ASSET ACQUISITION AND PURCHASE AGREEMENT
THIS ASSET ACQUISITION AND PURCHASE AGREEMENT dated March
31, 1997, by and between Xxxxxx Interactive, Inc., a Delaware
corporation, with a principal place of business at Xxx Xxxxxxxx
Xxxxxx, Xxxxxxxxxx, XX, 00000 ("Buyer"), Cyberiad Software, Inc.,
a Rhode Island corporation, with a principal place of business at
Xxxxx 000, 00 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 02906("Seller"),
Xxxxxxxxxxx X. Xxxxxxxx, an individual resident at 00 Xxxxxx
Xxxx, Xxxxxxxxxx, XX 00000 ("Xxxxxxxx"), and Xxxxxxx Xxxxx, an
individual resident at 00 Xxxxxx Xxxx, Xxxxxxxx, XX 00000
("Xxxxx" and, collectively with Xxxxxxxx, "Owners" and Owners
collectively with Buyer and Seller, the "Parties").
RECITALS
WHEREAS, Seller desires to transfer and sell to Buyer, and Buyer
desires to acquire and buy from Seller, substantially all of the
assets of Seller, including but not limited to all the patents,
copyrights, trademarks, know-how, software and other proprietary
or intellectual property of any kind of Seller, all upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements of the parties hereinafter
set forth, the Parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Upon the terms and subject
to the condition of this Agreement, Buyer agrees to purchase,
accept, and acquire from Seller, and Seller agrees to sell,
transfer, assign, convey, and deliver to Buyer, at the Closing,
all right, title, and interest of Seller in and to all of the
following rights and assets (collectively, the "Assets"):
a. Inventories. All inventories (the "Inventory") of
(1) computer program code (in all media) and materials, including
the Software Programs; (2) program documentation, including user
materials and (3) all other unused or reusable materials, stores,
and supplies, in each case to the extent used in, relating to, or
arising out of the business (the "Business") of Seller as
conducted on or before July 1, 1996 (the "Effective Date"). As of
the Effective Date, the Inventory consists of the Inventory
listed by category and volume level in Schedule 1.1.a.
b. Technical Documentation All technical and
descriptive materials (other than Inventory) relating to the
acquisition, design, development, use, or maintenance of computer
code and program documentation and materials in the Business (the
"Technical Documentation").
c. Software Contracts. All contracts, agreements,
licenses, and other commitments and arrangements, oral or
written, with any person or entity respecting the ownership,
license, acquisition, design, development, distribution,
marketing, use, or maintenance of computer program code, related
technical or user documentation, and databases, in each case
relating to or arising out of the Business (the "Software
Contracts"). As of the Effective Date, the Software Contracts
consist of the items listed and classified in Schedule 1.1.c as
(1) licenses from third parties (development and/or marketing);
(2) licenses from third parties (internal use only); (3)
development contracts, work-for-hire agreements, and consulting
and employment agreements; (4) distributorships, dealerships,
franchises, and manufacturer's representative contracts; (5)
licenses and sublicenses to others; and (6) maintenance, support,
or enhancement agreements.
d. Business Records. All business and marketing
records, including accounting and operating records, asset
ledgers, inventory records, budgets, personnel records, payroll
records, customer lists, employment and consulting agreements,
supplier lists, information and data respecting leased or owned
equipment, files, correspondence and mailing lists, advertising
materials and brochures, and other business records used in the
Business and relating to the Assets (the "Business Records").
e. Authorizations. All governmental approvals,
authorizations, certifications, consents, variances, permissions,
licenses, and permits to or from, or filings, notices, or
recordings to or with, federal, state, and local governmental
authorities (the "Authorizations"), but subject, as to the
reassignability to Buyer, to the procurement of the Required
Government Consents. As of the Effective Date, the Authorizations
consist of the items listed in Schedule 1.1.e.
f. Intellectual Property. All patents, trademarks,
service marks, trade names, and copyrights (including
registrations, licenses, and applications pertaining thereto),
and all other intellectual property rights, trade secrets, and
other proprietary information, processes, and formulae used in
the Business or otherwise necessary for the ownership and use of
the Assets and the conduct of the Business (the "Intellectual
Property"). As of the Effective Date, the Intellectual Property
includes, but is not limited to, the trade name Cyberiad (under
the law of the State of Rhode Island) and the other trademarks'
service marks, and trade names, the copyrights, the patent
applications and issued patents, the know-how and other technical
information, and the software listed in Schedule 1.1.f.
g. Claims. All claims Seller may have against any
person relating to or arising from the Assets, including rights
to recoveries for damages or defective goods, to refunds,
insurance claims, and chooses in action ("Claims").
h. Other Assets. All other assets of Seller listed in
Schedule 1.1.h.
1.2 Intent of the Parties. Although the Schedules to this
Agreement are intended to be complete, to the extent any rights
or assets of Seller are necessary or desirable for the ownership,
exploitation or use of the Assets, but are not properly itemized
or do not appear on the applicable Schedules where required,
then, unless this Agreement otherwise expressly provides directly
for Buyer to provide for or obtain such rights or assets in a
different way, such rights and assets shall nonetheless be deemed
transferred to Buyer at Closing. It is mutually acknowledged that
the Schedules to Section 1.1 are to be prepared as of the
Effective Date, and consequently the Assets so identified may
vary on the Closing Date because of the effect of the ongoing
operations of the Business.
Section 2
ASSUMPTION OF LIABILITIES
2.1 Enumeration of Assumed Liabilities. At and after the
Closing, Buyer shall assume and agree to pay or perform only the
liabilities and obligations of Seller that (i) are listed in
schedule 2.1 or (ii) arise after the Closing Date and are out of
the Software Contracts (the "Assumed Liabilities"), if any.
2.2 Liabilities Not Assumed. Without in any way expanding
the specificity and limitation of Section 2.1, Buyer shall not
assume or be responsible for any of other liabilities or
obligations (the "Excluded Liabilities"), including without
limitation:
a. Nonenumerated Liabilities. Any liability or
obligation of Seller of any kind, known or unknown, contingent or
otherwise, not either enumerated as an Assumed Liability in
Section 2.1 or resulting from any other covenant, agreement, or
indemnity of Buyer in this Agreement or the other agreements and
instruments to be executed and delivered by Buyer in connection
with Agreement.
b. Taxes. Any liability or obligation of Seller for
federal, state, or local income, franchise, property, sales or
use, recapture or other taxes, assessments, and penalties,
whether arising out of the transactions contemplated by this
Agreement or otherwise.
c. Violations of Law. Any liability or obligation
resulting from violations of any applicable laws or regulations
by Seller prior to the Closing Date or infringement of third-
party rights or interests.
d. Employee Liabilities. Any employee liabilities
relating to present and past employees of the Business with
respect to salaries, wages, plans, programs, policies,
commitments, and other benefit entitlement established or
existing on or prior to Closing (whether or not such liabilities
are accrued or payable at Closing, and whether or not such
liabilities are contingent in nature), including without
limitation:
1. Any liability or obligation for workers'
compensation.
2. Any current or future liabilities to employees
retiring on, before, or after Closing, and their
dependents.
3. Any current or future liabilities for benefits
that may have been accrued or earned by any employees
associated with the Business on or before Closing under
any pension plans relating to service prior to the
Closing Date.
4. Any current of future liabilities for claims
incurred prior to Closing and related expenses with
respect to any employees associated with the Business
under any welfare or disability plans established or
existing at or prior to Closing, regardless of when
filed with Buyer, Seller, or the claims administrator
for any such plan.
5. Any retrospective premium on pension, savings,
thrift, or profit-sharing plan contribution relating to
any employees associated with the Business incurred or
accrued prior to the Closing Date, regardless of when
invoiced or recorded.
6. Any monetary liability for severance payments that
may arise at any time in favor of any of Seller's
employees under any plan, program, policy, commitment,
or other benefit entitlement.
e. Product Liability. Any liability or obligation for
product liability or warranty claims or damage claims arising out
of defects in or failures of any product, program, or material of
Seller or the Business provided, distributed, licensed, or
delivered prior to the Closing Date.
f. Incidents to Excluded Assets. Any liability or
obligation associated with any of the asset of Seller other than
the Assets.
g. Litigation. Any Litigation (as defined in Section
4.20) pending or threatened against Seller or the Assets.
h. Obligations to Owners. Any liability or obligation
from Seller to either or both Owners whether or not reflected in
the Financial Statements in excess of the amount in schedule 2.1.
