Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
December 30, 1997 by and among Segue Software, Inc., a Delaware corporation
("Buyer USA"), Segue Software Entwicklung GmbH, an Austrian corporation, ("Buyer
Austria") (Buyer USA and Buyer Austria are sometimes collectively referred to
hereinafter as the "Buyer" or the "Buyers") and ARC - Dr. Ambichl & Xx. Xxxxxx
Communication GmbH, an Austrian corporation ("ARC"), and each holder of the
share capital of ARC, which include Ernst Ambichl, Xxxxxxx Xxxxxx and Xxxxx
Xxxxxxxxxxx (the "Stockholders" and, together with ARC, the "Sellers").
W I T N E S S E T H
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WHEREAS, subject to the terms and conditions hereof, ARC desires to sell to
Buyer USA all of its intellectual property and related assets as set forth
herein; and
WHEREAS, subject to the terms and conditions hereof, Buyer USA desires to
purchase from ARC all of ARC's intellectual property and related assets for the
consideration applicable thereto as specified herein; and
WHEREAS, subject to the terms and conditions hereof, ARC desires to sell to
Buyer Austria certain of its assets as set forth herein; and
WHEREAS, subject to the terms and conditions hereof, Buyer Austria desires
to purchase certain of the assets of ARC for the consideration applicable
thereto as specified herein;
NOW, THEREFORE, in order to consummate said purchases and sales and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE.
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1.1 Sale of ARC Assets and Purchase Price.
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1.1.1 Sale of Intellectual Property. Subject to the provisions
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of this Agreement, Buyer USA agrees to purchase from ARC and the Stockholders,
and ARC and the Stockholders agree to sell, convey, transfer, assign and deliver
to Buyer USA, on the Closing Date (as defined in Section 1.8 hereof) the
Intellectual Property Assets owned or used by ARC as of the close of business on
the Closing Date which are used in the conduct of ARC's
business and operations, other than the Excluded Assets (as defined in Section
1.1.3). The Intellectual Property Assets shall include, without limitation, the
following:
(i) the business of ARC, as a going concern,
including all of ARC's goodwill therein, as well as ARC's website (including the
domain name "______________" and any similar domain name related to, or
contemplated for use by, ARC or any of the products or services offered by ARC);
(ii) all claims, rights (and benefits arising
therefrom), causes of action, rights of recovery, set-offs or defenses of any
kind pertaining to, or arising out of, ARC's business and operations, and all
rights of ARC against suppliers under warranties covering the Intellectual
Property Assets and all non-compete agreements with any current or former
employees of ARC, copies of which non-compete agreements have been delivered to
Buyer by ARC prior to the date hereof;
(iii) all computer programs, databases, software
and software licenses owned or licensed by ARC used by ARC in the operation of
ARC's business, all of which are listed on Schedule 1.1.1(iii) hereto;
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(iv) all of ARC's right, title and interest in
all copyrights (registered and unregistered) and applications, if any, therefor,
patents, patent applications, patent rights, trade secrets, trade secret rights,
trademarks (registered and unregistered), service marks (registered and
unregistered), technology, know-how, techniques, processes, all documents of ARC
embodying proprietary information and copyright protected material, all evidence
of ownership of any of the foregoing, and all other intellectual property
developed by or on behalf of ARC or to which ARC have rights, including, without
limitation, the copyrights, patents, trademarks, service marks, software, and
technology listed on Schedule 1.1.1(iv) hereto;
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(v) all of the Stockholders' right, title and
interest in the Intellectual Property Assets owned or used by ARC as of the
close of business on the Closing Date which are used in the conduct of ARC's
business and operations, other than the Excluded Assets, including without
limitation, the following rights embodied in such Intellectual Property Assets:
all copyrights (registered and unregistered) and applications, if any, therefor,
patents, patent applications, patent rights, trade secrets, trade secret rights,
trademarks (registered and unregistered), service marks (registered and
unregistered), trade names, trade name rights, trade style, logos, technology,
know-how, techniques, processes, all documents embodying proprietary information
and copyright protected material, all evidence of ownership of any of the
foregoing, and all other intellectual property;
(vi) the trade names, trade name rights, trade
style, or other similar rights owned or licensed by ARC, including,
specifically, the names, any similar name, any logo or xxxx used in connection
with ARC's business, including, without limitation, the trade names listed on
Schedule 1.1.1(v) hereto, and any goodwill associated therewith;
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(vii) all mailing lists, subscriber lists,
advertiser lists, and subscriptions or processes of ARC; and
(viii) all advertising and promotional material, a
customer list which shall consist of an electronic and a hard copy list of all
of ARC's customers as of the Closing Date, customer information, a supplier list
which shall consist of an electronic and hard copy list of all of ARC's
suppliers as of the Closing Date, supplier information owned or licenses by ARC
or the Stockholders, market surveys, marketing know-how, and information
pertaining to planned products or services (if any).
1.1.2 Sale of Non-Intellectual Property Assets. Subject to
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the provisions of this Agreement, Buyer Austria agrees to purchase from ARC, and
ARC agrees to sell, convey, transfer, assign and deliver to Buyer Austria, on
the Closing Date (as defined in Section 1.8 hereof) the Non-Intellectual
Property Assets. The term "Non-Intellectual Property Assets" shall mean the
assets, properties and business (other than the Intellectual Property Assets)
that are owned or used by ARC as of the close of business on the Closing Date
which are used in the conduct of ARC's business and operations, other than the
Excluded Assets (as defined in Section 1.1.3). The Intellectual Property Assets
and the Non-Intellectual Property Assets are referred to herein together to as
the "Subject Assets." The Non-Intellectual Property Assets shall include,
without limitation, the following:
(i) all inventories, office supplies,
maintenance supplies, spare parts and similar items used by ARC in the conduct
of its business;
(ii) all machinery, equipment (including office
equipment, computers and computer hardware and peripherals), furniture,
furnishings and other fixed assets (including leasehold interests therein) of
ARC listed on Schedule 1.1.2(ii) hereto;
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(iii) all leases and contracts of ARC used in or
related to its business, including, without limitation, all leases of real or
personal property, all contracts for services and supplies, all contracts to
sell products or services, all purchase orders, and all other agreements,
commitments and personal property leases (whether written or oral) to which ARC
is a party or under which ARC receives benefit arising out of or related to its
business (collectively, the "Assigned Contracts"), which Assigned Contracts
shall include, without limitation, all existing and pending sales contracts and
sales commission agreements or arrangements, including orders, offers and
proposals, all of which Assigned Contracts are listed on Schedule 1.1.2(iii)
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hereto;
(iv) all Federal, state, local, foreign or other
governmental and other third party permits (including occupancy permits),
certificates, licenses, consents and authorizations held by ARC that are used in
or related to its business to the extent assignable (the "Assigned Permits"),
including, without limitation, all permits, certificates, licenses and
authorizations listed on Schedule 1.1.2(iv) hereto;
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(v) all files, documents, records (other than
ARC's Corporate
Records (as defined in Section 1.1.3), employee files, data and books of account
maintained in connection with ARC's business;
(vi) all memberships in trade associations of ARC
to the extent assignable;
(vii) all raw materials and inventories, including
inventories of works-in-process and supplies, owned by ARC; and
(viii) all intangible rights relating to any of the
foregoing.
1.1.3 Excluded Assets. Notwithstanding the foregoing, the
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Subject Assets shall not include the following items owned, leased or used by
ARC (the "Excluded Assets"):
(i) Assets and property disposed of since the
date of the Base Balance Sheet in the ordinary course of business and such other
assets as have been or are disposed of pursuant to this Agreement;
(ii) ARC'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 ARC's
organization or stock capitalization (collectively, the "Corporate Records");
provided, however, that ARC shall provide Buyer prior to the Closing with copies
of each of the foregoing, certified by ARC to be true and correct copies;
(iii) ARC's rights under this Agreement and the
agreements and instruments delivered to Buyer pursuant hereto; and
(iv) ARC's rights, title and interest in and to
assets of, and obligations under, any pension funds, profit sharing, 401(k) or
similar plans maintained by or on behalf of ARC for the benefit of its
employees.
