ASSET PURCHASE AGREEMENT
THIS
AGREEMENT is made as of the 27th day of December, 2006, by and between MIGO
SOFTWARE, INC., a Delaware corporation (the “Buyer”)
and
STOMPSOFT, INC., a California corporation (the “Seller”).
RECITALS
The
Seller is engaged in the business of developing
Internet security and privacy software titles, including software solutions
for home and business users for (i) Internet security and privacy;
(ii) data protection and disaster recovery; and (iii) PC performance
and reliability utilities
(the
“Stomp Business”). The Buyer wishes to purchase, and the Seller wishes to sell,
substantially all of the assets of the Seller, including the Stomp Business
as a
going concern, upon the terms and conditions herein set forth (the “Asset
Sale”).
NOW,
THEREFORE, in consideration of the mutual promises herein made, and intending
to
be legally bound hereby, the parties agree as follows;
ARTICLE
1
PURCHASE
AND SALE OF ASSETS
1.1
Purchased
Assets.
Subject
to the terms and conditions herein set forth, the Buyer shall purchase on
the
Closing Date (as hereinafter defined), and the Seller shall sell and transfer
to
the Buyer, all of the Seller’s assets and properties of every kind and
description, real, personal and mixed, tangible and intangible, and wherever
situated, but expressly excluding the Excluded Assets described in Section
1.2
hereof, all as the foregoing may exist as of the Closing Date (hereinafter,
all
of such assets and properties are referred to as the “Purchased
Assets”).
The
Purchased Assets shall include, without limitation, the following assets
of the
Seller:
(a)
All
inventories of whatever kind, including, without limitation, finished goods,
supplies, work-in-process and raw materials, but excluding any consigned
inventory as described in Schedule 1.2 (the “Inventory”
);
(b)
All
customer contracts of Seller, including but not limited to those described
on
Schedule
1.1(b)
(the
“Customer
Contracts”);
(c)
All
prepaid expenses listed on Schedule
1.1(c);
(d)
All
equipment, furniture, computer systems, assets held under capitalized leases,
fixtures and fixed assets, including those items listed on Schedule
1.1(d) attached
hereto;
(e)
All
rights of the Seller pursuant to equipment leases, contracts, purchase orders,
sales orders, supplier relationships, and other agreements whatsoever relating
to the Business;
(f)
All
right, title and interest (including the right to xxx for past infringements)
in
and to intellectual property, including all patents and applications therefor,
unpatented inventions, trademarks, corporate names (including the name
“StompSoft, Inc.” or all variations thereof), trade names, domain names, service
marks, copyrights, applications for and registrations of any of the foregoing,
software, operating systems, know-how, trade secrets, formulas and technical
information and the goodwill associated with any and all of the foregoing
throughout the world (collectively, “Intellectual
Property Rights”)
and
all rights of Seller to enforce its Intellectual Property Rights against
others;
(g)
All
governmental and nongovernmental licenses, permits, authorizations, consents
and
indulgences to the extent the Seller has the right to transfer and assign
the
same to the Buyer;
(h)
All
computer, office and other supplies;
(i)
All
warranty rights, guaranty rights, causes of actions, judgments and claims
and
similar rights against vendors, suppliers, designers, architects, engineers
or
other third parties;
(j)
All
rights of Seller under confidentiality, noncompetition and invention assignment
agreements with employees, contractors or others;
(k)
All
lists
of the Seller’s customers, suppliers, vendors and sources; all books, records,
journals, computer software and files; all information, blueprints, engineering
data, drawings, sales and promotional materials, telephone and telecopier
numbers and listings; and
(l)
The
goodwill associated with the Stomp Business.
1.2
Excluded
Assets.
The
Purchased Assets shall not include, and the Seller shall retain, the following
assets (the “Excluded
Assets”):
(a)
The
Seller’s bank accounts and all cash and cash equivalents;
(b)
all
employee agreements (other than agreements relating to the intellectual property
of Seller, inventions or discoveries by employees or restrictions on competition
or confidential information, all of which shall constitute part of the Purchased
Assets), employee benefit plans, programs and arrangements and other commitments
of the Seller relating to employees, whether written or oral, express or
implied;
(c)
any
claims, rights and interest in and to any refunds of income and any other
taxes
or fees of any nature whatsoever which relate solely to the period up to
and
including the Closing Date;
(d)
All
claims for refunds including, without limitation, insurance claims;
(e)
All
insurance policies;
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(f)
The
Seller’s accounts receivable for products sold or services performed on or
before Closing and all claims and contract rights relating thereto;
(g)
The
Seller’s rights under the lease of Seller’s office space at 0000 XxXxx, Xxxxx X,
Xxxxxx, Xxxxxxxxxx 00000 (the “Office
Lease”);
(h)
The
Seller’s rights under this Agreement;
(i)
The
Seller’s corporate record books, minute books, stock record books and corporate
franchise and tax returns and reports, and employee records;
(j)
The
assets listed in Schedule
1.2
attached
hereto; and
(k)
The
Seller’s records relating to the items described in the foregoing clauses (a)
through (i).
1.3
Closing.
The
closing (the “Closing”
or
“Closing Date”) of the purchase and sale of the Stomp Business and the Purchased
Assets shall take place at 1:00 p.m., Pacific Standard Time, on December
27,
2006, at the offices of the Seller, or at such other time and place as may
be
mutually agreed by the Buyer and the Seller. The effective time of the
“Closing
Date”
and
the
effective date of the transactions described herein shall be the close of
business on the date immediately preceding the Closing Date, unless otherwise
agreed by the parties. All transactions relating to the Stomp Business occurring
on or after the Closing Date shall be for the Buyer's account.
1.4
Taking
of Necessary Action; Further Action.
If, at
any time after the Closing, any further action is necessary or desirable
to
carry out the purposes of this Agreement and to vest the Buyer with full
right,
title and possession to the Purchased Assets and the Stomp Business,
Seller shall, at Buyer’s expense, use commercially reasonable efforts to
take such lawful and necessary actions.
ARTICLE
2
CONSIDERATION
FOR TRANSFER
2.1 Purchase
Price.
The
purchase price (the “Purchase Price”) shall consist of the following
consideration: (i) Six Hundred Fifty Thousand Dollars ($650,000.00) payable
by
satisfaction of that certain promissory note dated on or about December 20,
2006
from Seller to Buyer and the balance payable in cash at Closing; and (ii)
twenty
million (20,000,000) shares of the Common Stock, $.0001 par value per share,
of
Buyer (the “Buyer
Shares”).
2.2
Conveyance
of Assets.
At the
Closing, the parties shall execute a Xxxx of Sale, General Conveyance,
Assignment and Assumption Agreement substantially in the form attached hereto
as
Exhibit
2.2
(the
“Conveyance
Agreement”).
3
2.3
Website
and Other Rights.
Effective upon the Closing and during the Website Term (as defined below),
the
Buyer shall, without cost or expense to Seller or the Seller’s customers that
previously purchased the Software Product (as defined below): (i) maintain
and
support on Buyer’s website (the “Website”)
prominent links (“Links”)
with
words that are reasonably prominently displayed on the website to the effect
that make clear such link is for a free backup MyPC
upgrade to
version
6 for “backup my pc” and which allow, without cost to Seller or Seller’s
customers and former customers who previously bought “backup my pc” software
products and which Software Products are part of the Excluded Assets (the
“Software
Products”)
the
right, through such link, to download certain updates and corrections to
such
Software Products, which updates and corrections shall be provided by Seller’s
licensor or Seller (collectively, the “Downloads”)
; (ii)
maintain and support the websites and other infrastructure such as servers
to
allow for the downloading of the Updates to the Software Products; (iii)
provide
for a reasonable location of such down link on the Buyer’s website so that
customers and former customers who purchased the Software Products will be
able
to readily locate and utilize such link; (iv) allow for the StompSoft domain
name to be linked to such Website; (v) reasonably maintain and support a
XxxxxXxxx.xxx web page that will provide for the Downloads as described in
this
paragraph 2.3; and (vi) assist Seller in conducting email blasts to customers
and former customers of the Software Products as required by Seller from
time to
time and Seller will pay for the out of pocket costs of conducting such email
blasts that Seller desires to do during the Website Term. The Website
Term
means
the period from the Closing Date and ending on the later of July 1, 2007
or
until the Seller no longer has any legal obligation to make available the
Downloads as described herein. In addition, effective on the Closing, Buyer
hereby grants to Seller an irrevocable royalty free non exclusive license
(“License”)
to use
the name “StompSoft” and all other trade names and marks that are part of the
Purchased Assets for the following limited purposes: marketing and selling
the
consigned inventory that Seller owns as of the Closing; selling of Seller’s
consigned inventory by Seller’s retailers and distributors and brokers; and
collection of Seller’s accounts receivable existing from time to time. Such
License shall end when all of the Seller’s consigned inventory has been sold or
returned; and all of its accounts receivable have been collected or reasonably
expected to be collected, but no later than December 31, 2007. Further,
notwithstanding any term in this Agreement or any exhibits to the contrary,
Seller may, after the Closing, continue to sell all of its existing consigned
inventory through its retailers and distributors and other marketing channels,
and collect all of its current and future accounts receivable and Seller
may
conduct such activities using the License on a royalty free basis as described
above. The terms of this Section 2.3 and the terms of Section 2.4 below shall
survive the Closing.
2.4
Purchase
Price Allocation.
The
parties agree to allocate the Purchase Price among the Purchased Assets and
the
non-competition covenants set forth in Section 10.4 of this Agreement as
mutually agreed upon and to execute a memorandum (“Memo”) to confirm such
allocation on or before February 28, 2007, subject to the following: (i)
Each of
the parties shall report the income tax consequences of the transactions
called
for in this Agreement in a manner consistent with the allocation set forth
in
such Memo; (ii) such allocation shall be followed in all tax returns of the
Buyer and the Seller for the taxable year that includes the Closing Date;
(iii)
neither the Buyer nor the Seller will take any position inconsistent with
such
allocation unless otherwise required by applicable law; and (iv) for purposes
of
this Section 2.4, the determination of the Purchase Price and the consideration
to be allocated on all required IRS forms and as reflected in the Memo shall
be
determined by Xxxxx & Co.(who will be retained by Seller and Seller shall
pay for Xxxxx & Co’s fees for such determination) and such determination of
Purchase Price by Xxxxx & Co. shall be binding on the parties
hereto.
4
ARTICLE
3
LIABILITIES
3.1
Assumed
Liabilities.
The
Buyer agrees to assume, pay and discharge as and when due the following
liabilities of the Seller (the “Assumed
Liabilities”):
(a)
Liabilities
and obligations of the Seller under those quotes, bids, proposals, awards,
customer orders, work-in-process, pending projects, contracts and purchase
orders with customers given, entered into and accepted by the Seller and
remaining uncompleted or outstanding on the Closing Date that are listed
on
Schedule
3.1(a);
(b)
Liabilities
and obligations under the contracts listed on Schedule
3.1(b)
but only
to the extent such liabilities and obligations are to be performed on and
after
the Closing.
(c)
All
product warranty obligations of Seller but only to the extent of the warranties
described on Schedule
3.1(c);
provided, however, that Buyer shall have no obligation to honor any rebate
or
refund claims of Seller’s customers;
(d)
All
liabilities listed on Schedule
3.1(d)
attached
hereto;
(e)
All
rent,
percentage rent, utilities, common area charges, pass through charges, real
property taxes and insurance payable under that certain lease of space at
the
Seller’s current location that accrue commencing on the Closing Date and ending
on the earlier of: (i) four months thereafter; or (ii) the vacating of such
location by Seller if Seller vacates such location prior to the end of such
four
(4)month period; and
(f)
Liabilities
and obligations with respect to all Purchased Assets to the extent such
liabilities and obligations accrue on and after the Closing.
3.2
Non-Assumption
of Liabilities.
With
the exception of the Assumed Liabilities, the Buyer shall not assume, pay,
perform, discharge, accept, or be responsible for any liabilities, accounts
payable, debts or obligations of the Seller of any kind whatsoever, whether
actual, contingent, accrued, known or unknown, including, without limitation,
any relating to taxes, contracts, loans, breach of warranty claims, liabilities
resulting from breach of contract, torts, illegal activity, unlawful business
practice or any other liability or obligation whatsoever. All such non-assumed
liabilities, debts and obligations shall remain the responsibility of the
Seller, and Seller shall discharge all such liabilities in full or otherwise
fully satisfy such liabilities. The Buyer hereby waives compliance by the
Seller
with the provisions of all applicable state bulk sales laws.
3.3
Employee
Liabilities.
The
Buyer shall not assume, honor or accept any agreement relating to the Seller’s
employees, leased employees or contractors, or any employee benefit plan
of the
Seller. Except for accrued vacation obligations of Seller’s employees, which are
described in Schedule 3.1.(d) and which obligations shall be assumed by Buyer,
the Seller shall be solely responsible for satisfying all obligations (whether
arising under federal, state or local law, or pursuant to contract) which
may
arise or which may have arisen or accrued prior to the Closing Date in
connection with the Seller’s employees, leased employees or contractors, the
creation, funding or operation of any employee benefit plan, or which may
arise
in any claims by Seller’s employees, leased employees or contractors in
connection with the termination of their employment or relationship with
the
Seller or the transactions described in this Agreement. Notwithstanding any
provision in this Agreement to the contrary, in addition to any other obligation
of Buyer, the Buyer shall pay for all compensation, benefits and payroll
costs
associated with Seller’s employees for the time period commencing December 15,
2006 and through December 31, 2006.
