This is the proposed, and then withdrawn, Asset Purchase Agreement [PDF] SCO and York struggled to come up with, as text. When SCO withdrew its emergency motion to sell its Unix assets, it didn't promise never to come up with such a plan again. It was withdrawn without prejudice. When I put this APA together with the latest SCO motions to extend the exclusive time to file a reorganization plan and the one to renew the leases, I can't help but think that SCO means to bide its time and then come around the mountain again for another try.
There are some hints in this document, I think. Let me show you all the strange bits I notice. You may notice others.
Our thanks go to Steve Martin for tackling the text on this 57-page PDF. It wasn't until I read it as text that I noticed some of the items I am going to highlight, so that alone shows me the value of doing everything that we can as text. So thank you, Steve.
You will note that there are a number of typos in the original PDF, more than usual. For example, in the opening WHEREFORE section, at the end it uses the word 'premises' where it should be 'promises'. Probably it's reflective of the way the agreement was pulled together -- at the hearing about it on November 6, one lawyer for SCO was still working on it as they spoke, and they said they'd been working on it day and night for days. So it was a rush job, trying to get it ready for the hearing, and with a lot of sleepless nights where teams of lawyers worked through the night, and all for nothing in the end. Or is it?
I notice something that might not strike you, unless you are a paralegal too and have typed up contracts like this. The buyer is identified only like this:
[________], a Delaware [________] ("Purchaser")
So the document doesn't reveal who the proposed buyer was or whether it's a regular corporation or an LLC or whatever, but yet 'Delaware' is typed in as the state in which it was registered. I find that very odd. If you were trying to hide the entity buying the assets, and they were, you'd leave it *all* blank. So, from my experience, I suspect that they intended to set up an entity in Delaware, but never got that far before they withdrew the motion, and they hadn't decided yet what form it would be registered as. Either that or they simply goofed and included it by mistake, being sleep-deprived.
Not that they intended us to know who it was, I don't think. The definition of contract is unusual too -- this agreement defines it as any written or oral agreement. I can't tell you how strange that is. Usually lawyers want to avoid oral agreements and deliberately exclude them. What might it mean?
I think it means there is one, some oral agreement between SCO and someone, maybe with the money behind this, whoever that is, or whoever was trying to buy all the assets, if there is a distinction. It brought to my mind the breach of contract litigation Novell brought against Canopy, the Canopy before Ralph Yarro was forced out, that we learned about in 2004, where Canopy claimed there was an oral agreement that Canopy would sue Microsoft on Novell's behalf, and that they didn't put that in writing because Ray Noorda didn't want Microsoft to know about it. Novell denied it, and Canopy lost on the money part of the case, but the court did find that there had been an agreement. Is it impossible to believe that Yarro has done something like that again, only this time he's smart enough to require that oral agreements be recognized? You will note in Article IV there is a confidentiality agreement referenced, and it "shall survive any termination" of the agreement. So if there is any oral agreement, no one is supposed to tell, I'm guessing.
And here's the final odd note: the buyer was to take over SCO's leases, according to "Article 4.2. Deliveries by Sellers". This raises the obvious question: where was SCO going to be? Where would Darl McBride be when he went to his office to work on Me Inc.? They did tell us that Me Inc. would continue. You may recall that York's lawyer represented to the court that its client just liked to buy up old software. But why, then, would it need the leases? You don't need a particular building to house software or to license it or even to write it. Not even to sue over it. So what exactly was the real plan of "reorganization"?
And finally, some of the assets that were to be sold, the agreement says in "Section 2.5. Certain Subsidiaries", are owned by foreign subsidiaries. Which assets? The foreign subsidiaries are not in bankruptcy, so how does that work? We can only guess, because the schedules referenced throughout this APA are not attached.
The definitions section is fascinating too, particularly the definition of "Affiliate":
"Affiliate" means, with respect to any specified Person at any time, (a) each Person,
directly or indirectly controlling, controlled by, or under direct or indirect common control with, such
specified Person at such time, (b) each Person who is at such time an officer or director of, or direct
or indirect beneficial holder of at least 20% of any class of the equity interests of, such specified
person, (c) each Person that is managed by a common group of executive officers and/or directors as
such specified Person, (d) the members of the immediate family (i) of each officer, director or holder
described in clause (b) and (ii) if such specified Person is an individual, of such specified Person, and
(e) each Person of which such specified Person or an Affiliate (as defined in clauses (a) through (d)) thereof will, directly or indirectly, beneficially own at least 20% of any class of equity interests at such time.
What is this talking about? Family members? Why are they included? It's the kind of wording that is clearly carving in someone very specific. Who? There is a lot SCO has not yet told us.
Filing Copy - In Substantially Final Form - 11/16/07
ASSET PURCHASE AGREEMENT
Dated as of November _____, 2007
by and between
The SCO Group, Inc.
and certain of its Affiliates
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), dated as of November ____,
2007, by and among The SCO Group, Inc., a Delaware corporation ("SCO Group"), SCO
Operations, Inc. ("SCO Operations") and certain Affiliates of SCO Group identified on the signature
pages hereto (together with SCO Group and SCO Operations, each a "Seller" and collectively,
"Sellers"), and [________], a Delaware [________] ("Purchaser"). Each of Sellers and
Purchaser is a "Party" and collectively they are the "Parties" to this Agreement.
WHEREAS, Sellers own or hold a transferable interest in the Purchased Assets;
WHEREAS, on or about September 14, 2007 (the "Petition Date"), SCO Group and SCO
Operations filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware, jointly administered as Case Nos. 07-11337
and 07-11338 (KG) (the "Chapter 11 Cases"); and
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Sellers
desire to sell, transfer and assign to Purchaser, and Purchaser desires to purchase, acquire and assume
from Sellers, pursuant to Sections 363 and 365 of the Bankruptcy Code, all of the Purchased Assets
and Assumed Liabilities, all as more specifically provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, and intending to be legally bound, the Parties hereby agree as
1.1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the meanings
specified in this Section 1.1:
"Action" means any claim, action, cause of action or suit (whether in contract or tort
or otherwise), litigation (whether at law or in equity, whether civil or criminal), controversy,
assessment, arbitration, mediation or other dispute resolution proceeding, investigation, hearing,
charge, complaint, demand, notice or proceeding to, from, by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person at any time, (a) each Person,
directly or indirectly controlling, controlled by, or under direct or indirect common control with, such
specified Person at such time, (b) each Person who is at such time an officer or director of, or direct
or indirect beneficial holder of at least 20% of any class of the equity interests of, such specified
person, (c) each Person that is managed by a common group of executive officers and/or directors as
such specified Person, (d) the members of the immediate family (i) of each officer, director or holder
described in clause (b) and (ii) if such specified Person is an individual, of such specified Person, and
(e) each Person of which such specified Person or an Affiliate (as defined in clauses (a) through (d))
thereof will, directly or indirectly, beneficially own at least 20% of any class of equity interests at
"Alternative Transaction" means any transaction occurring after the Bidding
Procedures Order is entered involving either (i) except as contemplated by this Agreement, the
consummation of the sale of all or any material or significant portion of the Purchased Assets or the
Business by any Seller to a purchaser other than Purchaser and/or one or more of its Affiliates at any
time during the pendency of the Chapter 11 Cases or as a part of, or pursuant to, any plan of
reorganization confirmed in the Chapter 11 Cases or (ii) except to the extent the Closing has
occurred, the filing of a plan of reorganization by any Seller or the confirmation of a plan of
reorganization with respect to any Seller that does not include a sale of all, or any portions of which
in the aggregate involve substantially all, of the Purchased Assets and the Business by any Seller to
Purchaser and/or one or more Affiliates of Purchaser. For the avoidance of doubt, the sale, transfer,
assignment or license of Company Technology included in the Purchased Assets to any Person (other
than Purchaser) or the sale, transfer, assignment or license of any Me Inc. Products or related
Intellectual Property to any Person (other than Purchaser) in violation of the Cross License
Agreement shall constitute an "Alternative Transaction".
"Auction" means the process established by the Bidding Procedures Order providing
for the sale and assignment of the Purchased Assets either to Purchaser (assuming Purchaser is the
"Winning Bidder" as defined therein) or pursuant to an Alternative Transaction, and approving and
authorizing Sellers to consummate the transactions provided for in the Sale Order.
"Auction Date" means the date established by the Bidding Procedures Order to
consummate the Auction, as may be changed, extended or continued by order of the Bankruptcy
"Bankruptcy Code" means Title 11 of the United States Code.
"Bankruptcy Court" means the United States Bankruptcy Court for the District of
Delaware, or such other court having jurisdiction over the Chapter 11 Cases originally administered
in the United States Bankruptcy Court for the District of Delaware.
"Bid Submission Date" means [________], or such other date as may be
determined in accordance with the Bid Procedures Order.
"Business" means all assets and business of Sellers, the Subsidiaries and the Sellers'
Affiliates, including without limitation the design, manufacture, marketing, distribution, sale and
related operations and functions of Operating System Products, the Layered Operating System
Products and Hipcheck, but excluding the Me Inc. Products and the other Excluded Assets.
"Business Day" means any day of the year on which national banking institutions in
New York City or Wilmington, Delaware are open to the public for conducting business and are not
required or authorized to close.
"Channel Sales" means sales of Products on sale or return terms or to a distributor,
partner or other reseller.
"Claims" means any and all claims as defined in Section 101(5) of the Bankruptcy
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Technology" means any and all Technology and Intellectual Property
owned by, or licensed to, any Seller which is used in or related to the Business as is currently
conducted or contemplated to be conducted.
"Competitive Bidding Period" means the competitive bidding period for the
acquisition of the Purchased Assets, which period shall commence on the date on which the
Bankruptcy Court enters the Bid Procedures Order and end on the Auction Date at the conclusion of
"Computer Softare" means all computer softare including: source code; object
code; operating systems, applications programs, firmware; files, records and data; product
specifications; schematics; logic diagrams; flow charts; algorithms; databases; routines; sub-routines;
program and system logic; program architecture; program structure, sequence and organization;
listings; screen displays; programmers' notes; languages; compilers; testing routines and procedures;
test results; documentation; operating instructions; technical and user manuals; training materials; all
media on which any of the foregoing is recorded; all technology and tools used to design, develop,
test, support, maintain and diagnose errors in the computer software; all updates, upgrades,
modifications, enhancements, improvements and derivatives of the foregoing; and all other
information and technical data related to the ownership, use, design, development, testing,
enhancement, support and/or maintenance of the computer softare.
"Contract" means any written or oral contract, indenture, note, bond, lease, license or
other legally binding agreement or arrangement.
"Contractual Obligation" means, with respect to any Person, any Contract,
agreement, deed, mortgage, lease, license, commitment, promise, undertaking, arrangement or
understanding, whether written or oral and whether express or implied, or other document or
instrument (including any document or instrument evidencing or otherwise relating to any Debt) to
which or by which such Person is a part or otherwise subject or bound or to which or by which any
property, business, operation or right of such Person is subject or bound.
"Cross License Agreement" means the revenue sharing agreement, technology cross
license, and mutual distribution agreement and/or OEM agreement between Me Inc. and Purchaser in
substantially the form attached hereto as Exhibit B.
"Current Assets" means, as of any date of determination, the amount of Sellers'
Accounts Receivable and Inventory as of such date, determined in accordance with GAAP.
"Debt" for any Person, means all means obligations (a) for borrowed money, (b)
evidenced by notes, bonds, debentures or similar instruments, (c) for which interest charges are
customarily paid, (d) under conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (e) issued or assumed as the deferred purchase price of property or
services (other than trade accounts payable), (f) earnouts arising in connection with acquisitions, (g)
under capital leases, (h) in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements, (i) as an account part in respect
of letters of credit and bankers' acceptances, (j) with respect to any indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent or otherwise to be
secured by) any Encumbrances on property owned or acquired by such Person, (k) in the nature of
guarantees of any indebtedness of others, and (l) all accrued interest on any of the foregoing.
"Employees" means all individuals, whether or not actively at work as of the date
hereof, who are employed by any Seller or the Subsidiaries in connection with the Business, together
with individuals who are hired in respect of the Business after the date hereof and prior to the
"Encumbrance" means any defect or imperfection in title, encumbrance, lien, interest,
claim, charge, pledge, mortgage, deed of trust, security interest, lease, sublease, license, option, right
of first refusal, easement, right-of-way, servitude, covenant, condition, proxy, voting trust or
agreement or transfer restriction under any shareholder or similar agreement. For the avoidance of
doubt, "Encumbrances" shall include any and all rights, claims and interests of any nature
whatsoever with respect to the Company Technology that may have been or may be asserted by any
Person (other than Sellers) under the agreements set forth on Schedule 1.1(a).
"Environmental Law" means any Law that relates to, or otherwise imposes liability
or standards of conduct concerning, pollution, or protection of the environment, or protection of
human or occupational health from environmental hazards, including those concerning discharges,
releases or threatened releases of, petroleum or hazardous substances.
"Equipment" means all machinery, equipment, furniture, trade fixtures, furnishings,
vehicles, leasehold improvements, Hardware and other tangible personal property used in connection
with the Business as presently conducted, including, without limitation, all artwork, desks, chairs,
tables, Hardware, copiers, telephone lines and numbers, facsimile machines and other
telecommunication equipment, cubicles and miscellaneous office furnishings and supplies.
"Equity Interests" means (a) any capital stock, share, partnership or membership
interest, unit of participation or other similar interest (however designated) in any Person and (b) any
option, warrant, purchase right, conversion right, exchange rights or other Contractual Obligation
which would entitle any Person to acquire any such interest in such Person or otherwise entitle any
Person to share in the equity, profit, earnings, losses of gains of such Person (including stock
appreciation, phantom stock, profit participation or other similar rights).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Matter" means anyone or more of the following: (i) the effect of any
change in the United States' economy generally or in the securities or financial markets in the United
States in general in each case to the extent such conditions do not have a disproportionate impact on
the Sellers, taken as a whole, relative to other companies operating in the same industries and
geographies in which the Sellers operate; (ii) the effect of any change arising in connection with
earthquakes, hostilities, acts of war, or military actions occurring after the date hereof or any
escalation or material worsening of any such hostilities, acts of war, or military actions existing or
underway as of the date hereof to the extent such conditions do not have a disproportionate impact on
the Sellers, taken as a whole, relative to other companies operating in the same industries and
geographies in which the Sellers operate, or (iii) any changes associated with the bankruptcy of
Sellers pursuant to the Chapter 11 Cases.
"Facilities" means any buildings, plants, improvements or structures located on the
"GAAP" means generally accepted accounting principles in the United States as of
the date hereof as applied in a manner consistent with the Sellers' historical accounting policies.
"Government Order" means any order, writ, judgment, injunction, decree, stipulation,
ruling, determination or award entered by or with any Governmental Authority.
"Governmental Authority" means any United States federal, state or local or any
foreign government, or political subdivision thereof, or any multinational organization or authority or
any authority, agency or commission entitled to exercise any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department,
bureau, or division thereof) or any arbitrator or arbitral body.
"Hardware" means any and all computer and computer-related hardware, including,
without limitation, computers, file servers, facsimile servers, scanners, color printers, laser printers
"Hazardous Substances" means any wastes, substances, products, pollutants or
materials, whether solid, liquid or gaseous, that (i) are or contain asbestos, polychlorinated biphenyls,
radioactive materials, oil, petroleum or any fraction thereof, (ii) require removal, remediation or
reporting under any Environmental Law, or are defined, listed or identified as a "contaminant",
"pollutant", "toxic substance", "toxic material", "hazardous waste" or "hazardous substance" or
words of similar meaning and regulatory effect thereunder or (iii) are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and are regulated
as such by any Governmental Authority under any Environmental Law.
"IBM Litigation" means that certain litigation identified as The SCO Group, Inc. vs.
International Business Machines Corporation, currently pending as Civil Case No. 2:03CV0294DAK
in the United States District Court, District of Utah, Central Division, and other Actions based on the
same or substantially similar set of facts, causes of actions or allegations (but excluding the Linux
Litigation or other Actions related to Purchased Assets).
"Intellectual Property" means the entire right, title and interest in and to all
proprietary rights of every kind and nature, throughout the world, including all rights and interests
pertaining to or deriving from: (a) registered and unregistered patents and copyrights, copyrightable
works, mask work rights, technology, know-how, methods, processes, trade secrets, algorithms,
inventions, works of authorship, proprietary data, databases, formulae, research and development
information and Computer Softare; (b) trademarks, trade names, service marks, service names,
brands, trade dress and logos, and the goodwill and activities associated therewith, together with all
translations, adaptations, derivations and combinations thereof; (c) domain name rights, rights of
privacy and publicity, moral rights, and proprietary rights of any kind or nature, however
denominated, throughout the world in all media now known or hereafter created; (d) trade secrets,
know-how and confidential information; (e) any and all registrations, applications, recordings,
licenses, common-law rights and Contractual Obligations relating to any of the foregoing; and (f) all
Actions and rights to sue at law or in equity for past or future infringement or other impairment of
any of the foregoing, including the right to receive all proceeds and damages therefrom, and all rights
to obtain renewals, reissues, reexaminations, continuations, continuations-in-part, divisions or other
extensions of legal protections pertaining thereto.
"Inventory" means all finished goods, work in process, raw materials, goods in
transit, goods at customer sites and other inventory or goods held for sale of a Person in all forms,
wherever located, now or hereafter existing.
"Law" means any federal, state, local or foreign law, common law, statute, code,
ordinance, rule or regulation.
"Legal Requirement" means all requirements under Law and as imposed by all
Orders and Contractual Obligations.
"Liability" means any Debt, liability or obligation (whether direct or indirect, known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due) and including all costs and expenses relating thereto.
"Licensed Intellectual Property" means all Company Technology that is licensed to
any Seller from another Person.
"Linux Litigation" means the pending legal proceedings pending against Autozone
and Red Hat, and any other legal proceedings to enforce the Intellectual Property related to the
Business or the Purchased Assets against infringement, and other Actions based on the same or
substantially similar set of facts, causes of actions or allegations or against Linux users (but
excluding the IBM Litigation, the Novell Litigation or other Actions retained by Sellers under
"Losses" means collectively, all damages, claims, liabilities, fines, penalties, levies,
fees, costs or expenses (including reasonable expenses and disbursements of accountants and legal
counsel), but not including any punitive, special, indirect, incidental or consequential damages.
