EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
between
ELIBRIUM, INC.
("Purchaser")
and
CLICKACTION INC.
("Seller")
Dated as of June 7, 2001
EXHIBITS
Exhibit A Form of License Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is executed as of the 7th day of June 2001
and shall be effective at the Effective Time, by and between Elibrium,
Inc., a California corporation ("Purchaser"), and ClickAction Inc., a
Delaware corporation ("Seller"). Certain capitalized terms used herein
are defined in Article I.
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser all of the Purchased Assets (as hereinafter defined),
and Purchaser is willing to assume all of the Assumed Obligations (as
hereinafter defined), all upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
warranties, representations, covenants and agreements herein
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
"Accounts Receivable" shall mean all accounts receivable, trade
receivables, notes receivable and other receivables, which in any case
are payable as a result of goods sold or services provided by Seller in
connection with the Business.
"Affected Employees" shall have the meaning provided in Section 4.11.
"Affiliate" shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is under common control
with, or is controlled by, such specified Person. A Person shall be
deemed to "control" another Person if it (i) owns more than 50%
of the capital stock or other equity interest of such other Person, (ii)
has the power to elect a majority of the board of directors or similar
governing body of such other Person or (iii) has the power, by Contract
or otherwise, to direct the management and policies of such other
Person.
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended from time to time
in accordance with its terms.
"Assets" shall mean the Purchased Assets and the Leased Assets.
"Assignment and Assumption Agreement" shall mean an assignment and
assumption agreement between Purchaser and Seller to be dated the
Closing Date and to be delivered at Closing in a mutually agreeable form.
"Assumed Obligations" shall have the meaning provided in Section 2.4.
"Business" shall mean the business previously and currently conducted
by Seller under the name Elibrium, in which Seller is engaged in
manufacturing and distributing shrink-wrap business productivity
software products and small business web-based services.
"Business Day" shall mean any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which banks located in San
Francisco,
California generally are closed for business.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article XI.
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Contested Adjustments" shall have the meaning provided in Section
3.2(c).
"Confidential Information" shall mean all Information and Records and
Intellectual Property that are not and have not become ascertainable or
obtainable from public or published information.
"Contract" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond,
right, warrant, instrument, plan, permit or license, whether written or
verbal, which is intended or purports to be binding and enforceable.
"Customer Contracts" shall have the meaning provided in Section 2.2(b).
"Distribution Contract" shall mean the written or verbal agreements
between Seller and Distributors.
"Distributors" shall mean current distributors and retailers either
distributing or directly selling retail software products, including
Xxxxxx Micro, Office Depot, Best Buy, Fry's, MicroCenter and Merisel.
"Dollars" or numbers preceded by the symbol "$" shall mean amounts in
United States Dollars.
"Effective Time" shall mean 5:00 p.m., Pacific Standard Time, on the
date that Purchaser delivers to Seller evidence reasonably satisfactory
to Seller of General Bank's final approval of a loan to Purchaser in an
amount not less than $5,000,000; provided, however, that unless the
Effective Time is prior to 5:00 p.m., Pacific Standard Time, on June 15,
2001 this Agreement shall be null and void.
"Equipment" shall have the meaning provided in Section 2.1(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"GAAP" shall mean U.S. generally accepted accounting principles at the
time in effect.
"Governmental Authority" shall mean the government of the United States
or any other country or any state or political subdivision thereof and
any entity, body or authority exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Gross Profit" shall mean gross revenue less cost of goods sold,
calculated in accordance with GAAP.
"Hired Employee" shall have the meaning provided in Section 10.1(a).
"Indemnified Person" shall mean the Person or Persons entitled to, or claiming
a right to, indemnification under Article XIII.
"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article
XIII.
"Independent Accountants" shall have the meaning provided in Section 3.2().
"Information and Records" shall have the meaning provided in Section 2.1(c).
"Initial Payment" shall have the meaning provided in Section 3.1(a).
"Intellectual Property" shall mean all United States and foreign patents
(including continuations, continuations-in-part, reissues and re-examinations
thereof) and patent applications; registered and unregistered trade names,
trademarks, service names, domain names and service marks (and applications for
registration of the same) and all goodwill associated therewith; copyrights and
copyright registrations (and applications for the same); trade secrets,
computer data (including formulations and analyses), computer software (in
source codeand object code form) and all related programming, user, technical
and systems documentation; inventions, processes and designs (whether or not
patentable or reduced to practice); know-how and formulae; and all other
intangible assets,properties and rights.
"Intellectual Property Licenses" shall have the meaning provided in Section
2.2(d).
"Inventory" shall have the meaning provided in Section 2.1(b).
"Law" shall mean any law (including common law), statute, regulation,
ordinance, rule, order, decree, judgment, consent decree, settlement
agreement or governmental requirement enacted, promulgated, entered
into,agreed or imposed by any Governmental Authority.
"Leased Assets" shall mean all assets leased or licensed to Seller
pursuant to any of the Personal Property Leases or Intellectual Property
Licenses.
"Licensed Intellectual Property" shall have the meaning provided in
Section 4.6(a).
"Lien" shall mean any mortgage, lien (except for any lien for taxes
not yet due and payable), charge, restriction, pledge, security
interest, option, lease or sublease, claim, right of any third party,
easement, encroachment or encumbrance.
"Loss" or "Losses" shall mean any and all liabilities, losses, costs,
claims, damages (including special or consequential damages when
suffered by third parties, but excluding special and consequential
damages if claimed by the parties to this Agreement), penalties and
expenses (including reasonable attorneys' fees and expenses and costs
ofinvestigation and litigation). In the event any of the foregoing are
indemnifiable hereunder, the terms "Loss" and "Losses" shall also
include all reasonable attorneys' fees and expenses and costs of
investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity.
"Material Adverse Change" shall mean a material and adverse change in
the business, operations, assets, liabilities, results of operations,
cash flows or condition (financial or otherwise) of the Business or the
Assets; provided, however, that the effects of changes that are
generally applicable to (a) the industries and markets in which the
Business operates, (b) the United States economy, (c) the United States
securities markets or (d) any adverse effect on the Business or the
Assetsresulting from the execution of this Agreement or announcement
relating to this Agreement or the transactions contemplated hereby,
including the effect of any such announcement on the employees or
customers of the Business, shall be excluded from the determination
of a Material Adverse Change.
"Material Adverse Effect" shall mean a material and adverse effect on
the business, operations, assets, liabilities, results of operations,
cash flows or condition (financial or otherwise) of the Business or the
Assets; provided, however, that the effects of changes that are
generally applicable to (a) the industries and markets in which the
Business operates, (b) the United States economy, (c) the United States
securities markets or (d) any adverse effect on the Business or the
Assets resulting from the execution of this Agreement or announcement
relating to this Agreement or the transactions contemplated hereby,
including the effect of any such announcement on the employees or
customers of the Business, shall be excluded from the determination of
a Material Adverse Effect.
"Other Contracts" shall have the meaning provided in Section 2.2(e).
"Owned Intellectual Property" shall have the meaning provided in
Section 2.1(d).
"Payment Periods" shall mean the Second Payment Period and the Third
Payment Period and "Payment Period" shall mean either of them.
"Payments" shall mean, collectively, the Second Payment and the Third
Payment and "Payment" shall mean either of them.
"Performance Periods" shall mean July 1, 2001-June 30, 2002; July 1,
2002-June 30, 2003; and July 1, 2003-June 30, 2004.
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability partnership, limited
liability company, trust, association or other entity.
"Personal Property Leases" shall have the meaning provided in
Section 2.2(a).
"Purchase Contracts" shall have the meaning provided in Section 2.2(c).
"Purchase Price" shall have the meaning provided in Section 3.1.
"Purchased Assets" shall have the meaning provided in Section 2.1.
"Purchased Contracts and Permits" shall have the meaning provided in
Section 2.2.
"Purchaser" shall have the meaning provided in the preamble.
"Purchaser Consents" shall have the meaning provided in Section 5.3(a).
"Purchaser Indemnified Party" shall have the meaning provided in
Section 13.2.
"Purchaser's Knowledge" means the actual knowledge of the following
persons; Xxxxxx Xxxx, Xxxxxxxxx Xxxxxxx, Xxxx Xxxxxxx and Xxxxxxx
XxXxxxx, provided, however, that the burden of establishing the
Purchaser did not have actual knowledge shall fall upon Purchaser.
"Real Property" shall mean the Leased Real Property and any other real
property previously or currently owned or used by Seller in connection
with the conduct of the Business.
"Related Agreement" shall mean any Contract which is or is to be entered
into at the Closing or otherwise pursuant to this Agreement. The
Related Agreements executed by a specified Person shall be referred to
as "such Person's Related Agreements," "its Related Agreements" or
another similar expression.
"Revenue Amount" shall mean the revenue recognized by the Business
duringa Payment Period determined in accordance with GAAP and
consistent with Seller's revenue recognition policies in effect prior
to the Closing.
"Seller" shall have the meaning provided in the preamble.
"Seller Consents" shall have the meaning provided in Section 4.3(a).
"Seller's Knowledge" means the actual knowledge of the following
persons; Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxx and
Xxxxxxxxxxx Xxx, provided,however, that the burden of establishing the
Seller did not have actual knowledge shall fall upon Seller.
"Separation Agreement" shall mean an employment separation agreement
between Seller and each Affected Employee to be dated and delivered on
the Closing Date and in a form mutually agreeable to the parties.
"Tax Return" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with
any Taxes.
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties),levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, license, payroll, environmental, capital stock, disability,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and
such term shall include any interest, penalties or additions to tax
attributable thereto.
"Transfer" shall mean to assign, sell, give, pledge, hypothecate, encumber or
otherwise transfer any securities, rights or assets, whether in a merger, sale
of capital stock, sale of assets or otherwise.
"Transferred Permits" shall have the meaning provided in Section 2.2(f).
1.2 Interpretation. The headings preceding the text of Articles and Sections
included in this Agreement and the headings to Schedules attached to this
Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of
the masculine, feminine or neuter gender or the singular or plural form of words
herein shall not limit any provision of this Agreement. The use of the terms
"including" or "include" shall in all cases herein mean "including, without
limitation" or "include, without limitation," respectively. Reference to any
Person includes such Person's successors and assigns to the extent such
successors and assigns are permitted by the terms of any applicable agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually. Reference to any agreement (including this
Agreement), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof. Reference to any Law means
such Law as amended, modified, codified, replaced or re-enacted, in whole or in
part, and in effect on the date hereof, including rules, regulations,
enforcement procedures and any interpretations promulgated thereunder.