Section 3
PRICE
3.1 Purchase Price.
a. The purchase price (the "Purchase Price") for the
Assets will be (a) two hundred thousand (200,000) fully paid,
duly authorized, validly issued and non-assessable shares of
Xxxxxx Stock (b) two (2) shares of the phantom stock described in
Section 3.1.b (the "Phantom Stock") The Purchase Price shall be
subject to adjustment and offset at any time during the term of
the Escrow Agreement (as provided in Section 8.2.d) under and in
accordance with the terms and conditions set forth Sections 10.1,
10.6 and 12.12.
b. Subject the terms and conditions contained in the
remainder of this Section 3.1.b, the rights and privileges of a
holder of any share of the Phantom Stock are:
i. if, before a date seven (7) years after the Effective
Date, Xxxxxx or the Buyer sells or otherwise transfers all,
or substantially all, the "Interactive Software Business" to
any Person other than a Related Person of Xxxxxx or the
Buyer, then in such case such holder shall be entitled to
receive from Xxxxxx for each share of Phantom Stock then
owned by it ten percent (10%) of the consideration (whether
in cash, stock or otherwise) actually received by Xxxxxx or
the Buyer, as the case may be, for the Interactive Software
Business;
ii. if, before a date seven (7) years after the Effective
Date, Xxxxxx or the Buyer sells or otherwise transfers, in a
single transaction or related group of transactions, assets
or stock of subsidiaries (the "Sold Assets") which include
all, or substantially all, the "Interactive Software
Business" to any Person other than a Related Person of
Xxxxxx or the Buyer, then in such case such holder shall be
entitled to receive from Xxxxxx for each share of Phantom
Stock then owned by it ten percent (10%) of the
consideration (whether in cash, stock or otherwise) actually
received for the Sold Assets times a fraction the numerator
of which is the Total Revenues originating from the
Interactive Software Business from Effective Date to the
date of such transaction and the denominator of which is the
Total Revenues originating from the Sold Assets during the
same period; and
iii. if, before a date seven (7) years after the Effective
Date, all, or all substantially all, of the issued and
outstanding securities of Xxxxxx are purchased in a single
transaction or a related group of transactions occurring at
substantially the same time by any Person other than a
Related Person of Xxxxxx, then in such case such holder
shall be entitled to receive from Xxxxxx for each share of
Phantom Stock then owned by it ten percent (10%) of the
consideration actually received for such securities of
Xxxxxx times a fraction the numerator of which is the Total
Revenues originating from the Interactive Software Business
from Effective Date to the date of such transaction and the
denominator of which is the Total Revenues of Xxxxxx and all
subsidiaries of Xxxxxx during the same period.
The rights and privileges of the Phantom Stock are subject to the
following terms and conditions:
iv. No share of Phantom Stock may be sold, pledged,
hypothecated or transferred in any way (whether or not for
consideration) except to the Owners or to Xxxxxx.
v. In no event may rights relating to the Phantom Stock
under more than one subsection (i.e., i., ii. or iii.) of
this Section 3.1.b be exercised. In any case where more than
one of such subsections may apply, only Section 3.1.b.i or
3.1.b.ii, as the case may be, shall be deemed to apply. In
all cases the exercise of rights relating to the Phantom
Stock under any subsection of this Section 3.1.b shall
automatically terminate the right to exercise rights under
the other subsections.
vi. An Owner's share of Phantom Stock shall be canceled and
be deemed void and of no further force or effect on the
earlier of (i) a date seven (7) years from the Effective
Date, (ii) the termination for any reason (except for
Constructive Termination or for a termination by Xxxxxx or
Buyer which is not for Cause) of the employment of such
Owner of the Phantom Stock in question with Xxxxxx or the
Buyer, as the case may be, (iii) the making of the payment
provided in Section 3.1.b.i., ii. or iii. and (iv) thirty
(30) days after Buyer or Xxxxxx have notified Seller of a
material breach of this Agreement if Seller or its delegate
has failed to commence to cure said breach during such
thirty (30)day period and has in any event failed to cure
said breach within ninety (90) days after such notice.
vii. Notwithstanding anything to the contrary that may be
contained in this Agreement, no certificate or other
document evidencing the Phantom Stock will be issued to
Seller. There are no rights and privileges appertaining to
the Phantom Stock except as is expressly set forth in this
section 3.1.b, and, without limiting the foregoing, no
holder of Phantom Stock shall be entitled to vote or to
exercise any of the other rights or privileges of a holder
of the stock of Xxxxxx or the Buyer.
viii. As used in subparagraph 3.1.b.iii., but only in such
subparagraph, the term "purchased" shall mean only a
transaction in which the consideration received for the
outstanding Xxxxxx securities is either:
(a) cash;
(b) securities of a company having Total Revenues for
the then immediately preceding year at least the
following Applicable Multiple times the Total Revenues
of Xxxxxx for the same period
Xxxxxx Total Revenues Applicable Multiple
$10,000,000 or less 10
$10,000,001-$50,000,000 4
Greater than $50,000,000 2.5
; or
(c) a combination of (a) or (b).
c. As used in this Agreement the following terms shall have
the meanings as set forth:
"Cause"-- (i) any act or omission of either Owner which, in the
good faith determination of the Board of Directors of Buyer or
Xxxxxx, as the case may be, has an adverse material effect on
Buyer, Xxxxxx, the Interactive Software Business or the ability
or desirability of Xxxxxx or the Buyer, as the case may be, to
continue the employment of the Owner in question and is
(a) an act of dishonesty against any member of the Group or
fraud upon any member of the Group;
(b) an act of dishonesty or fraud committed while in the
employment of any member of the Group;
(c) a failure to comply with applicable law while in the
employment of any member of the Group;
(d) a criminal act under applicable law (other than traffic
or other minor offenses); or
(e) by itself, or with the passage of time or the giving of
notice (but in such case only after the applicable cure
period has expired) or both, constitutes a breach of this
Agreement or any obligation or duty owed under applicable
law to any member of the Group, or
(ii) the failure by either Owner in any other way, in the
sole reasonable opinion of the board of directors of the member
of the Group in question, materially to carry out his duties as
an employee of such member of the Group after written notice of
such failure and thirty (30) days opportunity to cure.
"Constructive Termination"- (i) the permanent reassignment of the
Owner in question to a position whose duties are primarily
neither technical nor managerial or (ii) a substantial permanent
reduction in salary which is materially greater, on a
proportional basis, than the greater of either (a) reductions
being made at substantially the same time in the salaries of
other employees of the Interactive Software Business or (b)
reductions being made at substantially the same time in the
salaries of other employees with similar job functions of Xxxxxx;
provided, however, that the term shall not include, and nothing
herein shall be deemed to restrict Nestor's or the Buyer's right
to change the title of, or reassign, either Owner within the
Group so long as the duties of the position are primarily either
technical or managerial or both.
"Group"-- the group of Related Persons consisting of Buyer,
Xxxxxx or any Related Person of Buyer or Xxxxxx.
"Interactive Software Business"-the part of the business of
Xxxxxx (whether or not separately incorporated) which provides
software solutions designed to increase a company's customer
value and retention through identification of customer interests,
values and behaviors through Internet and Intranet communications
and such other business as the Board of Directors of Xxxxxx, in
its sole discretion, explicitly hereafter designates by valid
resolution as part of the Interactive Software Business;
excluding, without limitation, any assets or business of Xxxxxx
which are either (i) now existing or (ii) hereafter acquired or
developed and unrelated to the Business.
"Xxxxxx"-- Xxxxxx Inc., a Delaware corporation, with a principal
place of business at Xxx Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000.
Buyer is a wholly owned subsidiary of Xxxxxx.
"Xxxxxx Audited Financial Statements"-- Nestor's consolidated
financial statements audited by Nestor's then independent
accountants. To the extent any provision of this Agreement
requires that an amount is to be determined by reference to
Xxxxxx Audited Financial Statements, the determination of such
amount by the independent accountants who have audited the Xxxxxx
Audited Financial Statements for the year in question shall be
final and binding on the Parties.
"Xxxxxx Stock"-- the common stock, par value $.01 per share, of
Xxxxxx to be issued to Seller as part of the Purchase Price,
which stock shall be issued to Seller without registration
thereof under the Securities Act or any State securities law.
"Xxxxxx Securities"- Xxxxxx Stock and, if subject to regulation
under the Securities Act or any State securities law, the Phantom
Stock.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Related Person"--with respect to the Owners:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person (other than the Group) in which such individual or
members of such individual's Family hold (individually or in the
aggregate) a Material Interest; and
(d) any Person (other than the Group) with respect to which such
individual or one or more members of such individual's Family
serves as a director, officer, partner, executor, or trustee (or
in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under
common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person (other than, in the case of the Group, the
Owners) that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's
spouse, (iii) any other natural person who is related to the
individual or the individual's spouse within the second degree,
and (iv) any other natural person who resides with such
individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity
securities or equity interests in a Person.
