EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 27th day of March, 2001, by and between SOCRATES TECHNOLOGIES
CORPORATION ("Socrates"), a Delaware corporation, NETWORKLAND, INC.
("Networkland"), TECHNET COMPUTER SERVICES, INC. ("Technet"), both Virginia
corporations (Technet and Networkland are sometimes referred to as "each Seller"
and collectively referred to herein as "Sellers'), and CBQ, INC., a Colorado
corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Socrates, through its wholly-owned subsidiaries, Networkland
and Technet, is engaged in the software development and technology services
business in the United States (the "Business"); and
WHEREAS, Sellers desires to sell to Purchaser and Purchaser desire to
acquire from Sellers substantially all of the assets of Sellers.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, each intending to be legally bound, do hereby agree as follows:
ARTICLE I
1. Definitions.
1.1 Defined Terms. As used herein, the following terms, unless the context
otherwise requires, whether capitalized or not, shall have the meanings set
forth respectively after each such term.
"Accounts Receivable" has the meaning set forth in Section 3.20.
"Adjusted Earnings" means earnings before interest, taxes, depreciation
and amortization accounted for consistent with GAAP.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person will be deemed to control another Person if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, partnership interests or other equity
interests, by contract or otherwise.
"Agreement" has the meaning set forth in the prologue, and includes all
of the exhibits and Schedules hereto.
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"Assets" means all of the right, title and interest of Sellers in and
to all of their assets, properties and rights, both tangible and intangible of
every kind, nature and description whatsoever and wherever the same may be
located, which are listed on Schedule 1.1 to this Agreement and goodwill, claims
and causes of action arising in connection with the Assets after the Closing
Date, and the Books and Records; provided, however, that the Assets shall not
include the Excluded Assets.
"Asset Leases" has the meaning set forth in Section 3.10.
"Assumed Liabilities" means the account payables of Networkland and
Technet as disclosed on the unaudited March 6, 2001 Balance Sheets of
Networkland and Technet.
"Books and Records" shall mean all of the books and records of Sellers
in any way related to the Assets or the Business, including without limitation,
(a) books and records relating to the purchase of materials and supplies,
invoices, customer lists, supplier lists, personnel records and subscriber
information, and (b) computer software and data in computer readable and/or
human readable form used to maintain such books and records together with the
media on which such software and data are stored and all documentation relating
thereto.
"Business" has the meaning set forth in the recitals.
"Business Day" means any day of the year on which banks are not
required or authorized to be closed in the State of Maryland.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Closing Balance Sheet" means the balance sheet of the Business as of
the Closing as finally determined pursuant to Section 2.6.
"Consideration Shares" has the meaning set forth in Section 2.2.
"Consulting Period" has the meaning set forth in Section 5.12.
"Contracts" means all leases, contracts, commitments, understandings
and agreements to which each Seller is a party and which are used or useful in
the Business; including without limitation, those contracts set forth on
Schedule 3.8, whether written or oral.
"Damages" has the meaning set forth in Section 9.2(b).
"Environmental Laws" means any Laws relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or Hazardous Materials or
wastes into the environment (including ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or Hazardous Materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent named in the Escrow Agreement.
"Escrow Agreement" means that certain Collateral Agreement and Security
Agreement in form and substance reasonably acceptable to the Sellers, the
Purchaser and the Collateral Agent (as defined in the Collateral Agreement).
"Escrow Deposit" means the Consideration Shares and the Note delivered
to the Collateral Agent.
"Excluded Assets" means those assets of the Business not included in
the Assets and retained by Sellers or Socrates.
"Excluded Liabilities" means all liabilities or obligations of Sellers
(i) under this Agreement, (ii) with respect to inter-company accounts payable
owed by either of the Subsidiaries to Socrates, (iii) under any employment
agreement Socrates or either of the Sellers have with any employee, or (iv) not
expressly assumed by Purchaser under this Agreement.
"Financial Statements" means the unaudited balance sheet of Technet
dated March 6, 2001 and the balance sheet of Networkland dated March 6, 2001.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means the federal government, any state,
county, municipal, local or foreign government and any governmental agency,
bureau, commission, authority or body.
"Hazardous Materials" means any pollutants, hazardous or toxic
materials, substances or wastes, including: petroleum and petroleum products and
derivatives; asbestos; radon; polychlorinated bi-phenyls; urea-formaldehyde foam
insulation; explosives; radioactive materials; laboratory wastes and medical
wastes (including contaminated clothing, body fluids, contaminated medical
instruments and equipment, catheters, used bandages, gauzes, needles or other
sharp instruments); and any chemicals, materials or substances designated or
regulated as hazardous or as toxic substances, materials, or wastes, or
other-wise regulated, under any Environmental Law.
"Intellectual Property" means all patents, trademarks, trademark
rights, trade names, product designations, service marks, copyrights and
applications for any of the foregoing used or owned by Seller, all electronic
data processing systems, information systems, computer software
programs, program specifications charts, procedures, source codes, input data,
routines, data bases, report layouts, formats, record file layouts, diagrams,
functional specifications, narrative descriptions, flow charts and other related
material which have been used, or are currently used or useful in, the Business.
"Knowledge," "best of knowledge," "aware" or similar expressions means
the actual knowledge, after due inquiry, of the officers and directors of
Sellers and Socrates.
"Law" means any statute, ordinance, code, rule, regulation or order
enacted, adopted, promulgated, applied or followed by any Governmental
Authority.
"Licenses and Permits" has the meaning set forth in Section 3.15.
"Liens" means any encumbrance, security interest, mortgage or other
lien.
"Material Adverse Effect" means with respect to any Person, a material
adverse effect on the financial condition, operations, assets, prospects,
results of operations, cash flows or the business of such Person, or a material
adverse effect on the ability of such Person to consummate the transactions
contemplated by this Agreement.
"Note" means that certain note in the principal amount of Seven Hundred
Thousand Dollars and No Cents ($700,000.00) as attached hereto as Exhibit A.
"Noteholders" means those individuals and entities listed on Exhibit B.
"Objection Period" has the meaning set forth in Section 2.6.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent
for which adequate reserves have been established, (ii) any Lien for Taxes being
contested in good faith by appropriate proceedings for which adequate reserves
have been established, (ii) any statutory encumbrance arising in the ordinary
course of business by operation of law with respect to a liability that is not
yet due or delinquent for which adequate reserves have been established, and
(iii) any Liens with respect to the Assets that arise out of (A) the rights of
any lessors (or any creditors thereof) thereunder, or (B) fee mortgages.
"Person" means any individual, trustee, corporation, general or limited
partnership, limited liability company, joint venture, joint stock company,
bank, firm, Governmental Agency, trust, association, organization or
unincorporated entity of any kind.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one
individual including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchaser" has the meaning set forth in the prologue to this
Agreement.
"Purchaser Basket" has the meaning set forth in Section 9.2(a).
"Purchaser Damages" has the meaning set forth in Section 9.2(a).
"Real Property Leases" has the meaning set forth in Section 3.9(a).
"Registration Date" means October 1, 2001.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"Sellers" has the meaning set forth in the prologue to this Agreement.
"Seller Basket" has the meaning set forth in Section 9.2(b).
"Seller Damages" has the meaning set forth in Section 9.2(b).
"Tax" or "Taxes" means all taxes, charges, fees, levies, tariffs,
charges, duties or other assessments, and all estimated payments thereof,
including but not limited to income, excise, property, sales, use, value added,
environmental, franchise, payroll, transfer, gross receipts, withholding, social
security, and unemployment taxes, imposed by any foreign, federal, state, county
or local government, or any subdivision or agency thereof, and any interest,
penalty and expense relating to such taxes, charges, fees, levies or other
assessments.
