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EXHIBIT 2.1
STOCK AND ASSET PURCHASE AGREEMENT
BY AND AMONG
T.N.H. FRANCE SARL,
T.N.H. HOLDINGS GmbH,
THE THOMSON CORPORATION (AUSTRALIA) PTY LTD,
THOMSON INFORMATION & SOLUTIONS LIMITED,
THOMSON GLOBAL RESOURCES
AND
THOMSON LEARNING INC.
(THE "SELLERS")
AND
SKILLSOFT PUBLIC LIMITED COMPANY
AND
SKILLSOFT CORPORATION
(THE "BUYERS")
October 25, 2006
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TABLE OF CONTENTS
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ARTICLE I
STOCK AND ASSET
PURCHASE.......................................................
1
1.1
Purchase and Sale of
Stock.................................................................
1
1.2
Purchase and Sale of
Assets................................................................
1
1.3
Assumption of
Liabilities..................................................................
2
1.4
Purchase Price; Severance Amount; Reimbursement
Amount.....................................
2
1.5 The
Closing................................................................................
3
1.6
Pre-Closing
Adjustments....................................................................
5
1.7
Post-Closing
Adjustments...................................................................
6
1.8
Further
Assurances.........................................................................
8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THOMSON
LEARNING.............................
9
2.1
Organization, Qualification and Corporate
Power............................................
9
2.2
Capitalization; Representations Regarding
Stock............................................
9
2.3
Authorization of
Transaction...............................................................
10
2.4
Government Consents and Approvals;
Noncontravention........................................
10
2.5
Subsidiaries...............................................................................
11
2.6
Financial
Statements.......................................................................
11
2.7
Absence of Certain
Changes.................................................................
11
2.8
Undisclosed
Liabilities....................................................................
11
2.9
Tax
Matters................................................................................
12
2.10
Ownership
and Condition of
Assets..........................................................
14
2.11
Owned Real
Property........................................................................
15
2.12
Real
Property
Leases.......................................................................
15
2.13
Intellectual
Property......................................................................
16
2.14
Contracts..................................................................................
18
2.15
Litigation.................................................................................
20
2.16
Employees..................................................................................
20
2.17
Employee
Benefits..........................................................................
21
2.18
Environmental
Matters......................................................................
23
2.19
Legal
Compliance...........................................................................
24
2.20
Permits....................................................................................
24
2.21
Certain
Business Relationships With
Affiliates.............................................
24
2.22
Brokers'
Fees..............................................................................
24
2.23
Inventory..................................................................................
25
2.24
Accounts
Receivable........................................................................
25
2.25
Insurance..................................................................................
25
2.26
Warranties.................................................................................
25
2.27
Customers..................................................................................
25
2.28
Powers of
Attorney.........................................................................
25
2.29
Books and
Records..........................................................................
26
2.30
Investment
Representation..................................................................
26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SKILLSOFT
PLC................................ 26
3.1
Organization, Qualification and Corporate
Power............................................ 26
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3.2
Authorization of
Transaction...............................................................
27
3.3
Noncontravention...........................................................................
27
3.4
Turnover in
Ireland........................................................................
27
3.5
Litigation.................................................................................
27
3.6
Brokers'
Fees..............................................................................
28
3.7
Independent Investigation; Sellers'
Representations........................................
28
3.8
Capitalization.............................................................................
28
3.9
Reports and Financial
Statements...........................................................
28
3.10
Absence of
Material Adverse
Change.........................................................
29
ARTICLE IV
COVENANTS......................................................................
29
4.1
Closing
Efforts............................................................................
29
4.2
Regulatory and Other Authorizations; Notices and
Consents.................................. 29
4.3
Additional Financial
Statements............................................................
31
4.4
Operation of
Business......................................................................
32
4.5
Access to
Information......................................................................
34
4.6
Exclusivity................................................................................
35
4.7
Expenses...................................................................................
35
4.8
Financing
Commitments......................................................................
35
4.9
Insurance..................................................................................
36
4.10
Elimination of Intercompany
Items..........................................................
36
4.11
Listing of
Shares..........................................................................
36
4.12
Equity
Financing...........................................................................
36
4.13
Valuation
Report...........................................................................
37
4.14
Depositary.................................................................................
37
4.15
German
Audit...............................................................................
37
4.16
Tax
Filings................................................................................
37
ARTICLE V
CONDITIONS TO
CLOSING..........................................................
37
5.1
Conditions to Obligations of Each
Party....................................................
37
5.2
Conditions to Obligations of the
Buyers....................................................
37
5.3
Conditions to Obligations of the
Sellers...................................................
38
ARTICLE VI
POST-CLOSING
COVENANTS.........................................................
39
6.1
Proprietary
Information....................................................................
39
6.2
Solicitation and
Hiring....................................................................
39
6.3
Non-Competition............................................................................
39
6.4
Sharing of
Data............................................................................
41
6.5
Use
of
Name................................................................................
41
6.6
Cooperation in
Litigation..................................................................
43
6.7
Collection of Accounts
Receivable..........................................................
43
6.8
Employees..................................................................................
43
6.9
COBRA......................................................................................
43
6.10
Seller
Benefit
Plans.......................................................................
43
6.11
Buyer
Savings
Plan.........................................................................
44
6.12
Termination Liability for Thomson Learning Business
Employees.............................. 44
6.13
Termination Liability for Business Subsidiary Business
Employees........................... 45
6.14
Employee
Release...........................................................................
45
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6.15
Scottsdale
Lease...........................................................................
45
6.16
UK
Business Subsidiary
Structure...........................................................
46
6.17
German
Audit...............................................................................
46
ARTICLE VII
INDEMNIFICATION................................................................
46
7.1
Indemnification by Thomson
Learning........................................................
46
7.2
Indemnification by SkillSoft
PLC...........................................................
47
7.3
Indemnification
Claims.....................................................................
47
7.4
Survival of Representations and
Warranties.................................................
49
7.5
Limitations................................................................................
50
7.6
Treatment of Indemnity
Payments............................................................
51
7.7
Tax
Matters................................................................................
51
ARTICLE VIII
TAX
MATTERS....................................................................
51
8.1
Preparation and Filing of Tax Returns; Payment of
Taxes.................................... 51
8.2
Tax
Indemnification........................................................................
52
8.3
Allocation of Certain
Taxes................................................................
53
8.4
Cooperation on Tax Matters; Tax
Audits.....................................................
54
8.5
Termination of Tax Sharing
Agreements......................................................
56
8.6
Time
of
Payment............................................................................
56
8.7
Tax
Refunds and Tax
Benefits...............................................................
57
8.8
Tax
Covenants..............................................................................
57
8.9
Miscellaneous..............................................................................
58
ARTICLE IX
REGISTRATION
RIGHTS............................................................
58
9.1
Demand
Registration........................................................................
58
9.2
Limitations on Registration
Rights.........................................................
58
9.3
Registration
Procedures....................................................................
59
9.4
Requirements of the
Holders................................................................
60
9.5
Indemnification............................................................................
60
9.6
Assignment of
Rights.......................................................................
61
ARTICLE X
TERMINATION....................................................................
61
10.1 Termination of
Agreement...................................................................
61
10.2
Effect of
Termination......................................................................
62
ARTICLE XI
DEFINITIONS....................................................................
62
ARTICLE XII
MISCELLANEOUS..................................................................
79
12.1
Press
Releases and
Announcements...........................................................
79
12.2
No Third
Party
Beneficiaries...............................................................
79
12.3
Entire
Agreement...........................................................................
79
12.4
Succession
and
Assignment..................................................................
79
12.5
Counterparts and Facsimile
Signature.......................................................
79
12.6
Headings...................................................................................
79
12.7
Notices....................................................................................
80
12.8
Governing
Law..............................................................................
80
12.9
Amendments
and
Waivers.....................................................................
80
12.10
Severability...............................................................................
81
12.11
Submission to
Jurisdiction.................................................................
81
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12.12
Construction...................................................................................
81
ARTICLE XIII
SELLER PARENT
GUARANTEE........................................................
82
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Schedule 1.4 - Purchase
Price Allocation
Schedule 4.8(a) - Financing Terms
Schedule 4.2(i) - Content and Technology
Agreements
Schedule 5.2(a) - Required Consents
Schedule 6.5(a) - Business-Related Names
Schedule 6.12(a) -
Thomson Learning Business Employees
Schedule 6.13(a) -
Business Subsidiary Business Employees
Schedule 11.1 - Monsoon
Platform
Exhibit A -
Form of Bill of Sale
Exhibit B -
Form of Patent Assignment
Exhibit C -
Form of Trademark Assignment
Exhibit D-
Form of Copyright Assignment
Exhibit E -
Form of Instrument of Assumption
Exhibit F -
Transition Services Agreement
Exhibit G -
License Agreement
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock
and Asset Purchase Agreement is entered into as of October 25,
2006 by and among SkillSoft Public Limited Company, a corporation
incorporated
under the laws of the Republic of Ireland ("SkillSoft PLC"),
SkillSoft
Corporation, a Delaware corporation ("SkillSoft Inc."), Thomson
Learning Inc., a
Delaware corporation ("Thomson Learning"), Thomson Global
Resources, a
corporation incorporated under the laws of the Republic of Ireland
("TGR", and
collectively with Thomson Learning, the "Asset Sellers"), T.N.H.
France SARL, a
French limited liability company ("Thomson France"), T.N.H.
Holdings GmbH, a
company legally established under the laws of Germany ("Thomson
Germany"), The
Thomson Corporation (Australia) Pty Ltd, an Australian private
limited company
("Thomson Australia"), and Thomson Information & Solutions
Limited, a
corporation organized under the laws of England and Wales ("Thomson
UK").
SkillSoft PLC and SkillSoft Inc. are each individually referred to
herein as a
"Buyer" and collectively as the "Buyers." Thomson France, Thomson
Germany,
Thomson Australia and Thomson UK are each individually referred to
herein as a
"Parent" and are collectively referred to herein as the "Parents."
The Parents
and Asset Sellers are each individually referred to herein as a
"Seller" and are
collectively referred to herein as the "Sellers."
1.
Capitalized terms used in this Agreement shall have the
meanings
ascribed to them in Article XI.
2.
The
Business Subsidiaries and the Asset Sellers are engaged, among
other matters, in the Business.
3.
SkillSoft
PLC desires to purchase from the Parents, and the Parents
desire to sell to SkillSoft PLC, all of the Stock upon the terms
and subject to
the conditions set forth herein.
4.
The Buyers
desire to purchase from the Asset Sellers, and the Asset
Sellers desire to sell to the Buyers, the Acquired Assets and the
Buyers are
willing to assume from the Asset Sellers all Assumed Liabilities
upon the terms
and subject to the conditions set forth herein.
Now,
therefore, in consideration of the representations, warranties
and
covenants herein contained, the Parties agree as follows.
ARTICLE I
STOCK AND ASSET PURCHASE
1.1
Purchase and
Sale of Stock. Upon and subject to the terms and
conditions of this Agreement, SkillSoft PLC shall purchase from
each Parent, and
each Parent shall sell, transfer, convey, assign and deliver to
SkillSoft PLC,
at the Closing, for the consideration specified below in this
Article I, the
Stock of each Business Subsidiary held by such Parent.
1.2
Purchase and
Sale of Assets.
(a) Upon and
subject to the terms and conditions of this
Agreement, SkillSoft Inc. shall purchase from Thomson Learning, and
Thomson
Learning shall sell, transfer, convey,
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assign and deliver to SkillSoft Inc., at the Closing, for the
consideration
specified below in this Article I, all of Thomson Learning's right,
title and
interest in, to and under the TL Assets.
