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(Exhibit 1 to Schedule 13D)
ASSET PURCHASE AGREEMENT
BETWEEN
ARI NETWORK SERVICES, INC.
AND
XXXXXX & XXXXXXXX CORPORATION
September 15, 1998
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TABLE OF CONTENTS
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Page
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ARTICLE I Assets to Be Purchased ......................................... 1
1.1. Subject Assets ............................................. 1
1.2. Retained Assets ............................................ 3
ARTICLE II Consideration ................................................. 4
2.1. Consideration; Payment ..................................... 4
2.2. Assumption of Liabilities .................................. 4
2.3. Non-Transferable and Non-Assignable Assets ................. 4
ARTICLE III Closing ...................................................... 5
3.1. Time And Place of Closing .................................. 5
3.2. Conditions Precedent to Buyer's Performance ................ 5
3.3. Conditions Precedent to Seller's Performance ............... 6
3.4. Deliveries of Seller ....................................... 6
3.5. Deliveries of Buyer ........................................ 7
ARTICLE IV Warranties and Representations of Seller ...................... 8
4.1. Corporate Matters .......................................... 8
4.2. No Violation ............................................... 9
4.3. No Consent ................................................. 9
4.4. Title to and Condition of Subject Assets ................... 9
4.5. Software and Licensed Software ............................. 9
4.6. Accounts Receivable ........................................ 10
4.7. Litigation ................................................. 10
4.8. Intangible Assets .......................................... 10
4.9. Financial Statements ....................................... 11
4.10. Taxes ..................................................... 11
4.11. Contracts and Other Agreements ............................ 11
4.12. Customization Projects .................................... 12
4.13. Employees ................................................. 13
4.14. Labor Practices ........................................... 13
4.15. ERISA ..................................................... 13
4.16. Conduct Out of Ordinary Course ............................ 13
4.17. No Transfer of Assets ..................................... 14
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4.18. Insurance ................................................. 14
4.19. Brokers and Agents ........................................ 14
4.20. Warranties ................................................ 14
4.21. Laws and Permits .......................................... 14
4.22. Customers ................................................. 14
4.23. Investment Intent ......................................... 15
4.24. Warranties True and Correct ............................... 15
4.25. Warranties Survive Closing ................................ 15
4.26. Knowledge of Seller ....................................... 15
ARTICLE V Warranties and Representations of Buyer ........................ 16
5.1. Corporate Matters .......................................... 16
5.2. No Violation ................................................ 16
5.3. No Consent .................................................. 16
5.4. No Litigation ............................................... 16
5.5. Brokers and Agents .......................................... 16
5.6. SEC Documents ............................................... 17
5.7. Financial Statements ........................................ 17
5.8. Capitalization .............................................. 17
5.9. Registration Rights ......................................... 18
5.10. Subject Shares ............................................. 18
5.11. Warranties True and Correct ................................ 18
5.12. Warranties Survive Closing ................................. 18
5.13. Knowledge of the Buyer ..................................... 18
ARTICLE VI [Reserved] .................................................... 18
ARTICLE VII Conduct Prior to and Subsequent to Closing ................. 19
7.1. Execution and Delivery of Further Instruments by Seller .. 19
7.2. Access to Business Records After Closing ................. 19
7.3. Seller's Customers ....................................... 19
7.4 Sale of BMS Business ..................................... 19
7.5. Conduct of Subject Business Prior to the Closing ......... 20
7.6. Access to Information .................................... 20
7.7. Consummation of Agreement ................................ 20
7.8. Noncompetition ........................................... 21
7.9. Termination of Dealings .................................. 21
7.10. Confidentiality ......................................... 21
7.11. COBRA ................................................... 22
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ARTICLE VIII Indemnification ............................................. 22
8.1. Indemnification of Buyer ................................... 22
8.2. Indemnification of Seller .................................. 23
8.3. Procedure Relative to Indemnification ...................... 23
8.4. Certain Limits ............................................. 24
ARTICLE IX Bulk Sales .................................................... 24
ARTICLE X [Reserved] ..................................................... 25
ARTICLE XI Miscellaneous ................................................. 25
11.1. Expenses .................................................. 25
11.2. Notices ................................................... 25
11.3. Confidentiality and Public Announcements .................. 26
11.4. Entire Agreement .......................................... 26
11.5. Legends ................................................... 26
11.6. Binding Effect ............................................ 27
11.7. Paragraph Headings ........................................ 27
11.8. Severability .............................................. 27
11.9. Terminology ............................................... 27
11.10. Applicable Law ........................................... 27
11.11. Dispute Resolution ........................................ 27
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LIST OF SCHEDULES AND EXHIBITS
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Schedule 1(b) Software
Schedule 1(c) Licensed Software
Schedule 1(d) Fixed Assets
Schedule 1(h) Registrations
Schedule 1(l) Assumed Contracts
Schedule 1.2 Retained Assets
Schedule 2.1 Allocation of Purchase Price
Schedule 2.2 Assumed Liabilities
Schedule 4.1 Foreign Subsidiaries
Schedule 4.7 Litigation
Schedule 4.8 Intangible Assets
Schedule 4.9 Financial Statements
Schedule 4.11 Material Contracts
Schedule 4.12 Customization Projects
Schedule 4.18 Insurance
Schedule 4.20 Warranties
Schedule 4.21 Permits
Schedule 4.22 Customers
Schedule 5.8 Capitalization
Schedule 5.9 Registration Rights
Schedule 7.4 BMS Assets
Exhibit A Xxxx of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Registration Rights Agreement
Exhibit D Customer Contract
Exhibit E-1 - E-9 Assignments of Trademark
Exhibit F Registration Name Change Agreement
Exhibit G Opinion of Seller's Counsel
Exhibit H Opinion of Buyer's Counsel
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of September 15, 1998 (the
"Effective Date"), by and between ARI NETWORK SERVICES, INC., a Wisconsin
corporation ("Buyer"), with a principal place of business at 000 X. Xxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000-0000, and XXXXXX & XXXXXXXX CORPORATION, a
Wisconsin corporation ("Seller"), with a principal place of business at 00000
Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000-0000.
BACKGROUND:
A. Seller, directly, since the dissolution of its wholly-owned
subsidiary POWERCOM-2000, Inc. in June 1998, and indirectly through its
wholly-owned subsidiaries POWERCOM-2000 Australia PTY Ltd., POWERCOM-2000,
Ltd., POWERCOM-2000 Canada, Inc., POWERCOM-2000 Germany Gmbh, and POWERCOM-2000
UK Limited (such subsidiaries, collectively, the "Foreign Subsidiaries") is
engaged in the business of providing electronic commerce software and services
to companies primarily in the outdoor power, power tool and power sports
industries (the "Subject Business").