Underscored references to Articles, Sections, clauses, Exhibits or Schedules
shall refer to those portions of this Agreement, and any underscored references
to a clause shall, unless otherwise identified, refer to the appropriate clause
within the same Section in which such reference occurs. The use of the terms
"hereunder", "hereof", "hereto" and words of similar import shall refer to
this Agreement as a whole and not to any particular Article, Section or clause
of or Exhibit or Schedule to this Agreement. No specific representation,
warranty or covenant contained herein shall limit the generality or
applicability of a more general representation, warranty or covenant contained
herein. A breach of or inaccuracy in any representation, warranty or covenant
shall not be affected by the fact that any more general or less general
representation, warranty or covenant was not also breached or inaccurate. This
document shall be interpreted at all times as if it was drafted by the
Purchaser and Seller jointly, and shall not be interpreted in favor of or
against either party.
ARTICLE II
SALE AND PURCHASE OF ASSETS;
ASSUMPTION OF ASSUMED OBLIGATIONS
2.1Purchased Assets. Subject to the terms and conditions of this Agreement, at
and as of the Closing, Seller shall sell, assign, convey, transfer and deliver
to Purchaser, and Purchaser shall purchase, acquire and take assignment and
delivery of the following Assets, including all of Seller's right, title and
interest in and to the following Assets:
(a)Equipment. All machinery, equipment, fixed assets, furniture, tools, spare
parts, maintenance equipment, materials, computers, printers, servers and other
items of personal property that are set forth on Schedule 2.1(a) (collectively,
the "Equipment");
(b)Inventory. All supplies, materials and other inventories that are set forth
on Schedule 2.1(b) (collectively, the "Inventory");
(c)Information and Records. All books, records, files, databases, plans,
specifications, technical information, confidential information, price lists,
promotional materials, advertising copy and data, marketing research and
information, competitive analysis, sales records, service records, customer
lists and files, other customer information, plans and designs of buildings,
structures, fixtures and equipment, environmental control, monitoring and test
records and all other proprietary information that is set forth on or
referencedin Schedule 2.1(c) (collectively, the "Information and Records");
(d)Intellectual Property. All Intellectual Property owned by Seller that is set
forth on Schedule 2.1(d) (the "Owned Intellectual Property");
(e)Other Intangibles. All customer relationships and goodwill, if any, used
in, related to or arising in conjunction with the Business; and
(f)Accounts Receivable. All Accounts Receivable set forth on Schedule 2.1(f)
All of the foregoing assets described in this Section 2.1, together with the
Purchased Contracts and Permits, are referred to herein collectively as the
"Purchased Assets." If Purchaser believes that one or more assets used in the
Business were unintentionally omitted from the schedules prepared in connection
with this Section 2.1, and such assets should have been included as Purchased
Assets as described in Sections 2.1 (a)-(f), Purchaser shall so notify Seller
within ninety (90) days of the Closing and Seller agrees to negotiate in good
faith with Purchaser to determine whether such assets identified by Purchaser
should have reasonably been included as Purchased Assets. In the event that
Purchaser and Seller cannot reach agreement regarding any asset(s) which, in
The aggregate, possess a fair market value of over $2,000.00, the parties agree
to submit such dispute to a mutually agreeable arbitrator and the parties agree
to be bound by the decision of that arbitrator. This arbitration shall be
conducted according to the procedures outlined in Section 13, paragraph
13.9(iii) of this Agreement.
2.2 Assignment of Contracts and Permits. Subject to the terms and conditions of
this Agreement, at and as of the Closing Date, Seller shall assign and transfer
to Purchaser all of Seller's right, title and interest in and to, and Purchaser
shall take assignment of the Contracts outlined in Schedule 2.2 which include:
(a) Personal Property Leases. All leases to or by Seller of the personal
(b) property (collectively, the "Personal Property Leases");
(b) Customer Contracts. All Distribution Contracts and all customer contracts,
purchase orders and other vendor agreements (collectively, the "Customer
Contracts");
(c) Purchase Contracts. All purchase orders and other Contracts for the
(d) purchase by Seller of goods, materials and/or services (collectively, the
(e) "Purchase Contracts");
(d) Intellectual Property Licenses. All agreements for the license to or by
Seller of any Intellectual Property (collectively, the "Intellectual Property
Licenses");
(f) Other Contracts. The other Contracts of Seller listed on Schedule 2.2
(g) (collectively, the "Other Contracts"); and
(f) Transferred Permits. All Permits (collectively, the "Transferred Permits")
All of the foregoing are referred to herein collectively as the "Purchased
Contracts and Permits." Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
contract or Permit or any claim or right or any benefit or obligation thereunder
or resulting therefrom if an assignment thereof, without the consent of a third
party thereto, would constitute a breach or violation thereof and if such a
consent is not obtained at or prior to the Closing.
2.3 Excluded Assets. All Assets not listed in the schedules related to
Sections 2.1 and 2.2 shall be retained by Seller, and are not being sold or
assigned to Purchaser hereunder, subject to the procedures articulated in
paragraph 2.1 for resolving ownership of assets unintentionally excluded from
such schedules.Assumed Obligations. At the Closing, Purchaser shall assume,
and agree to pay, perform, fulfil and discharge, the obligations of Seller (the
"Assumed Obligations") as outlined in the schedule of accounts payable in this
Schedule 2.4 and as further outlined in the schedules included in Section 2.2
and which are required to be performed, and which accrue, after the Closing
Date under the Purchased Assets (but not any liabilities of Seller in respect
of a breach by Seller of or default by Seller under such Purchased Assets or
anyliabilities or obligations arising prior to the Closing), to the extent such
Purchased Assets, and all rights of Seller thereunder, are effectively assigned
to Purchaser on the Closing Date pursuant to Section 2.2, but excluding any
Contracts entered into in violation of Section 6.3. If Seller believes that one
or more obligations arising from the Business was unintentionally omitted from
the schedules prepared in connection with Section 2.2 or 2.4, and such
obligations should have been included as Assumed Obligations as described in
these Sections, Seller shall so notify Purchaser within ninety (90) days of the
Closing and Purchaser agrees to negotiate in good faith with Seller to determine
whether such obligations identified by Seller should have reasonably been
included as Assumed Obligations. In the event that Purchaser and Seller cannot
reach agreement regarding any obligation(s) which, in the aggregate, possess a
value of over $2,000.00, the parties agree to submit such dispute to a mutually
agreeable arbitrator and the parties agree to be bound by the decision of that
arbitrator. This arbitration shall be conducted according to the procedures
outlined in Section 13, paragraph 13.9(iii) of this Agreement.
2.5 No Other Liabilities Assumed. Anything in this Agreement to the contrary
notwithstanding, except as specifically set forth in Section 2.4, neither
Purchaser nor any of its Affiliates shall assume or otherwise be liable in
respect of, or be deemed to have assumed or otherwise be liable in respect of,
any debt, claim, obligation or other liability of Seller or any of its
Affiliates whatsoever.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 Payment of Purchase Price.
In consideration for the sale of the Purchased Assets by Seller, Purchaser
shall remit a purchase price of Three Million Dollars ($3,000,000.00)
(the "Purchase Price") determined as set out below in this Section 3.1.
(a) On the Closing Date, Purchaser shall pay to Seller in cash $500,000
(the "Initial Payment").
(b) On or before September 15, 2001, Purchaser shall pay to Seller in cash
$1,000,000.
(c) On or before December 15, 2001, Purchaser shall pay to Seller in cash
$1,000,000.
(d) On or before March 15, 2002, Purchaser shall pay to Seller in cash $500,000.
3.2 Performance Payments.
(a)Purchaser shall also remit to Seller performance payments based on Gross
Profit generated by distribution of the intellectual property included in the
Purchased Assets, in their current and future revised versions, as such
business may be conducted after the Closing. In the event that Purchaser
recognizes a Gross Profit in excess of Eleven Million Dollars ($11,000,000.00)
during a Performance Period, Purchaser shall remit to Seller ten percent (10%)
of the Gross Profit in excess of Eleven Million Dollars ($11,000,000.00)
within said Performance Period, within forty-five (45) days of the end of
said Performance Period.
(b)As soon as practicable after the conclusion of the Performance Period, but
within forty-five (45) days after the end of such Performance Period, Purchaser
shall prepare and deliver to Seller a statement, in reasonable detail, setting
forth the Gross Profit and the manner in which it was calculated during the
Performance Period (a "Revenue Statement").
(c)Upon receipt of a Revenue Statement, Seller shall have a period of 10
Business Days to audit such Revenue Statement and propose any adjustments
thereto. If Seller accepts the Revenue Statement without further adjustment or
fails to deliver adjustments thereto within such 10-Business Day period, then
the Revenue Statement delivered by Purchaser shall be deemed to be final and
binding on the parties for purposes of Section 3.2(c). Any adjustments proposed
by Seller shall be set out in a written statement delivered to Purchaser and
Purchaser shall have a period of 10 Business Days from receipt of such written
statement to object to such proposed adjustments. If Purchaser agrees to such
proposed adjustments or fails to deliver a written objection to such proposed
adjustments within such 10-Business Day period, then Seller's proposed
adjustments shall be incorporated into the Revenue Statement and such adjusted
Revenue Statement shall be deemed to be final and binding on the parties for
purposes of Section 3.2(c). If Purchaser objects in writing within such 10-
Business Day period to any such proposed adjustment (the proposed adjustments
to which Purchaser objects are referred to herein as the "Contested
Adjustments"), Seller and Purchaser shall use reasonable efforts to resolve
their dispute regarding the Contested Adjustments, but if a final resolution
thereof is not obtained within five (5) Business Days after Purchaser delivers
to Seller the written objection setting forth the Contested Adjustments, Seller
and Purchaser shall promptly retain KPMG LLP or another internationally
recognized independent accounting firm acceptable to both Seller and Purchaser
(the "Independent Accountants") to resolve any remaining disputes concerning
the Contested Adjustments to the Revenue Statement. Either Seller or Purchaser
may retain the Independent Accountants on behalf of Seller and Purchaser upon
the expiration of such five (5) Business Day period, except that if the
Independent Accountants are other than KPMG LLP the written agreement of both
Seller and Purchaser shall be required to retain the Independent Accountants.
If Independent Accountants are retained, then (i) Seller and Purchaser shall
each submit to the Independent Accountants in writing within 10 Business Days
after the Independent Accountants are retained their respective proposals with
respect to the Contested Adjustments, together with such supporting
documentation as they deem necessary or as the Independent Accountants request
(provided that if any documentation requested by the Independent Accountants
cannot be obtained by either Seller or Purchaser within such 10-Business Day
period (acting in good faith and in a diligent manner), then such 10-Business
Day period shall be extended for such period of time as is reasonably necessary
for such information to be obtained), (ii) the Independent Accountants shall
select, within 10 Business Days after receiving the proposals of both Seller
and Purchaser and all supplementary supporting documentation requested by the
Independent Accountants, either Seller's or Purchaser's proposal, but not a
different proposal, with respect to the Contested Adjustments, which selection
shall be final and binding on both Seller and Purchaser, and (iii) the fees
and expenses of the Independent Accountants shall be borne equally by
Purchaser and Seller.
