ASSET PURCHASE AND SOFTWARE LICENSE AGREEMENT
THIS ASSET PURCHASE AND SOFTWARE LICENSE AGREEMENT (the
"Agreement"), dated as of February 7, 1997, is made and entered into by
and between WASATCH EDUCATION SYSTEMS CORPORATION, a Utah corporation
(the "Seller"), and WASATCH INTERACTIVE LEARNING CORPORATION, a Utah
corporation (the "Buyer").
WITNESSETH:
WHEREAS, the parties hereto desire that Seller sell to Buyer
and Buyer buy from Seller certain of the assets of Seller as more fully
described herein; and
WHEREAS, the parties hereto desire that Seller license to Buyer
and Buyer license from Seller certain intellectual property of Seller
as more fully described herein;
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants and agreements hereinafter contained, the parties
hereto hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
Accounts Receivable shall mean all accounts and notes
receivable of Seller, and all other entitlements to payment arising out
of or otherwise relating to the Business, existing on the Closing Date
including, without limitation, those described in Schedule 5.7.
Affiliate shall mean, with respect to any Person, any Person
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with, such other Person.
Agreement shall mean this Agreement and all of its Exhibits and
Schedules.
Assumed Liabilities shall mean the liabilities related to the
Business which Buyer is expressly assuming pursuant to the provisions of
Section 4.1 below, but excluding the Retained Liabilities specifically
identified in Section 4.1 below and any other Liabilities of Seller not
specifically identified as Assumed Liabilities in Section 4.1 below.
Bids shall mean all outstanding bids and proposals of Seller
with respect to the Business, and shall include Government Bids.
Business Day shall mean days other than Saturdays, Sundays, and
other legal holidays or days on which banks in Salt Lake City are
required or permitted by law to be closed.
Business shall mean the Education Market business conducted by
Seller prior to the Closing Date.
Cash and Deposits shall mean all cash, bank deposits, and cash
equivalents of Seller relating to the Education Market as of the Closing
Date.
Closing Date shall mean the date on which the Closing takes
place and shall be the date on which the Cash Consideration referred to
in section 4.1 is paid by Buyer, but not later than February 14, 1997.
Code shall mean the Internal Revenue Code of 1986, as amended.
Contracts shall mean, collectively, the Purchase Orders, Sales
Orders, Government Contracts, and Other Contracts.
Education Market shall mean the following markets for
standalone products (program resides and runs on one workstation only),
networked products(program runs on more than one workstation
concurrently, with multiple workstations connected to a common server),
and products delivered via the Internet: (i) preschool education
institutions, facilities, and programs, both public and private; (ii) K-
12 education institutions, facilities, and programs, both public and
private; (iii) juvenile and adult basic education institutions,
facilities, and programs, both public and private; (iv) correctional
facilities and corporate sites; (v) post-secondary educational
institutions, facilities, and programs, including vocational schools and
community colleges; (vi) individuals or parents of minor students,
provided the sales are made through educational institutions,
facilities, or programs (as opposed to retail sales); and (vii)
organizations directly affiliated with the above education institutions,
such as PTAs.
Education Market License shall mean the license agreement
attached hereto as Exhibit D pursuant to which Seller has agreed to
license to Buyer, and Buyer has agreed to license from Seller, the
Licensed Programs.
Equipment shall mean all of the office equipment, computers,
audio and video equipment, duplication equipment, furniture, trade show
equipment and displays, fixtures and leasehold improvements, bins,
racks, displays, demonstration discs, audio and video tapes, and other
personal property owned or leased by Seller and used in the Business on
the Closing Date including, without limitation, the items set forth in
Schedule 5.6.
Excluded Property shall mean the Licensed Programs and
Intellectual Property, which are being licensed to Buyer under the
Education Market License, and the capitalized development costs, net
operating losses, and other tax benefits which are not being sold to
Buyer.
Exclusivity Period means a period of one (1) year from the
Closing Date; provided, however, that the Exclusivity Period may be
extended upon payment of certain minimum royalties by Buyer to Seller
pursuant to the Education Market License as follows:
Minimum Royalty Payment Dates New Exclusivity
--------------- ------------- Period
---------------
$500,000 1st License Year Two (2) License Years
$500,000 2nd License Year Three (3) License Years
$500,000 3rd License Year Four (4) License Years
$500,000 4th License Year Five (5) License Years
Files and Records shall mean those files and records of Seller
relating to the Business, whether in hard copy or magnetic format,
including without limitation the following: customer and vendor lists,
customer and supplier files, advertising materials and signs (including
copy, artwork, and photographic negatives or plates), correspondence,
equipment maintenance records, equipment warranty information, equipment
drawings, trade secrets and customer specifications, correspondence with
federal, state, and local governmental agencies relating to the
Business, and all other files and records of Seller related to the
Business.
Government Bid shall mean any outstanding quotation, bid, or
proposal submitted by Seller (but only with respect to the Business) to
(i) the Government, (ii) any proposed prime contractor of the
Government, or (iii) any contractor proposing to perform work or provide
services or products to be eventually used or employed by, or sold or
transferred to, the Government or any proposed prime contractor of the
Government.
Government Contracts shall mean any prime contracts,
subcontracts, teaming agreements or arrangements, joint ventures, basic
ordering agreements, letter contracts, purchase orders, delivery orders,
change orders, arrangements, or other agreements of any kind, including
all amendments, modifications, and options thereunder or relating
thereto, proposed or performed solely by the Business, between Seller
and any of (i) the Government, (ii) any prime contractor of the
Government, or (iii) any contractor proposing to perform work or provide
services or products to be eventually used or employed by, or sold or
transferred to, the Government or any proposed prime contractor of the
Government currently in force.
Government shall mean any agency, division, subdivision, audit
group, or procuring office of the United States federal government, any
state or local government, or any foreign government, including the
employees or agents thereof.
Home Market shall mean end users who are not in the Education
Market and who purchase products through channels other than the
Education Market. Such other channels shall include direct Internet
channels, retail or off-the-shelf channels, and direct sales channels,
including, without limitation, mail order.
Intangible Assets shall mean all intangible personal property
rights, other than Intellectual Property, related to the Business,
including without limitation all choses in action relating thereto, the
tradename "Wasatch Education Systems Corporation" and all goodwill of
Seller relating to the Business, other than the good will associated
with the Licensed Tradenames (as defined in the Tradename License).
Internet shall mean distribution or delivery over a wide area
network using electronic data communications technology as presently
implemented in the Internet or as hereafter designed for use in
conjunction with telephone, cable, wireless, or other types of data
transmission systems.
Intellectual Property shall mean all copyrights, registered or
unregistered, trademarks, trade names, service marks, trade secrets,
know-how, inventions and other intellectual property rights in the
Licensed Programs which Seller owns or possesses the rights to use,
license, or distribute.
Inventory shall mean all the finished goods, raw materials,
work in progress other than Intellectual Property, inventoriable
supplies, owned by Seller on the Closing Date for use in the Business.
Liability shall mean, with respect to any Person, any liability
or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, secured or unsecured, joint or several, due
or to become due, vested or unvested, executory, determined,
determinable, or otherwise, and whether or not the same is required to
be accrued on the financial statements of such Person.
Licenses and Permits shall mean all licenses, permits,
franchises, authorizations, and approvals issued or granted by the
United States, any state or local government, any foreign national or
local government, or any department, agency, board, commission, bureau,
regulatory authority, or instrumentality of any of the foregoing to
Seller and related exclusively to the Business.