B. Buyer desires to purchase from Seller and the Foreign
Subsidiaries all of the Subject Assets (as hereafter defined) and to assume the
Assumed Liabilities (as hereafter defined) related to, used or held for use in
the Subject Business, and Seller desires to sell to Buyer the Subject Assets
and to have Buyer assume the Assumed Liabilities in accordance with the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
ASSETS TO BE PURCHASED
1.1. SUBJECT ASSETS. Subject to the terms and conditions set forth in
this Agreement, at the Closing (as defined in Paragraph 3.1, below), Seller
will, and will cause the Foreign Subsidiaries to, sell, transfer, convey, assign
and deliver to Buyer, and Buyer will acquire and purchase from Seller and the
Foreign Subsidiaries, all right, title and interest of Seller and the Foreign
Subsidiaries in and to the properties, assets and rights of every nature, kind
and description, tangible and intangible, whether accrued, contingent or
otherwise and whether now existing or after this date acquired primarily
relating to, or used or held for use primarily in connection with the operation
of the Subject Business, excluding the Retained Assets as hereinafter defined
(the "Subject Assets"), including, without limitation, those items in the
following categories:
(a) the lock boxes and post office boxes pertaining to the Subject
Business;
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(b) the software programs identified in Schedule 1(B), including
the source and object code thereof and any and all existing
documentation (regardless of whether such documentation is provided on
a commercial basis) including flow charts, program descriptions,
program listings, layouts, schematics, engineering and design drawings,
technical support documentation, diagrams and other documentation
depicting or specifying the designs and components of such software
programs, libraries, logs, reports, drafts, models, prototypes,
technical and other data, test and other data and programs, any and all
proceeding versions, works in process, fixes, enhancements, future
releases or other developments by Seller or any of the Foreign
Subsidiaries which may be combined or embodied in any medium or format
whatsoever, and for all language versions and hardware platforms,
software platforms and operating environments and whether sold
separately or bundled with other applications, consisting of a set of
logical instructions and information which guide the functioning of a
processor, and which shall include all information, electronic form
content, so-called "look & feel", graphic design, electronic form user
methodologies, user interface design, software tools primarily related
to the Subject Business and owned by the Seller or any of the Foreign
Subsidiaries, know-how, systems, and processes concerning such computer
programs but excluding the Licensed Software (collectively, the
"Software");
(c) Seller's or any of the Foreign Subsidiaries' rights in the
third party software licensed for use by Seller or any of the Foreign
Subsidiaries and contained in or necessary for the operation or
development of the Software or otherwise used in the Subject Business
as listed in SCHEDULE 1(C) (the "Licensed Software");
(d) the fixed assets primarily used in the Subject Business,
including, without limitation, the furniture, furnishings, fixtures,
machinery, computers, printers, copiers, phone systems and other
equipment, wherever located ("Fixed Assets") described on SCHEDULE
1(D);
(e) all accounts receivable (whether billed or unbilled) and other
receivables pertaining to the Subject Business (the "Accounts
Receivable");
(f) all credits, prepaid expenses, advance payments and deposits
pertaining to the Subject Business;
(g) all of the supplies, consumable materials and other similar
assets held for use in the Subject Business, including without
limitation, supplies of sales literature, catalogs and brochures;
(h) all of the following assets or rights pertaining primarily to
the Subject Business (collectively, with the Software and the Licensed
Software, the "Intangible Assets"):
(1) patents, patent applications, trade names, trademarks,
service marks, trademark registrations and any applications
for trademark registrations, copyrights, copyright
registrations and applications for copyright registrations,
whether issued or pending, and whether registered or
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unregistered ("Registrations") including those items listed
on SCHEDULE 1(H);
(2) all inventions, improvements, product specifications,
secret processes, formulas, technologies, trade secrets,
know-how, and technical knowledge;
(3) the name "Powercom-2000" and all names similar to such
name used by Seller or any Foreign Subsidiary primarily in
the Subject Business and all rights to the World Wide Web
site with the URLs "xx0x.xxx" and any other URL registered
(whether or not now used) for use primarily by the Subject
Business; and
(4) all other intellectual property and other similar
interests;
(i) all sales, manufacturing, supplier and customer lists and
records, personnel and payroll records, accounting records, purchasing
and sales records, and all other records, wherever located, pertaining
primarily to the Subject Business;
(j) all inventories of the Subject Business, whether on hand or in
transit (the "Inventory");
(k) all causes of action, judgments, claims and demands of
whatever nature relating primarily to the Subject Business;
(l) all nondisclosure and confidentiality agreements or
nondisclosure and confidentiality provisions of other agreements and
all other agreements pertaining primarily to the Subject Business and
listed on SCHEDULE 1.1(L) (the "Assumed Contracts");
(m) all rights to phone numbers of the Subject Business; and
(n) the goodwill, if any, and all other miscellaneous assets used
primarily in the operation of the Subject Business.
1.2. RETAINED ASSETS. Notwithstanding the foregoing, the assets and
other property of Seller and the Foreign Subsidiaries set forth on SCHEDULE 1.2
hereto shall not be Subject Assets and are to be retained by Seller and the
Foreign Subsidiaries, although they may relate to the Subject Business (the
"Retained Assets").
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ARTICLE II
CONSIDERATION
2.1. CONSIDERATION; PAYMENT. As consideration for the Subject Assets,
Buyer will issue and deliver to Seller Eight Hundred Forty Thousand (840,000)
shares (the "Subject Shares") of the $.001 par value common stock ("Common
Stock") of Buyer, as adjusted for any stock dividends, stock splits, reverse
stock splits or the like that become effective or which have a record date prior
to Closing. At the Closing, Buyer will issue and deliver to Seller a certificate
or certificates representing the Subject Shares. In addition, following Closing,
Buyer will pay the amount, if any, set forth in Paragraph 7.4. The purchase
price shall be allocated among all of the Subject Assets in accordance with
SCHEDULE 2.1.
2.2. ASSUMPTION OF LIABILITIES. As of the Closing Date, Buyer will
assume and will pay and perform when due (a) all liabilities and obligations of
Seller or any of the Foreign Subsidiaries arising from and after the Closing
Date under the Assumed Contracts to the extent relating to the period from and
after the Closing Date (but excluding liabilities and obligations caused by
actions or omissions which occurred prior to the Closing Date), and (b) the
liabilities of Seller or any of the Foreign Subsidiaries on the Closing Date
primarily pertaining to the Subject Business and arising in the ordinary course
of the Subject Business including without limitation the items listed on
Schedule 2.2, exclusive, however, of liabilities owed to Seller, any Foreign
Subsidiary or any other affiliate of Seller. The liabilities assumed by Buyer in
accordance with this Paragraph 2.2 are referred to in this Agreement as the
"Assumed Liabilities." Except for the Assumed Liabilities, Buyer will assume no
obligations or liabilities of Seller or any of the Foreign Subsidiaries and
Seller will pay, perform and discharge all liabilities and obligations of Seller
or any of the Foreign Subsidiaries which are not specifically assumed by Buyer
under this Agreement, including without limitation, payroll obligations,
severance obligations and liabilities in respect of expenses accrued.
2.3. NON-TRANSFERABLE AND NON-ASSIGNABLE ASSETS. To the extent that any
of the Subject Assets, or any claim, right or benefit arising under or resulting
from such Subject Assets (collectively, the "Rights") is not capable of being
transferred without the approval, consent or waiver of any third person, or if
the transfer of a Right would constitute a breach of any obligation under, or a
violation of, any applicable law unless the approval, consent or waiver of such
third person is obtained, then, except as expressly otherwise provided in this
Agreement and without limiting the rights and remedies of the Buyer contained
elsewhere in this Agreement, this Agreement shall not constitute an agreement to
transfer such Rights unless and until such approval, consent or waiver has been
obtained. After the Closing and until all such Rights are transferred to Buyer,
Seller shall:
(a) maintain its existence and hold the Rights in trust for Buyer;
(b) comply with the terms and provisions of the Rights as agent
for the Buyer at the Buyer's cost and for the Buyer's benefit;
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(c) cooperate with the Buyer in any reasonable and lawful
arrangements designed to provide the benefits of such Rights to the
Buyer; and
(d) enforce, at the request of the Buyer and at the expense and
for the account of the Buyer, any rights of the Seller arising from
such Rights against any third person, including the right to elect to
terminate any such rights in accordance with the terms of such rights
upon the written direction of the Buyer.
In order that the full value of the Rights may be realized for the
benefit of the Buyer, the Seller shall, at the request and expense and under the
direction of the Buyer, in the name of the Seller or otherwise as the Buyer may
specify, take all such action and do or cause to be done all such things as are
reasonable and necessary or proper in order that the obligations of the Seller
under such Rights may be performed in such manner that the value of such Rights
is preserved and inures to the benefit of the Buyer, and that any moneys due and
payable and to become due and payable to the Buyer in and under the Rights are
received by the Buyer. The Seller shall promptly pay to the Buyer all moneys
collected by or paid to the Seller in respect of every such Right. The Buyer
shall indemnify and hold the Seller harmless from and against any payment, claim
or liability under or in respect of such Rights arising because of any action of
the Seller taken pursuant to this Section excluding any costs of transfer which
shall be the obligation of the Seller.
ARTICLE III
CLOSING
3.1. TIME AND PLACE OF CLOSING. The closing of the purchase and sale
contemplated in this Agreement (the "Closing") will take place at 9:00 a.m. on
September 15, 1998 (the "Closing Date") at the offices of Xxxxxxx & Xxxx, S.C.,
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx, 00000 or at such other time or
place as Seller and Buyer mutually agree.
3.2. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The obligations of
Buyer to purchase the Subject Assets and assume the Assumed Liabilities under
this Agreement are subject to the satisfaction, at or before the Closing, of all
the following conditions, any or all of which may be waived by Buyer in whole or
in part without prior notice:
(o) All representations and warranties of Seller hereunder and in
all certificates delivered by Seller to Buyer pursuant to this
Agreement shall be true and accurate in all material respects on and as
of the Closing Date as though made at that time.
(p) Seller shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by Seller on or before the
Closing Date.
(q) No litigation or proceeding will be threatened or pending
against Seller, any of the Foreign Subsidiaries or Buyer (i) for the
purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this
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Agreement or (ii) which, if adversely determined, could reasonably be
expected to have a material adverse effect on the Subject Assets or the
Subject Business.
(r) No material adverse changes shall have occurred to the Subject
Assets or in the business, prospects, liabilities, financial condition
or operations of the Subject Business since June 28, 1998.
3.3. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE. The obligations of
Seller to sell and transfer the Subject Assets under this Agreement are subject
to the satisfaction, at or before the Closing, of all the following conditions,
any or all of which may be waived by Seller in whole or in part without prior
notice:
(s) All representations and warranties of Buyer hereunder and in
all certificates delivered by Buyer to Seller pursuant to this
Agreement shall be true and accurate in all material respects on and as
of the Closing Date as though made at that time.