"Material Adverse Effect" means any events, circumstances, development, change or
effect that, individually or in the aggregate with all other events, circumstances, developments,
changes and effects, has or could reasonably be expected to have: (i) a material adverse effect on the
Business, Purchased Assets, properties, prospects, results of operations or condition (financial or
otherwise) of Sellers (taken as a whole); or (ii) a material adverse effect on the ability of Sellers to
consummate the transactions contemplated by this Agreement, in each case (clause (i) or (ii) above)
other than an effect resulting from an Excluded Matter.
"Me Inc. Products" means the source and object code for the (i) Me Inc. Platform, (ii)
the Me Inc. Mobile Server, (iii) the Me Inc. Client Framework, (iv) Me Inc. Shout, (v) Me Inc. MI4
time management, calendaring, and task management solution, (vi) Shout Hosted Platform, (vii)
Shout Postcard, and (viii) Vote/Shoutback, (ix) Grassroots, (x) Order Entry, (xi) SCO Mobile Server,
(xii) SCO Mobile Client Framework, (xiii) Edgeclick and (xiv) Edgeclick SDK, and all related
Technology and Intellectual Property of Sellers, as of the date hereof, other than pursuant to the
Business, in each case, solely to the extent licensed to Purchaser under the Cross-License Agreement.
"Novell Exception" means (i) prior to the entry of the final Sale Order, with respect
to the Business, the Company Technology and related Purchased Assets, any and all existing or
potential ownership rights or interests, licenses, royalties or claims based on infringement,
misappropriation or impermissible use, and any and all Encumbrances now or at any time owned or
held by Novell, Inc., or that have been asserted or that could be asserted by Novell Inc., or its
successors and assigns at any time and from time to time, including without limitation, all Actions,
pleadings, declarations, admissions, judgments, orders or decrees made, arising or asserted in, or that
could arise and be asserted in, or that have been or may in the future be entered in, the Novell
Litigation or any appeals therefrom, or successor, replacement or similar proceedings involving the
same or substantially similar claims, arising at any time in the Novell Litigation, the Bankruptcy
Case or in any court or dispute resolution context, and (ii) upon the entry of the final Sale Order, such
Novell Exception as qualified, limited or affected by the Sale Order.
"Novell Litigation" means that certain litigation identified as The SCO Group, Inc.,
vs. Novell, Inc., currently pending as Civil Case No. 2:04CV00139 in the United States District
Court, District of Utah, Central Division, and other Actions based on the same or substantially
similar set of facts, causes of actions or allegations (but excluding the Linux Litigation or other
Actions related to Purchased Assets).
"OEM License Sales" means any sales to equipment manufacturers who bundle,
attach or include the Operating System Products in their respective product offerings.
"Order" means any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award of a Governmental Authority.
"Ordinary Course of Business" means the ordinary and usual course of normal day-to-day operations of
the Business since January 1, 2006.
"Organizational Documents" means any certificate or articles of incorporation or
formation, memoranda of association, bylaws or other charter or other applicable organizational or
governing documents of any Person.
"Permits" means any approvals, authorizations, consents, licenses, permits or
certificates of a Governmental Authority.
"Permitted Encumbrances" means (i) any Encumbrance pursuant to the Novell
Exception and (ii) any other Encumbrances which will be discharged on or before the Closing Date
in connection with the Sale Order or any other actions of the Bankruptcy Court.
"Person" means any individual, corporation, limited liability company, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.
"Products" means any and all products developed, manufactured, marketed or sold in
connection with the Business.
"Qualifying Accounts Receivable" means all bona fide accounts, accounts receivable,
notes receivable, chattel paper, documents, and all other receivables of any type or nature of the
company including, but not limited to, all accounts receivable arising from bona fide transactions for
the sale of licenses or maintenance or services, entered in good faith, involving existing Products
entered into in the Ordinary Course of Business that meet the following requirements: (a) the account
is not more than ninety (90) days overdue; (b) the account is not from a payor that has any account
with Sellers that is more than ninety (90) days past due or has been forgiven or written off within the
preceding twelve (12) months; (c) in the event that the transaction giving rise to the account involves
a distributor, partner or other reseller, there is documentary evidence of an underlying transaction
with an end user that otherwise meets the definition of Qualified Account Receivable; (d) the terms
of payment on a domestic account are sixty (60) days or less from the date of the transaction and the
terms of payment on an international account are ninety (90) days or less from the date of the
transaction; (e) the account is not subject to any right of setoff, right of return or counterclaim and is
unencumbered, provided, however, that the account shall be a Qualified Accounts Receivable to the
extent of the amount of the account less the amount of the setoff, right of return or counterclaim; (f)
the account is freely assignable to Purchaser; and (g) the account is not with any Affiliate of any
"Registered Intellectual Property" means all Intellectual Property owned or controlled
by any Seller that has been registered, or for which an application for registration has been filed, with
the United States Patent and Trademark Office, the United States Copyright Office or any other
"Release" means any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching, or migration at, into or onto the environment, including
movement or migration through or in the environment, whether sudden or non-sudden and whether
accidental or non-accidental, or any release, emission or discharge as those terms are defined in any
applicable Environmental Law.
"Sellers' Knowledge" means the actual knowledge of those officers and directors of
Sellers identified on Schedule 1.1(b), assuming reasonable inquiry by such individuals in the
Ordinary Course of Business.
"Subsidiary" means any Person of which a majority of the outstanding voting
securities or other voting equity interests are owned, directly or indirectly, by SCO Group.
"Tax Authority" means any federal, state, local or foreign government, or any
agency, instrumentality or employee thereof, charged with the administration of any Law relating to
"Tax Return" means all returns, declarations, reports, estimates, information returns
and statements required to be filed in respect of any Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges or other
assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes; and (ii) all interest, penalties, fines, additions to tax or additional amounts
imposed by any Tax Authority in connection with any item described in clause (i).
"Technology" means all inventions, works of authorship, discoveries, developments,
innovations, know-how, ideas, concepts, research and development, information, formulae,
compositions, methods, processes, techniques, data, designs, models, drawings, schematics,
specifications, blueprints, customer and supplier lists, pricing and cost information, business and
marketing plans and proposals, documentation and manuals, Computer Software, Hardware,
integrated circuits and integrated circuit masks, electronic, electrical and mechanical equipment and
all other forms of technology, including improvements, modifications, works in progress, derivatives
or changes, whether tangible or intangible, embodied in any form, whether or not protectible or
protected by patent, copyright, mask, work right, trade secret Law or otherwise, and all notes,
notebooks, reports, summaries, memoranda and other documentation and materials recording any of
"WARN" or "WARN Act" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any similar state Law, and the rules and regulations
1.2. Terms Defined Elsewhere in this Agreement. For purposes of this Agreement, the
following terms have meanings set forth in the sections indicated:
|Accounting Firm||3.4(a) |
|Actual Transition Costs||8.11 |
|Bidding Procedures Order||7.1|
|Chapter 11 Cases||Recitals|
|Confidential Information||8.7 |
|Contractual Discount Customer||8.2(b )(ix) |
|Cure Amount||2.3(b) |
|Disclosed Contract|| 5.19(b) |
|Employee Plans||5.17(a) |
|Escrow Agent||3.2 |
|Escrowed Funds||3.2 |
|Estimated Transition Costs||8.11 |
|Excluded Assets||2.2 |
|Excluded Liabilities||2.4 |
|Fees and Expenses||4.6(d) |
|Financial Summary||5.12 |
|Indemnified Party||12.4 |
|Indemnifying Party||12.4 |
|Intellectual Property Licenses||5.14(f)|
|Lease Assignments ||4.2(c)|
|Litigation Credit Facility ||3.1(b)|
|Monthly Financials ||5.6(a)(iii)|
|Most Recent Balance Sheet ||5.6(a)(i)|
|Most Recent Balance Sheet Date ||5.6(a)(i)|
|Petition Date ||Recitals|
|Prepaid and Accrued Expenses ||3.5|
|Purchased Assets ||2.1|
|Purchase Price ||3.1|
|Purchaser Material Adverse Effect ||6.4|
|Purchaser Party ||12.2(a)|
|Purchaser Plans ||9.2(b)|
|Real Property Leases ||5.12(a)|
|Requested Party ||8.8(b)|
|Required Consents ||5.3(a)|
|Required Discount ||8.2(b)(ix)|
|Revised Statements ||11.2|
|Sale Motion ||7.1|
|Sale Order ||7.1|
|Seller Party ||12.3(a)|
|Seller Documents ||5.2|
|Subcontracted Services ||8.11|
|Termination Date ||4.4(a)|
|Third Party Claims ||12.|
|Transferred Employees ||9.1(a)|
|Transition Agreements ||8.11|
|Transition Period ||8.11|
|Transfer Taxes ||11.1|
1.3. Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of this Agreement, the
following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time before which, within
which or following which any act is to be done or step taken pursuant to this Agreement, the date that
is the reference date in calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S. dollars.
Exhibits/Schedules. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any
matter or item disclosed on one schedule shall be deemed to have been disclosed on each other
schedule only where such matter or item's relevance is readily apparent on the face of such item.
Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be
defined as set forth in this Agreement.
Gender and Number. Any reference in this Agreement to gender shall include all
genders, and words imparting the singular number only shall include the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this Agreement into
Articles, Sections and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in constring or interpreting this Agreement. All
references in this Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof" and "hereunder" refer to
this Agreement as a whole and not merely to a subdivision in which such words appear unless the
context otherwise requires.
Including. The words such as "includes" and "including" shall mean "including
(b) The parties hereto have participated jointly in the negotiation and drafting of
this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the Parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1. Purchased Assets. On the terms and subject to the conditions set forth in this
Agreement, at the Closing, Purchaser shall purchase, acquire and accept from Sellers, and Sellers
shall sell, transfer, assign, convey and deliver to Purchaser all of Sellers' right, title and interest in, to
and under the Purchased Assets, free and clear of any Encumbrances. "Purchased Assets" shall mean
all tangible and intangible assets, properties, interests and rights of Sellers as of the Closing, other
than the Excluded Assets, including the following:
(a) All of Sellers' tangible personal property, supplies, computers, printers,
Equipment, furniture, fixtures, goods and other similar Assets, including, but not limited to, those
identified in the fixed asset depreciation schedule to be created and attached hereto by the Seller prior
to the Closing as Schedule 2.1(a), except for furniture and personal property used solely in
connection with the Me Inc. Products to be identified as used therefor on Schedule 2.1(a);
(b) All of Sellers' rights and benefits under Contracts assumed and assigned to
Purchaser pursuant to the Sale Order, which Sellers shall identify and Purchaser shall designate in
writing and attach hereto prior to Closing as Schedule 2.1(b) as Contracts to be assumed by
Purchaser ("Assumed Contracts");
(c) All right, title and interest of Sellers in and to Company Technology;
(d) All rights of Sellers in and to general intangibles;
(e) All rights of Seller in and to (i) the customer and client lists, vendor lists,
catalogues, data relating to vendors, promotion lists and marketing data and other compilations of
names and requirements; (ii) telephone numbers, internet addresses and web sites; and (iii) other
material information related to the Business;
(f) All Inventory of Sellers, including, but not limited to, the Inventory set forth
on Schedule 2(f) to be created and attached hereto by Sellers prior to Closing;
(g) All accounts, accounts receivable, notes receivable, chattel paper, documents,
and all other receivables of any type or nature of Sellers;
(h) The Linux Litigation;
(i) To the extent provided in Section 2.5, the Equity Interests owned by SCO
Group or any of the Subsidiaries in and to SCO Operations and the Subsidiaries involved in the
Business or any other investments or ventures identified in Schedule 2.1(i);
(j) All goodwill associated with the Sellers' and their business and the Purchased
(k) All rights in and to any governmental and other Permits, to the extent
assignable, used in or relating to the Business or the Purchased Assets;
(1) An irrevocable, assignable, twenty percent (20%) interest (the "Percentage
Interest") in any and all proceeds of any judgment, settlement or assignment (by operation of law or
otherwise) for equity, compromise or other consideration to Sellers and their Affiliates and/or their
successors or assigns (each, "Proceeds"), if any, when and as collected by Sellers and their Affiliates
(and/or such successors and assigns) from, in connection with, or in respect of, any Action (including
but not limited to the Novell Litigation and the IBM Litigation), regardless of whether or not such
Proceeds result from Actions funded by the Litigation Credit Facility, it being understood that there
is no assurance that any Proceeds will result from the Novell Litigation, the IBM Litigation or any
other Action. The total payments to Purchaser under this Section 2.1(1) shall not exceed One
Hundred Million Dollars ($100,000,000) (the "Cap"). The 20% Percentage Interest in Proceeds, up
to a maximum of One Hundred Million Dollars ($100,000,000) as described above, assumes, and is
conditioned upon, Purchaser electing to establish the Commitment Amount as defined in the
Litigation Credit Facility at Ten Million Dollars ($10,000,000). If Purchaser elects to establish the
Commitment Amount at Five Million Dollars ($5,000,000) instead of Ten Milion Dollars
($10,000,000), as is contemplated in the Litigation Credit Facility, then, in such event, Purchaser's
Percentage Interest for purposes of this Section 2.1(1) shall be ten percent (10%), and the Cap shall be
Fifty Million Dollars ($50,000,000). Purchaser's interest in Proceeds is junior to full payment of all
attorneys' and other professionals' fees and costs (including contingency fees) incurred in the related
Action, and amounts outstanding under the Litigation Credit Facility. The Parties intend,
acknowledge and agree that the interest in Proceeds purchased by Purchaser under this Section 2.1(l)
will be a present transfer at Closing of a property interest for which no further action of the Parties is
required to effect assignment. The Parties will take such actions and execute such agreements as
may be required to confirm the foregoing arrangements. The Purchaser may not assign, sell,
hypothecate or otherwise transfer its interest in the Proceeds without the consent of the Sellers, not to
be unreasonably withheld; and
(m) All Assets set forth on Schedule 2.1(m).
2.2. Excluded Assets. Nothing contained herein shall be deemed to sell, transfer, assign or
convey the Excluded Assets to Purchaser, and Sellers shall retain all right, title and interest to, in and
under the Excluded Assets. "Excluded Assets" shall mean the following Assets of Sellers:
(a) All Me Inc. Products and the furniture and personal property used solely in
connection with the Me Inc. Products to be identified as used therefor on Schedule 2.1(a);
(b) All cash, cash deposits and cash equivalents held by Sellers at the time of the
Closing (and interest or earnings thereon);
(c) All refunds, rebates, credits, loss allocations and losses for Taxes (and all
related rights and claims) for any tax-reporting periods (or portions thereof) ending on or before the
Closing Date, and including and any interest due thereon or penalty rebate arising therefrom;
(d) SCO Group's Equity Interests in its Subsidiaries (except for the Subsidiaries
identified in Schedule 2.5);
(e) The Novell Litigation, the IBM Litigation and all other Actions other than the
Linux Litigation first arising or accrued prior to the Closing (except as set forth in clause (1) of
Section 2.1 above);
(f) All Contracts of Sellers other than the Assumed Contracts;
(g) All Assets not assignable or transferable under applicable Laws;
(h) Any (i) confidential personnel and medical records pertaining to any
Employees not set forth on Schedule 5.22; (ii) other books and records relating solely to the Me Inc.
Products or that Sellers are required by Law to retain or that Sellers determine are necessary or
advisable to retain including, without limitation, Tax returns, financial statements, and corporate or
other entity filings; provided, however, that Purchaser shall have, to the extent allowed by applicable
Law, the right to make copies of any portions of such retained books and records that relate to the
Business or any of the Purchased Assets; (iii) information management systems of Sellers, other than
those used or useful in the conduct of the Business; (iv) minute books, stock or membership interest
records and corporate seals; and (v) documents relating to proposals to acquire Assets or Equity
Interests by Persons other than Purchaser;
(i) All Sellers' rights under this Agreement;
(j) All Actions of Sellers arising under Bankruptcy Code Sections 506, 544-553,
inclusive, or otherwise against any third party and that do not relate to or arise from any of the
Purchased Assets; and
(k) All Assets set forth on Schedule 2.2(k), which schedule may be amended by
Purchaser so as to exclude additional Assets in its discretion from time to time until one (1) Business
Day prior to the Closing Date (provided however, no such exclusions (other than of any accounts
receivable or any assets of any of the Subsidiaries listed on Schedule 2.5) shall result in any Purchase
2.3. Assumed Liabilities. On the terms and subject to the conditions set forth in this
Agreement, at the Closing, Purchaser shall assume the following, and only the following, Liabilities
of Sellers (the "Assumed Liabilities"):
(a) All Liabilities specifically set forth in Schedule 2.3(a) (including but not
limited to those arising from the Prohibited Transactions listed in Sections 8.2(b)(v) through and
including 8.2(b)(xi)), to be created by Purchaser and attached hereto by no later than one (1)
Business Day prior to Closing;
(b) All executory obligations under the Assumed Contracts first arising after the
Closing and not as a result of or relating to any action or inaction taken by any Seller or any Affiliate
thereof, including any breach of covenant or agreement under this Agreement thereby; and
(c) All amounts payable under Section 365 of the Bankruptcy Code to cure
monetary defaults under the Assumed Contracts (the "Cure Amount"); provided that the sum of the
Cure Amount plus the amount of Assumed Liabilities shall not exceed the Cash Component, as
reduced pursuant to Section 3.1(a).