1.2 Assumption of Liabilities. Except for the Assumed
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Liabilities (as defined below), Buyer shall not assume or be bound by any
obligations or liabilities of any Seller, accrued, absolute, contingent or
otherwise, whether or not existing or hereafter arising whatsoever. Upon the
sale and purchase of the Subject Assets, Buyer agrees to perform in accordance
with their respective terms the obligations of ARC (other than obligations
described in Section 1.3(vi)) under all Assigned Contracts and Assigned Permits
and other grants of rights assigned to Buyer pursuant to Section 1.1.1 arising
or to be performed after the Closing Date (the "Assumed Liabilities"). The
assumption of said liabilities by Buyer hereunder shall not enlarge any rights
of third parties under contracts or arrangements with Buyer or ARC and nothing
herein shall prevent any party from contesting in good faith with any third
party any of said liabilities.
1.3 Retained Liabilities. Buyer and ARC agree that, except for
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the Assumed Liabilities, Buyer is not assuming, and ARC shall remain fully
liable for, all of its liabilities
and obligations relating to the property, assets, business and operations of ARC
(collectively, the "Retained Liabilities"), including, without limitation, the
following:
(i) all liabilities for any income, gain, profit
or similar tax arising out of or resulting from the sale, conveyance, transfer,
assignment and delivery of the Subject Assets provided for in this Agreement;
(ii) all Taxes (as defined in Section 2.8(a))
imposed on, or with respect to, the business of ARC;
(iii) all liabilities and obligations of ARC in
respect of accounts payable, accrued expenses, accrued employee obligations and
other current liabilities arising out of the operation of ARC's business;
(iv) all liabilities and obligations of ARC for
indebtedness for borrowed money;
(v) all liabilities and obligations of ARC in
connection with or relating to any of ARC's existing or former employees,
employee benefit plans, employee insurance policies, severance or other
termination obligations, accrued vacations, accrued and unpaid wages, salaries,
bonuses, commissions and sick pay or other employment related matters,
including, without limitation, all liabilities and obligations (whether fixed or
contingent) with respect to any employment benefit program or plan as a result
of the consummation of the transactions contemplated by this Agreement, as
required by Austrian law or otherwise, and all liabilities of ARC under sales
representative or similar agreements or arrangements pursuant to which any
person or entity may be entitled to a commission on account of revenues booked
or earned prior to the Closing Date; provided, however, that in no event is
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Buyer assuming any liabilities with respect to any employees terminated prior to
the Closing Date or any severance or other termination obligations or any
liability under any pension, profit sharing, 401(k) or similar employee benefit
plan;
(vi) all liabilities and obligations of ARC to
third parties arising out of any breach by ARC prior to the Closing Date of any
representation, warranty, covenant or indemnification obligation of ARC under
any Assigned Contract or Assigned Permitted or other right assigned hereunder;
(vii) all liabilities and obligations arising in
respect of the Excluded Assets;
(viii) all liabilities for retrospective or similar
insurance premium adjustments and all claims for injury or sickness compensable
under ARC's insurance plans arising prior to the Closing Date; and
(ix) all other liabilities of ARC that are
attributable to or arise from facts, events or conditions that occurred or came
into existence prior to the Closing Date,
including without limitation, any intellectual property indemnification
obligations.
1.4 Purchase Price and Payment.
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1.4.1 Intellectual Property Assets. In consideration of the
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sale by ARC to Buyer USA of the Intellectual Property Assets and upon the
assumption by Buyer of the Assumed Liabilities, Buyer USA agrees that at the
First Closing (as hereinafter defined) it will deliver to ARC (a) Three Million
Seven Hundred Seven Thousand Eight Hundred Dollars ($3,707,800) by bank cashiers
check in Boston Clearing House Funds or by wire transfer of immediately
available funds and (b) a junior subordinated promissory note in the principal
amount of Three Million Seven Hundred Eighteen Thousand Eight Hundred Dollars
($3,718,800) (the "ARC Note") substantially in the form attached hereto as
Exhibit 1.4.
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1.4.2 Non-Intellectual Property Assets. In consideration of
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the sale by ARC to Buyer Austria of the Non-Intellectual Property Assets, and
upon the assumption by Buyer of the Assumed Liabilities, Buyer Austria agrees
that at the Second Closing (as hereinafter defined) it will deliver to ARC
Eleven Thousand Dollars ($11,000) by bank cashiers check in Boston Clearing
House Funds or by wire transfer of immediately available funds.
1.5 Transfer of Subject Assets. At the First Closing, ARC shall
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deliver or cause to be delivered to Buyer USA good and sufficient instruments of
transfer transferring to Buyer USA title to all of the Intellectual Property
Assets as provided herein and at the Second Closing, ARC shall deliver or cause
to be delivered to Buyer Austria good and sufficient instruments of transfer
transferring to Buyer Austria title to all of the Non-Intellectual Property
Assets as provided herein. 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
Buyer and its counsel, (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 the Assumed Liabilities, and (d) shall include, without
limitation, (i) the Xxxx of Sale in the form of Exhibit 1.5(a) hereto, (ii) the
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Assignment and Assumption of Contracts Agreement in the form of Exhibit 1.5(b)
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hereto, (iii) the Assignment and Assumption of Leases Agreement in the form of
Exhibit 1.5(c) hereto, and (iv) the Assignment and Assumption of Intellectual
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Property in the form of Exhibit 1.5(d) hereto.
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1.6 Delivery of Records and Contracts. At or prior to the First
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Closing, ARC shall deliver or cause to be delivered to Buyer all of ARC's
leases, contracts, commitments, agreements (including without limitation non-
competition agreements) and rights that are included in the Subject Assets, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer the full benefit of the same. ARC shall also deliver to Buyer at the First
Closing all business records, tax returns, books and other data relating to ARC
and the Subject Assets, and ARC shall take all requisite steps to put Buyer in
actual possession and operating control of the Subject Assets. After the First
Closing, Buyer shall afford to ARC and its accountants and attorneys, for the
purpose of preparing such tax returns of ARC as may
be required after the First Closing, reasonable access to the books and records
of ARC delivered to Buyer under this Section and shall permit ARC, at ARC's
expense, to make extracts and copies therefrom. After the First Closing, ARC
shall afford to Buyer and its accountants and attorneys, for the purpose of
preparing and supporting such tax returns of Buyer as may be required after the
First Closing, reasonable access to the relevant books and records of ARC
retained by ARC and shall permit Buyer, at Buyer's expense, to make extracts and
copies therefrom. ARC and Buyer each agree to retain any such books and records
for a period of seven years or, in the event either party elects to dispose of
such books and records in any manner, such party shall notify the other party of
its intent to do so and shall offer the other party the opportunity to receive
such books and records or, at the other party's expense, full and complete
copies thereof.
1.7 Allocation of Purchase Price. ARC and Buyer agree to
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allocate the Asset Purchase Price and the Assumed Liabilities (and all other
capitalized costs) among the Subject Assets in accordance with the provisions of
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
such allocation shall be binding upon Buyer and ARC for all purposes (including
financial accounting purposes, financial and regulatory reporting purposes and
tax purposes).
1.8 Closing.
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(a) The transactions contemplated by this Agreement
shall be consummated at the closing (the "First Closing") which will take place
at the offices of Xxxxxxx, Procter & Xxxx LLP, Exchange Place, Boston,
Massachusetts on December 30, 1997, or at such other place or earlier or later
date or time as may be fixed by mutual agreement of Buyer and the Sellers (the
"First Closing Date").
(b) Notwithstanding the foregoing, the closing in
respect of and the physical transfer of the Non-Intellectual Property Assets
(the "Second Closing") shall occur on January 9, 1998 or on such earlier or
later date as may be fixed by mutual agreement of Buyer and the Sellers (the
"Second Closing Date").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
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2.1 Making of Representations and Warranties. As a material
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inducement to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, ARC and the Stockholders hereby jointly and severally make
to Buyer the representations and warranties contained in this Section 2.