(t) Buyer shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by Buyer on or before the Closing
Date.
(u) No litigation or proceeding will be threatened or pending
against Seller, any of the Foreign Subsidiaries or Buyer for the
purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this Agreement.
(v) No material adverse change shall have occurred in the
business, prospects, liabilities, financial condition or operations of
Buyer since April 30, 1998.
3.4. DELIVERIES OF SELLER. At the Closing, Seller will deliver or
cause to be delivered to Buyer the following:
(a) a xxxx of sale in the form attached hereto as EXHIBIT A, and
such other assignments, certificates of title and instruments of
conveyance as Buyer may reasonably require, in a form reasonably
satisfactory to Buyer, duly executed by Seller and the Foreign
Subsidiaries;
(b) an Assignment and Assumption Agreement, in the form attached
hereto as EXHIBIT B (the "Assignment and Assumption Agreement"), duly
executed by Seller, assigning to Buyer all of Seller's right, title and
interest in and to the Assumed Contracts;
(c) the Registration Rights Agreement, in the form attached hereto
as EXHIBIT C (the "Registration Rights Agreement"), duly executed by
Seller;
(d) the Customer Contract, in the form attached hereto as EXHIBIT
D (the "Customer Contract"), duly executed by Seller;
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(e) the Assignments of Trademark, in the forms attached hereto as
EXHIBITS E-1 - E-9, duly executed by Seller;
(f) the Registration Name Change Agreement, in the form attached
hereto as EXHIBIT F (the "Registration of Name Change Agreement"), duly
executed by Seller;
(g) a certificate from the Secretary of Seller, in a form
reasonably satisfactory to Buyer, setting forth the resolutions adopted
by the Board of Directors of Seller authorizing the execution and
delivery by Seller of this Agreement and all documents to be executed
in connection with this Agreement and the taking by Seller of any and
all actions necessary or advisable to consummate the transactions
contemplated in this Agreement;
(h) a certificate dated the Closing Date signed by an authorized
officer of Seller certifying that the conditions specified in
Paragraphs 3.2(a), (b) and (d) have been fulfilled and that there is no
litigation under Paragraph 3.2(c) threatened or pending against Seller
or any of the Foreign Subsidiaries;
(i) actual or constructive possession of the complete books and
records relating to the Subject Business;
(j) a copy of the current version of the source code for the
Software on mutually agreeable electronic medium;
(k) a certificate from the Secretary of each of the Foreign
Subsidiaries, in form reasonably satisfactory to Buyer, setting forth
the resolutions adopted by the Board of Directors of such Foreign
Subsidiary authorizing the disposition of such Foreign Subsidiary's
Subject Assets to the Buyer pursuant to this Agreement;
(l) possession of the Subject Assets;
(m) the opinion of Xxxxx Xxxx, senior counsel of Seller, dated the
Closing Date, in substantially the form of EXHIBIT G;
(n) nondisclosure and confidentiality agreements in the customary
form of the Subject Business, executed by Xxxxx Xxxxx, Xxxxxxx Xxxxxx
and Xxxxx Xxxxx.
3.5. DELIVERIES OF BUYER. At the Closing, Buyer will deliver or cause
to be delivered to Seller the following:
(a) the Subject Shares as specified in Article II, above;
(b) the Assignment and Assumption Agreement, duly executed by
Buyer;
(c) the Registration Rights Agreement, duly executed by Buyer;
(d) the Customer Contract, duly executed by Buyer;
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(e) the Registration Name Change Agreement, duly executed by
Buyer;
(f) a certificate from the Secretary of Buyer, in a form
reasonably satisfactory to Seller, setting forth the resolutions duly
adopted by the Board of Directors of Buyer authorizing the execution
and delivery by Buyer of this Agreement and all documents to be
executed in connection with this Agreement and the taking by Buyer of
any and all actions necessary or advisable to consummate the
transactions contemplated in this Agreement;
(g) a certificate dated the Closing Date signed by an authorized
officer of Buyer certifying that the conditions specified in Paragraphs
3.3(a), (b) and (d) have been fulfilled and that there is no litigation
under Paragraph 3.3(c) threatened or pending against Buyer.
(h) the opinion of Xxxx Xxxxxxx, Executive Vice President and
General Counsel of Buyer, dated the Closing Date, in substantially the
form of EXHIBIT H.
ARTICLE IV
WARRANTIES AND REPRESENTATIONS OF SELLER
Seller represents and warrants to Buyer as follows as of the Effective
Date and as of the Closing Date:
4.1. CORPORATE MATTERS. Seller is a corporation duly incorporated and
validly existing under the laws of the State of Wisconsin and has and has had
the requisite corporate authority and power to carry on all activities related
to the Subject Business as currently or previously conducted. Seller is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership, leasing or holding of its properties
makes such qualification necessary unless the absence of qualification would not
have a material adverse effect on the Subject Business or the Subject Assets.
Seller has the corporate power and corporate authority to enter into this
Agreement and to consummate the transactions this Agreement contemplates. The
Board of Directors of Seller has approved the execution and delivery of this
Agreement, the agreements, documents and instruments relating to this Agreement
and the consummation of the transactions this Agreement contemplates, and this
Agreement and such other agreements, documents and instruments will constitute
valid and legally binding obligations of Seller, enforceable against it in
accordance with their respective terms. Each Foreign Subsidiary has the
corporate power and corporate authority to transfer its Subject Assets to the
Buyer pursuant to this Agreement. SCHEDULE 4.1 sets forth the name, jurisdiction
of incorporation, capitalization, ownership and officers and directors of each
Foreign Subsidiary. Each Foreign Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each Foreign Subsidiary has and has had the full power and
authority to carry on all activities as currently or previously conducted.
Except for Seller's ownership of the Foreign Subsidiaries, neither the Seller
nor any of the Foreign Subsidiaries, directly or indirectly, owns any capital
stock of, any equity interest in, or any other ownership or investment interest
in, any corporation, partnership, limited liability company, joint venture or
other business entity through which the Subject Business is conducted.
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4.2. NO VIOLATION. The execution and delivery of this Agreement does
not, and the consummation of the transactions this Agreement contemplates and
compliance with the terms of this Agreement will not (a) conflict with, or
result in any violation of, (i) any provision of the Articles of Incorporation
or By-Laws (or comparable governing instruments) of Seller or any Foreign
Subsidiary or (ii) any judgment, order or decree, or statute, law, ordinance,
rule or regulation applicable to Seller or any Foreign Subsidiary, the Subject
Business or the Subject Assets, or (b) except as set forth on SCHEDULE 4.11,
result in a breach or default under any Material Contract (as defined in
Paragraph 4.11).
4.3. NO CONSENT. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by or with respect to Seller, any
Foreign Subsidiary, the Subject Business or the Subject Assets in connection
with the execution and delivery of this Agreement or the consummation of the
transactions this Agreement contemplates.
4.4. TITLE TO AND CONDITION OF SUBJECT ASSETS. Seller and the Foreign
Subsidiaries have, and Seller will or will cause the Foreign Subsidiaries to
transfer to Buyer at Closing, good and marketable title to the Accounts
Receivable, the Intangible Assets (other than the Licensed Software), the
Inventory, the Fixed Assets and all of the other Subject Assets which Seller or
any of the Foreign Subsidiaries purports to own, tangible and intangible, free
and clear of all liens, claims and encumbrances. The Fixed Assets are in
reasonably good operating condition and repair, ordinary wear and tear and
routine maintenance excepted, and SCHEDULE 1(D) details the net book value of
the various items of Fixed Assets as reflected in Seller's accounting records
prepared in accordance with generally accepted accounting principles
consistently applied but ARE OTHERWISE PROVIDED AS IS WITHOUT ANY WARRANTY OF
ANY KIND, INCLUDING BUT NOT LIMITED TO ALL EXPRESS, IMPLIED AND STATUTORY
WARRANTIES, INCLUDING WITHOUT LIMITATION ALL WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE AND MERCHANTABILITY. All leased property is substantially in
the condition required of such property by the lease of such property.
4.5. SOFTWARE AND LICENSED SOFTWARE.
(a) SCHEDULE 1(B) identifies all software currently licensed to
others by the Subject Business or under development by the Subject
Business.
(b) The Software is owned by Seller free and clear of all liens,
claims or encumbrances.
(c) Except as listed on the SCHEDULE 1(B), Seller is not
obligated to pay any compensation to any person or entity with respect
to use of the Software.
(d) Upon Closing, Buyer may use, modify and/or distribute the Software
without restriction and, except as listed on the SCHEDULE 1(B),
there are no fees, charges, licenses or other costs payable by Buyer
with respect to the Software or the use or distribution of the
Software.
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(e) The Software performs substantially in accordance with its
functional specifications and related documentation. Seller
has provided Buyer with all fault logs and other logs and
other records relating to the Software and any defects or
deficiencies in the possession of Seller.
