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EXHIBIT 10.12
TECHNOLOGY PURCHASE AGREEMENT
This Technology Purchase Agreement ("AGREEMENT") is made and entered
into as of August 21, 1997, by and among FOUNDING PARTNERS, a California general
partnership ("BUYER"), FALCON SYSTEMS, INC., a California corporation ("SELLER")
and XXXXX XXXXXXX, the sole shareholder of Seller (the "SOLE SHAREHOLDER").
RECITALS
A. Seller is engaged and has been engaged in a variety of activities,
including the manufacture and distribution of computer peripheral equipment (the
Seller's activities and operations being herein referred to as the "BUSINESS").
B. Buyer desires to purchase from Seller, Seller desires to sell to
Buyer, and the Sole Shareholder desires to cause Seller to sell to Buyer, the
Purchased Assets (as defined below) pursuant to the terms of this Agreement.
NOW, THEREFORE, In consideration of the foregoing premises, and the
mutual covenants set forth below, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties to this Agreement agree
as follows.
1. Purchase And Sale of Assets
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of
this Agreement, on the Closing Date (as hereinafter defined) Seller shall, and
the Sole Shareholder shall cause Seller to, sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase and accept, all right, title and
interest in and to the Purchased Assets. The "PURCHASED ASSETS" shall be defined
as all of Seller's interest in: (i) all United States, state and foreign
trademark rights, trade dress, service marks, trade names, and brand names,
including all claims for infringement, and all registrations thereof and
applications therefor and all goodwill associated with the foregoing accruing
from the dates of first use thereof; (ii) all United States and foreign
copyrights, copyright registrations and copyright applications, including all
claims for infringement, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all United States and foreign patents
and patent applications, including all claims for infringement and all
international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; and (iv) all inventions,
invention disclosures (internal or otherwise), mask works and mask work
registrations, know-how, discoveries, improvements, designs, trade secrets, shop
and royalty rights, source code, object code, product rights, employee covenants
and agreements respecting intellectual property and non-competition and all
other types of intellectual property, including but not limited to
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any and all records, files, specifications, designs, drawings, data, plans,
sketches, drawings, specifications, work standards, manufacturing and process
information, documentation, theories of operation, repair manuals, service
manuals, notebooks, writings, pictures, drawings, magnetic tapes, computer
programs, equipment, prototypes, tools, models and protocols relating to any of
the foregoing. Notwithstanding the foregoing, Purchased Assets shall not include
rights under any contract which requires the consent of any third party for the
transfer thereof to Buyer hereunder which consent of any third party for the
transfer thereof to Buyer hereunder which consent has not been obtained as of
the date hereof (which rights shall reside with Artecon pursuant to the Asset
Purchase Agreement of even date herewith).
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2. LIABILITIES
2.1 LIABILITIES NOT TO BE ASSUMED. Notwithstanding any other provision
of this Agreement, Buyer is not assuming any debts, liabilities, obligations or
contracts of Seller and all such debts, liabilities, obligations and contracts
shall be and remain the responsibility of Seller. Without limiting the
generality of the foregoing, Buyer is not assuming and Seller shall not be
deemed to have transferred to Buyer the following debts, liabilities,
obligations and contracts of Seller:
2.1.1 LITIGATION MATTERS. Any liability or obligation of Seller
with respect to any suits, actions, claims or proceedings, whether or not
described in Schedule 5.10 of the Disclosure Schedule;
2.1.2 INFRINGEMENTS. Any liability of Seller to a third party
under its intellectual property or other proprietary rights, including, but not
limited to, claims arising out of the manufacture, use or sale of goods or
apparatus, the performance of services, or the copying, modifying, distributing,
performing or displaying of any work or mask work;
2.1.3 LIABILITY FOR BREACH. Liabilities and obligations of Seller
for any breach or failure to perform any of Seller's covenants and agreements to
any third party, or, prior to the Closing, any other contract, whether or not
assumed hereunder, including any breach arising from assignment of contracts
hereunder, other than those identified on Schedule 1.1.9(c), without consent of
third parties;
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2.1.4 LIABILITIES TO AFFILIATES. Liabilities and obligations of
Seller to its present or former Affiliates (as defined in Section 5.18.3);
2.1.5 VIOLATION OF LAW. Liabilities and obligations of Seller for
any violation of or failure to comply with any statute, law, rule, regulation,
order, writ, injunction or decree of any court or governmental authority, which
violation would result in a breach of the representation set forth in Section
5.11; and
2.1.6 TRANSACTION EXPENSES. All liabilities, costs, obligations
or expenses incurred by Seller in connection with this Agreement and the
transactions contemplated herein.
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3. PURCHASE PRICE
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3.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the following shall be the sole consideration paid by Buyer for the
Purchased Assets (the "PURCHASE PRICE"):
3.1.1 The sum of one million seven hundred fifty thousand dollars
($1,750,000) to be delivered by Buyer to Seller at the Closing, all of which is
payable in the form of a Promissory Note in substantially the form attached
hereto as Exhibit A.
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3.3 ALLOCATION OF PURCHASE PRICE. The aggregate Purchase Price shall be
allocated among the Purchased Assets for tax purposes in accordance with
Schedule 3.3. Seller and Buyer will follow and use such allocation in all
income, sales registration and other tax returns, filings or other related
reports made by them to any governmental agencies. To the extent that
disclosures of this allocation are required to be made by the parties to the
Internal Revenue Service ("IRS") under the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "CODE"), or any regulations
thereunder, Buyer and Seller will disclose such reports to the other prior to
filing with the IRS.
4. CLOSING
4.1 THE CLOSING. The closing of the purchase and sale of the Purchased
Assets pursuant to this Agreement (the "CLOSING") shall take place at 0000
Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000 at 10:00 A.M. (local
time) on the date hereof or at such other time and place as the parties hereto
shall agree upon. Such date is referred to in this Agreement as the "CLOSING
DATE".
4.2 DOCUMENTS TO BE DELIVERED BY SELLER AND THE SOLE SHAREHOLDER. At the
Closing, Seller and the Sole Shareholder shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
4.2.1 DEEDS, BILLS OF SALE. General warranty bills of sale and
such other instruments of assignment, transfer, conveyance and endorsement as
will be sufficient in the reasonable opinion of Buyer and its counsel to
transfer, assign, convey and deliver to Buyer the Purchased Assets as
contemplated hereby.
4.2.2 COMPLIANCE CERTIFICATE. A certificate signed by the Sole
Shareholder certifying that, to Sole Shareholder's knowledge, each of the
representations and warranties made by Seller and the Sole Shareholder in this
Agreement is true and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made or given on and as of the Closing Date (except for any changes permitted by
the terms of this Agreement or
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consented to in writing by Buyer), and that Seller and the Sole Shareholder have
performed and complied in all material respects with all of Seller's and the
Sole Shareholder's respective obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date.
4.2.3 INTELLECTUAL PROPERTY DELIVERABLES. Copies in electronic
form of any source code listed on Schedule 1.1., together with copies of such
other tangible manifestations of the Purchased Assets as may be requested in
writing by Buyer prior to the Closing, whether in electronic or printed format,
including without limitation all documentation, algorithms, source code, object
code, memoranda, descriptions, specifications, drawings, schematics and
notebooks, to the reasonable satisfaction of Buyer. It is expressly understood
that neither Seller nor any Affiliate (defined below) shall be entitled to
retain any copies of any of the foregoing items following the Closing, and the
Sole Shareholder shall cause any copies of the foregoing items in his possession
or control that are not delivered to Buyer as aforesaid to be destroyed
immediately following the Closing.
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4.2.5 CERTIFIED RESOLUTIONS. A certified copy of the resolutions
adopted by the Board of Directors of Seller and by the Sole Shareholder
authorizing and approving this Agreement and the consummation of the
transactions contemplated by this Agreement.
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4.2.7 ARTICLES; BYLAWS. A copy of (i) the Bylaws of Seller
certified by the secretary of Seller and (ii) a copy of the Articles of
Incorporation of Seller certified by the Secretary of State of the State of
California.
4.2.8 GENERAL RELEASE. The Sole Shareholder shall deliver, and
Seller shall cause the Sole Shareholder to deliver, a general release to Buyer,
in form and substance satisfactory to Buyer and its counsel, releasing Seller
and the directors, officers, agents and employees of Seller from all claims to
the Closing Date, except (i) as may be described in written contracts disclosed
in the Disclosure Schedule and expressly described and excepted from such
release, (ii) compensation for current periods expressly described and excepted
from such release and (iii) claims based on or arising out of any breach or
failure to perform any of Buyer's covenants and agreements contained in,
referred to, or made pursuant to this Agreement.
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4.2.10 OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
4.3 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall
deliver the following documents, in each case duly executed or otherwise in
proper form:
4.3.1 PURCHASE PRICE. To Seller the Promissory Note as required
by Section 3.1.1 hereof.