"Total Revenues"-- the amount of total revenues for the
Interactive Software Business or all of Xxxxxx, as the case may
be, which is included in the income statement portion of the
Xxxxxx Audited Financial Statements for the year in question. In
the case of a company (other than Xxxxxx) described in Section
3.1.b.viii., Total Revenues shall mean the amount of total
revenues which is included in the income statement portion of
such company's audited financial statements for the year in
question.
Section 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS
Seller and each Owner hereby individually, jointly and
severely represent and warrant to Buyer as follows:
4.1 Organization. Seller is a corporation validly existing
and in good standing under the laws of the State of Rhode Island
with the corporate power and authority to conduct its business
(including the Business) and to own and lease its properties and
assets (including the Assets). As of the Effective Date, the
Closing Date, and each and every date between the Effective Date
and the Closing Date, Owners are, and have been, the record and
beneficial owners and holders of the all of the issued and
outstanding stock or other equity of Seller or of Seller's
predecessor, free and clear of all claims and encumbrances. All
of the outstanding stock of the Company has been duly authorized
and validly issued and is fully paid and nonassessable. There are
no contracts relating to the issuance, sale, or transfer of any
security of the Company.
4.2 Power and Authority. Seller and each Owner has the
power and authority to execute, deliver, and perform this
Agreement and the other agreements and instruments to be executed
and delivered by it in connection with the transactions
contemplated hereby and thereby, has taken all necessary action
to authorize the execution and delivery of this Agreement and
such other agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. This Agreement is,
and the other agreements and instruments to be executed and
delivered by Seller and the Owners in connection with the
transactions contemplated hereby shall be, the legal, valid, and
binding obligations of Seller or Owners, as the case may be,
enforceable in accordance with their terms.
4.3 No Conflict. Neither the execution and delivery of this
Agreement and the other agreements and instruments to be executed
and delivered in connection with the transactions contemplated
hereby or thereby, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with (1)
any federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree
applicable to Seller, Owners, the Business, or the Assets, (2)
any provision of any charter, bylaw or other governing or
organizational instrument of Seller, or (3) except insofar as
Required Contract Consents are to be procured prior to Closing,
any mortgage, indenture, license, instrument, trust, contract,
agreement, or other commitment or arrangement to which Seller or
either Owner is a party or by which Seller or either Owner or any
of the Assets is bound.
4.4 Required Government Consents. Except for the filing
and/or recording of deeds and other instruments of conveyance,
transfer, or assignment required by federal copyright, patent, or
trademark laws or the laws of the states in which the Assets are
located ("Required Government Consents"), no approval,
authorization, certification, consent, variance, permission,
license, or permit to or from, or notice, filing, or recording to
or with, federal, state, or local governmental authorities is
necessary (i) for the execution and delivery of this Agreement
and the other agreements and instruments to be executed and
delivered in connection with the transactions contemplated hereby
or thereby by Seller or Owners or the consummation by Seller or
the Owners of the transactions contemplated hereby or thereby, or
(2) the ownership and use of the Assets (including by Buyer).
4.5 Required Contract Consents. Except as set forth in
Schedule 4.5 (such scheduled items being referred to herein as
the "Required Contract Consents"), no approval, authorization,
consent, permission, or waiver to or from, or notice, filing, or
recording to or with, any person (other than the governmental
authorities addressed in Section 4.4) is necessary for (1) the
execution and delivery of this Agreement and the other agreements
and instruments to be executed and delivered in connection with
the transactions contemplated hereby or thereby by Seller or
Owners or the consummation by Seller or Owners of the
transactions contemplated hereby; (2) the transfer and assignment
to Buyer at Closing of the Software Contracts, or (3) the
ownership and use of the Assets (including by Buyer).
4.6 Title to Property. Buyer at Closing shall obtain good
and marketable title to all of the Assets, free and clear of all
title defects, liens, restrictions, claims, charges, security
interests, or other encumbrances of any nature whatsoever,
including any mortgages, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements, or other title
or interest retention arrangements.
4.7 Condition of Property. All of the Assets are in good
operating order, condition, and repair, ordinary wear and tear
excepted, and are suitable for use in the Business in the
ordinary course.
4.8 Inventory. Taken into account changes in the Business
described in Schedule 4.16, all Inventory is of usable quality
and includes no material amount of obsolete or discontinued items
or items that cannot be used by Buyer in the Business in the
ordinary course.
4.9 Title to Intellectual Property.
a. Ownership. Except for the rights and licenses
validly and effectively established by the Software Contracts,
Seller owns, Buyer shall receive at Closing, and the Intellectual
Property includes, all patents, trademarks, service marks, trade
names, and copyrights (including registrations, licenses, and
applications pertaining thereto) and all other intellectual
property rights, trade secrets, and other proprietary
information, processes, and formulae (i) used in the Business or
(ii) otherwise necessary for the ownership and use of the Assets
or the conduct of the Business or (iii) relating to any of the
foregoing or arising therefrom whether owned by Seller or either
Owner and whether on the Effective Date, the Closing Date or any
date in between the Effective Date and the Closing Date. Schedule
1.1.f sets forth all registered trademarks and service marks, all
reserved trade names, all registered copyrights, all filed patent
applications and issued patients, all know-how and other
technical information and all software (i) owned by Seller or
(ii) owned by either Owner and relating to or arising from the
Business or the Assets or (iii) otherwise necessary for the
conduct of the Business as conducted on or before the Effective
Date.
b. Procedures for Copyright Protection. Schedule 4.9.b
sets forth the form and placement of the proprietary legends and
copyright notices displayed in or on the Software Programs. In no
instance has the eligibility of the Software Programs for
protection under applicable copyright law been forfeited to the
public domain by omission of any required notice or any other
action.
c. Procedures for Trade Secret Protection. Seller has
at all times considered and treated the source code and system
documentation relating to the Software Programs and any and all
other Intellectual Property the confidentiality of which is
necessary or desirable for the ownership and use of the Assets or
the conduct of the Business as trade secrets. Seller has taken
all reasonable steps to maintain the confidentiality of such
Intellectual Property. Without limiting the foregoing, the source
code and system documentation relating to the Software Programs
(1) have at all times been maintained in confidence and (2) have
been disclosed by Seller only to employees and consultants having
"a need to know" the contents thereof in connection with the
performance of their duties to Seller.
d. Personnel Agreements. The Owners and all other
personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the
conception and development of the Software Programs, Technical
Documentation, or Intellectual Property on behalf of Seller
either (1) have been party to a "work-for-hire" arrangement or
agreement with Seller, in accordance with applicable federal and
state law, that has accorded Seller full, effective, exclusive,
and original ownership of all tangible and intangible property
thereby arising, or (2) have executed appropriate instruments of
assignment in favor of Seller as assignee that have conveyed to
Seller full, effective, and exclusive ownership of all tangible
and intangible property thereby arising. The originals of all
such agreements and assignments will have been delivered to the
Buyer on or before the Closing Date.
e. Absence of Claims. No claims have been asserted by
any person or entity to the use of the Intellectual Property, and
Seller does not know of any valid basis for any such claim. The
use of the Intellectual Property by the Seller does not infringe
on the rights of any person or entity.
4.10 Description of Products; Adequacy of Technical
Documentation.
a. Schedule 4.10 contains a complete list and
description of all products or services developed or marketed by
the Seller since its organization. True, complete, and accurate
copies of the source and object code of, and all Technical
Documentation for, all such products Programs have been delivered
to the Buyer.
b. The Technical Documentation includes the source
code, system documentation, statements of principles of
operation, and schematics for all Software Programs, as well as
any pertinent commentary or explanation that may be necessary to
render such materials understandable and usable by a trained
computer programmer. The Technical Documentation also includes
any program (including compilers), "workbenches," tools, and
higher level (or "proprietary") language used for the
development, maintenance, and implementation of the Software
Programs.
4.11 Contracts--General. The Software Contracts listed in
Schedule 1.1.c constitute all contracts, agreements, licenses,
and other commitments and arrangements effecting the Assets. All
such contracts are valid, binding, and enforceable in accordance
with their terms and are in full force and effect. There are no
existing defaults by Seller under any such contracts and no act,
event, or omission has occurred that, whether with or without
notice, lapse of time, or both, would constitute a default
thereunder.
