Exhibit 2.3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of and effective
as of this 31st day of March, 2005 (the "Effective Date") by and between
E-DENTIFICATION, INC., a Delaware corporation ("Seller"), EDENTIFY, INC., a
Delaware corporation ("Buyer").
RECITALS
A. Seller owns technology and software applications therefrom used for the
purpose of reducing fraud and enhancing individual privacy through identity
verification, particularly in the financial services and health insurer
industries (the "Business").
B. Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller
certain of the Seller's assets, including without limitation, the technology and
software described in Patent Application No. 09/489,111 (the "Patent"), allowed
by the U.S. Patent and Trade Xxxx Office and related technology (collectively,
the "Verification Technology") and all, right, title and interest therein
(hereinafter, the "Acquisition").
C. Buyer has delivered to Seller and Seller is currently using and in
possession of the Patent and Verification Technology.
D. The parties hereto desire to set forth the definitive terms and
conditions upon which Seller shall sell, and Buyer shall purchase, certain
assets of Seller identified herein.
E. Following the Closing (as such term is defined in SECTION 4.5 hereof) of
the Acquisition, Purchaser intends to consummate a reverse merger into a "shell"
corporation (the "Merger"), whose shares of common stock are registered under
Exchange Act of 1934 (the "Surviving Corporation"). Prior to the Merger, it is
contemplated that the target shell shall have completed a 10-for-1 reverse stock
split of its then issued and outstanding stock. In addition, contemporaneously
with or after the Merger, the Surviving Corporation intends to consummate a
financing consisting of the issuance and sale (or series of issuances and sales)
of equity securities or debt or equity securities convertible into equity
securities for an aggregate consideration of not less than One Million dollars
($1,000,000) (the "Qualified Financing"). The parties anticipate that the
Qualified Financing shall be consummated, but there is no assurance that this or
any other financing will be consummated under or in connection with this
Agreement.
NOW THEREFORE, in consideration of the foregoing, the parties hereto,
intending to be legally bound agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Seller hereby sells, assigns, transfers and delivers to Buyer
and Buyer hereby
purchases from Seller all of Seller's right, title and interest in the following
assets (collectively, the "Assets"):
(a) the Verification Technology, the Patent, all source code and
object code, if any, and all human readable forms of the Verification
Technology, including all existing documentation thereto necessary for Buyer or
Buyer's designee to fully utilize, modify and maintain the Verification
Technology, all revisions, modifications, enhancements, abridgements,
condensations or expansions, improvements, additions, updates, upgrades,
conversions, corrections, maintenance releases, new minor versions, new major
versions and replacement produces, of or for the Verification Technology, if
any, or any form in which such technology or software has been or may be recast,
transformed, or adapted, and all other such technology, software or integration
applications, all trade secrets, confidential business information, formulas,
inventions, know-how, research and development information, plans, and
technical, financial, marketing and business data, manuals, pricing and cost
information and all other intellectual property, including all patents,
copyrights, trademarks, internet domain names and applications used in the
operation of, or developed as part of, the Business, or related to, or
associated with, the Business, the Verification Technology, or the Patent,
including but not limited to the intellectual property identified in SCHEDULE
1.1 (A) (collectively, the "Intellectual Property");
(b) all contracts, agreements, options, leases, licenses (whether
Seller is the Licensor or Licensee), sales and purchase orders, commitments and
other instruments of any kind, whether written or oral, to which Seller is a
party or is otherwise bound, as identified on SCHEDULE 1.1 (B) (the
"Contracts");
(c) all the Books and Records, relating to the Assets and Assumed
Liabilities (hereinafter defined), the names and last known addresses of the
developers of the Verification Technology, media containing the Verification
Technology or confirmation regarding the electronic data transfer of all of the
Verification Technology in forms reasonably acceptable to Buyer; and, all
documentation, including user manuals, installation manuals, and technical
manuals for the Verification Technology and any other documents, literature and
writings describing the features and functions of the Verification Technology,
including without limitation, marketing materials and copies of all other
documents as are necessary or desirable to operate the Business of the Seller
and to consummate the Merger, which shall be delivered to Buyer on the Effective
Date (provided that, Seller shall keep its corporate minute books, stock ledger
and stock books, books and records relating to the Excluded Assets and Excluded
Liabilities (each hereinafter defined) and copies of all other documents
necessary or desirable to implement the wind down of Seller's remaining
business);
(d) all rights, if any, of Seller under express or implied warranties
from suppliers or contractors with respect to the Assets;
(e) all of Seller's claims, causes of action, choses in action, rights
of recovery and rights of set-off relating to the Assets; and
(f) all goodwill of Seller's Business as a going concern.
