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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this (6th day of December, 1999, by and between
Tsunami Media, Inc., a California corporation (the "Company") and
Tsunami Media Corporation, a Delaware corporation ("Buyer") with
reference to the following facts:
A. The Company has been engaged in the business of developing
and licensing software.
B. Buyer wishes to purchase the Assets (definitions of certain
capitalized terms are set forth in Schedule 0), and the Company
wishes to sell the Assets, on the terms and conditions herein set
forth.
C. Concurrently with the execution hereof, the Company and
Buyer have entered into a Registration Rights Agreement, pursuant to
which the Buyer has granted to the Company and its assignees
registration rights with respect to the stock issued pursuant hereto.
NOW, THEREFORE, based on the above premises and in consideration
of the mutual covenants and agreements contained herein, the parties
agree as set forth below:
1. Agreement to Purchase and Sell.
1.1 Acquisition. On the terms and subject to the conditions of
this Agreement, the Company agrees to sell the Assets to Buyer, and
Buyer agrees to purchase the Assets from the Company, in exchange for
the payment of the Purchase Price. The Purchase Price shall be equal
to (i) Seven Hundred Fifty Thousand Dollars ($750,000) ($250,000 of
which shall be payable to Xxxxxx Xxxxxxxxxx, President of the
Company) plus (ii) 2,000,000 shares of the common stock, without par
value, of Buyer (the "Buyer Shares") (500,000 of which shall be
issuable to Xx. Xxxxxxxxxx).
1.1.1 Of the $500,000 payable to the Company pursuant to
Section 1.1, (i) $100,000 is being paid by wire transfer to the
Company concurrently with the execution hereof, (ii) $190,000 is to
be paid upon the completion by Buyer of one or more debt or equity
offerings (or other capital raising transactions) whereby the Buyer
receives in the aggregate at least $2,800,000 and (iii) $190,000 is
to be paid upon the occurrence of a Qualified Transaction and (iv)
$20,000 was previously paid by Buyer to the Company's counsel on
behalf of the Company.
1.1.2 Of the $250,000 payable to Xx. Xxxxxxxxxx pursuant to
Section 1.1, (i) $62,500 is being paid by wire transfer to Xx.
Xxxxxxxxxx concurrently with the execution hereof, (ii) $62,500 is to
be paid upon the completion by Buyer of one or more debt or equity
offerings (or other capital raising transactions) whereby the Buyer
receives in the aggregate at least $2,800,000 and (iii) $125,000 is
to be paid upon the occurrence of a Qualified Transaction.
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1.2 Allocation of Consideration; Sales Tax. Attached as
Schedule 1.2 is an allocation of the Purchase Price among the Assets
for tax purposes. Each of the parties agrees (i) to report the
Transaction for federal and state income tax purposes in accordance
with this allocation, (ii) not to take any position inconsistent with
such allocation on its tax z return without the written consent of
the other and (iii) to file timely federal tax form 8594 with the
applicable tax return for the year of the Transaction. Buyer will be
responsible for any sales tax due with regard to the Transaction.
1.3 Non-Assumption of Liabilities. Buyer does not assume and is
not liable for, and the Company indemnifies and holds Buyer harmless
against, any debts, obligations, claims, commitments or liabilities
of any nature, known or unknown, contingent or noncontingent,
liquidated or unliquidated, direct or indirect, primary or secondary
(i) of the Company or (ii) which arise from contracts or obligations
that exist as of the date hereof and are, or could become, claims,
liens or encumbrances against any of the Assets and (iii) any costs
and expenses of defense with respect to third-party claims thereof,
in each case excepting the Assumed Contracts.
2. Representations and Warranties of the Company.
As an inducement for Buyer to enter into this Agreement, the
Company represents and warrants that, except as set forth in the
Disclosure Schedule or as contemplated by this Agreement, each of the
following statements is true and correct as of the date hereof
2.1 Existence and Rights. The Company (i) is a corporation duly
organized and validly existing in good standing under the laws of the
State of California, (ii) has all corporate power and authority,
rights and franchises necessary to own its properties and to carry on
its business as now conducted and carry out the Transaction, and
(iii) is in good standing as a foreign corporation in each
jurisdiction where the nature of the business transacted by it
requires such qualification, except where the failure is not
reasonably expected to have a Material Adverse Effect. The copies of
the charter documents and bylaws of the Company previously delivered
to Buyer are complete and correct as of the date hereof.