(f) Except as set forth on SCHEDULE 1(B), Seller has not disclosed
the source code for any of the Software or other
confidential or proprietary information constituting,
embodied in or pertaining to the Software to any person or
entity other than employees or contractors of Seller who
are bound by confidentiality agreements in substantially
the form disclosed to Buyer. Except as set forth on
SCHEDULE 1(B), none of the Software has been placed in
escrow or is subject to other arrangements pursuant to
which the source code has been or could be delivered or
disclosed to any third party.
(g) Except as provided in SCHEDULE 1(B), the Software is designed
to be used prior to, during, and after the calendar year
2000 A.D., and the Software will operate during each such
time period without error related to date data and,
specifically, be able to accurately carry out calculations
using, and compare and sequence, date data of the twentieth
and twenty-first centuries, including leap year
calculations.
(h) SCHEDULE 1(C) identifies all Licensed Software.
4.6. ACCOUNTS RECEIVABLE. The Accounts Receivable arose from Seller's
or a Foreign Subsidiary's performance of services or from a bona fide sale or
license of software or other goods or services and Seller has received no notice
of any dispute regarding the payment of any Accounts Receivable.
4.7. LITIGATION. SCHEDULE 4.7 sets forth all litigation, proceedings or
investigations or other legal or administrative proceedings pending or, to the
best of Seller's knowledge, threatened (a) against or relating to any Foreign
Subsidiary, the Subject Assets or the Subject Business, (b) which questions or
challenges the validity of this Agreement or any action taken by Seller pursuant
to this Agreement or in connection with the transactions contemplated hereby or
(c) against Seller which, if adversely determined, could reasonably be expected
to have an adverse effect on the Subject Business.
4.8. INTANGIBLE ASSETS. The Subject Business does not own any
Registrations except as set forth on SCHEDULE 1(H). To Seller's knowledge, the
Intangible Assets do not infringe or otherwise violate the patent, trade name,
trademark, copyright or other rights of any other person in the United States or
in any foreign country in which the Subject Business has sold products or
conducted business. To Seller's knowledge, the Intangible Assets are all the
intellectual property necessary for the conduct of the Subject Business as
currently conducted. Any employee or independent contractor of Seller or any
Foreign Subsidiary having any interest in any of the Intangible Assets has
assigned or will assign such interest or interests to Seller prior to the
Closing. Except as set forth in the SCHEDULE 4.8, Seller has taken all
commercially reasonable steps to enforce its rights in the Intangible Assets and
has not granted any license or other right under, or authorized or permitted
anyone else to use, any of the Intangible Assets, nor, to the
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knowledge of Seller, does any other person have any right in the foregoing, nor
to the best knowledge of Seller, is any other person making any unauthorized use
of any of the foregoing. Except as set forth in SCHEDULE 4.8, all of Seller's
rights in, to and under the Intangible Assets and its other proprietary rights
are transferable by Seller in accordance with this Agreement without the consent
of any third party.
4.9. FINANCIAL STATEMENTS. The income statement and balance sheet of
the Subject Business as and for the fiscal years ended June 28, 1998, and June
29, 1997, and the interim financial statements for the period ended August 28,
1998 (collectively, the "Financial Statements"), are attached hereto as SCHEDULE
4.9 and present fairly the financial condition of Seller on the dates of such
statements and the results of operations for the periods in such Financial
Statements and were prepared in accordance with generally accepted accounting
principles, consistently applied ("GAAP") except that they do not contain
footnotes required by GAAP and, in the case of interim financial statements, are
subject to audit and appropriate year-end adjustments. The Financial Statements
do not reflect adjustments relating to capitalized software or any required
provision for loss contracts under percentage of completion accounting. Except
as set forth in SCHEDULE 4.9, there has been no change in the capitalization,
assets, liabilities, business prospects or methods of doing business of the
Subject Business since June 28, 1998, other than changes in the ordinary course
of business (none of which have had a material adverse effect on the business,
prospects or condition, financial or otherwise, of the Subject Business).
4.10. TAXES. To the extent relating to the Subject Business or Subject
Assets: (I) all federal, state, county, local and foreign tax returns, reports
and forms of the Seller or any Foreign Subsidiary due prior to the date of this
Agreement have been filed and properly reflect the tax liability of the Seller
or Foreign Subsidiary, and all federal, state, county, local and foreign taxes
due and payable prior to the Closing (including applicable payroll and sales
taxes) will have been paid prior to the Closing; (ii) no tax liens have been
filed and no claims are being asserted with respect to any taxes and there is no
basis for any such lien or claim; and (iii) neither Seller nor any Foreign
Subsidiary is a party to any agreement for the extension of the time for the
assessment and payment of any tax and no restriction on assessment or collection
of taxes has been waived with respect to the Seller or any Foreign Subsidiary.
4.11. CONTRACTS AND OTHER AGREEMENTS. SCHEDULE 4.11 lists all of the
following written or oral contracts (the "Material Contracts") to which Seller
or any Foreign Subsidiary is bound that relate to the Subject Business:
(a) All contracts not in the ordinary course of business;
(b) Contracts with Seller or an affiliate thereof;
(c) Contacts pertaining to the borrowing of money;
(d) Contacts creating guarantees or powers of attorney;
(e) Contacts relating to employment (other than at-will) or
consulting services;
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(f) VAR, distributor, dealer, representative, agency or other
distribution agreements;
(g) Development agreements;
(h) Joint venture, partnership or similar agreements or cooperative
arrangements;
(i) Noncompetition, confidentiality, secrecy or similar agreements
that impose obligations on the Subject Business;
(j) Contracts involving payment or performance by either party
thereto having an aggregate value of $25,000 or more;
(k) Licenses or royalty agreements (other than licenses to customers
in the ordinary course of business);
(l) Contracts granting exclusive rights of any kind to any other
party;
(m) Contracts that cannot be canceled on thirty (30) days or less
notice without payment or penalty;
(n) Contracts relating to the lease of real property; or
(o) Contracts requiring performance by Seller or a Foreign
Subsidiary outside of the United States.
Seller has delivered true and correct copies of each of the Material
Contracts, and all amendments and modifications of such Contracts, to Buyer (and
true and correct English translations thereof for any Material Contract written
in a foreign language). Each Material Contract is valid, binding and in full
force and effect in accordance with its terms. Except as set forth on SCHEDULE
4.11, none of Seller, any Foreign Subsidiary, nor, to the best of Seller's
knowledge, any other party to a Material Contract is in breach or default under
any Material Contract (with or without the lapse of time, or the giving of
notice, or both). Neither Seller nor any Foreign Subsidiary has relinquished any
rights it has under any of the Material Contracts. Except in respect of
Intellectual Property, any and all contracts, licenses, agreements and similar
items held in the name of, or for the benefit of, Seller or any Foreign
Subsidiary, and that are necessary to the conduct of the Subject Business as
currently conducted, are included in SCHEDULE 4.11.
4.12. CUSTOMIZATION PROJECTS. Attached hereto as SCHEDULE 4.12 is a
true and correct listing of all customizations or software or catalog
development projects in process, or pending proposals regarding customization or
software or catalog development projects, including a description of the
project, estimated costs of completion, payment terms, xxxxxxxx to date,
xxxxxxxx received, work completed and work still to be performed. Seller has
delivered true, correct and complete copies of documentation relating to each of
the foregoing projects or proposals to Buyer. Seller makes no representation or
warranty that the actual costs of completion will not exceed the estimated costs
of completion -- but does represent that such estimates represent
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Seller's good faith estimate of such costs, considering the nature of the
customer requirements and the work performed to date.
4.13. EMPLOYEES. Seller has delivered to Buyer true and correct copies
of the following:
(a) all employee handbooks and personnel manuals applicable to
employees of the Subject Business and the Foreign Subsidiaries; and
(b) a list of all employees of the Subject Business and each
Foreign Subsidiary as of the date hereof together with their current
job descriptions, rates of salary or wages, vacation benefits and each
bonus, deferred compensation, fringe benefit, stock option, incentive
compensation, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefit or
program, profit sharing, pension or retirement plan, program, agreement
or arrangement currently affecting such employees.
None of the employees of the Subject Business is represented by a
union.
4.14. LABOR PRACTICES. Neither Seller nor any of the Foreign
Subsidiaries has engaged in any unfair labor practice or unlawful discriminatory
practice in the conduct of the Subject Business, and there is no basis for any
claim by any past or present employee of the Subject Business that such employee
was subject to wrongful discharge or any employment discrimination arising out
of or relating to such employee's race, sex, color, religion, handicap or other
protected characteristic under applicable law. Seller and the Foreign
Subsidiaries have complied with all applicable laws, ordinances and governmental
regulations relating to employment practices, including, without limitation,
wage hour laws, equal pay laws and all laws relating to employment
discrimination, employee welfare, immigration matters and labor standards.