2.4. Excluded Liabilities. Notwithstanding anything in this Agreement to the contrary,
except for the Assumed Liabilities specifically described in Section 2.3 (it being understood that if a
Liability could be construed to be described in both Section 2.3 and Section 2.4, then it shall be
deemed an Excluded Liability), Purchaser shall not assume, be liable for, or have responsibility with
respect to, and shall be deemed not to have assumed, be liable for, or have any responsibility with
respect to, any of the Liabilities of the Sellers, whether known or unknown, absolute or contingent,
accrued or unaccrued, due or to become due (collectively, the "Excluded Liabilities"), which
Excluded Liabilities include:
(a) All Liabilities arising out of or relating to Excluded Assets, including
Liabilities first arising or accruing prior to Closing under Assumed Contracts other than Cure
(b) Any Contracts of the Subsidiaries (other than the Sellers and those
Subsidiaries set forth on Schedule 2.5) and all Liabilities arising thereunder;
(c) Except as provided in Article IX, all Liabilities with respect to all employee
benefit plans, policies, agreements and arrangements of the Sellers and their Affiliates, including all
Employee Plans, and any Liability to or in respect of, or arising out of or in connection with, the
employment by any of the Sellers or cessation of employment with any of the Sellers of any
employees or independent contractors or former employees or independent contractors of any of the
Sellers, including any severance obligations that arise on or prior to the Closing Date;
(d) All Liabilities for (i) Taxes of Sellers (including all Liabilities for Taxes
relating to the Purchased Assets) for any Tax periods (or portions thereof) ending on or before the
Closing Date and (ii) Transfer Taxes;
(e) All Liabilities incurred in the Ordinary Course of Business and existing prior
to the filing of the Chapter 11 Cases that are subject to compromise under the Bankruptcy Code,
other than Purchaser's obligation to pay any Cure Amount pursuant to Section 2.3(b);
(f) Any Debt of Sellers;
(g) All Liabilities relating to amounts required to be paid by Sellers under this
(h) All Liabilities relating to Real Property other than obligations under leases
that are Assumed Contracts;
(i) All Liabilities associated with Current Assets conveyed to Purchaser under
(j) All Liabilities associated with brokers, finders or other consultants or advisors
to Sellers or its Affiliates entitled to a fee or reimbursement of expenses with respect to this
(k) All other Liabilities, accrued expenses or accounts payable of Sellers arising
from or associated with the Business or the Purchased Assets arising from events, facts or
circumstances occurring before the Closing, except to the extent expressly identified as an Assumed
2.5. Certain Subsidiaries. The parties acknowledge that a portion of the Purchased Assets
are presently owned and/or held by the foreign Subsidiaries listed on Schedule 2.5. At the Closing,
the Sellers shall transfer to the Purchaser all of the Purchased Assets held by those Subsidiaries. In
the event that the parties reasonably determine that the Subsidiaries listed on Schedule 2.5 cannot
transfer assets in order to comply with Sellers' obligations hereunder, or that such transfer would be
unduly burdensome, Purchaser may, in addition to its other rights under this Agreement, elect at any
time prior to Closing to have the Sellers transfer to Purchaser all equity and other interests in those
Subsidiaries. In the event of such election and transfer, the Purchase Price payable under Section 3.1
shall also be appropriately adjusted upward or downward to reflect the difference between (i) any
cash and cash equivalents (giving effect to any tax consequences, restrictions or other limitations on
the use or distribution of that cash at Closing to a US corporate parent) held by a Subsidiary so
transferred, and (ii) any Liabilities ofthat Subsidiary.
3.1. Purchase Price. The total purchase price for the Purchased Assets consists of both
cash and non-cash components in the estimated aggregate amount of up to Thirty Six Million Dollars
($36,000,000) (the "Purchase Price"), as set forth below:
(a) A cash payment of up to Ten Million Dollars ($10,000,000) (the "Cash
Component"), which shall be reduced, dollar for dollar, in an amount equal to the book value at
Closing of all Assumed Liabilities as of Closing and all Cure Amounts and decreased dollar for
dollar based on the difference, if any, between accounts receivable to be transferred to Purchaser and
Qualifying Accounts Receivable at Closing, as reasonably determined by Purchaser. Ten (10) days
prior to Closing, Sellers shall deliver to Purchaser an accounts receivable run in Microsoft Excel
format. At Closing, Purchaser shall deliver to Sellers a statement indicating Qualified Accounts
(b) Up to Ten Million Dollars ($10,000,000) in the form of a litigation credit
facility (substantially in the form attached hereto as Exhibit A) to fund litigation expenses (the
"Litigation Credit Facility").
(c) Up to Ten Million Dollars ($10,000,000) in the form of a 20% interest in any
and all net Proceeds (as defined in Section 2.1(l)) which are realized by Purchaser and which will be
paid to Sellers (after deducting the Purchaser's related fees and expenses and a preferred return on
such fees and expenses paid by Purchaser at the prime rate, as reported from time to time by The
Wall Street Journal, compounded semi-annually), if any, when and as collected by Purchaser, from
or in connection with any Linux Litigation, it being understood that there is no assurance that any
proceeds will result from any Linux Litigation. The Parties intend that Sellers' interest in the
Proceeds under this Section 3.1(c) will be a present and vested assignment at Closing for which no
further action of the Parties is required; provided that the Parties will take such actions and execute
such agreements as may be required to confirm the foregoing arrangements. The Sellers may not
assign, sell, hypothecate or otherwise transfer their interest under this Section 3.1(c) without the
consent of the Purchaser, not to be unreasonably withheld.
(d) Up to Six Million Dollars ($6,000,000) as provided pursuant to the terms of
the Cross License Agreement.
3.2. Purchase Price Deposit. Pursuant to the terms of this Agreement, Purchaser has
deposited on October 25, 2007 with Berger Singerman, P.A., in its capacity as escrow agent (the
"Escrow Agent"), One Million Eight Hundred Thousand Dollars ($1,800,000) by wire transfer of
immediately available funds (the "Escrowed Funds"), into an interest-bearing account, to be released
by the Escrow Agent and delivered to either Purchaser or Sellers, in accordance with the provisions
of this Agreement. Pursuant to this Agreement, the Escrowed Funds (together with all accrued
investment income or interest thereon) shall be distributed as follows:
(a) if the Closing occurs, the Escrowed Funds shall be applied towards the Cash
Component payable by Purchaser to Sellers under Section 3.3 hereof, and all accrued investment
income or interest thereon shall be delivered to Purchaser at the Closing;
(b) if this Agreement is terminated by Sellers due to a breach by Purchaser
pursuant to Section 4.4(e), the Escrowed Funds shall be released to Sellers and all accrued
investment income or interest thereon or any remainder, shall be returned to Purchaser;
(c) if this Agreement is terminated for any reason other than default by Purchaser
pursuant to Section 4.4(e), the Escrowed Funds, together with all accrued investment income or
interest thereon, shall be returned to Purchaser.
(d) The Escrow Agent represents the Sellers herein, and shall be entitled to
continue to do so, including in connection with any interpleader proceeding relating to the Escrow
Funds. The Escrow Agent, in its capacity as such, shall act in accordance with the terms set forth in
Schedule 3.2 attached hereto.
3.3. Cash Component Availability. Consistent with Section 6.6, in connection with the
filing of the Sales Order, Purchaser will demonstrate to the reasonable satisfaction of the Sellers and
the Bankruptcy Court, that sufficient cash is funded or irrevocably dedicated to Purchaser from a
creditworthy source to ensure that Purchaser is, as of the hearing on the Sales Order, prepared to
close and pay the Cash Component, as adjusted pursuant to this Article III, at Closing. The payment
of the Cash Component, as adjusted pursuant to this Article III, less the Escrowed Funds, shall be
made on the Closing Date by wire transfer of immediately available funds to an account designated
CLOSING AND TERMINATION
4.1. Closing Date. Subject to the satisfaction of the conditions set forth in Sections 10.1,
10.2 and 10.3 hereof (or the waiver thereof by the Party entitled to waive that condition): (a) the
closing of the purchase and sale of the Purchased Assets and the assumption of the Assumed
Liabilities provided for in Article II hereof (collectively, the "Closing") shall take place at 5:00 p.m.
Eastern Standard Time on the Business Day selected by Purchaser that is on or after the day the Sale
Order becomes a final order no longer subject to appeal or reconsideration but before December 31,
2007; or (b) if (i) any appeal is filed but the Sale Order is not otherwise stayed, and (ii) Purchaser
decides, in its sole and absolute discretion, to proceed with the Closing (which decision shall be
made through written notice to Sellers within three (3) Business Days after Purchaser receives actual
notice of such appeal), the Closing shall take place at 5:00 p.m. Eastern Standard Time on the
Business Day selected by Purchaser that is on or before three (3) Business Days after the date on
which Purchaser notifies Sellers of such decision. The Closing shall take place at the offices of
Proskauer Rose LLP in New York (or at such other place as the Parties may designate in writing).
The date on which the Closing shall be held is referred to in this Agreement as the "Closing Date."
For purposes of determining what constitutes Purchased Assets, the Closing shall be deemed to have
occurred at 11:59 p.m. New York City time on the Business Day prior to the Closing Date. As used
herein, a "final order" refers to an Order of the Bankruptcy Court that has not been vacated, reversed,
modified, amended, or stayed, and for which the time to further appeal or seek review or rehearing
4.2. Deliveries by Sellers. At the Closing, Sellers shall deliver to Purchaser:
(a) a bill of sale in the form of attached hereto as Exhibit C, duly executed by the
(b) an assignment and assumption agreement in the form attached hereto as
Exhibit D, duly executed by the Sellers;
(c) an assignment and assumption of lease for each of the Facilities in the form
attached hereto as Exhibit E, with such modifications as are necessary to properly describe each
Facility (collectively, the "Lease Assignments"), duly executed by the applicable Seller that holds the
leasehold interest in each Facility;
(d) duly executed assignments of (i) any patents, patent applications, registered
trademarks and applications for trademark registration owned by any Seller that are included in
Company Technology, in forms suitable for recording in the United States Patent and Trademark
Office, (ii) any copyright registrations and applications for copyright registration owned by any
Seller that are included in Company Technology, in forms suitable for recording in the United States
Copyright Office and (iii) any domain name registrations and applications for domain name
registration owned by any Seller that are included in Company Technology, in forms suitable for
transfer of such domain names;
(e) a certificate signed by an authorized officer of Sellers on behalf of all Sellers,
dated the Closing Date, certifying that the conditions set forth in Section 1O.1(a)-(f) have been
(f) a copy of all orders of the Bankruptcy Court pertaining to the transactions
contemplated herein, including the Sale Order, in the form attached as Exhibit F, with such
modifications mutually acceptable to Sellers and Purchaser in their respective sole discretion;
(g) a 10% warrant in the Me Inc. Products substantially in the form attached
hereto as Exhibit G duly executed by Me Inc.;
(h) the Cross License Agreement duly executed by Me Inc.;
(i) the Litigation Credit Facility duly executed by Sellers;
(j) a closing statement mutually acceptable to Sellers and Purchaser (the
"Closing Statement"), duly executed by Sellers; and
(k) all other instruments of conveyance and transfer, in form and substance
reasonably acceptable to Purchaser, as may be necessary to convey the Purchased Assets to
4.3. Deliveries by Purchaser. At the Closing, Purchaser shall deliver to Sellers:
(a) the Cash Component (less the Escrowed Funds), subject to the terms and
adjustments set forth in Article III hereof, in immediately available funds and evidence of payment of
the Cure Amount in immediately available funds;
(b) an assignment and assumption agreement in the form attached hereto as
Exhibit D, duly executed by Purchaser;
(c) the Lease Assignments duly executed by Purchaser;
(d) a certificate signed by an authorized officer of Purchaser, dated the Closing
Date, certifying that the conditions set forth in Section 10.2(a)-(b) have been satisfied;
(e) the Cross License Agreement duly executed by Purchaser;
(f) the Litigation Credit Facility duly executed by Purchaser;
(g) the Closing Statement, duly executed by Purchaser; and
(h) all other instruments of conveyance and transfer, in form and substance
reasonably acceptable to Sellers, as may be necessary to convey the Purchased Assets to Purchaser.
4.4. Termination of Agreement. This Agreement may be terminated prior to the Closing
(a) by mutual written consent of Sellers and Purchaser;
(b) by Purchaser, if any of the conditions to the obligations of Purchaser set forth
in Sections 10.1 and 10.3 shall have become incapable of fulfillment other than as a result of a breach
by Purchaser of any covenant or agreement contained in this Agreement or any other Purchaser
Document, and such condition is not waived by Purchaser;
(c) by Purchaser, if there shall be a breach by any Seller of any representation or
warranty, or any covenant or agreement contained in this Agreement or any other Seller Document,
which would result in a failure of a condition set forth in Section 10.1 or 10.3, and which breach
cannot be cured or has not been cured by the earlier of (i) seven (7) Business Days after the giving of
written notice by Purchaser to such Seller of such breach and (ii) the Termination Date;
(d) by Sellers, if any condition to the obligations of Sellers set forth in Sections
10.2 and 10.3 shall have become incapable of fulfillment other than as a result of a breach by any
Sellers of any covenant or agreement contained in this Agreement or any other Seller Document, and
such condition is not waived by Sellers;
(e) by Sellers, if there shall be a breach by Purchaser of any representation or
warranty, or any covenant or agreement contained in this Agreement, which would result in a failure
of a condition set forth in Section 10.2 or 10.3, and which breach cannot be cured or has not been
cured by the earlier of (i) seven (7) Business Days after the giving of written notice by Sellers to
Purchaser of such breach and (ii) the Termination Date;
(f) by either Purchaser or Seller if any Governmental Authority (other than the
Bankruptcy Court) having competent jurisdiction issues a final and non-appealable order, decree or
ruling restraining, enjoining or otherwise prohibiting the transaction;
(g) by Purchaser upon a determination by any Seller or either of Sellers' respective boards of directors to pursue, or upon approval by the Bankruptcy Court of, a Competing Bid or an Alternative Transaction, subject to Purchaser's right to payment of the Break-Up Fee in
accordance with the provisions of Section 4.6;
(h) by Purchaser if (i) the Bidding Procedures Order, in form and content
acceptable to Purchaser in its reasonable discretion, is not entered by the Bankruptcy Court on or
before November 20, 2007, or (ii) the Sale Order, in form and content provided by Purchaser, is not
entered by the Bankruptcy Court on or before December 31, 2007; or
(i) by Purchaser or Sellers, if the Closing shall not have occurred by the close of
business on April 30, 2008 (the "Termination Date"); provided that, in the case of Sellers, any delay
was not caused by any Seller or its failure to comply with any provision of this Agreement.
4.5. Procedure Upon Termination. In the event of termination by Purchaser or Sellers, or
both, pursuant to Section 4.4 hereof, written notice thereof shall forthwith be given to the other Party
or Parties, and this Agreement shall terminate, and the purchase of the Purchased Assets hereunder
shall be abandoned, without further action by Purchaser or Sellers. If this Agreement is terminated
as provided herein each Party shall use reasonable efforts to destroy or redeliver all documents, work
papers and other material of any other Party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the Party furnishing the same; provided
that, subject to the confidentiality provisions set forth in Section 4.6(g) below, no Party will be liable
for failing to destroy materials or make any such redelivery.
4.6. Effect of Termination: Break-Up Fee.
(a) In the event that this Agreement is validly terminated as provided herein, then
each of the Parties shall be relieved of its duties and obligations arising under this Agreement
effective on the date of such termination and such termination shall be without liability to Purchaser
or Sellers; provided, however, that the obligations of the parties set forth in this Section 4.6 and
Section 8.7 hereof shall survive any such termination and shall be enforceable hereunder.
(b) If this Agreement is terminated the Escrowed Funds shall be released to the
appropriate Party pursuant to Section 3.2 above and once Escrow Agent has delivered the Escrowed
Funds as provided in Section 3.2 above, Escrow Agent shall be released of all obligations hereunder
with respect to such Escrowed Funds.
(c) Notwithstanding any other provision of this Agreement to the contrary, in the
event that this Agreement is terminated for any reason other than due to a breach by Purchaser
hereunder resulting in Sellers' termination of this Agreement pursuant to Section 4.4(e), then
Purchaser shall within a reasonable time thereafter provide Seller with summary documentation
(redacted as appropriate for attorney-client privilege and work product issues) for all costs of
reviewing the Business and all fees and expenses, including attorney and other advisor's fees,
incurred in connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby ("Fees and Expenses") of Purchaser, and promptly, but
no later than five (5) Business Days after its receipt of such documentation, Sellers shall reimburse
Purchaser for all such Fees and Expenses, not to exceed Four Hundred Eighty Thousand Dollars
($480,000.00) in the aggregate. The foregoing reimbursement obligation shall be entitled to super-priority administrative expense treatment under Sections 364(c), 503(b) and 507(a) of the Bankruptcy
Code; and provided further that, in the event that, and only for so long as: (i) this Agreement is
terminated because a condition set forth in Section 10.3 has not been timely satisfied or waived, (ii)
the failure of such condition is not the result of a material breach by Sellers of this Agreement and
(iii) no Competing Bid or Alternative Transaction is consummated, Sellers' reimbursement
obligation hereunder shall not exceed Three Hundred Thousand Dollars ($300,000) in the aggregate.
The Sellers shall also pay One Hundred Fifty Thousand Dollars ($150,000) in respect of the Fees and
Expenses (the "Guaranteed Expense Reimbursement"). The Guaranteed Expense Reimbursement
shall be paid promptly following entry of the Bankruptcy Court Order approving the bidding
procedures contemplated by this Agreement, and shall be credited in reduction of any subsequent
payment in respect of the Fees and Expenses.
(d) Notwithstanding any other provision of this Agreement to the contrary, in the
event that (i) this Agreement is terminated for any reason other than due to a breach by Purchaser
hereunder resulting in Sellers' termination of this Agreement pursuant to Section 4.4(e), and (ii)
Sellers consummate a Competing Bid or Alternative Transaction or (iii) Purchaser is not the
"Winning Bidder" at the Auction, then Purchaser will be paid in immediately available funds a fee
(the "Break-Up Fee") equal to Six Hundred Thousand Dollars ($600,000.00). The Break-Up Fee
shall be paid upon the consummation of the Competing Bid or Alternative Transaction, in lieu of any
Losses Purchaser may suffer, as liquidated damages and not as a penalty, as Purchaser's sole and
exclusive remedy (in addition to Sellers' reimbursement obligation set forth in Section 4.6(c) above)
as a result of such a termination. The Break-Up Fee shall be entitled to super-priority administrative
expense treatment under Sections 364(c), 503(b) and 507(a) of the Bankruptcy Code.
(e) If this Agreement is terminated due to breach by Purchaser, Sellers shall be
entitled to receive the Escrowed Funds as liquidated damages and not as a penalty as Sellers' sole
and exclusive remedy as a result of such a termination.
(f) The Confidentiality Agreement shall survive any termination of this
Agreement and nothing in this Section 4.6 shall relieve Purchaser or Sellers of their respective
obligations under the Confidentiality Agreement.