3.3 Rent and Utility Payments. Until such time as Purchaser completes the
physical move of its property and employees from both the ClickAction Palo Alto
facility and ClickAction San Francisco facility, it shall pay Seller the fixed
sum of $42,000 per month for the use of those physical facilities and to
compensate Seller for Purchaser's proportionate share of any and all utilities,
phones, building maintenance expenses, network connections and other costs
incurred supporting Purchaser's employees in those facilities. It is agreed
that Purchaser shall pay this monthly fee for no less than four (4) months,
after which time it shall continue to make such monthly payments on a month-to-
month basis so long as Purchaser's employees occupy the ClickAction facilities
and so long as the parties mutually agree that Purchaser's continued occupancy
is desirable. If so requested by Seller, Purchaser agrees to enter into a
mutually acceptable agreement with Seller on or prior to the Closing Date
regarding the San Francisco and Palo Alto ClickAction facilities ("Facilities
Agreement").
3.4 Accounts Receivable Adjustments. The parties agree that Purchaser expects
to receive four million dollars ($4,000,000) in cash payments from Distributors
between the closing date and the last day of the third fiscal quarter 2001,
which ends September 30, 2001, such payments to be in compensation for the
distribution of products included in the Purchased Assets and listed on
Schedule 2.1(d). The parties additionally agree that Purchaser expects to
receive five million dollars ($5,000,000) in cash payments from Distributors
between October 1, 2001 and the last day of the fourth fiscal quarter, which
ends on December 31, 2001, for distribution of products included in the
Purchased Assets and listed on Schedule 2.1(d). In the event that the actual
cash payments in either the third or fourth fiscal quarter, which are
attributable to distribution of these Purchased Assets, exceeds the expected
cash payments, Purchaser shall pay 50% of the amount above the expected amount
to Seller within 15 days of the end of each fiscal quarter. Seller shall have
the right to receive reports with respect to these payments reasonably
satisfactory to Seller and the right to audit such reports pursuant to the
procedure and within the time periods described in Section 3.2(a) and 3.2(b).
3.5 Prorations. Seller and Purchaser agree that all of the items listed below
relating to the Business and the Purchased Assets will be prorated as of the
Closing Date, with Seller liable to the extent such items relate to any time
period up to and including the Closing Date and Purchaser liable to the extent
such items relate to periods subsequent to the Closing Date:
(a) Personal property, real estate, occupancy and other Taxes, if any, payable
by Seller with respect to the Purchased Assets;
(b) Rents, Taxes, royalties and other items which in any case are payable
periodically by or to Seller under any of the Real Property Leases, Personal
Property Leases or Intellectual Property Licenses;
(c)The amount of any fees and charges which in any case are payable
periodically by Seller pursuant to any of the Contracts set forth in Section
2.2.
(e)The amount of any fees or charges which in any case are payable by Seller
periodically with respect to any of the Transferred Permits; and
(f)The amount of sewer rents and charges for water, electricity, telephones and
other utilities and fuel.
Seller agrees to furnish Purchaser with such documents and other records as
Purchaser reasonably requests in order to confirm all adjustment and proration
calculations made pursuant to this Section 3.5. If current payments with
respect to items to be prorated pursuant to this Section 3.5 are not
ascertainable on or before the Closing Date, such payments shall be prorated on
the basis of the most recently ascertainable xxxx therefor and shall be
reprorated between Seller and Purchaser when the current bills with respect to
such items have been issued and a cash settlement shall be made promptly
thereafter.
3.6 Allocation of Consideration. The Purchase Price for the Purchased Assets
shall be allocated among the Purchased Assets in accordance with Schedule 3.6.
Following the Closing, Purchaser and Seller in connection with their respective
U.S. federal, state and local income Tax Returns and other filings (including
Internal Revenue Service Form 8594), shall not take any position inconsistent
with such allocation.
3.7 Default Interest Rate. Interest shall accrue on any payment due under this
Article 3 in the amount of 1.5% per month, commencing on the date that such
payment became due and payable under the terms of this Article 3.
3.8 Security Interest. Pursuant to the form of Security Agreement which shall
be presented and agreed upon at closing (the "Security Agreement"), Purchaser
agrees to grant to Seller a second priority security interest in the Assets,
subject only to a first priority security interest in the Assets granted to
General Bank, to secure Purchaser's obligation to make the scheduled payments
of the Purchase Price pursuant to Section 3.1 hereof (the "Scheduled Payments")
in the event of a default by Purchaser. On or prior to the Closing, Purchaser
shall execute and deliver a Uniform Commercial Code financing statement
relatingto the perfection of the security interest created by the Security
Agreement.After Purchaser satisfactorily pays the September 15, 2001 and
December 15, 2001 Scheduled Payments pursuant to Section 3.1 in full, Seller
shall, upon the written request of Purchaser, promptly execute and deliver to,
or as directed in writing by, Purchaser an appropriate instrument (in due form
for recording) sufficient to release the Assets from the security interest
created by the Security Agreement, if one has been filed. Purchaser agrees to
execute and deliver to Seller on or prior to the Closing a second UCC financing
statement with respect to the Seller's second priority security interest in the
Purchased Assets which shall be held in escrow by Seller, and which shall not
be filed until or unless all of the following occur: 1) the originally filed
security interest is filed, 2) the originally security interest is withdrawn by
request of Purchaser after the December 15, 2001 Scheduled Payment and all
previous Scheduled Payments are made and 3) Purchaser subsequently fails to
make the remaining March 15, 2002 Scheduled Payment or subsequently becomes
insolvent.
3.9 Additional Consequences of Late Payment. In the event Purchaser
fails to make a scheduled payment within fifteen (15) days of that payment's
due date, then all of Purchaser's rights and Seller's obligations under the
License Agreement shall be suspended until such time as all such scheduled
payments (including the accelerated payments) are made to Seller by Purchaser.
3.10 Effect of Purchaser Insolvency. In the event Purchaser files for
bankruptcy protection, or becomes otherwise insolvent, all remaining payments
due under Section 3.1 shall become immediately due and collectable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as provided in Schedules to this Article IV to be delivered at the
Closing in a form mutually agreeable to Purchaser and Seller, Seller represents
and warrants to Purchaser, as of the date of the Closing, as follows:
4.1 Due Incorporation, etc. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
allrequisite corporate power and authority to own, lease and operate its
properties and to carry on the Business as they are now owned, leased and
operated.
4.2 Due Authorization. Seller has full power and authority to execute, deliver
and perform this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Seller of this Agreement and its Related Agreements and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly and validly approved by Seller's board of directors and, to the
extentrequired by applicable Law, by all stockholders of Seller entitled to
vote thereon, and no other actions or proceedings on the part of Seller are
necessary to authorize the execution, delivery and performance by Seller of
this Agreement, its Related Agreements or the transactions contemplated hereby
and thereby. Seller has duly and validly executed and delivered this Agreement
and has duly and validly executed and delivered (or prior to or at the Closing
will duly and validly execute and deliver) its Related Agreements. This
Agreement constitutes legal, valid and binding obligations of Seller, and
Seller's Related Agreements upon execution and delivery by Seller will
constitute legal, valid and binding obligations of Seller, in each case,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally, by equitable limitations on the
availability of specific remedies and by principles of equity.
4.3 Consents and Approvals; No Conflicts, etc.
(a) No consent, authorization or approval of, filing or registration with,
waiver of any right of first refusal or first offer from, or cooperation from,
any Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by Seller
of this Agreement and its Related Agreements or the consummation by Seller of
the transactions contemplated hereby or thereby.
(b) The execution, delivery and performance by Seller of this Agreement and its
Related Agreements and the consummation by Seller of the transactions
contemplated hereby and thereby do not and will not violate any Law applicable
to Seller, the Business or any of the Assets; violate or conflict with, result
in a breach or termination of, constitute a default or give any third party any
additional right (including a termination right) under, permit cancellation of,
result in the creation of any Lien upon any of the Assets under, or result in
or constitute a circumstance which, with or without notice or lapse of time or
both, would constitute any of the foregoing under, any Contract to which Seller
is a party or by which Seller or any of its assets are bound; permit the
acceleration of the maturity of any indebtedness of Seller or indebtedness
secured by any of the Assets; or violate or conflict with any provision of any
of the articles of incorporation, bylaws or similar organizational instruments
of Seller.
4.4 No Adverse Effects or Changes. Since June 1, 2001, the Business has been
conducted in all respects only in the ordinary course and consistent with past
practices to Seller's Knowledge. Without limiting the foregoing, to Seller's
Knowledge, since June 1, 2001, the Business has not:
(a) suffered any Material Adverse Change;
(b) taken any action, or entered into or authorized any Contract or transaction
or any amendment or modification to any Contract or transaction, other than in
the ordinary course of business and consistent with past practice;
(c) sold, transferred, conveyed, assigned or otherwise disposed of any of its
assets, except sales of inventory in the ordinary course of business and
consistent with past practice;
(d) acquired or leased any assets other than in the ordinary course of business
and consistent with past practices;
(e) waived, released or cancelled any claims against third parties or debts
owing to it or any rights which have any value;
(f) made any borrowing, incurred any debt (other than trade payables in the
ordinary course of business and consistent with past practice) or assumed,
guaranteed, endorsed (except for the negotiation or collection of negotiable
instruments in transactions in the ordinary course of business and consistent
with past practice) or otherwise become liable (whether directly, contingently
or otherwise) for the obligations of any other Person, or made any payment or
repayment in respect of any indebtedness (other than trade payables and accrued
expenses in the ordinary course of business and consistent with past practice);
(g) suffered or permitted the creation of any Lien over any of the Assets other
than in the ordinary course of business and consistent with past practice;
(h) made any Tax election or settled or compromised any federal, state or local
Tax liability, or waived or extended the statute of limitations in respect of
any such Taxes; or
(i) terminated the employment of any employee of Seller wholly or primarily
dedicated to the Business or who devoted a material portion of his or her time
to the Business or transferred any such employee from Seller to any of its
Affiliates.
4.5 Title to Properties. Except as set forth on Schedule 2.2, Seller has good
and marketable and valid record and equitable title to, and is the lawful owner
of, the Purchased Assets, free and clear of any Lien.