2.2 Agreement Authorized. The Company has full power and
authority to enter into this Agreement and to carry out the
Transaction. This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes its legal,
valid and binding obligation, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally,
and by legal and equitable limitations on the availability of
specific remedies. The transactions contemplated by this Agreement
have been approved by the outstanding shares of the Company pursuant
to California Corporations Code section 100 1.
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2.3 No Conflicts. The execution, delivery and performance by
the Company of this Agreement and the consummation of the Transaction
do not (i) violate any Pen-nit, Law or Order applicable to the
Company; (ii) violate or conflict with any provision of the charter
documents or bylaws of the Company; (iii) result in a breach of, or
constitute a default (or an event which, with or without notice or
lapse of time or both, would constitute a default) under, or permit
cancellation of, or result in the creation of any Lien upon the
Company's assets under any of the terms, conditions or provisions of
any contract, Order or Permit to which the Company is a party; or
(iv) require the consent of any third party or Authority except for
violations, conflicts, defaults, consents or other similar occurrence
that are not reasonably expected to have a Material Adverse Effect.
2.4 Contingencies. To the knowledge of the Company, except for
Claims arising in the ordinary course of business, which are not
expected to be materially inconsistent in type or number with past
experience, and claims from past due creditors, all of which are
expected to be settled with the proceeds of this transaction, there
are no Claims pending or threatened against the Company which are
reasonably expected to have a Material Adverse Effect. The Company is
not subject to any Order which is reasonably expected to have a
Material Adverse Effect.
2.5 Financial Condition. The unaudited balance sheets of the
Company as of March 31, 1998 and 1999 and the unaudited related
income statements for the periods then ended (collectively, the
"Financial Statements"), attached hereto as Exhibit 2.5 (i) are true
and correct in all material regards as of the dates thereof and for
the periods then ended and (ii) fairly present the financial
condition of the Company at the dates thereof and the results of
operations of the Company for the periods covered thereby, and (iii)
have been prepared in accordance with generally accepted accounting
principles on a basis consistently applied during the relevant
period. The Assets had an original acquisition cost (prior to
depreciation or amortization) of at least $4 million, although the
Company does not make any representation as to their current value.
2.6 No Subsequent Changes. Since June 30, 1999, (i) there has
not been any Material Adverse Effect; (ii) the Company has used
reasonable efforts to maintain the Assets in the usual and ordinary
course of business and in accordance with the manner that has been
established by the Company in its usual and ordinary business
practices, (iii) the Company has not entered into a fixed price
contract, nor any other agreement which was -expected to yield
materially less in value than it would require the Company to expend,
having regard to the normal and usual business practice of the
Company; or (iv) there has not been any declaration or payment of any
dividends or distribution with respect to, or any repurchase of, any
of the capital stock of the Company.
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2.7 Title to Assets. The Company has good title to all assets
reflected on its books except for (i) Liens securing obligations set
forth in the Financial Statements, (ii) Liens securing taxes which
are not delinquent or are being contested in good faith, (iii) Liens
arising as a result of purchase or sales orders in the ordinary
course of business consistent with past practice, and (iv) any
defects in title or Liens that are not reasonably expected to have a
Material Adverse Effect. The Assets include all of the Company's
Significant Contracts and Intellectual Property.
2.8 Premises. The Company is, as tenant, party to a month to
month lease agreement in respect of the Premises occupied in
California. This lease agreement will remain the responsibility of
the Company, and is excluded from the Assets to be transferred to
Buyer pursuant to the terms and conditions herein.
2.9 Permits; Compliance with Law and Governmental Contracting
Rules; Environmental Compliance. The Company holds the Permits set
forth on Schedule 2.9, and no other material Permits are currently
necessary for the lawful operation of the Business. The Company has
complied with, and is not in default under or in violation of, any
Permit, Law or Order to which it is subject, except for defaults or
violations that are not reasonably expected to have a Material
Adverse Effect. To the knowledge of the Company, the Company is in
compliance with (i) all terms and conditions of any Permits required
by the Environmental Laws and (ii) all other requirements of the
Environmental Laws, except in each case for matters which are not
reasonably expected to have a Material Adverse Effect.
