EXHIBIT 2.01
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of July 9, 1999
(the "Effective Date"), by and among Xxxxxxx.xxx, Inc., a Delaware corporation
with its principal offices at 0000 Xxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
("Buyer"), and XxxxxXxxxxxxx.xxx, LLC, a Georgia limited liability company with
its principal offices at 0000 Xxx Xxxx Xxxx, #000, Xxxxxxxx, XX 00000 ("SE"),
Solutions Management, Inc., a Georgia corporation with its principal offices at
0000 Xxx Xxxx Xxxx, #000, Xxxxxxxx, XX 00000 ("SMI"), Interactive Monitoring
Systems, Inc., a Georgia corporation with its principal offices at 0000 Xxx Xxxx
Xxxx, #000, Xxxxxxxx, XX 00000 ("IMS") and Xxxxxxx Xxxxxxx, an individual and
the sole shareholder of SMI, SE and IMS ("Founder" and, collectively with SMI,
SE and IMS, the "Seller").
R E C I T A L S
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A. Seller is engaged in a broad range of businesses, including the
business of developing, manufacturing, licensing, marketing and selling certain
proprietary computer software products and related services (the "Enhancer
Business"), which products are listed in Schedule 1.2(b)(i) and include without
limitation Seller's client-server and internet based SalesEnhancer and
PhoneEnhancer product lines (the "Enhancer Products").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain assets (including business records technology, software
products, product designs and intellectual properties) of Seller related to the
Enhancer Business, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, Buyer and Seller hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
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1.1 Agreement to Sell and Purchase Assets. Subject to the terms and
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conditions of this Agreement, and in reliance on the representations, warranties
and covenants set forth in this Agreement, Seller agrees to sell, assign,
transfer and convey to Buyer at the Closing (as defined in Section 2.3 below),
and Buyer agrees to purchase and acquire from Seller at the Closing, all of
Seller's right, title and interest in and to all of the Assets (as defined
below). The Assets will be sold, assigned, transferred and conveyed to Buyer on
the Closing Date (as hereinafter defined), free and clear of all mortgages,
pledges, liens, licenses, rights of possession, security interests,
restrictions, encumbrances, charges, title retention, conditional sale or other
security arrangements and all claims or agreements of any nature whatsoever,
except as otherwise expressly disclosed in the Seller Disclosure Letter.
1.2 Assets Defined. As used in this Agreement, the term "Assets" means,
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collectively, all of the assets, rights and properties of Seller described in
the following paragraphs of this Section 1.2, except for the Excluded Assets (as
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defined in Section 1.3 below):
(a) Marketing Information; Customer Lists. All of Seller's customer
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lists (whether current or prior) and customer account histories for customers or
prospective customers of the Enhancer Business, including all data regarding
such customers, and all other marketing, promotional, and sales information,
whether stored in written form, magnetic or electronic media or in any other
form, that have been or now are related to the Enhancer Business or that have
been or now are used, developed or purchased in connection with the Enhancer
Business, including all competitive and expense market studies and analyses.
Upon the Closing, Buyer shall acquire and have sole and exclusive ownership of,
access to and use of all assets described in this Section 1.2(a).
(b) Technology; Products and Intellectual Property. All copies of
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documentation, drafts, papers, designs, drawings, schematics, diagrams, models,
prototypes, software (in both source code and object code form and in any media
or format and for all hardware platforms, software platforms and operating
environments) including but not limited to the software products listed in
Schedule 1.2(b)(i) hereto, computer stored data, diskettes, manuscripts and
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other items describing any product, development tools, testing tool or suite,
application, operating system, routine, subroutine, module or other proprietary
technology, together with any derivative works made or developed therefrom, that
are related to or used, developed, sold, marketed or purchased in connection
with the Enhancer Products and all of Seller's rights, title and interest in and
to all Intellectual Property (as defined in Section 5.6 below) that is related
to or used, developed or purchased in connection with the Enhancer Products (a
complete list of such Intellectual Property is set forth in Schedule 1.2(b)(ii)
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hereto).
(c) Enhancer Business Records. All logs, books, records, files,
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engineering and design drawings, diagrams and other documentation depicting or
specifying the designs of all the Enhancer Products, and all sales literature
and sales aids, pictures, product sheets and documentation, product displays,
advertising materials, manuals, computer and electronic data processing
materials and correspondence relating to the Enhancer Products, and copies of
all contracts, agreements, and engagements with customers and prospective
customers of the Enhancer Business, (collectively, the "Customer Records") as
well as copies of all licenses relating to the Enhancer Business.
(d) Trade Names; Trade Secrets; Domain Names. All of the know-how,
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trademarks, trade names, and trade secrets associated with the Enhancer
Products, including without limitation, the exclusive right to use the domain
names "XxxxxXxxxxxxx.xxx" and "Xxxxxxxxxxxxxxx.xxx" and any substantially
similar name, trademark, or variant thereof.
(e) Tangible Assets. All equipment, inventory, furniture component
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pieces and other tangible property listed set forth in Schedule 1.2(e) hereto
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(the "Tangible Assets").
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1.3 Excluded Assets. All assets of Seller related to or used, developed or
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purchased in connection with the Enhancer Business that do not fall within the
description of Assets set forth in Section 1.2 above are retained by Seller (the
"Excluded Assets").
1.4 Asset Transfer; Passage of Title; Delivery.
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(a) Title Passage. Except as otherwise provided in this Section, upon
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the Closing, title to all of the Assets shall pass to Buyer; and Seller shall
deliver to Buyer possession of all of the Assets as provided in subsection
1.4(b), and shall further deliver to Buyer proper assignments, conveyances and
bills of sale sufficient to convey to Buyer good and marketable title to all the
Assets, free and clear of all mortgages, pledges, liens, licenses, rights of
possession, security interests, restrictions, encumbrances, charges, title
retention, conditional sale or other security arrangements and all claims or
agreements of any nature whatsoever, as well as such other instruments of
conveyance as counsel for Buyer may reasonably deem necessary or desirable (both
at and after the Closing) to effect or evidence the transfers contemplated
hereby.
(b) Delivery of Assets. The Assets shall be delivered by Seller to
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Buyer as follows, and all Assets shall be delivered by Seller to Buyer on the
Closing Date at such locations as Buyer may request in writing; provided,
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however, that if such location is other than at the location at which such
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Assets are located on the Effective Date, then Buyer shall promptly reimburse
Seller for all shipping expenses Seller incurs in delivering such Assets to
Buyer at the location specified by Buyer.
2. PURCHASE PRICE; PAYMENTS.
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2.1 Purchase Price. In consideration of the sale, transfer, conveyance and
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assignment of all the Assets to Buyer at the Closing, Buyer shall pay to Seller
the sum of Three Million Six Hundred Eighty Seven Thousand Five Hundred and One
Dollars ($3,687,501) (the "Purchase Price"), of which One Million Four Hundred
Thirty Seven Thousand Five Hundred Dollars ($1,437,500) shall be delivered by
Buyer to Seller at the Closing (the "Closing Payment"), up to Two Hundred and
Fifty Thousand Dollars ($250,000) shall be payable pursuant to Section 10 below
(the "Escrow Amount") and up to three (3) payments of Six Hundred and Sixty Six
Thousand Six Hundred and Sixty Seven Dollars ($666,667) shall be payable
pursuant to the immediately following sentence (each, a "Periodic Payment"). On
each of January 1, 2000, July 1, 2000 and January 1, 2001 (each, a "Periodic
Payment Date"), Buyer shall pay a Periodic Payment to Seller in the event
Founder has not through such Periodic Payment Date either (i) been terminated by
Buyer for "cause" (as defined in the Employment Agreement attached hereto as
Exhibit 2-6A (the "Xxxxxxx Employment Agreement")) or (ii) voluntarily
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terminated his employment with Buyer. In the event Founder disputes Buyer's
belief that it terminated Founder for "cause," the matter shall be submitted to
binding arbitration and the remaining Periodic Payments shall be payable only
upon a finding by the arbitrator that Founder was not terminated for "cause."