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1.2 EXCLUDED ASSETS. Except as set forth in Section 1.1 no other assets of
the Seller shall be included in the Assets (the "Excluded Assets").
1.3 ASSUMED LIABILITIES. Buyer agrees to assume on the Closing only those
liabilities and obligations of Seller listed on SCHEDULE 1.3 (the "Assumed
Liabilities"). Notwithstanding the foregoing, Buyer shall assume all obligations
relating to the maintenance of the Intellectual Property and the Contracts
following the Closing Date (as such term is defined in paragraph 4.5 hereof).
Buyer further agrees to enter into a Novation Agreement with Xxxx Xxxxxxxx in
substantially the form attached hereto as EXHIBIT "B".
1.4 CLOSING. The consummation of the Acquisition of the Assets will occur
simultaneously with the execution and delivery this Agreement on the Effective
Date.
1.5 EXCLUDED LIABILITIES. Except as set forth in SECTION 1.3, no other
liabilities of the Seller shall be included in the Assumed Liabilities (the
"Excluded Liabilities").
1.6 PURCHASE PRICE. The aggregate consideration to be paid for the Assets
by Buyer (the "Purchase Price") shall be One Hundred Thousand dollars ($100,000)
(hereinafter the "Cash Consideration") to be paid to the Seller as follows:
(a) Prior to or at Closing, Buyer shall have made the following
deposits to Seller or payments on behalf of Seller in payment of debts, fees and
costs owed by Seller to creditors or in connection with this transaction: (i)
$5,342.50 on December 31, 2004; (ii) $8,900.00 on January 31, 2005; (iii)
$6,235.00 on March 22, 2005; (iv) $2,693.46 on March 28, 2005; and (v) $7,250 on
March 28, 2005 for a total deposit of $30,420.96 (collectively, the "Deposits")
to Seller. The Deposits shall be credited towards the Cash Consideration;
(b) At the Closing of the Acquisition, Buyer shall pay, by certified
check or wire transfer the sum of Nineteen Thousand Five Hundred Seventy-Nine
Dollars and Four Cents ($19,579.04) to Seller or to third party nominees of, and
on behalf of Seller to satisfy certain Excluded Liabilities;
(c) After Closing but prior to April 30, 2005, Buyer shall pay the sum
of Ten Thousand Five Hundred Dollars and no Cents ($10,500.00) to O'Melveny &
Xxxxx LLP for legal fees incurred by Seller or Seller's nominees in connection
with this transaction and assumed at Closing by Buyer and shall be credited
towards the Cash Consideration;
(d) After Closing but prior to June 30, 2005 Buyer shall pay the sum
of Seven Thousand Two Hundred Fifty Dollars and no Cents ($7,250.00),
representing obligations incurred in connection with this transaction that have
been assumed at Closing by Buyer and shall be credited towards the Cash
Consideration;
(e) Upon the later of (i) completion and acceptance by a major data
aggregator of a Request for Proposal (RFP) from Buyer, or if Buyer otherwise
reaches agreement with a major data aggregator and Buyer enters into an
agreement to perform a beta test with a Qualified Prospect ("Qualified
Prospects" are those parties or persons listed on SCHEDULE 1.6 (A) hereto), or
(ii) 90 days, Buyer shall pay, by certified check or wire transfer, the sum of
Thirty-Two
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Thousand Two Hundred Fifty Dollars and no Cents ($32,250.00) to Seller or to
third party nominees of, and on behalf of, Seller to satisfy certain Excluded
Liabilities;
(f) All payments to be made to third party nominees of the Seller
shall be paid subject to and only upon delivery of a full satisfaction and
release in favor of Seller, its successors and assigns and Buyer, executed by
each third party nominee identified on SCHEDULE 1.6 (B) ("Third Party
Nominees"), in the form attached hereto as EXHIBIT A ("Satisfaction and
Release"). The Seller waives payment of any and all consideration provided to be
paid to Third Party Nominees hereunder in the event that any Third Party Nominee
fails to deliver an executed Satisfaction and Release at Closing;
(g) On the effective date of the closing of the Merger, Buyer shall
issue to Seller shares of stock, par value $0.001, equal to 4.767% of the issued
and outstanding shares of common stock of the Surviving Corporation prior to
consummation of the Qualified Financing, and subject to adjustment as provided
below (the "Common Stock"), and warrants to purchase shares of common stock of
the Surviving Corporation (the "Warrants"), which, if exercised as of the date
the warrants are issued, will be exercisable to purchase 41.65% of the number of
shares of Common Stock (the "Warrant Shares") (Common Stock and Warrants
referred to herein collectively as the "Securities Consideration");
(h) The Warrants will have a term of three (3) years. One half (1/2)
of the Warrants will have an exercise price of $5.00 per share of Common Stock
and one half (1/2) of the Warrants will have an exercise price of $7.50 per
share of Common Stock;
(i) The Securities Consideration will be subject to Rule 144
promulgated under the Securities Act of 1933; and
(j) An illustration of the capitalization of the Surviving Corporation
upon consummation of the Merger and prior to the Qualified Financing is set
forth on SCHEDULE 1.6 (J) hereto. If the shareholders of the Buyer, pre-Merger,
wind up with a different percentage of the Common Stock in the Surviving
Corporation as a result of the Merger, then the number of shares of such Common
Stock and the number of shares of such Common Stock issued upon exercise of the
Warrants and the stock options to employees and consultants such Common Stock to
be held by the Seller and the Employees (hereinafter defined) and the Consultant
(hereinafter defined) will be adjusted accordingly, together with the exercise
prices therefore, in the manner illustrated on SCHEDULE 1.6 (J) hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller makes the representations and warranties to the Buyer contained
in this Article II as of the Closing Date and all of the representations and
warranties of the Seller shall survive for a period of six (6) months following
the execution of this Agreement.
