BUSINESS UNIT PURCHASE AGREEMENT
DATED AS OF JANUARY 15, 2002
BY AND BETWEEN
TELECOMPUTING, INC.
AND
COMMTOUCH INC.
BUSINESS UNIT PURCHASE AGREEMENT
THIS BUSINESS UNIT PURCHASE AGREEMENT (this "Agreement") dated as of
January 15, 2002, is by and between TeleComputing, Inc., a Florida corporation
("Buyer") and COMMTOUCH INC., a California corporation ("Seller"). Capitalized
terms not otherwise defined herein shall have the meanings ascribed to such
terms in Section 9.7 of this Agreement.
WHEREAS, Seller is interested in selling and transferring to Buyer, and
Buyer is interested in acquiring, Seller's business, assets, rights, and certain
obligations and liabilities, relating to Seller's proprietary Hosted Exchange
Business Unit (the "Business");
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Seller and Buyer hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
SECTION 1.1. Purchase of Assets. At the Closing (as defined below) and
upon the terms and subject to the conditions of this Agreement, Seller will
sell, transfer, assign and convey to Buyer, and Buyer will purchase from Seller,
the following assets (the "Assets"):
(a) Customer/Channel Partner/Reseller Agreements. The customer,
channel partner and reseller agreements set forth in and
attached to Exhibit A hereto, which exhibit is hereby
incorporated into this Agreement.
(b) Equipment Lease Agreements. The equipment lease agreements set
forth in and attached to Exhibit D hereto, which exhibit is
hereby incorporated into this Agreement.
(c) Data Center Agreements. Seller's use of the data center
facilities pursuant to the agreements set forth in and
attached to Exhibit B hereto, which exhibit is hereby
incorporated into this Agreement, but only during the
migration as described in Article 3 below.
(d) Seller Equipment. All right, title and interest in and to the
equipment set forth in Exhibit C, attached hereto, which
exhibit is hereby incorporated into this Agreement, including,
but not limited to, any applicable and transferable
manufacturers' and/or vendors' warranties and guarantees.
(e) Records. All relevant records, information, correspondence and
contracts relating to the foregoing.
SECTION 1.2. Retained Assets. Without derogating from any other right
not expressly transferred to Buyer herein and retained by Seller and
notwithstanding the terms of
Section 1.1, Seller shall not transfer to Buyer and the Assets shall not include
the Seller's right, title and interest in and to any and all claims, actions
and/or demands of Seller against any customer, channel partner, reseller,
licensor, vendor or manufacturer that accrued to Seller or arose prior to the
Closing including, but not limited to, claims for payment of set-up, service or
professional service fees.
SECTION 1.3. Purchase Price. The "Purchase Price" for the assets shall
be paid in the manner described as follows:
(a) Buyer shall pay to Seller twenty percent (20%) of all revenues
collected from the entities set forth on Exhibit A for
services performed during the current term of the relevant
agreements identified in Exhibit A therewith, exclusive of any
renewal term of any such agreement. Such agreements may not be
cancelled, replaced or otherwise amended voluntarily by Buyer
for the purpose of deferring revenues or otherwise negatively
impact the payment obligations to Seller.
(b) Buyer shall pay to Seller ten percent (10%) of all revenue of
any kind collected from prospective customers, resellers and
channel partners identified by the parties during due
diligence prior to the Closing. The payments hereunder shall
be made based on revenue collected from each such entity for
services performed during a twelve (12) month period
commencing on the date services are first provided by Buyer
under each individual agreement entered into between Buyer and
any such customers, resellers or channel partners. Before the
Closing, these entities shall be identified on Exhibit E
attached hereto and hereby incorporated into this Agreement.
(c) Buyer shall pay to Seller ten percent (10%) of all revenue of
any kind collected from customers, resellers and channel
partners referred to Buyer by Seller for a period of two (2)
years subsequent to the Closing. The payments hereunder shall
be made based on revenue collected from each such entity for
services performed during a twelve (12) month period
commencing on the date services are first provided by Buyer
under each individual agreement with such entity(ies). Seller
shall submit to Buyer for its consideration a referral form
containing, at a minimum, the information set forth in Exhibit
F attached hereto, which exhibit is hereby incorporated into
this Agreement. Buyer may accept or reject to pursue a
business relationship with any referral at its sole
discretion. Further, Buyer may reject any such referral if it
can prove by reliable means that, within the twelve (12)
months prior to the referral, it had been in discussions with
the relevant entity for sale of the relevant service to such
entity.
(d) At Closing, Buyer shall pay to Seller an amount equal to
twenty-five percent (25%) of the cost to Seller of the
equipment set forth on Exhibit C plus any applicable sales
taxes. Seller shall provide to Buyer proper documentation from
its books and records evidencing the cost to Seller of the
equipment. If such documentation is not readily available,
Buyer and Seller shall use the cost estimates provided from
Seller to Buyer on January 9, 2002.
SECTION 1.4 Payments. Payments for the amounts due and owing to Seller
from Buyer under Section 1.3(a) - (c) above shall be made on a monthly basis by
Buyer, by no later than the tenth day of each month based on the applicable
revenues collected during the prior month. Any payments made more than 30 days
past the due date shall bear interest at the rate of 1% for each month that such
amount remains unpaid, or the maximum legal rate, whichever is less. Payments
from Buyer to Seller in relation to use of the data center and staff set forth
in Exhibit B shall be made in advance semi-monthly, commencing on the Closing,
based on estimated expenses, with any adjustments to be made in subsequent
payment periods.