Licensed Programs shall mean the computer programs, multimedia
materials, and print materials for all products and services heretofore
sold and provided by Seller to the Education Market, including but not
limited to the software and courseware titles listed or described as
Licensed Programs on Schedule 1.0 attached hereto, together with all
lesson content, graphics and sound files, management systems,
interfaces, authoring tools, templates, development engines, utilities,
development and testing tools, and related technologies, trade secrets,
know-how, inventions, copyrights, and intellectual properties. Licensed
Programs also include the Third Party Courseware listed or described on
Schedule 1.0.
Lien shall mean any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind except for (i) liens for current
taxes or assessments not yet due or payable, (ii) worker's, mechanics',
suppliers', carriers', warehousemen's, materialmen's, or repairmen's
liens and similar liens arising in the ordinary course of business, and
(iii) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation.
Losses shall have the meaning ascribed in Section 12.1.
Management Group means Xxxxxxx Xxxxxx, Xxxxx Xxxxx, and Xxxxx
Xxxxx, who have served as the senior management team of Seller for the
three (3) year period immediately prior to the Closing Date.
Other Contracts shall mean, (but only as they relate to the
Business), all currently effective Equipment leases, indentures, loan
agreements (but specifically excluding Retained Liabilities, as defined
in Section 4.1 below), security agreements, agency and representation
agreements, partnership or joint venture agreements, license agreements,
service contracts, employment, commission, and consulting agreements,
suretyship contracts, letters of credit, reimbursement agreements,
distribution agreements, contracts or commitments limiting or
restraining Seller with respect to the Business from engaging or
competing in any lines of business or with any person, firm or
corporation, documents granting the power of attorney with respect to
the Business, agreements not made in the ordinary course of business of
the Business, options to purchase any assets or property rights of the
Business, working capital maintenance or other form of guaranty
agreements specifically related to the Business, contracts awarded to
Seller pursuant to any Bids and all other agreements to which Seller is
a party and which are specifically related to the operation of the
Business, but excluding all agreements not specifically related to the
Business, as well as Government Contracts, the lease for the Salt Lake
Facility, Purchase Orders, Sales Orders, and severance pay plans.
Person shall mean any individual, corporation, partnership,
joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization, Government, or other
entity.
Purchase Orders shall mean all of Seller's outstanding purchase
orders, contracts or other commitments to suppliers of goods and
services for materials, supplies, or other items utilized in the
Business which have not been furnished or supplied prior to the Closing
Date.
Purchased Property shall mean the Accounts Receivable, Bids,
Cash and Deposits, Contracts, Equipment, Files and Records, Intangible
Assets, Inventory, Licenses and Permits (to the extent transferable by
Seller), Third Party Software, the Salt Lake Facility office lease, and
any other assets of Seller related to the Business on the Closing Date
(including, without limitation, all assets reflected on Schedules with
additions thereto (net of dispositions in the ordinary course of
business) and includes all of the tangible and intangible assets (other
than the Licensed Programs and Intellectual Property) of Seller used in
the Business or related thereto.
Royalty Period shall mean the period of time following the
Closing Date during which Buyer is obligated to pay royalties to Seller
under the Education Market License.
Sales Orders shall mean all of Seller's sales orders, contracts
or other commitments to provide goods and services to Seller's customers
in the Education Market.
Salt Lake Facility shall mean the approximately 8,381 square
feet of office space and related rights presently leased by Seller at
0000 Xxxxx 000 Xxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, pursuant to
a Lease dated as of April 1, 1996.
Sell or sale, when used in the context of Licensed Programs,
Third Party Courseware, Licensor Derivative Works, and Licensee
Derivative Works, means sale of a non-exclusive sublicense to an end
user to use the same in object code.
Seller's Accountant shall means Xxxxxx Xxxxxxxx, L.L.P.
Seller's Knowledge shall mean the collective actual knowledge,
based on actual inquiry (if any inquiry was actually so conducted), of
Xxxx Xxxxxx, Xxxx Xxxxxx, and Xxxxxxx Xxx.
Tax or Taxes shall mean, for all purposes of this Agreement,
all taxes (including, without limitation, excise taxes, ad valorem
taxes, sales taxes, and transfer taxes and fees) and other Governmental
charges of any nature imposed upon a Person, including without
limitation, all taxes or Governmental charges of any nature imposed upon
any of the properties, tangible or intangible assets, income, receipts,
payrolls, transactions, stock transfers, capital, net worth or
franchises of a Person (including, without limitation, all sales, use,
withholding, or other taxes which a Person is required to collect and/or
pay over to any Government), and all additions to tax, penalties, or
interest paid or payable which relate in any way to such taxes and other
Governmental charges, or any assessment or collection thereof.
Third Party Software shall mean third party software programs,
development tools, and utilities used in the Business, including without
limitation all word processing, spreadsheet, database, graphics and
desktop publishing, project management, product testing and authoring
programs, and other off-the-shelf programs which are not sublicensed by
Seller to the Education Market. Third Party Software does not include
Third Party Courseware.
Third Party Courseware shall mean the proprietary computer
programs, utilities and tools, and related documentation, owned by third
parties and licensed to Seller for commercial distribution into the
Education Market as part of Seller's product offering, subject to
royalty payments to the third parties, including those programs
identified as Third Party Courseware on Schedule 1.0.
Tradename License shall mean the license of tradenames in
substantially the form of Exhibit C hereto.
Transferred Employees shall mean all employees of Seller as of
the Closing Date.
2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.
2.1 Transfer of Assets. Subject to the terms and conditions
herein set forth, Seller shall sell, transfer or assign to Buyer, and
Buyer shall purchase and acquire from Seller, on the Closing Date, all
right, title, and interest of Seller in and to the Purchased Property.
Seller shall retain sole and exclusive ownership and possession of the
Excluded Property.
2.2 Sale at Closing Date The sale, transfer, assignment, and
delivery by Seller of the Purchased Property to Buyer, as herein
provided, shall be effected on the Closing Date by means of a General
Assignment, Xxxx of Sale, and Assumption Agreement substantially in the
form of Exhibit A, the Assignment of Office Lease in the form of Exhibit
B, the Tradename License substantially in the form of Exhibit C, and
such other instruments of transfer and conveyance as Buyer may
reasonably request Buyer shall pay all state and local sales, transfer,
value-added, or other similar taxes, and all recording and filing fees
that may be imposed by reason of the sale, transfer, assignment, and
delivery of the Purchased Property Risk of loss to the Purchased
Property shall pass from Seller to Buyer at the Closing.
2.3 Subsequent Documentation. Seller shall, from time to time
after the Closing Date, upon the reasonable request of Buyer and at the
expense of Buyer, execute, acknowledge, and deliver, or cause to be
executed, acknowledged, and delivered, all such further assignments,
transfers, and conveyances as may be required for the better assigning,
transferring, granting, conveying, and confirming to Buyer or its
successors and assigns, or for aiding and assisting in collecting and
reducing to possession, any or all of the Purchased Property or to
otherwise effectuate the purposes of this Agreement.
2.4 Limited Warranty. Seller warrants that it has good and
marketable title to all Purchased Property and that its conveyance of
the same to Buyer shall vest in Buyer good, marketable, and unencumbered
title to all Purchased Property, except for the Assumed Liabilities.
2.5 Education Market License. As an integral part of this
Agreement, Seller and Buyer shall enter into the Education Market
License attached hereto as Exhibit D at the Closing.
3. INTENTIONALLY OMITTED
4. PURCHASE PRICE.
4.1 Assumption of Liabilities. On the Closing Date, Buyer
shall assume (and indemnify Seller against) the following liabilities
and obligations of Seller (collectively the "Assumed Liabilities"):
(a) Liabilities of the Seller relating to its business in the
Education Market which are shown on the most recent balance sheet of
Seller and/or are otherwise known to the Management Group, excepting the
following which Seller shall retain (the "Retained Liabilities"): (i)
indebtedness and obligations evidenced by certain debentures issued by
Seller having a face principal amount of approximately $1.2 million;
(ii) any and all obligations and commitments of Seller to its
shareholders or directors who are not members of the Management Group or
Transferred Employees; and (iii) any other Liabilities of Seller of any
kind.