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4.3.3 COMPLIANCE CERTIFICATE. A certificate signed by an officer
of Buyer that, to such officer's knowledge, the representations and warranties
made by Buyer in this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given on and as of the Closing Date (except for
any changes permitted by the terms of this Agreement or consented to in writing
by Seller), and that Buyer has performed and complied in all material respects
with all of Buyer's obligations under this Agreement which are to be performed
or complied with on or prior to the Closing Date.
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4.3.9 OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Seller at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Seller may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF SELLER AND SOLE SHAREHOLDER
Sole Shareholder (to his knowledge) and Seller, jointly and severally,
make the following representations and warranties to Buyer, each of which is
true and correct on the date hereof, shall remain true and correct to and
including the Closing Date and shall be unaffected by any investigation
heretofore or hereafter made by Buyer, or any knowledge of Buyer other than as
specifically disclosed in the Disclosure Schedule and all schedules (and
accompanying documentation) delivered by Seller to Buyer at the time of the
execution of this Agreement (the "DISCLOSURE SCHEDULE").
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5.1 CORPORATE MATTERS
5.1.1 Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. Seller has all
requisite corporate power and authority to own, operate and lease its
properties, to carry on its business as and where such is now being conducted,
to enter into this Agreement and the other documents and instruments to be
executed and delivered by Seller pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
5.1.2 Except as set forth on Schedule 5.1.2, seller is duly
licensed or qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction where, by reason of the character of the
properties owned or leased by it, or the nature of its business, the failure to
be so licensed or qualified would have a material adverse effect on the
business, financial condition, operations or prospects of Seller.
5.1.3 The authorized capital stock of Seller consists, and on the
Closing Date will consist, of 100,000 shares, .01 par value per share, of which
2,000 shares are issued and outstanding. All of the issued and outstanding
shares of Seller are owned by the Sole Shareholder, are validly issued, fully
paid and nonassessable, and the issuance of such shares were not subject to any
preemptive rights. Except as set forth above, there are not as of the date
hereof, and on the Closing Date there will not be, any capital shares of Seller
authorized, issued or outstanding or any authorized or outstanding
subscriptions, options, warrants, stock appreciation rights, calls, rights,
convertible securities or other agreements or commitments of any character
relating to issued or unissued capital shares or other securities of Seller, or
otherwise obligating Seller to issue, transfer or sell any capital shares of
Seller, or other securities convertible into, exchangeable for, or evidencing
the right to subscribe for, any capital shares of Seller. Seller does not own
any interest in any corporation, partnership or other entity.
5.1.4 Neither the Board of Directors of Seller nor the Sole
Shareholder has adopted any resolution or taken any other action with respect to
dissolution, liquidation or winding up of Seller, no such resolution or other
action is proposed, under consideration or contemplated, and there is no
proceeding or other action pending or, to the knowledge of Seller and the Sole
Shareholder, threatened, proposed or contemplated by any court, administrative
or governmental agency, instrumentality, commission, authority, board or body
with respect to any dissolution, liquidation or winding up of Seller, nor is
there any basis for any such proceeding or other action.
5.1.5 Schedule 5.1.5 contains a true and correct list showing for
any time period during the last seven years: (i) all names under which Seller or
any predecessor to Seller (a "PREDECESSOR") has conducted business, together
with the type of entity of each Predecessor, (ii) the domicile of Seller and
each Predecessor, and the location of the chief
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executive office of Seller and each Predecessor, (iii) each location at which
Seller or any Predecessor conducted business, and (iv) each location where the
records of accounts receivable of Seller or any Predecessor were maintained.
5.2 AUTHORITY; APPROVAL; ENFORCEABILITY; CONFLICTS.
5.2.1 The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Seller and Sole
Shareholder pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Seller and the Sole Shareholder. No other or further corporate act
or proceeding on the part of Seller, its Board of Directors or any of its
shareholders is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Seller and Sole Shareholder pursuant
hereto or the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the other documents
and instruments to be executed and delivered by Seller and Sole Shareholder
pursuant hereto will constitute, valid binding agreements of Seller and Sole
Shareholder, respectively, enforceable in accordance with their respective
terms, except as such may be limited by bankruptcy, insolvency, reorganization
or other laws affecting creditors' rights generally, and by general equitable
principles.
5.2.2 The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Seller and Sole
Shareholder pursuant hereto, and the consummation by Seller and Sole Shareholder
of the transactions contemplated hereby and thereby (1) to the knowledge of
Seller and Sole Shareholder, (a) will not violate any statute or law or any
rule, regulation, order, writ, injunction or decree of any court or governmental
authority, (b) will not require any authorization, consent, approval, exemption
or other action by or notice to any court, administrative or governmental
agency, instrumentality, commission, authority, board or body (including,
without limitation, under any "plant-closing" or similar law), and (c) subject
to obtaining the consents referred to in Schedule 5.2.2 of the Disclosure
Schedule, will not violate or conflict with, or constitute a material default
(or an event which, with notice or lapse of time, or both, would constitute a
material default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any Lien (as defined
below) upon any of the assets of Seller under, any term or provision of any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller or the Sole Shareholder is a party or by
which Seller, the Sole Shareholder or any of Seller's assets or properties may
be bound or affected, and (2) will not violate or conflict with any term or
provision of the Articles of Incorporation or By-laws of Seller. Notwithstanding
the foregoing, Seller and Sole Shareholder shall not be deemed to have breached
this Section 5.2.2 by reason of any claim by XXX Xxxxxxxxxxx, a Massachusetts
corporation ("EMC"), that the execution and delivery of this Agreement
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constitutes a violation of that certain Settlement and License Agreement dated
August 16, 1996 by and between EMC and Seller (the "EMC Agreement").
5.3 FINANCIAL STATEMENTS; BOOKS AND RECORDS
5.3.1 Included as Schedule 5.3.1 of the Disclosure Schedule are
true and complete copies of the financial statements of Seller consisting of (i)
an unaudited balance sheet as of July 31, 1997 (the "RECENT BALANCE SHEET"), and
the related unaudited statements of income and cash flow for the seven (7) month
period preceding July 31, 1997, (ii) the audited balance sheet of Seller as of
December 31, 1996 and the related statements of income and cash flow for the
year ended December 31, 1996 (including the notes contained therein or annexed
thereto), together with the report thereon of Xxxxxx Xxxxxxxx, independent
certified public accountants, and (iii) the unaudited balance sheets as at
December 31 in each of the years 1993 through 1995, and the related unaudited
statements of income and cash flow for each of the fiscal years then ended
(collectively, the "FINANCIAL STATEMENTS"). Except as noted in Schedule 5.3.1,
the Financial Statements (including all notes and schedules contained therein or
annexed thereto) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except, with respect to
unaudited financial statements, for the absence of footnotes and subject to
normal year-end audit adjustments applicable to the unaudited financial
statements), and fairly present, in accordance with generally accepted
accounting principles (except, with respect to unaudited financial statements,
for the absence of footnotes and subject to normal year-end audit adjustments
applicable to the unaudited financial statements), the assets, liabilities and
financial position, the results of operations and the cash flows of Seller as of
the dates and for the periods indicated.
5.3.2 All of the books of account and other financial records of
Seller have been made available to Buyer and its counsel and are complete and
correct.
5.3.3 Seller maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5.4 NO UNDISCLOSED LIABILITIES. Without in any way limiting the other
provisions set forth in this Agreement, except as and to the extent specifically
disclosed in Schedule 1.1.9, 2.1.3, 5.4, 5.14.2 or 5.18.1 or the Recent Balance
Sheet (including any
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modification pursuant to Schedules 2.1.1 and 2.1.2), to the knowledge of Seller
and Sole Shareholder, Seller has no liabilities, commitments or obligations
(secured or unsecured, and whether accrued, absolute, contingent, direct,
indirect or otherwise), other than commercial liabilities and obligations
incurred since the date of the Recent Balance Sheet in the ordinary course of
business and consistent with past practice which in the aggregate have not and
will not have a material adverse effect on the business, financial condition or
operations of Seller. Except as and to the extent specifically reflected in the
Recent Balance Sheet, neither Seller nor Sole Shareholder is aware of any facts
that could reasonably be expected to give rise to any basis for the assertion
against Seller of any liability, and there are no circumstances, conditions,
happenings, events or arrangements, contractual or otherwise, which may give
rise to liabilities, except commercial liabilities and obligations incurred in
the ordinary course of Seller's business and consistent with past practice.