2.2 Organization and Qualifications of ARC. ARC is a
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corporation duly organized, validly existing and in good standing under the laws
of Austria with full corporate power and authority to own 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 currently conducted or
proposed to be conducted. The copies of ARC's Certificate of Incorporation (or
similar organizational document) as amended to date, certified by a notary
public or the appropriate
governmental officer, and By-laws (or similar document), as amended to date,
certified by ARC's General Manager, and heretofore delivered to Buyer's counsel,
are complete and correct, and no amendments thereto are pending. ARC is not in
violation of any provision of its Certificate of Incorporation (or similar
organizational document) or By-laws (or similar document). ARC is not qualified
to do business as a foreign corporation in any state or jurisdiction.
2.3 Subsidiaries. ARC has no subsidiaries, and does not own any
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securities issued by any other business organization or governmental authority.
ARC does not own and does not have any direct or indirect interest in or control
over any corporation, partnership, joint venture or entity of any kind.
2.4 Capital Stock; Beneficial Ownership. The authorized share
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capital of ARC consists of ATS 500,000 of which ATS 250,000 has been
contributed. The equity of ARC is owned 39% by Ernst Ambichl, 39% by Xxxxxxx
Xxxxxx and 22% by Xxxxx Xxxxxxxxxxx. There are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
share capital of ARC. None of the share capital of ARC has been issued in
violation of any federal or state law. There are no voting agreements, trusts,
proxies or other agreements, instruments or undertakings with respect to the
voting of the share capital of ARC to which ARC or any Stockholder is a party.
2.5 Authority of ARC. ARC has full right, authority and power
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to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by ARC pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by ARC
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary action of ARC and its stockholders (as the
case may be) and no other action on the part of ARC or its stockholders or
otherwise is required in connection therewith. This Agreement and each
agreement, document and instrument executed and delivered by ARC pursuant to
this Agreement constitutes, or when executed and delivered will constitute,
valid and binding obligations of ARC enforceable in accordance with their terms.
The execution, delivery and performance by ARC of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate any provision of the
Certificate of Incorporation (or similar organizational document) or By-laws of
ARC;
(ii) do not and will not violate any laws of the
United States, or any state or other jurisdiction (domestic or foreign)
applicable to ARC or require such Seller to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made, except where the failure of which
will, individually or in the aggregate, not result in a material adverse affect
on the business or prospects of ARC; and
(iii) except as described in Section 2.6(b)(vii)
hereof, do not
and will not result in a breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of any indenture or
loan or credit agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which ARC is a party or by which the
property of ARC is bound or affected, or result in the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or encumbrance on
any of ARC's assets or property.
2.6 Real and Personal Property.
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(a) Owned Real Property. ARC does not own any real property.
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(b) Leased Real Property. All of the real property leased by
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ARC, as tenant or lessee, is identified on Schedule 2.6(b) hereto
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(collectively referred to herein as the "Leased Real Property"). The Sellers
hereby make the following representations and warranties with respect to the
Leased Real Property:
(i) ARC holds a good, clear, marketable, valid and
enforceable leasehold interest in the Leased Real Property;
(ii) None of the Sellers is aware of any material defects
in the physical condition of any improvements constituting a part of the Leased
Real Property, including, without limitation, structural elements, mechanical
systems, roofs or parking and loading areas, and to the knowledge of the
Sellers, all of such improvements are in reasonable operating condition and
repair, have been maintained in accordance with past practice and are free from
material infestation by rodents or insects;
(iii) The copies of the lease for the Leased Real Property
(the "Lease") delivered by ARC to Buyer pursuant to this Agreement is complete,
accurate, true and correct;
(iv) The Lease is in full force and effect and has not
been modified, amended, or altered, in writing or otherwise;
(v) All obligations of the landlord or lessor under the
Lease which have accrued have been performed, and to the best of the knowledge
of the Sellers, no landlord or lessor is in default under the Lease;
(vi) All obligations of the ARC under the Lease which have
accrued have been performed, and ARC is not in default under the Lease, and no
circumstance presently exists which, with notice or the passage of time, or
both, would give rise to a default by ARC; and
(vii) ARC will not have obtained prior to the Closing the
consent of the landlord or lessor under the Lease, and the failure to obtain
such consent shall
not constitute a default hereunder. On or before the Closing Date, ARC will have
notified in writing the landlord under the Lease that the Lease is being
assigned to Buyer hereunder.
(c) Personal Property. A complete description of ARC's fixtures,
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machinery, equipment and other tangible personal property is contained in
Schedule 2.6(c) hereto. ARC has good and marketable title to all of its
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personal property. None of such personal property or assets is subject to any
mortgage, pledge, lien, conditional sale agreement, security agreement,
encumbrance or other charge. All leasehold improvements, furnishings,
machinery, equipment and other tangible personal property of ARC have been
maintained consistent with past practice, are suitable for the purposes for
which they are intended and are in good repair.
2.7 Financial Statements.
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(a) Sellers have delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 2.7:
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(i) A balance sheet of ARC (including for purposes of this
Section 2.7 any predecessor entity of ARC) for its fiscal year ending on
December 31, 1996 and a statement of income for the year then ended, with
appropriate footnotes, certified by ARC's chief financial officer.
(ii) A balance sheet of ARC (including for purposes of this
Section 2.7 any predecessor entity of ARC) as of October 31, 1997 (the "Base
Balance Sheet") and a statement of income for the period then ended, with
appropriate footnotes, certified by ARC's chief financial officer.
Said financial statements have been prepared in accordance with generally
accepted accounting principles in force in Austria applied consistently during
the periods covered thereby, are complete and correct in all material respects,
and present fairly in all material respects the financial condition of ARC at
the dates of said statements and the results of its operations and its cash
flows for the periods covered thereby.
(b) Except as reflected on the Base Balance Sheet, as of the date
of the Base Balance Sheet, ARC had no liabilities of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (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 or contingent or potential liabilities relating to activities
of ARC or the conduct of its business prior to the date of the Base Balance
Sheet regardless of whether claims in respect thereof had been asserted as of
such date).
(c) As of the date hereof and as of the Closing, ARC does not and
will not have liabilities of any nature, whether accrued, absolute, contingent
or otherwise, asserted or unasserted, known or unknown (including without
limitation liabilities as guarantor or otherwise with respect to obligations or
others, or liabilities for taxes due or then accrued or
to become due or contingent or potential liabilities relating to activities of
ARC or the conduct of its business prior to the date hereof or the Closing, as
the case may be, regardless of whether claims in respect thereof had been
asserted as of such date), which Buyer Austria or Buyer USA will be legally
obligated to pay under any theory of successor liability or otherwise.
2.8 Taxes.
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(a) ARC has paid or caused to be paid all federal, state,
local, foreign and other taxes, including, without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, stamp taxes,
transfer taxes, windfall profit taxes, environmental taxes and property taxes,
whether or not measured in whole or in part by net income, and all deficiencies,
or other additions to tax, interest, fines and penalties owed by it
(collectively, "Taxes"), required to be paid by ARC through the date hereof
whether disputed or not.
(b) ARC has in accordance with applicable law filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof, and all such returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. A list of all federal,
state, local and foreign income tax returns filed with respect to ARC for
taxable periods ended on or after December 31, 1992, are set forth in Schedule
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2.8 hereto, and said Schedule indicates those returns that have been audited or
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currently are the subject of an audit. ARC has delivered to Buyer correct and
complete copies of all federal, state, local and foreign income tax returns
listed on said Schedule, and of all examination reports and statements of
deficiencies assessed against or agreed to by ARC with respect to said returns.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the knowledge of the Sellers,
threatening to assert against ARC any deficiency or claim for additional Taxes.
No claim has ever been made by an authority in a jurisdiction where ARC does not
file reports and returns that ARC is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of ARC that
arose in connection with any failure (or alleged failure) to pay any Taxes.