"Transfer Taxes" means all sales, use, transfer, real property
transfer, reporting, recording and other similar Taxes arising out of or in
connection with the transactions effected pursuant to this Agreement.
"Transferred Employees" has the meaning set forth in Section 5.6.
1.2 Use of Defined Terms. Any defined term used in the plural shall refer to all
members of the relevant class, and any defined term used in the singular shall
refer to any one or more of the members of the relevant class. The use of any
gender shall be applicable to all genders.
1.3 Miscellaneous Terms. The terms "herein," "hereof," "hereto," "hereunder" and
other terms similar to such terms shall refer to this Agreement as a whole and
not merely to the
specific article, section, paragraph or clause where such terms may appear. The
term "including" shall mean "including, but not limited to."
ARTICLE II
2. Sale and Purchase of the Assets
2.1 Sale and Purchase. Subject to the terms and upon satisfaction of the
conditions contained in this Agreement, at the Closing, Sellers shall sell,
convey, transfer, assign and deliver to Purchaser the Assets, and Purchaser
shall purchase, acquire and accept from Sellers, the Assets, free and clear of
all Liens other than Permitted Liens, and Purchaser shall assume and become
responsible for the Assumed Liabilities.
2.2 Purchase Price. Subject to the provisions of the Escrow Agreement, Purchaser
shall pay, deliver and transfer to Sellers at the Closing as consideration for
the Assets, the following: (a) Seven Million Six Hundred Fifty Thousand
(7,650,000) shares of voting common stock of Purchaser with a par value of $.01
per share (the "Consideration Shares"), (b) the Note, and (c) assume the Assumed
Liabilities. The Assets are sold "as is" without any special representations as
to use or merchantability other than those expressly set forth herein.
2.3 The Closing. Subject to the terms and conditions of this Agreement, the sale
and purchase of the Assets contemplated hereby shall take place at a closing
(the "Closing") at the offices of Thomas & Libowitz, P.A., 100 Light Street,
Suite 1100, Baltimore, Maryland 21202 1053 at 10:00 a.m., local time, on the
date which is three (3) Business Days after the satisfaction or waiver of all of
the conditions to the consummation of the sale and purchase of the Assets
contemplated hereby or at such other time and place as the Seller and the
Purchaser shall mutually agree upon but, in any event, no later than March 30,
2001 (the day on which the Closing takes place shall be referred to herein as
the "Closing Date", and the Closing shall deemed to be effective as of 12:01
a.m. on the Closing Date).
2.4 Deliveries at the Closing. Subject to the provisions of Articles VI and VII
hereof and the Escrow Agreement, at the Closing:
(a) Sellers will deliver, or cause to be delivered, to Purchaser against payment
of the Purchase Price as provided herein and assumption of the Assumed
Liabilities by Purchaser:
(i) the instruments of transfer described in Section 6.5; and
(ii) all certificates and other instruments and documents
contemplated under Article VI to be delivered by
Sellers to Purchaser at or prior to the Closing.
(b) Subject to the Escrow Agreement, Purchaser will deliver, or cause to be
delivered to Sellers:
(i) the Consideration Shares;
(ii) the Note;
(iii) the instruments of assumption described in Section 7.5; and
(iv) all certificates and other instruments and documents contemplated under
Article VII to be delivered by Purchaser to Seller at or prior to the
Closing.
2.5 Allocation of Purchase Price. Sellers and Purchaser agree to allocate the
Purchase Price for all purposes (including financial accounting and Tax
purposes) in accordance with an allocation schedule to be prepared by Purchaser
(which schedule shall be reasonably acceptable to Seller) and file IRS Form 8594
in accordance with that allocation. Any dispute over the allocation of the
Purchase Price shall be resolved in accordance with the dispute resolution
process set forth in Section 2.6 below.
2.6 Closing Balance Sheet; Prorations. Not later than twenty (20) days after the
Closing Date, Purchaser shall prepare and deliver to Socrates a balance sheet of
the Business as of the Closing. Such balance sheet shall be prepared in
accordance with GAAP as of the Closing, and shall include pro rated (based on
the number of days during the relevant period) prepaid expenses and other
payments made pre-Closing by Sellers in respect of the Assets (including
pursuant to Contracts) that relate to post-Closing periods and payments made
post Closing by Purchaser in respect of the Assets and expenses that relate to
goods and services provided in pre-Closing periods. From and after the Closing,
Purchaser shall provide Socrates and its representatives and accountants access
to such books, records and personnel of the Business as is reasonably requested
by Socrates to permit Socrates and its representatives or accountants to prepare
a balance sheet of the Business as of the Closing and to otherwise determine the
accuracy and basis for Purchaser's Closing balance sheet and prorations.
Socrates shall have thirty (30) days after delivery by the Purchaser of its
Closing balance sheet (the "Objection Period") to object to any item or items
shown on thereon, and during the Objection Period, Socrates and its
representatives and accountants shall have access to all work papers of the
Purchaser and its accountants which were used in the preparation thereof. If
Socrates does not object during the Objection Period, the Closing balance sheet
received by Socrates and such prorations shall be conclusive and binding on the
parties hereto and may not be challenged by any of them in any forum, in which
case, Socrates or Purchaser, as the case may be, shall remit to the other party
the appropriate payment no later than five (5) days after the last day of the
Objection Period. If Socrates and Purchaser are unable to resolve any dispute
with respect to the Closing balance sheet or such prorations within thirty (30)
days after delivery by Socrates of Socrates' objections, the matter or matters
in dispute shall be submitted to such firm of nationally or regionally
recognized accountants as Socrates and Purchaser may agree if they cannot so
agree, Socrates shall select one such firm and Purchaser shall select another
and the two firms so chosen shall select a third firm of nationally or
regionally recognized accountants to which such dispute shall be submitted. The
accounting firm chosen, whether by agreement of Purchaser and
Socrates or by their, respective accountants, shall be limited to determining a
value for those items on the Closing balance sheet prepared by the Purchaser or
for the prorations that are in dispute by Socrates in accordance with this
Section 2.6 and are not resolved by agreement between Purchaser and Socrates.
The decision of such firm shall be conclusive and binding upon Socrates and
Purchaser and shall be incorporated into the Purchaser's Closing balance sheet
which shall thereupon be conclusive and binding on the parties, and may not be
challenged by either of them in any forum, and the fees and costs therefor shall
be borne by the parties in a proportion to be determined by such accounting firm
taking into account the relative fault of the parties in the dispute. Socrates
or Purchaser, as the case may be, shall remit to the other the amount found to
be due hereunder within five (5) days after the decision of the accountants has
been received. All amounts payable by Socrates or Purchaser, as the case may be,
hereunder and any indemnification obligation by either Socrates or Purchaser, as
the case may be, for breach hereof shall be without regard to the limitations on
indemnification contained in Article IX hereof which limitations shall not apply
hereto.
2.7 Payment from Escrow. If Sellers or Socrates fail to pay any amount due and
owing by Sellers or Socrates to Purchaser within the time periods prescribed in
Section 2.6, Purchaser may recover the amounts due from Sellers or Socrates from
the Escrow Deposit in accordance with the terms of the Escrow Agreement upon
written notice to Socrates as provided by the Escrow Agreement.
ARTICLE III
3. Representations and Warranties of Sellers.
Each Seller hereby, together with Socrates, jointly and severally,
represent and warrant to Purchaser as follows:
3.1 Organization, Standing, Power and Qualification. Sellers are corporations
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Sellers have all requisite right, power and authority
to enter into this Agreement and to carry out their obligations hereunder. The
execution, delivery and performance of this Agreement by Sellers have been duly
and validly authorized by Sellers and Sellers' boards of directors and
stockholders, to the extent, if any, required by Virginia law, and no other
proceedings on the part of Sellers are necessary to authorize this Agreement or
the transactions contemplated hereby. This Agreement has been duly and validly
executed by Sellers and, assuming due authorization, execution and delivery by
each other party hereto, this Agreement constitutes a legal, valid and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms,
except as may be limited by bankruptcy, moratorium and insolvency laws and by
other laws affecting the rights of creditors generally and except as may be
limited by the availability of equitable remedies.