The Periodic Payment amounts shall be deposited with the Escrow Agent pursuant
to the Escrow Agreement (as such terms are defined in Section 10.9 hereof).
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2.2 Allocation of Purchase Price. The Purchase Price shall be allocated
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among Founder, SMI, IMS and SE as set forth on Schedule 2.2 hereto. Seller
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represents and warrants that to Seller's best knowledge and belief such
allocation is a reasonable allocation of the relative value of the Assets being
transferred by each of Founder, SMI, IMS and SE. In addition, within fifteen
(15) days of the Closing, Seller and Buyer shall agree upon an allocation of the
purchase price among the Assets for each entity and such agreement shall be
reduced to a writing executed by Buyer and Seller that shall be delivered by
Buyer and Seller to each other (the "Purchase Price Allocation Agreement"). Any
subsequent adjustments to the allocable Purchase Price shall be reflected in the
Purchase Price Allocation Agreement in a manner consistent with Treasury
Regulation (S)1.1060-lT(f). Each party agrees not to take any position that is
adverse to or inconsistent with the Purchase Price Allocation Agreement in any
tax return or other similar filing made by such party with any governmental
taxing authority, including the United States Internal Revenue Service unless
otherwise required by an applicable taxing authority. Nothing herein contained
shall impose on either party the duty or obligation to contest any action which
any taxing authority may take or any adjustment or change in such allocation
which any taxing authority may make or propose. Seller and Buyer shall each be
responsible for the preparation of their own Section 1060 statements and forms
in accordance with applicable tax laws, and each shall execute and deliver to
each other such statements and forms as are reasonably requested by the other
party.
2.3 Closing. The consummation of the purchase and sale of the Assets
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contemplated hereby will take place at a closing to be held at the offices of
Buyer's counsel, Fenwick & West, Two Xxxx Xxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx,
Xxxxxxxxxx (the "Closing") on July 6, 1999 (the "Closing Date"), or at such
other time or date, and at such place, or by such other means of exchanging
documents, as may be agreed to by the parties hereto.
3. NO ASSUMPTION OF LIABILITY OR OBLIGATIONS.
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With the exception of that certain Lease Agreement between Seller, Xxxxxx Xxxx
Xxxxxx and Xxxxxx, Xxxx & Xxxx Real Estate dated July 29, 1997 (the "Lease"),
which Buyer shall assume, Buyer shall not assume or become obligated in any way
to pay any liabilities, debts or obligations of Seller or of the Enhancer
Business whatsoever (the "Excluded Liabilities") other than those contained in
the Lease, including but not limited to any liabilities or obligations now or
hereafter arising from or with respect to, the sale or license of any products
or services of Seller, the termination by Seller of the employment of any
current or future employees of Seller or any of its affiliates, any other claims
brought against Seller arising from Seller's employment of any person, any
duties or obligations under any existing or future employee benefit plans of
Seller or any of its affiliates, any present or future obligations or
liabilities of Seller or any of its affiliates to existing or future employees
of Seller or any of its affiliates under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), the Federal Worker Adjustment
and Retraining Act ("WARN") or any severance pay obligations of Seller or any of
its affiliates, or any obligations or liabilities or arising from any breach or
default by Seller of any contract, agreement or commitment of Seller.
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4. REPRESENTATIONS AND WARRANTIES OF BUYER.
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Buyer hereby represents and warrants to Seller that all the following
statements are true, accurate and correct:
4.1 Corporate Organization. Buyer is a corporation duly organized, validly
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existing, and in good standing under the laws of the State of Delaware. Buyer
has all necessary corporate power and authority to enter into this Agreement and
all assignments or other documents that Buyer is required to execute and deliver
hereunder (the "Ancillary Documents"), and holds all permits, licenses, orders
and approvals of all federal, state and local governmental or regulatory bodies
necessary and required therefor.
4.2 Power and Authority; No Default. The execution, delivery and
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performance by Buyer of this Agreement and the Ancillary Documents, and the
consummation of all the transactions contemplated hereby and thereby, have been
duly and validly authorized by Buyer by all necessary corporate action of
Buyer's Board of Directors. This Agreement and the Ancillary Documents, when
executed and delivered by Buyer, will be duly and validly executed and delivered
and will be the valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms. Neither the execution and
delivery of this Agreement or the Ancillary Documents by Buyer, nor the
performance by Buyer of its obligations under this Agreement, will (i) violate
Buyer's Certificate of Incorporation or Bylaws, (ii) result in a material
violation or breach of, or permit any third party to rescind any term or
provision of, or constitute a default under, any loan, note, indenture,
mortgage, deed of trust, security agreement or material contract, license, lease
or other agreement to which Buyer is a party or by which Buyer, or (iii) to the
best of Buyer's knowledge, violate any law, statute, rule or regulation or
order, writ, judgment, injunction or decree of any court, administrative agency
or government body applicable to Buyer.
4.3 Brokerage and Finder's Fees. Neither Buyer nor any of its affiliates
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has employed any broker, finder or agent, or agreed to pay or incurred any
brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder or agent with respect thereto as a result of which
any claim for a fee can be asserted against Seller.
4.4 Authorization for this Agreement. No authorization, approval, consent
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of, or filing with any governmental department, bureau, agency, public board,
authority or other third party is required for the consummation by Buyer of the
transactions contemplated by this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Seller represents and warrants to Buyer that, except as set forth in the
disclosure letter that has been delivered by Seller to Buyer prior to the
Effective Date (the "Seller's Disclosure Letter"), all of the following
statements are true, accurate and correct:
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5.1 Corporate Organization. Each of SMI and IMS is a corporation duly
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incorporated, validly existing, and in good standing under the laws of the State
of Georgia. SE is a limited liability company duly organized, validly existing,
and in good standing under the laws of the State of Georgia. Seller has all
necessary corporate power and authority to own and use the Assets and to operate
the Enhancer Business and to enter into this Agreement and all assignments or
other documents that Seller is required to execute and deliver hereunder (the
"Ancillary Documents"), and holds all permits, licenses, orders and approvals of
all federal, state and local governmental or regulatory bodies necessary and
required therefor. Seller has delivered true and correct copies as in effect on
the date hereof, of (i) the Certificates of Incorporation and Bylaws of SMI and
IMS and (ii) the Certificate of Formation and Operating Agreement of SE.