4.6 Intellectual Property.
(a) Seller is the sole and exclusive owner of, and Purchaser shall receive at
Closing, the Owned Intellectual Property free and clear of any Liens, and
exceptas set forth on Schedule 2.2, the Owned Intellectual Property is not
subject to any license, royalty or other agreement. Schedule 2.1(d) sets forth
a list of all Owned Intellectual Property, including all registered trademarks,
domain names (and any application names relating thereto) and service marks,
all reserved trade names, all registered copyrights, and all filed patent
applications and issued patents that relates to other Assets or that is used or
held for use in, or relates to, in whole or in part, the Business. Schedule
2.2 contains a complete and accurate list of all Intellectual Property Licenses
(b) All personnel, including employees, agents, consultants, and contractors,
who have contributed to or participated in the conception and development of
theIntellectual Property or any of Seller's products on behalf of Seller either
(i) have been party to a "work-for-hire" arrangement or agreement with Seller,
in accordance with applicable Law, that has accorded Seller full, effective,
exclusive, and original ownership of all tangible and intangible property
thereby arising or (ii) have executed appropriate instruments of assignment in
favor of Seller as assignee that have conveyed to Seller full, effective, and
exclusive ownership of all tangible and intangible property thereby arising.
4.7 Equipment; Personal Property. Schedule 2.1(a) sets forth a true, accurate
and complete list of all of the Equipment having an original acquisition cost
of$100 or more, other than items acquired by Seller in the ordinary course of
business from the date hereof through the Closing Date (and Seller will
identifyin writing to Purchaser, prior to the Closing, each item so acquired
having an original acquisition cost of $100 or more Schedule 2.2 sets forth a
true, complete and accurate list of all of the Personal Property Leases. All
of the Equipment and all of the personal property leased by Seller under the
Personal Property Leases is presently utilized by Seller in the ordinary course
of business. Seller has delivered to Purchaser true, accurate and complete
copies of all Personal Property Leases as amended or modified.
4.8 Inventory. Schedule 2.1(b) sets forth a complete description of the
nature,amount and location of the Inventory as of the date of this Agreement.
4.9 Accounts Receivable. Schedule 2.1(f) sets forth each Account Receivable as
of the date of this Agreement. After the Closing, Seller will have no legal
right to and shall not make any further attempts to collect any of the Accounts
Receivable; however, during the ninety (90) day period following the Closing,
Seller shall reasonably cooperate with Purchaser in assisting Purchaser to
collect said Accounts Receivable.
4.10 Contracts. Schedule 2.2 sets forth all Contracts and arrangements of the
following types to which Seller is a party or by which it is bound and which
relate to, in whole or in part, the Assets or which are used or held for use
in,or relate to, in whole or in part, the Business, or to which any of the
Assets is subject:
(a) any collective bargaining agreement;
(b) any Contract or arrangement with any Person for the purchase or sale of
goods or services for resale to end-user customers;
(c) any Customer Contract;
(d) any Contract or arrangement pursuant to which Seller grants or is granted
any license or other rights to use any of the Assets or any rights of joint use
with respect to any of the Assets (other than any Real Property Lease, Personal
Property Lease or Intellectual Property License);
(e) any Contract or arrangement that either (i) requires a payment by any party
in excess of, or a series of payments which in the aggregate exceed, $5,000 or
provides for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $5,000 or (ii) has a term,
or requires the performance of any obligations by Seller over a period, in
excess of one (1) year;
(f) any Contract or arrangement with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising agency
or other Person engaged in sales, distributing or promotional activities, or
any Contract to act as one of the foregoing on behalf of any Person;
(g) any Contract or arrangement pursuant to which Seller has made or will make
loans or advances, or has or will have incurred debts or become a guarantor or
surety or pledged its credit on or otherwise become responsible with respect
to any undertaking of another Person (except for the negotiation or collection
of negotiable instruments in transactions in the ordinary course of business);
(h) any indenture, credit agreement, loan agreement, note, mortgage, security
agreement, lease of real property or personal property, loan commitment or
otherContract or arrangement relating to the borrowing of funds, an extension
of credit or financing;
(i) any Contract or arrangement involving a partnership, joint venture or other
cooperative undertaking;
(j) any Contract or arrangement involving any restrictions with respect to the
geographical area of operations or scope or type of business of Seller;
(k) any power of attorney or agency agreement or arrangement with any Person
pursuant to which such Person is granted the authority to act for or on behalf
of Seller, or Seller is granted the authority to act for or on behalf of any
Person;
(m) any Contract, whether or not fully performed, relating to any acquisition
ordisposition of any stock of, or any material portion of the assets of,
Seller,or any acquisition or disposition of any subsidiary, division, line of
business or real property of Seller;
(l) any Contract not made in the ordinary course of business and consistent
withpast practice and that is to be performed in whole or in part at or after
the date of this Agreement; and
(m) any Contract not specified above that is material to the Business.
4.11 Employment and Labor Matters. Schedule 4.11 sets forth a true, accurate
and complete list of the names and titles or job descriptions of each employee
of Seller wholly or primarily dedicated to the Business (the "Affected
Employees") to whom Purchaser will extend offers of employment pursuant to
Section 10.1. Prior to the Closing Date, Seller will have entered into a
Separation Agreement with each Affected Employee.
4.12 Taxes.
(a) All federal, state, local and foreign income, corporation and other Tax
Returns have been filed for Seller and all other filings in respect of Taxes
have been made for Seller (or will be filed or made prior to the due dates
therefor) for all periods through and including the Closing Date as required by
applicable Law. All Taxes shown as due on all such Tax Returns and other
filings have been paid (or will be paid prior to the due dates therefor).
Each such Tax Return and filing is true, accurate and complete in all
material respects and Seller does not and will not have any additional
liability for Taxes with respect to any Tax Return or other filing
heretofore filed or which was required by Law to be filed, other than as
reflected as liabilities on Seller's financial statements. There are no
Tax Liens (other than Liens for current Taxes not yet due and payable)
upon any of the Assets. All Taxes that Seller is required by Law to
withhold or collect, including sales and user taxes, and amounts required
to be withheld for Taxes of employees and other withholding taxes,
have been duly withheld or collected and, to the extent required,
have been paid over to the proper Governmental Authorities or are
held in separate bank accounts for such purpose.
(b) Seller is not a "foreign person" as defined in Section 1445(f)(3) of the
Code.
4.13 No Defaults or Violations. To Seller's Knowledge:
(a) The Business and each of the Assets is in full compliance with, and no
violation exists under, any and all Laws applicable to the Business and the
Assets other than any noncompliance which would not have a Material Adverse
Effect.
(b) No notice from any Governmental Authority has been received by Seller
within the last thirty-six (36) months with respect to the Business claiming
any violation of any Law (including any building, zoning or other ordinance)
or requiring any work, construction or expenditure, or asserting any Tax,
assessment or penalty.
4.14 Litigation.
(a) Except as set forth on Schedule 4.14, there are no actions, suits,
mediation, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or threatened against or
affecting Seller or any of its officers, directors, employees, agents or
stockholders in their capacity as such with respect to the Business or any of
the Assets and, to Seller's Knowledge, there are no facts or circumstances
which are reasonably likely to give rise to any of the foregoing.
To Seller's Knowledge, in connection with the Business or any of the Assets,
there is no order, judgment, decree, injunction, stipulation or consent order
of or with any court or other Governmental Authority affecting the Business.
Seller has not entered into any agreement to settle or compromise any
proceeding pending or threatened against it with respect to the Business or
any of the Assets which has involved any obligation other than the payment of
money or for which Seller has any continuing obligation.
(b) There are no claims, actions, suits, proceedings or investigations pending
or threatened by or against Seller with respect to this Agreement or any of the
Related Agreements, or in connection with the transactions contemplated hereby
or thereby, and Seller has no reason to believe there is a valid basis for any
such claim, action, suit, proceeding, or investigation.
4.15 Information and Records. The Information and Records are true, accurate
and complete and, at Purchaser's expense, will be transferred to Purchaser at
or after the Closing promptly at Purchaser's request in such form and format
(including disaggregating such data from other data of Seller) as Purchaser
reasonably requests.
4.16 No Other Agreement. Except for sales of assets in the ordinary course of
business, neither Seller nor any of its Affiliates has any Contract or
arrangement with respect to the sale or other disposition of the Business or
any of the Assets that are used or held for use in, or relate to, in whole or
in part, the Business, except as set forth in this Agreement.
4.17 Brokers. Seller has not used any broker or finder in connection with the
transactions contemplated hereby, and neither Purchaser nor any Affiliate of
Purchaser has or shall have any liability or otherwise suffer or incur any
Loss as a result of or in connection with any brokerage or finder's fee or
other commission of any Person retained by Seller in connection with any of
the transactions contemplated by this Agreement or the Related Agreements.
4.18 Accuracy of Statements. Neither this Agreement nor any Related Agreement
nor any schedule, exhibit, statement, list, document, certificate or other
information furnished or to be furnished by or on behalf of Seller to Purchaser
or any representative or Affiliate of Purchaser in connection with this
Agreement, any Related Agreement or any of the transactions contemplated
hereby or thereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller, as of the date of this Agreement,
as follows:
5.1 Due Incorporation. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, with
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as they are now owned, leased and
operated.
5.2 Due Authorization. Purchaser has full power and authority to execute,
deliver and perform this Agreement and its Related Agreements and to consummate
the transactions contemplated hereby and thereby. The execution, delivery
and performance by Purchaser of this Agreement and its Related Agreements and
the consummation by Purchaser of the transactions contemplated hereby and
thereby have been duly and validly approved by Purchaser's board of directors
and, to the extent required by applicable Law, by all stockholders of
Purchaser entitled to vote thereon, and no other actions or proceedings on
the part of Purchaser are necessary to authorize the execution, delivery
and performance of this Agreement, its Related Agreements or the
transactions contemplated hereby and thereby. Purchaser has duly and validly
executed and delivered this Agreement and has duly and validly executed
and delivered (or prior to or at the Closing will duly and validly execute
and deliver) its Related Agreements. This Agreement constitutes legal,
valid and binding obligations of Purchaser and Purchaser's Related Agreements
upon execution and delivery by Purchaser will constitute legal, valid and
binding obligations of Purchaser, in each case, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
in effect which affect the enforcement of creditors' rights generally, by
equitable limitations on the availability of specific remedies and by
principles of equity.
5.3 Consents and Approvals; No Conflicts, etc.
(a) No consent, authorization or approval of, or filing or registration with,
any Governmental Authority or any other Person not a party to this Agreement
is necessary in connection with the execution, delivery and performance by
Purchaser of this Agreement and its Related Agreements and the consummation
by Purchaser of the transactions contemplated hereby or thereby.
(b) The execution, delivery and performance by Purchaser of this Agreement
23and its Related Agreements and the consummation by Purchaser of the
transactions contemplated hereby and thereby do not and will not violate any
Law applicable to Purchaser or any of its properties or assets; violate or
conflict with, result in a breach or termination of, constitute a default or
give any third party any additional right (including a termination right)
under, permit cancellation of, result in the creation of any Lien upon any of
the assets or properties of Purchaser under, or result in or constitute a
circumstance which, with or without notice or lapse of time or both, would
constitute any of the foregoing under, any Contract to which Purchaser is a
party or by which Purchaser or any of its assets are bound; permit the
acceleration of the maturity of any indebtedness of Purchaser or indebtedness
secured by any of its assets or properties; or violate or conflict with any
provision of the certificate of incorporation or memorandum and articles of
association or bylaws or similar organizational instruments of Purchaser.