(b) Upon and
subject to the terms and conditions of this
Agreement, SkillSoft PLC shall purchase from TGR, and TGR shall
sell, transfer,
convey, assign and deliver to SkillSoft PLC, at the Closing, for
the
consideration specified below in this Article I, all of TGR's
right, title and
interest in, to and under the Monsoon Platform.
(c)
Notwithstanding the provisions of Sections 1.2(a) and 1.2(b),
the Acquired Assets shall not include the Excluded Assets.
1.3
Assumption of
Liabilities.
(a) Upon and
subject to the terms and conditions of this
Agreement, SkillSoft Inc. shall assume all Assumed Liabilities
relating to the
TL Assets and SkillSoft PLC shall assume all Assumed Liabilities
relating to the
Monsoon Platform and any other Assumed Liabilities to the extent
that such
liabilities are not assumed by SkillSoft Inc.
(b)
Notwithstanding the terms of Section 1.3(a) or any other
provision of this Agreement to the contrary, the Buyers shall not
assume or
become responsible for, and the Asset Sellers shall remain liable
for, the
Excluded Liabilities.
1.4
Purchase Price;
Severance Amount; Reimbursement Amount.
(a) In
consideration for the sale and transfer of the Acquired
Assets and the Stock, the Buyers shall, at the Closing, pay to the
Sellers an
amount equal to the Purchase Price, and in consideration of the
sale and
transfer of the Acquired Assets, the Buyers shall assume the
Assumed
Liabilities. Except as otherwise provided in Section 4.8, the
Purchase Price
shall consist of (i) $215,778,000 in cash in immediately available
funds and
(ii) at SkillSoft PLC's option, either (A) 11,093,230 Buyer ADSs,
(B)
$69,221,760 in cash in immediately available funds or (C) a
combination of cash
and such Buyer ADSs having an aggregate value of $69,221,760, it
being agreed
that each Buyer ADS shall be deemed to have a value of $6.24. The
number of
Buyer ADSs to be issued shall be subject to equitable adjustment in
the event of
any stock split, stock dividend, reverse stock split or similar
event affecting
the Buyer ADSs between the date of this Agreement and the
Closing.
(b) SkillSoft
Inc. shall pay, and SkillSoft PLC shall cause
SkillSoft Inc. to pay, to Thomson Learning, or its designee, the
portion of the
Purchase Price allocated to the TL Assets, the non-solicitation
covenant set
forth in Section 6.2 and the non-competition covenant set forth in
Section 6.3
in accordance with Schedule 1.4. SkillSoft PLC shall pay to TGR and
the Parents
the respective portions of the Purchase Price allocated to the
Monsoon Platform
and the Stock in accordance with Schedule 1.4.
(c) The Purchase
Price is subject to adjustment as provided in
Section 1.7, Section 1.8, Article VII and Article VIII. Any such
adjustment to
the Purchase Price shall be allocated among the consideration to be
paid
pursuant to Schedule 1.4 in accordance with the source of the
respective
adjustments to the extent such source is traceable, and otherwise
to the TL
Assets.
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(d) Subject to
the provisions of Section 6.12(d), at the Closing,
SkillSoft Inc. shall pay to Thomson Learning in cash in immediately
available
funds an amount equal to the parties' good faith calculation of the
Severance
Amount, which amount may, if applicable, be offset against any
amounts payable
by Thomson Learning pursuant to Section 1.4(d) below.
(e) Subject to
the provisions of Section 6.13(c), at the Closing,
Thomson Learning shall pay to SkillSoft Inc. in cash in immediately
available
funds an amount equal to the parties' good faith calculation of
the
Reimbursement Amount, which amount may, if applicable, be offset
against any
amounts payable by SkillSoft Inc. pursuant to Section 1.4(c)
above.
(f) Without
prejudice to the terms of Section 1.4(a) or Schedule
1.4, any portion of the Purchase Price that is not attributable to
(i) any of
the anticipated debt financings as described in Section 4.8, (ii)
the Equity
Financing, or (iii) the issuance of up to 11,093,230 Buyer ADSs,
shall be funded
out of the cash of the Buyers.
(g)
Notwithstanding anything to the contrary in this Agreement,
any Seller that is entitled to receive Buyer ADSs at the Closing
may not
transfer or agree to transfer at any time before the Closing any or
all of such
Buyer ADSs, but may transfer such Buyer ADSs at any time
thereafter.
1.5
The Closing.
(a) The Closing
shall take place at the offices of Wilmer Cutler
Pickering Hale and Dorr LLP in Boston, Massachusetts commencing at
9:00 a.m.
local time on the Closing Date. All transactions at the Closing
shall be deemed
to take place simultaneously, and no transaction shall be deemed to
have been
completed and no documents or certificates shall be deemed to have
been
delivered until all other transactions are completed and all other
documents and
certificates are delivered.
(b) At the
Closing:
(i) the Sellers
shall deliver to the Buyers the various
certificates, instruments and documents referred to in Section
5.2;
(ii) the Buyers shall
deliver to the Sellers the various
certificates, instruments and documents referred to in Section
5.3;
(iii) each Parent shall deliver to SkillSoft PLC
certificate(s) evidencing all of the Stock owned by such Parent,
duly endorsed
in blank or with stock powers duly executed by the Parent;
(iv) each Asset Seller
shall execute and deliver a Bill of
Sale in substantially the form attached hereto as Exhibit A;
(v) each Asset
Seller shall execute and deliver a Patent
Assignment in substantially the form attached hereto as Exhibit
B;
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(vi) each Asset Seller
shall execute and deliver a Trademark
Assignment in substantially the form attached hereto as Exhibit
C;
(vii) each Asset Seller shall execute and deliver a Copyright
Assignment in substantially the form attached hereto as Exhibit
D;
(viii) each Asset Seller shall execute and deliver such other
instruments of conveyance as the Buyers may reasonably request in
order to
effect the sale, transfer, conveyance and assignment to the Buyers
of valid
ownership of the Acquired Assets owned by the Asset Seller;
(ix) each Buyer shall
execute and deliver to each Asset
Seller an instrument of assumption in substantially the form
attached hereto as
Exhibit E and such other instruments as such Asset Seller may
reasonably request
in order to effect the assumption by the appropriate Buyer of the
Assumed
Liabilities;
(x) the Asset
Sellers shall transfer to the Buyers all the
books, records, files and other data (or copies thereof) within the
possession
or control of such Asset Sellers relating to the Acquired
Assets;
(xi) the Parents shall
deliver (or shall cause to be
delivered) to SkillSoft PLC the minute books, stock books, ledgers
and
registers, corporate seals and other similar corporate records of
the Business
Subsidiaries;
(xii) the Buyers shall pay to the Sellers, payable by wire
transfer or other delivery of immediately available funds to an
account
designated by the Sellers, the cash portion of the Purchase Price
pursuant to
Section 1.4;
(xiii) SkillSoft PLC shall, if applicable, deliver the Buyer
ADSs to the Parents and TGR;
(xiv) the Asset Sellers shall deliver to the Buyer, or
otherwise put the Buyer in possession and control of, all of the
Acquired Assets
of a tangible nature; and
(xv) the Buyers and
the Sellers shall execute and deliver to
each other a cross-receipt evidencing the transactions referred to
above.
1.6
Allocation.
Within 45 days after the Closing, SkillSoft Inc. shall
provide Thomson Learning with a proposed allocation of the sum of
the Purchase
Price to be allocated to the TL Assets, the non-solicitation
covenant set forth
in Section 6.2 and the non-competition covenant set fort in Section
6.3
(collectively, "TL Assets Amount") and the portion of the Assumed
Liabilities
attributable to the TL Assets among the TL Assets (the
"Allocation"). If Thomson
Learning does not provide any comments to SkillSoft Inc. in writing
within 45
days following delivery by SkillSoft Inc. of the proposed
Allocation, then the
Allocation proposed by SkillSoft Inc. shall be deemed to be final
and binding,
absent manifest error. If, however, Thomson Learning submits
comments to
SkillSoft Inc. within such 45-day period, SkillSoft Inc. and
Thomson Learning
shall negotiate in good faith to resolve any differences within 30
days. If
Thomson Learning and SkillSoft Inc. are unable to reach a
resolution within such
30 day period,
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then all remaining disputed items shall be submitted for resolution
by an
internationally-recognized, independent accounting firm mutually
selected by
Thomson Learning and SkillSoft Inc. (the "Allocation Accounting
Firm"), which
shall make a final determination as to the disputed items within 30
days after
such submission, and such determination shall be final, binding and
conclusive
on Thomson Learning and SkillSoft Inc. The fees and disbursements
of the
Allocation Accounting Firm shall be shared equally between Thomson
Learning and
SkillSoft Inc. Any subsequent adjustments to the TL Assets Amount
shall be
reflected in the Allocation in a manner consistent with Section
1060 of the Code
and the Regulations thereunder. For all Tax purposes, SkillSoft
Inc. and Thomson
Learning agree that the transactions contemplated by this Agreement
shall be
reported in a manner consistent with the terms of this Agreement,
including the
Allocation, and that neither of them will take any position
inconsistent
therewith in any Tax Return, in any refund claim, in any
litigation, or
otherwise. Each of Thomson Learning and SkillSoft Inc. agrees to
cooperate with
the other in preparing IRS Form 8594, and to furnish the other with
a copy of
such form prepared in draft form within a reasonable period before
its filing
due date.
1.7
Pre-Closing
Adjustments. The Purchase Price shall be subject to
adjustment prior to the Closing Date as follows:
(a) If the
Audited 2005 Revenue is less than $161,300,000 and
greater than or equal to $145,620,000, the Purchase Price shall be
reduced by an
amount equal to the product of (i) 1.78 and (ii) the amount by
which the Audited
2005 Revenue is less than $161,800,000.
(b) If the
Audited 2005 Revenue is less than $145,620,000, the
Purchase Price shall be reduced by an amount equal to the sum of
(X)
$28,800,400, and (Y) the product of (i) 3.00 and (ii) the amount by
which the
Audited 2005 Revenue is less than $145,620,000.
(c) If the
Audited 2005 Expenses are greater than $174,500,000 and
less than or equal to $191,400,000, the Purchase Price shall be
reduced by an
amount equal to the product of (i) 1.78 and (ii) the amount by
which the Audited
2005 Expenses exceed $174,000,000.
(d) If the
Audited 2005 Expenses are greater than $191,400,000,
the Purchase Price shall be reduced by an amount equal to the sum
of (X)
$30,972,000, and (Y) the (i) product of 3.00 and (ii) the amount by
which the
Audited 2005 Expenses exceed $191,400,000.
(e) If the
Sellers are unable to obtain a consent to assignment in
favor of the Buyers to any agreement required to be disclosed
pursuant to
Section 2.14(a)(iii)(A) for which (i) such consent is required
pursuant to the
terms of such agreement in order to transfer the rights and
obligations of such
agreement to the Buyers in connection with the transactions
contemplated by this
Agreement and (ii) such agreement does not otherwise provide such
customer with
a legally enforceable right to terminate such agreement either for
convenience
or without cause (each such agreement, a "Consent Agreement"), then
the Purchase
Price shall be reduced by an amount equal to the product of (i)
1.78 and (ii)
the aggregate amount of Committed Revenue as of the Closing Date
under all
Consent Agreements for which a consent to assignment in favor of
the Buyers has
not been obtained. Notwithstanding the foregoing, (A) the Buyers
shall promptly
reimburse Thomson Learning for an amount equal to the product of
(i) 1.78 and
(ii) all Committed Revenue actually collected by the Buyers
pursuant to Consent
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Agreements for which consent to assignment had not been obtained
prior to the
Closing, (B) the Purchase Price shall not be reduced pursuant to
this Section
1.7(e) if, prior to the Closing, the counterparty to a Consent
Agreement enters
into an agreement with a Seller or SkillSoft PLC or any of its
Affiliates that
includes among other products and services the provision of
substantially
similar services or the sale of substantially similar products as
are provided
or sold pursuant to such Consent Agreement (a "Substitute
Agreement") on terms
for such services or products that are not materially worse to the
Buyer than
the terms of such Consent Agreement and (C) if, following the
Closing, a
customer that is party to a Consent Agreement terminates such
Consent Agreement
and enters into a Substitute Agreement and it is reasonably
apparent that such
Substitute Agreement was entered into in connection with the
termination of the
original Consent Agreement, SkillSoft PLC shall reimburse Thomson
Learning for
an amount equal to the product of (i) 1.78 and (ii) all Committed
Revenue under
the Consent Agreement; provided, however, that if the financial
terms of such
Substitute Agreement in clause (B) or (C) are materially worse to
the Buyers
than the original Consent Agreement, SkillSoft PLC shall reimburse
Thomson
Learning the difference between (X) an amount equal to the product
of (i) 1.78
and (ii) the aggregate amount of the Committed Revenue as of the
Closing Date
under such Consent Agreement, minus (Y) an amount equal to the
product of (i)
1.78 and (ii) the Committed Revenue under the Substitute Agreement
for the
remaining term of the Consent Agreement prior to its
termination.