REPRESENTATIONS AND WARRANTIES OF SELLERS
In order to induce Purchaser to enter into and perform this Agreement and to
consummate the transactions contemplated hereby, each Seller hereby jointly and severally
represents and warrants to Purchaser as follows:
5.1. Organization: Predecessors.
(a) Organization. Schedule 5.1(a) sets forth for each Seller its name and
jurisdiction of organization. Each Seller is (i) duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and (ii) is duly qualified to do business and in
good standing in each jurisdiction in which it owns or leases Real Property and in each other
jurisdiction in which the failure to so qualify has not had, and is not reasonably likely to have, a
Material Adverse Effect. Sellers have delivered to Purchaser true, accurate and complete copies of
(x) their Organizational Documents and (y) their minute books which contain records of all meetings
held of, and other corporate actions taken by, their respective stockholders, Boards of Directors and
any committees appointed by such Boards of Directors.
(b) Predecessors. Schedule 5.1(b) sets forth a list of (i) any Person that has ever
merged with or into a Seller, (ii) any Person a majority of whose capital stock (or similar outstanding
ownership interests) or Equity Interests has ever been acquired by a Seller, (iii) any Person all or
substantially all of whose assets has ever been acquired by a Seller, and (iv) any prior names of any
Seller or any Person described in clauses (i) through (iii) (each such Person, a "Predecessor").
5.2. Power and Authorization.
(a) Contemplated Transaction. The execution, delivery and performance by each
Seller of this Agreement and each other agreement, document, instrument or certificate to be
executed by any Seller in connection with the consummation of the transactions contemplated by this
Agreement (the "Seller Documents") have been duly authorized by all necessary action on the part of
each Seller. This Agreement and each Seller Document to which each Seller is (or will be ) a party
(i) has been (or, in the case of Seller Documents to be entered into at or prior to the Closing, will be)
duly executed and delivered by each Seller and (ii) is (or, in the case of Seller Documents to be
entered into at or prior to the Closing, will be) a legal, valid and binding obligation of such Seller,
enforceable against each such Seller in accordance with its terms.
(b) Conduct of Business. Each Seller has the full power and authority necessary
to own and use its Assets and carry on the Business.
5.3. Authorization of Governmental Authorities. Except for the Sale Order and as
disclosed on Schedule 5.3 (collectively, "Required Approvals"), no action by (including any
authorization, consent or approval), or in respect of, or filing with, any Governmental Authority, is
required for, or in connection with, the valid and lawful (a) authorization, execution, delivery and
performance by any Seller of this Agreement and each Seller Document to which it is (or will be) a
part or (b) the consummation of the transactions contemplated hereby or thereby by each Seller.
5.4. Non-contravention. Except as disclosed on Schedule 5.4 (collectively, "Required
Consents"), neither the execution, delivery and performance by any Seller of this Agreement or any
Seller Document to which it is (or will be) a part nor the consummation of the transactions
contemplated hereby will, except pursuant to the transaction specifically contemplated by this
(a) assuming the entry of the Sale Order and the taking of any action by
(including any authorization, consent or approval), or in respect of, or any filing with, any
Governmental Authority, in each case, as disclosed on Schedule 5.3, violate any material Legal
Requirement applicable to any Seller or the transactions contemplated by this Agreement;
(b) result in a breach or violation of, or default under, any Contractual Obligation
of any Seller;
(c) require any actions by (including any authorization, consent or approval) or in
respect of (including notice to), any Person under any Contractual Obligation of any Seller;
(d) result in the creation or imposition of an Encumbrance upon, or the forfeiture
of, any Asset; or
(e) result in a breach or violation of, or default under, the Organizational
Documents of any Seller.
5.5. Capitalization of Sellers.
(a) Outstanding Capital Stock. As of the date of this Agreement, the entire
authorized capital stock of each Seller is as set forth on Schedule 5.5(a). All of the outstanding
shares of capital stock of each Seller have been duly authorized, validly issued, and are fully paid and
non-assessable. None of the Sellers has violated the Securities Act of 1933, as amended, any state
"blue sky" or securities laws, any other similar Legal Requirement or any preemptive or other similar
rights of any Person in connection with the issuance or redemption of any of its Equity Interests.
(b) Ownership; Subsidiaries. All of the outstanding Equity Interests in each of
the Subsidiaries are set forth on Schedule 5.5(c) and are validly issued, fully paid and non-assessable.
Seller is the beneficial owner (and Seller or its Subsidiaries listed on Schedule 5.5(c) is the record
owner) of all of the Equity Interests in the Subsidiaries and hold such Equity Interests free and clear
of all Encumbrances except as are imposed by applicable securities Laws.
(c) Encumbrances. Except as disclosed on Schedule 5.5(d): (i) there are no
preemptive rights or other similar rights in respect of any Equity Interests in any Seller, (ii) except as
imposed by applicable securities Laws, there are no Encumbrances against, or other Contractual
Obligations relating to, the ownership, transfer or voting of any Equity Interests in any Seller, or
otherwise affecting the rights of any holder of the Equity Interests in any Seller, (iii) except for the
transactions contemplated hereby, there is no Contractual Obligation, or provision in the
Organizational Documents of any Seller which obligates it to purchase, redeem or otherwise acquire,
or make any payment (including any dividend or distribution) in respect of, any Equity Interests in
5.6. Financial Statements.
(a) Financial Statements. Attached to Schedule 5.6 are copies of each of the
(i) the audited consolidated balance sheet of the Sellers as of October
31, 2006 (respectively, the "Most Recent Balance Sheet," and the "Most Recent Balance Sheet
Date"), October 31, 2006 and October 31, 2005, and the related audited consolidated statements of
income, cash flow and changes in stockholders' equity of the Sellers for such fiscal years,
accompanied by any notes thereto and the report of Tanner LC (collectively, the "Audited
(ii) the unaudited consolidated balance sheet of the Sellers for the
quarters ended January 31, 2007, April 30, 2007 and July 31, 2007 and the related unaudited
consolidated statement of income, cash flow and changes in stockholders' equity of the Sellers for
such quarters (the "Interim Financials"); and
(iii) monthly unaudited financial statements of the Sellers in the form
customarily prepared by management for internal use for each complete month from the Most
Recent Balance Sheet Date through the date of this Agreement (the "Monthly Financials," and
together with the Audited Financials and Interim Financials, collectively the "Financials").
(b) Compliance with GAAP, etc. Except as disclosed on Schedule 5.6, the
Financials (including any notes thereto) (a) are complete and correct and were prepared in
accordance with the books and records of the Sellers, (b) have been prepared in accordance with
GAAP, consistently applied (subject, in the case of the unaudited Financials, to normal year-end
audit adjustments, the effect of which will not, individually or in the aggregate, be materially adverse
and the absence of notes that, if presented, would not differ materially from those included in the
Most Recent Balance Sheet) and (c) fairly present the consolidated financial position of the Sellers as
at the respective dates thereof and the consolidated results of the operations of the Sellers and
changes in financial position for the respective periods covered thereby.
5.7. Absence of Undisclosed Liabilities. No Seller has any Liabilities except for (a)
Liabilities set forth on the face of the Most Recent Balance Sheet and (b) Liabilities incurred in the
Ordinary Course of Business since the Most Recent Balance Sheet Date (none of which results from,
arise out of, or relates to any breach or violation of, or default under, a Contractual Obligation or
material Legal Requirement).
5.8. Absence of Certain Developments. Since the Most Recent Balance Sheet Date,
except for the filing of the Chapter 11 Cases, the Business has been conducted in the Ordinary
Course of Business and, except for the matters disclosed in Schedule 5.8 (which matters have not
had, and are not reasonably likely to have, a Material Adverse Effect):
(a) no Seller has (i) amended its Organizational Documents, (ii) amended any
term of its outstanding Equity Interests or other securities or (iii) issued, sold, granted, or otherwise
disposed of, its Equity Interests or other securities;
(b) no Seller has become liable in respect of any guarantee or has incurred,
assumed or otherwise become liable in respect of any Debt, except for in the Ordinary Course of
Business, (i) trade payables and (ii) borrowings under credit facilities in existence on the Most
Recent Balance Sheet Date and disclosed on Schedule 5.19;
(c) no Seller has permitted any of its Assets to become subject to any
Encumbrance other than a Permitted Encumbrance;
(d) no Seller has (i) made any declaration, set aside, dividend or other
distribution with respect to, or any repurchase, redemption or other acquisition of, any of its capital
stock or other Equity Interests or (ii) entered into, or performed, any transaction with, or for the
benefit of, any Seller or any Affiliate of any Seller (other than payments made to officers, directors
and Employees in the Ordinary Course of Business);
(e) there has been no material loss, destruction, damage or eminent domain
taking (in each case, whether or not insured) affecting the Business or any Assets with a value in
excess of $25,000, individually or in the aggregate, or otherwise material to the Business;
(f) no Seller has increased the compensation payable or paid, whether
conditionally or otherwise, to (i) any Employee, consultant or agent other than in the Ordinary
Course of Business, (ii) any director or officer or (iii) any Seller or any Affiliate of any Seller;
(g) no Seller has entered into any Contractual Obligation providing for the
employment or consultancy of any Person on a full-time, part-time, consulting or other basis or
otherwise providing compensation or other benefits to any officer, director, employee or consultant;
(h) no Seller has made any change in its methods of accounting or accounting
practices (including with respect to reserves);
(i) no Seller has made, changed or revoked any material Tax election, elected or
changed any method of accounting for Tax purposes, settled any Action in respect of Taxes or
entered into any Contractual Obligation in respect of Taxes with any Governmental Authority;
(j) no Seller has terminated or closed any Facility, business or operation;
(k) no Seller has adopted any Employee Plan or, except in accordance with terms
thereof as in effect on the Most Recent Balance Sheet Date, increased any benefits under any
(l) no Seller has written up or written down any of its material Assets or revalued
(m) no Seller has entered into any Contractual Obligation to do any of the things
referred to elsewhere in this Section 3.8; and
(n) to Sellers' Knowledge, no event or circumstance has occurred which has had,
or is reasonably likely to have, a Material Adverse Effect.
5.9. Debt Guarantees. The Sellers have no Liabilities in respect of Debt except as set
forth on Schedule 5.9. For each item of Debt, Schedule 5.9 correctly sets forth the debtor, the
principal amount of the Debt as the date of this Agreement, the creditor, the maturity date, the
collateral, if any, securing the Debt. No Seller has any Liability in respect of a guarantee of any
Liability of any other Person (other than another Seller).
(a) Ownership of Assets. Each Seller has sole and exclusive, good and
marketable title to, or, in the case of property held under a lease, license or other Contractual
Obligation, a sole and exclusive, enforceable leasehold interest or license in, or right to use, all of its
properties, rights and Assets, whether real or personal and whether tangible or intangible, including
all assets reflected in the Most Recent Balance Sheet or acquired after the Most Recent Balance
Sheet Date (except for such assets which have been sold or otherwise disposed of since the Most
Recent Balance Sheet Date in the Ordinary Course of Business) (collectively, the "Assets"). Except
as disclosed on Schedule 5.10, none of the Assets is subject to any Encumbrance other than
(b) Sufficiency of Assets. The Purchased Assets comprise all of the assets,
properties and rights of every type and description, whether real or personal, tangible or intangible,
used or useful in or necessary to the conduct of the Business and are adequate to conduct the
Business as currently conducted and contemplated to be conducted.
(c) Investments. No Seller controls, directly or indirectly, or owns any direct or
indirect Equity Interest in any Person which is not a Subsidiary or not set forth on Schedule 2.1(i).
5.11. Accounts Receivables. All accounts and notes receivable reflected on the Most
Recent Balance Sheet and all accounts and notes receivable arising subsequent to the Most Recent
Balance Sheet Date and on or prior to the Closing Date, have arisen or will arise in the Ordinary
Course of Business, represent or will represent legal, valid, binding and enforceable obligations of a
Seller and, subject only to consistently recorded reserves for bad debts established as of a date prior
to the Closing Date in accordance with GAAP and in a manner consistent with past practice and
disclosed to Purchaser in writing on or prior to the date hereof, have been, or will be, collected or are,
or will be collectible in the aggregate recorded amounts thereof in accordance with their terms and, to
the Sellers' Knowledge, will not be subject to any contests, claims, counterclaims or setoffs. No
accounts or notes receivables are subject to any Encumbrance, and each of which is freely assignable
to Purchaser at the Closing upon entry of the Sale Order.
5.12. Real Property.
(a) Schedule 5.12(a) sets forth a list of all real property owned by each of the
Sellers and specifies the Sellers which occupy such property if different from the owners and
describes each leasehold interest in real property leased, subleased by, licensed or with respect to
which a right to use or occupy has been granted to or by any Seller (such leased Real Property
together with such owned Real Property, the "Real Property"), and specifies the lessor(s) of such
leased property, the Seller occupying such leased property, and identifies each lease or any other
Contractual Obligation under which such property is leased (the "Real Property Leases"). Except as
described on Schedule 5.12(a) there are no written or oral subleases, licenses, concessions,
occupancy agreements or other Contractual Obligations granting to any other Person the right of use
or occupancy of the Real Property and there is no Person (other than any Seller and any lessor(s) of
leased Real Property) in possession of the leased Real Property. With respect to each Real Property
Lease that is a sublease, to the Sellers' Knowledge, the representations and warranties set forth in
Section 5.12(b) are true and correct with respect to the underlying lease.
(b) The Real Property Leases do not impose material restrictions on any portion
of the Business other than radius or use restrictions described on Schedule 5.12 that do not materially
interfere with the Business. No Seller is obligated to pay any leasing or brokerage commission as a
result of the transactions contemplated hereby. There is no pending or, to Sellers' Knowledge,
threatened eminent domain taking affecting any of the Real Property. The Sellers have delivered to
Purchaser true, correct and complete copies of the Real Property Leases including all amendments,
modifications, notices or memoranda of lease thereto and all estoppel certificates or subordinations,
non-disturbance and attornment agreements related thereto in Sellers' possession.
(c) To Sellers' Knowledge, none of the Facilities currently existing on the Real
Property encroaches upon, and any Facilities under construction on the Real Property will not
encroach upon, the real property of any other Person, and no facility of any other Person encroaches
upon the Real Property. Each Facility is supplied with utilities and other services (including gas,
electricity, water, drainage, sanitary sewer, storm sewer, fire protection and telephone) necessary for
the operation of such Facility as the same is currently operated or currently contemplated to be
operated. Each parcel of Real Property abuts on, and has direct vehicular access to, a public road, or
has access to a public road via a permanent irrevocable appurtenant easement benefiting the parcel of
Real Property, in each case, to the extent necessary for the conduct of the Business.
(d) To Sellers' Knowledge, all Permits necessary in connection with the
construction upon, and current and currently contemplated use and operation of, the Real Property
and the lawful occupancy thereof have been issued by the appropriate Governmental Authorities.
The current and currently contemplated use of the Real Property is, to Sellers' Knowledge in all
material respects, in accordance with the certificates of occupancy relating thereto and the terms of
any such Permits. All such Permits will to Sellers' Knowledge continue in full force and effect
immediately after giving effect to the transactions contemplated hereby. To Sellers' Knowledge, the
Real Property and its current and currently contemplated use, occupancy and operation by the Sellers
and the Facilities located thereon do not (i) constitute a nonconforming use under any applicable
building, zoning, subdivision or other land use or similar Legal Requirements or (ii) otherwise
violate or conflict with any covenants, conditions, restrictions or other Contractual Obligations,
including the requirements of any applicable Encumbrance. Except as set forth on Schedule 5.12(d),
no Seller nor to Sellers' Knowledge, any Predecessor (x) is in violation of any Legal Requirement
relating to Real Property, including setback requirements, zoning restrictions and ordinances,
building, life, access, safety, health and fire codes and ordinances affecting the Real Property, or (y)
has received notice of any eminent domain, condemnation or similar proceeding pending or, to the
Sellers' Knowledge, threatened, or any Government Order relating thereto. The Real Property is not
located within any flood plain or subject to any similar type of restriction for which any Permits
necessary to the use thereof have not been obtain.
5.13. Equipment. All of the Equipment is, in all materials respects, (a) adequate and
suitable for its present and intended uses, (b) in good working order, operating condition and state of
repair, (c) without defects (whether patent or latent) and (d) maintained, and has been maintained, in
accordance with normal industry practice.
5.14. Intellectual Property. Except as set forth on Schedule 5.14, as may be applicable to
the following subclauses:
(a) Except as set forth on Schedule 5.14(a), Sellers are the sole owners of or have
the sole right to use all Company Technology, and none of the Company Technology is in the
possession, custody, or control of any Person other than Sellers.
(b) Except as set forth on Schedule 5.14(b), (i) no Seller (nor any Predecessor)
has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties; (ii) no Seller (nor any Predecessor) has received any
charge, complaint, claim, demand, or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that a Person must license or refrain from using
any Intellectual Property rights of any third party in connection with the conduct of the Business or
the use of the Company Technology); and (iii) to Sellers' Knowledge, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any Company
(c) Schedule 5.14(c) sets forth a true, accurate and complete list of all Registered
Intellectual Property, and Sellers have delivered to Purchaser true, accurate, and complete copies of
all such registrations and applications, in each case, as amended, or otherwise modified and in effect,
as well as true, accurate and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule 5.14(c) also identifies each
trade name, trade dress and unregistered trademark or service mark used by any Seller in or in
connection with the Business or the Company Technology. All items of Registered Intellectual
Property are currently in compliance with formal Legal Requirements (including, without limitation,
as applicable, payment of filing, examination, issue, registration and maintenance fees, proof of
working or use, timely post-registration filing of affidavits of use or incontestability and renewal
applications); are not subject to any maintenance fees or Taxes or Actions falling due within ninety
(90) days after the Closing; and are valid, enforceable, subsisting, unexpired and have not been
abandoned or canceled.
(d) Except as set forth in Schedule 5.14(d), with respect to each item of Company
Technology: (i) one of the Sellers possesses all right, title and interest in and to such item free and
clear of any Encumbrance other than the Permitted Encumbrances; (ii) such item is not subject to any
outstanding Government Order, and no Action is pending or, to Sellers' Knowledge, threatened,
which challenges the legality, validity, enforceability, use or ownership of such item; and (iii) no
Seller has agreed or has a Contractual Obligation to indemnify any Person for or against any
interference, infringement, misappropriation or other conflict with respect to such item.