2.1 ORGANIZATION, POWER AND QUALIFICATIONS OF THE SELLER. The Seller
represents and warrants to Buyer that: (a) it is a corporation duly organized,
validly existing and in good standing under the laws of Delaware; and (b) Seller
has the full power and authority to execute
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and deliver this Agreement and to consummate the transaction contemplated hereby
(the "Transaction"). The execution and delivery of this Agreement and the
consummation of the Transaction have been duly authorized by the Seller, no
other authorization being necessary; and this Agreement has been duly executed
and delivered by the Seller.
2.2 NO VIOLATION. The Seller represents and warrants to Buyer that the
execution and delivery of this Agreement, and the consummation of the
Transaction shall not violate or result in a breach of any provision of the
Seller's articles of incorporation or bylaws; and that the execution and
delivery by the Seller of this Agreement, and the consummation of the
Transaction shall not (a) result in a default or give rise to a right of
termination, modification or acceleration under the provisions of any agreement
or other instrument or obligation to which the Seller is a party or by which the
Seller or any of the Assets may be bound; or (b) violate any law or regulation,
or any judgment, order or decree of any governmental authority.
2.3 CONSENTS, APPROVALS. The Seller represents and warrants to Buyer that,
to Seller's Knowledge, no consent, approval, notification, filing or
registration with any third party, including without limitation any governmental
authority, is required to be obtained or made by the Seller (a) in connection
with the Acquisition, including but not limited to the assignment and transfer
of all right, title and interest in and to the Patent and the Verification
Technology, other than the consents or permits set forth on SCHEDULE 2.3 hereto,
or (b) to avoid the loss of any license or the violation, breach or termination
of, or any default under, or the creation of any lien on any Asset pursuant to
the terms of, any law, regulation, order or other requirement or any contract
binding upon the Seller or to which any Asset may be subject.
2.4 ABSENCE OF CHANGE. The Seller represents and warrants to Buyer there
has not been: (a) any license, sale, transfer, pledge, mortgage or other
disposition or encumbrance of the Assets; or (b) any action by the Seller or any
other occurrence, or any other party or person (to the Seller's Knowledge), that
would materially impair Buyer's ability to enjoy the full use and the ability to
commercialize and sell the Assets, including without limitation, the
Verification Technology and the Patent, after Closing.
2.5 LITIGATION. Except as set forth in SCHEDULE 2.5, the Seller represents
and warrants to Buyer that, to Seller's Knowledge, there are no actions, suits,
claims, investigations or proceedings pending or, to the Knowledge of the
Seller, threatened against the Seller with respect to the Assets, whether at law
or in equity and whether civil or criminal in nature, before any governmental
authority or arbitrator. Further, except as set forth in SCHEDULE 2.5, there are
no judgments, orders or decrees of any governmental authority or arbitrator
affecting the Seller with respect to the Assets which have not been complied
with and/or satisfied in full.
2.6 TITLE AND CONDITION. Except as set forth on SCHEDULE 2.6, Seller
represents and warrants to Buyer that Seller exclusively owns all right, title
and interest in and to all of the Assets, including without limitation the
Verification Technology and the Patent, free and clear of all liens, mortgages,
deeds of trust, security interests, pledges, charges and other encumbrances of
any kind and that it has the right to transfer, convey and assign the Assets,
and the instruments of transfer, conveyance and assignment to be executed and
delivered by Seller to Buyer at the Closing, shall be valid and binding
obligations of Seller.