SECTION 1.5 Reports. Buyer shall provide Seller with detailed quarterly
reports of all revenue collected for which Seller is entitled to payments as
described herein, including the source thereof and the period to which it is
applicable.
SECTION 1.6. Security Interest. Buyer hereby grants a first priority
security interest in all customer, channel partner and reseller agreements
transferred by Seller to Buyer within the framework of this Agreement, as well
as the proceeds/fees collected by Buyer thereunder, as security for payment of
the Purchase Price as described in Section 1.3(a) - (c) hereinabove. Buyer shall
take all necessary measures reasonably requested by Seller prior to or on the
Closing to perfect Seller's security interest in such agreements and the stated
proceeds/fees, and shall provide proof of same to Seller on the Closing.
Furthermore, Buyer undertakes not to voluntarily allow any third parties to
encumber, lien or attach in any way such agreements or proceeds/fees, and shall
immediately take all necessary measures to remove any
encumbrances/liens/attachments when and if effected by a third party. Buyer
shall provide Seller with notice immediately upon discovering the placement or
attempted placement of any lien, encumbrance or attachment on the subject
agreements and/or proceeds/fees. Buyer agrees to open a separate bank account in
which only the revenues collected within the framework of this Agreement shall
be deposited. The security interest granted herein by Buyer shall be deemed
released upon the earlier of (i) Buyer's payment of the Purchase Price or (ii)
the termination of this Agreement in accordance with Article 8, whereupon the
Seller shall take all such actions as shall be reasonably requested by Buyer to
affect the termination of the security interest granted hereby, including the
execution of and filing with appropriate governmental authorities uniform
commercial code financing statements.
ARTICLE 2
CLOSING
SECTION 2.1. Closing of the Sale and Purchase. The closing of the sale
and purchase of the Business (the "Closing") will take place at 2:00 pm Pacific
Time on January 31, 2002 (the "Closing Date"), subject to satisfaction of the
conditions set forth in Article 7 (other than conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions), at the offices of Seller, 0000 Xxxxxxxx Xx., Xxxxxxxx Xxxx,
XX 00000, unless another time, date or place is agreed to in writing by the
parties hereto. If the Closing shall occur, it shall be deemed effective as of
11:59 pm (Pacific Time) on the Closing Date.
SECTION 2.2. Transfer of Assets. At the closing, Seller shall transfer,
assign, deliver and convey to Buyer, free and clear of all liens and other
encumbrances other than any such lien or encumbrance arising out if the rights
and interests of lessors of equipment in the Assets, including execution and
delivery of a Xxxx of Sale, in form and substance acceptable to Seller (the
"Xxxx of Sale"), agreement of assignments and other appropriate documents. As to
the equipment under Exhibits C and D, the equipment shall be delivered Ex Works
(Equinix facility, San Jose, CA). Loading and shipping are at the expense and
responsibility of Buyer.
SECTION 2.3. Assumption of Liabilities. At the Closing, Buyer shall
fully assume and agrees to pay, perform and discharge the following:
(a) All liabilities, debts, obligations, claims, warranties and
guaranties of any kind arising from and after the Closing
under or in relation to the agreements and leases listed in
Exhibits A, B and D to this Agreement. Notwithstanding the
above, Buyer's obligations in relation to the data center
agreements described in Exhibit B shall only be applicable
until the migration described in Article 3 is fully completed,
which migration will be completed before March 31, 2002, at
which time such obligations shall revert to Seller. Buyer
shall provide Seller with at least fifteen (15) days advance
written notice of its intention to cease utilizing Seller's
data center.
(b) All obligations and liabilities arising from and after the
Closing Date in connection with Buyer's ownership of the
Assets and the conducting by Buyer of the operations of the
Business, including all obligations arising after the Closing
Date under the contract between the Seller and Microsoft
Corporation included in the Assets.
(c) All out of pocket expenses incurred by either party in
relation to the performance of migration services as set forth
in Section 3.1 below; provided that Seller shall obtain
Buyer's prior written approval, including which approval may
be given by email, before incurring such expenses.
(d) The fully-burdened cost to Seller for the allocation by Seller
of employees as set forth in Section 3.2 and enumerated in
Exhibit B. Payment therefor shall be made by Buyer within
fifteen (15) days of receipt of an applicable invoice from
Seller. Buyer shall provide Seller with at least fifteen (15)
days advance written notice of its intention to cease
utilization of such employees' services.
(e) All taxes relating to or arising at any time from the sale of
the Assets, or in connection with the operation of the Business
by Buyer from and after the Closing.
ARTICLE 3
MIGRATION OF SERVICE
SECTION 3.1. Migration Services. In order to provide for the most
stable service to customers, channel partners and resellers during the transfer
of the Business from Seller to Buyer, Buyer shall perform a seamless migration
of all Exchange mailbox accounts to Buyer's data center and Seller agrees to
assist Buyer as may be necessary.