5
3.4 Further
Cooperation; Consents to Assignment.
Each of
the Seller and the Buyer shall cooperate, and use 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 under applicable laws and
regulations to consummate and make effective the transactions contemplated
by
this Agreement. With respect to those agreements identified on Schedule
3.4
for
which consents or approvals are not provided at Closing, from and after the
Closing the Seller shall use commercially reasonable efforts to obtain the
consent of the other party to each such agreement to the assignment thereof
to
Buyer. If such consent is not obtained with respect to any such agreement,
such
agreement shall not be assigned, but the Seller will cooperate with the Buyer
in
any reasonable arrangement designed to provide to the Buyer the benefits
thereof
and the Buyer's assumption of the obligations and liabilities of the Seller
under any such agreement.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES
OF
THE
SELLER
In
order
to induce the Buyer to enter into this Agreement, the Seller makes the
representations and warranties set forth in this Article 4, each of which
shall
be deemed to be independently material and relied upon by the Buyer, regardless
of any investigation made by, or information known to, the Buyer.
4.1
Organization
and Qualification.
(a)
The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of California. The Seller is qualified to transact
business as a foreign corporation in the jurisdictions set forth on Schedule
4.1 attached
hereto, and the Seller is not required to be so qualified in any other
jurisdiction except where failure to be so qualified would not have a “Material
Adverse Effect” on Seller. For purposes of this Agreement, “Material
Adverse Effect”
means a
material adverse effect on the financial condition, results of operations
of the Stomp Business, taken as a whole, or on the ability of Seller to
consummate timely the transactions contemplated hereby, or on the future
sales
of StompSoft products by the five largest customers of Seller.
(b)
The
Seller has delivered to the Buyer complete and correct copies of the Seller's
Articles of Incorporation and By-laws, as amended to the date hereof, certified
by the Secretary of State of California and the Secretary of the Seller,
respectively. The Articles of Incorporation and Bylaws are in full force
and
effect. Seller is not in violation of any of the provisions of its
Articles of Incorporation or Bylaws.
6
4.2
Ownership
of Shares.
Schedule
4.2
lists
all the stockholders of the Seller and the shares owned by each. There are
no
outstanding options, warrants, calls, subscriptions, commitments, agreements,
or
other rights to purchase or dispose of any of the stock of the Seller, or
other
securities outstanding which are convertible into the stock of the Seller,
and
no other party has any right or option to acquire any equity interest in
the
Seller.
4.3
No
Subsidiaries; Investments.
The
Seller has no subsidiaries, nor does it own any stock, bonds or other securities
of, have any proprietary interest in, or control the management or policies
(by
means of a management contract or otherwise) of any other corporation, firm,
association or business organization. No corporation, firm, association or
business organization controls the management or policies (by means of a
management contract or otherwise) of the Seller. “Control” in the preceding
sentences means the power, by means of ownership of securities, contract
or
otherwise, to elect or designate a majority of the board of directors or
other
management policies of a corporation, firm, association or business
organization. Except as disclosed on Schedule
4.3,
Seller
does not rely on any single vendor, service provider or distributor which
reliance could reasonably have a material adverse effect on Seller or the
Business.
4.4
Conflicting
Obligations; Consents.
Except
as set forth in Schedule
4.4,
the
execution and delivery of this Agreement do not, and the consummation of
the
sale and purchase of the Purchased Assets and the Stomp Business contemplated
hereby will not: (a) conflict with or violate any provisions of the Articles
of
Incorporation or Bylaws of the Seller; or (b) conflict with or violate any
provisions of, or result in the maturation or acceleration of, or termination
right under, any obligations under any contract (including customer contracts),
agreement, instrument, document, lease, license, permit, indenture, or
obligation, or any law, statute, ordinance, rule, regulation, code, guideline,
order, arbitration award, judgment or decree, to which the Seller is subject
or
to which the Seller is a party, except where any such violation, maturation
or
acceleration would not have a Material Adverse Effect on the operation of
the
Stomp Business by Buyer after the Closing. Except as set forth on Schedule
4.4,
no
third-party consents, approvals or authorizations are necessary for the
execution and consummation of the transactions contemplated hereby, nor are
any
such consents, approvals or authorizations required in order to enable the
Buyer
to enjoy the benefits of any contracts, agreements, instruments, documents,
leases, licenses, permits, indentures or rights of the Seller in accordance
with
their existing terms.
4.5
Enforceability.
This
Agreement and all other agreements of the Seller contemplated hereby or to
be
delivered in connection herewith are or, upon the execution and delivery
thereof, will be valid and binding obligations of the Seller, enforceable
against it in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
enforcement of creditors’ rights generally, or general principles of
equity.
4.6
Authorization.
The
Seller has all necessary power and authority to enter into and perform the
transactions contemplated hereby in accordance with the terms and conditions
hereof. The execution, delivery and performance of this Agreement by the
Seller
have been duly authorized and approved by the Seller’s Board of Directors and by
its stockholders and no other corporate proceedings on the part of Seller
are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by Seller.
7
4.7
Financial
Statements; No Undisclosed Liabilities.
Attached as Schedule
4.7A are
true
and complete copies of the financial statements (including balance sheets,
statements of income and retained earnings, statements of cash flow, and
any
notes pertaining thereto of the Seller for its fiscal years ending December
31,
2004 and December 31, 2005, and interim financial statements for the period
ending September 30, 2006 (collectively, the “Financial
Statements”).
The
balance sheet as of September 30, 2006 is hereinafter referred to as the
“Latest
Balance Sheet.”
The
Seller’s books and records of accounts accurately reflect all of the assets,
liabilities, transactions and results of operations of the Seller in all
material respects, and the Financial Statements have been prepared based
upon
and in conformity therewith. Except as set forth in Schedule
4.7B,
the
Financial Statements have been prepared in accordance with generally accepted
accounting principles in the United States (“GAAP”)
maintained and applied on a consistent basis throughout the indicated periods,
and fairly present the financial condition and results of operation of the
Seller in all material respects at the dates and for the relevant periods
indicated. (except
as may be indicated in the footnotes to the Financial Statements and that
the
interim financial statements may not have notes thereto and other presentation
items that may be required by GAAP and are subject to normal and recurring
year-end adjustments that are not reasonably expected to be material in
amount).
Except
as set forth on the Financial Statements or on the Liabilities Schedule
attached as Schedule
4.7,
Seller
has no liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that are, individually or in the aggregate, material
to
the Stomp Business and that would be required to be reflected on a balance
sheet
or in notes thereto prepared in accordance with GAAP, except for immaterial
liabilities or obligations incurred in the ordinary course of business
consistent with past practice since the Latest Balance Sheet. All
reserves established by Seller and set forth in the Financial Statements
are in
accordance with GAAP. As of the date of the Latest Balance
Sheet, there were no material loss contingencies (as such term is used in
Statement of Financial Accounting Standard No. 5) that are not adequately
provided for in the Latest Balance Sheet.
4.8
Taxes.
(a) To
the
extent failure to do so would materially adversely affect the
Stomp Business or Buyer’s ownership or operation of the Stomp
Business, Seller has timely filed all material Tax Returns that it was
required to file. All such Tax Returns have been true and complete in all
material respects. All Taxes owed by Seller (whether or not shown or
required to be shown on any Tax Return) have been paid to the
extent failure to do so would materially adversely affect the Stomp
Business or Buyer’s ownership or operation of the Stomp
Business. No claim has ever been made in writing by an authority in a
jurisdiction where Seller does not file Tax Returns that Seller is or may
be
subject to taxation in such jurisdiction. To the extent failure to do
so would materially adversely affect the Stomp Business or Buyer’s
ownership or operation of the Stomp Business, Seller has withheld and paid
all material Taxes required to have been withheld and paid in connection
with
any amounts paid or owing to any employee, independent contractor, creditor,
or
stockholder or other third party, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed in all material
respects. There is no material dispute or claim concerning any Tax
liability of Seller (A) raised by any authority in writing or (B) of which
Seller has knowledge.
8
(b) For
purposes of this Section:
(i) “Tax”
means
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, windfall profits, custom
duties, ownership interests, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales,
use, transfer, registration, value-added, alternative, or other tax of any
kind
whatsoever, whether computed on a separate or consolidated, unitary, or combined
basis or in any other manner, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligation to indemnify
or
otherwise assume or succeed to the Tax liability of any other
Person.
(ii)
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return
or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
(c) There
are
no waivers of the applicable statutes of limitations for such taxes for any
period and no deficiency assessment or proposed adjustment of the Seller’s
income taxes is pending.
4.9
Real
Property.
(a)
No
Owned Real Property.
Seller
does not own any interest in any real property.
(b)
No
Leased Real Property to be Assumed.
Seller
does not lease any real property to be assumed by Buyer.
4.10
Personal
Property; Good Title; Condition.
Except
for such personal property as has been disposed of in the ordinary course
of the
Seller’s businesses since the date of the Latest Balance Sheet, the Seller owns
good and marketable title to all property which it purports to own (including,
but not limited to, that reflected on the Latest Balance Sheet), as well
as all
property acquired by the Seller since the date of the Latest Balance Sheet.
All
tangible personal property reflected on the Latest Balance Sheet is actually
on
hand, increased and decreased by acquisitions and dispositions of such property
in the ordinary course of business since the date of the Latest Balance Sheet.
Seller’s equipment in regular use has been reasonably maintained, is in good
condition and repair (normal wear and tear excepted), and, as of the Closing,
will be owned by the Seller free and clear of all security interests (including
any conditional sale or other title retention agreements), liens, claims,
charges, pledges, exceptions, and defects of title and other encumbrances
of any
kind, except as otherwise set forth on Schedule
4.10. Schedule 4.10 lists
all
leases of tangible personal property under which the Seller is the lessee,
and
the Seller has delivered to the Buyer true and complete copies of each such
lease. No default exists under any such lease, as to the payment of rent
or
otherwise. All tangible personal property owned or leased by the Seller is
located upon the Seller's premises, except as otherwise set forth on
Schedule
4.10.
The
Purchased Assets and Excluded Assets consist of all assets and rights used
in,
or useful to, Seller in the operation of the Stomp Business.
9
4.11
Inventory.
The
Inventory consists solely of raw materials, supplies, work-in-process and
finished goods and has been valued as reflected in the Financial Statements..
The Inventory is usable and generally salable at normal profit margins and
within customary time periods in the ordinary course of the Stomp Business
and
contains no material amount of slow-moving, obsolete or damaged items. The
value
at which Inventory is reflected on the Financial Statements reflects appropriate
writedowns for slow-moving, obsolete and damaged merchandise. Except as noted
in
the Financial Statements and
as disclosed in Schedule 4.11 herein,
no Inventory has been consigned
to
others, nor is any Inventory consigned to the Seller.
4.12
Authorizations.
Seller
is in possession of all permits necessary for Seller to own, lease and operate
its properties or to produce, store, distribute and market its products or
otherwise to carry on the Stomp Business as it is now being conducted (the
“Permits”),
and,
as of the date of this Agreement, none of the Permits has been suspended
or
cancelled nor is any such suspension or cancellation pending or, to the
knowledge of Seller, threatened, except for such Permits for which the failure
to possess or the suspension or termination of which would not, individually
or
in the aggregate, have a Material Adverse Effect. All of Seller’s Permits are
listed on Schedule
4.12.
The operation of the Stomp Business by Seller is not in conflict with, or
in
default or violation of, any Permits, except for such conflict, default or
violation of which would not have a Material Adverse Effect.
4.13
Litigation.
Except
as set forth on Schedule
4.13,
there
is no litigation, claim, proceeding or investigation pending, or, to the
Seller’s knowledge, threatened against or relating to the Seller, its properties
or business, or the transactions contemplated herein. Schedule
4.13 discloses,
with respect to each item described thereon, the name or title of the action
(and parties or potential parties thereto), a description of the nature of
the
action or claim, and an estimate of the maximum liability of the Seller in
the
event of an adverse result. Except as so described, the Seller knows of no
state
of facts or circumstances which reasonably could be expected to ripen into
litigation, proceeding or investigation or have a material adverse effect
on the
properties or business of the Seller. Except as described on Schedule
4.13,
there
is no outstanding order, decree or stipulation issued by any federal, state
or
local authority to which the Seller is a party or subject and which has or
may
have a Material Adverse Effect. No injunction, judgment, or other order has
been
issued by any court or governmental authority in any legal action or proceeding
instituted by a third party against Seller or any of its assets arising by
reason of the acquisition of the Stomp Business pursuant to this Agreement,
which restrains, prohibits or invalidates or seeks to restrain, prohibit
or
invalidate, the consummation of the transactions contemplated by this Agreement,
or seeks damages related thereto.