(e) Schedule 5.14(e) sets forth a true, accurate and complete list of all licenses,
sublicenses and other Contractual Obligations to which any Seller is a part or by which it is bound
and pursuant to which any other Person is authorized to have access to, or use of, Company
Technology or to exercise any other right with regard thereto. Sellers have delivered to Purchaser
true, accurate and complete copies of all such licenses, in each case, as amended, or otherwise
modified and in effect.
(f) Schedule 5.14(f) sets forth a true, accurate and complete list of all licenses,
sublicenses and other agreements or arrangements pursuant to which any Seller has been granted a
right or license to any Licensed Intellectual Property for use in or in connection with the Business
(such licenses, together with the licenses set forth on Schedule 5.14(e), "Intellectual Property
Licenses"). Sellers have delivered to Purchaser true, accurate and complete copies of all such Third
Part Licenses, in each case, as amended, or otherwise modified and in effect. Except as disclosed
on Schedule 5.14(f), there are no royalties for the use of any such Licensed Intellectual Property.
With respect to each such item identified on Schedule 5.14(f): (i) such item is not subject to any
outstanding Government Order, and no action is pending or, to Sellers' Knowledge, threatened which
challenges the legality, validity or enforceability of such item and (ii) no Seller has granted any
sublicense or similar right with respect to any such Licensed Intellectual Property.
(g) Each of the Intellectual Property Licenses is a legal, valid and binding obligation of each of the parties thereto, enforceable in accordance with its terms; to Sellers'
Knowledge, no part to such Intellectual Property License is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default or permit
termination, thereunder; and no notice of default with respect to any such Intellectual Property
License has been sent or received by any Seller.
(h) The Company Technology constitutes all of the Technology and Intellectual
Property necessary to conduct the Business as currently conducted and contemplated to be
(i) Immediately subsequent to the Closing, all Company Technology will be
owned or available for use by Purchaser upon terms and conditions identical to those under which
Sellers owned or used such Company Technology immediately prior to the Closing.
(j) Except as set forth on Schedule 5.14(j), no Seller has licensed, sublicensed,
assigned, transferred or otherwise conveyed any right or interest in any Company Technology to any
Person, and no other Person has any such right or interest in the Company Technology.
(k) Neither the execution nor delivery of this Agreement and the other Seller
Documents, nor the consummation of the transactions contemplated hereby will result in a default
under or require the consent of any other Person in respect of any Intellectual Property License, or
will alter or impair the Sellers' rights in the Company Technology.
(l) Sellers have taken all reasonable steps to protect and maintain the secrecy,
confidentiality and value of their trade secrets, including, without limitation, requiring all employees,
consultants, contractors and other Persons with access to such trade secrets to execute binding
confidentiality agreements and, to Sellers' Knowledge, no such employee, consultant, contractor or
other Person is in breach of any such confidentiality agreement.
(m) (i) Except as set forth on Schedule 5.14(m), no Computer Software included
within Company Technology has been delivered or made available to any third party in source code
form, and no Seller has agreed to or undertaken to provide any such Computer Software in source
code form to any third party; (ii) there are no third parties entitled to: (A) be enrolled as a beneficiary
under a technology escrow arrangement or otherwise with respect to the source code for any such
Computer Software or (B) receive the source code for any such Computer Software (including
without limitation, receiving the source code as a result of an event (including a change of control of
ownership of any Seller, bankruptcy of any Seller or otherwise) under an escrow arrangement or
otherwise and (iii) the source code for such Computer Software has been in the possession of only
those parties set forth in Schedule 5.14(m).
(n) To Sellers' Knowledge, the Company Technology does not contain any
viruses, time-bombs, key-locks or any other devices that could disrupt or interfere with the operation
of the Company Technology or the integrity of the data, information or signals produced by the
Company Technology in a manner that could be adverse to a user of the Company Technology.
(o) Except as set forth in Schedule 5.14(o), all Products made, used, or licensed
under any patents that are part of the Company Technology are properly marked with patent notices.
All Products and other materials that use any trademark or service mark that is part of the Company
Technology or otherwise used in the Business bear proper trademark notices. All works that are part
of the Company Technology and provided or published to third parties are marked with proper
(p) Except as set forth in Schedule 5.14(p), all current and former employees and
contractors of any Seller or Predecessor who contributed to the Company Technology in any way
have executed enforceable Contractual Obligations that assign to such Seller all the respective rights,
including Intellectual Property, to any inventions, improvements, discoveries or information relating
to the Business.
(q) Except as set forth in Schedule 5.14(q), none of the Company Technology
constitutes or is dependent on any open source computer code, and none of the Company Technology
is subject to any license or other Contractual Obligation that would require the Sellers to divulge to
any Person any source code or trade secret that is part of the Company Technology.
5.15. Legal Compliance; Illegal Payments; Permits.
(a) Compliance. No Seller is in breach or violation of, or default under, and has
not, since January 1, 2002, been in breach or violation of, or default under:
(i) its Organizational Documents nor, to Sellers' Knowledge, is there a
basis which could constitute such a breach, violation or default; or
(ii) any material Legal Requirement nor, to Sellers' Knowledge, is there
a basis which could constitute such a breach, violations or default, except for breaches, violation or
defaults (x) disclosed on Schedule 5.15 and (y) which have not had, and are not reasonably likely to
have, a Material Adverse Effect.
(b) Illegal Payments, etc. In the conduct of the Business, no Seller nor any of its
directors, officers, employees or agents, has (a) directly or indirectly, given, or agreed to give, any
illegal gift, contribution, payment or similar benefit to any supplier, customer, governmental official
or employee or other Person who was, is or may be in a position to help or hinder and Seller (or
assist in connection with any actual or proposed transaction) or made, or agreed to make, any illegal
contribution, or reimbursed any illegal political gift or contribution made by any other Person, to any
candidate for federal, state, local or foreign public office or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or records for any purpose.
(c) Permits. Each Seller has been duly granted all Permits under all material
Legal Requirements necessary for the conduct of the Business as currently conducted and
contemplated to be conducted. Schedule 5.15(c) describes each Permit affecting, or relating to, the
Assets or the Business together with the Governmental Authority or other Person responsible for
issuing such Permit. Except as disclosed on Schedule 5.15(c), (i) the Permits are valid and in full
force and effect, (ii) no Seller is in breach or violation of, or default under, any such Permit, and, to
the Sellers' Knowledge, no basis exists which, with notice or lapse of time or both, would constitute
any such breach, violation nor default and (iii) the Permits will continue to be valid and in full force
and effect, on identical terms following the consummation of the transactions contemplated hereby.
5.16. Tax Matters.
(a) Each Seller has timely filed, or has caused to be timely filed on its behalf, all
Tax Returns required to be filed by it in accordance with all Legal Requirements. All such Tax
Returns were true, correct and complete in all respects. All Taxes owed by each Seller (whether or
not shown on any Tax Return) have been timely paid in full. No claim has ever been made by an
authority in a jurisdiction where any Seller does not file Tax Returns that such Seller is or may be
subject to taxation by that jurisdiction, and, to the Sellers' Knowledge, there is no basis for any such
claim to be made. There are no Encumbrances with respect to Taxes upon any Asset other than
Permitted Encumbrances for current Taxes not yet due and payable.
(b) Each Seller has deducted, withheld and timely paid to the appropriate
Governmental Authority all Taxes required to be deducted, withheld or paid in connection with
amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third
part, and each Seller has complied with all reporting and recordkeeping requirements.
(c) Except as set forth on Schedule 5.16(c), to the Sellers' Knowledge, there is no
dispute, audit, investigation, proceeding or claim concerning any Tax Liability of any Seller pending,
being conducted, claimed, raised by a Governmental Authority in writing. Each Seller has provided
or delivered to Purchaser true, correct and complete copies of all Tax Returns, examination reports,
and statements of deficiencies filed, assessed against, or agreed to by any Seller since January 1,
(d) No Seller has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency. No Seller has executed any
power of attorney with respect to any Tax, other than powers of attorney that are no longer in force.
No closing agreements, private letter rulings, technical advice memoranda or similar agreements or
rulings relating to Taxes have been entered into or issued by any Governmental Authority with or in
respect of any Seller.
(e) The unpaid Taxes of the Sellers (a) did not as of the Most Recent Balance
Sheet Date exceed the reserve for Taxes (excluding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (b) will not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom and practice of the
Sellers in filing their Tax Returns.
(f) No Seller has made any payments, or has been or is a part to any agreement,
contract, arrangement or plan that could result in it making payments, that have resulted or would
result, separately or in the aggregate, in the payment of any "excess parachute payment" within the
meaning of Code Section 280G or in the imposition of an excise Tax under Code Section 4999 (or
any corresponding provisions of state, local or foreign Tax law) or that were or would not be
deductible under Code Section 162 or 404.
(g) No Seller has ever been a member of an "affiliated group" within the meaning
of Code Section 1504(a) filing a consolidated federal income Tax Return (other than the "affiliated
group" the common parent of which is SCO Group). No Seller is a part to any Contractual
Obligation relating to Tax sharing or Tax allocation. No Seller has any Liability for the Taxes of any
person (other than any Seller) under Treasury Regulation 1.1 502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.
(h) No Seller has filed a consent under Code Section 341(f).
(i) No Seller is or has been required to make any adjustment pursuant to Code
Section 481(a) (or any predecessor provision) or any similar provision of state, local or foreign tax
law by reason of any change in any accounting methods, or will be required to make such an
adjustment as a result of the transactions contemplated hereby, and there is no application pending
with any Governmental Authority requesting permission for any changes in any of its accounting
methods for Tax purposes. To the Sellers' Knowledge, no Governmental Authority has proposed
any such adjustment or change in accounting method.
(j) No Seller will be required to include any amount in taxable income or
exclude any item of deduction or loss from taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of (i) any "closing agreement" as described in Code Section
7121 (or any corresponding or similar provision of state, local or foreign Income Tax law) executed
on or prior to the Closing Date, (ii) any deferred intercompany gain or excess loss account described
in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign Income Tax law), (iii) installment sale or open
transaction disposition made on or prior to the Closing Date, (iv) any prepaid amount received on or
prior to the Closing Date or (v) any change in Legal Requirements.
(k) No Seller owns any property of a character, the indirect transfer of which,
pursuant to this Agreement, would give rise to any documentary, stamp, or other transfer Tax.
(l) If the Purchaser notifies the Sellers of their election to purchase the stock of
any of the foreign Subsidiaries, then the Sellers will promptly cooperate with Purchaser in providing
all requested due diligence, tax and other information relating thereto.
5.17. Employee Benefit Plans.
(a) For purposes of this Agreement, "Employee Plan" means any plan, program,
agreement, policy or arrangement, whether or not reduced to writing, and whether covering a single
individual or a group of individuals, that is (a) a welfare plan with the meaning of Section 3(1) of
ERISA, (b) a pension benefit plan within the meaning of Section 3(2) of ERISA, (c) a stock bonus,
stock purchase, stock option, restricted stock, stock appreciation right or similar equity-based plan or
(d) any other deferred-compensation, retirement, welfare-benefit, bonus, incentive or fringe-benefit
plan, program or arrangement.
(b) Schedule 5.17 lists all Employee Plans as to which any Seller sponsors,
maintains, contributes or is obligated to contribute, or under which any Seller has or may have any
Liability, or which benefits any current or former employee, director, consultant or independent
contractor of any Seller or the beneficiaries or dependents of any such Person. With respect to each
Employee Plan, the Sellers have delivered to Purchaser true, accurate and complete copies of each of
the following: (i) if the plan has been reduced to writing, the plan document together with all
amendments thereto, (ii) if the plan has not been reduced to writing, a written summary of all
material plan terms, (iii) if applicable, copies of any trust agreements, custodial agreements,
insurance policies, administrative agreements and similar agreements, and investment management
or investment advisory agreements, (iv) copies of any summary plan descriptions, employee
handbooks or similar employee communications, (e) in the case of any plan that is intended to be
qualified under Code Section 401(a), a copy of the most recent determination letter from the Internal
Revenue Service and any related correspondence, and a copy of any pending request for such
determination, (f) in the case of any funding arrangement intended to qualify as a VEBA under Code
Section 501(c)(9), a copy of the Internal Revenue letter determining that it so qualifies and (g) in the
case of any plan for which Forms 5500 are required to be filed, a copy of the two most recently filed
Forms 5500, with schedules attached.
(c) No Seller or any other Person that would be considered a single employer
with any Seller under the Code or ERISA has ever maintained a plan subject to Title IV of ERISA or
Code Section 412, including any "multi employer plan" as defined in Section 4001(a)(8) of ERISA.
(d) Each Employee Plan that is intended to be qualified under Code Section
401(a) is so qualified. Each Employee Plan, including any associated trust or fund, has been
administered in accordance with its terms and with applicable Legal Requirements, and nothing has
occurred with respect to any Employee Plan that has subjected or could subject any Seller t a penalty
under Section 502 of ERISA or to an excise tax under the Code, or that has subjected or could
subject any participant in, or beneficiary of, a Employee Plan to a tax under Code Section 4973.
Each Employee Plan that is a qualified contribution plan is an "ERISA Section 404(c) Plan" within
the meaning of the applicable Department of Labor regulations.
(e) All required contributions to, and premium payments on account of, each
Employee Plan have been made on a timely basis.
(f) There is no pending or, to the Sellers' Knowledge, threatened, Action relating
to a Employee Plan, other than routine claims in the Ordinary Course of Business for benefits
provided for by the Employee Plans. No Employee Plan is or, within the last six years, has been the
subject of an examination or audit by a Governmental Authority, is the subject of an application or
filing under, or is a participant in, a government-sponsored amnesty, voluntary compliance, self
correction or similar program.
(g) Except as required under Section 601 et seq. of ERISA, no Employee Plan
provides benefits or coverage in the nature of health, life or disability insurance following retirement
or other termination of employment.
5.18. Environmental Matters. Except as set forth in Schedule 5.18, (a) the Sellers and their
Predecessors are, and have been, in compliance with all material Environmental Laws, (b) there has
been no release or threatened release of any Hazardous Substance on, upon, into or from any site
currently or heretofore owned, leased or otherwise used by any Seller or a Predecessor, (c) there have
been no Hazardous Substances generated by any Seller or a Predecessor that have been disposed of
or come to rest at any site that has been included in any published U.S. federal, state or local
"superfund" site list or any other similar list of hazardous or toxic waste sites published by any
Governmental Authority, (d) there are no underground storage tanks located on, PCBs
(polychlorinated biphenyls) or PCB-containing Equipment used or stored on, and no "hazardous
waste" as defined by the Resource Conservation and Recovery Act stored on, any site owned or
operated by any Seller or a Predecessor, except for the storage of such hazardous waste in
compliance with Environmental Laws, and (e) the Sellers have delivered to Purchaser true, accurate
and complete copies of all material environmental records, reports, notifications, certificates of need,
permits, pending permit applications, correspondence, engineering studies, and environmental studies
or assessments, in each case as amended and currently in effect.
(a) Contracts. Except for this Agreement and as disclosed on Schedule 5.19, no
Seller is bound by or a party to:
(i) any Contractual Obligation (or group of related Contractual
Obligations) for the purchase or sale of inventory, raw materials, commodities, supplies, goods,
products, equipment or other personal propert, or for the furnishing or receipt of services, in each
case, the performance of which will extend over a period of more than one year or which provides
for aggregate or annual rental or other payments in excess of $25,000;
(ii) (A) any capital lease or (B) any other lease or other Contractual
Obligation relating to the Equipment providing for aggregate or annual rental payments in excess of
$25,000, under which any Equipment is held of used by any Seller;
(iii) any Contractual Obligation, other than Real Property Leases or
leases relating to the Equipment, relating to the lease or license of any Asset (including Company
Technology and including all customer license and maintenance agreements) that is not included on
(iv) any Contractual Obligation relating to the acquisition or disposition
of (A) any business of any Seller (whether by merger, consolidation or other business combination,
sale of securities, sale of assets or otherwise) or (B) any Asset other than in the Ordinary Course of
(v) any Contractual Obligation under which any Seller is, or may
become, obligated to pay any amount in respect of indemnification obligations, purchase price
adjustment or otherwise in connection with any (A) acquisitions or disposition of Assets or
securities (other than the sale of inventory in the Ordinary Course of Business), (B) merger,
consolidation or business combination or (C) series or group of related transactions or events of the
type specified in clauses (A) and (B) above.
(vi) any Contractual Obligation concerning or consisting of a partnership,
limited liability company, joint venture agreement or strategic alliance;
(vii) any Contractual Obligation (or group of related Contractual
Obligations) (A) under which any Seller has created, incurred, assumed or guaranteed any Debt in
excess of $25,000 or (ii) under which any Seller has permitted any Asset to become subject to any
(viii) any Contractual Obligation under which any Seller has guaranteed
any Debt of any other Person or any other Person has guaranteed any Debt of any Seller;
(ix) any Contractual Obligation related to confidentiality or non-competition
(whether any Seller is subject to or the beneficiary of such obligations);
(x) any Contractual Obligation under which any Seller is, or may
become, obligated in incur any severance pay or other compensation obligations which would
become payable by reason of, this Agreement of the transactions contemplated hereby;
(xi) any Contractual Obligation under which any Seller is, or may, have
any Liability to any investment bank, broker, financial advisor, finder's agreement or other similar
Person (including an obligation to pay any legal, accounting, brokerage, finder's or similar fees or
expenses in connection with this agreement or the transactions contemplated hereby);
(xii) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, incentive or other plan or arrangement for the benefit of any
Seller's current or former directors, officers, and employees;
(xiii) any Contractual Obligation providing for the employment or
consultancy with an individual on a full-time, part-time, consulting, independent contractor or other
basis or otherwise providing compensation or other benefits to any officer, director, employee or
consultant (other than the Employee Plan);
(xiv) any agency, dealer, distributor, sales representative, marketing or
other similar agreement; or
(xv) any Contractual Obligation (or group of related Contractual
Obligations) the performance of which involves consideration in excess of $25,000 over the life of
such Contractual Obligation.
Each written Contractual Obligation listed on Schedule 5.19 provided to Purchaser is a true, accurate
and complete copy thereof, in each case, as amended or otherwise modified and in effect. The
Sellers will, prior to the Auction Date, deliver to Purchaser a written summary setting forth the terms
and conditions of each oral Contractual Obligation listed on Schedule 5.19.