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2.7 INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 2.7, Seller
represents and warrants to Buyer that it exclusively owns all right, title and
interest in and to, all the Intellectual Property and there are no claims or
proceedings pending or, to Seller's Knowledge, threatened, against Seller with
regard to its exercise of the rights appurtenant to the Intellectual Property.
Seller further represents and warrants, that to Seller's Knowledge: (a) the
Intellectual Property does not infringe any patent, copyright, trademark, trade
secret, license or any other proprietary right of any third party; (b) Seller
has the right to transfer, assign and sell all the rights set forth in this
Agreement in connection with the Intellectual Property to Buyer; (c) all the
Intellectual Property is free and clear of all liens, security interests,
charges or encumbrances by third parties; and (d) there are no claims pending or
threatened that infringe the rights of any other person and Seller has no
Knowledge of any exercise of the rights appurtenant to the Intellectual Property
use by it that may, with notice or passage of time, give rise to such a claim.
Except as set forth in SCHEDULE 2.7, Seller has not licensed or otherwise
assigned the Intellectual Property to any third party and, to Seller's
Knowledge, there are no existing infringing uses of the Intellectual Property by
any third parties.
2.8 NO RE-DEVELOPMENT OF INTELLECTUAL PROPERTY. Seller and Owners (those
persons that own equity in the Seller and whose names and signatures appear on
the signature lines hereto) warrant to Buyer that they shall neither jointly,
separately nor individually, redevelop, reengineer, copy, reproduce, recreate,
modify, update, improve or use the Assets sold to Buyer in any manner or form
whatsoever after the Closing Date, including with out limitation the
Verification Technology and all of the Intellectual Property, or any part
thereof, and Seller and Owners disclaim any and all rights, title and interest
in and to the Intellectual Property and any and all rights to redevelop,
reengineer, copy, reproduce, recreate, modify, update, improve or use in any way
any and all of the Intellectual Property after the Closing Date.
2.9 GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Seller represents
and warrants to Buyer that all governmental licenses, certificates, permits and
approvals required for use of the Assets, including without limitation the
Intellectual Property, have been obtained and are in full force and effect. No
investigation or review is pending or, to Seller's Knowledge, threatened, by any
governmental entity (a) with respect to any alleged violation by Seller of any
law, order, regulation, policy or guideline of any government entity related to
the Assets, or (b) with respect to any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the use of the Assets, and Seller has not received notice of
such investigation or review.
2.10 COPY PROTECTION. Seller hereby represents and warrants, there are no
copy protections, or similar mechanisms within the Verification Technology or
any of the Intellectual Property, which will, either now or in the future,
interfere with the sale, assignment and transfer of the Assets, including
without limitation all Intellectual Property.
2.11 PERFORMANCE. Seller hereby represents and warrants that the
Verification Technology shall perform substantially in accordance with the
documentation and statements made thereto.
2.12 FULL DISCLOSURE. The Seller, to its Knowledge, represents and warrants
to Buyer that no statement contained herein or in any document, certificate or
other writing furnished or to
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be furnished by the Seller to Buyer pursuant to the provisions of this Agreement
contains or shall contain any untrue statement of a material fact or shall omit
to state any material fact necessary, in the light of the circumstances under
which it was made, to make the statements therein not misleading.
2.13 COMPLIANCE. Seller represents and warrants to Buyer that, to Seller's
Knowledge, Seller has not violated or breached or infringed, and is not
violating or breaching or infringing, any federal, state, local or foreign
statute, law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree or other requirement of any
governmental authority relating to (a) the operation of Seller's Business, (b)
the development, use and sale of the Intellectual Property, or (c) the use and
disclosure of any confidential, private and nonpublic information, including but
not limited to the Fair Credit Reporting Act or the Xxxxx-Xxxxx-Xxxxxx Act.
2.14 DISCLAIMER OF ANY OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS TO
THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN ARTICLE
II OF THIS AGREEMENT, SELLER DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS AND
GUARANTIES WHETHER EXPRESS OR IMPLIED.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer makes the representations and warranties to the Seller contained
in this Article II as of the Date and all of the representations and warranties
of the Buyer shall survive only until the six month anniversary of the Effective
Date of this Agreement.
3.1 ORGANIZATION, POWER AND QUALIFICATIONS OF THE BUYER. The Buyer
represents and warrants to Seller that (a) it is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and (b) Buyer
has the full power and authority to execute and deliver this Agreement and to
consummate the Transaction. The execution and delivery of this Agreement and the
consummation of the Transaction have been duly authorized by the Buyer, no other
authorization being necessary; and this Agreement has been duly executed and
delivered by the Buyer.
