Exhibit 10.1
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is made as of the date set forth on the
signature page hereto, by and among IPS ACQUISITION, INC. ("Purchaser"), a
Washington corporation, IPS PUBLISHING, INC. ("Seller"), a Washington
corporation, and XXXXXXX X. XXXXX ("Xxxxx") individually and as sole trustee of
the XXXXXXX XXXXX XXXXX REVOCABLE TRUST dated September 4, 1992 (the "Trust").
BACKGROUND:
Seller is engaged in the business of writing, selling and licensing
software and algorithms for use by, among others, publishers of mathematics and
science textbooks and by mathematics and science teachers and students (the
"Business"). The Trust is the sole shareholder of Seller, and Xxxxx is the sole
current beneficiary of the Trust. Purchaser desires to purchase substantially
all of Seller's rights and assets, including the Business, and Seller, the Trust
and Xxxxx desire to sell the same to Purchaser.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
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Purchase and Sale of Assets.
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1.1. Subject Assets. At Closing (as defined below), Seller shall
sell to Purchaser, and Purchaser shall purchase from Seller, all of the assets
and properties, real and personal, tangible and intangible, of Seller (except
for the Excluded Assets, as defined below) as the same may exist on the date of
the Closing (the "Subject Assets"), including, but not limited to, all assets
used, owned or employed in connection with the Business and all of the following
assets of Seller:
(a) Cash. All cash, cash deposits, bank accounts, certificates
of deposit, money market shares, negotiable securities and other cash
equivalents (the "Cash");
(b) Accounts Receivable. All accounts, notes and other
receivables (the "Accounts Receivable");
(c) Inventory. All software media, packaging materials,
supplies, promotional and advertising materials, printed or written
materials, finished goods and other items of inventory (the "Inventory");
(d) Equipment. All computers, data processing equipment,
machinery, equipment, replacement parts, furniture, fixtures and leasehold
improvements, vehicles and other tangible assets of every kind and
description, including, without limitation, those items described in
Section 4.10 of the Disclosure Schedule (as defined below) (the
"Equipment");
(e) Intellectual Property. All patents, patent applications,
inventions, designs, models, processes, formulations, know-how and
schematics, all trade names, trademarks, service marks and copyrights and
all registrations thereof, all mask works, algorithms, authoring tools,
computer software programs or applications (in both source code and object
code form) and documentation relating thereto and/or explaining the use
thereof and all tangible or intangible proprietary information or material
owned by Seller and/or used in the Business, and all goodwill related to
any of the foregoing (the "Intellectual Property"), including, without
limitation, the intellectual property identified in Exhibit 1.1(e), hereto;
(f) Seller Contracts. Each contract, oral or written,
identified in Exhibit 1.1(f), hereto (the "Seller Contracts");
(g) Prepayments, Claims, Licenses. All prepayments and customer
deposits, all rights under Seller's insurance policies, all claims, causes
of action, refunds, rights of recovery, rights of set off and rights of
recoupment of any kind, all franchises, approvals, permits, licenses,
orders, registrations, certificates, variances and similar rights obtained
from governments and governmental agencies, and all rights to all workers
and unemployment compensation accounts and deposits of Seller;
(h) Records. All accounting books and records and all quality
control records, customer records, credit files, correspondence, market
studies, consultant reports, product specifications and records, research
and development studies, product development studies or reports, capital
expenditure budgets or proposals, personnel and payroll records, and all
other books, records and files owned by Seller or relating to the Business
(the "Records");
(i) Name. All rights to the names "IPS," "IPS Publishing" and
"International Publishing Services" or any derivations thereof and all
goodwill of the Business; and
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(j) Other Assets. Any and all other rights and assets owned by
Seller and/or used by Seller in the operation of the Business as conducted
since January 1, 1995, excluding the Excluded Assets.
1.2. Excluded Assets. Section 1.1, hereof, notwithstanding, the
Subject Assets shall not include the following (the "Excluded Assets"):
(a) IBM Receivable. Any right or interest in the payment to be
made pursuant to Section 5.2 of that certain Licensing Agreement (the "IBM
Contract") dated as of November 30, 1995 entered into by Seller (under the
name International Publishing Services, Inc.) and International Business
Machines Corporation ("IBM").
(b) Corporate Records. Seller's corporate minute book, stock
transfer records and other corporate records.
(c) Personal Effects. The personal items owned by Xxxxx and
described in the Disclosure Schedule (as defined below).
1.3. Cash. Paragraph 1.1(a), hereof, notwithstanding, but subject to
Section 3.3, hereof, Seller may exclude any and all of its cash, cash deposits,
bank accounts, certificates of deposit, money market shares, negotiable
securities and other cash equivalents from the "Subject Assets," and any such
items so excluded shall constitute "Excluded Assets" for purposes hereof.
ARTICLE II
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Assumption of Liabilities
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2.1. Assumption of Liabilities. At Closing, Purchaser shall assume
the following liabilities and obligations of Seller (the "Assumed Liabilities"):
(a) Seller Contracts. All of Seller's liabilities and
obligations under the Seller Contracts to be satisfied or performed on or
after the Closing Date (excluding, except as set forth in Paragraphs (b)
and (c), below, liabilities, obligations, penalties or damages arising
thereunder in connection with breaches or defaults, if any, occurring prior
to the Closing Date);
(b) Standard Representations and Warranties. All of Seller's
liabilities and obligations, if any, arising from the breach of any
representation or warranty (excluding
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any representation or warranty covering Seller's title or infringement)
included in Seller's standard terms and conditions covering any standard,
non-customized product sold or licensed by Seller prior to the Closing
Date;
(c) Bug Fixes. All of Seller's liabilities and obligations, if
any, under the Seller Contracts to correct software Errors (as defined
below) in the software subject thereto. For purposes hereof, an "Error"
shall mean: (i) an error which causes the software or a major component to
stop or renders it otherwise unusable, or a data corruption error; (ii) an
error in which functional behavior of a component differs from the behavior
as described in the specifications for the software or an error which
causes a component to default without rendering the software unusable;
and/or (iii) an error in which a component differs from specified behavior
in a minor or nonfunctional way (e.g., an incorrect error return or a
misspelled text message);
(d) Current Liabilities. Accrued vacation pay for 1996 and
other Current Liabilities of Seller (as defined in Paragraph 4.9(c) shown
on the certificate to be delivered at Closing as provided in Section 10.5,
below, in an amount not exceeding Fifty Thousand and no/100 Dollars
($50,000.00) (the "Assumed Current Liabilities"); and
(e) Real Estate Lease. All of Seller's liabilities and
obligations under the Real Estate Lease (as defined in Section 4.11) to be
satisfied or performed on and after the Closing Date excluding (except to
the extent, if any, included in Assumed Current Liabilities), any
obligation for any rent or other amounts payable by the Seller under the
Real Estate Lease attributable to any period prior to the Closing Date and
any liabilities, obligations, penalties or damages in connection with any
breaches or defaults, if any, under the Real Estate Lease occurring prior
to the Closing Date.
2.2. Excluded Liabilities. Except for the Assumed Liabilities
referred to in Section 2.1, Purchaser shall not assume and shall not be
obligated to pay, perform or discharge, any liabilities or obligations of
Seller, the Business, Xxxxx and/or the Trust, including, without limitation, any
of the following:
(a) Seller Contracts. Except to the extent assumed under
Paragraphs 2.1(b) and 2.1(c), hereof, any liabilities, obligations,
penalties or damages arising under
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the Seller Contracts in connection with any breaches or defaults, if any,
occurring thereunder prior to the Closing Date, including, without
limitation, any claims relating to any breaches by Seller of any warranty
or representation by Seller as to ownership of any software sold or
licensed under any Seller Contract;
(b) Real Estate Lease. Any liabilities, obligations, penalties
or damages arising under the Real Estate Lease in connection with any
breaches or defaults, if any, occurring thereunder prior to the Closing
Date;
(c) Taxes. Except to the extent, if any, included in Assumed
Current Liabilities, and except as set forth in Section 15.1, hereof, any
assessments, claims or liabilities (including interest and/or penalties)
for federal, state or local income, sales, use, franchise or other taxes
relating to, imposed upon or assessed against the sales, income, property
or business of Seller for periods ending on or before the Closing Date
and/or, resulting from the sale of the Subject Assets hereunder;
(d) Operating Liabilities. Except to the extent, assumed under
Paragraphs 2.1(b) and 2.1(c), hereof, or included in Assumed Current
Liabilities, any claim, cause of action, damages, fine, penalty, assessment
and/or interest ("Claims") arising out of any act, omission or occurrence
in Seller's operation of the Business on or before the Closing Date,
including, without limitation, any Claim relating to or arising out of
breach of warranty, any product liability or other claim for personal
injury or for property damage and/or any claim for violation of wage and
hour laws or employment discrimination; or
(e) Employees. Except to the extent, if any, included in
Assumed Current Liabilities, any liabilities with respect to any former
employee of Seller, any current employee of Seller who is not employed by
Purchaser as of the Closing Date or any current employee of Seller who is
employed by Purchaser as of the Closing Date relating to or arising out of
periods prior to the Closing, including any liabilities to any such
employees for employee benefits, accrued vacation pay, wages, bonuses,
payroll taxes or contributions accrued as of the Closing Date.
Seller agrees to pay, perform and discharge all liabilities and obligations of
Seller and the Business other than the Assumed Liabilities (the "Excluded
Liabilities").
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ARTICLE III
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Closing
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3.1. Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place by mail effective as of
12:01 a.m., Vancouver time, on August 1, 1996 (the "Closing Date"). All
transactions which take place at the Closing shall be deemed to have taken place
simultaneously, and no delivery or payment shall be considered to have been made
until all transactions to be made at the Closing have been completed.
3.2. Purchase Price. Subject to reduction for any Working Capital
Deficiency (as defined below) as hereafter provided, the purchase price for the
Subject Assets (the "Purchase Price") shall be Five Million Two Hundred Fifty
Thousand Dollars ($5,250,000.00), plus the value of the "Assumed Liabilities,"
which shall be payable as follows:
(a) Downpayment. Subject to the terms and conditions of a
Letter of Intent dated May 30, 1996, Purchaser has paid Twenty-Five
Thousand Dollars ($25,000.00) to Seller as a downpayment on the Subject
Assets (the "Downpayment") which shall be applied against the Purchase
Price at Closing.
(b) Closing Payment. At Closing, Purchaser shall pay Four
Million Eight Hundred Seventy-Five Thousand Dollars ($4,875,000.00), less
the Deferred Amount (as defined below) and less the amount of any Working
Capital Deficiency to the Seller in immediately available funds by wire
transfer to such account as Seller may designate in writing. The amount
paid at Closing pursuant to this Paragraph 3.2(b) is referred to herein as
the "Closing Payment."
(c) Contingency Amount. On the first anniversary of the Closing
Date, Purchaser shall pay to Seller, in immediately available funds by wire
transfer to such account as Seller may designate in writing, the sum of
Three Hundred Fifty Thousand Dollars ($350,000.00) (the "Contingency
Amount"), less such amount as Purchaser may set off against the Contingency
Amount pursuant to Section 13.10, hereof, together with interest on the
amount so paid from the Closing Date to the date paid at the rate of ten
percent (10%) per annum.
(d) Deferred Amount. By written notice to Purchaser given not
less than ten (10) days prior to the
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Closing Date, Seller may direct Purchaser to deliver up to Two Million Six
Hundred Twenty-Five Thousand Dollars ($2,625,000.00) to Bank of America
Northwest, N.A. (the "Escrow Agent") on the Closing Date to be held by the
Escrow Agent and to be paid to Seller by the Escrow Agent, together with
certain interest and contingent payments in accordance with the terms of
the Escrow Agreement, a copy of which is attached hereto as Exhibit 3.2(d).
The amount paid to the Escrow Agent on the Closing Date for later payment
to Seller is referred to herein as the "Deferred Amount."
(e) Assumed Liabilities. On the Closing Date, Purchaser shall
assume the Assumed Liabilities by execution of the Assignment and
Assumption Agreement referred to in Section 11.7, below.
3.3. Price Reduction for Working Capital Deficiency. If at Closing
the Cash transferred to Purchaser by Seller hereunder does not equal at least
Two Hundred Ninety Thousand Dollars ($290,000.00), the Purchase Price and the
Closing Payment shall be reduced by the amount of such deficiency (the "Working
Capital Deficiency").
ARTICLE IV
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Representations and Warranties of Seller, Xxxxx and the Trust
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Seller, the Trust and Xxxxx, jointly and severally, represent and
warrant to Purchaser, which representations and warranties shall be true and
correct as of the Closing Date and which shall, except as set forth in Paragraph
13.3(c), hereof, survive the Closing notwithstanding any investigation made by
or information furnished to Purchaser in connection herewith that, except as set
forth in the Disclosure Schedule attached hereto (the "Disclosure Schedule")
and/or the documents referred to therein:
4.1. Due Incorporation. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
4.2. Authority of Seller and the Trust. Seller has full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Seller. The Trust
has all requisite power and authority under the terms of its governing
instrument to enter into this
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Agreement and Xxxxx is authorized to execute this Agreement as trustee on behalf
of the Trust and is the sole trustee of the Trust.
4.3. No Breach of Law by Seller. The execution and delivery hereof,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof by Seller, Xxxxx and the Trust will not: (i)
conflict with or result in a violation under Seller's Certificate of
Incorporation or By-Laws and/or any agreements governing the organization of
Seller and/or the Trust; (ii) contravene any applicable law, rule or regulation,
or any order, writ, judgment, injunction, decree, determination or award which
binds or may materially and adversely affect Seller, Xxxxx, the Trust or any of
their assets; (iii) require any consent, approval, authorization, license,
permit, registration, filing, recording or waiver under any applicable law, rule
or regulation, under any order, writ, judgment, injunction, decree,
determination or award which affects or binds Seller, Xxxxx or the Trust, or
under any governmental or judicial license, franchise, permit or approval held
by Seller, Xxxxx or the Trust or which binds or may materially and adversely
affect them or any of their assets; or (iv) result in the creation or imposition
of any lien, claim or encumbrance upon any assets of Seller, Xxxxx or the Trust.
4.4. No Breach of Contract. The execution and delivery hereof, the
consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof by Seller, Xxxxx and the Trust, will not: (i)
conflict with or result in a breach of or default under, or cause or permit the
termination or acceleration of the maturity of, or otherwise impair any
contract, agreement, lease, commitment, license, indenture, loan or credit
agreement or any other agreement or instrument or obligation to which Seller,
Xxxxx or the Trust is a party or by which any of them or any of their properties
may be affected or is bound; or (ii) require any consent, approval or waiver
under any contract, agreement, lease, commitment, license, indenture, loan or
credit agreement or any other agreement or instrument or obligation to which
Seller, Xxxxx or the Trust is a party or by which any of them or any of their
properties may be affected or is bound.
4.5. Articles and By-Laws. The copies of Seller's Articles of
Incorporation and By-laws previously delivered to Purchaser are true, complete
and correct and are in full force and effect without further amendment or
modification.
4.6. Enforceability. This Agreement has been duly executed and
delivered by Seller, Xxxxx and the Trust and
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constitutes a legal, valid and binding obligation of each such party enforceable
against such party in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by the application of general
principles of equity.
4.7. Capital Stock. The Trust is the sole shareholder of the Seller.
The authorized capital stock of Seller consists of 100,000 shares of common
stock, no par value, (the "Common Stock"), of which 3,056 shares are validly
issued and outstanding, fully paid and nonassessable and owned by the Trust.
Seller is not authorized to issue any other class of capital stock. Seller holds
no shares of its capital stock in its treasury. No shares of the Common Stock or
any other securities issued by Seller have been issued in violation of any
preemptive rights or any applicable securities or other laws, and there are no
existing options, warrants, rights, calls, puts or commitments of any character
relating to authorized but unissued shares of Seller's capital stock, to any of
the Common Stock, or to any other securities issued or to be issued by Seller.
There are no voting agreements, understandings or arrangements, whether written
or oral, which govern the voting of Seller's capital stock or, except for
Seller's Articles of Incorporation or By Laws and resolutions identifying the
persons elected as officers and directors of Seller, the management of Seller.
4.8. Subsidiaries. Since the date of its incorporation, Seller has
not owned, and does not now own, any capital stock of, any equity in, or any
other ownership or investment interest in, any corporation, limited liability
company, partnership, joint venture or other business entity, except Seller
invests in publicly traded mutual funds which in turn invest in publicly traded
operating companies. No other corporation has been merged with or consolidated
into Seller, except that, in order to reincorporate in Washington, Seller's
predecessor, IPS Publishing, Inc., a California corporation, was merged with and
into Seller in 1994.
4.9. Financial Statements and Information .
(a) Seller has delivered to Purchaser the following financial
statements (the "Financial Statements") of Seller:
(i) Unaudited compiled Statements of Assets, Liabilities
and Equity-Cash Basis as of December 31, 1989, 1990, 1991, 1992, 1993,
1994 and 1995 and the related statements of Revenues, Expenditures and
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Retained Earnings-Cash Basis for the years ended on such dates; and
(ii) An unaudited compiled Statement of Assets, Liabilities
and Equity-Cash Basis as of May 31, 1996 and related statements of
Revenues, Expenditures and Retained Earnings for the five (5) month
period then ended. The Statement of Assets, Liabilities and Equity-
Cash Basis dated May 31, 1996 is referred to herein as the "May
Balance Sheet."
(b) The Financial Statements have been prepared in accordance
with the books and records of Seller and, to Xxxxx'x knowledge, except as
noted in the footnotes thereto, in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis, and, subject
to customary year-end adjustments in the case of the May 31, 1996
statements (including, without limitation, a year-end adjustment to
Seller's deferred income account), fairly present the financial condition
and results of operations of Seller as of the dates and for the periods
indicated on a cash basis.
(c) To Xxxxx'x knowledge, Seller has no liabilities which would
be required to be disclosed on a balance sheet according to GAAP, except
accounts payable and other current liabilities incurred in the ordinary
course of business which are due within sixty (60) days, tax liabilities
which, in any case, are not past due or delinquent and accrued vacation pay
for 1996 ("Current Liabilities").
4.10. Tangible Personal Property.
(a) Seller owns or leases all of the tangible personal property
and assets used by Seller in connection with the conduct of the Business as
historically conducted except inventory and obsolete equipment sold in the
ordinary course of business. All of the tangible personal property owned or
leased by Seller is currently in its possession and located on the Premises
(as defined below). All machinery, office equipment and other tangible
property owned or leased by Seller, including all of Seller's computer and
data processing equipment, is in operating condition.
(b) Except for leased tangible personal property, Seller has
good and marketable title to all tangible personal property used in the
conduct of the Business, free and clear of all liens, claims and
encumbrances.
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(c) The Disclosure Schedule identifies each lease under which
Seller has rights in tangible personal property.
(d) The inventory of Seller is of a quality and quantity useable
and saleable in the ordinary course of the Business as conducted on the
date hereof and does not include any obsolete, discontinued, or surplus
items.
4.11. Real Property. Seller occupies premises at 12606 Northeast
95th Street, Suite C-110 (the "Premises") under a lease dated March 11, 1994 (as
extended by Amendment to Lease Renewal dated December 14, 1995, the "Real Estate
Lease") by and between Seller and Xxxxxxxxx Business Park. The Premises
constitute all of real property used by Seller in connection with the conduct of
the Business. To Xxxxx'x knowledge, Seller's use of the Premises is in
compliance with all applicable zoning laws, all local, state and federal laws,
ordinances and regulations affecting the use and occupancy of the Premises and
the terms and restrictions of the industrial parks, if any, in which the
Premises are located. To Xxxxx'x knowledge, the current use of the Premises is
not a special use exception or a nonconforming use. Seller has not received any
notice of and Xxxxx has no knowledge of any: (i) planned or actually commenced
improvements which may result in an assessment involving the Premises; (ii) any
governmental agency or court orders requiring the repair, alteration or
correction of any existing condition with respect to the Premises; or (iii)
other matters adversely affecting Seller involving the Premises. To Xxxxx'x
knowledge, the Premises are in good condition and repair and adequate for
Seller's use.