(b) Enforceability, etc. To the Sellers' Knowledge, each Contractual Obligation
required to be disclosed on Schedules 5.9 (Debt), 5.12 (Real Property), 5.14 (Intellectual Property),
5.17 (Employee Plans), 5.19 (Contracts), 5.21 (Customers and Suppliers) or 5.25 (Insurance) (each, a
"Disclosed Contract") is enforceable against each party to such Contractual Obligation, and is in full
force and effect, and, subject to obtaining any necessary consents disclosed in Schedule 5.3, will
continue to be so enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby.
(c) Breach, etc. No Seller or, to the Sellers' Knowledge, any other party to any
Disclosed Contract is in breach or violation of, or default under, or has repudiated any provision of,
any Disclosed Contract.
5.20. Affiliate Transactions. Except for the matters disclosed on Schedule 5.20, no Seller
or any Affiliate of any Seller is an officer, director, employees, consultant, competitor, creditor,
debtor, customer, distributor, supplier or vendor of, or is a party to any Contractual Obligation with,
any Seller. Except as disclosed on Schedule 5.20, no Persons other than the Sellers owns any Asset
used in, or necessary to, the Business.
5.21. Customer and Suppliers. Schedule 5.21 sets forth the complete and accurate list of
(a) the ten largest customers of the Sellers (measured by aggregate billings) during the fiscal year
ended on the Most Recent Balance Sheet Date, indicating the existing Contractual Obligations for
each such customer by product or service provided and (b) the ten largest suppliers of materials,
products or services to the Sellers (measured by the aggregate amount purchased by the Sellers)
during the fiscal year ended on the Most Recent Balance Sheet Date, indicating the Contractual
Obligations for continued supply from each such supplier. The relationships of the Sellers with the
customers and the suppliers required to be listed on Schedule 5.21 are good commercial working
relationships (subject to payment delinquencies or interruptions related to Sellers' bankruptcy) and
none of such customers or suppliers has canceled, terminated or otherwise materially altered
(including any materials reduction in the rate or amount of sales or purchases of material increase in
the prices charges or paid, as the case may be) or notified the Seller of any intention to do any of the
foregoing or otherwise threatened in writing to cancel, terminate or materially alter (including any
material reduction in the rate or amount of sales or purchases, as the case may be) its relationship
with any Seller and to Sellers' Knowledge there is no basis therefor.
5.22. Employees. Except as disclosed on Schedule 5.22, there are no labor troubles
(including any work slowdown, lockout, stoppage, picketing or strike) pending, or to the Sellers'
Knowledge, threatened between any Seller, on the one hand, and its employees on the other hand,
and there have been no such troubles since January 1, 2002. Except as set forth on Schedule 5.22, (a)
no employees of any Seller are represented by a labor union, (b) no Seller is a part to, or otherwise
subject to, any collective bargaining agreement or other labor union contract, (c) no petition has been
filed or proceeding instituted by an employee of group of employees of any Seller with any labor
relations board seeking recognition of a bargaining representative and (d) there is no organization
effort currently being made of threatened by, or on behalf of, any labor union to organize employees
of any Seller and no demand for recognition of employees of any Seller has been made by, or on
behalf of, any labor union. No executive officer's or other key employee's employment with the
Sellers has been terminated for any reason nor has any such officer or employee notified the
Company of his or her intention to resign or retire since January 1, 2002.
5.23. Litigation; Government Orders.
(a) Litigation. Except as set forth on Schedule 5.23 (which matters have not had,
and are not reasonable likely to have, a Material Adverse Effect), there is no Action to which any
Seller is a part (either as plaintiff or defendant or otherwise) or to which its Assets or the Business
are subject pending, or to the Sellers Knowledge, threatened, which affect any Seller or its ownership
of, or interest in, any Asset or the use or exercise by any Seller of any Asset or the Business. There is
no Action to which the Seller is a part (either as plaintiff or defendant or otherwise) or to which its
Assets or the Business are subject pending, or to the Sellers' Knowledge, threatened, which (a) in any
manner challenges or seeks to rescission of, or seeks to prevents, enjoin, alter or materially delay the
consummation of, or otherwise related to, this Agreement and the transactions contemplated hereby,
or (b) to Sellers' Knowledge, is there any basis for any of the foregoing. Except as set forth on
Schedule 5.23, there is no Action which any Seller presently intends to initiate.
(b) Government Orders. Except as disclosed on Schedule 5.23, no
Government Order has been issued which is applicable to, or otherwise affects, any Seller or its
Assets or the Business.
5.24. Product Warranties; Defects; Liability.
(a) Except as disclosed in Schedule 5.24 (and except for the other Liabilities for
which there is a reserve which meets the standards described in the following sentences), each
Product is, and at all times has been, (a) in compliance with all applicable Legal Requirements, (b) fit
for the ordinary purposes for which it is intended to be used and in conformity with any and all
Contractual Obligations express and implied warranties, promises and affirmations of fact made by
Sellers. No Seller has any Liability (and, to the Sellers' Knowledge, there is no basis for any present
of future Action giving rise to any Liability) for replacement of repair of any Products or any other
Losses in connection with any Products, subject only to the reserve for product warranty claims set
further on the fact of the Most Recent Balance Sheet, as adjusted for the passage of time in
accordance with GAAP, applied on a basis consistent with the principles applied in the preparation of
the Most Recent Balance Sheet, which reserve is adequate to address all such Liabilities. Each
Product contains adequate warnings, the content and display of which conform with the applicable
Legal Requirements and current industry practice. There is no design defect with respect to any
(b) Except as disclosed in Schedule 5.24, no Product is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and conditions of sale, lease of
license. Schedule 5.24 includes a summary of the standard terms and conditions of sale, lease or
license for the Sellers (including applicable guaranty, warranty, and indemnity provisions).
(c) Except as disclosed on Schedule 5.24, there is no Action to which any Seller
is a part pending, or to the Sellers' Knowledge, threatened relating to, or otherwise involving,
alleged defects in the Products or services provided by any Seller, or the failure of any such Products
or services to meet certain specifications, and to the Sellers' Knowledge, there is no basis for any of
the foregoing. Schedule 5.24 sets forth all concluded Actions (including the disposition thereof)
against any Seller since January 1, 2002, relating to, or otherwise involving, alleged defects in the
Products or services provided by any Seller, 0 the alleged failure of any such services of Products to
meet certain specifications. No Seller has any Liability (and, to the Sellers' Knowledge, there is no
basis for any present or future Action giving rise to any Liability) arising out of any injury to any
person or property as a result of any service provided by and Seller, or the ownership, possession, or
use of the Products.
5.25. Insurance. Schedule 5.25 sets further a list of insurance policies, including policies
by which the Sellers, or any of their Assets, employees, officers or directors or the Business has been
insured since January 1, 2002 (the "Liability Policies") and, with respect to such Liability Policies
under which the Sellers, or any of their Assets, employees, officers or directors of the Business is
currently insured (the "Current Liability Policies"). Schedule 5.25 includes for each Liability Policy
the type of policy, form of coverage, policy number and name of insurer and expiration date. The
Sellers have delivered to Purchaser true, accurate and complete copies of all Liability Policies, in
each case, as amended or otherwise modified and currently in effect. Schedule 5.25 describes any
self-insurance arrangements affecting the Sellers. The Sellers have since January 1, 2002 maintained
in full force and effect with financially sound and reputable insurers insurance with respect to their
Assets and the Business, in such amount and against such losses and risks as is customarily carred
by Persons engaged in the same or similar business as Seller and as is required under the terms of any
applicable Real Property Leases of other Contractual Obligations. Except as disclosed on Schedule
5.25, no insurer (a) has questioned, denied or disputed (or otherwise reserved its right with respect to)
the coverage of any claim pending under any Liability Policy or (b) to Sellers' Knowledge has
threatened to cancel any Liability Policy. Except as disclosed on Schedule 5.25, to the Sellers'
Knowledge no insurer plans to raise the premiums for, or materially alter the coverage under, any
Current Liability Policy. Except as disclosed on Schedule 5.25, the Sellers will after the Closing
continue to have coverage under all of the Current Liability Policies with respect to events occurring
prior to the Closing.
5.26. Banking Facilities. Schedule 5.26 sets forth a true, correct and complete list of: (a)
each bank, savings and loan or similar financial institution with which any Seller has an account or
safety deposit box or other arrangements, and any numbers or other identifying codes of such
accounts, safety deposit boxes or such other arrangements maintained by any Seller thereat; and (b)
the names of all persons authorized to draw on any such account or to have access to any such safety
deposit box facility or such other arrangement. Sellers will withdraw all cash on hand in all deposit
accounts prior to the Closing.
5.27. Powers of Attorney. No Seller has general of special powers of attorney outstanding
(whether as grantor or grantee thereof).
5.28. No Brokers. No Seller has any Liability of any kind to, or is subject to any claim of,
any broker, finder or agent in connection with the transactions contemplated hereby other than those
which will be borne by the Sellers.
5.29. Disclosure. The representation and warranties contained in this Section 5 and in the
schedules and the other Seller Documents do not contain and will not contain any untrue statement of
fact or (when taken as a whole) omit to state any material fact necessary in order to make the
statements and information contained therein not misleading in light of the circumstances in which
such statements are made.
REPRESENTATIONS AND WARNTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers that:
6.1. Organization and Good Standing. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties, to carry on its business as currently
conducted and contemplated to be conducted and to perform its obligations under this Agreement
and the Purchaser Documents.
6.2. Authorization of Agreement. Purchaser has full corporate power and authority to
execute and deliver this Agreement and each other agreement, document, instrument or certificate to
be executed by Purchaser in connection with the consummation of the transactions contemplated by
this Agreement (the "Purchaser Documents"), to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The execution and delivery
by Purchaser of this Agreement and the Purchaser Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all requisite corporate
action on behalf of Purchaser. This Agreement has been, and each Purchaser Document will be at or
prior to the Closing, duly executed and delivered by Purchaser and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each
Purchaser Document when so executed and delivered will constitute, the legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms.
6.3. Conflicts: Consents of Third Parties.
(a) None of the execution and delivery by Purchaser of this Agreement or the
Purchaser Documents, the consummation of the transactions contemplated hereby or thereby, or
compliance by Purchaser with any of the provisions hereof or thereof will conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a
right of termination or cancellation under any provision of (i) Purchaser's Organizational Documents,
(ii) any Contract or Permit to which Purchaser is a part or by which Purchaser or its properties are
bound or (iii) any applicable Law.
(b) Except for the consent of the Bankruptcy Court under the Bidding Procedures
Order and the entry of the Sale Order, no consent, waiver, approval, Order, Permit or authorization
of, or declaration or filing with, or notification to, any Person or Governmental Authority is required
on the part of Purchaser in connection with the execution and delivery of this Agreement or the
Purchaser Documents, the compliance by Purchaser with any of the provisions hereof or thereof, the
consummation of the transactions contemplated hereby without any material delay, the performance
by Purchaser of its obligations hereunder, or the taking by Purchaser of any other action
6.4. Litigation. There are no Actions pending or, to the knowledge of Purchaser,
threatened against Purchaser, or to which Purchaser is otherwise a part before any Governmental
Authority, which, if adversely determined, would reasonably be expected to have a Purchaser
Material Adverse Effect. For the purposes of this Agreement, "Purchaser Material Adverse Effect"
means a material adverse effect on the ability of Purchaser to (i) consummate the transactions
contemplated hereby or by the Purchaser Documents without any material delay or (ii) perform their
respective obligations under this Agreement or the Purchaser Documents. Purchaser is not subject to
any Order of any Governmental Authority except to the extent the same would not reasonably be
expected to have a Purchaser Material Adverse Effect.
6.5. No Brokers. Purchaser has no Liability to any broker, finder or agent in connection
with the transactions contemplated hereby other than those which will be borne by Purchaser.
6.6. Financial Capability. Purchaser (i) has, based on existing commitments, sufficient
funds available to pay the Purchase Price subject to the terms of Article II and any expenses incurred
by Purchaser in connection with the transactions contemplated by this Agreement, (ii) has, based on
existing commitments, the resources and capabilities (financial or otherwise) to perform its
obligations hereunder and (iii) has not incurred any obligation, commitment, restriction or Liability
of any kind, that would impair or adversely affect such resources and capabilities or could reasonable
be expected to have a Purchaser Material Adverse Effect.
6.7. Adequate Assurances Regarding Executory Contracts. Purchaser is and will be
capable of satisfying the conditions and requirements contained in Section 365(b)(1)(C) and 365(f) of
the Bankruptcy Code, the Sale Order, this Agreement and the other Seller Documents with respect to
the Assumed Contracts.
BANKRUPTCY COURT MATTERS
7.1. Bankruptcy Actions. Sellers have filed with the Bankruptcy Court a motion in a form
satisfactory to Purchaser seeking, among other things, entry of an order approving (A) the bidding
protections described and/or set forth in Article IV of this Agreement or otherwise set forth in such
motion, and (B) certain bidding procedures for alternative offers for the Purchased Assets, which
order shall be substantially in the form attached hereto as Exhibit H or otherwise acceptable to Seller
and Purchaser (the "Bidding Procedures Order"). No later than three (3) Business Days after the
hearing on the entry of the Bidding Procedures Order, Seller shall file with the Bankruptcy Court a
motion or motions (the "Sale Motion") in form and substance reasonably satisfactory to Purchaser
seeking among other things the entry of the Sale Order and an order approving the Litigation Credit
Facility. The "Sale Order" shall be an order in the form attached hereto as Exhibit F, with such
modifications mutually acceptable to Sellers and Purchaser in their sole respective discretion, and
shall include provisions covering, among other things (i) approving the sale of the Purchased Assets
to Purchaser free and clear of all Encumbrances (other than Permitted Encumbrances) whatsoever
under Section 363 of the Bankruptcy Code and any other applicable sections of the Bankruptcy Code
on the terms and conditions set forth in this Agreement, or such higher and better terms and
conditions offered at the Sale Hearing, and authorizing Sellers to proceed with this transaction; (ii)
stating that any objections timely filed with respect to the sale of the Purchased Assets, which have
not been withdrawn, are overruled or the interests of such objections have been otherwise satisfied or
adequately provided for by the Bankruptcy Court, (iii) finding that the Purchase Price as provided in
Article II represents fair value for the Purchased Assets, (iv) finding that the sale is in the best
interests of Sellers' estates and creditors, (v) finding that Purchaser is a good faith purchaser of the
Purchased Assets under Section 363(m) of the Bankruptcy Code and that the provisions of Section
363(n) of the Bankruptcy Code have not been violated, (vii) finding that upon the Closing, Purchaser
shall be able to operate the business in the same manner as Sellers currently operate the Business
(including, without limitation, any royalty, license or other obligation consistent with how the
Business has previously been conducted); (viii) providing that the Bankruptcy Court shall retain
jurisdiction for the purpose of enforcing the provisions of the Sale Order including, without
limitation, compelling delivery of the Purchased Assets to Purchaser and protecting Purchaser against
any Encumbrances against Sellers or the Purchased Assets; (ix) authorizing and directing Sellers to
execute, deliver, perform under, consummate and implement this Agreement, together with all
additional instruments and documents that may be reasonably necessary or desirable to implement
the foregoing, (x) determining that Purchaser is not a successor to Sellers or otherwise liable for any
of the Excluded Liabilities and permanently enjoining each and every holder of any of the Excluded
Liabilities from commencing, continuing or otherwise pursuing or enforcing any Action or
Encumbrance against Purchaser or the Purchased Assets related thereto; (xi) providing that all
monetary obligations of the Sellers, including any and all indemnification claims asserted by
Purchaser under this Agreement shall be entitled to administrative expense priority in the Chapter 11
Cases pursuant to Sections 503(b) and 507(a) of the Bankruptcy Code; (xii) finding that, pursuant to
Section 1146(a) of the Bankruptcy Code, the within transaction is "in contemplation of a plan or
plans of reorganization to be confirmed in the Chapter 11 Cases," and as such shall be free and clear
of any and all transfer tax, stamp tax or similar Taxes; provided, however, that Purchaser's
obligations hereunder shall not be conditioned on the finding set forth in this clause (xii), (xiii)
providing either that the sale transactions provided for herein shall consummate without requiring
any assumption or assignment of the Sellers' Contracts with Novel, Inc., or that if such assumption
and assignment is required, then the Cure Amount applicable to such Contracts is zero or such other
amount determined by the Bankruptcy Court; (xiv) providing that any p1an(s) of reorganization
respecting the Sellers confirmed in the Chapter 11 Cases (hereinafter, and as same may be amended
or modified, collectively, the "Plan") and any confirmation order(s) entered with respect to such
p1an(s) (hereinafter, and as same may be amended or modified, collectively, the "Confirmation
Order") shall ratify, reaffirm and provide for the assumption by the reorganized Sellers (or any other
successors to the Sellers) under such Plan, all obligations of the Sellers under or relating to the Sale
Order and the Seller Documents; and (xv) providing that (y) the Sale Order, the Seller Documents
and all obligations of the Sellers arising under or relating thereto shall survive entry of (a) any
Confirmation Order, (b) any order converting any of the Chapter 11 Cases to a case under Chapter 7
of the Bankruptcy Code, and (c) any order dismissing any of the Chapter 11 Cases or any successor
cases under Chapter 7 of the Bankruptcy Code; and (z) the Sellers' obligations under or relating to
the Sale Order and Seller Documents (a) shall not be discharged, released, waived, terminated,
modified or in any manner altered by any Plan or Confirmation Order, and (b) shall be binding upon,
and inure to the benefit of, the Purchaser, the Sellers and their estates, and their respective trustees,
officers, heirs, executors, administrators, successors and assigns, including, without limitation, any
Chapter 11 or Chapter 7 trustee appointed with respect to the Chapter 11 Cases.
7.2. Seller Actions. Sellers shall use their reasonable efforts to have the Bankruptcy Court
(i) schedule a hearing on the Sale Motion and (ii) enter the Sale Order as and when contemplated by
the Bidding Procedures Order, but in any case no later than December 21,2007. Furthermore, Sellers
shall use their reasonable efforts to obtain any other approvals or consents from the Bankruptcy
Court that may be reasonably necessary to consummate the transactions contemplated in this
7.3. Purchaser Actions. Purchaser agrees that it will promptly take such reasonable actions
as are reasonably requested by Sellers to assist in obtaining the Sale Order and the Bidding
Procedures Order, including, without limitation, furnishing affidavits or other documents or
information for filing with the Bankruptcy Court for the purposes, among others, of providing
necessary assurances of performance by Purchaser under this Agreement and demonstrating that
Purchaser is a "good faith" purchaser under Section 363(m) of the Bankruptcy Code.