(d) No extension of time with respect to any date on which a
tax return was or is to be filed by ARC is in force, and no waiver or agreement
by ARC is in force for the extension of time for the assessment or payment of
any Taxes.
(e) None of the Sellers has been (and has no liability for
unpaid Taxes because it once was) a member of an "affiliated group." ARC has
never filed, nor has it been required to file, a consolidated, combined or
unitary tax return with any other entity. ARC does not own, nor has it ever
owned, a direct or indirect interest in any trust, partnership, corporation or
other entity, nor is any such interest necessary to conduct the business of ARC,
and Buyer is not acquiring from any Seller an interest in any such entity.
No such entity is a party to any tax sharing agreement.
(f) ARC has made all necessary and required contributions under
applicable social security systems with respect to employees of ARC and non-
employee contractors of ARC.
2.9 Accounts Receivable. All of the accounts receivable of ARC (less the
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reserve for bad debts set forth on the Base Balance Sheet) are or will be at the
Closing valid and enforceable claims, fully collectible and subject to no setoff
or counterclaim. ARC does not have any accounts or loans receivable from any
person, firm or corporation which is affiliated with either ARC or from any
director, officer or employee of ARC, and all accounts and loans receivable from
any such person, firm or corporation shall be paid in cash prior to the Closing.
2.1 Absence of Certain Changes. Other than the conversion of ARC from an
--------------------------
OEG to a GmbH, since the date of the Base Balance Sheet, there has not been:
(i) any change in the financial condition, properties, assets,
liabilities, business or operations of ARC which change by itself or in
conjunction with all other such changes, has been materially adverse with
respect to ARC;
(ii) any contingent liability incurred by ARC as guarantor
or otherwise with respect to the obligations of others or any cancellation of
any debt or claim owing to, or waiver of any material right of, ARC;
(iii) any mortgage, encumbrance or lien placed on any of the
assets or properties of ARC which remain in existence on the date hereof or will
remain on the Closing Date;
(iv) any obligation or liability of any nature incurred by
ARC whether accrued, absolute, contingent or otherwise, asserted or unasserted
(including without limitation liabilities for Taxes due or to become due or
contingent or potential liabilities relating to products or services provided by
ARC or the conduct of ARC's business since the date of the Base Balance Sheet
regardless of whether claims in respect thereof have been asserted), other than
obligations and liabilities incurred in the ordinary course of business
consistent with the terms of this Agreement (it being understood that product or
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(v) any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of ARC other than in the ordinary course of business;
(vi) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, assets or
business of ARC;
(vii) any other transaction entered into by ARC other than
transactions in the ordinary course of business; or
(viii) any agreement or understanding whether in writing or
otherwise, for ARC to take any of the actions specified in paragraphs (i)
through (viii) above.
2.11 Ordinary Course. Other than the conversion of ARC from an OEG to
---------------
a GmbH, since the date of the Base Balance Sheet, ARC has conducted its business
and operations only in the ordinary course and consistently with its prior
practices.
2.12 Banking Relations. All of the arrangements which ARC has with any
-----------------
banking institution are completely and accurately described in Schedule 2.12
-------------
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.13 Proprietary Rights.
------------------
(a) Except as set forth in Schedule 2.13, ARC owns all right,
title and interest in and to all patents, copyrights, technology, software,
software tools, know-how, processes, trade secrets, trademarks, service marks,
trade names and other proprietary rights used in or necessary for the conduct of
ARC's business as conducted to the date hereof or contemplated, including,
without limitation, the technology and all proprietary rights developed or
discovered in connection with or contained in ARC's products (the "ARC
Products"), free and clear of all liens, claims and encumbrances (including
without limitation distribution rights) (all of which are referred to as
"Proprietary Rights"). The foregoing representation as it relates to Third Party
Technology (as hereinafter defined) is limited to ARC's interest pursuant to the
Third Party Licenses (as hereinafter defined), all of which are valid and
enforceable and in full force and effect and which grant ARC such right to Third
Party Technology as are employed in or necessary to the business of ARC as
conducted or proposed to be conducted prior to the Closing Date.
(b) Schedule 2.13 hereto contains an accurate and complete
-------------
description of (i) all patents, trademarks (with separate listings of registered
and unregistered trademarks), trade names, and registered and unregistered
copyrights in or related to the ARC Products, all applications and registration
statements therefor, and a list of all licenses and other agreements relating
thereto, and (ii) a list of all licenses and other agreements with third parties
(the "Third Party Licenses") relating to any software, technology, know-how, or
processes that ARC is licensed or otherwise authorized by such third parties to
use, market, distribute or incorporate into products distributed by ARC (such
software, technology, know-how and processes are collectively referred to as the
"Third Party Technology"). All of ARC's trademark or trade name registrations
related to the ARC Products and all of ARC's copyrights in any of the ARC
Products are valid and in full force and effect; and consummation of the
transactions contemplate hereby will not alter or impair any such rights. There
is no material default by any party to any Third Party License and all of ARC's
rights thereunder are freely assignable. To the knowledge of the Sellers, the
licensors under such
Third Party Licenses have and had all requisite power and authority to grant the
rights purported to be conferred thereby. True and complete copies of such Third
Party Licenses, and any amendments thereto, have been provided to Buyer.
(c) No claims have been asserted against ARC or any of the
Stockholders (and neither ARC nor any of the Stockholders is aware of any claims
which are likely to be asserted against ARC or any of the Stockholders or which
have been asserted against others) by any person challenging ARC's use or
distribution of any patents, trademarks, trade names, copyrights, trade secrets,
software, technology, know-how or processes utilized by ARC (including, without
limitation, the Third Party Technology) or challenging or questioning the
validity or effectiveness of any license or agreement relating thereto
(including, without limitation, the Third Party Licenses). To the Sellers'
knowledge, there is no valid basis for any claim of the type specified in the
immediately preceding sentence which could in any way relate to or interfere
with the continued enhancement and exploitation by ARC of any of the ARC
Products. None of the ARC Products nor the use of any patents, trademarks, trade
names, copyrights, software, technology, know-how or processes by ARC in its
current business infringes on the rights of, constitutes misappropriation of, or
in any way involves unfair competition with respect to, any proprietary
information or intangible property right of any third person or entity,
including without limitation any trade secret, copyright, trademark or trade
name, or, to the knowledge of the Sellers, any patent.
(d) All licenses or other agreements pursuant to which the
Sellers have granted rights to others in Proprietary Rights owned or licensed by
the Sellers are listed on Schedule 2.13. All of such licenses or agreements are
in full force and effect, there is no default by any party thereto and all of
Sellers' rights thereunder are freely assignable. True and complete copies of
all such licenses or other agreements, and any amendments thereto, have been
provided to Buyer. Except as set forth in Schedule 2.13, the Sellers have not
-------------
granted any third party any right to manufacture, reproduce, distribute, market
or exploit any of the ARC Products or any adaptations, translations, or
derivative works based on the ARC Products or any portion thereof, including,
without limitation, as a value added reseller. Except with respect to the rights
of third parties to the Third Party Technology, no third party has any right to
manufacture, reproduce, distribute, market or exploit any underlying works or
materials of which any of the ARC Products are a "derivative work" as that term
is defined in the United States Copyright Act, Title 17, U.S.C. Section 101.
(e) Except as set forth on Schedule 2.13, all designs, drawings,
-------------
specifications, source code, object code, documentation, flow charts and
diagrams incorporating, embodying or reflecting any of the ARC Products at any
stage of their development (the "ARC Components") were written, developed and
created solely and exclusively by employees of ARC without the assistance of any
third party or entity or were created by third parties (including, without
limitation, each of the Stockholders), who assigned ownership of their rights to
ARC in valid and enforceable consultant confidentiality and invention assignment
agreements. All such employees and third parties have executed waivers of any
right, title or interest in the ARC Products and ARC Components pursuant to
documents prepared by Buyer's counsel. The Sellers have at all times used
commercially
reasonable efforts to treat the ARC Products and the ARC Components as
containing trade secrets and has not disclosed or otherwise dealt with such
items in such a manner as to cause the loss of such trade secrets by release
into the public domain.