1.8
Post-Closing
Adjustments. The Purchase Price shall be subject to
adjustment after the Closing Date as follows:
(a) Within 75
days after the Closing Date, SkillSoft PLC shall
prepare and deliver to Thomson Learning, as the agent for all of
the Sellers,
the Draft Working Capital Statement. SkillSoft PLC shall prepare
the Draft
Working Capital Statement in accordance with GAAP applied on a
basis consistent
with the application of GAAP to and otherwise in a manner
consistent with the
preparation of the Most Recent Balance Sheet and having line items
set forth in
the definition of "Closing Working Capital" in Article XI.
(b) At all
reasonable times during the 75 days immediately
following Thomson Learning's receipt of the Draft Working Capital
Statement,
Thomson Learning and its representatives shall be permitted to
review the
records of SkillSoft PLC relating to the Business and each Business
Subsidiary
relating to the Draft Working Capital Statement, and SkillSoft PLC
shall direct
any accountants engaged to prepare the Draft Working Capital
Statement, upon
receipt of customary waivers, to permit Thomson Learning and its
representatives
to review such accountant's work papers, if any, relating to the
Draft Working
Capital Statement, in each case reasonably requested by Thomson
Learning, and
SkillSoft PLC shall make reasonably available to Thomson Learning
and its
representatives the individuals employed by SkillSoft PLC and the
Business
Subsidiaries and responsible for the preparation of the Draft
Working Capital
Statement in order to respond to the inquiries of Thomson Learning
related
thereto.
(c) Thomson
Learning shall deliver to SkillSoft PLC by the
Objection Deadline Date either a notice indicating that Thomson
Learning accepts
the Draft Working Capital Statement ("Notice of Acceptance") or a
detailed
statement describing its objections to the Draft Working Capital
Statement
("Notice of Disagreement"). If Thomson Learning delivers
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to SkillSoft PLC a Notice of Acceptance, or Thomson Learning does
not deliver a
Notice of Disagreement by the Objection Deadline Date, then,
effective as of
either the date of delivery of such Notice of Acceptance or as of
the close of
business on the Objection Deadline Date, the Draft Working Capital
Statement
shall be deemed to be the Final Working Capital Statement. If
Thomson Learning
timely delivers a Notice of Disagreement, only those matters
specified in such
Notice of Disagreement shall be deemed to be in dispute, and all
other matters
shall be final and binding upon the Sellers and SkillSoft PLC.
(d) The
objections set forth on the Notice of Disagreement shall
be resolved as follows:
(i) SkillSoft
PLC and Thomson Learning shall first use
reasonable efforts to resolve such objections.
(ii) Any resolution by
SkillSoft PLC and Thomson Learning as
to such objections shall be final and binding on the Parties.
(iii) If SkillSoft PLC and Thomson Learning do not reach a
resolution of all objections set forth on Thomson Learning's Notice
of
Disagreement within 30 days after delivery of such Notice of
Disagreement,
SkillSoft PLC and Thomson Learning shall, within 30 days following
the
expiration of such 30-day period, engage the Neutral Accountant,
pursuant to an
engagement agreement executed by SkillSoft PLC, Thomson Learning
and the Neutral
Accountant, to resolve any Unresolved Objections.
(iv) SkillSoft PLC and
Thomson Learning shall jointly submit
to the Neutral Accountant, within 10 days after the date of the
engagement of
the Neutral Accountant (as evidenced by the date of the engagement
agreement), a
copy of the Draft Working Capital Statement, a copy of the Notice
of
Disagreement, and a statement setting forth the resolution of any
objections
agreed to by SkillSoft PLC and Thomson Learning. Each of SkillSoft
PLC and
Thomson Learning shall submit to the Neutral Accountant (with a
copy delivered
to SkillSoft PLC or Thomson Learning, as the case may be, on the
same day),
within 45 days after the date of the engagement of the Neutral
Accountant, a
memorandum (which may include supporting exhibits) setting forth
its position on
the Unresolved Objections. Each of SkillSoft PLC and Thomson
Learning may (but
shall not be required to) submit to the Neutral Accountant (with a
copy
delivered to SkillSoft PLC or Thomson Learning, as the case may be,
on the same
day), within 60 days after the date of the engagement of the
Neutral Accountant,
a memorandum responding to the initial memorandum submitted to the
Neutral
Accountant by SkillSoft PLC or Thomson Learning, as the case may
be. Unless
requested by the Neutral Accountant in writing, neither Party may
present any
additional information or arguments to the Neutral Accountant,
either orally or
in writing.
(v) Within 90
days after the date of its engagement
hereunder, the Neutral Accountant shall determine whether the
objections raised
by Thomson Learning are appropriate and shall issue a ruling which
shall include
a balance sheet, comprised of the Draft Working Capital Statement
as adjusted
pursuant to any resolutions to objections agreed upon by SkillSoft
PLC and
Thomson Learning and pursuant to the Neutral Accountant's
resolution of the
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Unresolved Objections. Such balance sheet shall be deemed to be the
Final
Working Capital Statement.
(vi) The resolution by
the Neutral Accountant of the
Unresolved Objections shall be conclusive and binding upon
SkillSoft PLC and
Thomson Learning. SkillSoft PLC and Thomson Learning agree that the
procedure
set forth in this Section 1.8(d) for resolving disputes with
respect to the
Draft Working Capital Statement shall be the sole and exclusive
method for
resolving any such disputes; provided that this provision shall not
prohibit any
Party from instituting litigation to enforce the ruling of the
Neutral
Accountant.
(vii) SkillSoft PLC and Thomson Learning shall share the fees
and expenses of the Neutral Accountant equally.
(e) The Draft
Working Capital Statement shall be deemed to be the
Final Working Capital Statement for the purposes of this Section
1.8 upon the
earliest of (x) the delivery by Thomson Learning of the Notice of
Acceptance or
the failure of Thomson Learning to deliver the Notice of
Disagreement by the
Objection Deadline Date pursuant to Section 1.8(c), (y) the
resolution of all
disputes by Thomson Learning and SkillSoft PLC pursuant to Section
1.8(d)(ii)
and (z) the resolution of all disputes pursuant to Section
1.8(d)(v) by the
Neutral Accountant. Within five (5) Business Days after the Final
Working
Capital Statement becomes or is deemed final and binding on the
parties, an
adjustment to Purchase Price shall be made as follows:
(i) If the
Closing Working Capital as shown on the Final
Working Capital Statement is less than the Reference Working
Capital Amount by
at least $250,000, the Purchase Price shall be reduced by the
amount by which
such deficiency exceeds $250,000 and Thomson Learning shall pay to
SkillSoft
PLC, by wire transfer or other delivery of immediately available
funds, within
three (3) Business Days after the date on which the Final Working
Capital
Statement is finally determined pursuant to this Section 1.8, an
amount equal to
the amount by which such deficiency exceeds $250,000.
(ii) If the Closing
Working Capital as shown on the Final
Working Capital Statement exceeds the Reference Working Capital
Amount by at
least $250,000, the Purchase Price shall be increased by the amount
by which
such excess exceeds $250,000 and SkillSoft PLC shall pay to Thomson
Learning, by
wire transfer or other delivery of immediately available funds,
within three (3)
Business Days after the date on which the Final Working Capital
Statement is
finally determined pursuant to this Section 1.8, an amount equal to
the amount
by which such excess exceeds $250,000.
(f) Any payment
required to be made by SkillSoft PLC or Thomson
Learning pursuant to this Section 1.8 shall bear interest from the
Closing Date
through the date of payment at the interest rate per annum equal to
the average
of the rate per annum publicly announced by Citibank, N.A. or any
successor
thereto in New York, New York from time to time as its "base rate",
on each day
during the period from the Closing Date through the date of
payment.
1.9
Further
Assurances. At any time and from time to time after the
Closing, at the request of the Buyers, the Asset Sellers shall
execute and
deliver such other instruments of sale,
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transfer, conveyance and assignment and take such actions as the
Buyers may
reasonably request to give effect to the transfer, conveyance and
assignment to
the Buyers, and to confirm the Buyers' rights to, title in and
ownership of, the
Acquired Assets, all as contemplated by this Agreement. The Asset
Sellers shall
bear the expenses for the preparation of such instruments that are
necessary to
give effect to the transfer, conveyance and assignment of the
Acquired Assets to
the Buyers, and the Buyers shall bear all other expenses arising
under this
Section 1.9.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THOMSON LEARNING
Thomson
Learning represents and warrants to the Buyers as follows,
except
as set forth in the Disclosure Schedule. The disclosures in any
section or
subsection of the Disclosure Schedule shall qualify other sections
and
subsections in this Article II only to the extent it is reasonably
apparent from
a reading of the disclosure that such disclosure is applicable to
such other
sections and subsections.
2.1
Organization,
Qualification and Corporate Power.
(a) The Sellers.
Each of the Sellers is a corporation duly
organized, validly existing and in good standing under the laws of
its
jurisdiction of organization. Each Asset Seller has all requisite
corporate
power and authority to carry on the Business and to own and use the
properties
owned and used by it in the Business.
(b) The Business
Subsidiaries. Each Business Subsidiary is a
corporation duly organized, validly existing and in good standing
under the laws
of its jurisdiction of organization and is duly qualified to
conduct business
and is in good standing under the laws of each jurisdiction in
which the
properties owned or leased by it or the operation of its business
requires such
qualification, except for such failure to be so qualified or in
good standing
that, individually or in the aggregate, has not had and would not
reasonably be
expected to have a Business Material Adverse Effect. Each Business
Subsidiary
has all requisite corporate power and authority to carry on the
business in
which it is engaged and to own and use the properties owned and
used by it.
(c) Charter and
Corporate Records of each Business Subsidiary.
Except as set forth in Section 2.1 of the Disclosure Schedule,
Sellers have made
available to SkillSoft PLC correct and complete copies of the
certificate of
incorporation and bylaws or other organizational documents of each
Business
Subsidiary (each as amended through the date hereof). The minute
books
(containing the records of meetings of the stockholders and the
board of
directors) and the stock record books of each Business Subsidiary
are correct
and complete in all material respects. No Business Subsidiary is in
default
under or in violation of any provision of its certificate of
incorporation,
bylaws or other organizational documents.
2.2
Capitalization;
Representations Regarding Stock.