4.12 Third-Party Components in Software Programs. Seller has
validly and effectively obtained the right and license to use,
copy, modify, and distribute the third-party programming and
materials contained in the Software Programs and Technical
Documentation pursuant to the Software Contracts identified as
"licenses from third parties (development and/or marketing)" or
"licenses from third parties (internal use only)" in Schedule
1.1.c. Except as set forth in Schedule 4.12, the Software
Programs and Technical Documentation contain no other programming
or materials in which any third party may claim superior, joint,
or common ownership, including any right or license. Except for
material in the public domain and identified in Schedule 4.12,
the Software Programs and Technical Documentation do not contain
derivative works of any programming or materials not owned in
their entirety by Seller and included in the Assets.
4.13 Third-Party Interests or Marketing Rights in Software
Programs. Seller has not granted, transferred, or assigned any
right or interest in the Software Programs, the Technical
Documentation, or the Intellectual Property to any person or
entity, except pursuant to the Software Contracts identified as
"distributorships, dealerships, franchises, and manufacturer's
representative contracts" or "licenses and sublicenses to others"
in Schedule 1.1.c. Except as set forth in Schedule 4.13, all
Software Contracts identified as "licenses and sublicenses to
others' in Schedule 1.1.c constitute only end-user agreements,
each of which grants the end-user thereunder solely the
nonexclusive right and license to use an identified Software
Programs and related user documentation, for internal purposes
only, on a single central processing unit (CPU). There are no
contracts, agreements, licenses, and other commitments and
arrangements in effect with respect to the marketing,
distribution, licensing, or promotion of the Software Programs or
any other Inventory, the Technical Documentation, or the
Intellectual Property by any independent salesperson,
distributor, sublicensor, or other remarketer or sales
organization, except for the Software Contracts identified as
"distributorships, dealerships, franchises, and manufacturer's
representative contracts" in Schedule 1.1.c.
4.14 Financial Statements. Schedule 4.14 sets forth
combined income statements, balance sheets, and statements of
changes in financial position for the Business as of December 31,
1995 and December 31, 1996 (the "Financial Statements"). The
Financial Statements do not overstate the Assets or understate
the Assumed Liabilities as then in existence. The results of
operation in the Financial Statements do not overstate revenues
or understate expenses of Seller or its predecessor.
4.15 Undisclosed Liabilities. Except as set forth in
Schedule 4.15 and subject to any explicit knowledge
qualifications contained elsewhere in this Article 4, there are
no liabilities or obligations, secured or unsecured (whether
absolute, accrued, contingent, or otherwise, and whether due or
to become due), except such liabilities and obligations that are
accrued and reserved against in the Financial Statements.
4.16 Conduct of Business.
a. No Change in Assets. Except as set forth in
Schedule 4.16.a, since the Effective Date, Seller has not removed
or disposed of, and there has been no other change in, any assets
that were assets of the Business.
b. No Material Adverse Change. Except as set forth in
Schedule 4.16.b, since the Effective Date, there has been no
material adverse change in the Business or the Assets or in the
financial condition, operations, or prospects of the Business.
c. Absence of Particular Events. Except as set forth in
Schedule 4.16.c, since the Effective Date, Seller has not (1)
suffered any damage or destruction adversely affecting the
Business or involving the Assets; (2) made any change in any
method, practice, or principle of accounting involving the
Business or the Assets; (3) sold, transferred, leased or in any
way disposed of any Asset; or (4) agreed to take any action
described in this Section 4.18.c.
d. Absence of Joint Ventures, etc. Except as set forth
in Schedule 4.16.d, Seller is not a party to any joint venture or
other similar agreement or arrangement that involves any sharing
of profits of the Business or the Assets or is similar to or
competitive with the Business, other than the Software Contracts
identified as "licenses from third parties (development and/or
marketing)" or "distributorships, dealerships, franchises, and
manufacturer's representative contracts" in Schedule 1.1.c.
4.17 Major Vendors and Customers. Schedule 4.17 lists each
licensor, developer, remarketer, distributor, and supplier of
property or services to, and each licensee, end-user, or customer
of, the Business together with, in each case, the amount paid or
billed during the most recent fiscal year. Seller and Owners have
no reason to believe that the relationship with any such person
or entity might not be continued by Buyer, after its acquisition
of the Assets, indefinitely at least at substantially the same
level of business and on substantially the same terms as Seller
experienced during the twelve (12) month period preceding the
Effective Date.
4.18 Litigation. Except as set forth in Schedule 4.18.a, no
claim, action, suit, proceeding, inquiry, hearing, arbitration,
administrative proceeding, or investigation (collectively,
"Litigation") is pending, or threatened against Seller or either
Owner, Seller's present or former directors, officers, or
employees, or any party to any Software Contract, affecting,
involving, or relating to the Business or any of the Assets.
Except as set forth in Schedule 4.18.b, no Litigation has been
brought against Seller or either Owner affecting, involving, or
relating to the Business or any of the Assets. Seller and both
Owners know of no facts that could reasonably be expected to
serve as the basis for Litigation against any of them (or the
Buyer upon acquisition of the Assets), Seller's present or former
directors, officers, or employees, or any party to the Software
Contracts, affecting, involving, or relating to the Business or
the Assets.
4.19 Court Orders, Decrees, and Laws
a. Compliance With Laws. There is no outstanding or
threatened order, writ, injunction, or decree of any court,
governmental agency, or arbitration tribunal against Seller or
either Owner. Seller is not in violation of any applicable
federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or
decree, and Seller or the Owners have received no notices of any
allegation of any such violation. The foregoing shall be deemed
to include without limitation laws and regulations relating to
the federal patent, copyright, and trademark laws, state trade
secret and unfair competition laws, and to all other applicable
laws, including equal opportunity, wage and hour, and other
employment matters, and antitrust and trade regulation laws.
b. Adequacy of Authorizations. The Authorizations
constitute all approvals, authorizations, certifications,
consents, variances, permissions, licenses, or permits to or
from, or filings, notices, or recordings to or with, federal,
state, or local governmental authorities that are required for
the ownership and use of the Assets and the conduct of the
Business under federal, state, and local law, regulation,
ordinance, zoning requirement, governmental restriction, order,
judgment, or decree. Seller is in compliance with all terms and
conditions of such required Authorizations. All of the
Authorizations are in full force and effect, and no suspension or
cancellation of any of them is being threatened, nor will any of
the Authorizations be affected by the consummation of the
transactions described in this Agreement, except to the extent
any such Authorizations are transferable only upon receipt of the
Required Government Consents. Seller is in compliance with all
other applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables contained in those laws or contained in any law,
regulation, code, plan, order, decree, judgment, notice, or
demand letter issued, entered, promulgated, or approved
thereunder materially relating to or affecting the Business.
c. Environmental Compliance. Seller has never used any
Hazardous Materials (as hereinafter defined) on, from, or
affecting the Assets or any facility, site, area, or property
owned, used, controlled, or occupied by the Business (other than
the premises of Xxxxxx) in any manner that violates any federal,
state, or local law, regulation, governmental restriction, order,
judgment, or decree governing the use, storage, treatment,
transportation, manufacture, handling, production, or disposal of
Hazardous Materials. For purposes hereof, "Hazardous Materials"
include any flammable materials, explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or
toxic substances, or related materials defined and/or regulated
in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 USC 9601 et seq.), the
Hazardous Materials Transportation Act, as amended (49 USC
1801 et seq.), the Resource Conservation and Recovery Act, as
amended (42 USC 6901 et seq.), and applicable state
environmental law, and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal,
state, or local environmental law, ordinance, rule, or
regulation. The term "material" includes asbestos,
polychlorinated biphenyls, kerosene, and fuel oil. The term
"release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment. The term
"environment" means any surface or groundwater water supply,
land, surface, or subsurface strata or the ambient air.
4.22 Taxes
a. Tax Returns and Payment of Taxes. All tax returns
of every kind (including returns of real and personal property
taxes, intangible taxes, withholding taxes, and FICA and
unemployment compensation taxes) that are due to have been filed
by Seller in accordance with any applicable law have been duly
filed; and all taxes shown to be due on such returns have been
paid in full.
b. State Sales Taxes, etc. Schedule 4.22.b identifies
(1) each jurisdiction in which the Business is conducted in which
sales, use, excise, or intangible taxes are due or paid on
Software Programs or other Inventory sold or licensed by Seller
in conjunction with the Business and (2) the Software Programs or
other Inventory subject to taxation in such jurisdiction.