(b) Obligations to the existing installed base of Education
Market customers for software support and maintenance arising before and
after the Closing Date;
(c) Royalties owed to third party licensors on account of (i)
Seller's sublicensing of Third Party Courseware to its customers in the
Education Market before the Closing Date; and (ii) Buyer's sublicensing
of Third Party Courseware to its customers from and after the Closing
Date, but specifically excluding Seller's sublicensing of Third Party
Courseware to its customers after the Closing Date.
(d) All liabilities of Seller with respect to Transferred
Employees, including but not limited to accrued wages, accrued vacation,
sick leave, employee reimbursements, and severance.
Except for the specific Assumed Liabilities identified above, Buyer
shall not assume or in any way be responsible for any liabilities or
obligations of Seller, and Seller shall continue to be solely liable for
all of the Retained Liabilities and all other liabilities and
obligations of Seller that are not specifically identified above as
Assumed Liabilities.
4.2 Cash Purchase Price. In addition to the assumption of the
Assumed Liabilities, Buyer shall pay to Seller cash consideration ("Cash
Consideration") in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000), payable at the Closing by (i) certified check
payable to the order of Seller, or (ii) wire transfer of immediately
available U. S. funds to an account that Seller designates.
4.3 Option to Buy Out Royalty Obligations. At its option,
Buyer may discharge the royalty obligations set forth in the Education
Market License by paying to Seller, on the Closing Date, or within one
(1) year after the Closing Date, additional Cash Consideration of Three
Million Five Hundred Thousand Dollars ($3,500,000) for a total Cash
Consideration of Five Million Dollars ($5,000,000), in which event
Buyer's licenses shall be fully paid up and perpetually exclusive in the
Education Market; provided, however, that the exclusivity covenant and
agreement of Buyer as set forth in Section 8.2 below shall continue so
long as Seller does not materially breach the obligations of its
exclusivity covenant and agreement set forth in Section 7.4 below and
fail to cure any such breach within sixty (60) days after written notice
from Buyer.
4.4 Adjustment to Cash Consideration. In arriving at the Cash
Consideration set forth in Section 4.2 above and the royalty payments
set forth in the Education Market License (collectively, the "Purchase
Price"), the parties have attempted to make a reasonable and good faith
allocation of value between the assets and business being sold or
transferred to Buyer under this Agreement (the "Sold Business") and the
assets and business being retained by Seller (the "Retained Business").
However, neither party is entirely comfortable that the Purchase Price
properly reflects the appropriate allocation of value between the Sold
Business and the Retained Business. Therefore, Seller and Buyer hereby
agree that the Purchase Price shall be adjusted as set forth below in
the event there is an acquisition, merger, or sale of all or
substantially all of the stock or assets (the "Acquisition") of the Sold
Business or Retained Business within the time period set forth below:
(a) In the event of an Acquisition of the Sold Business, Buyer
or its successor shall have the option of discharging the royalty
obligations set forth in the Education Market License by paying to
Seller an amount equal to $3,500,000, which royalty discharge amount
shall be paid within thirty (30) days after the closing of the
Acquisition. In the event Buyer or its successor does not exercise the
foregoing option, the royalty obligations set forth in the Education
Market License shall be expressly assumed by the successor company in
the Acquisition and continue in full force and effect against said
successor.
(b) In the event of an Acquisition of the Sold Business within
two (2) years after the Closing Date, then, in addition to the payment
of any royalty or royalty buyout under subsection (a) above, the
Purchase Price shall be increased by an amount calculated as follows
(the "Increased Amount") based upon the applicable percentage set forth
below of the "Net Sold Business Acquisition Proceeds":
Portion of Net Sold Business
Month of Sold Business Acquisition Acquisition Proceeds
---------------------------------- --------------------
1-12 months after Closing Date 10.00%
13-16 months after Closing Date 7.50%
17-20 months after Closing Date 5.00%
21-24 months after Closing Date 2.50%
25 or more months after Closing Date 0.00%
For purposes of this Agreement, "Net Sold Business Acquisition Proceeds"
shall mean (a) the total cash consideration, plus the Fair Market Value
of property or stock, received by Buyer or its shareholders as payment
in the Sold Business Acquisition, less all commissions and out-of-pocket
expenses of the Sold Business Acquisition, minus (b) the sum of (i) the
Cash Consideration paid to date, (ii) the aggregate royalties paid to
date under the Education Market License, Section 4.3 above, or
subsection (a) above, and (iii) in the case of an asset sale, the debts
and obligations owed to creditors of Buyer immediately prior to the Sold
Business Acquisition. The Increased Amount of the Purchase Price shall
be paid by Buyer to Seller within thirty (30) days after the closing of
the Sold Business Acquisition. In the event the Net Sold Business
Acquisition Proceeds are primarily property or stock, Buyer may elect to
discharge all or any part of its obligations to pay the Increased Amount
by conveying or transferring to Seller a portion of the property (or
undivided interest therein) or stock received (the "Buyer's In-Kind
Payment"), in which case the cash payment of the Increased Amount shall
be reduced by the Fair Market Value (determined in the manner set forth
in subsection (d) below) of the Buyer's In-Kind Payment.
(c) In the event of an Acquisition of the Retained Business
within two (2) years after the Closing Date, then notwithstanding the
payment of any royalty or royalty buyout under subsection (a) above, the
Purchase Price shall be decreased by an amount calculated as follows
(the "Decreased Amount") based upon the applicable percentage set forth
below of the "Net Retained Business Acquisition Proceeds":
Portion of Net Sold Business
Month of Sold Business Acquisition Acquisition Proceeds
---------------------------------- --------------------
1-12 months after Closing Date 10.00%
13-16 months after Closing Date 7.50%
17-20 months after Closing Date 5.00%
21-24 months after Closing Date 2.50%
25 or more months after Closing Date 0.00%
For purposes of this Agreement, "Net Retained Business Acquisition
Proceeds" shall mean (a) the total cash consideration, plus the Fair
Market Value of property or stock, received by Seller or its
Shareholders as payment in the Retained Business Acquisition, less all
commissions and out-of-pocket expenses of the Retained Business
Acquisition, minus (b) the sum of (i) Seller's shareholder indebtedness
and Preferred Stock liquidation preferences as of the Closing Date, and
(ii) in the case of an asset sale, the debts and obligations owed to
creditors of Seller immediately prior to the Retained Business
Acquisition. The Decreased Amount of the Purchase Price shall be offset
against the next royalties due by Buyer to Seller under the Education
Market License. In the event the Net Retained Business Acquisition
Proceeds are primarily property or stock, Seller may elect to discharge
all or any part of its obligations to pay the Decreased Amount by
conveying or transferring to Buyer a portion of the property (or
undivided interest therein) or stock received (the "Seller's In-Kind
Payment"), in which case the Decreased Amount, i.e., the amount of
Buyer's credit or offset against royalties next due under the Education
Market License, shall be reduced by the Fair Market Value (determined in
the manner set forth in subsection (d) below) of the Seller's In-Kind
Payment. In the event the Decreased Amount is greater than the
royalties due by Buyer to Seller (e.g., Buyer has bought out the
Education Market License pursuant to Section 4.3 above or subsection (a)
above), Seller shall pay the Decreased Amount to Buyer in cash or
Seller's In-Kind Payment, as the case may be.