(a) The
capitalization of each Business Subsidiary is set forth in
Section 2.2 of the Disclosure Schedule. All of the issued and
outstanding shares
of capital stock of each Business Subsidiary are duly authorized,
validly
issued, fully paid and nonassessable. There are no (i) outstanding
or authorized
options, warrants, rights, agreements or commitments to which
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any Business Subsidiary or any Seller is a party or which are
binding upon any
Business Subsidiary providing for the issuance, disposition or
acquisition of
any shares of capital stock of any Business Subsidiary, (ii)
outstanding or
authorized stock appreciation, phantom stock or similar rights with
respect to
any Business Subsidiary or (iii) agreements, voting trusts or
proxies with
respect to the voting, or registration under the Securities Act, of
any Business
Subsidiary.
(b) All of the
issued and outstanding shares of capital stock of
the Business Subsidiaries are owned of record and beneficially by
the Sellers as
set forth in Section 2.2 of the Disclosure Schedule, and each of
the Sellers has
good title to such capital stock free and clear of any Security
Interest,
contractual restriction or covenant, option or other adverse claim
(whether
arising by contract or by operation of law), in each case as set
forth in
Section 2.2 of the Disclosure Schedule.
2.3
Authorization of
Transaction. Each Seller has all requisite power
and authority to execute and deliver this Agreement and the
Ancillary Agreements
to which it will be a party and to perform its obligations
hereunder and
thereunder. The execution and delivery by each Seller of this
Agreement and the
performance by each Seller of this Agreement and the Ancillary
Agreements to
which it will be a party and the consummation by each Seller of the
transactions
contemplated hereby and thereby have been duly and validly
authorized by all
necessary corporate action on the part of such Seller. This
Agreement has been
duly and validly executed and delivered by each Seller and
constitutes, and each
of the Ancillary Agreements, upon its execution and delivery by
each Seller, as
the case may be, will constitute, a valid and binding obligation of
such Seller,
as the case may be, enforceable against such Seller in accordance
with its
terms.
2.4
Government
Consents and Approvals; Noncontravention.
(a) Except (i)
as set forth in Section 2.4 of the Disclosure
Schedule, (ii) for the premerger notification and waiting period
requirements of
the Hart-Scott-Rodino Act, or (iii) as may be necessary as a result
of any facts
or circumstances relating solely to SkillSoft PLC or any of its
Affiliates,
neither the execution and delivery by any Seller of this Agreement
or the
Ancillary Agreements to which any Seller will be a party, nor the
consummation
by any Seller of the transactions contemplated hereby or thereby,
will require
on the part of any Seller any notice to or filing with, or any
permit,
authorization, consent or approval of, any Governmental Entity.
(b) Assuming
that all consents, approvals, authorizations and
other actions described in Section 2.4(a) have been obtained, all
filings and
notifications listed in Section 2.4(a) of the Disclosure Schedule
have been made
and any applicable waiting period has expired or been terminated,
and except as
may result from any facts or circumstances relating solely to the
Buyers, the
execution, delivery and performance of this Agreement and the
Ancillary
Agreements by each Seller do not and will not (a) conflict with or
violate any
provision of the certificate of incorporation or by-laws of any
Seller or any
Business Subsidiary, (b) materially conflict with, result in a
material breach
of, or constitute a material default under, any Material Contract
to which any
Seller or any Business Subsidiary is a party or by which any Seller
or any
Business Subsidiary is bound or to which any of their respective
assets is
subject, (c) result in the imposition of any Security Interest upon
any of the
Acquired Assets or the assets of any Business Subsidiary except for
such
Security Interests as may result in connection with
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<PAGE>
the financing contemplated by Section 4.8 or (d) violate any order,
writ,
injunction, decree, statute, rule or regulation applicable to any
Seller or any
Business Subsidiary or any of their respective properties or
assets.
2.5
Subsidiaries.
The Business Subsidiaries do not, and with respect to
the Business, the Asset Sellers do not, control, directly or
indirectly, or have
any direct or indirect equity participation or similar interest in
any
corporation, partnership, limited liability company, joint venture,
trust or
other business association or entity.
2.6
Financial
Statements.
(a) The
Unaudited Financial Statements are attached to Section
2.6(a)(i) of the Disclosure Schedule. Except as set forth in
Section 2.6(a)(ii)
of the Disclosure Schedule, Unaudited Financial Statements have
been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods
covered thereby, fairly present in all material respects the
combined financial
condition, results of operations and cash flows of the Business as
of the
respective dates thereof and for the periods referred to therein
and are
consistent with the books and records of the Business; provided,
however, that
the Unaudited Financial Statements referred to in clause (b) of the
definition
of such term are subject to normal recurring year-end
adjustments.
(b) Section
2.6(b) of the Disclosure Schedule lists, and Thomson
Learning has made available to SkillSoft PLC, copies of the
documentation
creating or governing, all securitization transactions and
"off-balance sheet
arrangements" (as defined in Item 303(a)(4) of Regulation S-K of
the SEC)
relating to the Business effected by any Seller or any Business
Subsidiary since
January 1, 2002.
(c) The turnover
of the Business in the Republic of Ireland from
sales and/or services supplied to customers for the fiscal year
ended December
31, 2005 was less than 40,000,000 Euro.
2.7
Absence of
Certain Changes. Since the Balance Sheet Date, except as
set forth in Section 2.7 of the Disclosure Schedule, (a) there has
occurred no
event or development which, individually or in the aggregate, has
had, or would
reasonably be expected to have, a Business Material Adverse Effect,
and (b) no
Seller nor any Business Subsidiary has taken any of the actions set
forth in
paragraphs (a) through (m) of Section 4.4 with respect to the
Business.
2.8
Undisclosed
Liabilities. Except as set forth in Section 2.8 of the
Disclosure Schedule, the Business Subsidiaries do not, and, with
respect to the
Business, the Asset Sellers do not, have any material liability
(whether known
or unknown, whether absolute or contingent, whether liquidated or
unliquidated
and whether due or to become due), except for (a) liabilities shown
on the Most
Recent Balance Sheet, (b) liabilities which have arisen since the
Balance Sheet
Date in the Ordinary Course of Business, (c) liabilities which have
arisen prior
to the Balance Sheet Date under the Assumed Contracts and
contractual and other
liabilities incurred in the Ordinary Course of Business which are
not required
by GAAP to be reflected on a balance sheet and (d) liabilities
relating to
Taxes.
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2.9
Tax Matters.
Except as set forth in Section 2.9 of the Disclosure
Schedule and except for matters that would not have a Business
Material Adverse
Effect, to the Knowledge of the Sellers:
(a) Each
Business Subsidiary and, to the extent relating to the
Business, each Seller has properly filed on a timely basis (taking
into account
any extension of time to file granted or obtained) all Tax Returns
that each is
and was required to file, and all such Tax Returns were true,
correct and
complete in all material respects. Each Business Subsidiary and, to
the extent
relating to the Business, each Seller has properly paid on a timely
basis all
Taxes, whether or not shown on any of its Tax Returns, that were
due and
payable. All Taxes that each Business Subsidiary and to the extent
relating to
the Business all Taxes that each Seller is or was required by law
to withhold or
collect have been withheld or collected and, to the extent
required, have been
properly paid on a timely basis to the appropriate Governmental
Entity. Each
Business Subsidiary and, to the extent related to the Business,
each Seller has
complied with all information reporting and back-up withholding
requirements
including maintenance of the required records with respect thereto,
in
connection with amounts paid to any employee, independent
contractor, creditor
or other third party.
(b) The unpaid
Taxes of each Seller and each Business Subsidiary
for periods through the Balance Sheet Date with respect to the
Business do not
exceed the accruals and reserves for Taxes (excluding accruals and
reserves for
deferred Taxes established to reflect timing differences between
book and Tax
income) (the "Tax Reserves") set forth on the Most Recent Balance
Sheet. All
Taxes attributable to the period from and after the Balance Sheet
Date and
continuing through the Closing Date with respect to the Business
are, or will
be, attributable to the conduct by the Sellers and each Business
Subsidiary of
their operations in the ordinary course of business and are, or
will be,
consistent both as to type and amount with Taxes attributable to
such comparable
period in the immediately preceding year, and will not exceed the
Tax Reserves
set forth on the Final Working Capital Statement.
(c) No Seller
and no Business Subsidiary is or has ever been a
member of any group of corporations with which it has filed (or
been required to
file) consolidated, combined, or unitary Tax Returns for taxable
periods with
respect to which the statute of limitations has not expired, other
than a group
the common parent of which is Thomson Corporation (the "Seller
Parent"). No
Seller and no Business Subsidiary (i) has any actual or potential
liability
under Treasury Regulation Section 1.1502-6 (or any comparable or
similar
provision of federal, state, local or foreign law), or as a
transferee or
successor, by contract or otherwise, for any Taxes of any person
(including
without limitation any affiliated, combined or unitary group of
corporations or
other entities that included the Sellers or any Business Subsidiary
during a
prior Taxable period) for Taxable periods with respect to which the
statute of
limitations has not expired, other than a group the common parent
of which is
the Seller Parent, or (ii) is a party to, bound by or obligated
under any Tax
allocation, Tax sharing, Tax indemnity or similar agreement.
(d) The Sellers
have delivered or made available to SkillSoft PLC
complete and correct copies of all Tax Returns for any Income Taxes
of each
Business Subsidiary for all Taxable periods beginning on or after
January 1,
2003 and with respect to each Business Subsidiary, to the extent it
has a
material effect on any Taxable period or portion thereof of any
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Business Subsidiary, complete and correct copies of all private
letter rulings,
revenue agent reports, information document requests, notices of
assessment,
notices of proposed deficiencies, deficiency notices, protests,
petitions,
closing agreements, settlement agreements, pending ruling requests
and any
similar documents submitted by, received by or agreed to by or on
behalf of any
Business Subsidiary, or, to the extent related to the income,
business, assets,
operations, activities or status of any Business Subsidiary,
submitted by,
received by or agreed to by or on behalf of any such entity or
member of an
Affiliated Group (which includes a Business Subsidiary), and
relating to Taxes
for all Taxable periods for which the applicable statute of
limitations has not
yet expired. No examination or audit of any Tax Return of any
Business
Subsidiary or, to the extent relating to the Business, any Seller
or any other
member of an Affiliated Group by any Governmental Entity is
currently in
progress or, to the Knowledge of the Sellers, threatened or
contemplated. No
Seller and no Business Subsidiary or any other member of an
Affiliated Group has
been informed in writing by any jurisdiction that the jurisdiction
believes that
any Business Subsidiary or, to the extent relating to the Business,
any Seller
or any other member of an Affiliated Group was required to file any
Tax Return
that was not filed. To the Knowledge of the Sellers, there is no
basis upon
which a Tax deficiency or assessment could reasonably be expected
to be asserted
against any Seller relating to the Business or any Business
Subsidiary.
(e) No Business
Subsidiary and, to the extent relating to the
Business, no Seller and no other member of an Affiliated Group has
(i) waived
any statute of limitations with respect to Taxes or agreed to
extend the period
for assessment or collection of any Taxes, (ii) requested any
extension of time
within which to file any Tax Return, which Tax Return has not yet
been filed, or
(iii) executed or filed any power of attorney relating to Taxes
with any
Governmental Entity.
(f) No Business
Subsidiary and, to the extent relating to the
Business, no Seller is a party to any Tax litigation. No Business
Subsidiary
and, to the extent relating to the Business, no Seller is or has
ever been a
party to any transaction or agreement that is in conflict with the
Tax rules on
transfer pricing in any relevant jurisdiction. No Business
Subsidiary is a party
to any understanding or arrangement described in Section
6662(d)(2)(C)(ii) of
the Code or Section 1.6011-4(b) of the Regulations or is a material
advisor as
defined in Section 6111(b) of the Code or, if applicable,
comparable provisions
under state or foreign law.