4.23 Personnel and Compensation
a. List of Personnel. Seller has no, and has never
had, any employees. Seller shall have delivered to Buyer prior to
Closing a true and complete list of the names and current
compensation levels of all consultants involved in the Business.
b. Compensation, etc. Except as set forth in Schedule
4.23.b, Seller is not subject to, and has no obligation under,
any employment, consulting, or collective bargaining contracts,
deferred compensation, pension (as defined in Section 3(2) of the
Employee Retirement Income Security Act (ERISA), profit-sharing,
bonus, stock option, stock appreciation, stock purchase, or other
nonqualified benefit or compensation commitments, benefit plans,
arrangements, or plans, including any welfare plans (as defined
in Section 3(1) of ERISA), fringe benefit arrangements, or multi-
employer plans (as defined in Section 3(37)(A) of ERISA). Seller
has complied with all of its obligations under the foregoing in
all material respects.
c. Retirement Plans. Seller has established no
retirement plans.
d. Multi-employer Plan. Neither Seller or any
predecessor in interest thereto, nor any trade or business under
common control with Seller or any predecessor in interest thereto
(within the meaning of Section 414(i) of the Internal Revenue
Code) has ever contributed to any pension plan that is a Multi-
employer Plan.
e. Adequate Reserves for Welfare Plans. For welfare
plans (as defined in Section 3(2) of ERISA) listed (or required
to be listed) in Schedule 4.23.b, reserves have been established
by Seller or its insurance companies at least sufficient to pay
all claims incurred under the provisions of such plans on or
prior to the Closing Date. Seller has not received notice of, nor
does it know any basis for, any retrospective premium charge for
claims relating to any period prior to the Closing Date under
such contracts.
d. Compliance with Laws. Seller is in compliance with
all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and occupational safety and health, and is not engaged in
any unfair labor practice within the meaning of Section 8 of the
National Labor Relations Act. There is no unfair labor practice,
charge, or complaint or any other matter against or involving
Seller pending or threatened before the National Labor Relations
Board or any court of law. No certification or decertification
question or organizational drive exists or has existed within the
past twelve (12) months respecting Seller. There are no charges,
investigations, administrative proceedings, or formal complaints
of discrimination (including discrimination based upon sex, age,
marital status, race, national origin sexual preference,
handicap, or veteran status) pending or threatened before the
Equal Employment Opportunity Commission or any federal, state, or
local agency or court against Seller and no basis for any such
charge, investigation, administrative proceeding, or complaint
exists. There have been no audits of the equal employment
opportunity practices of Seller.
4.25 Sufficiency of Rights. Except as set forth in Schedule
4.25, and assuming the renewal or continuation of all business
arrangements currently in place (and to the best knowledge of
Seller and Owners, no reason exists why such renewal or
continuation in favor of Buyer could be obstructed), the Assets
constitute all of the properties, rights, and privileges
necessary for the indefinite continuation of the conduct of the
Business by Buyer in substantially the same manner as it has been
operated by Seller during the twelve (12)-month period preceding
the Effective Date.
4.26 Broker's or Finder's Fees. Seller has not authorized
any person to act as broker or finder or in any other similar
capacity in connection with the transactions contemplated by this
Agreement in any manner that may or will impose liability on
Buyer.
4.27 Related-Party Transactions. Except as disclosed in
Schedule 4.27, Seller is not a party to any contract, agreement,
license, lease, or arrangement with, or any other commitment to,
directly or indirectly, (1) any Owner or officer or director of
Seller or a Related Person to any of the foregoing; (2) any
corporation, trust, or other entity in which any such person has
an equity or participating interest; or (3) or any partnership in
which any such person has a partnership or participating
interest. Each such contract, agreement, license, lease,
arrangement, and commitment was entered into by Seller in the
ordinary course of business upon terms that are fair and
reasonable to the Assets without regard to the status and
relationship of such other parties.
4.28 Certain Payments. Except for routine and ordinary
business expenses, incurred in the ordinary course of business
and reflected in the Financial Statements, since the Seller's
organization, neither the Seller nor the Owners nor any other
person associated with or acting for or on behalf of the Seller
or the Owners, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any person or entity, private or
public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii)
to obtain special concessions or for special concessions already
obtained, for or in respect of the Seller or any affiliate of
the Seller, or (iv) in violation of any law, rule or regulation,
or (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Seller.
4.29 Issuance of Xxxxxx Securities.
a. The Owners and Seller understand and agree that
issuance of the Xxxxxx Securities to Seller pursuant to this
Agreement is intended to be exempt from registration under the
Securities Act by virtue of section 4(2) of the Securities Act
and the regulations issued thereunder. Neither Seller nor either
Owner has or will take any action, or fail to take any action,
which could result in, or have the effect of such exemption being
or becoming unavailable. Neither Seller nor either Owner shall
take the position, or make any claim, that the issuance of the
Xxxxxx Securities pursuant to Seller pursuant to this Agreement
is not so exempt from registration under the Securities Act.
b. All documents, records and books pertaining to
Xxxxxx or to Owners' acquisition of the Xxxxxx Securities have
been made available for inspection by Seller, Owners, their
attorneys and/or accountants.
c. The Owners and Seller and/or their advisor(s) have
had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of Xxxxxx
concerning its business and the Xxxxxx Securities and all such
questions have been answered to the full satisfaction of the
Owners and Seller.
d. The Seller and the Owners are not acquiring the
Xxxxxx Securities as a result of or subsequent to any advertise
ment, article, notice or other communication published by the
Buyer or Xxxxxx or any one acting on their behalf in any
newspaper, magazine or similar media, or broadcast over
television or radio, any seminar or meeting, or any solicitation
of by a person not previously known to the Owners or Seller in
connection with investments in securities generally.
e. The Owners have each reached the age of majority
(as defined by the states in which they reside), have each
adequate means of providing for their individual current needs
and personal contingencies, are each able to bear the substantial
economic risks of an investment in the Xxxxxx Securities for an
indefinite period of time, have each no need for liquidity in
such investment and, at the present time, could afford a complete
loss of such investment. Seller is a corporation wholly owned by
Owners and not formed for the purpose of acquiring the Xxxxxx
Securities.
f. The Owners's individual overall commitments to
investments which are not readily marketable are not, and their
individual acquisitions of Xxxxxx Securities will not cause such
overall commitment to become, disproportionate to their
respective net worths.
g. The Owners each have such knowledge and experience
in financial, tax and business matters so as to enable each of
them to utilize the information made available to them in connec
tion with the issuance of the Xxxxxx Securities in order to
evaluate the merits and risks of an investment in the Xxxxxx
Securities and to make an informed investment decision with
respect thereto.
h. The Seller and Owners are each acquiring the Xxxxxx
Securities solely for their own accounts as principal, for
investment purposes only and not with a view to the resale or
distribution thereof, in whole or in part, and no other person
has, or will have immediate subsequent to the Closing, a direct
or indirect beneficial interest in the Xxxxxx Securities issued
to the Owners.
i. Except for transfers by the Seller to the Owners,
the Seller and each Owner (i) will not sell, transfer, pledge,
assign or otherwise dispose of any Xxxxxx Securities without
registration thereof under the securities act or receipt by
Xxxxxx of an opinion of counsel in form and substance satisfac
tory to Xxxxxx and its counsel to the effect that such
registration is not required and (ii) fully understand and agree
that they must bear the economic risk of its investment for an
indefinite period of time because, among other reasons, the
Xxxxxx Securities has not been registered under the Securities
Act or under the securities laws of certain states and,
therefore, cannot be resold, transferred, pledged, assigned or
otherwise disposed of unless they are subsequently registered
under the Securities Act and under the applicable securities laws
of such states or unless an exemption from such registration is
available.
j. The Seller and each Owner understand that neither
Xxxxxx nor the Buyer is not under any obligation to register or
attempt to register the Xxxxxx Securities or to assist the Owners
in complying with any exemption from registration under the
Securities Act except to provide such information regarding
Xxxxxx as may be reasonably required in connection with the
rendering of an opinion under Section 4.29.i.
k. The Seller and each Owner understands that (i)
sales or transfers of the shares of the Xxxxxx Securities may be
made only in compliance with certain state securities laws, (ii)
certificates evidencing shares of the Xxxxxx Securities will bear
a legend reflecting the transfer restrictions imposed thereon
both by law and this Agreement and a notation may be made in the
records of Xxxxxx restricting the transfer of such Xxxxxx
Securities in a manner consistent with the foregoing.
l. No federal or state agency has passed upon the
Xxxxxx Securities or made any finding or determination as to the
fairness of investment therein.
4.30 Use of Certain Assets, Etc. The Intellectual Property
was conceived and developed by Owners on their own time during
the period Xxxxxxxx was an employee of Xxxxxx. Neither the Seller
nor either Owner used or incorporated on or prior to the
Effective Date in any "material" (as hereinafter defined) way any
intellectual property or other assets of Xxxxxx in the Business
(including, without limitation, the conception or development of
the Intellectual Property), except for (i) information then in
the public domain and (ii) information or other assets used after
the Effective Date by the Owners in their capacities as employees
of Xxxxxx or the Buyer. As used in this Section 4.30 the term
"material" means assets in the aggregate totaling $5000 or more.