7.4. Competing Bid. From the date hereof until the Bidding Procedures Order is entered,
Sellers shall not, and will not permit any Person acting for or on behalf of Sellers to solicit any offers
for any Alternative Transactions. After the entry, and subject to the terms, of the Bidding Procedures
Order, Sellers may solicit "higher or better" offers for the Purchased Assets pursuant to the Bidding
Procedures Order approved by the Bankruptcy Court in the Bidding Procedures Order ("Competing
Bids") and respond to any inquires or offers for Competing Bids and to perform any and all other
acts reasonably related thereto to the extent required under the Bankruptcy Code or other applicable
Law including, without limitation, supplying information relating to the Purchased Assets and the
Assumed Liabilities to any prospective purchasers constituting qualified purchasers under the
Bidding Procedures Order. If Seller determines in good faith that any offer constitutes a Competing
Bid, Sellers shall have the right to enter into the Competing Bid and Purchaser shall have the right to
terminate this Agreement pursuant to Section 4.4(g).
8.1. Access to Information. Sellers agree that, prior to the Closing Date, Purchaser shall
be entitled, through its officers, employees and representatives (including, without limitation, its
legal advisors and accountants), to make such investigation of the properties, businesses and
operations of the Business and such examination of the books and records of the Business, the
Purchased Assets and the Assumed Liabilities as it reasonably requests and to make extracts and
copies of such books and records. Any such investigation and examination shall be conducted during
regular business hours upon reasonable advance notice and under reasonable circumstances and shall
be subject to restrictions under applicable Law. Sellers shall cause the officers, employees,
consultants, agents, accountants, attorneys and other representatives of Sellers to cooperate with
Purchaser and Purchaser's representatives in connection with such investigation and examination,
and Purchaser and its representatives shall cooperate with Sellers and their representatives and shall
use their reasonable efforts to minimize any disruption to the Business. Notwithstanding anything
herein to the contrary, no such investigation or examination shall be permitted to the extent that it
would require Sellers to disclose information subject to attorney-client privilege or conflict with any
confidentiality obligations to which any Seller is bound. Purchaser will not contact any employee,
customer or supplier of Sellers with respect to this Agreement without the prior written consent of
Sellers (which such consent will not be unreasonably withheld or delayed); provided, however, that
so long as there is no disruption to the Business and Purchaser's conduct is in accordance with the
reasonable requirements of Sellers, Purchaser shall be entitled to contact and engage in discussions
with (i) counterparties to Assumed Contracts in connection with Purchaser's attempt to negotiate
amounts necessary to cure any breach or default under such Contracts, (ii) Sellers' vendors and (iii)
Seller's customers, and, Sellers shall cooperate with Purchaser to facilitate such contact and
discussions between Purchaser and such counterparties, vendors and customers. Promptly following
the date of this Agreement, Seller shall provide Purchaser with contact information for each customer
and supplier identified on Schedule 5.21 and notwithstanding any agreement between the parties to
the contrary, Purchaser shall be entitled to contact such customers and suppliers. Purchaser agrees to
repair at its sole cost any damage to each Facility due to investigation and to indemnify and hold
Sellers harmless of and from any claim for physical damages or physical injuries arising from
Purchaser's investigation of each Facility, and notwithstanding anything to the contrary in this
Agreement, such obligations to repair and to indemnify shall survive the closing or any termination
of this Agreement.
8.2. Conduct of the Business Pending the Closing.
(a) Prior to the Closing, and subject to any obligations as debtors-in-possession
under the Bankruptcy Code and except (1) as set forth on Schedule 8.2(a), (2) as required by
applicable Law, (3) as otherwise expressly contemplated by this Agreement or (4) with the prior
written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or
conditioned), Sellers shall:
(i) use commercially reasonable efforts to maintain the Purchased
Assets in the Ordinary Course of Business, pay expenses and payables, bill customers, collect
receivables, purchase Inventory, repair and continue normal maintenance (normal wear and tear
excepted), maintain theirs books, records and accounts in accordance with GAAP and otherwise
conduct the Business in the Ordinary Course of Business;
(ii) (A) comply in all material respects with all Laws and Assumed
Contracts, (B) maintain all existing Permits applicable to the Business, and (C) pay all applicable
Taxes as such Taxes become due and payable;
(iii) use commercially reasonable efforts to maintain working capital and
current asset and current liability levels consistent with those reflected in the Sellers' financial
statements previously provided to Purchaser;
(iv) maintain in full force and effect all Company Technology owned by
(v) utilize commercially reasonable efforts to pursue Section 363 of the
Bankruptcy Code sales processes and to comply at all times with the Sale Motion and Bidding
(vi) use their commercially reasonable efforts to (A) preserve the present
business operations, organization and goodwill of the Business and (B) preserve the present
relationships with customers and suppliers of the Business and employees of Sellers; and
(vii) promptly inform Purchaser in writing of the occurrence or nonoccurrence
of any event known to any Seller that would cause the condition set forth in Section
10.1(a) not to be satisfied or the breach of any covenant hereunder by any Seller.
(b) Subject to any obligations as debtors-in-possession under the Bankruptcy
Code and except (1) as set forth on Schedule 8.2(b), (2) as required by applicable Law, (3) as
otherwise contemplated by this Agreement or (4) with the prior written consent of Purchaser, Sellers
shall not (and shall not have since the date hereof), solely as it relates to the Business or other Assets
of the Sellers in which the Purchaser has any rights or interests:
(i) modify or amend, in any material respect, or terminate any Contract
set forth on Schedule 5.19 or waive, release or assign any material rights or claims thereunder;
(ii) enter into any Contractual Obligation or transaction relating to the
purchase of Assets primarily for use in the Business in excess of Fifty Thousand Dollars ($50,000);
(iii) increase salaries or wages, declare bonuses, increase compensation
or benefits or institute any new employment arrangement, benefit plan or program with respect to
any director, Employee or consultant, except as required by Law, as required by the terms of
previously existing Employee Plans or in the Ordinary Course of Business, and except that Sellers
can declare or pay bonuses or enter into deferred compensation or similar arrangements in
connection with the retention of the continued services of directors, Employees or consultants;
(iv) sell, lease, transfer, mortgage, encumber, alienate or dispose of
Assets for an aggregate purchase price in excess of Fifty Thousand Dollars ($50,000) except for (A)
sales of Inventory in the Ordinary Course of Business or (B) licenses of Company Technology
granted in the Ordinary Course of Business, subject to the other provisions of this Section 8.2(b);
(v) accelerate any payments that are not currently due under any
maintenance or license agreement or Contractual Obligation (any such acceleration shall result in an
Assumed Liability under Section 2.3);
(vi) enter into any maintenance agreement or Contractual Obligation with
a term of greater than one (1) year;
(vii) renew any maintenance agreement or Contractual Obligation that is
not within one (1) month, for domestic contracts, and within two (2) months, for international
contracts, of the expiration date for maintenance services contained in such agreement;
(viii) renew or reinstate any maintenance agreement that has expired for an
amount less than the annual amount of such maintenance during the last period such maintenance
agreement was in effect; or
(ix) with respect to direct and OEM License Sales, (A) with respect to
any sale to a customer or OEM that was, on the Petition Date, part to an agreement with Seller
granted such customer or OEM a discount from list (a "Contractual Discount Customer"), discount
any sale more than the required contractual percentage off of Seller's list price (the "Required
Discount"), (B) with respect to any sale to a customer or OEM that was not on the Petition Date, a
Contractual Discount Customer, discount any sale more than fiibiblio.org percent (15%); (C) grant any
site licenses, special sales incentives of any form, or engage in any time-shift in financial
performance, or (D) enter a license sale that (i) has not been put into production within two weeks of
sale in the case of direct customers or, in the case of OEMs, has not been shipped to a bona fide
customer within two (2) weeks of sale as evidenced by information received from the customer or
OEM, and (ii) together with all other transactions entered into with such customer or OEM during
the preceding thirty (30) days, exceeds the normal and usual requirements of such customer or OEM
by more than the average monthly volume of licenses sold to such customer or OEM during the
twelve (12) months preceding such transaction;
(x) with respect to Channel Sales, (A) with respect to any Contractual
Discount Customer, discount any sale more than the Required Discount; (B) with respect to any
customer that is not a Contractual Discount Customer, discount any sale more than fiibiblio.org percent
(15%) off of Seller's list price; (C) grant any site licenses, special sales incentives of any form, or
engage in any time-shift in financial performance, or (D) enter into any license sale that (i) has not
been sold to an end user customer within two (2) weeks of sale, as evidenced by information
received from the end user customer and (ii) together with all other transactions entered into with
such distributor during the preceding thirty (30) days exceeds the normal and usual requirements of
such distributor by more than the average monthly volume of licenses sold to such distributor during
the twelve (12) months preceding such transaction;
(xi) discount any Qualified Account Receivable by more than five
(xii) settle any Action or Claim or fail to pursue any Action or Claim in
good faith (including, without limitation, the IBM Litigation, the Novel Litigation and the Linux
Litigation) or assign to any third party any part of any Action or Claim; or
(xiii) agree to do anything prohibited by this Section 8.2.
(c) Prior to the Closing, each of the Sellers shall take any and all necessary
actions to transfer, assign, record or perfect in its name record title to any of its Purchased Assets that
is not presently held or recorded in its name, including, without limitation, filing any necessary
notices of assignment in the United States Patent and Trademark Office or United States Copyright
Office, as applicable, with respect to the Registered Intellectual Property.
8.3. Regulatory Approvals. Purchaser and Sellers shall use commercially reasonable
efforts to (a) obtain all Required Consents and (b) take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, consistent with applicable Law, to consummate the
transactions contemplated hereby.
8.4. Further Assurances. Each of Sellers and Purchaser shall use its commercially
reasonable best efforts to (i) take all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement and (ii) cause the fulfillment at the earliest practicable date of all of
the conditions to their respective obligations to consummate the transactions contemplated by this
Agreement. Sellers will not oppose and will cooperate with Purchaser to create an incentive plan for
key members of the Sellers' management team reasonably requested by Purchaser in order to assist
in connection with the Linux Litigation.
8.5. Assumed Liabilities. Subsequent to the Closing, Purchaser agrees to pay, perform and
discharge the Assumed Liabilities as they become due, including, without limitation, the discharge
and performance when due of each and every obligation of Sellers to be satisfied or performed on or
after the Closing Date, under the Assumed Contracts.
8.6. Intentionally Deleted.
(a) Purchaser acknowledges that the Confidential Information provided to it in
connection with this Agreement, including under Section 8.1, and the consummation of the
transactions contemplated hereby, is subject to the terms of the confidentiality agreement between
Purchaser and Seller dated September 21, 2007 (the "Confidentiality Agreement"), the terms of
which are incorporated herein by reference. Effective upon, and only upon, the Closing Date, the
Confidentiality Agreement shall terminate with respect to Confidential Information relating solely to
the Business or otherwise included in the Purchased Assets; provided, however, that Purchaser
acknowledges that any and all other Confidential Information provided to it by any Seller or its
representatives concerning any Seller and the Subsidiaries shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing Date. For purposes of this Section 8.7
"Confidential Information" shall mean any confidential information with respect to, without
limitation, methods of operation, customers, customer lists, Products, prices, fees, costs, Technology,
inventions, trade secrets, know-how, softare, marketing methods, plans, personnel, suppliers,
competitors, markets or other specialized information or proprietary matters.
(b) The Sellers have had access to and contributed to information and materials
of a highly sensitive nature (including Confidential Information) regarding the Purchased Assets and
the Business. Each Seller agrees that unless it first secures the written consent of an authorized
representative of Purchaser, it shall not use for itself or anyone else, and shall not disclose to others,
any Confidential Information except to the extent such use or disclosure is required by Law (in which
event it shall inform Purchaser in advance of any such required disclosure, shall cooperate with
Purchaser in all reasonable ways in obtaining a protective order or other protection in respect of such
required disclosure, and shall limit such disclosure to the extent reasonably possible while still
complying with such requirements). Each Seller shall use reasonable care to safeguard Confidential
Information and to protect it against disclosure, misuse, espionage, loss and theft.
8.8. Preservation of Records. For a period of five (5) years after the Closing Date (or such
longer period as may be required by any Governmental Authority or ongoing claim):
(a) Purchaser shall not dispose of or destroy any of the business records and files
of the Business held by Purchaser and relating to the period preceding the Closing Date. If Purchaser
wishes to dispose of or destroy such records and files after that time, or if Sellers wish at any time to
destroy any business records and files of the Business held by it, the Party proposing such disposition
or destruction shall first give thirty (30) days' prior written notice to the other Party, and such other
Party shall have the right, at its option and expense, upon prior written notice to the notifying Party
within such 30-day period, to take possession of the records and files within fiibiblio.org (15) days after
the date of such notice. Purchaser shall bear the costs associated with preserving these records.
(b) Each party (the "Requested Party") shall allow the other party and any of its
directors, officers, employees, counsel, representatives, accountants and auditors reasonable access
during normal business hours to all employees and files of the Requested Party and any books and
records and other materials included in the Purchased Assets relating to periods prior to the Closing
Date in connection with general business purposes, whether or not relating to or arising out of this
Agreement or the transactions contemplated hereby (including the preparation of Tax returns,
amended Tax returns or claims for refund (and any materials necessary for the preparation of any of
the foregoing), and financial statements for periods ending on or prior to the Closing Date, the
management and handling of any audit, investigation, litigation or other proceeding in, whether such
audit, investigation, litigation or other proceeding is a matter with respect to which indemnification
may be sought hereunder), to comply with the rules and regulations of the Internal Revenue Service,
the Securities and Exchange Commission or any other Governmental Authority or otherwise relating
to Sellers' other businesses or operations. Sellers shall further provide prompt notice to Purchaser of
any notices, documents or the like delivered or forwarded to any Seller that relate to the Business
acquired by Purchaser.
8.9. Publicity. No Sellers nor Purchaser shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby without obtaining
the prior written approval of the other Parties hereto, which approval will not be unreasonably
withheld or delayed, unless, in the sole judgment of Purchaser or Sellers, disclosure is otherwise
required by applicable Law or by the Bankruptcy Court with respect to filings to be made with the
Bankruptcy Court in connection with this Agreement or by the applicable rules of any stock
exchange on which Purchaser or Sellers list securities, provided that the Party intending to make such
release shall use its reasonable efforts consistent with such applicable Law or Bankruptcy Court
requirement to consult with the other Party with respect to the text thereof.
8.10. Certain Consents. Sellers shall use their commercially reasonable efforts to obtain
prior to (or, if not obtained prior to, subsequent to) the Closing all Required Approvals and Required
Consents. Purchaser will use commercially reasonable efforts to cooperate with Seller in connection
with seeking and obtaining such Required Approvals and Required Consents.
8.11. Sublease and Subcontract. For a period of sixty (60) days after the Closing Date (the
"Transition Period"), Sellers shall, as applicable, sublease or subcontract to Purchaser the contracts
and leases set forth on Schedule 8.11 (the "Transition Agreements") and subcontract to Purchaser
during the Transition Period the provision of such utilities and other services reasonably necessary
and useful to conduct the Business as determined by Purchaser in its sole discretion (the
"Subcontracted Services"), in order to transition the Business and Purchased Assets to Purchaser.
Not less than six (6) Business Days before the Closing Date, the Purchaser shall provide a schedule
setting forth the Subcontract Services. Not more than three (3) Business Days after actually
receiving the such schedule, Sellers shall provide Purchaser with a schedule setting forth the
estimated costs that Sellers will likely accrue or incur under or on account of the Transition
Agreements and the Subcontracted Services during the Transition Period (the "Estimated Transition
Costs"). Purchaser shall be liable for and shall pay within thirty (30) Business Days of notice thereof
from Sellers or their agent, representative or designee any Actual Transition Costs. During the
Transition Period, Sellers shall not seek to reject or terminate any of the Transition Agreements or
the Subcontracted Services except to the extent that any such rejection or termination becomes
effective after the end of the Transition Period. During the Transition Period, Sellers shall, at the
expense and request of Purchaser and to the extent they continue as debtors in possession, object to
or challenge any motion or other attempt to reject, terminate, suspend or modify the Transition
Agreements or the Subcontracted Services except to the extent that any such rejection, termination,
suspension or modification becomes effective after the end of the Transition Period.
EMPLOYEES AND EMPLOYEE BENEFITS
(a) Sellers shall terminate all Employees immediately prior to Closing, other than
employees to be retained by Sellers or Purchaser (as identified by Purchaser not later than the
Closing). Purchaser shall offer employment effective as of the Closing to certain Employees at its
sole discretion as set forth on Schedule 5.22. Employees who accept Purchaser's offer of
employment and become employees of Purchaser as of or after the Closing Date shall be referred to
as the "Transferred Employees" effective on their respective initial dates of employment with
(b) Sellers shall be responsible for providing all WARN notices related to the
termination of the Employees by Sellers, and Sellers shall bear full liability for all WARN Liability
associated with its termination of Employees. Purchaser shall bear no responsibility to provide any
WARN notice associated with the termination of Employees pursuant to the transaction
9.2. Accrued and Unused Vacation. Purchaser agrees to assume and maintain all
Liabilities with respect to accrued vacation pay for each Transferred Employee, as set forth on
Schedule 9.2 and in an aggregate amount to be determined by Purchaser, acting reasonably, in
accordance with such vacation policies set forth on Schedule 9.2.