3.2 No Conflict. Except as set forth on Schedule 3.2, the execution and delivery
of this Agreement does not, and the consummation of the transactions described
herein will not result in or constitute a default, breach or violation of the
Certificate of Incorporation or By-laws
of Sellers or any Contract to which Sellers are a party or by which the Assets
are bound, or a violation of any Law or judgment of any court or other
Governmental Authority.
3.3 Financial Statements. Schedule 3.3 contains a copy of the Financial
Statements. To Sellers' Knowledge, the Financial Statements fairly present in
all material respects the results of operation and financial position of Sellers
for the periods reflected thereon; provided, however, that the Financial
Statements are complied and not audited.
3.4 Absence of Undisclosed Liabilities. To Sellers' Knowledge, except as set
forth on Schedule 3.4, since December 31, 2000, Sellers have not incurred any
indebtedness, liability or obligation of any nature, whether absolute, accrued,
contingent or otherwise, related to or arising from the ownership, possession or
use of the Assets, except for indebtedness, liabilities or obligations incurred
in the ordinary course of its business consistent with past practice and as
reflected on the Financial Statements.
3.5 Absence of Certain Developments. Except as disclosed on Schedule 3.5, since
December 31, 2000, Sellers have operated the Business in the ordinary course
consistent with past practice and there has not been any:
(a) event which has had or would, individually or in the aggregate, have a
Material Adverse Effect with respect to either Seller; provided, however, the
parties acknowledge and understand that Farshad Sajedi's employment as chief
executive officer and president of Technet Computer Services, Inc. and
Networkland, Inc. was terminated on March 23, 2001 for cause;
(b) material damage, destruction or loss, whether or not insured, affecting
the Assets.
(c) intentional failure to maintain in full force and effect insurance
coverage for destruction, damage to or loss of any of the material Assets;
(d) sale, lease, transfer, or assignment of any of the Assets; or
(e) agreement or understanding legally obligating it to take any of the
actions described above in this Section 3.5.
3.6 Taxes
(a) Except as set forth on Schedule 3.6(a), Sellers have (i) filed, or caused to
be filed for themselves, as applicable, with the appropriate Governmental
Authority, all required Tax and information returns, and (ii) paid, caused to be
paid or accrued all Taxes shown to be due and payable or claimed to be due and
payable thereon for any period ending on or before the Closing.
(b)
Except as set forth on Schedule 3.6(b), (i) there are no audit
examinations being conducted or, to the Knowledge of Sellers, threatened against
either Seller, and (ii) there is no deficiency, litigation or controversy in
progress or, to the Knowledge of Sellers, threatened, with respect to any Taxes
previously paid by either of the Sellers or with respect to any Returns
previously filed by or on behalf of either of the Sellers.
3.7 Insurance. Schedule 3.7 sets forth a list and summary description (including
the name of the insurer, type of coverage, annual premium and policy period),
that is accurate in all material respects as of the date hereof, of all binders
or policies of fire, liability, product liability, workers compensation,
vehicular, unemployment and other insurance, self insurance programs and
fidelity bonds which are maintained by Sellers or in which Sellers are a named
insured and which cover the Assets.
3.8 Contracts. Schedule 3.8 sets forth, as of the date hereof, a list of the
Contracts by which the Sellers or any of the Assets are bound. A copy of each
Contract has been made available by Sellers to Purchaser. Each Contract is in
full force and effect and Sellers have complied with each Contract except where
the failure to so comply would not be reasonably likely to have a Material
Adverse Effect with respect to such Seller. To the Knowledge of Sellers, each
other party to each Contract has complied with all material commitments and
obligations on its part to be performed or observed thereunder. Neither Seller
has received any notice of a default, offset or counterclaim under any Contract
and no event or condition has happened or presently exists which constitutes a
default or, after notice or lapse of time or both, would constitute a default
under any Contract, except for such defaults, offsets or counterclaims which
would not be reasonably likely to have a Material Adverse Effect with respect to
either Seller or the Assets.
3.9 Real Property.
(a) Neither Seller owns any real property. Schedule 3.9 sets forth a list
(including the name of the landlord, term and annual rental), that is accurate
in all material respects, of all real property that is leased or subleased by
the Sellers as of the date hereof and used by the Sellers in the operation of
the Business (collectively, "Real Property Leases").
(b) A copy of each Real Property Lease has been made available by Sellers to
Purchaser. Each Real Property Lease is in full force and effect and Sellers have
complied with each Real Property Lease except where the failure to so comply
would not be reasonably likely to have a Material Adverse Effect with respect to
Sellers. To the Knowledge of Sellers, each other party to a Real Property Lease
has complied with all material commitments and obligations on its part to be
performed or observed thereunder. Sellers have not received any notice of a
default, offset or counterclaim under any Real Property Lease and no event or
condition has happened or presently exists which constitutes a default or, after
notice or lapse of time or both, would constitute a default under any Real
Property Lease.
3.10 Title, Etc.
(a) Except as set forth on Schedule 3.10 and except for Liens that will be
released prior to Closing, Sellers have good and clear title to the Assets, free
and clear of all Liens other than Permitted Liens. The Assets (to the extent
applicable) are in good operating condition and repair (reasonable wear and tear
excepted), are suitable for the purposes for which it is currently being used
and is adequate to meet all current and reasonably anticipated future
requirements of the Business, as currently conducted. Each Asset marked with an
asterisk on Schedule 1.1 is leased or subleased (each an "Asset Lease" and
collectively, the "Asset Leases") by either of the Sellers as of the date
hereof.
(b) A copy of each Asset Lease has been made available by Sellers to Purchaser.
Each Asset Lease is in full force and effect and each Seller has complied with
each Asset Lease to the extent such Asset Lease is applicable to such Seller. To
the Knowledge of Sellers, each other party to any Asset Lease has complied with
all material commitments and obligations on its part to be performed or observed
thereunder. Neither of the Sellers has received any notice of a default, offset
or counterclaim under any of the Asset Leases and no event or condition has
happened or presently exists which constitutes a default or, after notice or
lapse of time or both, would constitute a default under any of the Asset Leases,
except for such notices, defaults, offsets or counterclaims which would not be
reasonably likely to have a Material Adverse Effect with respect to either
Seller or the Assets.
3.11 Environmental Matters.
(a) No judgment has been issued, no claim has been filed, no penalty has been
assessed and, to the Knowledge of Sellers, no investigation or review has
occurred or is pending or threatened against Sellers or either of them, by any
Governmental Authority with respect to (i) any alleged failure by Sellers to
have any License and Permit required under applicable Environmental Laws, or
(ii) any generation, treatment, storage, recycling, transportation, discharge,
disposal or release of any Hazardous Materials generated by Sellers, and, to the
Knowledge of Sellers, there are no facts or circumstances in existence which
could form the basis for any such judgment, claim or penalty.
(b) Neither Sellers own, operate or lease a treatment, storage or disposal
facility requiring a permit under any Law.
3.12 Intellectual Property.
(a) Schedule 3.12 sets forth a list, that is accurate in all material respects,
of all Intellectual Property used in the Business by each Seller as currently
conducted.
(b) Except as set forth on Schedule 3.12, each Seller, as applicable, is
licensed or otherwise has the right to use all Intellectual Property used in the
Business by such Seller.
(c) Except as set forth on Schedule 3.12, to the Knowledge of Sellers, the use
of the Intellectual Property does not infringe upon or otherwise violate the
rights of any third party in or to such Intellectual Property. No claim has been
asserted with respect thereto. Sellers have no Knowledge of any claim that can
be asserted by any Person against either Seller with respect to the use of any
item of Intellectual Property challenging or questioning the validity or
effectiveness of such use of any such item.
3.13 ERISA Matters. Schedule 3.13 contains a list, which is accurate in all
material respects, of each Plan covering any proposed Transferred Employee (as
defined in Section 5.6). Sellers have made available to Purchaser a copy of each
such Plan. There have been no material violations of any reporting or disclosure
requirements under ERISA with respect to any Plan.
3.14 Compliance with Laws. Each of Sellers and the material Assets comply in all
material respects with all applicable Laws.
3.15 Licenses and Permits. Schedule 3.15 contains a list (including the name of
the licensor, a summary of the license and the date of expiration or renewal),
that is accurate in all material respects as of the date hereof, of any licenses
(other than licenses of Intellectual Property), permits, approvals, franchises,
registrations or authorizations issued to either Seller and used in the Business
(collectively, "Licenses and Permits"). All Licenses and Permits are valid and
in full force and effect and there are no pending or threatened proceedings
which could result in the termination, revocation, limitation or impairment of
any such Licenses and Permits.
3.16 Legal Proceeding. Except as set forth on Schedule 3.16, neither Sellers are
engaged in or a party to or, to the Knowledge of Sellers, threatened with any
action, suit, proceeding, complaint, charge, investigation or arbitration, and,
to the Knowledge of Sellers, there is no reasonable basis for any such action
against either or any of the Assets. Neither Sellers have received written
notice of any investigation threatened or contemplated by any Governmental
Authority.
3.17 Employees. (a) Schedule 3.17 sets forth a list that is accurate in all
material respects of all employees of the Sellers employed as of the date hereof
who earned in excess of Twenty Thousand Dollars ($20,000.00) in 2000 or whose
present rate of pay would cause them to earn more than that amount in fiscal
year 2001, and indicates the salary, bonus, vacation, sick leave, deferred
compensation, and severance pay, if any, to which such employee is currently
entitled. To the Knowledge of Sellers, no executive, key employee, or group of
employees has any plans to terminate their employment with either of the
Sellers, whether by reason of the transactions contemplated by this Agreement or
otherwise. Except as set forth on Schedule 3.17, neither Seller is a party to or
subject to any collective bargaining agreement or written or oral employment
agreement with any employee. Except as set forth in Schedule 3.17, to the
Knowledge of Sellers, there is no union campaign being conducted to solicit
cards from any employees authorizing a union to represent any of the employees
of either Seller or to request a National Labor Relations Board certification
election with respect to any employees. With respect to the employees, the
Sellers have complied in all material respects with all laws, rules and
regulations relating to the employment of labor, including those related to
wages, hours,
collective bargaining, occupational safety, discrimination, and the payment of
social security and other payroll-related taxes, and has not received any notice
alleging that the Sellers have failed to comply materially with any such laws,
rules, or regulations.
3.18 Disclosure. The representations and warranties of Sellers contained in this
Agreement, when made, do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements and
information contained in this Agreement not misleading.
3.19 Insolvency Proceedings. Neither of the Sellers nor any of the Assets are
subject to any pending or threatened insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary. Neither of
the Sellers have made an assignment for the benefit of creditors or taken any
action in contemplation of or which would constitute a valid, basis for the
institution of any such insolvency proceedings. Neither the Sellers or Socrates
are insolvent nor will either Seller or Socrates become insolvent as a result of
entering into and performing this Agreement.
3.20 Accounts Receivable. All accounts receivable of the Sellers that are
reflected on the Financial Statements of such Seller or on Schedule 1.1
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business without any setoff by any obligor. The Accounts Receivable are or
will be as of the Closing Date current and collectable net of the respective
reserve, if any, shown on the Financial Statements or on Schedule 1.1 (which
reserves, if any, are adequate and calculated consistent with past practice).
There is no contest, claim, or right of setoff under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Each Seller shall deliver on the Closing Date a complete
and accurate list of all Accounts Receivable as of the Closing Date relating to
such Seller.
3.21 Investment Representations of Sellers.
(a) Qualifications.
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(i) Each Seller (x) has prior investment experience, including investment in
non-listed and non-registered securities, (y) has the capacity to evaluate the
merits and risks of the acquisition of the Consideration Shares, and (z)
understands the nature of an investment in the Consideration Shares and is able
to bear the economic risks of such an investment;
(ii) Each Seller is experienced in evaluating the merits and risks of investing
in the businesses and industries in which Purchaser operates; and
(iii) Socrates Technologies Corporation is a public corporation. Sellers have
been afforded a reasonable opportunity to consult with their respective
professional advisors about the investment aspects and risks of the
Consideration Shares and to ask questions and
receive answers from CBQ and its management about CBQ's business and financial
affairs and condition, strategic plans and resources.
(b) Investment Intent. Each Seller will acquire the Consideration Shares
pursuant to this Agreement for investment for its own account, and not with a
view to the distribution (as such term is used in Section 2(11) of the
Securities Act) thereof; provided, however, that the Sellers may distribute the
Consideration Shares pursuant to a distribution to shareholders that is
registered under the Securities Act or exempt from such registration or made
pursuant to a court order.
(c) Purchaser Information. Each Seller acknowledges that it (i) has received and
reviewed copies of the Purchaser's relevant filings with the Securities and
Exchange Commission (the "SEC"); (ii) has been furnished such information with
respect to Purchaser's operations, business and prospects as it believes
necessary and appropriate to evaluate the merits of an investment in the
Consideration Shares; and (iii) has been given the opportunity to ask questions
of and receive answers from Purchaser and its representatives concerning such
information.
(d) Resale Restrictions. Each Seller understands and acknowledges that the
Consideration Shares will not be registered under the Securities Act and
applicable state "Blue Sky" laws at or after the Closing Date until the
Registration Date, and must be held indefinitely unless or until (i) they are
subsequently registered under the Securities Act and applicable state "Blue Sky"
laws, or (ii) an exemption from such registration is available for any
subsequent sale or distribution.
(e) Exempt Sale. Each Seller understands and acknowledges that the offer and
sale of the Consideration Shares by Purchaser under this Agreement has not been
registered (i) under the Securities Act and is intended to be exempt from the
registration and prospectus delivery requirements of the Securities Act by
virtue of Section 4(2) of the Securities Act and/or Regulation D thereunder, or
(ii) under applicable state securities laws and regulations in reliance upon
exemptions contained in such laws and regulations, and (iii) that the reliance
by Purchaser on such exemption is predicated in part on each Sellers'
representations set forth in this Section 5.9. Neither Seller has offered the
Consideration Shares to any Person or taken any other action that of itself
would cause the aforesaid non-public offering exemption not to be available to
Purchaser with respect to the issuance of the Consideration Shares.
(f) Legends on Certificates. Each Seller understands and acknowledges that any
certificate or other instrument evidencing any of the Consideration Shares
delivered at the Closing shall be stamped or otherwise imprinted with the
legends substantially in the form set forth below:
(i) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR UNDER THE SECURITIES LAW OF ANY STATE.
SUCH SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE HYPOTHECATED OR DISTRIBUTED EXCEPT (A) (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OR (ii) PURSUANT TO A VALID EXEMPTION
FROM SUCH REGISTRATION UNDER THE SECURITIES ACT AND UNDER THE
SECURITIES LAW OF ANY STATE, AND (B) UPON RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION
SHALL BE SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY
THAT SUCH SALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND
SUCH STATE SECURITIES LAW,"
(ii) Any legend imposed or required by Purchaser's certificate of incorporation
or bylaws or applicable state securities laws.