(d) For purposes of subsections (b) and (c) above, "Fair Market
Value" shall be determined by agreement between Buyer and Seller;
provided, however, that if Buyer and Seller cannot agree upon Fair
Market Value by the Acquisition closing date, Buyer and Seller shall
each appoint an appraiser qualified to value the property or stock
received, and if the two appraisers so appointed cannot agree upon Fair
Market Value within twenty (20) days after the Acquisition closing date,
the two appraisers shall jointly select a third appraiser and the Fair
Market Value shall be the average of the three appraisals.
5. REPRESENTATIONS AND WARRANTIES OF SELLER,
Seller hereby represents and warrants to Buyer:
5.1 Corporate Organization. To Seller's Knowledge, Seller is a
corporation duly organized, validly existing and in good standing under
the laws of the state of Utah, and has all requisite corporate power and
authority to own and lease its properties and assets and to conduct its
business as now conducted.
5.2 Qualification to Do Business. To Seller's Knowledge,
Seller is duly qualified to do business as a foreign corporation and is
in good standing in every jurisdiction where the character of the
properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary and which in the absence of
such qualification would have a material adverse effect on the Business,
taken as a whole.
5.3 Authorization and Validity of Agreements. To Seller's
Knowledge, Seller has all requisite corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the performance of
Seller's obligations hereunder have been duly authorized by all
necessary corporate action by the Board of Directors, shareholders and
debenture holders of Seller, and no other corporate proceedings on the
part of Seller are necessary to authorize such execution, delivery, and
performance. This Agreement has been duly executed by Seller and
constitutes the valid and binding obligation of Seller enforceable
against Seller in accordance with its terms except as the same may be
limited by non-competition laws, restraint of trade laws, bankruptcy,
insolvency, reorganization, or other laws relating to or generally
affecting the enforceability of creditors' rights and except that the
remedy of specific performance or similar equitable relief may be
subject to equitable defenses and to the discretion of the court before
which enforcement is sought.
5.4 No Conflict or Violation. To Seller's Knowledge, the
execution, delivery, and performance by Seller of this Agreement do not
and will not violate or conflict with any provision of the Certificate
or Articles of Incorporation or Bylaws of Seller, and do not and will
not violate any provision of any agreement or instrument to which Seller
is a party or by which it is bound, or of any law, order, judgment, or
decree of any court or other governmental or regulatory authority, the
consequences of which would have a material adverse effect on Seller,
taken as a whole.
5.5 Consents and Approvals. To Seller's Knowledge, Schedule
5.5 sets forth a true and complete list of each material consent,
waiver, authorization, or approval of the Government, or of any other
Person, and each declaration to or filing or registration with the
Government, that is required in connection with the execution and
delivery of this Agreement by Seller, or the performance by Seller of
its obligations hereunder. For the purposes of this Section 5.5, with
respect to Contracts, "material consent, waiver, authorization, or
approval" refers, except with respect to a Government Contract, to Sales
Orders, Purchase Orders, and Other Contracts, in each individual case
having a current value in excess of $100,000.
5.6 Equipment. To Seller's Knowledge, (a) Schedule 5.6 sets
forth, as of February 1, 1997, a complete and correct list of each item
of Equipment; (b) except as set forth in Schedule 5.6, Seller has good
title, free and clear of all title defects and Liens to the Equipment
owned by it; (c) none of the title defects or Liens (if any) listed on
Schedule 5.6 materially adversely affects the value of any of the items
of Equipment or materially interferes with its use in the conduct of the
Business; (d) except as set forth in Schedule 5.6, Seller holds good and
transferable leaseholds in all of the Equipment leased by it in each
case under valid and enforceable leases; (e) Seller is not in material
default with respect to any item of Equipment purported to be leased by
it, and no event has occurred which constitutes or with due notice or
lapse of time or both may constitute a default under any lease thereof.
5.7 Accounts Receivable. To Seller's Knowledge, (a) Schedule
5.7 sets forth, as of February 1, 1997, a complete and correct list of
the Accounts Receivable; and (b) except as set forth in Schedule 5.7,
such Accounts Receivable are not subject to any Liens, counterclaims or
set-offs, other than amounts deductible as commissions or other amounts
payable to distributors or sales representatives in connection with the
licensing or sale of the Licensed Programs in the usual course of the
Business. Any collections made by Seller on or after the Closing Date,
shall be for the account of Buyer, and all such collections shall be
promptly remitted to Buyer. Notwithstanding anything in this Agreement
to the contrary, Seller makes no representation or warranty whatsoever
as to the collectibility of the Accounts Receivable.
5.8 Government Contracts and Sales Orders. To Seller's
Knowledge, (a) Schedule 5.8 sets forth, as of February 1, 1997, a
complete and correct list of the Government Contracts and Sales Orders
of the Business; and (b) except as set forth in Schedule 5.8, Seller has
good title, free and clear of all Liens on such Government Contracts and
Sales Orders.
5.9 Licensed Programs and Third Party Courseware. To Seller's
Knowledge, Seller owns or has the right to license the Licensed Programs
and Third Party Courseware in accordance with the Education Market
License. To Seller's Knowledge, as of the date hereof, (a) there are no
actual or threatened claims that Seller's use, licensing, and
distribution of Licensed Programs or Third Party Courseware constitutes
a violation of the intellectual property rights of third parties; (b)
Seller's interest in the Licensed Programs and Third Party Courseware is
free of Liens; and (c) Seller (i) is not in material breach of its
obligations under agreements relating to Third Party Courseware, (ii)
has not received written notice of such material breach by third party
developers, and (iii) is not aware of any events or circumstances
occurring prior to the date hereof which would constitute a material
breach under the Third Party Courseware agreements.
5.10 Tax Matters. Except as set forth in Schedule 5.10, to
Seller's Knowledge, Seller has timely filed all tax returns and paid the
taxes due and required to be filed and paid in respect of the Business
by any applicable Tax law and where the failure to do so would have a
material adverse effect on the Business and the Purchased Property.
5.11 Litigation. Except as set forth in Schedule 5.11, to
Seller's Knowledge, there are no actions, suits, or proceedings pending
or threatened, which, individually or in the aggregate, would have a
material adverse effect on the business or financial condition of
Seller, or which could delay or prevent the consummation of, or impair
the ability of, Seller to consummate the transactions contemplated
hereby.
5.12 Disclaimer. Except for the warranty of title set forth in
Section 2.4 above, SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, EXCEPT
AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, AND HEREBY DISCLAIMS AND
EXCLUDES ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY AND
ALL WARRANTIES OF MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE, OR NONINFRINGEMENT, OR QUALITY, WITH RESPECT TO THE
PURCHASED PROPERTY OR ANY PART THEREOF, OR THE BUSINESS, OR THE ABSENCE
OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD
THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PURCHASED
PROPERTY AND THE BUSINESS ARE TO BE CONVEYED "AS IS, WHERE IS" ON THE
CLOSING DATE, AND BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF.
5.13 Finder's Fees. Seller warrants and represents it has not
retained any finder, broker or financial advisor in connection with the
transactions contemplated by this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller:
6.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Utah, has all requisite corporate power and authority to
own and lease all of its properties and assets and to conduct its
business as now conducted, and is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction where
the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary and
which in the absence of such qualification would have a material adverse
effect on the Business, taken as a whole.
6.2 Authorization and Validity of Agreements. Buyer has the
requisite corporate power and authority to enter into this Agreement and
to incur and perform its obligations hereunder. The execution,
delivery, and performance by Buyer of this Agreement have been duly
authorized by all necessary corporate action on the part of Buyer, and
this Agreement constitutes a valid, legal and binding obligation of
Buyer, enforceable in accordance with its terms, except as the same may
be limited by non-competition laws, restraint of trade laws, bankruptcy,
insolvency, reorganization, or other laws relating to or generally
affecting the enforceability of creditors' rights and except that the
remedy of specific performance or similar equitable relief may be
subject to equitable defenses and to the discretion of the court before
which enforcement is sought.
