ever
violated in any material respect, any federal or applicable or foreign state
environmental law. For purposes of this Section 2.17, "Hazardous Material" means
any hazardous waste, hazardous material, hazardous substance, petroleum product,
oil, toxic substance, pollutant, or contaminant, as defined or regulated under
any Federal, state or any foreign environmental law, or any other substance
which may pose a threat to the environment or to human health or safety.
2.18 Government Authorizations. The Seller holds all Government
-------------------------
Authorizations which are required to own its properties and assets and to permit
it to conduct its businesses as presently conducted. All such Government
Authorizations are listed on Schedule 2.18 hereto, together with the applicable
-------------
expiration date, and are now, and will be after the Closing, valid and in full
force and effect, and, to the extent permitted by law, Buyer shall have full
benefit of the same. No proceeding is pending or, to the knowledge of the Seller
or Parent, threatened seeking the revocation or limitations of any Government
Authorization.
2.19 Warranty or Other Claims.
------------------------
(a) Except as set forth on Schedule 2.19(a), neither the Seller nor
----------------
Parent knows of any existing or threatened claims, or any facts upon which a
claim is likely to be asserted, against the Seller for services or merchandise
which are defective or fail to meet any service or product warranties. No claim
has been asserted against the Seller for material renegotiation or price
redetermination of any business transaction, and neither the Seller nor Parent
has knowledge of any facts upon which any such claim is likely to be asserted.
(b) All products that were designed, manufactured or sold by the
Seller complied with applicable contracts, agreed product specifications, Laws
and standards (whether Seller, government or industry) and there are no defects
in such products beyond what is generally accepted within the software industry.
Schedule 2.19(b) sets forth the Seller's experience with returns of products
----------------
sold by the Seller for fiscal years 1997 and 1998 and for the portion of the
current fiscal year (including claims or notices that products may or will be
returned, whether by reason of alleged overshipments, defective merchandise or
otherwise).
________________________________________________________________________________
Page 18
2.20 Litigation. Except for matters described in Schedule 2.20 hereto,
---------- -------------
there is no action, suit, claim, proceeding, investigation or arbitration
proceeding pending (or, to the knowledge of the Seller or Parent, threatened)
against or otherwise involving the Seller, any Foreign Affiliate or any of the
Subject Assets or any of the officers, directors, former officers or directors,
employees, shareholders or agents of the Seller (in their capacities as such)
and there are no outstanding Court Orders to which the Seller is a party or by
which any of the Subject Assets are bound, which (a) question this Agreement or
any Ancillary Documents or any action to be taken hereby or thereby or affect
the transactions contemplated hereby, or (b) materially restrict the present
business properties, operations, prospects, assets or condition, financial or
otherwise, of the Seller or (c) will result in any materially adverse change in
the business, properties, operations, prospects, assets or the condition,
financial or otherwise, of the Seller. Neither the Seller nor Parent has any
reason to believe that any such action, suit, proceeding, investigation or
arbitration proceeding may be brought against the Seller.
2.21 Borrowings and Guarantees. Except as shown on Schedule 2.1 hereto,
------------------------- ------------
there are no agreements or undertakings pursuant to which the Seller (a) is
borrowing or is entitled to borrow any money, (b) is lending or has committed
itself to lend any money, or (c) is a guarantor or surety with respect to the
obligations of any person. Complete and accurate copies of all such written
agreements have been delivered to Buyer.
2.22 Insurance.
---------
(a) The Seller or Parent maintains (i) insurance on all of Seller's
property (including leased or owned) real or personal property that insures
against loss or damage by fire or other casualty (including extended coverage)
and (ii) insurance against liabilities, claims and risks of a nature and in such
amounts as are normal and customary in its industry.
(b) Schedule 2.22 contains a complete and correct list of all policies
-------------
of insurance maintained by or on behalf of the Seller (including insurance
providing benefits for employees) in effect on the date hereof, together with
complete and correct information with respect to the premiums, coverages,
insurers, expiration dates, and deductibles in respect of such policies.
Schedule 2.22 also sets forth any other insurance policies in effect at any time
-------------
during the five year period ended on the Base Balance Sheet Date under which the
Seller or Parent may currently be entitled to assert a claim in connection with
any of the Subject Assets.
(c) Except for amounts deductible under the policies of insurance
described on Schedule 2.22 or with respect to risks assumed as a self-insurer
-------------
and described on such Schedule, the Seller is not, nor has the Seller at any
time been subject to any liability as a self-insurer of the business or assets
of the Seller.
(d) Except as set forth on Schedule 2.22, there are no claims pending
-------------
under any of said policies, or disputes with insurers, and all premiums due and
payable thereunder have been paid, and all such policies are in full force and
effect in accordance with their respective terms. Schedule 2.22 also sets forth
-------------
the insurance claims expenses of the Seller or Parent in connection with any of
the Subject Assets since January 1, 1997. No notice of cancellation or
termination has been received with respect to any such policy and there is no
basis upon which
________________________________________________________________________________
Page 19
the insurance company would have the right to terminate any such policy during
the policy term and no notice relating to non-renewal reduction of coverage or
increase in premium has been received by the company with respect to any such
policy. The Seller has not been refused any insurance with respect to assets or
operations, nor has its coverage been limited by any insurance carrier with
which it has applied for any such insurance or with which it has carried
insurance. Neither the Seller nor Parent has knowledge of any insurance
carrier's insolvency or inability to perform its obligations or pay any claims
pursuant to any of the insurance policies maintained by the Seller.