4.31 Disclosure. No representation, warranty, or statement
made by Seller or the Owners in this Agreement or in any document
or certificate furnished or to be furnished to Buyer pursuant to
this Agreement contains or will contain any untrue statement or
omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading. Seller
and the Owners have disclosed to Buyer all facts known or
reasonably available to Seller and the Owners that are material
to the financial condition, operation, or prospects of the
Business, the Assets, and the Assumed Liabilities.
4.32 Truth at Closing. All of the representations,
warranties, and agreements of Seller and the Owners contained in
this Article IV shall be true and correct and in full force and
effect on and as of the Effective Date, the Closing Date and each
and every date between the Effective Date and the Closing Date.
Section 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation validly existing
and in good standing under the laws of the State of Delaware with
the corporate power and authority to conduct its business and to
own and lease its properties and assets.
5.2 Power and Authority. Buyer has the power and authority
to execute, deliver, and perform this Agreement and the other
agreements and instruments to be executed and delivered by it in
connection with the transactions contemplated hereby and thereby,
and Buyer has taken all necessary corporate action to authorize
the execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. This Agreement is,
and, when such other agreements and instruments are executed and
delivered, the other agreements and instruments to be executed
and delivered by Buyer in connection with the transactions
contemplated hereby and thereby shall be, the legal, valid, and
binding obligation of Buyer, enforceable in accordance with their
terms.
5.3 Broker's or Finder's Fees. Buyers has not authorized any
person to act as broker, finder, or in any other similar capacity
in connection with the transactions contemplated by this
Agreement.
5.4 No Conflict. Neither the execution and delivery by
Buyer of this Agreement and of the other agreements and
instruments to be executed and delivered by Buyer in connection
with the transactions contemplated hereby or thereby, nor the
consummation by Buyer of the transactions contemplated hereby or
thereby will violate or conflict with (1) any federal, state, or
local law, regulation, ordinance, governmental restriction,
order, judgement, or decree applicable to Buyer, or (2) any
provision of any charter, bylaw, or other governing or
organizational instrument of Buyer.
5.5 Xxxxxx Stock. Upon its issuance to the Company in
accordance with the terms and conditions of this Agreement, the
Xxxxxx Stock will be validly issued, fully paid and non-
assessable.
5.6 Truth at Closing. All of the representations,
warranties, and agreements of Buyer contained in this Article V
shall be true and correct and in full force and effect on and as
of the Closing Date.
Section 6
CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of Seller and the Owners to be
performed hereunder shall be subject to the satisfaction (or
waiver by Seller) at or prior to the Closing Date of each of the
following conditions:
6.1 Representations and Warranties True at Closing Date.
Buyer's representations and warranties contained in this
Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of such date;
Buyer shall have complied with the covenants and agreements set
forth herein to be performed by it on or before the Closing Date;
and Buyers shall have delivered to Seller a certificate dated the
Closing Date and signed by a duly authorized officer of Buyer to
all such effects.
6.2 Litigation. No Litigation shall be threatened or
pending against Buyer, Seller or either Owner before any court or
governmental agency that, in the reasonable opinion of counsel
for Seller, could result in the restraint or prohibition of any
such party, or the obtaining of damages or other relief from such
party, in connection with this Agreement or the consummation of
the transactions contemplated hereby.
6.3 Documents Satisfactory in Form and Substance. All
agreements, certificates, and other documents delivered by Buyer
to Seller hereunder shall be in form and substance satisfactory
to counsel for Seller, in the exercise of such counsel's
reasonable judgment.
6.4 Consents. All Required Contract Consents shall have
been obtained.
6.5 Employment of Owners. At or prior to the Closing, the
Owners shall have become employees at will of Xxxxxx or the
Buyer, as the case may be.
6.6 Letter of Xxxxxx. At or prior to the Closing, Xxxxxx
shall have delivered to Seller a letter in the form attached
hereto as Schedule 6.6, the effectiveness of which shall be
expressly contingent upon the occurrence of Closing.
6.7 Release. At or prior to the Closing, Xxxxxx shall have
entered into releases in the form attached hereto as Schedule
6.7, the effectiveness of which shall be expressly contingent
upon the occurrence of Closing.
Section 7
CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of Buyer to be performed hereunder
shall be subject to the satisfaction (or the waiver by Buyer) at
or prior to the Closing Date of each of the following conditions:
7.1 Representations and Warranties True at Closing Date.
Seller's and Owners' representations and warranties contained in
this Agreement shall be true on and as of the Closing Date with
the same force and effect as though made on and as of such date;
Seller and Owners shall have complied with the covenants and
agreements set forth herein to be performed by them on or before
the Closing Date; and Seller and each Owner shall have delivered
to Buyer a certificate dated the Closing Date and signed by a
duly authorized officer of Seller to all such effects.
7.2 Performance. Seller and Owners shall have performed and
complied with all agreements, obligations, and conditions
required by this Agreement to be performed or complied with by
them on or prior to the Closing.
7.3 Investigations. Neither any investigation of Seller or
Owners by Buyer, nor the Schedules hereto, nor any other document
delivered to Buyer as contemplated by this Agreement, shall have
revealed any facts or circumstances that, in the good faith
judgment of Buyer, reflect in a material adverse way on the
Assets, the Assumed Liabilities, or the business, operations, or
prospects of the Software Business.
7.4 Consents. All Required Government Consents and Required
Contract Consents shall have been obtained.
7.5 No Litigation. No Litigation shall be threatened or
pending against Buyer, Seller or either Owner before any court or
governmental agency that, in the reasonable opinion of counsel
for Seller, could result in the restraint or prohibition of any
such party, or the obtaining of damages or other relief from such
party, in connection with this Agreement or the consummation of
the transactions contemplated hereby.
7.6 No Material Adverse Change. From Effect Agreement until
the Closing Date, Seller shall not have suffered any material
adverse change (whether or not such change is referred to or
described in any supplement to the Schedules) effecting, the
Assumed Liabilities, or the financial condition, operations, or
prospects of the Business.
7.7 Opinion of Seller's Counsel. Seller and the Owners
shall have delivered to Buyer an opinion of Xxxxxxx and
Associates, counsel to Seller and the Owners, dated as of the
Closing Date, in form and substance reasonably satisfactory to
Buyer.
7.8 Employment of Owners. At or prior to the Closing, the
Owners shall have become employees at will of Xxxxxx or the
Buyer, as the case may be.
7.9 Non-Compete Agreements. At or prior to the Closing, the
Owners shall each have entered into non-compete agreements in the
form attached hereto as Schedule 7.9, the effectiveness of which
shall be expressly contingent upon the occurrence of Closing.
7.10 Releases. At or prior to the Closing, the Owners shall
have each entered into releases in the form attached hereto as
Schedule 7.10, the effectiveness of which shall be expressly
contingent upon the occurrence of Closing.
Section 8
CLOSING
8.1 Closing. The closing of the purchase and sale of the
Assets and the transfer and assumption of the Assumed Liabilities
(the "Closing") shall take place at the offices of Buyer at 10:00
AM on March 31, 1997 (the "Closing Date").
8.2 Actions at Closing. At Closing, Buyer and Seller shall
take the following actions, in addition to such other actions as
may otherwise be required under this Agreement:
a. Copies of Consents. Seller shall deliver to Buyer
copies of all Required Contract Consents and all Required
Government Consents.
b. Conveyance Instruments. Seller shall deliver to
Buyer such warranty deeds, bills of sale, assignments, and other
instruments of conveyance and transfer as Buyer may reasonably
request to effect the assignment to Buyer of the Assets.
c. Deliver of Assets. Seller shall deliver to Buyer all
Inventory, tangible Assets, Technical Documentation, Business
Records, and all copies of, but a least one master copy of each
version of, the Software Programs (in both source code and object
code form).
d. Payment of Purchase Price. Buyer will cause to be
issued at the written direction of Seller two hundred thousand
(200,000) shares of the Xxxxxx Stock of which one hundred
thousand (100,000) will be immediately delivered, or caused to be
delivered, by Seller to the escrow agent referred to in the next
sentence of this Section 8.2.d. Buyer, Seller and Owners will
enter into an escrow agreement in the form of Schedule 8.2.d (the
"Escrow Agreement") with Xxxxxxx X. Xxxxxx. At a minimum the
Escrow Agreement shall provide that Buyer may adjust or set off,
as the case may be, any amount to which it may be entitled under
Sections 10.1, 10.6 and 12.12 against any Xxxxxx Stock held in
escrow under the Escrow Agreement.
f. Assumption Agreement. Buyer shall deliver to Seller
an assumption agreement pursuant to which Buyer assumes and
agrees to pay and perform the Assumed Liabilities.
g. Certificates. Each Party shall deliver the
certificates required under Section 6.1 and 7.1, respectively, as
to the accuracy of the representations and warranties contained
herein, the compliance with the covenants and agreements
contained herein, and the satisfaction of the conditions to
Closing contained herein.
h. Opinion of Seller's Counsel. Seller shall cause its
counsel to deliver to Buyer the legal opinion required under
Section 7.7.
i. Employment. Each of the Owners shall become
employees at will of Xxxxxx or the Buyer.
k. Non-Compete Agreement. Each of the Owners shall have
entered into the non-compete agreements set forth in Schedule
7.9.
l. Releases. Each of Xxxxxx and the Owners shall have
entered into the releases set forth in Schedules 6.7 and 7.10
respectively.
