EXHIBIT 10.14
TECHNOLOGY ASSET PURCHASE AGREEMENT
Agreement made and entered into the 23rd day of February 2004, effective on the
23rd day of February, 2004, by and between Karunga Technologies Corporation, 000
Xxxx 0000 Xxxxx, Xxxx Xxxx Xxxx, XX 00000 (hereinafter referred to as "Seller"),
and Y3K Secure Enterprise Software, Inc., 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxx, XX
00000 (hereinafter referred to as the "Buyer").
WHEREAS, Seller is engaged in the business of developing secure web-based
collaborative communication software, including the Integrated Communication
System software, commonly referred to by the Buyer and Seller as "ICS System" or
"ICS Platform", and all related technologies and software tools and strategies
(the "ICS Technology"); Seller also from time to time engages in software
development contracts and consulting services unrelated to the ICS Technology;
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the ICS Technology and all assets and liabilities related to the
development and support of the ICS Technology, subject to the conditions set
forth in this Agreement;
WHEREAS, Seller and Buyer have worked together over a period in excess of three
years, initially with Seller as a Licensee of Buyer, and subsequently, for a
period of two years, as joint venture partners, pursuant to a series of
agreements, both written and oral, working together to leverage each others
resources, abilities and assets to jointly create a viable business model, to
generate adequate cash flow to continue and build joint operations, and to
jointly pursue adequate financing to support the acquisition of strategically
important partners, each relying on the other that at the appropriate time, and
in the most strategic manner, the two companies would formally come together;
NOW, THEREFORE, in consideration of the promises and of the mutual agreements,
covenants, representations and warranties hereinafter contained, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows.
I. PURCHASE AND SALE OF TECHNOLOGY ASSETS
1.1 Assets to be Purchased. Upon the terms and subject to the conditions of this
Agreement, Seller hereby sells, assigns, transfers, conveys and delivers to
Buyer, and Buyer hereby purchases and accepts from Seller, the ICS Technology,
and all assets and liabilities related specifically to the ICS Technology, its
development and deployment, (hereinafter Purchased Technology), including all
intellectual property rights associated with the ICS Technology, and including,
but not necessarily limited to, those items specifically set forth in Schedule
A. The Purchased Technology shall be free from liens or encumbrances. Seller
shall provide written certification that the Technology Assets are free from any
liens or encumbrances, including statements of principal developers and
architects of the Purchased Technology and that the Seller has the full right
and authority to
1.2 Excluded Assets. There shall be excluded from the Purchased Technology, all
assets and liabilities not related to the ICS Technology, which items are set
forth in Schedule B, attached hereto and by this reference incorporated herein
1.3 Creditor Plan. Upon the terms and subject to the conditions of this
Agreement, Buyer hereby agrees to assume at Closing all the obligations
related to the development of the Purchased Technology, set forth in
Schedule D, Assumption of Liabilities related to Development of Purchased
Assets, attached hereto and by this reference incorporated herein, and
shall create and execute all documents reasonably to comply with this
paragraph and Schedule D.
EXHIBIT 10.14 - 1
II. PURCHASE TERMS
2.1 Purchase Terms. In consideration of the purchase of the Purchased
Technology, Buy shall, at the closing, pay, assign, transfer, convey and
deliver, the following:
A. Common Shares. Twenty Three Million Thirty Thousand Seven
Hundred Fifty (23,030,750) shares of Y3K Secure Enterprise
Software, Inc.'s (OTC BB:YTHK.OB) common stock ("Common
Shares"). The Common Shares shall be issued to the Seller.
B. Option and Warrants. Buyer shall, at the closing, issue
Options or Warrants, as appropriate, for the purchase of
Buyer's Common Shares, to the persons, at the strike price,
and upon the terms as set forth in Schedule C, attached hereto
and by this reference incorporated herein.
C. Assumption of Obligation for the Payment of the Liabilities
Associated with ICS Technology. Buyer shall assume the sole
liability for the payment and discharge of the liabilities of
Seller incurred in the development of the ICS Technology,
which liabilities are set forth in Schedule D, attached hereto
and by this reference incorporated herein.
III. CLOSING
3.1 Closing. The closing of the purchase and sale of Purchased Technology (the
"Closing") shall occur on or before March 15, 2004, or as soon thereafter
as the Seller's shareholders have ratified the transaction as required
under Utah law.
IV. REPRESENTATIONS OF SELLER
4.1 Authority. Seller has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement and shall, by the
Closing Date, have obtained all shareholder approvals necessary under Utah
law, to consummate the transactions contemplated hereby.