2.10 Significant Contracts. Schedule 2.10 correctly sets forth
in all material respects the existence of all Significant Contracts
of the Company in effect as of the date hereof Except for matters not
reasonably expected to have a Material Adverse Effect, to the
knowledge of the Company, each of the Significant Contracts disclosed
on Schedule 2. 10 (i) has been duly authorized, executed and
delivered by the parties thereto, (ii) remains in full force and
effect to the extent of its terms, (iii) is binding on the parties
thereto in accordance with and to the extent of its terms and
applicable laws; and (iv) is not subject to, and the Company has not
received any written notice threatening or declaring, termination as
a result of any existing or alleged uncured breach or default by the
Company and no other party is in default thereunder in any material
respect. Schedule 2. 10 also contains a list of certain Tools and
Technologies covered by the license to Visual Purple.
2.11 Intellectual Property.
2.11.1 Attached hereto as Schedule 2.11 is a list of the
patents, registered trademarks, registered tradenames and registered
copyrights of the Company (the "Registered IP"). To the knowledge of
the Company, the use of the Intellectual Property in the operation of
the Business does not infringe any intellectual property rights of
another Person, except for Claims which are not reasonably expected
to have a Material Adverse Effect. The Company has not received any
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notice contesting its right to use, or asserting infringement with
respect to, any Intellectual Property now used by it in connection
with the Business or the operation thereof, except for matters
previously resolved or which are not reasonably expected to have a
Material Adverse Effect. Except for matters not reasonably expected
to have a Material Adverse Effect, the Company possesses the right to
use in perpetuity (without royalty or payment) all Intellectual
Property necessary to conduct the Business as of the date hereof.
Except for matters not reasonably expected to result in a Material
Adverse Effect, to its knowledge, the Company has taken all
reasonably necessary actions to obtain and maintain the Registered
IP.
2.11.2 Further, to the knowledge of the Company, the
Intellectual Property embodied in the Games does not infringe any
intellectual property rights of another Person. The Company has not
received any notice contesting its right to use, or asserting
infringement with respect to, any of the Games, except for matters
previously resolved. The individuals contributing content, software
or source code in the creation of the Games are identified on the
respective Game packages and credits. The Company possesses the right
to use in perpetuity (without royalty or payment) the Intellectual
Property embodied in the Games.
2.12 Employees. The Company has terminated all of its
employees effective on or prior to the date hereof, and will be
responsible for any disputes with such employees.
2.13 Taxes. All federal, and all material state, local and
foreign Tax returns required to be filed by the Company through the
date hereof have been accurately prepared in all material respects,
and were duly and timely filed, and all material Taxes (including
Taxes withheld from employees' salaries and all other withholding
Taxes and obligations and all deposits required to be made by the
Company with respect to such withholding Taxes or otherwise),
interest, penalties, assessments and/or deficiencies required to be
paid before the date hereof have been timely paid or will be paid
from the Purchase Price. The provisions for the payment of taxes on
the Company's financial statements or the books of account for taxes
not due and payable as of the date hereof is reasonable.
2.14 Brokers. The Company has not employed any broker or
finder in connection with the Transaction, and Buyer shall not 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 the Company in connection with the
Transaction.
2.15 Accuracy of Statements. To the knowledge of the Company,
neither this Agreement nor any Schedule hereto furnished by the
Company contains any untrue statement of a material fact regarding
the Company, or omits to state a material fact necessary to make the
statements regarding the Company contained herein or therein, in
light of the circumstances in which they are made, not misleading.
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2.16 Stock Representations.
2.16.1 Investment. The Buyer Shares are being acquired
for investment for the Company, not as a nominee or agent, and not
with a view to the sale or distribution of all or any part thereof.
Buyer, however, acknowledges that the Company intends to distribute
the Buyer Shares to its shareholders and to certain of its creditors,
who will be advised that such shares are restricted as provided
herein.
2.16.2 Not Registered. The Company understands that the
Buyer Shares are neither (a) registered under the Securities Act of
1933 nor (b) qualified under the California Corporate Securities Law
of 1968.
2.16.3 Legends. The Company understands that each
certificate for the Buyer Shares will bear the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS
OF ANY STATE, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
APPLICABLE STATE LAWS, OR AN EXEMPTION FROM THE REGISTRATION AND
QUALIFICATION REQUIREMENTS THEREOF.