5.5 ABSENCE OF CERTAIN CHANGES. Except as and to the extent disclosed in
Schedule 5.5 of the Disclosure Schedule, since the date of the Recent Balance
Sheet, there has not been:
5.5.1 Any material adverse change in the financial condition,
assets, liabilities, business, prospects or operations of Seller;
5.5.2 Any material loss, damage or destruction, whether covered
by insurance or not, affecting Seller's business or properties;
5.5.3 Any increase in the salaries, wages or other remuneration
or compensation, or in any benefits payable or to become payable to any employee
or agent of Seller (including, without limitation, any increase or change
pursuant to any bonus, pension, profit sharing, retirement or other plan or
commitment), or any bonus or other employee benefit granted, made or accrued to
any such person;
5.5.4 Any labor dispute or disturbance;
5.5.5 Any material commitment or transaction by Seller
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice;
5.5.6 Any declaration, setting aside, or payment of any dividend
or any other distribution in respect of Seller's capital stock; any redemption,
purchase or other acquisition by Seller of any capital stock of Seller, or any
security relating thereto; or any other payment to any shareholder of Seller as
such a shareholder;
5.5.7 Any sale, lease or other transfer or disposition of any
properties or assets of Seller, except for the sale of inventory items in the
ordinary course of business;
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5.5.8 Any indebtedness for borrowed money incurred, assumed or
guaranteed by Seller;
5.5.9 Any Lien (as defined below) on any of the properties or
assets of Seller;
5.5.10 Any entering into, amendment or termination by Seller of
any material contract, or any waiver of material rights thereunder, other than
in the ordinary course of business;
5.5.11 Any waiver of rights under any Contract listed on Schedule
1.1.9;
5.5.12 Any loan or advance (other than advances to employees in
the ordinary course of business for travel in accordance with past practice) to
any person including, but not limited to, any officer, director or employee of
Seller or the Sole Shareholder or any Affiliate;
5.5.13 Any entering into of any type of license agreement or
other agreement regarding intellectual property rights involving fees of $30,000
or more;
5.5.14 Any grant of credit to any customer or distributor on
terms or in amounts more favorable than those which have been extended to such
customer or distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of Seller's policies or practices with
respect to the granting of credit; or
5.5.15 Any other event or condition not in the ordinary course of
business of Seller.
5.6 TAX MATTERS
5.6.1 The provision made for taxes on the Recent Balance Sheet
(as modified pursuant to Schedules 2.1.1 and 2.1.2) is sufficient for the
payment of all federal, state, foreign, county, local and other income, ad
valorem, excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and assessments,
whether or not disputed at the date of the Recent Balance Sheet, and for all
years and periods prior thereto. Since the date of the Recent Balance Sheet,
Seller has not incurred any taxes other than taxes incurred in the ordinary
course of business consistent in type and amount with Seller's past experiences.
5.6.2 All federal, state, foreign, county, local and other tax returns
required to be filed by or on behalf of Seller, including information returns,
have been timely filed and when filed were true, correct and complete, and the
taxes shown as due thereon were paid or adequately accrued. Seller has duly
withheld and paid all taxes which it is
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required to withhold and pay relating to salaries, wages and other compensation,
remuneration or benefits paid to the employees of Seller (other than solely with
respect to such taxes applicable to salaries accrued during the pay period
commencing immediately prior to the Closing and accrued vacation as of the
Closing).
5.6.3 No federal or state income tax returns of Seller have been
audited by the Internal Revenue Service or appropriate state taxing authorities
since inception, and Seller has not received from the Internal Revenue Service
or from the tax authorities of any state, county, local or other jurisdiction
any notice of underpayment of taxes or other deficiency which has not been paid
nor any objection to any return or report filed by Seller. There are outstanding
no agreements or waivers extending the statutory period of limitations
applicable to any tax return or report.
5.6.4 Seller has never been a member of an affiliated group that
filed a consolidated tax return on which the statute of limitations does not bar
a federal tax assessment.
5.6.5 Seller has never (i) filed any consent or agreement under
Section 341(f) of the Code, (ii) applied for any tax ruling, (iii) entered into
a closing agreement with any taxing authority, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been a
party to an agreement (including this Agreement) that under any circumstances
could obligate it to make payments that will not be deductible because of
Section 280G of the Code, or (vi) been a party to any tax allocation or tax
sharing agreement.
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5.9 TITLE TO AND CONDITION OF PROPERTIES.
5.9.1 Seller has good and marketable title to all the Purchased
Assets, free and clear of all mortgages, liens (statutory or otherwise),
security interests, claims, pledges, licenses, equities, options, conditional
sales contracts, lease purchase agreements, financing leases, assessments,
levies, easements, covenants, reservations, restrictions, rights-of-way,
exceptions, limitations, charges or encumbrances of any nature whatsoever
(collectively, "LIENS") except those described in Schedule 5.9.1 of the
Disclosure Schedule. Except with respect to the Assumed Contracts listed on
Schedule 1.9(c), none of the Purchased Assets are subject to any restrictions
with respect to the transferability thereof. Except with respect to the Assumed
Contracts listed on Schedule 1.9(c), Seller has complete and unrestricted power
and right to sell, assign, convey and deliver the Purchased Assets to Buyer as
contemplated hereby. At Closing, Buyer will
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receive good and valid title to all the Purchased Assets, free and clear of all
Liens of any nature whatsoever except those described in Schedule 5.9.1 of the
Disclosure Schedule.
5.9.2 [This Section Intentionally Left Blank.]
5.9.3 [This Section Intentionally Left Blank.]
5.9.4 To the knowledge of Seller and Sole Shareholder, neither
the whole nor any portion of the property or any other assets of Seller is
subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor to Seller's and the Sole Shareholder's knowledge
has any such condemnation, expropriation or taking been proposed.
5.10 PURCHASED ASSETS
5.10.1 Schedule 1.1.2 sets forth an accurate and complete list
identifying all of the following Intellectual Property Rights as of the Closing
Date: (i) all patents and patent applications owned by Seller or any Affiliate,
including the country of filing, filing number, date of issue, expiration date,
title and inventors; (ii) all registered trademarks and servicemarks and
trademark and servicemark applications, including country of filing, filing
number, date of issue and expiration date; (iii) all common law trademarks,
service marks, trade names and copyright registrations; (iv) all material
license agreements pursuant to which Seller or any Affiliate acquired any
Intellectual Property Rights and all material agreements, oral or written,
pursuant to which Seller or any Affiliate is obligated to pay royalties to third
parties with respect to such Intellectual Property Rights; and (v) all material
license agreements, oral or written, including site licenses, pursuant to which
Seller or any Affiliate has granted any person any rights to any of the
Intellectual Property Rights. Complete and accurate copies of all written
agreements (and complete and accurate descriptions of all oral agreements)
referred to in the foregoing clauses (iv) and (v) have been provided to Buyer.
The entire right, title and interest in the Intellectual Property Rights reside
solely with Seller. To the knowledge of Seller and the Sole Shareholder after
due inquiry thereof, there are no actual or claimed infringements, violations or
misappropriations existing by any third party with respect to the Intellectual
Property Rights.
5.10.2 To the knowledge of Seller and the Sole Shareholder, the
operation of the Business as currently conducted, including, but not limited to,
the operation and use of the Purchased Assets and the manufacture, sale or use
of the Products, does not and will not infringe, violate or misappropriate any
patent, trade secret, copyright or other intellectual property rights of any
third party or entity.
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5.10.3 Except to the extent set forth in Schedule 1.1.2, no
material licenses, sub-licenses or other agreements relating to the Intellectual
Property Rights exist which would limit or restrict the rights of Buyer to
operate the Business following the Closing, including, without limitation, the
operation and use of the Assets and the manufacture, sale or use of the
Products. 5.10.4 To the knowledge of Seller and the Sole Shareholder, except as
set forth on Schedule
5.10.4, all trademarks, servicemarks, and related applications
and registrations thereof and all copyrights and registrations thereof related
to the Business (collectively the "TRADEMARKS AND COPYRIGHTS") are valid and
enforceable, Seller has the exclusive right to use the Trademarks and Copyrights
in connection with the Business and there are no oppositions, cancellations or
governmental, arbitral or other proceedings currently pending or threatened that
protest the rights of Seller to use and/or register the Trademarks and
Copyrights. Neither Seller nor the Sole Shareholder has, by act or failure to
act, including without limitation, by failure to attach any required notice,
transferred any rights to the Intellectual Property Rights into the public
domain.
5.10.5 Neither Seller nor any Affiliate is making use of any
patentable or unpatentable invention or any confidential information in the
Business in which any present or past employee of Seller has or has claimed an
interest, and neither Seller nor the Sole Shareholder is aware of facts that
could reasonably be expected to give rise to such a claim. Neither Seller nor
the Sole Shareholder has any knowledge (after due inquiry thereof) of the
assertion against Seller of any conflicting rights to any Intellectual Property
Rights. Each employee of Seller has entered into, and no employee of Seller has
failed or refused to execute and deliver an agreement between such employee and
Seller in substantially the form attached hereto as Schedule 5.10.5, and no such
employee has failed or refused to take any action required under such agreement.
5.11 TRADE SECRETS
5.11.1 The Purchased Assets include all documentation relating to
all of Seller's trade secrets, if any, which, if they exist, may include
customer lists, processes, know-how, computer programs and routines and other
technical data used in the Products or in the Business (collectively, the "TRADE
SECRETS") that is current, accurate, and sufficient in detail and content to
identify and explain such trade secrets, and to allow their full and proper use
by Buyer; provided, however, that the trade secrets do not include the
specialized knowledge and experience of Seller's employees.