4.15. ERISA. Since at least June 29, 1997, the Subject Business has had
no employee pension benefit plan other than such plans offered generally to the
employees of Seller.
4.16. CONDUCT OUT OF ORDINARY COURSE. Since June 28, 1998, Seller and
the Foreign Subsidiaries have conducted the business of the Subject Business in
the normal and ordinary course and have not, (a) incurred or agreed to incur any
obligations or liabilities, absolute, accrued, contingent or otherwise, whether
due or to become due, except current liabilities accrued in the ordinary course
of business, none of which materially adversely affects the Subject Business,
the Subject Assets or the obligations this Agreement contemplates; (b)
mortgaged, pledged or subjected to, or agreed to mortgage, pledge or subject to,
any lien, charge, security interest or any other encumbrance or restriction, any
of the Subject Assets or the Subject Business, except for this Agreement; (c)
except as set forth on SCHEDULE 1(D), sold, transferred, leased to others or
otherwise disposed of or agreed to sell, transfer, lease or otherwise dispose of
any of the Subject Assets (except sales of Inventory in the ordinary course of
business), or canceled or compromised, or agreed to cancel or compromise, any
debt or claim or waived or released, or agreed to waive or release, any right of
substantial value relating to the Subject Business or the Subject Assets; (d)
suffered any damage, destruction or loss (whether or not
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covered by insurance) materially affecting any of the Subject Assets, or the
business, condition or known prospects (financial or otherwise) of the Subject
Business; (e) transferred or granted, or agreed to transfer or grant, any rights
under, or entered into or agreed to enter into, any settlement regarding the
breach or infringement of any lease, license, patent, copyright, trademark,
trade name, invention or similar rights, or modified or agreed to modify any
existing rights with respect to the foregoing; or (f) made, or agreed to make,
any direct or indirect change in the rate of compensation, commission, bonus or
other remuneration payable, or paid or agreed to pay, conditionally or
otherwise, any bonus, extra compensation, pension or severance pay, to any
employee or agent of the Subject Business out of the ordinary course of
business.
4.17. NO TRANSFER OF ASSETS. Except as set forth on SCHEDULE 1(D), none
of the Fixed Assets has, since June 28, 1998, been sold, disposed of, stolen,
transferred or otherwise lost.
4.18. Insurance. Seller maintains policies of fire and casualty,
liability and other forms of insurance in such amounts, with such deductibles
and against such risks and losses as are, in Seller's judgment, reasonable for
the Subject Business and the Subject Assets and will continue such insurance in
effect through the date of Closing. A true and complete list of such insurance
policies is set forth on attached SCHEDULE 4.18.
4.19. BROKERS AND AGENTS. Neither Seller nor any employee, agent or
other representative of the Subject Business has dealt with any agent, finder,
broker or other representative in any manner which could result in Buyer being
liable for any fee or commission in the nature of a finder's fee or originator's
fee in connection with the subject matter of this Agreement.
4.20. WARRANTIES. SCHEDULE 4.20 sets forth a true and accurate
description of the warranty claims expenses incurred by the Subject Business in
the two years ended June 28, 1998.
4.21. LAWS AND PERMITS. Seller and each of the Foreign Subsidiaries are
in compliance in all material respects with and have all material permits
required by all applicable federal, state, local or foreign laws, statutes,
regulations, rules, ordinances or other requirements of law or interpretations
of any such matters by any court ("Laws") in the operation of the Subject
Business as previously or presently operated, including the import, export,
manufacture, storage, sale and distribution of all products and services. A true
and complete list of all material permits issued or granted to the Company or
any Foreign Subsidiary by any governmental authority is set forth on the
SCHEDULE 4.21 and true, complete and correct copies of all such permits have
previously been delivered to the Buyer. Neither the Company nor any Foreign
Subsidiary is in breach or violation in any material respect of any applicable
Law relating thereto and all such permits are current and effective. Without
limiting the foregoing, Seller and the Foreign Subsidiaries have complied with
all applicable Laws relating to the reproduction, distribution and marketing of
the Software, including any such laws or regulations relating to the export or
import of the Software.
4.22. CUSTOMERS. SCHEDULE 4.22 sets forth, with respect to the last two
(2) fiscal years of the Seller, a list regarding the recurring and nonrecurring
revenue received from each of the ten (10) largest (based on dollar amounts
purchased from the Seller and any of the Foreign Subsidiaries) customers of the
Subject Business. Except as set forth on Schedule 4.22, neither
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the Seller nor any Foreign Subsidiary has received any written notice or
indication (or, to Seller's knowledge, any oral notice or indication) of the
intention of any of such customers to cease doing business or reduce in any
material respect the business transacted with the Subject Business or to
terminate or modify any arrangements or agreements with the Subject Business (as
a result of consummation of the transactions contemplated hereby or otherwise).
4.23. INVESTMENT INTENT. Seller is acquiring the Subject Shares for its
own account, for investment purposes, and not with a view to the distribution
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Seller covenants and agrees that it will not offer, sell or
otherwise transfer the Subject Shares unless and until the Subject Shares are
registered pursuant to the Securities Act and all other applicable securities
laws or unless the disposition thereof is exempt from registration thereunder.
4.24. WARRANTIES TRUE AND CORRECT. No warranty or representation by
Seller contained in this Agreement or in any writing to be furnished under this
Agreement or previously furnished to Buyer contains or will contain any untrue
statement of a material fact nor has Seller omitted to state any material fact
necessary in order to make any such warranty or representation, in light of the
circumstances under which it was made, not misleading.
4.25. WARRANTIES SURVIVE CLOSING. Notwithstanding any investigation by
or information supplied to Buyer, the warranties and representations of Seller
contained in this Agreement will be true and correct on the Closing Date and
will survive the Closing for sixteen (16) months following the Closing Date. Any
claim for indemnification under Article VIII below, made in writing prior to the
expiration of the sixteen (16) month period specified in Paragraph 8.1, and the
rights of indemnity with respect to such claim, will survive such expiration
until resolved or judicially determined and any such claim not submitted in
writing prior to the expiration of such applicable survival period will be
considered to have been waived. Notwithstanding the foregoing, the first
sentence of Paragraph 4.4 and the right of indemnity with respect thereto shall
forever survive the Closing.
4.26. KNOWLEDGE OF SELLER. For those warranties and representations set
forth in this Article IV which are subject to the qualification "to Seller's
knowledge" or "to the best of Seller's knowledge," the Seller will be considered
to have knowledge of a matter if Xxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxx, Xxxx
Xxxxx, Xxxxxx Xxxxxx or any other current executive officer or current director
of the Subject Business has actual knowledge of the matter.
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ARTICLE V
WARRANTIES AND REPRESENTATIONS OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. CORPORATE MATTERS. Buyer is a corporation duly incorporated and
validly existing under the laws of the State of Wisconsin and has the requisite
corporate authority and power to carry on all business activities Buyer
currently conducts or previously conducted. Buyer is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary unless the absence of qualification would not have a material adverse
effect on Buyer's business activities. Buyer has the corporate power and
corporate authority to enter into this Agreement and to consummate the
transactions this Agreement contemplates. The Board of Directors of Buyer has
approved the execution and delivery of this Agreement, the agreements, documents
and instruments relating to this Agreement and the consummation of the
transactions this Agreement contemplates, and this Agreement and such other
agreements, documents and instruments are and will constitute valid and legally
binding obligations of Buyer, enforceable against it in accordance with their
respective terms.
5.2. NO VIOLATION. The execution and delivery of this Agreement does
not, and the consummation of the transactions this Agreement contemplates and
compliance with the terms of this Agreement will not (a) conflict with, or
result in any violation of, (I) any provision of the Articles of Incorporation
or By-Laws of Buyer, or (ii) any judgment, order or decree, or statute, law,
ordinance, rule or regulation applicable to Buyer or Buyer's assets, or (b)
result in a breach or default under any material agreement, instrument or
document to which Buyer is a party or which binds Buyer or its assets.
5.3. NO CONSENT. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by or with respect to Buyer in
connection with the execution and delivery of this Agreement or the consummation
of the transactions this Agreement contemplates, except as contemplated by the
Registration Rights Agreement, filing of appropriate notices with The Nasdaq
Stock Market and filings required under the Securities Exchange Act of 1934, as
amended.
5.4. NO LITIGATION. There is no litigation, proceeding or investigation
or other legal or administrative proceeding pending or, to the best of Buyer's
knowledge, threatened (a) against or relating to Buyer or (b) which questions or
challenges the validity of this Agreement or any action taken by Buyer pursuant
to this Agreement or in connection with the transactions contemplated hereby.
5.5. BROKERS AND AGENTS. Buyer has not dealt with any agent, finder,
broker or other representative in any manner which could result in Seller being
liable for any fee or commission in the nature of a finder's fee or originator's
fee in connection with the subject matter of this Agreement.
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5.6. SEC DOCUMENTS.