5.4 Brokers. Purchaser has not used any broker or finder in connection with
the transactions contemplated hereby, and neither Seller nor any Affiliate of
Seller has or shall have any liability or otherwise suffer or incur any Loss as
a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Purchaser in connection with any of the
transactions contemplated by this Agreement or the Related Agreements.
5.5 Accuracy of Statements. Neither this Agreement nor any Related Agreement
nor any schedule, exhibit, statement, list, document, certificate or other
information furnished or to be furnished by or on behalf of Purchaser to Seller
or any representative or Affiliate of Seller in connection with this Agreement,
any Related Agreement or any of the transactions contemplated hereby or thereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
5.6 No Knowledge of Seller Breach. To Purchaser's Knowledge, the
representations of Seller set forth in Article IV and the related schedules are
true, accurate, complete and correct.
5.7 No Reliance on Advice of any Officer or Director of Seller.. In making its
decision to enter into this Agreement and the Related Agreements to consummate
the transactions contemplated hereby and thereby, Purchaser has not relied on
any representation, projection or other oral or written statement or advice by
any director of Seller or any officer or employee of Seller that is not an
Affected Employee.
ARTICLE VI
COVENANTS OF SELLER
Seller agrees to perform each of the following covenants:
6.1 Implementing Agreement. Subject to the terms and conditions hereof, Seller
shall take all commercially reasonable action required of it to fulfil its
obligations under the terms of this Agreement and shall otherwise use all
commercially reasonable efforts to facilitate the consummation of the
transactions contemplated hereby. Except as expressly permitted hereby, Seller
agrees that it will not initiate any action which leads to the termination of
any Distribution Contract, or any action which leads to a material adverse
change in such Distribution Contracts, except with the express written consent
of Purchaser, such consent not to be unreasonably withheld.
6.2 Consents and Approvals. Seller shall use all commercially reasonable
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the performance by it of its obligations under this
Agreement and its Related Agreements and the consummation by it of the
transactions contemplated hereby and thereby, including all such consents and
approvals by each party to any of the Contracts included in the Purchased
Contracts and Permits; provided, that no contact will be made by Seller (or any
representative of Seller) with any third party to obtain any such consent or
approval except as agreed to by Purchaser. If a consent or approval is
required by any party under any of the Contracts included in the Purchased
Contracts and Permits and is not obtained on or before the Closing or if an
attempted assignment is ineffective, Seller shall cooperate with Purchaser in
any reasonable arrangement requested by Purchaser to provide for Purchaser the
benefits under any such Contracts. Seller shall use all commercially
reasonable efforts to obtain all required consents and approvals (if any) to
assign and transfer the Permits to Purchaser at Closing and, to the extent that
one or more of the Permits are not transferable, to obtain replacements
therefor. If certain Permits are not transferable or replacements therefor are
not obtainable on or before the Closing, but such Permits are transferable or
replacements therefor are obtainable after the Closing, Seller shall continue
to use such efforts in cooperation with Purchaser after the Closing as may be
required to obtain all required consents and approvals to transfer, or obtain
replacements for, such Permits after Closing. Seller shall make, or cause to
be made, all filings, notices, applications, statements and reports to all
Governmental Authorities and other Persons that are required to be made prior
to the Closing Date by or on behalf of Seller or any of its Affiliates pursuant
to any applicable Law or Contract in connection with this Agreement and its
Related Agreements and the transactions contemplated hereby and thereby and
shall cooperate with Purchaser in making all such filings, notices,
applications, statements and reports that are required to be made prior to the
Closing Date by or on behalf of Purchaser or any of its Affiliates pursuant to
any applicable Law in connection with this Agreement and its Related
Agreements and the transactions contemplated hereby and thereby.
6.3 Preservation of Business.
(a) Until the Closing, Seller shall incur and pay costs and otherwise operate
the Business only in the usual, regular and ordinary course and in a manner
consistent with past practice, and shall use its best efforts to (i) preserve
intact the present business organization and personnel of the Business, (ii)
preserve the goodwill and advantageous relationships of the Business with
customers, suppliers, independent contractors, employees and other Persons
material to the operation of the Business, (iii) prevent any event that could
have a Material Adverse Effect and (iv) not permit any action or omission that
would cause any of the representations or warranties of Seller contained
herein to become inaccurate or any of the covenants of Seller to be breached.
(b) Without limiting the generality of clause (a), until the Closing, or
without the prior written consent of Purchaser or as otherwise permitted
under this Agreement, Seller will not:
(i) do any act or omit to do any act, or permit any act or omission to act,
which would cause a material breach of any of the Purchased Contracts and
Permits or any other Contract or obligation the breach of which could have a
Material Adverse Effect,
(ii) take any action, or enter into or authorize any Contract or transaction
or any amendment or modification to any Contract or transaction, other than
in the ordinary course of business and consistent with past practice,
(iii) sell, transfer, convey, assign or otherwise dispose of any of its
assets, except sales of inventory in the ordinary course of business and
consistent with past practice,
(iv) except for capital improvements, purchases and expenditures permitted by
clause (v), acquire or lease any assets other than in the ordinary course of
business and consistent with past practices or any assets that are material
to the Business,
(v) authorize or make any capital improvements or purchases or other capital
expenditures that individually or in the aggregate are in excess of $15,000,
(vi) waive, release or cancel any claims against third parties or debts owing
to it, or any rights which have any value,
(vii) make any changes in its accounting systems, policies, principles or
practices that would impact the financial results of the Business,
(viii) make any borrowing, incur any debt (other than trade payables in the
ordinary course of business and consistent with past practice), or assume,
guarantee, endorse (except for the negotiation or collection of negotiable
instruments in the ordinary course of business and consistent with past
practice) or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person, or make any payment or
repayment in respect of any indebtedness (other than trade payables and
accrued expenses in the ordinary course of business and consistent with past
practice),
(ix) suffer or permit the creation of any Lien over any of the Assets other
than in the ordinary course of business and consistent with past practice,
(x) increase in any manner the compensation or fringe benefits of any
Affected Employee or pay any benefit to an Affected Employee not required by
any existing plan and arrangement or enter into any Contract or arrangement
to do any of the foregoing,
(xi) terminate, rescind, modify, amend or otherwise alter or change any of the
terms or provisions of any of the Purchased Contracts and Permits, or reduce,
discount, waive or forego any material payment or right thereunder, or agree
to any compromise or settlement with respect thereto,
(xii) terminate, without cause, the employment of any Affected Employee or
transfer any Affected Employee from Seller to any of its Affiliates,
(xiii) enter into any Contract or arrangement with any Person for the purchase
or sale of goods or services for resale to end-user customers other than in
the ordinary course of business consistent with past practice,
(xiv) enter into any Contract or arrangement pursuant to which Seller grants
or is granted any license or other right to use any of the Assets or any
right of joint use with respect to any of the Assets,
(xv) incur any obligation or enter into any Contract or arrangement without
the express written permission of Purchaser that either (i) requires a
payment by any party in excess of, or a series of payments which in the
aggregate exceed, $15,000 or provides for the delivery of goods or
performance of services, or any combination thereof, having a value in excess
of $15,000 or (ii) has a term, or requires the performance of any obligations
by Seller over a period, in excess of one year,
(xvi) enter into any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or
promotional activities, or any Contract to act as one of the foregoing on
behalf of any Person, or
(xxiii) modify or amend any customer xxxx in any material respect.
(c) Without limiting the generality of clause (a), until the Closing, except
as set forth on Schedule 6.3, Seller shall:
(i) maintain its books, accounts and records in the usual, regular and
ordinary manner, and on a basis consistent with Seller's financial statements
and past practices,
(ii) continue to carry its existing insurance through the Closing Date, and
shall not allow any breach, default, termination or cancellation of such
insurance policies or agreements to occur or exist, and
(iii) duly comply with all Laws applicable to the Business or the Assets
or as may be required for the valid and effective transfer and assignment of
the Purchased Assets.
(d) Any Contract or other obligation which requires the prior written consent
of Purchaser pursuant to Section 6.3(b) and which is entered into or incurred
with the prior written consent of Purchaser shall be included in the Purchased
Assets and Permits and shall constitute an Assumed Obligation, and the
Schedules to this Agreement shall be deemed to have been updated to include
any such Contract or obligation. Any Contract or other obligation entered
into or incurred in violation of Section 6.3(b) shall not be included in the
Purchased Assets and Permits, shall constitute an Excluded Obligation, and
shall not be included on any of the Schedules to this Agreement.
6.4 Confidentiality. Except as required by Law or any Governmental Authority,
after the Closing, Seller shall maintain all Confidential Information (other
than such Confidential Information which after the Closing is received from a
third party (provided such third party is not known by Seller to be bound by
an obligation of secrecy)) in strict confidence in accordance with the
procedures it uses to protect its own information of a similar nature and
shall not use any such Confidential Information for any purpose; it being
agreed and understood, however, that Purchaser may disclose the material
terms of the transactions contemplated by this Agreement and may file a copy
of this Agreement with the Securities and Exchange Commission.
6.5 Tax Matters. After the Closing, Seller shall make available to Purchaser
such records as Purchaser may require for the preparation of any Tax Returns
or other similar governmental reports or forms required to be filed by
Purchaser and such records as Purchaser may reasonably require for the defense
of any audit, examination, administrative appeal or litigation of any such Tax
Return or other similar governmental report or form with regard to the
Purchased Assets.
6.6 Cooperation. Prior to the Closing, Seller shall cooperate with Purchaser
and shall take all actions reasonably requested by Purchaser to ensure a
smooth transition of the customers of the Business from Seller to Purchaser,
including participating in joint marketing efforts, allowing access to
communications channels with such customers and providing information
regarding such transition to such customers.
ARTICLE VII
COVENANTS OF PURCHASER
Purchaser agrees to perform each of the following covenants:
7.1 Implementing Agreement. Subject to the terms and conditions hereof,
Purchaser shall take all action required of it to fulfil its obligations under
the terms of this Agreement and shall use all commercially reasonable efforts
to facilitate the consummation of the transactions contemplated hereby. Except
as otherwise expressly permitted hereby, Purchaser agrees that it will not
take any action that would have the effect of preventing or impairing
Purchaser's performance of its obligations under this Agreement.