(f) To the Sellers' knowledge, no employee of ARC is in violation
of any term of any employment contract, patent disclosure agreement or any other
contract or agreement relating to the relationship of any such employee with ARC
or, to the best of the Sellers' knowledge, any other party, including, without
limitation, any previous employer, because of the nature of the business
conducted by ARC or proposed to be conducted by ARC.
(g) Each person presently or previously employed by ARC
(including independent contractors, if any) employed in a research and
development or other technical position has executed a confidentiality and non-
disclosure agreement previously provided to Purchaser or its representatives.
Such confidentiality and non-disclosure agreements constitute valid and binding
obligations of ARC and such person, enforceable in accordance with their
respective terms. To the best of ARC's and each of the Stockholder's knowledge,
neither the execution or delivery of such agreements, nor the carrying on of
ARC's business as employees by such persons, nor the conduct of ARC's business
as currently anticipated, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract, covenant
or instrument under which any of such persons is obligated. ARC is not making
unauthorized use of any confidential information or trade secrets of any person,
including, without limitation, any former employer or any past or present
employee of ARC. Neither ARC nor, to the knowledge of the Sellers, any of ARC's
employees have any agreements or arrangements with any persons other than ARC
related to confidential information or trade secrets of such persons or
restricting any such employee's ability to engage in business activities of any
nature.
(h) No product liability or warranty claims which individually or
in the aggregate could exceed Five Thousand Dollars ($5,000) have been
communicated to or threatened against ARC nor, to the best of the Sellers'
knowledge, is there any specific situation, set of facts or occurrence that
provides a basis for such claim. ARC has provided to Buyer an accurate list of
all errors or "bugs" in the ARC Products which are contained in the computer
databases which ARC maintains for the purpose of tracking errors and "bugs" in
its software. Such list is set forth as Schedule 2.13 (h).
-----------------
(i) Prior to the date hereof, the Stockholders transferred all
rights, title and interest of the Stockholders in the ARC Products to ARC, and
the Stockholders have no rights, title or interest in the ARC Products.
2.14 Contracts. Except for contracts, commitments, plans, agreements and
---------
licenses (true and complete copies of which have been delivered to Buyer)
described in Schedule 2.14 hereto, ARC is not a party to or subject to:
-------------
(i) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(ii) any employment contract or contract for personal
services;
(iii) any contract or agreement relating to capital
expenditures in excess of $5,000 per annum;
(iv) any other contracts or agreements creating any
obligations of ARC of $5,000 or more per annum with respect to any such contract
or agreement not specifically disclosed elsewhere in this Agreement;
(v) any contract or agreement providing for the purchase of all
or substantially all of its requirements of a particular product from a
supplier;
(vi) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by such entity or any successor
or assignee on not more than one month's notice.
(vii) any contract not made in the ordinary course of business;
(viii) any contract or agreement for the purchase of any fixed
asset for a price in excess of $5,000 whether or not such purchase is in the
ordinary course of business;
(ix) no agreements, contracts or commitments that provide
for the sale, licensing or distribution by ARC of any of its products,
technology, know-how, trademarks or trade names. Section 2.14 hereof sets forth
------------
all of the maintenance obligations of ARC without regard to the dollar amount of
such obligation;
(x) any contract containing covenants limiting the freedom of
such entity to compete in any line of business or with any person or entity;
(xi) any license agreement (as licensor or licensee);
(xii) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(xiii) any contract or agreement with any officer, employee,
director or stockholder of ARC or with any persons or organizations controlled
by or affiliated with any of them.
ARC is not in default under any such contracts, commitments, plans, agreements
or licenses described in said Schedule, and none of the Sellers have any
knowledge of conditions or facts which with notice or passage of time, or both,
would constitute a default.
Without limiting the provisions of Section 2.13, except for the License and
Distribution Agreement between ARC and SQLBench International, Inc., ARC has not
granted to any third party (including, without limitation, OEMs and site license
customers) any rights to reproduce or manufacture any of the ARC Products, nor
has ARC granted to any third party any exclusive rights of any kind with respect
to any of the ARC Products, including, without limitation, territorial
exclusivity or exclusivity with respect to particular versions, implementations
or translations of any of the ARC Products, nor has ARC granted any third party
any right to market any of the ARC Products under any "private label"
arrangements pursuant to which ARC is not identified as the source of such
goods.
2.15 Litigation. There is no litigation or governmental or
----------
administrative proceeding or investigation pending or, to the Sellers'
knowledge, threatened against ARC or any affiliate of ARC which may have an
adverse effect on ARC's properties, assets, prospects, financial condition or
business or which would prevent or hinder the consummation of the transactions
contemplated by this Agreement.
2.16 Compliance with Laws. ARC is in compliance with all applicable
--------------------
statutes, ordinances, orders, judgments, decrees and rules and regulations
promulgated by any federal, state, municipal or other governmental authority
which apply to ARC or to the conduct of its business, and ARC has not received
notice of a violation or alleged violation of any such statue, ordinance, order,
rule or regulation.
2.17 Insurance. The only insurance maintained by the Company is
---------
disclosed on Schedule 2.17 hereto, and if any insurance is disclosed on said
-------------
Schedule, then any such insurance policy is in full force and effect, all
premiums with respect thereto are currently paid, and ARC is in compliance in
all material respects with the terms thereof. Said insurance is adequate and
customary for the business engaged in by ARC and is sufficient for compliance by
ARC with all requirements of law and all agreements and leases to which ARC is a
party.
2.18 Warranty or Other Claims. There are no existing or threatened
------------------------
product liability, warranty or other similar claims, or any facts upon which a
material claim of such nature could be based, against ARC for products or
services which are defective or fail to meet any product or service warranties.
No claim has been asserted against ARC for renegotiation or price
redetermination of any business transaction, and there are no facts upon which
any such claim could be based.
2.19 Powers of Attorney. Except for the power of attorney granted to
------------------
Meyndt, Ransmayr, Xxxxxxxxx & Partner with respect to the transactions
contemplated by this Agreement, ARC has not granted powers of attorney which are
presently outstanding.
2.20 Finder's Fee. None of the Sellers 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.
2.21 Corporate Records; Copies of Documents. The corporate record
--------------------------------------
books of ARC
accurately record all corporate action taken by its stockholders and board of
directors and committees thereof. The copies of the corporate records of ARC, as
delivered to Buyer pursuant to this Agreement, are true and complete copies of
the originals of such documents. ARC has made available for inspection and
copying by Buyer and its counsel complete and correct copies of all documents
referred to in this Section or in the Schedules delivered to Buyer pursuant to
this Agreement.
2.22 Employee Benefit Programs; Employees; Labor Relations.
-----------------------------------------------------
(a) Except as set forth on Schedule 2.22(a) or as provided under
----------------
the laws of Austria, ARC does not have any employment contract, collective
bargaining or other labor agreement, any agreement containing severance or
termination pay arrangements, deferred compensation agreement, pension or
retirement plan, bonus or profit-sharing plan, stock option or purchase plan or
other non-terminable (with or without penalty) arrangement, group insurance,
group hospitalization or other employee benefit plan, in each case relating to
its employees.
(b) Upon termination of the employment of any of ARC's employees,
Buyer will not by reason of the transactions contemplated by this Agreement, or
anything done prior to or on the Closing Date be liable to any of said employees
for so-called "severance pay" or any other payments other than as provided by
mandatory provisions of Austrian law.
2.23 Disclosure. The representations, warranties and statements
----------
contained in this Agreement and in the certificates, exhibits and schedules
delivered to Buyer do not contain any untrue statement of a material fact, and,
do not omit to state a material fact required to be stated therein or necessary
in order to make such representations, warranties or statements not misleading
in light of the circumstances under which they were made. To the knowledge of
the Sellers, there are no facts which presently or may in the future have a
material adverse affect on the business, properties, prospects, operations or
condition of ARC which have not been specifically disclosed herein or in a
Schedule furnished herewith, other than general economic conditions affecting
ARC's industry.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
---------- ----------------------------------------------
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder hereby
severally makes to Buyer each of the representations and warranties set forth in
this Section 3 with respect to such Stockholder. No Stockholder shall have any
right of indemnity or contribution from ARC with respect to the breach of any
representation or warranty hereunder.