SECTION 3.2. Use of Seller Employees. Until the migration is complete,
Seller undertakes to make available those remaining employees from the Business
who are necessary in managing the service, managing relationships with customers
and channel partners and assisting in performing the migration services, as
mutually agreed by the parties hereto. Seller agrees to continue to employ these
employees during the migration period, and to provide them with their standard
facilities, as well as the time necessary to service the needs of the parties in
performing the migration. Nothing herein shall prevent Seller from terminating
an employee for "cause". Buyer further understands that any one or more of the
employees may voluntarily terminate his or her employment at any time. In this
regard, Buyer waives any and all claims, known or unknown, that it may have as a
result of such terminations (except any claims directed by such employees
against Buyer for which Seller is legally responsible), including a claim that
its ability to properly perform the migration services was impaired in any way
by the occurrence of such an event of termination of employment or combination
of events, and Seller shall not be responsible for replacing the services of any
such employee whose employment terminates (whether voluntarily or
involuntarily); provided Seller uses commercially reasonable efforts to replace
such employees and/or to assist Buyer in replacing such employees. Seller
acknowledges that its role, status and the status of its employees in connection
with the migration services provided to the Buyer shall be that of an
independent contractor and nothing in this Section shall be construed to create
an employer-employee relationship between the parties. Seller's employees shall
not be entitled to any of the Buyer's employee benefits. Seller shall have sole
responsibility for all federal, state and local withholding taxes, unemployment
insurance tax, social security tax and other similar taxes and levies arising
from Seller's employment of its employees to perform the migration services.
SECTION 3.3. Wingra Services. In performing migrations for Jamcracker
customers, unless otherwise expressly required by Jamcracker or unless Buyer is
able to secure a lower price, Buyer undertakes to use the migration services
offered by Wingra, an affiliated company of Seller, for a period of twelve (12)
months from the Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof and the date of Closing, Seller hereby represents and
warrants to Buyer that:
SECTION 4.1. Organization and Qualification. Seller is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
organization, and it has all requisite power and authority to own, lease and
operate its assets or properties and to carry on its businesses as now being
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its assets
or properties or conduct of its business requires such qualification.
SECTION 4.2. Authority Relative to this Agreement. Seller has all
necessary corporate power and authority to execute and deliver the Transaction
Agreements to which it is a party, to perform its obligations under such
Transaction Agreements and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of the Transaction Agreements to which
the Seller is a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all required
corporate approval, including without limitation any necessary shareholder or
director approval, and as of the Closing there will be no revocation of such
approval and no other corporate proceedings on the part of Seller are necessary
to authorize this Agreement and such other Transaction Agreements or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been, and when executed, each other Transaction Agreement to which the Seller is
a party will be, duly and validly executed and delivered by Seller and
constitutes, or, when executed, will constitute, a valid, legal and binding
agreement of Seller, enforceable against it in accordance with their respective
terms.
SECTION 4.3. Asset Status. Seller has good, marketable and undivided
title (or legal right in the case of the leased equipment identified in Exhibit
D hereto) to and possession of the Assets. The agreements under Exhibits A and D
and the equipment under Exhibits C and D (except for the Lien held by the lessor
in the case of the leased equipment listed in Exhibit D) are held free and clear
of all Liens (as defined hereinbelow), including Liens with respect to taxes or
other governmental charges, obligations or fees, except for liens for real
and/or personal property taxes not yet due and payable, and there are no pending
legal actions by any party relating to such Assets. As of the Closing, the
equipment listed in Exhibits C and D is in good operating condition, normal wear
and tear excepted, and is adequate and usable for the purposes for which it is
currently used.
SECTION 4.4. Contracts. Attached to Exhibits A and D hereof are true,
correct and complete copies of all of the existing contracts, agreements and
leases, including summaries of any oral agreements and any relevant
correspondence in respect of any thereof, relating to the Business and reflected
in the Accounts Receivable Report (the "Contracts"). Except for the Contracts,
the Seller is not a party to or bound by any contract, agreement or arrangement
relating to the purchase or sale of any goods or services relating to the
Business. Contracts are in full force and effect as against, and constitute the
legal, valid and binding obligation of, Seller
and, to the knowledge of Seller, each other party thereto. Seller and each other
party to each Contract has performed all of the obligations required to be
performed by Seller and such other party to date, and there is no existing
default by Seller or, to the knowledge of Seller, each other party thereto under
any of the Contracts or event that, with notice or lapse of time, or both, would
constitute such a default. None of the Contracts has been terminated or notice
of termination given with respect thereto, no notice has been given by any party
thereto of any alleged default thereunder by any party thereto, and Seller is
aware of no intention or right of any party thereto to declare a default
thereunder. There exists no actual or threatened acceleration, termination,
cancellation or material modification of any of Seller's rights or obligations
under any of the Contracts. No customer or lessor of Seller identified in any of
the Contracts has notified Seller that it intends to terminate or change its
business relationship with the Business following the consummation of the
transactions contemplated under this Agreement.
SECTION 4.5. No Violations. Neither the execution, delivery and
performance by Seller of the Transaction Agreements to which the Seller is a
party nor the consummation by Seller of the transactions contemplated thereby
will (i) conflict with or result in any breach of any provision of the articles
of association and other charter documents (or similar governing documents) of
Seller, (ii) to the best of Seller's knowledge, result in a violation or breach
of or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Seller is a party or by which any of them or
any of their respective properties or assets may be bound, or (iii) violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Seller or any of its respective properties or assets.
SECTION 4.6. Litigation. There is no civil, criminal or administrative
suits, claims, actions, grievances, arbitrations, proceedings or investigations
pending or, to the best knowledge of Seller, threatened against the Business or
any of its respective properties or assets, or, except as set forth on Schedule
4.6 hereof, against the Seller.