4.14
Compliance
With Law.
The
conduct of the Stomp Business does not violate, nor is Seller in default
under,
any law, statute, ordinance, rule, regulation, code, license, permit, guideline,
order, arbitration award, judgment or decree, including, without limitation,
civil rights legislation, equal employment opportunity legislation, occupational
safety and health legislation, legislation pertaining to illegal bribes or
kickbacks except for any such violation that would not have a Material Adverse
Effect on the conduct of the Stomp Business. No investigation or
review by any Governmental Entity is pending or, to Seller’s knowledge, has been
threatened in a writing delivered to Seller against Seller, nor, to
Seller’s knowledge, has any Governmental Entity indicated an intention to
conduct an investigation of Seller. There is no agreement, judgment, injunction,
order or decree binding upon Seller which has or could reasonably be expected
to
have the effect of prohibiting or materially impairing any business practice
of
Buyer as the successor to the Stomp Business.
10
4.15
Environmental
Laws.
Except
as could not reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect, to the knowledge of Seller (i) Seller is in
compliance with all federal, state, local and foreign statutes, codes, laws,
ordinances, regulations, rules, guidance, notices, permits, judgments, orders
and decrees applicable to it or any of its properties, assets, operations
and
businesses relating to pollution or the protection of human health or the
environment (“Environmental
Laws”);
(ii) all past noncompliance of Seller with Environmental Laws has been
resolved without any pending, ongoing or future obligation, cost or liability;
and (iii) Seller has not released a Hazardous Waste, Hazardous Material or
Hazardous Substance (as defined in any Environmental Law) at, or transported
a
Hazardous Material to or from, any real property leased or occupied by Seller,
in violation of any Environmental Law.
4.16
Employees.
(a) Schedule
4.16 lists
all
individuals currently employed by the Seller or engaged as independent
contractors in connection with the Stomp Business (excluding all attorneys,
accountants, consultants and other advisors engaged for purposes of this
transaction), the current pay arrangement for each such person, and a
description of any written or oral agreements with such individuals that
are not
terminable by the Seller at will. All payments to the Seller’s employees which
would have been paid in the ordinary course of business consistent with the
Seller’s past practices on or before the Closing Date shall have been paid as of
the Closing with respect to any of Seller’s employees whose employment with
Seller is terminated as of the Closing. No promises or representations have
been
made by the Seller to any employee of the Seller with respect to his employment
by the Buyer after the Closing, or the terms thereof.
(b) Seller
is
not a party to any collective bargaining or other labor union contract
applicable to persons employed by Seller, and no collective bargaining agreement
is being negotiated by Seller. As of the date of this Agreement, there is
no labor dispute, strike or work stoppage against Seller pending or, to the
knowledge of Seller, threatened that may interfere with the business activities
of the Stomp Business. As of the date of this Agreement, to the knowledge
of Seller, neither Seller nor any of its representatives or employees has
committed any unfair labor practice in connection with the operation of the
Stomp Business, and to Seller’s knowledge, there is no charge or complaint
against Seller by the National Labor Relations Board or any comparable
governmental entity pending or threatened in writing.
(c) Except
as
could not reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect, Seller is in compliance with all currently applicable
laws and regulations respecting employment, discrimination in employment,
terms
and conditions of employment, wages, hours and occupational safety and health
and employment practices. There are no controversies pending or, to the
knowledge of Seller, threatened, between Seller and any of its employees,
which
controversies have or could reasonably be expected to result in an action,
suit,
proceeding, claim, arbitration or investigation before any agency, court
or
tribunal, foreign or domestic, and to Seller’s knowledge, there are no existing
factors or circumstances that could reasonably be expected to result in such
an
action, suit, proceeding, claim, arbitration or investigation. To the
knowledge of Seller, no employees of Seller are in violation of any material
term of any employment Contract, patent disclosure agreement, noncompetition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by Seller because of the nature
of the
business conducted or presently proposed to be conducted by Seller or to
the use
of trade secrets or proprietary information of others. Seller has not
received since June 30, 2006, any written or, to Seller's knowledge, oral
notice
that any such employee intends to terminate his or her employment with the
Stomp
Business.
11
(d) Schedule
4.16 lists
all proposed or anticipated bonuses to be paid to any employee, representative
or agent of the Stomp Business through or relating to activities performed
prior
to the Closing Date.
(e)
Foreign
Employees.
There
are no officers or employees, current or former, of the Seller working outside
the United States.
4.17
Employee
Benefits.
(a)
Schedule
4.17
to this
Agreement is a list of all Seller’s current employment contracts, collective
bargaining agreements, and pension, bonus, profit-sharing, stock option,
or
other agreements providing for employee remuneration and benefits, and the
Seller has provided the Buyer with true and complete copies of each. Seller
and
its transferees shall remain responsible for all compensation and benefits
claimed by Seller’s employees with respect to employment by Seller, including
any claims resulting from their termination of employment as a result of
the
transaction contemplated hereby. Buyer shall not have any responsibility
therefor.
(b)
Exclusivity.
The
Seller has no material responsibility or liability, contingent or otherwise,
with respect to any employee benefits for or on behalf of its employees other
than under the Plans listed on Schedule
4.17.
The
Seller has the right to amend or terminate, without the consent of any other
person, any Plan, except as prohibited by law. None of the Plans is (i) a
multiemployer plan (as such term is defined in Section 3(37) of ERISA), or
(ii)
an arrangement providing medical or other welfare benefits to retirees or
other
former employees or their beneficiaries, except as required under COBRA and
similar state statutes.
4.18 Intellectual
Property.
(a)
“Intellectual
Property Rights”
shall
mean any and all of the following which are used and/or owned by Seller,
along
with all income, royalties, damages and payments due or payable after the
Closing, including, without limitation, damages and payments for infringements
or misappropriations thereof occurring after Closing, the right to xxx and
recover for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: patents, patent applications, patent disclosures and inventions (whether
or not patentable and whether or not reduced to practice) and any reissue,
continuation, continuation-in-part, division, revision, extension or
reexamination thereof, utility model registrations and applications; design
registrations and applications; trademarks, service marks, trade dress, logos,
trade names, Internet sites, email domain names, email addresses and
corporate names together with all goodwill associated therewith, copyrights
registered or unregistered and copyrightable works; mask works; and all
registrations, applications, and renewals for any of the foregoing; trade
secrets and confidential information (including without limitation, ideas,
formulae, compositions, manufacturing and production processes and techniques,
research and developmental information, drawings, specifications, designs,
plans, proposals, technical data, financial, business and marketing plans,
and
customer and supplier lists and related information); computer software and
software systems (including, without limitation, data, databases, object
code,
source code, executable code and firmware and related documentation); licenses
or other agreements including but not limited to those assigning, waiving
or
relating to rights of publicity, moral rights or neighboring rights to or
from
third parties; and all copies and tangible embodiments of the foregoing (in
whatever form or medium), in each case including, without limitation, the
items
set forth on
Schedule 4.18.
12
(b)
Schedule
4.18
sets
forth a complete and correct list of (i) all patents, trademark and service
xxxx
registrations, copyright registrations and other Intellectual Property Rights
registered by Seller as well as all pending applications therefor; (ii) all
business names, trade names and material unregistered trademarks used by
Seller
(to the extent not reflected on other schedules attached hereto) as its own
marks; (iii) all material computer software owned or used by Seller (other
than
commercial software products generally available to users); (iv) all other
material licenses or similar agreements for the Intellectual Property Rights
to
which Seller is a party, in each case identifying the subject Intellectual
Property Rights; and (v) all Internet sites and email domain names owned
or used
by Seller in the Stomp Business.
(c)
Except
as
set forth on
Schedule 4.18,
(i)
Seller owns, free and clear of any security interests and has a valid and
enforceable right to, each of the Intellectual Property Rights as described
on
Schedule 4.18
other
than the Intellectual Property Rights that Seller licenses from others, as
to
which Seller has a valid and enforceable right to use such licensed Intellectual
Property Rights, and no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Intellectual Property Rights
has
been made, is currently outstanding or, to Seller's knowledge, is threatened;
(ii) the Intellectual Property Rights comprise all material intellectual
property rights which are currently being used by Seller or which are necessary
for the operation of the Stomp Business as currently conducted by Seller;
(iii)
to Seller's knowledge, no present or former member, shareholder, officer,
director, manager, agent, consultant or independent contractor of Seller
owns or has any other right in or to, or has claimed any ownership or other
right in or to, any Intellectual Property Rights which are necessary or
desirable in connection with the Stomp Business as now conducted; (iv) no
loss
or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights is, to Seller’s knowledge, threatened, or is
pending, except for those which could not reasonably be expected, individually
or in the aggregate, to cause a Material Adverse Effect on the
Stomp Business; (v) Seller has not received any notices of, nor is Seller
aware
of any facts which indicate a likelihood of any infringement or misappropriation
by, or conflict with, any third party with respect to any of the Intellectual
Property Rights including, without limitation, any demand or request by Seller
that such third party license any of the Intellectual Property Rights from
Seller or to Seller; (vi) to Seller’s knowledge, Seller has not infringed,
misappropriated or otherwise conflicted with any rights, including intellectual
property rights of any third parties, and Seller is not aware of any
infringement, misappropriation or conflict by Seller of any third-party patent,
trademark, copyright or other intellectual property right or of any such
infringement, misappropriation or conflict which shall occur as a result
of the
continued operation of the Stomp Business, as currently conducted, and there
is
no demand or request from a third party that Seller take a license under
any
intellectual property right; and (vii) none of the Intellectual Property
Rights
owned or used by Seller are, to Seller’s knowledge, being infringed,
misappropriated or conflicted by any third party.
13
(d)
Seller
has taken commercially reasonable and practical steps to protect its trade
secrets and other confidential information.
(e)
Seller
represents that the Intellectual Property Rights being transferred to Buyer
include all of Seller's rights, if any, in and to the relevant source and
executable codes for Seller's software along with all of Seller's rights,
if
any, in and to any existing modifications, bug fixes and enhancements that
have
been developed by or for Seller for use with Seller’s software.
(f)
All
personnel, including employees, officers, directors, agents, consultants
and
contractors, who have contributed to or participated in the conception, use
or
development of the Intellectual Property Rights have executed agreements
that
require such personnel to assign any and all interest in the Intellectual
Property Rights to Seller and to keep confidential all trade secrets,
proprietary data, customer information or other business information of
Seller. No such personnel is a party to any Contract with any Person other
than Seller that requires such personnel to assign interest in any Intellectual
Property Rights to any Person other than Seller.
(g)
Except
for escrow agreements executed in the ordinary course of business
with persons listed on Schedule
4.18,
and persons listed on Schedule
4.18 who
are bound by an appropriate confidentiality Contract, the source code and
system
documentation relating to Seller's software programs (i) have been
disclosed by Seller only to personnel who have a “need to know” the
contents thereof in connection with the performance of their duties to Seller,
and (ii) have not been disclosed to any third party.
4.19
Customers
and Suppliers.
(a)
Schedule
4.19A lists
all
the customers of the Seller during the period January 1, 2005 to the date
hereof. Except as described on Schedule
4.19A,
Seller
is not aware of any adverse change in its relationships with respect to
customers with which it is currently doing business or of any intention of
any
customer with which it is currently doing business to terminate or reduce
its
business relationship with the Seller prior to the Closing or fail to continue
such relationship with the Buyer. The Seller has delivered to the Buyer true
and
complete copies of all existing Customer Contracts. For these purposes, Seller
shall be considered to be currently doing business with all customers identified
on Schedule
4.19A.
(b)
For
purposes of this Agreement, “Material Customer” shall mean Seller’s top ten (10)
customers during the twelve (12) month period ended December 31, 2005, and
top
ten (10) customers during the nine (9) month period ended September 30, 2006,
based upon total dollars invoiced in such period. The Material Customers
for
each such period are listed on Schedule
4.19B.
To
Seller’s knowledge, the consummation of the transactions contemplated hereunder
will not have any Material Adverse Effect on the business relationship of
Seller
with any Material Customer.
14
(c)
Seller
has received no written, or to the knowledge of Seller, oral notice from
any
material customer or supplier of Seller that such customer does not intend
to
pay for services rendered or products purchased, such customer is dissatisfied
with any service or product of Seller in any material respect, such supplier
does not intend to continue to supply goods or services to Seller or there
exists any breach or event of default under any Contract with such customer
or
supplier, no material customer or supplier has cancelled or otherwise
terminated, or to Seller's knowledge, threatened to cancel or otherwise
terminate, its relationship with the Stomp Business since December 31,
2005. Seller has no agreements or arrangements establishing, creating or
relating to any rebate, promotion or other allowance that involves any
obligation or liability to any customer that is material.
4.20
Contracts.
