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EXHIBIT 10.5
[USA GROUP LETTERHEAD]
July 28, 1999
ECI, Inc.
00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxxxx.xxx Incorporated
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to those two transactions between ECI, Inc., a
Massachusetts corporation formerly known as Enrollment Collaborative, Inc.
("ECI"), and USA Group Xxxx-Xxxxxx, Inc., an Indiana corporation and successor
in interest to Enrollment Technologies, Inc. ("USAGNL"), the first occurring on
or about October 27, 1993, and the second occurring on or about May 16, 1996.
More specific reference is made to the transactions contemplated by the Software
And Know-How License and Trademark Assignment Agreement dated May 16,1996 (the
"1996 Agreement"), pursuant to which USAGNL (i) exclusively licensed to ECI (A)
certain "Licensed Properties", which are defined in the 1996 Agreement as the
software known as the CollegeLink(R) and IntroApp(R) computer programs and all
associated modules, subroutines, algorithms, application development tools,
utilities or other software which are useful in connection with the development,
enhancement or maintenance of the CollegeLink(R) and IntroApp(R) programs,
including copyrights and other intellectual property rights; and (B) "Know-How"
relating to the Licensed Properties as described in the 1996 Agreement; (ii)
assigned the CollegeLink(R) and IntroApp(R) trademarks (collectively, the
"Trademarks") to ECI (which is now the owner of record of the Trademarks); and
(iii) pursuant to Section 8.4 of the 1996 Agreement reserved a right to
re-acquire the Trademarks under certain circumstances. For the purposes of this
letter agreement all of the October 27, 1993, and May 16, 1996 transactions
between ECI and USAGNL shall sometimes be hereinafter referred to as the
"Transactions".
This letter agreement is being entered into solely in connection with
the pending merger (the "Merger") of ECI with and into XxxxxxxXxxx.xxx
Incorporated ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of Xxxxxxxx.xxx Incorporated, a New York corporation ("Cytation"). In
the Merger, ECI stockholders will receive (i) shares of Cytation Common Stock
valued at $4,200,000 and (ii) shares of Cytation Series B Convertible Preferred
Stock convertible into Cytation Common Stock valued at $3,500,000, subject to
adjustment based on the total liabilities of ECI as of the date of the closing
of the Merger. The Merger is more particularly described in the Merger
Agreement, dated as of June 18, 1999, by and among Cytation, Xxxxxx Sub, ECI,
Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxx (collectively, the
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"Principals"), and Xxxxxx X. Xxxxxx, as agent for the Principals, attached
hereto as Exhibit A (the "Merger Agreement"). Cytation acknowledges the direct
benefit and value it will receive, by virtue of its sole ownership of the stock
in Merger Sub, as a result of USAGNL's release of its claims against ECI as
specifically described in the sixth paragraph of this letter agreement and the
transfer by USAGNL to Merger Sub of USAGNL's rights and interests in and to the
Licensed Properties and Know-How as specifically described in the seventh
paragraph of this letter agreement.
This letter agreement and the Registration Rights Agreement (as defined
below) shall not be effective unless and until (A) USAGNL, Cytation and ECI have
each executed three (3) copies of this letter agreement, (B) USAGNL and Cytation
have each executed two (2) copies of the Registration Rights Agreement, (C) the
transactions contemplated by the Merger are closed, (D) USAGNL has received the
USAGNL Shares (as defined below), (E) USAGNL, Cytation and ECI have each
received one (1) fully executed copy of this letter agreement, and (F) USAGNL
and Cytation have each received one (1) fully executed copy of the Registration
Rights Agreement. For purposes of this letter agreement, the time at which the
actions described in clauses (A) through (F) above are completed shall be
referred to herein as the "Effective Time". In the event that the actions
described in clauses (A) through (F) above have not been completed on or before
September 4, 1999, this letter agreement and the Registration Rights Agreement
shall be void ab initio.
ECI has certain unfulfilled obligations to USAGNL and USAGNL has raised
claims against ECI arising under the Transactions. ECI and USAGNL desire to
settle certain of their obligations and claims in consideration of the USAGNL
Shares received by USAGNL.
Promptly after the Merger, Cytation shall issue to USAGNL shares of
Cytation Common Stock and Cytation Series B Convertible Preferred Stock
(collectively, the "USAGNL Shares") equal to the greater of (i) 17.64% of the
consideration to be received by the ECI stockholders in connection with the
Merger and (ii) $1,500,000 (based on the values used in the Merger Agreement).
The ratio of Cytation Common Stock to Cytation Series B Convertible Preferred
Stock received by USAGNL shall be equal to the ratio of such securities received
by the ECI stockholders pursuant to the Merger. In conjunction with the USAGNL
Shares, USAGNL shall have those certain registration rights granted by Cytation
to USAGNL as set forth in the Registration Rights Agreement, dated as of the
date of this letter agreement, by and between Cytation and USAGNL, attached
hereto as Exhibit B (the "Registration Rights Agreement").