4.2 Representations. Seller represents to Buyer that Seller will not:
A. Mortgage, pledge or subject to any Lien any of the Purchased
Technology listed in Schedule A;
B. Acquire or dispose of any assets or properties, or, except in
connection with the transactions contemplated by this
Agreement, enter into any agreement or other arrangement for
any such acquisition or disposition, other than in the
ordinary course of business;
C. Conduct its business or enter into any transaction, other than
in the ordinary course of business;
X. Xxxxx any rights or licenses under any of its Intellectual
Properties without Buyer's consent.
V. REPRESENTATIONS OF BUYER
5.1 Authority and Enforceability. Buyer has full corporate power and authority
to execute, deliver and perform its obligations under this Agreement and, by the
Closing Date, shall have obtained all necessary approvals required to consummate
the transactions contemplated hereby.
VI. OTHER TERMS AND CONDITIONS
6.1 Expenses of Sale. Seller and Buyer shall each bear their own direct and
indirect expenses incurred in connection with the negotiation and
preparation of this Agreement and the consummation and performance of the
transactions contemplated hereby and any income taxes of any kind. Seller
shall pay any excise, sales, use, gross receipts or similar taxes. Buyer
and Seller will cooperate with one another in filing any required tax
returns and in seeking any applicable exemption from the payment of any
excise, sales, use, gross receipts or similar tax with respect to the
transfer of the Purchased Technology.
6.2 Deliveries of Seller. Prior to Closing, Seller shall deliver to Buyer each
of the following documents:
EXHIBIT 10.14 - 2
A. A copy of the resolutions adopted by its Board of Directors
and shareholders approving the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby; and,
B. General xxxx of sale to vest in Buyer good and marketable
right, title and interest in the Purchased Technology.
C. Written certification that there are no liens or encumbrances,
encumbrancing the Purchased Technology including written
certificates from the principal software developers and
architects of the Purchased Technology.
6.3 Deliveries of Buyer. Prior to or at Closing Buyer shall deliver to Seller
the following:
A. A copy of the resolution adopted by its Board of Directors
approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and
B. A share certificate in the amount of Twenty Three Million
Thirty Thousand Seven Hundred Fifty (23,030,750) shares of Y3K
Secure Enterprise Software, Inc.'s (OTC BB:YTHK.OB) common
stock ("Common Shares") issued to the Seller; and,
C. Options agreement and warrants consistent with paragraph 2.1 B
of this Agreement; alternatively a schedule of Options and
Warrants to be issued to Karunga shareholders having options
of Karunga common stock or Warrants, and a resolution of the
Board of Directors of Buyer that it will promptly cause
options and warrants for Buyer's common stock to be issued
consistent with paragraph 2.1 B, and according to such
schedule.
6.4 Employment Of Karunga Employees. Commencing concurrently with the signing of
this document, Buyer shall offer Xxxxx Xxxxx and Xxxxxx Xxxxx, employment
contracts as key employees of Buyer. Such contracts shall provide for salary,
benefits, stock options and terms of length of employment consistent with the
other key senior level management employees of Buyer, the exact details shall be
reduced to writing and signed on or before the Closing. Employment contracts
shall also contain covenants of confidentiality, non-solicitation and
non-circumvention consistent with the employment contracts of other senior
management key employees of Buyer.
6.5 Board Position. The Buyer covenants and agrees, as a material inducement to
enter into this Agreement, that commencing not later than the signing of this
Agreement, Xxxxx Xxxxx, CEO of Seller shall be appointed to the Board of
Directors of Buyer, as a fully voting member of the Board of Directors. The said
position on the Board of Directors shall have all of the rights, duties, and
obligations associated with the office and position of a director of the Board
of Directors of the Buyer. Seller shall use best efforts to assist the said
appointment to continue for a period of 36 months. In the event that Xxxxx Xxxxx
is unwilling to finish the full term, or not able to finish the term due to
illness, then the seat on the Board of Directors shall be filled by a designee
appointed by the board of directors of the Seller. In the event that the board
of directors of Seller has ceased to exist, then the seat on the board of
directors shall be filled by appointment by the board of directors of the Buyer,
from among any then senior level officer of the Buyer who was, at the time of
the signing of this Agreement, an officer, director or significant shareholder
of the Seller.
6.6 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Washington without regard
to principles of conflicts or choice of law.
6.7 Bulk Transfer Laws. Buyer and Seller hereby waive compliance with all
applicable bulk sales and similar laws. Buyer agrees to bear all costs and
expenses associated with any and all claims, losses, liabilities, costs and
expenses relating to the Assets or Assumed Liabilities that Seller or Buyer may
incur as a consequence of any bulk transfer laws, including the waiver of
compliance therewith. Seller agrees to bear all costs and expenses associated
with any claims, losses, liabilities, costs and expenses relating to the
Excluded Assets or the Excluded Liabilities that Buyer may incur as a
consequence of any bulk transfer laws, including the waiver of compliance
therewith.