(g) There are no liens or other
encumbrances with respect to Taxes
upon any of the Acquired Assets or the assets or properties of any
Business
Subsidiary, other than with respect to Taxes not yet due and
payable, and there
is no basis for the assertion of any claim relating or attributable
to Taxes,
which, if adversely determined, would result in any lien or
encumbrance on the
Acquired Assets or the assets of any Business Subsidiary.
(h) No Business
Subsidiary has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the
Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the
Code.
(i) No Business
Subsidiary will be required to include any item of
income in, or exclude any item of deduction from, Taxable income
for any Taxable
period (or portion thereof) ending after the Closing Date as a
result of any (i)
change in method of accounting for a
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Taxable period ending on or prior to the Closing Date (or as a
result of the
transactions contemplated by this Agreement) under Section 481 of
the Code (or
any corresponding or similar provision of federal, state, local or
foreign Tax
law); (ii) "closing agreement" as described in Section 7121 of the
Code (or any
corresponding or similar provision of state, local or foreign Tax
law) executed
on or prior to the Closing Date; (iii) deferred intercompany gain
or any excess
loss account described in Treasury Regulations under Section 1502
of the Code
(or any corresponding or similar provision of state, local or
foreign Tax law);
(iv) installment sale or open transaction disposition made on or
prior to the
Closing Date; or (v) prepaid amount received on or prior to the
Closing Date.
Each Business Subsidiary currently utilizes the accrual method of
accounting for
Income Tax purposes and such method of accounting has not changed
in the past
five (5) years.
(j) No Seller
and no Business Subsidiary has participated in or
cooperated with an international boycott within the meaning of
Section 999 of
the Code.
(k) Section
2.9(k) of the Disclosure Schedule sets forth each
jurisdiction (other than United States federal) in which any Seller
or any
Business Subsidiary files, or is required to file or has been
required to file a
Tax Return.
(l) No Business
Subsidiary owns any interest in an entity that is
characterized as a partnership for federal Income Tax purposes.
2.10
Ownership and
Condition of Assets.
(a) Except for
any additions, removals or modifications of assets
made in the Ordinary Course of Business after the date hereof, each
Asset Seller
is the true and lawful owner, and has good title to, or is the
lessee under a
valid lease of, all of the Acquired Assets purported to be owned by
it, free and
clear of all Security Interests. Each Business Subsidiary is the
true and lawful
owner, and has good title to, all material assets purported to be
owned by it,
free and clear of all Security Interests. Upon execution and
delivery by the
Asset Sellers to the Buyers of the instruments of conveyance
referred to in
Section 1.5(b) and except to the extent that any consents set forth
in Section
2.4 of the Disclosure Schedule are not obtained, the Buyers will
receive good
title to the Acquired Assets, free and clear of all Security
Interests except
for such Security Interests as may result in connection with the
financing
contemplated by Section 4.8.
(b) The tangible
assets owned by or leased to the Business
Subsidiaries, together with the Acquired Assets, will be sufficient
for the
conduct of the Business as presently conducted and, except for (i)
any
additions, removals or modifications of assets in the Ordinary
Course of
Business, (ii) the Excluded Assets and (iii) the assets used in
connection with
the services to be provided pursuant to the Ancillary Agreements,
will
constitute all the tangible assets used primarily or exclusively by
the Sellers
and the Business Subsidiaries in the Business. Each material
tangible asset used
primarily or exclusively in the Business is free from material
defects, has been
maintained in all material respects in accordance with normal
industry practice,
is in good operating condition and repair (subject to normal wear
and tear) and
is suitable for the purposes for which it presently is used.
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(c) Except (x)
for the Excluded Assets, (y) for the Intellectual
Property covered by, and the assets used in connection with, and
the services to
be provided pursuant to, the Ancillary Agreements and (z) to the
extent that any
consents set forth in Section 2.4 of the Disclosure Schedule are
not obtained:
(i) after the
Closing, all of the material assets,
properties and rights of every type and description, real, personal
and
tangible, used or held for use primarily or exclusively in the
conduct of the
Business will be owned by, or leased or licensed by third parties
to the Buyers
or a Business Subsidiary; and
(ii) after the
Closing, no Seller or any other Affiliate of
any Seller will have any ownership, license or similar interest in
or to any of
the assets, properties or rights of any type and description, real,
personal and
tangible, used primarily or exclusively in the conduct of the
Business.
Notwithstanding anything herein to the contrary, this Section
2.10(c) shall not
apply to Company Intellectual Property, which shall instead be
governed by the
provisions set forth in Section 2.13.
2.11
Owned Real Property.
No Asset Seller and no Business Subsidiary owns
any real property used primarily or exclusively in connection with
the operation
of the Business.
2.12
Real Property Leases.
Section 2.12 of the Disclosure Schedule lists
all Leases of any Business Subsidiary or included in the Acquired
Assets and the
annual rent and operating expenses (or rates and services, as the
case may be)
payable thereunder, in each case as in effect as of the date
hereof. The Sellers
have made available to SkillSoft PLC complete and accurate copies
of such Leases
in effect as of the date hereof. Except as would not adversely
affect in any
material respect the ability of the Asset Sellers and the Business
Subsidiaries
to conduct the Business as it is currently conducted, to the extent
that any
consents set forth in Section 2.4 of the Disclosure Schedule are
not obtained or
as described in Section 2.12 of the Disclosure Schedule, with
respect to each
such Lease:
(a) such Lease
is legal, valid, binding, enforceable and in full
force and effect;
(b) such Lease
will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the
Closing in
accordance with the terms thereof as in effect immediately prior to
the Closing;
(c) no Seller
nor any Business Subsidiary or, to the Knowledge of
the Sellers, any other party is in breach or violation of, or
default under, any
such Lease, and no event has occurred, is pending or, to the
Knowledge of the
Sellers, is threatened which, after the giving of notice, with
lapse of time or
otherwise, would constitute a breach or default by any Seller or
any Business
Subsidiary or, to the Knowledge of the Sellers, any other party
under such
Lease;
(d) no Seller
nor any Business Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in
the leasehold or subleasehold;
(e) no Seller is
aware of any Security Interest, easement,
covenant or other restriction applicable to the real property
subject to such
lease which would reasonably be
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<PAGE>
expected to materially impair the current uses or the occupancy by
any Business
Subsidiary, or, with respect to the Business, any Seller, of the
property
subject thereto; and
(f) each leased
or subleased facility is in such condition that,
upon the expiration of the lease or sublease, as the case may be,
and without
giving effect to any conditions created or changes made on or after
the Closing
Date, the Buyers or the applicable Business Subsidiary will not be
obligated to
make any alterations or improvements to such facility in excess of
$100,000 in
the aggregate for such facility and the obligations of the Buyers
or such
Business Subsidiary relating to the condition of such premises will
have been
discharged in full.
2.13
Intellectual
Property.
(a) Company
Registrations. Section 2.13(a) of the Disclosure
Schedule lists all Company Registrations (except with respect to
copyrights and
applications therefor), in each case enumerating specifically the
applicable
filing or registration number, title, jurisdiction in which filing
was made or
from which registration issued, date of filing or issuance, and
names of all
current applicant(s) and registered owners(s), as applicable. To
the Knowledge
of the Sellers, all Company Registrations are valid and
enforceable.
(b)
Ownership;
Sufficiency. To the Knowledge of the Sellers, after
the Closing, each item of Company Intellectual Property will be
owned or
available for use by the Buyers or the relevant Business Subsidiary
immediately
following the Closing on substantially identical terms and
conditions as it was
immediately prior to the Closing. After the Closing, the Buyers or
a Business
Subsidiary will be the sole and exclusive owner of all Company
Owned
Intellectual Property, free and clear of any Security Interests.
The Company
Intellectual Property constitutes all Intellectual Property used in
the Ordinary
Course of Business.
(c) Protection
Measures. Except as would not, individually or in
the aggregate, have a Business Material Adverse Effect, the Sellers
and each
Business Subsidiary have taken reasonable measures in accordance
with normal
industry practice to maintain in confidence all material trade
secrets and
confidential information comprising a part of the Company Owned
Intellectual
Property. To the Knowledge of the Sellers, there has been no: (i)
unauthorized
disclosure of any material third party proprietary or confidential
information
in the possession, custody or control of the Sellers or any
Business Subsidiary
or (ii) material breach of any Seller's or any Business
Subsidiary's security
procedures wherein confidential information has been disclosed
without
authorization to a third person. Except as would not, individually
or in the
aggregate, have a Business Material Adverse Effect, each Seller and
each
Business Subsidiary has taken commercially reasonable measures to
monitor the
quality of goods and services sold, licensed, distributed or
marketed under each
of its Trademarks that are licensed to third parties.
(d) Infringement
by the Business. The operation of the Business as
currently conducted does not infringe or violate, or constitute
misappropriation
of, any Intellectual Property rights in the form of trade secrets
or copyrights
of any third party in any material respect. The operation of the
Business as
currently conducted does not, to the Knowledge of the Sellers,
infringe or
violate any patents or trademarks of any third party in any
material respect.
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<PAGE>
Section 2.13(d) of the Disclosure Schedule lists any written
complaint, claim,
notice, or threat of any of the foregoing (including any written
notification
that a license under any patent is or may be required), received by
any Seller
or any Business Subsidiary alleging any such infringement,
violation or
misappropriation.
(e) Infringement
of Company Rights. To the Knowledge of the
Sellers, no person is infringing, violating or misappropriating any
of the
Company Owned Intellectual Property or any Company Licensed
Intellectual
Property which is exclusively licensed to any Seller or any
Business Subsidiary.
(f) Outbound IP
Agreements. Except for those licenses granted to
customers and end users in the Ordinary Course of Business and
except for
non-disclosure agreements entered into in the Ordinary Course of
Business with
terms consistent with non-disclosure agreements typically used by
similar
companies, Section 2.13(f) of the Disclosure Schedule identifies
each license,
covenant or other agreement pursuant to which any Seller or any
Business
Subsidiary has assigned, transferred, licensed, distributed or
otherwise granted
any right to any person, or covenanted not to assert any right,
with respect to
any existing or future Company Intellectual Property. Each Seller
and each
Business Subsidiary has in the Ordinary Course of Business agreed
to indemnify
its end users and customers against any infringement, violation
or
misappropriation of any Intellectual Property rights with respect
to any
Customer Offerings; however, no Seller nor any Business Subsidiary
has received
any written request or demand for indemnification from such end
users and
customers or from any other third party within the past three (3)
years.
(g) Inbound IP
Agreements. Section 2.13(g) of the Disclosure
Schedule identifies each license or other agreement pursuant to
which any Seller
or any Business Subsidiary has obtained from a third party a
license in, to or
under any Company Licensed Intellectual Property (excluding
licenses of
commercial off the shelf software programs that are licensed to the
Seller or
any Seller Subsidiary pursuant to "shrink wrap" licenses). To the
Knowledge of
the Sellers, there are no agreements or contracts with third
parties (other than
agreements with employees entered into in the Ordinary Course of
Business),
under which any Seller or any Business Subsidiary acquired any
Company Owned
Intellectual Property, requiring any Seller or any Business
Subsidiary to make
payments after the date of the Closing to such third parties in
respect of any
Company Owned Intellectual Property or which impose any other
material
obligations after the date of the Closing with respect to any
Company Owned
Intellectual Property.
(h) Source Code.
Except as would not have a Business Material
Adverse Effect, and to the Knowledge of the Sellers, none of the
Sellers nor any
Business Subsidiary has licensed, distributed or disclosed, and
there has been
no distribution or disclosure by others of, the material Company
Source Code
included in the Company Owned Intellectual Property to any person,
except
pursuant to the agreements listed in Section 2.13(h) of the
Disclosure Schedule,
and each Seller and each Business Subsidiary has taken reasonable
physical and
electronic security measures in accordance with normal industry
practice to
prevent the unauthorized disclosure of such material Company Source
Code.