3.1 Authority. Such Stockholder has full right, authority, power and
---------
capacity to enter into this Agreement and such agreement, document and
instrument to be executed and delivered by or on behalf of him or her pursuant
to this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document
and instrument executed and delivered by such Stockholder pursuant to this
Agreement constitutes, or when executed and delivered will constitute, valid and
binding obligations of such Stockholder enforceable in accordance with their
respective terms. The execution, delivery and performance by such Stockholder of
this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any laws of the United
States, or any state or other jurisdiction (domestic or foreign) applicable to
such Stockholder or require such Stockholder to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a right of
termination of, any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award to
which such Stockholder is a party or by which the property of such Stockholder
is bound or affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any of the
Subject Assets.
3.2 Finder's Fee. Such Stockholder has not 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.
3.3 Agreements. Each such Stockholder who is employed by ARC is not a
----------
party to any non-competition, trade secret or confidentiality agreement with any
party other than ARC. There are no agreements or arrangements not contained
herein or disclosed in a Schedule hereto, to which such Stockholder is a party
relating to the business of ARC or to such Stockholder's rights and obligations
as a stockholder, director or officer of ARC. Such Stockholder does not own,
directly or indirectly, on an individual or joint basis, any material interest
in, or serve as an officer or director of, any customer, competitor or supplier
of ARC, or any organization which has a contract or arrangement with ARC. Such
Stockholder has not at any time transferred any of the stock of ARC held by or
for such holder to any employee of ARC, which transfer constituted or could be
viewed as compensation for services rendered to ARC by said employee. The
execution, delivery and performance of this Agreement will not violate or result
in a default or acceleration of any obligation under any contract, agreement,
indenture or other instrument involving ARC to which such Stockholder is a
party. Notwithstanding the foregoing, the continued ownership of interests in
ARC by the Stockholders will not constitute a violation of this Section 3.3,
provided that ARC, on and after the Closing, (i) does not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent, employee,
co-venturer or otherwise, engage, participate, assist or invest in any Competing
Business (as hereinafter defined), (ii) refrains from directly or indirectly
employing, attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave employment with the Buyer or Merger Sub, and
(iii) refrains from soliciting or encouraging any customer or supplier to
terminate or otherwise modify adversely its business relationship with the Buyer
or Merger Sub. For purposes of this Agreement, the
term "Competing Business" shall mean a business conducted anywhere in the United
States, Europe or any other place in the world which is engaged in the business
of designing, developing, marketing, selling, distributing and/or consulting
with respect to software testing products.
SECTION 4. COVENANTS OF THE SELLERS.
---------- ------------------------
4.1 Making of Covenants and Agreements. Sellers hereby make their
----------------------------------
respective covenants and agreements set forth in this Section 4.
4.2 Conduct of Business. Between the date of this Agreement and the
-------------------
Second Closing Date, ARC will, and the Stockholders will cause ARC to, conduct
its business only in the ordinary course and refrain from changing or
introducing any method of management or operations except in the ordinary course
of business and consistent with prior practices.
4.3 Due Diligence; Production of Documents. ARC shall provide and
--------------------------------------
the Stockholders shall cause ARC to provide Buyer with full access to its books,
properties, management and employees so as to enable Buyer to conduct such
review of the business, assets and property of ARC as Buyer shall deem necessary
or appropriate in connection with the consummation of the transactions
contemplated by this Agreement.
4.4 Authorization from Others. Prior to the First Closing Date, ARC
-------------------------
shall obtain and the Stockholders shall use their reasonable best efforts to
cause ARC to obtain all authorizations, consents and permits of others required
to permit the consummation by it of the transactions contemplated by this
Agreement.
4.5 Notice of Default. Promptly upon the occurrence of, or promptly
-----------------
upon any Seller becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to such
Seller prior to the date hereof, of any of the representations, warranties or
covenants of any Seller contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, such Seller shall give
detailed written notice thereof to Buyer and shall use its best efforts to
prevent or promptly remedy the same.
4.6 Cooperation; Consummation of Agreement; Books and Records. Each
---------------------------------------------------------
Seller shall cooperate with all reasonable requests of Buyer and Buyer's counsel
in connection with the consummation of the transactions contemplated hereby, and
each Seller shall use its best efforts to perform and fulfill all conditions and
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement shall be fully
carried out. ARC shall maintain its books and records in accordance with good
business practices, on a basis consistent with past practices, and such entity
shall promptly make available to Buyer such books and records, any other
material or information regarding ARC as Buyer or its counsel, accountants or
other advisors may from time to time reasonably request.
4.7 Tax Returns. ARC, with the approval of Buyer and in accordance
-----------
with applicable law, shall (i) promptly prepare and file on or before the due
date or any extension thereof all federal, state, local and foreign tax returns
required to be filed by ARC with respect to taxable periods of ARC that include
any period ending on or before the Second Closing Date and (ii) pay all Taxes of
ARC attributable to periods ending on or before the Second Closing Date.
4.8 Satisfaction of Indebtedness. At or prior to the First Closing,
----------------------------
ARC shall, and the Stockholders shall cause ARC to, cause all mortgages,
security interests, pledges and other arrangements securing indebtedness or
other encumbrances upon the Subject Assets to be extinguished.
4.9 1997 Financial Statements. Each Seller shall cooperate with
-------------------------
Buyer and shall promptly provide to Buyer all necessary information and
documentation requested by Buyer in connection with the preparation of any
audited financial statements required to be prepared under applicable U.S.
securities laws.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------- ---------------------------------------
5.1 Making of Representations and Warranties. As a material
----------------------------------------
inducement to the Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby makes the representations and
warranties to the Sellers contained in this Section 5.
5.2 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 corporate power to own 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.
5.3 Authority of Buyer. Buyer has full right, authority and power to
------------------
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Buyer of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary corporate action of Buyer and no
other action on the part of Buyer is required in connection therewith. This
Agreement and each other agreement, document and instrument executed and
delivered by Buyer pursuant to this Agreement constitute, or when executed and
delivered will constitute, valid and binding obligations of Buyer enforceable in
accordance with their terms. The execution, delivery and performance by Buyer of
this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or by-laws of Buyer;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to Buyer or,
assuming no breach in the representations set forth in Sections 2.5 and 2.24
hereof, require Buyer to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) which has not been
obtained or made; and
(iii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under, or give rise to a right of
termination of any indenture, loan or credit agreement, or any other agreement,
mortgage, lease, permit, order, judgment or decree to which Buyer is a party and
which is material to the business and financial condition of Buyer and its
parent and affiliated organizations on a consolidated basis.
5.4 Litigation. There is no litigation or governmental or
----------
administrative proceeding or investigation pending or, to its knowledge,
threatened against Buyer which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
5.5 Finder's Fee. Buyer has not 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.
5.6 Buyer USA Public Information. Buyer USA has heretofore
----------------------------
furnished the Stockholders with information regarding Buyer USA, including its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, each as
filed with the Securities and Exchange Commission ("SEC"), and will provide to
the Stockholders any Current, Annual or Quarterly Report filed by Buyer USA with
the SEC at or prior to the Closing Date (as any such documents have been amended
since their original filing, the "Buyer USA SEC Documents"). As of their
respective filing dates, the Buyer USA SEC Documents did not or will not contain
any untrue statements of material fact or omit to state material facts required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective filing dates, the Buyer USA SEC Documents complied or will comply in
all material respects with the applicable requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated under such statutes.
5.7 Buyer USA Indebtedness. Buyer USA has no material indebtedness or
----------------------
other obligations not reflected on the face of the Buyer USA SEC Documents.
SECTION 6. COVENANTS OF BUYER.
---------- ------------------
6.1 Authorization from Others. Prior to the First Closing Date, Buyer
-------------------------
shall obtain all authorizations, consents and permits of others required to
permit the consummation by it of the transactions contemplated by this
Agreement.