5.2 Power and Authority; No Default Upon Transfer. The execution, delivery
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and performance by Seller of this Agreement and the Ancillary Documents, and the
consummation of all the transactions contemplated hereby and thereby, have been
duly and validly authorized by Seller by all necessary corporate action of SMI's
and IMS's Board of Directors and shareholders and by SE's Members and Board of
Managers. This Agreement and the Ancillary Documents, when executed and
delivered by Seller, will be duly and validly executed and delivered and will be
the valid and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms. Neither the execution and delivery of
this Agreement or the Ancillary Documents by Seller, nor the performance by
Seller of its obligations under this Agreement, will (i) violate the
Certificates of Incorporation and Bylaws of SMI and IMS or the Certificate of
Formation and Operating Agreement of SE, (ii) result in a material violation or
breach of, or permit any third party to rescind any term or provision of, or
constitute a default under, any loan, note, indenture, mortgage, deed of trust,
security agreement, lease or material contract, license, lease or other
agreement to which Seller is a party or by which Seller or any of the Assets is
bound or (iii) violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree of any court, administrative agency or government
body applicable to the Seller or the Enhancer Business.
5.3 Title. Seller has good and marketable title to all of the Assets, free
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and clear of all mortgages, pledges, liens, licenses, rights of possession,
security interests, restrictions, encumbrances, charges, conditional sale or
other security arrangements and all claims or agreements of any nature
whatsoever. Title to all the Assets is freely transferable from Seller to Buyer
without obtaining the consent or approval of any person or party, except such
consents and approvals as will be obtained by Seller prior to the Closing.
Except for the "shrinkwrap" or other use licenses or other rights to use object
code or executable code copies of third party personal computer software
programs (and the copies of such software), the Assets include all of the
intangible assets used in the Enhancer Business to use, create, enhance and
modify the Enhancer Products software programs set forth on Schedule 1.2(b)(i).
5.4 Litigation. There is no claim, action, suit or proceeding pending or,
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to Seller's knowledge, threatened, against Seller (including but not limited to
any claim, action, suit or proceeding relating to or affecting the Enhancer
Business or the Assets), at law, in equity, by way of arbitration or before any
governmental department, commission, board or agency that might have a material
adverse effect on the Assets, nor is Seller aware of any reasonable basis
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therefor. There are no judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or arbitrator
against Seller affecting the Assets.
5.5 Contracts and Commitments. Schedule 5.5 hereto sets forth a
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description of all contracts, agreements, understandings and commitments of
Seller related to the Enhancer Business, whether written or oral, that involve
the purchase or license of any Intellectual Property (as defined in Section 5.6
below), including all customer contracts relating to the Enhancer Products and a
true and correct listing, by customer and by Enhancer Product, of all deposits
and fees and other monies paid by each Enhancer Business customer. Seller is not
in violation, breach or default of any of the contracts, agreements or
understandings listed on Schedule 5.5. Seller has delivered to Buyer true and
correct copy of each of the Customer Records. A true and correct copy of
Seller's standard customer product warranty for its Enhancer Products and a true
and correct accounting of Seller's warranty claims experience for its Enhancer
Products is set forth on Section 5.5 of the Seller Disclosure Letter. Seller
represents and warrants to Buyer that the Enhancer Products and each component
thereof have been and will be tested and are and will be fully capable of
providing accurate results using data having date ranges spanning the twentieth
(20th) and twenty-first (21st) centuries (e.g., years 1900-2099). Without
limiting the generality of the foregoing, Seller represents and warrants to
Buyer that the Enhancer Products and each component thereof shall (a) manage and
manipulate data involving all dates from the 20th and 21st centuries without
functional or data abnormality related to such dates; (b) manage and manipulate
data involving all dates from the 20th and 21st centuries without inaccurate
results related to such dates; (c) have user interfaces and data fields
formatted to distinguish between dates from the 20th and 21st centuries; and (d)
represent all data related to include indications of the millennium, century and
decade as well as the actual year.
5.6 Intellectual Property. The term "Intellectual Property" means and
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includes, collectively, the worldwide rights to all patents, patent applications
(including but not limited to continuations, continuations-in-part, divisionals
and reissues), trademarks (whether or not registered), trade names, service
marks (whether or not registered), copyrights (whether or not registered), moral
rights, trademark and service xxxx registrations (and pending applications
therefor), mask works and mask work registrations, computer software in object
and source code form (whether owned by Seller, or authored or developed for
Seller by any of its employees, contractors or agents), licenses, sublicenses,
and franchise agreements of Seller, and all know-how, formulae, recipes,
compositions by matter, processes, techniques, confidential business
information, designs, patterns, shapes, inventions (whether or not patented or
patentable), trade secrets, and other proprietary information (including without
limitation customer lists) and technology owned by or licensed to Seller.
Schedule 1.2(b)(i) contains a true and accurate list of all products and
services currently offered as part of the Enhancer Products and Schedule
1.2(b)(ii) sets forth a true and accurate list of all Intellectual Property
referred to in Section 1.2(b). Seller owns, possesses, has the exclusive right
to make, use, sell and license, has the right to bring actions for the
infringement of, and where necessary, has made timely and proper application
for, all Intellectual Property rights that are used in the Enhancer Products.
Seller has not granted any third party any outstanding licenses or other rights
to any of its Intellectual Property that is used in the Enhancer Products and
Seller is not liable, nor has it made any contract or arrangement whereby it may
become liable, to any person for any royalty or other
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compensation for the use of any Intellectual Property that is used in the
Enhancer Products. The Intellectual Property that is used in the Enhancer
Products does not infringe any patent, copyright, moral right, mask work, trade
secret or proprietary right of any third party and there is no basis for such
claim known to Seller. All employees and consultants of Seller and any other
third parties who have been involved in product development for the Enhancer
Products have executed invention assignment agreements and all employees and
consultants who have access to confidential or trade secret information
concerning Seller's technology or products have executed nondisclosure
agreements, each effective as of the first date of service to Seller, and each
substantially similar to the form of agreement attached hereto as Schedule 5.6.
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5.7 Seller Balance Sheets. Seller has delivered to Acquirer copies of: (a)
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the unaudited consolidated balance sheet as of June 30, 1999 for SMI, IMS and SE
(collectively, the "Balance Sheets"), copies of which are attached hereto as
Schedule 5.7A. The Balance Sheets: (i) are in accordance with the books and
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records of such companies; (ii) fairly present in all material respects each
such company's financial condition at the date therein indicated and the results
of operations for the period therein specified; and (iii) have been prepared in
accordance with GAAP applied on a consistent basis (except for the absence of
any footnotes required by GAAP in the Balance Sheets and subject to customary
year-end adjustments). Except as set forth in the Balance Sheets, SMI, IMS and
SE do not have any debt, obligation, duty or liability of any nature including
any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent,
indirect, conditional, implied, vicarious, derivative, joint, several or
secondary liability, regardless of whether such debt, obligation, duty or
liability (i) would be required to be disclosed on a balance sheet prepared in
accordance with GAAP, (ii) is immediately due and payable or (iii) was incurred
after June 30, 1999. A list of each individual debt, obligation, duty or
liability, including the name of the creditor and the amount of such obligation,
is set forth on Schedule 5.7B hereto.
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5.8 Brokerage and Finder's Fees. Neither Seller nor any of its affiliates
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has employed any broker, finder or agent, or agreed to pay or incurred any
brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder or agent with respect thereto as a result of which
any claim for a fee can be asserted against Buyer.