Set
forth on Schedule
4.20
is a
list of the following Contracts to which Seller is a party or by which or
to
which any of the assets of Seller is bound or subject, in effect on the date
hereof (collectively, the “Material
Contracts”),
true
and complete copies of which have been provided or made available to
Buyer:
(a)
distributor,
sales, marketing, vendor, advertising, financial advisory, broker-dealer,
agency
or manufacturer’s representative Contracts involving more than
$25,000;
(b)
continuing
Contracts for the purchase or provision of materials, supplies, equipment
or
services involving in the case of any such Contract more than $25,000 over
the
life of the Contract;
(c)
Contracts
that expire, or may be renewed at the option of any Person (as defined herein)
other than Seller so as to expire, more than one year after the date of this
Agreement and involving more than $25,000 in the aggregate;
(d)
trust
indentures, mortgages, promissory notes, loan agreements or other Contracts
for
the borrowing of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be capitalized
in
accordance with GAAP;
(e)
Contracts
for capital expenditures in excess of $25,000 in the aggregate;
(f)
Contracts
currently in effect that were entered into in the ordinary course of business
and that involve the payment or receipt of consideration in excess of
$25,000;
(g)
Contracts
for the sale, lease or sublease of real property;
(h)
Contracts
for the sale of any material assets or properties of Seller or for the grant
to
any Person any preferential rights to purchase any material assets or properties
of Seller, other than in the ordinary course of business;
(i)
Contracts
establishing joint ventures or partnerships;
(j)
Contracts
containing any material obligations or liabilities of any kind to holders
of
ownership interests of Seller except for contracts for the sale or purchase
of
such ownership interests which have been fully performed;
15
(k)
Contracts
relating to the acquisition by Seller of any operating business or any capital
stock of any other Person;
(l)
Contracts
requiring the payment to any Person of any material override or similar
commission or fee in excess of $25,000;
(m)
Contracts
with any current or former officer or director, including any employment
or
deferred compensation Contract and any compensation, bonus, incentive plan,
severance or change-in-control Contract;
(n)
Agreements
of guarantee, support, indemnification, assumption or endorsement of, or
any
similar commitment with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any other
Person
that involve the potential payment by Seller of amounts in excess of $25,000
in
the aggregate; or
(o)
Contracts
that were not made in the ordinary course of business and that are material
to
Seller taken as a whole.
Seller
is
not in violation of or in default under (nor has there occurred any event
that
with the giving of notice or the expiration of any cure period would result
in
such a violation of or default under) any Material Contract, except for such
violations or defaults which would not, individually or in the aggregate,
have a
Material Adverse Effect. Each Material Contract is in full force and
effect and is a legal, valid and binding obligation of Seller and, to the
knowledge of Seller, each of the other parties thereto, enforceable in
accordance with its terms, in each case, subject to applicable laws of
bankruptcy, insolvency or similar laws relating to creditors’ rights generally
and to general principles of equity (whether applied in a proceeding in law
or
equity). As used herein, “Person”
shall
mean any person, limited liability company, partnership, trust, corporation
or
other entity.
4.21
Product
Warranties.
Schedule
4.21
sets
forth the Seller’s policy regarding warranties on its products and services and
all warranty claims made against Seller since January 1, 2004. Seller has
provided no written warranties not described on Schedule
4.21.
4.22
Insurance.
Schedule
4.22 lists
all
policies of insurance and all surety and other bonds to which the Seller
now is
a party, specifying for each policy or bond the insurer, the term, whether
or
not such policy is in full force and effect, the amount of coverage, the
type of
insurance, any pending claims thereunder, and any notice which has been given,
or grounds which exist, to cancel any of such policies or bonds or to reduce
the
coverage provided thereby.
4.23
Absence
of Questionable Payments.
Neither
the Seller nor, to the knowledge of Seller, any of its respective officers,
directors, agents or employees purporting to act on its behalf has authorized
or
made, or agreed or offered to make, any payment of, or promise to pay, any
money
or anything of value, or any use of the Seller’s assets (i) to or on behalf of
an official of any government or foreign government, or political party or
official thereof or candidate for political office (domestic or foreign),
or
other person, to or for any purpose except as permitted by applicable law,
(ii)
for any of the purposes described in Section 162(c) of the Internal Revenue
Code, or (iii) for establishment or maintenance of any concealed fund or
concealed bank account. Neither Seller nor, to the knowledge of Seller, any
director, officer, agent or employee of Seller (in his or her capacity as
such)
has (i) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees
or to
foreign or domestic political parties or campaigns or violated any provision
of
the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any
other unlawful payment. To Seller’s knowledge, no officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of Seller
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary
course
of business) to any customer, supplier, employee or agent of a customer or
supplier, official or employee of any governmental body, governmental body
or
any political party or candidate for office (domestic or foreign) or other
person who was, is or may be in a position to help or hinder the business
of
Seller (or assist Seller in connection with any actual or proposed transaction)
which would be reasonably expected to (i) subject Seller, or any other
individual or entity to any damage or penalty in any legal proceeding, (ii)
if
not given in the past, cause a Material Adverse Effect on the Stomp Business,
or
(iii) if not continued in the future, could cause a Material Adverse Effect
on
the Stomp Business.
16
4.24
Recent
Changes.
(a)
Except
as
disclosed on Schedule
4.24,
since
the date of the Latest Balance Sheet, there has not occurred or been
incurred:
(i) any
material adverse change in the condition (financial or otherwise) of the
Stomp
Business including without limitation, a material adverse change in, or loss
of,
a material relationship with any customer or other person, except changes
in the
ordinary course of business which have not individually or in the aggregate
had
a Material Adverse Effect;
(ii) any
damage, destruction or loss (whether or not covered by insurance) which would
have a Material Adverse Effect;
(iii) any
change in the accounting methods or practices followed by the Seller or any
change in depreciation or amortization policies or rates heretofore adopted
which is in any way material to the Stomp Business or the Financial
Statements;
(iv) any
material debt, obligation or liability to any person or entity entered into
or
incurred by the Seller (whether or not presently outstanding), except
liabilities incurred and obligations entered into in the ordinary course
of
business, or those that are not Assumed Liabilities;
(v) any
sale,
lease, assignment, transfer, license, abandonment, pledge, mortgage or other
disposition by the Seller, other than in the ordinary course of business,
of any
equipment or other asset or operating property, or the sale, assignment,
transfer, license, pledge, mortgage or other disposition by the Seller of
any
intangible asset, which is material to the Stomp Business or the Financial
Statements;
17
(vi) any
labor
trouble, strike, dispute, slowdown, stoppage or other occurrence, event or
condition of any similar character, concerning the Stomp Business or the
Seller;
(vii) any
waiver or release of any right or claim of material value to Seller’s
business;
(viii) any
wage
or salary increase or bonus, or increase in any other direct or indirect
compensation for or to any employee, officer, director, consultant, agent
or
other representative, other than to non-officers or non-director employees,
consultants, agents or other representatives in the ordinary course of business
consistent with past practice;
(ix) any
pledge or encumbrance, voluntarily or involuntarily, of any of its assets
or
properties, except for liens for current taxes which are not yet delinquent
or which are being contested in good faith and purchase-money liens arising
out of the purchase or sale of products made in the ordinary course of business
and in any event not in excess of $15,000 for any single item or $25,000
in the
aggregate;
(x) any
material change of any of its business policies or practices, including
advertising, marketing, pricing, purchasing, personnel, sales or budget
policies;
(xi) any
agreement to do any of the foregoing; or
(xii) any
material adverse change in the conduct or nature of the Stomp Business, whether
or not made in the ordinary course of business.
4.25
Business
Activity Restriction.
There is no non-competition or other similar agreement, commitment, judgment,
injunction, order or decree to which Seller is a party or subject to that
has or
could reasonably be expected to have the effect of prohibiting or materially
impairing the conduct of the Stomp Business as currently conducted.
Seller has not entered into any agreement under which Seller is restricted
from
selling, licensing or otherwise distributing any of its technology or products
to, or providing services to, customers or potential customers or any class
of
customers, in any geographic area, during any period of time or in any segment
of the market or line of business.
4.26
Export
Control Laws.
Seller has conducted its export transactions in accordance with applicable
provisions of United States export control laws and regulations, including
but
not limited to the Export Administration Act and implementing Export
Administration Regulations, except for such violations which would not have,
individually or in the aggregate, a Material Adverse Effect.
4.27
Brokerage.
The
Seller has not incurred, or made commitments for, any brokerage, finders'
or
similar fee in connection with the transaction contemplated by this Agreement,
other than as set forth in Schedule
4.27.
18
4.28
Transactions
with Affiliates.
No
executive officer, director, Affiliate or equity owner of Seller has engaged
in
any business dealings with Seller during the last three years other than
business dealings engaged on behalf of Seller in which such Person had no
pecuniary interest other than compensation from Seller or such Person’s equity
ownership interest in Seller. “Affiliate” of
a
Person shall mean: (i) any other Person directly, or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with such Person; (ii) any officer, director, partner, employer, or
direct or indirect beneficial owner of any 10% or greater equity or voting
interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity. No stockholder,
director, officer or employee of the Seller, or any member of his or her
immediate family or any other of its, his or her affiliates, owns or has
a 5% or
more ownership interest in any corporation or other entity that is a competitor,
supplier or customer of the Seller.
4.29
Employee
Complaints.
Since December 31, 2005, to Seller's knowledge, Seller has not discharged,
demoted, suspended, threatened, harassed or in any other manner discriminated
against any employee (i) who had previously submitted to his or her
supervisor or anyone else in a position of authority with Seller any written,
or
to the knowledge of Seller, oral complaint, concern or allegation regarding
any
alleged unlawful or unethical conduct by Seller or its employees relating
to
accounting, internal accounting controls or auditing matters, or (ii) who
has provided information to, or otherwise assisted any investigation by,
any law
enforcement, regulatory or other governmental authority or a member of the
United States Congress. Since December 31, 2005, no employee of Seller to
knowledge of Seller (i) has submitted to his or her supervisor or to
someone else in a position of authority any written or oral complaint, concern
or allegation regarding any alleged unlawful or unethical conduct by Seller
or
its employees relating to accounting, internal accounting controls or auditing
matters or (ii) has provided information to, or otherwise assisted any
investigation by, any law enforcement, regulatory or other governmental
authority or a member of the United States Congress.
4.30
Business
Information.
The pipeline report included in Schedule
4.30
represents known active interactions with prospective customers regarding
the
potential sale of Seller's software and services. This report in no way
represents or guarantees that such prospective customers will choose to purchase
software or services from Seller or its successors.
4.31
Investment
Representations by Seller.
(a)
Seller
understands that the Buyer Shares are being offered and issued to it in reliance
on specific exemptions from the registration requirements of the Securities
Act
and state securities laws and that Buyer is relying in part upon the truth
and
accuracy of, and Seller’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Seller set forth herein
in order to determine the availability of such exemptions and the eligibility
of Seller to acquire the Buyer Shares.
(b)
The
Buyer
Shares are being acquired by Seller for its own account, and not for any
other Person, for investment only and not being acquired with a view to or
for
the resale, distribution, subdivision, or fractionalization thereof. Seller
agrees not to sell, hypothecate or otherwise dispose of the Buyer Shares
unless they have been registered under the Securities Act and applicable
state
securities laws or in the opinion of counsel to Buyer, an exemption
therefrom is available.
19
(c)
Seller
has read this Agreement and all other documents provided by Buyer in connection
herewith, including the Buyer’s reports as filed with the Securities and
Exchange Commission (“SEC”),
and
fully understands the terms and conditions under which the Buyer Shares are
being issued to it pursuant hereto. Buyer has made available to Seller the
opportunity to ask questions of and receive answers from Buyer concerning
the
business of Buyer and the terms and conditions under which Buyer Shares will
be
issued to it and to obtain any additional information which Buyer possesses
or
can acquire without unreasonable effort or expense that is necessary to verify
the accuracy of information furnished in connection with this Agreement or
in
response to any request for information.
(d)
Seller
agrees that the Buyer Shares shall bear a legend in
substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR ANY
STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED
OR
OFFERED FOR SALE, TRANSFER OR HYPOTHECATION UNLESS A REGISTRATION
STATEMENT UNDER THAT ACT AND OTHER APPLICABLE SECURITIES LAWS WITH
RESPECT
TO SUCH SECURITIES IS THEN IN EFFECT OR, IN THE REASONABLE OPINION
OF
COUNSEL TO THE ISSUER, SUCH REGISTRATION IS NOT REQUIRED.
|
4.32 Bankruptcy.
Seller
has not filed a petition or request for reorganization or protection or relief
under the bankruptcy laws of the United States or any state or territory
thereof; made any general assignment for the benefit of creditors; or consented
to the appointment of a receiver or trustee, including a custodian under
the
United States bankruptcy laws, whether such receiver or trustee is appointed
in
a voluntary or involuntary proceeding which has not been discharged prior
to the
date hereof.
4.33
Survival;
Limitation on Liability.
All
representations, warranties, covenants and agreements set forth in this
Agreement or in any writing or certificate delivered in connection with this
Agreement shall survive the execution and delivery of this Agreement and
the
consummation of the transactions contemplated hereby and shall not be affected
by any examination made for or on behalf of Buyer, the knowledge of Buyer,
or
the acceptance by Buyer of any certificate or opinion.