2.16.4 Financial Ability. The Company's shareholders
and the Company's creditors who will be distributed Buyer Shares
pursuant to Section 2.16.1 hereof (a) can afford the complete loss of
the investment in the Buyer Shares and (b) can provide for current
needs and possible contingencies without the need to sell or dispose
of the Buyer Shares.
2.16.5 Access to Information. The Company's shareholders
and the Company's creditors who will be distributed Buyer Shares
pursuant to Section 2.16.1 hereof (a) have the requisite knowledge
and experience to assess the relative merits and risks of an
investment in the Buyer Shares; (b) have had full opportunity to ask
questions and receive answers concerning the business of Buyer.
2.17 Assignment; Consents No consent, waiver or approval of any
third party is required with respect to any of the Significant
Contracts in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
3. Representations and Warranties of Buyer.
As an inducement for the Company to enter into this Agreement,
Buyer hereby represents and warrants that, except as set forth in
Buyer's Disclosure Schedule or as contemplated by this Agreement,
each of the following statements is true and correct as of the date
hereof
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3.1 Existence and Rights. Buyer (i) is a corporation duly
organized and validly existing in good standing under the laws of
Delaware, (ii) has all corporate power and adequate authority, rights
and franchises necessary to own its properties and to carry on its
business as now conducted and to make and carry out the Transaction,
and (iii) is in good standing as a foreign corporation authorized to
do business in each jurisdiction where the nature of the business
transacted by it requires such qualification, except where the
failure is not reasonably expected to have a material adverse effect
on its business or the Transaction. The copies of the charter
documents and bylaws of Buyer previously delivered to the Company are
complete and correct as of the date hereof.
3.2 Agreement Authorized. Buyer has full power and authority
to enter into this Agreement and to carry out the Transaction. This
Agreement has been duly and validly authorized, executed and
delivered by Buyer, and constitute its legal, valid and binding
obligation, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in
effect which affect creditors' rights generally, and by legal and
equitable limitations on the availability of specific remedies.
3.3 No Conflicts. The execution, delivery and performance of
this Agreement and the consummation of the Transaction by Buyer do
not (i) violate any Permit, Law or Order applicable to Buyer; (ii)
violate any provision of the charter documents or bylaws of Buyer;
(iii) result in a breach of, or constitute a default (or an event
which, with or without notice or lapse of time or both, would
constitute a default) under, or permit cancellation of, or result in
the creation of any Lien upon Buyer's assets under any of the terms,
conditions or provisions of any contract, Order or Permit to which
Buyer is a party; or (iv) require the consent of any third party or
Authority except for violations, conflicts, defaults, consents or
other similar occurrence that are not reasonably expected to have a
material adverse effect on its business or the Transaction.
3.4 Buyer Shares. The Buyer Shares, when issued in compliance
with this Agreement, will be duly and validly authorized and issued,
and will be fully paid and nonassessable.
3.5 Capitalization. The authorized capital stock of Buyer
consists of 20,000,000 shares of common stock, without par value, of
which 13,405,401 shares are issued and outstanding, and 5,000,000
shares of preferred stock, of which none are outstanding. All of the
issued and outstanding shares of common stock of Buyer have been duly
and validly authorized and issued, and are fully paid and
non-assessable. There are no outstanding subscriptions, warrants,
options, calls, commitments or other rights or agreements by which
Buyer is bound relating to the issuance, sale or redemption of shares
of common stock or other securities of Buyer. No shares of capital
stock or other securities of Buyer are reserved for any purpose.
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3.6 Buyer Financial Status. Buyer is a newly formed Delaware
corporation, and has no activities or liabilities except in
connection with the Transaction. Buyer received at least $871,000 in
cash in exchange for the issuance of its outstanding stock prior to
entering into the Agreement and issuing the Buyer Shares pursuant to
the terms hereof.
3.7 Brokers. Buyer has not employed any broker or finder in
connection with the Transaction and the Company shall not 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 Buyer in connection with the Transaction.
3.8 Accuracy of Statements. To the knowledge of Buyer, neither
this Agreement nor any Schedule hereto furnished by or on behalf of
Buyer contains any untrue statement of a material fact regarding
Buyer or omits to state a material fact necessary to make the
statements regarding Buyer contained herein or therein, in light of
the circumstances in which they are made, not misleading.