6.8 Further Assurances. Seller and Buyer shall use their best efforts to
promptly obtain any and all consents, approvals and waivers necessary to permit
the assignment to, and assumption by Buyer of all of the assets and liabilities
acquired by Buyer under this Agreement with respect to which a third-party
consent, approval or waiver is required and has not been obtained prior to the
Closing.
EXHIBIT 10.14 - 3
6.9 Survival. All of the terms, representations and warranties shall survive for
one year from the date of the closing. This Agreement shall bind and inure to
the benefit of the Seller and Buyer and their respective heirs, executors,
administrators, successors and assigns.
6.10 Appendices and Schedules. All appendices and schedules referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein.
6.11 Interpretation. As both parties to this Agreement were involved in the
drafting of this Agreement, the parties agree that no ambiguous terms in this
Agreement shall automatically be interpretation in the detriment of the drafting
party.
IN WITNESS WHEREOF, the parties have executed this Agreement or
caused this Agreement to be executed by their respective duly authorized
officers on this 23rd day of February, 2004.
Karunga Technologies Corporation. Y3K Secure Enterprise Software, Inc.
By: Xxxxx Xxxxx By: Xxxx Xx. X. Xxxx
/s/ Xxxxx Xxxxx /s/ Xxxx Xx. X. Xxxx
----------------------------- ---------------------------
Title: President & CEO Title: President
EXHIBIT 10.14 - 4
Schedule A-1
Purchased Technology
Intellectual Property
1. ICS Client Software
The ICS Client Software is the software and all source code used to
create the ICS client. It consists of a number of layered modules and
thin client code that combine together to create the ICS graphical
Client. The Client communicates with an API layer that implements the
direct interface to the ICS peer clients, or to the server.
2. ICS Server Source Code
The ICS Server Source Code is the software that implements the ICS
server that serves as the hub for all ICS clients and interacts with a
SQL database to manage user lists, group lists, and other status or
non-volatile information. It is the reciprocal server based code that
interfaces to the client API layer.
3. ICS Database Administration Tools
This is the software and its source code for the server based
administrator module that manages the users, passwords, and other user
information. It is an ODBC based application designed to aid an
administrator in managing users.
4. ICS Skin and Banner method documentation, all branded banners and files
This is a directory of tools and examples used to create the banners
and skins used in various ICS implementations.
5. SWIFT Software and Source Code
This is the software download system and source code that is used along
with Versign authentication, to create an object that is able to be
executed by Internet Explorer script to cause embedded XML like code on
a web page to guide the download and decompression of modules
comprising the ICS system.
6. Karunga website server software and Source Code
This is the web server software and source code used to host the ICS
website and download page. It has some shared components with the ICS
server and the ICS client API layer.
7. Karunga Video Software Source code and Business
This is software and source that was used to create a video download
and display system intended to be used as a video delivery system for
the business and enterprise markets.
8. Section 34 Multimedia Source Code
This is a body of code and methods implementing a library of functions
capable of working with sound, graphics, display, and other graphical
interaction. Parts of the code base were adapted and developed into
some of the GUI framework of the ICS system.
9. Solstice Source Code
The Solstice Source Code is the collections of code, modules, concepts,
and documentation that describe a layered programming framework that
implements at its lowest level a network API layer, a multi-channel
adaptive packet mechanisms, and various application level layer
capabilities including inter-process communication, database access,
and game server functions,
Software (to be specifically enumerated by Closing)
--------
All functional and complete software packages used in the development of the ICS
Technology.
This includes:
1. The ICS Build Directory Structure This includes the directories to
build the ICS server (Cyber), the ICS client (PJimp), the SWIFT
software (kSwift), and support interface and release directories (such
as kAPI, kDistrib), experimental interface code (IcsDLL).
EXHIBIT 10.14 - 5
2. The system uses Microsoft uses Visual C++ 6.0. The final release of the
code will include the instructions to recompile the ICS system from the
source code.
EXHIBIT 10.14 - 6
SCHEDULE A-2
Certification of No Liens or Encumbrances
EXHIBIT 10.14 - 7
Schedule B
Excluded Assets
Hardware (to be specifically enumerated by Closing)
All tangible and functional office furniture
All tangible and functional filing cabinets
All tangible computers and functional computers
Seller's corporate charter, taxpayer and other identification numbers, tax
returns, corporate seals, corporate minute books, stock ledgers and other
documents of Seller relating to the organization and existence of Seller as a
corporation; and
All software development contracts unrelated to the Purchased Technology and all
Technology not described in Schedule A.