6.2 Cooperation; Consummation of Agreement; Books and Records. Buyer
---------------------------------------------------------
shall cooperate with all reasonable requests of Sellers' counsel in connection
with the consummation of the transactions contemplated hereby, and Buyer shall
use its best efforts to perform and fulfill all conditions and obligations on
its part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be fully carried out.
6.3 Notice of Default. Promptly upon the occurrence of, or promptly
-----------------
upon the Buyer becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to the
Buyer prior to the date hereof, of any of the representations, warranties or
covenants of the Buyer contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, the Buyer shall give detailed
written notice thereof to the Sellers and shall use its best efforts to prevent
or promptly remedy the same.
SECTION 7. CONDITIONS.
---------- ----------
7.1 Conditions to the Obligations of Buyer.
--------------------------------------
7.1.1 Conditions to Obligations of Buyer at First Closing. The
---------------------------------------------------
obligation of Buyer to consummate this Agreement and the transactions
contemplated hereby to be consummated at the First Closing are subject to the
fulfillment, prior to or at the First Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of the Sellers contained in Section 2 and of the
Stockholders in Section 3 shall be true and correct in all material respects as
though made on and as of the First Closing Date; and the Sellers shall, on or
before the First Closing, have performed all of their obligations hereunder
which by the terms hereof are to be performed on or before the First Closing.
(b) No Material Change. There shall have been no
------------------
material adverse change in the financial condition, prospects, properties,
assets, liabilities, business or operations of ARC since the date hereof.
(c) Certificate from Officers. ARC shall have delivered
-------------------------
to Buyer a certificate of the General Manager of ARC and each Stockholder shall
have delivered a certificate dated as of the First Closing Date to the effect
that the statements set forth in paragraphs (a) and (b) above in this Section
7.1 are true and correct.
(d) Opinion of Counsel. At the First Closing, Buyer
------------------
shall have received from Meyndt, Ransmayr, Xxxxxxxxx & Partner, counsel for ARC
and the Stockholders, an opinion as of said date, in the form attached hereto as
Exhibit 7.1(d).
---------------
(e) No Litigation. There shall have been no
-------------
determination by Buyer, acting in good faith, that the consummation of the
transactions contemplated by this Agreement has become inadvisable or
impracticable by reason of the institution or threat by any person or any
federal, state, foreign or other governmental authority of litigation,
proceedings or other action against Buyer or any Seller.
(f) Consents. ARC shall have made, and the
--------
Stockholders shall have caused ARC to make, all filings with and notifications
of governmental authorities, regulatory agencies and other entities required to
be made by such entity in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated hereby and the
continued operation of the businesses of such entity to be acquired by Buyer
subsequent to the First Closing; and the Sellers shall have received all
authorizations, waivers, consents and permits, in form and substance reasonably
satisfactory to Buyer, from all third parties, including, without limitation,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties required to permit the continuation of the business of such
entity by Buyer and the consummation of the transactions contemplated by this
Agreement, and in connection with the transfer of the Subject Assets.
(g) Employment Agreements. Each of Ernst Ambichl,
---------------------
Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxxxxx shall have executed and delivered to Buyer
an Employment Agreement in substantially the forms of Exhibit 7.1(g).
--------------
(h) Cancellation of OEM Agreement. All parties to that
-----------------------------
certain Software OEM Agreement, dated as of November 11, 1996, among, inter
-----
alia, Buyer and ARC (as amended or modified to date, the "OEM Agreement") shall
-----
have been terminated effective October 1, 1997.
(i) Closing of Beta Transaction. All conditions to the
---------------------------
closing of the transactions contemplated by that certain Agreement and Plan of
Merger, dated as of the date hereof, among the Buyer USA, Beta and the
stockholders of Beta (the "Merger") shall have been satisfied or waived and the
Merger (as defined therein) shall have been consummated.
7.1.2 Conditions to the Obligations of Buyer at the Second Closing.
------------------------------------------------------------
The obligations of Buyer to consummate this Agreement and the transactions
contemplated hereby to be consummated at the Second Closing are subject to the
fulfillment , prior to the Second closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of the Sellers contained in Section 2 and of the
Stockholders in Section 3 shall be true and correct in all material respects as
though made on and as of the Second Closing Date; and the Sellers shall, on or
before the Second Closing, have performed all of their obligations hereunder
which by the terms hereof are to be performed on or before the Closing.
(b) No Material Change. There shall have been no
------------------
material adverse change in the financial condition, prospects, properties,
assets, liabilities, business or operations of ARC since the date hereof.
(c) Certificate from Officers. ARC shall have delivered
-------------------------
to Buyer a certificate of the President and Chief Financial Officer of ARC and
each Stockholder shall have delivered a certificate dated as of the Second
Closing Date to the effect that the statements set forth in paragraphs (a) and
(b) above in this Section 7.1.2 are true and correct.
7.2 Conditions to Obligations of the Sellers.
----------------------------------------
7.2.1 The Sellers' obligations to consummate this Agreement and
the transactions contemplated hereby is subject to the fulfillment, prior to or
at the First Closing, of the following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in Section 5 shall be true and
correct as though made on and as of the First Closing Date; Buyer shall, on or
before the Closing, have performed all of its obligations hereunder which by the
terms hereof are to be performed on or before the First Closing; and Buyer shall
have delivered to the Sellers a certificate of the Chief Executive Officer,
President or Treasurer of Buyer dated as of the First Closing Date to such
effect.
(b) No Material Change. There shall have been no material
------------------
adverse change in the financial condition, prospects, properties, assets,
liabilities, business or operations of the Buyer since the date hereof.
(c) Opinion of Counsel. At the First Closing, the
------------------
Sellers shall have received from Xxxxxxx, Procter & Xxxx LLP, counsel for Buyer,
an opinion as of said date, in the form attached hereto as Exhibit 7.2(b).
--------------
(d) No Litigation. There shall have been no
-------------
determination by the Sellers, acting in good faith, that the consummation of the
transactions contemplated by this Agreement has become inadvisable or
impracticable by reason of the institution or threat by any person or any
federal, state, foreign or other governmental authority of litigation,
proceedings or other action against Buyer or any Seller.
(e) Consents. The Buyer shall have made all filings with
--------
and notifications of governmental authorities, regulatory agencies and other
entities required to be made by such entity in connection with the execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of Beta to be acquired by
Buyer subsequent to the First Closing; and the Buyer shall have received all
authorizations, waivers, consents and permits, in form and substance
reasonably satisfactory to the Sellers, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties required to permit the continuation of the
business of ARC by Buyer and the consummation of the transactions contemplated
by this Agreement.
(f) Employment Agreements. The Buyer shall have executed
---------------------
and delivered to each of Ernst Ambichl, Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxxxxx an
Employment Agreement in substantially the form of Exhibit 7.1(g) attached
--------------
hereto.
(g) Closing of Beta Transaction. All conditions to the
---------------------------
closing of the transactions contemplated by that certain Agreement and Plan of
Merger, dated as of the date hereof, among Buyer USA, Beta and the stockholders
of Beta (the "Merger Agreement") shall have been satisfied or waived and the
transactions contemplated by the Merger Agreement shall have been consummated.
7.2.2 Conditions to the Obligations of Sellers at the Second Closing.
--------------------------------------------------------------
The obligations of the Sellers to consummate this Agreement and the transactions
contemplated hereby to be consummated at the Second Closing are subject to the
fulfillment, prior to or at the Second closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in Section 5 shall be true and
correct as though made on and as of the Second Closing Date; Buyer shall, on or
before the Second Closing, have performed all of its obligations hereunder which
by the terms hereof are to be performed on or before the Second Closing; and
Buyer shall have delivered to the Sellers a certificate of the Chief Executive
Officer, President or Treasurer of Buyer dated as of the Second Closing Date to
such effect.
(b) No Material Change. There shall have been no material
------------------
adverse change in the financial condition, prospects, properties, assets,
liabilities, business or operations of the Buyer since the date hereof.