7.2 Consents and Approvals. Purchaser shall use all commercially reasonable
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the performance by it of its obligations under
this Agreement and its Related Agreements and the consummation by it of the
transactions contemplated hereby and thereby. Purchaser shall make, or cause
to be made, all filings, notices, applications, statements and reports to all
Governmental Authorities and other Persons that are required to be made prior
to the Closing Date by or on behalf of Purchaser or any of its Affiliates
pursuant to any applicable Law or Contract in connection with this Agreement
and its Related Agreements and the transactions contemplated hereby and
thereby and shall cooperate with Seller in making all such filings, notices,
applications, statements and reports that are required to be made prior to the
Closing Date by or on behalf of Seller or any of its Affiliates pursuant to
any applicable Law in connection with this Agreement and its Related
Agreements and the transactions contemplated hereby and thereby.
7.3 Tax Matters. After the Closing, Purchaser shall make available to Seller
such records as Seller may require for the preparation of any Tax Returns or
other similar governmental reports or forms required to be filed by Seller and
such records as Seller may require for the defense of any audit, examination,
administrative appeal or litigation of any such Tax Return or other similar
governmental report or form.
7.4 Resale of Assets. It is agreed that, in the event that Purchaser resells
substantially all of the Purchased Assets, or in the event that Purchaser
enters a merger transaction in which it is not the surviving entity, within
24 months of the closing date, that Purchaser shall 1) immediately satisfy
any remaining payment due under this Agreement, and 2) shall share a
percentage of the amount received from the resale of the Purchased Assets
which exceed the Purchase Price and the fees paid under the License Agreement
to Seller in the following amounts:
i. If the resale occurs within 6 months of the closing date, and if the
purchase price is greater than the $4.5 million received by Seller as purchase
price and licensing fees under this transaction, Seller shall receive 50% of
the amount received by Purchaser which is greater than $4.5 million whether
that payment is in cash, equity or both.
ii. If the resale occurs between 6 months and one day of the closing date and
12 months of the closing date, and if the purchase price is greater than
$4.5 million, Seller shall receive 33% of the amount received by Purchaser
which is greater than $4.5 million whether that payment is in cash, equity or
both.
iii. If the resale occurs between 12 months and one day of the closing date
and 18 months of the closing date, and if the purchase price is greater than
$4.5 million, Seller shall receive 25% of the amount received by Purchaser
which is greater than $4.5 million whether that payment is in cash, equity or
both.
iv. If the resale occurs between 18 months and one day of the closing date and
24 months of the closing date, and if the purchase price is greater than $4.5
million, Seller shall receive 10% of the amount received by Purchaser which is
greater than $4.5 million whether that payment is in cash, equity or both.
v. The parties agree that if a merger transaction in which Purchaser is not the
surviving entity occurs within 24 months of the Closing Date, Purchaser shall
cause the surviving entity to agree to issue or pay to Seller on the closing
date of that merger the applicable percentage of the merger consideration as
determined by sub-paragraphs i., ii. iii. or iv. above, if any (whether such
consideration is paid in cash, equity, a combination of cash and equity or any
other property); provided, however, that Seller agrees and acknowledges that
any equity securities issued to Seller pursuant to this sub-paragraph may be
subject to the same lockup or other equity restrictions imposed by the other
party to the merger as those applicable to the shares issued to the
stockholders of Purchaser; provided, however, that in no event shall such
shares be subject to any escrow arrangement.
7.5 Information Rights.. During the Performance Periods, Purchaser shall
deliver the following to Seller:
(a) as soon as available but in any event within 45 days after the end of each
quarterly accounting period in each fiscal year (including the fourth quarter
in each fiscal year), unaudited consolidating statements of income and cash
flows of Purchaser and its subsidiaries for that quarterly period and for the
period from the beginning of the fiscal year to the end of that quarterly
period, and consolidating balance sheets of Purchaser and its subsidiaries as
of the end of that quarterly period, setting forth in each case comparisons to
the corresponding period in the preceding fiscal year, if applicable, all of
which statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to normal year-end
adjustments and the lack of footnote disclosures (none of which adjustments
and disclosures would, alone or in the aggregate, be materially adverse to
the financial condition, operating results, assets or operations of Purchaser
and its subsidiaries taken as a whole); and
(b) within 120 days after the end of each fiscal year, consolidated statements
of income and cash flows of Purchaser and its subsidiaries for the preceding
fiscal year, and consolidated balance sheets of Purchaser and its subsidiaries
as of the end of that fiscal year, setting forth in each case comparisons to
the preceding fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by with respect to
the consolidated portions of those statements, an opinion of Purchaser's
independent public accounting firm.
ARTICLE VIII
CONDITIONS PRECEDENT
TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Articles II and III of this Agreement are
subject to the satisfaction by Seller of the following conditions precedent on
or before the Closing Date, unless earlier waived in writing by Purchaser:
8.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Seller contained herein and in its Related
Agreements shall have been true, accurate and correct in all material respects
on and as of the date of this Agreement, and shall also be true, accurate and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made by Seller on and as of the Closing Date.
8.2 Compliance with Agreements and Covenants. Seller shall have performed
andcomplied in all material respects with all of its covenants, obligations
and agreements contained in this Agreement and in its Related Agreements to
be performed and complied with by it on or prior to the Closing Date.
8.3 Financing. Purchaser shall have secured financing from General Bank in
the amount of at least $5.0 million.
8.4 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which (a)
might have a Material Adverse Effect or (b) could enjoin, restrain or
prohibit, or could result in substantial damages in respect of, any
provision of this Agreement or any Related Agreement or the consummation of
the transactions contemplated hereby or thereby.
8.5 Delivery of Documents. Seller will have delivered to Purchaser the
documents as specified by Section 11.2.
ARTICLE IX
CONDITIONS PRECEDENT
TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are subject to
the satisfaction by Purchaser of the following conditions precedent on or
before the Closing Date, unless waived in writing by Seller:
9.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Purchaser contained herein shall have been
true, accurate and correct in all material respects on and as of the date of
this Agreement, and shall also be true, accurate and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made by Purchaser on and as of the Closing Date.
9.2 Compliance with Agreements and Covenants. Purchaser shall have performed
and complied in all material respects with all of its covenants, obligations
and agreements contained in this Agreement and in its Related Agreements to
be performed and complied with by it on or prior to the Closing Date.
9.3 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or any Related Agreement or the
consummation of the transactions contemplated hereby or thereby.
9.4 Facilities Agreements. Purchaser, upon request by Seller, shall have
entered into each of the Facilities Agreements.
9.5 License Agreement. Purchaser shall have entered into the License Agreement
9.6 Closing Payments. Purchaser shall have made the cash payments required to
be paid to Seller on the Closing Date pursuant to this Agreement and the
License Agreement.
9.7 Fairness Opinion. Seller shall have received, from a financial advisor of
its choice, a written opinion reasonably satisfactory to Seller to the effect
that the consideration for the Purchased Assets to be received by Purchaser
pursuant to this Agreement and the Related Agreements is fair to the holders
of Seller's capital stock from a financial point of view.
9.8 Delivery of Documents. Purchaser will have delivered to Seller the
documents as specified in Section 11.3.
ARTICLE X
EMPLOYEES AND BENEFIT PLANS
10.1 Employees.
(a) On or prior to the Closing Date, Purchaser shall make offers of employment,
conditioned on the Closing, to each of the Affected Employees. Such offers of
employment shall have terms and conditions that are at least as favorable as
those currently enjoyed by each Affected Employee with respect to salary,
vacation and health benefits. Seller shall not take any actions that dissuade
any such employee from accepting any such offer. Each such Affected Employee
who accepts any such offer of employment shall be referred to herein as a
"Hired Employee." Except for the Affected Employees, Purchaser shall not
extend employment offers to nor accept investments from, any other
then-employed employee of Seller for a period of one (1) year from the date
of execution of this Agreement, or from any ex-employee of seller for 30 days
after their separation date with Seller or one (1) year from the Closing Date,
whichever comes first.
(b) With respect to all Affected Employees (including Hired Employees), Seller
shall be responsible for and shall pay, as soon as reasonably practicable
following the Closing Date, all wages, bonuses, vacation pay, pay for other
compensated absences and other remuneration (including mandatory or
discretionary benefits such as Cobra Notices) earned or accrued by such
employees as of the close of business on the Closing Date, including any
related payroll deductions (such as FICA and any pension or other employee
benefit plan contributions and employment Taxes) with respect thereto,
regardless of whether such amounts have been accrued on the books of Seller
at the close of business on the Closing Date.
(c) Seller shall terminate all of the Affected Employees effective on the
Closing Date and Seller shall have liability for and shall pay all severance
payments (if any) due to any of the Affected Employees (including any Hired
Employee) as a result of the termination of their employment with Seller in
connection with the transactions contemplated in this Agreement, along with
any accrued vacation, expense settlements or other amounts owed, regardless
of whether such employees become Hired Employees.
(d) Stock options of Hired Employees shall be handled depending upon their
status: (i) stock options in Seller that have not vested as of the Closing
Date will be null and void, and (ii) stock options in Seller that have vested,
but are not yet exercised, as of the Closing Date shall continue to be
available to be exercised by the employee for a period of 6 months after
the Closing Date hereof, at which time such options shall be null and void.
10.2 Liabilities Under Stock Option or Benefit Plans. Seller shall retain
all,and Purchaser shall not purchase any assets of, and Purchaser shall not
assume and shall not be deemed to have assumed any liability or responsibility
for any obligations or liabilities arising prior to the Closing under, with
respect to or in connection with, any stock option or employee benefit plan of
Seller or with respect to any Affected Employee, including any Hired Employee.
10.3 No Third Party Beneficiaries. It is understood and agreed between the
parties that all provisions contained in this Agreement with respect to
employee benefit plans or employee compensation are included for the sole
benefit of the respective parties hereto and do not and shall not create any
right in any otherPerson, including any Hired Employee, any participant in any
benefit or compensation plan or any beneficiary thereof.
10.4 Non-Solicitation of Employees. Purchaser and Seller agree not to solicit
the then-employed employees of the other for one (1) year from the Closing Date
or within 30 days of an employee's separation date with Seller or one (1) year
from the Closing Date, whichever comes first. Further, Purchaser agrees not to
accept any investments or other participation from any executive officer of
Seller which could present a conflict of interest for that officer for one (1)
year from the Closing Date.
ARTICLE XI
CLOSING
11.1 Closing. The Closing shall take place at the offices of Xxxxxxxxxx, Abbot
& Xxxxxxxxx, LLP, at 10:00 a.m. on or about June 15, 2001 after all of the
closing conditions set forth in Articles VIII and IX have been satisfied. The
Closing, and all transactions to occur at the Closing, shall be deemed to have
taken place at, and shall be effective as of, the close of business on the
Closing Date.