5.11.2 To the knowledge of Seller and the Sole Shareholder,
Seller is the sole owner of each of the trade secrets, free and clear of any
liens, encumbrances, restrictions, or legal or equitable claims of others.
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5.11.3 To the knowledge of Seller and the Sole Shareholder, the
trade secrets have not been used, divulged, or appropriated for the benefit of
any past or present employees or other persons or to the detriment of Seller.
5.12 [THIS SECTION INTENTIONALLY LEFT BLANK.]
5.12.1 [This Section Intentionally Left Blank.]
5.12.2 [This Section Intentionally Left Blank.]
5.13 NO LITIGATION. Except as specifically described in Schedule 5.13,
there is no action, suit, arbitration or other proceeding, investigation or
inquiry pending or, to the knowledge of Seller and the Sole Shareholder,
threatened against Seller, its directors (in such capacity), the Sole
Shareholder or Seller's business or any of its assets, nor is Seller or the Sole
Shareholder aware of any facts that could reasonably be expected to give rise to
any basis for any such proceedings, investigations or inquiries. Schedule 5.13
also identifies all such actions, suits, proceedings, investigations and
inquiries to which Seller, any of its directors (in such capacity) or the Sole
Shareholder have been parties since inception. Except as set forth in Schedule
5.13, neither Seller nor its business or assets is subject to any judgment,
order, writ or injunction of any court, arbitrator or federal, state, foreign,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
5.14 COMPLIANCE WITH LAWS
5.14.1 Except as set forth in Schedule 5.14.1, to the knowledge
of Seller and Sole Shareholder, Seller (including each and all of its
operations, practices, properties and assets) is in compliance with all
applicable federal, state, local and foreign laws, ordinances, orders, rules and
regulations (collectively, "LAWS"), including, without limitation, those
applicable to discrimination in employment, occupational safety and health,
trade practices, competition and pricing, product warranties, zoning, building
and sanitation, employment, retirement and labor relations, product advertising
and the Environmental Laws (as hereinafter defined). Except as set forth in
Schedule 5.14.1 of the Disclosure Schedule, Seller has not received notice of
any violation or alleged violation of, and to the knowledge of Seller and the
Sole Shareholder (after due inquiry thereof) is subject to no liability (whether
accrued, absolute, contingent, direct or indirect) for past or continuing
violation of, any Laws. All reports and returns required to be filed by Seller
with any governmental authority have been filed, and were accurate and complete
when filed. Without limiting the generality of the foregoing:
(a) Seller has made all required payments to its
unemployment compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such accounts; and
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(b) Seller has delivered to Buyer copies of all records of
Seller required for the past five years under the federal Occupational Safety
and Health Act of 1970, as amended, and under all other applicable health and
safety laws and regulations, and all correspondence relating thereto. The
deficiencies, if any, noted in such records and correspondence have been
corrected.
5.14.2 Seller has all licenses, permits, approvals,
authorizations and consents ("PERMITS") of all governmental and regulatory
authorities and all certification organizations required for the conduct of the
Business (as presently conducted and as proposed to be conducted) and operation
of the Facilities, except for any Permits the failure to possess which would not
have a material adverse effect on the financial condition, assets, liabilities,
business, prospects or operations of the Business. All such Permits are
described in Schedule 5.14.2 of the Disclosure Schedule, are in full force and
effect and are, except as expressly set forth on Schedule 5.14.2, assignable to
Buyer in accordance with the terms hereof. Except as set forth in Schedule
5.14.2 of the Disclosure Schedule, Seller (including its operations, properties
and assets) is and has been in compliance with all such Permits.
5.14.3 The applicable Laws relating to pollution or protection of
the environment, including Laws relating to emissions, discharges, generation,
storage, releases or threatened releases of pollutants, contaminants, chemicals
or industrial, toxic, hazardous or petroleum or petroleum-based substances or
wastes ("WASTE") into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Waste including, without limitation,
the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery
Act, the Toxic Substances Control Act and the Comprehensive Environmental
Response Compensation Liability Act ("CERCLA"), as amended, and their state and
local counterparts, are herein collectively referred to as the "ENVIRONMENTAL
LAWS." Without limiting the generality of the foregoing provisions of this
Section 5.14.3, to the knowledge of Seller and Sole Shareholder, Seller is in
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as set forth in Schedule 5.13 of the
Disclosure Schedule, there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the knowledge of Seller and the Sole
Shareholder, threatened against Seller relating in any way to the Environmental
Laws or any regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder. Except as
set forth in Schedule 5.13 of the Disclosure Schedule, to the knowledge of
Seller and Sole Shareholder, there are no past
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or present events, conditions, circumstances, activities, practices, incidents,
actions or omissions which could reasonably be expected to interfere with or
prevent compliance or continued compliance with the Environmental Laws or with
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, or which may
give rise to any liability, including, without limitation, liability under
CERCLA or similar state or local Laws, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, notice of violation, study or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any Waste.
5.15 INSURANCE. Set forth in Schedule 5.15 of the Disclosure Schedule is
a complete and accurate list and description of all policies of fire, casualty,
general liability, product liability, workers compensation, health and other
forms of insurance presently in effect with respect to the business and
properties of Seller, true and correct copies of which have heretofore been
delivered to Buyer. Schedule 5.15 of the Disclosure Schedule includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $10,000. All such policies are
valid, outstanding and enforceable policies and provide insurance coverage for
the properties, assets and operations of Seller, of the kinds (except for
product liability and D&O insurance), in the amounts and against the risks
customarily maintained by organizations similarly situated; and no such policy
(nor any previous policy) provides for or is subject to any currently
enforceable retroactive rate or premium adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or partially out of events
arising prior to the date hereof. Schedule 5.15 of the Disclosure Schedule
indicates each policy as to which (a) the coverage limit has been reached in the
current year of coverage or (b) the total incurred losses in the current year of
coverage equal 75% or more of the coverage limit in the current year of
coverage. No notice of cancellation or termination has been received with
respect to any such policy, and neither Seller nor the Sole Shareholder has
knowledge of any act or omission of Seller which could result in cancellation of
any such policy prior to its scheduled expiration date. Seller has not been
refused any insurance with respect to any aspect of the operations of the
business nor has its coverage been limited by any insurance carrier to which it
has applied for insurance or with which it has carried insurance during the last
three years. Seller has duly and timely made all claims it has been entitled to
make under each policy of insurance. There is no claim by Seller pending under
any such policies as to which coverage has been denied or disputed by the
underwriters of such policies, and neither Seller nor the Sole Shareholder knows
of any basis for denial of any claim under any such policy. Seller has not
received any written notice from or on behalf of any insurance carrier issuing
any such policy that
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insurance rates therefor will hereafter be substantially increased (except to
the extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such policy. Such policies are sufficient in
all material respects for compliance by Seller with all requirements of law and
with the requirements of all contracts to which Seller is a party.
5.16 CONTRACTS AND COMMITMENTS.
5.16.1 [This Section Intentionally Left Blank.]
5.16.2 [This Section Intentionally Left Blank.]
5.16.3 Except for Seller's obligations under that certain
Agreement dated April 24, 1997 between Seller and Traaken Software, Inc., Seller
has no material purchase commitments for inventory items or supplies that,
together with amounts on hand, constitute in excess of three months normal
usage, or which are at an excessive price.
5.16.4 Seller has no agreements or commitments to customers or
distributors pursuant to agreements with terms materially different from
Seller's standard form of sales and as to certain products, a license agreement
(which standard forms are attached to Schedule 5.16.4) other than as listed and
described in Schedule 5.16.4, and Seller has no such agreements or commitments
except those made in the ordinary course of business and at arm's length, and no
such agreements or commitments are for a sales price which would result in a
loss to Seller.
5.16.5 Except as disclosed in Schedule 5.16.5, Seller has no
agreement, understanding, contract or commitment (written or oral) with any
Affiliate or any other officer, employee, agent, consultant, distributor, dealer
or franchisee that is not cancelable by Seller on notice of not longer than 30
days without liability, penalty or premium of any nature or kind whatsoever.
5.16.6 Seller has not given a power of attorney, which is
currently in effect, to any person, firm or corporation for any purpose
whatsoever.
5.16.7 Seller is not a party to any collective bargaining
agreements with any unions, guilds, shop committees or other collective
bargaining groups.
5.16.8 Except as set forth in Schedule 5.16.8 of the Disclosure
Schedule, Seller is not obligated under any loan agreement, promissory note,
letter of credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise.
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5.16.9 Except as set forth on Schedule 5.16.9, Seller has not
guaranteed the payment or performance of any person, firm or corporation, agreed
to indemnify any person or act as a surety, or otherwise agreed to be
continentally or secondarily liable for the obligations of any person.
5.16.10 Except as shown on Schedule 5.16.10, Seller is not a
party to any contract with any national governmental body.
5.16.11 Except as shown on Schedule 5.16.11, Seller is not a
party to nor is it bound by any agreement, deed, lease or other instrument which
is so burdensome as to materially affect or impair the operation of Seller.