8.3 Further Assurances. At and after the Closing, without
further consideration, Seller and each Owner shall take all such
other action and shall procure or execute, acknowledge, and
deliver all such further certificates, conveyance instruments,
consents, and other documents as Buyer or its counsel may
reasonably request (1) to vest in Buyer, and perfect and protect
Buyer's right, title, and interest in, and enjoyment of, the
Assets or (2) to ensure more effectively the compliance of Seller
with its agreements, covenants, warranties, and representatives
under this Agreement.
Section 9
COVENANTS OF SELLER AND BUYER FOLLOWING CLOSING
9.1 Tax Matters. Seller shall have the right, liability and
responsibility to direct the handling of all tax matters
affecting or relating to it, including the prosecution of all
administrative and judicial remedies, the settlement of all
issues, and the execution of agreements, consents, or waivers,
extending the statute of limitations, provided that no such
action, agreement, or stipulation shall have any effect on the
tax position or liability of Buyer, including as successor to the
Business, or result in any increase in the Assumed Liabilities.
Buyer understands that Seller and Owners intend that the
transactions contemplated by this Agreement and the liquidation
of Seller pursuant to a plan of liquidation shall constitute a
Plan of Reorganization and shall qualify as a "C" reorganization
under IRC section 368 (a)(1) (C). Buyer agrees that, in the event
there is a challenge to that places in issue that qualification,
it will, at Seller's and Owners' sole liability and subject to
reimbursement by Seller or Owners for all the expenses incurred
thereby, reasonable cooperate with Seller and Owners to furnish
such relevant information as they may request.
9.2 Allocation of Purchase Price. The Purchase Price shall
be allocated to the Assets and Assumed Liabilities as set forth
in Schedule 9.2, and all tax returns and reports filed by Seller
and Buyer with respect to the transactions contemplated by this
Agreement shall be consistent with that allocation.
9.3 Transfer Taxes. All sales, transfer, and similar taxes
and fees (including all recording fees, if any) incurred in
connection with this Agreement and the transactions contemplated
hereby shall be borne by Seller and Seller shall file all
necessary documentation with respect to such taxes.
9.4 Non-Compete. For a period of five (5) years after the
Closing Date, Seller shall not engage in the business of
acquiring, developing, marketing, distributing, licensing, or
maintaining systems and application computer programs having any
function similar to, competitive with, or substitutable for, the
Software Programs, anywhere in the world, except as a customer or
authorized distributor of Buyer or otherwise with Buyer's consent
(which may be withheld in Buyer's sole discretion). Seller
acknowledges and agrees that the current market for the Software
Programs extends throughout the entire world, and it is therefore
reasonable to prohibit Seller from competing with Buyer anywhere
in such territory. Seller shall not engage in any such activity,
directly or indirectly, on its own behalf or in the service of or
on behalf of others.
9.5 Seller's name. On or within thirty (30) days after the
Closing Date, Seller shall change its name to a name not
including Cyberiad and which is acceptable to Buyer, which
acceptance shall not be unreasonably withheld.
Section 10
INDEMNITY
10.1 Indemnification by Seller and Owners. Seller and
Owners shall jointly and severely indemnify, defend, and hold
harmless Buyer and each other member of the Group, and their
respective successors and assigns and the directors, officers,
employees, and agents of each (collectively, the "Buyer Group"),
at, and at any time after, the Closing, from and against any and
all demands, claims, actions, or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts,
together with interest and penalties (collectively, a "Loss" or
"Losses"), asserted against, resulting to, imposed upon, or
incurred by the Buyer Group, directly or indirectly, by reason
of, resulting from, or arising in connection with any of the
following:
a. Breach of Obligation. Any breach of any
representation, warranty, or agreement of Seller contained in or
made pursuant to this Agreement, including the agreements and
other instruments contemplated hereby.
b. Excluded Liabilities. Any liabilities or obligations
of any kind or nature whatsoever, whether accrued, absolute,
contingent, or otherwise, known or unknown, arising out of or in
connection with the conduct of the Business or the ownership or
use of the Assets prior to the Closing Date, except for the
Assumed Liabilities.
c. Failure to Obtain Consents. Any failure to obtain
the Required Government Consents or the Required Contract
Consents.
d. Noncompliance with Bulk Sales Law. Any failure to
comply with any "bulk sales" or similar laws relating to notices
to creditors.
e. Incidental Matters. To the extent not covered by the
foregoing, any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel,
other expenses of investigation, handling, and litigation, and
settlement amounts, together with interest and penalties,
incident to the foregoing.
10.2 Indemnification by Buyer. Buyer shall indemnify,
defend, and hold harmless Seller and its successors and assigns
and the directors, officers, employees, and agents of each
(collectively, the "Seller Group"), at, and at any time after,
the Closing, from and against any and all demands, claims,
actions or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including reasonable fees and
expenses of counsel, other expenses of investigation, handling,
and litigation, and settlement amounts and including any net
income tax amount associated with all such indemnification
recoveries (collectively, a "Loss" or "Losses"), asserted
against, resulting to, imposed upon, or incurred by the Seller
Group, to the extent arising from any of the following:
a. Breach of Obligation. Any breach of any
representation, warranty, or agreement of Buyer contained in or
made pursuant to this Agreement, including the agreements and
other instruments contemplated hereby.
b. Assumed Liabilities. Any of the Assumed Liabilities,
except insofar as such Loss represents an Excluded Liability.
10.3 Notice of Claim. The party entitled to indemnification
hereunder (the "Claimant") shall promptly deliver to the party
liable for such indemnification hereunder (the "Obligor") notice
in writing (the "Required Notice") of any claim for recovery
under Section 10.1 or Section 10.2, specifying in reasonable
detail the nature of the Loss, and, if known, the amount, or an
estimate of the amount, of the liability arising therefrom (the
"Claim"). The Claimant shall provide to the Obligor as promptly
as practicable thereafter information and documentation
reasonably requested by the Obligor to support and verify the
claim asserted, provided that, in so doing, it may restrict or
condition any disclosure in the interest of preserving privileges
of importance in any foreseeable litigation.
10.4 Defense. If the facts pertaining to the Loss arise out
of the claim of any third party (other than a member of the Buyer
Group or Seller Group, whichever is entitled to indemnification
for such matter) available by virtue of the circumstances of the
Loss, the Obligor may assume the defense or the prosecution
thereof, including the employment of counsel or accountants, at
its cost and expense. The Claimant shall have the right to employ
counsel separate from counsel employed by the Obligor in any such
action and to participate therein, but the fees and expenses of
such counsel employed by the Claimant shall be at its expense.
The Claimant shall have the right to determine and adopt (or, in
the case of a proposal by Obligor, to approve) a settlement of
such matter in its reasonable discretion, except that Claimant
need not consent to any settlement that (1) imposes any non-
monetary obligation or (2) Obligor does not agree to pay in full.
The Obligor shall not be liable for any settlement of any such
claim effected without its prior written consent, which shall not
be unreasonably withheld. Whether or not the Obligor chooses to
so defend or prosecute such claim, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish
such records, information, and testimony, and attend such
conferences, discovery proceedings, hearings, trials, and
appeals, as may be reasonably requested in connection therewith.
10.5 Limitation. Notwithstanding anything in this Section
10 to the contrary, each Party's total liability to the other
Parties for indemnification pursuant to Section 10, exclusive of
Losses attended by fraud or any knowing or wilful breach of this
Agreement, shall not exceed the then value of the Xxxxxx
Securities. Except for claims made under this Section 10 arising
out of or in connection with or relating to a claim made by a
third party or a claim attended by fraud or any knowing or
willful breach of this Agreement, no claim may be made under this
Article 10 more than thirty (30) months from the Closing Date.