5.9 Compliance with Laws. In the operation of the Enhancer Business,
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Seller has, to the best of Seller's knowledge, duly complied with all applicable
laws, rules, regulations and orders of federal, state, local and foreign
governments (including but not limited to all export control laws and
regulations of the United States of America or any governmental, authority or
agency of the United States government), except where the failure to comply
would not have a materially adverse effect on the Assets or the Enhancer
Business, and Seller is not in default with respect to any order, judgment,
writ, injunction, decree, award, rule or regulation of any court, governmental
or regulatory body or arbitrator which restrains or limits the operations of the
Enhancer Business or the use of the Assets.
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5.10 Authorization for this Agreement. No authorization, approval, consent
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of, or filing with any governmental department, bureau, agency, public board,
authority or other third party is required for the consummation by Seller of the
transactions contemplated by this Agreement.
5.11 Taxes. At the Closing, and upon the date of any subsequent transfer
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of Assets to Buyer in accordance with this Agreement, there will be no federal,
state or local tax liens against any of the Assets to be transferred to Buyer
hereunder. Seller has paid or will pay, when due, any federal, state or local
taxes attributable to periods prior to the Effective Date with respect to the
Assets or the Enhancer Business which, if unpaid, may result in a lien against
any of the Assets.
5.12 Employees; Employee Benefit Plans. Attached hereto as Schedule 5.12
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is a complete list of Seller's employees, consultants and other individuals or
entities whose work relates to, or has related to, the Enhancer Business at any
time prior to the Closing (each, a "Service Provider"), including (i) a
description of the title and responsibilities of each such employee, (ii) the
current compensation payable to each such Service Provider, (iii) the date of
hire and the date and amount of last compensation adjustment and any contract,
agreement, understanding or ongoing commitment of Seller to such Service
Provider, whether or not in written form and (iv) the date and title of any
written agreement that was executed by such Service Provider. Seller has no
pension, retirement, profit sharing, deferred compensation agreements,
severance, stock, stock options, bonus or other incentive plans or other
employee benefit plans or other employee benefit plans or arrangements,
maintained by Seller for any of its employees, including all "Employee Benefit
Plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
5.13 Condition and Sufficiency of Assets. Each of the Tangible Assets
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included in the Assets is in good working condition and repair, ordinary wear
and tear excepted, and is suitable for the purposes for which it is presently
used, except where failure of such assets to be in such condition would not have
a material adverse effect on the Enhancer Business taken as a whole. The current
location, original cost, depreciation and current book value of all Tangible
Assets is set forth in Section 5.14 of the Seller Disclosure Letter. Following
the Closing, Buyer will have all assets and consents necessary to conduct and
operate the Enhancer Business substantially as it has been conducted and
operated during the most recent 24 months.
5.14 Access to Code. To the best of Seller's knowledge, no former employee
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or consultant of Seller has possession of any software (in source code or object
code form) that is part of the Enhancer Products.
5.15 Tax Advice. Sellers have been advised by their own advisers
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concerning the tax treatment of the sale of the Assets and the other
transactions contemplated by this Agreement and are not relying on Buyer or any
of its agents for any advice concerning such tax consequences.
5.16 Material Misstatements or Omissions. No representation or warranty by
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Seller in this Agreement, or in any document, statement, certificate or schedule
furnished or to be furnished to Buyer by (or on behalf of) Seller pursuant
thereto, contains, or will when furnished
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contain, any untrue statement of a material fact, or omits, or will then omit to
state, a material fact necessary to make any statement of facts contained herein
or therein not materially misleading. There have been no events or transactions,
or information which has come to the attention of Seller which, as related
directly to Seller, the Enhancer Business or the Assets, could reasonably be
expected to have a material adverse effect on the business, operations, affairs,
prospects or condition of the Enhancer Business or the Assets.
6. COVENANTS OF BUYER.
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6.1 Confidential Information. All copies of financial information,
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marketing and sales information, pricing, marketing plans, business plans,
financial and business projections, manufacturing processes and procedures,
formulae, methodologies, inventions, product designs, product specifications and
drawings, and other confidential and/or proprietary information of Seller
disclosed to Buyer in the course of negotiating the transaction contemplated by
this Agreement ("Seller Confidential Information") will be held in confidence
and not used or disclosed by Buyer or any of its employees, affiliates or
stockholders for a period of [one (1)] year from the Effective Date and will be
promptly destroyed by Buyer or returned to Seller, upon Seller's written request
to Buyer; provided, however that from and after the Closing, the foregoing
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covenant shall not be applicable to any Seller Confidential Information included
in the Assets. Buyer's employees, affiliates and stockholders will not be given
access to Seller Confidential Information except on a "need to know" basis. It
is agreed that Seller Confidential Information will not include information
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that: (a) is known to Buyer prior to receipt of such information from Seller;
(b) is disclosed by a third party having the legal right to disclose such
information and who owes no obligation of confidence to Seller; (c) is now, or
later becomes part of the general public knowledge or literature in the art,
other than as a result of a breach of this Agreement by Buyer; or (d) is
independently developed by Buyer without the use of any Seller Confidential
Information.
6.2 Stock Options. In addition to those obligations set forth in the
-------------
Xxxxxxx Employment Agreement and the Employment Agreement with Xxxx Xxxxxx, a
form of which is attached hereto as Exhibit 2.6B, (collectively, with the
------------
Xxxxxxx Employment Agreement, the "Employment Agreements"), Buyer shall grant to
each former Seller employee that accepts employment with Buyer stock options to
purchase shares of Buyer's common stock pursuant to Buyer's Equity Incentive
Plan. Such options shall have an exercise price calculated in accordance with
Buyer's customary procedures and shall vest 25% at the end of the first year
anniversary of such grant and in equal monthly installments over the following
three (3) years.
6.3 No Relocation. Buyer shall not require any former Seller employee
-------------
that accepts employment with Buyer to relocate from Georgia as a condition of
employment with Buyer.
6.4 Survival of Covenants. The covenants set forth in Sections 6.1, 6.2
---------------------
and 6.3 above shall survive the Closing. In addition, the covenants set forth
in Section 6.1 shall survive the termination of this Agreement for any reason.
10
7. COVENANTS OF SELLER.
-------------------
Seller covenants and agrees with Buyer as follows:
7.1 Protection of Assets. From the Effective Date to the Closing Date,
--------------------
Seller agrees to use reasonable efforts to retain its employees, to protect and
preserve the Assets, and to preserve the goodwill of its customers, suppliers,
and others having business relations with the Enhancer Business. Without
limiting the generality of the foregoing, without Buyer's prior written consent,
Seller shall: (a) not engage in any transaction that would be inconsistent with
any representation or warranty of Seller set forth herein or which would cause a
breach of any such representation or warranty; (b) not sell, transfer, convey,
assign, lease, license or otherwise dispose of any of the Assets; (c) not
mortgage or otherwise encumber any of the Assets; (d) conduct the business of
SMI, SE and IMS in the ordinary course and will not enter into any transaction
or agreement or take any action other than in the ordinary course and in a
reasonable and prudent manner, consistent with past practices; (e) use its best
efforts to preserve its existing relationships with employees, customers,
suppliers and the like of SMI, SE and IMS; (f) use its best efforts to preserve
and protect its properties and assets of SMI, SE and IMS; (g) not enter into any
extraordinary transactions nor issue nor grant any securities or any rights,
options, warrants or debt convertible into or exercisable or exchangeable for
any securities of SMI, SE and IMS; (h) not change the terms (including
acceleration of vesting) of any outstanding stock option or other security of
SMI, SE and IMS and (i) not incur any liabilities of SMI, SE and IMS other than
in the ordinary course, consistent with past practices. Seller will inform
Buyer in writing as to Seller's entry into any material commitments or
obligations (including without limitation agreeing or otherwise committing with
any third party to license or develop any material technology or to sell,
purchase or lease any material property or asset), pledge, subject to a lien, or
grant a security interest in, or otherwise encumber, any of the Assets.