6.3 Consents and Approvals. To Buyer's knowledge, the
execution, delivery, and performance of this Agreement on behalf of
Buyer does not require the consent or approval of, or filing with, any
government, governmental body, or agency or other entity or person
except (i) as provided in Section 9.3 with respect to the assignment,
novation, subleasing, or subcontracting of certain Contracts, and the
transfer of certain Bids, and (ii) such consents, approvals, and
filings, of which the failure to obtain or make would not, individually
or in the aggregate, have a material adverse effect on the business or
financial condition of Buyer, or impair the ability of Buyer to
consummate the transactions contemplated hereby.
6.4 No Conflict or Violation. The execution, delivery, and
performance by Buyer of this Agreement do not and will not violate or
conflict with any provision of the Articles of Incorporation or Bylaws
of Buyer, and do not and will not violate any provision of any agreement
or instrument to which Buyer is a party or by which it is bound, or of
any law, order, judgment, or decree of any court or other governmental
or regulatory authority to which Buyer is subject, the consequences of
which would have a material adverse effect on Buyer, taken as a whole.
6.5 Litigation. Except as set forth in Schedule 5.11, to
Buyer's knowledge there are no actions, suits, or proceedings pending or
threatened which, individually or in the aggregate, would have a
material adverse effect on the business or financial condition of Buyer,
or which could delay or prevent the consummation of, or impair the
ability of, Buyer to consummate the transactions contemplated hereby.
6.6 Finder's Fees. Buyer warrants and represents it has not
retained any finder, broker or financial advisor in connection with the
transactions contemplated by this Agreement.
7. COVENANTS OF SELLER.
Seller covenants as follows:
7.1 Consents and Approvals. Seller shall: (a) use its
commercially reasonable efforts to obtain all material consents,
waivers, authorizations, and approvals of the Government and of all
other Persons required in connection with the execution, delivery, and
performance by it of this Agreement, and (b) shall diligently cooperate
with Buyer in preparing and filing all documents required to be
submitted by Buyer to the Government in connection with such
transactions and in obtaining any consents, waivers, authorizations, or
approvals of the Government which may be required to be obtained by
Buyer in connection with such transactions (which cooperation shall
include, without limitation, timely furnishing to Buyer all information
concerning the Business which counsel to Buyer reasonably determines is
required to be included in such documents or would be helpful in
obtaining any such required consent, waiver, authorization or approval).
7.2 Further Assurances. Upon the request of Buyer at any time
after the Closing Date, Seller, at Buyer's expense, will execute and
deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction, or authorization and other documents as Buyer
may reasonably request in order to perfect title of Buyer and its
successors and assigns to the Purchased Property or otherwise to
effectuate the purposes of this Agreement.
7.3 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions of this Agreement, Seller will use its
commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper,
or advisable consistent with applicable law to consummate and make
effective in the most expeditious manner practicable the transactions
contemplated hereby.
7.4 Covenant of Education Market Exclusivity. During the
Exclusivity Period, Buyer shall have exclusive rights to exploit the
Licensed Programs, Third Party Courseware (as to which exclusivity will
apply as between Buyer and Seller--or parties acting on behalf of
Seller--and not with respect to any other third parties), and Licensee
Derivative Works, directly or through third parties, in the Education
Market, including the exclusive right to market, sell, distribute, and
sublicense the Licensed Programs, Third Party Courseware and Licensee
Derivative Works to individual end-users through the institutional
channels defined in the Education Market. During the Exclusivity
Period, Seller covenants that it shall not market, sell, distribute, or
sublicense Licensed Programs, Third Party Courseware, or Licensor
Derivative Works (as defined in the Education Market License), directly
or through third parties, to the Education Market (nor will Licensor
license development engines or tools to third parties to use in
developing products for the Education market). The foregoing covenants
and restrictions do not apply to new products or new services (i.e, not
Licensor Programs, Third Party Courseware, or Licensor Derivative Works)
offered by Seller. The foregoing covenants and restrictions will apply
to all successors and assigns of Seller, and to all third parties
claiming by, through or under Seller. Inadvertent or incidental sales
of the Licensed Programs, Third Party Courseware or Licensor Derivative
Works to end users of the Education Market will not be considered a
material breach of the foregoing covenant and agreement so long as the
sales occur through an Internet or retail distribution channel and
result from general marketing activities or catalogs that are not
substantially directed or targeted at educators or educational
institutions in the Education Market.
7.5 Exclusive Use of Product Names. To the fullest extent
allowed by law, Seller shall grant to Buyer an exclusive, perpetual,
worldwide, fully paid-up license to use all tradenames and logos
embodied in or associated with the Licensed Programs and Third Party
Courseware (the "Licensed Tradenames"), which Licensed Tradenames are
listed on Schedule 7.5 attached hereto. To the extent Seller does not
have the right or power to grant an "exclusive" license for Licensed
Tradenames of Third Party Courseware, the foregoing license shall be
exclusive as between Seller and Buyer. In any event, Seller shall not
use in any product name, or grant any licenses to any third party to
use, the Licensed Tradenames. Seller shall develop and use new names
for Licensed Products, Third Party Courseware, and Licensor Derivative
Works distributed into the Home Market; provided, that (a) Seller shall
not use a new product name that combines an existing product name (or
one that is confusingly similar to an existing product name) with some
special designation such as "Home Edition" or "Family Edition" or
"Personal Edition" or "New and Improved"; (b) Seller shall not use
"Wasatch" or "Wasatch Education" in its new product name. In all
events, Seller may continue to use "Wasatch Education Systems
Corporation" as its corporate name, including the following variations
thereof: "Wasatch", "Wasatch Education", and "Wasatch Education Systems"
(collectively, the "Corporate Name"), display the Corporate Name (but
not the "Wasatch" logo) prominently, and refer to the Corporate Name as
the development origin of the products it offers in the Home Market. In
the event Seller introduces a "networked product" for the Home Market
during the Exclusivity Period, Seller shall (a) provide Buyer at least 3
months' prior written notice of the anticipated release date; and (b)
label the "networked product" as follows: "Not Intended for School Use".
8. COVENANTS OF BUYER.
8.1 Consents and Approvals. Buyer shall: (a) use its
commercially reasonable efforts to obtain all material consents,
waivers, authorizations, and approvals of the Government and of all
other Persons required in connection with the execution, delivery, and
performance by it of this Agreement, and (b) shall diligently cooperate
with Seller in preparing and filing all documents required to be
submitted by Seller to the Government in connection with such
transactions and in obtaining any consents, waivers, authorizations, or
approvals of the Government which may be required to be obtained by
Buyer in connection with such transactions (which cooperation shall
include, without limitation, timely furnishing to Seller all information
concerning the Business which counsel to Buyer reasonably determines is
required to be included in such documents or would be helpful in
obtaining any such required consent, waiver, authorization or approval).
8.2 Covenant of Home Market Exclusivity. During the Royalty
Period, Seller shall have exclusive rights to exploit the Licensed
Programs, Third Party Courseware, and Licensor Derivative Works,
directly or through third parties, in the Home Market. During the
Royalty Period, Buyer covenants that it will not market, sell,
distribute, or sublicense Licensed Programs, Third Party Courseware, or
Licensee Derivative Works, directly or through third parties, to the
Home Market. The foregoing covenants and restrictions do not apply to
new products or new services (i.e, not Licensee Derivative Works)
offered by Buyer. The foregoing covenants and restrictions will apply
to all successors and assigns of Buyer, and to all third parties
claiming by, through or under Buyer. Inadvertent or incidental sales of
the Licensed Programs, Third Party Courseware or Licensee Derivative
Works to end users of the Home Market will not be considered a material
breach of the foregoing covenant and agreement so long as the sales
occur through Education Market distribution channels.