4.12. Intangible Personal Property.
(a) Seller has delivered to Purchaser a true and complete aging
schedule of Seller's receivables as of May 31, 1996.
(b) The Disclosure Schedule identifies: (i) all patents owned
and patent applications made by Seller and the jurisdictions by which each
such patent has been issued or in which each such application has been
filed (including registration and application numbers); (ii) all trade
names, trademarks and service marks used by Seller whether or not owned by
Seller; (iii) all registrations made and registration applications filed by
Seller for trade names, trademarks and service marks owned by Seller, and
the jurisdictions by which each such registration has been issued or in
which each such application has been filed; and (iv) all registrations made
and registration applications
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filed by Seller for copyrights owned by Seller and each jurisdiction by
which each such registration has been issued or in which each such
application has been filed.
(c) The Disclosure Schedule lists: (i) all licenses,
sublicenses and other agreements under which any person is authorized to
use any Intellectual Property owned by Seller; and (ii) all licenses,
sublicenses and other agreements under which Seller is authorized to use
any patents, inventions, designs, models, processes, formulations, know-how
or schematics, any trade names, trademarks, service marks or copyrights
and/or any mask works, algorithms, authoring tools, computer software
programs or applications or other proprietary information or material owned
by third parties (the "Third Party Intellectual Property").
(d) Except for the Third Party Intellectual Property which
Seller has a right to use under the agreements listed on the Disclosure
Schedule, and except for rights existing under the agreements referred to
clause (c)(i) above, Seller is the sole and exclusive owner of, with all
right, title and interest in and to, free and clear of all liens, valid
claims and encumbrances, the Intellectual Property with the exclusive right
to the use thereof. There are no trademarks, service marks, copyrights,
mask works, algorithms, authoring tools, computer software programs or
applications, documentation or other intellectual property or proprietary
rights used by Seller or relating to the Business except for the Third
Party Intellectual Property and the Intellectual Property to be transferred
and conveyed to Purchaser pursuant hereto. To the knowledge of Xxxxx, all
patents and all registered trademarks, service marks, copyrights and mask
works included in the Intellectual Property are valid and subsisting, and
no Intellectual Property has been declared invalid or, in whole or in part,
been abandoned, dedicated, disclaimed or allowed to lapse for nonpayment of
fees or taxes or for any other reason. No claims with respect to the
Intellectual Property or the Third Party Intellectual Property (to the
extent arising out of any use, reproduction or distribution of such Third
Party Intellectual Property by Seller) are currently pending or, to the
knowledge of Xxxxx, threatened by any person, nor does Xxxxx know of any
valid grounds for any bona fide claims: (i) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or
licensed by Seller or any use by Seller of any Intellectual Property
infringes upon any patent, trademark, service xxxx, copyright, mask work or
trade secret or
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other proprietary right owned or used by any other person; (ii) against the
use by Seller of any Intellectual Property; (iii) challenging the
ownership, validity or effectiveness of any Intellectual Property; or (iv)
challenging Seller's license or legally enforceable right to use any Third
Party Intellectual Property. To the knowledge of Xxxxx, there is no
unauthorized use, infringement or misappropriation of any of the
Intellectual Property by any third party, including any employee or former
employee of Seller.
(e) Copies of all algorithms, tools and other software and all
source and object programs and codes and related documentation are located
on the Premises or at off-premises sites under Seller's control as
identified in the Disclosure Schedule. Such algorithms, tools, software,
programs, codes and documentation are fully useable and understandable by
persons ordinarily skilled in computer programming and are sufficient to
permit the maintenance and further development of all software products and
rights currently sold or licensed by Seller. Without limitation, Seller's
source code includes a full source language statement of the programs
comprising all of Seller's software, including any support utilities which
are not commercially available and which are required to build the object
code from the source code.
(f) The Disclosure Schedule accurately identifies and lists the
amounts paid to each supplier or licensor of Intellectual Property that
received more than $1,000 from Seller in 1995 or will be paid more than
$1,000 by Seller in 1996 under currently existing arrangements.
4.13. Contracts and Commitments.
(a) The Disclosure Schedule identifies each material contract,
oral or written: (i) to which Seller is a party; (ii) by which Seller or
any of its assets is or may become bound or under which Seller has or may
become subject to any obligation; (iii) under which Seller has or may
acquire any right or interest; or (iv) with respect to which Seller is or
may become subject to any liability.
(b) Except as set forth on the Disclosure Schedule and except
for Plans (as defined below), Seller is not a party to nor bound by: (i)
any contract or arrangement with employees, agents, sales representatives,
consultants, distributors or dealers; or (ii) any agreements or
arrangements involving employees of Seller that contain any severance or
termination pay liabilities or obligations; or
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(iii) any bonus, vacation pay, sick pay, group insurance, deferred
compensation, stock purchase, stock option, profit sharing, pension,
retirement, fringe benefit or other employee benefit plans involving such
employees.
(c) The Disclosure Schedule identifies all policies of insurance
owned by Seller as of the date hereof. The Disclosure Schedule sets forth a
current summary description of each claim made by Seller under, or which
has been made against Seller and has been paid or defended in accordance
with the terms of, any insurance policy of Seller within two (2) years
prior to the date hereof.
(d) Seller has provided Purchaser with true and complete copies
of the Real Estate Lease and each other written Seller Contract identified
in the Disclosure Schedule, except that Seller has not provided Purchaser
with copies of those Seller Contracts which are marked with asterisks in
Exhibit 4.4 of the Disclosure Schedule. Each Seller Contract marked with an
asterisk on Exhibit 4.4 to the Disclosure Schedule is identical, except as
to date, title of publication covered and price, to a contract otherwise
identified in Exhibit 4.4, a true and complete copy of which Seller has
provided to Purchaser. Each of the Seller Contracts is valid and
enforceable and in full force and effect. Seller has not materially
breached, violated or committed a default under, or committed or omitted
any act which, with notice or lapse of time, or both, would constitute a
breach or violation of, or default under, any Seller Contract. Xxxxx has no
knowledge that any other party is in breach or violation of, or default
under, or has committed or omitted any act which, with notice or lapse of
time, or both, would constitute a breach or violation of, or default under,
any such Seller Contract.
(e) The Disclosure Schedule identifies each Seller Contract for
the license or development of algorithms or other software which has not
been delivered or under which Seller has any continuing development or
maintenance obligations and describes the work required to complete each
such contract (the "Unfinished Contracts").
4.14. Licenses, Permits and Authorizations. To Xxxxx'x knowledge, Seller
has all approvals, authorizations, consents, licenses, franchises, orders and
other permits of, and has made all filings with, any governmental authority,
whether foreign, federal, state, regional or local, which are required for the
conduct of the Business as historically conducted, and all such licenses,
permits and other authorizations are listed on the Disclosure Schedule. To
Xxxxx'x knowledge, all such approvals, authorizations, consents, licenses,
franchises, orders and other permits are in full force and effect, and all fees
and charges payable with respect thereto have been paid.
14
4.15. Taxes.
(a) Seller has filed an election (an "S Election") in accordance
with the provisions of Section 1362 of the Internal Revenue Code of 1986,
as amended (the "Code") and the applicable provisions of the laws of each
state or other jurisdiction where Seller is subject to tax which has rules
corresponding to subchapter S of the Code, and each of Seller's
shareholders has filed a timely consent to such election pursuant to
Section 1362 of the Code or applicable provisions of the laws of any such
other jurisdiction. Seller's predecessor's S election was in effect
continuously for all taxable years from the taxable year ended December 31,
1981 until Seller's predecessor was merged into Seller, and Seller's S
election has been in effect since it commenced business operations and will
remain in effect through the Closing.
(b) To Xxxxx'x knowledge, Seller and its shareholders have
timely filed all federal, state, local and foreign tax returns and reports
required under applicable law to be filed with respect to Seller's income,
operations and/or assets (including income, sales, use and employment tax
returns), and each such return or report is complete and correct, and the
tax liability with respect to Seller's income, operations and/or assets is
properly reflected thereon. To Xxxxx'x knowledge, all taxes, assessments
and other governmental charges reflected on such tax returns and reports
which are due and payable by Seller have been paid, other than those taxes
which are currently payable without penalty or interest but for which
adequate reserves have been set aside on the books of Seller. To Xxxxx'x
knowledge, Seller has withheld amounts from its employees to the extent
required by law, and has filed all federal, foreign, state and local
returns and reports with respect to employee income tax withholding and
social security and unemployment taxes in compliance with the tax
withholding provisions of the Code and other applicable federal, foreign,
state or local laws. No currently effective waiver or extension of any
statute of limitations relating to taxes or other governmental charges has
been executed or given by Seller, and no requests for such waivers are
pending.
(c) Neither Seller nor its shareholders has been notified that
it is currently under examination by the Internal Revenue Service or any
other taxing authority; neither the Internal Revenue Service, nor any other
taxing authority, is now asserting or, to the knowledge of Xxxxx,
threatening to assert against Seller any adjustment,
15
deficiency, lien or claim for additional taxes or interest thereon or
penalties in connection therewith; and all returns filed by Seller and its
shareholders with the Internal Revenue Service or any other taxing
authority through the taxable years or periods ended December 31, 1991 have
been examined and closed or are returns with regard to which the statute of
limitations for the assessment of additional tax has expired.
4.16. Labor Practices and Labor Matters.
(a) The Disclosure Schedule identifies each of Seller's
employees and each consultant or contractor currently engaged by Seller
together with the title or a description of the services performed and
salary, wage rate or other compensation arrangement with each such person.
(b) Seller is in compliance with the Federal Fair Labor
Standards Act and all federal, state and local laws, ordinances, rules,
regulations and orders relating to employment discrimination, employee
welfare and labor standards which are applicable to Seller, including
without limitation: (i) any laws, rules or regulations relating to the
employment of any person not a citizen of the United States; and (ii) any
provisions thereof relating to wages, bonuses, collective bargaining, equal
pay and the payment of social security and similar payroll taxes. To the
knowledge of Xxxxx, there is no basis for any claim by any past or present
employee of Seller that such employee was wrongfully discharged or subject
to any employment discrimination by Seller or its management arising out of
or relating to such employee's race, sex, color, religion, handicap or any
other protected characteristic under applicable law. No proceedings are
pending before any court, government agency or instrumentality or
arbitrator relating to labor matters, and there is no pending investigation
by any governmental agency or, to the knowledge of Xxxxx, threatened claim
by any such agency or other person relating to labor or employment matters.
(c) Seller is not a party to any agreement or contract with any
union, labor organization, employee group, or other entity or individual
which affects the employment of employees of Seller, including without
limitation, any collective bargaining agreements or labor contracts.
(d) To the knowledge of Xxxxx, none of the employees of Seller
is in the process of being organized by or into labor unions or
associations. Since December 31,
16
1991, Seller has not been subject to a strike or other work stoppage and,
to the knowledge of Xxxxx, there are no strikes or work stoppages
contemplated or threatened against Seller.
(e) The Disclosure Schedule lists each of the states where
Seller has or maintains any unemployment or workers compensation accounts.
Since December 31, 1991, Seller has not had any adverse change in its
contribution rate or its experience rating for unemployment or workers'
compensation purposes in any state. No unemployment or workers' account of
Seller has a negative balance.
(f) To the knowledge of Xxxxx, Seller is in full compliance with
the Occupational Safety and Health Act of 1970, as amended, ("OSHA") and
all other federal, state or local laws or ordinances, including orders,
rules and regulations thereunder, regulating or otherwise affecting health
and safety of the work place ("OSHA Laws").
4.17. Plans. Each employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA")) and each employee welfare benefit plan (as defined in Section 3(i) of
ERISA) to which Seller is required to make contributions for the benefit of
Seller's employees is identified and described on the Disclosure Schedule (the
"Plans"). Each of the Plans which is intended to qualify under Section 401(a) of
the Code is so qualified and Seller has received a favorable determination
letter to such effect from the Internal Revenue Service. To Xxxxx'x knowledge,
each such Plan, and the administration of each such Plan, is in full compliance
with ERISA and the Code.
4.18. Depositories, Powers of Attorney. The Disclosure Schedule
sets forth: (i) the name of each bank or similar entity in which Seller has an
account, lockbox or safe deposit box and the names of all persons authorized to
draw thereon or to have access thereto; and (ii) the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from Seller and a description of the terms thereof.
4.19. Customers and Suppliers. The Disclosure Schedule identifies
each of Seller's Major Customers and Major Suppliers (both as defined below) and
states the revenues and payments received and made to such persons during 1995
and the five (5) months ended May 31, 1996. For purposes of this Section 4.19,
"Major Customer" shall mean each of Seller's twenty (20) largest customers, by
sales volume, during 1995 or the five (5) months ended May 31, 1996. For the
purposes of this Section
17
4.19, "Major Supplier" shall mean each of Seller's ten (10) largest vendors, by
purchase volume, during 1995 and the five (5) months ended May 31, 1996. Seller
has not received any notice or communication from any Major Customer or Major
Supplier to the effect that such person intends to cease doing business or to
materially reduce its business with Seller or to terminate any agreement with
Seller.
4.20. Compliance With Laws. Seller has complied with all material
provisions of all applicable laws, ordinances and governmental regulations
(including, without limitation, laws and regulations regulating or otherwise
affecting the environment and/or the disposal of waste or other materials
("Environmental Laws"), noncompliance with which would have a material adverse
effect on Seller or the Business, and all services and products provided by
Seller, and all marketing material and distribution arrangements used or
employed by Seller, conform to all requirements of all material provisions of
all applicable laws, rules and regulations. Seller is not subject to any
judgment, decree, order or citation related to or arising out of Environmental
Laws, and Seller has disposed of all waste in full compliance with all
Environmental Laws.
4.21. Payments. Neither Seller nor any of its officers, directors,
employees or agents, has, directly or indirectly, given or made, or agreed to
give or make, any illegal political contributions or any illegal commission,
payment, gratuity, gift, or similar benefit, in each case on behalf of Seller,
to any candidate, government official, customer, supplier or other person
(foreign or domestic) who is in or may be in a position to help or hinder the
business of Seller or to assist Seller with any actual or proposed transaction.
4.22. Related Party Transactions. Since December 31, 1994, no
Related Party (as defined below) has had, any interest in any transaction,
lease, contract or other arrangement with Seller. Without limitation to the
foregoing, since December 31, 1994, no Related Party has or has had: (i) any
interests in any entity which has purchased, sold or furnished to Seller any
goods or services; (ii) a beneficial interest in any lease, contract, commitment
or understanding to which Seller is a party or by which it is bound or affected;
(iii) any interest or claim against Seller or any assets of Seller; or (iv) any
interest in any assets used in the Business. For purposes hereof, each of the
following shall be deemed to be a "Related Party": (a) Xxxxx; (b) each
individual who is, or who has at any time been, an officer or director of
Seller; (c) each member of the family of any of the individuals referred to in
clauses (a) and/or (b), above; (d) the Trust; and (e) any entity (other than
Seller) in
18
which any of the individuals referred to in clauses (a), (b) and/or (c), above,
or the Trust holds, beneficially or otherwise, a voting, proprietary or equity
interest.
4.23. Product Warranties. Except as set forth on the Disclosure
Schedule: (i) all software and other products sold or licensed by Seller (and
the delivery thereof) have been in conformity with all applicable contractual
commitments and all expressed or implied warranties; and (ii) no liability for
any warranty claims exists for the replacement thereof or otherwise. Seller has
not made any guaranties or warranties with respect to any product heretofore
sold or licensed by Seller other than as set forth in the Seller Contracts or in
the standard terms and conditions used by Seller in connection with the sale or
license of any standard, non-customized product, copies of which have been
furnished to Purchaser. All product labeling is in conformity with all
applicable laws. To Xxxxx'x knowledge, there are no pending claims by any of
Seller's end-users for the correction of any so called "bug," and Xxxxx does not
know of any so called "bugs" in the software subject to the Seller Contracts
which may form the basis for any such claim. It is not the intention of Seller
or Purchaser that this Section 4.23 negate the obligations of Purchaser pursuant
to Section 2.1(b) and (c).
4.24. Absences of Certain Changes or Events. Since May 31, 1996,
Seller has not: (i) taken any action which would have constituted a violation
under Section 6.1 hereof if Seller had then been bound by Section 6.1 hereof; or
(ii) failed to take any action which would have been required by Section 6.1
hereof, if Seller had then been bound by Section 6.1 hereof. Since the May 31,
1996 Balance Sheet, there has not been: (i) any material adverse change in the
Business and/or the assets, liabilities, properties (tangible or intangible),
operations, financial condition or results of operations of Seller; or (ii) any
material damage, destruction, loss or claim, whether or not covered by
insurance, adversely affecting the Business and/or the assets, properties
(tangible or intangible), operations, financial condition or results of
operations of Seller.
4.25. Finder's Fees. None of Seller, Xxxxx or the Trust is obligated
to pay any agent, finder, broker or other representative any fee or commission
in connection with the consummation of the transactions contemplated hereby.
4.26. Litigation.
(a) There is no claim, action, suit, proceeding, arbitration or
to Xxxxx'x knowledge, any investigation or inquiry before any federal,
state, municipal, foreign or
19
other court or governmental or administrative body or agency, any
securities or commodities exchange, other regulatory body or any private
arbitration tribunal now pending, or, to the knowledge of Xxxxx,
threatened, against, relating to or affecting: (i) Seller, Xxxxx or the
Trust which would adversely affect Seller's ability to consummate the
transactions contemplated hereby; or (ii) Seller, or the Business, or any
director, officer or other employee thereof in his capacity as such, or the
assets or properties of Seller, nor, to the knowledge of Xxxxx, does any
basis exist for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry.
(b) Neither Seller nor, to Xxxxx'x knowledge, any of its
officers, directors or employees, currently is or has been permanently or
temporarily enjoined or prohibited by any order, judgment or decree of any
court or governmental or administrative body or agency, or any other
regulatory body, from engaging in or continuing any conduct or practice in
connection with the Business.
(c) There is not in existence any order, judgment or decree of
any court or governmental or administrative body or agency, or any other
regulatory body, enjoining or prohibiting Seller from taking, or requiring
Seller to take, any action of any kind or to which Seller, the Business
and/or any of Seller's properties or assets are subject or bound.
(d) Seller is not in default under any order, writ, injunction
or decree of any court or governmental or administrative body or agency or
any other regulatory body.
4.27. Undisclosed Liabilities. Seller is not obligated as a
guarantor or cosigner or otherwise liable for any obligation of any kind of any
other person or entity. Seller is not subject to any obligation, liability, debt
or commitment, contingent or otherwise except for: (i) liabilities under the
Seller Contracts not required to be disclosed on a balance sheet in accordance
with GAAP; (ii) current liabilities described in Paragraph 4.9(c), hereof; (iii)
liabilities not required to be disclosed on a balance sheet in accordance with
GAAP but which are otherwise disclosed herein; (iv) liabilities arising
hereunder.
4.28. No Material Omissions. No representation or warranty by
Seller, Xxxxx and/or the Trust contained herein or in any writing furnished
pursuant hereto to Purchaser contains any untrue statement of fact or omits to
state any material fact
20
required to make the statements herein or therein contained not misleading.
Xxxxx has disclosed to Purchaser all material adverse facts known to Xxxxx
relating to the Business and/or Seller and/or its assets.