(a) Buyer has filed all forms, reports and documents required
to be filed with the SEC since July 31, 1997, including without
limitation (i) its Annual Report on Form 10-K for the fiscal year ended
July 31, 1997; (ii) its Quarterly Reports on Form 10-Q for the periods
ended October 31, 1997, January 31, 1998 and April 30, 1998 and (iii)
the definitive Proxy Statement for the meeting of shareholders of Buyer
held November 19, 1997 (collectively, the "Buyer SEC Reports").
(b) The Buyer SEC Reports (i) were prepared in conformity in
all material respects with the applicable rules and regulations of the
SEC, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required
to be stated in such reports or necessary in order to make the
statements in such reports, in light of the circumstances under which
they were made, not misleading.
5.7. FINANCIAL STATEMENTS. The financial statements and related notes
of Buyer set forth in the Buyer SEC Reports present fairly the financial
condition of Buyer on the dates of such financial statements and the results of
operations for the periods in such financial statements and were prepared in
accordance with GAAP, except that any interim financial statements are subject
to audit and appropriate year-end adjustments and do not contain footnotes
required by GAAP. There has been no change in the capitalization, assets,
liabilities, business prospects or methods of doing business of Buyer since July
31, 1998, other than changes in the ordinary course of business (none of which
has had a material adverse effect on the business, prospects or condition,
financial or otherwise, of Buyer).
5.8. CAPITALIZATION.
(a) The entire authorized capital stock of Buyer consists of
25,000,000 shares of Common Stock, par value $.001 per share, of which
4,242,780 shares are outstanding (exclusive of the shares issued
hereby) and 1,000,000 shares of Preferred Stock, par value $.001 per
share, of which 40,000 shares are designated as Series A Preferred
Stock, 20,000 shares of which are issued and outstanding.
(b) Except as set forth on SCHEDULE 5.8, there are no
outstanding options, warrants or other rights to subscribe for,
purchase or otherwise receive any shares of capital stock of Buyer or
any security or obligation of Buyer which is by its terms convertible
into capital stock of Buyer or any option, warrant, subscription or
other purchase right with respect to capital stock of Buyer
(collectively, "Buyer Capital Stock") from Buyer (including, without
limitation, convertible debt securities).
(c) Except as set forth on SCHEDULE 5.8, Buyer is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of Buyer Capital Stock.
(d) Except as set forth on SCHEDULE 5.8, there are no
agreements, whether written or oral, between any shareholder and Buyer
with respect to the voting or transfer
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of Buyer Capital Stock or with respect to any other aspect of Buyer's
affairs that is required to be disclosed in the Buyer SEC Reports and
is not so disclosed.
5.9. Registration Rights. Except as set forth on Schedule 5.9, no
shareholder, investor or other person has any right to cause Buyer to register
under the Securities Act of 1933 any shares of Buyer Capital Stock, whether upon
demand or in connection with any registration by Buyer of Buyer Capital Stock.
5.10. Subject Shares. The Subject Shares have been duly and validly
authorized, and when issued as provided herein, will be duly and validly issued,
fully paid and non-assessable (except for liability for certain indebtedness to
employees as provided in Section 180.0622 of the Wisconsin Business Corporation
Law, or any successor provision to such Section).
5.11. Warranties True and Correct. No warranty or representation by
Buyer contained in this Agreement or in any writing to be furnished under this
Agreement or previously furnished to Seller contains or will contain any untrue
statement of a material fact nor has Buyer omitted to state any material fact
necessary in order to make any such warranty or representation, in light of the
circumstances under which it was made, not misleading.
5.12. Warranties Survive Closing. Notwithstanding any investigation by
or information supplied to Seller, the warranties and representations of Buyer
contained in this Agreement will be true and correct on the Closing Date and
will survive the Closing for sixteen (16) months following the Closing Date. Any
claim for indemnification under Article VIII, below, made in writing prior to
the expiration of the sixteen (16) month period specified in Paragraph 8.2, and
the rights of indemnity with respect to such claim, will survive such expiration
until resolved or judicially determined and any such claim not submitted in
writing prior to the expiration of such applicable survival period will be
considered to have been waived.
5.13. Knowledge of the Buyer. For those warranties and representations
set forth in this Article V which are subject to the qualification "to Buyer's
knowledge" or "to the best of Buyer's knowledge," Buyer will be considered to
have knowledge of a matter if any current executive officer of Buyer has actual
knowledge of the matter.
ARTICLE VI
[RESERVED]
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ARTICLE VII
CONDUCT PRIOR TO AND SUBSEQUENT TO CLOSING
7.1. EXECUTION AND DELIVERY OF FURTHER INSTRUMENTS BY SELLER. Seller
will at any time, and from time to time after the Closing, upon the reasonable
request of Buyer or its successors or assigns, execute, acknowledge and deliver
to Buyer or its successors or assigns such further instruments of conveyance,
assignment and transfer, consents and assurances and will take such other action
as Buyer or its successors or assigns may reasonably request in order to more
effectively convey, assign, transfer and deliver any of the properties or assets
intended to be conveyed, assigned, transferred and delivered under this
Agreement, and assist, at Buyer's expense, in the collection or reduction to
possession of any and all such properties or assets.
7.2. ACCESS TO BUSINESS RECORDS AFTER CLOSING. From and after the
Closing Date, Buyer will maintain the financial books and business records of
the Subject Business acquired by Buyer under this Agreement. Upon Seller's
request and with prior notice to Buyer, Buyer will afford Seller and its
accountants and counsel access to any such financial books and business records
during normal business hours to the extent such access is required by Seller in
anticipation of, or preparation for, any legal proceedings or financial, tax or
audit matters involving Seller. Damage by fire or other casualty or accident
excepted, Buyer will not for a period of three (3) years after the Closing Date,
destroy or dispose of any such books or records unless Buyer first offers
Seller, at least sixty (60) days prior to such destruction or disposition, an
opportunity to take possession of such books and records.
7.3. SELLER'S CUSTOMERS. Seller hereby confirms that it has granted
Buyer permission to contact any of Seller's customers, vendors or suppliers and
to discuss the fact that Buyer is purchasing the Subject Business from Seller
with such customers, vendors and/or suppliers.
7.4 SALE OF BMS BUSINESS. Buyer shall use commercially reasonable
efforts to sell the assets relating to the Subject Business' Business Management
System business (the "BMS Assets"), as set forth on SCHEDULE 7.4. In the event
that Buyer is successful in selling all or any portion of the BMS Assets within
six (6) months of the Closing, (i) as part of the Purchase Price referred to in
Paragraph 2.1, above, Buyer shall pay Seller an amount equal to the
consideration received by Buyer for such BMS Assets (which shall be cash,
assumed liabilities and/or marketable securities, including restricted stock)
(the "Consideration") less the greater of Twenty Five Thousand Dollars ($25,000)
or five percent (5%) of the Consideration, and (ii) Seller shall reimburse Buyer
for its out of pocket expenses incurred in connection with such sale. Such
expenses are not to include a charge for the time of any Buyer employee. In the
event that Buyer is unable to sell any of the BMS Assets within six (6) months
of the Closing, Buyer may retain such assets and, at its own risk and expense,
operate or discontinue the BMS business, and Buyer shall have no further
obligation to Seller under this Paragraph with respect thereto. Seller has
granted Buyer the right to begin working on the sale of the BMS Assets, provided
that any sale of the BMS Assets will be contingent upon the Closing. Seller will
cooperate with Buyer in the sale of the BMS Assets and provide such consulting
advice and assistance and such information as Buyer shall reasonably request.
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7.5. CONDUCT OF SUBJECT BUSINESS PRIOR TO THE CLOSING. Except as
contemplated by this Agreement, between the date hereof and the Closing Date,
Seller shall conduct the Subject Business in the ordinary course and consistent
with prior practices. Without limiting the generality of the foregoing, without
Buyer's prior consent, Seller shall:
(a) continue pricing, purchasing, collection, vendor payments, sales
and credit policies and procedures in accordance with past practice;
(b) use reasonable efforts to preserve the goodwill of the Subject
Business and the Subject Business' current relationships with employees,
customers, suppliers and other persons with which the Subject Business has
significant business relationships;
(c) refrain from doing any act or omitting to do any act, which will
cause a breach of any Material Contract;
(d) sell any properties or assets, or enter into any agreement or
agreements for the sale of assets or properties, other than the sale of, and
agreements for the sale of, inventory made in the ordinary course of the Subject
Business;
(e) adopt, amend or increase compensation or benefits payable under, or
take any actions which might result in adverse tax or other consequences with
respect to, any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, collective bargaining agreement, or other
plan, agreement, trust, fund or arrangement for the benefit of any employee or
class of employees of the Subject Business; or
(f) take any action or refrain from taking any action that results in
the representations and warranties set forth herein not to be true and correct
in all material respects on the Closing Date.