8.3 Payment of Finder's Fees. Buyer shall be solely and
exclusively liable to any Person(s) claiming any fee, commission, or
compensation related to, based on, or due in connection with the
transactions hereby contemplated, provided the Person(s) were contacted
or retained by Buyer. Buyer hereby agrees to defend, indemnify, and
hold Seller harmless from and against any and all liability for such
commission, fee, or other compensation claimed by any such Person(s) in
connection with these transactions.
8.4 Transition Support and Services. At the Closing, Buyer
shall deliver to Seller copies of all source code and object code with
respect to the Licensed Programs and Third Party Courseware, together
with copies of scripts, functional specifications, design documents,
story boards, programming notes and other documentation relating to the
foregoing; provided however, that Buyer's obligations shall be limited
to materials which presently exist and are within the possession or
control of Buyer. For a period of six (6) months after the Closing
Date, Buyer shall provide to Seller technical assistance on a
"commercially reasonable efforts, as available" basis to support
Seller's use of the Licensed Programs and development of Seller
Derivative Works of the Licensed Programs. This support shall consist
of timely telephone, fax, or e-mail responses to specific questions of
Seller relating to the code or documentation of the Licensed Programs
that can be readily answered by Buyer without the need for substantial
research or analysis on the part of Buyer; provided, however, that this
support shall in no event require more than 10 man-hours of Buyer's
employees' time per month. At the Closing, Buyer shall deliver to
Seller copies of all Files and Records of Seller, which are in Buyer's
possession, in hard copy or magnetic format relating to the Education
Market and/or the Licensed Programs and Third Party Courseware which
might assist Seller in continuing its business in an orderly and
efficient manner. In particular, Buyer shall provide to Seller, for a
period of twelve (12) months after the Closing Date, accounting
assistance on a "commercially reasonable efforts, as available" basis to
support Seller's ownership and use of the capitalized development, net
operating losses, and other tax benefits which remain with Seller,
provided, however, that this support shall in no event require more than
10 man-hours of Buyer's employees' time per month. Seller shall hold
all such material and information confidential, not disclose it to
third parties except under appropriate Non-Disclosure Agreements (in
form reasonably acceptable to Buyer), and use it solely for its own
internal purposes in connection with its business in the Home Market.
9. JOINT COVENANTS.
9.1 Assignment of Contracts.
(a) At the Closing and effective as of the Closing Date, Seller
shall assign to Buyer all of its rights under the Contracts.
Notwithstanding the foregoing, no Contract shall be assigned contrary to
law or the terms of such Contract and, with respect to Contracts that
cannot be assigned or novated to Buyer at the Closing Date, the
performance obligations of Seller thereunder shall, unless not permitted
by such Contract, be deemed to be subleased or subcontracted to Buyer
until such Contract has been assigned or novated. Buyer shall assist
Seller in obtaining any necessary approvals to such subleases and
subcontracts. Seller shall use commercially reasonable efforts, at
Buyer's expense, to obtain all necessary consents and Buyer shall take
all necessary actions to perform and complete all Contracts in
accordance with their terms if neither assignment, novation, subleasing,
nor subcontracting is permitted by the other party, and Seller shall pay
over to Buyer any amounts received by Seller after the Closing Date as a
result of performance by Buyer of such Contracts net of any costs
incurred by Seller in order to: (i) assign those contracts, or (ii)
perform those contracts, but only in the event that (A) Buyer requests
in writing for Seller to perform the contract(s); or (B) Buyer fails to
perform the contract(s), the other party makes demand upon Seller to
perform the contract(s), Seller promptly conveys such demand to Buyer,
and Buyer continues to fail or refuse performance.
(b) At the Closing and effective as of the Closing Date, all
Bids shall be transferred to Buyer to the extent permitted by law.
Buyer and Seller shall work together and use their best efforts to
preserve such Bids and to facilitate award thereon consistent with
applicable laws and regulations.
9.2 Audits. Following the Closing Date, each party shall
cooperate reasonably with the other in connection with any audit or
review by the Internal Revenue Service, state taxation authorities, or
any other governmental authority or other party with respect to the
Business.
9.3 Novation of Government Contracts. Buyer and Seller shall
use their best efforts to cooperate and obtain any necessary novation
agreements of all Contracts requiring novation.
10. TRANSFERRED EMPLOYEES.
10.1 Transfer of Employees. Set forth in Schedule 10 is a list
of employees of the Business to whom Buyer will make offers of
employment, effective as of the Closing Date, comparable to each such
employee's then-current position. Any employee who accepts such offer
and becomes an employee of Buyer shall be considered a Transferred
Employee. Buyer hereby assumes (effective as of the Closing Date) the
Liabilities associated with the termination of the employment with
Seller of (i) Xxxxxxx Xxxxxx, Xxxxx Xxxxx, and Xxxxx Xxxxx under
Seller's employment arrangements with each such person, including,
without limitation, severance payments (collectively, "Management
Severance"), and (ii) the Transferred Employees, including, without
limitation, any Liability with respect to accrued wages, accrued
vacation, sick leave, employee reimbursements, and severance, if any,
payable to such employees by reason of termination of employment with
Seller. Except with respect to the hiring of Transferred
Employees on terms consistent with the offers required to be made under
provisions of this Section 10, Buyer has no obligation to hire any
former or current employees of Seller. Buyer agrees to defend,
indemnify, and hold Seller harmless from and against any claims or
liability for severance and Management Severance, respectively, arising
out of such employment termination actions. Buyer's indemnification
obligation with respect to Assumed Liabilities for Management Severance
shall be satisfied by delivering to Seller at the Closing Mutual General
Releases in the form of Exhibit E attached hereto, signed by each member
of the Management Team. In the event the transactions contemplated by
this Agreement are not consummated, the Mutual General Release shall not
be effective.
10.2 401(k) Plan. Seller has previously adopted a 401(k)
salary deferral plan (the "Plan") covering substantially all of Seller's
employees, under which Prudential, Inc. is the Plan Administrator, and
certain members of the Management Group and Transferred Employees are
Plan Trustees. Seller has made no contributions to the Plan and
represents that there are no unfunded obligations relating to the Plan.
Pursuant to Section 10.1 above, the Transferred Employees (who make up
all or substantially all of Seller's current employees) are being
transferred to Buyer in connection with the Closing of this transaction.
It is the intention of the parties that sponsorship of the Plan be
transferred from Seller to Buyer in a manner that preserves to the
Management Group and Transferred Employees their present benefits under
the Plan without termination, interruption or adverse tax consequences
to the Plan Sponsor or Plan Participants. Seller and Buyer hereby agree
to cooperate with each other and to take all actions necessary or
appropriate to transfer sponsorship of the Plan from Seller to Buyer as
soon as practicable after the Closing. Seller agrees to pay all
administrative expenses incurred on behalf of the Plan prior to the
Closing Date, and Buyer shall pay all administrative expenses of the
Plan incurred after the Closing Date. Buyer shall pay all third party
expenses related to transferring sponsorship of the Plan from Seller to
Buyer.