ARTICLE V
---------
Representations and Warranties
of Purchaser
------------
Purchaser represents and warrants to Seller, which representations and
warranties shall (except as set forth in Paragraph 13.3(c), hereof) survive the
Closing notwithstanding any investigation made by or information furnished to
Seller in connection herewith as follows:
5.1. Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
Xxxxxxxx X. and Xxxxxx X. Xxxx own all of the issued and outstanding capital
stock of Purchaser.
5.2. Authority of Purchaser. Purchaser has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of Purchaser.
5.3. No Breach of Law by Purchaser. The execution and delivery
hereof, the consummation of the transactions contemplated hereby, and compliance
with the terms and provisions hereof, by Purchaser will not: (i) conflict with
or result in a violation under Purchaser's Articles of Incorporation or By-Laws
and/or any agreement governing the organization of Purchaser; (ii) contravene
any applicable law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award which affects or binds Purchaser;
(iii) require any consent, approval, authorization, license, permit,
registration, filing, recording or waiver under any applicable law, rule or
regulation, under any order, writ, judgment, injunction, decree, determination
or award which affects or binds Purchaser, or under any governmental or judicial
license, franchise, permit or approval held by Purchaser or which binds or may
affect Purchaser or any of its assets; or (iv) result in the creation or
imposition of any lien, claim or encumbrance upon any assets of Purchaser.
5.4. No Breach of Contract by Purchaser. The execution and delivery
hereof, the consummation of the transactions contemplated hereby, and compliance
with the terms and
21
provisions hereof by Purchaser will not: (i) conflict with or result in a breach
of or default under, or cause or permit the termination or acceleration of the
maturity of, or otherwise impair any contract, agreement, lease, commitment,
indenture, loan or credit agreement or any other agreement or instrument to
which Purchaser is a party or by which Purchaser or any of its assets may be
affected or is bound; or (ii) require any consent, approval or waiver under any
contract, agreement, lease, commitment, indenture, loan or credit agreement or
any other agreement or instrument to which Purchaser is a party or by which
Purchaser or any of its assets may be affected or is bound.
5.5. Enforceability. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid and binding obligation of
Purchaser enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by the application of general
principles of equity.
5.6. Finder's Fees. Purchaser is not obligated to pay any agent,
finder, broker or other representative any fee or commission in connection with
the consummation of the transactions contemplated hereby. 5.7. Litigation. There
is no claim, action, suit, proceeding or arbitration, or to Purchaser's
knowledge, any investigation or inquiry before any federal, state, municipal,
foreign or other court or governmental or administrative body or agency, any
securities or commodities exchange, other regulatory body or any private
arbitration tribunal now pending, or, to Purchaser's knowledge, threatened,
against, relating to or affecting Purchaser, Advantage Learning Systems, Inc.,
Xxxxxxxx X. and/or Xxxxxx X. Xxxx which would adversely affect Purchaser's
ability to consummate the transactions contemplated hereby.
5.7. Litigation. There is no claim, action, suit, proceeding or
arbitration, or to Purchaser's knowledge, any investigation or inquiry before
any federal, state, municipal, foreign or other court or governmental or
administrative body or agency, any securities or commodities exchange, other
regulatory body or any private arbitration tribunal now pending, or, to
Purchaser's knowledge, threatened, against, relating to or affecting Purchaser,
Advantage Learning Systems, Inc., Xxxxxxxx X. and/or Xxxxxx X. Xxxx which would
adversely affect Purchaser's ability to consummate the transactions contemplated
hereby.
5.8. No Material Omissions. No representation or warranty by
Purchaser contained herein or in any writing furnished pursuant hereto to Seller
contains any untrue statement of fact or omits to state any material fact
required to make the statements herein or therein contained not misleading.
22
ARTICLE VI
----------
Seller's, Xxxxx'x and the Trust's Pre-Closing Covenants
-------------------------------------------------------
Except and to the extent Purchaser may otherwise permit in writing,
Seller, Xxxxx and the Trust covenant and agree as follows:
6.1. Conduct of Business in Ordinary Course. Until the Closing,
Seller shall carry on its business diligently and substantially in the manner as
heretofore conducted, and Seller shall not make or initiate any unusual or novel
methods of purchase, sale, management, accounting or operation, or make any
adjustments in the pricing of its products or services not consistent with its
past business practices. Seller shall not enter into any contract or commitment
to engage in any transaction not in the ordinary course of its business or not
consistent with its past business practices. Seller shall use its best efforts
to preserve for Purchaser its business organization, including present
employees, and its relationships with suppliers, customers and others having
business relations with Seller. Without limiting the scope of the foregoing,
Seller shall:
(a) Use, preserve and maintain its properties and assets on a
basis consistent with past practices;
(b) Maintain all insurance covering Seller and its business,
properties or assets in effect as of the date hereof;
(c) Pay all debts and obligations incurred by Seller in the
operation of its business in accordance with its customary practices as the
same become due and payable, except to the extent Seller is contesting such
debts or obligations in good faith by appropriate proceedings and has
established appropriate reserves therefor; and
(d) Maintain its books, accounts and records in the usual manner
and on a basis consistent with past practice.
Furthermore, and without limiting the scope of the foregoing, Seller shall not:
(e) Make any capital expenditures, or commitments with respect
thereto (including, without limitation, capital leases), other than capital
expenditures or commitments not
23
in excess of Ten Thousand Dollars ($10,000.00) in the aggregate;
(f) Enter into any agreement or agreements for the sale of
assets or properties, other than agreements for the sale of inventory or
software licenses made in the ordinary course of business on a basis
consistent with past practice and approved by Purchaser in writing;
(g) Enter into or modify any employment agreements with
employees, agents and/or representatives;
(h) Except as contemplated by Section 6.6, hereof, adopt or
amend or increase compensation or benefits payable under, or take any
actions which might result in adverse tax or other consequences with
respect to, any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, collective bargaining agreement, or
other plan, agreement, trust, fund or arrangement for the benefit of any
employee or class of employees;
(i) Commit any act or omit to do any act, or permit any act or
omission to act, which will or may cause a material breach of any Seller
Contract;
(j) Change its prices or credit policies;
(k) Incur any indebtedness other than indebtedness for accounts
payable to trade creditors incurred in the ordinary course of business in
connection with obtaining materials or services;
(l) Authorize or issue any capital stock or securities
convertible into capital stock, including without limitation, options,
warrants, convertible debt or other rights to acquire capital stock; and
(m) Except as contemplated by Section 10.9, hereof, amend its
Articles of Incorporation, other charter documents or By-Laws.
6.2. Inspection. Until the Closing, Seller shall provide Purchaser
and its authorized representatives and agents: (i) full access during normal
business hours to the Premises and all books, records, contracts and documents
of Seller; and (ii) all such information with respect to the business and
affairs of Seller as it may reasonably request. No review, examination,
inspection, study or audit made by Purchaser pursuant hereto
24
shall be deemed to be a waiver by Purchaser of, or a release of Seller, Xxxxx or
the Trust from, any representations, warranties, covenants, conditions,
liabilities or obligations set forth in this Agreement.
6.3. No Solicitation. Until the Closing, or termination of this
Agreement as provided in Article XIV, below, neither Seller, Xxxxx nor the
Trust shall, directly or indirectly, solicit, initiate, encourage or enter
into any discussions or negotiations with, or provide any assistance or
information to, or enter into any agreement with, any person or group of
persons (other than Purchaser) concerning any acquisition, directly or
indirectly, of an equity interest in, or merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or a substantial portion of the assets
of, Seller (any such proposal or offer being an "Acquisition Proposal"), or
assist or participate in, facilitate or encourage any effort or attempt by
any other person to do or seek to do any of the foregoing; provided,
however, that receipt of and response by Seller or Xxxxx to an unsolicited
Acquisition Proposal by any other person without any solicitation,
initiation, encouragement, assistance or participation after the date of
this Agreement and without entering into any discussions or negotiations
with respect to any such unsolicited Acquisition Proposal will not
constitute a violation hereof, provided Seller or Xxxxx promptly advises
Purchaser of the identity of any such person and advises such person that
negotiations are not permitted pursuant hereto.
6.4. Interim Financial Statements and Aging Schedules. Until the
Closing, Seller shall furnish to Purchaser, promptly upon completion
thereof, the financial statements of Seller (including a balance sheet and
a statement of results of operations) for each month after May, 1996, and
the then ending year to date period, together with financial statements as
of the corresponding dates and for the corresponding periods during the
preceding fiscal year, which financial statements shall be prepared in
accordance with past practice consistently applied subject only to usual
and customary year end adjustments. Seller shall also furnish to Purchaser
current accounts receivable aging schedules as and when requested by
Purchaser.
6.5. Best Efforts. Until the Closing, Seller and Xxxxx shall use
their best efforts to take or cause to be taken all actions and to do or
cause to be done all things necessary, proper or advisable under applicable
laws and regulations to satisfy the conditions set forth in Articles VIII
and IX, hereof, and to consummate and make effective the transactions
contemplated hereby.
25
6.6. Profit Sharing and Bonus Plans. On or before the Closing Date,
Seller shall make appropriate contributions, consistent with past practices, to
Seller's profit sharing plan for the period from January 1, 1996 through the
Closing Date and shall pay such bonuses as may be required under Seller's 1996
bonus plan. In Seller's discretion, Seller may pay to Seller's employees such
additional cash bonuses as the Seller deems appropriate in connection with the
transactions contemplated hereby.
6.7. Delivery of Documentation. On or before the Closing Date,
Seller shall assure that duplicate copies of all of Seller's algorithms,
authoring tools and other software and all source and object programs and codes
and related documentation reproduced in written form or stored on disks or other
appropriate software media are stored in an off-site location in the Vancouver,
Washington area which will be accessible by Purchaser after the Closing.
6.8. Delivery of Records. On or before the Closing Date, Seller,
Xxxxx and the Trust shall cause to be delivered to the Premises all files,
records, documents and other information and records relating to Seller and/or
the Business which are in the possession or under the control of Seller, Xxxxx
or the Trust and which are not then located at such facility.
ARTICLE VII
-----------
Purchaser's Pre-Closing Covenants
---------------------------------
Except and to the extent Seller may otherwise permit in writing,
Purchaser covenants and agrees that until the Closing Purchaser shall use its
best efforts to take or cause to be taken all actions and to do or cause to be
done all things necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions set forth in Articles VIII and IX, hereof,
and to consummate or make effective the transactions contemplated hereby.
ARTICLE VIII
------------
Conditions to Seller's, Xxxxx'x and the Trust's Obligations
-----------------------------------------------------------
Each and every obligation of Seller, Xxxxx and/or the Trust under this
Agreement shall be subject to the fulfillment, prior to or at the Closing, of
each of the following conditions:
8.1. Purchaser's Representations and Warranties . Each
representation and warranty made by Purchaser herein shall be true and correct
on and as of the Closing Date with the same
26
effect as though each such representation or warranty had been made or given on
and as of the Closing Date.
8.2. Purchaser's Covenants. Purchaser shall have performed and
complied with all of the terms, covenants and conditions set forth herein which
are to be performed or complied with by Purchaser before or as of the Closing
Date.
8.3. Escrow Agreement. Purchaser, Seller and the Escrow Agent shall
have entered into the Escrow Agreement dated as of the Closing Date.
8.4. Opinion of Counsel. Xxxxxxx & Xxxx, S.C., counsel for
Purchaser, shall have delivered to Seller an opinion dated the Closing Date in
form and substance satisfactory to Seller and Seller's counsel.
8.5. Legal Actions or Proceedings. No suit, action, investigation,
inquiry or other proceeding by any governmental authority or other person or
legal or administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or which otherwise seeks to affect, or could affect, the transactions
contemplated hereby or impose damages or penalties upon any party hereto if such
transactions are consummated.
8.6. Xxxxxx Employment Agreement. Purchaser and Xx. Xxxx Xxxxxx
shall have entered into an Employment Agreement as contemplated by Section 9.7,
below.
8.7. Purchaser's Deliveries . Purchaser shall have tendered delivery
of the items contemplated by Article XI, hereof.
If any of the conditions to Closing set forth in this Article VIII shall not
have been satisfied, Seller may elect to terminate this Agreement as
contemplated by Article XIV, hereof, or to consummate the transactions
contemplated herein despite such failure, in which case Seller shall retain all
of its rights to indemnification pursuant to Article XIII, hereof.
ARTICLE IX
----------
Conditions to Purchaser's Obligations
-------------------------------------
Each and every obligation of Purchaser under this Agreement shall be
subject to the fulfillment, prior to or at Closing, of each of the following
conditions:
27
9.1. Seller's, Xxxxx'x and the Trust's Representations and
Warranties. Each representation and warranty made by Seller, Xxxxx and/or the
Trust herein shall be true and correct on and as of the Closing Date with the
same effect as though each such representation and warranty had been made or
given on and as of the Closing Date.
9.2. Seller's, Xxxxx'x and the Trust's Covenants . Seller, Xxxxx and
the Trust shall have performed and complied with all of the terms, covenants and
conditions set forth herein which are to be performed or complied with by
Seller, Xxxxx and/or the Trust before or as of the Closing Date.
9.3. Escrow Agreement. Purchaser, Seller and the Escrow Agent shall
have entered into the Escrow Agreement dated as of the Closing Date.
9.4. Opinion of Counsel. Heurlin & Potter, P.S., Seller's, Xxxxx'x
and the Trust's counsel, shall have delivered to Purchaser an opinion dated the
Closing Date in form and substance satisfactory to Purchaser and Purchaser's
counsel.
9.5. Legal Actions or Proceedings . No suit, action, investigation,
inquiry or other proceeding by any governmental authority or other person or
legal or administrative proceeding shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or which otherwise seeks to affect, or could affect, the transactions
contemplated hereby or impose damages or penalties upon any party hereto if such
transactions are consummated.
9.6. Seller's, Xxxxx'x and the Trust's Deliveries . Seller, Xxxxx
and the Trust shall have tendered delivery of the items contemplated by Article
X, hereof.
9.7. Xxxxxx Employment Agreement. Purchaser shall have entered into
an employment agreement with Xx. Xxxx Xxxxxx on terms and conditions
satisfactory to Purchaser under which Xx. Xxxxxx will serve as the President of
Purchaser in Vancouver, Washington for a two year period following the Closing
Date with responsibilities, compensation and benefits substantially similar to
those provided under her current employment arrangements with Seller.
9.8. Royalty Payments. Seller shall have made appropriate
arrangements with Xx. Xxxxxx Xxxxxxx and any other persons entitled to royalty
payments or other payments based upon Seller's sales or earnings (excluding
persons entitled to such payments under Seller's licenses for "Applications in
Basic Math"
28
and "Equation Editor") to terminate or release all rights to such payments.
9.9. Manager's Certificate. Xx. Xxxx Xxxxxx shall have delivered a
certificate to Purchaser dated the Closing Date to the effect that: (i) she has
reviewed Articles IV and VI, hereof; (ii) except as noted in such certificate,
she has no actual knowledge that any representation or warranty made by Seller,
the Trust and/or Xxxxx herein is not true and correct on and as of the date of
such certificate with the same effect as though such representation or warranty
had been made on such date; and (iii) she does not have any actual knowledge
that Seller, the Trust and/or Xxxxx has not performed or complied with all of
the covenants set forth herein which are to be performed or complied with before
or as of the Closing Date.
9.10. Approvals and Consents . Purchaser shall have received, at or
before Closing, all consents, approvals, permits and licenses ("Consents") which
Purchaser reasonably deems necessary to operate the Business or to assume and
continue the Seller Contracts after the Closing, including, but not limited to,
consents from governmental and regulatory agencies, lenders, equipment lessors,
landlords, suppliers, customers, software licensees and licensors and other
parties whose approval may be necessary to avoid the acceleration of any
indebtedness or the termination of any contracts, licenses or permits affecting
Seller, the Business and/or Seller's properties or for the assignment thereof to
Purchaser.
9.11. Intellectual Property Assignments. Purchaser shall have
received, at or before Closing, such copyright assignments, licenses,
confirmations or other documents as Purchaser reasonably deems necessary to
confirm and perfect Seller's and Purchaser's title to the algorithms, software
and other Intellectual Property to be transferred to Purchaser pursuant hereto,
including, but not limited to, copyright assignments from software developers or
other third parties engaged to write or develop any of Seller's software or
other Intellectual Property.
9.12. Due Diligence. Purchaser and its accountants and counsel shall
have had an opportunity to examine and review all aspects of the operation of
Seller and the Business, and Purchaser and its representatives shall be
satisfied in their absolute discretion as to the results of such examination and
review and of their continuing due diligence investigations and evaluations of
Seller and the Business, including, without limitation: (i) the adequacy of
Seller's books, records and accounting systems and methods; (ii) Seller's rights
and title to
29
its software and other Intellectual Property; (iii) Seller's obligations under
the contracts to which it is a party and the anticipated cost to complete such
contracts; and (iv) Purchaser's ability to continue Seller's relationships and
agreements with its major customers and suppliers. No such review, examination,
inspection, study or audit shall be deemed to be a waiver by Purchaser of, or a
release of Seller, Xxxxx and/or the Trust from any representations, warranties,
covenants, conditions, liabilities or obligations as set forth in this
Agreement.
If any of the conditions to Closing set forth in this Article IX shall not have
been satisfied, Purchaser may elect to terminate this Agreement as contemplated
by Article XIV, hereof, or to consummate the transactions contemplated hereby
despite such failure, in which case Purchaser shall retain all of its rights to
indemnification pursuant to Article XIII, hereof.
ARTICLE X
---------
Seller's, Xxxxx'x and the Trust's Deliveries at Closing
-------------------------------------------------------
At Closing, Seller, Xxxxx and the Trust shall deliver the following to
Purchaser:
10.1. Subject Assets. Actual or constructive possession of the
Premises and the Subject Assets, including the Inventory, the Equipment and the
Records.
10.2. Cash. Checks, wire transfers, duly endorsed share certificates
and documentation reasonably satisfactory to Purchaser sufficient to transfer to
Purchaser all of Seller's Cash and control over any bank, mutual fund or other
accounts in or to which any of Seller's Cash is deposited or credited.
10.3. Xxxx of Sale. A warranty xxxx of sale and such assignments,
certificates of title and other instruments of conveyance as Purchaser shall
reasonably request, in a form satisfactory to Purchaser and its counsel duly
executed by Seller, conveying to Purchaser the Subject Assets free and clear of
all liens, claims and encumbrances.
10.4. Intangible Assets. One or more assignments in a form
satisfactory to Purchaser and its counsel assigning to Purchaser those items of
Seller's Intellectual Property for which Purchaser may request a specific
assignment and an executed Assignment and Assumption Agreement (the "Assignment
and Assumption Agreement"), in a form satisfactory to Purchaser and its counsel,
assigning to Purchaser all of Seller's right, title and interest in and to the
Seller Contracts.
30
10.5. Current Liability Certificate. A certificate signed by Seller,
Xxxxx and the Trust dated as of the Closing Date totaling Seller's Cash as of
the Closing Date and listing each account payable or other Current Liability of
Seller as of the Closing Date to be assumed by Purchaser as provided in
Paragraph 2.1(d).
10.6. Bring Down Certificate. A Bring Down Certificate signed by
Seller, Xxxxx and the Trust dated as of the Closing Date to the effect that,
except as noted in such certificate, each representation and warranty made by
Seller, Xxxxx and/or the Trust herein is true and correct on and as of the date
of such certificate with the same effect as though each such representation or
warranty had been made or given on and as of such date, and that Seller, Xxxxx
and the Trust have performed and complied with all of the terms, covenants and
conditions set forth herein which are to be performed or complied with by
Seller, Xxxxx and/or the Trust before or as of the Closing.