CONDITIONS TO CLOSING
10.1. Conditions Precedent to Obligations of Purchaser. The obligation of Purchaser to
consummate the transactions contemplated by this Agreement is subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any or all of which may be waived by
Purchaser in whole or in part to the extent permitted by applicable Law):
(a) each of the representations and warranties of Sellers set forth in this
Agreement and the other Seller Documents shall be true and correct in all material respects as of the
Closing Date (or on the date when made in the case of any representation and warranty which
specifically relates to an earlier date) with the same force and effect as though made on and as of the
(b) Sellers shall have performed and complied in all material respects with all
obligations and agreements required in this Agreement or the other Seller Documents to be
performed or complied with by the Sellers prior to the Closing Date;
(c) all Required Approvals and Required Consents required to be obtained by
Sellers for the authorization, execution and delivery of this Agreement and the other Seller
Documents and the consummation of the transactions contemplated hereby and thereby shall have
been obtained by Sellers;
(d) there shall not have occurred an event or failure to act causing a Material
(e) there shall be (i) no pending or overtly threatened Action (other than any
Action which is determined by the parties in good faith, after consulting their respective attorneys, to
be without legal or factual substance or merit), whether brought against any Seller or Purchaser, that
seeks to enjoin the consummation of any of the transactions contemplated by this Agreement, (ii) no
order that has been issued by any Governmental Authority having jurisdiction that restrains or
prohibits the consummation of the purchase and sale of the Purchased Assets hereunder and no
Action pending that is reasonably likely to result in the issuance of such an order; and (iii) no
pending or overtly threatened Action, which has had or is expected to have a Material Adverse
(f) no appeal of or motion for stay, reargument, rehearing or reconsideration with
respect to the Bidding Procedures Order of the Sale Order shall have been served on any Seller or
shall have been filed;
(g) Sellers shall have delivered, or caused to be delivered, to Purchaser all of the
items set forth in Section 4.2 in form and substance satisfactory to Purchaser;
(h) Sellers shall cause its Subsidiaries in the United Kingdom, France, Germany,
Japan and India to assign to Sellers all of its customer agreements and contracts, that are in fact
assignable, and Sellers shall then assign those agreements and contracts that Purchaser identifies in
writing to Purchaser;
(i) with respect to each Assumed Contract, Sellers shall have obtained a final and
non-appealable order from the Bankruptcy Court authorizing Sellers to assume such Assumed
Contract and to assign such Assumed Contract to Purchaser; and
(j) the adjustments to the Purchase Price pursuant to Section 3.1(a) shall not, in
the aggregate, reduce the Purchase Price payable pursuant to Section 3.1(a) to less than zero.
10.2. Conditions Precedent to Obligations of Sellers. The obligations of Sellers to
consummate the transactions contemplated by this Agreement are subject to the satisfaction, prior to
or on the Closing Date, of each of the following conditions (any or all of which may be waived by
Sellers in whole or in part to the extent permitted by applicable Law):
(a) each of the representations and warranties of Purchaser set forth in this
Agreement shall be true and correct, in all material respects on and as of the date hereof and as of the
Closing Date (or on the date when made in the case of any representation and warranty which
specifically relates to an earlier date) with the same force and effect as though made on and as of the
(b) Purchaser shall have performed and complied in all material respects with all
obligations and agreements required by this Agreement and the other Purchase Documents to be
performed or complied with by Purchaser on or prior to the Closing Date; and
(c) Purchaser shall have delivered, or caused to be delivered, to Sellers all of the
items set forth in Section 4.3.
10.3. Conditions Precedent to Obligations of Purchaser and Sellers. The respective
obligations of Purchaser and Sellers to consummate the transactions contemplated by this Agreement
are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions
(any or all of which may be mutually waived by Purchaser and Sellers in whole or in part to the
extent permitted by applicable Law):
(a) there shall not be in effect any Order by a Governmental Authority of
competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(b) the Bankruptcy Court shall have entered the Bidding Procedures Order, in
form and substance acceptable to Sellers and Purchaser; and
(c) the Bankruptcy Court shall have entered the Sale Order; provided that,
notwithstanding anything contained in this Agreement to the contrary, if the Bankruptcy Court issues
the Sale Order but fails to approve the assignment to Purchaser of any Assumed Contract solely by
reason of a failure by Purchaser to provide adequate assurance of future performance as required by
the Bankruptcy Code, then the Assumed Contract the contemplated assignment of which was not
approved by the Bankruptcy Court, shall become an Excluded Asset, and, assuming the other
conditions to Purchaser's obligations under the Agreement have been satisfied, the Parties shall
proceed with the Closing without any corresponding adjustment to the Purchase Price.
10.4. Frustration of Closing Conditions. Neither Sellers nor Purchaser may rely on the
failure of any condition set forth in Section 10.1, 10.2 or 10.3, as the case may be, if such failure was caused by such Party's failure to comply with any provision of
11.1. Transfer Taxes. Purchaser shall have no liability for any sales, use, stamp,
documentary stamp, filing, recording, transfer or similar fees or taxes or governmental charges
(including any interest and penalty thereon) payable in connection with the transactions contemplated
by this Agreement ("Transfer Taxes"). Sellers, however, shall seek to include in the Sale Order a
provision that provides that the transfer of the Purchased Assets shall be free and clear of any stamp
or similar taxes under Section 11 46( a) of the Bankruptcy Code. In addition, Sellers shall indemnify
and hold harmless Purchaser from and against any such Transfer Taxes so long as Purchaser is in
compliance with Section 11.2. Any amounts payable by Sellers to Purchaser on account of such
indemnity shall be entitled to super priority administrative treatment under Sections 503(b) and 507
of the Bankruptcy Code. Sellers and Purchaser shall cooperate and otherwise take commercially
reasonable efforts to obtain any available refunds for Transfer Taxes.
11.2. Purchase Price Allocation. Purchaser shall allocate the Purchase Price (including the
Assumed Liabilities) among the Purchased Assets within one year after Closing and Sellers and
Purchaser shall file their income Tax Returns in Form 8594, in accordance with such allocation;
provided, however, that nothing contained herein shall prevent Sellers and Purchaser from settling
any proposed deficiency or adjustment by any Tax Authority based upon or arising out of the
purchase price allocation, and neither Sellers nor Purchaser shall be required to litigate before any
court, any proposed deficiency or adjustment by any taxing authority challenging such allocation.
Purchaser shall revise from time to time the purchase price allocation so as to report any matters that
need updating (including purchase price adjustments, if any) consistent with the agreed upon
12.1. No Survival of Representations and Warranties. All of the representations and
warranties set forth in this Agreement or any other Seller Document shall terminate and not survive
13.1. Expenses. Except as otherwise provided in this Agreement, Sellers and Purchaser
shall bear their own Fees and Expenses. Notwithstanding the foregoing, in the event of any action or
proceeding to interpret or enforce this Agreement, the prevailing part in such action or proceeding
shall be entitled to have and recover from the non-prevailing part such costs and expenses
(including, without limitation, all court costs and reasonable attorneys' fees) as the prevailing part
may incur in the pursuit or defense thereof.
13.2. Injunctive Relief. Damages at law may be an inadequate remedy for the breach of any
of the covenants, promises and agreements contained in this Agreement, and, accordingly, any Party
hereto shall be entitled to injunctive relief with respect to any such breach, including, without
limitation, specific performance of such covenants, promises or agreements or an order enjoining a
part from any threatened, or from the continuation of any actual, breach of the covenants, promises
or agreements contained in this Agreement. The rights set forth in this Section 13.2 shall be in
addition to any other rights which is Party may have at law or in equity pursuant to this Agreement.
13.3. Entire Agreement: Amendments and Waivers. This Agreement (including the
Schedules and Exhibits hereto) and the Confidentiality Agreement represent the entire understanding
and agreement between the Parties with respect to the subject matter hereof. This Agreement can be
amended, supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the Party against whom
enforcement of any such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any
Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by any Party of a
breach of any provision of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any
Part to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party
preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
13.4. Parties in Interest. Nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any Persons other than Sellers and Purchaser and
their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the obligations or liability of any third Persons to Sellers or Purchaser. No provision of this
Agreement shall give any third Persons any right of subrogation or action over or against Sellers or
13.5. GOVERNING LAW: CONSENT TO SERVICE OF PROCESS: WAIVER OF RIGHT TO TRIAL BY
JURY. THIS AGREEMENT, THE SELLER DOCUMENTS AND THE PURCHASER DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE BANKRUPTCY CODE AND, TO
THE EXTENT NOT INCONSISTENT WITH THE BANKRUPTCY CODE, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS WHICH WOULD RESULT IN THE APPLICATION OF THE
SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. PURCHASER AND SELLERS FURTHER AGREE THAT THE
BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION OVER ALL DISPUTES AND OTHER MATTERS
RELATING TO (A) THE INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER SELLER
DOCUMENT OR PURCHASER DOCUMENT; AND/OR (B) THE PURCHASED ASSETS AND/OR THE ASSUMED
LIABILITIES AND THE PARTIES EXPRESSLY CONSENT TO AND AGREE NOT TO CONTEST SUCH EXCLUSIVE
JURISDICTION; PROVIDED, HOWEVER, THAT IF THE BANKRUPTCY COURT REFUSES TO ACCEPT
JURISDICTION OVER ANY SUCH DISPUTE, THEN ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF
NEW YORK SHALL HAVE JURISDICTION OVER SUCH DISPUTE AND PURCHASER AND SELLERS HEREBY
EACH CONSENT TO THE JURISDICTION OF SUCH COURT IN ANY SUCH CASE. THE PARTIES HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION
WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE BROUGHT
IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE.
EACH OF THE PARTIES HERETO AGREES THAT A JUDGMENT IN ANY SUCH DISPUTE MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN AN OTHER MANNER PROVIDED BY LAW. EACH
PARTY HEREBY CONSENTS TO PROCESS BEING SERVED BY ANY PARTY IN ANY SUIT, ACTION OR
PROCEEDING BY DELIVERY OF A COPY THEREOF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 13.6.
EACH PARTY WAIVES AN RIGHT TO TRIAL BY JURY IN ANY ACTION, MATTER OR PROCEEDING
REGARDING OR RELATING TO THIS AGREEMENT OR ANY OTHER SELLER DOCUMENT OR PURCHASER
13.6. Notices. All notices and other communications under this Agreement shall be in
writing and shall be deemed given (i) when delivered personally by hand (with written confirmation
of receipt), (ii) on the day when sent when sent by facsimile (with written confirmation of
transmission) if so sent and confirmed prior to 5:00 p.m. New York City time on any Business Day
or, if after 5:00 p.m., on the next Business Day or (iii) one Business Day following the day sent by
overnight courier (with written confirmation of receipt), in each case at the following addresses and
facsimile numbers (or to such other address or facsimile number as a part may have specified by
notice given to the other part pursuant to this provision):
If to Sellers, to:
[INSERT NAME & ADDRESS]
With a copy (which shall not constitute notice) to:
Berger Singerman, P.A.
Attention: Arthur J. Spector, Esq.
If to Purchaser, to:
c/o York Capital Management
Attention: Adam J. Semler, CFO and Charles C. Hale, Managing Director
With a copy (which shall not constitute notice) to:
McNutt & Litteneker, LLC
Attention: Scott H. McNutt, Esq.
Proskauer Rose LLP
Attention: Adam J. Kansler, Esq.
13.7. Severability. If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any law or public policy, all other terms or provisions of this
Agreement shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse to
any Party. Upon such determination that any term or other provision is invalid, illegal or incapable
of being enforced, this Agreement shall be modified so as to effect the original economic position of
the Parties as closely as possible in order that the transactions contemplated hereby are consummated
as originally contemplated to the greatest extent possible.
13.8. Binding Effect: Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights in any Person or
entity not a Party to this Agreement except as provided below (including without limitation any
employee or contractor of any Seller). No assignment of this Agreement or of any rights or
obligations hereunder may be made by Sellers (by operation of law or otherwise) without the prior
written consent of Purchaser and any attempted assignment without the required consent shall be
13.9. Non-Recourse. No past, present or future director, officer, employee, incorporator,
member, partner or equityholder (other than Sellers) of any Seller shall have any Liability for any
obligations or Liabilities of Sellers under this Agreement or the Seller Documents or for any claim or
Action based on, in respect of, or by reason of, the transactions contemplated hereby and thereby
except for any claim or Action against an individual based on the fraud of such individual in
connection with the representations set forth in this Agreement or any other Seller Document.
13.10. Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
13.11. Post-Closing Cooperation. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each Seller will take such further
action (including the execution and delivery of such further instruments and documents) as Purchaser
may request, all at the sole cost and expense of the requesting part. Without limiting the foregoing,
if required in order for Sellers to fully pursue any Action retained by Sellers that relates to rights
under Assumed Contracts, or if pursuit of that Action requires information pertaining to Assumed
Contracts, Purchaser will take such actions as may be necessary and reasonably practicable in order
to facilitate Sellers' dispute resolution strategy and the implementation thereof (including, as
appropriate, limited assignments of Contract rights, third-part beneficiary status, and/or joining in
Sellers' Actions as a nominal part for that sole purpose), and Purchaser will otherwise reasonably
cooperate with Sellers to provide information or other assistance in support of Sellers' Actions;
provided that Purchaser will not be required to incur expenses or liabilities, and Purchaser's
compliance herewith will be reasonably tailored in order that Purchaser's obligations will not be
unreasonably burdensome on employees or representatives of Purchaser and will not be in breach of
Assumed Contracts as result of its compliance with this Section 13 .11. In addition, without limiting
the foregoing, if required in order for Purchaser to fully pursue any Action acquired by Purchaser that
relates to rights under any agreements or assets or rights held by Sellers, or if pursuit of an Action
requires information pertaining to such agreements, assets or rights, Sellers will take such actions as
may be necessary and reasonably practicable in order to facilitate Purchaser's dispute resolution
strategy and the implementation thereof (including, as appropriate, limited assignments of contract
rights, third-part beneficiary status, and/or joining in Purchaser's Actions as a nominal part for that
sole purpose), and Sellers will otherwise reasonably cooperate with Purchaser to provide information
or other assistance in support of Purchaser's Actions; provided that Sellers will not be required to
incur expenses or liabilities, and Sellers' compliance herewith will be reasonably tailored in order
that Sellers' obligations will not be unreasonably burdensome on employees or representatives of
Sellers and will not be in breach of the applicable contracts, rights or agreements as result of
its compliance with this Section. In addition, the Parties will act reasonably and communicate with
each other and their respective counsel and advisors, and discuss strategy, tactics and goals under a
joint prosecution or confidentiality agreement as to be approved prior to Closing, and the Parties will
provide status reports and respond to inquires from time to time in furtherance of their mutual
cooperation and assurance covenants herein.
13.12. No Third Party Beneficiaries. This Agreement is intended for the benefit of the Parties
and their respective successors and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except as otherwise expressly provided in this Agreement.
13.13. Limitation on Damages. No Party nor any of its respective Affiliates, officers,
directors, employees, agents, representatives, successors and assigns shall be liable to any other Party
or its respective Affiliates, officers, directors, employees, agents, representatives, successors and
assigns, whether in contract, tort, negligence, indemnity, strict liability or otherwise, for any punitive,
special, indirect, incidental or consequential damages in connection with or arising out of or relating
to the performance, non-performance or breach of this Agreement or any other Seller Document or
Purchaser Document or any obligations arising hereunder or thereunder.
13.14. Risk of Loss.
(a) Sellers will bear all risk of loss occurring to or upon any portion of the
Purchased Assets prior to the Closing, other than any Losses caused by acts of gross negligence of
Purchaser or any of its representatives or agents, which Losses shall be the responsibility of
Purchaser upon Closing.
(b) If, prior to Closing, all or any material portion of the Purchased Assets is
taken by eminent domain or is the subject of a pending, or to Sellers' Knowledge, contemplated
taking which has not been consummated, or if all or a material portion of the Purchased Assets is
damaged or destroyed by earthquake, fire or other casualty, Sellers shall notify Purchaser promptly in
writing of such fact. If such taking, contemplated taking, damage or destruction would have a
Material Adverse Effect, Sellers shall have the option, if exercised by prompt notice to Purchaser, to
restore, repair or replace the taken or damaged Purchased Assets prior to the Closing. Upon any
taking, contemplated taking, damage or destruction of less than a material portion of the Purchased
Assets, Purchaser and Sellers shall negotiate in good faith to settle the Losses resulting from such
taking, damage or destruction by making a fair and equitable adjustment to the Purchase Price and,
subject to all other terms and conditions of this Agreement, proceed with the consummation of the
transactions contemplated by this Agreement at Closing. If Sellers elect to restore, repair or replace
the Purchased Assets, which election shall be made by notice to Purchaser within shirt (30) days
following the occurrence of the taking or casualty, the completion of the restoration, repair or
replacement shall be a condition to the Closing pursuant to Section 10.1 and the Closing Date shall
automatically be postponed at the election of Sellers for the amount of time reasonably necessary to
complete such restoration, repair or replacement (not to exceed 180 days after receipt by Purchaser of
such notice without Purchaser's consent). In the event that Sellers elect not to restore, repair or
replace such damaged Purchased Assets, or in the event that Sellers, having elected to restore, repair
or replace such damaged Purchased Assets, fails to complete the repair, replacement or restoration
within such 180-day period, then the Parties shall negotiate in good faith an equitable adjustment to
the Purchase Price to reflect to impact of the casualty or taking, as mitigated by any restoration,
repair or replacement work actually completed by Sellers, on the Purchased Assets being sold to
Purchaser, and shall, subject to all other terms and conditions of this Agreement, proceed with the
consummation of the transactions contemplated by this Agreement at Closing. In the event that the
Parties fail to reach agreement on an equitable adjustment to the Purchase Price within thirty (30)
days, then Purchaser shall have the option, exercisable by written notice to any Seller, within fiibiblio.org
(15) days immediately following the expiration of such thirty (30)-day period, to either (i) proceed
with the consummation of the transactions contemplated by this Agreement at Closing, with a
reduction in the Purchase Price consistent with Sellers' last offer communicated to Purchaser, in
which event Sellers shall assign over and deliver to Purchaser at Closing all condemnation or
insurance proceeds which Sellers have received or to which Sellers are entitled by virtue of such
casualty or taking or (ii) terminate this Agreement, in which event this Agreement shall terminate
and neither Party shall thereafter have any obligation or Liability to the other by reason of such
termination except pursuant to Section 4.6. If Purchaser shall fail to make such election within the
prescribed fiibiblio.org (15)-day period, Purchaser shall be deemed to have made an election to proceed
with the Closing.
13.15. Acknowledgment. Purchaser acknowledges the existence of the Novell Exception
as defined herein. Purchaser has undertaken preliminary independent due diligence with respect
thereto and has been provided with underlying facts and circumstances. Sellers advise and
Purchasers acknowledge that the Novell Exception qualifies and affects various representations
and warranties of the Sellers.
[Remainder of page intentionally left blank.
Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date first written above.
The SCO Group, Inc.
SCO Operations, Inc.
SCO Global, Inc.
[Add other Sellers]