SECTION 4.7. Compliance with Applicable Law. Seller is in compliance
with the terms of all laws, statutes, regulations, permits, licenses, variances,
exemptions, orders and approvals necessary for the lawful conduct of the
Business. To the best knowledge of Seller, no investigation or review by any
Governmental Entity with respect to Seller is pending or threatened in writing
that would impact in any materially adverse way the transactions contemplated by
the Transaction Agreements.
SECTION 4.8. Accounts Receivable Report.
4.8.1 Accounts Receivable Report. The "Accounts Receivable
Report," a copy of which is attached hereto as Schedule 4.8.1 and incorporated
into this Agreement, provided to Buyer from Seller and dated January 15, 2002
(the "Report Date") represents fairly the accounts receivable balance of that
date for the specific customers and resellers to be transferred under this
Agreement.
4.8.2 Absence of Changes. As from the Report Date and up to
the Closing, the Business will be conducted in the ordinary course consistent
with past practices and the covenants set forth in Section 6.1, and Seller will
disclose any events or conditions that are discovered that are, individually or
in the aggregate, reasonably expected to have a material adverse effect
(financial or otherwise) on the Business.
SECTION 4.9. Brokers. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried out without the
intervention of any person acting on behalf of Seller in such manner as to give
rise to any valid claim against Buyer or Seller for any brokerage or finder's
commission, fee or similar compensation.
SECTION 4.10. Consents of Third Parties. Except for the consents set
forth in Schedule 4.10, no consents or approvals of any third party are
necessary in connection with the execution and delivery by Seller of the
Transaction Agreements to which the Seller is a party and the consummation by
Seller of the transactions contemplated thereby, including without limitation,
the transfer and assignment of the Assets contemplated under Section 1.1 hereof.
SECTION 4.11. Disclosure. No representation or warranty of Seller
contained herein, when read together with the Schedules and Exhibits referred to
herein, is false or misleading in any material respect or omits to state a fact
herein or therein necessary in order to make the statements contained herein or
therein not false or misleading in any material respect.
SECTION 4.12. Disclaimer of Other Representations and Warranties.
Seller does not make any representations or warranties relating to the Business
in connection with the transactions contemplated hereby other than those
expressly set forth by it in this Agreement. It is also understood that any cost
estimates, projections or other productions, any data, any financial information
or any memoranda or presentations are not and shall not be deemed to be or to
include representations or warranties of Seller, except to the extent otherwise
expressly covered by the representations and warranties in this Agreement. No
person has been authorized by Seller to make any representation or warranty
relating to the Business or otherwise in connection with the transactions
contemplated hereby except as set forth in this Agreement and the documents as
identified in Section 7.3 hereof. If any statements were made by such
unauthorized person(s), such representation or warranty must not be relied upon
as having been authorized by Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 5.1. Organization. Buyer is duly organized, validly existing
and in good standing under the laws of its state of incorporation and Buyer has
all requisite power and authority to own, lease and operate its assets or
properties and to carry on its business as now being conducted and is qualified
to do business and in good standing as a foreign corporation in each
jurisdiction where such qualification is required to carry on its business as
now being
conducted, and to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
SECTION 5.2. Authority Relative to this Agreement. Buyer has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the board of directors of Buyer, as of the
Closing there will be no revocation of such approval and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes, assuming the due
authorization, execution and delivery hereof by Seller, a valid, legal and
binding agreement of Buyer, enforceable against it in accordance with its terms.
SECTION 5.3. No Violations. Neither the execution, delivery and
performance of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificates of incorporation or bylaws (or similar
governing documents) of Buyer, (b) result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Buyer is a party or by which it or any of its respective
properties or assets may be bound or (c) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Buyer or any of its
respective properties or assets.
SECTION 5.4. Litigation. There are no civil, criminal or administrative
suits, claims, actions, grievances, arbitrations, proceedings or investigations
pending or, to the best knowledge of Buyer, threatened against Buyer or any of
its respective properties or assets, which would have a material adverse effect
on Buyer's ability to perform its obligations under this Agreement.
SECTION 5.5. Compliance with Applicable Law. Buyer is in compliance in
all material respects with the terms of all permits, licenses, variances,
exemptions, orders and approvals necessary for the lawful conduct of its
businesses (the "Permits"). To the best knowledge of Buyer, no investigation or
review by any Governmental Entity with respect to Buyer is pending or threatened
in writing that would impact in any materially adverse way the transactions
contemplated by this Agreement.
SECTION 5.6. No Vote Required. No vote of the holders of Buyer stock is
required under applicable law or corporate governing documents in connection
with this Agreement.
SECTION 5.7. Investigation by Buyer.
(a) Buyer has conducted its own independent investigation, review and
analysis of the Business, including, but not limited to, operations, Assets,
liabilities, results of operations, financial condition, technology and
prospects of the Business. Buyer acknowledges that it and its representatives
have been provided adequate access to the personnel, properties, premises and
records of the Business identified by Seller as relating to the Business as
Buyer has requested for
such purpose. In entering into this Agreement, Buyer acknowledges that it has
relied solely upon the aforementioned investigation, review and analysis and not
on any factual representations or opinions of Seller or the representatives
thereof (except for the specific representations and warranties of Seller set
forth in this Agreement. Buyer has formed an independent judgment concerning the
Business and the rights, obligations, Assets and liabilities pertaining thereto.