10.7. Xxxxx Employment Agreement. An employment, consulting and
noncompetition agreement in the form of Exhibit 10.7, hereto, (the "Xxxxx
Employment Agreement") executed by Xxxxx as of the Closing Date.
10.8. Resolutions. A certificate from the Secretary of Seller in
form and substance reasonably satisfactory to Purchaser setting forth
resolutions duly adopted by the Board of Directors and Shareholders of Seller
pursuant to the Washington General Corporation Law (the "WGCL") approving the
execution and delivery of this Agreement and the transactions contemplated
thereby.
10.9. Change of Name. An amendment to Seller's Articles of
Incorporation and other documentation reasonably acceptable to Purchaser and its
counsel suitable for filing with the appropriate agencies of the State of
Washington pursuant to which Seller shall change its corporate name to a name
which is not confusingly similar to the names "IPS," "IPS Publishing, Inc." or
"International Publishing Services, Inc."
ARTICLE XI
----------
Purchaser's Deliveries at Closing
---------------------------------
At Closing, Purchaser shall deliver the following to Seller:
11.1. Closing Payment. Payment of the Closing Payment as
contemplated by Paragraph 3.2(b), hereof.
31
11.2. Deferred Amount. Payment of the Deferred Amount, if any, as
contemplated by Paragraph 3.2(d), hereof, by delivery to the Escrow Agent.
11.3. Bring Down Certificate. A Bring Down Certificate dated as of
the Closing Date executed by Purchaser to the effect that, except as noted in
such certificate, each representation and warranty made by Purchaser herein is
true and correct on and as of the date of such certificate with the same effect
as though each such representation or warranty had been made or given on and as
of such date and that Purchaser has performed and complied with all the terms,
covenants and conditions set forth herein which are to be performed or complied
with by Purchaser before or as of the Closing.
11.4. Xxxxx Employment Agreement. The Xxxxx employment agreement
executed by Purchaser as of the Closing Date.
11.5. Xxxxxx Employment Agreement. An Employment Agreement in the
form of Exhibit 11.5, hereto (the "Xxxxxx Employment Agreement") executed by
Purchaser as of the Closing Date.
11.6. Resolutions. A certificate from the Secretary of Purchaser in
form and substance reasonably satisfactory to Seller setting forth resolutions
adopted by the Board of Directors of Purchaser pursuant to the WGCL authorizing
the execution and delivery of this Agreement and the transactions contemplated
thereby.
11.7. Assignment and Assumption Agreement. The Assignment and
Assumption Agreement, duly executed by Purchaser, pursuant to which Purchaser
shall agree to pay and perform the Assumed Liabilities.
ARTICLE XII
-----------
Conduct Subsequent to Closing
-----------------------------
12.1. Purchase Price Allocation. As soon as practicable following
the Closing, Seller and Purchaser shall allocate the Purchase Price among the
Subject Assets as Seller and Purchaser may mutually agree. Seller and Purchaser
agree that such allocation shall be binding upon them and their respective
successors and permitted assigns, and that each of them shall report the
transactions contemplated hereby in accordance with such allocation. Each of
Seller and Purchaser shall file a Form 8594, prepared in accordance with the
allocation agreed to under this Section 12.1, with its federal income
32
tax returns. Notwithstanding the foregoing, if Seller and Purchaser are unable
to agree upon an allocation of the Purchase Price among the Subject Assets, then
each of Seller and Purchaser shall file the forms and tax returns described in
this Section 12.1 in the manner that it, in its discretion, determines to be
appropriate.
12.2. Execution and Delivery of Further Instruments by Seller.
Seller, Xxxxx and the Trust shall, at any time and from time to time after the
Closing upon the reasonable request of Purchaser, execute, acknowledge and
deliver to Purchaser such further instruments and take such other actions as
Purchaser may reasonably request in order to consummate the transactions
contemplated by this Agreement.
12.3. Execution and Delivery of Further Instruments by Purchaser.
Purchaser shall at any time, and from time to time after the Closing upon the
reasonable request of Seller, Xxxxx or the Trust execute, acknowledge and
deliver to Seller, Xxxxx or the Trust such further instruments and take such
other actions as Seller, Xxxxx or the Trust may reasonably request in order more
effectively to consummate the transactions contemplated by this Agreement.
12.4. Noncompetition and Nondisclosure.
(a) Xxxxx and Seller each agree that he(it) shall not for a
period of five (5) years from the date of Closing, directly or indirectly,
as employee, consultant, representative, trustee, partner, owner,
proprietor or otherwise: (i) acquire an interest in, work for, render
advice or assistance to or otherwise participate or engage in the business
of, any "Mathematics and/or Science Software Publisher" (as defined below)
other than Purchaser; (ii) divert, or attempt to divert, any Mathematics
and/or Science Software Publishing business from or persuade, or attempt to
persuade, any Customer (as defined below) not to do business with
Purchaser; (iii) induce, or attempt to induce, any employee of or
consultant engaged by Purchaser to leave the employ of Purchaser or in any
way interfere with the relationship between Purchaser and any employee or
consultant thereof; or (iv) disclose to any person other than an employee,
consultant or agent of Purchaser having a need to know such information in
the ordinary course of business any trade secret, confidential proprietary
information or any other information not generally known to the public
relating to the Business or the Intellectual Property, or otherwise
relating to the software, assets or business of Seller or Purchaser.
Notwithstanding the foregoing: (i) nothing
33
herein shall prevent Xxxxx from acquiring for investment up to 1% of the
outstanding shares of any Mathematics and/or Science Software Publisher
provided that Xxxxx does not render advice or assistance to such entity;
and (ii) Purchaser acknowledges that Xxxxx'x engagement in business
ventures relating to CD Roms for Classic Comics and software for non-native
English speakers and his service on the Board of Directors of the
Assessment Training Institute will not be considered to be in violation of
the agreements set forth in this Paragraph 12.4(a). For purposes hereof,
the term "Mathematics and/or Science Software Publisher" shall mean any
business which is engaged in the development, sale, licensing, use and/or
publication of any software or other products of the type sold or licensed
by Seller on the date hereof, including any software algorithms and/or
authoring tools designed to create mathematics and/or science problems or
tests and/or useful for mathematics and/or science performance assessment
or instruction, or otherwise to teach, develop or improve mathematics
and/or science knowledge and skills. For purposes hereof, a "Customer"
shall mean any person who has been a customer of Seller prior to Closing,
any potential customer with whom Seller has engaged in negotiations prior
to Closing, any customer of Purchaser and/or any potential customer of
Purchaser with which Purchaser has engaged in negotiations.
(b) Xxxxx and Seller acknowledge and agree that a breach of the
provisions of Paragraph 12.4(a), above, will cause irreparable injury to
Purchaser, and Purchaser shall be entitled to an injunction enjoining and
restraining Xxxxx and/or Seller from doing or continuing to do any such act
or creating any other violations or threatened violations of said
paragraph.
(c) Xxxxx and Seller agree that the terms and conditions of this
Paragraph 12.4 are reasonable and necessary for the protection of
Purchaser, and the trade secrets and confidential information acquired by
Purchaser pursuant hereto and for the prevention of damage or loss to
Purchaser as a result of action taken by Xxxxx and/or Seller.
12.5. Assumed Liabilities. From and after the Closing, Purchaser
shall pay, perform and discharge as and when due each of the Assumed
Liabilities.
12.6. Excluded Liabilities. From and after the Closing, Seller shall
pay, perform and discharge when due each of the Excluded Liabilities.
34
12.7. Name. From and after the Closing, Seller shall not use the
names "IPS," "IPS Publishing," "International Publishing Services, Inc." and/or
any name confusingly similar thereto.
12.8. Access to Records. After the Closing, each of Seller and
Purchaser shall provide to the other and its representatives the opportunity,
upon reasonable request, to examine and make copies of the Records and other
documents and records relating to the Business in its custody, and to consult
with its officers, employees, directors, accountants and other representatives,
in connection with any bona fide business purpose, including, without
limitation, the preparation of tax returns and financial statements and/or any
audit with respect thereto. For a period of six (6) years after the Closing,
neither party shall dispose of any records relating to the Business in its
custody at the Closing unless it has first given the other party at least thirty
(30) days prior written notice of its intention to do so and afforded the other
party the opportunity to take possession of such records prior to their
disposition.
ARTICLE XIII
------------
Indemnification
---------------
13.1. Indemnification by Seller, Xxxxx and the Trust. Seller, Xxxxx
and the Trust, jointly and severally, shall indemnify and hold Purchaser, its
shareholders, directors, officers, employees and agents and their respective
successors and assigns, harmless from and against any and all losses,
liabilities, damages, claims, costs, expenses and/or assessments, including
attorneys' and other professional fees and costs as well as fines, penalties
and/or interest (collectively "Losses") suffered or incurred by any of them
which result from or arise out of:
(i) the falsity or breach of any representation or warranty made
by Seller, Xxxxx and/or the Trust herein or in any agreement, instrument or
certificate delivered pursuant hereto;
(ii) the failure of Seller, Xxxxx and/or the Trust to comply
with or perform any covenant or agreement of Seller, Xxxxx and/or the Trust
set forth herein or in any agreement, instrument or certificate delivered
pursuant hereto, including, without limitation, any failure to pay or
satisfy any of the Excluded Liabilities;
35
(iii) any assessments, claims or liabilities (including interest
and penalties) for federal, state or local income, sales, use, franchise or
other taxes relating to, imposed upon or assessed against the sales,
income, property or business of Seller for all periods ending on or before
the Closing Date;
(iv) any third party claims (including fines and penalties
sought to be imposed or enforcement proceedings commenced by governmental
agencies) based upon, alleging or arising out of any act, omission or
occurrence by or relating to Seller or the Business on or before the
Closing Date, including, without limitation, any Loss relating to or
arising out of any nonperformance or breach of contract or warranty, any
product liability or other claim for personal injury or property damage
and/or any claim for violation of wage/hour laws or employment
discrimination;
(v) any rights of ownership, use or other interest held or
claimed by any third party in or with respect to any algorithms, code,
software, Intellectual Property or other Subject Assets transferred
hereunder and/or any claim that the use of any such Assets infringes upon
the rights of others, including, without limitation, (a) any claim by any
person who has developed software for the Seller to any rights in such
software, (b) any claim by any person to entitlement to any rights to any
source code comprising a part of the Intellectual Property under any
agreement entered into by Seller before the Closing, and/or (c) any claim
by any person alleging or arising out of the matters discussed in the
Fenwick & West letter dated November 13, 1995 addressed to Xx. Xxxxxxx
Xxxxxx (a copy of which has been provided to Seller); provided, however,
that the foregoing indemnification shall not extend to (y) any claim by any
person to rights to use any of Seller's Intellectual Property solely in
connection with a publication or application specifically identified in an
agreement described in Exhibit 4.4 to the Disclosure Schedule pursuant to
rights granted under such agreement or derived therefrom or (z) to any
claim by any customer of the Business with respect to the right to use
Seller's "Exam in a Can" software under the terms of Seller's standard form
license agreement attached as Exhibit ___ to the Disclosure Schedule; and
(vi) any third party claim based upon or alleging a failure to
obtain any private third party consent in connection with the transactions
contemplated hereby.
36
13.2. Indemnification by Purchaser. Purchaser shall indemnify and
hold Seller, Xxxxx, the Trust and their respective trustees, shareholders,
directors, officers, employees, agents, successors and/or assigns harmless from
and against any and all Losses suffered or incurred by any of them which result
from or arise out of:
(i) the falsity or breach of any representation or warranty made
by Purchaser herein or in any instrument or certificate delivered pursuant
hereto;
(ii) the failure by Purchaser to comply with or perform any
covenant or agreement of Purchaser set forth herein or in any agreement,
instrument or certificate delivered pursuant hereto, including the failure
to perform any obligation under any of the Seller Contracts to be performed
after the Closing Date; or
(iii) any third party claims (including fines and penalties
sought to be imposed or enforcement proceedings commenced by governmental
agencies) based upon, alleging or arising out of any act, omission or
occurrence by or relating to the Business after the Closing Date,
including, without limitation, any Loss relating to any claim for
nonperformance or breach of contract or warranty, any product liability or
other claim for personal injury or property damage and/or any claim for
violation of wage/hour laws or employment discrimination.
13.3. Limitation on Liability. Anything in this Agreement to the
contrary notwithstanding:
(a) No party shall be required to indemnify or make any payment
hereunder with respect to any Loss arising under clause 13.1(i) or 13.2(i),
hereof, or the failure to comply with or perform any covenant or agreement
to be complied with or performed by such party prior to the Closing if the
falsity or breach in question or the failure to comply or nonperformance in
question, as the case may be, was disclosed in the Bring Down Certificate
delivered by such party pursuant to Section 10.6 or 11.3, hereof, as the
case may be.
(b) No party shall be required to indemnify or make any payment
hereunder with respect to any Loss arising under clause 13.1(i) or 13.2(i),
hereof, or the failure to comply with or perform any covenant or agreement
to be complied with or performed by such party before the Closing
37
unless and until the aggregate amount of such Losses for which such party
would otherwise be liable hereunder exceeds $52,500 (the "Basket Amount"),
but if and when the aggregate amount of such Losses exceed the Basket
Amount, then such party shall be liable for all of such Losses in excess of
the Basket Amount; provided, however, that the maximum aggregate amount
against which any party may be required to provide indemnification or which
any party may be required to pay hereunder with respect to such Losses
shall be Five Million Two Hundred Fifty Thousand Dollars ($5,250,000).
(c) No person shall be entitled to indemnification or any
payment hereunder from any party hereto pursuant to this Article XIII
unless the Indemnified Party (as defined below) shall have provided the
Indemnifying Party (as defined below) with notice of its claim to
indemnification as provided in Section 13.4, hereof: (i) within twenty-four
(24) months after the Closing Date in the case of Losses arising out of any
falsity or breach of warranty described in clause 13.1(i) or 13.2(i) other
than Losses arising out of the representations and warranties set forth in
Sections 4.1 through 4.8, 4.10, 4.12(b), (c) and (d), 4.15, 4.25, 4.26 and
5.1 through 5.7, hereof (the "Title Warranties"); (ii) within twenty-four
(24) months after the Closing Date in the case of Losses arising out of any
failure to comply or nonperformance described in clauses 13.1(ii) or
13.2(ii) other than Losses arising out of the noncompliance with or
nonperformance of any covenants or agreements to be complied with or
performed by the Indemnifying Party after the Closing Date (the "Post-
Closing Covenants"); and (iii) within the period of the applicable statute
of limitation in all other cases, including any Losses arising out of the
falsity or breach of any Title Warranty or the failure to comply with or
perform any Post-Closing Covenant.
(d) Purchaser shall not be entitled to indemnification or any
payment from Seller, Xxxxx or the Trust with respect to any claims arising
out of any obligations assumed by Purchaser pursuant to Paragraphs 2.1(b)
and 2.1(c) of which Xxxxx had no knowledge as of the date hereof.
13.4. Disclosure Schedule. To the extent a matter is disclosed in
the Disclosure Schedule, it shall limit the obligations of Seller, Xxxxx and/or
the Trust, and it shall limit the rights of Purchaser, under clause 13.1(i),
hereof, but it shall not limit the obligations of Seller, Xxxxx and/or the
38
Trust, or the rights of Purchaser, under any other clause of Section 13.1,
hereof.
13.5. Notice of Claims. Promptly after any person entitled to
indemnification hereunder (A) receives notice of any claim or the commencement
of any action or proceeding against it, or (B) has knowledge of any claim,
action or proceeding against it or any Loss for which it intends to seek
indemnification hereunder, such person shall, if a claim for reimbursement with
respect thereto is to be made against any party hereto obligated to provide
indemnification (the "Indemnifying Party") hereunder, promptly give the
Indemnifying Party written notice of such claim or Loss or the commencement of
such action or proceeding, provided, however, that failure to give such
notification shall not affect indemnification hereunder, except to the extent
that (X) the Indemnifying Party is unable to defend any such claim or is
required to pay a greater amount or accrue additional expenses with respect to
any such claim or Loss as a result of such failure to provide prompt notice, or
(Y) such notice is not given within the period, if any, specified in Section
13.3, hereof.
13.6. Compromise of Third Party Claims. The Indemnifying Party shall
have the right to compromise or defend, at its own expense and by its counsel,
any third party claim made against the person seeking indemnification (the
"Indemnified Party"); provided, however, that no compromise of any claim shall
be made without the consent of the Indemnified Party unless such compromise
results in the full and unconditional release of all claims against the
Indemnified Party by the person asserting such claim. If the Indemnifying Party
shall undertake to compromise or defend any such third party claim, it shall
promptly notify the Indemnified Party of its intention to do so. The Indemnified
Party shall cooperate with the Indemnifying Party or its counsel in the defense
against any such third party claim and in any compromise thereof. Such
cooperation shall include, but not be limited to, furnishing the Indemnifying
Party with any books, records or information reasonably requested by the
Indemnifying Party. After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to compromise or defend any such third party
claim, the Indemnifying Party shall not be liable for any additional legal
expense incurred by the Indemnified Party. However, the Indemnified Party shall
have the right to retain its own counsel and participate in the defense of such
claim at the expense of the Indemnified Party, in which case the Indemnifying
Party shall cooperate in providing information to and consulting with the
Indemnified Party about the claim. If the Indemnifying Party does not assume the
defense of such claim, the Indemnified Party may defend against or settle such
claim in such manner and on such terms as it deems appropriate, and shall
39
be indemnified by the Indemnifying Party for the amount of any judgment or
settlement and for all losses or expenses, including attorneys' and other
professional fees and costs, incurred by the Indemnified Party in connection
with the defense or settlement of such claim.
13.7. Payment. If any Indemnified Party shall incur any Loss for
which it is entitled to indemnification hereunder, the Indemnifying Party shall
make the indemnification payment required under this Article XIII within ten
(10) days after receipt by the Indemnifying Party of written notice from the
Indemnified Party stating the amount of the Loss and of the indemnification
payment requested. Any indemnification payment required under this Section 13.7
which is not made when due shall bear interest at the Prime Rate (as defined
below) plus 2% per annum from the date due until paid. For purposes hereof, the
"Prime Rate" shall mean the rate announced as the "Prime Rate" from time to time
by the Wall Street Journal, Midwest Edition, with such rate to be adjusted as
and when such "Prime Rate" as announced in the Wall Street Journal, Midwest
Edition, is adjusted.
13.8. Adjustment to Final Purchase Price. Seller and Purchaser agree
that any indemnification payment made under this Article XIII shall constitute
and be treated as an adjustment to the Purchase Price for the Subject Assets for
tax purposes.
13.9. Attorneys Fees. If any dispute between Seller, Xxxxx, the
Trust and/or Purchaser under this Agreement or with respect to the transactions
contemplated hereby is determined, resolved or adjudicated by a court or public
or private tribunal or panel, the party prevailing in such dispute shall be
entitled to recover from the other its reasonable attorneys fees and other
professional fees and costs incurred in such disputes.
13.10. Setoff. From and after the Closing Date, in the event
Purchaser has a claim for indemnification against Seller, Xxxxx and/or the
Trust, Purchaser shall be entitled to set off the amount of such claim against
the Contingent Amount. Prior to making any set off pursuant to this Section
13.10, Purchaser shall first give Seller a written notice of its intention to
make a set off (the "Set Off Notice") which shall specify the reasons for such
set off and the amount thereof. Such set off shall be final and binding on
Seller, Xxxxx and/or the Trust unless, within fifteen (15) days after the date
of the Set Off Notice, Seller gives a notice of objection (the "Objection
Notice") to Purchaser stating in reasonable detail the nature of Seller's
objections. The parties shall thereafter negotiate in good faith to resolve such
objections and, if they
40
are unable to reach agreement with respect to the proposed set off within thirty
(30) days after the giving of the Objection Notice, either Seller or Purchaser
shall have the right to submit the dispute for resolution by arbitration in the
manner set forth in Section 13.11.