7.2 Access to Information. From the Effective Date to the Closing Date,
---------------------
Seller will afford to the representatives of Buyer, including its counsel and
auditors, during normal business hours, access to any and all of the Assets and
information with respect to the Enhancer Products to the end that Buyer may have
a reasonable opportunity to make such a full investigation of the Assets in
advance of the Closing Date as it shall reasonably desire, and the officers of
Seller will confer with representatives of Buyer and will furnish to Buyer,
either orally or by means of such records, documents, and memoranda as are
available or reasonably capable of preparation, such information as Buyer may
reasonably request.
7.3 Consent of Third Parties. From the Effective Date to the Closing Date,
------------------------
Seller shall obtain the consent in writing of all persons necessary to permit
Seller to assign and transfer all of the Assets (including but not limited to
copies of the Customer Records) to Buyer, free and clear of all liens, security
interest, restrictions, claims and encumbrances and to perform its obligations
under, and to conclude the transactions contemplated by, this Agreement in order
that the performance hereof will not result in the termination of, or any
violation, breach or default under, any material contracts, agreements,
obligations, leases, permits or licenses to which Seller is a party or by which
any of Seller's property is bound.
11
7.4 Further Assurances. From and after the Closing Date, Seller shall
------------------
promptly execute and deliver to Buyer any and all such further assignments,
endorsements and other documents as Buyer may reasonably request for the purpose
of effecting the transfer of Seller's title to the Assets to Buyer and/or
carrying out the provisions of the Agreements. Seller hereby appoints Buyer as
its attorney-in-fact for the limited purpose of executing such assignments,
endorsements and other documents should Seller be unable or unwilling to do so.
7.5 Covenants Not to Compete.
------------------------
(a) Covenants. Subject to the following provisions of this Section
---------
7.5, as a material inducement and consideration for Buyer to enter into this
Agreement, for a period commencing on the Closing Date and continuing through
the second anniversary of the Closing Date (the "Restricted Period"), neither
Founder nor any other Seller shall, within any state of the United States, any
province of Canada or any country that is a member of the European Community,
directly or indirectly, carry on any business, or own (in whole or in part),
operate, advise, assist or lend funds to or invest funds in, any person, firm,
partnership, business, corporation or other entity which competes, in whole or
in part, with the Enhancer Products or any other products and services then
offered by Buyer. This Section shall not prohibit the ownership by Founder or
any other Seller as a passive investor only, of an aggregate of not more than
one percent (1%) of the total stock or other equity interests of any company or
partnership whose stock or equity interests are publicly traded on a national
stock exchange or in the over-the-counter market. During the Restricted Period,
Founder and each other Seller further agrees not to interfere with, disrupt or
attempt to disrupt the relationship between Buyer and any third party, including
without limitation any customer, supplier or employee of Buyer, and not to
endorse or otherwise promote or support any product or service competitive to
Buyer's, including without limitation the Enhancer Products.
(b) Remedy. In the event of a breach of any of the covenants set
------
forth in this Section 7.5, Buyer shall be entitled to recover all damages
resulting from said breach, and to an injunction against the Seller restraining
such breach in addition to any other remedies provided by law or equity. In the
event that any covenant in this Section is held to be invalid, illegal or
unenforceable by any court of competent jurisdiction or any other governmental
authority, it is agreed and understood that such covenant shall not be voided
but rather shall be construed to impose limitations upon Seller's activities no
greater than allowable under then applicable law.
7.6 Use of Names "XxxxxXxxxxxxx.xxx", "XxxxxXxxxxxxx.xxx" and
---------------------------------------------------------
"Xxxxxxxxxxxxxxx.xxx". From and after the Closing Date, Seller shall cease to
---------------------
use the trademarks and trade names "XxxxxXxxxxxxx.xxx", "XxxxxXxxxxxxx.xxx" and
"Xxxxxxxxxxxxxxx.xxx" or any similar name, without the prior written consent of
Buyer.
7.7 Confidential Information. All copies of financial information,
------------------------
marketing and sales information, pricing, marketing plans, business plans,
financial and business projections, manufacturing processes and procedures,
formulae, methodologies, inventions, product designs, product specifications and
drawings, and other confidential and/or proprietary information of Buyer
disclosed to Seller in the course of negotiating the transaction contemplated by
this
12
Agreement ("Buyer Confidential Information") will be held in confidence and not
used or disclosed by Seller or any of its employees, affiliates or stockholders
for a period of [five (5)] years from the Closing Date and will be promptly
destroyed by Seller or returned to Buyer, upon Buyer's written request to
Seller. Seller's employees, affiliates and stockholders will not be given access
to Buyer Confidential Information except on a "need to know" basis. It is agreed
that Buyer Confidential Information will not include information that: (a) is
---
known to Seller prior to receipt of such information from the Buyer; (b) is
disclosed by a third party having the legal right to disclose such information
and who owes no obligation of confidence to the Buyer; (c) is now, or later
becomes part of the general public knowledge or literature in the art, other
than as a result of a breach of this Agreement by Seller; or (d) is
independently developed by Seller without the use of any Buyer Confidential
Information.
7.8 Exclusivity. Seller will not, and will not permit any of its
-----------
affiliates to, (i) solicit, initiate, or encourage the submission of any
proposal or offer from any person relating to any acquisition or purchase of the
Enhancer Business Expense or any of its Assets, or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any attempt by any
person to do any of the foregoing. Seller will notify Buyer immediately if any
person makes such an offer, proposal, inquiry or contact.
7.9 Payment of Creditors. Within thirty (30) days of the Closing, Seller
--------------------
agrees to use the Closing Payment to fully extinguish the obligations of each
creditor of Seller, including but not limited to those set forth on Schedule
5.7B hereof.
7.10 License Agreement. Within thirty (30) days of the Effective Date,
-----------------
Founder shall use his best efforts to have the License Agreement attached hereto
as Exhibit 7.10, signed by the dealers set forth on Schedule 7.10 hereto that
have licensed a client-server software product from Seller.
7.11 Survival of Covenants. Each of the covenants set forth in Sections
---------------------
7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10 and this Section 7.11 shall survive the
Closing. The covenants set forth in Section 7.7 above shall, in addition,
survive the termination of this Agreement for any reason.
8. CONDITIONS TO CLOSING.
---------------------
8.1 Conditions to Buyer's Obligations. The obligations of Buyer hereunder
---------------------------------
shall be subject to the satisfaction and fulfillment of each of the following
conditions, except as Buyer may expressly waive the same in writing:
(a) No Material Adverse Change. From the Effective Date through the
--------------------------
Closing Date, there shall have been no material adverse change in the Assets or
the Enhancer Business.