(b) Buyer acknowledges that none of Seller and its respective
directors, officers, shareholders, employees, affiliates, controlling persons,
agents, advisors or representatives makes, or has made, any oral or written
representation or warranty, either express or implied, as to the accuracy or
completeness of any estimates, projections, forecasts, operating plans or
budgets relating to the Business delivered or made available to Buyer or
otherwise obtained by Buyer or its directors, officers, employees, affiliates,
controlling persons, agents or representatives in respect of future revenues,
expenses or future results of operations except to the extent, if any, expressly
set forth herein.
(c) Buyer agrees, to the fullest extent permitted by law, that none of
Seller's directors, officers, employees, shareholders or affiliates, shall have
any personal liability or responsibility whatsoever to Buyer or its directors,
officers, employees, affiliates, controlling persons, agents or representatives
on any basis (including in contract or tort, under federal or state securities
laws or otherwise) based upon any information provided or made available, or
statements made (including in any memorandum relating to Seller or the Business
provided to the Buyer, in presentations by Seller's management or otherwise) to
Buyer or its directors, officers, employees, affiliates, controlling persons,
advisors, agents or representatives (or any omission therefrom), including in
respect of specific representations and warranties, other than any specific
representations and warranties set forth in Article 4 of this Agreement except
for any liability arising out of the intentional misrepresentation or willful
misconduct of any thereof or arising out of common law fraud.
SECTION 5.8. Sufficiency of Skill and Knowledge.
Buyer understands the type, quality and scope of the Business as
provided by Seller to its customers, channel partners and resellers prior to the
Closing, and Buyer has or will have at the Closing the facilities, means,
manpower, finances and other resources to run the Business, and will make best
efforts in satisfying the contractual needs of those entities in a timely
fashion during the current terms of the agreements with those entities.
Notwithstanding the foregoing, the terms of this section shall not impose any
additional obligation or duty on the part of Buyer to renew those agreements.
ARTICLE 6
ADDITIONAL COVENANTS
SECTION 6.1. Conducting of Business.
(a) Except as contemplated by this Agreement, during the period from
the date hereof to the Closing or the earlier termination of this Agreement,
Seller will use all reasonable efforts
to ensure that it conducts the Business in the ordinary course of business in
substantially the same manner as heretofore conducted consistent with past
practice and, to the extent consistent therewith, it shall seek to preserve
intact the service of key employees and preserve its relationships with
customers, channel partners and resellers with the intention that its ongoing
Business shall be unimpaired at the Closing.
(b) During the period as from the Closing, Buyer will use all
reasonable efforts to ensure that it conducts the Business in a manner so as to
preserve its relationship with customers, channel partners and resellers with
the intention that the Business' goodwill and revenue generating capability
shall be unimpaired after the Closing. Without derogating from the generality of
the above, Buyer agrees to continue to meet the requirements of the Service
Level Agreement set forth in the agreements listed under Exhibit A.
(c) Buyer undertakes to continue to run the Business for at least the
greater of twelve (12) months as from the Closing or the maximum period
necessary to service the agreements transferred to Buyer under this Agreement.
SECTION 6.2. Confidentiality. Each of the parties hereto will hold, and
will cause its consultants and advisers to hold, in confidence all documents and
information furnished to it by or on behalf of another party to this Agreement
in connection with the transactions contemplated by this Agreement pursuant to
the terms of that certain Confidentiality Agreement entered into between the
Seller and Buyer dated January 7, 2002.
SECTION 6.3. Certain Filings; Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use commercially reasonable efforts to take or cause to
be taken all action and to do or cause to be done all things reasonably
necessary, proper or advisable under applicable law to consummate and make
effective the transactions contemplated by this Agreement, including using
commercially reasonable efforts to execute any additional instruments necessary
to consummate the transactions contemplated hereby.
(b) Buyer and Seller will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any foreign, federal,
or state antitrust, competition, or fair trade law. In this regard but without
limitation, each party hereto shall promptly inform the other of any material
communication between such party and the Federal Trade Commission, the Antitrust
Division of the United States Department of Justice, or any other federal,
foreign or state antitrust or competition governmental entity regarding the
transactions contemplated herein.
SECTION 6.4. Public Announcements. Neither Buyer nor Seller shall issue
any press release or otherwise make any public statements with respect to the
transactions contemplated by this Agreement, including the sale of the Business,
without the prior consent of Buyer and Seller, which consent may not be
unreasonably withheld, except as may be required by applicable law, or by the
rules and regulations of, or pursuant to any agreement with, the NASD, the
Security
Exchange Automated Quotation System ("SEAQ") the Nasdaq National Market, or the
Oslo Stock Exchange, in which case the party proposing to issue such press
release or make such public statement or disclosure shall use its reasonable
best efforts to consult with the other party before issuing such press release
or making such public statement or disclosure. The first public announcement of
this Agreement and the sale of the Business shall be by way of a joint press
release agreed upon by Buyer and Seller, or a press release prepared by Buyer
subject to Seller's prior review and approval which approval shall not be
unreasonably denied or delayed.
SECTION 6.5. Additional Events.
(a) During the period prior to the Closing, Seller and Buyer shall
promptly notify the other party in writing of:
(i) the discovery by any of them of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of
this Agreement and that caused or constitutes a breach of any
representation or warranty made by them in this Agreement;
(ii) any breach of any covenant or obligation of any of them;
or
(iii) the discovery of any event, condition, fact or
circumstance that would reasonably be likely to make the timely
satisfaction of any of the conditions set forth in this Agreement
impossible or unlikely.