Without limiting the generality of the foregoing, Seller is not a party to nor
is it bound by any agreement requiring Seller to assign any interest in any
trade secret or proprietary information, or prohibiting or restricting Seller
from competing in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on its business anywhere in the world.
5.16.12 Schedule 5.16.12 contains a description and summary of
terms of contracts relating to the Business involving consideration or other
expenditures in excess of $10,000 or more negotiated or discussed by Seller or
the Sole Shareholder at any time within sixty (60) days prior to the Closing but
not finalized.
5.16.13 Seller has no lease, contract or commitment of any nature
involving consideration or other expenditures in excess of $10,000 by or from
Seller, or involving performance over a period of more than three months, or
which is otherwise individually material to the operations of Seller, except as
explicitly described in Schedule 5.16.13 or in any other Schedule of the
Disclosure Schedule.
5.16.14 A complete and accurate copy of each written agreement
and other document identified on the Schedules referred to in Sections 5.16.1
through 5.16.13, as amended to date, has been delivered to Buyer. Each lease,
contract and commitment referred to in Sections 5.16.1 through 5.16.13 is,
except to the extent fully performed on the date hereof, in full force and
effect and valid and binding on Seller in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and subject to general
equity principles and to limitations on the availability of equitable relief.
Seller has performed all material obligations required to be performed by it and
is not in default under any lease, contract or commitment (except any default
arising as a result of the transfer to Buyer of the Assumed Contracts described
on Schedule 5.2.5 as requiring the consent of the other party), nor has any
event or omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the acceleration
of any of Seller's obligations or result in the creation of any Lien on any of
the assets owned, used or occupied by Seller. Neither Seller nor the Sole
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Shareholder has received any notice that it is in default thereunder, and
neither Seller nor the Sole Shareholder is aware of any facts that could
reasonably be expected to give rise to such a default. No third party is in
default under any lease, contract or commitment to which Seller is a party, nor
has any event or omission occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination, thereof.
5.17 LABOR MATTERS. Except to the extent set forth in Schedule 5.17 of
the Disclosure Schedule, (a) within the last five years Seller has not
experienced any labor disputes, union organization attempts or work stoppage due
to labor disagreements in connection with its business; (b) to the knowledge of
Seller and Sole Shareholder, Seller is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(c) there is no unfair labor practice charge or complaint against Seller pending
or, to Seller's and the Sole Shareholder's knowledge, threatened; (d) there is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending or threatened against or affecting Seller nor any secondary
boycott with respect to products of Seller; (e) no question concerning
representation has been raised or is, to the knowledge of Seller and Sole
Shareholder, threatened respecting the employees of Seller; (f) no grievance and
no arbitration proceeding arising out of or under collective bargaining
agreements, is pending and no such claim therefor exists; and (g) there are no
administrative charges or court complaints against Seller concerning alleged
employment discrimination or other employment related matters pending or, to
Seller's and the Sole Shareholder's knowledge, threatened before the U.S. Equal
Employment Opportunity Commission or any state or federal court or agency.
5.18 EMPLOYEE BENEFIT PLANS.
5.18.1 Seller has no "defined benefit" plan as defined in ERISA.
Schedule 5.18.1 of the Disclosure Schedule sets forth all pension, thrift,
savings, profit sharing, retirement, incentive bonus or other bonus, medical,
dental, life, accident insurance, benefit, employee welfare, disability, group
insurance, stock purchase, stock option, stock appreciation, stock bonus,
executive or deferred compensation, hospitalization and other similar fringe or
employee benefit plans, programs and arrangements, and any employment or
consulting contracts, "golden parachutes," collective bargaining agreements,
severance agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")). No such employee benefit plan is a
"multiemployer plan" (as defined in Section 4001 of ERISA), and Seller has never
contributed nor been obligated to contribute to any such multiemployer plan.
Schedule 5.18.1 also lists those provisions of all employee manuals, and all
written or binding oral statements of policies, practices
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or understandings relating to employment, which are provided to, for the benefit
of, or relate to, any persons employed by Seller ("SELLER EMPLOYEES") with
respect to intellectual property developed by Seller or Seller Employees, or
with respect to obligations of confidentiality related to Seller's affairs or
property.
5.18.2 With respect to each employee benefit plan that is subject
to the provisions of Title IV of ERISA and with respect to which Seller or any
of its assets may, directly or indirectly, be subject to any liability,
contingent or otherwise, or the imposition of any lien (whether by reason of the
complete or partial termination of any such plan, the funded status of any such
plan, any "complete withdrawal" (as defined in Section 4203 of ERISA) or
"partial withdrawal" (as defined in Section 4205 of ERISA) by any person from
any such plan, or otherwise):
(a) no such plan has been terminated so as to subject,
directly or indirectly, any assets of Seller to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA;
(b) no proceeding has been initiated or threatened by any
person (including the Pension Benefit Guaranty Corporation ("PBGC")) to
terminate any such plan;
(c) no condition or event currently exists or currently is
expected to occur that could subject, directly or indirectly, any assets of
Seller to any liability, contingent or otherwise, or the imposition of any lien
under Title IV of ERISA, whether to the PBGC or to any other person or otherwise
on account of the termination of any such plan;
(d) if any such plan were to be terminated as of the
Closing Date, no assets of Seller would be subject, directly or indirectly, to
any liability, contingent or otherwise, or the imposition of any lien under
Title IV of ERISA;
(e) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred with respect to any such plan;
(f) no such plan which is subject to Section 302 of ERISA
or Section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code, respectively),
whether or not waived; and
(g) no such plan is a multiemployer plan or a plan
described in Section 4064 of ERISA.
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5.18.3 There have been no "prohibited transactions" within the
meaning of Section 406 or 407 of ERISA or Section 4975 of the Code for which a
statutory or administrative exemption does not exist with respect to any
employee benefit plan, and no event or omission has occurred in connection with
which Seller or any of its assets or any employee benefit plan, directly or
indirectly, could be subject to any liability under ERISA, the Code or any other
law, regulation or governmental order applicable to any employee benefit plan,
including, without limitation, Section 406, 407, 409, 501, 502, 510, 511, 601,
4062, 4063, 4069, 4071, or 4201 of ERISA, or Section 4971, 4972, 4975, 4976,
4977, 4979 or 4980B of the Code, or under any agreement, instrument, statute,
rule of law or regulation pursuant to or under which Seller has agreed to
indemnify or is required to indemnify any person against liability incurred
under, or for a violation or failure to satisfy the requirements of, any such
statute, regulation or order.
5.18.4 The funds available under each employee benefit plan which
is intended to be a funded plan equal or exceed the amounts required to be paid,
or which would be required to be paid if such Plan were terminated, on account
of rights vested or accrued as of the Closing Date (using the actuarial methods
and assumptions then used by Seller's actuaries in connection with the funding
of such Plan).
5.18.5 Seller is not and never has been a member of a controlled
group as defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of the Code.
Seller is not and never has been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. Except as set forth on
Schedule 5.18.5, there are not and never have been any leased employees within
the meaning of Section 414(n) of the Code who perform services for Seller, and
no individuals are expected to become leased employees.
5.18.6 With respect to each employee benefit plan, (i) all
payments due from Seller to date have been made and all amounts properly accrued
to date as liabilities of Seller which have not been paid have been properly
recorded on the books of Seller and are reflected in the Recent Balance Sheet;
(ii) Seller has materially complied with, and each such employee benefit plan
conforms in all material respects in form and operation to, all applicable laws
and regulations, including but not limited to ERISA and the Code, and all
reports and information relating to such employee benefit plan required to be
filed with any governmental entity have been timely filed; (iii) to Seller's and
Sole Shareholder's knowledge all reports and information relating to each such
employee benefit plan required to be disclosed or provided to participants or
their beneficiaries have been timely disclosed or provided; (iv) to Seller's and
Sole Shareholder's knowledge each such employee benefit plan which is intended
to qualify under Section 401 of the Code has received a favorable determination
letter from the Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of
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such letter that has or is likely to adversely affect such qualification or
exemption; (v) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to Seller's and the Sole Shareholder's knowledge,
threatened with respect to such employee benefit plan or against the assets of
such employee benefit plan; and (vi) no employee benefit plan is a plan which is
established and maintained outside the United States primarily for the benefit
of individuals substantially all of whom are nonresident aliens.
5.18.7 The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee of Seller to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any such employee or
former employee or (iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available or (iv) result in Buyer being or becoming liable to any Seller
Employee or liable for any amount owed to any employee benefit plan.
5.19 EMPLOYMENT COMPENSATION. Schedule 5.19 of the Disclosure Schedule
contains a true and correct list of all employees to whom Seller is paying
compensation, including bonuses and incentives, at an annual rate in excess of
$60,000 for services rendered or otherwise; and in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range.