4.34
Disclosure.
No
representation or warranty of Seller contained in this Agreement and no
statement in the Disclosure Schedules, certificate, instrument or other writing
furnished or to be furnished by the Seller to Buyer pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains
or
will contain any untrue or inaccurate statement in any material respect or
omits
to state a material fact necessary to make the statements herein or therein,
in
light of the circumstances under which they were made, not
misleading.
20
ARTICLE
5
REPRESENTATIONS
OF THE BUYER
In
order
to induce the Seller to enter into this Agreement, the Buyer makes the following
representations and warranties, each of which shall be deemed to be
independently material and relied upon by the Seller, regardless of any
investigation made by, or information known to, the Seller.
5.1
Organization.
The
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. The Buyer is qualified to transact
business as a foreign corporation in the jurisdictions set forth on Schedule
5.1 attached
hereto, and the Buyer is not required to be so qualified in any other
jurisdiction except where failure to be so qualified would not have a Material
Adverse Effect on Buyer. Buyer has delivered to the Seller complete and correct
copies of the Buyer’s Certificate of Incorporation and By-laws, as amended to
the date hereof, certified by the Secretary of State of Delaware and the
Secretary of the Buyer, respectively.
5.2
Enforceability;
Conflicting Obligations.
This
Agreement and all other agreements of Buyer contemplated hereby are or, upon
the
execution thereof, will be the valid and binding obligations of Buyer
enforceable against it in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting enforcement of creditors’ rights generally, or general principles of
equity. The execution and delivery of this Agreement do not, and the
consummation of the purchase of the Purchased Assets will not, conflict with
or
violate any provision of the Certificate of Incorporation or Bylaws of the
Buyer, nor any provisions of, or result in the acceleration of, any obligation
of the Buyer.
5.3
Authorization.
Buyer
has all necessary power and authority to enter into and perform the transactions
contemplated herein in accordance with the terms and conditions hereof. The
execution and delivery of this Agreement, and the performance by Buyer of
its
obligations contained herein, have been duly approved by Buyer's Board of
Directors.
5.4
Issuance
of Shares.
All
shares of Buyer that are to be issued to Seller upon the Closing have been
duly
authorized and are fully paid and nonassessable.
5.5
Brokerage.
The
Buyer has not incurred, nor made commitment for, any brokerage, finder's
or
similar fee in connection with the transactions contemplated by this Agreement,
other than as set forth on Schedule
5.5.
21
5.6
SEC
Filings; Buyer Financial Statements.
(a)
Since
October 1, 2005, Buyer has filed all forms, reports and documents required
to be
filed by Buyer with the SEC and has made available to Seller and will continue
to make available to the Seller such forms, reports and documents in the
form
filed with the SEC (if and to the extent such forms, reports and documents
are
not available on XXXXX) until the Closing. All such required forms, reports
and
documents (including those that Buyer may file subsequent to the date hereof
and
including, without limitation all amendments filed on or after October 1,
2005
that relate to periods of time prior to October 1, 2005)are referred to herein
as the “SEC
Reports.”
As of
their respective dates, the SEC Reports (i) were prepared in
accordance with and comply with the requirements of the Securities Act of
1933,
as amended (the “Securities
Act”),
or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports and (ii) did not at the time
they were filed (or if subsequently amended or superseded by a filing prior
to
the date of this Agreement, then on the date of such subsequent filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b)
Each
of
the consolidated financial statements (including, in each case, any related
ones
thereto) contained in the SEC Reports (the “Buyer
Financials”),
was
prepared in accordance with GAAP applied on a consistent basis throughout
the
periods involved (except as may be indicated in the notes thereto or, in
the
case of unaudited interim financial statements, as may be permitted by the
SEC
on Form 10-QSB, 8-K or any successor form under the Exchange Act) and
fairly presented the consolidated financial position of the Buyer and its
subsidiaries as at the respective dates thereof and the consolidated results
of
Buyer’s operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain all the footnotes
required by GAAP for audited statements, and were or are subject to normal
and
recurring year-end adjustments that Buyer does not expect to be material,
individually or in the aggregate. The Buyer’s Financials (including any related
notes) contained or incorporated by reference in the SEC Reports complied
as to
form in all material respects with the published rules and regulations of
the
SEC applicable thereto. Buyer has not been notified by its independent auditors
or the staff of the SEC that such auditors or the staff of the SEC, as the
case
may be, are of the view that any financial statement included in any
registration statement filed by Buyer under the Securities Act or any periodic
or current report filed by Buyer under the Exchange Act should be restated,
or
that Buyer should modify its accounting in future periods in a manner that
would
be materially adverse to Buyer. Buyer has delivered to Seller accurate and
complete copies of all SEC Reports other than such documents that can be
obtained on the Securities and Exchange Commission’s (SEC) website at
xxx.xxx.xxx. Except as would not have a Material Adverse Effect on Buyer,
all
statements, reports, schedules, forms and other documents required to have
been
filed by Buyer with the SEC have been filed on a timely basis. None of the
Buyer’s subsidiaries is required to file any documents with the SEC under the
Exchange Act. The certifications and statements required by (A) Rule 13a-14
under the Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of the
Xxxxxxxx-Xxxxx Act) relating to the SEC Reports (collectively, the “Certifications”)
are
accurate and complete and comply as to form and content with all applicable
laws
or rules of applicable governmental and regulatory authorities.
22
(c)
Except
as
described in the SEC Reports, (i) Buyer maintains disclosure controls and
procedures that satisfy the requirements of Rule 13a-15 under the Exchange
Act,
and (ii) such disclosure controls and procedures are designed to ensure that
all
material information concerning Buyer is made known on a timely basis to
the
individuals responsible for the preparation of Buyer’s filings with the SEC and
other public disclosure documents.
(d)
Buyer’s
auditor has at all required times since the date of enactment of the
Xxxxxxxx-Xxxxx Act been: (i) to the knowledge of Buyer, a registered public
accounting firm (as defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act);
(ii)
“independent” with respect to Buyer and the Buyer’s subsidiaries within the
meaning of Regulation S-X under the Exchange Act; and (iii) to the knowledge
of
Buyer, in compliance with subsections (g) through (l) of Section 10A of the
Exchange Act and the rules and regulations promulgated by the SEC and the
Public
Company Accounting Oversight Board thereunder.
(e)
Schedule
5.6
lists,
and Buyer has delivered to Seller accurate and complete copies of the
documentation creating or governing, all securitization transactions and
“off-balance sheet arrangements” (as defined in Item 303(c) of Regulation S-B
under the Exchange Act) effected by Buyer since December 31, 2005.
ARTICLE
6
CONDITIONS
TO CLOSING
6.1
Conditions
to Obligations of Buyer.
The
obligations of the Buyer hereunder are subject to the fulfillment to the
Buyer’s
satisfaction, on or before the Closing Date, of each of the following
conditions, any of which may be waived in writing in whole or in part by
the
Buyer:
(a)
All
proceedings taken in connection with the transactions contemplated hereby
and
all instruments and documents incident thereto shall be satisfactory in form
and
substance to the Buyer and its counsel. Without limiting the generality of
the
foregoing, the Buyer shall have received copies of resolutions adopted by
the
Board of Directors and stockholders of the Seller authorizing the execution,
delivery and performance of this Agreement, certified to by the Secretary
of the
Seller; a certificate of incumbency relating to the Seller’s officers and a
certificate of good standing relative to Seller recently certified by the
Secretary of State of its state of organization.
(b)
The
representations and warranties of the Seller contained herein shall be true
and
correct as of the date hereof.
(c)
The
Seller shall have in all respects performed and complied with each of the
agreements, covenants, terms and conditions hereof applicable to it which
were
to be performed or complied with on or prior to the Closing Date.
23
(d)
Since
December 31, 2005, there shall have been no Material Adverse Effect relating
to
the Seller or the Stomp Business, except as otherwise disclosed by Buyer
in this
Agreement or the Schedules hereto.
(e)
The
Seller shall have delivered to the Buyer on the Closing Date a certificate,
dated that date, to the effect of each of the provisions of Sections 6.1(b)
and
(c).
(f)
The
Seller shall have furnished to the Buyer on the Closing Date an opinion of
its
counsel, in substantially the form of Exhibit
6.1(f) hereto.
(g)
No
action
or proceeding shall have been instituted or threatened to set aside the
transactions provided for herein or to enjoin or prevent the consummation
thereof or which might, in the reasonable judgment of the Buyer, make the
consummation thereof inadvisable.
(h)
All
consents, permits and waivers necessary for consummation of the transactions
contemplated by this Agreement shall have been obtained.
(i)
Buyer
shall have made satisfactory arrangements for the employment of the individuals
listed on Schedule
6.1(i).
(j)
Seller
shall execute and deliver to Buyer a Stock Pledge Agreement in the form attached
hereto as Exhibit
6.1(j)
and
there shall be delivered to the Pledgeholder thereunder one or more stock
certificates for 5,000,000 shares of Buyer’s Common Stock..
(k)
Seller
shall have provided Buyer with audited financial statements of Seller for
the
years ended December 31, 2004 and 2005, with an unqualified opinion from
Xxxxx
& Co.
(l)
All
actions to be taken by the Seller at the Closing, including without limitation
the execution and delivery of the Conveyance Agreement and all other agreements
and documents required by this Agreement, shall have been taken.
(m)
The
Seller shall have taken such action as may be necessary or appropriate to
effect
a change of name to one substantially different in sound and appearance from
the
name “StompSoft, Inc.” The Seller agrees that the Buyer may use such names
immediately upon Closing, irrespective of the date upon which the Seller’s name
is changed by law.
(n)
The
Buyer
shall have obtained current Uniform Commercial Code and state, local and
federal
tax, sales and unemployment compensation tax, judgment, bankruptcy and similar
lien searches showing no liens, security interests, claims or judgments against
the assets of the Seller other than as set forth on Schedule
4.10,
and any
such liens, security interests, claims and judgments shall have been removed,
other than as set forth on Schedule
6.1(n).
6.2
Conditions
to Obligations of the Seller.
The
obligations of the Seller hereunder are subject to the fulfillment to the
Seller’s satisfaction, on or before the Closing Date, of each of the following
conditions, any or all of which may be waived in writing in whole or in part
by
the Seller:
24
(a)
All
proceedings taken in connection with the transactions contemplated hereby
and
all instruments and documents incident thereto shall be satisfactory in form
and
substance to the Seller and its counsel. Without limiting the generality
of the
foregoing, the Seller shall have received copies of resolutions adopted by
the
Board of Directors of the Buyer authorizing the execution, delivery and
performance of this Agreement, certified to by the Secretary of the Buyer;
a
certificate of incumbency relating to the Buyer’s officers; and a certificate of
good standing relative to the Buyer recently certified by the Secretary of
State
of its state of organization.
(b)
The
representations and warranties of the Buyer contained herein shall be true
and
correct on and as of the date hereof.
(c)
The
Buyer
shall have in all respects performed and complied with each of the agreements,
covenants, terms and conditions hereof applicable to the Buyer.
(d)
The
Buyer
shall have delivered to the Seller on the Closing Date a certificate of an
executive officer of Buyer, dated that date, to the effect of the provisions
of
Section 6.2(b) and (c) and such other certificates as the Seller and its
counsel
may reasonably request.
(e)
The
Buyer
shall have furnished to the Seller on the Closing Date an opinion of its
counsel, Xxxxx Xxxx, P.C., in substantially the form of Exhibit
6.2(e) hereto.
(f)
The
Buyer
shall have executed and delivered to Seller a Registration Rights Agreement
in
substantially the form of Exhibit
6.2(f)
hereto.
(g)
No
action
or proceeding shall have been instituted or threatened to set aside the
transactions provided for herein or to enjoin or prevent the consummation
thereof.
(h)
All
actions to be taken by the Buyer at the Closing, including, without limitation,
the payment of the cash consideration, issuance of the Buyer Shares and the
execution and delivery of all other agreements and documents, shall have
been
taken.
ARTICLE
7
INDEMNIFICATION
BY THE SELLER
7.1
Indemnification.
Notwithstanding the Closing, and regardless of any investigation made by
or on
behalf of the Buyer, or any information known to the Buyer, the Seller, subject
to the terms and conditions of this Article 7, shall indemnify and save the
Buyer, its stockholders, officers, directors, employees, consultants and
agents
and their respective successors and assigns (collectively, as used in this
Article 7, the “Indemnitees”)
harmless from and against any and all losses, claims, damages, liabilities,
costs, expenses or deficiencies including, but not limited to, reasonable
attorneys' fees and other costs and expenses reasonably incident to proceedings
or investigations or the defense or settlement of any claim or claims, incurred
by or asserted against the Indemnitees or the Purchased Assets due to or
resulting from: (i) the inaccuracy or breach of any representation or warranty
of the Seller given in or pursuant to this Agreement; (ii) any breach or
default
in the performance by the Seller of any of its covenants, obligations or
agreements in or pursuant to this Agreement; (iii) any liability or obligation
of the Seller other than the Assumed Liabilities; and/or (iv) the ownership
or
conduct of the Stomp Business or the ownership or use of the Purchased Assets
at
any time prior to the Closing, or any incident, occurrence, condition or
claim
arising or accruing prior to the Closing and relating to the operation or
conduct of the Stomp Business or the ownership or use of the Purchased Assets
prior to the Closing, other than an Assumed Liability and any liability or
obligation with respect to which the Seller is entitled to be indemnified
pursuant to Section 8.1 hereof. The foregoing are collectively referred to
in
this Article 7 as “Indemnifiable
Damages.”