11. TAXES.
Seller and Buyer hereby covenant and agree as follows:
11.1 Taxes. Seller shall be responsible for the preparation
and filing of all required tax returns of Seller and shall be liable for
the payment of any and all Taxes imposed on Seller with respect to the
Business relating to all periods through the Closing Date, except as
otherwise provided pursuant to the proration provisions of Section 11.2
hereof. Buyer shall be responsible to prepare and file any and all
required tax returns and shall be liable for the payment of any and all
Taxes imposed on the operations of the Business relating to any and all
periods after the Closing Date except as otherwise provided pursuant to
the proration provisions of Section 11.2 hereof.
11.2 Proration of Taxes. All real and personal property taxes
with respect to the tangible assets of the Business being transferred to
Buyer pursuant to this Agreement shall be assumed and paid by Buyer.
All sales and use taxes and payroll taxes with respect to the Business
being transferred to Buyer pursuant to this Agreement shall be prorated
based on the period to which they relate. Seller shall be responsible
for all such taxes allocable to all times including and prior to the
Closing Date (except for any sales tax imposed on the transfer of the
Purchased Property) and Buyer shall be responsible for reporting and
paying the sales tax imposed on the transfer of the Purchased Property
and for all taxes allocable to all times after the Closing Date.
Following the Closing Date, each party shall, upon request of the other
party, promptly reimburse the other party (a) for any such taxes or
other expenses for which said party is responsible but have been paid by
the other party, and (b) for collections made by one party on behalf of
the other party.
11.3 Cooperation on Tax Matters. Buyer and Seller agree to
furnish or cause to be furnished to each other, as promptly as
practicable, such information and assistance relating to the Business as
is reasonably necessary for the preparation and filing of any return,
claim for refund, or other required or optional filings relating to tax
matters, for the preparation for and proof of facts during any tax
audit, for the preparation for any tax protest, for the prosecution or
defense of any suit or other proceeding relating to tax matters and for
the answer to any governmental or regulatory inquiry relating to tax
matters.
11.4 Allocation of Purchase Price and Purchase Price Allocation
Forms.
(a) Buyer shall, as promptly as practicable after the Closing
Date, submit to Seller a statement of Buyer's allocation of the Purchase
Price to the different items of Purchased Property (the "Allocation
Statement"). The Allocation Statement shall be binding and conclusive
upon the parties hereto unless Seller objects in writing to any item or
items shown on the Allocation Statement within sixty (60) Business Days
after delivery thereof to Seller. If Buyer and Seller shall be unable
to resolve any dispute with regard to the Allocation Statement within
sixty (60) Business Days after delivery of Seller's written objections,
the matter or matters in dispute shall be submitted (at the 50/50
expense of Seller and Buyer) to an Independent Accounting Firm selected
by the mutual agreement of the parties. The decision of the Independent
Accounting Firm shall be conclusive and binding upon Buyer and Seller.
(b) Promptly after the Closing Date (but not before a
resolution of all disputes, if any, with regard to the Allocation
Statement), Buyer's accountants shall prepare, in consultation with
Seller or Seller's Accountants, those statements or forms (including
Form 8594 if available) required by Section 1060 of the Code and the
regulations promulgated thereunder with respect to the allocation of the
Purchase Price. Such statements or forms shall be prepared consistently
with the allocation of Purchase Price. Such statements or forms shall
be filed by the parties with their respective federal income tax returns
as required by Section 1060 of the Code and the regulations promulgated
thereunder and each party shall provide the other party with a copy of
such statement or form as filed.
11.5 Tax Refunds. The party who is liable for the reporting
and payment of any Tax in respect of the Business as allocated in
Section 11.1 and Section 11.2shall be entitled to any refund made with
respect thereto.
12. INDEMNIFICATION.
12.1 Indemnification by Seller. Notwithstanding the Closing or
the delivery of the Purchased Property, Seller shall indemnify and
agrees to fully defend, save, and hold Buyer and its respective
directors, officers, and employees (the "Buyer Indemnitees"), harmless
if any Buyer Indemnitee shall at any time or from time to time suffer
any damage, liability, loss, cost, expense (including reasonable
attorneys' fees), deficiency, interest, penalty, assessment, or fine
(collectively, "Losses") arising out of, or resulting from, or shall pay
or become obligated to pay any sum on account of, any and all of
Seller's Events of Breach; provided however, that (i) the
indemnification provided by this Section 12.1 does not include or cover
consequential damages, excepting those related to violations of Seller's
covenants set forth in Section 7.4 above, (ii) Seller's indemnification
obligation hereunder for all Losses on account of Seller's Events of
Breach, in the aggregate, shall not exceed the Cash Consideration
received by Seller for the Purchased Property; (iii) Seller shall have
no obligation under this Section 12.1 with respect to any individual
Loss by a Buyer Indemnitee that is less than, or reasonably can be
anticipated to be less than, $25,000 (the "Threshold"), except that the
Threshold shall not apply with respect to any individual Loss sustained
or incurred by a Buyer Indemnitee by reason of any acts of fraud
committed by or on behalf of Seller. As used herein, "Seller's Events
of Breach" shall mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of Seller
or the breach of any warranty of Seller contained in this Agreement;
(b) any failure of Seller to duly perform or observe any term,
provision, covenant, agreement, or condition in this Agreement on the
part of Seller to be performed or observed by Seller, except as shall
have been waived by Buyer in writing;
(c) any claim or cause of action by any party against any Buyer
Indemnitee with respect to the Retained Liabilities; and
(d) any claim, cause of action, or liability asserted against
any Buyer Indemnitee with respect to Seller's operation of its business,
arising out of facts occurring from and after the Closing.
12.2 Procedures for Indemnification by Seller. If a Seller's
Event of Breach occurs or is alleged and a Buyer Indemnitee asserts that
Seller has become obligated to such Buyer Indemnitee pursuant to Section
12.1, or if any suit, action, investigation, claim, or proceeding is
begun, made, or instituted as a result of which Seller may become
obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall
give prompt written notice thereof to Seller. Seller agrees to defend,
contest, or otherwise protect Buyer Indemnitee against any such suit,
action, investigation, claim, or proceeding at Seller's sole cost and
expense. Buyer Indemnitee shall have the right, but not the obligation,
to participate at its own expense in the defense thereof by counsel of
Buyer Indemnitee's choice and shall in any event cooperate with and
assist Seller to the extent reasonably possible. If Seller fails timely
to defend, contest, or otherwise protect Buyer Indemnitee against any
such suit, action, investigation, claim, or proceeding, Buyer Indemnitee
shall have the right to do so, including, without limitation, the right
to make any reasonable compromise or settlement thereof, and Buyer
Indemnitee shall be entitled to recover the entire cost thereof from
Seller, including, without limitation, reasonable attorneys' fees,
disbursements, and amounts paid as the result of such suit, action,
investigation, claim, or proceeding.
12.3 Indemnification by Buyer. Notwithstanding the Closing or
the delivery of the Purchased Property, Buyer shall indemnify and agrees
to fully defend, save, and hold Seller and its Affiliates and their
respective directors, officers, and employees (the "Seller
Indemnitees"), harmless if any Seller Indemnitee shall at any time or
from time to time suffer any Losses arising out of, or resulting from,
or shall pay or become obligated to pay any sum on account of, any and
all of Buyer's Events of Breach; provided however, that (i) the
indemnification provided by this Section 12.3 does not include or cover
consequential damages, excepting those related to violations of the
covenants set forth in Section 8.2 above; (ii) Buyer's indemnification
obligation hereunder for all Losses on account of Buyer's Events of
Breach, in the aggregate, shall not exceed the Cash Consideration paid
for the Purchased Property; (iii) Buyer shall have no obligation under
this Section 12.3 with respect to any individual Loss by a Seller
Indemnitee that is less than, or reasonably can be anticipated to be
less than, $25,000 (the "Threshold"), except that the Threshold shall
not apply with respect to any individual Loss sustained or incurred by a
Seller Indemnitee by reason of any acts of fraud committed by or on
behalf of Buyer. As used herein, "Buyer's Events of Breach" shall mean
any one or more of the following:
(a) any untruth or inaccuracy in any representation of Buyer or
the breach of any warranty of Buyer contained in this Agreement,
(b) any failure of Buyer to duly perform or observe any term,
provision, covenant, agreement, or condition in this Agreement on the
part of Buyer to be performed or observed by Buyer, except as shall have
been waived by Seller in writing;
(c) any claim or cause of action by any party against any
Seller Indemnitee with respect to the Assumed Liabilities; and
(d) any claim, cause of action, or liability asserted against
any Seller Indemnitee with respect to Buyer's operation of its business,
including Buyer's operation of the Business arising out of facts
occurring from and after the Closing.