7.6. ACCESS TO INFORMATION. From the date hereof until the Closing,
upon reasonable notice, Seller shall afford the officers, employees and
authorized agents, accountants, counsel, and representatives of Buyer full and
complete access to the offices, properties, software, books, records, contracts,
financial statements and other documents and materials relating to the Subject
Business' operations, business, financial condition, assets and liabilities.
From the date hereof through the Closing Date, Seller shall cause appropriate
management personnel of the Subject Business to be available on a regular and
frequent basis to confer with one or more designated representatives of Buyer to
report material operational matters and the general status of ongoing operations
of the Business. Seller shall cooperate in keeping Buyer fully informed and
promptly notify Buyer of any adverse change in the normal course of business or
prospects of the Subject Business and permit Buyer to participate in all
discussions relating thereto.
7.7. CONSUMMATION OF AGREEMENT. Seller and Buyer shall each use their
respective commercially reasonable efforts to perform and fulfill all
obligations on each of their parts to be performed and fulfilled under this
Agreement, and to cause all of the conditions precedent to the consummation of
the transactions contemplated by this Agreement to be met. Each of the parties
hereto shall use their respective commercially reasonable efforts to take, or
cause to be taken, all appropriate action, do or cause to be done all things
necessary, proper or advisable under
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applicable law, and to execute and deliver such documents and other instruments
or papers as may be required to carry out the provisions of this Agreement and
to consummate and render effective the transactions contemplated by this
Agreement.
7.8. NONCOMPETITION. Seller agrees that at no time for a period of two
(2) years after the Closing (the "Non-Competition Period") shall Seller, either
directly or indirectly:
(a) Acquire an ownership interest in (other than stock of a
publicly-traded corporation amounting to less than 5% of the corporation's
outstanding shares or any interest obtained in connection with the sale of the
BMS Assets), engage in or render advice or assistance to any business
competitive with the Subject Business in the United States, Canada or Europe;
(b) Divert, or attempt to divert, any business from the Subject
Business in the United States, Canada or Europe, or, in such areas, solicit or
entice, or attempt to solicit or entice, any of the customers or suppliers of
the Subject Business so as to cause any such customers or suppliers not to do
business with the Buyer; or
(c) Contact or solicit for employment any person now or hereafter
employed by the Subject Business or entice, or attempt to solicit or entice, any
such person to leave the employment of the Buyer.
Seller recognizes that irreparable injury may result to Buyer and the
Subject Business in the event of a breach by Seller of the restrictions imposed
by this Paragraph, and that its acceptance of such restrictions was a material
factor in the Buyer's decision to enter into this Agreement. In the event that
Seller shall engage in any act in violation of the provisions of this Paragraph,
Buyer shall be entitled, in addition to such other remedies and damages as may
be available to it, to an injunction prohibiting such Seller from engaging in
such acts.
7.9. TERMINATION OF DEALINGS. Seller shall not, nor shall it permit any
of its officers, directors, employees, agents, or representatives to, directly
or indirectly, solicit, initiate or enter into discussions or negotiations with,
or provide any assistance or information to, or enter into any agreement with,
any person or group of persons (other than Buyer) concerning any acquisition,
directly or indirectly, of any equity interest in, or a merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving the
Subject Business or any purchase of any of the Subject Assets. Seller shall
immediately cease, and shall cause all of its officers, directors, employees,
agents, representatives, or affiliates to immediately cease, any existing
activities, including discussions or negotiations with any parties, conducted
heretofore with respect to any acquisition proposal and shall take the necessary
steps to inform the relevant persons of the obligations undertaken in this
Paragraph.
7.10. CONFIDENTIALITY.
(a) Buyer and Seller agree that, after the Closing, the Mutual
Non-Disclosure Agreement dated February 24, 1998 among the parties and
Powercom-2000, Inc. (the "Non-Disclosure Agreement") shall be terminated and of
no further force or effect.
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(b) Seller agrees that, except as required by law, at no time
subsequent to the Closing shall Seller, directly or indirectly, use for any
purpose, disclose to any person or retain copies of any Confidential
Information. As used herein, Confidential Information means and includes (i) any
proprietary, nonpublic information included within the definition of Intangible
Assets, (ii) any manuals, reports, business or other plans, customer or prospect
profiles, recommendations or proposals to the extent relating to the Subject
Business prepared by or for the Subject Business or customers or clients of the
Subject Business other than Seller or any affiliate of Seller, (iii) information
with respect to any products or services of the Subject Business or any of its
customers or clients other than Seller or any affiliate of Seller, including
without limitation customer lists and customer information, and development and
marketing activities and operations, and (iv) any other confidential information
of Buyer provided to Seller in accordance with the Non-Disclosure Agreement;
provided, however, Confidential Information shall not include any information
which is or becomes generally available to the public other than as a result of
disclosure on or after the Closing Date by Seller or its present or former
subsidiaries, affiliates, employees or agents.
(c) In the event Seller is requested or required by applicable law or
regulation or by legal process to disclose any Confidential Information, Seller
agrees to provide Buyer with prompt notice of such request to enable Buyer to
seek an appropriate protective order. Seller agrees to cooperate with Buyer in
any lawful attempt that Buyer may make to obtain reasonable assurance that
confidential treatment will be afforded the Confidential Information.
7.11. COBRA. Seller will provide notice pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 to all employees of the Subject
Business whose employment with Seller or any Foreign Subsidiary terminates prior
to the Closing.
ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION OF BUYER. Subject to Paragraph 4.25, Seller will
indemnify Buyer and hold it harmless from and against any and all damages,
losses, deficiencies, actions, demands, judgments, costs and expenses (including
without limitation, reasonable attorneys' and accountants' fees) (collectively,
"Damages") of or against Buyer resulting from or arising out of (a) any
misrepresentation or breach of any warranty or representation of Seller
contained in this Agreement, or in any agreement, document or instrument
delivered by or on behalf of Seller pursuant to or in connection with this
Agreement; (b) the breach or nonfulfillment of any covenant or agreement of
Seller contained in this Agreement or in any agreement, document or instrument
delivered by or on behalf of Seller pursuant to or in connection with this
Agreement; (c) except for the Assumed Liabilities, any liabilities or
obligations of Seller or the Foreign Subsidiaries arising out of the ownership
or operation of the Subject Business prior to the Closing Date, including,
without limitation, any assessments, claims or liabilities (including interest
and penalties) for federal, state, local or foreign income, sales, use,
franchise, transfer or other taxes, any claim for nonperformance or breach of
contract, any claim for worker's compensation or unemployment compensation, any
liability or obligation of Seller or a Foreign Subsidiary to any of its
employees or former employees, any litigation or proceeding (whether or
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not set forth in Schedule 4.7), and any claims for personal injury or property
damage; (d) any violation of the Worker Adjustment and Retraining Notification
Act or similar notification requirements under state law which occurs prior to
the Closing; or (e) without limiting the foregoing, any claims for refunds or
Damages caused by actions or omissions which occurred prior to the Closing Date
under any of the Assumed Contracts.
8.2. INDEMNIFICATION OF SELLER. Subject to Paragraph 5.12, Buyer will
indemnify Seller and hold it harmless from and against any and all Damages of or
against Seller resulting from or arising out of (a) any misrepresentation or
breach of any warranty or representation of Buyer contained in this Agreement,
or in any agreement, document or instrument delivered by or on behalf of Buyer
pursuant to or in connection with this Agreement; (b) the breach or
nonfulfillment of any covenant or agreement of Buyer contained in this Agreement
or in any agreement, document or instrument delivered by or on behalf of Buyer
pursuant to or in connection with this Agreement; (c) the Assumed Liabilities;
(d) any liabilities or obligations of Buyer arising out of the ownership or
operation of the Subject Business on or after the Closing Date, including,
without limitation, any claim for nonperformance or breach of contract, any
claim for worker's compensation or unemployment compensation, and/or claims for
personal injury or property damage occurring thereafter; (e) any violation of
the Worker Adjustment and Retraining Notification Act or similar requirements
under state law which occurs after or as a result of the Closing; or (f) the
first post-Closing payroll obligations paid by Seller to the employees of the
Subject Business, except amounts paid to Xxxx Xxxxxxx or Xxxxx Xxxxx and any
amounts paid to Xxxxx Xxxxx in excess of two weeks' salary.