In consideration of the USAGNL Shares received by USAGNL hereunder,
USAGNL, on behalf of itself and its affiliates, hereby releases and forever
discharges and covenants not to
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sue, commence or prosecute judicial or administrative proceedings against ECI,
Cytation or any of their respective subsidiaries, affiliates, directors,
officers, employees or agents from and with respect to any and all claims,
demands, causes of action or damages of any kind whatsoever, whether know or
unknown, which USAGNL now has or ever had against any of the foregoing, arising
(i) prior to the Effective Time and (ii) out of the Transactions; provide, that
USAGNL does not release or discharge any claims, demands, causes of action or
damages that USAGNL or its affiliates may have with respect to its
indemnification rights under Section 10 of that certain Equipment Lease With
Option To Purchase, dated as of May 16, 1996, by and between ECI and USAGNL, and
Section 4 of that certain Assignment and Assumption of Assigned Contracts, dated
as of May 16, 1996, by and between ECI and USAGNL
In consideration of the USAGNL Shares received by USAGNL hereunder,
USAGNL agrees to irrevocably transfer, grant, assign and convey to Merger Sub,
without warranty of any kind and on an AS IS, WHERE IS basis, all of USAGNL's
right, title and interest in and to the Licensed Properties and Know-How,
including, without limitation, the exclusive worldwide right to use, reproduce,
modify, enhance, develop, market, distribute, sublicense and otherwise exploit
the Licensed Properties and Know-How, including all copyrights and any other
rights granted to an author or inventor under the patent, copyright, or trade
secret laws of the United States or any foreign jurisdiction. As of the
Effective Time, USAGNL hereby transfers, grants, assigns and conveys to Merger
Sub, without warranty of any kind and on an AS IS, WHERE IS basis, all of
USAGNL's right, title and interest in and to the Licensed Properties and
Know-How, including all copyrights and other intellectual property rights
therein. USAGNL agrees to provide such further assurance or execute any
additional documents which may be necessary to effect the transfer as Merger Sub
may reasonably request from time to time, including any notices, applications,
assignments or other instruments of conveyance for filing with the U.S. Patent
and Trademark Office, the U.S. Copyright Office, any foreign offices or
elsewhere as Merger Sub may reasonably deem appropriate, in order to more fully
evidence or perfect the transfer of rights made herein. Also, as of the
Effective Time, USAGNL hereby relinquishes its right of reassignment of the
Trademarks pursuant to Section 8.4 of the 1996 Agreement, and relinquishes all
other rights which it may have under the 1996 Agreement to the Trademarks, the
Licensed Properties or the Know-How. In addition, promptly after the Effective
Time, USAGNL shall deliver to Merger Sub or destroy all copies of the Licensed
Properties and any documentation relating to the Know-How in the possession or
control of USAGNL, including all copies of the source code and object code for
the CollegeLink(R) and IntroApp(R) programs.
In consideration of the releases provided by USAGNL as set forth above,
ECI and Cytation, on behalf of itself and its affiliates, each hereby release
and forever discharge and covenants not to sue, commence or prosecute judicial
or administrative proceedings against
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USAGNL or any of its subsidiaries, affiliates, or each of its respective
directors, officers, employees or agents from and with respect to any and all
claims, demands, causes of action or damages of any kind whatsoever, whether
know or unknown, which ECI now has or ever had against any of the foregoing,
arising out of the Transactions.
USAGNL represents that it is its present intention to acquire the
USAGNL Shares for its own account and that the USAGNL Shares will be acquired by
it for the purpose of investment and not with a view to distribution or resale
thereof. The receipt by USAGNL of the USAGNL Shares shall constitute a
confirmation of this representation. USAGNL further represents that (i) USAGNL
has full power and authority to enter into and to perform this letter agreement
in accordance with its terms, (ii) USAGNL has made such inquiry concerning
Cytation, its business and its personnel, as USAGNL deems appropriate in
connection with its investment in Cytation, (iii) the officers of Cytation have
made available to USAGNL any and all written information which it has requested
and have answered to USAGNL's satisfaction all inquiries made by USAGNL, (iv)
the officers of USAGNL have sufficient knowledge and experience in investing in
companies similar to Cytation so as to be able to evaluate the risks and merits
of USAGNL's investment in Cytation, and (v) USAGNL is able financially to bear
the risks thereof.
ECI represents and warrants to USAGNL that ECI has full power and
authority to enter into and to perform this letter agreement in accordance with
its terms. ECI further incorporates by reference all representations and
warranties set forth in Article 2 of the Merger Agreement and agrees that USAGNL
may rely upon and enforce such representations and warranties as though USAGNL
was an original party thereto.
Cytation represents and warrants to USAGNL that (i) Cytation has full
power and authority to enter into and to perform this letter agreement and the
Registration Rights Agreement in accordance with its respective terms, and (ii)
the USAGNL Shares have been duly authorized and validly issued, are fully paid
and nonassessable, are not subject to any right of rescission, and have been
offered, issued, sold and delivered by Cytation in compliance with all
registration or qualification requirements (or applicable exemption therefrom)
of applicable federal and state securities laws. Cytation further incorporates
by reference all representations and warranties set forth in Article 4 of the
Merger Agreement and agrees that USAGNL may rely upon and enforce such
representations and warranties as though USAGNL was an original party thereto.
The terms and conditions herein expressed shall be binding upon and
inure to the benefit of all parties and their respective successors and assigns.
The parties hereto agree to take all
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actions and do all things, including deliver all additional documents,
reasonably necessary to effect the transactions contemplated by this letter
agreement.
If the foregoing is acceptable to you, please evidence your agreement
in the space provided below and return to me, whereupon it will be a
Massachusetts contract executed under seal.
USA GROUP XXXX-XXXXXX, INC.
By: /S/ X. Xxxxx Xxxx
--------------------------------
X. Xxxxx Xxxx
Treasurer
XXXXXXXX.XXX INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
Chief Financial Officer
Dated: July __, 1999
ECI, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer
Dated: July __, 1999