(b) In the event that the Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person then, and in each such case to the extent necessary to effectuate
the purpose of this Agreement, Buyer shall take all necessary measures to ensure
that the successors and assigns of the Buyer shall succeed to the obligations
set forth in this Agreement.
SECTION 6.6. Customer Relations. Prior to the Closing:
(i) the parties shall cooperate in developing a joint customer
notification of the assignment of agreements to be sent to
each transferred customer/channel partner/reseller of the
Business;
(ii) at Buyer's request (but only for the first 30 days from
Closing), Seller will introduce a Buyer representative to each
transferred customer/channel partner/reseller;
(iii) Seller will promptly advise Buyer of any customer issues that
may affect the ongoing relationship with such customer.
SECTION 6.7. Collection of Service Fees. As and from the Closing, Buyer
undertakes to make all reasonable efforts to collect in a timely fashion
outstanding amounts under the customer/channel partner/reseller agreements. Any
amounts collected by Buyer on behalf of fees due and owing to Seller prior to
the Closing shall be delivered promptly to Seller by Buyer.
SECTION 6.8. Indemnification.
(a) Seller will indemnify, defend and hold harmless Buyer and its
affiliates and their respective officers, directors, employees, agents and
shareholders from and against, and pay and reimburse any of them for, any
claims, actions, damage, judgment, cost, expense, liability, loss or deficiency,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, claim or proceeding, arising out of or
resulting from (i) the operation of the Business prior to Closing; (ii) any
liabilities of Seller not assumed by Buyer under this Agreement; (iii)
misrepresentations or breaches of representations or warranties made herein by
Seller; (iv) noncompliance with or breach by Seller of any of the covenants or
agreements contained in this Agreement; or (v) the discharge of any lien or
encumbrance imposed upon or affecting the Assets other than any such lien or
encumbrance arising out of the rights and interests of lessors of equipment in
the Assets.
(b) Buyer will indemnify, defend and hold harmless Seller and its
affiliates and their respective officers, directors, employees, agents and
shareholders from and against, and pay and reimburse any of them for, any
claims, actions, damage, judgment, cost, expense, liability, loss or deficiency,
including, without limitation, reasonable attorneys' fees and other costs and
expenses incident to any suit, action, claim or proceeding, arising out of or
resulting from (i) the operation of the Business after the Closing or of the
equipment identified on Exhibits C or D by Buyer after the Closing; (ii)
misrepresentations or breaches of representations or warranties made herein by
Buyer; or (iii) noncompliance with or breach by Buyer of any of the covenants or
agreements contained in this Agreement.
(c) Notwithstanding the foregoing, Buyer shall have the right to offset
from and against any amounts payable by Buyer to Seller pursuant to Section 1.3
any amount due or owing by Seller to Buyer under this Section 6.8 provided the
amount due or owing by Seller shall have been admitted in writing by Seller,
shall have been agreed to in writing by Buyer and Seller or shall have been
determined to be due or owing by Seller to Buyer by a court of competent
jurisdiction or by an arbitrator or mediator having binding authority over such
dispute.
SECTION 6.9. Audit Rights. Seller may, upon reasonable notice, appoint
any nationally-recognized independent accounting firm that agrees to accept
reasonable and customary confidentiality obligations to audit, upon not less
than seven (7) days advance written notice and during normal business hours,
Buyer's records applicable to the agreements transferred or customers/channel
partners/resellers referred hereunder by Seller to Buyer in order to determine
the accuracy of payments made and reports provided by Buyer to Seller, or to
discover any under-reported revenues and/or under-payments. Seller shall pay the
costs of any such audit unless the audit reveals an underpayment of five percent
(5%) or more, in which case, in addition to any other rights of Seller hereunder
or at law, the audit costs shall be paid by Buyer. Audits are limited to no more
than one per calendar quarter.
SECTION 6.10. Nonassignable Contracts. With respect to any contract or
agreement sold or transferred to Buyer hereunder whose consent to the assignment
thereof to Buyer shall not have been obtained by the Closing, the parties will
cooperate with each other in any lawful and reasonable arrangement to provide
that Buyer shall receive the benefits under any such contract not assigned and
transferred at the Closing by reason of the failure to obtain such consent (a
"Non-Transferred Instrument"), including entering into a sublease or
subcontract. Seller shall immediately transfer and assign to Buyer any
Non-Transferred Instrument for which a consent has been received.
Notwithstanding anything to the contrary in this Agreement, Seller shall not
transfer or assign any interest in any contract, and Buyer shall not assume any
liability arising thereunder or resulting therefrom, if an assignment or
transfer or attempt to make an assignment or transfer of such contract, without
the consent or approval of a third party or governmental authority, would
constitute a breach or violation thereof or a violation of applicable law, or
affect adversely the rights' of Buyer or Seller thereunder, until such consent
or approval has been obtained. Furthermore, as to the open standards
(non-Exchange messaging service) portion of the Outtask agreement assigned
hereunder, no rights in said portion are assigned or otherwise transferred to
Buyer.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE SALE AND PURCHASE
SECTION 7.1. Conditions to Each Party's Obligations to Effect the
Purchase and Sale. The respective obligations of each party hereto to effect the
purchase and sale of the Business as contemplated herein are subject to the
satisfaction or, if permitted by applicable law, waiver, at or prior to the
Closing of the following conditions:
(a) no statute, rule, regulation, executive order or other such order,
shall have been enacted, entered, promulgated or enforced and remain in effect
by any United States federal or state or foreign court or United States federal
or state or foreign governmental entity that
prohibits, restrains, enjoins or restricts the consummation of the transactions
described herein; and
(b) any governmental or regulatory notices, consents, approvals or
other requirements necessary to consummate the transactions contemplated hereby
shall have been given, obtained or complied with, as applicable.