4. Indemnification.
4.1 Indemnity. Each party severally agrees to indemnify and
hold the other harmless from and against any Losses suffered as a
result of any breach of the Indemnifying Party's warranties,
representations or covenants in this Agreement.
4.2 Conditions.
4.2.1 Time. The representations, warranties and covenants
contained in this Agreement shall survive beyond the date hereof, but
no party may seek indemnity under this Article 4 or any other
recovery or remedy for any Losses under this Agreement or with
respect to the Transaction unless it has commenced arbitration
against the Indemnifying *Party with regard to such Claim within
twelve months from the date hereof
4.2.2 Amount. Except with respect to Claims with respect
to Sections 2.1 2.2, 3.1, 3.2 and 3.4 and Claims for actual fraud,
which may be made without regard to any limitation, (i) each party
shall be required to indemnify the other only to the extent that the
aggregate amount of Losses for which it must provide indemnity
exceeds $50,000 and (ii) the aggregate recoveries from the Buyer and
the Company may each not exceed an aggregate of the Purchase Price as
a result of all Losses under this Agreement or with respect to the
Transaction.
4.3 Procedure.
4.3.1 Notice. Promptly upon receipt by an
Indemnified Party of (i) any tax audit or proceeding for the
assessment of any tax by any Taxing Authority or any other proceeding
likely to result in the imposition of a liability or obligation for
Taxes required to be indemnified hereunder or (ii) a notice of a
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Claim by a third party that may give rise to a Claim hereunder, the
Indemnified Party shall give written notice thereof to the
Indemnifying Party, although failure to do so shall not affect the
right to indemnification except to the extent of actual prejudice.
4.3.2 Control of Defense. The Indemnified Party shall
allow the Indemnifying Party to assume control of the defense of any
such action brought by a third party. Such defense will be conducted
by reputable attorneys retained by the Indemnifying Party at the
Indemnifying Party's cost and expense. The Indemnified Party will
have the right to participate in such proceedings and to be
separately represented by attorneys of its own choosing at its
expense.
4.3.3 Effect. The Indemnifying Party may contest or
settle any third party Claim on such terms as the Indemnifying Party
may choose, however, the Indemnifying Party will not have the right,
without the Indemnified Party's written consent, to settle any such
Claim if such settlement (i) arises from or is part of any criminal
action, suit or proceeding, (ii) contains an admission of wrongdoing
on the part of the Indemnified Party, or (iii) provides for
injunctive relief which is binding on the Indemnified Party.
4.4 Cooperation. The Indemnifying Party and the Indemnified
Party shall cooperate in determining the validity of any Claim for
any Loss for which a Claim of indemnification may be made hereunder.
Each party shall also use all reasonable efforts to minimize all
Losses. In any case, the Indemnifying Party and the Indemnified Party
shall cooperate and assist each other in such defense, and shall make
available to the other all records, documents and information
(written or otherwise) relevant to such defense.
4.5 Subrogation. If an Indemnifying Party makes any payment
under this Section 4, then, to the extent of such payment and subject
to the rights of the Indemnified Party to recover any other Losses
first from such third party, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any insurer
or third party.
5. Cooperation. Each party hereto agrees, after the date hereof,
to execute any and all ftirther documents and writings and perform
such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out the Transaction.
6. Miscellaneous.
6.1 Modifications. This Agreement may not be amended, altered
or modified except by a writing signed by the parties.
6.2 Expenses. Except as set forth in Article 1, the parties
hereto will each pay all of their own expenses incurred in connection
with the authorization, preparation, execution and performance of
this Transaction, including, without limitation, all fees and
expenses of their respective agents, representatives, counsel and
accountants.
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6.3 Notices. All notices under this Agreement will be in
writing and will be delivered by personal service or telegram,
telecopy or certified mail (if such service is not available, then by
first class mail), postage prepaid, to such address as may be
designated from time to time by the relevant party, and which will
initially be as set forth below. Any notice sent by certified mail
will be deemed to have been given three (3) days after the date on
which it is mailed. All other notices will be deemed given when
received. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a
party. Notices will be addressed as follows or to such other address
as the party to whom the same is directed will have specified in
conformity with the foregoing:
(i) If to Buyer:
0000 00 x' Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxx X0X0X0
Xxxxxx
(ii) If to the Company:
00000 Xxx Xxxx Xxx, Xxxxx X
Xxxxxxxx, Xxxxxxxxxx 00000
XXX
6.4 Parties.
6.4.1 No Third Party Benefits. None of the provisions of
this Agreement shall be for the benefit of, or enforceable by, any
third party beneficiary.