(e) Except as set forth on Schedule 2.22, the Seller has no current or
-------------
prior insurance policy which remains subject to a retrospective adjustment of
the premiums payable thereunder.
2.23 Finder's Fee. Neither the Seller nor Parent has incurred or become
------------
liable for any broker's commission or finder's fee relating to or in connection
with the transactions contemplated by this Agreement, other than any fee owed to
Xxxxxx & Company by Seller.
2.24 Transactions with Interested Persons. Except as set forth on Schedule
------------------------------------ --------
2.24 and except for any interest less than or equal to 1% in any publicly traded
----
corporation subject to the reporting requirements of the Securities and Exchange
Act of 1934, no officer, supervisory employee, director or stockholder of the
Seller, Parent or Foreign Affiliate, or their respective spouses or children,
(i) owns, directly or indirectly, on an individual or joint basis, any interest
in, or serves as an officer or director of, any customer, competitor or supplier
of the Seller or Foreign Affiliate or any organization which has a contract or
arrangement (written or oral) with the Seller or Foreign Affiliate, or (ii) has
any contract or agreement (written or oral) with the Seller or Foreign
Affiliate, and all such agreements are on arms-length terms.
2.25 Absence of Sensitive Payments. Neither the Seller, Parent, nor any
-----------------------------
Foreign Affiliate has, nor to the knowledge of the Seller or Parent have any of
their directors, officers, agents, stockholders or employees or any other person
associated with or acting on their behalf:
(a) made or agreed to make any solicitations, contributions, payments
or gifts of funds or property to any governmental official, employee or agent
where either the payment or the purpose of such solicitation, contribution,
payment or gift was or is illegal under the laws of the United States, any state
thereof, or any other jurisdiction (foreign or domestic) or prohibited by the
policy of the Seller or of any of its suppliers or customers;
(b) established or maintained any unrecorded fund or asset for any
purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) made or agreed to make any contribution or expenditure, or
reimbursed any political gift or contribution or expenditure made by any other
person to candidates for public office, whether federal, state or local (foreign
or domestic) where such contributions were or would be a violation of applicable
Law.
2.26 Year 2000.
---------
________________________________________________________________________________
Page 20
(a) The current release of the software constituting part of the
Subject Assets and described in Schedule 2.26 attached hereto has been
-------------
designated by Seller as Year 2000 compliant, as of the specified Year 2000
compliant version number, and is capable of satisfying the following criteria
when used in accordance with the associated documentation provided with the
software, and provided that all hardware, firmware and software used in
combination with such Year 2000 compliant software properly exchange accurate
date data with the Year 2000 compliant software:
(i) no value for current date causes interruptions in normal
operations;
(ii) all manipulations of calendar-related data (dates,
durations, days of week, etc.) produces valid results for all valid date values
within the application domain;
(iii) date elements in interfaces and data storage permit
specifying century to eliminate ambiguity; and
(iv) for any date element represented without century, the
correct century is unambiguous for all manipulations involving that element.
2.27 Copies of Documents. To the extent requested by Buyer, complete and
-------------------
correct copies of any underlying documents listed or described in this Article 2
or any Schedules delivered pursuant to this Article, together with all
amendments, renewals and modifications related thereto, have been delivered or
otherwise made available to Buyer.
2.28 Disclosure of Material Information. Neither this Agreement nor the
----------------------------------
financial statements (including the footnotes thereto), any Schedule, any
exhibit, document or certificate delivered by or on behalf of the Seller or
Parent pursuant hereto contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements herein or
therein not misleading, nor to the knowledge of the Parent or Seller is there is
any fact which materially adversely affects the business or condition (financial
or otherwise), properties or operations of the Seller or the Subject Assets
which has not been set forth herein (including any Schedule, exhibit, document
or certificate delivered by or on behalf of the Seller or Parent pursuant
hereto).
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Parent as follows:
3.1 Organization of Buyer. Buyer is a corporation duly organized, validly
---------------------
existing and in good standing under the laws of the State of Delaware with full
power and authority to own, operate or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
3.2 Authorization of Transaction. All necessary action, corporate or
----------------------------
otherwise, has been taken by Buyer to authorize the execution, delivery and
performance of this Agreement and each of the Ancillary Documents, and the
Agreement is the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms.
________________________________________________________________________________
Page 21
3.3 No Conflict of Transaction With Obligations and Laws.
----------------------------------------------------
(a) Neither the execution, delivery and performance of this
Agreement, nor the performance of the transactions contemplated hereby, will:
(i) constitute a breach or violation of the Buyer's Charter or bylaws; (ii)
require any consent, approval or authorization of or declaration, filing or
registration with any person other than a Governmental Authority described in
paragraph (b) below; or (iii) conflict with or constitute (with or without the
passage of time or the giving of notice) a breach of, or default under any debt
instrument to which Buyer is a party, or give any person the right to accelerate
any indebtedness or terminate, modify or cancel any material right; (iv)
constitute (with or without the passage of time or giving of notice) a default
under or breach of any other material agreements, instrument or obligation to
which the Buyer is a party or by which it or its assets are bound; or (v) result
in a violation of any Law or Court Order applicable to Buyer or its business or
assets.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by Buyer do not require the consent, waiver,
approval, authorization, exemption of or giving of notice by Buyer to any
Governmental Authority.
3.4 Litigation. There is no litigation pending or, to the knowledge of
----------
Buyer, threatened, against Buyer which will have a material adverse effect on
its properties, assets or business or which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
3.5 Finder's Fees. Buyer has not incurred or become liable for any
-------------
broker's commission or finder's fee related to or in connection with the
transactions contemplated by this Agreement.