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<PAGE>
(i) Open Source
Code. Section 2.13(i) of the Disclosure Schedule
lists all Open Source Materials that, to the Knowledge of the
Sellers, any
Seller or any Business Subsidiary has utilized in any material
Customer
Offerings distributed by any Seller or any Business Subsidiary or
in conjunction
with any other software developed and distributed by any Seller in
connection
with the Business.
(j) Employee and
Contractor Assignments. Each employee and each
independent contractor of KnowledgeNet.com, Inc. that contributed
to the
development of the Monsoon Platform and the KnowledgeNet.com, Inc.
technology
executed a proprietary and invention assignment agreement. To the
Knowledge of
the Sellers, TGR exclusively owns all right, title and interest in
and to the
Monsoon Platform.
(k)
Quality. Except
as would not, individually or in the
aggregate, have a Business Material Adverse Effect, to the
Knowledge of the
Sellers, the Customer Offerings and the Internal Systems (i) are
free from
significant defects in design, workmanship and materials and
conform in all
material respects to the written Documentation, if any, and
specifications
therefor, and (ii) do not contain any disabling device, virus,
worm, back door,
Trojan horse or other disruptive or malicious code that is intended
to impair
their intended performance or otherwise permit unauthorized access
to, hamper,
delete or damage any computer system, software, network or
data.
(l) Support and
Funding. No Seller and no Business Subsidiary has
received any support, funding, resources or assistance from any
federal, state,
local or foreign governmental or quasi-governmental agency in
connection with
the development of the Customer Offerings or the Internal Systems
or any
facilities or equipment used in connection therewith.
2.14
Contracts.
(a) Section 2.14
of the Disclosure Schedule lists the following
agreements in effect as of the date hereof to which any Seller or
any Business
Subsidiary is a party and which relate primarily or exclusively to
the Business
as of the date of this Agreement (such agreements being the
"Material
Contracts"):
(i) any
agreement (or group of related agreements) for the
lease of personal property from or to third parties providing for
remaining
lease payments in excess of $200,000 during the current term of
such agreement;
(ii) any agreement (or
group of related agreements) for the
purchase of products or the receipt of services which involves the
remaining
payment of more than $200,000 during the current term of such
agreement;
(iii) any agreement (or group of related agreements) for the
sale of products or for the furnishing of services (A) with a
customer of the
Business from which more than $150,000 is expected to be received
between June
30, 2006 and the end of the current term of such agreement, (B)
with a customer
of the Business from which more than $150,000 is expected to be
received between
June 30, 2006 and the end of the current term of such agreement in
which any
Seller or any Business Subsidiary has granted to such customer
"most favored
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<PAGE>
nation" pricing provisions or marketing or distribution rights
relating to any
products or territory or (C) under which any Seller or a Business
Subsidiary is
obligated to provide custom designed products or services for a
customer of the
type included or to be included in the line item for Custom
Services on the
Business's profit and loss statement as of the Balance Sheet Date
and from which
more than $50,000 is expected to be received between the Balance
Sheet Date and
the end of the current term of such agreement;
(iv) any agreement
concerning the establishment or operation
of a partnership, joint venture or limited liability company;
(v) any
agreement where a Governmental Entity has provided a
Tax or other credit, made a grant, funded operations or otherwise
provided an
economic benefit under which any Seller or any Business Subsidiary
may be
obligated to refund all or a portion of such benefit in the event
the Business
does not satisfy certain performance criteria;
(vi) any agreement (or
group of related agreements) under
which any Seller or any Business Subsidiary has created, incurred,
assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness
(including
capitalized lease obligations) involving more than $200,000 or
under which any
Seller or any Business Subsidiary has imposed (or may impose) a
Security
Interest on any of its assets, tangible or intangible;
(vii) any agreement for the disposition of any significant
portion of the assets or business of any Seller or any Business
Subsidiary
(other than sales of products in the Ordinary Course of Business)
or any
agreement for the acquisition of the assets or business of any
other entity
(other than purchases of inventory or components in the Ordinary
Course of
Business);
(viii) any agreement under which any Seller or any Business
Subsidiary is restricted from selling, licensing or otherwise
distributing any
of its technology or products, or providing services to, customers
or potential
customers or any class of customers, in any geographic area, during
any period
of time or any segment of the market or line of business;
(ix) any agreement
under which a third party would be
entitled to receive a license or any other right to any Buyer
Intellectual
Property as a result of the consummation of the transactions
contemplated by
this Agreement;
(x) any
employment or consulting agreement;
(xi) any agreement
involving any current or former officer,
director or stockholder of any Seller, any Business Subsidiary or
an Affiliate
thereof;
(xii) any agreement under which Company Source Code has been
placed in escrow by any Seller or any Business Subsidiary; and
(xiii) any other agreement (or group of related agreements)
involving more than $200,000 in remaining receipts or payments
during the
current term of such agreement, and not entered into in the
Ordinary Course of
Business.
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<PAGE>
(b) The Sellers
have made available to SkillSoft PLC or its
advisors a complete and accurate copy of each agreement listed in
Section 2.13
or Section 2.14 of the Disclosure Schedule. Except as disclosed in
Section
2.14(b) of the Disclosure Schedule, with respect to each agreement
so listed:
the agreement (i) is legal, valid and binding on the Asset Seller
or the
Business Subsidiary that is party thereto and, to the Knowledge of
the Sellers,
the counterparties thereto and is enforceable and in full force and
effect, and
(ii) upon consummation of the transactions contemplated by this
Agreement,
except to the extent that any consents set forth in Section 2.4(b)
of the
Disclosure Schedule are not obtained, shall continue in full force
and effect
without penalty or other adverse consequence. Except as disclosed
in Section
2.14(b) of the Disclosure Schedule, neither any Seller nor any
Business
Subsidiary is in breach of, or default under, any Material Contract
to which it
is a party, except for such breaches or defaults that would not
have a Business
Material Adverse Effect and no event has occurred, is pending, or,
to the
Knowledge of the Sellers, is threatened which, after the giving of
notice, with
lapse of time, or otherwise, would constitute a breach or default
by any Seller
or any Business Subsidiary or, to the Knowledge of the Sellers, any
other party
under such agreement.
2.15
Litigation. Except as
set forth in Section 2.15 of the Disclosure
Schedule and except for collection matters in the Ordinary Course
of Business,
as of the date hereof, there is no material Legal Proceeding that
is pending by
or against any Seller or any Business Subsidiary, or, to the
Knowledge of the
Sellers, has been threatened with respect to the Business, and
there are no
outstanding judgments, orders or decrees outstanding with respect
to the
Business against any Seller or any Business Subsidiary.
2.16
Employees.
(a) Section 2.16
of the Disclosure Schedule contains a list of all
Business Employees identified only by employee number as of the
date hereof,
along with the position, regional (except for sales employees)
location and the
annual rate of compensation (base salary plus bonus) of each such
person, in
each case in effect as of the date hereof. Except as set forth in
Section
2.16(a) of the Disclosure Schedule, each current Business Employee
who (i)
performs a product development or human resources function, or (ii)
performs a
finance function and has an rate of annual pay (base salary and
bonus) in excess
of $70,000 has entered into a confidentiality agreement with a
Seller or a
Business Subsidiary, a copy or form of which has previously been
made available
to SkillSoft PLC. Section 2.16 of the Disclosure Schedule contains
a list of all
Business Employees as of the date hereof who are a party to a
non-competition
agreement with a Seller or any Business Subsidiary; a copy or form
of such
agreement has previously been made available to SkillSoft PLC.
Section 2.16 of
the Disclosure Schedule contains a list of all Business Employees
as of the date
hereof whose employment is based in the United States who are not
citizens of
the United States.
(b) No Seller
and no Business Subsidiary is a party to or bound by
any collective bargaining agreement, nor have any of them
experienced any
strikes, grievances, claims of unfair labor practices or other
collective
bargaining disputes within the past two years. To the Knowledge of
the Sellers,
no organizational effort has been made or threatened, either
currently or within
the past two years, by or on behalf of any labor union with respect
to the
Business Employees.
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<PAGE>
(c) The Asset
Sellers, with respect to the Business, and the
Business Subsidiaries are in compliance with all applicable laws
relating to the
hiring and employment of employees.
2.17
Employee Benefits.
(a) Section
2.17(a) of the Disclosure Schedule contains a complete
and accurate list of all material Business Benefit Plans. Complete
and accurate
copies of (i) all Business Benefit Plans which have been reduced to
writing,
(ii) written summaries of all unwritten Business Benefit Plans,
(iii) all trust
agreements, insurance contracts and summary plan descriptions
related to any
Business Benefit Plans, (iv) all descriptions of Business Benefit
Plans offering
equity securities of a Seller and related prospectuses, (v) in the
case of a
Business Benefit Plan qualified under Code Section 401(a), a copy
of the most
recent IRS determination letter for such plan, (vi) the two most
recent annual
reports filed on IRS Form 5500, 5500C or 5500R, for each Business
Benefit Plan,
if any, together with all attachments and (vii) all plan financial
statements,
if any, for the last three plan years for which they are available
for each
Business Benefit Plan, have been made available to SkillSoft
PLC.
(b) Each
Business Benefit Plan has been administered in all
material respects in accordance with its terms, and each Seller,
each Business
Subsidiary and each ERISA Affiliate has in all material respects
met its
obligations with respect to each Business Benefit Plan and has made
all required
premium payments or contributions thereto. Each Business Benefit
Plan is in
compliance in all material respects with applicable law, including
the
provisions of ERISA and the Code and the regulations thereunder
(including
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601
through 608 and Section 701 ET SEQ. of ERISA). Except as would not
result in
material liability to the Buyers or any of the Business
Subsidiaries, all
filings and reports as to each Business Benefit Plan required to
have been
submitted to the Internal Revenue Service, to the United States
Department of
Labor, to the PBGC or any other regulatory agency have been timely
submitted.
Except as set forth in Section 2.17(b) of the Disclosure Schedule,
no Business
Benefit Plan that includes an arrangement described in Section
401(k)(2) of the
Code has assets that include securities issued by any Seller, any
Business
Subsidiary or any ERISA Affiliate or any other assets that cannot
be readily
liquidated at fair market value without adjustment, penalty or
charge under the
terms of the investment. The assets of each such Business Benefit
Plan are
reported at their fair market value on the books and records of
such plan as of
the date of determination indicated thereon.
(c) There are no
pending or, to the Knowledge of the Sellers,
threatened Legal Proceedings (except claims for benefits payable in
the normal
operation of the Business Benefit Plans and proceedings with
respect to
qualified domestic relations orders) against or involving any
Business Benefit
Plan or asserting any rights or claims to benefits under any
Business Benefit
Plan that would reasonably be expected to give rise to any material
liability
for the Business or any Business Subsidiary, and there are no
audits involving
any Business Benefit Plan by any Governmental Entity in progress,
or for which
notice has been received, or which has been concluded and resulted
in any
finding of a breach of fiduciary duty or any material liability for
any Asset
Seller or any Business Subsidiary.
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<PAGE>
(d) All the
Business Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received
determination letters
from the Internal Revenue Service to the effect that such Business
Benefit Plans
are so qualified and are exempt from federal Income Taxes under
Section 401(a)
of the Code. Except as set forth in Section 2.17(d) of the
Disclosure Schedule,
no such determination letter has been revoked, and, to the
Knowledge of the
Sellers, revocation has not been threatened, and no such Business
Benefit Plan
has been amended since the date of its most recent determination
letter or
application therefor in any respect, and no act or omission has
occurred, in
each case, that would adversely affect its qualification. Except as
set forth in
Section 2.17(d) of the Disclosure Schedule, no such Business
Benefit Plan has
experienced a termination or partial termination in the past six
years. Each
Business Benefit Plan that is required to satisfy Section 401(k)(3)
or Section
401(m)(2) of the Code has been tested for compliance with, and
satisfies the
requirements of, such section for each plan year ending prior to
the Closing
Date, and each such Business Benefit Plan that provides for
compliance with
Section 404(c) of ERISA, or is intended to comply with such
provision, so
complies.