6.4.2 Successors and Assigns. Except as provided herein to
the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted
assigns.
6.5 Disputes.
6.5.1 Governing Law; Jurisdiction. All dollar amounts
are expressed in United States dollars. All questions with respect to
this Agreement and the rights and liabilities of the parties will be
governed by the laws of California, regardless of the choice of law
provisions of California or any other jurisdiction. Any and all
disputes between the parties which may arise pursuant to this
Agreement not settled by arbitration will be heard and determined
before an appropriate federal or state court located in Madera,
California. The parties hereto acknowledge that such court has the
jurisdiction to interpret and enforce the provisions of this
Agreement and the parties waive any and all objections that they may
have as to personal jurisdiction or venue in any of the above courts.
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6.5.2 Arbitration as Exclusive Remedy. Except for
actions seeking injunctive relief, which may be brought before any
court having jurisdiction, any Claim arising out of or relating to
(i) this Agreement or any related agreement, including without
limitation its validity, interpretation, enforceability or breach, or
(ii) the Transaction (including without limitation its commencement
and termination) whether based on breach of covenant, breach of an
implied covenant or other tort or contract theories, which are not
settled by agreement between the parties, shall be settled by
arbitration in Los Angeles, California under the commercial
arbitration rules of the American Arbitration Association. Each party
agrees that the arbitration provisions of this Agreement are its
exclusive remedy for such claims and expressly waives any right to a
jury trial or to seek redress in another forum. During the
arbitration proceedings, each party shall bear the fees of any
arbitrator appointed by it, and the fees of any neutral arbitrator(s)
shall be borne equally by each party. At the conclusion of the
arbitration proceedings, the losing party shall reimburse the winning
party for any fees for arbitrators previously borne by the winning
party.
6.5.3 Attorneys' Fees. In any dispute between the
parties hereto or their representatives concerning any provision of
this Agreement or the rights and duties of any person or entity
hereunder, the party or parties prevailing in such dispute shall be
entitled, in addition to such other relief as may be granted, to the
attorneys' fees and court costs incurred by reason of such dispute.
6.6 Waivers Strictly Construed. With regard to any power,
remedy or right provided herein or otherwise available to any party
hereunder (i) no waiver or extension of time will be effective unless
expressly contained in a writing signed by the waiving party; and
(ii) no alteration, modification or impairment will be implied by
reason of any previous waiver, extension of time, delay or omission
in exercise, or other indulgence.
6.7 Rules of Construction.
6.7.1 Headings. The Article and Section headings in
this Agreement are inserted only as a matter of convenience, and in
no way define, limit, or extend or interpret the scope of this
Agreement or of any particular Article or Section.
6.7.2 Tense and Case. Throughout this Agreement, as
the context may require, references to any word used in one tense or
case shall include all other appropriate tenses or cases, and the
term "including" means "including but not limited to."
6.7.3 Severability. The validity, legality or
enforceability of the remainder of this Agreement will not be
affected even if one or more of the provisions of this Agreement will
be held to be invalid, illegal or unenforceable in any respect.
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6.7.4 Knowledge. Whenever a representation or warranty
is stated to be based on the knowledge of a corporate party, such
phrase refers to whether any of such party's Senior Management has
actual knowledge of the matters involved.
6.7.5 Legal. The language used in this Agreement will
be deemed to be the language chosen by the parties to this Agreement
to express their mutual intent, and no rule of strict construction
shall be applied against any party. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the
context requires otherwise. Disclosure of an item on one Schedule
shall constitute disclosure on any other Schedule when the
applicability of such item is reasonably apparent.
6.8 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect to the
Transaction, and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof and is not
intended to confer upon any other person any rights or remedies
hereunder. There have been no representations or statements, oral or
written, that have been relied on by any party hereto, except those
expressly set forth in this Agreement.