25
7.2
Indemnification
Limitations.
(a)
Limitations
on Indemnifiable Damages.
Notwithstanding the foregoing, the Indemnitees shall not be entitled to recover
Indemnifiable Damages for any matter described in Section 7.1 hereof unless
and
until the aggregate of all claims for Indemnifiable Damages asserted pursuant
to
Section 7.1 hereof exceeds $10,000 (the “Deductible”),
provided that if such claims exceed the Deductible in the aggregate, the
Indemnitees shall be entitled to recover all amounts of Indemnifiable Damages;
further, provided, however, that notwithstanding any provision in this Agreement
to the contrary, in no event shall the aggregate of the Indemnifiable Damages
described in Section 7.1 hereof exceed the total amount of $2,050,000 (the
“Cap”).
(b)
Tax
Provision.
In
computing the amount of Indemnifiable Damages, there shall be deducted therefrom
an amount equal to the net, actual income tax savings, if any, demonstrably
resulting to the Indemnitees from the income tax deduction or deferral and
amounts received or provided for Indemnitees’ benefit pursuant to policies of
insurance, if any, to which the Indemnitees shall become entitled as a
consequence of any loss, claim, damage, liability, cost, expense or deficiency
giving rise to the Indemnifiable Damages, but only to the extent that such
income tax savings would not be offset by adverse tax consequences to the
Indemnitees by reason of receipt of the Indemnifiable Damages or such proceeds
of insurance. Buyer waives for itself and its insurance providers all rights
of
subrogation and assignment against the Seller related to Indemnifiable Damages.
(c)
Exclusive
Remedy.
The
indemnification provisions of Article 7 are the exclusive remedy of the
Indemnitees for Indemnifiable Damages arising thereunder, except for those
arising by reason of any breach of the covenants contained in Article 10
and as
to which the Buyer may pursue all rights and remedies available to it at
law or
in equity.
(d)
Exclusion.
Indemnifiable Damages for purposes of Article 7 shall exclude and the Seller
shall not be obligated to indemnify Buyer or otherwise be liable for any
consequential damages. For purposes of Article 7 and Article 8, Indmnifiable
Damages shall be reduced by insurance proceeds paid to the indemnified party
and
the indemnifying party shall not be obligated for Indemnifiable Damages to
the
extent of such insurance proceeds.
7.3
Procedures
for Making Claims.
If and
when the Indemnitees desire to assert a claim for Indemnifiable Damages against
the Seller pursuant to the provisions of this Article 7, the Indemnitees
shall
deliver to the Seller, reasonably promptly after the Indemnitees’ receipt of a
claim or specific and affirmative awareness of a potential claim, a certificate
signed by the Buyer’s secretary (as used in this Article 7, the “Notice
of Claim”):
(i)
stating that the Indemnitees have paid or accrued (or intend to pay or accrue)
Indemnifiable Damages to which they are entitled to indemnification pursuant
to
this Article 7 and the amount thereof (to the extent then known); and, (ii)
specifying to the extent possible (A) the individual items of loss, damage,
liability, cost, expense or deficiency included in the amount so stated,
(B) the
date each such item was or will be paid or accrued and (C) the basis upon
which
Indemnifiable Damages are claimed. If the Seller shall object to such Notice
of
Claim, the Seller shall promptly deliver written notice of objection (as
used in
this Article 8, the “Notice
of Objection”).
The
Notice of Objection shall set forth the grounds upon which the objection
is
based and state whether the Seller objects to all or only a portion of the
matter described in the Notice of Claim. Any such claim or claims shall
ultimately be resolved by agreement of the parties or litigation. If it shall
be
determined that the Indemnitees shall be entitled to any Indemnifiable Damages
by reason of its claim or claims, the Indemnifiable Damages so determined
shall
be paid to the Indemnitees in the same manner as if the Seller had not delivered
a Notice of Objection.
26
7.4
Participation
in Defense of Third Party Claims.
If any
third party shall assert any claim against the Indemnitees which, if successful,
might result in an obligation of the Seller to pay Indemnifiable Damages,
Buyer
will promptly notify Seller of the existence of the claim and will give Seller
a
reasonable opportunity to defend the claim at its own expense and with counsel
of its own selection; provided that Buyer will at all times also have the
right
to participate fully in the defense at its own defense. If, within a reasonable
time after this notice, Seller fails to defend, Buyer will have the right,
but
not the obligation, to undertake the defense of, and to compromise or settle
(exercising reasonable business judgment), the claim or other matter on behalf
and at the risk of Seller. If the claim is one that cannot by its nature
be
defended solely by Seller (including any federal or state tax proceeding),
Buyer
will make available all information and assistance that Seller may reasonably
request.
7.5
Survival
of Representations and Indemnification.
The
Seller’s obligation to pay Indemnifiable Damages arising out of claims described
in Sections 7.1 (ii), (iii) or (iv) hereof shall survive the Closing of this
transaction for a period equal to l the applicable statute of
limitations.
7.6
The
representations and warranties contained in Article 4 hereof, and the
Indemnitors’ obligation to pay Indemnifiable Damages arising out of Section
7.1(i) hereof, shall survive the Closing Date, as follows:
(a)
Fraudulent
Breach of Representations; Certain Representations.
In the
case of a claim based upon the inaccuracy or breach of a representation or
warranty which was made fraudulently or with respect to any representation
or
warranty contained in Sections 4.4, 4.5 and 4.6 hereof, for a period equal
to
the applicable statute of limitations.
(b)
Taxes.
In the
case of a claim based upon the inaccuracy or breach of a representation or
warranty pertaining to taxes, for a period equal to the applicable statute
of
limitations.
27
(c)
Setoff
Claims.
In the
case of a claim for which Indemnitees assert the right to setoff as provided
in
Section 7.6, for a period expiring at such time as the Indemnitees no longer
owe
amounts to the Seller; and
(d)
All
Other Claims.
In the
case of all other claims based upon the inaccuracy or breach of a representation
or warranty, for a period commencing on the date hereof and ending eighteen
(18) months after the Closing Date.
No
claim
for recovery of Indemnifiable Damages arising out of Section 7.1(i) hereof
may
be asserted by the Indemnitees after the expiration of the applicable time
period described in the foregoing Sections 7.5(a)-(d); provided, however,
that
any claim first asserted by the giving of a Notice of Claim within the
applicable survival period shall neither be abated nor barred.
7.7
Setoff.
Buyer
shall have the right, but not the obligation, to set off or deduct against
any
cash or shares of stock owed by the Buyer to the Seller under this Agreement
any
Indemnifiable Damages or other amounts to which the Indemnitees are entitled.
Setoffs shall be applied in the order in which the amounts owed to the Seller
are due. Any setoff in respect of an unmatured claim shall be provisional
until
such time as the claim matures and it is finally determined whether and to
what
extent the Seller has indemnity obligations to the Indemnitees in respect
of
such claim. If it is finally determined that the amount set off is in excess
of
the indemnity obligations of the Seller in respect of such claim, the Buyer
shall pay to the Seller, as applicable, within thirty (30) days after the
date
of such final determination, an amount sufficient to bring its obligations
under
any agreement or other obligation current after giving effect to the proper
amount of such setoff as so finally determined.
ARTICLE
8
INDEMNIFICATION
BY BUYER
8.1
Indemnification.
Notwithstanding the Closing, and regardless of any investigation made by
or on
behalf of the Seller, or any information known to the Seller, the Buyer,
subject
to the terms and conditions of this Article 8, indemnifies and saves the
Seller,
its stockholders, officers, directors, employees, consultants and agents,
and
their respective successors and assigns (collectively as used in this Article
8,
the “Indemnitees”)
harmless from and against any and all losses, claims, damages, liabilities,
costs, expenses or deficiencies, including, but not limited to, reasonable
attorneys' fees and other costs and expenses reasonably incident to proceedings
or investigations or the defense or settlement of any claim or claims, incurred
by or asserted against the Indemnitees due to: (i) the inaccuracy or breach
of
any representation or warranty of the Buyer given in or pursuant to this
Agreement; (ii) any breach or default in the performance by the Buyer of
any of
its covenants, obligations or agreements in or pursuant to this Agreement,
(iii)
any of the Assumed Liabilities; and/or (iv) the ownership or conduct of the
Stomp Business or the ownership or use of Purchased Assets at any time after
the
Closing, or any incident, occurrence, condition or claim arising or occurring
after the Closing and relating to the operation or conduct of the Stomp Business
or the ownership or use of the Purchased Assets after the Closing, other
than
any liability or obligation with respect to which the Buyer is entitled to
be
indemnified pursuant to Section 7.1 hereof. The foregoing are collectively
referred to in this Article 8 as “Indemnifiable
Damages.”
28
8.2
Indemnification
Limitations.
(a)
Limitations
on Indemnifiable Damages.
Notwithstanding the foregoing, the Indemnitees shall not be entitled to recover
Indemnifiable Damages for any matter described in Section 8.1 hereof unless
and
until the aggregate of all claims for Indemnifiable Damages asserted pursuant
to
Section 8.1 hereof exceeds $10,000 (the “Deductible”), provided that if such
claims exceed the Deductible in the aggregate, the Indemnitees shall be entitled
to recover all amounts of Indemnifiable Damages; further, provided, however,
that notwithstanding any provision in this Agreement to the contrary, in
no
event shall the aggregate of the Indmenifiable Damages for any matter described
in Section 8.1 exceed the Cap as defined in Section 7.2
(b)
Tax
Provision.
In
computing the amount of Indemnifiable Damages, there shall be deducted therefrom
an amount equal to the net, actual income tax savings, if any, demonstrably
resulting to the Indemnitees from the income tax deduction or deferral and
amounts received or provided for Indemnitees’ benefit pursuant to policies of
insurance, if any, to which the Indemnitees shall become entitled as a
consequence of any loss, claim, damage, liability, cost, expense or deficiency
giving rise to the Indemnifiable Damages, but only to the extent that such
income tax savings would not be offset by adverse tax consequences to the
Indemnitees by reason of receipt of the Indemnifiable Damages or such proceeds
of insurance. Buyer waives for itself and its insurance providers all rights
of
subrogation and assignment against the Seller related to Indemnifiable
Damages.
(c)
Exclusive
Remedy.
The
indemnification provisions of Article 8 are the exclusive remedy of the
Indemnitees for Indemnifiable Damages arising thereunder.
(d)
Exclusion.
Indemnifiable Damages for purposes of Article 8 shall exclude and the Buyer
shall not be obligated to indemnify Seller or otherwise be liable for any
consequential damages.
8.3
Procedures
for Making Claims.
If and
when the Indemnitees desire to assert a claim for Indemnifiable Damages against
the Buyer pursuant to the provisions of this Article 8, the Indemnitees shall
deliver to the Buyer, reasonably promptly after the Indemnitees’ receipt of a
claim or awareness of a potential claim, a certificate signed by the Indemnitees
(as used in this Article 8, the “Notice
of Claim”):
(i)
stating that the Indemnitees have paid or accrued (or intend to pay or accrue)
Indemnifiable Damages to which they are entitled to indemnification pursuant
to
this Article 8 and the amount thereof (to the extent then known) ; and, (ii)
specifying to the extent possible (A) the individual items of loss, damage,
liability, cost, expense or deficiency included in the amount so stated,
(B) the
date each such item was or will be paid or accrued and (C) the basis upon
which
Indemnifiable Damages are claimed. If the Buyer shall object to such Notice
of
Claim, the Buyer shall deliver written notice of objection (as used in this
Article 8, the “Notice
of Objection”)
to the
Indemnitees. The Notice of Objection shall set forth the grounds upon which
the
objection is based and state whether the Buyer objects to all or only a portion
of the matter described in the Notice of Claim. Any such claim or claims
shall
ultimately be resolved by agreement of the parties or litigation. If it shall
be
determined that the Indemnitees shall be entitled to any Indemnifiable Damages
by reason of their claim or claims, the Indemnifiable Damages so determined
shall be paid to the Indemnitees by the Buyer without the necessity of further
action.
29
8.4
Participation
in Defense of Third Party Claims.
If any
third party shall assert any claim against the Indemnitees which, if successful,
might result in an obligation of the Buyer to pay Indemnifiable Damages,
Seller
will promptly notify Buyer of the existence of the claim and will give Buyer
a
reasonable opportunity to defend the claim at its own expense and with counsel
of its own selection; provided that Seller will at all times also have the
right
to participate fully in the defense at its own defense. If, within a reasonable
time after this notice, Buyer fails to defend, Seller will have the right,
but
not the obligation, to undertake the defense of, and to compromise or settle
(exercising reasonable business judgment), the claim or other matter on behalf
and at the risk of Buyer. If the claim is one that cannot by its nature be
defended solely by Buyer (including any federal or state tax proceeding),
Seller
will make available all information and assistance that Buyer may reasonably
request.