(e) Except as
set forth in Section 2.17(e) of the Disclosure
Schedule, no Seller, no Business Subsidiary and no ERISA Affiliate
maintains or
has maintained in the past six years an Employee Benefit Plan
subject to Section
412 of the Code or Title IV of ERISA.
(f) Except as
set forth in Section 2.17(f) of the Disclosure
Schedule, at no time in the past six years has any Seller, any
Business
Subsidiary or any ERISA Affiliate been obligated to contribute to
any
"multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) Except as
set forth in Section 2.17(g) of the Disclosure
Schedule, there are no obligations under any Business Benefit Plan
providing
benefits after termination of employment to any Business Employee
(or to any
beneficiary of any such employee), including, but not limited to,
retiree health
coverage and deferred compensation, but excluding (i) continuation
of health
coverage required to be continued under COBRA, but only to the
extent such
continuation coverage is provided solely at the participant's
expense, or (ii)
obligations under a Business Benefit Plan intended to be qualified
under Code
Section 401(a).
(h) No act or
omission has occurred and no condition exists with
respect to any Business Benefit Plan that would subject any Asset
Seller, any
Business Subsidiary or Buyer to (i) any material fine, penalty, tax
or liability
of any kind imposed under ERISA or the Code or (ii) any
contractual
indemnification or contribution obligation protecting any
fiduciary, insurer or
service provider with respect to any Business Benefit Plan, nor
will any of the
transactions contemplated by this agreement give rise to such an
obligation.
(i) No Business
Benefit Plan is funded by, associated with or
related to a "voluntary employees' beneficiary association" with
the meaning of
Section 501(c)(9) of the Code.
(j) Except as
set forth in Section 2.17(j) of the Disclosure
Schedule, each Business Benefit Plan in which any Business Employee
will be
eligible to participate following
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<PAGE>
the transactions contemplated by this Agreement may be amended or
terminated, at
any time, without participant consent and without liability or
expense to the
Buyers, any Business Subsidiary or such Business Benefit Plan as a
result
thereof (other than for benefits accrued through the date of
amendment or
termination and reasonable administrative expenses related
thereto), and no such
Business Benefit Plan (nor any plan documentation or agreement or
summary plan
description or other written communication distributed generally to
employees
with respect thereto) by its terms prohibits the amendment or
termination
thereof.
(k) Except as
set forth in Section 2.17(k) of the Disclosure
Schedule, there is no agreement with any key Business Employee (i)
the benefits
of which are contingent, or the terms of which are altered, upon
the occurrence
of the transactions contemplated by this Agreement or (ii)
providing any term of
employment or compensation guarantee. There is no agreement or plan
binding any
Seller or any Business Subsidiary, including any stock option plan,
stock
appreciation right plan, restricted stock plan, stock purchase
plan, severance
benefit plan or Business Benefit Plan with or for the benefit of
any such
Business Employee, any of the benefits of which will be increased,
or the
vesting of the benefits of which will be accelerated, by the
occurrence of any
of the transactions contemplated by this Agreement or the value of
any of the
benefits of which will be calculated on the basis of any of the
transactions
contemplated by this Agreement.
(l) Except as
set forth in Section 2.17(l) of the Disclosure
Schedule, there are no outstanding loans from any Asset Seller or
any Business
Subsidiary to any Business Employee. No Business Benefit Plan is a
split-dollar
life insurance program or otherwise provides for loans to any
Business Employee
in violation of the prohibition on personal loans under Section
13(k) of the
Securities Exchange Act of 1934, as amended.
(m) Except as
set forth in Section 2.17(m) of the Disclosure
Schedule, each Asset Seller and each Business Subsidiary has at all
times in the
past six years and in all material respects properly classified
each Business
Employee as an employee and each independent contractor or leased
employee of
the Business as an independent contractor or employee of the
lessor, as
applicable, and no claim has been made, and, to the Knowledge of
the Sellers, no
indication has been received from any Governmental Entity that such
independent
contractors or leased employees would be considered employees of
any Asset
Seller or any Business Subsidiary for employment law or Tax
purposes at any
time.
2.18
Environmental
Matters.
(a) Except as
set forth in Section 2.18 of the Disclosure
Schedule, each Asset Seller and each Business Subsidiary are, with
respect to
the Business, in material compliance with all applicable
Environmental Laws.
There is, with respect to the Business, no pending or, to the
Knowledge of the
Sellers, threatened civil or criminal litigation, written notice of
violation,
formal administrative proceeding, or written inquiry or information
request by
any Governmental Entity, relating to any Environmental Law
involving any Seller
or any Business Subsidiary, in each case, with respect to the
Business.
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<PAGE>
(b) No Asset
Seller and no Business Subsidiary has, with respect
to the Business, any liabilities or obligations arising from the
release of any
Materials of Environmental Concern into the environment.
(c) No Asset
Seller and no Business Subsidiary is, with respect to
the Business, a party to or bound by any court order,
administrative order,
consent order or other agreement with any Governmental Entity
entered into in
connection with any legal obligation or liability arising under
any
Environmental Law.
(d) To the
Knowledge of the Sellers, there is no environmental
liability of any solid or hazardous waste transporter or treatment,
storage or
disposal facility that has been used by any Seller or any Business
Subsidiary,
in each case, in connection with the Business. (e) The
representations in this
Section 2.18 constitute the sole and exclusive representations and
warranties
concerning Environmental Laws, environmental permits, or Materials
of
Environmental Concern.
2.19
Legal Compliance.
Except as set forth in Section 2.19 of the
Disclosure Schedule, each Seller and each Business Subsidiary is
currently
conducting, and has at all times since January 1, 2003 conducted,
the Business
in material compliance with each applicable law (including rules
and regulations
thereunder) of any federal, state, local or foreign government, or
any
Governmental Entity. No Seller nor any Business Subsidiary has
received any
notice or communication from any Governmental Entity alleging
noncompliance by
the Business with any applicable law, rule or regulation.
2.20
Permits. Section 2.20
of the Disclosure Schedule sets forth a list
of all material Permits issued to or held by any Asset Seller or
any Business
Subsidiary with respect to the Business. Such listed Permits are
the only
material Permits that are required to conduct the Business as
presently
conducted. Each such Permit is in full force and effect; each of
the Asset
Sellers and the Business Subsidiaries is in compliance with the
terms of each
such Permit; and, to the Knowledge of the Sellers, no suspension or
cancellation
of such Permit is threatened.
2.21
Certain Business
Relationships With Affiliates. Except as set forth
in Section 2.21 of the Disclosure Schedule, no Affiliate of any
Seller or any
Business Subsidiary (other than a Seller or a Business Subsidiary)
(a) owns any
material property or right, tangible or intangible, which is used
in the
Business, (b) has any claim or cause of action against any Asset
Seller or any
Business Subsidiary with respect to the Business, or (c) owes any
money to, or
is owed any money by, any Asset Seller or any Business Subsidiary
with respect
to the Business. Section 2.21 of the Disclosure Schedule describes
any
agreements or arrangements relating to the Business between any
Asset Seller or
any Business Subsidiary, on the one hand, and any Affiliate of any
Seller or
Business Subsidiary (other than a Seller or a Business Subsidiary),
on the other
hand, which is in effect as of the date hereof.
2.22
Brokers' Fees. The
Business Subsidiaries do not, and, with respect
to the Acquired Assets, the Asset Sellers do not, have any
liability or
obligation to pay any fees or commissions to any broker, finder or
agent with
respect to the transactions contemplated by this Agreement.
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2.23
Inventory. All
inventory of the Business, whether or not reflected
on the Most Recent Balance Sheet, consists of a quality and
quantity usable and
saleable in the Ordinary Course of Business, except for obsolete
items and items
of below-standard quality, all of which have been reserved, written
off or
written down to net realizable value on the Most Recent Balance
Sheet.
2.24
Accounts Receivable.
All accounts receivable of the Business
reflected on the Most Recent Balance Sheet (other than those paid
since such
date and other than the Course ILT Receivables) are valid
receivables subject to
no setoffs or counterclaims, net of the applicable reserve for bad
debts on the
Most Recent Balance Sheet. A complete and accurate list of the
accounts
receivable outstanding as of June 30, 2006, showing the aging
thereof as of such
date, is included in Section 2.24 of the Disclosure Schedule. All
accounts
receivable of the Business that have arisen since the Balance Sheet
Date are
valid receivables subject to no setoffs or counterclaims.
2.25
Insurance. Section
2.25 of the Disclosure Schedule lists each
insurance policy in effect as of the date hereof (including fire,
theft,
casualty, commercial general liability, workers compensation,
business
interruption, environmental, product liability and automobile
insurance policies
and bond and surety arrangements) relating to the Business to which
any Seller
or any Business Subsidiary is a party, all of which are in full
force and effect
and all claims filed by any Seller or any Business Subsidiary with
respect to
the Business during the three (3) years prior to the date hereof.
There is no
material claim relating to the Business pending under any such
policy as to
which coverage has been questioned, denied or disputed by the
underwriter of
such policy. All premiums due and payable under all such policies
have been
paid, and each Seller and each Business Subsidiary is otherwise in
compliance in
all material respects with the terms of such policies. There are no
insurance
policies held exclusively by any Business Subsidiary.
2.26
Warranties. No product
or service sold, leased, licensed or
delivered by the Business is subject to any Warranty Obligations
other than any
Warranty Obligations provided in the Ordinary Course of Business.
During the
fiscal year ended December 31, 2005, no product or service sold,
leased,
licensed or delivered by the Business was subject to any claims by
customers of
the Business with respect to a Warranty Obligation other than any
Warranty
Obligations (a) to any one such customer that were not in excess of
$25,000 or
(b) in the aggregate that were not in excess of $250,000. As of the
Balance
Sheet Date, there are no outstanding claims by customers of the
Business with
respect to Warranty Obligations (a) to any one such customer that
were in excess
of $25,000 or (b) in the aggregate that were in excess of
$250,000.
2.27
Customers. Section
2.27 of the Disclosure Schedule sets forth a list
of (a) each customer that accounted for more than 1% of the
consolidated
revenues of the Business during the fiscal year ended December 31,
2005 and the
amount of revenues accounted for by such customer during each such
period. No
such customer has indicated in writing within the past year that it
will stop
buying products of the Business.
2.28
Powers of Attorney.
Except as set forth in Section 2.28 of the
Disclosure Schedule, there are no outstanding powers of attorney
relating to the
Business executed on behalf of any Asset Seller or any Business
Subsidiary.
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2.29
Books and Records. The
minute books and other similar records of
each Seller and each Business Subsidiary with respect to the
Business contain
complete and accurate records of all actions taken at any meetings
of the
Sellers' or any Business Subsidiary's stockholders, Board of
Directors or any
committee thereof and of all written consents executed in lieu of
the holding of
any such meeting.
2.30
Investment
Representation.
(a) Each Seller
that is acquiring any Buyer ADSs is acquiring the
Buyer ADSs for its own account for investment only, and not with a
view to, or
for sale in connection with, any distribution of the Buyer ADSs in
violation of
the Securities Act, or any rule or regulation under the Securities
Act.
(b) Thomson
Learning has had adequate opportunity to obtain from
publicly available sources such information about SkillSoft PLC as
is necessary
for the Seller to evaluate the merits and risks of Seller's
investment in
SkillSoft PLC.