13.11. Arbitration. Any controversy or claim arising out of this
Article XIII or the breach thereof shall be submitted to and settled by
arbitration in accordance with the then prevailing rules of the American
Arbitration Association. The dispute shall be submitted to a single arbitrator
agreed to by Seller and Purchaser or, if such parties are unable to agree upon a
single arbitrator, to three arbitrators selected in accordance with such rules.
All filing fees and other expenses in connection with the conduct of such
arbitration shall be shared by the parties, but may be awarded to the prevailing
party as determined by the arbitrator(s).
ARTICLE XIV
-----------
Termination
-----------
14.1. Termination. This Agreement, and the transactions contemplated
hereby, may not be terminated except as follows:
(a) Upon the mutual consent of Seller and Purchaser;
(b) By Seller, if any of the conditions to Seller's, Xxxxx'x and
the Trust's obligations set forth in Article VIII, hereof, shall not have
been satisfied or waived at the time of Closing;
(c) By Purchaser, if any of the conditions to Purchaser's
obligations set forth in Article IX, hereof, shall not have been satisfied
or waived at the time of Closing; or
(d) By Seller or Purchaser, if the Closing has not occurred on
or before August 15, 1996 (or such later date as may have been approved by
Seller and Purchaser); provided, however, that the right to terminate this
Agreement under this Section 14.1(d) shall not be available to any party whose
failure to fulfill or perform any obligation under this Agreement has been the
cause of, or has resulted in, the failure of the Closing to occur on or before
such date.
41
14.2. Remedies. If Seller or Purchaser shall terminate this
Agreement pursuant to the provisions of this Article XIV, such termination shall
not waive or terminate any rights or remedies which the terminating party may
have against any other party hereto, whether at law or equity. Nothing contained
herein shall be deemed to require any party to terminate this Agreement rather
than to proceed with the Closing if a condition precedent to the obligations of
such party has not been satisfied. The parties hereto acknowledge that the
Business constitutes unique property and that there is no adequate remedy at law
for the damage which any party might sustain as a result of the failure by any
other party hereto to consummate the transactions contemplated hereby, and,
accordingly, that each of the parties hereto is entitled to the remedy of
specific performance to enforce the consummation of the transactions
contemplated hereby.
ARTICLE XV
----------
Miscellaneous
-------------
15.1. Expenses and Taxes. Each party shall pay its own expenses and
costs relating to the negotiation, execution and performance of this Agreement.
The forgoing notwithstanding: (i) all sales taxes, use taxes, stock transfer
fees, stamp taxes and other transfer taxes or fees incurred in connection with
the transactions contemplated hereby shall be borne equally by Seller and
Purchaser; and (ii) Seller shall pay all other taxes incident to the
consummation of the transactions contemplated hereby. The party upon whom any
sales, use or other transfer taxes may be imposed shall prepare the applicable
return, if any, and shall submit such return to the other party for its review
and timely consent, which consent shall not be unreasonably withheld. Payment of
a party's share of any such taxes shall be made to the party upon whom the tax
in question is imposed in sufficient time so that such tax payment may be timely
made to the taxing authority in question.
15.2. Governing Law. The parties hereto agree that all terms and
conditions of this Agreement and the documents delivered in connection herewith
shall be governed by, construed and enforced in accordance with the laws of the
State of Wisconsin, without giving effect to any choice of law or conflict
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of Wisconsin.
15.3. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when hand delivered, including,
42
without limitation, by courier or overnight delivery service, or when sent by
facsimile (transmission confirmed), or two (2) days after being mailed,
certified or registered mail, with postage prepaid addressed as follows (or to
such other person or address as the party to receive such notice may have
designated from time to time by notice in writing pursuant hereto):
If to Seller, Xxxxx
and/or the Trust: c/o IPS Publishing, Inc.
00000 X.X. 00xx Xxxxxx
X-000 Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
With copies to: Xxxxx X. Xxxxxxx
Heurlin & Potter, P.S.
000 Xxxxxx Xxxxxx, Xxxxx 000
P. X. Xxx 000
Xxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
If to Purchaser: c/o Xxxxxxxx X. Xxxx
Advantage Learning Systems, Inc.
P. O. Xxx 0000
Xxxxxxxxx Xxxxxx, XX 00000-0000
Fax: (000) 000-0000
With copies to: Xxxxxxx & Xxxx, S.C.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
15.4. Certain Definitions; Interpretation. Unless the context
clearly otherwise requires, as used herein, the term "Agreement" means this
Agreement and the Exhibits hereto. The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision. The use of the neuter
pronoun "it" shall also refer as appropriate to the masculine and/or feminine
gender, and vice versa. The use of the singular herein shall, where appropriate,
be deemed to include the plural and vice versa. As used herein, the word
"person" refers to any individual, corporation, limited liability company,
partnership, trust, governmental body or authority or other organization or
entity. As used herein, the term "including" means "including, without
limitation." As used herein, matters stated "to the knowledge" or "to be known"
or as to which a person has "no knowledge" or similar references to the
knowledge or state of mind of a person shall be deemed to refer to the
43
actual knowledge of such person. In the case of such references when referring
to the "knowledge" of Xxxxx or the Trust, Xxxxx and the Trust shall be
considered to have knowledge of any matters actually known to Xxxxx and/or Xxxx
Xxxxxx after due inquiry of employees of Seller who might reasonably be expected
to have knowledge of specific relevant matters. The Disclosure Schedule and
other exhibits hereto shall not vary, change or alter the literal meaning of any
representation of warranty of Seller and/or Xxxxx contained in this Agreement
other than by creating exceptions and setting forth information with respect
thereto. Exceptions and information set forth on the Disclosure Schedule for one
representation or warranty shall be considered set forth for all representations
or warranties to the extent applicable.
15.5. Headings. The headings to Articles and Sections of this
Agreement are for reference only and shall not be used in construing the
provisions hereof or otherwise affect the meaning hereof.
15.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original but all of which shall
constitute but one and the same agreement and shall become binding upon the
parties when each party hereto has executed one or more counterparts.
15.7. Entire Agreement. This Agreement embodies the entire agreement
and understanding among Seller, Xxxxx, the Trust and Purchaser, and supersedes
all prior agreements and understandings related to the subject matter hereof.
There are no representations, warranties, covenants, promises or agreements on
the part of any party hereto to any other party hereto which are not explicitly
set forth herein.
15.8. Modifications, Waivers. Any modification or amendment of or
with respect to any provisions of this Agreement or any agreement, instrument or
document delivered pursuant hereto shall not be effective unless it shall be in
writing and signed by Seller, Xxxxx, the Trust and Purchaser, and shall
designate specifically the terms and provisions so modified. Any waiver of or
with respect to any provisions of this Agreement or any agreement, instrument or
document delivered pursuant hereto shall not be effective unless it shall be in
writing and signed by the party against whom it is sought to be enforced.
15.9. Benefit; Assignment. This Agreement shall be binding upon and
inure to the benefit of Seller, Xxxxx, the Trust and Purchaser and their
respective successors and permitted assigns. Except as provided in Sections 13.1
and 13.2, hereof,
44
this Agreement shall not be deemed to confer any rights or remedies upon any
person other than the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 1st day of August, 1996.
PURCHASER:
IPS ACQUISITION, INC.
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------
Xxxxxxxx X. Xxxx, President
SELLER:
IPS PUBLISHING, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx, CEO
/s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx
THE XXXXXXX X. XXXXX REVOCABLE
TRUST dated September 4, 1992
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx, sole Trustee
GUARANTY
--------
The undersigned, being the sole shareholders of Purchaser, hereby
guaranty timely payment and performance by Purchaser of all its obligations
under the foregoing Asset Purchase Agreement, and agree to pay when due any
amount not timely paid by Purchaser thereunder and to cause Purchaser to
45
timely comply with and perform each of its undertakings and agreements set forth
therein.
/s/ Xxxxxxxx X. Xxxx
------------------------------------
Xxxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
August 1, 1996.
46
EXHIBIT INDEX
1.1(e) Intellectual Property
1.1(f) Seller Contracts
3.2(d) Form of Escrow Agreement
10.7 Form of Xxxxx Employment Agreement
11.5 Form of Xxxxxx Employment Agreement
Exhibit 1.1(e)
Intellectual Property
---------------------
Patents: None
-------
Trade Names, Trademarks, Service Marks:
--------------------------------------
Exam in a Can, Objective Tracker, MathCheck, Science Check, Standard
Tracker, Outcome Tracker, ipsTest, TestPrep, ExamPrep
Registrations:
Xxxx Issuer Number
---- ------ ------
Exam in a Can US PTO 1,613,668
Objective Tracker Washington State 023810
Registration Applications:
Xxxx Issuer Number
---- ------ ------
MathCheck and design US PTO 75084855
Science Check and design US PTO 75084856
Standard Tracker and design US PTO Not Yet Assigned
Outcome Tracker and design US PTO Not Yet Assigned
Copyrights:
----------
Registrations:
Title Issuer Number
----- ------ ------
ipsTest II US Copyright Office TX 0-000-000
(IBM Edition)
ipsTest IV US Copyright Office TX 0-000-000
(IBM Edition)
Exhibit 1.1(f)
Seller Contracts
----------------
ABACUS
Distribution Agreement 695
Achterbosch, Jurgen Non Disclosure 640
ADDISION-WESLEY
Access to Algebra and Geometry DOS 612
Access to Alg & Geom MAC 613
Xxxxxxx-Xxxxxx Indemnification
Agreement 514
Alg, Alg & Trig, Geometry Upgrade 614
Angel/Xxxxxx
Survey of Mathematics IBM 523
Survey Macintosh 523-1
Survey with Applications Omni3 720
Survey with Applications Mac 719
Xxxxx
Elementary Algebra Library IBM 495
Billstein
Math for Teachers IBM 539
Billstein/Xxxxxxxxx/Xxxx
Problem solving approach to Math
Omni 3 717 Mac 718
Xxxxxxxxx
Calculus 5/e IBM 510
Xxxxxxxxx
Calculus IBM 668
Calculus Macintosh 669
Xxxxxxxxx
Applied Calc Upgrade 555
Xxxxxxxxx
Development Math DOS 677
Xxxxxxxxx
PreAlgebra 96 IBM 682
PreAlgebra 96 Xxxxxxxxx 000
Xxxxxxxxx/Xxxxxxx
Xxxx. Xxx. Library IBM 000
Xxxxxxxxx/Xxxxxxx
Xxxxxxx & Trig IBM 560
Xxxxxxxxx/Xxxxx
Basic Math 0/x Xxxxxxxxx 000
Xxxxxxxxxxxx Xxxxxxx 0/x Xxxxxxxxx 000
Xxxxxxxxxxxx Xxxxxxx 0/x Xxxxxxxxx 000
Xxxxxxxxx/Xxxxx/Xxxxxxxxxx
Xxxxxxx Xxxxxxxxxxxx Xxxxxxx 4/e IBM 579
Intermediate Algebra 0/x Xxxxxxxxx 000
Xxxxxxxxx/Xxxxx/Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxx Xxxxxxx 0/x Xxxxxxxxx 000
Xxxxxxxxxx Xxxxxxx 4/e IBM 585
Xxxxxxxxx/Xxxxx/Xxxxxxxxxx
Elem & Inter Alg Concepts & Applications
OmniTest 3 674
Xxxxxxxxx/Xxxxx/Xxxxxxxxxx
Elem & Int Alg Concepts & Applications
Macintosh 000
Xxxxxx
Xxxxxxx Xxxxxxx 0/x 000
Xxxxxx/Xxxxx
Xxxxxxx Xxxxxxx 000
Xxxxxx/Xxxxx
Xxxxxxx and Trig and Pre calculus 494
Demana/Waits 1997
PreCalc Functions/Graphs IBM 699
PreCalc Functions/Graphs Mac 700
Demana/Waits/Xxxxxxx
Precalc Math Functions & Graphs IBM 558
Precalc Math Functions & Graphs Mac 559
Demana/Waits/Xxxxxxxx/Xxxxxx
Intermediate Alg: Graphing Approach IBM
593
Intermediate Alg: Graphing Approach Mac
594
Dugopolski
Elementary Algebra IBM 509
Elementary Alg 2/e IBM 664
Elementary Alg 0/x Xxx 000
Xxxxxxxxxxxx Xxx 2/e IBM 666
Intermediate Alg 0/x Xxx 000
Xxxxxxxxxxxx Xxxxxxx IBM 508
College Alg & Trig III IBM 615
College Alg III IBM 615-1
College Alg & Trig Mac 616
College Alg Mac 616-1
Extension of Exclusive Agreement 417-A
Exclusive Fourth Addendum 417-B
Xxxxxx/Xxxxxx
Calculus 2/e IBM 586
Futura Confidentiality 599
Xxxxx/Childers
Contemp Physics 2e IBM 551
Contemp Physics 2e Macintosh 552
Xxxxx/Xxxxxxxxx
Essentials of Math IBM 513
Xxxxx/Xxxxxxxxx/Xxxxxxx
Developmental Math IBM 512
Xxxxx/Xxxxxxxxx
Alg & Trig IBM 557
Xxxxx/Xxxxxxxxx
Basic Math 7/e IBM and Macintosh
Introductory Alg 7/e IBM and Macintosh
Intermediate Alg 7/e IBM and Macintosh..602
Lotus 123 Xxxxxx X Xxxxx and Zak
Bus Specified IBM 498 498-1 498-2
Release of Exclusive on OmniTest II 641
Xxxxxx/Xxxxxx, 9/e
Calculus and Analytic Geometry
Library Edition...655
Xxxxxx
Elementary Statistics IBM 501
Elementary Statistics 6/e IBM 617
Elementary Stats 6/e Macintosh 627
Xxxxxx/Xxxxxxxx
Elementary Business Statistics IBM 595
Washington
Technical Math w/Calculus IBM 638
Technical Math w/Calculus Macintosh 000
Xxxxx
Elementary Stats Upgrade 554
Introductory Statistics 4e IBM 596
Introductory Stats 4/e Macintosh 626
Elementary Statistics Omni 3 670
Elementary Statistics Macintosh 671
Young
Physics Macintosh 553
XXXXXXX-XXXXXX CANADA
Minds on Math IBM 672
Minds on Math Macintosh 673
ADDISON XXXXXX SCHOOL
School Division Alg & Trig Macintosh 562
School Division Algebra Macintosh 561
School Division Geometry Macintosh 563
School Division Access to Alg & Geom 604
School Division Alg, Alg & Trig, Geom 605
School Division Access to Alg / Geo 6.0 606
School Division Alg & Trig DOS 647
School Division Alg & Trig Mac 648
School Division Focus on Alg DOS 649
School Division Focus on Alg Mac 650
School Division Focus on Geo DOS 643
School Division Focus on Geometry Mac 644
School Division Foundations DOS 645
School Division Foundations Mac 646
School Division Chemistry Practice DOS 691
School Division Chemistry Practice Mac 692
XXXX XXXXXX Rep Puerto Rico 508
CHANCERY SOFTWARE
License Agreement EIAC 550
XXXXXX Xxxxxxx
Non Disclosure 656
XXXXXXXXX Xxxxx
Work for Hire 598 611 628 642
Non Disclosure 608
COMPUTER CURRICULUM CORP
Software Design and Development 1994 625
Amendment 9-5-95 Milestone Payment 625-1
COMPUTER RESULTS
Xxxxx Xxxxxxxx 527
CCC Agreement 698
CURRICULUM NETWORKING SPEC.
ILS Exam in a Can + 502
CNS License Agreement 532
DATAPAK Software PAIGE 686
Licensed..Computer Results Using
DC XXXXX
Xxxxx
Topics in Contemporary Math Mac 533
Topics in Contemporary Math IBM 533-1
Clast to Accompany Topics IBM 533-2
Intermediate Algebra IBM 590
Beginning Algebra IBM 591
Geometry Test Bank IBM & Mac 000
Xxxxxx/Xxxxxxxxx
Xxxxxxx Xxxxxxx IBM 568
College Algebra Macintosh 000
Xxxxxxx & Trigonometry IBM 000
Xxxxxxx & Trigonometry Macintosh 571
Pre calculus IBM 572
Pre calculus Xxxxxxxxx 000
0000 Xxxxxx/Xxxxxxxxxxx Series
IBM Mac 697
Passport to Algebra & Geometry
1995 702
XXXXXX
Xxxxxx Use of Algorithms 1992 542
Xxxxxxx/Xxxxxxx IBM/MAC M/C F/R 534
Xxxxxxx/Xxxxxxx F/X X/C
Applied Calculus IBM Mac 588
Applied Math IBM Mac 588-7
Xxxxxxxx IBM Mac M/C F/R 534
DESIGN SCIENCE
License Agreement 652
XXXXXX, Xxxxx
Telemarketing Agreement 578
GLENCOE
Adv Math Concepts IBM 581 Mac 581-1
Xxxxxxx
Math Connections Pre Algebra
Xxxxxxx 0 Xxxxxxx 2 w/Trig
Macintosh 517
Middle School 1 Middle School 2
Middle School 3 Geometry
IBM Mac Apple 528 1-11
Xxxxxxx Physics Mac 532
Xxxxxxx Chemistry 535
Updates
Doco 637
Math 1,2,3 636
Xxxxxxx Physics 0/x 000
XXXXXXX Xxxxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxxxxx License EIAC Geometry 587
XXXXXXXX-XXXXXXX/XxXxxxxx Xxxxxxx
Integrated Math 1 Mac and IBM 654
Integrated Math 2 Mac and IBM 658
Integrated Math 3 Mac and IBM 000
Xxxxxxx 1 IBM Mac 701
IBM Contract & Amendment 600
IBM Title Transfer Agreement 607
IBM Evaluation Agreement 689
IBM Product Remarketing Agreement 000
Xxxxxx Xxxxx Xxxxxxxxx XXX000000 696
New Agreement for Remarketing 703
IBM License Source Code
SCR950585 710
IDEAL LEARNING
License Agreement 526
XXXXX Xxxxx
Promissory Note 505
Purchase of Stock 506
Indemnification Agreement 000
XXXX Xxxxxx XX
Strategic Alliances 520
Addendum 520-1
XXXXX Xxxx
Non disclosure 574
LEASE
Vancouver 110 & 120 564
Lease updated 92 & 93 530
Lease Termination Westlake 575
MAKE TEST
License Agreement 000
XXXXXXXX XXXXXXX
Xxxxxxx 1 Macintosh 547
Algebra 2 Macintosh 548
Geometry Macintosh 549
Gateways IBM 000
Xxxxxxxx Xxxxx 566
Gateways Macintosh 567
Project Plan 2 Xxxxx
Algebra 2 IBM & Mac 722
XxXXXX-XXXX XXXXXXX
Math Power Series
Math 7 IBM Mac 704 705
Math 8 IBM Mac 706 707
Math 9 IBM Mac 708 709
Black line masters IBM 715
(Math 7,8,9)
Black Line masters Mac 714
LOI OT Agreement 723
OT Agreement 000
XXXX, Xxxxxxx
Non Disclosure 609
Non Disclosure Termination
Work for Hire Contract 721
XXXXXXX
Xxxx Xxxxxx Todays Math 715
XXXXXXXXX, Xxxxx
Work for Hire X.X. Xxxxx 693
NATIONAL SCIENCE FOUNDATION
Non Disclosure 504
Algo Specifications Math Algos 521
O'XXXXXXX Xxxxx
Work for Hire 603
PAIGE
Data Pak Software 686
Renewal of Service Agreement
XXXXXXXXX Xxxx
Non Disclosure 522
PHARLAP
License Agreement 663
PKWARE 563
License Agreement
PRENTICE XXXX
Xxxxx
Interm Alg for College Students IBM 515
Intermediate Algebra 4/e IBM 684
Elementary Algebra 4/e IBM 685
Blitzer
Intermediate Algebra IBM 634
Intermediate Algebra Macintosh 635
Introductory Algebra IBM 632
Introductory Algebra Macintosh 633
Xxxxx/Xxxxx
College Alg and Trig IBM 546
Elem Alg for College Students IBM 516
Xxxxxxxx
Physics for Scientists & Engineers IBM 524
Macintosh for above 525
Amendment to 524 1996
Xxxxxx Xxx
Prealgebra IBM 543
Beginning Algebra IBM 544
Intermediate Algebra IBM 000
Xxxxxx Xxxxx Math
6,7,8 IBM and Macintosh 000
Xxxxx
Xxxxxxx Xxxxxxx IBM 631
College Algebra & Trigonometry IBM 630
Precalculus IBM 629
Xxxxxxxx
659;660;661...All rewritten as:
Xxxxxxxx Texts IBM 679, Macintosh 680
Xxxxx/Xxxxxx
Basic Math IBM 618 Mac 619
Beginning Algebra IBM 620 Mac 621
Intermediate Alg IBM 622 Mac 623
World Geography & US History
IBM and Macintosh.....610
PROJECTED LEARNING PROGRAMS
Reseller Letter of Agreement Oct 93 597
Xxxxx Xxx
Mexico 518
XXXX XXXX & ASSOCIATES
Advertising Service Agreement
January 1996 712
XXXXXXX Xxxx
Promissory Note 503 624
Addendum Contract to #360
Buy out 716-1 716-2
SCANTRON
License Agreement OT 93 592
SKILLS BANK CORPORATION
License Agreement... 657
Amendment #1 To License Agreement 657-1
SMARTSTUFF SOFTWARE
Non Disclosure...656
SEABYTE Educational Consultants
Distribution Agreement 588
XXXXX Xxxxxx
Xxxxx Software Work for Hire gr edit 531
TRADEMARK
OT 676
XXXXXXX, Xxxx
Work for Hire XX Xxxxx 694
VISUAL TOUCH AMERICA
Xxxxx Xxxxxxx Non Disclosure 577
WICAT SYSTEMS/JOSTENS
Letter of intent - addendum 491
Non exclusive distribution of Can
Non Disclosure 496
Jostens Addendum buy out 491-1
WORLD BOOK
Agreement dated 4-27-95 678
[LETTERHEAD OF INTERNATIONAL PUBLISHING SERVICES, INC.]