Each seller understands and acknowledges that Purchaser will
make, or cause to be made, a notation in its stock transfer registry with
respect to the restrictions on offer and sale of the Consideration Shares.
(g) Obligation to Register Consideration Shares. Purchaser shall not be
obligated to register for resale any Consideration Shares issued at the Closing
prior to the Registration Date.
ARTICLE IV
4. Representations and Warranties of Purchaser.
The Purchaser hereby represents and warrants to the Sellers as follows:
4.1 Organization, Standing, Power and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Purchaser has all requisite right, power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Purchaser has been duly
and validly authorized and no other proceedings on the part of Purchaser are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly and validly executed by Purchaser and, assuming due
authorization, execution and delivery by each other party hereto, this Agreement
constitutes a
legal, valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms, except as may be limited by bankruptcy, moratorium
and insolvency laws and by other laws affecting the rights of creditors
generally and except as may be limited by the availability of equitable
remedies.
4.2 No Conflict. Except as set forth on Schedule 4.2, the execution and delivery
of this Agreement does not, and the consummation of the transactions described
herein will not, result in or constitute a default, breach or violation of the
Certificate of Incorporation or the By-laws of Purchaser or any Contract to
which Purchaser is a party or by which any of its assets are bound, or a
violation of any Law or judgment of any court or other Governmental Authority by
which Purchaser or any of its assets are bound, except, in each case, for such
defaults, breaches, violations or restrictions as would not have a Material
Adverse Effect with respect to Purchaser or require any Consent, except where
failure to obtain such Consent would not have a Material Adverse Effect with
respect to Purchaser.
4.3 Legal Proceedings. Purchaser is not engaged in or a party to or, to the
knowledge of Purchaser, threatened with any action, suit, proceeding, complaint,
charge, investigation or arbitration and, to the actual knowledge of Purchaser,
there is not any reasonable basis for any such action against Purchaser.
ARTICLE V
5. Covenants.
5.1 Access; Confidentiality.
(a) From the date hereof, Purchaser and its directors, officers, employees,
Affiliates, counsel, accountants, representatives and agents shall have full
access, upon reasonable notice and during normal business hours, to the
financial, legal and other representatives of Sellers with knowledge of the
Business or the Assets and, upon reasonable notice, shall be given access to all
relevant documents, records and other information concerning the Business,
finances of Sellers and Assets that they may reasonably request.
(b) Until the Closing, no party hereto (or its officers, directors, employees,
representatives or agents) shall disclose to any third party any confidential or
proprietary information about the transaction contemplated hereby, except as may
be required by applicable Law. The parties hereto agree that the remedy at law
for any breach of the requirements of this Section 5.1 will be inadequate and
that any such breach would cause such immediate, and permanent damage as would
be impossible to ascertain, and, therefore, the parties hereto agree and consent
that in the event of any breach of this Section 5.1, in addition to any and all
other legal and equitable remedies available for such breach, including a
recovery of damages, the non-breaching party shall be entitled to obtain
preliminary or permanent injunctive relief without the necessity of proving
actual damage by reason of such breach and, to the extent permissible under the
applicable statutes and rules of procedure, a temporary restraining order may be
granted immediately on commencement of such action.
5.2 Publicity. Neither party shall issue any announcement, press release, public
statement or other information to the press or any third party with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party; provided, however, that nothing herein shall
prohibit any party hereto from making any public disclosure regarding this
Agreement and the transactions contemplated hereby if, in the opinion of counsel
to such party, such disclosure is required under applicable Law (and each party
agrees, to the extent reasonably practicable, to provide advance notice of any
such required disclosure). Parties agree, understand and acknowledge that the
execution of this Agreement is a reportable event under the Securities Exchange
Act of 1934, as amended.
5.3 Conduct of Business Prior to the Closing.
(a) Except as otherwise expressly contemplated by or disclosed in this Agreement
or as specifically consented to in writing by Purchaser, from and after the date
of this Agreement until the Closing Date, Sellers will use their best efforts to
preserve their current business organization intact, keep available the services
of its present employees, preserve its current relationships with Persons having
business dealings with Sellers, operate their business in the ordinary and
regular course consistent with its prior practices, maintain its Books and
Records in a manner sufficient to allow it to prepare financial statements and
maintain all insurance and Licenses and Permits material to the conduct of the
Business as currently conducted.
(b) In addition, during such period, except as otherwise provided in this
Agreement or as otherwise consented to by Purchaser in writing or disclosed in
any schedule hereto, Sellers will not: (i) dispose of any Assets, (ii) make any
material change in the Business; (iii) acquire any other business or interest
therein; (iv) enter into, amend in any material respect or terminate any
Contract, Asset Lease or Real Property Lease; (v) enter into any Contract with
any officer, director or employee of Sellers binding upon Purchaser after the
Closing Date, or (vi) take any action which could reasonably result in any Liens
being filed against any of the Assets. Purchaser acknowledges that Sellers have
substantially restructured their business operations in the past calendar year,
and that the foregoing representations are made in the context of such
restructure.
5.4 Cooperation; Further Assurances.
(a) The parties hereto agree to (i) use their reasonable best efforts to cause
the conditions to the Closing set forth in this Agreement to be satisfied on or
prior to March 30, 2001; (ii) cooperate with each other in determining whether
any filings are required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings promptly and in seeking to obtain timely any such consents; and (iii)
pursue all reasonable best efforts to obtain promptly the satisfaction of the
conditions to the Closing.
(b) The parties hereto shall each furnish to each other and each other's counsel
all such information as may be reasonably required in order to give effect to
the provisions of Section 5.5(a). Subject to the terms and conditions hereof, at
any time after the Closing, the Sellers and Purchaser will promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by Purchaser or Sellers, as the case may be, to satisfy, or in connection with,
its obligations hereunder.
5.5 Taxes.
(a) Pre-Closing. Parties understand and acknowledge that the Sellers have not
filed all required federal and state income tax returns and that they have filed
extensions for filing such returns in certain jurisdictions. Sellers shall use
their good faith efforts to become current in all such filings within ninety
(90) days of the Closing.
(b) Post-Closing. After the Closing, Purchaser shall be responsible for the
timely preparation of all federal, state, local or foreign income Tax returns
for all taxable periods ending on or after the Closing and all excise,
withholding, property, sales, use, franchise and other Tax returns, reports and
forms of Sellers or Purchaser pertaining to the Assets, and the payment of all
amounts due thereunder (which amounts shall be prorated and paid in accordance
with Section 2.6, to the extent the same relate to pre-Closing periods).
(c) Due to Transactions. Sellers and Purchaser shall each pay when due one-half
of all Transfer Taxes arising out of the transfer of Assets and the other
transactions contemplated by this Agreement, whether imposed by law on Sellers
or Purchaser.
(d) Cooperation on Tax Matters. Purchaser and Sellers shall cooperate fully, as
and to the extent reasonably requested by any other party, in connection with
(i) the preparation of Tax returns relating to the Business or the Assets and
(ii) any audit, litigation or other proceeding with respect to Taxes involving
the Business. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
5.6 Employees.
(a) Effective as of the Closing Date, Purchaser shall offer employment to all
employees of the Networkland (employees who accept such offers of employment
from Purchaser are referred to herein as "Transferred Employees"); such
employment by Purchaser shall commence upon the Closing Date at comparable wages
or salaries and the Transferred Employees shall, on the date of employment by
Purchaser, to the extent allowable by law and the provisions of Purchaser's
benefit plans, be eligible to participate in the medical, dental, life
insurance, profit sharing, deferred pay and vacation plans, if any, available to
employees of Purchaser. Except as may be specifically required by applicable
law, Purchaser shall not be
obligated to continue any employment relationship of any Transferred Employee
for any specific period of time. Purchaser shall have no obligation to employ
directly the employees of Technet.