(c) Thomson
Learning is an "accredited investor" as defined in
Rule 501(a) of the Securities Act, and each Seller that is
acquiring any Buyer
ADSs has sufficient expertise in business, financial and investment
matters to
be able to evaluate the risks involved in the acquisition of the
Buyer ADSs and
to make an informed investment decision with respect to such
investment. Each
such Seller is capable of bearing the economic risk of the Seller's
investment
in the Buyer ADSs indefinitely.
(d) Each Seller
that is acquiring any Buyer ADSs understands that
the Buyer ADSs have not been registered under the Securities Act
and are
"restricted securities" within the meaning of Rule 144 under the
Securities Act;
and the Buyer ADSs cannot be sold, transferred or otherwise
disposed of unless
they are subsequently registered under the Securities Act or an
exemption from
registration is then available.
(e) Each Seller
that is acquiring any Buyer ADSs agrees that a
legend substantially in the following form will be placed on the
Buyer ADRs
representing the Buyer ADSs:
"The
shares represented by this certificate have not been registered
under
the Securities Act of 1933, as amended, and may not be sold,
transferred or
otherwise disposed of in the absence of an effective registration
statement
under such Act or an exemption therefrom."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SKILLSOFT PLC
SkillSoft
PLC represents and warrants to the Sellers as follows:
3.1
Organization,
Qualification and Corporate Power. SkillSoft PLC is a
public limited liability company, incorporated and validly existing
under the
laws of the Republic of Ireland. SkillSoft Inc. is a corporation
duly organized,
validly existing and in good standing under the laws of the state
of Delaware.
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<PAGE>
3.2
Authorization of
Transaction. Each of the Buyers has all requisite
power and authority to execute and deliver this Agreement and the
Ancillary
Agreements to which it will be a party and to perform its
obligations hereunder
and thereunder. The execution and delivery by each Buyer of this
Agreement and
the Ancillary Agreements to which it will be a party and the
consummation by the
Buyers of the transactions contemplated hereby and thereby have
been duly and
validly authorized by all necessary corporate action on the part of
each Buyer.
No approval of SkillSoft PLC's shareholders is required to
consummate the
transactions contemplated by this Agreement and the Ancillary
Agreements or to
secure the necessary financing to consummate the transactions
contemplated by
this Agreement and the Ancillary Agreements. This Agreement has
been duly and
validly executed and delivered by each Buyer and constitutes, and
each of the
Ancillary Agreements, upon its execution and delivery by the
applicable Seller
will constitute, a valid and binding obligation of each Buyer
enforceable
against such Buyer in accordance with its terms.
3.3
Noncontravention.
(a) Except (i)
as set forth in Section 3.3 of the Disclosure
Schedule, (ii) for the premerger notification and waiting period
requirements of
the Hart-Scott-Rodino Act, or (iii) as may be necessary as a result
of any facts
or circumstances relating solely to the Sellers or any of their
Affiliates,
neither the execution and delivery by the Buyers of this Agreement
or the
Ancillary Agreements to which the Buyers will be a party, nor the
consummation
by the Buyers of the transactions contemplated hereby or thereby,
will require
on the part of the Buyers any notice to or filing with, or any
permit,
authorization, consent or approval of, any Governmental Entity.
(b) Assuming
that all consents, approvals, authorizations and
other actions described in Section 3.3(a) have been obtained, all
filings and
notifications listed in Section 3.3(a) of the Disclosure Schedule
have been made
and any applicable waiting period has expired or been terminated,
and except as
may result from any facts or circumstances relating solely to the
Sellers, the
execution, delivery and performance of this Agreement and the
Ancillary
Agreements by the Buyers do not and will not (a) conflict with or
violate any
provision of the Buyer Charter Documents or by-laws of SkillSoft
Inc., (b)
conflict with, result in a breach of, or constitute a default
under, any
contract or instrument to which any Buyer is a party or by which
any Buyer is
bound or to which any of its assets is subject, (c) result in the
imposition of
any Security Interest upon any assets of any Buyer or (d) violate
any order,
writ, injunction, decree, statute, rule or regulation applicable to
any Buyer or
any of its properties or assets.
3.4
Turnover in
Ireland. The turnover of SkillSoft PLC and its
subsidiaries from sales and/or services supplied to customers in
the Republic of
Ireland for the fiscal year ended January 31, 2006 was less than
40,000,000
Euro.
3.5
Litigation.
There is no Legal Proceeding by or against any Buyer
which is pending or, to the Buyer's Knowledge, has been threatened
and there are
no outstanding judgments, orders or decrees against the Buyers,
that could
reasonably be expected to affect the legality, validity or
enforceability of
this Agreement, any Ancillary Agreement or the consummation of the
transactions
contemplated hereby or thereby.
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<PAGE>
3.6
Brokers' Fees.
Except for Credit Suisse Securities (USA) LLC and its
Affiliates, the Buyers do not have any liability or obligation to
pay any fees
or commissions to any broker, finder or agent with respect to the
transactions
contemplated by this Agreement.
3.7
Independent
Investigation; Sellers' Representations. In entering
into this Agreement, each Buyer acknowledges that it has not relied
upon any
factual representations, opinions, projections or forecasts of the
Sellers or
their representatives (except the specific representations and
warranties of the
Sellers set forth in Article II and the schedules thereto). Each
Buyer hereby
acknowledges and agrees that, other than the representations and
warranties made
in Article II, none of the Sellers, their Affiliates, or any of
their respective
officers, directors, employees or representatives make or have made
any
representation or warranty, express or implied, at law or in
equity, with
respect to the Business, the Business Subsidiaries, the Stock or
the Acquired
Assets.
3.8
Capitalization.
(a) The
authorized share capital of SkillSoft PLC is
(euro)27,500,000 divided into 250,000,000 Buyer Ordinary Shares. As
of September
30, 2006, 108,284,548 Buyer Ordinary Shares were issued and
outstanding (in the
form of Buyer Ordinary Shares or Buyer ADSs), of which 6,533,884
Buyer Ordinary
Shares were held in the treasury of SkillSoft PLC. Each Buyer ADS
represents one
Buyer Ordinary Share.
(b) All
outstanding shares of SkillSoft PLC are, and all Buyer
Ordinary Shares underlying the Buyer ADSs to be issued pursuant to
this
Agreement will be upon issuance, duly authorized, validly issued,
fully paid and
not subject to or issued in violation of any purchase option, call
option, right
of first refusal, preemptive right, subscription right or any
similar right
under any provision of Irish law, the Buyer Charter Documents or
any agreement
to which SkillSoft PLC is a party or is otherwise bound. Upon the
due issuance
by the Bank of New York, as depository, of Buyer ADRs evidencing
Buyer ADSs to
be issued pursuant to this Agreement against deposit of the Buyer
Ordinary
Shares underlying such Buyer ADSs in accordance with this Agreement
and the
provisions of the Deposit Agreement, such Buyer ADRs will be duly
and validly
issued, and the Seller will be entitled to the rights of a
registered holder of
Buyer ADRs specified in the Deposit Agreement.
3.9
Reports and
Financial Statements. SkillSoft PLC has previously
furnished or made available to the Seller complete and accurate
copies, as
amended or supplemented, of the Buyer Reports. The Buyer Reports
constitute all
of the documents required to be filed by SkillSoft PLC under
Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC from
February 1, 2004 through the date of this Agreement. The Buyer
Reports complied
in all material respects with the requirements of the Exchange Act
and the rules
and regulations thereunder when filed. As of their respective
dates, the Buyer
Reports did not contain any untrue statement of a material fact or
omit to state
a material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they
were made,
not misleading. The audited financial statements and unaudited
interim financial
statements of SkillSoft PLC included in the Buyer Reports (a)
complied as to
form in all material respects with applicable accounting
requirements and the
published rules and regulations of the SEC with respect thereto
when filed, (b)
were prepared in accordance with
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<PAGE>
GAAP applied on a consistent basis throughout the periods covered
thereby
(except as may be indicated therein or in the notes thereto, and in
the case of
quarterly financial statements, as permitted by Form 10-Q under the
Exchange
Act), and (c) fairly present the consolidated financial condition,
results of
operations and cash flows of SkillSoft PLC as of the respective
dates thereof
and for the periods referred to therein.
3.10
Absence of Material
Adverse Change. Since July 31, 2006, there has
not occurred any Buyer Material Adverse Effect.
ARTICLE IV
COVENANTS
4.1
Closing Efforts.
Each of the Parties shall use its reasonable best
efforts to take all actions and to do all things necessary, proper
or advisable
to consummate the transactions contemplated by this Agreement.
4.2
Regulatory and
Other Authorizations; Notices and Consents.
(a) Each of the
Buyers and the Sellers shall use its best efforts
to promptly obtain all authorizations, consents, orders and
approvals of all
Governmental Entities and officials that are necessary for its
execution and
delivery of, and the performance of its obligations pursuant to,
this Agreement
and will cooperate fully with the other party in promptly seeking
to obtain all
such authorizations, consents, orders and approvals. Each of the
Buyers and the
Sellers agrees to make its filing pursuant to the Hart-Scott-Rodino
Act with
respect to the transactions contemplated by this Agreement on or
before November
10, 2006 and to supply as promptly as practicable to the
appropriate
Governmental Entities any information and documentary material that
may be
requested pursuant to the Hart-Scott-Rodino Act or any other
applicable
antitrust, competition or trade regulation law.
(b) Without
limiting the generality of the Buyers' undertaking
pursuant to Section 4.2(a), each Buyer agrees to use its best
efforts, and to
take any and all steps necessary, to eliminate each and every
impediment under
any antitrust, competition or trade regulation law that is asserted
by any
Governmental Entity (through the Head of the Governmental Entity or
Division
thereof) or any other party so as to enable the Parties hereto to
close the
transactions contemplated hereby, prior to the Termination Date,
including but
not limited to (i) negotiating, committing to and effecting by
consent decree,
hold separate orders, or otherwise, the sale, divesture or
disposition of such
of the Buyers' assets, properties or businesses or of the Company's
properties
or businesses to be acquired by it pursuant hereto, and the
entrance into such
other arrangements, as are necessary in order to effect the
dissolution of any
injunction, temporary restraining order or other order in any suit
or
proceeding, which would otherwise have the effect of preventing the
consummation
of the transactions contemplated by this Agreement prior to the
Termination Date
and (ii) defending through litigation on the merits any claim
asserted in court
by any party in order to avoid entry of, or to have vacated or
terminated, any
decree, order or judgment (whether temporary, preliminary or
permanent) that
would prevent the Closing from occurring prior to the Termination
Date;
provided, however, that such litigation in no way limits the
obligation of each
Buyer to use its best efforts, and to take any and all steps
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<PAGE>
necessary, to eliminate each and every impediment under any
antitrust,
competition or trade regulation law to close the transactions
contemplated
hereby prior to the Termination Date.
(c) Each Buyer
and each Seller shall promptly notify the other
party of any communication it or any of its Affiliates receives
from any
Governmental Entity relating to the matters that are the subject of
this
Agreement and permit the other party to review in advance any
proposed
communication by such party to any Governmental Entity. Neither any
Buyer nor
any Seller shall agree to participate in any meeting with any
Governmental
Entity in respect of any filings, investigation (including any
settlement of the
investigation), litigation, or other inquiry unless it consults
with the other
party in advance and, to the extent permitted by such Governmental
Entity, gives
the other party the opportunity to attend and participate at such
meeting. Each
Buyer and each Seller will coordinate and cooperate fully with each
other in
exchanging such information and providing such assistance as the
other party may
reasonably request in connection with the foregoing and in seeking
early
termination of any applicable waiting periods, including under
the
Hart-Scott-Rodino Act. Each Buyer and each Seller will provide each
other with
copies of all correspondence, filings or communications between
them or any of
their representatives, on the one hand, and any Governmental Entity
or members
of its staff, on the oth