12.4 Procedures for Indemnification by Buyer. If a Buyer's
Event of Breach occurs or is alleged and a Seller Indemnitee asserts
that Buyer has become obligated to such Seller Indemnitee pursuant to
Section 12.3, or if any suit, action, investigation, claim, or
proceeding is begun, made, or instituted as a result of which Buyer may
become obligated to a Seller Indemnitee hereunder, such Seller
Indemnitee shall give prompt written notice thereof to Buyer. Buyer
agrees to defend, contest, or otherwise protect Seller Indemnitee
against any such suit, action, investigation, claim, or proceeding at
Buyer's sole cost and expense. Seller Indemnitee shall have the right,
but not the obligation, to participate at its own expense in the defense
thereof by counsel of Seller Indemnitee's choice and shall in any event
cooperate with and assist Buyer to the extent reasonably possible. If
Buyer fails timely to defend, contest, or otherwise protect Seller
Indemnitee against any such suit, action, investigation, claim, or
proceeding, Seller Indemnitee shall have the right to do so, including,
without limitation, the right to make any reasonable compromise or
settlement thereof, and Seller Indemnitee shall be entitled to recover
the entire cost thereof from Buyer, including, without limitation,
reasonable attorneys' fees, disbursements, and amounts paid as the
result of such suit, action, investigation, claim, or proceeding.
13. MISCELLANEOUS
13.1 Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the
transactions contemplated hereby and supersedes and replaces all prior
and contemporaneous agreements and understandings, oral or written, with
regard to such transactions. All schedules hereto and any documents and
instruments delivered pursuant to any provision hereof are expressly
made a part of this Agreement as fully as though completely set forth
herein.
13.2 Governing Law: Jurisdiction. This Agreement shall be
construed, performed, and enforced in accordance with, and governed by,
the internal laws of the State of Utah, without giving effect to the
principles of conflicts of laws thereof. Each party agrees that the
state and federal courts situated in the City and County of Salt Lake,
shall have exclusive jurisdiction of any and all disputes concerning the
interpretation or enforcement of this Agreement, and accordingly, hereby
irrevocably: (a) consents to the jurisdiction of such courts and (b)
waives its right to trial by jury in any proceeding brought in such
courts in connection with this Agreement or the transactions
contemplated hereby.
13.3 Expenses. Each of the parties hereto shall pay its own
expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any legal and
accounting fees, whether or not the transactions contemplated hereby are
consummated. The fees of Fenwick & West LLP incurred after July 1,
1996, and prior to February 5, 1997, with respect to work requested by
the principals of Buyer, shall be assumed and paid by Buyer.
13.4 Force Majeure. Neither party shall be liable for any
failure of or delay in the performance of this Agreement for the period
that such failure or delay is due to acts of God, public enemy, civil
war, strikes or labor disputes, or any other cause beyond the parties'
reasonable control. Each party agrees to notify the other party
promptly of the occurrence of any such cause and to carry out this
Agreement as promptly as practicable after such cause is terminated.
13.5 Severability. In the event that any part of this
Agreement is declared by any court or other judicial or administrative
body to be null, void, or unenforceable, said provision shall survive to
the extent it is not so declared, and all of the other provisions of
this Agreement shall remain in full force and effect.
13.6 Survival of Certain Provisions. Each of the
representations and warranties made by the respective parties hereto
shall be deemed represented and made by each such party at the Closing
as if made at such time and shall survive the Closing for a period
terminating on the later of (a) the first anniversary of the Closing
Date, and (b) with respect to claims asserted pursuant to Section 12, if
the claim is asserted before the expiration of the survival period of
the applicable representation or warranty, on the date such claim is
finally liquidated or otherwise resolved. Notwithstanding anything to
the contrary in this Agreement, a party shall not be deemed to have
breached a representation or warranty hereunder if the party to whom
such representation or warranty was made was aware, at or prior to the
Closing, of the facts and circumstances such party asserts as
constituting such breach.
13.7 Notices. Any notice or communication required or
permitted by this Agreement shall be in writing and shall be delivered
as follows: (i) by personal delivery to the party to whom the notice is
to be given, (ii) by overnight delivery service, (iii) by prepaid
registered or certified mail, return receipt requested, or (iv) by
facsimile. Except for notice of a party's change of address, which
shall be effective only upon actual receipt, a notice or communication
shall be effective (a) in the case of personal service, upon receipt by
the party, (b) by overnight delivery, one (1) day after placing the
notice of communication in the care of the delivery service as confirmed
by the receipt provided by such service, (c) by registered or certified
mail, five (5) days after mailing, as confirmed by the date on the
receipt provided by the postal service, and (d) by facsimile
transmission, upon transmission as confirmed by telephone that such
notice or communication has been received in legible form. All
notices or other communications shall be sent to the recipient at the
address listed below (or such other address that the receiving party may
have provided for the purpose of receiving notices and other
communications in accordance with this Section 13.7):
If to the Seller:
Wasatch Education Systems Corporation
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
with copy to:
Xxxxxxx Xxx
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Xxxx Xxxxxx
Unison Capital Group
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
If to Buyer:
Wasatch Interactive Learning Corporation
0000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
with copy to:
Xxxx X. Xxxxxxxxxxx, P.C.
00000 X. X. 000xx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
13.8 Amendments, Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties,
or conditions hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by the party
waiving compliance. Any waiver by any party of any condition, or of the
breach of any provision, term, covenant, representation, or warranty
contained in this Agreement, in any one or more instances, shall not be
deemed to be nor construed as further or continuing waiver of any such
condition, or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement. All rights shall be
cumulative and non-exclusive and shall survive the termination of this
Agreement for the period of the applicable statute of limitations.
13.9 Public Announcements. The parties shall negotiate in good
faith a joint press release or announcement to be released after the
Closing. If any such announcement or other disclosure is required by
law, the disclosing party agrees to provide the nondisclosing party with
prior notice and an opportunity to comment on the proposed disclosure.
13.10 Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than Seller and Buyer and their
respective successors and permitted assigns. Nothing in this Agreement
is intended to relieve or discharge the obligations or liability of any
third persons to Seller or Buyer. No provision of this Agreement shall
give any third persons any right of subrogation or action over or
against Seller or Buyer.
13.11 Section and Paragraph Headings. The section and
paragraph
headings in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
13.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which shall constitute the same instrument.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized on the
date first written above.
SELLER: BUYER:
WASATCH EDUCATION SYSTEMS WASATCH INTERACTIVE
CORPORATION, a Utah Corporation LEARNING CORPORATION, a Utah
Corporation.
By /s/Xxxxxxx X. Xxxxxx By /s/Xxxxxxx Xxxxxx
----------------------- --------------------
Xxxxxxx X. Xxxxxx Xxxxxxx Xxxxxx,
President Director
Date Signed: February 7, 1997 Date Signed: February 7, 1997