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
---------- -------------------------------------------
8.1 Termination. At any time prior to the Closing, this Agreement
-----------
may be terminated as follows:
(i) by mutual written consent of all of the parties
to this Agreement;
(ii) by Buyer, pursuant to written notice by Buyer to
the Sellers, if any of the conditions set forth in Section 7.1 of this Agreement
have not been satisfied at or prior to the First Closing Date and Buyer is not
then in default hereunder; and
(iii) by the Sellers, pursuant to written notice by
Sellers to Buyer, if any of the conditions set forth in Section 7.2 of this
Agreement have not been satisfied at or prior to the First Closing Date and the
Sellers are not then in default hereunder.
8.2 Effect of Termination. All obligations of the parties hereunder
---------------------
shall cease upon any termination pursuant to Section 8.1; provided, however,
-------- -------
that the provisions of this Section 8, Section 10.2 and Section 10.10 hereof
shall survive any termination of this Agreement.
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
---------- --------------------------------------------
9.1 Survival of Warranties; Setoff.
------------------------------
(a) Each of the representations, warranties, agreements,
covenants and obligations herein or in any schedule, exhibit, certificate or
financial statement delivered by any party to the other 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 regardless of any
investigation and shall not merge in the performance of any obligation by either
party hereto. Subject to Section 9.1(c) below, each party shall be liable to any
other party for all damages, liabilities, losses, taxes, fines, penalties,
expenses or costs (including reasonable attorneys fees and expenses) of any kind
or nature whatsoever (collectively "Losses") which may be sustained, suffered or
incurred by or against such party as a result of any breach of this Agreement or
any document or instrument related hereto or in any Schedule, exhibit or
certificate delivered pursuant hereto.
(b) Subject to Section 9.1(c) below, any breach by the Sellers
of a representation, covenant or obligation contained in this Agreement, in any
agreement or document related hereto (other than any Employment Agreement) or in
any Schedule, exhibit or certificate delivered pursuant hereto shall entitle
Buyer first to set off from any future payment that Buyer is to make pursuant to
the Note, amounts equal to the Losses sustained, suffered or incurred by or made
against the Buyer as a result of such breach and then to collect the balance, if
any, directly from the Sellers.
(c) Notwithstanding the foregoing, the Sellers shall not have
any liability to Buyer for any breach of or noncompliance with this Agreement
(and with any other document executed by any of the Sellers in connection
herewith), including by way of set off from any future payments that Buyer is
required to make pursuant to the Note, unless (a) the aggregate amount of all
Losses shall exceed $25,000, and thereafter, Sellers shall only be liable for
Losses in excess of said $25,000; and (b) such claim, except claims with respect
to Section 2.8 or Section 2.13 which may be asserted until the expiration of the
applicable statue of limitations, is asserted against the Sellers (whether or
not such Losses have actually been incurred) on or before the third anniversary
of the Closing Date. Buyer agrees to reasonably cooperate to minimize Losses.
(d) Notwithstanding the foregoing, Buyer shall not have any
liability to any Seller for breach of or noncompliance with this Agreement or
with any other document executed by Buyer in connection herewith except the Note
or the Employment Agreements, unless and until (a) the aggregate amount of all
Losses shall exceed $25,000, in which case, Buyer shall thereafter only be
liable for Losses in excess of said $25,000; and (b) such claim is asserted
against Buyer (whether or not such Losses have been actually incurred) on or
before the third anniversary of the Closing Date. The Sellers agree to
reasonably cooperate to minimize Losses.
SECTION 10. MISCELLANEOUS.
---------- -------------
10.1 Bulk Sales Law. Buyer waives compliance by the Sellers with the
--------------
provisions of any applicable bulk sales, fraudulent conveyance or other law for
the protection of creditors in connection with the transfer of the Subject
Assets under this Agreement.
10.2 Fees and Expenses.
-----------------
(a) Except as set forth herein, 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 Sellers or
the Stockholders relating in any way to the purchase and sale of the Subject
Assets hereunder and the transactions contemplated hereby, including without
limitation, legal, accounting or other professional expenses of the Sellers or
the Stockholders, shall be charged to or paid by Buyer or included in any of the
Assumed Liabilities.
(b) ARC will pay all costs incurred, whether at or subsequent to
the Closing, in connection with the transfer of the Subject Assets to Buyer as
contemplated by this Agreement, including without limitation, all sales, use,
excise, real property and other transfer taxes and charges applicable to such
transfer; all recording charges and fees applicable to the recordation of deeds
and mortgages and other instruments of transfer; and all costs of obtaining or
transferring permits, registrations, applications and other tangible and
intangible properties. Notwithstanding the foregoing, the Sellers shall not be
liable for any costs of obtaining or transferring permits, registrations,
applications and other tangible or intangible properties, that would not have
been necessary for the conduct of the business of ARC in the jurisdictions and
in the manner in which ARC did business on the date hereof.
10. Governing Law. This Agreement shall be construed under and
-------------
governed by the internal laws of the Commonwealth of Massachusetts, U.S.A.
without regard to its conflict of laws provisions. Except with respect to
matters as to which injunctive relief is being sought, any dispute arising out
of this Agreement or related to its violation, termination or nullity shall be
finally settled under the Rules of Arbitration and Conciliation of the
International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna
(Vienna Rules) by three arbitrators appointed in accordance with such rules. The
substantive law of the Commonwealth of Massachusetts shall be applicable,
whereby the parties hereto waive the application of the Austrian Conflict of Law
Rules (IPRG) and the application of the Convention
of International Sales of Goods (CISG). The language to be used in the arbitral
proceeding shall be English. The International Arbitral Centre in Vienna shall
have exclusive jurisdiction, no other forum shall have jurisdiction either for a
request of arbitration or any other means of conducting the arbitral
proceedings. The venue and seat of arbitration shall be in Linz, Austria. Each
of the parties hereto further agrees that service of any process, summons,
notice or document by U.S. registered mail to its address set forth herein shall
be effective service of process for any action, suit or proceeding brought
against it in any such court.
10.4 Notices. Any notice, request, demand or other communication
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States Post Office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: Segue Software, Inc.
--------
0000 Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, XX 00000
Facsimile: 000-000-0000
With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
TO ARC OR THE
STOCKHOLDERS: ARC - Dr. Ambichl & Xx. Xxxxxx
-------------
Communication GmbH
Wiener Strasse 131
4020 Linz
With a copy to: Perrie, Buker, Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
Facsimile: 000-000-0000
and: Meyndt, Ransmayr, Xxxxxxxxx &
Partner Rechtsanwalte
A-4020 Linz
Landstrasse 42/Rudigierstrasse
Attn: Xxxxxx Xxxxxxxxx
Facsimile: 0732/796906
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
10.5 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
10.6 Assignability; Binding Effect. Prior to the Second Closing, this
-----------------------------
Agreement shall only be assignable by Buyer to a corporation, partnership or
limited liability company controlling, controlled by or under common control
with Buyer upon written notice to the Sellers. After the Second Closing,
Buyer's rights and obligations hereunder shall be freely assignable. This
Agreement may not be assigned by the Sellers without the prior written consent
of Buyer. This Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
10.7 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
10.8 Execution in Counterparts. For the convenience of the parties
-------------------------
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
10.9 Amendments. This Agreement may not be amended or modified, nor
----------
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
10.10 Publicity and Disclosures. No press releases or public
-------------------------
disclosure either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of Buyer, ARC and the Stockholders.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER: SEGUE SOFTWARE, INC.
-----
By: /s/ J. Xxxxxxx Xxxxxxxxxxxx
-----------------------------------------
Name:
Title:
SELLERS: ARC - DR. AMBICHL & XX. XXXXXX
-------
COMMUNICATION GmbH
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------------
Name:
Title:
/s/ Ernst Ambichl
-----------------------------------------
Ernst Ambichl
/s/ Xxxxxxx Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxxx
/s/ Bernd Griefeneder
-----------------------------------------
Xxxxx Xxxxxxxxxxx