(b) The Sellers shall be responsible to all their employees, and remain
responsible after the Closing, for all compensation and benefits, including
wages, salaries, commissions, bonuses, deferred compensation, severance,
termination, insurance, pensions, profit-sharing, vacation, sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Closing. Purchaser shall be responsible to all of the Transferred Employees, and
remain responsible after the Closing, for all compensation and benefits,
including wages, salaries, commissions, bonuses, deferred compensation,
severance, termination, insurance, pensions, profit-sharing, vacation, sick pay
and other compensation or benefits to which such Transferred Employees are
entitled after the Closing Date; provided, however, that Purchaser shall not be
responsible for any employment agreements which are Excluded Liabilities.
5.7 Notice of Developments. Sellers will give prompt notice to Purchaser of any
fact of which Sellers become aware prior to the Closing that would, if it were
true on the Closing Date, constitute a breach of Sellers' representations and
warranties in this Agreement. Each party to this Agreement will give prompt
written notice to the other of any material development affecting the ability of
such party to consummate the transactions contemplated by this Agreement.
5.8 Exclusivity. Sellers have conducted a good faith and diligent effort during
the past six (6) months to find a suitable purchaser of assets or a candidate to
acquire the Sellers in a business combination. As of the date first written
above, there is no third party bona fide acquisition offer or proposal from any
third party. In light of the absence of a competing offer, neither of the
Sellers nor their directors, officers, employees, Affiliates, representatives or
agents shall, directly or indirectly, solicit, encourage or initiate any
discussions or negotiations with, participate in any negotiations with, provide
any information to, otherwise cooperate in any other way with or facilitate or
encourage any effort or attempt by Person, other than Purchaser and its
directors, officers, Affiliates, representatives and agents, concerning any
merger, sale of the Assets, sale of a majority of Sellers' shares of capital
stock or similar transaction involving Sellers, and Sellers shall use reasonable
diligence to restrict any such officer, director, employees, Affiliate,
investment banker, attorney or other advisor retained by any such party from any
of the foregoing.
5.9 Registration of the Consideration Shares. To the extent allowable under the
Securities Act, the Securities and Exchange Act of 1934 and applicable Blue Sky
laws, Purchaser agrees to use its best efforts to register the Consideration
Shares no later than the Registration Date, Purchaser agrees to file the
appropriate registration statement in compliance herewith no later than May 31,
2001. To the extent required by Virginia law, Purchaser shall file a completed
Form D for the issuance of the Consideration Shares with the Virginia State
Corporation Commission ("SCC") within fifteen (15) days from the Closing. CBQ
shall pay the required filing fee of Two Hundred Fifty Dollars ($250.00) to the
SCC for and concurrently with the filing of said Form D.
5.10 Bulk Sale Laws. The Purchaser does not believe that the Virginia Bulk Sales
Law applies to the transactions contemplated herein. In the event the Virginia
Bulk Sales Act does apply to the transactions contemplated herein, then the
Purchaser shall be solely liable for compliance with said law and any and all
costs or other liabilities reasonably necessary to comply with Virginia Bulk
Sale Law.
5.11 Right of First Offer. In the event Purchaser determines to sell all of the
issued and outstanding voting stock or substantially all of the assets of its
subsidiary, CBQ Technet, Inc. (the "Technet Subsidiary"), within six (6) months
after the Closing Date (a "Technet Sale"), or in the event Purchaser receives an
unsolicited offer of a proposed Technet Sale, then, in either event, Purchaser
shall notify the employees of Technet who are employees of Technet on the date
of such notice from Purchaser of the terms and conditions of such Technet Sale,
and such employees shall have the opportunity to elect to purchase the issued
and outstanding shares of the Technet Subsidiary or the assets of the Technet
Subsidiary (as the case may be) for a purchase price calculated as the greater
of (i) the product of three (3) times the annual Adjusted Earnings of the
Technet Subsidiary, or (ii) the amount offered by a purchaser of the Technet's
Subsidiary's stock or all or substantially all of the assets of the Technet
Subsidiary.
5.12 Consulting Fee. Purchaser agrees to pay to Socrates a monthly consulting
fee in the amount of Fifteen Thousand Five Hundred Dollars ($15,500) per month
for each of the three (3) calendar months after the Closing Date (the
"Consulting Period"), so long as Socrates makes appropriate personnel available
to consult with Purchaser and provides consulting services upon reasonable
requests by Purchaser during normal business hours during the Consulting Period.
ARTICLE VI
6. Conditions to the Obligations of the Purchaser.
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The obligations of Purchaser hereunder are subject to the satisfaction
(or waiver in writing), at or before the Closing, of the conditions set forth
below.
6.1 Representations and Warranties; Covenants. The representations and
warranties of Sellers contained in Article III of this Agreement shall be true
and correct as of the date when made and as of Closing Date as though made at
and as of that time (except for representations and warranties that speak as of
a specific date or time which need only be true and correct as of such date or
time) and Purchaser shall have received a certificate attesting thereto signed
by a duly authorized officer of each Seller.
6.2 Performance by Sellers. Sellers shall have performed, satisfied and complied
in all material respects with all covenants and agreements required by this
Agreement and Purchaser shall have received a certificate attesting thereto
signed by a duly authorized officer of each Seller.
6.3 Lien Releases. Sellers shall have delivered or caused to be delivered UCC-3s
sufficient to release any Liens (other than Permitted Liens) applicable to the
Assets in a form appropriate for filing promptly after Closing.
6.4 Proceedings and Documents. All legal and corporate proceedings in connection
with the transactions contemplated by this Agreement shall be in form and
substance reasonably satisfactory to Purchaser and Purchaser's counsel, and
Purchaser shall have received all such counterpart originals or certified or
other copies of such documents and proceedings in connection with such
transactions as Purchaser reasonably requests, in form and substance as to
certification and otherwise reasonably satisfactory to the Purchaser and
Purchaser's counsel, including, but not limited to, an Incumbency Certificate.
6.5 Instruments of Transfer and Related Agreements. Sellers shall have executed
and delivered to Purchaser such bills of sale, general conveyance and
assignment, stock certificates, stock powers and such other instruments of
transfer as may be necessary or reasonably requested by Purchaser to effect the
transfer of the Assets to Purchaser under this Agreement.
6.6 Changes in the Business. Since February 28, 2001, there shall have occurred
no event which would have a Material Adverse Effect with respect to the Assets
or which would materially and adversely affect the prospects of the Business.
6.7 Sublease. Purchaser shall have entered into a sublease with Socrates for
office space located at Suite 770, 8133 Leesburg Pike, Vienna, Virginia on terms
and conditions acceptable to Purchaser (which in no event shall include monthly
rent in excess of Two Thousand Five Hundred Dollars ($2,500) per month), and any
consent by the landlord to such sublease shall have been obtained by Sellers.
Nothing contained herein shall obligate the Sellers to maintain offices at said
premises. Sellers shall be entitled to relocate their offices after the Closing.
6.8 Escrow Agreement. Sellers and Escrow Agent shall have executed and delivered
to Purchaser the Escrow Agreement.
6.9 Noteholder Consent. Sellers shall have obtained a written consent to the
transactions contemplated by this Agreement from each of the Noteholders.
6.10 Technet Employees. Technet shall have entered into an agreement with
Purchaser or its assignee for its employees to provide services to Purchaser on
terms and conditions satisfactory to Purchaser.