8.5
Survival
of Representations and Indemnification.
The
Buyer’s obligation to pay Indemnifiable Damages arising out of claims described
in Section 8.1(ii), (iii) or (iv) hereof shall survive the Closing of this
transaction for a period equal to the applicable statute of limitations The
obligation of Buyer to pay Indemnifiable Damages arising out of Section 8.1(i)
hereof shall survive the Closing Date, as follows:
(a)
Fraudulent
Breach of Representations; Certain Representations.
In the
case of a claim based upon the inaccuracy or breach of a representation or
warranty which was made fraudulently, or with respect to any representation
or
warranty contained in Sections 5.2 and 5.3 hereof, for a period equal to
the
applicable statute of limitations.
(a)
Setoff
Claims.
In the
case of a claim for which Indemnitees assert the right to setoff as provided
in
Section 8.6, for a period expiring at such time as the Indemnitees no longer
owe
amounts to the Buyer; and
(b)
All
Other Claims.
In the
case of all other claims based upon the inaccuracy or breach of a representation
or warranty, for a period commencing on the date hereof and ending eighteen
(18) months after the Closing Date.
No
claim
for recovery of Indemnifiable Damages arising out of Section 8.1(i) hereof
may
be asserted by the Indemnitees after the expiration of the applicable time
period described in the foregoing Section 8.5(a) - (c); provided, however,
that any claim first asserted by the giving of a Notice of Claim within the
applicable survival period shall neither be abated nor barred.
8.6
Setoff.
The
Seller shall have the right, but not the obligation, to set off or deduct
against any obligations owed by the Seller to the Buyer any Indemnifiable
Damages or other amounts to which the Indemnitees are entitled. Setoffs shall
be
applied in the order in which the amounts owed to the Buyer are due. Any
setoff
in respect of an unmatured claim shall be provisional until such time as
the
claim matures and it is finally determined whether and to what extent the
Buyer
has indemnity obligations to the Indemnitees in respect of such claim. If
it is
finally determined that the amount set off is in excess of the indemnity
obligations of the Buyer in respect of such claim, the Seller shall pay to
the
Buyer, as applicable, within thirty (30) days after the date of such final
determination, an amount sufficient to bring its obligations under any agreement
or other obligation current after giving effect to the proper amount of such
setoff as so finally determined.
30
ARTICLE
9
EMPLOYMENT
PROVISIONS
9.1
Offers
of Employment.
(a)
Buyer
agrees to employ Xxxxxxx Xxxxxxx for a period of one (1) year at a salary
of Two
Hundred Thousand Dollars ($200,000.00) per year, payable monthly. In that
regard, Buyer and Xxxxxxx shall enter into an Employment Agreement substantially
in the form of Exhibit
9.1
attached
hereto.
(b)
Buyer
intends to continue without interruption the operations of the Stomp Business,
and may offer employment to one or more of the Seller’s other current employees.
To that end, the Seller agrees to assist the Buyer in meeting with the Seller’s
employees prior to Closing to explain the transaction and to xxxxxx a smooth
transition of any requested employees to the employment of the Buyer.
9.2
Employment
at Will.
Nothing
set forth herein shall be construed to imply that the Buyer shall have any
continuing obligation to employ any of Seller’s current employees (other than
Xxxxxxx) or maintain in effect any specific fringe benefits or that such
employees shall be offered employment other than on an “at will”
basis.
ARTICLE
10
CONFIDENTIALITY
AND NON-COMPETITION
10.1
Confidentiality.
The
Seller acknowledges that the Buyer is acquiring from the Seller valuable
Proprietary Information, as defined below, relating to the Stomp Business.
Seller covenants and agrees to keep the Proprietary Information in confidence
and to use its reasonable best efforts to prevent its dissemination other
than
as authorized in writing by the Buyer. Seller further covenants and agrees
to
use the Proprietary Information exclusively for the benefit of the Buyer.
The
covenants of this Section 10.1 shall continue for a period of five (5) years
from the Closing Date; provided that with respect to any Proprietary Information
deemed a trade secret at law, such covenants shall continue for so long as
such
Proprietary Information remains a trade secret.
10.2
Proprietary
Information.
“Proprietary Information” shall include, but not be limited to, the following
types of information regarding the Buyer: all Intellectual Property Rights,
corporate information, including contractual arrangements, plans and strategies;
marketing information, including sales or product plans, strategies, tactics,
methods, prospects, market research data, customer and potential customer
lists;
financial information, including cost and performance data; and operational
information, including manufacturing and distribution processes and methods,
trade secrets, and technical data; and personnel information, including
personnel lists. Proprietary Information includes and is limited to that
information which is not generally known and is protected as confidential
by the
Buyer using reasonable efforts.
31
10.3
Non-Inducement.
The
Seller agrees that for a period of three (3) years from the Closing Date,
it
shall not, directly or indirectly, for its own account or as agent, servant
or
employee of any business entity, offer to hire or entice away or in any other
manner persuade or attempt to persuade any officer or employee of the Buyer
to
discontinue or otherwise materially and adversely alter the terms of his
or her
relationship with the Buyer.
10.4
Non-Competition.
The
Seller agrees and covenants that except as set forth in this Agreement, and
except for the sale of Seller’s inventory and consigned inventory existing as of
the Closing and any related activities including collection of accounts
receivable, for a period of two (2) years from the Closing Date, it will
not
directly or indirectly (whether as a representative, agent, partner, owner,
stockholder of otherwise), (i) engage in any business which is competitive
with
the Stomp Business as currently conducted, or (ii) solicit business from,
or
market services or products to, any entity which was a customer of the Seller
prior to the Closing Date, with respect to products within the Seller’s product
lines as of the Closing Date. Seller agrees not to divulge, communicate,
use to
the detriment of Buyer or for the benefit of any other person or persons,
or
misuse in any way, any confidential information or trade secrets of Seller
including personnel information, secret processes, know-how, customer lists,
recipes, formulas, other technical data and any such data acquired by Buyer
as
part of the Purchased Assets.
10.5
Acknowledgements.
(a)
Seller
hereby acknowledges and agrees that (i) Seller has expended considerable
and
substantial time, effort and capital resources to develop the Proprietary
Information being sold to Buyer hereunder; (ii) the Proprietary Information
is
innovative and must receive confidential treatment to protect Buyer’s
competitive position in the market and Buyer’s proprietary interest therein from
irreparable damage and (iii) the Proprietary Information and all physical
embodiments or other repositories of the same shall be and at all times remain
the sole and exclusive property of Buyer. In the event of a breach or threatened
breach by the Seller of the provisions of Section 10.1, Buyer shall be entitled
to an injunction restraining the Seller from disclosing, in whole or in part,
the Proprietary Information,. Upon receipt of a written request by Buyer,
the
Seller agrees to surrender and return to Buyer all documents, records,
memoranda, notebooks and similar repositories of Proprietary Information
of
every character or description.
(b)
The
parties hereto acknowledge
and agree that (i) the covenants contained in this Article 10 are incidental
to
the sale of assets of Seller; (ii) the covenants contained in this Article
are
reasonably necessary to protect the interest of Buyer in whose favor said
covenants are imposed; (iii) the restrictions imposed by this Article are
not
greater than are necessary for the protection of Buyer in light of the
substantial harm that Buyer will suffer should there be a breach of any such
covenant; (iv) the period of restriction and extent of restriction contained
in
this Article are fair and reasonable in that Seller’s business is international
in scope and in that they are reasonably required for the protection of Buyer;
(v) the nature, kind and character of the activities the Seller is prohibited
to
engage in as described in this Article are reasonable and necessary to protect
Buyer and shall not be interpreted or construed as prohibiting the Seller
from
rendering any other services or performing any other activities not referenced
therein, and (vi) the covenants and agreements of the Seller contained in
this
Article have been specifically negotiated by the parties and are material
inducements to Buyer to enter into this Agreement, and, but for such covenants
made by the Seller herein, Buyer would not have entered into this
Agreement.
32
(c)
The
Seller acknowledges and agrees that each of the covenants and agreements
contained in this Article is made in consequence of and as a specific inducement
to Buyer to enter into this Agreement and to protect and preserve the benefit
of
this Agreement to Buyer; that each of the covenants contained in this Article
is
reasonable and necessary to protect and preserve the benefits to be received
by
Buyer under this Agreement; irreparable loss and damage will be suffered
by
Buyer should the Seller breach any of such covenants and agreements; each
of
such covenants and agreements is separate, distinct and severable not only
from
the other of such covenants and agreements but also from the other and remaining
provisions of this Agreement; that the unenforceability of any such covenant
or
agreement shall not affect the validity or enforceability of any other such
covenant or agreements or any other provision or provisions of this Agreement;
and that, in addition to other remedies available to it, Buyer shall be entitled
to both temporary and permanent injunctions to prevent a breach or contemplated
breach by the Seller of any of such covenants or agreements. In the event
Buyer
should seek an injunction hereunder, the Seller hereby waives any requirement
that Buyer submit proof of the economic value of any Proprietary
Information.
(d)
If
the
provisions of this Article should ever be adjudicated to exceed the time,
geographic or other limitations permitted by applicable law in any jurisdiction,
then such provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic or other limitation permitted by applicable
law.
(e)
The
covenants and agreements on the part of the Seller contained in this Article
shall be construed as agreements independent of any other agreement between
Buyer and Seller. The existence of any claim of cause of action of the Seller
against Buyer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Buyer of any of such covenants
and
agreements.
(f)
Nothing
contained in this Article shall restrict the Seller from being a less than
five
percent (5%) stockholder of any corporation that directly or indirectly competes
with Buyer provided the stock of such competing corporation is publicly held
and
listed on a regional or national stock exchange and the Seller is not otherwise
involved as an officer, director, employee, consultant or agent of such
corporation.
10.6
Severability.
It is
the parties' express intention that if a court of competent jurisdiction
finds
or holds any provision of this Article 10 to be excessively broad as to time,
duration, geographical scope, activity or subject, such provision shall then
be
construed by limiting or reducing it so as to comport with then applicable
law.
In the event any such provision cannot be limited or reduced so as to comport
with then applicable law, then such provision of this Article 10 shall be
severable from all other provisions of this Article 10, and the other provisions
of this Article 10 shall continue to be enforceable to the fullest extent
allowable.
33
10.7
Injunctive
Relief.
It is
hereby acknowledged and agreed by the parties that the Seller’s violation of any
of the provisions of this Article 10 shall severely damage the Buyer's business,
and the parties recognize that such damage shall be difficult to precisely
determine. Therefore, it is expressly agreed that the Buyer, in addition
to any
other remedies it may have, shall be entitled to seek an injunctive relief
against the Seller in the event of any such breach.
10.8
Extension
of Time.
If the
enforceability of any of the terms of this Article 10 shall be challenged
in
court by the Seller and such party is not enjoined from breaching any of
the
restrictions herein contained, and if a court of competent jurisdiction finds
that the challenged restriction is enforceable, then the time period applicable
to such restriction shall be deemed tolled upon the filing of the lawsuit
challenging the enforceability of such restriction until the dispute is finally
resolved and all periods of appeal have expired.
10.9
Award
of Fees to Prevailing Party.
In any
court action relating this Article 10, the court may make a determination
regarding which party’s legal position in such matter is the more substantially
correct (the “Prevailing Party”) and require the other party to pay the
reasonable legal and other professional fees and costs incurred by the
Prevailing Party in connection with such action.
ARTICLE
11
OTHER
AGREEMENTS
11.1
Office
Lease.
Buyer
shall not assume Seller’s obligations under the Office Lease, but Buyer agrees
with Seller to pay the base rent thereunder during a transition period not
to
exceed four (4) months after the Closing Date.
11.2
Name
Change.
Upon
request from the Buyer, the Seller shall take such action (at the expense
of
Seller) as may be requested by the Buyer to change the name of Seller to
a name
not including “StompSoft” or any derivative thereof so as to allow the Buyer to
form an entity using the StompSoft or similar name in any jurisdiction in
which Seller is registered.
11.3
Assignment
of Customer Contracts.