5.20 MAJOR CUSTOMERS AND SUPPLIERS.
5.20.1 Schedule 5.20.1 of the Disclosure Schedule contains a list
of the ten largest customers of Seller for each of the two most recent fiscal
years (determined on the basis of the total dollar amount of net sales) showing
the total dollar amount of net sales to each such customer during each such
year. Neither Seller nor the Sole Shareholder has any knowledge of any facts
indicating that any of the customers listed on Schedule 5.20.1 of the Disclosure
Schedule will not continue to be customers of the business of Seller after the
Closing at substantially the same level of purchases as heretofore.
5.20.2 Schedule 5.20.2 of the Disclosure Schedule contains a list
of the ten largest suppliers to Seller for each of the two most recent fiscal
years (determined on the basis of the total dollar amount of purchases) showing
the total dollar amount of purchases from each such supplier during each such
year. Neither Seller nor the Sole Shareholder has any knowledge or information
of any facts indicating that any of the suppliers listed on Schedule 5.20.2 of
the Disclosure Schedule will not continue to be
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suppliers to the business of Seller after the Closing and will not continue to
supply the business with substantially the same quantity and quality of goods at
competitive prices.
5.20.3 Schedule 5.20.3 of the Disclosure Schedule contains a list
by product line of all dealers, distributors and franchisees of Seller.
5.21 AFFILIATES' RELATIONSHIPS TO SELLER.
5.21.1 All leases, contracts, agreements or other arrangements
between Seller and any Affiliate are described on Schedule 5.21.1 of the
Disclosure Schedule. Except as shown on Schedule 5.21.1, Seller has no business
relationship with any Affiliate (other than the direct employment of an
individual Affiliate as an employee, officer or director) where such Affiliate
is a customer, supplier, vendor, licensor, lessor, landlord, distributor, sales
representative, lender or borrower. Schedule 5.21.1 contains a complete list of
all business relationships of Seller with any Affiliate.
5.21.2 Except as set forth on Schedule 5.21.2, no Affiliate has
any direct or indirect interest in (i) any entity which does business with
Seller or is competitive with Seller's business, or (ii) any property, asset or
right which is used by Seller in the conduct of its business (other than an
interest constituting less than 1% of the outstanding voting stock of a company
whose Common Stock is traded on a national securities exchange or traded in the
national over-the-counter market)
5.21.3 For purposes of this Agreement "AFFILIATE" means:
(i) any current or former shareholder, director or officer
of the Seller;
(ii) any sibling, uncle, aunt, niece or nephew of any
person described in clause (i);
(iii) any ancestor or lineal descendant of any person
described in clauses (i) or (ii);
(iv) any current or former spouse of any person described
in clauses (i), (ii) or (iii) or any person who is a member of the same
household of the person described in clauses (i), (ii) or (iii) or who has
resided with such person for more than 10 days in any calendar year;
(v) any ancestor or lineal descendant of any person
described in clauses (i), (ii), (iii) or (iv);
(vi) any entity or person in which any of the foregoing
have a direct or indirect interest (except through ownership of less than 1% of
the outstanding
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shares of any entity whose securities are listed on a national securities
exchange or traded in the national over-the-counter market).
5.22 [THIS SECTION INTENTIONALLY LEFT BLANK.]
5.23 NO BROKERS OR FINDERS. Except for arrangements with Xxxxxx X.
XxXxxxxx, Xx. in connection with the letter agreement and waiver and release
referenced in Section 4.2.10 of this Agreement, neither Seller nor any of its
directors, officers, employees, shareholders or agents have retained, employed
or used any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
5.24 AS-IS. Buyer acknowledges that Buyer is acquiring the Purchased
Assets and the Business "As-Is, Where-Is, With All Faults," in its current
condition subject to the terms of this Agreement, and that, with the exception
of the representations and warranties contained in this Agreement, no
representations or warranties of any kind whatsoever, express or implied, have
been made by the Seller, Sole Shareholder or Seller's employees, agents or
representatives with regard to the Purchased Assets or the Business, the
condition or quality of either, or the ability of Buyer to develop the Purchased
Assets or the Business.
5.25 SALES REPRESENTATIVE, DISTRIBUTORSHIP AND LICENSE AGREEMENTS.
Schedule 5.25 contains a true and complete list of all distributorship, sales
representative and manufacturing license agreements (if any material term
thereof is oral, Schedule 5.25 contains a complete description of such oral term
or provision). There are no other agreements, oral or written, with any
distributor, sales representative or other party except as set forth in Schedule
5.25.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Sole Shareholder that,
as of the date of this Agreement:
6.1 ORGANIZATION AND STANDING. Buyer is a general partnership duly
organized, validly existing and in good standing under the laws of California,
and has all requisite power and authority to own, operate and lease its
properties and carry on its business as now conducted.
6.2 AUTHORITY AND ENFORCEABILITY.
6.2.1 Buyer has full power and authority to execute, deliver and
perform its obligations under this Agreement and all documents to be executed by
Buyer in
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connection with the transactions contemplated hereby and all partnership and
other action of Buyer necessary for such execution, delivery and performance has
been duly taken.
6.2.2 [This Section Intentionally Left Blank.]
6.2.3 This Agreement and all documents to be executed by Buyer in
connection with the transactions contemplated hereby is, and upon due execution
and delivery by the parties thereto will be, a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its respective
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or affecting
enforcement of creditor's rights and by rules of law governing specific
performance, injunctive relief or other equitable remedies.
6.2.4 The execution and delivery by Buyer of this Agreement and
all documents to be executed by Buyer in connection with the transactions
contemplated hereby do not, and the performance and consummation by Buyer of the
transactions contemplated by this Agreement and such other documents will not,
result in any conflict with, breach or violation of or default, termination,
forfeiture or lien under (or upon the failure to give notice or the lapse of
time, or both, result in any conflict with, breach or violation of or default,
termination, forfeiture or lien under) any terms or provisions of Buyer's
partnership agreement, each as amended to date, or any statute, rule,
regulation, judicial or governmental decree, order or judgment, or any
agreement, lease or other instrument, to which Buyer is a party or to which it
or its assets are subject that has or is likely to have a material adverse
effect on Buyer's ability to carry out its obligations under this Agreement or
such other documents.
6.3 FINANCIAL STATEMENTS. The Personal Financial Statements delivered by
each of the general partners of the Partnership dated as of, or about, August 3,
1997 are true and correct in all material respects and there have been no
material changes to the information set forth in those financial statements from
the date thereof.
6.4 [THIS SECTION INTENTIONALLY LEFT BLANK.]
6.5 [THIS SECTION INTENTIONALLY LEFT BLANK.]
6.5.1 [This Section Intentionally Left Blank.]
6.5.2 [This Section Intentionally Left Blank.]
6.5.3 [This Section Intentionally Left Blank.]
6.5.4 [This Section Intentionally Left Blank.]
6.5.5 [This Section Intentionally Left Blank.]
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6.5.6 [This Section Intentionally Left Blank.]
6.5.7 [This Section Intentionally Left Blank.]
6.5.8 [This Section Intentionally Left Blank.]
6.5.9 [This Section Intentionally Left Blank.]
6.5.10 [This Section Intentionally Left Blank.]
6.5.11 [This Section Intentionally Left Blank.]
6.5.12 [This Section Intentionally Left Blank.]
6.5.13 [This Section Intentionally Left Blank.]
6.5.14 [This Section Intentionally Left Blank.]
7. EMPLOYEES - EMPLOYEE BENEFITS
7.1 [THIS SECTION INTENTIONALLY LEFT BLANK.]
7.2 [THIS SECTION INTENTIONALLY LEFT BLANK.]
7.3 [THIS SECTION INTENTIONALLY LEFT BLANK.]
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject, at its option, to the fulfillment at or prior
to Closing of each of the following conditions:
8.1 DELIVERY OF CLOSING ITEMS. Seller and the Sole Shareholder, as
applicable, shall have duly executed and delivered to Buyer each of the
documents, certificates and other items provided for in Section 4.2 of this
Agreement to the reasonable satisfaction of Buyer and its counsel.
8.2 [THIS SECTION INTENTIONALLY LEFT BLANK.]
8.3 WAIVER AND RELEASE. The waiver and release contemplated by Section
4.2.10 of this Agreement shall have been executed by Xxxxxx X. XxXxxxxx, Xx. and
delivered to Buyer.
8.4 ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall have
been executed and delivered by Seller and the Sole Shareholder.
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8.5 [THIS SECTION INTENTIONALLY LEFT BLANK.]
8.6 COMPLETION OF DUE DILIGENCE. Buyer shall have completed to its
satisfaction its legal and financial due diligence investigations concerning
Seller.
8.7 SELLER CONSENTS. Buyer shall have received evidence, in form and
substance reasonably satisfactory to Buyer and its counsel, that such licenses,
permits, consents, approvals, waivers, authorizations, qualifications and orders
of governmental authorities as are necessary and appropriate in connection with
the consummation of the transactions contemplated hereby have been obtained.
8.8 ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
AGREEMENTS. Each of the representations and warranties made by Seller and the
Sole Shareholder in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer), and Seller and the Sole Shareholder shall
have performed and complied in all material respects with all of Seller's and
the Sole Shareholder' respective obligations under this Agreement which are to
be performed or complied with on or prior to the Closing Date.