ARTICLE VII
7. Conditions and Obligations of the Sellers.
The obligations of the Sellers hereunder are subject to the
satisfaction (or waiver in writing), at or before the Closing, of the conditions
set forth below.
7.1 Representations and Warranties; Covenants. The representations and
warranties of Purchaser shall be true and correct as of the date when made and
as of Closing Date as though made at and as of that time (except for
representations and warranties that speak as of a specific date or time which
need only be true and correct as of such date or time), and Sellers shall have
received a certificate attesting thereto signed by a duly authorized officer of
Purchaser.
7.2 Performance by Purchaser. Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and Sellers shall have received a certificate
attesting thereto signed by a duly authorized officer of Purchaser.
7.3 Proceedings and Documents. All legal and corporate proceedings in connection
with the transactions contemplated by this Agreement shall be in form and
substance reasonably satisfactory to Sellers and Sellers' counsel, and Sellers
shall have received all such counterpart originals or certified or other copies
of such documents and proceeding in connection with such transactions as Sellers
reasonably request, in form and substance as to certification and otherwise
reasonably satisfactory to Sellers and Sellers' counsel.
7.4 Escrow Agreement. Purchaser and Escrow Agent shall have executed and
delivered to Sellers the Escrow Agreement.
7.5 Instruments of Assumption. Purchaser shall have executed and delivered to
Sellers such instruments of assumption necessary or reasonably requested by
Sellers to effect the assumption of the Assumed Liabilities by Purchaser under
this Agreement.
7.6 Technet Employees. Purchaser shall have entered into an agreement with
Technet to lease the services of employees of Technet on terms and conditions
satisfactory to Technet.
ARTICLE VIII
8. Termination.
8.1 Termination. Notwithstanding anything to the contrary set forth in this
Agreement, this Agreement may be terminated and the transactions contemplated
herein abandoned at any time prior to the Closing:
(a) by mutual written consent of the parties hereto;
(b) by either Purchaser or Sellers if the Closing shall not have occurred by
March 30, 2001, provided, however, that the right to terminate this Agreement
under this Section 8.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing Date to occur on or before such date;
(c) by either Purchaser or Sellers if a court of competent jurisdiction shall
have issued a judgment permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;
(d) by Sellers, if Purchaser (x) breaches its representations and warranties and
such breaches are reasonably likely to result in a Material Adverse Effect with
respect to the Purchaser, or (y) fails to comply in any material respect with
any of its covenants or agreements contained herein; or
(e) by Purchaser, if Sellers (x) breaches its representations and warranties and
such breaches are reasonably likely to result in a Material Adverse Effect with
respect to either Seller or the Assets, or (y) fails to comply in any material
respect with any of its covenants or agreements contained herein.
8.2 Effect of Termination. Upon termination of this Agreement pursuant to
Section 8.1 hereof, this Agreement (other than this Section 8.2 and Section
10.1) will forthwith become null and void and of no further force or effect
except that such termination shall not relieve any party then in breach of this
Agreement from liability in respect of such breach.
ARTICLE IX
9. Survival and Indemnification.
9.1 Survival of Representations and Warranties. Except as otherwise
specifically provided for herein, the representations, warranties,
covenants and agreements of the parties hereto included or provided for
herein, or in other instruments or agreements delivered or to be
delivered pursuant hereto, shall survive for a period ending on the date which
is One Hundred Twenty (120) calendar days from the Closing Date.
9.2 General Indemnification.
(a) Sellers' Indemnification. The Sellers jointly and severally agree to
indemnify and hold harmless Purchaser and its Affiliates from and after the
Closing against (i) any and all damage, loss, claim, expense, deficiency or cost
resulting from the breach of any representation or warranty made by either
Seller of which Purchaser does not have actual knowledge prior to Closing, (ii)
any and all damage, loss, claim, expense, deficiency or cost resulting from the
breach of any covenant made by either Seller hereunder, (iii) any Excluded
Liability, (iv) any Excluded Asset, and (v) any and all actions, suits,
proceedings, demands, assessments, judgments, costs, costs of collection and
legal and other expenses incident to any of the foregoing (collectively,
"Purchaser Damages"), provided that the Sellers shall have no liability in
respect of a claim for indemnification pursuant hereto unless Purchaser has
paid, suffered or incurred such Purchaser Damages that in the aggregate exceed
$100,000 (the "Purchaser Basket"), after which time the Sellers will be
obligated to indemnify Purchaser for all amounts in excess of the Purchaser
Basket, by forfeiting and returning to Purchaser up to a maximum of One Million
Five Hundred Thousand (1,500,000) shares of the Consideration Shares; provided,
however, that Purchaser's Basket shall not apply to any indemnification by
Sellers with respect to any employment agreement included as an Excluded
Liability, and Purchaser shall have the right to recover any such Purchaser's
Damages without regard to the Purchaser's Basket. In calculating the amount of
Consideration Shares to be forfeited by Sellers under this Section 9.2(a), each
Consideration Share shall have a value of Fifty Cents ($.50).
(b) Purchaser's Indemnification. Purchaser agrees to indemnify and hold harmless
Sellers, and their Affiliates from and after the Closing against (i) any and all
damage, loss, claim, expense, deficiency or cost resulting from the breach of
any representation or warranty made by Purchaser of which Sellers do not have
actual knowledge prior to Closing, (ii) any and all damage, loss, claim,
expense, deficiency or cost resulting from the breach of any covenant made by
Purchaser hereunder, (iii) any Assumed Liability, (iv) any Asset, and (v) any
and all actions, suits, proceedings, demands, assessments, judgments, costs,
costs of collection and legal and other expenses incident to any of the
foregoing (collectively, "Seller Damages" and together with Purchaser Damages,
"Damages'); provided that Purchaser shall have no liability in respect of a
claim for indemnification pursuant hereto unless Sellers collectively have paid,
suffered or incurred Seller Damages that in the aggregate exceed $100,000 (the
"Seller Basket"), after which time Purchaser will be obligated to indemnify
Sellers for all amounts in excess of the Seller Basket, up to a maximum of Seven
Hundred Fifty Thousand Dollars ($750,000) collectively in the aggregate for both
Sellers, which Damages may be paid by Purchaser in its sole discretion in common
voting stock of Purchaser at a value of Fifty Cents ($.50) per share.
(c) Limitations. The amount of the Damages suffered by an indemnified party
shall be net of any insurance payment or recovery which such party or its
representatives realizes in respect of or as a result of such Damages or the
facts or circumstances relating thereto.
If any Damages for which indemnification is provided hereunder are subsequently
reduced by any such insurance payment or other recovery from a third party, the
amount of such reduction shall be remitted to the indemnifying party. If, after
the Closing, either party realizes any Damages for which it is indemnified by
the other party hereunder, such indemnified party shall use its reasonable
efforts to obtain the maximum recovery or other benefit reasonably believed by
it to be available to it under any applicable insurance policy. An indemnified
party shall furnish to the indemnifying party, on demand, a certificate of its
chief financial officer verifying the amount of any such insurance recovery or
other benefit.
(d) Exclusive Remedy. The rights of Sellers or Purchaser under Sections 8.1,
8.2, 9.2, and 9.4, respectively, will be the exclusive remedy of Sellers or
Purchaser, with respect to breaches of representations and warranties or
covenants contained in or made pursuant to this Agreement, and any obligation of
Sellers to indemnify Purchaser hereunder shall be satisfied solely from amounts
held by the Escrow Agent pursuant to the Escrow Agreement; provided, however,
that nothing in this Agreement shall be deemed or construed to limit any rights,
remedies or amount of damages that Purchaser may have for either Sellers' or
Socrates' fraud.