(b) Conduct of Enhancer Business in Ordinary Course. From the
-----------------------------------------------
Effective Date through the Closing Date, Seller shall have conducted the
Enhancer Business only in the ordinary course, consistent with Seller's past
practices, except for actions expressly permitted by
13
this Agreement, matters incident to carrying out this Agreement, or such further
matters as may be consented to by Buyer in writing.
(c) Accuracy of Representations and Warranties on Closing Date. The
----------------------------------------------------------
representations and warranties made herein by Seller (as qualified by Seller's
Disclosure Letter which shall be updated as of the Closing Date) shall be true
and correct in all material respects, and not misleading in any material
respect, on and as of the date given, and on and as of the Closing Date with the
same force and effect as though such representations and warranties were made on
and as of the Closing Date.
(d) Compliance. As of the Closing Date, Seller shall have complied in
----------
all material respects with, and shall have fully performed, in all material
respects, all conditions, covenants and obligations of this Agreement imposed on
Seller and required to be performed or complied with by Seller at, or prior to,
the Closing Date.
(e) Delivery of Assets. Seller shall have delivered, and Buyer shall
------------------
shall have received, the Assets.
(f) Delivery of Closing Documents. Seller shall have delivered, and
-----------------------------
Buyer shall have received, the documents described in Section 9.2 hereof.
(g) Seller's Consents Obtained. All consents and approvals required
--------------------------
to be obtained by Seller shall have been obtained, including but not limited to
the approval of authorizing the execution and delivery by Seller of this
Agreement, all related agreements, the consummation of the transactions
contemplated hereby and thereby and the waiver of amounts to be received by
Founder from treatment under Section 280G of the Code, the Internal Revenue Code
of 1986, as amended (the "Code") by Founder.
8.2 Conditions to Seller's Obligations. The obligations of Seller
----------------------------------
hereunder shall be subject to the satisfaction and fulfillment of each of the
following conditions, except as Seller may expressly waive the same in writing:
(a) Accuracy of Representations and Warranties on Closing Date. The
----------------------------------------------------------
representations and warranties made herein by Buyer in Section 4 hereof shall be
true and correct in all material respects, and not misleading in any material
respect, on and as of the date given, and on and as of the Closing Date with the
same force and effect as though such representations and warranties were made on
and as of the Closing Date.
(b) Compliance. Buyer shall have complied in all material respects
----------
with, and shall have fully performed, the terms, conditions, covenants and
obligations of this Agreement imposed thereon to be performed or complied with
by Buyer at, or prior to, the Closing Date.
(c) Delivery of Closing Documents. Buyer shall have delivered, and
-----------------------------
Seller and shall have received, the documents described in Section 9.1 hereof.
14
9. CLOSING OBLIGATIONS.
-------------------
9.1 Buyer's Closing Obligations. At the Closing, Buyer shall deliver to
---------------------------
Seller the following:
(a) A certificate signed by the President or Chief Financial Officer
of Buyer, on behalf of Buyer, to the effect that the representations and
warranties of Buyer made in the Agreement are true and correct in all material
respects as of the Closing Date and that Buyer has fully performed all of its
pre-closing commitments hereunder;
(b) A certified copy of the resolutions of the Board of Directors of
Buyer authorizing the execution and delivery by Buyer of this Agreement, and all
related agreements, and the consummation of the transactions contemplated hereby
and thereby;
(c) Payment of the Purchase Price by delivery to Seller of a wire
transfer or check payable to Seller's order in the amount of the Payment;
(d) The Employment Agreements, in the form attached hereto as Exhibit
2.6A and Exhibit 2.6B, signed by an authorized officer of Buyer on behalf of
Buyer; and
(e) The Assignment, Xxxx of Sale and Assumption Agreement, in the
form attached hereto as Exhibit 4.2, signed by an authorized officer of Buyer on
behalf of Buyer.
9.2 Seller's Closing Obligations. At the Closing, Seller shall deliver to
----------------------------
Buyer the following:
(a) The Assets, or if Seller has delivered the Assets to Buyer prior
to the Closing, a certificate signed by an officer of Seller, on behalf of
Seller, to the effect that the Assets have been earlier delivered to Buyer;
(b) A certified copy of the resolutions of (i) the Board of Directors
and the shareholders of SMI and IMS, and (ii) the Board of Managers and the
Members of SE;
(c) A certificate signed by the President of SMI, IMS and SE, on
behalf of each such company, to the effect that the representations and
warranties of Seller made herein are true and correct in all material respects
as of the Closing Date and that Seller has fully performed all its pre-closing
obligations hereunder;
(d) The Employment Agreements, in the forms attached hereto as
Exhibit 2.6A and 2.6B, signed by each party thereto other than Buyer;
(e) The Assignment, Xxxx of Sale and Assumption Agreement, in the
form attached hereto as Exhibit 4.2, signed by each party thereto other than
Buyer;
(f) The Assignment and Waiver Agreement attached hereto as Exhibit
9.2(f), signed by each party thereto other than Buyer;
15
(g) Such specific assignments and other instruments of conveyance as
Buyer and/or Buyer's counsel may reasonably request; and
(h) All consents required to be obtained by Seller pursuant to
Section 7.3.
10. SURVIVAL OF WARRANTIES AND INDEMNIFICATION.
------------------------------------------
10.1 Survival of Warranties. All representations and warranties made by
----------------------
Seller or Buyer herein, or in any certificate, schedule or exhibit delivered
pursuant hereto, shall survive the Closing for a period of three (3) years after
the Closing Date except that all representations contained in Section 5.11 shall
survive until the expiration of the applicable statute of limitations (including
extensions).
10.2 Indemnified Losses. For the purpose of this Section 10.2 and when
------------------
used elsewhere in this agreement, "Loss" shall mean and include any and all
liability, loss, damage, claim, expense, cost, fine, fee, penalty, obligation or
injury including, without limitation, those resulting from any and all actions,
suits, proceedings, demands, assessments, judgments, award or arbitration,
together with reasonable costs and expenses including the reasonable attorneys'
fees and other legal costs and expenses relating thereto.
10.3 Indemnification by Seller. Subject to the provisions and limitations
-------------------------
set forth in this Section 10, Seller agrees to defend, indemnify and hold
harmless Buyer, any parent, subsidiary or affiliate of Buyer and any director,
officer, employee, stockholder, agent or attorney of Buyer or of any parent,
subsidiary or affiliate of Buyer (collectively, the "Buyer Indemnitees") from
and against any Loss which arises out of or results from:
(a) any breach of any covenant, or the inaccuracy or untruth of any
representation or warranty of Seller made herein, including but not limited to
those contained in Sections 2.2, 5 and 7 of this Agreement;
(b) taxes, assessments and other governmental charges of any kind or
nature whatsoever, including without limitation any withholding, social security
or unemployment levies, arising out of, or payable with respect to, Seller's
business operations;
(c) any demand, claim, debt, suit, cause of action or proceeding
made or asserted by a stockholder, creditor, receiver, or trustee in bankruptcy
of Seller asserting that the transfer of the Purchased Assets to Buyer hereunder
constitutes a bulk sale, bulk transfer, fraudulent conveyance, fraudulent
transfer, or constitutes a preference under any applicable state or federal law,
including but not limited to the United States Bankruptcy Code;
(d) any demand, claim, debt, suit, cause of action, arbitration or
other proceeding (including, but not limited to, a warranty claim, a strict
product liability claim or any other claim) that is made or asserted by any
third party that relates to any product or service, that was sold, licensed or
otherwise provided by Seller to any Enhancer Business customer;
16
(e) any demand, claim, debt, suit, cause of action or proceeding
made or asserted by any employee or independent contractor or any former
employee or independent contractor of Seller, that relates in any manner to any
termination by Seller of its employment or the services of such employee or
independent contractor or any other matter relating to Seller's employment of
such employee or independent contractor; or
(f) any of the Excluded Liabilities and any claim, suit, action,
loss, judgment, award, damages, debt, liability, costs and expenses incurred or
suffered by Buyer in connection with any Excluded Liabilities.