11.2 Deliveries by Seller. At the Closing, Seller shall deliver to Purchaser
the following:
(a) The Assignment and Assumption Agreement duly executed by Seller;
(b) A xxxx of sale substantially in a mutually agreeable form duly executed by
Seller;
(c) Originals of, and duly executed assignments of, all of the following: (i)
the Personal Property Leases (if such Leases or a memorandum thereof has been
recorded, such assignments shall be in recordable form); and (ii) all other
Purchased Contracts and Permits to the extent such Contracts have not been
assigned to Purchaser pursuant to the Assignment and Assumption Agreement;
(d) An affidavit stating Seller's U.S. taxpayer identification number and that
Seller is a "United States person," as defined by Section 7701(a)(30) of the
Code;
e)The EMA License Agreement substantially in the form set forth in Exhibit A
(the "License Agreement") duly executed by Seller;
(f) Other instruments of transfer reasonably required by Purchaser to evidence
the transfer of the Purchased Assets to Purchaser, including assignments with
respect to any Intellectual Property (i) registered, recorded or filed with any
Governmental Authority, in form suitable for registration, recordation or
filing with such Governmental Authority, in each case duly executed by Seller
and (ii) licensed to Seller by a third party, including any written consents
of such third parties to such assignments and transfers if required under the
terms of such licenses;
(g) A certificate, dated the Closing Date, of Seller certifying as to the
compliance by Seller with Sections 8.1 and 8.2;
(h) A certificate of the secretary of Seller certifying resolutions of the
board of directors of Seller approving and authorizing the execution, delivery
and performance of this Agreement and its Related Agreements and the
consummation by Seller of the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding the officer(s)
signing on behalf of Seller);
(j) Such other documents and instruments as may be required by any other
provision of this Agreement or as may reasonably be required to consummate the
transactions contemplated by this Agreement and the Related Agreements.
11.3 Deliveries by Purchaser. At the Closing, Purchaser shall make the payment
described in Section 3.1 of this Agreement and Sections 3.1 and 3.2 of the
License Agreement and shall deliver to Seller the following:
(a) The Assignment and Assumption Agreement duly executed by Purchaser;
(b) The License Agreement duly executed by Purchaser;
(c) The Facilities Agreements (if requested by Seller) duly executed by
Purchaser;
(d) The Security Agreement duly executed by Purchaser;
(e) A certificate, dated the Closing Date, of Purchaser, certifying (i) as to
compliance by Purchaser with Sections 9.1 and 9.2; and (ii) to Purchaser's
Knowledge, as to compliance by Seller with Section 6.3 (or, if to Purchaser's
Knowledge, Seller has not complied with Section 6.3, setting forth a
description, in reasonable detail, of the events or actions creating or causing
such noncompliance).
(f) A certificate of the secretary of Purchaser certifying resolutions of the
board of directors of Purchaser approving and authorizing this Agreement and
its Related Agreements and the consummation by Purchaser of the transactions
contemplated hereby and thereby (together with an incumbency and signature
certificate regarding the officer(s) signing on behalf of Purchaser); and
(g) Such other documents and instruments as may be required by any other
provision of this Agreement or as may reasonably be required to consummate
the transactions contemplated by this Agreement and the Related Agreements.
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) With the mutual consent of Seller and Purchaser;
(b) By Purchaser, if there shall have been a material breach of any covenant,
representation or warranty of Seller hereunder or under any of its Related
Agreements, and such breach shall not have been remedied within fifteen (15)
days after receipt by Seller of a notice in writing from Purchaser
specifying the breach and requesting such be remedied;
(c) By Seller, if there shall have been a material breach of any covenant,
representation or warranty of Purchaser hereunder or under any of its
Related Agreements, and such breach shall not have been remedied within
fifteen (15) days after receipt by Purchaser of notice in writing from
Seller specifying the breach and requesting such be remedied; or
>PAGE>
(d) By Purchaser or Seller if the Closing has not occurred by June 29, 2001;
provided, however, that the right to terminate this Agreement under this
Section 12.1(d) shall not be available to any party whose failure to fulfil
any obligation under this Agreement has been the primary cause of, or
resulted in, the failure to consummate the Closing on or before June 29, 2001.
12.2 Effect of Termination.
(a) If this Agreement is terminated by Purchaser or Seller pursuant to Section
12.1(a) or (d), then all obligations of the parties hereunder shall terminate,
except for the obligations set forth in Section 6.6 (Confidentiality) and
Section 15.1 (Expenses), which shall survive the termination of this Agreement.
(b) If this Agreement is terminated by Purchaser pursuant to Section 12.1(b),
then (i) all obligations of the parties hereunder shall terminate, except for
the obligations set forth in Section 6.6 (Confidentiality), Section 15.1
(Expenses) and this Section 12.2 which shall survive the termination of this
Agreement and (ii) Seller shall immediately pay to Purchaser a termination fee
in the amount of one hundred thousand dollars ($100,000).
(c) If this Agreement is terminated by Seller pursuant to Section 12.1(c), then
(i) all obligations of the parties hereunder shall terminate, except for the
obligations set forth in Section 6.6 (Confidentiality), Section 15.1
(Expenses) and this Section 12.2 which shall survive the termination of this
Agreement and (ii) Purchaser shall immediately pay to Seller a termination fee
in the amount of one hundred thousand dollars ($100,000).
ARTICLE XIII
INDEMNIFICATION
13.1 Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in Sections 4.3, 4.6, 4.7, 4.8, 4.9,
4.10, 4.11, 4.15, 4.16, 4.18, 5.3, 5.5 and 5.7 shall terminate on the Closing
Date and shall not survive the Closing. The representations and warranties of
the parties hereto contained in Sections 4.1, 4.4, 4.5, 4.12, 4.13, 4.17, 5.1,
5.2, and 5.4 shall survive the Closing and remain in effect for eighteen months
(18) from the Closing Date. The representations and warranties of the parties
hereto contained in Sections 4.2 and 4.14 shall remain in effect for the period
of time defined by California or Federal Law as the statute of limitations for
claims arising under those sections. The representations and warranties in
thisSection that shall survive the Closing Date shall be known as the
"SurvivingRepresentations" and the applicable period that each Surviving
Representation shall survive shall be known as the "Surviving Period." The
representation and warranty contained in Section 5.6 shall survive for the
length of the applicable Surviving Period.
13.2 Indemnification by Seller. Seller agrees to indemnify Purchaser and its
Affiliates (each a "Purchaser Indemnified Party") against, and agrees to hold
each of them harmless from, any and all Losses incurred or suffered by them
relating to or arising out of or in connection with any breach of or failure by
Seller to perform any covenant or obligation of Seller set out or contemplated
in this Agreement or any Related Agreement or any document delivered by Seller
at the Closing. Additionally, Seller agrees to indemnify Purchaser and its
Affiliates with respect to any breach of or inaccuracy in (or alleged
inaccuracy breach of or inaccuracy in) any Surviving Representation, provided
that a notice of the Purchaser Indemnified Parties' claim shall have been given
to Seller not later than the close of business on the last day of the
applicable Surviving Period.
13.3 Indemnification by Purchaser. Purchaser agrees to indemnify Seller and
its Affiliates against, and agrees to hold each of them harmless from, any and
all Losses incurred or suffered by them relating to or arising out of or in
connection with any breach of or failure by Purchaser to perform any covenant
or obligation of Purchaser set out or contemplated in this Agreement or any
Related Agreement or any document delivered by Purchaser at the Closing.
Additionally, Purchaser agrees to indemnify Seller with respect to any breach
of or inaccuracy in (or alleged inaccuracy breach of or inaccuracy in) any
Surviving Representation, provided that a notice of the Seller's claim shall
have been given to Purchaser not later than the close of business on the last
day of the applicable Surviving Period.
13.4 Claims. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement not involving any claim, or the
commencement of any suit, action or proceeding, of the type described in
Section 13.5, the Indemnified Person shall promptly give notice to the
Indemnifying Person of such claim and the amount the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided, that the
failure of the Indemnified Person to give notice shall not relieve the
Indemnifying Person of its obligations under this Article XIII except to the
extent (if any) that the Indemnifying Person shall have been actually
prejudicedthereby. If the Indemnifying Person does not object in writing to
such indemnification claim within thirty (30) days of receiving notice thereof,
the Indemnified Person shall be entitled to recover promptly from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted. If the Indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be entitled to
recover promptly from the Indemnifying Person the lesser amount, without
prejudice to the Indemnified Person's claim for the difference.
13.5 Notice of Third Party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided, that the failure
of the Indemnified Person to give notice shall not relieve the Indemnifying
Person of its obligations under this Article XIII except to the extent
(if any) that the Indemnifying Person shall have been actually prejudiced
thereby. The Indemnifying Person may, at its own expense (a) participate
in the defense of any claim, suit, action or proceeding and (b) upon notice
to the Indemnified Person and the Indemnifying Person's delivering to the
Indemnified Person of a written agreement that the Indemnified Person is
entitled to indemnification pursuant to Section 13.2 or 13.3 for all Losses
arising out of such claim, suit, action or proceeding, at any time during
the course of any such claim, suit, action or proceeding, assume the defense
thereof; provided, that (i) the Indemnifying Person's counsel is reasonably
satisfactory to the Indemnified Person and (ii) the Indemnifying Person shall
thereafter consult with the Indemnified Person upon the Indemnified Person's
reasonable request for such consultation from time to time with respect to
such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the
obligation) to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnifying
Person. If, however, the Indemnified Person reasonably determines in its
judgment that representation by the Indemnifying Person's counsel of both
the Indemnifying Person and the Indemnified Person would present such counsel
with a conflict of interest, then such Indemnified Person may employ separate
counsel to represent or defend it in any such claim, action, suit or
proceeding and the Indemnifying Person shall pay the fees and disbursements
of such separate counsel. Whether or not the Indemnifying Person chooses to
defend or prosecute any such claim, suit, action or proceeding, all of the
parties hereto shall cooperate in the defense or prosecution thereof.
13.6 Settlement or Compromise. Any settlement or compromise made or caused to
be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any such claim, suit, action or proceeding of the kind referred to in
Section 13.5 shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in
the amount of such settlement or compromise; provided, that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result of
such settlement without its prior written consent. The Indemnified Person will
give the Indemnifying Person at least thirty (30) days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time the Indemnifying Person may reject such proposed
settlement or compromise; provided, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or
proceeding and any and all Losses in connection therewith in excess of the
amount of unindemnifiable Losses which the Indemnified Person would have been
obligated to pay under the proposed settlement or compromise.
13.7 Failure of Indemnifying Person to Act. In the event that the Indemnifying
Person does not elect to assume the defense of any claim, suit, action or
proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
13.8 Effect on Purchase Price of Indemnity Payments. Any amounts payable under
Section 13.2 or Section 13.3 shall be treated by Purchaser and Seller as an
adjustment to the Purchase Price of the Purchased Assets.