8.3. PROCEDURE RELATIVE TO INDEMNIFICATION.
(a) In the event that any party to this Agreement claims that it is
entitled to be indemnified under the terms of this Article VIII, it (the
"Claiming Party") will notify the party against which the claim is made (the
"Indemnifying Party") in writing of such claim promptly after discovery of the
facts supporting the claim or receipt of a notice of any claim of a third party
(a "Third Party Claim") that may reasonably be expected to result in a claim by
such party against the party to which such notice is given, as the case may be;
provided, however, that failure to give such notification will not affect the
indemnification provided under this Agreement except to the extent the
Indemnifying Party is actually prejudiced as a result of such failure. Such
notice will specify the breach of representation, warranty, covenant or
agreement claimed by the Claiming Party and the liability, loss, cost or expense
incurred by or imposed upon the Claiming Party on account of such breach and
will include, if applicable, a copy of any summons, complaint or other court
pleading which evidences any Third Party Claim. If such liability, loss, cost or
expense is liquidated in amount, the notice will state such amount and such
amount will be considered the amount of the claim of the Claiming Party. If the
amount is not liquidated, the notice will so state and in such event a claim
will be considered asserted against the Indemnifying Party on behalf of the
Claiming Party.
(b) The Indemnifying Party may, upon receipt of written notice of a
Third Party Claim and at its expense, defend such Third Party Claim in its own
name or, if necessary, in the name of the Claiming Party. The Claiming Party
will cooperate with and make available to the Indemnifying Party such assistance
and materials as may be reasonably requested of it, at the Indemnifying Party's
expense, and the Claiming Party will have the right, at its expense, to
participate in the defense. The
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Claiming Party will not have the right to settle and compromise any Third Party
Claim without the prior written consent of the Indemnifying Party, which consent
will not be unreasonably withheld.
(c) In the event the Indemnifying Party refuses to, or notifies the
Claiming Party that it refuses to, conduct a defense against a Third Party
Claim, then the Claiming Party will have the right to conduct a defense against
such Third Party Claim and will have the right to settle and compromise such
Third Party Claim without the consent of the Indemnifying Party. Once the amount
of such Third Party Claim is liquidated and the Third Party Claim is finally
determined, the Claiming Party will be entitled to pursue each and every remedy
available to it at law or in equity to enforce the indemnification provisions of
this Article VIII and, in the event it is determined, or the Indemnifying Party
agrees, that it is obligated to indemnify the Claiming Party for such Third
Party Claim, the Indemnifying Party will pay all costs, expenses and fees,
including all reasonable attorneys' fees which may be incurred by the Claiming
Party in attempting to enforce indemnification under this Article VIII, whether
enforced by suit or otherwise.
8.4. CERTAIN LIMITS.
(a) Seller shall be liable to Buyer, and Buyer shall be liable to
Seller, for Damages that are indemnifiable under Paragraphs 8.1(a) or 8.2(a),
respectively, only to the extent that the aggregate amount of Damages exceeds
$100,000. The foregoing deductible shall not apply to and every dollar of
Damages shall be indemnifiable for breaches of the representations and
warranties in Paragraphs 4.1, 4.2, 4.3, the first sentence of Paragraph 4.4,
4.10, 4.19, 4.23, 5.1, 5.2, 5.3, 5.5, 5.8 and 5.10.
(b) If any representation, warranty or covenant subject to
indemnification pursuant to Paragraph 8.1(a) or (b) or 8.2(a) or (b) contains a
materiality qualification (e.g., "material," "materiality," "in all material
respects," "material adverse effect" or similar qualifications), such
materiality qualification shall have been deemed to have been met, and such
representation, warranty or covenant shall be deemed to have been breached, if
Buyer or Seller, as the case may be, incurs or is alleged to have incurred
Damages for any breach with respect to each individual claim that exceeds $5,000
(such excess over $5,000 being the Damages for such claim).
ARTICLE IX
BULK SALES
Seller and Buyer waive compliance by Buyer and Seller with the
provisions of the Uniform Commercial Code relating to bulk sales and Seller
agrees to pay and discharge when due all claims of creditors which could be
asserted against Buyer by reason of such noncompliance to the extent that Buyer
does not specifically assume such liabilities under this Agreement.
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ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS
11.1. Expenses. The parties to this Agreement will pay their own
expenses, including without limitation, accountants' and attorneys' fees
incurred in connection with the negotiation and consummation of the transactions
the Agreement contemplates.
11.2. Notices. All notices or other communications required or
permitted to be given under this Agreement to a party under this Agreement will
be in writing and will be considered to be given and received in all respects
when (a) personally delivered; (b) upon confirmation of transmission if sent by
telecopy; (c) one (1) business day after being sent by reputable overnight
courier service; or (d) three (3) business days after being deposited in the
United States mail, certified mail, postage prepaid, return receipt requested,
addressed as follows, or to such other address as will be designated by notice
duly given:
IF TO BUYER: ARI Network Services, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
With a Copy To: Xxxxx X. Xxxxxxxxx
Xxxxxxx & Xxxx, S. C.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
IF TO SELLER: Xxxxxx & Xxxxxxxx Corporation
00000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxx Xxxxx
Fax: (000) 000-0000
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With a Copy To: Xxxxxx X. Xxxxx
Xxxxxx & Xxxxxxxx Corporation
00000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Fax: (000) 000-0000
11.3. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. All information and
documents received by either party from the other relating to this Agreement
will be subject to the Non-Disclosure Agreement. Except as required by law,
neither party will make any public announcement regarding this Agreement or the
matters described herein without the prior written consent of the other party.
Neither party shall make any other press release or other written public
statement concerning the matters covered by this Agreement without the approval
of the other party; provided, however, that either Buyer or Seller may, without
such approval, make such press releases or other written public statements
required by law, and shall consult with the other party with respect to the form
and substance of such statements. Notwithstanding the foregoing, after the
Closing, Buyer will have the sole authority as to what, if any, public
announcements are to be made.
11.4. ENTIRE AGREEMENT. This Agreement, the Non-Disclosure Agreement,
the attached schedules and exhibits and the agreements executed and delivered in
connection with this Agreement constitute the entire agreement between the
parties relating to the subject matter of this Agreement, and all prior
agreements, correspondence, discussions and understandings of the parties
(whether oral or written) are superseded (including the Letter of Intent dated
July 24, 1998), it being the intention of the parties that this Agreement will
serve as the complete and exclusive statement of the terms of their agreement
together. No amendment, waiver or modification to or under this Agreement will
be valid unless in writing signed by an authorized signatory of the party or
parties affected by such amendment, waiver of modification.
11.5. LEGENDS. The certificate representing the Subject Shares shall be
endorsed with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING
SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS
SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL OR MEMORANDUM OF LAW REASONABLY SATISFACTORY TO THE COMPANY
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Buyer and its transfer agent need not register a transfer of Subject Shares,
unless the conditions specified in the foregoing legend are satisfied.
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11.6. BINDING EFFECT. This Agreement will be binding upon the parties
to this Agreement and their respective legal representatives, successors and
assigns.
11.7. PARAGRAPH HEADINGS. The headings in this Agreement are for
convenience and ease of reference only and will not be construed to limit or
otherwise affect the meaning of any part of this Agreement.
11.8. SEVERABILITY. The parties agree that if any provision of this
Agreement is under any circumstances considered invalid or inoperative, this
Agreement will be construed with the invalid or inoperative provision deleted,
and the remaining rights and obligations of the parties will be construed and
enforced in accordance with the remaining provisions of the Agreement.
11.9. TERMINOLOGY. As used in Article IV, unless the context indicates
otherwise, references to the Seller shall be deemed to include Powercom-2000,
Inc., a Wisconsin corporation that was dissolved in June 1998.
11.10. APPLICABLE LAW. This Agreement and all questions arising in
connection with it will be governed and construed in accordance with the
internal laws of the State of Wisconsin.
11.11. DISPUTE RESOLUTION. All controversies or claims between the
Seller and the Buyer arising out of or relating to this Agreement or the breach
thereof, including any dispute as to the existence or validity of this Agreement
or the arbitrability of any particular issue which cannot be settled amicably by
the Buyer and the Seller, shall be finally settled in an arbitration to be
conducted under the commercial arbitration rules of the American Arbitration
Association (the "AAA") by a single arbitrator selected under the rules of the
AAA. Any such arbitration proceedings shall be conducted in English and shall be
held in Milwaukee, Wisconsin. The decision of any such arbitrator shall be final
and binding upon the Buyer and the Seller and may be enforced in any court of
competent jurisdiction, and neither the Buyer nor the Seller shall seek redress
against each other in any court or tribunal except solely for the purpose of
obtaining execution of any arbitral award or of obtaining a judgment consistent
therewith. The fees and expenses of the arbitration proceedings shall be divided
equally between the Buyer and the Seller; provided, that the Buyer and the
Seller each shall pay the fees and expenses of its own legal counsel and
representatives incurred in connection with the arbitration proceedings.
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IN WITNESS WHEREOF, the parties have caused their names to be
subscribed on one or more counterparts of this Agreement, all of which such
counterparts will be read together and construed as but one and the same
instrument as of the day, month and year first above written.
SELLER:
:
XXXXXX & XXXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxxx
Executive Vice President -
Sales and Service
BUYER:
ARI NETWORK SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Xxxx X. Xxxxxxx
Executive Vice President of Business
Development and Administration and
Secretary
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