-------------------------------------------------------
Classroom Assessment Software and Instructional Management Systems
IPS Publishing, Inc.
Consumer Products
dealer discount structure
11/06/95
Except for the following list, all authorized Exam in a Can resellers receive a
standard 40% discount from the suggested (US currency) list price.
* Xxxxxxx-Xxxxxx, Canada -- 50% discount from list price.
Cambridge Development Laboratories -- 50% discount from list price.
IBM Eduquest -- 55% discount from list price.
* Interware, Ltd. -- 58% discount from list price.
* SeaByte Educational Consultants -- 45% discount from list price.
* Sigma Software -- 50% discount from list price.
* International Dealers
Unfinished Contracts
Publisher Contract # Book (Project) Platform Work completed Work required
Xxxxxxx-Xxxxxx 717 Billstein DOS matrix, all ch printouts make any revisions
College Problem Solving to publisher build disks/QC/deliver disks
ipsTest
718 MAC none pickup algorithms
build disks/QC/deliver disks
720 Angel/Xxxxxx DOS Ch 1 & 2 matrix and pickup algorithms and static,
Survey of Math printouts to publisher send chapters to author
ipsTest build disks/QC/deliver disks
719 MAC none pick up algorithms and static,
build disks/QC/deliver disks
Glencoe 000 Xxxxxxx 1 DOS algorithms approved static being reviewed
ipsTest some static sent for review building disks/QC/deliver disks
MAC none pick up algorithms and static,
build disks/QC/deliver disks
000 Xxxxxxx 2 DOS matrix algorithms being reviewed
ipsTest submit and keyboard static items
build disks/QC/deliver disks
Page 1
Unfinished Contracts
Publisher Book (Project) Platform Work completed Work required
McGraw Hill 725 Math 7 WIN algorithms authored send chapters for approval
Ryerson OT make revisions
build disks/QC/deliver disks
725 Math 8 WIN none author algorithms
OT send chapters for approval
make revisions
build disks/QC/deliver disks
725 Math 9 WIN none author algorithms
OT send chapters for approval
make revisions
build disks/QC/deliver disks
Prentice Hall 726 Xxxxxx-Xxx DOS matrix, Chapter printouts approval from author,
College Beginning Algebra make revisions
ipsTest build disks/QC/deliver disks
727 MAC none pickup algorithms
build disks/QC/deliver disks
726 WIN none convert algorithms to Windows
build disks/QC/deliver disks
Worth Publish- dated 6-11-96 Xxxx and Xxxxxx WIN none need contract signed - matrix,
ing ipsTest not signed College Algebra author algorithms, send chapter
printouts
build disks/QC/deliver disks
MAC none pickup algorithms
build disks/QC/deliver disks
Page 2
Unfinished Contracts
Publisher Book (Project) Platform Work completed Work required
IBM SCR950585 Development WIN design, coding, delivery Final Testing
testing
IBM SCR950366 ITBS/SAT/TAAS/ WIN keyboarding author algorithms/complete key
CTBS boarding static/build/QC/deliver
Page 3
Source Code License Agreement between Datapak Software, Inc. and
Seller dated July 25, 1996.
Reseller Agreement dated March 19, 1996 by and between Seller and
GW International.
Reseller Agreement dated November 2, 1993 by and between Seller and Software
Express.
Reseller Agreement dated January 25, 1996 by and between Seller and Heartsoft.
Letter of Agreement dated October 11, 1993 by and between Seller and
Projected Learning Programs, Inc.
Reseller Agreement dated December 29, 1993 by and between Seller and the
Computer CenterLine.
Equation Editor License Agreement between Seller and Design Science, Inc.
dated November, 1994.
License Agreement for Instalit between Seller and Helpful Programs, Inc.
License Agreement between Seller and Abacus-NCS dated September 6, 1995.
License Agreement dated January 18, 1995 between Seller and PharLap Software,
Inc.
License Agreement dated November 3, 1994 between Seller and Data Pack Software,
Inc.
Exhibit 3.2(d)
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT is made and entered into as of the date set
forth on the signature page hereto by and among SEATTLE FIRST NATIONAL BANK, a
banking corporation organized under the laws of the United States (the "Escrow
Agent"), IPS PUBLISHING, INC. (f/k/a IPS ACQUISITION, INC.), a Washington
corporation (the "Purchaser"), and ________________________ (f/k/a IPS
Publishing, Inc.) (the "Seller").
BACKGROUND:
As of the date hereof, under the terms of an Asset Purchase Agreement
(the "Purchase Agreement") dated as of ___________, 19__, the Purchaser has
acquired substantially all of the assets and business of the Seller, and each
party has changed its corporate name. Under the terms of the Purchase
Agreement, the Seller was given the right to defer payment of a portion of the
purchase price to be held by the Escrow Agent and paid to the Seller in
accordance with the terms of this Agreement. The Seller has elected to defer
payment of the sum of $_____________, and the parties desire to set forth herein
their agreement with respect to the payment of such amount to Seller together
with certain supplemental payments as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Escrow Deposit.
1.1. Escrow Deposit. The Seller has directed the Purchaser to
deliver the sum of $___________ to the Escrow Agent to be held by the Escrow
Agent under the terms of this Escrow Agreement. The Escrow Agent hereby
acknowledges receipt of such amount and agrees to hold such amount pursuant to
the terms hereof. The amount deposited for the Seller hereunder is referred to
herein as the "Cash Amount."
1.2. Escrow Fund. The escrow fund (the "Escrow Fund") shall consist
of the following, whether now or hereafter acquired, together, in each case,
with the proceeds thereof: (a) the Cash Amount; and (b) the investments in
which the Escrow Agent may invest the Cash Amount hereunder.
1.3. Earnings. Interest and other income, if any, resulting from the
investment of the Escrow Fund shall inure to the Purchaser, shall not become
part of the Escrow Fund and shall be distributed to the Purchaser as and when
requested by the Purchaser.
2. Escrow Agent Provisions.
2.1. Investments. The Escrow Agent shall hold and safeguard the
Escrow Fund, shall treat such fund as a trust fund in accordance with the terms
of this Escrow Agreement and shall invest and reinvest the Escrow Fund, as
directed by the Purchaser in: (i) bankers acceptances and bank certificates of
deposit (if issued by a bank organized under the laws of the United States or
any State within the United States); (ii) marketable commercial paper maturing
within one year and rated "Single A" or higher by either Standard & Poor's
Corporation or Xxxxx'x Investor Services, Inc.; (iii) marketable obligations
issued or guaranteed by the United States government or any agency thereof; (iv)
municipal bonds rated, or having an underlying credit rating of "Single A" or
higher by either Standard & Poor's Corporation or Xxxxx'x Investor Services,
Inc.; and/or (v) repurchase agreements for underlying securities of the type
described in clause (iii), hereof and entered into with any bank meeting the
qualifications of clause (i), hereof. The Escrow Agent shall provide the
Purchaser with statements of earnings as reasonably requested by the Purchaser.
2.2. Fees and Expenses. The Escrow Agent shall be entitled to charge
its reasonable and customary fees in connection with its services as Escrow
Agent hereunder, and such fees shall be paid by the Purchaser.
2.3. Exculpation. The duties and obligations of the Escrow Agent
shall be determined solely by the express provisions of this Escrow Agreement,
and the Escrow Agent shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Escrow Agreement.
The Escrow Agent shall not be responsible in any manner whatsoever for any
failure or inability of any party to the Purchase Agreement to perform or comply
with any of the provisions of the Purchase Agreement or this Escrow Agreement.
2.4. Indemnification. The Purchaser and the Seller will reimburse
and indemnify the Escrow Agent for, and hold the Escrow Agent harmless against,
any loss, liability or expense, including, but not limited to, reasonable
attorneys' fees, incurred without bad faith or willful misconduct on the part of
the Escrow Agent arising out of or in connection with the acceptance or
performance of its duties and obligations under this Escrow Agreement as well as
the reasonable costs and expenses (including, without limitation, attorneys'
fees) of defending against any claims or liabilities arising out of or relating
to this Escrow Agreement. The Escrow Agent shall be
2
fully protected in acting in reliance upon any written notice, direction,
request, waiver, consent, receipt or other paper or document which the Escrow
Agent in good faith believes to be genuine and duly authorized and to have been
signed and presented by the proper party or parties. The Escrow Agent shall not
be liable for any error of judgment, or for any action taken or omitted by the
Escrow Agent in good faith, or for any mistake in fact or law, or for anything
which the Escrow Agent may do or refrain from doing in connection with this
Escrow Agreement, except for its own willful misconduct or negligence. The
Escrow Agent may (at the expense of the Purchaser) seek the advice of legal
counsel in the event of any dispute or question as to the construction of any of
the provisions of this Escrow Agreement or its duties hereunder, and the Escrow
Agent shall incur no liability and shall be fully protected with respect to any
action taken, omitted, or suffered by the Escrow Agent in good faith and in
accordance with the opinion of such counsel.
2.5. Resignation. The Escrow Agent shall have the right to resign at
any time on thirty (30) days prior written notice thereof to the Purchaser and
the Seller. In the event of any such resignation, the Purchaser and the Seller
shall agree upon a successor Escrow Agent and, in the event that the Purchaser
and the Seller shall fail or refuse to so agree, the Escrow Agent may appoint a
successor. Any successor Escrow Agent shall have, from and after appointment as
successor hereunder, all of the titles, interests, duties and powers, including
discretionary rights, powers and immunities, which are by the provisions of this
Escrow Agreement granted to and vested in the Escrow Agent named in this Escrow
Agreement. Upon such resignation, all obligations of the Escrow Agent so
succeeded shall terminate.
3. Payments.
3.1. Withdrawals by the Purchaser. Subject to the Purchaser's
obligation to redeliver the amounts so withdrawn as set forth below, to fund the
Purchaser's working capital requirements, the Purchaser may, from time to time,
withdraw, redeliver and rewithdraw portions of the Cash Amount, provided the
aggregate portion of the Cash Amount which the Purchaser has so withdrawn and
which the Purchaser has not redelivered shall at no time exceed Four Hundred
Thousand Dollars ($400,000.00). To make a withdrawal of any portion of the Cash
Amount hereunder, the Purchaser shall give a written notice to the Escrow Agent
specifying the portion of the Cash Amount which the Purchaser wishes to withdraw
and the account to which the Escrow Agent is to wire transfer the portion of the
Cash Amount to be withdrawn. Simultaneously with the delivery of any such
notice to the Escrow
3
Agent, the Purchaser shall deliver a copy of such notice to the Seller. Ten
(10) banking days after the Escrow Agent receives any such notice from the
Purchaser, the Escrow Agent shall pay the portion of the Cash Amount requested
by the Purchaser in immediately available funds by wire transfer to such account
as the Purchaser has specified in its written notice. If the Seller shall give
written notice to the Escrow Agent under Section 3.2, hereof, and if the amount
to be withdrawn by the Seller pursuant to such notice is greater than the Cash
Amount then on deposit with the Escrow Agent hereunder by virtue of withdrawals
made by the Purchaser pursuant to this Section 3.1, the Escrow Agent shall
immediately provide written notice to the Purchaser of the deficiency resulting
from the Seller's request for withdrawal (with a copy of said notice being sent
to the Seller). The Purchaser shall, within thirty (30) days of receiving a
copy of such notice, redeliver to the Escrow Agent so much of the Cash Amount
then withdrawn by the Purchaser under this Section 3.1 as may be necessary to
enable the Seller to make its desired withdrawal. In any case, on or before
January 2, 1998, the Purchaser shall redeliver to the Escrow Agent all portions
of the Cash Amount withdrawn by the Purchaser hereunder.
3.2. Withdrawals by the Seller. Not more frequently than once in
each calendar quarter, the Seller may at any time withdraw all or any part of
the Cash Amount. To make such a withdrawal, the Seller shall give written
notice to the Escrow Agent specifying the amount which the Seller wishes to
withdraw and the account to which the Escrow Agent is to wire transfer the
amount to be withdrawn. Simultaneously with the delivery of any such notice to
the Escrow Agent, the Seller shall deliver a copy of such notice to the
Purchaser. Ten (10) banking days after the Escrow Agent receives any such
notice from the Seller, the Escrow Agent shall pay the withdrawal amount
requested by the Seller in immediately available funds by wire transfer to such
account as the Seller has specified in its written withdrawal notice. The
foregoing notwithstanding, if the amount to be withdrawn by the Seller pursuant
to any notice given under this Section 3.2 is greater than the Cash Amount then
on deposit with the Escrow Agent hereunder by virtue of withdrawals made by the
Purchaser pursuant to Section 3.1, hereof, then the Escrow Agent shall pay to
the Seller in immediately available funds by wire transfer to such account as
the Seller has specified in its written withdrawal notice: (i) within ten (10)
banking days after the Escrow Agent receives the notice in question from the
Seller, the entire Cash Amount then on deposit hereunder; and (ii) when the
Purchaser redelivers the portion of the Cash Amount necessary to make such
payment, the balance of the withdrawal amount requested by the Seller. Upon any
payment of any portion of the Cash Amount to the Seller by the Escrow Agent
under this Section 3.2,
4
the Purchaser shall simultaneously pay to the Seller in immediately available
funds by wire transfer to such account as the Seller has designated in its
written withdrawal notice interest on the amount so paid to the Seller
calculated at the rate of 10% per annum from the date hereof through the date
such amount is paid to the Seller by the Escrow Agent hereunder.
3.3. Final Payment. If the Seller has not withdrawn the full Cash
Amount pursuant to Section 3.1, hereof, before January 2, 1998, on January 2,
1998, the Escrow Agent shall pay to the Seller in immediately available funds by
wire transfer to such account as the Seller may specify in writing any portion
of the Cash Amount not previously withdrawn by the Seller (the Seller's
"Balance"). Upon payment by the Escrow Agent of the Seller's Balance to the
Seller, the Purchaser shall simultaneously pay to the Seller in immediately
available funds by wire transfer to such account as the Seller may designate in
writing the greater of: (i) interest on the Seller's Balance calculated at the
rate of 10% per annum from the date hereof through January 2, 1998; or (ii) if
Advantage Learning Systems, Inc. ("ALS") has closed an Initial Public Offering
(as defined below) of its common stock before December 1, 1997, an amount equal
to the ALS Appreciation Factor (as defined below) times the Seller's Balance.
For purposes hereof, an "Initial Public Offering" by ALS shall mean the offer
and sale of the common stock of ALS under Section 5 of the Securities Act of
1933, as amended, by a registered broker/dealer in a so-called "firm commitment
underwriting," provided ALS has more than 300 registered shareholders after such
sale. For purposes hereof, the "ALS Appreciation Factor" shall equal: (i) the
ALS Share Price (as defined below) minus the ALS IPO Price divided by (ii) the
ALS IPO Price. For purposes hereof, the "ALS IPO Price" shall be the per share
price at which ALS common stock is issued in the ALS Initial Public Offering,
and the "ALS Share Price" shall mean the arithmetic mean (rounded to two decimal
places) of the closing prices (or the closing bids) for shares of the ALS common
stock on the principal exchange (or market) therefor as reported in The Wall
Street Journal or other recognized reference source reasonably selected by the
Purchaser for the 15 trading days preceding January 2, 1998. If ALS has closed
an Initial Public Offering of its common stock before December 1, 1997, then on
January 2, 1998, the Purchaser shall provide to the Seller a written calculation
of the ALS Appreciation Factor together with supporting documentation, and the
Escrow Agent shall have no responsibility for determining the ALS Appreciation
Factor or for forwarding interest or the ALS Appreciation Factor as contemplated
above.
5
3.4. Interest. Any amount not paid by the Purchaser to Seller when
due hereunder shall bear interest at the rate of fifteen percent (15%) per annum
from the date due until paid in full.
4. Miscellaneous.
4.1. Right of Setoff. The Purchaser hereby acknowledges that the
Seller's rights to payments hereunder are absolute and unconditional, and that
the Purchaser shall not have any right of setoff against the Escrow Fund. The
Purchaser therefore hereby agrees not to take or attempt to take any action, or
exercise any right of setoff, against the Escrow Fund.
4.2. Attorney's Fees. In the event suit or action is instituted to
enforce any of the terms of this Agreement, the prevailing party shall be
entitled to recover from the other party such sum as the court may judge as
reasonable attorneys' fees, including any fees incurred at trial or on appeal of
such suit or action or in any bankruptcy or insolvency proceedings.
4.3. Nonliability for Defaults of Escrow Agent. The Seller
acknowledges that Purchaser shall have no liability for any act, omission or
default by the Escrow Agent in performing its obligations hereunder or for any
loss on any investments of the Escrow Fund and agrees not to assert any claims
against Purchaser with respect to any such matters.
4.4. Governing Law. The parties hereto agree that all terms and
conditions of this Escrow Agreement shall be governed by, construed and enforced
in accordance with the laws of the State of Washington, without giving effect to
any choice of law or conflict provision or rule that would cause the application
of the laws of any jurisdiction other than the State of Washington.
4.5. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when hand delivered, including, without limitation, by courier or
overnight delivery service, or when sent by facsimile (transmission confirmed),
or two (2) days after being mailed, certified or registered mail, with postage
prepaid addressed as follows (or to such other person or address as the party to
receive such notice may have designated from time to time by notice in writing
pursuant hereto):
6
If to the Seller: c/o IPS Publishing, Inc.