13.9 Right to Set Off. In the event that Purchaser shall have incurred or
suffered or reasonably anticipates to incur or suffer any amount of
Indemnifiable Damages or other damages hereunder, Purchaser may, at its
election, seek to set-off any such amount of damages against any amount of
Consideration to be paid by Purchaser to the Seller, under this Agreement,
subject, however, to the following terms and conditions:
(i) Purchaser shall give written notice to the Seller of any claim for
Indemnifiable Damages or any other damages hereunder, which notice shall set
forth the basis of the claim therefor;
(ii) Such set off shall be effected on the later to occur on the expiration of
ten (10) business days from the date of such notice (the "Notice of Contest
Period") or, if such claim is contested, the date the dispute is resolved; and
(iii) If, prior to the expiration of the Notice of Contest Period, the Seller
shall notify Purchaser in writing of an intention to dispute the claim and if
such dispute is not resolved within twenty (20) days after expiration of such
period, then Purchaser may submit the matter to binding arbitration before an
arbitrator under the Commercial Arbitration Rules of the American Arbitration
Association then existing, which arbitrator shall be selected by the AAA, and
who shall have no less than ten (10) years experience in negotiating and/or
adjudicating complex business contracts or agreements. The place of arbitration
shall be agreed to by the parties or in the absence of such agreement shall be
San Francisco, California. The arbitrator shall render a written award within
thirty (30) days of the close of the arbitration hearings, as decided by the
arbitrator in reasonable discretion and the prevailing party shall be entitled
to receive its attorneys' fees and costs. If the decision of the arbitrator is
that each party has prevailed in part, then attorney's fees and costs shall be
apportioned between the parties in proportion to the award of the arbitrator to
each party. The arbitrators may order specific performance or other equitable
relief or remedies to the extent they deem it appropriate, in any situation in
which a court could so order. The Seller hereby waives personal service of any
process in connection with any such action or proceeding and agree that the
service thereof may be made by certified or registered mail directed to Seller.
The decision of the arbitrators shall be final and binding upon the parties,
their successors and assign, and they shall comply with such decision in good
faith, and each party hereby submits itself to the jurisdiction of AAA and of
the courts of the place where the arbitration is held, but only for the entry
of judgment with respect to and to enforce the decision of the arbitrators
hereunder, which judgment may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. This provision shall not
preclude the filing of a lawsuit or other judicial action to enable the
recording of a notice of pending action, or for attachment, receivership,
injunction or other provisional remedies. Judgment on the arbitration award
may be entered in any court having jurisdiction over the subject matter of the
controversy.
ARTICLE XIV
MISCELLANEOUS
14.1 Expenses. Except as otherwise provided herein, each party hereto shall
bear its own expenses with respect to the transactions contemplated hereby.
The parties shall each pay an equal portion of any sales, use, stamp,
transfer, vehicle use, service, recording, real estate and like taxes or fees,
if any, imposed by any Governmental Authority in connection with the transfer
and assignment of the Purchased Assets. The Seller shall pay all costs, if
any, of transferring the Information and Records to Purchaser.
14.2 Amendment. This Agreement may be amended, modified or supplemented but
only in writing signed by Purchaser and Seller.
14.3 Notices. Any notice, request, instruction or other document to be given
hereunder by a party hereto shall be in writing and shall be deemed to have
been given (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission (receipt confirmed) or (c) five Business Days after being
deposited in the mail, certified or registered, postage prepaid:
If to Seller, addressed as follows:
ClickAction Inc.
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Chief Executive Officer
Telephone No.: 650) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxx, Xxxxx 0000
Attention: Xxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Purchaser, addressed as follows:
Elibrium, Inc.
Attn: Xxxxxxx XxXxxxx, General Counsel
0000 00xx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone No. (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxxx, Abbot & Xxxxxxxxx
0000 Xxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X.X. Xxxxxx
Telephone No.: (000) 000 0000
Facsimile No.: (000) 000 0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
14.4 Waivers. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or
more instances shall be deemed to be a further or continuing waiver of any
such condition or breach in other instances or a waiver of any other condition
or breach of any other term, covenant, representation or warranty.
14.5 Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; provided,
that no assignment of any rights or obligations shall be made by Seller
without the written consent of Purchaser or by Purchaser without the written
consent of Seller, except that Purchaser may assign any or all of its rights
hereunder without such consent to any Affiliate of Purchaser.
14.6 No Third Party Beneficiaries. This Agreement is solely for the benefit of
the parties hereto and, to the extent provided herein, their respective
Affiliates, and no provision of this Agreement shall be deemed to confer upon
any other third parties any remedy, claim, liability, reimbursement, cause of
action or other right.
14.7 Further Assurances. Upon the reasonable request of Purchaser, Seller will
on and after the Closing Date execute and deliver to Purchaser such other
documents, deeds, releases, assignments and other instruments as may be
requiredto effectuate completely the transfer and assignment to Purchaser of,
and to vest fully in Purchaser title to, each of the Purchased Assets, and to
otherwise carry out the purposes of this Agreement. Seller further agrees
that,from and after the Closing Date, it will cooperate in all reasonable
efforts of Purchaser to enforce or preserve its rights in and to all
Intellectual Property conveyed to Purchaser pursuant to this Agreement.
14.8 Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, the validity, legality or enforceability of the other
provisions hereof shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and enforceable provision
as similar as possible to the provision at issue.
14.9 Remedies Cumulative. The remedies provided in this Agreement shall be
cumulative and shall not preclude the assertion or exercise of any other rights
or remedies available under law, in equity or otherwise.
14.10 Entire Understanding. This Agreement and the Related Agreements set
forth the entire agreement and understanding of the parties hereto with
respect to the transactions contemplated hereby and supersede any and all
prior agreements, arrangements and understandings among the parties relating
to the subject matter hereof.
14.11 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of California
without giving effect to the principles of conflicts of law thereof.
14.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
CLICKACTION INC.
By:/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
President and CEO
ELIBRIUM, INC.
By: /s/ Xxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx
President
ARTICLE I - DEFINITIONS 1
1.1 Definitions 1
1.2 Interpretation. 6
ARTICLE II - SALE AND PURCHASE OF ASSETS; ASSUMPTION OF ASSUMED OBLIGATIONS 7
2.1 Purchased Assets. 7
2.2 Assignment of Contracts and Permits 8
2.3 Excluded Assets 8
2.4 Assumed Obligations 8
2.5 No Other Liabilities Assumed 8
ARTICLE III - PURCHASE PRICE AND PAYMENT 9
3.1 Payment of Purchase Pric 9
3.2 Performance Payments. 9
3.3 Prorations 10
3.4 Allocation of Consideration 11
3.5 Penalties for Late Payment 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER 11
4.1 Due Incorporation, etc 11
4.2 Due Authorization 11
4.3 Consents and Approvals; No Conflicts, etc 12
4.4 No Adverse Effects or Changes 12
4.5 Title to Properties 13
4.6 Intellectual Property. 14
4.7 Equipment; Personal Property 14
4.8 Inventory. 14
4.9 Accounts Receivable 14
4.10 Computer System 14
4.11 Contracts 15
4.12 Insurance 16
4.13 Employment and Labor Matters. 16
4.14 [intentionally omitted] 16
4.15 Taxes. 17
4.16 No Defaults or Violations 17
4.17 Litigation 17
4.18 [intentionally omitted] 18
4.19 Information and Records 18
4.20 No Other Agreement 18
4.21 Brokers 18
4.22 Accuracy of Statements 18
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER 18
5.1 Due Incorporation 18
5.2 Due Authorization 18
5.3 Consents and Approvals; No Conflicts, etc 19
5.4 Brokers 19
5.5 Accuracy of Statements 19
5.6 [To come - no knowledge of Seller breach]. 20
ARTICLE VI - COVENANTS OF SELLER 20
6.1 Implementing Agreement 20
6.2 Consents and Approvals 20
6.3 Preservation of Business 21
6.4 Confidentiality 23
6.5 Tax Matters 23
6.6 Cooperation 24
ARTICLE VII - COVENANTS OF PURCHASER 24
7.1 Consents and Approvals 24
7.2 Tax Matters 24
7.3 Resale of Assets 24
ARTICLE VIII - CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 25
8.1 Warranties True as of Both Present Date and Closing Date 25
8.2 Compliance with Agreements and Covenants. 25
8.3 Financing. 26
8.4 Actions or Proceedings 26
8.5 Sublease.26
ARTICLE IX - CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 26
9.1 Warranties True as of Both Present Date and Closing Date 26
9.2 Compliance with Agreements and Covenants 26
9.3 Actions or Proceedings 26
ARTICLE X - EMPLOYEES AND BENEFIT PLANS 26
10.1Employees 27
10.2Liabilities Under Stock Option or Benefit Plans. 27
10.3No Third Party Beneficiaries 27
10.4Non-Solicitation of Employees. 28
ARTICLE XI - CLOSING 28
11.1Closing. 28
11.2Deliveries by Seller 28
11.3Deliveries by Purchaser 29
ARTICLE XII - TERMINATION 29
12.1Termination 29
12.2Effect of Termination 30
ARTICLE XIII - INDEMNIFICATION 30
13.1Survival 30
13.2Indemnification by Seller 30
13.3 Indemnification by Purchaser 30
13.4 Claims 30
13.5 Notice of Third Party Claims; Assumption of Defense 31
13.6 Settlement or Compromise 31
13.7 Failure of Indemnifying Person to Act 32
13.8 Effect on Purchase Price of Indemnity Payments 32
13.9 Right of Set Off. 32
ARTICLE XIV - MISCELLANEOUS 32
14.1 Expenses 32
14.2 Amendment 32
14.3 Notices 32
14.4 Effect of Investigation 33
14.5 Waivers 33
14.6 Assignment 34
14.7 No Third Party Beneficiaries 34
14.8 Publicity 34
14.9 Further Assurances 34
14.10 Severability 34
14.11 Remedies Cumulative 34
14.12 Entire Understanding 34
14.13 Applicable Law 35
14.14 Counterparts 35
An extra section break has been inserted above this paragraph. Do not
delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause
Table of Contents/Authorities headers and footers to appear on any pages
following the Table of Contents/Authorities.
The following schedules have been omitted from this Exhibit 2.1:
Schedule 2.1(a) Purchased Equipment
Schedule 2.1(b) Purchased Inventory
Schedule 2.1(c) Purchased Information and Records
Schedule 2.1(d) Purchased Owned Intellectual Property
Schedule 2.1(e) Purchased Accounts Receivables
Schedule 2.2 Purchased Contracts and Permits
Schedule 2.4 Assumed Accounts Payable
Schedule 3.6 Allocation of the Purchase Price
Schedule 4.3 Consents
Schedule 4.4 Absence of Material Adverse Changes
Schedule 4.5 Title to Properties
Schedule 4.11 Affected Employees
Schedule 4.12 Taxes
Schedule 4.13 Defaults or Violations
Schedule 4.14 Litigation