3.2 CAPITALIZATION. As of the date hereof, the authorized capital stock of
Buyer consists of 100,000 shares of common stock. As of the close of business on
March 25, 2005, 1,000 shares were issued and outstanding. No other capital stock
of Buyer is issued or outstanding. All issued and outstanding shares of the
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and were issued free of preemptive rights and in compliance with applicable
corporate and securities laws. Except as set forth herein and on SCHEDULE 3.2
hereto, as of the date hereof, there are no outstanding rights, reservations of
shares, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the capital stock or
any other security of Buyer, and there is no authorized or outstanding security
of any kind convertible into or exchangeable for any such capital stock or other
security. There are no restrictions upon the transfer of or otherwise
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pertaining to the securities (including, but not limited to, the ability to pay
dividends thereon) or retained earnings of Buyer or the ownership thereof.
3.3 NO VIOLATION. The Buyer represents and warrants to Seller that the
execution and delivery of this Agreement, and the consummation of the
Acquisition and Merger shall not violate or result in a breach of any provision
of the Buyer's articles of incorporation or bylaws; and that the execution and
delivery by the Buyer of this Agreement, and the consummation of the Transaction
shall not (a) result in a default or give rise to a right of termination,
modification or acceleration under the provisions of any agreement or other
instrument or obligation to which the Buyer is a party or by which the Buyer or
any of the Assets may be bound; or (b) violate any law or regulation, or any
judgment, order or decree of any governmental authority.
3.4 CONSENTS, APPROVALS. The Buyer represents and warrants to Seller that,
to its Knowledge, no consent, approval, notification, filing or registration
with any third party, including without limitation any governmental authority,
is required to be obtained or made by the Buyer (a) in connection with the
Acquisition or (b) to avoid the loss of any license or the violation, breach or
termination of, or any default under, or the creation of any lien on any Asset
pursuant to the terms of, any law, regulation, order or other requirement or any
contract binding upon the Buyer or to which any Asset may be subject..
3.5 ABSENCE OF CHANGE. The Buyer represents and warrants to Seller there
has not been any event, occurrence, state of circumstances or facts or changes
that has had or that may be reasonably expected to prevent, enjoin, alter or
delay the Acquisition or prevent the use of the Assets or the operation of the
Business by Buyer following the Closing.
3.6 LITIGATION. Except as set forth in SCHEDULE 3.6, the Buyer represents
and warrants to Seller that there are no actions, suits, claims, investigations
or proceedings pending or, to the Knowledge of the Seller, threatened against
the Buyer or any subsidiary, officer, director, employee or agent thereof,
whether at law or in equity and whether civil or criminal in nature, before any
governmental authority or arbitrator that would reasonably be expected to
prevent, enjoin, alter or delay the Transaction. Further, except as set forth in
SCHEDULE 3.6, there are no judgments, orders or decrees of any governmental
authority or arbitrator that could hinder or prevent the use of the Assets by
Buyer following the Closing.
3.7 COMPLIANCE WITH APPLICABLE LAWS. Buyer represents and warrants to
Seller that Buyer has not violated or breached or infringed, and is not
violating or breaching or infringing, any federal, state, local or foreign
statute, law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree or other requirement of any
governmental authority relating to (a) the authorized stock of the Buyer and (b)
the use and disclosure of confidential, private and nonpublic information,
including but not limited to the Fair Credit Reporting Act, the
Xxxxx-Xxxxx-Xxxxxx Act and all applicable state privacy laws.
3.8 BUYER'S COMMON STOCK. The Common stock to be delivered to Seller, upon
issuance, shall have been duly authorized and, when delivered at the Closing,
will be validly issued, fully paid and non-assessable, will be free and clear of
any encumbrances of any kind, and, except as set forth in this Agreement or any
Schedule hereto, or the sale, pledge or other
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disposition thereof is limited by the provisions of the Securities Act and any
applicable state blue sky laws, will have been issued in accordance with the
Securities Act and any applicable state blue sky laws.
3.9 AVAILABILITY OF FUNDS. Buyer has obtained funds in an amount sufficient
to enable the Buyer to consummate the transactions contemplated by this
Agreement and to perform all of its obligations hereunder, including, without
limitation, payment of the Purchase Price.