10.4 Indemnification By Buyer. Subject to the provisions and limitations
------------------------
set forth in this Section 10, Buyer agrees to defend, indemnify and hold
harmless Seller, any parent, subsidiary or affiliate of Seller and any director,
officer, employee, stockholder, agent or attorney of Seller or of any parent,
subsidiary or affiliate of Seller (collectively, the "Seller Indemnitees") from
and against and in respect of any Loss which arises out of or results from any
breach by Buyer of any covenant, or the inaccuracy or untruth of any
representation or warranty of Buyer made herein, including but not limited to
those contained in Sections 4 and 6 of this Agreement, and from any Loss
incurred by Seller that is both (i) related to Buyer's operation of the Enhancer
Business subsequent to Closing and (ii) not due, in whole or in part, to a
breach of any representation, warranty or covenant of Seller set forth in this
Agreement.
10.5 Procedures for Indemnification. If any action, suit or proceeding
------------------------------
shall be commenced against, or any claim or demand be asserted against, Seller
or Buyer, as the case may be, in respect of which Seller or Buyer is entitled to
demand indemnification under Section 10 of this Agreement, then as a condition
precedent thereto, the party seeking indemnification ("Indemnitee") shall
promptly notify the other party ("Indemnitor") in writing to that effect, and
with reasonable particularity and with reference to the applicable provision(s)
of this Agreement. The Indemnitor shall have the right to assume the entire
control of the defense, compromise or settlement of such action, suit,
proceeding or claim and including the selection of counsel, subject to the right
of the Indemnitee to participate (at its expense and with counsel of its choice)
in the defense, compromise or settlement of such action, suit, proceeding, claim
or demand, and in connection therewith, the Indemnitee shall cooperate fully in
all respects with the Indemnitor in any such defense, compromise or settlement.
The Indemnitor will not compromise or settle any such action, suit, proceeding,
claim or demand without the prior written consent of the Indemnitee, which
consent will not be unreasonably withheld or delayed. So long as the Indemnitor
is defending in good faith any such action, suit, proceeding, claim or demand
asserted by a third party against the Indemnitee, the Indemnitee shall not
settle or compromise such action, suit, proceeding, claim or demand without the
prior written consent of the Indemnitor, which consent will not be unreasonably
withheld or delayed. The Indemnitee shall make available to the Indemnitor or
its agents all records and other materials in the Indemnitee's possession
reasonably required for contesting any third party claim or demand. If the
Indemnitor shall fail to promptly and adequately defend any such action, suit,
proceeding, claim or demand, then the Indemnitee may defend, through counsel of
its own choosing, such action, suit, proceeding, claim or demand and (so long as
Indemnitee gives the Indemnitor at least ten (10) days' notice of the terms of
the proposed settlement thereof and permits the Indemnitor to then
17
undertake the defense thereof if Indemnitor objects to the proposed settlement)
to settle such action, suit, proceeding, claim or demand and to recover from the
Indemnitor the amount of such Losses.
10.6 Period for Making Claims. A claim for indemnification under this
------------------------
Section 10:
(a) must be brought, if at all, at any time within three (3) years
after the Closing Date, with respect to any claim or claims for indemnification
under this Section 10 not described in subsection 10.6(b) below; and
(b) may be brought at any time up to expiration of the applicable
statute of limitations (including extensions) with respect to any claim for
indemnification relating to or based upon the provisions of Section 5.10.
10.7 Limitations on Indemnification Obligations; Baskets.
---------------------------------------------------
(a) Limitations on Seller. Notwithstanding anything herein to the
---------------------
contrary, in no event shall Seller incur any liability for indemnification under
this Section 10 unless and until the aggregate amount of all Loss incurred by
Buyer (or any other Buyer Indemnitee) for which Buyer or such other Buyer
Indemnitee seeks indemnification from Seller hereunder exceeds the aggregate sum
of Twenty Thousand Dollars ($20,000); provided, however, that when the aggregate
-------- -------
amount of all such Loss incurred by Buyer and/or such other Buyer Indemnitees
exceeds Twenty Thousand Dollars ($20,000), then Seller shall thereafter be
liable for all such Loss (including the first Twenty Thousand Dollars ($20,000)
of such Loss). Notwithstanding anything herein to the contrary, in no event
shall Seller incur any liability for indemnification under this Section 10, once
the aggregate liability of Seller for indemnification under this Section 10
exceeds the Purchase Price. The limitations set forth in this Section 10.7(a)
shall not apply to any claim for indemnification which arises out of or results
from the fraud or willful misconduct of Seller.
(b) Limitations on Buyer. Notwithstanding anything herein to the
--------------------
contrary, in no event shall Buyer incur any liability for indemnification under
this Section 10 unless and until the aggregate amount of all Loss incurred by
Seller or any other Seller Indemnitee for which Seller or such other Buyer
Indemnitee seeks indemnification from Buyer hereunder exceeds the aggregate sum
of Twenty Thousand Dollars ($20,000); provided, however, that when the aggregate
-------- -------
amount of all such Loss incurred by Seller and/or such other Seller Indemnitees
exceeds Twenty Thousand Dollars ($20,000), then Buyer shall thereafter be liable
for all such Loss (including the first Twenty Thousand Dollars ($20,000) of such
Loss). Notwithstanding anything herein to the contrary, in no event shall Buyer
incur any liability for indemnification under this Section 10, once the
aggregate liability of Buyer for indemnification under this Section 10 exceeds
the Purchase Price. The limitations set forth in this Section 10.7(b) shall not
apply to any claim for indemnification which arises out of or results from the
fraud or willful misconduct of Buyer.
10.8 Right to Offset. Notwithstanding anything to the contrary in this
---------------
Agreement, Buyer may notify the Escrow agent to withhold and set off against any
Periodic Payment any
18
amounts as to which Seller is obligated to indemnify Buyer pursuant to the
breach of any covenant, or the inaccuracy or untruth of any representation or
warranty of Seller, related to Seller's representations and warranties contained
in Section 5.6 hereof or maintenance or other obligations due to Seller's
client-server customers that have purchased products or services from Seller
within the twelve (12) months preceding the Closing. The Escrow Agent shall pay
to Seller the amount of the Periodic Payment which exceeds the estimated value
of the claim. The balance shall be delivered to Buyer unless Seller provides
written notice to Escrow Agent that Seller contests such claims within fifteen
(15) days of such date, in which case such funds shall be held by the Escrow
Agent.