ARTICLE 4. COVENANTS OF THE PARTIES.
The Seller, Parent and Buyer hereby mutually covenant and agree as follows:
4.1 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing, unless Buyer shall otherwise consent in writing the Seller will conduct
its business only in the ordinary course of business consistent with past
practice and refrain from changing or introducing any method of management or
operations except in the ordinary course of business and consistent with prior
practices, making any purchase, sale or disposition of any asset or property
other than in the ordinary course of business, or other action which will
materially reduce the assets or increase the liabilities of the Seller or create
any Encumbrance upon the Subject Assets
4.2 Employee/Employee Compensation.
------------------------------
(a) Parent agrees to cause the Seller to discharge when due all
compensation and benefits to any employee under all pay and compensation
practices applicable to the business of the Seller and under any employment
agreements payable in the ordinary course of business, except to the extent
assumed by Buyer on Schedule 1.2.
------------
________________________________________________________________________________
Page 22
(b) Other than as provided in Section 4.4 hereof, Seller and Parent
shall be solely responsible for any severance pay obligation under any contract
arising out of the termination of any employee not listed on Schedule 2.16 or
-------------
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated.
4.3 ERISA and Employee Benefits.
---------------------------
(a) Buyer does not assume responsibility for any of the Plans or Other
Arrangements of Seller and its ERISA Affiliates. In its discretion and subject
to the rules of its own employee benefit plans as in effect from time to time,
Buyer will provide benefit coverage to employees who its hires. Seller and its
ERISA Affiliates retain responsibility for all of the Plans and Other
Arrangements of itself and its ERISA Affiliates.
(b) Seller and its ERISA Affiliates will be solely responsible to
provide COBRA continuation coverage with respect to all current and former
employees who are not hired by Buyer and Buyer will be responsible for COBRA
only with respect to employees who its hires.
(c) Seller will fully vest all employees to be hired by Buyer in their
benefits in qualified plans in which they participate and will permit such
employees, subject to their completing appropriate elections, to transfer their
fully vested balances to eligible individual account plans (as provided in the
Code).
(d) All defined terms referred to in this Section 4.3 shall have the
meanings ascribed thereto in Section 2.15 hereof.
4.4 Certain Employment Costs. Buyer agrees to assume responsibility for up
------------------------
to an aggregate maximum of $375,000 payable to the Chief Executive Officer,
Chief Financial Officer and Vice President Sales as severance costs as a result
of a change in control of Seller to the extent those three officers become
entitled to any amounts of such costs pursuant to the terms of the Seller's
existing Retention and Severance Agreements with those officers, but shall not
otherwise have any responsibility for any other amounts owing to those officers
under those agreements.
4.5 Cooperation on Certain Matters Post Closing
-------------------------------------------
(a) Buyer, Parent and Seller shall cooperate in order to minimize any
liability of Parent to HRM Ltd. ("HRM") after December 23, 1999 caused by
inability to release or sublet the premises located at 0000 Xxxxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx (the "Lease") or early termination of
the Lease. Any such liability to HRM shall be borne equally by Buyer and Parent.
(b) Parent and Seller shall cooperate with Buyer in connection with
the return by Buyer to Oracle Corporation ("Oracle") of certain software
licensed by Oracle to Seller and in connection with obtaining a refund from
Oracle to Buyer with respect to certain license fees.
________________________________________________________________________________
Page 23
(c) Buyer, Parent and Seller shall cooperate in order to work out an
arrangement in connection with certain source code escrow agreements whereby the
rights, responsibilities and costs associated with those escrow agreements would
be appropriately allocated between the parties.
(d) Buyer, Seller and Parent shall cooperate to obtain consent of
Rational Software Corporation to the assignment by Parent of the Products
License Agreement with Domain Solutions Corporation as Licensee dated November
21, 1997 and all software licenses thereunder.
(e) Buyer shall cause any employees of Seller transferred to Buyer or
any subsidiary of Buyer to cooperate with Seller and Parent in connection with
the winding down and ultimate dissolution of Seller and each of the Foreign
Affiliates.
(f) Buyer, Seller and Parent shall cooperate and Parent shall cause
Pharma to cooperate in order to work out a space sharing arrangement with Pharma
in connection with certain office premises in England whereby those employees
retained by Buyer in England shall continue to share office space with Pharma
employees until the expiration of the lease of such premises and Buyer shall
contribute towards the cost of the leased premises (including utilities) on the
basis of the proportionate square footage utilized.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to consummate this Agreement and the transactions
contemplated hereby are subject to the condition that on or before the Closing
the actions required by this Article 5 will have been accomplished.
5.1 Representations; Warranties; Covenants. Each of the representations
--------------------------------------
and warranties of each of the Seller and Parent contained in Article 2 shall be
true and correct as though made on and as of the Closing Date and each of the
Seller and Parent shall, on or before the Closing have performed all of their
obligations hereunder which by the terms hereof are to be performed by them on
or before the Closing. Parent shall have delivered to Buyer a certificate of
Parent dated as of the Closing to the foregoing effect.
5.2 Release of Encumbrances. All Encumbrances on the assets or business
-----------------------
of the Seller shall be released as of the date of the Closing.