00000 X.X. 00xx Xxxxxx
X-000 Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
If to the Purchaser: c/o Xxxxxxxx X. Xxxx
Advantage Learning Systems, Inc.
X.X. Xxx 0000
Xxxxxxxxx Xxxxxx, XX 00000-0000
Fax: 000-000-0000
If to the Escrow
Agent: ______________________
______________________
______________________
______________________
Fax: ________________
4.6. Headings. The headings to Articles and Sections of this Escrow
Agreement are for reference only and shall not be used in construing the
provisions hereof or otherwise affect the meaning hereof.
4.7. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be an original but all of which shall
constitute but one and the same agreement and shall become binding upon the
parties when each party hereto has executed one or more counterparts.
4.8. Entire Agreement. This Escrow Agreement embodies the entire
agreement and understanding between the Seller, the Purchaser and the Escrow
Agent, and supersedes all prior agreements and understandings related to the
subject matter hereof. There are no representations, warranties, covenants,
promises or agreements on the part of any party to any other party hereto which
are not explicitly set forth herein.
4.9. Modifications, Waivers. Any modification or amendment of or
with respect to any provisions of this Escrow Agreement shall not be effective
unless it shall be in writing and signed by the Seller, the Purchaser and the
then current Escrow Agent, and shall designate specifically the terms and
provisions so modified. Any waiver of or with respect to any provisions of this
Escrow Agreement shall not be effective unless it shall be in writing and signed
by the party against whom it is sought to be enforced.
4.10. Benefit; Assignment . This Escrow Agreement shall be binding
upon and inure to the benefit of the Seller, the
7
Purchaser and the Escrow Agent and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the _____ day of July, 1996.
ESCROW AGENT:
___________________________________
By: _______________________________
(Title)
PURCHASER:
IPS PUBLISHING, INC.
By: _______________________________
Xxxxxxxx X. Xxxx, President
SELLER:
___________________________________
By: ______________________________
Xxxxxxx X. Xxxxx, President
GUARANTY
--------
The undersigned hereby guaranty timely payment and performance by the
Purchaser of all of its obligations under the foregoing Escrow Agreement, and
agree to pay when due any amount not timely paid by the Purchaser thereunder and
to cause the Purchaser to timely comply with and perform each of its
undertakings and agreements set forth therein.
___________________________________
Xxxxxxxx X. Xxxx
___________________________________
Xxxxxx X. Xxxx
Date: July __, 1996
8
Exhibit 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made and entered into as of the date set forth below
by and between IPS PUBLISHING, INC., a Washington corporation (the "Company"),
and XXXXXXX XXXXX (the "Executive").
BACKGROUND:
As of the date hereof, under the terms of an Asset Purchase Agreement
dated as of August ____, 1996 (the "Purchase Agreement"), the Company (formerly
known as IPS Acquisition, Inc.) has acquired substantially all of the assets and
business of IPS Publishing, Inc. ("OldCo"), and has changed its name to "IPS
Publishing, Inc." Executive was the principal shareholder and Chief Executive
Officer of OldCo and the Company and the Executive desire to provide for
Executive's continued employment by the Company.
NOW, THEREFORE, the Company and the Executive, in consideration of the
foregoing and the mutual promises herein-after set forth, promise and agree as
follows:
ARTICLE I
General Terms of Employment
---------------------------
1.1. General Duties. During the term hereof, the Company shall employ
Executive and the Executive shall serve the Company in the capacity of Chief
Executive Officer. In such capacity, subject to the supervision and control of
the Company's Chairman, the Executive shall perform such duties and render such
services consistent with his experience and previous duties with OldCo as the
Company's Chairman may determine after consultation with Executive.
1.2. Fulltime Duties. During the Executive's employment hereunder, the
Executive shall devote his best efforts on a full-time basis to the business and
affairs of the Company and shall not, without the prior approval of the
Company's Chairman, directly or indirectly, engage in outside business
activities in such a manner as to interfere with his performance of services for
the Company. The Company hereby acknowledges that the Executive is involved with
Curriculum Technologies, Inc. and agrees that Executive may provide services to
Curriculum Technologies, Inc. at home, on weekends and evenings, without
interfering with his duties hereunder.
1.3. Board of Directors. For so long as he is employed hereunder, the
Executive shall, subject to election by such corporation's shareholders, serve
as a member of the Company's Board of Directors and as a member of the Board of
Directors of the Company's affiliate, Advantage Learning Systems, Inc.
ARTICLE II
Compensation; Employee Benefits
-------------------------------
2.1. Salary. The Company shall pay Executive an initial salary of One
Hundred Twenty-Five Thousand Dollars ($125,000.00) per year. Executive's salary
will be reviewed annually and may be increased (but not decreased) over such
initial annual salary from time to time in the sole discretion of the Company's
Board of Directors. Executive's salary shall be paid to him in equal
installments at such intervals as other executive employees of the Company
receive payment for their employment services.
2.2. Incentive Plans. In addition to the salary set forth in Section
2.1, above, Executive shall also be entitled to received deferred compensation
under the phantom stock plans adopted by the Company affiliates, Advantage
Learning Systems, Inc. and Institute for Academic Excellence, Inc., in
accordance with the terms of such plans. Effective as of the date hereof,
Executive shall be awarded 25 shares and effective as of January 1, 1997
Executive shall be awarded an additional 25 shares of "phantom stock" under the
terms of each of such plans. Executive's rights to deferred compensation under
such plans shall be as provided in such plans and subject to the terms and
conditions thereof. In addition, if and when the Company and its affiliates are
merged and an initial public offering completed, the Company, or its successor,
shall cause the Executive to participate in such stock based incentive plans as
the Company, or its successor, may adopt from time to time on a basis comparable
to executives of the Company, or its successor, having similar responsibilities.
2.3. Expenses. During the Executive's employment hereunder, the
Company shall pay or reimburse the Executive for all reasonable out-of-pocket
expenses incurred by the Executive in connection with rendering services
hereunder, including, without limitation, reasonable out-of-pocket travel, meal
and lodging expenses incurred by the Executive in connection with overnight
travel on Company business, cellular and other telephone expenses incurred in
connection with the business of the Company and, subject to approval in advance
by the Company's
2
Chairman, entertainment expenses. The Executive shall be required to submit an
itemized account of such expenditures and such proof thereof as the Company
customarily requires of its executive employees generally. In addition, through
December, 1996, the Company shall make the monthly lease payments of $648.18
each on the Ford Explorer currently utilized by Executive. Executive shall
reimburse the Company for the reasonable costs of Executive's personal use
thereof as agreed to from time to time by Executive and the Company.
2.4. Vacation. Executive shall be entitled to six (6) weeks of
vacation per year or such greater amount as the Board of Directors of the
Company may from time to time establish. Vacation time shall be noncumulative,
but Executive shall be entitled to reimbursement for vacation time not taken in
any year in accordance with the vacation reimbursement policies from time to
time established by the Company for its employees generally, provided Executive
shall not be reimbursed for more than four (4) weeks of unused vacation with
respect to any year.
2.5. Other Benefits. In addition to the benefits expressly set forth
herein, Executive shall also be entitled during the term hereof to receive such
other fringe benefits and to participate in such benefit programs as the Company
may from time to time determine to make available to its executive employees
generally, including, but not limited to, health insurance, life insurance and
401(k) plan participation to the extent offered by the Company. Executive
acknowledges that he shall have no vested rights under any such benefit programs
except as expressly provided by the terms thereof and that such programs may be
terminated or enhanced at any time without obligation to Executive.
ARTICLE III
Termination of Employment
-------------------------
3.1. Term. Unless otherwise terminated as provided in Section 3.2,
hereof, the Executive's employment shall commence as of the date hereof and
shall continue for a period of two (2) years. Thereafter, either the Company or
the Executive may terminate the Executive's employment hereunder at any time by
thirty (30) days' prior written notice to the other.
3.2. Causes for Termination. Notwithstanding the term set forth in
Section 3.1, above, the Executive's employment hereunder shall terminate upon
the occurrence of any of the following events:
3
3.2.1. Upon the Executive's death.
3.2.2. At the option of the Company upon notice to the Executive in
the event of the Executive's disability. For purposes hereof, the Executive
shall be considered to be disabled if he has been, or if it is apparent to a
reasonable degree of medical certainty that he will be, unable to perform the
regular duties of his employment hereunder for a continuous period of sixty (60)
days by reason of physical or mental illness or incapacity. If there is any
dispute as to whether the Executive is or was disabled, such question shall be
submitted to a licensed physician reasonably designated by the Company and the
determination of such physician shall be conclusive. The Executive shall submit
to such examinations and provide such information as any such physician may
request.
3.2.3. By the Company forthwith upon notice to the Executive, if the
Executive shall commit any act or omission constituting "Cause" for the
termination of his employment. For purposes hereof, the Company shall be deemed
to have "Cause" for the termination of the Executive's employment if the
Executive should: (i) breach any provision of this Agreement and fail to cure
such breach within ten (10) days after written notice to Executive from the
Company; (ii) commit any act of dishonesty or disloyalty involving the Company;
(iii) or commit any act or omission which, in the reasonable judgment of the
Company's Board of Directors, is likely to have a material adverse effect upon
the business or reputation of the Executive or the Company.
3.3. Consequences of Termination. Except as provided in Section 3.4,
in the event of the termination of Executive's employment, the Company's sole
obligation shall be to pay to Executive (or his estate) his salary at the annual
rate then in effect prorated through the date of termination.
3.4. Additional Voluntary Termination. Section 3.1, hereof,
notwithstanding: (i) the Executive may, at any time, terminate the Executive's
employment hereunder upon thirty (30) days' prior written notice to the Company
if the Company moves its headquarters from the Vancouver, Washington area; and
(ii) the Company may, at any time, terminate the Executive's employment
hereunder upon thirty (30) days' prior written notice to the Executive; provided
that, if any such termination occurs before that date six (6) months after the
date hereof the Company shall continue until that date six (6) months after the
date hereof to: (i) pay the Executive when and as the same would otherwise have
4
been payable hereunder, his salary at the annual rate then in effect; and (ii)
provide the Executive when and as the same would otherwise have been provided
hereunder, the health and life insurance benefits specified in Section 2.5,
hereof.
3.5. Benefits. In addition to any other payments set forth in this
Article III to which the Executive may be entitled upon termination of his
employment, the Executive shall also be entitled to receive upon or following
the termination of his employment any payments, benefits or rights due or
exercisable by him under any life or disability policies, 401(k) or phantom
stock plans or other benefit programs or incentive compensation plans
established by the Company and in which the Executive is a participant at the
time of his termination and in accordance with the terms of such plans.
ARTICLE IV
Covenant Not to Compete; Confidentiality
----------------------------------------
4.1. Noncompetition. Executive agrees that he shall not, without the
prior written consent of the Company, at any time while he is employed by the
Company or at any time during the period of two (2) years following the
termination of his employment for any reason, either directly or indirectly, as
employee, consultant, representative, trustee, partner, owner, proprietor or
otherwise: (i) acquire an interest in, work for, render advice or assistance to
or otherwise participate or engage in the business of, any "Competing Business"
(as defined below); (ii) divert or attempt to divert any business from, or
persuade or attempt to persuade, any Customer (as defined below) not to do
business with the Company; or (iii) induce or attempt to induce any employee of
or consultant engaged by the Company or any of its Affiliates (as defined below)
to leave the employ of the Company or any of its Affiliates or in any way
interfere with the relationship between the Company or any of its Affiliates and
any employee or consultant thereof. Notwithstanding the foregoing: (i) nothing
herein shall prevent the Executive from acquiring for investment up to one
percent (1%) of the outstanding shares of any Competing Business provided that
he does not render advice or assistance to such entity; and (ii) the Company
acknowledges that the Executive's engagement in business ventures relating to CD
roms for Classic Comics and software for non-native English speakers and his
services on the Board of Directors of Assessment Training Institute will not be
considered to be in violation of the restrictions set forth in this Section 4.1.
For purposes hereof, the term "Competing Business" shall mean any business which
is engaged in the development, sale, licensing, use and/or publication of any
software or other products of the type sold or
5
licensed by the Company or any of its Affiliates while Executive is employed by
the Company or, in the case of the termination of his employment, during the six
(6) month period prior to such termination, including any software designed to
teach, assess or improve reading skills and any software, algorithms and/or
authoring tools designed to create mathematics and/or science problems or tests
and/or useful for mathematics and/or science performance assessment or
instruction, or otherwise to teach, develop or improve mathematics and/or
science knowledge and skills. For purposes hereof, a "Customer" shall mean,
while Executive is employed by the Company, any person who has been an actual or
potential customer of the Company or any of its Affiliates and, in the case of
the termination of Executive's employment, any person who has been a customer of
the Company or any of its Affiliates within the period of six months prior to
the termination of Executive's employment or a potential customer with whom the
Company or any of its Affiliates has engaged in negotiations within such six
month period. For purposes hereof, "Affiliate" of the Company shall mean any
corporation or other entity which directly or indirectly through one or more
subsidiaries or other intermediaries is controlled by, is under common control
with or which controls the Company. For purposes hereof, the term "control"
shall mean, in the case of a corporation, ownership of 50% or more of the shares
of such corporation which have the power to elect a majority of the Board of
Directors or, in the case of any other entity, the power to direct the affairs
of such corporation or to elect a majority of the persons having such power. As
of the date hereof, the Affiliates of the Company include Advantage Learning
Systems, Inc., a Wisconsin corporation, and Institute for Academic Excellence,
Inc,. a Wisconsin corporation.
4.2. Confidentiality and Assignment of Rights. Simultaneously with the
execution hereof, Executive shall execute and deliver to the Company a
Confidential Information and Business Ideas Assignment Agreement (the
"Confidentiality Agreement") in the form attached hereto, the terms of which are
hereby incorporated by reference.
EXECUTIVE ACKNOWLEDGES AND REPRESENTS THAT THE SCOPE OF THE RESTRICTIONS IN
SECTIONS 4.1 AND 4.2 HEREOF, INCLUDING THE RESTRICTIONS SET FORTH IN THE
CONFIDENTIALITY AGREEMENT, ARE APPROPRIATE, NECESSARY AND REASONABLE FOR THE
PROTECTION OF THE BUSINESS, GOODWILL AND PROPERTY RIGHTS OF THE COMPANY AND THE
COMPANY AND WILL NOT PREVENT EXECUTIVE FROM EARNING A LIVING IN THE EVENT OF,
AND AFTER, TERMINATION OF HIS EMPLOYMENT BY THE COMPANY.
6
4.3. Injunction. Executive recognizes that irreparable and
incalculable injury may result to Company, its business and property, in the
event of a breach by him of any of the restrictions imposed by this Article IV
and agrees that if he shall engage in any acts in violation of the provisions
hereof, Company shall be entitled, in addition to such other remedies and
damages as may be available, to an injunction prohibiting him from engaging in
such acts.
4.4. Subsequent Employment. In the event of the expiration or
termination of Executive's employment with the Company, Executive agrees, prior
to the commencement of any new employment, to advise any new employer who is or
subsequently becomes a Competing Business of the terms of this Agreement and the
Confidentiality Agreement and to furnish such new employer with a copy of such
agreements. Executive further agrees that the Company may furnish copies of this
Agreement and the Confidentiality Agreement to any such new employer.
ARTICLE V
Miscellaneous
-------------
5.1. Withholding Taxes. The Company shall deduct from all payments to
the Executive under this Agreement any federal, state or local withholding or
other taxes or charges which the Company is from time to time required to deduct
under applicable law, and all amounts payable to the Executive hereunder are
stated herein before any such deductions.
5.2. Notices. Any notice required or permitted to be given or made by
either party to the other hereunder shall be sufficient if hand delivered,
mailed postage prepaid, sent by prepaid express or courier service or sent by
facsimile transmission and actually received to the parties at their respective
addresses set forth opposite the signatures hereto or to such changed address as
either party shall designate by proper notice to the other.
5.3. Waiver of Breach. The waiver by the Company of the breach of any
provisions of this Agreement or the Confidentiality Agreement by the Executive
shall not be deemed a waiver by the Company of any subsequent breach.
5.4. Assignment. The Company may not assign this Agreement without the
written consent of the Executive, except that if the Company shall liquidate,
merge, or consolidate with or into, or transfer substantially all of its assets,
including, goodwill, to another corporation or other form of business
7
organization, this Agreement shall be binding upon and inure to the benefit of
the successor corporation in such liquidation, merger, consolidation or
transfer. The Executive may not assign, pledge or encumber any interest in this
Agreement or any part thereof without the prior written consent of the Company.
5.5. Governing Law. This Agreement and all questions of its
interpretation, performance, enforceability and the rights and remedies of the
parties hereto, shall be governed by and determined in accordance with the
internal laws of Washington.
5.6. Noncompetition; Confidentiality. The Executive hereby
acknowledges that he has agreed, on the terms and conditions set forth in the
Purchase Agreement, not to compete with the Company for a period of five (5)
years from the date hereof, and not to disclose proprietary or other
confidential information of the Company, and that his agreement set forth in
Article IV, hereof, and the Confidentiality Agreement are in addition to, and
not by way of limitation to, his agreements in the Purchase Agreement.
5.7. Severability. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
_____ day of August, 1996.
Address for Notice: COMPANY:
c/o Xxxxxxxx X. Xxxx IPS PUBLISHING, INC.
Advantage Learning
Systems, Inc.
0000 Xxxxxxxxxx Xxxxxx
X. X. Xxx 0000 By: _______________________________
Xxxxxxxxx Xxxxxx, XX 00000 (Title)
fax No. 000-000-0000
Address for Notice: EXECUTIVE:
c/o IPS Publishing, Inc.
00000 X.X. 00xx Xxxxxx
X-000 Xxxxxxxxx, XX 00000 ___________________________________
fax No. 000-000-0000 Xxxxxxx Xxxxx
8
By this Agreement you are agreeing that you will transfer to the Companies
all rights you may have or acquire in copyrights, inventions and
discoveries, protect the Companies' trade secrets and keep information
confidential. If you have questions about your obligations or rights, you
should seek independent legal advice.
CONFIDENTIAL INFORMATION AND BUSINESS IDEAS
ASSIGNMENT AGREEMENT
This Agreement is made and entered into as of the date set forth below
by the undersigned Employee of IPS PUBLISHING, INC., ADVANTAGE LEARNING SYSTEMS,
INC., INSTITUTE FOR ACADEMIC EXCELLENCE, INC. and/or their Affiliates
(collectively called herein, the "Companies"). As a condition to my employment,
I agree that:
1. Trade secrets and confidential information about the Companies'
business which may be disclosed to me or of which I may learn during the course
of my employment are not to be disclosed. One of my important duties as an
employee, and even after my employment terminates, is to use my best efforts to
safeguard the Companies' trade secrets and to keep information about the
Companies confidential. Unless I am expressly authorized to do so in writing, I
will not disclose any of the Companies' trade secrets or any confidential
information about the Companies other than to other employees of the Companies
who have a need to know such secrets or information. I will assume any
particular information about the Companies' business is confidential until I am
informed it is not or until it has been published or is generally or publicly
known outside the Companies. I understand that "confidential information",
includes, without limitation, (i) all source codes, algorithms and other
programming data and technical information relating to the Companies' software
products; (ii) any information concerning any product under development or being
tested by any of the Companies but not yet offered for sale; (iii) any
information concerning the pricing policies of the Companies, the prices charged
by any of the Companies to any customer, the volume of orders of any customer
and all other information concerning the transactions of the Companies with any
customer or proposed customer; (iv) any information concerning the marketing
programs or strategies of any of the Companies; (v) any financial information
concerning any of the Companies; and (vi) any information concerning the
salaries or wages to be paid to, the work records of or any other personnel
information relating to any employee of any of the Companies other than the
undersigned.