6.9 Confidentiality. The parties will hold, and will cause
their employees and agents to hold, in strict confidence all
non-public information about the other party that was not either
already in the recipient party's possession prior to the disclosure
thereof or received thereafter on an unrestricted basis. The parties
will not make, nor cause to be made, any news releases or other
public announcements pertaining to the transactions contemplated
hereby without the prior consent of the other party, except as
required by law after consulting with, and making good faith efforts
to accommodate the requests of, the other i)arty hereto.
6.10 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
THE COMPANY
Tsunami Media, Inc.,
a California corporation
/s/ Xxxxxx Xxxxxxxxxx
By: Xxxxxx Xxxxxxxxxx
Its: President
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BUYER
Tsunami Media Corporation,
a Delaware Corporation
By:/s/ Xxxxx Xxxxxxxxx
Its: President
SCHEDULE 0
DEFINITIONS
"Assets" means all of the Company's right, title and interest in
and to its assets tangible and intangible, including (i) all
Intellectual Property of the Company, including, but not limited to,
the software and source code embodied in the following game titles:
Silent Steel, Flash Traffic, Ringworld, Blue Force, Protostar-War on
the Frontier, Wacky Funksters, Geewad-Games of the Galaxy, Man Enough
(formerly Lovelife) and First Wave Collection (collectively, the
"Games"); (ii) hardware; (iii) film and video; (iv) current
inventory; (v) receivables outstanding as of the date hereof-, (vi)
cash on hand as of the date hereof; (vii) all work in progress as of
the date hereof; (viii) prepaid expenses and deposits in connection
with the Assets as of the date hereof, (ix) contracts and agreements
to which the Company is a party except the lease agreement for the
Premises (the "Assumed Contracts"); (x) title to the name "Tsunami
Media" and the use thereof; and (xi) other property or assets of the
Company not specifically referred to herein as forming part of the
Assets.
"Affiliate" means any person which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is
in common control with, a specified person.
"Business" is the business of the Company, including, but not
limited to, developing and licensing computer software, as operated
on the date hereof.
"Buyer Disclosure Schedule" means the disclosure schedule
attached to this Agreement setting forth exceptions to the
representations and warranties of Buyer.
"Buyer Shares" shall mean fully-paid and non-assessable shares
of the common stock, without par value, of Buyer delivered to the
Company in partial payment of the Purchase Price.
"Claim" means any claim, lawsuit, demand, suit, hearing,
governmental investigation, litigation, proceeding, arbitration, or
other dispute, whether civil, criminal or administrative.
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"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" means Tsunami Media, Inc., a California corporation.
"Disclosure Schedule" means the Disclosure Schedule attached to
this Agreement setting forth exceptions to the representations and
warranties of the Company.
"Environmental Laws" means Laws relating to pollution or
protection of the environment, including Laws relating to (i)
emissions, discharges, releases or threatened releases or discharges
of materials constituting Hazardous Wastes into the environment
(including, without limitation, ambient air, surface water, land
surface or subsurface strata) or (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Wastes. "Hazardous Waste" means any waste
defined as "hazardous" under any Environmental Law, including the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980.
"Games" has the meaning set forth in the definition of Assets
above.
"Indemnified Party" means, with respect to any alleged Loss, the
party seeking indemnification hereunder.
"Indemnifying Party" means, with respect to any alleged Loss,
the party from whom indemnification is being sought hereunder.
"Intellectual Property" means all United States and foreign
letters patent, patents, patent applications, patent disclosures,
trademarks, service marks, trade names, brand names, logos and other
trade designations (including unregistered names and marks),
trademark and service xxxx registrations and applications, rights of
publicity, copyrights, copyright registrations and applications, mask
works, designs or design models, utility models, inventions,
invention disclosures, protected formulae, formulations, processes,
methods, substances, trade secrets, software, data and documentation
relating to software (including, but not limited to, all technical
documentation, user and operator manuals, source code, flow charts,
diagnostic and training materials and any similar materials, together
with all translations of all or any portion thereof, and all
electronic media for any of the foregoing), passwords, computer
access and data security code procedures (including any user and
operator manuals relating thereto), manufacturing research and
similar technical information, engineering know-how, customer,
supplier and other confidential business information, assembly and
test data drawings and royalty rights and the World Wide Web site
(including the graphics thereon and the domain name thereof) of the
Company relating to the Business.
"Law" means any law, statute or regulation.
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"Lien" means any security interest, lien, charge, mortgage,
pledge or easement.