3.10 FULL DISCLOSURE. The Buyer represents and warrants to Seller that, to
its Knowledge, no statement contained herein or in any document, certificate or
other writing furnished or to be furnished by the Buyer to Seller pursuant to
the provisions of this Agreement contains or shall contain any untrue statement
of a material fact or shall omit to state any material fact necessary, in the
light of the circumstances under which it was made, to make the statements
therein not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 CONSENTS. The Seller shall make and effect all filings and obtain all
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the Acquisition, including but not
limited to the sale, transfer and assignment of the Verification Technology, the
Patent and all other Intellectual Property to Buyer.
4.2 FURTHER ASSURANCES. The Seller shall use best efforts to implement the
provisions of this Agreement, and for such purpose, at the reasonable request of
Buyer, on or after the date hereof, without further consideration, promptly
execute and deliver or cause to be executed and delivered, an assignment of the
Patent and such additional documents as may be necessary to implement any
provision of this Agreement.
4.3 SALES AND TRANSFER TAXES AND FEES. All taxes and fees (including all
intangible, documentary, stamp, patent taxes, filing fees and recording fees, if
any, but excluding any excise taxes and income tax the Seller may incur)
incurred directly as a result of the transfer of the Assets pursuant to this
Agreement and the Transaction, shall be borne by the Buyer.
4.4 PAYMENT OF LIABILITIES. Except as set forth on SCHEDULE 1.3 (Assumed
Liabilities), Seller shall pay or otherwise satisfy in the ordinary course of
its Business all of its liabilities and obligations with respect to the Assets
through the Closing Date.
4.5 TIME AND PLACE OF CLOSING. The closing of the transactions provided for
in this Agreement (the "Closing") shall take place at 10:00 a.m. Eastern
Standard Time, on March __, 2005 (the "Closing Date") at the offices of Xxxxx
Xxxxxx and Bacine, 000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxxxxxxx 00000
and may be effected by the exchange of fax copies or overnight delivery of
executed documents by the respective parties.
4.6 DELIVERIES BY THE SELLER. At the Closing, concurrently with the
discharge of the other parties' respective Closing obligations, the Seller is
delivering to Buyer the following:
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(a) a certificate of the Secretary of the Seller with respect to the
resolutions adopted by the board of directors of the Seller authorizing the
transactions contemplated herein;
(b) a good standing certificate of Seller dated not more than ten (10)
days before the Closing Date;
(c) an assignment of all Assets, including without limitation, the
Verification Technology, the Patent and all other Intellectual Property and all
consents and or permits required in connection therewith;
(d) executed copies of the employment agreements by and between the
Buyer and Xxxxx Xxxxxxxx and Xxxxxxxxxxx Xxxxxxxx substantially in the form of
EXHIBIT C attached hereto (each an "Employment Agreement") and executed copies
of a consulting agreement by and between the Buyer and Xxxx X. Xxxxxxxxx
substantially in the form of EXHIBIT D attached hereto ("Consulting Agreement");
(e) executed copies of all required Satisfaction and Releases; and
(f) such additional documents as Buyer may reasonably request to
effect the transactions contemplated hereby.
4.7 DELIVERIES BY BUYER TO THE SELLER. At the Closing, concurrently with
the discharge of the other parties' Closing obligations, Buyer is delivering to
the Seller the following:
(a) $50,000 in immediately available funds as provided in SECTION 1.6;
(b) the Securities Consideration as provided in SECTION 1.6(C) and
subject to the Indemnity Hold Back;
(c) a certificate of the Secretary of the Buyer with respect to the
resolutions adopted by the board of directors of the Purchaser authorizing the
transactions contemplated herein; and
(d) such additional documents as the Seller may reasonably request to
effect the Acquisition and Merger.
4.8 SURVIVING CORPORATION DISCLOSURES. Seller shall be entitled to all such
disclosures as are required by law or regulation to be given to shareholders of
the Surviving Corporation.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE SELLER. After the Closing Date, and subject to
the limitations imposed by Section 5.2 below, the Seller and Xxxx X. Xxxxxxxxx
("Xxxxxxxxx"), jointly and severally, will indemnify and hold harmless Buyer and
its officers, directors, employees, agents, representatives, successors and
assigns:
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(a) for any breach of the representations and warranties set forth in
this Agreement, any breach of covenants and agreements, any claim by any party
that Buyer is responsible for any Excluded Liabilities, any damages suffered by
Buyer on account of Seller failing to satisfy any Excluded Liabilities or to
otherwise comply with the Plan.
(b) from and against any demands, claims, causes of action,
administrative orders and notices, judgments, losses, costs, settlements,
awards, fines, assessments, liabilities, penalties, response costs, sanctions,
taxes, damages (whether direct, indirect or consequential) and expenses
(including reasonable legal, paralegal, accounting and consultant fees and other
expenses incurred in the investigation and defense of claims and actions) (each
a "Loss" and collectively, "Losses") sustained or suffered by Buyer and arising
out of, resulting from or otherwise relating to any inaccuracy,
misrepresentation or breach of any representation or warranty of the Seller
contained in this Agreement; and
(c) for any Losses sustained or suffered by Buyer and arising from any
debt, obligation or liability of the Seller not specifically assumed by Buyer
pursuant to this Agreement, or the conduct of the business or operation or
ownership of the Assets by the Seller during the period Seller operated its
Business.
Notwithstanding the foregoing and without limiting anything contained herein to
the contrary, Xxxxxxxxx'x liabilities will be limited as to matters for which he
has Knowledge and to the total consideration he is to receive as a creditor and
stockholder of Seller and as a Consultant to Buyer or the Surviving Corporation.
5.2 LIMITS ON INDEMNIFICATION. Notwithstanding anything herein to the
contrary, but subject to the last paragraph of SECTION 5.1:
(a) the Seller and Xxxxxxxxx shall be jointly and severally obligated
to indemnify the Buyer for Losses pursuant to SECTION 5.1 only to the extent the
aggregate amount of such Losses exceed $25,000; and
(b) the maximum aggregate liability of Xxxxxxxxx under this Agreement
shall not exceed $750,000 (the "Xxxxxxxxx Indemnification Cap").
5.3 INDEMNITY HOLD BACK. The portion of the Securities Consideration not
needed to satisfy the Excluded Liabilities and the portion of the Securities
Consideration to be received by Xxxxxxxxx as a creditor and stockholder of
Seller shall each be held back for six (6) months from the Closing Date ("Hold
Back Period") and shall be forfeited in full only to the extent necessary to
satisfy any and all indemnity claims, upon Notice of Claim (defined and as
provided below) to Seller and/or Xxxxxxxxx during such Hold Back Period.
5.4 INDEMNIFICATION BY THE BUYERS. After the Closing Date the Buyer shall
indemnify, defend and hold harmless Seller and its officers, directors,
employees, agents, representatives, successors and permitted assigns against any
Losses sustained or suffered by Seller and arising out of, resulting from, or
otherwise relating to any inaccuracy, misrepresentation or breach of any
representation or warranty of the Buyer contained in this
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Agreement. Notwithstanding anything to the contrary herein, the maximum
aggregate liability of Buyer under this Agreement shall not exceed $100,000.
5.5 PROCEDURE FOR CLAIMS. Promptly, but in any event within thirty (30)
days after obtaining knowledge of any claims or demands which may give rise to,
or could reasonably give rise to, a claim for indemnification hereunder
(collectively, "Indemnification Claims" and, individually, the "Indemnification
Claim"), the party or parties entitled to indemnification hereunder (the
"Indemnified Party") shall give written notice to the party or parties subject
to indemnification obligations therefore (the "Indemnifying Party") of such
Indemnification Claims (a "Notice of Claim"). A Notice of Claim shall be given
with respect to each Indemnification Claim. The Notice of Claim shall set forth
the amount (or a reasonable estimate) of the Loss, damage or expense suffered,
or which may be suffered, by the Indemnified Party as a result of such
Indemnification Claim and a brief description of the facts giving rise to such
Indemnification Claim. The Indemnified Party shall furnish to the Indemnifying
Party such information (in reasonable detail) as the Indemnified Party may have
with respect to such Indemnification Claim (including copies of any summons,
complaint or other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or asserting the
same).
If the claim or demand set forth in the Notice of Claim is a claim or
demand asserted by a third party (a "Third Party Claim"), the Indemnifying Party
shall have fifteen (15) days (or shorter period if an answer or other response
or filing with respect to the pleadings served by the third party is required
prior to the 15th day) after the date of receipt by the Indemnifying Party of
the Notice of Claim (the "Notice Date") to notify the Indemnified Party in
writing of the election by the Indemnifying Party to defend the Third Party
Claim on behalf of the Indemnified Party.
If the Indemnifying Party elects to defend a Third Party Claim on behalf of
the Indemnified Party, the Indemnified Party shall make available to the
Indemnifying Party and its agents and representatives all records and other
materials in its possession which are reasonably required in the defense of the
Third Party Claim and the Indemnifying Party shall pay any expenses payable in
connection with the defense of the Third Party Claim as they are incurred
(whether incurred by the Indemnified Party or the Indemnifying Party). In no
event may the Indemnifying Party settle or compromise any Third Party Claim
without the Indemnified Party's consent, which shall not be unreasonably
withheld or delayed.
If the Indemnifying Party elects to defend a Third Party Claim, the
Indemnified Party shall have the right to participate in the defense of the
Third Party Claim, the Indemnifying Party retaining control of the defense, at
the Indemnified Party's expense (and without the right to indemnification for
such expense under this Agreement); provided, however, that, the reasonable fees
and expenses of counsel retained by the Indemnified Party shall be at the
expense of the Indemnifying Party if (a) the use of the counsel chosen by the
Indemnifying Party to represent the Indemnified Party would present such counsel
with a conflict of interest; (b) within ten (10) days after being advised by the
Indemnifying Party of the identity of counsel to be retained to represent the
Indemnified Party, the Indemnified Party shall have objected to the retention of
such counsel for valid reasons (which shall be stated in a written notice to
Indemnifying Party), and the Indemnified Party shall not have retained different
counsel reasonably satisfactory to the
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Indemnified Party; or (c) the Indemnifying Party shall authorize the Indemnified
Party to retain separate counsel at the expense of the Indemnifying Party.
If the Indemnifying Party does not elect to defend a Third Party Claim or
does not defend a Third Party Claim in good faith, the Indemnified Party shall
have the right, in addition to any other right or remedy it may have hereunder,
at the sole and exclusive expense of the Indemnifying Party, to defend such
Third Party Claim.
To the extent that an Indemnified Party recovers on a Third Party Claim,
the amount of such recovery (after deduction of all costs and expenses incurred
in connection with such Third Party Claim) shall reduce, dollar-for-dollar, the
indemnification obligation otherwise owing by the Indemnified Party.
Each Indemnified Party shall take commercially reasonable actions to
mitigate Losses, including pursuing insurance claims and Third Party Claims, and
shall reasonably consult and cooperate with each Indemnifying Party with a view
towards mitigating Losses, in connection with claims for which an Indemnified
Person seeks indemnification hereunder.
ARTICLE VI
GENERAL PROVISIONS
6.1 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been validly given (i) if delivered by hand, (ii) if mailed certified or
registered mail return receipt requested with postage prepaid or (iii) if sent
by overnight delivery by a recognized courier which guaranties next day
delivery; addressed as follows.
If to Buyer:
Xxxxxxxx XxXxxxxx
000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxxxx, Esquire
Xxxxx, Xxxxxx & Bacine, P.C.
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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If to Seller, and/or Owners to:
E-dentification, Inc.
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxx
With a copy to:
Xxxxxxx X. Xxxxxx
Sonnenchein Nath & Xxxxxxxxx LLP
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
The designation of the person to be so notified or the address of such
person for the purposes of such Notice may be changed from time to time by
similar notice to be effective five (5) business days after such change of
address is supplied in accordance with the notice provisions of this Section.
6.2 SELLER'S KNOWLEDGE. Seller or Xxxxxxxxx, as the context requires, will
be deemed to have "Knowledge" of a particular fact or other matter only if: (a)
Seller or Xxxxxxxxx, as the context requires, is actually aware of such fact or
other matter; or (b) Seller or Xxxxxxxxx, as the context requires, should be
reasonably expected to be aware of such fact or other matter.
6.3 AMENDMENT. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.
6.4 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
Buyer and the Seller shall be responsible for and bear all of their own costs
and expenses (including any broker's or finder's fees and expenses of their
representatives) incurred at any time in connection with this Agreement.
6.5 HEADINGS. All section headings herein are inserted for convenience only
and shall not modify or affect the construction or interpretation of any
provision of this Agreement.
6.6 COUNTERPARTS. This Agreement may be executed by facsimile and in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
conflict of laws principles thereof.
6.8 VENUE. Any action, suit, or other legal proceeding which is commenced
in a court of law to resolve any matter arising under or relating to any
provision of this Agreement
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shall be commenced only in a federal or state court of or for the state of
Delaware. The Buyer and Seller each consents to the jurisdiction of such a
court.
6.9 ENTIRE AGREEMENT; INCORPORATION OF TERMS. This Agreement represents the
full and complete understanding of the parties with respect to the subject
matter hereof. The introductory language and the recitals are incorporated into
this Agreement by reference.
IN WITNESS WHEREOF the parties hereto have caused this Asset Purchase
Agreement to be executed as of the Effective Date.
E-DENTIFICATION, INC.
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
Address:
-------------------------------
EDENTIFY, INC.
By: /s/ Xxxxxxxx XxXxxxxx
------------------------------------
Name: Xxxxxxxx XxXxxxxx
Title: President
Address:
-------------------------------
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