5.3 Proprietary Information Agreements. As a condition to their
----------------------------------
employment by Buyer, the persons listed on Schedule 2.16 shall have executed and
delivered to Buyer the Proprietary Information Agreement having substantially
the terms of Exhibit A attached hereto (the "Proprietary Information Agreements
"). In addition, Seller shall assign the benefit of any and all nondisclosure
agreements entered into by Seller with each of its past and present employees.
________________________________________________________________________________
Page 24
5.4 Consents of Third Parties. The Seller and Parent shall have obtained
--------------------------
all necessary consents to consummation of the transactions contemplated hereby,
including without limitation those set forth on Schedule 2.6(a).
---------------
5.5 Opinion of Parent's Counsel.
---------------------------
(a) At the Closing, Buyer shall have received from Xxxxx & Xxxxxxx,
LLP, counsel for Parent and Seller, an opinion dated as of the Closing,
substantially in the form set forth as Exhibit B hereto.
---------
(b) In rendering the foregoing opinion such counsel may state their
opinions on specific matters of fact to the best of their knowledge and, to the
extent they deem such reliance proper, may rely on (i) certificates of public
officials, (ii) certificates, in form and substance satisfactory to Buyer and
its counsel, of officers of the Seller or Parent, and (iii) an opinion or
opinions of other counsel satisfactory to Buyer and its counsel, which opinions
are in form and substance satisfactory to Buyer and its counsel. In the event
such counsel for Parent rely upon any such certificate or opinion, a counterpart
of each thereof shall be delivered to Buyer and its counsel.
5.6 Real Property Leases; Leasehold Title Insurance. Buyer shall have
-----------------------------------------------
received a Consent to Assignment of Lease from Seller's landlord's mortgagee of
the leased premises in Burlington, Massachusetts and a Consent to Sublease from
HRM Ltd, Parent's landlord of the leased premises in Boca Raton, Florida on
terms satisfactory to Buyer.
5.7 Absence of Certain Litigation. There shall not be any (a) injunction,
-----------------------------
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, (b) suit,
action or other proceeding by any federal, state, local or foreign government
(or any agency thereof) pending before any court or governmental agency, or
threatened to be filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material transaction
contemplated by this Agreement or asserts the illegality thereof or (c) suit,
action or other proceeding by a private party pending before any court or
governmental agency, or threatened to be filed or initiated, which in the
reasonable opinion of counsel for Buyer is likely to result in the restraint or
prohibition of the consummation of any material transaction contemplated hereby
or the obtaining of an amount in payment (or indemnification) of material
damages from or other material relief against any of the parties or against any
directors or officers of Buyer, in connection with the consummation of any
material transaction contemplated hereby.
5.8 No Bankruptcy. The Seller shall not (i) have commenced a voluntary
-------------
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or substantially
all of its property, or have consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or have made a general assignment for the
benefit of its creditors, or (ii) have an
________________________________________________________________________________
Page 25
involuntary case or other proceeding commenced against it seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereinafter in effect or
seeking the appointing of a trustee, receiver, liquidator, custodian or similar
official of it or substantially all of its property or (iii) have an attachment
placed on all or a significant portion of its assets.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF SELLER AND PARENT.
The obligations of the Seller and Parent to consummate this Agreement and
the transactions contemplated hereby are subject to the condition that on or
before the Closing the actions required by this Article 6 will have been
accomplished.
6.1 Representations; Warranties; Covenants. Each of the representations
--------------------------------------
and warranties of Buyer contained in Article 3 shall be true and correct as
though made on and as of the Closing Date and Buyer shall, on or before the
Closing, have performed all of its obligations hereunder which by the terms
hereof are to be performed by it on or before the Closing. Buyer shall have
delivered to Parent a certificate of Buyer dated as of the Closing to the
foregoing effect.
6.2 Absence of Certain Litigation. There shall not be any (a) injunction,
-----------------------------
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, (b) suit,
action or other proceeding by any federal, state, local or foreign government
(or any agency thereof) pending before any court or governmental agency, or
threatened to be filed or initiated, wherein such complainant seeks the
restraint or prohibition of the consummation of any material transaction
contemplated by this Agreement or asserts the illegality thereof or (c) suit,
action or other proceeding by a private party pending before any court or
governmental agency, or threatened to be filed or initiated, which in the
reasonable opinion of counsel for Seller and Parent is likely to result in the
restraint or prohibition of the consummation of any material transaction
contemplated hereby or the obtaining of an amount in payment (or
indemnification) of material damages from or other material relief against any
of the parties or against any directors or officers of Seller or Parent, in
connection with the consummation of any material transaction contemplated
hereby.
6.3 No Bankruptcy. Buyer shall not (i) have commenced a voluntary case or
-------------
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or substantially
all of its property, or have consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or have made a general assignment for the
benefit of its creditors, or (ii) have an involuntary case or other proceeding
commenced against it seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereinafter in effect or seeking the appointing of a trustee, receiver,
liquidator, custodian
________________________________________________________________________________
Page 26
or similar official of it or substantially all of its property or (iii) have an
attachment placed on all or a significant portion of its assets.
ARTICLE 7. INDEMNIFICATION
7.1 Definitions For purposes of this Article 7:
-----------
"Losses" means all losses, damages (including, without limitation, punitive
and consequential damages), fines, penalties, liabilities, payments and
obligations, and all expenses related thereto. Losses shall include any
reasonable legal fees and costs incurred by any of the Indemnified Persons
subsequent to the Closing in defense of or in connection with any alleged or
asserted liability, payment or obligation, whether or not any liability or
payment, obligation or judgment is ultimately imposed against the Indemnified
Persons and whether or not the Indemnified Persons are made or become parties to
any such action.
"Buyer's Indemnified Persons" means the Buyer, its parent, subsidiary and
affiliated corporations, their respective directors, officers, employees,
stockholders and agents, the Seller after the Closing, and any person serving as
a director, officer, employee or agent of the Seller at Buyer's request after
the Closing.
"Indemnified Person" means any person entitled to be indemnified under this
Article 7.
"Indemnifying Person" means any person obligated to indemnify another
person under this Article 7.
"Parent's Indemnified Persons" means the Parent, Seller, the Affiliates of
Parent and their respective directors, officers, employees, stockholders and
agents.
"Third Party Action" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to which
any person believes it may be an Indemnified Person hereunder.
7.2 Indemnification by Seller and Parent.
------------------------------------
(a) Subject to the limitations in paragraph (b) below, each of the
Seller and Parent, jointly and severally agrees to defend, indemnify and hold
harmless Buyer's Indemnified Persons from and against all Losses directly or
indirectly incurred by or sought to be imposed upon any of them:
(i) resulting from or arising out of any breach of any of the
representations or warranties (other than those in Sections 2.1, 2.4, and,
solely to the extent relating to title, Section 2.11) made by the Seller and
Parent or either of them in or pursuant to this Agreement or in any agreement,
document or instrument executed and delivered pursuant hereto or in connection
with the Closing; provided that, for the purpose of this Section 7.2, any
qualification of such representations and warranties by reference to the
materiality of matters stated therein, and any limitations of such
representations and warranties as being "to the
________________________________________________________________________________
Page 27
knowledge of" or "known to" or words of similar effect, shall be disregarded in
determining any inaccuracy, untruth, incompleteness or breach thereof;
(ii) resulting from or arising out of any breach of any of the
representations or warranties made by Parent or Seller pursuant to Sections 2.1,
2.4, and, solely to the extent related to title, Section 2.11;
(iii) resulting from or arising out of any breach of any covenant
or agreement made by Parent or Seller any of them in or pursuant to this
Agreement;
(iv) in respect of any liability or obligation of the Seller or
any Foreign Affiliate not expressly assumed by Buyer under this Agreement, which
liabilities and obligations not assumed remain the sole responsibility of
Seller;
(v) resulting from or arising out of any liability, payment or
obligation arising out of any litigation or similar matter required to be
described on Schedule 2.20, including any governmental or third party claims for
-------------
damages or clean up costs under any environmental laws arising out of the
operations of the Seller on or before the Closing Date;
(vi) resulting from or arising out of the intentional
misrepresentation or breach of warranty of the Seller or Parent or any
intentional failure of the Seller or Parent to perform or comply with any
covenant or agreement of the Seller or Parent, respectively;
(vii) resulting from or arising out of any liability, payment or
obligation in respect of any taxes of any kind or description (including
interest and penalties with respect thereto) or any obligations under any
employee benefit plan owing by the Seller, Parent, or any Foreign Affiliate, or
Buyer as successor to Seller or any Foreign Affiliate, for all periods, or
portions thereof, ending on or before the Closing Date, except to the extent of
reserves with respect thereto on the Base Balance Sheet or any liability or
obligation in respect of any taxes of any kind arising out of the transaction,
including without limitation, Massachusetts excise tax;
(viii) resulting from or arising out of any Third Party Action
(including a binding arbitration or an audit by any taxing authority with
respect to taxes covered in paragraph (vii) above), that it is instituted or
threatened against any of Buyer's Indemnified Persons.
(b) The right to indemnification under paragraph (a) is subject to
the following limitations:
(i) Parent shall have no liability under paragraph (a) unless
one or more of the Buyer's Indemnified Persons gives written notice to the
Parent asserting a claim for Losses, including reasonably detailed facts and
circumstances pertaining thereto, before the expiration of the period set forth
below:
(A) for claims under clauses (i), (v) and (viii) (insofar
as a claim under clause (viii) relates to any matter
included
________________________________________________________________________________
Page 28
under clause (i) or (v)) of paragraph (a)
above,) a period of two years from the Closing Date;
(B) for claims under clauses (iii), (vii) and (viii)
(insofar as a claim under clause (viii) relates to any
matter included under clause (iii) or (vii)) of
paragraph (a) above, for so long as any claim may be
made in respect of such matters under any applicable
statute of limitations, as it may be extended; and
(C) for claims under clauses (ii), (iv) and (vi) of
paragraph (a) above, without limitation as to time;
except that, for any claim based upon a covenant or undertaking which by its
terms is to be performed after the Closing, then the period above shall commence
on the date when such covenant or agreement should have been performed.
(ii) Indemnification for claims under paragraph (a) above (other
than under clauses (a)(ii), (iv), (vi), (vii) or (viii) (insofar as the claim
relates to any matter included under clause (a)(ii), (iv), (vi) or (vii)) shall
be payable by Parent only if the aggregate amount of all Losses hereunder by
Buyer's Indemnified Persons shall exceed $75,000 (the "Basket"), at which point
Seller and Parent shall be responsible for all Losses, including the Basket. The
aggregate liability for indemnification under paragraph (a) above (other than
under clauses (a)(ii), (iv), (vi) and (vii) (insofar as the claim relates to any
matter included under clause (a)(ii), (iv) or (vi)) shall not exceed $500,000.
(iii) The gross amount with respect to a claim for indemnification
for which the Seller and Parent may be liable to a Buyer's Indemnified Person
pursuant to this Article 7 shall be reduced by any insurance proceeds actually
recovered by or on behalf of the Indemnified Person on account of the
indemnifiable Loss.
(c) In order to secure the obligations of the Seller and the Parent
hereunder the Parent shall arrange for the issuance of a letter of credit by a
national bank with assets of greater than one billion dollars mutually agreeable
to Buyer and Seller in the face amount of $500,000 which shall be confirmed and
irrevocable for a period of one year substantially in the form of Exhibit C.
---------
7.3 Indemnification by Buyer.
------------------------
(a) Subject to the limitations in paragraph (b) below, from and after
the Closing Date, Buyer shall indemnify and hold harmless Parent's Indemnified
Persons from any and all Losses directly or indirectly incurred by or sought to
be imposed upon them:
(i) resulting from or arising out of any breach of any of the
representations or warranties made by Buyer, in or pursuant to this Agreement or
in any
________________________________________________________________________________
Page 29
agreement, document or instrument executed and delivered pursuant hereto or in
connection with the Closing;
(ii) resulting from or arising out of any breach of any covenant
or agreement made by Buyer in or pursuant to this Agreement; or
(iii) resulting from or arising out of any liability, payment or
obligation in respect of any taxes owing by Buyer attributable to the Subject
Assets of any kind or description (including interest and penalties with respect
thereto) for all periods, or portions thereof, starting after the Closing Date;
(iv) in respect of any liability or obligation of Seller
expressly assumed by Buyer hereunder pursuant to Section 1.2(b); and
(v) resulting from the conduct of Buyer in connection with
operation of the business related to the Subject Assets after the Closing.
(vi) for an amount equal to 50% of all liability directly or
indirectly incurred by Parent after December 22, 1999 under the terms of the
Lease.
(b) The right to indemnification under paragraph (a) is subject to
the following limitations:
(i) Buyer shall have no liability under paragraph (a) above
unless a Parent's Indemnified Person gives written notice to Buyer asserting a
claim for Losses, including reasonably detailed facts and circumstances
pertaining thereto, before the expiration of the period set forth below:
(A) for claims under clause (i) of paragraph (a) above, two
years from the Closing Date;
(B) for claims under clause (ii) of paragraph (a) above, for so
long as any claim may be made in respect of such matters
under any applicable statute of limitations as it may be
extended; and
(C) for claims under clause (iii), (iv) and (v) of paragraph (a)
and under Paragraph (c) below without limitation as to time.
(ii) Indemnification for claims under paragraph (a)(i) above
shall be payable only if the aggregate amount of all Losses by Seller's
Indemnified Persons shall exceed $75,000 (the "Basket") at which point Buyer
will be responsible for all Losses, including the Basket. Buyer's aggregate
liability for indemnification under paragraph (a)(i) shall not exceed $500,000.
________________________________________________________________________________
Page 30
(c) In the event that prior to Closing Parent is unable to obtain a
full and unconditional release of its obligation to guarantee Seller's
performance under that certain Lease dated June 8, 1998 between Burlington
Crossing Office LLC and Manufacturing (the "Burlington Lease"), Buyer hereby
agrees to indemnify and hold harmless Parent from and against any and all
losses, claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and the cost and expenses of enforcing such indemnification
against Parent) arising out of or based upon or for or in respect of Parent's
guaranty of the Burlington Lease which may arise from and after the Closing
Date.
7.4 Defense of Third Party Actions.
------------------------------
(a) Promptly after receipt of notice of any Third Party Action, any
person who believes he, she or it may be an Indemnified Person will give notice
to the potential Indemnifying Person of such action. The omission to give such
notice to the Indemnifying Person will not relieve the Indemnifying Person of
any liability hereunder unless it was prejudiced thereby, nor will it relieve it
of any liability which it may have other than under this Article 7.
(b) Upon receipt of a notice of a Third Party Action, the
Indemnifying Person shall have the right, at its option and at its own expense,
to participate in and be present at the defense of such Third Party Action, but
not to control the defense, negotiation or settlement thereof, which control
shall remain with the Indemnified Person, unless the Indemnifying Person makes
the election provided in paragraph (c) below.
(c) By written notice within forty-five (45) days after receipt of a
notice of a Third Party Action, an Indemnifying Person may elect to assume
control of the defense, negotiation and settlement thereof, with counsel
reasonably satisfactory to the Indemnified Person; provided, however, that the
Indemnifying Person agrees (i) to promptly indemnify the Indemnified Person for
its expenses to date, and (ii) to hold the Indemnified Person harmless from and
against any and all Losses caused by or arising out of any settlement of the
Third Party Action approved by the Indemnifying Person or any judgment in
connection with that Third Party Action. The Indemnifying Persons shall not in
the defense of the Third Party Action enter into any settlement which does not
include as a term thereof the giving by the third party claimant of an
unconditional release of the Indemnified Person, or consent to entry of any
judgment except with the consent of the Indemnified Person.
(d) Upon assumption of control of the defense of a Third Party Action
under paragraph (c) above, the Indemnifying Person will not be liable to the
Indemnified Person hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other than
reasonable expenses of investigation.
(e) If the Indemnifying Person does not elect to control the defense
of a Third Party Action under paragraph (c), the Indemnifying Person shall
promptly reimburse the Indemnified Person for expenses incurred by the
Indemnified Person in connection with defense of such Third Party Action, as and
when the same shall be incurred by the Indemnified Person.
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(f) Any person who has not assumed control of the defense of any
Third Party Action shall have the duty to cooperate with the party which assumed
such defense.
7.5 Miscellaneous.
-------------
(a) Buyer's Indemnified Persons shall be entitled to indemnification
under Section 7.2(a) and Parent's Indemnified Persons shall be entitled to
indemnification under Section 7.3(a), regardless of whether the matter giving
rise to the applicable liability, payment, obligation or expense may have been
previously disclosed to any such person unless expressly disclosed on each
particular Schedule requiring such disclosure.
(b) If any Loss is recoverable under more than one provision hereof,
the Indemnified Person shall be entitled to assert a claim for such Loss until
the expiration of the longest period of time within which to assert a claim for
Loss under any of the provisions which are applicable.
(c) Buyer may, at its options, recover any amount owing by the Parent
for indemnification hereunder by setoff against any amounts that may otherwise
be due from the Buyer or the Seller to the Parent, or any of them, whether
hereunder or otherwise; provided that Buyer shall not be required to recover
such claims in such manner and may proceed against the Indemnified Party at any
time or times for recovery of indemnification claims.
7.6 Payment of Indemnification. Claims for indemnification under this
--------------------------
Article 7 shall be paid or otherwise satisfied by Indemnifying Persons within
thirty (30) days after notice thereof is given by the Indemnified Person. Any
amount which may become due and payable to any of the Buyer's Indemnified
Persons under Section 7.2(a) shall first be paid or otherwise satisfied out of
the Escrow Fund until the same has been exhausted. Any claims in excess of the
Escrow Fund may be satisfied by whatever remedy is available at law or equity.
ARTICLE 8. TERMINATION OF AGREEMENT.
8.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated (a) by mutual consent of the parties, (b) by either side if there has
been a material misrepresentation, breach of warranty or breach of covenant by
the other side in its representations, warranties and covenants set forth
herein, (c) by Buyer if the conditions stated in Article 5 have not been
satisfied at or prior to the Closing, (d) by the Parent if the conditions stated
in Article 6 have not been satisfied at or prior to the Closing, or (e) by
either side if the Closing shall not have occurred and the transactions
contemplated hereby consummated by June 30, 1999 provided that the right to
terminate under this clause (e) shall not be available to any parties whose
breach has been the cause of such failure to close.
8.2 Effect of Termination. If this Agreement shall be terminated as above
---------------------
provided, all obligations of the parties hereunder shall terminate but any
breaching party shall remain liable to a nonbreaching party for its damages. In
the event that this Agreement is so terminated, each party will return all
papers, documents, financial statements and other data furnished to it by or
with respect to each other party to such other party (including any copies
thereof made by the
________________________________________________________________________________
Page 32
first party). Notwithstanding such termination, the provisions of Article 7 and
Sections 9.2, 9.4 and 9.5 shall survive the termination of this Agreement.
8.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, if any of the conditions specified in Article 5 hereof have not
been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving its rights hereunder and have all
obligations, undertakings, agreements and other provisions of this Agreement
specifically performed by the Seller and Parent and Buyer shall have the right
to obtain and order such specific performance in any of the Courts in the United
States or any state or political subdivision thereof. If any of the conditions
specified in Article 6 hereof have not been satisfied, Parent shall have the
right to proceed with the transactions contemplated hereby without waiving its
rights hereunder and have all obligations, undertakings, agreements and other
provisions of this Agreement specifically performed by the Buyer and Seller and
Parent shall have the right to obtain and order such specific performance in any
of the Courts in the United States or any state or political subdivision
thereof.
ARTICLE 9. MISCELLANEOUS.
9.1 Survival of Warranties. All representations, warranties, agreements,
----------------------
covenants and obligations herein or in any schedule, certificate or financial
statement delivered by any party to another party incident to the transactions
contemplated hereby are material, shall be deemed to have been relied upon by
the other party and shall survive the Closing for the applicable periods set
forth in Article 7 and shall be further actionable subject to the limitations
set forth therein, regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto.
9.2 Fees and Expenses. Each of the parties will bear its own expenses in
-----------------
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of the Parent or the Seller
relating in any way to the purchase and sale of stock hereunder shall be
included in any account of the Seller as of the Closing or shall be charged to
or paid by Buyer.
9.3 Notices. All notices, requests, demands and other communications
-------
required or permitted to be given (i) hereunder by any party hereto shall be in
writing and shall be deemed to have been duly given when received if delivered
personally, or (ii) on the business day following the business day sent if sent
by prepaid domestically recognized overnight receipted courier if sent
domestically, or (iii) on the third business day following the day sent if sent
by prepaid internationally recognized overnight receipted courier if sent
internationally, or (iv) when receipt telephonically acknowledged if sent by
telecopier transmission on a business day or, if not a business day, on the next
following business day, or (v) when answered back if sent by telex, if on a
business day, or if not a business day, or the next following business day, to
the parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to the Buyer, to:
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Page 33
Xxxxxx Automation, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn.: Chief Financial Officer
with a copy to:
Brown, Rudnick, Freed & Gesmer
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
If to the Parent:
Domain Solutions Corporation
00 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Chief Financial Officer
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxx Xxxxxxx Xx., Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn.: Xxxxxxx X. Silver
If (prior to Closing), to the Seller, to:
Domain Manufacturing Corporation
0000 XXX Xxxx.
Xxxx Xxxxx, XX 00000
Attn: Chief Financial Officer
With a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxx Xxxxxxx Xx., Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn.: Xxxxxxx X. Silver
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
________________________________________________________________________________
Page 34
9.4 Publicity and Disclosures. Except as may be otherwise required for
-------------------------
compliance with applicable stock exchange rules or securities laws, neither
Buyer nor the Seller shall issue nor approve any news release or other public
announcement concerning this Agreement (or any schedules or exhibits hereto)
prior to the Closing without the prior written approval of the other.
Subsequent to the Closing, Buyer and Parent may issue any news release, public
announcement or published information or documents it deem necessary or
desirable.
9.5 Confidentiality. The parties agree that they will keep confidential
---------------
and not disclose or divulge any confidential, proprietary or secret information
which they may obtain from the Seller or Buyer in connection with the
transactions contemplated herein, or pursuant to inspection rights granted
hereunder, or reveal the financial or other terms and conditions of this
Agreement unless such information is or hereafter becomes public information
through means other than a default hereof by such party or is required to be
disclosed by applicable law, including applicable securities laws or stock
exchange rules or regulations. The obligations of this Section 9.5 shall
survive any termination of this Agreement.
9.6 Time Period. The parties acknowledge that time is of the essence
-----------
with respect to the fulfillment of the respective obligations of the parties
hereto and the Closing of the Transaction as contemplated by this Agreement.
9.7 Entire Agreement. This Agreement (including all exhibits or schedules
----------------
appended to this Agreement and all documents delivered pursuant to or referred
to in this Agreement, all of which are hereby incorporated herein by reference)
constitutes the entire agreement between the parties, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto, have been expressed herein or in the documents
incorporated herein by reference.
9.8 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision hereof.
9.9 Assignability. This Agreement may not be assigned otherwise than by
-------------
operation of law (a) by Buyer without the prior written consent of Parent or (b)
by Parent without the prior written consent of Buyer. However, any or all
rights of Buyer to receive performance (but not the obligations of Buyer to
Parent hereunder) and rights to assert claims against Parent in respect of
breaches of representations, warranties or covenants of Parent hereunder, may be
assigned by Buyer to (i) any direct or indirect subsidiary, parent or other
affiliate of Buyer, or (ii) any person or entity extending credit to Buyer to
finance the purchase price, but any assignee of such rights under clause (i) or
clause (ii) shall take such rights subject to any defenses, counterclaims and
rights of setoff to which Parent might be entitled under this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
9.10 Amendment This Agreement may be amended only by a written agreement
---------
executed by Buyer and by Parent, acting for itself and as attorney-in-fact for
the Seller.
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Page 35
9.11 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts (other than the
choice of law principles thereof), except that any representations and
warranties with respect to real and tangible property shall be governed by and
construed in accordance with the laws of the jurisdiction where such property is
situated if other than in the Commonwealth of Massachusetts.
9.12 Remedies. The parties hereto acknowledge that the remedy at law for
--------
any breach of the obligations undertaken by the parties hereto is and will be
insufficient and inadequate and that the parties hereto shall be entitled to
equitable relief, in addition to remedies at law. In the event of any action to
enforce the provisions of this Agreement, Parent shall waive the defense that
there is an adequate remedy at law. Parent acknowledge that the Seller Shares
are unique and cannot be obtained on the open market. Without limiting any
remedies Buyer may otherwise have hereunder or under applicable law, in the
event Parent refuse to perform their obligations under this Agreement, Buyer
shall have, in addition to any other rights at law or equity, the right to
specific performance.
9.13 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.14 Effect of Table of Contents and Headings. Any table of contents,
----------------------------------------
title of an article or section heading herein contained is for convenience of
reference only and shall not affect the meaning of construction of any of the
provisions hereof.
[REST OF PAGE INTENTIONALLY BLANK]
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Page 36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in multiple counterparts as of the date set forth above by their duly authorized
representatives.
XXXXXX AUTOMATION, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------
Xxxxx X. Xxxxxxxxx, Chief Financial Officer
DOMAIN MANUFACTURING CORPORATION
By: /s/ Xxxx Xxxxxxxxxx
-------------------
Xxxx Xxxxxxxxxx, Chairman
DOMAIN SOLUTIONS CORPORATION
By: /s/ Xxxx Xxxxxxxxxx
-------------------
Xxxx Xxxxxxxxxx, Chairman
________________________________________________________________________________
Page 37
ASSETS FOR CASH PURCHASE AGREEMENT
----------------------------------
List of Schedules and Exhibits
------------------------------
Schedules
---------
Schedule 1.1 Foreign Assets
Schedule 1.2 Assumed Contracts and Liabilities
Schedule 2.1 Foreign Qualification
Schedule 2.5 Notices and Complaints of Violations
Schedule 2.6 Conflicting Obligations
Schedule 2.7 Base Balance Sheet
Schedule 2.8 Undisclosed Liabilities
Schedule 2.9 Certain Changes
Schedule 2.10 Taxes
Schedule 2.11 Properties
Schedule 2.12 Receivables
Schedule 2.13 Intellectual Property Rights
Schedule 2.14 Contracts and Commitment
Schedule 2.15 ERISA Employee Benefit
Schedule 2.16 Employees Relations
Schedule 2.18 Government Authorizations
Schedule 2.19 Warranty and Other Claims
Schedule 2.20 Litigation
Schedule 2.21 Borrowings and Guarantees
Schedule 2.22 Insurance
Schedule 2.24 Transactions with Interested Persons
Schedule 2.26 Year 2000 Compliant
Exhibit A Proprietary Information Agreement
Exhibit B Legal Opinion of Seller's Counsel
Exhibit C Letter of Credit
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