"Losses" means any and all costs, expenses, damages and losses,
net of any tax adjustments, settlements, reductions or other effects
which actually result from that Loss and its payment by any
Indemnifying Party.
"Material Adverse Effect" means a material adverse effect on the
operations, assets, financial condition or prospects of the Business
that is reasonably expected to result in Losses in excess of $25,000;
except in the case of breaches of Section 2.11.2, where there is no
threshold.
"Order" means any decree, order or injunction.
"Permits" means any licenses or permits under any Law.
"Person" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
"Premises" means the Company's current premises'.
"Purchase Price" is defined in Section 1.1.
"Qualified Transaction" means (i) a merger or consolidation of
the Buyer in which the stockholders of the Buyer do not own a
majority of the outstanding shares of the surviving corporation (ii)
a sale of substantially all of the assets of the Buyer or (iii) the
closing of a firmly underwritten public offering of shares of Common
Stock of the Buyer with an aggregate offering price to the public of
not less than $5.0 million (before deduction of underwriters'
commissions and expenses related to the offering).
"Senior Management" in the case of the Company means Xxxxxx
Xxxxxxxxxx, and in the case of Buyer means Xxxxx Xxxxxxxxx.
"Significant Contracts" means (i) any contract which are
reasonably expected to provide more than $100,000 in revenue to, or
require more than $50,000 in expenses of, the Company; (ii) all other
material contracts not made in the ordinary course of business which
are to be performed at or after the date of this Agreement; and (iii)
any agreements limiting or restricting the right of the Company to
engage in any line of business in any geographic region in the world.
"Transaction" means the transaction contemplated by this
Agreement.
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TSUNAMI MEDIA, INC.
SCHEDULES TO ASSET ACQUISITION AGREEMENT
SCHEDULE 2.5 Financial Statements
1. March 31, 1998 and 1999 Financial Statements Attached.
2. These unaudited financial statements do not comply with
generally accepted accounting
principles in that they do not contain Notes; furthermore, because of
employee turnover, there
may be some inconsistency and changes in the application of the
accounting principles and some
eximates, although the Company has used its best efforts to maintain
consistency.
SCHEDULE 2.9 Permits
Tsunami Media, Inc. has been issued a business license by the County
of Madera.
SCHEDULE 2.10 Significant Contracts
Tsunami Media, Inc. is currently party to agreements with the
following parties:
I . DACOM Corporation (Korea) (dated as of September 6, 1996)
2. Digital River (dated as of March 5, 1999)
3. Enterprise Interactive, Inc. (dated as of April 22, 1998)
4. Eurovideo Bildprogramm GMBH (Germany) (dated as of February 10,
1996)
5. Nighthawk Technologies (dated as of March 7, 1994)
6. ORT International Limited (dated as of July 16, 1997)
7. Slingshot, Inc. (dated as of November 16, 1998)
8. Sport Active Television (dated as of March 1, 1998)
9. Synapse Co. Ltd. (Japan) (dated as of May 23, 1995)
10. Visual Purple, LLC (dated as of November 21, 1997)
11. ADT Security Services (dated as of December 4, 1998)
12. Xxxxxxx Technology, Inc. (dated as of October 2, 1997)
13. Finson, Srl. (dated as of October 28, 1996)
STARLIGHT
The License to Visual Purple covers all components of the Visual
Purple RBIT engine developed
to date. This includes:
1. The RBIT video engine - VP.EXE
2. The RBIT PCode engine - RBIT.DLL. This can optionally be
integrated into VP.EXE.
3. The RBIT Compiler - RBIT.BIN and META18.EXE
4. The R13IT PCode debug displayer - RBITDebug.EXE
5. The RBIT batch compilation program in Visual World -
Script.Compiler
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6. The CTL publishing tool - CTLDev.EXE
7. Documentation - RBIT Programming Language Manual
SCHEDULE 2.11 Intellectual Property
PATENTS:
On August .21.6, 1998, Tsunami Media, Inc. filed a patent for an
invention entitled "GAME
METHOD AND APPARATUS." This patent was assigned Serial No.
09/140,485.
REGISTERED COPYRIGHTS:
Blue Force
Return to Ringworld
Ringworld: Revenge of the Patriarch
Wave Design Logo
REGISTERED TRADEMARKS: The Tsunami name and logo attached hereto as
Appendix A.