10.9 Escrow Amount and Periodic Payment Amounts. The Escrow Amount and
------------------------------------------
Periodic Payment Amounts shall be held by State Street Bank and Trust Company of
California, N.A. (the "Escrow Agent") pursuant to the terms of that certain
Escrow Agreement substantially in the form attached hereto as Exhibit 10.9 (the
------------
"Escrow Agreement"). If Buyer has not delivered claims for indemnification to
Seller on or before the first anniversary of the Closing Date, all of the Escrow
Amount shall be paid promptly to Seller with no interest thereon. Likewise, if
no claims have been made as set forth herein the Periodic Payments shall be paid
promptly to Seller as they become due. If Buyer has delivered one or more
claims for indemnification to Seller on or before any Periodic Payment due date,
Buyer shall direct Escrow Agent to pay to Seller promptly on such due date an
amount equal to such Escrow Amount or Periodic Payment amount less an amount
reasonably estimated by Buyer to cover any unresolved claims calculated in
accordance with the limitations set forth in Section 10 hereof. The balance
shall be delivered to Buyer unless Seller provides written notice to Escrow
Agent that Seller contests such claims within fifteen (15) days of such date, in
which case such funds shall be held by the Escrow Agent.
11. MISCELLANEOUS.
-------------
11.1 Expenses. Buyer shall bear its own expenses (including without
--------
limitation attorneys' and accountant's fees) and Founder shall bear Seller's and
his own expenses (including without limitation attorney's and accountant's fees)
in connection with the negotiation and consummation of the transaction
contemplated hereby. In addition, Founder shall reimburse Buyer for any amount
in excess of Twenty-Five Thousand Dollars ($25,000) for costs incurred by Buyer
to engage a nationally-recognized accounting firm to audit the financial records
of SMI, IMS and SE.
11.2 Notices. Any notice required or permitted to be given under this
-------
Agreement shall be in writing and shall be personally or sent by certified or
registered United States mail, postage prepaid, or sent by nationally recognized
overnight express courier and addressed as follows:
19
(a) If to Sellers: XxxxxXxxxxxxx.xxx, LLC
-------------
Solutions Management, Inc.
Interactive Monitoring Systems, Inc.
0000 Xxx Xxxx Xxxx, #000
Xxxxxxxx, XX 00000
Attention: President
Xxxxxxx Xxxxxxx
0000 Xxx Xxxx Xxxx, #000
Xxxxxxxx, XX 00000
Attention: President
With copy to: Xxxxx Xxxxxx Xxxxx & Xxxxxx LLP
------------
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: J. Xxxxx X'Xxxx, Esq.
(b) If to Buyer: Xxxxxxx.xxx, Inc.
-----------
0000 Xxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attention: President
With copy to: Fenwick & West LLP
------------
Two Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
11.3 Entire Agreement; Captions. This Agreement, the Schedules hereto
--------------------------
(which are incorporated herein by reference) and the agreements to be executed
and delivered in connection herewith, together constitute the entire agreement
and understanding between the parties and there are no agreements or commitments
with respect to the transactions contemplated herein except as set forth in this
Agreement. This Agreement supersedes any prior offer, agreement or understanding
between the parties with respect to the transactions contemplated hereby. The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.
11.4 Amendment; Waiver. Any term or provision of this Agreement may be
-----------------
amended only by a writing signed by Seller and Buyer. The observance of any term
or provision of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party to be bound by such waiver. No waiver by a party of any
breach of this Agreement will be deemed to constitute a waiver of any other
breach or any succeeding breach.
20
11.5 No Third Party Beneficiaries. Nothing expressed or implied in this
----------------------------
Agreement is intended, or shall be construed, to confer upon or to give any
person, firm or corporation, other than the parties hereto, any rights or
remedies under or by reason of this Agreement.
11.6 Execution in Counterparts. For the convenience of the parties, this
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Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
11.7 Assignment. This Agreement may not be assigned by any party hereto
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without the prior written consent of each other party; except that Buyer may
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assign this Agreement (and all related agreements) by operation of law or in
connection with any merger, consolidation or sale of all or substantially all
Buyer's assets or in connection with any similar transaction.
11.8 Benefit and Burden. This Agreement shall be binding upon, shall
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inure to the benefit of, and be enforceable by and against, the parties hereto
and their respective successors and permitted assigns.
11.9 Governing Law. This Agreement shall be governed by and construed in
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accordance with the internal laws of the State of California (excluding
application of any choice of law doctrines that would make applicable the law of
any other state or jurisdiction) and, where appropriate, applicable federal law.
11.10 Severability. If any provision of this Agreement is for any reason
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and to any extent deemed to be invalid or unenforceable, then such provision
shall not be voided but rather shall be enforced to the maximum extent then
permissible under then applicable law and so as to reasonably effect the intent
of the parties hereto, and the remainder of this Agreement will remain in full
force and effect. Nothing herein will be deemed to contradict the provisions of
Section 7.5 hereof.
11.11 Attorneys' Fees. Should a suit or arbitration be brought to enforce
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or interpret any provision of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees to be fixed in amount by the
Court or the Arbitrator(s) (including without limitation costs, expenses and
fees on any appeal). The prevailing party will be entitled to recover its costs
of suit or arbitration, as applicable, regardless of whether such suit or
arbitration proceeds to a final judgment or award.
11.12. Arbitration. The parties hereto shall submit to mandatory binding
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arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof, provided, however, that Buyer retains its right
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to, and shall not be prohibited, limited or in any other way restricted from,
seeking or obtaining equitable relief from a court having jurisdiction over the
parties. Such arbitration shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association in effect at that time
in its San Jose, California offices, and judgment upon the determination or
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
[Remainder of Page Left Intentionally Blank]
21
IN WITNESS WHEREOF, Buyer and Seller executed and delivered this Agreement
by their duly authorized representatives as of the Effective Date.
SELLER: BUYER:
Solutions Management, Inc. Xxxxxxx.xxx., Inc.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ X X Xxxxxxxx
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Xxxxxx Xxxxxxxx
Its: President Its: Vice President of Finance
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and Administration & CFO
XxxxxXxxxxxxx.xxx, LLC
By: /s/ Xxxxxxx Xxxxxxx
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Its: President
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Interactive Monitoring Systems, Inc.
By: /s/ Xxxxxxx Xxxxxxx
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Its: President
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Xxxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
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22
EXHIBITS AND SCHEDULES
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Schedule 1.2(b)(i) Seller's Enhancer Products
Schedule 1.2(b)(ii) Seller's Intellectual Property
Schedule 1.2(e) Seller's Tangible Assets
Schedule 2.2 Purchase Price Allocation
Exhibit 2.6A Xxxxxxx Employment Agreement
Exhibit 2.6B Xxxxxx Employment Agreement
Exhibit 4.2 Assignment, Xxxx of Sale and Assumption Agreement
Schedule 5.5 Seller Customer Contracts
Schedule 5.6 Form of Employee Nondisclosure Agreement
Schedule 5.7A Seller Balance Sheets
Schedule 5.7B Seller Creditors
Schedule 5.12 Seller's Service Providers
Schedule 7.10 Seller's Licenses
Exhibit 7.10 Dealer License Agreement
Exhibit 9.2(f) Assignment and Waiver Agreement
Exhibit 10.9 Escrow Agreement