EXHIBIT 10.14 - 8
SCHEDULE C
Enumeration of Karunga Options and Warrants
Options Vested:
Date Investor Shares Unit Cumulative
2000
09/30/00 Xxxxxxx, Xxxx 25,000 0.1000 25,000
12/31/00 Xxxxxxx, Xxxx 25,000 0.1000 50,000
09/30/00 XxXxxxxxx, Xxx 25,000 0.1000 25,000
12/31/00 XxXxxxxxx, Xxx 25,000 0.1000 50,000
2000 Xxxxxxx, Xxx 100,000 0.1000 100,000
2001
2001 Xxxxxxx, Xxxx 100,000 0.1000 150,000
03/31/01 XxXxxxxxx, Xxx 25,000 0.1000 75,000
06/30/01 XxXxxxxxx, Xxx 25,000 0.1000 100,000
2001 Xxxxxxx, Xxx 100,000 0.1000 200,000
2002
09/30/02 Xxxxxx, Xxx 25,000 0.2500 25,000
12/31/02 Xxxxxx, Xxx 25,000 0.2500 50,000
03/31/02 Xxxxxxx, Xxxx 25,000 0.1000 175,000
06/30/02 Xxxxxxx, Xxxx 25,000 0.1000 200,000
06/30/02 Xxxxxx, Xxxxxxx X. 25,000 0.2500 25,000
09/30/02 Xxxxxx, Xxxxxxx X. 25,000 0.2500 50,000
2002 Xxxxxxx, Xxx 100,000 0.1000 300,000
TOTAL VESTED 700,000
Options Not Vested:
Date Investor Shares Unit Cumulative
2003
03/30/03 Xxxxxx, Xxx 25,000 0.1000 75,000
03/30/03 Xxxxxxx, Xxx 25,000 0.2500 325,000
TOTAL UNVESTED 50,000
EXHIBIT 10.14 - 9
Warrants:
Date Investor Strike Warrant Basis Expiration
06/29/01 Xxxxxx, Xxxxxxx X. 0.50 50,000 25,000.00 06/28/2004
07/02/01 Xxxxxx, Xxxxx 0.50 50,000 25,000.00 07/01/2004
07/09/01 Xxxxxxxxx, Xxx X. 0.50 62,500 31,250.00 07/08/2004
07/09/01 Xxxxxxxxx, Xxx X. 0.50 37,500 18,750.00 07/08/2004
07/09/01 Xxxxxxx, Xxxxx 0.50 25,000 12,500.00 07/08/2004
07/09/01 Xxxxxx, Xxxxx X. 0.50 25,000 12,500.00 07/08/2004
07/09/01 Xxxxxx, Xxxx X. 0.50 10,000 5,000.00 07/08/2004
07/09/01 Xxxxxx, Xxxxxx X. 0.50 20,000 10,000.00 07/08/2004
09/10/91 Xxxxxx, Xxxx 0.50 21,875 10,937.50 09/09/1994
09/19/01 Xxxxx Family Revocable Trust 0.50 5,000 2,500.00 09/18/2004
09/19/01 Xxxxxxxxx, Xxx X. 0.50 62,500 31,250.00 09/18/2004
09/28/01 Xxxxxxx, Xxxxx X. 0.50 15,625 7,812.50 09/27/2004
10/04/01 Viveka Limited c/o Berthold 0.50 4,688 2,343.75 10/03/2004
10/12/01 Xxxxxxx, Xxxxx 0.50 6,250 3,125.00 10/11/2004
11/01/01 Kara, Xxxxxx 0.50 3,125 1,562.50 10/31/2004
11/12/01 Xxxxxxxx, Xxxxxxx 0.50 6,250 3,125.00 11/11/2004
12/07/01 Gold, Xxxxxxxx 0.50 6,250 3,125.00 12/06/2004
12/14/01 Xxxxxxx, Xxxxxxx 0.50 6,250 3,125.00 12/13/2004
02/08/02 Xxxxxxx, Xxxxxx 0.50 6,250 3,125.00 02/07/2005
02/12/02 Walk, Xxxxx 0.50 6,250 3,125.00 02/11/2005
02/20/02 Xxxxxxxx, Xxxx 0.50 3,125 1,562.50 02/19/2005
TOTAL WARRANTS 433,438 $216,718.75
TOTAL OPTIONS and WARRANTS 1,183,438
EXHIBIT 10.14 - 10
SCHEDULE D
Assumption of Liabilities related to Development of Purchased Assets
General creditors of Seller related to the development of Purchased Technology
in the approximate amount of $70,000.00. The management of both Buyer and Seller
will cooperate with each other to work out settlement with the such general
creditors.
EXHIBIT 10.14 - 11