9.3 Claims by Third Parties.
(a) In the event that at any time a claim is made by any Person not a party to
this Agreement with respect to any matter to which the indemnity provided for by
Section 9.2(a) relates, Purchaser, on not less than thirty (30) days' prior
notice to the Sellers, may make settlement of such claim and such settlement
shall be binding upon them; provided, however, that the Sellers shall have the
option, to be exercised by notice to Purchaser within twenty (20) days after
such first mentioned notice shall have been given, to assume the contest and
defense of such claim. If the Sellers shall exercise such option, the Sellers
shall have control over such contest and defense and over the payment,
settlement or compromise of such claim, and Purchaser agrees to cooperate fully
with the Sellers and its attorneys with respect to such contest and defense. If
the Sellers shall not exercise such option, Purchaser may, but shall not be
obligated to, assume the contest and defense of such claim. Any payment or
settlement resulting from such contest, together with the total expenses
thereof, including but not limited to attorneys' fees, shall be binding upon
Sellers and Purchaser.
(b) In the event that at any time a claim is made by any Person not a party to
this Agreement with respect to any matter to which the indemnity provided for by
Section 9.2(b) relates, Sellers, on not less than thirty (30) days' prior notice
to Purchaser may make settlement of, such claim and such settlement shall be
binding upon Purchaser; provided, however, that Purchaser shall have the option,
to be exercised by notice to the Sellers within twenty (20) days after such
first mentioned notice shall have been given, to assume the contest and defense
of such claim. If Purchaser shall exercise such option, it shall have control
over such contest and defense and over the payment, settlement or compromise of
such claim, and Sellers agree to cooperate fully with Purchaser and its
attorneys with respect to such contest and defense. If Purchaser shall not
exercise such option, the Sellers may, but shall not be obligated to, assume the
contest and defense of such claim and shall have control over such contest and
defense and
over the payment, settlement or compromise of such claim. Any payment or
settlement resulting from such contest, together with the total expenses
thereof, including but not limited to attorney's fees, shall be binding upon
Purchaser and Sellers.
9.4 Specific Performance. The parties recognize that if either Seller breaches
this Agreement and refuses to perform under the provisions of this Agreement,
monetary damages alone would not be adequate to compensate Purchaser for its
injury. Purchaser shall, therefore, be entitled, in addition to any other
remedies that may be available, to obtain specific performance of the terms and
conditions of this Agreement. If any action is brought by Purchaser to enforce
this Agreement under this Section 9.4, both Sellers hereby waive the defense
that there is an adequate remedy at law.
ARTICLE X
10. MISCELLANEOUS.
10.1 Legal and Accounting Expenses. Except as otherwise provided in this
Agreement or in this Section 10.1, Sellers (or an Affiliate thereof) shall bear
their own legal and accounting expenses in connection with the transactions
contemplated by this Agreement, and one-half of all Transfer Taxes associated
with the sale and transfer of the Assets. Except as otherwise provided in this
Agreement, the Purchaser shall bear its own legal and accounting expenses in
connection with the transactions contemplated by this Agreement, and one-half of
all Transfer Taxes associated with the sale and transfer of the Assets.
10.2 Headings. Subject headings are included for convenience only and shall not
affect the interpretation of any provisions of this Agreement.
10.3 Notices. Any notice, demand, request, waiver or other communication under
this Agreement shall be in writing (including telecopier or facsimile or similar
writing) and shall be deemed to have been duty given on the date of service if
personally served or on the third (3rd) day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed, or on the date sent if sent by
telecopier, to the parties at the following addresses or telecopier numbers (or
at such other address or telecopier number for a party as shall be specified by
like notice):
If to the Sellers, to:
Socrates Technologies Corporation
Networkland, Inc.
Technet Computer Services, Inc.
8133 Leesburg Pike, Suite 770
Vienna, Virginia 22182
Attention: Ashok Rattehalli
Fax No.: _____________
with a copy to,
[Law Firm]
==============================================================
- --------------------------------------------------------------
Attention:__________________________________, Esquire
Fax No.: __________________________________
If to Purchaser, to:
CBQ, Inc.
10923 McCormick Road
Hunt Valley, Maryland 21031
Attention: Raymond J. Kostkowski
Fax No.: (410) 568-4021
with a copy to:
Thomas & Libowitz, P.A.
100 Light Street
Suite 1100
Baltimore, Maryland 21202
Attention: C. Wayne Davis, Esquire
Fax No.: (410) 752-2046
10.4 Assignment and Successors. Prior to the Closing, no party hereto shall
assign any rights or delegate any duties hereunder without the prior written
consent of the other party; provided, however, that Purchaser may assign its
rights and obligations hereunder to one or more subsidiaries without the consent
of Sellers so long as Purchaser is not relieved of its obligations hereunder;
and provided further that Socrates may assign its rights under this Agreement to
require the registration of the Consideration Shares without the consent of
Purchaser, so long as Socrates promptly notifies Purchaser of such assignment.
10.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and permitted assigns of the
parties.
10.6 Governing Law: Consent to Jurisdiction. This Agreement shall be construed
in accordance with, and governed by, the laws of the State of Maryland without
regard to principles of conflicts of law. Any legal action, suit or proceeding
arising out of or relating to this Agreement may be instituted in any state or
federal court located within the State of Maryland, and each party agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of such court in an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by such
court.Each party further irrevocably submits to the jurisdiction of any such
court in any such action, suit or proceeding. Any and all service process shall
be effective against any Party if given personally or by registered or certified
mail, return receipt requested, or by any other means of mail that requires a
signed receipt, postage prepaid, mailed to such party as herein provided.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction.
10.7 Entire Agreement. This Agreement, including the Exhibits and Schedules
hereto, sets forth the entire understanding and agreement and supersedes any and
all other understandings, negotiations or agreements among the parties hereto
relating to the transactions described herein.
10.8 Counterparts. This Agreement may be executed in counterparts (including by
facsimile), each of which shall be deemed an original, and all of which together
shall constitute a single agreement.
10.9 Severability. In the event that any one or more of the immaterial
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable the same shall not affect any other provision
of this Agreement, but this Agreement shall be construed in a manner which, as
nearly as possible, reflects the original intent of the parties.
10.10 Parties in Interest. Nothing expressed or implied in this Agreement is
intended or shall be construed to confer upon or give to any Person other than
the parties hereto any rights or remedies under or by reason of this Agreement
or any transaction contemplated hereby.
10.11 Amendment and Modification. This Agreement may be amended or modified only
by written agreement executed by all parties hereto.
10.12 Waiver. At any time prior to the Closing, any of the parties hereto may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto, or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party granting such waiver but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or future
failure.
10.13 No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly 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 of the provisions of this Agreement.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
SOCRATES TECHNOLOGY CORPORATION
By: /s/ Andreas A. Keller
Name: Andreas A. Keller
Title: President
NETWORKLAND INC.
By: /s/ Andreas A. Keller
Name: Andreas A. Keller
Title: President
TECHNET COMPUTER SERVICES, INC.
By: /s/ Andreas A. Keller
Name: Andreas A. Keller
Title: President
CBQ, INC.
By: /s/ Bart S. Fisher
Name: Bart S. Fisher
Title: President
TABLE OF EXHIBITS AND SCHEDULES
Provided pursuant to Item 601(b)(2) of Regulation S-B
Exhibit A Promissory Note
Exhibit B List of Noteholders
Schedule 1.1 Sellers Assets
Schedule 3.2 No Conflict
Schedule 3.3 Financial Statements
Schedule 3.4 Absence of Undisclosed Liabilities
Schedule 3.5 Absence of Certain Developments
Schedule 3.6(a)(b) Taxes
Schedule 3.10 Title
Schedule 3.13 ERISA Matters
Schedule 4.2 No Conflict