Furthermore, no claim may be made under this Article 10 by any
Party until and unless that Party's claims against the other
Parties to this Agreement exceed in the aggregate one thousand
dollars ($1000).
10.6 Escrow; Right of Set-off. Upon ten (10) business days'
notice to Seller and Owners specifying in reasonable detail the
basis for such set-off, Buyer may set off any amount to which it
may be entitled under Section 3.1.a, this Section 10 or Section
12.12 and against, at Buyer's sole election, (i) any Xxxxxx Stock
held in escrow under the Escrow Agreement and (ii) the then
unexercised rights and privileges in the Phantom Stock. The
exercise of such right of set-off by Buyer in good faith, whether
or not ultimately determined to be justified, will not constitute
an event of default under this Agreement or the Escrow Agreement.
Neither the exercise of nor the failure to exercise such right of
set-off or to give a notice of a claim under the Escrow Agreement
will constitute an election of remedies or limit Buyer in any
manner in the enforcement of any other remedies that may be
available to it.
10.7 Jurisdiction. Seller and Owners hereby consent to the
non-exclusive jurisdiction of any court in which a proceeding is
brought against Buyer for purposes of any claim under this
Section 10 with respect to such proceeding or the matters alleged
therein, and agree that process may be served on Seller or Owners
with respect to such a claim anywhere in the world by certified
mail, return receipt requested, or any other manner provided by
law.
Section 11
CONFIDENTIALITY
11.1 Confidentiality Obligation of Seller and Owners
Following Closing. Following the occurrence of Closing, Seller
and Owners shall, and shall use its best efforts to cause their
personnel and agents to, hold in strict confidence, not disclose
to any person without the prior written consent of Buyer, and not
use in any manner whatsoever, any confidential business or
technical information remaining in its possession concerning the
Business or the Assets. Such confidential information
specifically includes all source code, system and user
documentation, and other Technical Documentation pertaining to
the Software Programs, including any proposed design and
specifications for future products and products in development,
marketing plans, and all other technical and business information
concerning the Business. Promptly following Closing, Seller and
Owners shall surrender to Buyer or destroy all materials
remaining in their possession containing any such confidential
information, including all copies, extracts, adaptations, and
transcriptions thereof.
11.2 Scope of Confidential Information. For purposes of
this Agreement, information shall not be deemed confidential (1)
if such information is available in full from public sources; (2)
if such information is received from a third party not under an
obligation to keep such information confidential; (3) if the
recipient can conclusively demonstrate that such information was
independently developed by the recipient; or (4) if such
information solely and exclusively consists of residual
information, provided that such residual is not reproduced or
disclosed by the recipient to any third-party and is not by
recipient's use fixed in any tangible medium of expression
(including but not limited to any machine readable material) or
was not source code. Residual information shall mean information
retained by a recipient only in non-tangible form.
11.3 Judicial Proceedings. The provisions of this Section 11
shall not apply to any disclosure made pursuant to any order of
any court, provided that the recipient in question has notified
Buyer immediately upon its notice or knowledge of such order or
the proceedings therefor and provided further that the recipient
fully cooperates with Buyer in any efforts Buyer may make to
intervene in such proceedings or to otherwise prevent such
disclosure.
Section 12
MISCELLANEOUS
12.1 Entire Agreement. This Agreement (including the
Schedules), and the other certificates, agreements, and other
instruments to be executed and delivered by the parties in
connection with the transactions contemplated hereby; constitute
the sole understanding of the parties with respect to the subject
matter hereof. No amendment, modification, or alteration of the
terms or provisions of this Agreement shall be binding unless the
same shall be in writing and duly executed by the parties hereto.
12.2 Parties Bound by Agreement; Successors and Assigns.
The terms, conditions, and obligations of this Agreement shall
inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns thereof. Without the
prior written consent of the other party, Buyer may assign its
rights, duties, or obligations hereunder or any part thereof to
any other person or entity, which shall thereupon become Buyer,
provided that at the time of such assignment Buyer
unconditionally and irrevocably guarantees the payment and
performance of any duties or obligations so assigned.
12.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed
to be an original and all of which shall constitute the same
instrument.
12.4 Headings. The headings of the Sections and paragraphs
of this Agreement are inserted for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the
construction hereof.
12.5 Modification and Waiver. Any of the terms or
conditions of this Agreement may be waived in writing at any time
by the party that is entitled to the benefits thereof. No waiver
of any of the provisions of this Agreement shall be deemed to or
shall constitute a waiver of any other provision hereof (whether
or not similar).
12.6 Expenses. Seller and Buyer shall each pay all costs
and expenses incurred by it or on its behalf in connection with
this Agreement and the transactions contemplated hereby,
including fees and expenses of its own financial consultants,
accounts, and counsel.
12.7 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a Party may
designate by notice to the other parties):
Seller:
Cyberiad Software, Inc.
Xxxxx 000
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Owners:
if to Xxxxxxxx:
Xx. Xxxxxxxxxxx Xxxxxxxx
00 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
if to Xxxxx:
Xx. Xxxxxxx X. Xxxxx
00 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
with a copy to:
Xxxxxxx & Associates
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: 000-000-0000
Buyer:
Xxxxxx, Interactive, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
with copies to:
Xxxxxx, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
and
Halket & Pitegoff LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
and
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
12.8 Bulk Sales Law. The parties waive compliance with any
bulk sales laws or similar laws relating to notices to creditors.
12.9 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Rhode
Island without giving effect to the principles of conflicts of
law thereof.
12.10 Public Announcements. Neither Seller nor any Owner
shall issue any press release or make any public statement
regarding the existence of, terms and conditions of, or
transactions contemplated by, this Agreement without the
agreement of Buyer, except as such party's counsel advises in
writing may be required by law.
12.11 Third-Party Beneficiaries. With the exception of (1)
the Parties to this Agreement and (2) the Buyer Group and the
Seller Group, there shall exist no right of any person to claim a
beneficial interest in this Agreement or any rights occurring by
virtue of this Agreement.
12.12 Guaranty. To induce Buyer to enter into this Agree
ment, the Owners jointly and severally guarantee to Buyer the
due, full, complete and timely performance by Seller and/or the
other Owner of each and every covenant, obligation,
representation and warranty of Seller and/or the other Owner
under this Agreement, together with all costs and expenses
(including legal fees and expenses of attorneys chosen by Buyer)
incurred by Buyer because of Seller's default or because of any
default under this guarantee. This is an absolute, unconditional,
and unlimited guarantee and may be proceeded upon by Buyer before
taking any action against Seller or either Owner or after action
against Seller or either Owner has been commenced. The
obligations of the Owners hereunder shall not be discharged or
impaired or otherwise affected by the liquidation, bankruptcy or
other winding up of Seller or either Owner, by the failure of
Buyer to assert any claim or demand or to enforce any remedy
under this Agreement, by any waiver, modification, or amendment
of any provision hereof, by any default, failure, or delay,
willful or otherwise, in the performance by the Seller or either
Owner of its covenants, obligations, representation and
warranties under this Agreement, or by any other act or thing or
omission or delay to do any other act or thing which may or might
in any manner or to any extent vary the risk of the Owners, or
either of them, or would otherwise operate as a discharge of the
Owners as a matter of law. No payment by the Owners pursuant to
this guarantee shall entitle the Owners, by subrogation to the
rights of Buyer or otherwise, to any payment by Seller or either
Owner or out of or in respect of the property of Seller, except
after payment in full of all sums (including interest, costs and
expenses) which may be or become payable by Seller or either
Owner to Buyer at any time or from time to time pursuant to this
Agreement or otherwise. In addition, and not in substitution, to
the foregoing, upon the liquidation, bankruptcy or winding up of
Seller, the Owners jointly and severally shall thereupon
immediately assume and be personally liable and responsible for
the due, full, complete and timely performance by Seller of each
and every covenant, obligation, representation and warranty of
Seller and/or the other Owner under this Agreement.
12.13 References. Whenever reference is made in this
Agreement to any Article, Section, or Schedule, such reference
shall be deemed to apply to the specified Article or Section of
this Agreement or the specified Schedule to this Agreement.
12.14 Survival of Agreements. All Covenants, agreements,
representations, and warranties made herein shall survive the
execution and delivery of this Agreement and the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf on the date indicated.
CYBERIAD SOFTWARE, INC.
BY: /S/Xxxxxxxxxxx X. Xxxxxxxx, President
XXXXXX INTERACTIVE, INC.
BY: /S/Xxxxx Xxx, President
OWNERS:
/S/ Xxxxxxx Xxxxx
/S/ Xxxxxxxxxxx X. Xxxxxxxx