8.9 ACTIONS OR PROCEEDINGS; COURT ORDERS. No action, suit or other
proceeding before a court, tribunal or other governmental agency or body shall
have been instituted or threatened to restrain or prohibit the consummation of
the transactions contemplated by this Agreement, or seeking to obtain
substantial damages in respect thereof, or involving a claim that consummation
thereof would result in the violation of any law, decree or regulation of
governmental authority having appropriate jurisdiction, or in connection with
any material claim against Seller and the Sole Shareholder not disclosed on the
Schedules hereto, and no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (a) make the acquisition or holding by
Buyer of the Purchased Assets illegal or impose material limitations on its
ability to exercise full rights of ownership with respect to such Purchased
Assets or (b) otherwise prevent the consummation of the transaction contemplated
hereby.
8.10 NO ADVERSE CHANGE. There shall have been no event which has
occurred or which has been disclosed to Buyer which has had or could be
reasonably expected to have a material adverse effect on the financial
condition, assets, liabilities, business, prospects or operations of Seller.
29.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SOLE SHAREHOLDER
The obligations of Seller and the Sole Shareholder to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to Closing, of each of the following conditions:
9.1 DELIVERY OF CLOSING ITEMS. Buyer shall have delivered the Purchase
Price to be delivered to Seller at the Closing and shall have duly executed and
delivered to Seller each of the documents, certificates and other items provided
for in Section 4.3 of this Agreement to the reasonable satisfaction of Seller
and its counsel.
9.2 [THIS SECTION INTENTIONALLY LEFT BLANK.]
9.3 ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall have
been duly executed and delivered by Artecon, Inc.
9.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Seller), and Buyer shall have
performed and complied in all material respects with all of Buyer's obligations
under this Agreement which are to be performed or complied with on or prior to
the Closing Date.
9.5 APPROVAL. The Board of Directors of Buyer shall have approved this
Agreement and authorized Buyer to enter into this Agreement and to effect the
transactions contemplated hereunder.
9.6 ACTIONS OR PROCEEDINGS; COURT ORDERS. No action, suit or other
proceeding before a court, tribunal or other governmental agency or body shall
have been instituted or threatened to restrain or prohibit the consummation of
the transactions contemplated by this Agreement, or seeking to obtain
substantial damages in respect thereof, or involving a claim that consummation
thereof would result in the violation of any law, decree or regulation of
governmental authority having appropriate jurisdiction, or in connection with
any material claim against Buyer not disclosed on the Schedules hereto, and no
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a government, regulatory or administrative
agency or commission nor any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority shall be in effect which
would (a) make the acquisition or holding by Buyer of the Purchased Assets
illegal or (b) otherwise prevent the consummation of the transaction
contemplated hereby.
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10. ADDITIONAL AGREEMENTS
10.1 INCORPORATION OF SCHEDULES AND EXHIBITS. All schedules and exhibits
are incorporated into this Agreement by this reference and are warranted by the
party or parties which deliver the same to be accurate and complete. In the
event that any change shall occur with respect to any information disclosed in
any schedule furnished by Seller or the Sole Shareholder hereunder following the
date of the delivery thereof and prior to the Closing Date, Seller and the Sole
Shareholder shall promptly notify Buyer thereof in writing.
10.2 COOPERATION. Each party will take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on it with
respect to the consummation of the transactions contemplated by this Agreement.
Each party will take all reasonable actions necessary to obtain (and will
cooperate with the other party in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
governmental entity, domestic or foreign, or other person, required to be
obtained or made by such party (or by the other party) in connection with the
taking of any action contemplated by this Agreement. Without limiting the
foregoing, Seller and Sole Shareholder shall cooperate with Buyer in complying
with all provisions of the bulk sales or bulk transfer statutes of all states
having jurisdiction, including the provisions of Section 6106.2 of the
California Uniform Commercial Code.
10.3 CONFIDENTIALITY. For a period of five (5) years from the date of
this Agreement, Seller and Sole Shareholder will hold in confidence and use
their respective best efforts to have all of each of their respective employees,
agents, representatives and affiliates, as applicable, hold in confidence all
documents and other written material containing information of a confidential
nature relating to the Buyer's business or which is disclosed to such person by
Buyer in connection with the transactions contemplated by this Agreement
(including, but not limited to, customer lists and Intellectual Property
Rights), and not disclose, publish, use or permit others to use the same;
provided, however, that the foregoing restriction shall not apply to any portion
of the foregoing which (i) becomes generally available to the public in any
manner or form through no fault of any such party, or their respective
employees, agents or representatives, or (ii) is released for disclosure by one
party with the consent of Buyer, or (iii) when such disclosure is required by a
court or a governmental agency or is otherwise required by law or is necessary
in order to establish rights under this Agreement or any other agreements
referred to herein.
10.4 EFFECTIVE TRANSFER. Buyer, Seller and the Sole Shareholder shall
each use its best efforts to ensure a quick and effective transfer to Buyer of
the Purchased Assets. Effective as of the Closing, the Sole Shareholder shall
cause Seller to cease doing business under the name "Falcon Systems" and
promptly thereafter the Sole Shareholder
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shall cause Seller to change Seller's name to a name that is not confusingly
similar to "Falcon Systems."
11. MISCELLANEOUS
11.1 EXPENSES. Each party shall bear and pay his or its own expenses
incurred in connection with the transactions referred to in this Agreement.
11.2 KNOWLEDGE.
11.2.1 KNOWLEDGE AFTER "DUE INQUIRY." An individual shall be
deemed to have "knowledge" of a particular fact or other matter "after due
inquiry thereof" if such individual is actually aware of such fact or other
matter or if a prudent individual could be expected to be aware thereof after
making reasonable inquiry thereof and exercising due diligence with respect
thereto. An entity shall be deemed to have "knowledge" of a particular fact or
other matter "after due inquiry thereof" if any officer of such entity who is
involved in the management of such entity is actually aware of such fact or
other matter or would have knowledge of such fact or other matter after due
inquiry thereof.
11.2.2 KNOWLEDGE WITHOUT INQUIRY. Except as provided for in
Section 11.2.1 where an individual has made due inquiry thereof, an individual
shall be deemed to have "knowledge" of a particular fact or other matter if such
individual is actually aware of such fact or other matter or if a prudent
individual could be expected to be aware thereof after making inquiry of the
officers of Seller. Seller shall be deemed to have "knowledge" of a particular
fact or other matter if any officer of Seller who is involved in the management
of Seller is actually aware of such fact or matter or would have knowledge of
such fact or other matter after making inquiry of the officers of Seller.
11.3 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall have joint
responsibility for the content, timing and other matters relating to the
issuance of any and all press releases or trade releases and the making of such
other public statements (collectively, "PUBLIC STATEMENTS") with respect to the
Closing and the transactions contemplated hereby as may be necessary or
appropriate in Buyer's judgment. Neither Buyer nor Seller shall disclose the
Purchase Price in any Public Statements unless such disclosure is either (i)
required by law, governmental regulation or valid legal process or (ii) in
connection with any governmental filing.
11.4 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement, together
with the schedules and exhibits hereto and agreements referenced herein,
constitutes the final, exclusive and complete understanding of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, understandings and discussions with respect thereto including,
without limitation, that certain letter agreement, dated June 30, 1997, among
Buyer, Seller and the Sole Shareholder. No
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variation or modification of this Agreement and no waiver of any provision or
condition hereof, or granting of any consent contemplated hereby, shall be valid
unless in writing and signed by the party or parties against whom enforcement of
any such variation, modification, waiver or consent is sought.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party to this Agreement or pursuant hereto shall survive
until one year after the Closing. The representations and warranties hereunder
shall not be affected or diminished by any investigation at any time by or on
behalf of the party or parties for whose benefit such representations and
warranties were made. All statements contained herein or in any schedule,
exhibit or certificate delivered pursuant hereto shall be deemed to be
representations and warranties.
11.6 VALUATION. Buyer hereby represents and acknowledges that the Buyer
has made its own assessment of the commercial value in the Purchased Assets and
that Seller and Sole Shareholder have made no representation or warranties with
respect to the commercial value of the Purchased Assets. Except for any claims
arising out of the representations and warranties of Seller and Sole Shareholder
hereunder, Buyer agrees not to xxx, and hereby waives its right to xxx Seller
and/or Sole Shareholder based on the commercial value of the Purchased Assets or
the Purchase Price paid for the Purchased Assets. Notwithstanding any other
provision of this Section 11.6, however, nothing in this Section 11.6 shall
modify, limit or otherwise alter the representations, warranties, covenants
and/or conditions set forth elsewhere in this Agreement. Buyer and each of its
general partners agree that it, and they, will not make any claims inconsistent
with the foregoing sentence. Artecon, solely for the purpose of this section,
agrees to indemnify, defend and hold harmless Seller, its affiliates, agents,
officers, directors and employees from and against all losses, damages,
liabilities, expenses, costs, assessments and taxes (including, without
limitation, interest, penalties and attorneys' fees) relating to, arising from
or in connection with Buyer or any of its general partners' breach of its, or
their, obligations under this paragraph. Notwithstanding anything to the
contrary contained herein or in the Promissory Note, Buyer and each of the
Partners of Buyer hereby acknowledge and agree that the Seller and Sole
Shareholder may enforce their rights under the Promissory Note, by means of a
lawsuit, action, or any other proceeding, against any one or more of the
Partners directly with or without bringing such lawsuit, action, or other
proceeding against the Buyer or any other Partner. The Partners further
acknowledge that each of their signatures on this Agreement binds them
individually (as well as partners) with respect to this Section 11.6.