2. The Companies will own, and I hereby assign to the Companies, all
rights in all Business Ideas (as hereafter defined) which I originate or develop
either alone or working with others while I am employed by any of the Companies.
All Business
1
Ideas which are or form the basis for copyrightable works shall be considered
"works for hire" as that term is defined by U.S. Copyright Law and are hereby
assigned to the Companies.
3. While I am employed by any of the Companies and after my employment
terminates:
(a) I will promptly disclose all Business Ideas to the Companies;
and
(b) I will promptly execute all documents which any of the
Companies may reasonably require to perfect its patent, copyright and other
rights to such Business Ideas throughout the world.
4. The term "Business Ideas" as used in this Agreement means all
ideas, inventions, data, software, developments and copyrightable works, whether
or not patentable or registerable, which I originate or develop, either alone or
jointly with others while I am employed by any of the Companies and which are
either (i) related to any business known to me to be engaged in or contemplated
by any of the Companies, (ii) originated or developed during my working hours,
or (iii) originated or developed in whole or in part using materials, labor,
facilities or equipment furnished by any of the Companies. Notwithstanding the
foregoing, the term "Business Ideas" as used in this Agreement, shall not
include inventions for which no equipment, supplies, facility or trade secret
information of the Companies was used and which was developed entirely on my own
time, unless (a) the invention relates (i) directly to the business of the
Companies, or (ii) to the Companies' actual or demonstrably anticipated research
or development, or (b) the invention results from any work performed by me for
the Companies.
Nothing in this Agreement will prevent me, after my employment
terminates, from using general skills and knowledge I gained while employed by
any of the Companies.
Dated this ____ day of _______________, 19___.
_____________________________
(Employee)
The foregoing is hereby accepted as of its date.
IPS PUBLISHING, INC.
By: ___________________________
(Title)
Exhibit 11.5
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made and entered into as of the date set forth below
by and between IPS PUBLISHING, INC., a Washington corporation (the "Company"),
and XXXX XXXXXX (the "Executive").
BACKGROUND:
The Company (formerly known as IPS Acquisition, Inc.) has acquired
substantially all of the assets and business of IPS Publishing, Inc. ("OldCo"),
and has changed its name to "IPS Publishing, Inc." Executive has heretofore been
employed as President of OldCo and the Company and the Executive desire to
provide for Executive's continued employment by the Company on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the Company and the Executive, in consideration of the
foregoing and the mutual promises herein-after set forth, promise and agree as
follows:
ARTICLE I
General Terms of Employment
---------------------------
1.1. General Duties. During the term hereof, the Company shall employ
Executive and Executive shall serve the Company in the capacity of President or
in such other senior executive capacity as Executive and the Company may
hereafter agree. In such capacity, Executive shall have, subject to the
direction and control of the Company's Board of Directors and Chief Executive
Officer, such responsibilities for the conduct of the daily operations and
business of the Company as may from time to time be assigned to Executive by the
Board of Directors or Chief Executive Officer.
1.2. Executive Shall Serve Company Exclusively. During Executive's
employment hereunder, Executive shall devote her entire working time and her
best efforts to the business and affairs of the Company and shall not, without
the prior approval of the Company's Board of Directors, directly or indirectly,
engage in, or provide advice or assistance to any other business enterprise,
whether or not competitive with the Company.
ARTICLE II
Compensation, Expenses and Benefits
-----------------------------------
2.1. Salary. The Company shall pay Executive an initial salary of
Ninety-Eight Thousand Dollars ($98,000.00) per year. Executive's salary will be
reviewed annually and may be increased over such initial annual salary from time
to time in the sole discretion of the Company's Board of Directors. Executive's
salary shall be paid to her in equal installments at such intervals as other
executive employees of the Company receive payment for their employment
services.
2.2. Incentive Plans. In addition to the salary set forth in Section
2.1, above, Executive shall also be entitled to receive deferred compensation
under the phantom stock plans adopted by the Company's Affiliates, Advantage
Learning Systems, Inc. and Institute for Academic Excellence, Inc., in
accordance with the terms of such plans and, effective as of the date hereof,
Executive shall be awarded 20 shares of "phantom stock" under the terms of each
of such plans. Executive's right to deferred compensation under such plans shall
be as provided in such plans and subject to the terms and conditions thereof.
2.3. Expenses. The Company shall pay or reimburse Executive for all
reasonable transportation, meal, lodging and other out-of-pocket expenses
incurred by her in the course of performing her duties on behalf of the Company.
Executive shall keep accurate records and receipts of such expenditures and
shall submit such accounts and proof thereof as may from time to time be
required in accordance with such expense account or reimbursement policies as
the Company may establish for its executive employees generally.
2.4. Vacation. Executive shall be entitled to four (4) weeks of
vacation per year or such greater amount as the Board of Directors of the
Company may from time to time establish. Vacation time shall be noncumulative,
but Executive shall be entitled to reimbursement for any vacation time not taken
in any year in accordance with the vacation reimbursement policies from time to
time established by the Company for its employees generally.
2.5. Other Benefits. In addition to the benefits expressly set forth
herein, Executive shall also be entitled during the term hereof to receive such
other fringe benefits and to participate in such benefit programs as the Company
may from time to time determine to make available to its salaried employees
generally, including, but not limited to, health insurance, life insurance and
401(k) plan participation to the extent offered by the Company. Executive
acknowledges that she
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shall have no vested rights under any such benefit programs except as expressly
provided by the terms thereof and that such programs may be terminated or
enhanced at any time without obligation to Executive.
ARTICLE III
Term and Termination of Employment
----------------------------------
3.1. Term. Unless otherwise terminated as provided in Section 3.2, the
Executive's employment hereunder shall commence as of the date hereof and shall
continue for a period of two (2) years (the "Original Term"). At the expiration
of the Original Term or any renewal term hereof, the Executive's employment
hereunder shall automatically be renewed for a one (1) year period, unless
either party provides notice to the other of it's election to terminate the
Executive's employment hereunder at least Ninety (90) days prior to the
expiration of the Original Term or any renewal term.
3.2. Causes for Termination. Notwithstanding the term set forth in
Section 3.1, the Executive's employment under this Agreement shall terminate
upon the occurrence of any of the following events:
3.1.1. Upon the Executive's death.
3.1.2. At the option of the Company upon notice to the Executive
in the event of the Executive's disability. For purposes hereof, the
Executive shall be considered to be disabled if she has been, or if it is
apparent to a reasonable degree of medical certainty that she will be,
unable to perform the regular duties of her employment hereunder for a
continuous period of ninety (90) days by reason of physical or mental
illness or incapacity. If there is any dispute as to whether the Executive
is or was disabled, such question shall be submitted to a licensed
physician reasonably designated by the Company and the determination of
such physician shall be conclusive. The Executive shall submit to such
examinations and provide such information as any such physician may
request.
3.1.3. By the Company forthwith upon notice to Executive if
Executive shall commit any act or omission constituting "Cause" for the
termination of her employment. For purposes hereof, the Company shall be
deemed to have "Cause" for the termination of Executive's employment if
Executive should (i) breach any provision of this Agreement and fail to
cure breach within ten (10) days after written notice to Executive from the
Company, (ii) commit any act of dishonesty or disloyalty involving the
Company, (iii) be
3
chronically absent from work other than by reason of illness, (iv) use
alcohol or drugs in such a manner as to interfere with the performance of
her duties for the Company, or (v) commit a felony or misdemeanor or other
act or omission which, in the reasonable judgment of the Company's Board of
Directors, is likely to have a material adverse effect upon the business or
reputation of Executive or the Company.
3.3. Consequences of Termination. Except as provided in Section 3.4,
in the event of the termination of Executive's employment with the Company, the
Company's sole obligation shall be to pay to Executive (or her estate) her
salary at the annual rate then in effect prorated through the date of
termination.
3.4. Additional Voluntary Terminations. Section 3.1, hereof,
notwithstanding, the Company may, at any time, terminate Executive's employment
forthwith upon thirty (30) days prior written notice to Executive; provided
that, if such termination occurs during the Original Term, the Company shall
continue to pay Executive when and as the same would otherwise have been payable
hereunder, her salary set forth in Section 2.1 hereof for a period of one year
from the effective date of termination or for the balance of the Original Term,
whichever is less.
3.5. Benefits. In addition to any other payments set forth in this
Article III to which Executive may be entitled upon termination of her
employment, Executive shall also be entitled to receive or exercise upon or
following the termination of her employment any payments, benefits or rights due
or exercisable by her under any life or disability insurance policies, 401(k) or
phantom stock plans or other benefit programs or incentive compensation plans
established by the Company and in which Executive is a participant at the time
of her termination in accordance with the terms of such plans.
ARTICLE IV
Covenant Not to Compete; Confidentiality
----------------------------------------
4.1. Noncompetition. Executive agrees that she shall not, without the
prior written consent of the Company, at any time while she is employed by the
Company or at any time during the period of two (2) years following the
termination of her employment for any reason, either directly or indirectly, as
employee, consultant, representative, trustee, partner, owner, proprietor or
otherwise: (i) acquire an interest in, work for, render advice or assistance to
or otherwise participate or engage in the business of, any "Competing Business"
(as defined below); (ii) divert or attempt to divert any business from, or
persuade or attempt to persuade, any Customer (as defined below) not to do
4
business with the Company; or (iii) induce or attempt to induce any employee of
or consultant engaged by the Company or any of its Affiliates (as defined below)
to leave the employ of the Company or any of its Affiliates or in any way
interfere with the relationship between the Company or any of its Affiliates and
any employee or consultant thereof. For purposes hereof, the term "Competing
Business" shall mean any business which is engaged in the development, sale,
licensing, use and/or publication of any software or other products of the type
sold or licensed by the Company or any of its Affiliates while Executive is
employed by the Company or, in the case of the termination of her employment,
during the six (6) month period prior to such termination, including any
software designed to teach, assess or improve reading skills and any software,
algorithms and/or authoring tools designed to create mathematics and/or science
problems or tests and/or useful for mathematics and/or science performance
assessment or instruction, or otherwise to teach, develop or improve mathematics
and/or science knowledge and skills. For purposes hereof, a "Customer" shall
mean, while Executive is employed by the Company, any person who has been an
actual or potential customer of the Company or any of its Affiliates and, in the
case of the termination of Executive's employment, any person who has been a
customer of the Company or any of its Affiliates within the period of six months
prior to the termination of Executive's employment or a potential customer with
whom the Company or any of its Affiliates has engaged in negotiations within
such six month period. Notwithstanding the foregoing, nothing herein shall
prohibit Executive from working as a regular full-time employee of a textbook
publisher following the termination of her employment by the Company provided
that she perform services solely for such employer and does not, directly or
indirectly, through such employer or otherwise, write algorithms or software or
otherwise provide services for use or publication by persons other than such
employer. For purposes hereof, "Affiliate" of the Company shall mean any
corporation or other entity which directly or indirectly through one or more
subsidiaries or other intermediaries is controlled by, is under common control
with or which controls the Company. For purposes hereof, the term "control"
shall mean, in the case of a corporation, ownership of 50% or more of the shares
of such corporation which have the power to elect a majority of the Board of
Directors or, in the case of any other entity, the power to direct the affairs
of such corporation or to elect a majority of the persons having such power. As
of the date hereof, the Affiliates of the Company include Advantage Learning
Systems, Inc., a Wisconsin corporation, and Institute for Academic Excellence,
Inc,. a Wisconsin corporation.
4.2. Confidentiality and Assignment of Rights. Simultaneously with the
execution hereof, Executive shall execute and deliver to the Company a
Confidential Information and Business Ideas Assignment Agreement (the
"Confidentiality Agreement") in
5
the form attached hereto, the terms of which are hereby incorporated by
reference.
EXECUTIVE ACKNOWLEDGES AND REPRESENTS THAT THE SCOPE OF THE RESTRICTIONS IN
SECTIONS 4.1 AND 4.2 HEREOF, INCLUDING THE RESTRICTIONS SET FORTH IN THE
CONFIDENTIALITY AGREEMENT, ARE APPROPRIATE, NECESSARY AND REASONABLE FOR THE
PROTECTION OF THE BUSINESS, GOODWILL AND PROPERTY RIGHTS OF THE COMPANY AND THE
COMPANY AND WILL NOT PREVENT EXECUTIVE FROM EARNING A LIVING IN THE EVENT OF,
AND AFTER, TERMINATION OF HER EMPLOYMENT BY THE COMPANY.
4.3. Injunction. Executive recognizes that irreparable and
incalculable injury may result to Company, its business and property, in the
event of a breach by her of any of the restrictions imposed by this Article IV
and agrees that if she shall engage in any acts in violation of the provisions
hereof, Company shall be entitled, in addition to such other remedies and
damages as may be available, to an injunction prohibiting her from engaging in
such acts.
4.4. Subsequent Employment. In the event of the expiration or
termination of Executive's employment with the Company, Executive agrees, prior
to the commencement of any new employment, to advise any new employer who is or
subsequently becomes a Competing Business of the terms of this Agreement and the
Confidentiality Agreement and to furnish such new employer with a copy of such
agreements. Executive further agrees that the Company may furnish copies of this
Agreement and the Confidentiality Agreement to any such new employer.
ARTICLE V
Miscellaneous
-------------
5.1. Withholding Taxes. The Company shall deduct from all payments to
the Executive under this Agreement any federal, state or local withholding or
other taxes or charges which the Company is from time to time required to deduct
under applicable law, and all amounts payable to the Executive hereunder are
stated herein before any such deductions.
5.2. Notices. Any notice required or permitted to be given or made by
either party to the other hereunder shall be sufficient if hand delivered,
mailed postage prepaid, sent by prepaid express or courier service or sent by
facsimile transmission and actually received to the parties at their respective
addresses set forth opposite the signatures hereto or to such changed address as
either party shall designate by proper notice to the other.
6
5.3. Waiver of Breach. The waiver by the Company of the breach of any
provisions of this Agreement or the Confidentiality Agreement by the Executive
shall not be deemed a waiver by the Company of any subsequent breach.
5.4. Assignment. The Company may not assign this Agreement without the
written consent of the Executive, except that if the Company shall liquidate,
merge, or consolidate with or into, or transfer substantially all of its assets,
including, goodwill, to another corporation or other form of business
organization, this Agreement shall be binding upon and inure to the benefit of
the successor corporation in such liquidation, merger, consolidation or
transfer. The Executive may not assign, pledge or encumber any interest in this
Agreement or any part thereof without the prior written consent of the Company.
5.5. Definition of Affiliate. As used herein and in the
Confidentiality Agreement, an "Affiliate" of the Company shall mean a parent,
subsidiary, brother or sister corporation or other corporation or entity which
the Company controls or which is controlled by or under common control with the
Company. For purposes hereof, "control" means, in the case of a corporation,
direct or indirect ownership of more than 50% of the interest entitled to a vote
for a majority of the Board of Directors or equivalent body or, in the case of a
partnership, limited liability company or other entity, direct or indirect
ownership of the right to receive more than 50% of the profits thereof. As of
the date hereof, the Affiliates of the Company are Advantage Learning Systems,
Inc. and Institute for Academic Excellence, Inc., each of which are Wisconsin
corporations under common control with the Company.
5.6. Governing Law. This Agreement and all questions of its
interpretation, performance, enforceability and the rights and remedies of the
parties hereto, shall be governed by and determined in accordance with the
internal laws of Washington.
5.7. Severability. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly.
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of
this _____ day of August, 1996.
Address for Notice: COMPANY:
c/o Xxxxxxxx X. Xxxx IPS PUBLISHING, INC.
Advantage Learning Systems, Inc.
0000 Xxxxxxxxxx Xxxxxx
P. O. Xxx 0000
Xxxxxxxxx Xxxxxx, XX 00000-0000 By: ________________________
Fax: (000) 000-0000 (Title)
Address for Notice: EXECUTIVE:
______________________
______________________
______________________ ____________________________
Fax: _________________ Xxxx Xxxxxx
8
By this Agreement you are agreeing that you will transfer to the Companies
all rights you may have or acquire in copyrights, inventions and
discoveries, protect the Companies' trade secrets and keep information
confidential. If you have questions about your obligations or rights, you
should seek independent legal advice.
CONFIDENTIAL INFORMATION AND BUSINESS IDEAS
ASSIGNMENT AGREEMENT
This Agreement is made and entered into as of the date set forth below
by the undersigned Employee of IPS PUBLISHING, INC., ADVANTAGE LEARNING SYSTEMS,
INC., INSTITUTE FOR ACADEMIC EXCELLENCE, INC. and/or their Affiliates
(collectively called herein, the "Companies"). As a condition to my employment,
I agree that:
1. Trade secrets and confidential information about the Companies'
business which may be disclosed to me or of which I may learn during the course
of my employment are not to be disclosed. One of my important duties as an
employee, and even after my employment terminates, is to use my best efforts to
safeguard the Companies' trade secrets and to keep information about the
Companies confidential. Unless I am expressly authorized to do so in writing, I
will not disclose any of the Companies' trade secrets or any confidential
information about the Companies other than to other employees of the Companies
who have a need to know such secrets or information. I will assume any
particular information about the Companies' business is confidential until I am
informed it is not or until it has been published or is generally or publicly
known outside the Companies. I understand that "confidential information",
includes, without limitation, (i) all source codes, algorithms and other pro-
gramming data and technical information relating to the Companies' software
products; (ii) any information concerning any product under development or being
tested by any of the Companies but not yet offered for sale; (iii) any
information concerning the pricing policies of the Companies, the prices charged
by any of the Companies to any customer, the volume of orders of any customer
and all other information concerning the transactions of the Companies with any
customer or proposed customer; (iv) any information concerning the marketing
programs or strategies of any of the Companies; (v) any financial information
concerning any of the Companies; and (vi) any information concerning the
salaries or wages to be paid to, the work records of or any other personnel
information relating to any employee of any of the Companies other than the
undersigned.
2. The Companies will own, and I hereby assign to the Companies, all
rights in all Business Ideas (as hereafter defined) which I originate or develop
either alone or working with others while I am employed by any of the Companies.
All Business Ideas which are or form the basis for copyrightable works shall be
considered "works for hire" as that term is
defined by U.S. Copyright Law and are hereby assigned to the Companies.
3. While I am employed by any of the Companies and after my employment
terminates:
(a) I will promptly disclose all Business Ideas to the Companies;
and
(b) I will promptly execute all documents which any of the
Companies may reasonably require to perfect its patent, copyright and other
rights to such Business Ideas throughout the world.
4. The term "Business Ideas" as used in this Agreement means all
ideas, inventions, data, software, developments and copyrightable works, whether
or not patentable or registerable, which I originate or develop, either alone or
jointly with others while I am employed by any of the Companies and which are
either (i) related to any business known to me to be engaged in or contemplated
by any of the Companies, (ii) originated or developed during my working hours,
or (iii) originated or developed in whole or in part using materials, labor,
facilities or equipment furnished by any of the Companies. Notwithstanding the
foregoing, the term "Business Ideas" as used in this Agreement, shall not
include inventions for which no equipment, supplies, facility or trade secret
information of the Companies was used and which was developed entirely on my own
time, unless (a) the invention relates (i) directly to the business of the
Companies, or (ii) to the Companies' actual or demonstrably anticipated research
or development, or (b) the invention results from any work performed by me for
the Companies.
Nothing in this Agreement will prevent me, after my employment
terminates, from using general skills and knowledge I gained while employed by
any of the Companies.
Dated this ____ day of _______________, 19___.
_____________________________
(Employee)
The foregoing is hereby accepted as of its date.
IPS PUBLISHING, INC.
By: ___________________________
(Title)
2