SECTION 7.2. Conditions to the Obligations of Seller. The obligation of
Seller to effect the sale of the Business is subject to the satisfaction or, if
permitted by applicable law, waiver, at or prior to the Closing of the following
conditions:
(a) the representations and warranties of Buyer contained in this
Agreement shall be true and correct at and as of the Closing with the same
effect as if made at and as of the Closing (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date) and, at the
Closing, Buyer shall have delivered to Seller a certificate to that effect,
executed by two (2) executive officers or directors of Buyer; and
(b) each of the covenants and obligations of Buyer to be performed at
or before the Closing pursuant to the terms of this Agreement shall have been
duly performed in all material respects at or before the Closing, and Buyer, at
the Closing, shall have delivered to Seller a certificate to that effect,
executed by two (2) executive officers or directors of Buyer.
SECTION 7.3. Conditions to the Obligations of Buyer. The obligations of
Buyer to effect the purchase of the Business are subject to the satisfaction at
or prior to the Closing of the following conditions:
(a) the representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing with the same
effect as if made at and as of the Closing (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date) and, at the
Closing, the Seller shall have delivered to Buyer a certificate to that effect,
executed by two (2) executive officers or directors of Seller;
(b) Since the Report Date, there shall have been no change which has or
has had a material adverse effect (financial or otherwise) on the Business, and
the Chief Financial Officer of the Seller shall have delivered to Buyer a
certificate to that effect; and
(c) Each of the covenants and obligations of Seller to be performed at
or before the Closing pursuant to the terms of this Agreement shall have been
duly performed in all material respects at or before the Closing and, at the
Closing, the Seller shall have delivered to Buyer a certificate to that effect,
executed by two (2) executive officers or directors of Seller;
(d) Buyer shall have received written consent of assignment by
Jamcracker, Xxxx of Sale and other items to be delivered by Seller under Section
2.2, duly executed by an authorized officer of Seller, except for the third
party consents to the assignment of the Contracts identified on Schedule 7.3(e)
hereof.
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the sale
and purchase of the Business may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller or Buyer if (i) any court of competent jurisdiction or
other federal or state or foreign governmental entity of competent jurisdiction
shall have issued a final order, decree or ruling, or taken any other final
action, restraining, enjoining or otherwise prohibiting the sale and purchase
and such order, decree, ruling or other action is or shall have become
nonappealable or (ii) the sale and purchase has not been consummated by February
1, 2002; provided that no party may terminate this Agreement pursuant to this
clause (ii) if such party's failure to fulfill any of its obligations under this
Agreement shall have been a principal reason that the Closing shall not have
occurred on or before said date;
(c) by Seller if (i) there shall have been a breach of any
representations or warranties on the part of Buyer set forth in this Agreement
or if any representations or warranties of Buyer shall have become untrue such
that the conditions herein would be incapable of being satisfied by the Closing,
provided that Seller has not willfully breached any of its obligations hereunder
in any material respect and provided further, however, that Seller has provided
Buyer with notice of such breach and such breach shall not have been cured
within ten (10) business days of such notice; (ii) there shall have been a
breach by Buyer of any of its covenants or agreements hereunder materially
adversely affecting (or materially delaying) the ability of either party to
consummate the sale and purchase of the Business, and Buyer has not cured such
breach within ten (10) business days after notice by Seller thereof, provided
that Seller has not willfully breached any of their obligations hereunder in any
material respect;
(d) by Buyer if (i) there shall have been a breach of any
representations or warranties on the part of Seller set forth in this Agreement
or if any representations or warranties of Seller shall have become untrue such
that the conditions set forth herein would be incapable of being satisfied by
the Closing, provided that Buyer has not willfully breached any of its
obligations hereunder in any material respect and provided further, however,
that Buyer has provided Seller with notice of such breach and such breach shall
not have been cured within ten (10) business days of such notice; (ii) there
shall have been a breach by Seller of one or more of its covenants or agreements
hereunder materially adversely affecting (or materially delaying) the ability of
either party to consummate the sale and purchase of the Business, and Seller
shall have not cured such breach within ten (10) business days after notice by
Buyer thereof, provided that Buyer has not willfully breached any of its
obligations hereunder in any material respect; or
(e) if the Closing shall not have occurred by February 30, 2002.
SECTION 8.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates,
directors, officers or shareholders provided, however, that nothing contained in
this Section 8.2 shall relieve any party from liability for any breach of this
Agreement made prior to such termination.
SECTION 8.3. Fees and Expenses. Each party shall bear its own expenses
in connection with this Agreement and the transactions contemplated hereby,
except as otherwise provided in any provision hereof.
SECTION 8.4. Amendment. This Agreement may be amended only by an
instrument in writing signed on behalf of the parties hereto.