11.7 FURTHER ASSURANCES. The parties hereto shall use their best
efforts, and shall cooperate with each other, to secure all necessary consents,
approvals, authorizations, exemptions and waivers from third parties as shall be
required in order to consummate the transactions contemplated hereby, and shall
otherwise use their best
33.
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efforts to cause such transactions to be consummated in accordance with the
terms and conditions hereof. At any time or from time to time after the Closing
Date, each party hereto shall execute and deliver any further instruments or
documents and take all such further action as such requesting party may
reasonably request in order to consummate and document the transactions
contemplated hereby.
11.8 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the constructing or
interpretation of any provision of this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
11.10 SUCCESSORS AND ASSIGNS. No party shall assign this Agreement to
any third party without the prior written consent of the other parties, except
that after the Closing Buyer may assign this Agreement to any transferee of the
business of Buyer without seeking such consent from Seller or the Sole
Shareholder. This Agreement shall be binding upon, inure to the benefit of and
be enforceable by the respective successors and permitted assigns of the parties
hereto.
11.11 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
11.12 NOTICES. All notices, requests, demands and other communications
hereunder ("NOTICES") shall be in writing and shall be deemed to have been duly
given if delivered by hand or by registered or certified mail, postage prepaid,
return receipt requested, but only upon receipt of such return receipt, as
follows:
To Buyer: Xxxxx X. Xxxxxxx
Founding Partners
0000 Xx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxx, Esq.
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
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Xxx Xxxxx, Xxxxxxxxxx 00000
To Seller or the Xxxxx Xxxxxxx
Sole Shareholder: Falcon Systems, Inc.
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx, Brand, Seymour & Xxxxxx LLP
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
or to such other address as either any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. All Notices shall be deemed received on the date
of delivery or, if mailed, on the date appearing on the return receipt therefor.
11.13 LAW GOVERNING. This agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of California, without
regard to its choice-of-laws or conflicts-of-law rules.
11.14 ATTORNEY'S FEES. In any judicial action or proceeding or
arbitration proceeding between the parties hereto to enforce any of the
provisions of this Agreement, to seek damages on account of the breach hereof,
to seek injunctive relief to prevent the breach or continued breach hereof, to
seek a determination of the rights and obligations of the parties hereunder, or
in which this Agreement is raised as a defense, regardless of whether the action
or proceeding is prosecuted to judgment and in addition to any other remedy, the
unsuccessful party shall pay the successful party all costs and expenses,
including reasonable attorneys' fees, incurred therein by the successful party.
[remainder of this page intentionally left blank]
35.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
SELLER: FALCON SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------
Xxxxx Xxxxxxx
President
BUYER: FOUNDING PARTNERS
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx
General Partner
By: /s/ Xxxx X. Xxxxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxxxx
General Partner
By: /s/ X.X. Xxxxx
-------------------------------
X.X. Xxxxx
General Partner
SOLE SHAREHOLDER: /s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
ARTECON, INC.: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Signing solely for Xxxxx X. Xxxxxxx
the purposes of President
Section 11.6
36.
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EXHIBIT A
PROMISSORY NOTE
$1,750,000 August 21, 0000
Xxx Xxxxx, Xxxxxxxxxx
For value received, the undersigned (collectively, "Payor"), jointly and
severally, promise to pay to FALCON SYSTEMS, INC. ("FALCON"), a California
corporation, or order ("Holder"), in lawful money of the United States of
America and in immediately available funds, the principal sum of one million
seven hundred fifty thousand dollars ($1,750,000) (the "Principal Amount")
together with interest thereon at the times and in the manner set forth below.
This note (the "Note") is executed and delivered as part of the Purchase Price
pursuant to that certain Technology Purchase Agreement of even date herewith
among Payor, Holder and the sole shareholder of Holder (the "Purchase
Agreement"). Notwithstanding any other provision of this Note, this Note shall
be subject in all respects to the provisions of that certain Indemnity Agreement
of even date herewith Artecon, Inc., a California corporation, Founding
Partners, a California general partnership (the "Partnership"), each Partner of
the Partnership, Falcon and Xxxxx Xxxxxxx (the "Indemnity Agreement"), including
but not limited to Sections 1(d), 1(e) and 2 of the Indemnity Agreement.
1. REPAYMENT OF PRINCIPAL AND ACCRUED INTEREST. Subject to the terms of
this Note, the outstanding Principal Amount shall be repaid, together with
accrued interest thereon as provided below, in equal monthly combined principal
and interest payments of thirty-seven thousand, one hundred eighty-two dollars
and thirty-three cents $37,182.33, with the first payment due on the date that
is one (1) month from the date hereof and subsequent payments due each monthly
anniversary thereafter for a period of five years following the date hereof.
2. INTEREST RATE. Subject to the terms of this Note, Payor promises to pay
interest on the outstanding principal amount hereof from the date hereof until
payment in full, in accordance with Paragraph 1, which interest shall be payable
at the rate of ten percent (10%) per annum or the maximum rate permissible by
law (which under the laws of California shall be deemed to be the laws relating
to permissible rates of interest on commercial loans), whichever is less.
38
3. DEFAULT RATE. If the undersigned fails to pay any of the principal or
accrued interest when due, then all unpaid amounts, including all accrued but
unpaid interest, shall bear interest at 18% per annum, or the maximum rate
permissible by law in the event of a default of a promissory note of this type
and nature, whichever is less.
4. PLACE OF PAYMENT. Payments on this Note shall be payable at Holder's
office located at 000 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000, unless another
place of payment shall be specified in writing by Holder.
5. SECURITY. This note is subject to the security and subordination
provisions of that certain Security Agreement by and between Artecon, Inc., a
California corporation, and Holder of even date herewith (the "Security
Agreement") as well as the security provisions of that certain Subordination
Agreement by and among Payor and Holder as of the date hereof.
6. APPLICATION OF PAYMENTS. Payments on this Note shall be applied first to
accrued interest, and thereafter to the outstanding principal balance hereof.
7. PREPAYMENTS. This Note may be prepaid in whole or in part at any time
without premium or penalty.
8. MISCELLANEOUS.
(a) This Note will be considered in default, if after fifteen (15) days
following written notice to Payor of Payor's failure to make any payment of
principal or accrued interest hereunder, such failure remains uncured (provided
that such notice shall not be required more than three times in any calendar
year). In such event, at Holder's option, all outstanding principal and accrued
interest and any other amounts payable under this Note will become due and
payable.
(b) Except as otherwise provided in this Note, Payor, all endorsers,
guarantors and sureties of this Note, and each of them, and their successors and
assigns, hereby waive demand, presentment for payment, notice of non-payment,
protest and notice of protest, and notice of dishonor, and expressly agree that
without notice, this Note or any payment due date hereunder may be extended from
time to time, and consent to acceptance of additional or substitute parties or
both, or the release of any party liable with respect to this Note, all without
affecting in any way their liability.
(c) If Payor fails to make any interest or installment payment when due,
Payor promises to pay all costs and expenses of collection and reasonable
attorneys' fees incurred by Holder to enforce the terms of this Note and/or the
Security Agreement including, without limitation, those expenses and fees which
may be incurred in connection with the appointment of a receiver and all
appearances in bankruptcy or
39
insolvency proceedings. In any action brought under or arising out of this Note,
Payor hereby consents to the jurisdiction of any competent court within the
State of California and to service of process by any means authorized by
California law.
(d) Holder shall, at all times, have the right to proceed against any
portion of the security for this Note in such order and in such manner as Holder
may consider appropriate without waiving any rights with respect to any such
security. Any delay or omission on the part of Holder in exercising any right
hereunder shall not operate as a waiver of such right, or any other right under
this Note.
(e) This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder.
(f) This Note shall be governed by, and construed and entered in
accordance with, the laws of the State of California, as applied to contracts
entered into by California residents within the State of California, which
contracts are to be performed entirely within the State of California.
(g) The provisions of this Note shall inure to the benefit of and be
binding on any successor to Payor and shall extend to any holder hereof
including without limitation, Xxxxx Xxxxxxx.
/s/ Xxx Xxxxxxx
----------------------------------------
Xxx Xxxxxxx, individually and as a general
partner of Founding Partners
/s/ X.X. Xxxxx
----------------------------------------
X.X. Xxxxx, individually and as a general
partner of Founding Partners
/s/ Xxxx X. Xxxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxxx, individually and as
a general partner of Founding Partners