To the
extent that transfer or assignment hereunder by the Seller to Buyer of any
Customer Contract included in the Purchased Assets is not permitted or is
not
permitted without notification or the consent or approval of another Person,
this Agreement shall not be deemed to constitute an assignment, an attempted
assignment or an undertaking to assign such Customer Contract if such consent
or
approval is not given or if such an assignment, attempted assignment or
undertaking otherwise would constitute a breach thereof or cause a loss of
benefits thereunder. With respect to any such third party consent or approval
not obtained before the Closing, the Seller shall cooperate with the Buyer
in
any reasonable arrangement designed to provide for the Buyer after the Closing
the benefits intended to be assigned to the Buyer under the applicable Customer
Contract including enforcement at the cost and for the account of the Buyer
of
any and all rights of the Seller against the other party thereto arising
out of
the breach or cancellation thereof by such other party or otherwise; provided
that the Buyer shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent the Buyer would have been
responsible therefor hereunder if such consent, waiver or approval had been
obtained. The Seller shall, without consideration therefor, pay, assign and
remit to the Buyer promptly all monies, rights and other consideration received
in respect of such performance. Unless the parties agree otherwise, the Seller
shall continue to use its commercially reasonable efforts to obtain all such
unobtained consents or approvals at the earliest practicable date. If and
when
any such consents or approvals shall be obtained, then the Seller shall promptly
assign its rights and obligations thereunder to the Buyer without payment
of
consideration and the Buyer shall, without the payment of any consideration
therefor, assume such rights and obligations to the same extent as the Seller
had prior to such assignment. The parties shall execute such good and sufficient
instruments as may be necessary to evidence such assignment and
assumption.
34
11.4
Agreement
to Maintain Records.
Buyer
agrees that it shall maintain all records that it may receive from Seller
and
allow access to Seller and Seller’s agents and allow copying of such records as
requested by Seller upon request: (i) to the extent such records may be relevant
or helpful to an indemnitor under Article 7 in defending against liability
for a
claim under such Article or (ii) as determined by Seller with respect to
Seller’s liabilities and obligations that are not assumed by the Buyer. Buyer
agrees to provide the indemnitor with access to all such information for
such
purposes in a timely manner.
11.5
Access
to Information; Due Diligence.
Upon
reasonable notice and subject to restrictions contained in confidentiality
agreements by which Buyer and Seller are bound, Seller and Buyer shall afford
to
the officers, employees, accountants, counsel and other representatives of
the
other reasonable access, during normal business hours during the period prior
to
the Closing Date, to all their properties, books, contracts, commitments
and
records and permit such persons to make such inspections as they may reasonably
require and, during such period, each of Buyer and Seller shall furnish promptly
to the other all information concerning its business, properties and personnel
as the other may reasonably request; provided that if a party hereto (“Party”)
is withholding information because it is obligated to do so pursuant to a
confidentiality agreement by which it is bound, the Party shall give the
other
notice of such withholding. In
the
event of termination of this Agreement for any reason, each Party shall promptly
return all such information obtained from the other, and any copies made
of, or
reports or analyses based on, such information, to the other and not use
any
such information for any purpose.
11.6
No
Changes to StompSoft Products.
For a
period of no less than 180 days commencing on the Closing Date, Buyer agrees
that it shall not without Seller’s prior written consent (not to be unreasonably
withheld) take any action that would require retailers to swap or change
the
retail boxes of Seller’s software products that are owned by retailers or held
by retailers under consignment as of the date of this Agreement.
11.7
Collection
of Accounts Receivable.
The
parties agree to promptly forward any payments received from customers or
other
third parties that are payable or owed to the other party. For example, payments
that reflect payment of Seller’s accounts receivable that are received by Buyer
shall be promptly forwarded to Seller.
35
ARTICLE
12
MISCELLANEOUS
12.1
Further
Assurances.
Each
party hereto from time to time hereafter, and upon request, shall execute,
acknowledge and deliver such other instruments as reasonably may be required
to
more effectively transfer and vest in the Buyer the Purchased Assets or to
otherwise carry out the terms and conditions of this Agreement.
12.2
Benefit
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns;
provided, however, that this Agreement may not be assigned by either party
without the consent of the other, except that the Buyer may assign any of
its
rights hereunder to any affiliate or wholly-owned subsidiary; and provided
that
Buyer shall remain fully obligated with respect to all of the obligations
of
Buyer under this Agreement and all exhibits and agreements entered into in
connection with the transactions contemplated herein.
12.3
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware (regardless of such state's conflict of laws
principles).
12.4
Expenses.
Except
as otherwise herein provided, all expenses incurred in connection with this
Agreement or the transactions herein provided for shall be paid by the party
incurring such expenses and costs; provided, however, that Buyer shall pay
the
following expenses incurred and to be incurred by Seller and such obligations
to
pay such expenses shall survive the Closing or termination of this Agreement
for
any reason: (i) all of Xxxxx & Co’s audit fees and costs (“Audit Fees”) to
be incurred by Seller with respect to the audits of the Seller that are required
by Buyer under this Agreement, and such Audit Fees shall be paid by Buyer
upon
demand as invoices are presented by Xxxxx & Co. with respect to services and
costs actually incurred; and (ii) upon and only upon the Closing, the fees
owed
by Seller to GCMI Securities, Inc., as successor to Global Capital Markets,
Inc.
and Xxxxxx Xxxxx (collectively, “GCM”)
with
respect to that certain existing fee agreement (“Fee Agreement”) between GCM and
Seller regarding the transaction that is the subject matter of this Agreement
(the “GCM
Fees”),
a
copy of which Fee Agreement has been provided to Buyer by Seller. The GCM
Fees
shall be in the amount and form as set forth on Schedule
12.4.
GCMI
Securities, Inc. shall be a party to the Registration Rights Agreement effective
on the Closing and the common stock issued to GCM as part of the GCM Fees
will
be part of the Registrable Securities as defined in such Registration Rights
Agreement.. Xxxxx & Co. and GCM are third party beneficiaries of this
Agreement with respect to this Section 12.4. Buyer shall pay and deliver
the GCM
Fees to GCM at the Closing.
12.5
Jurisdiction;
Waiver of Trial by Jury.
(a)
Seller
and Buyer hereby irrevocably submit in any suit, action or proceeding arising
out of or related to this Agreement or any of the transactions contemplated
hereby or thereby, except those matters required to be submitted to arbitration,
to the jurisdiction of the United States District Court for the Northern
District of California, and United States District Court for the Southern
District of California and the jurisdiction of any court of the State of
California located in Orange County and San Mateo County, California and
waive
any and all objections to jurisdiction that they may have under the laws
of the
State of California or the United States.
36
(b)
Each
party hereto hereby irrevocably waives all right to trial by jury in any
proceeding (whether based on contract, tort or otherwise) arising out of
or
relating to this Agreement or any transaction or agreement contemplated hereby
or the actions of any party hereto in the negotiation, administration,
performance or enforcement hereof.
12.6
Public
Announcements.
Except
for disclosures by Buyer to comply with applicable securities laws, neither
the
Buyer nor the Seller will make any public announcement concerning any of
the
transactions provided for herein without the other’s prior consent, not to be
unreasonably withheld.
12.7
Notices.
All
notices, demands, and communications provided for herein or made hereunder
shall
be personally delivered or sent by overnight courier service or transmitted
by
confirmed facsimile (with hard copy mailed by first class mail), addressed
in
each case as follows, until some other address shall have been designated
in a
written notice given in like manner, and shall be deemed to have been given
or
made when so delivered, sent or transmitted:
(a)
If
to the
Buyer:
000
Xxxx
Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx
Xxxx, Xxxxxxxxxx 00000
Attention:
Xxxxxxx Xxxxxxx
Fax:
(000) 000-0000
With a copy to:
Xxxxxx
X.
Xxxxxxxx, Esq.
Xxxxx
Xxxx, P.C.
0000
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
Fax:
(000) 000-0000
(b)
If
to the
Seller:
StompSoft,
Inc.
0000
XxXxx, Xxxxx X
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
Xxxxxxx Xxxxxxx
Fax:
000-000-0000
37
With a copy to:
Xxxx
Xxxxxxx, Esq.
Xxxxxxx
& Xxxxxx
00000
XxxXxxxxx Xxxx, Xxxxx 000
Xxxxxx,
XX 00000
Fax:
000
000 0000
12.8
Transfer
Taxes.
The
Buyer shall pay all sales and other transfer, documentary, or similar taxes
or
charges resulting from the transactions contemplated by this
Agreement.
12.9
Counterparts;
Fax Signatures.
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This
Agreement may be executed by any party by delivery of a facsimile signature,
which signature shall have the same force as an original signature. Any party
which delivers a facsimile signature shall promptly thereafter deliver an
originally executed signature to the other parties; provided, however, that
the
failure to deliver an original signature page shall not affect the validity
of
any signature delivered by facsimile. Facsimile or photocopied signature
shall
be deemed to be the functional equivalent of an original for all
purposes.
12.10
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.
12.11
Amendment,
Modification and Waiver.
This
Agreement may not be modified, amended or supplemented except by mutual written
agreement of all the parties hereto. Any party may waive in writing any term
or
condition contained in this Agreement and intended to be for its benefit;
provided, however, that no waiver by any party, whether by conduct or otherwise,
in any one or more instances, shall be deemed or construed as a further or
continuing waiver of any such term or condition. Each amendment, modification,
supplement or waiver shall be in writing signed by the party or the parties
to
be charged.
12.12
Entire
Agreement.
This
Agreement and the Schedules and Exhibits attached hereto represent the entire
agreement of the parties with respect to the subject matter hereof and no
provision or document of any kind shall be included in or form a part of
such
agreement unless signed and delivered to the other party by the parties to
be
charged.
12.13
Third
Party Beneficiaries.
No
third parties are intended to benefit from this Agreement, and no third party
beneficiary rights shall be implied from anything contained in this
Agreement.
12.14
“Knowledge”.
As
used herein, any reference to the “knowledge” of a party shall mean the actual
knowledge of such party after making due inquiry and, if such party fails
to
make such inquiry, shall include constructive knowledge of such facts as
would
have been learned had such due inquiry been made.
38
12.15
Seller
Information.
The
Buyer shall make available to the Seller, and the Seller shall make available
to
the Buyer, (i) such records as any such party may require for the preparation
of
any tax return required to be filed by the Seller or the Buyer, as applicable,
and (ii) such records as the Seller or the Buyer may require for the defense
of
any audit, examination, administrative appeal, or litigation of any tax return
in which such party was included.
12.16
Construction.
The
language used in this Agreement will be deemed to be the language chosen
by the
parties to this Agreement to express their mutual intent, and no rule of
strict
construction shall be applied against any party. Nothing in the Schedules
shall
be deemed adequate to disclose an exception to a representation or warranty
made
herein unless the Schedule identifies the exception with particularity and
describes the relevant facts in detail of the exception. Without limiting
the
generality of the foregoing, the mere listing (or inclusion of a copy) of
a
document or other item shall not be deemed adequate to disclose an exception
to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
parties
hereto intend that each representation, warranty, and covenant contained
herein
shall have independent significance. If any party hereto has breached any
representation, warranty, or covenant contained herein in any respect, the
fact
that there exists another representation, warranty, or covenant relating
to the
same subject matter (regardless of the relative levels of specificity) which
such party has not breached shall not detract from or mitigate the fact that
the
party is in breach of the first representation, warranty, or
covenant.
[Signatures
on following page]
39
[Signature
page for Asset Purchase Agreement]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date and year first above written.
BUYER: | SELLER: | |||
MIGO SOFTWARE, INC. | STOMPSOFT, INC. | |||
By | By | |||
Title:
|
Title:
|
40
SCHEDULES
1.1(b)
|
Customer
Contracts
|
1.1(c)
|
Prepaid
Expenses
|
1.1(d)
|
Equipment
|
1.2
|
Excluded
Assets
|
2.4
|
Allocation
of Consideration
|
2.5
|
Software
Downloads Available to Customers Suing Seller
|
3.1(a)
|
Customer
Proposals
|
3.1(b)
|
Other
Assumed Liabilities
|
3.1(c)
|
Product
Warranties to be Assumed
|
3.1(d)
|
Other
Liabilities to be Assumed
|
4.1
|
Foreign
Qualifications
|
4.2
|
Ownership
of Shares
|
4.3
|
Other
Entities on which Seller is Dependent
|
4.4
|
Third
Party Consents
|
4.7A
|
Financial
Statements
|
4.7B
|
Exceptions
to GAAP
|
4.7C
|
Liabilities
Schedule
|
4.8
|
Tax
Liabilities
|
4.10
|
Tangible
Personal Property
|
4.12
|
Authorizations
and Permits
|
4.13
|
Litigation
|
4.16
|
Employees
|
4.16
|
Employee
Benefits
|
41
4.18
|
Intellectual
Property
|
4.19A
|
Customers
|
4.19B
|
Material
Customers
|
4.20
|
Material
Contracts
|
4.21
|
Product
Warranties
|
4.22
|
Insurance
Policies
|
4.24
|
Recent
Changes
|
4.27
|
Brokerage-Seller
|
4.30
|
Pipeline
Report
|
5.1
|
Foreign
Qualifications - Buyer
|
5.5
|
Brokerage
- Buyer
|
5.6
|
Off-balance
Sheet Arrangements
|
6.1(i)
|
Continuing
Employees
|
6.1(n)
|
Permitted
Liens
|
12.4
|
GCM
Fees
|
42
EXHIBITS
2.2
|
Conveyance
Agreement
|
6.1(f)
|
Opinion
of Seller’s Counsel
|
6.1(j)
|
Stock
Pledge Agreement
|
6.2(e)
|
Opinion
of Buyer’s Counsel
|
6.2(f)
|
Registration
Rights Agreement
|
9.1
|
Xxxxxxx
Employment Agreement
|
43