SECTION 8.5. Extension; Waiver. At any time prior to the Closing, each
party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Entire Agreement; Assignment. This Agreement and the other
Transaction Agreements (a) constitute the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersede all other prior
and contemporaneous agreements and understandings both written and oral between
the parties, except for the Confidentiality Agreement, which shall continue in
full force and effect, and shall survive any termination of this Agreement or
the Closing in accordance with its terms and (b) shall not be assigned by
operation of law or otherwise.
SECTION 9.2. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable, and such
invalidity or unenforceability shall not affect any other provision of this
Agreement which shall be enforced in accordance with the intent of this
Agreement.
SECTION 9.3 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, facsimile, sent by nationally-recognized overnight courier or mailed
by registered or certified mail (return receipt requested), postage prepaid, to
the parties at the addresses set forth below or to such other address as the
party to whom notice is to be given may have furnished to the other parties
hereto in writing in accordance herewith. Any such notice or communication shall
be deemed to have been delivered and received (A) in the case of personal
delivery, on the date of such delivery, (B) in the case of facsimile, on the
date sent if confirmation of receipt is received and such notice is
also promptly mailed by registered or certified mail (return receipt requested),
(C) in the case of a nationally-recognized overnight courier in circumstances
under which such courier guarantees next business day delivery, on the next
business day after the date when sent and (D) in the case of mailing, on the
third business day following that on which the piece of mail containing such
communication is posted:
if to Buyer:
TeleComputing, Inc.
00000 Xxxxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: 703.948.2506
Attention: Xxxxxxx Xxxxx
if to Seller:
c/o Commtouch Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 9.4. Governing Law and Venue.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. Any lawsuit filed by Seller against Buyer shall be commenced in a
federal or state court of competent jurisdiction in Santa Xxxxx County,
California and any lawsuit filed by Buyer against Seller shall be commenced in a
federal or state court of competent jurisdiction in Fairfax or Loudoun County,
Virginia, and each party hereby irrevocably submits to the personal jurisdiction
of such court, and hereby waives, and agrees not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a court. The parties hereby consent to and grant to any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
9.3 or in such other manner as may be permitted by applicable law, shall be
valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in the court specified under item (a) above, this being in addition to
any other remedy to which they are entitled at law or in equity.
(c) Should an action be brought before a court in accordance with the
above, the prevailing party shall be entitled to reasonable attorneys' fees and
costs from the other party.
SECTION 9.5. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.6. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided herein, nothing in this
Agreement is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.7. Certain Definitions. For the purposes of this Agreement
the term:
(a) "applicable law" means, with respect to any person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, regulation,
order, writ, injunction, judgment, decree or other requirement of any
governmental entity existing as of the date hereof or as of the Closing
applicable to such person or any of its respective properties, assets, officers,
directors, employees, consultants or agents.
(b) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an exhaustive list;
(c) "Lien" means, with respect to any asset (including any security),
any mortgage, lien, pledge, charge, claim, security interest or encumbrance of
any kind in respect of such asset; provided, however, that the term "Lien" shall
not include (i) statutory liens for Taxes (as defined below) that are not yet
due and payable, (ii) statutory liens for Taxes that are being contested in good
faith by appropriate proceedings and for which adequate reserves exist (iii)
statutory or common law liens to secure obligations to landlords, lessors or
renters under leases or rental agreements confined to the premises rented, (iv)
deposits or pledges made in connection with, or to secure payment of, workers'
compensation, unemployment insurance, old age pension or other social security
programs mandated under Applicable Laws, (v) statutory or common law liens in
favor of carriers, warehousemen, mechanics and material men, to secure claims
for labor, materials or supplies and other like liens, and (vi) minor liens that
have arisen in the ordinary course of business and that do not (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operation of Seller or any of its
subsidiaries; and (vi) purchase money liens incurred in the ordinary course of
business and liens securing debt which is reflected on the Accounts Receivable
Report;
(d) "person" means any individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any governmental entity;
(e) "Transaction Agreement" means, collectively, this Agreement, the
Xxxx of Sale and each other agreement or instrument entered into by the parties
hereto pursuant to the terms hereof.
SECTION 9.8 Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of Seller or Buyer or any officer, director,
employee, agent, representative or investor of any party hereto except for any
liability arising out of the intentional misrepresentation or willful misconduct
of any thereof or arising out of common law fraud.
SECTION 9.9. Taxes. To the extent that any franchise, sales, use,
personal property, excise, value added or other such taxes, except taxes based
on income, are imposed in the United States as a result of the sale and purchase
of the Assets at the Closing or in relation to the conducting of the operations
of the Business by Buyer thereafter, such taxes shall be paid by Buyer. Seller
shall be responsible for all taxes imposed on the Business and the Assets prior
to the Closing.
SECTION 9.10. Commtouch Messaging Platform ("CMP"). Buyer agrees that
it will evaluate and consider for purchase and use Seller's proprietary high
volume messaging server, CMP, it being understood that Buyer shall have no
obligation to purchase or use the same.
SECTION 9.11 Bulk Sales Laws. Buyer hereby waives compliance by Seller,
in connection with the transactions contemplated by this Agreement, with the
provisions of the Bulk Sales or Transfers Laws of the Uniform Commercial Code as
adopted in the State of California, and as adopted in any other states where any
of the Assets are located, and any other applicable bulk sales laws with respect
to or requiring notice to Seller's creditors, in effect as of the Closing.
SECTION 9.12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
TELECOMPUTING, INC.
By:
--------------------------------
Name:
Title:
Date:
COMMTOUCH INC.
By:
--------------------------------
Name:
Title:
Date:
